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Money, Money, Money

Posted on September 2, 2013 by howesdubai

Every month this year, consumer spending has shown marked increases – with June the largest on record as personal expenditure reached US$ 1.0 billion, with the H1 total at US$ 4.2 billion. Amazingly, this sum equates to all the spending recorded in the prior thirty months and brings the local banks’ personal lending to US$ 75.3 billion. No doubt, this boost in consumer spending is good news for the banks and local economy but not so for some residents who are living beyond their means which may prove costly in the future, as rates of inflation and interest rates inevitably rise.

By any measure, Dubai hotels had a spectacular Eid Al Fitr holiday, with occupancy rates at 89%. 73k of the 82k hotel rooms available were taken by guests coming from all over the globe, including the GCC (42k), Europe (14k) and Asia (12k). However, recent reports show that the number of Indian cancellations are beginning to rise as the falling rupee starts to hit the pockets of potential tourists from there; it will be interesting to see whether last year’s figure of 764k is surpassed in 2013. (Yet again, the currency skidded to another record low touching 70 to the US$ – with no end to its strife in sight).

It is difficult not to imagine another property bubble here when latest reports indicate that Dubai residential prices have risen over 30% in H1 alone. Amazingly, villa price hikes in Q2 (at 21%) were actually down on the same period last year which had a 24.4% increase. The Land Department estimates property sales in excess of US$ 6.2 billion for the first seven months of the year – a staggering 67.4% up on last year. Mortgages have risen in tandem showing a 66.4% surge to US$ 11.5 billion.

Helping to satisfy the increasing appetite for real estate, Nakheel is on track to deliver upwards of 3k units this year and has announced that it has just completed construction of over 800 homes in its Al Furjan development.

Dubai Aerospace Enterprise is in discussions with BBA Aviation in a reported part merger of certain divisions of their business. The UK aircraft services company is in negotiations with US-based StandardAero which DAE bought in 2007.

To keep pace with ever-growing demand, it is estimated that Emirates Airline will need to spend at least US$ 26.7 billion over the next five years as it prepares to expand its existing fleet from 201 to 320 aircraft. It is now planning to raise US$4.5 billion to finance its next tranche of aircraft – 10 Airbus 380s, 9 Boeing 777-300ERs and 2 Boeing 777 freighters. Will there come a time when economies of scale begin to go the other way?

Also expanding is the number of passengers using Dubai International Airport which saw a 6.1% July rise to 5.31 million – this equates to a YTD jump of 15.3% to almost 38 million. The world’s second busiest international airport is well on its way to narrowing the gap on London Heathrow and could well take over the top spot within two years.

Although minute, Qantas has returned to the black posting a US$ 5.4 million profit in 2013, compared to a loss of US$ 220 million a year ago – although US$ 112 million came as a result of a settlement with Boeing in relation to its cancelled orders for the troubled 787 Dreamliner. Its alliance with Emirates has helped the carrier improve passenger numbers on its international routes.

Despite a 1.3% drop in H1 revenue to US$ 1.51 billion, DP World still managed a 6.3% improvement in operating profit to US$ 278 million. This year, the company, 80% effectively owned by the government, has seen capital expenditure of US$ 544 million and has a further US$ 3.7 billion planned over the next thirty months. It currently has 65 terminals operating on all continents.

Dubai-based interior contracting company, Depa Limited returned to profit in H1. With revenue up 22.4% to US$ 275 million, it posted a surplus of US$ 9.0 million compared to a US$ 30.0 million loss a year earlier. With new contracts of US$ 354 million signed in H1, its project backlog has risen by 11% to US$ 817 million.

Orbit Showtime Network, the MENA region’s largest pay TV company, has purchased Pehla Media & Entertainment which brings in forty new channels and access to a a huge Asian audience. Dubai-based OSN has decided that acquisition – rather than organic expansion – is their fastest growth strategy.

The latest Forbes list of 1,226 billionaires includes four from Dubai. The CEO of Mashreq bank, Abdul Aziz Ghurair, has an estimated wealth of US$ 2.9 billion, followed by his relative Saif (US$ 2.0 billion), Abdullah Al Futtaim (US$ 1.6 billion) and his cousin Majid (US$ 1.1 billion).

In the UK, Citizens Advice is becoming increasingly concerned with financial services companies and their “cold calling” techniques, especially after the 30 million unwanted calls following the recent mis-selling PPI. The organisation is asking for a total ban on such calls and perhaps the same could be introduced in Dubai, where many financial services and real estate staff ply their trade with similar nuisance and unasked for calls.

The World Bank has released 2011 figures showing that the 15 million expatriates, then living in the six-country GCC, remitted a total of US$ 74.5 billion. 39.9% of this total (US$ 29.7 billion) was by Indians beating the combined total of the next four countries – Egypt (US$ 6.9 billion), Pakistan (US$ 6.0 billion), Philippines (US$ 5.0 billion) and Bangladesh (US$ 3.1 billion). Saudi Arabia was the main provider accounting for 38.4% of the total (US$ 28.6 billion) with UAE coming in next at US$ 18.2 billion.

Last week, it was thought that the Dubai bourse may lose some steam – but nobody could have predicted that it would come off the rails! Monday saw the market attain its highest level in five years, closing at 2742; Tuesday, the market had its biggest daily fall in six years, losing 7.01% of its value to close on 2549. By the end of the week some sort of normality had returned to the market where it closed on 2523 – 8.0% down on the week from its Sunday opening of 2700 points. Despite the tumultuous week, and the accompanying drop, it must be remembered that the market is still currently up 62.66% this year and 70.51% higher than it was this time in 2012. No doubt, the Syrian crisis was the tipping point for the massive sell-off but other factors are in play, including the anticipated US tapering of QE2 and the fact that profit-takers were in the market.

The big winner from the global mini stock market crash is gold which is fast recovering lost ground, topping US$ 1,429 per oz during the week, before falling back to just below US$ 1,400 – a gain of over 21% since its late June close of US$ 1,181. As usual, silver tracked gold and nearly reached US$ 25 per oz before sliding to under US$ 24 on Thursday.

It seems that embattled US bank, JP Morgan, is set to be fined US$ 80 million by federal regulators for inappropriate dealings with its retail customers some years ago. However, this is small change to reports that the bank could be fined US$ 6 billion for mis-selling securities to the value of US$ 33 billion to Fannie Mae and Freddie Mac, then the country’s biggest mortgage lenders. To further add to their woes, it could receive a similar hefty fine for its role in the ‘London Whale’ trading debacle that has already cost the firm US$ 6 billion.

The patchy US growth scenario was reflected in disappointing trade figures with July durable goods orders falling 7.3%, after three months of gains, and non-defence capital goods dropping 3.3%. This follows close on news of a marked slowdown in residential construction and new home sales.

As the Brazilian real continues in free fall to its lowest level in almost five years (at 2.45 to the US$) and inflation rates soar to 6.3%, the country’s central bank has confirmed its fourth rate hike this year to 9%. Whether this works remains to be seen but the odds are stacked against any early improvement, as the country gears up for the FIFA World Cup next year.

Meanwhile the gaffe-prone FIFA executive committee will soon vote to move the Qatar summer 2022 World Cup bid. This probably means either moving to a winter date, at the same location, or moving to another country. One has to ask two questions – why did the football authorities go against tradition and vote for the Gulf country in 2010, four years earlier than had ever been done before? Secondly, are they now blaming global warming for deciding it is too hot, less than a year after their selection (when evidently it was not too hot)? Money, Money, Money (must be funny in a rich man’s world).

Posted in Finance | Tagged DFM, Dubai, Dubai Aerospace Enterprise, Dubai Financial Market, Dubai International Airport, Emaar, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, Mashreq bank, Orbit Showtime Network, Qantas, UAE | Leave a comment

Should I Stay or Should I Go?

Posted on August 26, 2013 by howesdubai

According to UK press reports,the 80-floor Dubai Dynamic Tower, designed by Florentine architect David Fisher, is estimated to cost US$ 545 million and could be ready within two years. Its unique selling point is that each individual floor will rotate independently and turn a full 360 degrees around a central column.

Since Abu Dhabi’s Aabar Investments bought into Dubai’s largest contractor, Arabtec has gone from strength to strength posting a Q2 profit of US$ 25.2 million (compared to a 2012 loss of US$ 3.2 million) and amassing an order book of US$ 6.65 billion. Although officially denied, the company is reportedly in merger discussions with Saudi Oger and Kuwait’s Combined Group Contracting. This comes only months after a JV arrangement with Samsung Engineering.

Orion Holdings finalised the sale of 100 one-bedroom apartments in Silicon Oasis from Gulf General Investment Company for a reported US$ 15.7 million. Orion plan to offer the units on a 35% down payment, with the balance to be paid over three years.

As the hospitality sector‘s boom period continues unabated, reports indicate that, in the MENA region, there are of the 813 hotels (with 134k rooms) being built or in the planning stage, Of that sum, 114 hotels (representing 14% of the total inventory) will be located in the UAE with an estimated 32k rooms or 23.9% of the planned total. Dubai is expecting its annual room portfolio to rise by 7% over the coming years.

Every cloud has a silver lining – with all the regional strife, an increasing number of Saudis are visiting Dubai. In H1, the Dubai Tourism and Marketing Department estimate that there has been a 31.6% surge in numbers to 710k, which boosted the local economy by US$ 4.6 billion. (The Kingdom pumped 9.8 million barrels a day in 2012, at an average price of US$ 106.1, which equates to oil revenue of US$ 380 billion).

As indicated previously, budget carrier, flydubai, is to offer a business class service on many of its routes as from October. Their first flight will be to Kiev, when twelve premium seats will be on offer, with other destinations, including Istanbul, Male and Bucharest, to follow.

In a move to diversify, DEWA is looking at building a new clean coal power facility. When completed, the Hassyan plant will have a 1,200 MW capacity, producing 12% of Dubai’s power requirements – with the balance from natural gas (71%), nuclear energy (12%) and solar power (5%).

