Another One Bites The Dust!

Posted on October 27, 2013 by howesdubai

dubai-expo-2020HH Sheikh Hamdan bin Mohammed Al Maktoum, Crown Prince of Dubai, opened the 33rd Gitex Technology Week on Sunday. The event provides a major boost for the local economy as it attracts more than 130k industry specialists from over 150 countries. This will prove to be another boom week for the hospitality sector, following straight after the lucrative Eid Al Adha holiday.

Prior to the event, HH Sheikh Mohammed bin Rashid Al Maktoum announced a major project to transform Dubai into a Smart City. With the expanded use of smart technology, the project will enable the public, including residents and visitors, to link directly with the various departments in the public service 24/7. Other information portals – including weather, traffic, entertainment guides etc – will become available.

Dubai Customs also released figures showing the tremendous growth in the emirate’s electronics foreign trade with an H1 growth of 30.8% to US$ 37.1 billion. Imports were up 31.6% to US$ 20.5 billion of which China (accounting for 46.7%), Vietnam (16.0%) and Malaysia (5.3%) were the largest trading partners. Exports and reexports jumped 27.1% to US$ 16.6 billion with the main business going to Saudi (21.3%), Iraq (11.4%) and Hong Kong (6.6%). Not surprisingly, mobile phones were the single-most traded item, accounting for 49.2% of total imports and 57.5% of exports and reexports.

One of the first companies to announce their Q3 results was Emaar Properties with a 36% revenue surge in the first nine months of 2013 to US$ 2.4 billion whilst net profit was 13% up at US$ 490 million. Its prime asset, Dubai Mall, had a footfall of 55 million – 24% up on the same period last year and was a major contributor to the fact that the company’s malls and hospitality sectors accounted for 44% of total revenue.

Emirates NBD has acquired from Union Properties its Uptown MotorCity development, including six hundred apartments, as well as the 243-room Motor City Hotel, due for completion by June 2014 – five years later than originally planned. 40% of the residential units have already been sold. At the beginning of the year, the bank was UP’s largest shareholder but their latest accounts show that it had booked a US$ 52 million gain from divesting 32.6% of its shares and has announced that its remaining 15% is now up for sale. ENBD reported a 21% increase in Q3 net profit to US$ 211 million although a 50.5% rise in bad loan provisions, from US$ 275 million to US$ 414 million, meant its profit was below analysts’ forecasts.

Merlin Entertainment, the world’s second largest second largest visitor attraction operator (with 54 million visitors) after Disney, is planning to build a Legoland theme park in Dubai. Five years ago, it was due to partner Tatweer to build the park in Dubailand in what was to be a US$ 248 million project but the GFC put an end to those plans. (At the time, Dubai Holding subsidiary, Dubai International Capital, had a 17% share in Merlin but sold out in 2011).

Emirates International Telecommunications LLC, part of Dubai Holding, owned by the Ruler, is expected to sell two of its assets – a 35% share in Tunisie Telecom, which was bought for US$ 2.25 billion in 2006, and a 26% share in the Dubai-based Axiom Telecoms. It is estimated that proceeds from both sales will bring in US$ 1 billion and are part of the repayment strategy that sees state-owned entities having to find in the region of US$ 50 billion, over the next three years.

A 13 megawatt photovoltaic plant, opened this week, represented phase one of Dubai’s $3.3bn Mohammed Bin Rashid Solar Park in a push to diversify energy supplies in the UAE. Built by US company, First Solar, the facility will eventually produce 24 million kw pa which should meet the power needs of five hundred households. The solar park will eventually generate 5% of Dubai’s electricity.

The country continues to power on with an expected US$ 12.8 billion 2013 expansion in its nominal GDP to US$ 389.8 billion and this should easily top the US$ 400 billion mark next year. The main driver for growth will be the non-hydrocarbon sector at 4.5%, whilst the oil sector will fall to 1.6% growth this year, giving a real GDP expansion of 3.5%.

In no time at all, Dubai bourses hold nominal value of sukuks at US$ 11.1 billion, the third largest total globally, The DFM has had six new listings already this year, totalling US$ 4.4 billion. Undoubtedly, this market is set to develop further as Dubai expands its range of Islamic finance listings, including sukuks.

Meanwhile the Dubai Financial Market General Index witnessed a quieter week (in local terms) – up 3.1% to 2910 points, having started Sunday at 2823.  The market has jumped 5.4% already this month and shows an impressive 87.6% gain in 2013.

This week, Dubai welcomed more than 250 representatives, from 167 member nations of the Bureau International des Expositions (BIE). These delegates, who oversee World Expo, are here to check on the emirate’s readiness to host Expo 2020, with Dubai being the bookies’ favourite in a four horse race. However, the jury is still out whether the awarding of Expo 2020 will be a godsend to the Dubai economy. Whichever way the decision goes on 27 November, there will undoubtedly be a raft of mega projects announced. It will be disappointing news for Dubai if the BIE plump for any of the other candidate cities – Izmir, Sao Paulo and Yekaterinburg. However, if the unthinkable were to happen, the emirate will find suitable ways to spend the estimated US$ 8.4 billion cost of financing the six-month exposition.

The UK government seems to have wasted over US$ 2 billion of taxpayers’ money by selling its stake in Royal Mail at least 37% below market value. IPO shares were issued at US$ 5.33 (valuing the company at US$ 5.3 billion); at the beginning of the week, they were trading at US$ 7.26 (US$ 7.3 billion).

