howesdubai.com

Let’s Hang On To What We’ve Got

Posted on February 9, 2013 by howesdubai

The week started with HH Sheikh Mohammed bin Rashid Al Maktoum’s directive that work should commence on two major Nakheel developments on Palm Jumeirah. Nakheel Mall, located at the bottom of the trunk, will cost US$ 680 million whilst The Pointe – comprising a marina and retail outlets – will expend US$ 218 million. The debt-ridden developer will have a busy 2013 handing over 3,000 residential units plus other new projects totalling US$ 1.8 billion coming on line over the next three years.

Sunday saw the close of the Dubai Shopping Festival. Since its 1996 inception, visitor numbers have risen threefold from 1.6 million to this year’s estimated 4.8 million. It is projected that DSF 2013 Revenue will add US$ 4.8 billion to the emirate’s coffers.

Weeks after the Ministry of Economy announced it was fixing the 2013 prices of 2,000 basic food items, there was further good news for the consumer. This time, the Ministry of Health has been directed to ensure that prices of some 6,600 imported medicines be reduced by up to 40%.

Latest IATA figures show the influence the ME carriers have on the global airline sector. According to their latest figures, 2012 saw a 15.4% growth in passenger numbers (8.9% in 2011) with a 12.5% capacity expansion and a much improved load factor of 77.4%. Cargo in the region grew by 14.7% (8.2% in 2011). The sorry state of the global economy can be gleaned from the fact that worldwide figures showed passenger growth at 5.3% and cargo actually falling by 1.5% – a variance of 10.1% and 16.2% on ME returns. Based on these figures, it will be very interesting to see what Emirates report for their 31 March year end results – surely higher than last year’s profit of US$ 620 million.

By the time David Beckham had signed for Paris St Germain, Emirates has already finalised a further five year shirt sponsorship deal with the French club. No figures are readily available but it could be less than the recent Arsenal shirt extension (to 2018-19) which was valued at just under US$ 240 million. Among other European clubs bearing the Emirates logo are Real Madrid, AC Milan and Olympiakos.

To expand their sponsorship reach even further, the airline has signed a 5-year deal with Formula 1 to sponsor fifteen races a season at a rumoured annual cost of US$ 55 million. That being the case, it will see their sponsorship expenditure rise to over US$ 270 million in 2013. It is difficult to think of one sport in which Emirates are not involved.

On the subject of cars, Dubai boasts the world’s biggest Bentley workshop. ME sales of the luxury vehicles were up 44% in 2012 – a sure sign of the bounce back of the local economy.

In Q2, DubaiSat-2 will be launched and will be able to take better quality photographs than its predecessor which is still operating in space. This year, Eiast, the Dubai-based government entity, will start work on a facility to manufacture satellites in the UAE with plans to launch DubaiSat-3 by 2016.

One company taking advantage of the favourable conditions in Dubai is Transworld Group which is planning to expand its shipping fleet by three bulk carriers and three container ships at a cost of US$ 100 million. The 45-year old locally based shipping service provider already had a fleet of 27 vessels.

There was further news on Dubai Group’s US$ 10 billion debt – US$ 6 billion of which is owed to a consortium of 35 banks. Although some of these creditors – including RBS, Standard Chartered and Standard Bank – may have settled on an 18.5% arrangement, it seems that over half are looking for a total settlement over 12 years. The sooner an amenable restructuring scheme is in place, the better for the emirate.

The Emirates Bank Association has formally requested the UAE Central Bank to cap mortgages for expats at 75% and for Emiratis at 80%. Last month, the Central Bank had suggested LTVs at 50% and 60% so an obvious compromise will be reached by Q3 at the latest. The bankers have also suggested that the total loan value should not be more than 7 years’ salary for expats (8 years for UAE nationals).

Following the GFC, the Central Bank ploughed over US$ 19 billion into local banks. Now it appears that much of the money, that was converted into 7-year bonds in 2009, will be repaid this year as cheaper forms of financing become available to these financial institutions.

The Dubai bourse succumbed to a little profit taking and gave up some of its recent gains dropping 1.5% over the week to close on 1860 points. Its daily turnover is over US$ 100 million and so far this year it is still ahead by 14.61%!

The 2012 reporting season continues with a further flurry of pleasing results especially from two local banks. Mashreq, Dubai’s second largest bank, had a stunning Q4 which saw its profit jump six fold from US$ 17.4 million to US$ 109.0 million. Year on year, the bank saw its net profit up 67% from US$ 223.4 million to US$ 373.0 million. Not bad for a bank that saw its credit rating cut one notch to Baa2 in December. In line with the generous dividends paid previously by CBD and Emirates NBD, a cash pay-out of 38% has been proposed, subject to approval.

Meanwhile Dubai Islamic Bank saw its 2012 profit increase by13.3% (US$ 38.1 million) to US$ 324 million. During the year the bank saw total assets up by 5.3% to US$ 26 billion whilst its impairment provision fell from 12.1% to 9.8% – still relatively high.

Some international banks are in for a well-deserved torrid time and have been called to book for their dubious methods of generating revenue. For example, RBS, 81% owned by the British taxpayer, became the third bank penalised for its role in colluding with other financial institutions to rig Libor rates. Fined US$ 625 million, it joins Barclays (US$ 450 million) and UBS (US$ 1.47 billion) in the hall of shame with many banks set to suffer the same consequences for their fraudulent behaviour and cavalier attitude to their stakeholders.

Barclays is in the firing line once again – this time for misselling loan insurance designed to protect borrowers. All it seemed to do was to make money for the bank and left many of its customers worse off. To date, they have provided a reserve of over US$ 4.0 billion for potential claims but that seems to be on the light side. Another potentially bigger problem for the bank could become their Qatargate as authorities are investigating a US$ 5.3 billion investment by Qatar Holding in June and October 2008.

BP is still paying for the 2010 Deepwater Horizon incident in the Gulf of Mexico. So far it estimates that this disaster has already cost the company US$ 42.2 billion which included an additional US$ 4.1 billion Q4 provision for its settlement agreement with the US authorities. To add to their woes, they could be exposed to further massive costs as the civil cases are scheduled to start later in the month.

One of the smaller members of the Eurozone is embroiled in the bloc’s economic malaise with its banking system in tatters. Cyprus may require US$ 14 billion to keep its banks afloat with the money coming out of the EU bailout fund. Interestingly, the largest foreign investors in that country are the Russian Federation whilst the largest foreign investor in Russia is Cyprus.

Nearer home, Egypt’s woes continue with the political turmoil, civil unrest and economic uncertainty responsible for a further dwindling of the country’s currency reserves. In January, there was a 10% fall from US$ 15.0 billion to US$ 13.6 billion. Before the ouster of former President Hosni Mubarak, the foreign reserves stood at US$ 36.0 billion. (As an aside, a recent Transparent International report indicated that 99% of Egypt’s military spend was secret).

The problems in Spain just deteriorate by the day and probably the last thing needed was for the Prime Minister, Manoj Rajoy, becoming embroiled in a corruption scandal. Nearly a million Spaniards have now signed a petition calling for his resignation after allegations of secret cash payments to him and fellow members of his Popular Party. Not surprisingly he has rebuffed these claims as totally false.

Unfortunately there is always the possibility that the UAE may suffer as a consequence of the global crisis whether it be eurozone, US, China or regional political issues. For example, if the US were to go into recession, the global economy, including Dubai, will be affected. Not only will trade and tourism fall but the emirate’s ability to source international funds will inevitably dry up.

Posted in Finance | Tagged Barclays, David Beckham, DFM, Dubai, Dubai Financial Market, Dubai Islamic Bank, dubai shopping festival, Emaar, Emirates, emirates airline, Emirates Bank Association, Emirates NBD, Formula 1, HH Sheikh Mohammed bin Rashid Al Maktoum, IATA, Nakheel, Palm Jumeirah, UAE, UAE Central Bank | Leave a comment

Wishin’ and Hopin’

Posted on February 2, 2013 by howesdubai

As the real estate sector is fast returning to its pre-GFC levels, it came as no surprise to hear that Emaar’s latest off-plan development sold out on launch day. All 280 units, available in the 55-storey Downtown Residence Fountain Views, were snapped up by eager buyers – a tangible indicator of the strength of the Dubai recovery. To try and reduce “flipping”, the developer has insisted that any reseller will have had to have made at least a 40% repayment.

Some analysts have indicated that certain residential areas of Dubai have experienced rapid growth in 2012 including The Springs, Jumeirah Islands, Arabian Ranches and Palm Jumeirah with price hikes of 38%, 28%, 27% and 20% respectively. On average, year on year villa prices were up 23% and apartments 14%.

This only emphasises that the industry is showing early signs of overheating. The banking industry is taking steps to curb such excesses which brought Dubai to its economic knees just four years ago. The Central Bank was reportedly advising financial institutions that it would be setting mortgage caps at 50% for expats and 60% for nationals. Meanwhile, the Emirates Banks’ Association has recommended 75% for non-locals and 80% for Emiratis. Currently of the banks’ total retail market of US$ 136.2 billion, home loans account for only US$ 16.3 billion or 12%. From very high bad loan write-offs, seen in the recent past, the industry estimates that only 0.2% of these loans are now considered bad. However some reports indicate that more than 60% of Dubai property transactions are for cash totalling in excess of US$ 25 billion.

Emirates NBD, 55.6% owned by the Investment Corporation of Dubai, has bounced back in Q4 announcing a profit of US$ 170 million and a 2.8% rise in 2012 profits to US$ 681 million. There will also be some happy shareholders as its dividend pay-out came to US$ 381 million – 25% up on last year. The bank has seen its deposits rise 11% to US$ 58.3 billion and lending up 7% to US$ 59.5 billion whilst there has been a 20% fall in bad debt provisions to US$ 1.1 billion.

Emaar Properties – a true bellwether of the local economy – saw a fourfold jump in Q4 Revenue to US$ 730 million. Its 2012 profit at US$ 577 million was 18.2% up on the year although Revenue was flat at US$ 2.243 billion – a 1.5% rise on 2011’s US$ 2.209 million. 33% of the Revenue (US$ 740 million) was attributable to its retail sector whilst 17% resulted from its hospitality and leisure sectors.

