howesdubai.com

Out of Time

Posted on April 7, 2013 by howesdubai

With Easter fast approaching, the local hospitality industry is bracing itself for another busy period. Apart from the influx of tourists, another sector is becoming an increasingly important driver in filling Dubai’s growing number of hotels and that is the conference market. Recent figures indicate a 12.5% surge to 1.85 million in the number of visitors attending the various exhibitions held at the Dubai World Trade Centre last year, including 703,000 from overseas. The 150 trade shows and exhibitions held are estimated to have filled Dubai’s coffers by US$ 1.8 billion.

It is not only people flooding into these shores but also capital. The Department of Economic Development has reported that its foreign investment office facilitated investment of nearly US$ 1 billion last year with a total economic impact of US$ 5 billion – a 14.3% jump on 2011. No doubt, disgruntled Cypriot depositors will be looking to transfer funds into Dubai when draconian transfer limits are lifted.

The first two months of 2013 have seen Dubai International increase its passenger numbers by 15% up to 10.6 million. As a result, the airport has become the world’s second busiest – behind London Heathrow. It is expected that this will change with Dubai’s expansion plans of an increase in capacity by 50% to 90 million within the next five years.

The main driver behind these impressive returns has to be Emirates. Their passenger numbers will grow even further because of the decision by the Australian Competiton and Consumer Commission to give final approval for the airline and Qantas to combine operations for the next five years. Dubai will take over the mantle of Singapore which has been the regional hub for the Australian carrier for the past two decades.

Having received 151 aircraft from Boeing since 2002, Emirates has 73 777-300ER on order worth in excess of US$ 23 billion. The three-year old budget carrier, flydubai, already has 27 737-800s in service with a further 23 still to be delivered. An obvious boost for Boeing and the US economy.

Damac Properties continue to hog the headlines with a raft of new developments already announced in Q1. Their latest offering is a luxury tower of hotel serviced apartments located on the seafront at Dubai Maritime City. The company also announced that phase 1 of its US$ 1 billion Paramount Hotel sold out within hours of release as over 1,000 potential international investors attended the launch. This is yet another positive sign of a major recovery in the Dubai property market.

One of Dubai’s major developers has just signed a US$ 136 million contract to build the Nile Towers in Cairo. Arabtec’s 23-storey hotel and residential complex – its third major project in Egypt – will include a 256-room Hilton and 114 luxury apartments. Having got its fingers burnt during the Dubai real estate crash four years ago, the company seems to be concentrating away from its home base.

Meanwhile Q2 will see Meydan announce some major projects on its rambling 3.7 million sq mt site. In order to fund future infrastructure, Meydan has just signed a financing deal with Commercial Bank International and Qatar National Bank.

In Meydan’s southern extension, G & Co has started work on the US$ 327 million development of its Millennium Estate. It is expected that completion of the 198 luxury villas – that will cost between US$ 1.56 million and US$ 2.0 million – will be completed by 2015. Funding of the 3.8 million sq ft project has been sourced locally.

Following its recent announcement of a new hospital in Meydan, local company Mir Hashem Khoory (MHK) is going into education with news that it is tying up with UK’s Kent College, Canterbury. Unlike some other educational facilities, this will not be a franchise arrangement as the UK entity will manage and operate the 2,000 student operation ready to open in 2015. It is expected to cost in the region of US$ 41 million.

The Varkey-run GEMS is planning to build a further 21 schools, over the next three years, bringing their total inventory of educational establishments to over eighty. The Dubai company, the world’s largest privately owned provider of school education, may have to raise up to US$ 1 billion to finance this expansion.

There have been two major industrial investments reported by Dubai-based companies – Al Braik Investments and Caparol. The former has obtained approval to establish a US$ 200 million silicon smelter in Abu Dhabi’s Khalifa Industrial Zone. When up and running in 2016, its two furnaces will have an annual capacity of 33,000 tonnes.

The other – a JV between Emaar Industries and Investments and Caparol – will develop a US$ 10.9 million facility in Dubai Industrial City. The German partner is that country’s largest paint manufacturer and is looking at tapping into the MENA market estimated to be worth US$ 680 million. The factory will be able to produce 30,000 tonnes per annum.

The government-owned Dubai Silicon Oasis Authority had a record 2012 with a 26% jump in profits to US$ 45.1 million on Revenue of US$ 186 million. There was also a 32% hike in the number of companies to over 700 of which 480 are involved in the IT industry.

Having made records sales of over 1,650 vehicles in 2012, it is no wonder to see Al Nabooda planning a US$ 39 million new Porsche showroom on SZR. Early indicators are that motor vehicle sales this year will be stronger than 2012.

A recent study has shown that the use of electronic payment products continues to expand in the region. Over the past four years, this medium has reportedly added US$ 4.2 billion to the UAE economy, compared to US$ 4.7 billion in Saudi Arabia and US$ 1.2 billion in Kuwait. Once again the UAE is seen to be punching above its weight.

The long drawn out Deyaar fraud case came to its conclusion this week with the former CEO, Zack Shahin, sentenced to fifteen years and three of his cohorts receiving lesser sentences. Between 2004 – 2007, they were accused of accepting bribes to the value of US$ 5.5 million. In addition fines of more than US$ 7.8 million were handed out.

The Dubai Financial Market Index has fallen 3.4% – its largest weekly drop in the past ten months. April will probably see more of the same. The market has been flat and falling over the past four weeks but is still up 13.7% so far in 2013.

Although Cyprus is still the dominant business story, there is bad news further afield. Argentina is on the brink of defaulting on a looming US$ 1.3 billion claim. In 2002, the country had problems with repaying a US$ 100 billion loan; most of the creditors agreed to a revised settlement except for hold-out creditors who refused and wanted full payment. Courts have agreed to their request and the time of reckoning has now arrived for the South American government..

Three indictaors in the UK show that the country is in a bigger economic malaise than most obdservers had forecast. The latest quarterly GDP has a fall of 0.3% with a triple dip recession becoming more likely. Then its 2012 current account has jumped from US$ 30 billion to US$ 88 billion; the gap between spending and earnings is now 3.7% of the GDP – its highest level since 1989. Finally, sterling is under enormouus pressure and has fallen 6.7% to the US$ and 3.9% to the euro this quarter.

Eurozone’s third smallest economy, at US$ 23 billion, (behind Malta and Slovenia), has had an epic week. Finally Cyprus had to face reality after their last chance, Russia, refused any help. In exchange for a US$ 12.8 billion bail out, their second largest bank was closed down and depositors – with more than US$ 128k – were heavily penalised. Further measures included a daily limit of US$ 368 for withdrawals and severe restrictions on international transactions limited to US$ 6.4k per month.

The end result is that there are now two euros in Cyprus – a cash euro and a bank euro, most of which cannot be accessed. The country has little chance of economic survival if tihs staus quo continues. President Nicos Anastasiades still clings to the hope that Cyprus can stay in th euro. Unfortunately for this Mediterranean island (and maybe for the likes of the PISS countries – Portugal, Italy, Spain and Slovenia – future possible bail out candidates this year) they are all Out Of Time.