Despite the odd snippet of good news rippling out of Europe, many of the countries still face the prospect of continued austerity. For example, troubled Spain will have to slash public spending by 4.7% and cut pensions so as to reduce its public deficit to GDP to 5.8% in order to satisfy the new tougher European budgets. Greece – now in its 6th straight year of recession – has to introduce further draconian measures, as its public revenue is still far short of its proposed spending.

It is no surprise to see BHP Billiton, the world’s largest mining company, cancel all but one of its Indian operations – another example of a conglomerate not happy with the Indian government’s intransigence, petty bureaucracy and business-unfriendly policies. In the past four months, three other high profile MNCs have pulled the plug on their Indian projects. Wal-Mart recently closed their partnership with Bhartia Enterprises, having been ordered to source at least 30% of its goods sold locally and other over restrictive government regulations on foreign investment. Similar regulatory problems have seen South Korea’s Posco scrap a US$ 5.3 billion steel mill project and Luxemburg-based ArcelorMittal cancel plans to build a second major steel plant. The Indian people will be the ultimate losers as BPP Billiton becomes yet Another One To Bite The Dust!

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Hold On

Posted on October 21, 2013 by howesdubai

BernabeuA raft of property projects was announced at last week’s Cityscape including Crystal Lagoons building the world’s largest man-made lagoon (40 ha), in the new Mohammed bin Rashid City, featuring beaches and waters similar to the Caribbean (at more than three times the size of its Sharm El Sheikh facility).The company has a portfolio of 250 projects in fifty countries.

Khalaf Ahmad Al Habtoor has announced the world’s biggest residential and hospitality development, Al Habtoor City, with more than 3,000 hotel and residential units. Located on the site of the old Metropolitan Hotel, on Sheikh Zayed Road, there will be three luxury hotels in the 10 million sq ft development, as well as two 4-level penthouses, with a price tag of US$ 250 million each!

Latest RERA figures indicate that there were 5,175 residential property transactions in Q3, totalling US$ 3.04 billion. Over the same period, average rental increases for all types of property came in at 3.5% – the same level as the previous quarter. Apartment rentals have increased at a quicker rate than villas, with a Q3 rise of 4.5% (and 28% year on year).

Also slowing down in Q3 were office rentals but that sector still remains buoyant, despite an oversupply of stock. The two big gainers were JLT – up 14% quarter on quarter and 75% year on year – and Business Bay –  nudging up 10% and 28% over the same time period.

Will Real Madrid alter its iconic Santiago Bernabeu stadium name to include that of Emirates? The airline is the club’s main sponsor and club president, Florentino Perez, has hinted of a change.

Dubai-owned QE2 Holdings has appointed the Chinese COSCO Group to refurbish its 294 mt long cruise liner into a luxury floating hotel. Within two years, 400 suites (60 to 150 sq mt) will replace the 990 rooms and the shopping mall, ten lounges, seven restaurants and ballroom will be revamped. Is it incongruous then, that it will be based in Hong Kong, rather than Dubai?

With a US$ 100 million expansion strategy, Malabar Gold and Diamonds plans to open 100 mini jewellery stores, over the next three years, in the UAE. The ‘Pink Chic’ brand will be located in shopping malls and hotels and will sell jewellery in the US$ 100 – US$ 1,000 range. The company has seventy outlets in India and thirty in the Gulf.

The 33% sales increase of Renault vehicles so far this year and BMW Q3 turnover jumping 18% are sure indicators of the current boom in the local economy. Likewise the 69% YTD surge in the volumes registered on the Dubai Gold and Commodities Exchange (DGCX). At the end of Q3, there had been 11.4 million contracts with currency futures up 77%.

Dubai Duty Free continues to grow with revenue up 12% to US$ 1.27 billion for the first nine months of 2013, and expectations of another record end of year,  when sales could top US$ 1.8 billion. Terminal 3 had a 17% increase to US$ 801 million whilst arrivals jumped 10% to US$ 125 million. The big-3 selling items were perfume (15.7% of all sales, at US$ 201 million), liquor and gold.

French wine producer is trying to sell a Balthazar (a 12 litre bottle) of its 2009 vintage Chateau Margaux for US$ 195k. If successful, this would be the highest price ever paid for a red wine. The 400-year old vineyard has produced only six of these bottles, three of which are on sale at Dubai International Airport.

The OECD has ranked the UAE as the world’s 16th most generous country as it has committed US$ 1.59 billion in foreign aid, of which 87% – or US$1.38 billion – will go on development projects. US$ 883 million (55.6%) of the aid is spent in Asia.

The Dubai Financial Market has been closed all week for the Eid al Adha break and will reopen for business on Sunday when the index will be at 2823 points. The market will see increased activity in the coming weeks, especially with the Q3 reporting season under way and some exciting results expected, especially from the local banks.

With the banks expecting to announce spectacular performances, it is just a pity that so often their service goes in the other direction.

The biggest bank in the US, JP Morgan, has not had a good Q3, reporting a loss for the three months of US$ 400 million, compared to a US$ 5.7 billion profit a year earlier, because of a further US$ 9.2 billion legal provision before tax. Since 2010, the financial institution has already put aside a massive US$ 23 billion to meet penalties and claims and has admitted that it may have to find a further US$ 6.8 billion! The two major problem areas are its sub-prime mortgage losses, that could end up costing US$ 11.0 billion (US$ 7 billion in penalties and US$ 4 billion in claims), and the London Whale Trading incident, that could top US$ 7.1 billion (US$ 6.2 billion in trading losses and US$ 920 million in penalties).