One company that is recovering well from the property crash is the Islamic mortgage lender, Tamweel PJSC, whose major shareholder is Dubai Islamic Bank. This week, it fully repaid a five year US$ 300 million sukuk maturing in January 2013.

It comes as no surprise to see Dubai International Airport become the world’s third busiest international airport, now only behind London Heathrow and Paris Charles de Gaulle. Passenger numbers were 13.2% higher at 57.6 million with a 5.5% hike in aircraft movements to over 344k.

The airport’s growth plans will be further assisted by the fact that Emirates are now taking bookings to 32 of Qantas domestic destinations following Australian interim approval of the airlines’ proposed partnership. At the same time, Emirates Airline has issued a 12-year US$ 750 million amortising bond, launched at 300 basis points; some may consider this to be slightly on the high side.

Despite the gloomy trade climate, DP World managed a 2.4% increase in its 2012 cargo handling to 56.1 million 20’ equivalent container units (TEUs). It is estimated that 80% of the world’s third largest ports operator’s revenue is derived from container handling in its 60 international terminals. With the global economy in turmoil, 2013 promises to be a challenging year for the company.

Meanwhile HH Sheikh Mohammed bin Rashid Al Maktoum has approved an expansion of the present metro network with three new lines – Purple, Blue and Gold – covering 421 km and having 197 stations. The long term project, expected to be completed by 2030, will be in three phases.

Talking of trains, the Dubai Financial Market Index is going along like the proverbial steam engine with a 16.34% gain in the month of January. Over the past week alone, it has surged 5.36% to close at 1888 points – 96 points up on its Sunday opening. Hopefully this can keep on track.

HH Sheikh Mohammed also toured the 38th Arab Health Exhibition which is the second largest of its kind in the world. The number of attendees is staggering and the impact on the hospitality sector immense. This year, it is estimated that there will be over 3,500 exhibitors, 7,500 conference delegates and 80,000 healthcare professionals taking part in this 4-day event.

Another sign of the local recovery comes with the news that Toyota has seen car sales rise by 33% in the country – and 22.5% globally to 9.75 million units – with its Lexus models surging by 50%. (Compare this to their sales in Europe where growth was less than 2%). Most other car makers have fared well with increased UAE sales, including Hyundai (up 66%) and Ford (55%). Oddly enough, the UAE dealer has had to recall 5,000 Lexus vehicles because the wipers have a problem when there is a heavy snow storm!

With the worldwide economy still in deep trouble, it is strange to see that the World Bank has had time to issue a report on the cost of money remittances. Rather surprisingly, the UAE is the cheapest place in the world to remit money from, with average costs of 3.5% compared to the global average of 8.96%. Naturally costs vary from country to country so that Pakistan at 2.46% is less than half the cost of an Indian remittance (5.02%).

A week after mining giant Rio Tinto had to write off US$ 14 billion on two bad project investments in Mozambique, Anglo American finds itself doing likewise. After reviewing its Brazilian Minas Rio iron ore operation, it seems that it paid too much for the 2007 acquisition and underestimated the cost of bringing the mine on stream by US$ 4 billion. A disappointed Chief Executive, Cynthia Carroll, is to be replaced by Mark Cutifani, currently with AngloGold Ashanti.

Yet again the IMF has deemed it appropriate to lower its forecasts. China will see the biggest growth in excess of 8% with India and the Asean economies coming in at around the 5% mark. Behind will be Latin America, ME and Africa at over 3% with the UAE nearer the 4% level whilst the US will see a 2% expansion. The latter forecast could be seen as a little optimistic as Q4 saw the US economy actually contract by 0.1% after posting a 3.1% GDP growth in Q3. Indicators point to an economy that will struggle to hit the IMF’s latest estimate with European problems, a Chinese slowdown and a domestic fiscal cliff not helping its cause.

Despite there being a projected 0.2% contraction in Europe, so many politicians are still trying to talk up its prospects and this is just not going to happen. Europe is in a mire in every direction. Youth unemployment in the UK is nearing one million and as the country heads for a triple dip recession, this is not going to improve in 2013. Spain – with its property crash, a banking system in tatters, massive debt and a severe austerity programme in place – will again contract and have inevitable civil disturbances this year.

France has been described as “totally bankrupt” by its own Labour Minister, Michel Sapin, at a time when President Francois Hollande is hoping to cut the Gallic deficit from 4.5% of output to 3%. Some hope! One wonders what Yannis Stournaras is on as the Greek Finance Minister has declared 2013 to be the country’s last year of recession. Some wish! Here we are all Wishin’ and Hopin’ that the good times continue in Dubai with our only worry being when the new draft bankruptcy law will be enacted.

Posted in Finance | Tagged DFM, Downtown Residence Fountain Views, Dubai, Dubai Financial Market, Dubai International Airport, Emaar, Emirates, emirates airline, Emirates Banks’ Association, Emirates NBD, Nakheel, Palm Jumeirah, Qantas, Rio Tinto, Tamweel, The Central Bank, UAE | Leave a comment

Don’t Turn Around

Posted on January 31, 2013 by howesdubai

The on-going mortgage lending saga took another turn this week with reports that the Central Bank Governor, HE Sultan Nasser Al Suweidi, has advised that changes to the mortgage cap were not imminent and would not go ahead without consultation with the country’s commercial banks. Because of this, any possible amendments would probably take until Q4 to bear fruition.

The debate on mortgage capping is a consequence of the recent spikes in the prices of property and rentals with 2012 estimated increases of 17% and 14% respectively. To some observers, this could have been the beginning of another property bubble, four years after the last one that brought the Dubai economy to its knees. The other impact that this may have on the local economy is rising inflation – indeed 2013 may see rates turning out higher than the 1.5% which some analysts have predicted. (This year it is estimated that 18k new residential units and 550k sq mt office space will come on line).

2012 property sales rose by 8% and topped US$ 42 billion with nearly 42k transactions, according to Dubai Land Department. The 1,282 villa sales accounted for only US$ 1.4 billion of that total of which 671 were mortgages valued at US$ 545 million.

The Department of Economic Development has released 2012 figures showing that its export promotion agency, Dubai Exports, facilitated US$ 1.36 billion of trade through local companies – a 66.7% jump on the previous year. Over 50% of the business was with Saudi Arabia. In H1 2012, 210 companies participated in exhibitions and trade fairs arranged by the agency.

Although highly commendable, this is small change when one considers Dubai’s non-oil exports / reexports for the first ten months of 2012 which increased by 15.7% to US$ 114.4 billion (whilst imports hit US$ 165.9 billion – a 10.9% jump).

One company that is taking advantage of the local economic boom is Canadian convenience store chain, Circle K. With 29 shops currently in the UAE, it plans to spend US$ 55 million to open a further 500 outlets over the next four years. There is no doubt that groceries are big business in this country with 9,400 such shops generating a massive US$ 9.5 billion in sales.

After recently receiving US$ 100 million funding from private equity firm Olympus Capital Asia, Dubai-based DM Healthcare is looking at acquiring two southern Indian hospitals. By 2015, it hopes to quadruple the number of beds in India to 4,000 and, at that time, to consider an IPO either in London or Mumbai. This is in addition to its US$ 300 million regional expansion plans that will see new facilities in Dubai, Sharjah, Saudi Arabia and Qatar.

Just as borrowing costs are at their lowest (currently at 211 basis points), the Dubai government is looking at a potential US$ 1 billion Islamic bond in the very near future. The government’s last foray in this market was in April 2012 when its US$ 1.25 billion sukuk was well oversubscribed. Which comes first – this issue or the planned US$ 1 billion DEWA sukuk – remains to be seen.

The government’s direct debt is currently US$ 33.2 billion with US$ 1.8 billion maturing this year. The emirate’s primary investment fund, Investment Corporation of Dubai, has a US$ 29.5 billion portfolio with US$ 5.6 billion in listed shares and US$ 23.9 billion in unlisted companies, including Emirates airline.

Notwithstanding all the country’s troubles, development work in Lebanon is progressing with news that Dubai’s Majid Al Futtaim Properties have just been awarded a US$ 225.0 million contract to develop Waterfront City in Beirut in a JV with Arabian Construction Company and Matta et Associes.

In the apparent wake of possible future sanctions, and the corresponding negative impact that this would have if the company were to seek external investment, MAF have spun off its Syrian and Lebanese portfolio directly to its owner, Majid Al Futtaim. In 2012, the company issued bonds to the value of US$ 900 million. (His holding company has also announced that 2012 Revenue surged 10% to US$ 5.88 billion with EBITDA up 7% to US$ 817 million).

The UAE’s well-earned victory in the Gulf Cup last Friday resulted in huge celebrations over the length and breadth of the country. The team has been showered with praise and cash rewards with at least US$ 50 million gifted by the emirates’ various ruling families and other supporters. Also on the football and money sides, it was interesting to see that Dubai’s own “fake sheikh” has returned – this time as technical director of local side, Al Nasr. Former England coach, Sven Goran Eriksson, reiterated that he was not here for the money!

For the past four years the QE2 has been in Dubai limbo after its 2009 retirement following 39 years sailing six million miles and crossing the Atlantic over 800 times. Now after much conjecture, it seems that the grand old lady will become a luxury floating hotel with 500 rooms. Although there will be a Dubai shareholding in the new consortium, it seems strange that its final destination will be the Far East – rather than here.

Sofitel has announced its expansion in the region with 2013 additions of eight properties to their portfolio of which two will be located in Dubai. With an additional 1,200 rooms, the two hotels will be in Downtown Dubai and Palm Jumeirah whilst the operator has plans for a further opening in JBR. According to the developers, Enshaa, the 217-suite and 169-apartment Palazzo Versace will be completed this year. This project also includes the 80-floor D1 Tower and is located in Cultural Village.

Despite making a Q4 US$ 7.5 million profit, Tamweel’s full year return fell 28.9% to US$ 19.8 million. The Islamic mortgage lender is the subject of a take-over from its major 58.2% shareholder, Dubai Islamic Bank which is offering one of its shares for every 1.8 Tamweel shares. The latter’s share value is currently at US$ 0.31 – 99% up in the past year; what happens when it starts making reasonable profits?