June 2013 figures from the Central Bank indicate a 1% monthly fall in money supply aggregate M0 (currency) to US$ 16.2 billion. However M1 (M0 + banks’ current and call accounts) showed a 1.6% rise to US$ 94.5 billion. Money supply aggregate M2 (M1 plus quasi-monetary deposits) also showed an increase of 1.3% to US$ 253.4 billion. When government bank deposits are added to M2, money supply aggregate M3 comes in 0.6% higher at US$ 322.2 billion. A further sign that the economy is still on traction is that net bank loans jumped 1.4% to US$ 312.6 billion (and an impressive 4.4% in H1).

The Dubai bourse recovered this week closing 2.6% up at 2700 – 68 points higher than its Sunday opening of 2632 points. Some expect the market to lose steam in the coming month but it is currently up 73.45% this year and 78.56% higher than it was this time in 2012. Bellwether stocks, Emaar Properties and Arabtec Holdings ended on US$0.72 and US$ 1.70 respectively.

Internationally, embattled US bank, JP Morgan continues to hog the headlines – for all the wrong reasons. Following its London Whale trades debacle – which resulted in a loss of US$ 6.2 billion – and its US$ 410 million civil settlement over its manipulation of Californian energy markets, it is now being further investigated by US prosecutors. In addition, the SEC is looking at their hiring of children of high–ranking Chinese officials.

Thirteen financial institutions – including the likes of Barclays, RBS, Morgan Stanley and HSBC – have been forced by UK regulators to set up a US$ 2 billion compensation fund to pay out a staggering 7 million customers for yet another insurance mis-selling scandal. Some estimate that the series of mis-selling cases may cost banks over US$ 31 billion. Unfortunately, the perpetrators will invariably get off scot-free!

One of the biggest fraud cases is on-going in India where this week, Anil Ambani, head of Reliance ADA Group, was a reluctant witness in the infamous 2008 “2G Scam” court case. Two other companies – Swan and Unitech Wireless – are also involved along with the then Telecom Minister, A Raja. It is claimed that the government could have lost US$ 27 billion as licences were sold at giveaway prices to favoured companies in return for massive kickbacks.

Swiss mining conglomerate Glencore Xstrata has just come in with an H1 loss of US$ 8.9 billion, which included a US$ 7.6 billion goodwill write-down. These were the first results since their earlier merger which on a comparative basis saw sales 4% up to US$ 112 billion whilst comparative profit at US$ 2.04 billion was 39.3% down on 2012’s return of US$ 3.36 billion.

A welcome change with some good news from the eurozone – latest figures show the 17-member bloc reporting a US$ 23.0 billion trade surplus in June – compared to US$ 17.0 billion a year earlier. However, the EU (comprising the eurozone plus ten other countries) trade surplus came in lower at US$ 13.1 billion which, in turn, was a major improvement on June 2012’s deficit of US$ 1.3 billion. Inflation rates were almost identical – with the eurozone at 1.6% and the EU at 1.7% – and well within the European Central Bank’s target of 2.0%. Netherlands had the highest rate at 3.1% whilst Greece was at the other end of the scale with a negative 0.5%.

However for some Asian countries, the outlook is not so bright. For example, in Indonesia there is a widening current account deficit (up 69.0% to US$ 9.8 billion, quarter on quarter), a currency that has fallen 11% this year, inflation rising to 8.6% and its main bourse falling 21% in the past four months. Consequently, the country is in the throes of a marked slowdown in economic growth – now below 6% for the first time in three years.

Even worse is Thailand which worryingly fell into a recession, as its economy contracted 0.3% in Q2 – this is a far cry from the staggering 18.9% Q4 2012 GDP expansion. The baht is at its lowest level since 2009.

Over the past year, Japan has seen its trade deficit almost double to US$ 10.5 billion, mainly because of a 19.6% jump in imports and the yen falling 25% in the past nine months. The world’s third largest economy saw a Q2 decrease in growth from 4.1% to 2.6% but the policy of a low yen may yet stimulate exports and eventually assist in reducing the deficit. Abenomics may still be the country’s saviour!

With a noticeable improvement in the US economy, it is now likely that the Federal Reserve will taper their monthly US$ 85 billion quantitative easing programme later this year before ending it some time in 2014. Although there has been no official announcement, the markets have taken this as read and emerging markets have suffered. Interestingly, the BRICs, (Brazil, Russia, India and China), have witnessed an outflow of at least 30% of their bond funds. Their respective stock markets have fallen between 12% and 20% this year. These four countries have had their day in the sun and could be heading for a severe correction as investors’ money heads back to safer shores.

The Indian rupee goes from bad to worse plunging to new depths despite the government injection of US$ 1.25 billion into the banking system. The markets were not impressed by the latest move to improve liquidity and reduce bond yields so it was no surprise to see the rupee drop to historic lows of 64.6 to the US$ and the Bombay bourse spiral downwards, shedding over 7% this week alone – equivalent to over US$ 125 billion in value. There is no doubt that the new governor of the RBI, Raghuram Rajan, has problems to overcome. But the main protagonist is the octogenarian prime minister, Manomohan Singh, whose economic management has seen the country’s growth at its lowest in a decade, its currency the worst performing in Asia and both its fiscal and current account deficits ballooning out of control. With constant ill-thought out policy changes, and as the country heads into not only a deepening financial crisis, but also a crisis of confidence, maybe it is time for the PM to ponder the question – Should I Stay or Should I Go?

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

Walk Away

Posted on August 21, 2013 by howesdubai

Nakheel has issued a tender for piling works – a precursor for work to finally start on its US$ 680 million mall development at the end of Palm Jumeirah. The project, including a 200-room five star hotel, serviced apartments and 250 retail outlets, will cover nearly 420k sq mt.

Arabtec, Dubai’s largest contractor, saw its Q2 revenue up 23.1% to US$ 436 million and a profit swing from a Q2 2012 loss of US$ 3.2 million to a current quarterly surplus of US$ 25.2 million. This comes on the back of improving business confidence in the region and their winning of several lucrative contracts so far this year.

Better late than never – the IMG-owned Worlds of Adventure, first mooted in 2005 to be part of their City of Arabia project, is to open its first of four theme parks early in 2014. The construction columns, to hold the massive frame, are already in place and, within four years, the 1.5 million sq ft park will be able to cope with upwards of 20k daily guests. In addition, the US$ 5 billion City of Arabia will also have 40k residents in a self-contained environment with its own educational, recreational and health facilities.

The race is on between Dubai Multi Commodities Centre and Jebel Ali Free Zone. DMCC, established in 2002, has a government mandate to facilitate trade flows through Dubai and has now nearly 7,000 companies in its portfolio and is the master developer and licensing authority for JLT. Evidently, 95% of the 1,200 companies registered there this year were new to the emirate. JAFZA, thirty-four years old, has seen over 350 new companies, so far in 2012, bringing its total to just over 7,000. It is responsible for more than 25% of Dubai’s total non-hydrocarbon trade, with an estimated value of around US$ 82.0 billion.

Latest figures from the Ministry of Economy (albeit 2011 data) indicate that the number of UAE manufacturing companies rose 4.9% to 5,200, 40% of which were located in Dubai. However it only attracted 22% of investment in direct contrast to Abu Dhabi with 7% of the total companies but 59% of the investment. Overall, the industrial sector contributes 14% to the country’s GDP.

Empower, the local district cooling provider, has settled half of its 2013 repayment and 70% of its US$ 327 million loan taken out to finance new cooling plants in DIFC, Al Quoz, Mirdiff and Business Bay.

The RTA announced that its Dubai taxi fleet carried out over 50 million journeys in H1 – up 3% on last year. Over the same period, the green and red lines of the Metro have transported nearly 67 million passengers and are well on track to surpass their 2012 total of 109.1 million. For the more energetic, the RTA has recently opened 104 km of its planned 850 km of cycle tracks.

A potentially interesting development comes with Emirates Classification (Tasneef) signing a partnership arrangement with Dubai Drydocks World. The concept is to introduce a regulatory authority for merchant vessels, responsible for shipping surveys and insurance-related certificates. Already an international hub for vessels, there would appear to be an expedient market for such a service to join the ranks of the top five global classification establishments – Nippon Kaiji Kyokai, Lloyd’s, Bureau Veritas, Det Norske Veritas and the American Bureau of Shipping.

With the slowdown in the global economy continuing, it is no surprise to see that June cargo figures, at the world’s top fifty airports, declined by 1.1% compared to a year earlier. Equally unsurprising is that Dubai International again bucked the trend by increasing business by 3.6% to 202k tonnes making it the fifth largest airport cargo handler in the world. Currently only Memphis (342k tonnes), Hong Kong (337k tonnes), Shanghai (233k tonnes) and Anchorage are ahead of the local airport. (According to the UAE General Civil Aviation Authority, Dubai had over 29k aircraft movements in July).

Official data continues to show that the country’s inflation rate rose 1.3% for the year ending 31 July with Dubai reporting a higher figure of 1.6%. It is estimated that housing accounts for 44% of total consumer spend and recent reports indicate that Dubai rents have jumped 7.5% in Q2 and 30% over the year. Such hikes will undoubtedly push up future inflation rates.

July was another record month for the Dubai Gold and Commodities Exchange with total trading activity topping US$ 44.6 billion. – a 55% surge in volume compared to one year ago. Once again, currency contracts dominated with the Indian rupee trade accounting for 86.4% of the total of 1.45 million trades.

The country’s two bourses, Dubai and Abu Dhabi, have seventy four registered companies with a recorded combined H1 profit of US$ 6.9 billion – 15.1% up on last year. The recovery was spearheaded by the banking sector accounting for 57.1% of this figure (US$ 3.9 billion) and real estate with its combined profits up by 26% to US$ 814 million.