Posted in Finance | Tagged Al Braik Investments, Boeing, Caparol, Deyaar, DFM, Dubai, Dubai Financial Market, Emirates, emirates airline, Meydan, UAE | Leave a comment

Don’t Look Back In Anger

Posted on March 23, 2013 by howesdubai

There is no doubt that the local tourism industry is booming and latest figures from the World Travel and Tourism Council just serve to confirm this. The massive impact this sector has on the economy can be gauged from the fact that it contributed US$ 52.8 billion, or 14%, of the GDP, with this set to grow even further in 2013. No wonder then that the industry accounted for almost 23% of total investment last year (amounting to US$ 22.6 billion) and over 11% of the work force – over 383k.

Interestingly, UAE ranked 15^thof 140 countries in a World Economic Forum survey on positive attitudes towards foreign visitors. At the top end of the scale were New Zealand, Iceland and Morocco whilst the least friendly were Bolivia, Venezuela, Russia and Kuwait.

The second ‘T’ in the Dubai trinity is trade and recent blogs have enumerated how well this sector is performing. One of the fastest growing segments is that of diamond trading and latest figures indicate that Dubai has become the third most important global hub after Mumbai and Antwerp. From an almost zero start position in 2003, the business is now worth in excess of US$ 40 billion and growing.

(It has to be Dubai when you hear stories of a Swiss company selling a Bentley Continental GTC diamond encrusted bonnet for US$ 545k. In the same vein, the most expensive garment in the world – an abaya – valued at US$ 17.7 million is on show at Raffles Dubai).

DP World had a 20.9% increase in 2012 profits to US$ 555 million as its Revenue rose 4.7% to US$ 3.12 billion. The world’s third largest ports operator invested US$ 685 million last year on its sixty terminals spread across six continents. This year, it plans to spend US$ 3 billion and is currently involved in eleven new developments and expansions.

Dubai-based Kaloti Group is helping the government of Suriname to build South America’s first ever gold smelting plant. When fully operational in 2016, it could be refining over 60 tons of gold annually.

Another step in making Dubai a major medical hub was the announcement that MHK (Mir Hashem Khoory) will build a hospital at Meydan. The 170-bed project, covering 280k sq ft, will be completed in 2015 and will be manned by 600 staff, half of whom will be from Korea. Currently this sector contributes around 6% to the UAE’s non-oil GDP totalling US$ 3.2 billion; estimates are that this figure will quadruple over the next three years.

Emaar had mixed results in respect of their property trades in 2012. Whilst apartment sales more than doubled to US$ 681 million, both its villa and commercial sales were down – villa sales dropped marginally to US$ 255 million whilst its commercial property nosedived from US$ 736 million to US$ 186 million.

Already owning the world’s second largest yacht, Dubai, HH Sheikh Mohammed bin Rashid Al Maktoum has taken delivery of a rather smaller 40 metre aluminium superyacht built by the Italian company, Saniorenzo. Curiously, seven of the ten biggest ever yachts are regionally owned. “Dubai” comes in 2^nd at 160 metres (2 metres shorter than Roman Abramovich’s “Eclipse”), with The Sultan of Oman’s “Al Said” (155 metres), Saudi-owned “Abdulaziz” (147 metres), Abu Dhabi’s “Yas” (141 metres), Saudi Crown Prince’s “Al Salamah” (139 metres) and the Qatari Emir’s “Al Mirqab” (133 metres).

News this week that the belated Al Sufouh trams will be in Dubai by the end of 2013 – three years behind schedule because of liquidity problems emanating from the after effects of the GFC. The first phase of the 14 km track will see the 300-capacity vehicles move up to 3,500 passengers an hour from the Marina down Al Sufouh road and linking with three metro stations on SZR. Phase 1, covering 10.6 km, is expected to cost US$ 1.09 billion.

With an estimated US$ 50 billion worth of debt maturing between 2014-2016, don’t be surprised to see one of Dubai’s bigger government entities going public in the next year or so. Given the right economic climate, assets, such as Emirates or DEWA, would surely sell at a premium.

Last year, the UAE pumped 5% more oil raising their daily production to 2.68 million barrels. Consequently the country’s oil export earnings rose to US$ 124.7 billion boosting its current account from US$ 41 billion to US$ 60.5 billion – an impressive 47.6% surge.

During 2012, there was a 4.4% rise in money supply aggregate M2 as well as increases in bank loans and advances (2.6%) to US$ 299.5 billion and bank deposits (9.2%) to US$ 318.2 billion. The Central Bank also confirmed that, at the end of 2012, money supply M0 (currency in circulation and with banks) was at US$ 15.75 billion.

Meanwhile Dubai Financial Market Index had a flat trading week marginally down from its Sunday opening of 1916 to close on Thursday at 1910. The downward trend is expected to continue into April. YTD the Index is still up 16.85%.

HSBC is in trouble again – this time in Argentina where the authorities have accused the bank of money laundering and helping its clients evade taxes. The tax agency has commenced legal proceedings but the amounts involved are small fry compared to what went on in US which led to a US$ 1.9 billion settlement last year.

Another bank that seems to be more concerned with the welfare of its senior staff than its customers is Barclays. It has been reported that nine of them will receive a total of US$ 60 million in a share pay-out deal. So much for a promised overhaul of the bank’s extravagant pay deals!

One of the high profile firms in the US$ 2.25 trillion hedge fund industry, SAC Capital Advisors, has been caught in the biggest ever insider trading fraud. Its founder, Steven A Cohen, who has built up a US$ 15 billion hedge fund, settled with the US regulators and agreed to pay US$ 616 million as penalty for basically cheating the system. In the ideal world, the likes of Mr Cohen should be locked up for their misdemeanours.

On the tenth anniversary of the Iraq invasion, a recent report claims that the US has spent at least US$ 138 billion in military and reconstruction costs. 52% of this total (US$ 72 billion) was secured by ten contractors with the main beneficiary being KBR, a former subsidiary of Halliburton, which raked in revenues of US$ 39.5 billion. Coincidentally, Dick Cheney, the former VP to George Bush, used to run Halliburton. What is also worrying is a 2011 report on Wartime Contracting in Iraq and Afghanistan estimated that US$ 60 billion had been either wasted or lost to fraud since 2001.

In its aim to acquire strategic overseas assets, Chinese foreign direct investment continues to climb with Australia becoming a big target. In the first two months of this year, investment there was up 242% over the corresponding period in 2012 whilst there were major pushes in Hong Kong and US where increases of 156% and 146% were witnessed. Latest figures show that US$ 18.39 billion was spent overseas whilst inward investment stood at US$ 17.48 billion.

A combination of falling exports (2.9%) and rising imports (11.9%) is not good news for the Japanese economy as it reported a February trade deficit of US$ 8.1 billion. It seems that a falling yen (20% down on the US$ since November) is not the panacea many thought it would be.