Meanwhile, Dubai’s much-troubled property developer, Nakheel, declared a 57% jump in 2012 profits to US$ 549 million on a 91% surge in Revenue at US$ 1.12 billion. The company is confident that it will be able to meet its debt obligations which is said to be US$ 3.32 billion with US$ 2.18 billion owing to banks and US$ 1.14 billion in sukuks. Some analysts still have their doubts however.

Despite a 3.7% hike in profits to US$ 232 million, Commercial Bank of Dubai’s year end results fell short of estimates. Despite the market’s disappointment, its shares rose 4.8% to US$ 0.83 in Wednesday trading and shareholders received a 10% dividend yield of US$ 0.08.

The Dubai Financial Market Index had another shortened trading week closing on Wednesday almost 1% up at 1792, having opened on Sunday at 1775 points. In the first 23 days of the year, the market is already 10.46% higher and a creditable 33.68% up over the last 52 weeks. The Dubai bourse is running in tandem with the likes of the FTSE, S&P and All Ords all with recent stellar performances that may be a precursor of a stock market bubble.

This week was not a good one for the Anglo-Australian mining conglomerate, Rio Tinto, which was forced to write off US$ 14 billion in its investments in failed aluminium and coals projects in Mozambique. Two senior executives, CEO Tom Albanese and Doug Ritchie, the “brains” behind these two acquisitions, have been forced to stand down. This is another blow for the mining giant which has seen several big projects put on hold as a result of a Chinese slowdown and the continuing economic debacle in Europe.

The global economic landscape shows little signs of improvement with Europe the biggest obstacle to any turnaround. Having gained 3% in 2011, growth in Germany slowed considerably to 0.7% whilst its eurozone partners continued in recession with governments having to slash spending amid increasing austerity programmes.

Any reports that the worst is over need to be treated with caution. The latest IMF prediction is for slower growth indicating that the two-speed global economy will continue with the emerging economies outpacing the high-income countries, where business and consumer confidence are in tatters. Whilst record numbers are on the dole queues, it is impossible for any economy to recover. Then there is the possibility of the eurozone crisis moving north and dragging the likes of Germany and France deeper into the malaise whilst the US debt mountain will not go away and will bring more uncertainty into the economic arena.

The US leads the world in cranking up its money printing presses to keep its economy ticking over and is now seeing Japan following suit. 2013 may be the year that the world economic problems are exacerbated by currency wars as certain countries intentionally try to devalue their currencies to revive their flagging economies.

In contrast, Dubai has ticked all the right boxes since its well-publicised problems following the GFC. Now it has more than regained its credibility with the investment community and is looking at growth rates in excess of 4% this year. Not only is it considered as the safest haven in the MENA region, Dubai is indeed the financial capital of the wider region. Don’t Turn Around could be a theme for an emirate that has always looked forward and never has had to rest on past laurels.

Posted in Finance | Tagged Circle K, DEWA, DFM, Dubai, Dubai Financial Market, Majid Al Futtaim, Tamweel, UAE | Leave a comment

We Are The Champions

Posted on January 18, 2013 by howesdubai

Latest figures show that Dubai hotels are going from strength to strength with their best returns for three years. Occupancy levels hit 90.8% in November with average room rates up 3.1% to US$ 360.47 with even bigger leaps in revenue per available room and gross profit per available room – 5.2% to US$ 327.16 and 12.3% to US$ 297.15 respectively. Since the emirate attracted over 9 million visitors last year, with more expected in 2013, the outlook is indeed bright for Dubai’s 105 5-star hotels and the other 500+ establishments. This week alone, the country’s biggest hotel chain operator, Rotana, opened two new properties bringing their Dubai inventory to 15 hotels and 3,800 rooms.

Also helping to fill hotel’s coffers is the Dubai Shopping Festival. Organisers are confidently predicting an 8% increase in visitor numbers to 4.65 million this year with the highest number of tourists coming from Saudi Arabia. The 32-day festival ends on 03 February and is expected to see sales up by 18 % to US$ 4.9 billion.

Even with some major projects coming on stream this year, the outlook for the retail sector is bullish. An upturn in consumer confidence and the impressive growth in tourist numbers will ensure that the malls – including ten new ones such as Jumeirah Beach Village and Jumeirah Residence – continue to perform well.

The RTA ha reported that the emirate’s taxis made 37 million journeys over the past twelve months – a 12% increase on 2011. The taxi sector had a 46.8% surge in net profit to US$ 58.4 million on revenues of US$ 297.0 million. This week Salik charges were reintroduced for taxis in a bid to reduce their passenger numbers and move them to using the metro.

How times have changed! At the turn of the century, there were no buildings higher than 200 metres to be found in Dubai. Now it can boast of having 20% of the world’s tallest 100 towers as well as the top four global residential buildings. Not one to rest on its laurels, last year four of the six tallest buildings completed globally were located in Dubai.

Recent directives from the Ministry of Economy will result in the prices of 2,000 basic food items being fixed for 2013. Not surprisingly, some retailers are upset as they will see their profit margins slashed whilst most consumers will be happy to take advantage of cheaper produce. One possible downside is that suppliers may be reluctant to deliver at capped prices which may result in shortages of certain items.

One Dubai-based company is to invest US$ 90 million in India. Marina Home Furnishings is expected to open up to fifty outlets in the sub-continent over the next five years and is set to expand even further afield to the UK, US and Canada.

With year-end corporate results set to be released as from next week, positive news from Dubai Gold and Commodities Exchange which registered a staggering 137% growth in 2012 to over 9.6 million contracts with a value of US$ 372.8 billion.

It seems likely that there will soon be a total restructuring of Dubai Holding’s US$ 10 billion debt holding following an agreement with four banks – RBS, Commerzbank, Standard Bank and Commercial International Bank – who have now settled their dispute with this arm of Dubai Group. It is reported that the settlement included 18.5% of the debt being repaid in cash plus responsibility for their debts. Thirty five other banks – owed in the region of US$ 1.5 billion – will be offered the same arrangement. For any deal to progress further, there has to be agreement among its other creditors.

Another entity considering restructuring of their debt is Amlak Finance who are in talks with their creditors to restructure US$ 2 billion worth of liability. The Islamic mortgage company is partly owned by Emaar Properties, who this week announced the 28 January launch of The Address Residence Fountain Views. This follows the Q4 sell-out of its 72-storey project, The Address The BVLD last year.

There are unsubstantiated reports that Emaar is planning to divest itself of its retail and Turkish units and list them on the local bourse and Istanbul exchange. Its current share value stands at US$ 1.11 but its significance to the Dubai exchange can be gleaned from the fact that its US$ 6.85 million Thursday trading accounted for 18.5% of the DFMI’s total daily trade of US$ 36.95 million. The market itself is surging closing on Thursday at 1775 – up 1.1% on the week, 9.39% up in 2013 trading and 35.45% over the past year.

The Central Bank has been in the news more than usual recently especially with its declarations on bounced cheques and mortgage lending policy. To try and burst the property bubble before it inflated too quickly again, the Central Bank has ruled that residential mortgages be capped at 50% (60% for nationals) on the purchase of a first property and then 40% (50% for nationals) on the second and subsequent purchases. In some quarters, the news has gone down like a lead balloon.

Because harsh economic reality is at last hitting home and the need to drastically cut costs, many banks have been in the process of slashing their payroll numbers. One such bank, Morgan Stanley Inc, is reported to have made 1,600 employees redundant with the knock-on effect of their Dubai office being downsized. Other financial institutions – including HSBC, UBS, BoA and Merrill Lynch – have already gone through this exercise and reduced their Dubai numbers with others planning to follow suit. Some investment bankers may have to live on their past year bonuses for a while at least.

The economic climate in the eurozone continues to deteriorate with latest data showing that industrial output fell once again, by 0.3%, to a year on year fall of 3.7% and obvious signs that when Q4 figures come out it will indicate the fourth straight quarter of recession.

The World Bank had reduced its 2013 global growth outlook from its original estimate of 3.0% to 2.4% including advanced economies at 1.3%, developing countries 5.5% and China 8.4%. The usual suspects – high unemployment and fragile business confidence – are the causes of this dismal outlook.

Even the lucky country is not immune from the economic downturn with a slowdown in mining with other sectors under pressure because of the high Oz dollar (currently at over 1.05 to the greenback) and weak consumer demand. December unemployment rates rose to 5.4% as the manufacturing sector contracted for the 10^th straight month. Undoubtedly, the country has become an expensive holiday destination and the cash-strapped tourists will inevitably seek cheaper destinations. There are some analysts who are also predicting that Australia will see a bursting of its housing bubble this year.

In the US, lawmakers have six weeks to hammer out an agreement pertaining to the spending cuts as well as to agreeing to some sort of arrangement for its pre-determined debt ceiling, currently standing at US$ 16.4 trillion. No doubt that the US will be peering over the fiscal cliff again come the 01 March deadline.

Dubai and the UAE had more pressing things to worry about with the country’s involvement in the Gulf Cup, being played in Bahrain. Having won all of its first three games to progress to the semi-final, Mahdi Ali’s men received a boost. The various emirates’ rulers authorised free air travel, refreshments and tickets for the match against Kuwait – up to 9,000 fans availed themselves of this largesse and saw Ahmed Khalil score the only goal to secure victory and a berth in Friday’s final against Iraq. No doubt the good run will continue and there will be the usual fun and festivities as the celebrations take to Dubai’s roads. We Are The Champions.

Posted in Finance | Tagged Amlak Finance, Dubai, Dubai Duty Free, Dubai Financial Market, Dubai Gold and Commodities Exchange, dubai shopping festival, Emaar, RTA, UAE | Leave a comment

One More Cup of Coffee

Posted on January 14, 2013 by howesdubai

A sign of the global downturn came with Singapore Airlines’ announcement that it was asking its 2,400 captains to volunteer for unpaid leave. It seems that the carrier continues to struggle after declaring a 69% drop in annual Net Profit last March. Long haul travel demand has weakened as passengers’ disposable income has declined. Compare this to the ME carriers which saw a 10.5% November increase in passenger loads – compared to the global growth of 4.6%.