With figures like that being bandied about, there is no doubt that few lessons have been learnt from the GFC. Many of today’s banks continue to be too big to manage and too big to fail and this can only be a sure recipe for a future banking catastrophe.

It seems that the US is fast catching up with Saudi Arabia and Russia as the world’s largest crude oil producer. Thanks mainly to increased production from shale, the country is now the global oil supply leader (at 12.1 million bpd) when the likes of natural gas liquids and biofuels are added to its crude oil output of 3 million bpd. It is interesting to note that the US is the largest user of oil at a staggering 19.18 million bpd – far greater than China (9.06 million), Japan (4.45 million) and India (3.20 million).

The US economy will be helped by possible US$ 4 billion UAE government defence contracts including the purchase of Raytheon Joint Standoff Weapons and the Boeing Expanded-Response Standoff Land Attack Missiles. In addition, there will be requirements for training, software, related equipment, transportation and storage facilities. Next month is the Dubai Air Show, with probable Boeing orders from Emirates, for at least fifty 777-9x aircraft, and flydubai for fifty  737s – a welcome boost for the slowing US economy.

After sixteen days, the US farce came to its expected end as lawmakers produced a last-minute deal to stop the country defaulting on its debt. The compromise saw the Senate lift the US$ 16.7 trillion borrowing limit and re-open the government for business. There is every chance for this absurdity to reappear as the deal does not resolve the basic issues of spending and deficits and only funds the government until 15 January and raises the debt ceiling to 07 February 2014.

Unsurprisingly, the global markets responded well to the news as did the greenback which rose against most currencies. Whilst oil prices moved north to nearly US$ 111, the big loser was gold which continued its downward trend to dip to US$ 1,380 during the week, later rallying to close on Thursday at US$ 1,420. It is inevitable that this precious metal will see its first annual fall since 2001 and will continue to be a problematic investment, whilst the equity markets flirt with all-time highs. The message to those currently holding gold – Hold On.

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Start Me Up

Posted on October 17, 2013 by howesdubai

obama-laughingThis week saw the inevitable raft of new projects being announced that always coincides with Cityscape. Probably the most surprising property news of the week was Nakheel’s plan to restart work on the much delayed Palm Deira (now to be known as Deira Island). The change in name comes with a modification to the size of the development, with none of the original fronds being utilised. Despite this reduction, the island will still have 1,400 retail and food outlets, a 30k capacity ampitheatre and a 250-room hotel. There is every possibility that outside companies will be asked to tender for other areas in the development.

Another massive delayed project was brought back to life with news that Emaar Properties and Dubai Holding will restart work on the 6 million sq mt The Lagoons, located at the end of The Creek. This will include a central business district with the Dubai Twin Towers, schools, medical facilities and a hotel, and when completed will be three times the size of Downtown Dubai.

In 2008, there were plans to build an opera house on a Dubai Creek island but they were shelved because of the GFC. Now it seems that Dubai will finally have the most modern theatre in the world which can be converted to other uses such as for weddings, exhibitions etc. The 60k sq mt facility, shaped like a traditional dhow, will be completed by 2015.

Dubai Properties Group will start work with further developments of Culture Village, located on the Creek. This will include a 3.8km promenade with a retail souk, art centre and a residential area, Manazel Al Khour. Two of the major developments in this heritage location, the 6-start Palazzo Versace Hotel and D1 Residential Tower, will be completed next year.

DPG will also add new projects to its ‘The Walk’ in JBR, including yet another beachfront hotel. The area is home to 40k residents and welcomed over 13 million visitors in the past year.

Deyaar, now controlled by Dubai Islamic Bank, has confirmed that it will construct two tower blocks in Business Bay. The US$ 38 million received from a recent deal, together with a mix of bank loans and advance sales, will help finance these projects.

Meydan also used the property show to announce some major developments. As part of the new US$ 545 million, 3 km Dubai Canal Project, the organiser of the world’s richest horse race has formed a JV with Meraas to develop a 40 million sq ft site for up to US$ 9.5 billion worth of residential development, on either side of the canal. The JV has also commenced sales on its 520 mt high Entisar Tower, which will have 444 apartments.

Meydan Heights – with its 528 townhouses – will start receiving its first tenants, mostly Emirates pilots and staff, by the end of the year. It was no surprise that two other Meydan developments have already sold out. These are the 70 blocks of land for its upmarket Racecourse Villas and 120 Meydan Business Park plots.

Dubai Investments Real Estate Company has started work on three residential and commercial properties in Jumeirah, Mirdiff and Meydan. This comes after the success of its RITAJ project in Dubai Investments Park that comprised some 2k apartments, most of which have already been sold or leased.

Troubled developer, Union Properties, have also got in on the act, announcing six new projects. These include expansions of its Green Community and Motor City retail area – The Ribbon. It will also replace its proposed F1-branded theme park with a mixed-use development which will have a replica of the Champs-Elysees.

The DIFC zone is planning a US$ 4.1 billion expansion plan in a bid to attract more international companies. Currently only 60% of the total 25 million sq ft available is being utilised and suiters are being sought to develop the remaining area which is expected to be 65% offices, 20% residential and 15% retail.

On Tuesday, flydubai launched its first business class flight with FZ729 taking off for Kiev in the Ukraine. The three-year old airline already covers 65 destinations in 34 countries with more growth on the horizon.

The Dubai Financial Market General Index finally took a breather after a tumultuous six weeks of trading closing on Thursday on 2831 points – marginally up on its 2823 Sunday opening. The market is still 82.50% YTD and 2.5% up so far in October. The bourse will be closed next week for the Eid al Adha celebrations and will reopen on 20 October.