Forecasting is not one of George Osborne’s strengths. In October, the UK Chancellor estimated the country’s 2013 growth at 1.2% – now he admits that it will be halved to 0.6% and even that may be on the optimistic side. Furthermore his December borrowing forecast has now been revised downwards, adding a further US$ 84 billion over the next five years on a debt figure heading towards US$ 1.8 trillion.

The week started with an attempted Great Euro Bank Robbery via a brazen – but ultimately failed – effort by European politicians, bankers and unelected eurocrats to clean away their financial shenanigans at the expense of Cypriot bank customers. With estimates that Russian interests hold 40% (or US$ 31 billion) of total deposits in Cyprus banks, there was a feeling that maybe the Germans were not too happy to be seen rescuing Russian money launderers. It would appear that the troika would not release US$ 12.9 billion in emergency loans unless US$ 7.5 billion was forthcoming with a bank levy on deposit accounts. Why then did they allow funds to bail out troubled Spanish banks to be paid directly to the government. How did Greece get US$ 310 billion in funds when their small neighbour is asking for such a relatively small amount?

It appears that Angela Merkel will not allow any rescue funds to be used to bail out troubled banks. With an election coming up in September, the German Chancellor is probably more concerned about her domestic political future rather than the future of the eurozone. So much for eurozone solidarity as Cyprus is cast away to fend for itself.

If there is no satisfactory ending to this euro-made debacle, then there will be not only be huge ramifications in the Mediterranean island but the contagion effect will be felt around the world.

Noel Gallagher was in town this week and performed a few of his Oasis songs. Try telling Cypriots, US taxpayers, HSBC and Barclays bank customers Not To Look Back In Anger – they all have a right to be completely hacked off!

Posted in Finance | Tagged Al Sufouh trams, DEWA, DFM, Dubai, Dubai Duty Free, Dubai Financial Market, HH Sheikh Mohammed bin Rashid Al Maktoum, HSBC, Kaloti Group, UAE | Leave a comment

Help!

Posted on March 16, 2013 by howesdubai

Last year, the UAE economy grew by 6.5% with GDP rising to US$ 375 billion, mainly because of higher oil prices and increasing investment from within the region moving to a comparatively safe zone. Saudi’s GDP accounted for 43.1% of the GCC total of US$ 1.482 trillion with the UAE second at 25.3%. This figure was more than Qatar and Kuwait combined: however its per capita GDP at US$ 45,731 lagged behind these two GCC countries. The Washington-based Institute for International Finance is forecasting a 5.3% growth this year.

Preliminary figures covering the first nine months of 2012 indicate that UAE non-oil exports rose by 60.8% to US$ 37 billion. The most valuable traded item was gold at US$ 21.7 billion followed by ethylene polymers (US$ 1.4 billion) and jewellery (US$ 1.3 billion). Over the same period, there was a 12.5% hike in imports to US$ 134.9 billion. Trade in the free zones rose to US$ 3.5 billion, comprising US$ 1.7 billion imports, US$ 1.5 billion re-exports and US$ 0.3 billion exports.

A Ministry of Foreign Trade report shows that UAE exports of plastics increased by a massive 127% in H1 2012. With its price doubling to US$ 1,790 per tonne since 2008 and with GCC production estimated at US$ 44 billion, it is not surprising to see the Dubai Gold and Commodities Exchange launching a plastics future contract – the first of its kind in the world.

A recent report showed that Dubai luxury property rose by 20% in 2012 making it the second highest global increase behind Jakarta which had a massive 38% jump. Impressive gains such as this go a long way in clawing back the 60% fall following the GFC in 2008 with flatter rises expected in the current year.

Work on a US$ 3 billion project at Meydan City is expected to start in Q2 according to the Indian developer, Sobha. The project, covering 8 million sq ft, will take eight years to complete and will comprise hotels, shopping mall, villas and apartments.

2012 was a landmark year for the tourism industry with visitor numbers exceeding 10 million for the first time ever. Hotel guest numbers jumped 9.5% to 9.96 million and with the number of nights increasing by 14%, there was an 18% surge in hotel revenue to US$ 5.13 billion. Saudi Arabia accounted for 11.1% of all visitors with India, UK, US and Russia (with a 54% rise) making up the top five.

Starwood Hotels & Resorts Worldwide has recently moved their headquarters from New York to Dubai. The group, which runs the Sheraton and Le Meridien brands, plans to increase its Dubai portfolio by a further six properties. This is another sign that the emirate is now probably the centre for the world’s hospitality industry.

One tourist attraction not going ahead is the Formula One theme park that was to be built by troubled Union Properties. When launched seven years ago, the project was slated to cost US$ 360 million but after spending an estimated US$ 260 million, the project was suspended in 2009 when a further US$ 327 million was needed to complete the development. Now it seems that Bernie Ecclestone is set to receive US$ 10 million as a penalty for the abandonment of the theme park.

The local e-commerce sector is growing with on-line transactions topping US$ 11 billion and UAE’s total spend is equivalent to over 50% of the total GCC business. No wonder then that with foreign investment companies eyeing this burgeoning market, Tiger Global Management has just acquired the three year-old Dubai-based Cobone.com for an undisclosed amount but which could be around US$ 40 million.

With 3,500 vehicles currently in its fleet, Dubai Taxi Corporation has just ordered a further 1,100 Toyotas which will bring that manufacturer’s share of that market to 86%.

Having projects already in Brazil, Cameroon and Guinea, Dubai Aluminium Co has just purchased a 20% share in a Chinese calciner project. The joint venture with Hong Kong-based Sinoway Carbon Energy will secure Dubal’s future supply of calcined petroleum coke.

The latest Dubai entity seeking finance is Emirates NBD, 55.5% owned by the Investment Corporation of Dubai. The amount of the proposed bond is unknown but it is thought that it will be at least US$ 500 million. Some of the proceeds would go to repay part of the US$ 3.43 billion it received from the Ministry of Finance at the peak of the 2008 global crisis.

On the subject of debt, it must not be forgotten that Dubai is scheduled next year to repay US$ 22 billion, most of which relates to Dubai World. A large portion of this emanates from loans granted by Abu Dhabi and the UAE Central Bank when Dubai was on its economic knees following the GFC in late 2009.

As part of its on-going financial restructuring, DP World received US$ 736 million when selling interests in two container terminals and a logistics centre in Hong Kong. Ridding itself of a 55.2% share in its Asia Container Terminal raked in US$ 277 million whilst divesting 75% In CSX World Terminal and the ATL Logistics Centre netted the world’s third largest global ports operator a further US$ 459 million. This latest transaction is expected to see the company post a US$ 151 million gain.