Meanwhile Emirates go from strength to strength with the opening of its new purpose-built A380 terminal costing US$ 3 billion. Covering an area of 528k sq mt on 11 levels, it has 20 gates that will be utilised to manage traffic from the 31 jumbos already operating and the further 59 on order. The facility has the capacity to cope with 15 million passengers. Recently Emirates President has indicated that he would, in principle, buy a further 40 of these aircraft but for lack of room at the burgeoning airport.

As one of FIFA’s biggest sponsors, Emirates’ eight year US$ 195 million agreement runs out after the 2014 World Cup. This week, the airline indicated that it was satisfied that the world governing body was doing its best to rid itself of internal shenanigans and that as far it was concerned the brand was not being tarnished because of this association. (An August blog – A Sign of the Times – cited that Jose Havelange, IOC member from 1963 – 2011 and former FIFA president , was a beneficiary of bribes from ISL, a company granted exclusive marketing and TV rights for the 2002 and 2006 FIFA World Cups. It was revealed that Havelange and his cohort and ex son-in-law, Ricardo Teixeira, received at least US$ 1.5 million and US$12.6 million respectively).

One of Dubai’s older shopping centres is undergoing major renovation over the next eighteen months. Burjuman will see its retail space increase a further 20% to reach 1 million sq ft and will add a new Carrefour hypermarket, a cinema multiplex and a doubling of its food court.

On the subject of food, the largest Cheesecake Factory in the world has opened in MoE. As Dubai and most of the developed countries are becoming increasingly obese this is just what the doctor ordered! Market analysts expect the UAE restaurant market to surge 30% to US$ 780 million by 2015 and there is no surprise in the news that American brands account for 47% of all food and beverage outlets in Dubai malls.

Fairmont the Palm became the first of many new hotels to be opened in 2013. Located on Palm Jumeirah’s trunk, the 5-star property, costing US$ 330 million with 380 rooms and 460 metres of beachfront is part of a project that also includes a further 560 luxury apartments. The Fairmont will be seen as a premium location and will have room rates at the top end of the market – well in excess of the October average room rate of US$ 476 for beachfront hotels.

A recent report showed that the UAE currently has over 20k hotel rooms under construction at 2012 year end. Latest figures (October 2012) indicate a 17.3% jump in Dubai’s hotels’ RevPAR and a 5% spike in occupancy rates.

Despite the optimism in this sector, there are still some projects on hold including the likes of Jumeirah Hotel in DMC, the Creek’s Palazzo Versace and the Palm’s Oceana and Royal Amway hotels.

January is traditionally a great month for the emirate’s hotels which will be further boosted by the DSF and numerous exhibitions. This month alone, Dubai World Trade Centre expects at least 150,000 trade visitors attending the likes of Arab Health, the world’s second largest health care exhibition, Arabplast, Tekno Tube Arabia, Intersec and Aircraft Interiors ME. February and March will see larger exhibitions with even more visitors boosting the local economy. It is estimated that the DWTC adds almost US$ 1.8 billion to the Dubai purse, accounting for 2.1% of its GDP.

The emirate’s largest private developer, Damac, is offering prospective customers “free” Audi cars if units are purchased during the Dubai Shopping Festival. Penthouse buyers will be entitled to an R8 (valued at US$ 136k) with A8s, A6s and A4s on offer for 3, 2 and I bedroom apartments respectively.

The second phase of the government’s US$ 380 million Barsha housing project has been completed on time. This is part of HH Sheikh Mohammed bin Rashid Al Maktoum’s initiative to ensure that all his citizens live in a secure and comfortable environment. With almost 80% of the work now finished, the final completion is slated for September 2014.

Two of the bigger Dubai-based contractors, Brookfield Multiplex and Arabtec, were awarded major contracts. The former was on the receiving end of Emaar’s new 72-srorey, Address Hotel, with 200 rooms and 523 serviced apartments. At 370 metres, it will become the second tallest structure in Dubai when completed in 2015. The Canadian company – with an Australian background – has already built several iconic landmarks including Emirates Towers, the Standard Chartered Gate Building and DIFC Gate Building as well as several Marina developments. Arabtec were awarded a US$ 650 million contract for the Jean Nouvel- designed Louvre Abu Dhabi.

Nakheel is slowly extricating itself from its financial mess arising from its “cloud-building” exercises pre GFC. This week it issued a US$ 33 million Islamic bond, being the third tranche of a sukuk that is part of its August 2011 US$ 16 billion restructuring plan. There is still plenty of work to be done to return the developer to some form of financial normality.

DEWA expect to spend a little more this year with expenditure up under 2% to US$ 3.76 billion. 90% of the spend (US$ 3.4 billion) will be operational expenditure that will help maintain electricity and water production capacity higher than the 2012 levels of 9,646 MW and 470 MIGD respectively. To pay for some of these projects, as well as to refinance existing debt, the utility provider is planning a Q1 Islamic bond issue in the region of US$ 1 billion.

Another Dubai entity seeking additional finance is Emirates Islamic Bank (EIB). The bank’s capital base will be raised to US$ 1 billion as it issues 1.5 billion Dhs 1 shares with a rights issue.

It seems likely that the Islamic home finance provider, Tamweel, will be taken over by Dubai Islamic Bank who already hold 58.2% of the shares. The offer price would see 18 Tamweel shares being swapped for 10 DIB scrip with shares in the former valued at US$ 0.61 and the latter at US$ 0.34.

The local bourse has started the year on fire with a YTD 6.24% rise in the first ten days of 2013; on the week it is 3.66% up having ended the Thursday session on 1756 and a massive 31.03% over the past 52 weeks.

Another indicator on the growing strength of the local economy was Germany’s BMW’s announcing a record 21,300 vehicles being sold to ME customers in 2012. Of this total, the UAE accounts for nearly 50% of the market with sales in excess of 10k units.

Although the German car industry is ticking over, it seems that country may be edging closer to a recession with the latest quarterly results the worst in four years. There is no doubt that Germany is being dragged down by its poorer eurozone partners. Unemployment rates in the bloc rose to their highest ever level of 11.8% or 18 million. Worse still was the youth unemployment rates in places like Spain and Greece where they currently stand at 56.1% and 57.6%!

The UK’s economy has yet to recover the level it was at four years ago, pre GFC, and there are distinct possibilities of a triple dip recession in 2013. Eurozone’s PIGS all have debts as a percentage of GDP ratios of over 100% whilst the UK’s 86.3% is a worrying sign. Japan fares even worse with a rate of 212% – second in the world behind Zimbabwe! It is no surprise that, with Prime Minister Shinzo Abe facing general elections in July, the government has introduced a US$ 110 billion stimulus package in a belated attempt to end deflation and boost growth.

It can only be Dubai with Starbucks’ announcement that it had opened a 24 hour drive in on Beach Road for its customers. It proves that the coffee chain is making life less taxing for its patrons just as it does for itself in the UK. This is their 103^rd opening in the UAE – a country that drinks the equivalent of 3.5 kg of coffee annually – twice as much as any other GCC nation. One More Cup of Coffee for the thirsty Dubai populace.

Posted in Finance | Tagged Arabtec, Brookfield Multiplex, Carrefour, Cheesecake Factory, Damac, DEWA, Dubai, dubai shopping festival, Dubai World Trade Centre, Emirates, emirates airline, Emirates Islamic Bank, Fairmont, Singapore Airlines, Starbucks, Tamweel, UAE | 1 Comment

Simply The Best

Posted on January 6, 2013 by howesdubai

Dubai’s 2013 budget hopes to cut its annual deficit by 18% to less than 0.5% of GDP with Revenue expected to rise by 7.8% to US$ 8.9 billion and Expenditure up 6.0% at US$ 9.3 billion. It is not known what vehicle the government will use to finance this deficit of US$ 400 million. 39% of spending will be payroll-related, which includes an additional 1,600 jobs for Emiratis as part of the drive to put more locals into employment.

A recent FT survey yet again places Dubai as the region’s top destination accounting for 30% of all the ME’s DFI (direct foreign investment). There is no doubt that it has been helped by its superb infrastructure, Jebel Ali Port and Emirates.

04 January will not only be the 7^th anniversary of HH Sheikh Mohammed bin Rashid becoming the Dubai ruler but it will also see the completion and opening of the upgrade to the Al Khail Road. Costing US$ 517 million, with new flyovers and 8 line highways in some places, it is situated between SZR and Emirates Road. Indeed, with possible congestion on SZR over the next eighteen months – caused by the expansion of Dubai Creek through Jumeirah – Al Khail Road takes on added significance.

Dubai will continue developing its roads and infrastructure in 2013 and the RTA is expecting to spend US$ 1.7 billion with US$ 820 million and US$ 880 million earmarked for its operational and capital budgets respectively. Of the total, 34% (or US$ 580 million) is for the Traffic & Roads Agency. An 11% increase in forecast Revenue will help defray some of the costs.

The quay wall extension at Jebel Ali Port, an integral part of its 1 million TEU (20’ equivalent container units) expansion, has been completed. With an additional extension of 400 metres to 3,000 metres, the facility will be able to cope with handling six 15,000 TEU mega ships at the same time and is due to open in Q2 2013. At the end of September, the port had posted a 4.6% increase to handling almost 10 million TEUs.

Having splashed out a record amount to extend shirt branding of Arsenal FC through to 2019 and naming rights to the stadium until 2028 (thankfully they have started winning again), Emirates is now the official airline of the men’s tennis tour for the next five years. Last February, it also signed a seven year US$ 90 million deal to be the title sponsor for the US Open and nine other US tennis tournaments.

At the end of 2012, it seems likely that Emirates will become the world’s second biggest airline, overtaking Delta, but still well behind United which merged with Continental last year. Local “rivals”, Qatar and Etihad, are ranked 17^th and 28^th respectively. Meanwhile Dubai Airport came in as the 5^th biggest airport in terms of seats per week. Its 1.6 million was just behind Heathrow’s 1.7 million and not far from the biggest airport, Atlanta’s Hartsfield Jackson with 1.9 million. Interestingly, no other ME airport made the top 50.