Meanwhile Dubai’s other stock market, Nasdaq Dubai, listed its first new stock in four years. However, the Bank of London and The Middle East saw no activity in its first day of trading on Tuesday. The only other stocks listed on this exchange are DP World and Depa Ltd.

A recent study by the Emirates Identity Authority (Eida) estimates that only 20% of the 150k new jobs generated in the country every year is being taken by Emiratis. 58.7%, or 88k, are Dubai-based.

It is reported that the country’s consolidated financial account (CFA) will hit a new high this year because of the high oil prices. The country has recovered well from its US$ 8.0 billion 2010 deficit. It is estimated that in 2008, the country needed oil at US$ 23.4 to break even which rose to US$ 92.4 in 2011 and has fallen back to US$ 80.0 last year.

Not one of the best forecasters, the IMF has once again had to change their growth estimate for the GCC. Only four months ago, they were predicting a 3.78% 2014 expansion but now have amended that to 4.4%.This will be 18.9% up on the expected 2013 growth of 3.7%. The rest of the world does not fare so well with the world body lowering their July growth forecasts by 0.3% to 2.9% this year and by 0.2% to 3.6% in 2014.

The 3 ‘I’s are in the news. India has seen its growth pegged back from 5.6% to 3.8% over the past three months and has been dogged by persistent high inflation rates and a significant downturn. Italy has been beset by its usual problems of red tape, weak government, fragile economy and high debt which stands at 133% of GDP. Ireland expects to exit the bailout programme by the end of the year having had to go to the EU and IMF for a US$ 115 billion loan in 2010.

Despite apparent conciliatory moves by Republican John Boehner, it seems that the US president is not in a mood to negotiate. By Thursday, the federal government had been virtually shut down for ten days with no apparent end in sight. Consequently, the world’s markets are becoming spooked and 1-month US government debt hit a five-year high. This impasse threatens to stop the raising of the country’s US$ 16.7 trillion debt ceiling by 17 October and could push the rest of the world into a major recession. The simple message to Obama is – Start Me Up!

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Here We Go Round The Mulberry Bush

Posted on October 8, 2013 by howesdubai

falkirk-wheelThe latest industry market report indicates that property prices continue to surge – up 42% over the past year. The usual factors driving prices are in evidence – political stability, buoyant local economy, growing demand, 2020 Expo etc. However such steep climbs may well be a precursor of another asset bubble, similar to what happened in 2008.

One of the drawbacks of this current property boom is the increase in the number of cold-calls from brokers and agents. As a result, the Real Estate Regulatory Agency (RERA) has notified all concerned parties that such direct telemarketing tactics are against its 2006 regulation 85 which could lead to fines for offenders.

The government is planning to spend US$ 545 million in building a canal that will link Business Bay to the Arabian Gulf. The 3km waterway will have to cross Sheikh Zayed Road, around Safa Park, as well as Al Wasl  and Jumeirah Beach roads and will be completed by 2017. It will cover 80k sq mt and will use a bridge – that could be based on the Falkirk Wheel in Scotland – to straddle SZR.

The oldest shopping mall in Dubai – Al Ghurair – has finally completed its first phase of a US$ 545 million revamp. Its retail expansion has 130 new shops and 350 other outlets covering 850k sq ft.

Habtoor Leighton Group has been awarded a US$ 75 million contract to build the next phase of the JAFZA One convention centre complex, as work restarted on the stalled US$ 518 million project. The contract will cover the interior fit-out of one of the twin commercial towers which is part of the development that will include a hotel and associated exhibition and recreational facilities.

A reflection of Dubai’s economic upturn saw a 15.3% rise in the number of new licenses issued by the Department of Economic Development with an August total of 1,148. There were also increases in issued trade names (up by 27.2% to 4,840) and initial approvals by 23.3% to 1,629 during the month.

It is estimated that the UAE has plans, totalling US$ 58 billion, for future expenditure on its roads and bridges. With that amount of investment, it is no wonder that, according to the latest Travel and Tourism Competitiveness Report, the country ranks second in the world for roads quality. Shame about the driving!

In a move to encourage more budget hotels, newly built properties, in the 3-4 star brackets, will be granted a concession on the current 10% municipality fee. The waiver of the levy, charged on the nightly room rate, will be for a four year period.

Ducab and Abu Dhabi’s Senaat have formed a JV to build a 50k tpa aluminium rod mill. The new entity, Ducab Aluminium, will manufacture Electrical Conductive grade aluminium rods with the project slated to cost US$ 60.0 million and will be located in the Khalifa Industrial Zone.

An initial agreement has been signed between the Dubai Supreme Council of Energy and the China Sonangol Group to build a crude oil refinery in the emirate. This is seen as a necessary move as Dubai‘s energy requirements continue to grow in line with its booming economy.

The Dubai Financial Market witnessed a mesmeric Q3 gain of 24.2% closing at 2762, following a Q2 increase of 21.5%. Thursday’s closing bell saw the market at 2823 – a 3.1% jump on the Sunday opening of 2737 and 81.99% up for the year to date. Bellwether stocks, Emaar and Arabtec, were higher closing on US$ 1.64 and US$ 0.73 respectively.

There is speculation that the Dubai and Abu Dhabi bourses are discussing a possible merger, a move that would attract more foreign investment. On Wednesday, the share value of Dubai Financial Market was 15% limit up – a sure indicator that this on-off deal is back on the table.