The Dubai bourse turned in a rare weekly loss – down 1.6% to close on 2632 points. Some hope that this is just a minor blip as the market is still up 69.08% this year and 73.74% higher than it was this time in 2012.

As DEWA announces a 3.3% YTD increase in electricity usage to 6.857 MW and a 3.7% jump in daily water usage to 295.5 million imperial gallons, the six main UK power companies have amassed profits of over US$ 4.65 billion. Local users have had prices remain relatively flat over the past two years at a time when their British counterparts have seen their bills up by over US$ 460.

Latest estimates from OPEC indicate that there will be a 1.2% increase in 2014 oil consumption to 90.8 million barrels per day as the global economy starts picking itself up from the floor. The twelve-member cartel pumps about a third of that total or just under 30 million bpd. July prices were up 3.4% to US$ 104.45 per barrel.

Following a record trade year with Japan in 2012, slightly lower crude prices – allied with a slowdown in the Japanese economy – saw GCC exports to that country fall by 8.3% to US$ 74.83 billion in H1. UAE’s exports fell 7.4% to US$ 20.96 billion, whilst imports also dropped by 11.9% to US$ 4.08 billion.

After posting a 4.1% annual growth in Q1, Japan’s economy has seen a marked slowdown in Q2 with growth of 0.6% indicating a reduced annual growth rate of 2.6%. Despite Prime Minister, Shinzo Abe, introducing Abenomics to try and get the economy moving, it seems that his raising government spending and boosting money supply have met with minimal success and are the main drivers in the recent decline of the yen.

While Europe slowly emerges from its economic abyss, it seems less and less expatriates are choosing the likes of Spain, Portugal and France as preferred destinations. With Australia and Canada occupying the top two slots, Dubai has moved to third according to a listing drawn up by NatWest International Personal Banking Quality of Life Report. Obviously quality of life, job prospects and a better standard of living are the main reasons for this “transfer of power”.

Having already drawn down 90% of its bailout funds of US$ 320 billion, it is widely expected that Greece will be asking for even more by the start of next year. However with German elections coming up next month, it seems likely that no formal announcements will be made until after Chancellor Angela Merkel has a secured at third term in office. Greece has not helped itself with recent government reports indicating that half of the companies surveyed were cheating the taxman and 70% of staff with the National Tourism Organisation did not work their full minimum hours. Furthermore its GDP fell 4.6% in Q2, compared to 2012, following a 5.6% plunge in the previous quarter.

The French Finance Minister, Pierre Moscovici, is confident that the country’s US$ 2.67 trillion economy has turned the corner after recording two 0.2% contractions in Q4 2012 and Q1 2013. In June, the EU gave France two years to reduce its budget deficit of 3.7% to 2%. However unless Francois Hollande is willing to boost the economy, by reducing labour costs and minimising tax increases, the country is set to remain in a moribund state.

Despite the gloomy prognosis of certain individual EU member states, official data indicates a eurozone Q2 growth of 0.3% – welcome news after eighteen months of negative data. The German economy grew 0.7% in Q2 whilst the French reported growth of 0.5% after dipping into recession earlier. However the recovery is patchy and undoubtedly the PIGS will continue to struggle as they try to ease unemployment queues, political infighting, social unrest and austerity measures. The case for a two-tier euro system is there for all to see.

A dirty pipe has cost the New Zealand economy at least tens of millions of dollars. Fonterra, the country’s largest company and the world’s biggest dairy exporter, discovered botulism-causing bacteria in some of its whey products which resulted in China and other countries halting imports. This is a huge blow for the company, which has revenues of US$ 15.9 billion, the industry which accounts for 28% of the country’s exports and New Zealand with a tarnished reputation for many of its exports.

What has the financial world come to when charges are dropped against the London Whale, Bruno Iksil? Manhattan prosecutors have decided to take no further action against the man who reportedly was involved in racking up losses of US$ 6.2 billion for his employer, JP Morgan.

Following recent reports of HSBC culling some of its local retail customers, it now seems that Barclays is considering selling its UAE retail business. The UK’s third largest bank will most likely retain its corporate and investment banking arms. In H1, Barclays’ global profits were 17% down to US$ 5.6 billion and it has been reported that, over the past three years, the bank has paid out US$ 10.9 billion in bonuses, US$ 9.4 billion in fines and only US$ 3.1 billion in dividends.

In 2012, 2.4 million UK customers closed accounts with the Big Five banks – it seems that, in Dubai, certain financial institutions are getting in on the act before their clients jump ship. The simple message is that if you are not happy with your bank – Walk Away!

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

A Dedicated Follower of Fashion

Posted on August 10, 2013 by howesdubai

Dubai’s hospitality sector continues to confound its critics with all pointers showing sustained growth patterns – in June, occupancy rates by 3.6% to 79.2%, Average Room Rates (ARR) by 6.2% to US$ 207.29 and Revenue per Available Room (RevPAR) by 11.2% to US$ 164.22. It seems that Dubai is succeeding in its aim to make the emirate an all year holiday destination.

The Director-General of the Dubai Land Department, Sultan Butti bin Mejren, has announced that seven proposed pieces of legislation will be introduced over the next two years to better control the burgeoning real estate sector. These measures will protect the market from speculators and other damaging factors that have blighted the industry over recent times as well as enhance current legislation in relation to tenants’ rights, landlords’ associations and stalled projects.

Depa, the Dubai-based interiors contractor, has bought Loher Raumexklusiv, the German private jet and yacht outfitter, for an undisclosed amount. The company, based in Munich, had been facing bankruptcy earlier in the year and the sale will help with Depa’s aims of diversifying into an ever growing niche market.

Nakheel, has awarded five contracts to the value of US$ 127 million, the two largest for the building of villas in its Jumeirah Park location (US$ 82 million) and for the expansion of Ibn Battuta Mall which will cost US$ 25 million.

A raft of Q2 corporate earnings results hit the market this shortened week and most continued the trend of earlier announcements with increased revenue and profit levels – a sure sign of the upturn in Dubai’s economic fortunes.

Union Properties saw a 35.5% hike in Q2 profits to US$ 30.9 million compared to a year earlier and this despite a fall in revenue from US$ 151.8 million to US$ 116.3 million. The reduction in expenses came about because of liability settlements, totalling US$ 21.8 million, with various creditors during the period.

Another property company, Deyaar reported a 46.8% rise in Q2 profit to US$ 7.4 million and an even bigger H1 jump of 66.8% to US$ 12.7 million. The company has two new projects in the pipeline including a US$ 136 million residential project in Business Bay.

Even better results emanated from Drake & Scull International that saw both Q2 contract revenue and profits heading north – 86.8% up to US$ 365 million and 63.0% to US$ 14.2 million respectively. As a sign of the good times returning to these shores, the company has an order backlog of US$ 3.19 billion, 58.1% higher than in June 2012.

Meanwhile Dubai Islamic Bank – in line with most other Dubai-based financial institutions – announced a 34.8% surge in Q2 profits to US$ 113.9 million on a nominal 1.7% rise in its revenue to US$ 351 million.

After seven consecutive quarters of losses, Shuaa Capital finally turned the corner with a Q2 profit of US$ 354k – only the sixth time the troubled investment bank has not recorded a quarterly deficit over the past five years. The bank’s loan book has increased by some 15% to US$ 199 million.

Dubai Investments have seen its H1 profits swell by 116.4% to US$ 101 million but only on a 15.2% rise in total income of US$ 351 million. With total assets of US$ 3.43 billion and a net worth of US$ 2.34 billion, the company is the largest investment company listed on the Dubai Financial Market.

The Dubai Financial Market Index closed trading on Tuesday because of the upcoming Eid al Fitr holidays. However even in a three-day week it still managed to close 3.0% up at 2674 after a Sunday opening of 2595 points. Over the past year, the market is 79.04% in front and has risen 71.79% already in 2013. (in Q2 the Index rose 21.5% being only surpassed by the Damascus bourse which jumped 44.7% mainly on technical – rather than market – influences).

Official data confirms that UAE’s real GDP expanded 4.4% in 2012 to a record US$ 278 billion with the non-oil sector accounting for US$ 188 billion of this figure or an impressive 67.7%. The continuing positive move away from reliance on the oil industry is welcome news. Surprisingly, the official inflation rates last year was only 0.66% with more of the same expected this year coming in at just over 1%.

Greek prime minister, Antonis Samaras, is due to meet Barack Obama later in the week in an attempt to secure US approval to introduce stimulus policies for the embattled Ionic economy. The country is in its sixth straight year of recession and has 1.4 million of its population unemployed; this equates to 27.6% (compared to the eurozone rate of 12.1%) and even more depressing is the rise in youth unemployment which is now at 64.9%.

In stark contrast to its continental neighbours, the UK economy is showing signs of a grand revival. The world’s seventh largest economy recorded a major rise in the latest PMI (purchasing managers’ index) with the Markit/CIPS services survey posting a monthly jump from 56.9 to 60.2 – its highest level in six years. Other indicators are also heading in the right direction in July – retail sales were at their highest level in seven years, industrial production was up 1.2% and vehicle sales were 12.7% up. Despite the promising data, the country is still way behind the levels reached pre-GFC.

The Indian rupee continues to fall – this week sinking to all-time lows of 61.8 to the US$ with no apparent Reserve Bank of India intervention in sight. Unless the authorities rectify the country’s underlying economic problems and rein in its ballooning current and fiscal deficits, standing at 6.7% and 5.0% respectively, the currency will continue its descent – now 40% down over the past two years. Introducing half-baked measures, such as raising the gold import duty to 8% and lifting the price of fuel five times since June, have not appeased investors – both domestic and overseas – who are taking their money out of the country at record levels. High inflation and a slowing of growth to around the 5% mark will continue to drag the economy in a downward spiral.