As recent blogs have indicated, there has been tremendous growth in the UAE’s non-oil trade figures, expected to reach almost US$ 1 trillion this year with a 15% 2012 growth projected and next year will be along the same lines. UAE free zones, with a 20% increase, accounted for US$ 120 billion of the total. In the latest available figures, 46.2% of trade was with non-Arab Asian countries whilst the EU, Americas and GGC trailed behind with 21.5%, 9.3% and 9.2%.

The last week of the year started with claims and counterclaims as Qatar Airways filed a US$ 600 million suit against the Dubai / German JV Lindner Depa. The reason claimed for the legal dispute was that LDI failed to complete the construction of 19 airport lounges at the new US$ 15.5 billion Doha Airport putting back its opening a year to H2 2013. This in turn affected the airport’s expansion plan and inconvenienced the 20 million passengers – 80% of which are flown by the national carrier.

This was followed by LDI’s statement to Nasdaq Dubai (Depa is one of only two companies listed on that bourse). It indicated that the Qatari claim was false and misleading and, whilst being deeply disappointed by the allegations, it rebutted all claims.

Reports that certain properties in the Downtown area have seen prices increase by up to 10% in Q4 alone (and 25% in 2012) may well have sounded the alarm bells about the possibility of the start of another asset bubble. But those fears were quickly put to rest by the shock Central Bank announcement that banks have to cap mortgage lending for expatriates to 50% of the property’s value. Although it should stop the perennial flippers and speculators in their tracks, it will come as disappointing news to the genuine investor / buyer and could have a negative impact on other realty stakeholders, including developers and agents.

One wonders what hit the construction sector will take and what impact it will have on the Dubai economy. In 2011, the industry accounted for 10.3% of Dubai’s GDP with a total construction project value of US$ 86.9 billion – way ahead of Saudi Arabia’s US$ 59.6 billion. With over 80% of the population expatriates, it is hard to see where most of those, who would normally buy property, will access their money.

Despite this shock, Nakheel is going ahead with a self-financing US$ 136 million project for 381 villas in Jumeirah Park. This is a major step forward for a developer that reportedly had to write off assets, valued at US$ 21.4 billion after the last bubble burst in 2008. It is estimated 50% (or 4,500) pending units have already been handed over, with the balance slated for completion by the end of 2013.

Nakheel’s iconic Palm Jumeirah has received a boost with DEWA set to spend US$ 16 million to extend, by 3 km, a water transmission network from the island’s trunk to the crescent of the Palm. Completion is expected within eighteen months.

Contrary to earlier reports it seems that expatriates will not be immune from criminal charges in relation to bounced cheques. The new Presidential directive applies only to nationals and includes decriminalisation of such cheques presented by UAE citizens.

On the political front, the Syrian tragedy continues but this will be resolved one way or another in H1. The troubled relations between Japan and China will not go away and this will deteriorate even further this year. As North Korea becomes less isolationist, it will look for ways to improve their political and economic relations with the rest of the world. Nearer home, Egypt’s political impasse will drag on to the detriment of any meaningful economic progress.

Dubai has two stock markets. Nasdaq Dubai has only two listed stocks – DP World which ended 20.8% up on the year at US$ 11.73 whilst troubled Depa Limited closed 16.7% down at US$ 0.35. The Dubai Financial Market Index ended 2012 on 1623 points – a very credible 19.89% up on the year. It performed a lot better than most other global bourses such as Australian All Ords – 14.6%, Dow Jones – 7.3% and London FTSE – 5.84%.

Although the global economic climate remains bleak, the DFMI should continue its upward trend and could well break through the 1700 point level in H1. If anything, gold and silver did not perform as well in 2012 as some pundits had forecast. Gold stood at US$ 1,673.59, having risen 6.96% in 2012 but is now likely to test the US$ 1,800 level over the medium term. Having ended up 8.28%, at US$ 30.12, on the year, silver is expected to reach US$ 33.00 over the same time frame. (The almost daily volatility of these two metals may lead some to think that a little market manipulation may be occurring).

Over the past four years, Brent Crude has seen 3.78%, 13.35%, 21.27% and 65.82% rises and ended 2012 at US$ 111.27. It is hard to see oil trading over US$ 95 come the beginning of Q2 – unless, of course, there is some major catastrophe. Longer term, the price is set to drop quite significantly when new drilling technologies – including fracking – take effect. The world may become a different place if – and when – the US becomes the world’s top oil producer.

On the local front, property prices, in prime locations, will continue to rise – albeit at a slower rate whilst there will be more worrying news for tenants with annual rental increases of around 8% in the offing. Emirates will once again stun the aviation world when their annual results are released in April. Consequently both Dubai Airport and Dubai Duty Free, riding on the airline’s coattails, will continue announcing record figures – 60 million passengers and Revenue of US$ 2 billion in 2013 are not out of the question for these two entities.

If the world were not in such an economic mess, Dubai would grow at a faster rate than the predicted 4% for this year. Inflation will rise but will be still low on global comparisons. The hospitality sector will remain buoyant with 80%+ occupancy and RevPar rates nearing US$ 300. Whether the banks do anything about reducing their high provision rates for non-performing loans is problematic but these still continue as a millstone for local SMEs. The emirate’s government related companies will have no problem with US$ 9.4 billion bond repayments due this year – 2014 is another issue.

The eurozone is set to sink even further; do not be surprised to see turmoil in the markets and civil unrest on the streets of Greece, Spain, Italy and even France. The UK economy is expecting little growth following a double dip recession. When the IMF predicts Germany as one of its 20 worst performing economies, the Europeans portents look bleak indeed.

Elsewhere the BRICs are being superseded by the MICKS. Whilst China still remains an integral part of any possible recovery in 2013, the inefficiencies and corruption levels in the other three countries mean that they have been replaced by Mexico, Indonesia, Korea (South) and Southern Sudan. These countries have great growth prospects in the coming year.

The political lemmings in the US have avoided falling over the cliff – but the reprieve is only temporary. The huge debt problem is the main danger to the economy and there has to be some sort of bipartisan agreement to rein in that government’s US$ 16.4 trillion. Expect some more drama and show-boating by the end of February.

The Dubai Shopping Festival opens on Friday and has the tagline – “Dubai at its Best”. New Year’s Eve saw the emirate put on the world’s greatest fireworks display, watched by one million in the Down Town area and over a billion around the world. If Tina Turner had sung “Simply the Best”, nobody here would have argued.

Posted in Finance | Tagged Arsenal FC, Depa, Dubai, Dubai at its Best, Dubai Creek, dubai shopping festival, Emirates, emirates airline, Jebel Ali Port, Nasdaq Dubai, Qatar Airways, RTA, UAE | Leave a comment

Telegram Sam

Posted on December 30, 2012 by howesdubai

The impact that Emirates has on the local economy is staggering and the realty, retail, hospitality and trade sectors owe much of their recent success to the expansion, exploits and expertise of the local carrier. The aviation sector contributes US$ 22 billion, or 28%, to Dubai’s GDP. As the number of routes increases so do the number of employees, who require accommodation. There has been a tremendous growth not only in passenger numbers but also in the volume of travellers now stopping off in Dubai for a short break, boosting the takings of the malls, hotels and even Dubai Duty Free.

As passenger traffic at the airport is forecast to grow 13.1% this year to 57 million (with Emirates accounting for 60% of that total), it is little wonder that DDF is reaping the rewards. With 2012 Revenue expected to reach a record US$ 1.6 billion, with a 25% profit margin, the airport retailer continues to see double digit growth and with its retail space set to increase from 18k sq mt to 33k sq mt, it hopes to see its Revenue top US$ 3 billion within five years.

The annual Dubai Shopping Festival (DSF) – which this year ran from 05 January to 05 February – had 4.36 million visitors, who increased the emirate’s economy by US$ 4 billion, with shopping adding US$ 2.42 billion and accommodation US$ 0.76 billion – both marginally better than recorded in 2011. Although there was a 9.5% increase in visitor numbers, overall spending dropped by 2.6%. Of the 900k overseas visitors, 28% came from Europe, 23% GCC and 16% South Asia.

Retail accounts for 11.7% of all UAE’s GDP, having reached almost US$ 40 billion last year – the second largest contributor to the economy after petro-chemicals. No wonder then that the MAF-owned Dubai Mall, the world’s largest retail centre, claims that it has more annual visitors (50.2 million) than the whole of New York!

Following on last week’s announcement by Emaar that it was developing a retail outlet in Istanbul, MAF has announced that it is in discussions with Egypt’s Mansour Group to purchase its 70-store supermarket business, Metro, and discount groceries, Kheir Zaman, for US$ 300 million. Despite the political turmoil and a recent S & P downgrade, some investors have long term confidence in the Arab world’s largest populated country.

This week, HH Sheikh Mohammed bin Rashid Al Maktoum viewed plans of the 4 km waterfront development between the Creek and Hamriya Port. The US$ 816 million project was announced earlier in the year and includes six hotels, residential and commercial towers and a new fish market. He also reviewed the plans of the 2 km Business Bay Canal Project which will include a unique “hanging canal” over the metro track by Sheikh Zayed Highway.

Still struggling in Las Vegas is CityCenter, a US$ 8.5 billion JV between Dubai’s Infinity World (a subsidiary of Dubai World) and MGM Resorts. Opened three years ago, just as the city’s real estate imploded, the complex comprises a 4,000 room resort hotel, several other hotels, residential towers and a huge retail centre. The development was still in the red last year, with a Q4 loss of US$ 10 million, but it has just sold 427 homes for US$ 120 million which worked out at about US$ 300 per sq ft – up on last year – but still 50% off its 2006 peak.

Another questionable investment was by Istithmar – being its 2007 US$ 100 million purchase of the liner QE2, launched in 1969. Slated to become a floating hotel, it now seems that it may end up in a Chinese scrapyard, with a probable return to the owners of US$ 20 million.

DEWA continues in its on-going quest to maintain the efficiency of its networks and infrastructure. It has just activated a US$ 29 million 132/11kV substation at the Jebel Ali racecourse. A further 22 similar substations are currently under construction.