A long awaited, but welcome, move by the local banks sees the first phase of the introduction of a direct debit scheme being implemented from 05 October. Initially, all post-dated cheques will be transferred to the new system and then all loan repayments will be gradually phased in, followed by payments such as DEWA, insurance, credit cards, telecoms etc.

Hot on the heels of HSBC, it seems that troubled British bank, Barclays, has begun to cull their retail accounts in Dubai. It appears that both banks have had communication problems with customers, some of whom have claimed lack of information and notification. Confirming recent reports, it is no surprise to see Barclays plc decide to move out of retail banking in Dubai to concentrate on its core business of investment and corporate banking.

With UK Chancellor hinting that the country will be in austerity until 2020, German and Spanish September jobless figures rising and Berlusconi trying to topple the Italian government yet again, it is little wonder that the ECB president, Mario Draghi, thinks that European economic recovery is ‘weak, fragile and uneven’. Unemployment in the eurozone is at 19.2 million with Austria the country with the least unemployment at 4.9% and Greece at the other end of the scale with 27.9%. Even more disturbing is the fact that the total EU number of those aged under 25, not working, now stands at 23.7%.

The last thing the US economy needed was an impasse that saw 800k public workers forced to stay at home. It will further damage an already fragile domestic economy, with below 2% growth expected this year, and have serious repercussions across the globe, if the shutdown is prolonged, there will be widespread economic collateral damage that will result in a major global recession. Furthermore, it may be interesting to see China’s reaction to a weaker dollar and a stronger yuan.

Monday was the first day that the US government went into shutdown after Congress failed to approve next year’s funding. Nothing new as this is the 18th time in the past thirty-five years that this has happened.  Once again – Here We Go Round The Mulberry Bush.

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Don’t Stop Me Now

Posted on October 3, 2013 by howesdubai

dmcc-multiplexNow officially the emirate’s largest free zone – with over 7,300 registered companies – DMCC have contracted Brookfield Multiplex to design and construct ‘One JLT’, a glass-box style building. On completion, this impressive world-class building will cover 23.4k sq mt and be located in the middle of the 65 mixed-use residential and commercial tower JLT development. Maybe it is not beyond the realms of possibility to visualise the world’s tallest tower being built there in the not too distant future.

One unnamed landlord is taking advantage of the current boom in real estate prices by releasing 300 apartments in JBR. With apartment prices in Shams 1 ranging from US$ 327k to US$ 872k – 34% up on last year – and a growing demand for beachfront property, these apartments will be sold quickly.

A few more than usual potential buyers will be trying to seal deals this week, with news that the property transfer fee is set to double to 4%, effective from 06 October. The reason for this surprise move is to curtail the practice of flipping which was prevalent in the halcyon days of 2008, resulting in an asset bubble that spectacularly burst bringing Dubai to its economic knees.

Yet another hotel is planned for the Dubai Marina area with the TAJ RP International Limited has signing an agreement with the Intercontinental Hotels Group. The 280-room property is slated for completion by 2016 and will be the fourth Crowne Plaza in Dubai.

As part of its US$ 409 million investment strategy, R Hotels is planning to open its second Dubai hotel, in JBR, in Q4 2013. The company has also reportedly started work on another property on Palm Jumeirah.

Meanwhile, the Palazzo Versace is now expected to open by the end of 2014 – five years later than originally planned. The US$ 626 million project is being developed by Enshaa Services Group that initially had a JV with the Australian-based Sunland Group. However, a 2011 swap deal saw Enshaa take 100% in exchange for the Versace Hotel on the Australian Gold Coast.

A recent survey shows that Dubai’s waterfront hotels had the best profitability rates in the Middle East. Occupancy rates have risen by 3.7% to 84.0% whilst ADR has surged 4.85% to a creditable US$ 389.00.

With Emirates planning to start phasing out their current fleet of 120  777s in 2017, Boeing are hoping that their largest customer will shortly place a new order for the new long-range 777-9X. Some expect a major announcement to be made at November’s Dubai Air Show – whether this will surpass the Emirates’ US$ 18 billion order last time round, two years ago, remains to be seen.

Within a year, Emirates SkyCargo will move its operations to the new terminal at Al Maktoum International Airport. On completion, the fully automated facility, at the world’s first purpose-built aerotropolis, will be able to handle up to 1 million tonnes of cargo.

Although year on year August monthly cargo figures actually contracted by 3.1% to 185k tonnes, YTD returns are 8.1% higher at 1.59 million tonnes. Passenger traffic for August was up by 23.8% to just shy of 6 million whilst YTD is 16.4% up at almost 44 million.

Another indicator of the confidence in the local economy is that 2013 vehicle sales are expected to top the all-time high of 346k units, reached in 2008.

It was no surprise to see Lindner Depa Interiors file a US$ 245 million arbitration claim against New Doha International Airport. The company – a JV between Germany’s Linder AG and Dubai’s Depa Limited – had its contract terminated in June for their refusal to accept new terms and conditions.

Despite the global slowdown in trade, the UAE continues to expand with 2012 imports of US$ 273.5 billion – accounting for 26.8% of all the region’s imports, of US$ 1,022 billion, and even surpassing Saudi Arabia with its US$ 211 billion total. However its exports of US$ 314 billion (or 21.7% of the total) were less than Saudi’s US$ 410 billion. The extent of the country’s impressive growth can be seen from the fact that over the past five years, exports have grown in excess of 27% annually and imports by 24%.

The Dubai Financial Market has had a turbulent September so far starting the month at 2523 points and closing on Thursday 8.5% up at 2737. However, the past four weeks have witnessed a 7.4% fall to 2337, followed by an 8.6 gain to 2538, a 5.0% rise to 2666 followed this week by a modest (by Dubai standards) increase of 2.7%.