Despite avoiding a recession during the GFC, the Australian economy is now going backwards as commodity prices tumble and growth forecasts are cut once again – this time to 2.5% for this year. The lucky country is now bedeviled with rising unemployment levels (expected to hit 6.25%), flat retail sales, slowing tax receipts and falling business confidence. The Rudd government has seen the currency drop 14%, in a matter of months, to AUD 0.90 to the greenback and its budget deficit expected to double to US$ 26.8 billion this tax year. Whether this week’s move by the Reserve Bank to cut interest rates to its lowest ever level of 2.5% will help the struggling economy remains a matter of conjecture.

Over 4,000 families were directly affected by the April Bangladeshi factory collapse that claimed 1,132 lives and injured over 2,500. It is no surprise to see that much of the promised compensation by the government and the federal garment association remains outstanding. With earlier pledges indicating individual payouts of US$ 21,000, it is reported that the government has paid between US$ 1,200 and US$ 3,500 to only 350 of the survivors and family members and will only pay those who actually turn up at the prime minister’s office in Dhaka. Furthermore no payments of three months’ wages, promised by the Bangladesh Garment Manufacturers and Exporters Association, have been made to any of the victims. If these reports are true, it may be time for the likes of H&M, Abercrombie & Fitch, Walmart and Gap to take more positive action.

As part of Dubai’s overall strategy, HH Sheikh Mohammed bin Rashid Al Maktoum has issued a decree to set up the Dubai Design and Fashion Council and has ambitious plans to grow small businesses, develop the global market for locally produced goods and increase employment levels across the industry. If all goes to plan, within five years, the emirate could rival the likes of Paris, London and New York. Soon Dubai could be seen to be A Dedicated Follower of Fashion.

Posted in Finance | Tagged Depa, Dubai, Dubai Financial Market, Dubai Islamic Bank, Emaar, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, Shuaa Capital, UAE, Union Properties | Leave a comment

Catch Us If You Can

Posted on August 3, 2013 by howesdubai

To many observers, the local property market is perhaps growing at a faster rate than would be considered appropriate, bearing in mind that it is less than five years since over-inflated property prices saw a 50% diminution and brought Dubai to its economic knees. Latest figures indicate housing rentals up 30% over the past twelve months and residential property valuations up at almost the same level. In H1, recorded sales totalled US$ 7.85 billion of which a staggering (and worrying) US$ 6.32 billion, or 80.6%, were for cash. The most popular location was Dubai Marina where total transactions amounted to US$ 1.8 billion. Commercial sales were also up with H1 figures of US$ 21.6 billion.

A recent IMF report shows that Dubai government debt grew by over 10% to US$ 142 billion in the year ending 31 March 2013. Of this total, which is estimated to be 102% of the emirate’s GDP, 45% or US$ 64 billion falls due within the next three years. Could a double whammy of a crashing real estate sector and an unsettling financial market see history repeating itself.

Meanwhile, the Ruler of Dubai has issued a decree appointing a committee to deal with all court cases for stalled real estate projects, currently going through the legal system. It seems that the new body will have total responsibility for settling legal disputes between investors and developers in any scheme that has been cancelled by Dubai Real Estate Regulation Agency (RERA) – late last year, it reported that it had cancelled 217 projects between 2009 and 2011.

Latest figures show that there has been an 11.1% increase in Dubai visitors to 5.58 million with hospitality revenues up by 18.6% to an impressive US$ 3.17 billion. All indicators are heading north including hotel occupancy up from 81.8% to 84.6% – this despite a jump in inventory with sixteen new hotel establishments opening in the past year increasing the number of rooms available to 81.5k.

The week started with a formal announcement from Arabtec Holdings that it had raised US$ 654 million in a rights issue to double its equity. The 1.56 billion shares will have an issue price of US$ 0.41 (compared to its opening price on Sunday of US$ 0.61). It is expected that the money will be used to help with the company’s regional growth plan which has already seen 2013 orders of US$ 3.54 billion. The company may tap into the bond market later in the year to raise further finance.

Emaar Properties announced a 9.9% increase in Q2 profits to US$ 184 million on a 47.6% surge in revenue to US$ 845 million, compared to the same quarter in 2012. Its Dubai H1 sales of US$ 1.72 billion were four times higher than in the previous year but profit of US$ 335 million was less than 1% up on last year’s comparative figures. 45% of revenue (US$ 634 million) came from its hospitality and retail business.

One of Russia’s largest energy providers, Lukoil, is planning to move its head office from Moscow to Dubai in the near future. It is expected that up to 400 employees will make the move – a further indication of how the emirate is becoming a focal point for major players in the energy sector.

No surprise to see that Dubai International Airport recorded a 17.5% increase in June traffic to 5.54 million with the H1 total hitting 32.6 million – an increase of 16.9% over 2012 returns. Despite a slowdown in world trade, cargo figures also headed north with a 10.2% H1 hike to 1.2 million tonnes. Since the start of the year, the facility has seen the introduction of 84 new services to 25 destinations.

With lower cargo volumes in Asia, Africa and Europe, DP World reported a 5.7% decline in H1 container volumes, handling 12.8 million 20’ equivalent units, compared to 13.6 million TEUs in the same period of 2012. The world’s third biggest port operator remains upbeat for the rest of the year.

Dubai-based Adenium Capital, has doubled its solar portfolio by buying an Italian 24 MW solar farm in partnership with ForVEI. The company, that deals in renewable energy investments in Japan, Italy and Jordan, reportedly paid US$ 69.1 million for their new asset.

Following last week’s reports that Etisalat was in exclusive talks to acquire the 53% shareholding of the French operator Vivendi in Maroc Telecom for around US$ 5.1 billion, the telecoms provider is reportedly showing interest in Pakistani firm Warid Telecom. Warid, currently owned by The Abu Dhabi Group, is the smallest of that country’s five operators, and would probably sell for around US$ 1 billion.

Emirates Central Cooling Systems Corporation, a JV between Dewa and Tecom, is building the first green district cooling plant in the region. Empower have awarded Transgulf a US$ 42.2 million contract to build the facility, with a capacity of 45k Refrigeration Tonnes, in Business Bay.

Joyalukkas, the locally based jewellery trader, is planning an 18% increase in outlets to one hundred, covering ten countries. The company currently employs 6,000 and has expansion plans for its money exchanges.

The “Dress One Million Children” campaign, initiated by HH Sheikh Mohammed bin Rashid Al Maktoum, was extended after meeting its initial target of US$ 10.9 million. This week, it reached US$ 16.3 million which has now doubled by the fact that the Dubai ruler donated a similar amount. The end result is that children in forty six countries will benefit from the largesse of the Dubai community.

The Dubai Financial Market Index had another hectic week closing 3.0% up at 2595 after a Sunday opening of 2519 points. In what is usually a tranquil period for the market, July’s trading saw the Index start the month on 2221 and close 16.6% up at 2589. Over the past year, the market has been on fire and is 67.3% up (2589 to 1548) compared to the comparatively minor gains of FTSE 100 – 15.9% (6621 to 5712), S&P 500 – 21.7% (1686 to 1385) and All Ords – 17.4% (5036 to 4289).

The IMF has indicated that it expects the US economy to grow at a slower than expected rate in Q2 following a lacklustre 1.8% return in Q1. This comes despite the fact that house prices have been on the up and unemployment levels begun to drop. However, consumer spending, which accounts for 66% of US economic activity, has slowed down reflected in poor June retail sales figures.

The world body has also come out with concerns about the Chinese economy especially in relation to government debt (both central and regional) which stands at a worrying 45% of the country’s GDP. Even the government is concerned so much so that it has called for an urgent audit of all its debt which is measured in trillions of dollars. In addition, Moody’s Investor Services claims that the country’s shadow banking sector, at an estimated US$ 4.7 trillion, may be as high as 55% of GDP. However, China still holds a massive US$ 3.5 trillion in mainly US$ foreign reserves.

If China has a debt problem, what about Japan? The world’s third biggest economy has a debt level which is estimated to reach 230% of its GDP by 2014. The country should be wary of Abenomics which encourages more government spending and drastic monetary easing to lift Japan out of its long-standing deflationary era.

The Indian rupee continues to fall and on Wednesday it was at 61.17 to the US$. Authorities are trying – with little success – to revert its downward trend by introducing stop-gap measures such as expanding the gold duty, moving up short-term interest rates and pushing up fuel prices. Despite these efforts, the outlook is more of the same which will be good news for the NRIs remitting money home – but not for the long-term good of the Indian economy.

In Europe, the outlook is still bleak for the PIGS and certain other EU countries. However, there are some economists who consider certain former Iron Curtain countries to be possible hotspots for increased economic growth as they strive to catch up with their western neighbours. Interestingly, Poland is the only EU country to have escaped any recession whilst Russia is expecting 2013 growth in excess of 2%.

Barclays, the mis-selling bank, having already provided for US$ 4 billion mis-selling payment protection insurance and US$ 1.3 billion for mis-selling swap products, has set aside a further US$ 3.0 billion to cover future claims. This comes after the troubled bank has been hit with recent fines of US$ 460 million for manipulating US energy prices and US$ 444 for its role in the Libor rate-fixing scandal. To further add to its woes, the bank is being investigated by the UK’s Serious Fraud Squad relating to Qatar Holding’s US$ 8.1 billion 2008 investment, that helped the bank avoid a government bailout.

Another bank facing the wrath of the regulators is Credit Suisse. The UK’s Financial Services Authority fined the financial institution US$ 9.1 million for exposing some of its customers, who invested more than US$ 1.5 billion, to an unacceptable risk, when selling them Scarps (structured capital at risk products).

Not to be outdone, JP Morgan Chase have settled with the US authorities and agreed to pay a fine of US$ 410 million for its alleged power market manipulation – slightly less than Barclays penalty.

Long gone have the days when banks did what banks were supposed to do – taking in deposits and lending out to customers. Nowadays it seems much of their work is done in the twilight zone carrying out risky business transactions and shonky deals. In some cases, their simple message to the regulators is – Catch Us If You Can!