Dubai residents will shortly see a third petrol retailer operating alongside Emarat and Enoc. Abu Dhabi-based Adnoc is planning to open ten new petrol stations in the coming year.

The country is synonymous with oil and in November, daily production was at 2.65 million barrels with Abu Dhabi producing over 90% of that total whilst Dubai pumps about 60k bpd. In other words, in eight days, the Abu Dhabi output surpasses that of the whole year for Dubai.

October Central Bank figures showed a 1.4% monthly rise in M1 money supply aggregate (all the banks’ current and call account balances) to US$ 80.0 billion. A slightly bigger percentage increase was seen in total bank deposits to US$ 316.7 billion whilst there was no change in total bank loans and advances which remained at US$ 30.0 billion. It appears that only 4% of total lending (compared to 15% in developed countries) ends up with SMEs – a figure that will have to improve as they comprise 95% of all businesses. There was also a minute reduction in the banks’ bad loan provisions to US$ 17.79 billion (from US$ 17.82 billion) – noted because it was the first decline since the GFC four years ago when provisions stood at a miserly US$ 5.36 billion. Of the 51 banks in the country, 23 are local.

2012 has seen borrowing costs drop significantly as Dubai got on top of its debt problem with prompt repayments and a certain amount of restructuring. 2013 debt repayment for the emirate will come in at a surprisingly low US$ 9 billion but the Dubai government entities will have to repay US$ 31.0 billion in 2014 on its maturing bonds and loans.

On the local bourse, the Dubai Financial Market Index closed the week on 1611 points – 9 points up on the Sunday opening in flat trading. As the year draws to a close, the Index has shown a 19% increase in 2012.

2012 has seen bankers replace lawyers as people’s bêtes noires but the latter are fighting back. In a US litigation claim, Toyota has agreed to pay an estimated settlement of US$ 1.4 billion in an automobile defect class action. It seems that the plaintiff lawyers will pick up US$ 200 million in fees and US$ 27 million in costs!

Greek lawyers (and doctors) were fingered in a recent ERU and IMF Report that highlighted the fact that the Greek crackdown on tax evaders had somewhat faltered and was well under the target set by its lenders. It was envisaged, that by September 2012, 1,300 suspected HNWI would have been audited and at least US$ 2.65 billion overdue tax collected. Not surprisingly the actual audits totalled 440 and US$ 1.45 billion collected. In urging a more robust approach to the problem, the lenders concluded that “doctors and lawyers are a good place to start”. Coincidentally the biggest tax debtor turned out to be OSE, the state run railway!

Corruption will never go away and a recent report from Global Financial Integrity claims that in the first decade of this millennium, the developing world lost a total of US$ 5.86 trillion to illicit financial activities, China was streets ahead of the rest of the world with an estimated loss of US$ 2.74 trillion with Mexico a distant second at US$476 billion. UAE trailed way behind at a comparatively paltry US$ 107 billion.

Globally, the economic position is at best shaky. In Japan, despite the Liberal Democratic Party winning a landslide victory in the lower house, the yen fell to a two-year low whilst the stock market went the other way and reached its highest level since March 2011. The hope is that the incoming Prime Minister, Shinzo Abe, will introduce more proactive fiscal and monetary policies to kick start an economy that has been lifeless for some time.

It seems likely that the US government will hit their tax ceiling of US$ 16.4 trillion by 31 December and if this amount is not raised before then US$ 600 billion in tax rises and spending cuts cannot be avoided. However it seems that this date could be pushed back by two months if certain measures – creating a further US$ 200 billion – are implemented on an interim basis. The rest of the world can see first-hand how a true democracy works!

One of the enigmas of this year is why Spain has not sought an ECB rescue despite 18 months of recession and unemployment edging over the 25% mark. How long that a request for a sovereign bailout can be avoided remains to be seen. Their case will not be helped by Italy’s political troubles, which have seen the demise of Prime Minister, Mario Monti, as there will be a contagion effect on Spain’s borrowing costs.

As Dubai races into 2013 – and has the reputation of being one of the more progressive places in the world – it does seem quaint that Etisalat has just announced its new telegram services charges. For those in the know, service to the rest of the world will now be fixed at US$ 2.72 plus US$ 0.41 per word. Marc Bolan may well be dead but evidently there is still life in Telegram Sam.

Posted in Finance | Tagged Adnoc, CityCenter, DEWA, DFM, Dubai, Dubai Duty Free, Dubai Financial Market, Dubai Mall, dubai shopping festival, Emirates, emirates airline, Etisalat, HH Sheikh Mohammed bin Rashid Al Maktoum, Las Vegas, UAE | Leave a comment

Silent Night

Posted on December 27, 2012 by howesdubai

In a city of superlatives, it is not surprising to see that Dubai boasts ten of its constructions over 300 metres including the world’s highest building, shopping centre and hotel, viz., Burj Khalifa (828 metres), Princess Tower (414 metres) and JW Marriott Marquis Hotel (355 metres).

The scale of the recent expansion in new businesses setting up in Dubai is impressive. For example, Dubai Internet City has witnessed annual growth of 15% since 2008 with now more than 1,400 entities set up in this particular free zone. Last year, there were 166 new additions and this will be improved on in 2012. JAFZA is now home to over 6,800 companies which help to generate over 25% (US$ 69 billion) of Dubai’s total trade, 21% of its GDP and accounts for almost 50% of the emirate’s exports.

Last year, UAE’s industrial exports (excluding oil and gold bullion) showed a 16% rise from US$ 11.8 billion to US$ 13.7 billion. Figures also indicate that the fast growing manufacturing sector adds over US$ 27 billion whilst the country’s foreign trade in ceramics has risen by 45% with it now responsible for 60% of the global re-export trade.

Jebel Ali port has handled over 500k motor vehicles so far this year surpassing the previous record of 479k cars recorded just before the GFC in 2008. In the nine months ending September, the port handled 10 million TEUs (20 ft equivalent container units) – up 4.6% on the previous year.

With its current fleet of nearly 150 aircraft – and this number is set to double with new orders – Emirates are to build a new US$ 100 million engine maintenance facility. Khansaheb Engineering will be responsible for the 225k sq ft construction which should be in operation within eighteen months and require an additional 500 engineers to work on maintaining 300 engines a year.

The Australian authorities have given the initial green light for the Emirates / Qantas alliance which should be finalised by the end of Q1 2013. Despite some concern about reduced competition on certain routes, the Australian Competition and Consumer Commission (ACCC), concluded that benefits would far outweigh any concerns.

One good thing to come out of McDonalds is the waste cooking oil from which Dubai-based Neutral Fuels manage to convert to biodiesel. The company, based in Dubai Investment Park, has an annual capacity of 1 million litres. Its local operation has been so successful that it is now planning a process facility in Victoria, Australia, where it will have the waste from that state’s 211 McDonalds to convert to fuel for use by the fast food chain’s fleet of vehicles.

Gloria Hotels opened their 1,019 room Yasat Gloria property on Sheikh Zayed Road this week and when allied with its sister property, the 1,101 room Gloria, across the highway, makes it the largest hotel property in the region.

This week, one of the foremost luxury property developers, Damac, put 295 luxury serviced apartments up for sale in its The Distinction in the Downtown area. Being constructed by ANC Contracting, the project is slated for completion by 2015. The company was also joined by both Emaar and Nakheel who were also out looking for new buyers – the former launched its Sky Collection, a tranche of penthouses in its BLVD scheme, and the latter 90 villas in the Jumeirah Village Circle.

Overseas, Emaar is set to build the 73k sq mt Emaar Square in Istanbul and has just secured US$ 500 million bank finance for this development which will include a five star hotel, 1,000 villas and Turkey’s largest shopping mall.

DEWA has a US$ 10 million project to lay water transmission pipes at Al Khawaneej and Wadi al Amardi with the aim to meet the growing rise in water demand all over Dubai. It should be completed by the end of 2013.

Dubai Aluminium has announced a US$ 5 million investment in the Sheikh Mohammed bin Rashid Solar Park with phase 1 expected to produce 10 MW by the end of next year. Dubai Integrated Energy Strategy 2030 expects this figure to be ramped up to 1,000 MW by that date.

To further develop their infrastructure, Du has just signed a US$ 100 million loan agreement with Singapore’s DBS Bank. It is estimated that the Dubai-based telecom, 40% owned by the government, has already spent US$ 300 million in 2012 on network enhancements.

Thuraya, Dubai’s satellite phone company, is expecting at least a 10% surge in Revenue this year with even more business forecast in 2013. Etisalat owns 28% of this private company which operates two satellites covering most of the world, except for the Americas, and has over 200k subscribers, split evenly between data and voice.

Disturbing news for some parents came with the announcement by GEMS that it was planning to close its Westminster School as from June 2014. The owners have promised that it would give priority placements to the 4,800 exiled students in their other educational establishments, even though some are as far away as Ras Al Khaimah.

Another quite week on the Dubai Financial Market saw the Index edging higher to 1602 points – an increase of 17 from the Sunday opening of 1585. So far this year, the Index is up by18.32%.

Dubai’s second bourse, Nasdaq Dubai, which only has two listed companies, received a blow with news that Khalaf Al Habtoor had decided to postpone a planned IPO that would have seen his Al Habtoor Group raise up to US$ 1.6 billion by floating part of the company on that exchange. A valuation of US$ 6.06 billion by Grant Thornton excluded five overseas properties, several listed investments and their holding in Habtoor Leighton Group (HLG).

Interestingly, HLG is set to be the principal sponsor in the first Islamic Museum to be built in Australia. Expected to be the country’s centre for Islamic art, education and culture, Leighton Contractors envisage completing the building by 2014.

The Central Bank estimates that it will make a reduced US$ 820 million profit next year with revenues expected to reach over US$ 1.06 billion and expenditures in the region of US$ 240 million. This year the profit is expected to be in excess of US$ 1 billion.

Emirates NBD has laid out US$ 500 million to purchase the Egyptian arm of BNP Paribas, just days after Qatar National Bank spent US$ 2 billion for Société Générales operations in the same country. Time will tell whether this proves to be money well spent or the French knew something that the buyers did not.