Gold continues to lose its shine and is hovering around the US$1,320 per oz mark; it is already down 5% in September, 20% YTD and 25% over the past year. The fact that the Federal Reserve decided to maintain its US$ 85 billion monthly stimulus package has probably stopped the precious metal from testing the US$ 1,250 level or lower.

Next week, the USA will finally exceed its legal borrowing limit, set at US$ 16.7 trillion, and will balance on the edge of another financial cliff. If no further action is forthcoming, then the country will run out of cash by the end of October, resulting in cuts, job losses and potential loan defaults, with serious repercussions for the country’s economy. So much for the world’s leading democracy in action!

Whilst most of the global economies seem to be struggling, Dubai is still full steam ahead with a simple message – Don’t Stop Me Now!

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Shiny Happy People

Posted on September 14, 2013 by howesdubai

dubai-paddle-boardScarcely a week goes by without some report reaffirming the buoyancy of the Dubai real estate sector; the latest, that house prices are rising faster than anywhere else on the planet. With an annual 21.7% surge in the year to June 2013, the emirate leads the likes of Hong Kong (19.1%), Turkey (12.2%) and Brazil (11.9%), and is well ahead of mainland Europe, which managed a meagre 0.7% rise, and poor Greece, recording a fall of 11.5%.

Unfortunately, it came as no surprise to see July hospitality figures indicating a decline in both revenue and profit;  the double whammy of the holy month of Ramadan and the summer heat, resulted in falls in RevPAR (16.8%) and occupancy from 65.1% to 54.6% – however ARR crept up by 2.2% to US$ 196.87.

Dubai developer, Sheffield Holdings, is working with US-based Hampshire Hotels Management to invest in and run the Dream Dubai Marina. The 101-storey, 420 mt high, building will cost an estimated  US$ 410 million, and house 300 hotel rooms and 420 serviced apartments – the hotel is expected to open late next year whilst the remainder to be ready by 2017.

Damac Properties awarded its largest ever contract of US$ 272 million to Turkish company, TAV Tepe Afken Investment, to build its Damac Towers by Paramount. The four-tower development will include the luxury Paramount Hotel, with the other three buildings as serviced residences and is slated for completion within thirty-three months.

Drake and Scull have been awarded an Abu Dhabi government contract, valued at US$ 68 million, which brings their projects signed this year to a credible US$ 1.66 billion. The capital seems to be a good hunting ground for the Dubai-based company as it has recently procured work for the Fairmont Hotel and the prestigious Louvre Museum.

Majid Al Futtaim is planning to spend US$ 272 million further expanding its flagship Mall of the Emirates. The project – Evolution 2015 – will see a new fashion area, a sports and leisure zone along with additional luxury retail outlet and is expected to be finished within two years.

The Al Futtaim Group, with franchise rights to Toyota, Lexus, Honda, Jeep and others in Dubai, is to move further afield, with its first investment in Africa. It has offered US$ 86 million to take over CMC Holdings with its exclusive Ford distributorship in Kenya, Uganda and Tanzania.

Flydubai, one of the world’s fastest growing airlines, has announced its 66th destination – this time to Chisinau in Moldova. Interestingly, this will be the low cost carrier’s 45th destination that previously did not have direct UAE carrier links to Dubai. These new destinations can only benefit Dubai’s burgeouning trade and tourism sectors.

Following weeks of negotiations, Dubai Aerospace Enterprise has failed to cut a proposed deal with BBA Aviation. It was reported that the British based aircraft services company was in merger talks with US StandardAero – a company bought by DAE in 2007.

Already running the world’s longest driverless metro system at 75km, the RTA is planning to extend its network by almost 50% with 24km and 12km extensions to its Red and Green Lines respectively. Its current fleet of 58 trains carry over 366k passengers daily.

Although not in the same league as the big boys, Dubai continues to expand its foreign exchange trading. Currently, the UK takes 41.0% of the total trade with the US (19.0%), Singapore (5.7%), Japan (5.6%) and Hong Kong (4.1%) making up the top five forex centres. The Dubai Gold and Commodities Exchange witnessed a 23% increase in August business with currencies accounting for 97% of the 1.159 million trades – an impressive 89% surge in YTD business.

This week, there was a 5.7%  hike in the price of diesel sold in Dubai by the locally government-owned Emirates National Oil Company (Enoc), and its subsidiary, Emirates Petroleum Products Company (Eppco), to US$ 1.00 per litre. Emarat, Dubai’s third fuel retailer, established by the federal government, has followed suit. However, it is reported that Abu Dhabi’s Adnoc has fixed its diesel price at US$ 0.89. Unlike diesel, federal authorities fix the petrol price which is currently being sold at the subsidised rate of US$ 0.47.

Dubai Holding Investment Group has renegotiated a US$ 1.2 billion loan agreement with its creditors, who have agreed to an extension until 2020. DHIG is part of Dubai Holding and was formed by the amalgamation of Dubai Group and Dubai International Capital.

H1 saw Dubai’s exports jump 21.7% to US$ 22.9 billion whilst its imports rose by 16.3% to US$ 110.6 billion. In 2012, Dubai’s foreign trade growth rose 13% and in H1, this has improved by 16.2% to US$ 159.1 billion. As usual, gold was both the top imported and exported commodity at US$ 22.1 billion and US$ 13.6 billion respectively.