DP World, one of only two stocks trading on Nasdaq Dubai, was at US$ 14.40 at the close of business on Thursday. DEWA’s latest US$ 1 billion sukuk – rated BBB – was listed on Monday which brought the value of registered sukuk on that bourse to US$ 6.24 billion. Meanwhile Dubai Financial Market Index had another good week up 1.8% to 1916 from its Sunday opening of 1882. The Index is more likely to hit 1800 rather than 2000 in the coming weeks.

As its GDP shrinks at an annual rate of 2.4%, allied with rises in unemployment to 11.2% and public debt at 127%, it comes as no surprise to see Fitch downgrade the Italian economy to BBB+. This comes at the same time that the banks’ total gross bad loans increased by 16.6% to US$ 162.8 billion with the situation expected to worsen in H1.

Global markets are a little perturbed by the fact that comedian, Beppe Grillo, may hold the balance of power as centre left leader, Pier Luigi Bersani, tries to form a minority government The political uncertainty could have a negative knock-on effect on the PIGS – Portugal, Ireland, Greece and Spain.

Unemployment rates in these four countries range between 15% – 26% – compared to say the likes of Germany and the Netherlands where it is around 5%. Wage rates have remained flat in three of the countries with Ireland actually witnessing an 8% fall whereas Germany has seen labour costs rise by 10%. Even more depressing is the disparity in GDP where Spain, Ireland and Portugal have fallen 7% and Greece 24% since the GFC compared to Germany where the growth has been over 7%. All four countries have been racked by austerity measures moreso than most of their eurozone partners. This has resulted in falls in the PIGS’ domestic demand of between 13% – 25% and a weakening in their domestic investment.

Then there is the distinct possibility that Europe’s third largest market, the UK, will see itself in a triple dip recession. All economic indicators are heading south with the latest being industrial production which fell sharply in January. Following his “omnishambles” budget last year and having to admit that he will miss his own targets twelve months later, Chancellor George Osborne is in for a torrid time next Tuesday. Help!

Posted in Finance | Tagged cobone, DEWA, DFM, DP World, Dubai, Dubai Financial Market, Dubai Taxi Corporation, Dubai World, Emirates NBD, Meydan City, Nasdaq Dubai, Starwood Hotels & Resorts Worldwide, Tiger Global Management, UAE, UAE Central Bank, Union Properties | Leave a comment

Goodbye Yellow Brick Wall

Posted on March 10, 2013 by howesdubai

There is no doubt that tourism is a major driver for the Dubai economy, epitomised by January’s hotel occupancy, which rose to a giddy 89.6% – helped along by the success of the month-long Dubai Shopping Festival which this year attracted 4.7 million visitors. All figures headed north with Average Room Rate up 5% to US$ 359.39 and Total Revenue per Available Room at its highest level ever of US$ 522.92. RevPAR and F&B were both up 10.2% (US$ 321.85) and 6.5%. This year will see an 8.3% increase in the room inventory to 58,800 with a massive 16.7% jump to around 69,000 hotel rooms by the end of 2014.

The second ‘T’ in Dubai’s growth is travel with the aviation sector generating almost US$ 40 billion equivalent to 14.7% of UAE’s GDP. January IATA figures indicate how well this sector is performing when compared to European carriers and other global airlines. As is the norm these days, the region had the fastest worldwide growth in terms of passenger numbers with 14.3% compared to Europe that grew at a paltry 2.1% and globally at 2.7%. At the same time, available capacity grew at 14.4%, 0.4% and 2.2% respectively. More of the same is expected for the rest of the year.

With the retail sector accounting for an estimated 12% of GDP, Dubai has launched the first virtual mall,Tejuri.com, in the region. The fact that on-line shopping is still in its infancy here can be gauged from the income of only US$ 280 million generated in the UAE compared to say the UK where the industry is 170 times bigger at US$ 47.8 billion. There is no doubt that internet retail trading will be a growth sector for the local economy.

The end of March will see the phase 1 completion of the US$ 40.8 million new Dubai Zoo located in Al Warqa 5. The 400 hectares site will include a safari park, golf course and recreational facilities. In line with Dubai’s philosophy, the aim is to make the safari park the best centre for wildlife in the world. Dubai Municipality is also planning a crocodile park which will be set up in the near future.

An interesting development this week came with appointment of Douglas Kirkman as CEO of ICD-Brookfield Management Limited running a US$ 1 billion fund, targeting Dubai real estate assets. The Investment Corporation of Dubai, the government’s investment arm, has joined with the Canadian conglomerate to finance future major developments in the emirate.

Another government entity, Dubai Industrial City, is now home to 471 companies having seen a massive 82% increase (212) in the past year. DIC is a specialised industrial and logistics hub for light to medium manufacturing and is one of the main drivers that help to make the industrial sector the second largest contributor to the country’s GDP.

With an improved lending environment and historically low rates, Emirates becomes the third government-owned entity this year to opt for a sukuk financing option. This will be the airline’s second bond issue in 2013 following a rather complex structured US$ 750 million one in January; DEWA and the Dubai government have already raised finance of US$ 750 million and US$ 1.25 billion.

Emaar again hit the jackpot as it saw its third major project in three months sell out in less than one hour last Saturday. Investor interest in the Address Residence Sky View was worldwide with interested buyers from seventy-five countries which just shows the increasing pull of Dubai as a place to live. According to a recent survey, it has just become the seventh most desirable global living place for high wealth individuals.

Another massive development was announced this week – Damac Towers by Paramount. Located in Down Town, the US$ 1 billion project – with a movie based theme – will comprise four towers (all over 250 metres) and include a 540-room hotel and 1,400 serviced apartments. Construction has already started with completion expected by the end of 2015.

Meanwhile Nakheel is planning to construct two-storey villas in Jumeirah Village Circle and has issued a tender for potential bidders to develop the site. As the name implies, the development will see all ninety units built in a circle.

As one of the bedrocks of the local economy, it was not unexpected to see Dubal’s 2012 Net Profit increase by 6.5% to US$ 430 million on a 11.2% jump in Revenue to US$ 2.66 billion. Dubai Aluminium started operations in 1979 and has seen a sevenfold increase in annual production to over I million tonnes. Apart from being a shareholder in the Abu Dhabi-based Emal (Emirates Aluminium), the company has projects in Brazil, Cameroon and Guinea.

The Dubai Gold and Commodities Exchange has had a good start to the year with record trades of over US$ 44 billion (1.16 million contracts) recorded in February. Despite its title, DGCX’s strongest sector remained currencies which accounted for US$ 40 billion of trades – a year on year increase of 126%. Gold and silver futures registered gains of 77% and 38%.

With its tier one ratio standing at a relatively high 13.9% at the end of 2012, Dubai Islamic Bank is taking measures to reduce this to below the 12% regulatory limit. The largest sharia-compliant financial institution in the country is holding investor meetings prior to a proposed US$ 500 million issue of a hybrid Tier 1 perpetual sukuk. If this goes ahead, it will help strengthen the bank’s tier one capital and bring it more in line with the Basel III global standards.