Despite some banks – including HSBC, Deutsche Bank, Morgan Stanley and Credit Suisse – moving services away from Dubai to Qatar and elsewhere, Barclays have decided to boost its corporate banking operation here and wants to develop the emirate as the regional hub.

As intimated in a recent blog, UBS were in trouble again, this time with the authorities in three jurisdictions – USA, UK and Japan. For its unethical and immoral role in the interest rate manipulation, the Swiss bank will be fined US$ 1.6 billion. RBS is lining up behind with a possible fine of US$ 570 billion in the offing. The first bank to get into trouble was Barclays who in June agreed to settle on a fine of US$ 470 billion. These banks have been cooperative with investigators but other financial institutions have been less so and will not be treated as leniently.

Seeing these massive fines begs the question of who actually pays for these apparent fraudulent misdemeanours. The simple answer is the poor customer picks up the bill for the banks’ profligates, as can be seen by their continuing huge profits and fat cat pay packets.

Yet another country has cut its growth forecast; this time, India started the year expecting a 7.85% increase in its 2012 GDP, now slashed by 22% to 5.8% and even that figure may be problematic. Prior to the GFC, double digit expansion was the norm in a country that has never had growth at less than 6.5% over the past ten years. Some estimate that India has to grow at 8% just to keep its economic head above water.

Italy’s technocratic PM, Mario Monti, has resigned leaving a country worse off than when he took office 13 months ago, now with a smaller economy, higher taxes and rising unemployment. It is forecast that the country’s GDP will contract 2.1% this year and unemployment, currently at 11.1%, will continue at this damagingly high level.

After Italy, France is the next country to come under the spotlight. Recent growth has been sluggish – at 1.7% in 2011, an expected 0.2% this year and not much better in 2013. This means that Francois Hollande will miss his (and the eurozone’s rules) target of reducing public debt to 3% next year, with 4% being closer to the mark.

By the end of the week, it became apparent that House Speaker, John Boener, may well abandon a vote on “Plan B” which would then see the US teeter closer to the financial cliff. “Plan B” included extending the Bush-era tax cuts for all Americans, except those earning in excess of US$ 1 million. If no progress is made then the automatic tax hikes and spending cuts kick in on 01 January.

In Eastern Democratic Republic of Congo, Monusco, the UN-backed peacekeeping force, failed to stop the Rwanda-backed M23 from taking over the third largest city, Kisangani. In the past decade, it is estimated that at least 5.5 million people have died. The Syrian war continues unabated with at least 50,000 deaths and now there is the distinct prospect of chemical warfare. In the US, the last victims of the Newtown School massacre have been laid to rest and, if nothing is done about the US archaic gun laws, it will happen again. Silent Night, Holy Night. All is Calm, All is Bright. Some hope!

Posted in Finance | Tagged Burj Khalifa, Damac, DEWA, DFM, Dubai, Dubai Financial Market, Dubai Internet City, Dubai Investment Park, Emaar, Emirates, Emirates NBD, Gloria Hotels, JAFZA, Jebel Ali Port, Khansaheb Engineering, Nasdaq Dubai, UAE | Leave a comment

Send In the Clowns

Posted on December 24, 2012 by howesdubai

Only two weeks since the announcement of MBR City, its first project has been revealed. Dubai Hills, being developed by a JV between Emaar Properties and Dubai Holdings, will be on similar lines to the hugely successful Emirates Hills with sizable blocks of up to 30k sq ft. It will also have the obligatory 18-hole championship golf course, parks, retail outlets and schools and be located between Emirates Road and Al Khail Road.

With all the regional problems, it comes as no surprise to see Dubai as a safe haven especially for the HNWIs (high net worth individuals). With its booming economy, the emirate is proving a magnet for real estate investment with 40% going into residential, 40% hotel and leisure and 20% into commercial.

One of Canada’s largest property developers is planning to set up shop in Dubai. Empire Communities is hoping to develop iconic buildings in the city and is trying to take advantage of the upturn in the market here. Better late than never for the company that is building one of the tallest buildings in Canada – the 66-storey Eau de Soleil in Toronto.

Fears of another property bubble became a possibility with CBRE reporting that rents in some of Dubai’s more popular areas have risen 25% over the past twelve months. With only 36,000 new units slated to come on line within the next three years, some argue that this may not be enough supply to meet the demand from an ever growing population base. Indeed another report put Dubai as third in the world – after Moscow and Miami – for strongest performing property markets.

Despite these rental increases, UAE’s inflation rate stood at 0.5% in October – well down on its high of 12.3% in December 2008 and up from its record low in January 2011 of –1.6%.

Flavour of the month seems to be the healthcare sector with Majid Al Futtaim the latest entrant. In a bid to meet the increasing local demand (from both Emiratis and expats) and the growing medical tourism market, MAF is planning to use its high profile shopping malls as a base for top end medical facilities.

On the aviation front, Dubai Aerospace Enterprise has cancelled half of its order for ten 747-8 freighters. It was in the halcyon days of 2007 that the company stunned the aviation world with orders of 200 aircraft with Boeing and Airbus, most of which have now been cancelled. DAE was formed in 2006 by several well-known entities, including the Investment Corporation of Dubai, DIFC Investments and Emaar.

Construction of the new US$ 136 million Emirates new flight training academy is set to commence in January and will be located at the new airport, Dubai World Central. The facility will be solely for the Emirates’ National Cadet Pilots and will have a capacity for 400 students. However, in the future, it could be used to train pilots from other carriers.

Next week will see the first trial of Dubai Airport’s Concourse 3, built at a cost of US$ 3.5 billion. This expansion will lift the airport’s capacity to 75 million passengers and will be 645 metres long and able to handle 20 aircraft – 18 380s and 2 777s. A further US$ 7.6 billion will be spent over the next four years which will see the airport able to cope with 90 million travellers.

IATA have forecast that within three years the UAE will be among the top six global freight markets moving in the region of 2.5 million tonnes – ahead of Korea (1.9 million tonnes), UK (1.8 million tonnes) and India (1.6 million tonnes). In 2011, 29.6 million tonnes where carried by airlines with the figure set to grow to 34.5 million tonnes by 2016.

This week, Dubai Exports signed a MoU with the Hong Kong Trade Development Council to increase trade between the two entrepôts. In the first nine months of 2012, bilateral trade has increased by 33% to US$ 7 billion with exports jumping 48% to US$ 3.5 billion and imports up 20% to US$ 3.2 billion.

The federal Minister of Economy, HE Sultan Al Mansouri, met with the ambassadors from 18 EU member states to discuss improving trade links. The minister would like the bloc to play ball and ease some tariffs on UAE goods and reconsider the planned carbon trading tax for airlines which will have a negative impact on both Emirates and Etihad. Furthermore the EU plans to remove the country from a list of countries who are currently beneficiaries of reduced tariffs.

Dubai’s Mina Rashid port was again voted as the world’s best cruiser port by the World Travel Association. On-going development will see the port expand to be in a position to cope with seven cruise ships simultaneously.

Not so good news for investors in the country’s two telecom operators – Etisalat and Du. The government has indicated that it will increase royalty fees – for example Du will have to 17.5% of their profit (from (15%) and 5% of revenue as annual payments from this year.

The day of global censorship, control and government interference is fast approaching following a two week meeting in Dubai. Despite the fact that certain countries – including USA, UK, Australia, Canada and India – walked out, the World Conference for International Telecommunications agreed to update the 24 year old UN regulations giving countries a right to access international telecom services and to block spam.

Three Dubai banks received sobering news this week with a Moody’s downgrade because of concern about problem loans. Emirates NBD, CBD and Mashreqbank had long-term ratings lowered to Baa1 and all placed on negative outlook. As indicated in previous blogs, problem loans are at an unacceptable level of 15%+ – astronomically high when compared to the average GCC bank’s 6.1%. Evidently, the over exposure is primarily with stressed government entities and, although a reduction is expected in 2013, the problem may linger for somewhat longer. Latest lending figures show that the 3.2% UAE annual increase was about 20% of that of Saudi banks and point to the fact that this is a reason for local lending lethargy.

Shares in Emirates NBD fell this week following the downgrade. The actual DFM Index also fell on the week by 25 points closing the Thursday session at 1585.

HSBC were in the headlines for all the wrong reasons having confirmed that it had been hit by the largest ever penalty of US$ 1.92 billion. The fine, by US authorities, was the result of their role in transferring over US$ 7 billion cash – proceeds from illegal Mexican drug dealing. The bank has yet to settle with UK authorities. Next week another bank, UBS is looking at a fine in the region of US$ 1 billion to settle Libor manipulation charges brought by authorities in both the US and UK.

Overseas positive economic news is almost non-existent. For example, Japan saw an annualised GDP contraction of 3.5% and fell into recession over Q3. With exports falling and domestic consumer confidence waning, it seems that the country has yet to hit the bottom with Nissan and Honda slashing their profit forecasts for March 2013 by 20%. The yen has fallen 3.6% in the past month alone.

One fact is certain – until the eurozone get their act together and start making tough decisions to resolve their huge economic mess, the whole world will suffer in tandem. The need for the eurozone to become more competitive and get back to real work has never been more apparent. One just has to look at the following statistic that epitomises the problem. In the past ten years, labour costs have gone up in these four countries by the following percentages: Ireland – 37, Portugal – 32, Italy – 31 and Germany 6!

Two events this week brought some light relief to Europe. Despite the continent being in one of its worst ever economic crisis and deep rifts emerging between the continent’s “haves” and “have nots”, the EC president, Jose Manuel Barroso, along with Herman van Rompuy and Martin Schulz, collected the Nobel Peace Prize for the EU!? Then former Italian Prime Minister Silvio Berlusconi announced that he was “sadly returning to public service”. Send in the Clowns.