Central Bank reports highlight the fact that during the first seven months of the year, money supply aggregate M2 (currency, current accounts, call accounts and deposit accounts) increased by 8% to US$ 253.3 billion, The other positive news is that bank deposits have jumped 7.3% to US$ 341.4 billion, and bank loans and advances by 5.6% to US$ 316.3 billion.

Australian property developer, Sunland lost its US$ 15.5 million appeal against Matthew Joyce and Angus Reed, former employees of Nakheel. The three Australian judges rejected the appeal as “groundless” in a case that involved another Australian company, Prudentia, in an alleged scam to secure a Nakheel Dubai Waterfront plot, known as D17. In May, both men were found guilty of fraud in a Dubai court and received ten year sentences. Reed had already left the country whilst Joyce, the former GM of Dubai Waterfront, was also fined US$ 25 million and is under house arrest whilst his appeal is being heard.

Another week sees another roller coaster ride for the Dubai Financial Market General Index. Having lost 6.6% and 9.3% over the past two weeks, it opened on Sunday at 2337 points and regained 8.3% to close on 2539. Whether this week’s movement represents a ‘dead cat bounce’ remains to be seen.

It seems that the slower growth pattern coming out of China earlier in the year has now begun to move in the other direction with most analysts predicting that the world’s second largest economy will edge towards 8% growth, at least in the short-term. New credit was seen to be expanding in August with 45% (or US$ 115.6 billion) attributable to new loans – this plus the fastest gain in industrial output are positive signs that recovery is taking hold. Although one warning sign is that the country’s ratio of credit to GDP stands at an exceptionally high 187% and another potential problem is that only 3% (1.25 million) of the country’s SMEs are able to secure  a bank loan, hence the other 97% rely on the flourishing but unregulated shadow banking system. (Some estimate this sector could account for nearly 70% of China’s GDP equivalent to US$ 5.72 trillion).

Consumer confidence is fast returning to the Australian economy in the wake of the election of Tony Abbott and the ousting of the Labour government, latterly led by Kevin Rudd and previously by Julia Gillard. The new coalition is promising to cut red tape and lower taxes as it declares that, once again, Australia is open for business. It will receive an added boost with the upbeat news from China which will prove a fillip for the country’s resources sector. House prices have shown an annual 5.3% rise and with the current feel good factor in play, allied with low interest rates (2.25%), this trend is set to continue.

Its neighbour, Indonesia, is not faring as well with soaring inflation (fastest growing since 2009), a falling currency (already down 11% in Q3) and a widening current account deficit (US$ 9.8 billion). This week, it sold US$ 1.5 billion of sukuks at the highest rate (6.125%) in six years, compared to its last foray ten months ago when the rate was 3.3%. Its current deposit facility rate is at a high 7.25% and is bound to rise even further this month as the country’s economy deteriorates.

There is an inevitability to the Federal Reserve start to cutting back on its QE3 policy, of US$ 85 billion monthly bond-buying, sometime this month. That being the case, there is a strong argument for gold prices to ease downwards, perhaps to the US$ 1,200 level, not helped by steady low inflation rates and an upturn in the global economy. At noon Thursday, it was trading lower at US$ 1,339 (compared to US$ 1,924 in September 2012 – 30.4% down).

A week after its buildings were rated the vainest in the world comes news that the UAE is one of the planet’s happiest countries. It is now ranked number 14 and moving up on the previous report. Some may think that the UN would be better served trying to broker peace in places like Syria and Central Africa, but no they have published “The World’s Happiness Report 2013”. HH Sheikh Mohammed bin Rashid al Maktoum has been quoted that “all development plans that we approved, all initiatives that we launched and all government policies and laws, have one common goal – achieving the happiness of our people”. No wonder then that with the economy booming, a stock market rising 8.5% in one day, and the imminent arrival of perfect winter weather, Dubai is full of Shiny Happy People!

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You’re So Vain

Posted on September 10, 2013 by howesdubai

dubai-fountainAfter a relatively quiet period of reported new projects, Arady Developments – a JV between Deyaar Development and Dubai Properties Group – announced the launch of a 48-storey residential tower. Located in the Dubai International Financial Centre, this forms part of the 1.57 million sq ft Central Park plan. The building will house 426 apartments along with the usual accoutrements – swimming pools, exclusive shopping area and dining outlets – and will be completed by the end of next year.

There is a wide range of opinion on the state of Dubai’s residential market from an almost fully blown bubble to a continuing boom for the foreseeable future.  The former is driven by speculation, the latter by strong fundamentals of economic growth, rising population, increasing business confidence and strong demand. The truth is probably somewhere in the middle. In the past four years, the number of residential units has risen over 37% to an estimated total of 360k and is expected to rise by a further 11% to around 400k by the end of 2015. What will shake the sector will be any dent in consumer confidence and a further deterioration in the global economy – both are distinct possibilities. Any market that climbs so quickly, in such a short time span, is heading for trouble!

Yet another international hotel group is planning to start operations in Dubai. This time, the 672-room TRYP by Wyndham Dubai, to be located in Al Barsha, will be completed in 2016. The US-based group is the world’s largest and most diverse hotel company, managing over 7,400 properties, and has signed an agreement with The First Group.

It is only two years since government-owned DP World was forced to restructure US$ 25 billion of debt. Since then, the company has had to sell off non-core assets, as part of its deal with creditors – the latest of which is reportedly its 50% share in Miami’s Fontainebleau Hotel for which it paid US$ 375 million in 2008. In July, the company sold Gazeley, the logistics warehouse developer, to Brookfield Asset Management.

Just as Emirates will soon start flights to a second Philippines destination, Clark, dnata has announced that it will take over airport handling operations there. This will be the Dubai-based air service provider’s 75th global location.