Posted in Finance | Tagged Arabtec, Barclays, DFM, Dubai, Dubai Financial Market, Emaar, Emirates, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, IMF, Real Estate Regulation Agency, RERA, UAE | Leave a comment

Heart of Gold

Posted on July 28, 2013 by howesdubai

Just as one famous ocean-going liner, the QE2, leaves these shores, there are plans to bring another one to Dubai. Australian business tycoon, Clive Palmer, is to build an exact replica of the Titanic – with work commencing soon at the Chinese shipyard, CSC Jinling. If all goes to plan, it could be ready to sail to Dubai sometime in 2016.

After a relatively slow start, the world’s first purpose built maritime city will see at least fifteen mixed-use tower buildings ready within the next four years. Dubai Maritime City, which covers an area of 2.27 million sq mt and is located between the Dry Docks and Port Rashid, , will include a range of hotels ranging from budget to luxury 6 star as well as the usual mix of residential, retail and commercial.

Q2 data indicates that Dubai’s economy is steaming ahead at a faster pace than first expected with its GDP surging 4.7% compared to 4.1% in Q1. Most sectors showed growth as the emirate continues in efforts to ease its reliance on oil which now only contributes 12 % to Dubai’s budget – compared to trade (28%), manufacturing (16%), financial enterprises (14%), real estate (13%) and construction (8%).

Three of Dubai’s leading banks reported second quarter earnings. Emirates NBD defied market expectations by posting a massive 50.2% increase in Q2 profits to US$ 264.9 million at the same time as it recorded an impairment provision of US$ 271.7 million. However, it still has an outstanding repayment of US$ 1.31 billion to the federal government – the balance of the US$ 3.43 billion support received at the time of the GFC.

Commercial Bank of Dubai had a 2.3% rise in H1 profit to US$ 135.4 million on operating income of US$ 267.8 million, of which net interest income of US$ 189.1 million accounted for 70.6% of the total, and non-interest of US$ 78.7 million. During the period, it made impairment allowances of a further US$ 55.9 million on its non-performing loan balances.

Mashreq, controlled by the Al Ghurair family, showed a 25.6% jump in Q2 profits to US$ 109.7 million as its net loans and advances increased by 10.9% to US$ 12.9 billion.

Mortgage lender Tamweel got in on the act reporting a 40.4% hike in profit to US$ 7.1 million. The company is due to delist from the Dubai Financial Market as Dubai Islamic Bank becomes its 100% owner.

Further impressive Q2 results came from Dubai-based logistics firm, Aramex announcing an 11.9% surge in quarterly profits to US$ 19.7 million compared to the same period in 2012. Revenue jumped 8.8% to US$ 230.2 million as it continues its two-prong expansion strategy in the region and Africa.

With assets of US$ 10.6 billion and net debt of US$ 2.3 billion at the end of June, Majid Al Futtaim Holdings reported a 10% rise in H1 revenue to US$ 3.1 billion resulting in an operating profit of US$ 436 million. It is expected that Dubai’s leading property developer will shortly issue a perpetual hybrid security to partially fund its recent purchase of a 25% minority stake in MAF Hypermarkets from the Carrefour Group.

DP World lost a court battle with the UK tax authorities over an “elaborate trick” by the then independent P & O to reduce its 2004 tax bill. The Dubai-based global port authority now has to pay a US$ 21.4 million tax bill plus, one assumes, legal fees.

As already mentioned in a previous blog, Etisalat is in the final stages of acquiring the 53% shareholding of the French operator Vivendi in Maroc Telecom for around US$ 5.1 billion. Earlier, Qatar’s Ooredoo had shown interest in the Moroccan venture but is now out of contention.

Meanwhile the UAE telecoms operator has reported a 20% jump in Q2 revenue at US$ 2.7 billion and a smaller 9% rise in profit to US$ 537 million. Almost 64% of the company’s revenue (US$ 1.72 billion) emanated from the local market – 12 % up on the same quarter in 2012.

Du, the other provider, recorded a 12.2% increase in Q2 revenue to US$ 725 million with an H1 total of US$ 1.44 billion. After paying a royalty fee of US$ 82.8 million, it returned a net profit of US$ 129 million – up 45.4% on Q2 2012. The company also declared a US$ 0.0272 dividend amounting to a total of US$ 272 million.

Growing confidence in Dubai is reflected in the fact that even bank lending has begun to improve with news, that in the first four months of the year, total credit extended to residents jumped by US$ 6.3 billion to US$ 228.8 billion. 69.5% of this total (US$ 159.0 billion) was attributable to the private sector with government loans creeping up to US$ 33.3 billion.

Rather surprisingly, official figures put Dubai’s inflation rate at a paltry 0.66%. Whether this reflects reality is open to some conjecture when most expenses – including rents and education – continue to surge.

HE Sultan Al Mansouri, the federal Minister of Economy, has hinted that there will be a new Commercial Companies Law introduced by the end of this year. If implemented, it will replace the existing 1984 law and the long-awaited updated version will be welcomed by most of the business community.

The Dubai Financial Market General Index had a relatively quiet week closing on Thursday at 2519 points – up 0.9% on its Sunday opening of 2496. The Index has been heading north for some time starting the year at 1623 and rising in Q1 by 12.7% to 1829 and by a further 21.5% to 2223 at the end of June. The end result is that there has been a 13.3% increase this month, 61.82% growth so far in 2013 and an even better 74.96% over the past year. The increased trading has seen the bourse’s Q2 income jump a staggering 581% to US$ 18.9 million on revenues of US$ 30.7 million and a quarterly trade of US$ 10.4 billion. It is expected that similar growth patterns will be the norm for the rest of the year.

Two Dubai residents, Dhia Jafar and Omar Nabulsi, have been implicated for alleged insider trading involving Onyx Pharmaceuticals. The US SEC filed a lawsuit earlier in the month against unnamed plaintiffs who were alleged to have made a quick profit of US$ 4.6 million on an investment of just US$ 305k as its shares rose 51% in one day – 30 June 2013 – after it had rejected a takeover bid from Amgen and declared it would put itself up for sale. The two gentlemen allegedly made profits of US$ 2.33 million and US$ 200k respectively.

A week after the SEC filed civil charges against Steve Cohen, founder of SAC Capital and estimated to be worth US$ 8 billion, the US authorities have launched criminal charges relating to four counts of securities fraud and one of wire fraud against the company. It is alleged that the Wall St hedge fund, that once managed US$ 15 billion of assets, was involved in systematic insider trading resulting in hundreds of millions of dollars in illegal profits over a period of eleven years to 2010. Four employees have been charged – two of whom have already pleaded guilty.

Also in the US, prosecutors are following up on what has become the country’s largest ever hacking and data breach violation. The case involves the theft of a staggering 160 million credit cards by a gang of four Russians and one Ukrainian from a number of high profile companies including Heartland Payment Systems, Carrefour and 7-Eleven. The scam resulted in stolen credit cards being sold on to criminal gangs globally for amounts of between US$ 15 and US$ 150 each. Three of the companies involved have already reported losses of US$ 300 million.

Halliburton must be one lucky company having escaped this week with a nominal US$ 200k fine, after pleading guilty to deleting detailed evidence following the 2010 Gulf of Mexico oil spill. The company was BP’s cement contractor on the Macondo well that exploded, killing three, and created the biggest environmental disaster in US history. The oilfield service company and BP have blamed each other for the disaster.

The newly appointed Archbishop of Canterbury, Justin Welby, went to war this week on Wonga and threatened to put the company out of business because of their nefarious business practices. Unfortunately, he found out next day that the Church , with over US$ 8 billion in investments, had interests in the payday lender. One would think that it would be better all round if he put his own house in order before embarking on such crusades. No doubt the likes of Paddy Power, MacDonalds and Coca Cola will be future targets for the ex-Shell Oil executive.

On the accounting front, radical new UK measures are to be introduced which will see the big four audit firms – Deloitte, Ernst & Young, KPMG and PwC – losing some of their clout. Expected is a tougher stance with a move to stop the banks’ insistence of auditing by one of the Big 4 as a requirement for loans to companies and a ban on certain companies and institutions allowing only the Big 4 to apply for audit work. This follows concerns that the four firms – who audit 90% of country’s leading 350 listed companies – were too dominant and often not acting in the owners’ interests.

Who would have thought that Motor City, and the home of Tamla Motown, would have to file for bankruptcy after decades of corruption, mismanagement and economic decay? Detroit, the largest US city in history to go bust, has stopped payments on some of its US$ 18.5 billion of debts – with a repayment bill equivalent to 38% of city revenue – due to rise to an incredible 65% within three years! In a city of 700,000, the population will continue to fall as residents leave because of a burgeoning crime rate along with reduced city services and policing and 78,000 derelict buildings.

UK Q2 data indicates that the country’s recovery is moving at a quicker rate than expected with GDP up 0.6% – the best quarterly return in two years. However, any recovery is bound to be fragile and, it will be interesting to see how the incoming Mark Carney manages the Bank of England’s strategy in dealing with what is still a very weak economy that is almost 4% below its pre-GFC peak.

Despite some better news out of the eurozone, the bloc is still the main lagging factor holding back global recovery. Whilst record unemployment levels continue to head northwards, consumer confidence remains in tatters and social unrest simmers, the reality is that it will take a lot more positive news for the eurozone to move out of its stubborn recession into a state of expansion.

There are very few places in the world where citizens are paid to lose weight. In the US you may be awarded with a free burger, in the UK a certificate but only in Dubai will you be paid in gold. Open to any resident, “Your Weight in Gold” scheme will see participants receive a gram of gold for each kilogram lost before the final weigh-in on 16 August 2013. It is hoped that such initiatives will help reduce the high levels of obesity, which often result in heart problems and diabetes, caused by poor diet and lack of exercise. Dubai indeed has a Heart of Gold!