In regard to these standards, Moody’s has put the subordinated debt (amounting to some US$ 4 billion) of four UAE banks – ADCB, Emirates NBD, First Gulf Bank and Mashreq – with eight other Gulf banks on review for a possible future downgrade. The warning does not apply to any other aspects of the banks’ operations.

Whilst most global bourses were continuing their upward trend, the Dubai Financial Market Index edged 2.3% lower this week closing on 1882 from its Sunday opening of 1927. This drop into negative territory is largely the result of the 31.5% fall (from US$ 0.81 to US$ 0.56) in the price of Arabtec shares over the past week. This was precipitated by the company’s decision to raise a further US$ 1.8 billion that would obviously dilute the current value of shares. Despite the weekly fall, the Index has still risen by 16.0% so far in 2013.

Dubai’s CPI increased by 0.53% in January attributable to price rises in transport (1.61%), housing (1.44%) and health (0.83%) whilst certain sectors witnessed falls including clothing (1.47%), food (1.02%) and communications (0.86%). Abu Dhabi’s inflation increased only by 0.16%, even behind Sharjah (0.29%) and RAK (0.24%). Overall the UAE consumer price index rose by 0.43% to 117.41. Official figures indicate that 2012 inflation for the country was at a relatively low 0.6%. With the current property and tourist boom, it does not take a genius to see that 2013 inflation rates may well be a lot higher with 3.0%+ a top end estimate.

A sign of the times saw 366k less internet users as an increasing number of users turn to tablets and smart phones in 2012. The new boy on the bloke, du, is rapidly catching up with Etisalat as it takes 60% of the share of the two million new GSM subscribers last year. It now boasts 49% of the total market of 13.77 million. At 167.8%, the country now has one of the highest penetration rates in the world.

The World Bank has placed the UAE as the easiest place to do business in the Arab world and 22^nd globally. Covering 185 countries, the Ease of Starting Business Index confirms that the country has moved up 24 places in the past year. Singapore. Hong Kong and New Zealand filled the top three places.

In the UK, HM Revenue and Customs have produced a list of their top tax criminals as part of their US$ 1.5 billion crackdown on tax evasion. Included on the list are seven Brits involved in smuggling 20 million cigarettes into the UK from Dubai and a UK jeweller who bootlegged gold from the emirate to evade VAT of US$ 11.2 million.

The EU has fined Microsoft US$ 733 million for antitrust violations in not ensuring that up to 15 million consumers had a choice of browser – rather than defaulting to their own Internet Explorer. The US company had already been penalised US$ 2.08 billion for previous ‘skirmishes’ with this powerful authority. Other major IT companies may be next on the EU’s hit list.

It is sobering to see how the BRICs have fared recently after they were highlighted as the future economic powerhouses not so long ago. It is a sad refection of how the world economy has been so badly hit in recent times.

Brazil was forecast to see 4.5% growth in 2012 following a 2.7% improvement a year earlier which took it past the UK to become the world’s sixth biggest economy. The economy struggled to make 0.6% growth last year (to US$ 2.2 trillion) and its was pushed back one place to be overtaken by the UK; that sums up how bad things are as the country’s debt burden begins to cause a cut back in consumer spending.

Russia’s economy grew by 3.4% last year – its lowest level since the GFC. In 2013 a 3% expansion to the GDP would be good news because of low consumer confidence, a slowdown in investment, high inflation at 6% and a weakening global economy. At the expected level of growth in 2012, the country is actually going backwards.

India has again been rocked by another financial scandal – no surprise there. Adidas has had to take a US$ 200 million hit due to accounting irregularities at Reebok India Co. Evidently its former MD, Subhinder Singh Prem, and COO, Vishnu Bhgat, have been implicated in a fraud; both men deny the charges. On-going corruption is one of the main reasons why the Indian economy will never reach its full potential whilst red tape and flat manufacturing are lags on real expansion. When some analysts indicate that the country needs a minimum 8% growth rate just to keep up with its burgeoning population, it is of great concern that India saw only a 6.5% increase in GDP last year – down from 8.6% a year earlier. In the current year, anything over 5% would be a bonus.

The indicators from China are worrying with a marked slowdown in factory growth and the services sector. In 2012, the country grew at 7.8% – its lowest level this century – and is targeting a 7.5% expansion in GDP this year. Any official figures emanating from Beijing are best described as wobbly. Some think that its housing bubble may burst in 2013 – and that would have a detrimental effect not only in China but globally.

Posted in Finance | Tagged ADCB, Address Residence Sky View, Damac, DEWA, DFM, Dubai, Dubai Industrial City, dubai shopping festival, Dubai Zoo, Emaar, Emal, Emirates, emirates airline, ICD-Brookfield Management Limited, Nakheel, UAE | Leave a comment

Money For Nothing

Posted on March 2, 2013 by howesdubai

Latest reports indicate that the tourism boom continues unabated with Dubai hotels registering an 83.6% occupancy rate last year – with more of the same on the plate in 2013. More impressive was the climb in both RevPAR (revenue per available room) and Average Room Rates both up by 10.4% and 7.3% respectively.

The buoyancy in the market is reflected by the likes of Hilton and Marriott planning to add a further 1,000 and 3,000 rooms to their Dubai inventory over the next two years. Furthermore, the Jumeirah Group have started work on Phase 4 of Madinat totalling US$ 680 million whilst Al Habtoor will be building three more hotels on its Metropolitan site.

One event this week that saw the hotels bursting at the seams was Gulfood. With some 4,200 exhibitors and 60,000 visitors, the 4-day event is now the largest food exhibition in the world. For such a small city, it is a surprise to some that Dubai has over 2,000 companies involved in the food and beverage sector. Indeed it is estimated that almost 15% of Dubai’s manufacturing is food-related.

With its 2012 passenger numbers jumping 13.2% to 57.7 million, Dubai International Airport recorded a massive 14.6% hike in January numbers to 5.6 million compared to twelve months earlier. Despite the slowdown in world trade, the emirate once again bucked the trend with an 8.6% increase in freight traffic to 189k tonnes. (Near neighbour, Abu Dhabi dealt with 1.3 million passengers and 49k tonnes).

The driving force behind this phenomenal growth is Emirates which has carried 18.7 million passenger since last April – an increase of 15.4%. No wonder that pundits are expecting stellar profits when results are released in April. Their September 2012 half year figures indicated a doubling of its Net Income to US$ 463 million.

Troubled developer, Nakheel, is slowly battling back from its massive arrears problem and, with this week’s US$ 56 million repayment, has now settled US$ 252 million since its August 2011 US$ 16 billion debt restructuring scheme. Since then the company has delivered around 4,000 units and has a further US$ 380 million of developments in the pipeline. Last month, it reported that it had seen its 2012 Revenue surge 91% to US$ 2.13 billion.

Hardly a month goes by without Emaar Properties announcing a new project. This time it is a 189-room hotel and 532 serviced apartments located in Downtown. The Address Residence Sky View will be 230 metres high and have 50 floors. Sales will start on 02 March and it does not take a clairvoyant to see that it will be sold out the same day.