Posted in Finance | Tagged Dubai, Dubai Aerospace Enterprise, Dubai Hills, Dubai Holdings, Emaar, Emirates, emirates airline, Emirates NBD, Empire Communities, Majid Al Futtaim, Mashreq, Sultan Al Mansouri, UAE | Leave a comment

Let the Good Times Roll

Posted on December 9, 2012 by howesdubai

One of Dubai’s success stories, that seems to be under the radar, is the fact that the emirate is fast becoming one of the leading players in the healthcare market. The main drivers are the increased government and international investment which have seen the likes of Dubai Healthcare City beginning to flourish. It has been estimated that this sector will be worth in excess of US$ 11 billion next year – from an almost nil base less than a decade ago.

The reason why Dubai’s economy is flying, whilst that of say the UK is in a flat spin, is best exemplified by Willie Walsh, the beleaguered head of BA, speaking to the UK House of Commons Transport Committee. He pointed out that in 2001, Dubai was the 99^th biggest global airport – now it is 4^th – and that soon it will overtake Heathrow as the largest in the world because UK politicians are afraid to make tough decisions. One just has to see the quintessential response from HH Sheikh Mohammed bin Rashid Al Maktoum on such matters and that is why the London airport is at full capacity at 68 million whilst Dubai will have almost doubled its size to 90 million passengers.

The increasing stature of Emirates and other ME carriers to the aviation industry was brought home by the Boeing estimate that, over the next two decades, nearly 2,400 new aircraft will be ordered, with a value of US$ 470 billion. As would be expected, because of more long haul flights, 46% of that total would be twin-aisle aircraft compared to the global rate of 23%. Of the remaining order, 45% will be single aisle, 8% the larger craft such as the A380 and 747, with the remaining 1% being regional jets. There is no doubt that ME carriers will continue to outperform the global market.

There is slow visible progress at Dubai World Central, the new mega airport being developed in Jebel Ali. This year, freight tonnage should tip 200k tonnes whilst passenger operations are set to commence next year, although no actual timetable is yet available.

It is reported that Emirates are in potential partnership talks with Fastjet, the former aviation unit of Lonhro plc, which began commercial flights only last month. Despite the discussions being at an early stage, the low-cost African carrier’s share value jumped 7.5% on the London AIM this week.

Also on a similar front, dnata has won contracts to run ground handling services for Iberia and BA at two Swiss airports, Geneva and Zurich. Commencing in February 2013, the Dubai-based company will handle over 9,500 flights. Owned 100% by the Investment Corporation of Dubai, the company is one of the largest combined air services providers in the industry.

Rather surprisingly, Dubai is only ranked 60 of the most popular cities in the world for hosting conventions. Having put on 34 events in 2011, and because of its world-class infrastructure and position as a global travel hub, the local MICE industry will undoubtedly expand.

Dubai is currently hosting the World Conference on International Telecommunications, with over 2,000 attendees discussing pressing issues impacting the ICT sector. The last major overhaul was back in 1988 when there were a mere 4.3 million mobile accounts and the internet was a pipedream. How times have changed – today there are 6 billion mobile accounts and 2.5 billion using the internet. What is decided here in Dubai will dictate the future direction of how the industry is regulated and whether governments will get more actively involved in setting up usage charges. The worrying feature is that the 12-day meeting is being held behind closed doors with the future of the internet being decided by major telecoms – with all other interested stakeholders persona non grata.

The week that Dubai’s Ambassador to France, Mohamed Meer Abdulla Al Raesi, submitted the emirate’s formal Expo 2020 bid to the BIE, there is the announcement that the city will bid for the 2024 Olympic Games.

According to latest statistics (for 2011) from the World Trade Organisation, UAE is now the world’s 20^th biggest exporter in merchandise trade – its US$ 285 billion accounting for 1.56% of the global total of US$ 18.215 trillion – and 25^th biggest importer with its US$ 205 billion (or 1.12% of the US$ 18.38 trillion total).

The importance of the Chinese influence on the local economy is seen from the fact that their trade with JAFZ has more than doubled in five years from an annual US$ 4.4 billion in 2005 to over US$ 10 billion last year. No wonder then that Talal Al Hashimi, MD of Economic Zones World (EZW) will be leading a delegation to the Bauma Machinery and Construction Equipment Exhibition in Shanghai, in an attempt to attract even more business and raise the “Dubai brand”. (Interestingly the EZW accounts for over 40% of Dubai’s FDI and contributes 25% to its GDP).

It appears that Giordano is another company that has seen the benefits of setting up a regional hub in Dubai. The Hong Kong-based clothing retailer, established in 1993, is set to spend US$ 5 million in developing a logistics centre in Jebel Ali Free Zone (JAFZ).

Following recent announcements of various new tourism, retail and real estate projects, Emaar will expand the world’s largest shopping precinct, Dubai Mall, by a further 1 million sq ft. The development will comprise a new shopping boulevard, hotel, serviced apartments and luxury villas.

The other major property developer, Nakheel, is going green. Following the opening of its US$ 6.5 million park on Palm Jumeirah, it has intimated that they will be building many more recreational areas in their other developments. The newly opened Al Ittihad Park covers an area of 1.1 million sq ft and has a 3.2 km jogging track – it will be interesting to see how many residents will use this facility.

Dubai-based construction company, Arabtec has been awarded a contract in Qatar valued at US$ 630 million for ten buildings as part of a US$ 5.5 billion development of Msheireb Downtown Doha. Such projects will boost the company’s profitability and analysts are expecting an improvement on their rather disappointing Q3 Profit of US$ 9.5 million. Their shares on the Dubai Financial Market Index rose 1.7% on the day.

Meanwhile the Index ended its three day week (because of the National Day holidays), only 2 points higher at 1610 from its Tuesday start. YTD the market is up at a healthy 18.93%.

The business outlook for UAE continues bullish with the latest PMI (purchase managers’ index) standing little changed at 53.7. Any reading above 50 indicates growth whilst under that figure shows contraction – as is the case in the eurozone and other countries mired in the economic malaise. This is another sign that proves Dubai is outperforming most other places.

A further indicator that Dubai is prospering despite the global economic turmoil is that new car sales continue to soar. Latest figures show that for the half year to 30 September, Jaguar and Land Rover sales were up 21% and 33% respectively – their best results since the GFC. This is on the back of previous dealers’ latest results including Bentley sales up 88%, Ford 38%, Nissan Altimas 33% and BMW 15%.

The Road Transit Authority is trying its best to get residents off the road and on to its Metro. Their latest strategy is to start applying the Salik road charge for taxis, previously exempt from the US$ 1.10 toll, every time a cab passes one of the four electronic booths. It is expected that Salik will add almost US$ 1.4 billion to the government coffers next year.

This week, the President, HH Sheikh Khalifa bin Zayed Al Nahyan, directed that over US$ 410 million be used to clear the debts of Emirati nationals, the number of which was not disclosed. As part of the deal, monies will have to be repaid but will not exceed 50% of any debtor’s monthly salary.

The nefarious, Berlin-based Transparency International considers the UAE the least corrupt regional nation and is ranked 27th on the global stage. Predictably, Denmark, Finland and New Zealand were considered the “cleanest” whilst Afghanistan, North Korea and Somalia were at the bottom of the ladder of the 176 countries surveyed. That being the case why do certain western powers continue to pour billions into such profligate countries?

Just to show that corruption is endemic, the EU has imposed a US$ 1.9 billion fine on six companies, including LG, Philips and Panasonic for running two cartels for almost ten years. Evidently, senior management would regularly meet to fix prices and market share.

Then there is the case of Rolls Royce who are in talks with the UK’s Serious Fraud Office about possible bribery cases in China, Indonesia and other countries. If proven, then the US Department of Justice will become involved and that could mean even more trouble for UK engine maker; it was only two years ago that BAE felt the wrath of US justice and incurred a US$ 400 million charge.

Not to be outdone, banks’ shenanigans are back in the news with three ex-employees of Germany’s largest lender, Deutsche Bank, alleging that the bank hid losses up to US$ 12 billion. At the time, during the turbulent 2007 – 2009 period, the false valuation of their derivative positions averted a damaging government bailout. The SEC is studying the allegations. Meanwhile Standard Chartered has agreed a US$ 330 million settlement with US regulators for their flouting of sanctions against Iran.

Better late than never, German Chancellor, Angela Merkel, is beginning to realise the inevitability of a further write-down of Greek debt. As she still wants to be Chancellor after September 2013 elections, there is no doubt that this will not be considered until 2014 at the earliest. No doubt Greece will continue taking the easy way out, knowing that the real severe economic measures, that should be taken, can well be diluted.

Another sign of the global slowdown emanated from the world’s biggest exporter of iron ore and coal. With commodity prices declining rapidly, Australia saw its Q3 growth soften to 3.1% slowing from the 4.0% growth of H1. Although still resilient, compared to most other countries, there are two economies running in parallel universes – the mining sector has committed resource projects valued at US$ 280 billion whilst tourism, manufacturing and retail are struggling because of the lofty dollar, reduced consumer spending and relatively high labour costs.

The ECB President, Mario Draghi, blamed weak consumer and investment growth for a revised eurozone forecast that sees a further shrinkage of 0.5%. The bloc is mired in a recession from which it will find increasingly difficult to escape. Austerity packages result in unemployment rising which has a double whammy for governments – a fall in tax receipts and an increase in benefit hand-outs. The current unemployment level of 11.5% is a disgrace and demonstrates a lack of cohesive action from the Brussels bureaucrats.

There is probably no more bureaucratic organisation than the UN that has again shown its ineptitude with its mishandling of the Syrian crisis as massacres continue. The latest news is that there will be repercussions if the Assad government decide to use chemical warfare. President Obama and US officials have been issuing stern warnings this week but if more than 50,000 have already died, why do we have to wait for a tipping point?

In contrast, all the key economic indicators are pointing north as confidence in Dubai grows with prime real estate up 20%, hotel rates and occupancy up by 10%, the cost of insuring its debt against default more than halving over the past two years and the feel good factor fast returning. Let the Good Times Roll!

Posted in Finance | Tagged dnata, Dubai, Dubai Healthcare City, Dubai Metro, Dubai World Central, Emirates, emirates airline, HH Sheikh Khalifa bin Zayed Al Nahyan, Jebel Ali Free Zone, MICE, Road Transit Authority, UAE, World Conference on International Telecommunications, World Trade Organisation | Leave a comment