Posted in Finance | Tagged Clive Palmer, Commercial Bank of Dubai, DFM, DP World, Dubai, Dubai Financial Market, Dubai Maritime City, Emaar, emirates airline, Emirates NBD, Halliburton, HE Sultan Al Mansouri, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, UAE | Leave a comment

I Believe in Miracles

Posted on July 22, 2013 by howesdubai

The bounce back in local real estate can be gleaned from the fact that Dubai Land Department recorded a 30% surge in H1 business transactions, reaching US$ 29.4 billion. There was an even larger amount in the number of properties involved – up 60.8% to 30,469 units. As indicated in previous blogs, almost 75% of all transactions were for cash but only accounting for 48.9% or US$ 14.4 billion in total value.

Dubai Properties Group has announced plans to enhance The Walk at JBR with the addition of a Beach Club. This busy tourist thoroughfare had over ten million visitors last year and is slated to see increased numbers in 2013. One downside – especially for JBR residents – is accessibility, with on-going infrastructure work, including the Al Sufouh tram development, and high traffic volume.

Sheikh Ahmed bin Saeed Al Maktoum, President of Dubai Civil Aviation Authority, is confident that the emirate’s airport will serve 75 million passengers by 2015 – then making it the busiest and biggest international airport in the world. Having already seen 21.9 million passengers in the first four months of 2013, it seems likely that it will reach a record 66 million by year end. A US$ 7.8 billion capital expansion plan will see its capacity increase to 100 million by the end of the decade.

The next part of the expansion will be Concourse D, close to Terminal 1, which covers 65k sq mt and will be able to deal with 18 million passengers a year. It will service 100 international airlines and will be linked to Terminal 1 by an elevated rail system. To maximise revenue potential, Dubai Airports is inviting bids from interested parties who wish to open retail and food outlets.

However, Terminal 3 is no longer the world’s biggest building having just lost that accolade to the New Century Global Centre in Chengdu. The Chinese water park – at 1.7 million sq mt – has a floor space 0.2 million sq mt larger than T3.

Meanwhile Emirates SkyCargo – with its Boeing fleet of eight 777Fs and two 747-400ERFs – has announced that it will move its operations from Dubai International to the new Al Maktoum International as from May 2014. The new terminal will have initial annual capacity of some 700k tonnes. As cargo from its passenger operated flights will remain as is, there will be dedicated road feeder services between the two facilities. Oh for a rail service to take some of the trucks off the roads!

Further good news for the emirate was the signing of an agreement between Dubai Industrial City and Etihad Rail to build a terminal as part of the second phase of its development that will connect all UAE’s major cities and logistic hubs. This will be a huge boost for DIC that would see it linked with all the country’s major ports – Khalifa, Jebel Ali, Fujairah and Mussafah – and other major regional centres.

Reports indicate that DP World is in JV negotiations with the Maldivian government to establish an international port in Male. In bipartisan talks with HH Sheikh Mohammed bin Rashid Al Maktoum, the island’s president, Mohamed Waheed Hassan, also discussed assistance with setting up a financial hub and developing both e-government services and the health sector.

It is estimated that Nakheel has received at least US$ 8 million government support since its near 2008 implosion following the GFC. It has a reported current development pipeline of over US$ 2.2 billion and has managed to deliver 65% of the 9,300 units that were on its books at the time of its August 2011 restructuring. With the turnaround in the realty sector and increased building activity, the company’s US$ 1.16 billion sukuk has become one of the best performing Islamic debt paper, yielding nearly 10%.

Yet another international hotel chain sees the benefits of setting up operations in Dubai. This time, Thai-based Minor International expects its Anantara Palm Jumeirah to be completed by year end.

Local developer, Abdulsalam Al Rafi Group, has secured a US$ 245 million club loan to finance the Burj Al Salam Towers being built on Sheikh Zayed Road. One of the three towers will be a Starwood hotel and the other two will be commercial and residential. The deal was put together by Dubai’s largest bank, Emirates NBD, in conjunction with First Gulf Bank.

With 3,000 camels, producing 1.8 million litres of milk a year, and a 100% growth in revenue, Dubai-based Emirates Industry for Camel Milk & Products cannot keep up with demand. Products include milk, cheese, whey powder and chocolate and the company has just begun exports into Europe.

A case in the Dubai Criminal Court shows how naïve some people are. An American woman, living in Ghana, has been allegedly duped out of US$ 1.1 million by a scam involving two Nigerians and a Jordanian. The three have been accused of forging the signatures of the seven UAE rulers, on a fake US$ 80 million gold loan contract, in a “deal” with the federal government.

The Dubai Gold and Commodities Exchange witnessed H1 contract volumes more than double to 7.72 million totalling US$ 268.85 billion, up 112% on last year. Currency contracts accounted for the major part of the business with the Indian rupee again dominating the market with 90.2% (or US$ 242.5 billion) of total trades. This week again saw that currency hovering at near historic lows of 60 to US$1.

The Dubai Financial Market General Index had another bouyant week closing on Thursday at 2496 points – up 4.3% on its Sunday opening of 2392. Bellwether stocks, Emaar Properties and Arabtec, continue heading northwards ending on US$ 1.59 and US$ o.61 respectively. So far this year the Index has risen by 60.34% and over the past 52 weeks an impressive 69.40%.

As Australia’s economy continues at a slower growth pace, it seems that their weaker dollar – which has fallen some 13% in the past two months – may help both the trade and tourism sectors, as its mining boom starts to peter out. It does seem likely that there will be a further rate cut to maybe 2.5% at the next RBA meeting – hopefully further help for an under-performing economy.

Despite H1 retail sales up by 13.4%, fixed asset sales by 20.1% and industrial production by 8.9%, there has been a slowdown in the Chinese economy with Q2 growth down to 7.5%, compared to 7.7% in Q1. This is the sixth straight quarter that growth levels have been below 8% and there are forecasts that next year this may drop to below 7%. However, foreign direct investment into the country rose by 4.9% to US$ 62 billion in H1.

Yet another financial scandal has emanated from China – this time involving GlaxoSmithKline. The UK-based drugs manufacturer has been accused of transferring US$ 486 million in bribes to various sections of the medical profession and government officials.

Scarcely a week goes by without a further bank scandal. In the US, Barclays and four staff members have been fined US$ 488 million for manipulating energy markets, mainly in California, Arizona, Oregon and Washington. The bank is appealing the verdict.

A further sign of a slowdown in the US economy came with June retail sales figures which came in at lower than expected. Analysts, looking at an 0.8% jump, were disappointed to see a figure half that amount. This may mean that Ben Bernanke will not be so quick to phase out his monetary stimulus package.

Fitch Ratings lowered France’s credit rating to AA and expects to see the country’s government debt at 96% of GDP. Despite this, its budget to GDP – at 4% – is still well above the European limit set at 3%. A further problem that needs urgent attention is the country’s state pension fund which will have a deficit of US$ 27 billion by 2020, if no action is taken.

Both the Spanish and French governments continue to believe in fairy tales. This week, the Spanish Economy Minister, Luis de Guindos, has declared that the Spanish recession is over. Somebody should remind him that in Q1, the economy shrank for the sixth straight quarter by 0.5% and that unemployment levels of 27% show little sign of early improvement. Likewise, French President, Francois Hollande has again asserted that recovery has started despite continued recession, high unemployment and proposed cuts of US$ 18.2 billion in state expenditure, in a vain attempt to balance his ballooning budget.

Also in the news this week are Dr Montaser Al Mansouri and Sepp Blatter. The former is probably this country’s most celebrated illusionist who is hoping to make the world’s tallest building, Burj Khalifa, disappear later in the year. The other is an illusionist who is famous for moving the goalposts – this time, he has finally decided, following further medical information, that it will be too hot to have the 2022 Qatar FIFA World Cup played in summer!

To Messrs de Guindos, Hollande, Al Mansouri and Blatter – I Believe in Miracles!

Posted in Finance | Tagged DP World, Dubai, Dubai Financial Market, Dubai Land Department, Dubai Properties Group, Emaar, Emirates, emirates airline, Emirates NBD, Emirates SkyCargo, HH Sheikh Mohammed bin Rashid Al Maktoum, Sheikh Ahmed bin Saeed Al Maktoum, The Walk at JBR, UAE | 1 Comment

Here, There and Everywhere

Posted on July 19, 2013 by howesdubai

The next chapter in the history of the QE2 has been written with news that it is currently being converted into a luxury floating hotel at Drydocks World. In October, it will set sail for Singapore and from there to Hong Kong, before berthing in an unnamed Chinese shipyard for final renovations prior to beginning its new life in the Far East.

The warning bells are already ringing as a recent report indicated that Dubai rents jumped a frightening 18.3% in Q1 – even more staggering when the likes of London, New York and Hong Kong actually slumped by 3.1%, 2.6% and 2.3% over the same time-frame. Yet another report showed year on year growth to June for apartments up by 38% and villas 24% with rental returns climbing 20% and 17% for these two categories. There is no way that this trend can continue without an asset bubble eventually becoming a reality.

However, it appears that the two major local property developers are both confident that the upturn shows no sign of waning and is sustainable. Emaar has announced that over 95% of all units, launched in the past eighteen months, have been sold with total sales this year reaching US$ 1.23 billion, compared to just US$ 327 million in the corresponding 2012 period. In total, the company unveiled 1,050 units last year and a further 2,120 so far in 2013. It is interesting to note that forecast deliveries for the next three years are 749, 539 and 533 – a total of just 1,821!

Nakheel has announced H1 profits of US$ 327 million (up 57% on the corresponding period last year) on a 36% increase in Revenue to US$ 1.15 billion. This year, it hopes to place a total of 3,000 units, having already delivered 1,600 residences in H1.

It is surprising to note that JLT now houses 65,000 people – in their 65 tower blocks – who either live or work in the mushrooming complex. By the end of Q3, the DMCC should become Dubai’s largest free zone with registered companies reaching 7,000. What is good news for the Dubai economy is that 95% of the 1,200 companies registered this year were new to the emirate. On the flip side, office rentals have risen 75% over the past twelve months to US$ 306 per sq mt.