The largest listed contracting company in Dubai had a turbulent week. Arabtec announced that both its Chief Executive (and founder some forty years ago), Raid Kamal, and CFO, Ziad Makhzoumi, were no longer with the company. It did not take long for Abu Dhabi-based Aabar, who bought 22% of the company in August 2012, becoming its major shareholder, to overhaul the boardroom. On the financial side, the 2012 Profit fell 37% to US$ 37.9 million and it announced that it plans to increase its capital by US$ 1.77 billion via a rights issue (US$ 1.31 billion) and convertible bonds (US$ 463 million). The market did not take too kindly to the news with the stock losing 9.8% on Thursday to close at US$ 0.728.

Empower, the district cooling services provider, registered a 17% rise in 2012 profits to US$ 51.8 million with assets of US$ 1.23 billion. It has also managed to reduce its loan book from US$ 354 million to US$ 131 million. Dubai’s population growth over the next five years is the main reason why industry analysts expect the UAE district cooling industry to triple from US$ 4.09 billion to US$ 12.26 billion.

The Dubai government has bought back US$ 834 million of its own Medium Term Note of US$ 1.77 billion issued in April 2008. There is an apparent move afoot to better manage outstanding liabilities in the light of changed circumstances and lower borrowing costs.

Last month, HH Sheikh Mohammed bin Rashid Al Maktoum, spoke about his desire to make Dubai the hub for global Islamic economy. Although difficult to quantify, the global value of sukuk (Islamic bonds) is in the region of US$ 400 billion of which only 2.25% emanates from Dubai – well behind the likes of the big two (London US$ 27 billion and Malaysia US$ 23 billion). Last year, there was a 42.3% surge in the issues of sukuk to US$ 121 billion. On Wednesday, the Dubai ruler reiterated his ambition that Dubai become the number one global centre for such financing.

The Dubai Financial Market Index ended the week at 1927 nudging marginally higher from its Sunday opening of 1923. In the first two months of the year, the Index has risen by 18.77%.

With the political impasse continuing on Capitol Hill, the US is once again teetering on the edge of its fiscal cliff. With no imminent deal in sight, it seems likely that US$ 85 billion worth of spending cuts are due to take place. Although this seems a high figure, it is not when compared to the federal expenditure of US$ 3.8 trillion.

It was a bad start to the week for several European economies none moreso than the UK and Italy. Moody’s became the first ratings agency to downgrade the Cameron-led economy from AAA to Aa1 because of worries about the lack of growth prospects and, to a lesser extent, its relatively high levels of debt. Apart from the economic impact, it will lead to a political bun fight that may see the demise of the Chancellor George Osborne.

Italy, the world’s eighth largest economy, is in a more perilous state, not helped by political uncertainty following the recent general election. It has had six straight quarters of recession with the economy contracting 0.7% in Q4 and 2.7% in 2012. The unemployment rate has risen from 8.9% to 11.2% over the past twelve months with the situation expected to worsen in 2013. No wonder its borrowing costs have started to climb again with the latest sale of 10 year bonds up from 4.17% to 4.83%. Its debt position now is in excess of US$ 2.7 trillion whilst the unemployment rate continues to rise – up from 8.9% to 11.2% in 2012.

Reality has finally hit home for the EU bureaucrats. Like King Canute, they now realise that the tide cannot be turned and have conceded that the eurozone will be in recession in 2013. It was only in December that growth was forecast for this year but a combination of high unemployment and banks diving for cover and not lending, means that the bloc will remain in the doldrums for at least another year.

It has now dawned on authorities that joblessness is probably its main long-term problem and the fact that over 19 million are not working will continue to drag the eurozone deeper into economic trouble. At the same time, interest rates are at historical lows but that means nothing to public and private consumers if the banks are not lending.

Banks are again in the news for all the wrong reasons. Four UK banks have already put aside US$ 19.3 billion as a provision for future compensation claims for mis-selling payment protection insurance (PPI) to its long suffering customers. Lloyds TSB, Barclays, RBS and HSBC have provided US$ 9.9 billion, US$ 3.9 billion, US$ 3.3 billion and US$ 1.6 billion.

One of those offenders, RBS, has managed to make a loss every year since the UK government paid US$ 104 billion in 2008 to save the bank and become an 81% shareholder. In 2012, it managed to more than quadruple its loss to US$ 7.8 billion and then still want to pay out bonuses totaling US$ 921 million!

Not to be outdone, the world champions, Spain, have gone one better. Having received US$ 24.3 billion EU bailout funds in May 2012, one nationalised bank, Bankia, has returned an annual loss of US$ 25.2 billion. Next week, two other government-owned banks, Catalunya Banc and NCG Banco will come in with losses topping US$ 26 billion whilst Banco Popular and Banco de Valencia have already recorded 2012 deficits of US$ 3.3 billion and US$ 4.7 billion.

Money for Nothing

Posted in Finance | Tagged Arabtec, DFM, Dubai, Dubai Financial Market, Emaar, Emirates, emirates airline, Emirates NBD, Empower, Nakheel, UAE | Leave a comment

Islands in the Sun

Posted on February 22, 2013 by howesdubai

Some believe that there are only about 920k Emirati citizens in a UAE population of an estimated 8.3 million. Of more surprise is the local unemployment rate of 14% and this is why HH Sheikh Mohammed bin Rashid Al Maktoum is prioritising finding them employment opportunities. In a move to make the private sector more attractive for the nationals, the Minister of Labour, HE Saqr Ghobash, has been instructed to look at adjusting working hours, holidays and salary levels to bring them in line with the public sector, which is often seen as a softer employment option.

Despite the on-going boom in the local economy, UAE gold and silver sales actually fell in 2012. Although Q4 saw a 6% jump in jewellery sales to US$ 409 million and a 3% hike in gold to US$ 556 million, total annual sales were down 6.3% to US$ 2.27 billion and 7.0% to US$ 2.78 billion respectively. (Global demand for the yellow metal rose in value to US$ 236.4 billion but 4% down in tonnage to 4.4k tonnes).

International confidence in Dubai (and the UAE) continues to improve as seen from the rapid increase of foreign direct investment. In 2010, the UN Conference on Trade and Development put the figure of FDI at US$ 5.5 billion which rose 39.6% to US$ 7.7 billion a year later. In 2012, the UAE attracted an estimated US$ 8.2 billion of FDI.

There was welcome news for Deira shoppers this week with Al Ghurair Centre commencing work on a US$ 545 million expansion plan. First opened in 1981, the mall is planning to double the size of its retail area and add a large entertainment zone.

In an effort to pay off short-term debt and finance new projects, Dubai’s largest investment company is arranging a US$ 273 million five-year Islamic bond (sukuk). Dubai Investments already has some thirty-two companies and is looking at a possible six more to add to their portfolio which would then see a large increase on this year’s profit compared to the 2012 return of US$ 87 million.