A major mechanical, electrical and plumbing contract – valued at US$ 113 million – has been awarded to Drake & Scull International for work on the new Louvre Museum, being built in Abu Dhabi. Another Dubai company – Arabtec – is the main contractor on the US$ 653 million development, due to be completed within two years.

In line with other free zones, the Dubai International Finance Centre, is showing impressive growth figures. In H1, there was a 7% increase in companies to 979 whilst the number of employees rose by 1k to 15k. The DIFC is working close to full capacity and is currently utilising 372k sq ft of space, not owned or managed by the authority. A recent survey puts Dubai as the sixth in the ranking of international business centres.

Confirming recent reports, it is no surprise to see Barclays plc decide to move out of retail banking in Dubai to concentrate on its core business of investment and corporate banking. Up to 280 employees are in danger of losing their jobs as the UK’s third largest bank is still reeling from a 17% drop in H1 global profits to US$ 5.6 billion. Furthermore, there are reports 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.

Two local entities are seemingly in the market to raise funds. Dubai Duty Free estimates it will need US$ 750 million for its expansion plans. In 2012, DDF took out a six-year US$ 1.75 billion syndicated loan – a first foray into debt finance in its thirty year history. Last year, revenue reached new heights, topping US$ 1.6 billion and with H1 sales already at US$ 874 million, it is expected to reach US$ 1.8 billion by the end of 2013. Meanwhile, Majid Al Futtaim Holding is hoping to raise US$ 1.5 billion using a revolving credit facility.

The country’s love affair with the US continues as H1 imports rose 25.2% to US$ 13.7 billion and exports, largely crude oil, increased by 11.2% to US$ 1.4 billion. Interestingly, the country is the largest ME market for US imports, accounting for 26% of the total.

Australians go to the polls this weekend in an election that will probably see Australia swearing in its third prime minister (Tony Abbott) within the past three months. The country has suffered from a slowdown in its resource sector and, until recently, an over-valued dollar and this has had a negative impact on its trade to the region. Although the UAE is still Australia’s prime market, latest trade figures indicate a 13.0% slump to US$ 4.7 billion.

For the first time, the World Economic Forum has ranked the UAE as one of the top twenty most productive economies in the world – moving up five places to number 19 this year. There was no real surprise in the top 5 – Switzerland, Singapore, Finland, Germany and the US – but a slight shock to see Qatar, the highest-ranked ME nation, at number 13. The report added that UAE could improve further by investing in the health and education sectors.

Although not in the top twenty of yet another report, the country has made significant progress in the recently released Global Built Asset Wealth Index. The study, which tries to quantify the value of all public and private property along with infrastructure, estimates its value at US$ 1 trillion! This gives a per capita built asset wealth of US$ 123k.

August saw no movement in the UAE PMI which stayed unchanged at 54.5 points – an indicator on how well the economy is tracking. Latest figures show that consumer price inflation remains static at an annual rate of 1.3%.

This could be a gilded week for some 10k residents who entered the month-long “Your Weight in Gold” campaign. Participants will receive 2 gm of gold for every kg lost over 5 kg and 3 gm per kg if they lose 10 kg or more.

The Dubai Financial Market General Index took a another pasting this week – largely because of the continuing regional geo-political unrest, especially in Syria. Having lost 6.6% last week, it opened on Sunday at 2523 points and nose-dived another 9.3% to a Thursday close of 2337.

There is an ever-growing feeling that the global stock markets are heading for a major downward revision despite many pre-GFC highs being recorded in August. In the US, Dow indicators such as EPS (falling), PE ratios (rising) and volatility levels (at historic lows) all point to a pending crisis.

There were two massive telecom deals this week with the largest, by far, the Vodafone sale of its 45% share in their US JV with Verizon for US$ 130 billion. (To put this into perspective, this figure is almost the same as Dubai’s reported public debt). The other deal saw Microsoft pay US$ 7.2 billion for Nokia’s mobile business, as well as licensing the Finnish company’s patents and brand name for the next decade.

Slow global growth patterns present the biggest economic s challenge as the G20 meeting this week in St Petersburg at a meeting which will be dominated by Syria. However there is mounting economic concern about the sudden fall of the BRIC economies which have been blighted by plummeting currencies and slowing growth. They will feel even more pressure if and when the Fed starts cutting back its QE programme, resulting in even more selling of the weak currencies.

Although there are promising signs out of Europe, all is not well. Attempts by some countries to rail in public spending and, at the same time, introduce austerity packages have proved counterproductive. Instead of stimulating growth and economic activity, it has resulted in reduced tax receipts, higher unemployment and increased benefit payments. Someone has to pay for this folly. In the event of citizens of say Spain and Italy seeing their bank deposits raided, like their Cypriot neighbours, the world will then see the eurozone in a real crisis.

Dubai has another world record and this time it can boast having six of the top 10 vainest skyscrapers (any building over 985 ft) in the world. A recent report has claimed that the emirate’s skyscrapers waste 19% of their total space. It can only be a matter of time before the fountain music in front of the vainest of all buildings – the Burj Khalifa with 29% of “wasted” space – will be changed to You’re So Vain.

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Money, Money, Money

Posted on September 2, 2013 by howesdubai

AbbaEvery 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).

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Should I Stay or Should I Go?

Posted on August 26, 2013 by howesdubai

dubai-dynamic-towerAccording 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?

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Walk Away

Posted on August 21, 2013 by howesdubai

dubai-cycle-trackNakheel 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!

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