With the prospect of Dubai hosting the 2020 World Expo, Damac Properties have plans for a further 8,000 luxury serviced hotel apartments over the next six years. Their first foray into this sector was the 355-apartment, The Signature, which began handover last month.

The conundrum facing the realty sector is that despite all this activity, local banks’ mortgage books actually fell in Q1 by 2.9% from US$ 43.5 billion to US$ 42.5 billion. One of the side effects of the regional turmoil is that Dubai has become a safe haven resulting in money flooding in so that an estimated 80% of purchases are cash buyers. It has taken the local market some years to recover from the 2008 property crash and it can only be hoped that we are not watching history repeating itself.

On the retail front, it seems that Dubai is responsible for US$ 2.32 billion of luxury good purchases with a double digit increase slated for 2013. The emirate has an estimated 30% of the regional market, with up to 50% of the merchandise being sold in the Dubai Mall.

One project that has now been scrapped is the proposed Tiger Woods Dubai golf course, in partnership with Dubai Properties Group. There is no need to shed any tears for the now ebullient golfer since his company – ETW (Eldrick Tiger Woods) – had already banked US$ 55.4 million in 2008 for design and promotion work. The world’s number one golfer will be in Dubai in February 2014 to participate in the Omega Dubai Desert Classic.

With its recent rights issue being 30% oversubscribed, Arabtec has seen 1.46 billion new shares (at US$ 0.41 per share) issued with a total value of US$ 654 million. At the end of the week, the company’s shares were trading at US$ 0.57, giving a market capitalisation of almost US$ 1.91 billion. In H1, the company booked projects valued at US$ 3.53 billion.

The Dubai Financial Market Index saw a Q2 4.5% rise in its market capitalisation to US$ 58.14 billion and a massive 82.4% hike in shares traded to US$ 10.4 billion, Meanwhile trade remains robust with the Index continuing to defy gravity and logic by posting a weekly gain of 7.6% from a Sunday opening of 2222 points to a Thursday close of 2392. In Q2, it had a 21.5% jump and so far this year, it has surged 53.64%. It may not be too long before this market runs out of steam.

Following HH Sheikh Mohammed bin Rashid’s recent directives in relation to setting up Dubai Smart Government, an agreement has been signed with the Department for Economic Development to provide support in upgrading shared IT services. The ruler’s vision of government excellence will ensure that all authorities and departments will work to best practices and that shared infrastructure and systems will benefit the whole community.

In their latest report, the IMF was effusive in their praise for the economic progress made by the UAE. It has highlighted the growth in tourism, the stability in real estate and the large amount of money pouring into the country as indicators of the growing local confidence.

Unemployment in the eurozone continues to rise with levels at 12.2% compared to the likes of Japan, Canada and USA at 4.1%, 7.1% and 7.6%. More alarming is the number of under-25s out of work with over 66% in Greece and Spain and 33% in Portugal, Italy and the Slovak Republic.

There was a sharp fall in German exports with its May trade surplus of US$ 16.7 billion well down on analysts’ estimates of US$ 22.6 billion. The country’s exports fell 6.5% to US$ 113.1 billion with imports lower by 1.6% to US$ 96.4 billion.

The Indian rupee continues to drop to historic lows of over 61 to the US$. Overseas fund managers are getting spooked by a combination of a domestic economy on the skids and expectations of Ben Bernanke scaling down economic stimulus measures in the US. A fall of almost 12% has marked the rupee as Asia’s worst performing currency this year – and there may be worse to come!

Two of the largest UK security companies, G4S and Serco, have been accused of overcharging the government of tens of millions of dollars for tagging criminals – some of whom were dead or back in prison or out of the country. The former, still reeling from its 2012 Olympic debacle where it could not provide enough staff as part of its US$ 426 million contract, is being investigated further by the Serious Fraud Office. Last year, the company saw its government-related contracts surge 19.8% to US$ 550 million. Meanwhile Serco has agreed to an independent forensic audit and has, rather magnanimously, agreed to repay if it is found to have received too much!

Unfortunately, this sort of corrupt practice – whether it be governments, financial institutions or big business – is becoming increasingly common Here, There and Everywhere.

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

Reason To Believe

Posted on July 11, 2013 by howesdubai

The property boom continues unabated with May seeing a jump in prices of 2.01% over the previous month – with apartments and villas up 2.13% and 1.56% respectively. On an annual basis, the trend was similar at 17.3% and 12.2%. An earlier June report indicated that on their global scale, Dubai Q1 price rises of 9.0% were the second highest to China’s 10.7%. How long this can go on for – before a damaging asset bubble becomes a problem – is a matter of some conjecture.

There is no doubt that consumer confidence has returned and this is borne out by the fact that Majid Al Futtaim Holdings (MAF) is planning to invest US$ 817 million in its Dubai businesses over the next five years. These will include two hotels, four Carrefour supermarkets and two hypermarkets and a new cinema.

Scarcely a week goes by without a major Emaar Properties announcement. Now the developer is teaming up with Meraas Holding to build budget hotels under the “Dubai Inn” portfolio. This will be a welcome addition to the hospitality sector which is dominated by 5-star hotel brands – currently making up 62% of the total available rooms. With a raft of affordable hotels planned, this will introduce a new type of tourist to the city who hitherto may have been put off by high hotel prices. This will be Emaar’s fourth type of hotel branding following its Address, Armani and, its recently launched, Vida hotel ranges.

Following the success of its recent launch with Paramount Hotels & Resorts, with reported sales in excess of US$ 272 million, Damac Properties have announced their latest offering – Damac Villas by Paramount. This gated community will be located in the Akoya development which will include the up-market Donald Trump Golf Club.

Even the Dubai Multi Commodities Centre is getting in on the act, with plans to build the world’s tallest commercial tower, replacing Taipei 101 which stands at 508 metres. The tower may well be needed as the DMCC has attracted more than 4k companies since 2009 and expects the current trend of 200 new companies a month to continue.

Troubled developer Nakheel has sold two more hotel plots on Palm Jumeirah which brought in US$ 191 million. The company expects work to commence shortly on its two planned Palm developments – The Pointe and Nakheel Mall and Hotel – as well as its 240-room hotel at Dragon Mart and an economy class one at Ibn Battuta.

It has been reported that 736 buildings were completed in Q1 with a value of US$ 1.02 billion – a reflection of the buoyancy in the Dubai market. This was a 6.6% increase on already impressive Q4 2012 returns. 39% (or US$ 393.4 million) of this total were for multi storey buildings.

Not so good news for certain landlords with reports that some local developers have upped their service fee charges. It seems that owners in JBR, built by Dubai Properties Group, fall into this category as the company tries to recoup earlier losses and hike prices to reflect current market conditions.

On the Palm, DEWA has launched a new water pipeline at a cost of US$ 15.7 million which will help meet future demand. The laying of the water transmission pipes, covering 3 km, will take eighteen months to finalise.

The newest tourist attraction is a proposed crocodile theme park. Dubai Municipality will develop the US$ 2.7 million facility in liaison with entertainment company, White Oryx. The 20k sq mt attraction will be ready by Q2 2015.

Memon Investments have sold their 40% built Dubai Sports City Frankfurt Tower 1 to Orion Holdings for a reported US$ 6.0 million. When complete, the project will have 224 residential units of varying sizes.

HH Sheikh Mohammed bin Rashid Al Maktoum has approved Ministry of Works projects, totalling US$ 545 million, including the first phase of the US$ 163 million Al Ruwayyah hospital which will be finished within two years. Also announced was the Al Ittihad Bridge which will span the Creek and will replace the temporary floating bridge. Construction of the 61 metre wide, 15 metre high and 12 lane bridge will start next year and will cost an estimated US$ 300 million.

The world’s largest container ship at 366 metres – MSC La Spezia – was the main attraction at the opening of the new extension to Jebel Ali Port’s Container Terminal 2 (T2). The terminal wall has been extended by 15% to 3k metres and has seen its capacity increase by 9.3% to 15 million TEUs (twenty foot equivalent units).

Despite numerous false starts, it does now seem likely that Dubai will finally be home to the world’s first underwater hotel, currently being developed by Dry Docks World and Deep Ocean Technology, a Polish company. Eventually the luxury hotel will be located in 30 metres of water off the emirate’s coastline.

With a further sixty Airbus 380s still on order, Emirates is in the throes of arranging finance for four of these aircraft by means of an instrument, known as an enhanced equipment trust certificate (EETC). The US$ 630 million facility will comprise Class A notes, valued at US$ 462 million – with a final maturity of 10 years – and the balance of Class B notes.

The Emirates Air Line, a 1.1 km cable car system crossing the Thames, has carried over 2.4 million passengers in its first year of operation. Later this month, the world’s best airline will open another London tourist attraction – the Emirates Aviation Experience – to be located in Greenwich.

Dubai Duty Free once again saw its sales surge – for the first six months up by 13% to US$ 872 million. Not many duty frees can boast of every departing passenger spending US$ 48 on their way out. With the future opening of Concourse D, as well as Al Maktoum International, the future for the airport retailer is indeed rosy.

Due for completion by late next year, work will soon commence on a food processing facility in Dubai Investment Park. Al Islami Foods is planning to spend US$ 27.2 million on the plant, that will cover an area of 11.5k sq ft, and will be able to produce 18k metric tonnes of food a year.

On the local bourse, the Dubai Financial Market Index ended the week on 2264, with all indicators heading north – weekly by 1.89%, YTD by 45.45% and yearly by 58.43%. With the double whammy of the holy month of Ramadan and school summer holidays, the next few weeks will witness subdued activity, despite what should be an impressive Q2 reporting season

With the price of gold having dropped 35% since its September 2012 high of US$ 1,922, the Canadian miner Barrick Gold, the world’s largest, is considering a write down of a massive US$ 5.5 billion on an investment in its Pascua-Lama facility on the Chile-Argentina border. (Gold closed on Thursday at US$ 1,251).