It comes as no surprise also to see that Nakheel is in discussions to restructure a US$ 2.2 billion loan, due for maturity in 2015. The debt-ridden developer was badly hit by the GFC and has struggled to recover but recent indicators could be seen as positive; these include a 2012 profit of US$ 545 million, delivery of 3,000 properties this year, a doubling in size of Dragon Mart and commencement of three major projects – two on Palm Jumeirah (Nakheel Mall and the Pointe) and a major expansion to Ibn Batuta Mall. It seems that there will be no further development on Palm Jebel Ali – at least in the short-term.

Meanwhile Cape Reed, a South African construction company, has announced that it has completed its work on Lebanon Island making it the first commercially developed island on Nakheel’s iconic The World. Located 4 km off-shore, the resort has a restaurant for 200, eight chalets, a swimming pool and, of course, its own beach. (Its original owner, Wakil Ahmed Azmi, sold the island last year for US$ 9.5 million incurring a loss of US$ 6.8 million).

There is yet another island project. This time, Dutch contracting company, Van Oord, has started work on a US$ 134 million dredging contract on Island 2 off Jumeirah. This should finish by the end of the year at which time work on the mixed-development of a boutique resort with low rise apartments and a marina can start in earnest. The island, which will be connected to Jumeirah Road by a 300 mt long bridge, will be developed by Meraas Holding – the same company that recently announced a US$ 1.63 billion plan for the ‘Bluewaters’ island project off JBR.

Union Properties had another bumpy year with a fall in Revenue from US$ 1.34 billion to US$ 447 million but a major turnaround in Net Profit from a 2011 loss of US$ 425 million to a profit of US$ 48 million. More detailed figures are not currently available.

Dubai-based Arabtec has been awarded a US$ 272 million contract to construct the Abu Dhabi Fairmont hotel and serviced apartments. Covering an area of 155k sq mt, the 39-storey building will comprise a 563-room hotel and 249 apartments and is slated for completion within thirty months.

Next week sees another huge exhibition taking place. Last year, Gulfood generated US$ 155 million for the Dubai economy and this year, with 4,200 exhibitors and up to 60,000 visitors, will prove even more rewarding for the emirate’s coffers. Australia, which will have the largest number of overseas exhibitors, has seen its food exports to the UAE almost double since 2008 to US$ 662 million accounting for 8.6% of the country’s food bill of US$ 7.68 billion.

Having set up a successful business park model in Dubai, Tecom Investments has been trying for some time to set up a similar Internet City in Kerala. As a result of the usual setbacks associated with start-ups in India, construction is now expected in Q2 with Phase 1 estimated to cost US$ 735 million. Despite potential hurdles facing overseas investors, such as a weak rupee, high inflation, tax issues and the fact that Indian growth this year may be its lowest for a decade, Tecom is confident of commercial success.

Another Tecom enterprise, Dubai Biotechnology and Research Park (DuBiotech) saw the number of companies increase by 46.5% to 126 last year. In 2012, its first manufacturing facility was opened with Pharmax Pharmaceuticals’ US$ 10.9 million factory. Brookfield Multiplex is currently building Forearmed Hall – the prep school for Repton – due to open in Q3 and become the Park’s first educational establishment.

It has been a good week – and a good year – for the two telco companies. Etisalat saw a 15% increase in Net Profit (after royalty of US$ 1.76 billion) to US$ 1.83 billion with a 2% rise in revenue to US$ 8.96 billion. du announced a 14.7% jump in 2012 Revenue to US$ 2.77 billion with a resulting 80% surge in Net Profit (after royalty of US$ 230 million) to US$ 540 million. With these impressive results and a declared US$ 0.082 dividend, no wonder du’s shares rose 11% on the day.

Dubai Financial Market Index finally managed to push through the 1900 barrier ending the week 1.5% higher at 1923 on its Sunday opening of 1894 – and up a creditable 18.53% so far this year. (Compare this to gold which started the year on US$ 1,680 and is trading today 6.8% down at US$ 1,573).

Eurozone’s smallest economy is currently causing the bloc its biggest headache. Cyprus applied for international financial aid in Q3 2012 requesting some US$ 22 billion (US$ 12.5 billion to shore up its banks and the balance for its budget) – a drop in the ocean when compared to Greece’s IMF and EU bailout funds of US$ 323 billion. However any aid would see their debt skyrocket to 140% of GDP which would be contrary to Fund’s lending rules. If no help is forthcoming then the country would become bankrupt and that would really spook the already jittery markets.

Latest data from the beleaguered eurozone confirm that the bloc has been in recession for the past five quarters. The optimistic mood of some of the politicians seems unfounded especially when perusing the performance of the PIGS. The four countries – Portugal, Italy, Greece and Spain – have latest unemployment levels at 16.4%, 11.1%, 26.0% and 26.6%, youth unemployment at 38.7%, 37.1%, 57.6% and 56.5%. If that were not enough, Q4 saw all four GDPs contract by 3.8%, 2.7%, 6.0% and 1.8% on the same quarter a year earlier.

There is increasing concern on the state of the French economy following President Francois Hollande’s acknowledgement that the country will miss its initial 2013 growth estimate of 0.8% for 2013. 2% would seem more likely with a possibility that eurozone’s second largest economy may even slip into recession. To make matters worse, the government has admitted that it will fail to cut this year’s public deficit to within 3% of GDP – the EU ceiling.

The Indian economy – Asia’s third largest – is going through a worrying phase and there is speculation that the country could see its debt downgraded to junk status. The market will be waiting on the outcome of the 28 February budget which will try and cut the fiscal deficit from 5.3% of GDP to 4.8% by encouraging FDI and reducing government spending.

A perusal of the currencies will see that a potential currency war is a distinct possibility with the latest skirmish being triggered by Japan. Their plan for monetary easing is to boost economic activity by reducing the yen’s value, causing much consternation among its trading partners. At the beginning of the week, the yen had fallen 15% against the greenback since November. Following a G20 finance ministers’ weekend meeting a communiqué was issued stating their agreement that forex rates should be set by the market and not by any government intervention. Many believe that national interests will override as individual nations will boost their own economy even if it means upsetting others. John Donne’s poem, No Man is an Island, springs to mind.

Back in Dubai, island building is back in vogue and hopefully the emirate will not forget its desert heritage as it is quickly becoming better known for its Islands in the Sun.

Posted in Finance | Tagged Al Ghurair Centre, Arabtec, Cape Reed, DFM, Dubai, Dubai Financial Market, HH Sheikh Mohammed bin Rashid Al Maktoum, Nakheel, Palm Jumeirah, UAE, Union Properties, Van Oord | Leave a comment

Number One

Posted on February 19, 2013 by howesdubai

Yet another indicator of the strength of the local economic recovery is the news that Dubai Mall’s sales jumped 24% in 2012 and its footfall was 20% up at 65 million visitors / shoppers. If this is any guide for the rest of the sector, all bodes well since retail accounts for 30% of Dubai’s GDP.