The week has not been a good one for the eurozone with previously unresolved problems resurfacing. The troika is not happy with the lack of promised reform in the Greek civil service and, if no agreement is reached about future progress, there is a possibility that the country will be unable to repay a US$ 2.86 billion loan next month and, even worse, the IMF may stop a US$ 10.5 billion payment – part of its US$ 240 billion bailout package. With unemployment levels at 27%, the country is in its sixth straight year of recession and, with its citizens having lost over 30% of their disposable income, there is no way that Prime Minister Antonis Samaras can consider imposing further austerity measures.

It is reported that the French government is to make cuts of US$ 18.2 billion in state expenditure as the country continues to struggle. Even the Italian Economy Minister, Fabrizio Saccomanni, is forecasting possible civil unrest as it embarks on another round of public spending cuts. To add to his problems, the country is burdened with debts of over US$ 2.59 trillion!

Spanish banks are still in the doldrums as the country has still got grave economic problems and some consider that there is still plenty of mess to be cleaned up. The Central Bank has directed lenders to review their refinanced loan portfolio of US$ 270.8 billion and expect to write off at least another US$ 13 billion.

In 2010 and 2011, HSBC launched two US$ 100 million funds and added a further US$ 72 million last year, to help local SMEs. Now the bank has announced that it is in the throes of closing some accounts of companies for the apparent reasons that it wants to increase capital returns and streamline its operations. Having already pulled out of sharia banking here, this is another step that seems to point to the fact that the bank wants to cherry pick and is not too concerned about Dubai’s economic future. It will give “departing” customers 60 days’ notice, many of whom are asking for a Reason To Believe.

Posted in Finance | Tagged DEWA, DFM, Dubai, Dubai Financial Market, Dubai Multi Commodities, Emaar, Emirates, emirates airline, Emirates NBD, HH Sheikh Mohammed bin Rashid Al Maktoum, Majid Al Futtaim, UAE | 1 Comment

I Can See Clearly Now

Posted on June 28, 2013 by howesdubai

May was another great month for Dubai’s burgeoning hospitality sector with returns showing an 18.8% hike in hotels’ RevPAR (Revenue per available room) to US$ 173.09. ADR (average daily rate) also had a double-digit growth to US$ 216.22.

There will be yet another tourist attraction with SkyDive Dubai constructing the world’s largest vertical wind tunnel, due to open as early as this August. The four-storey glass structure has a 16.5ft diameter and will give visitors the opportunity to float in mid-air. The facility will be powered by four electric motors that will generate wind speeds up to 280kph. Being Dubai, it will only be a matter of time before they break the world record of having most jumpers simultaneously in a vertical wind tunnel – currently at 22 people.

China State Construction Engineering Corporation has bought an equity stake in the recently announced US$ 1 billion Viceroy Dubai Palm Jumeirah. Already the main contractor on the project, this massive Chinese construction company becomes the first from that country to make such a major property investment in Dubai. The SKAI Holdings venture – with 481 rooms and 221 residences – will be completed in 2016.

Drake & Scull have won a Saudi contract with Habtoor Leighton Specon for the National Institute of Neurosciences in Riyadh. The project, worth US$ 139.6 million, is for MEP work and forms part of the US$ 615 million to be spent building the region’s largest medical complex.

This week saw the launch of phase 3 of the Cedre Villas project, developed by Dubai Silicon Oasis Authority. The 160 luxury villas – with a cost of US$ 77.7 million – will be ready within the next fifteen months, with features including two parks, a pool and a cycle track. As the company was responsible for the first two phases, it was no surprise to see Arabtec being awarded the building contract valued at US$ 48.8 million. (The company also extended the subscription period for its US$ 627 million rights issue to 04 July).

Dubai Properties Group expects completion of six buildings in Business Bay this year, two of which have just been handed over. Their Bay Square development covers an area of 5 million sq ft and will eventually include twelve towers and comprise I million sq ft of commercial space and residential units.

Although it is estimated that up to 45% of current commercial property is vacant, Dubai now ranks 25^th most expensive city for office space in the world. Compared to the top two – Hong Kong (US$ 235.23 per sq ft) and London’s West End (US$ 222.58) – Dubai rates are comparatively cheap at US$ 92.64.

Just three years after its first flight, budget carrier, flydubai, has announced that it will introduce a business class service across its 60-destination network. Benefits will include dedicated staff, seat pitch of 42 inches, enhanced entertainment system, priority check-in and preferred car parking.

It will come as no surprise to see that Emirates scooped the Skytrax ‘World’s Best Airline’ award at the Paris Air Show. In addition, they picked up ‘Best ME Airline’ and ‘World’s Best Inflight Entertainment’.

According to a study by Brand Finance, Emirates Airline has a brand value of US$ 4.1 billion and UAE companies have fifteen brands in the top 50. Others on the list include Etisalat (US$ 3.4 billion), DP World (US$ 681 million) and Emaar Properties (US$ 468 million).

Emirates International Telecommunications, owned by Dubai Holding, is evidently considering a sale of its remaining 26% shareholding in Axiom Telecom. It is estimated that if the deal went through, it would be worth in excess of US$ 300 million. Furthermore, there are reports that EIT have divested its 35% share in Tunisie Telecom for US$ 2.25 billion.

Troubled government property developer, Nakheel, is reportedly in talks to refinance a US$ 2.2 billion loan due for repayment in 2015.This comes two years after the company agreed a US$ 16 billion restructuring with its creditors. If, as is expected, the Fed slows down or phases out its asset buying policy, global borrowing costs are bound to rise which would impact on future repayment plans.

To keep up with growing demand, DEWA have now completed almost 40% of work on its new US$100 million pipeline extension. Spanning 65 km, the final phase is due to start in Q3 2014.

Dubai International saw a massive 18.9% surge in May passenger traffic. With 5.2 million passengers last month, the five-month total of 27.1 million shows a 16.8% increase over the corresponding period last year. Cargo saw similar growth with YTD returns of 995k tonnes – up 11.6%. May aircraft movements rose by 10% to 31k.

Covering 132 countries, the UAE was ranked 19^th in the World Economic Forum’s recent Global Enabling Trade Report and even made the top ten for efficient trading procedures and security. In yet another study Dubai was placed fifth in AT Kearney’s Index for Retail Trade Growth – the highest-placed country in the region.

With a low inflation rate (slated to be at no more than 1.6%), and an economy that the IMF expects to grow by 3.1% this year and 6.4% in 2014, the economic outlook for the country looks promising. The main drag factor, that will cause problems, will be the real estate sector. According to REIDIN, the rental index has risen by 11.62% over the past twelve months and property prices continue to surge. However with the present demand, it would seem that any downturn will not be felt until mid-2014.

Another indicator of business confidence was the fact that local banks are lending more – for the first four months of the year, they approved personal loans of US$ 2.2 billion out of a total loan book of US$ 6.0 billion. At the end of April, total loans stood at US$ 305.8 billion with a bad loan provision of US$ 19.3 billion – still on the high side.

2012 was a bumper year for Foreign Direct Investment into the country, with an estimated US$ 9.6 billion pouring into local coffers – the third straight year of growth. On the flip side, UAE is the Arab world’s largest exporter of capital.

The Dubai Financial Market Index closed the week on 2222 – an 8.6% drop from its 02 June high of 2430. However, it is still up – 42.77% on the year and 59.52% over the past fifty two weeks.

Global financial markets have definitely been spooked following Fed Chairman Ben Bernanke’s recent mumblings of an early exit from the US QE policy. As global bond yields surge, investors face an uncertain future with the possibility of losing trillions of dollars which, in turn, would be the precursor of another financial crisis – just six years after the last one brought economies to their knees.

Gold producers were probably the main casualty of Bernanke’s comments and shares in many of the leading miners took a pasting during the week. When the Fed was printing money, at an unprecedented rate, by the issue of bonds to the monthly value of US$ 85 billion, the price of gold touched US$ 1,920 last September – since then, it has fallen by almost 37%. Simultaneously, production costs rose resulting in the double whammy of lower margins and lower prices. Indeed as the US Treasury bond yield increases, the price of gold will inevitably head south.

Australia has received the brunt of recent market falls as their commodities and mining boom fizzles out. Both its stock market and currency have been on the receiving end of a beating with both down – the former by almost 10% since its 14 May high and the dollar by almost 9% to US$0.92, since the beginning of May. There will be even more turbulence as the lucky country, with the demise of PM Julia Gillard, heads towards federal elections in September.

In the UK, Starbucks has still not woken up and smelt its own coffee. Although it has had sales of US$ 4.6 billion since 1998, it has managed to pay tax of just US$ 13.1 million. But to placate its ever-growing disgruntled customer base, it has decided to “pay” the Treasury US$ 15.4 million this year! There cannot be too many companies that are still operating after fifteen years of apparent losses.

Meanwhile there are indicators that the UK economy has now come off life support and recovering at a faster rate than most of its European neighbours. The boost in economic confidence can be seen from a 4% monthly jump in consumer spending, a 12% hike in on-line spending and a welcome improvement in household financial outlook.

And despite all the apparent good news emanating from the US, the country has debts of over US$ 16 trillion. If, and when, interest rates rise, this will become a huge millstone around Obama’s neck.

Dubai is the place to be where this week, HH Sheikh Mohammed bin Rashid Al Maktoum launched a platform, utilising Google’s Street View technology, showing all facets and a 360 degree view of Burj Khalifa. Users will be able to have a virtual tour of any part of the world’s tallest building with the Burj Khalifa Select application – the first time the technology has been used in the Middle East. The results are impressive, the views are stunning and maybe the Dubai Ruler was humming I Can See Clearly Now. (His view is a lot a brighter than for most other global leaders).

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