Across the board, UAE 2012 car sales have been impressive. Latest figures from Al Futtaim Motors, the exclusive Toyota distributor, show that the Japanese car maker has had a 32% year on year sales growth here. Mercedes has reported a 74% surge in the sales of its G Wagon range whilst its SUVs have increased by 38%. Other dealers have previously reported similar growth patterns.

Rarely a week goes by without mention of further property developments in Dubai. This week, there have been two major announcements. First, HH Sheikh Mohammad bin Rashid Al Maktoum has approved a US$ 1.63 billion plan by Meraas Holding for a new project off JBR. ‘Bluewaters’ Island will include the requisite 5-star hotel, residential and retail units as well as a US$ 272 million 210 metre Ferris wheel (naturally it will be the world’s largest); the complex will be connected to SZR by a direct roadway / monorail and to JBR by a pedestrian bridge.

Damac has launched a US$ 327 million project in Dubai Marina with the main contractor being Arabtec. Slated for completion by 2016, Damac Residenze, a 335 metre tower, will have an interior fit-out by the celebrated Italian designer, Fendi. No wonder then that prices will be in the region of US$ 8,200 per sq mt.

Welcome news for parents with children attending local private schools. The Knowledge and Human Development Authority has indicated that there will be no private school fee hikes in the next academic year. This comes only weeks after government directives ordered 2,000 basic food items be fixed for 2013 and that prices of some 6,600 imported medicines be reduced by up to 40%.

One little known fact is that Dubai sees over 30% of all global physical gold traded. Its mounting status in the yellow metal transactions will be further enhanced by the Dubai Gold and Commodities Exchange plan to establish a domestic exchange open to UAE investors to trade physical gold. Currently, the DGCE is one of the cheapest places in the world to trade gold. Meanwhile the bullion itself, hovering around the US$ 1,605 – 1,690 mark, has dropped more than 3% this year in contrast to strong performances from both platinum and palladium – up so far by 12% and 10% respectively. (The almost daily roller-coaster ride that is gold may lead the conspirators among us to consider that some sort of market manipulation may be afoot).

The substantial trade gap between the USA and UAE was further highlighted by 2012 figures showing a massive increase in their balance of trade from US$ 13.4 billion to US$ 20.3 billion. US exports to this country stood at US$ 22.5 billion whilst UAE exported only US$ 2.2 billion. A welcome fillip for Uncle Sam!

The past two weeks have seen the 17 listed UAE banks post favourable 2012 results with total year on year net profits rising by 11.4% to US$ 6.27 billion. Of the 23 national banks, 6 are not listed whilst there are 28 foreign financial institutions operating in the country.

Dubai-based bank, Shuaa Capital is slowly showing belated signs of recovery with a reduction in year on year Net Loss from US$ 80.0 million to US$ 16.1 million. Last year, the bank saw its Revenue jump 38% to US$ 37.4 million and its expenses drop by 45%.

DEWA announced a 6.4% increase in 2012 Net Profit to US$ 1.27 billion as its Turnover rose by 7.0% and cash generation by 1.4% to US$ 2.04 billion. At the end of the year, the public utility authority had total debts of US$ 5.6 billion, of which US$ 1.15 billion is due for repayment this year.

Not many airlines can boast of becoming profitable within three years from start-up – but flydubai can! In 2012, it posted net profits of US$ 41.4 million whilst carrying over 5.1 million passengers on its 52 routes. The CEO, Ghaith al Ghaith, is weighing up whether to add a further fifty aircraft to the low cost carrier’s fleet.

The locally owned baby store, JustKidding, has agreed a US$ 6.3 million franchise deal with the AMZ Group. Founded in 2006, it already has two Dubai outlets and, under the new arrangement, hopes to open a further three in the UAE as well as in Oman and Kuwait. Consequently, the forecast is for a fifteen fold increase in revenue over the next three years.

Dubai Financial Market Index tested the 1900 mark on Wednesday but later profit-taking saw the bourse close the week on 1894 – still 1.8% up since its Sunday opening and 16.73% so far this year.

With 2012 UAE sales up 15% and serving 50 million customers, McDonalds continues to dominate the local fast food sector. The American chain already has 109 outlets and with a 2013 investment of US$ 8.2 million will add another fifteen outlets. It hopes to increase its current 13% of the informal eating out market to 25% this year.

Just when horsemeat is getting all the press in Europe, the Dubai branded Calmelicious milk brand won EC approval to export their products into the bloc. The Emirates Industry for Camel Milk & Products, established in 2003, is home to the world’s largest camel milk and factory in the world. Although milk, chocolate and cheese are currently at the top of their export targets, EICMP is also in talks with cosmetic and medical companies that may have use for certain camel by-products.

A further sign of the global economic malaise comes with the world’s top steel producer, Arcelor Mittal, announcing a 2012 loss of US$ 3.72 billion. An 8.8% fall in European steel demand was the main driver for the company going into the red as the Indian conglomerate was forced to write down its European assets by US$ 4.3 billion, with an extra US$ 1.3 billion in restructuring costs.

Another company declaring a huge write-off is the beleaguered French auto-maker, Peugeot Citroen. Because of the dismal state of the European market, the company has deemed it necessary to write off US$ 6.3 billion in 2012.

Italy has been hit with further corruption probes. Giuseppe Orsi, Chairman of Finmeccanica, the country’s biggest defence company, has been arrested in connection with a probe into a US$ 560 million helicopter sale to India. Then there are the ongoing fraud enquiries relating to Italy’s third largest bank, Monte dei Paschi di Siena and the state-controlled energy group Eni.

Despite protestations from its technocrats that the worst was over, the eurozone has plunged even deeper into recession with no end in sight. The Q4 GDP fall of 0.6% is the worst quarterly return in four years with its three powerhouses, Germany, France and Italy all showing falls of 0.6%, 0.3% and 0.9% respectively. There is an Arabic saying that in order to kill a snake you should go for its head rather than its tale; maybe these problems could have been avoided if authorities had dealt more expeditiously with its eurozone “tale” countries – Spain, Greece, Portugal. The end result is a distinct danger of a contagion effect that could negatively impact on many economies including that of Dubai.

HH Sheikh Mohammed bin Rashid Al Maktoum held a Q & A session at this week’s two-day Government Summit attended by 2,500 officials in Dubai. Covering a wide range of topics, he again reiterated his desire that he wanted his nation to be number one. He continued that “becoming number one is not impossible – the word impossible doesn’t exist in our dictionary… My nation and I, we always try to be the first because no-one remembers the second”. That is the reason why the Dubai ruler insists on being Number One.

Posted in Finance | Tagged Arabtec, Arcelor Mittal, Damac, DEWA, DFM, Dubai, Dubai Financial Market, flydubai, Ghaith al Ghaith, JustKidding, McDonalds, Shuaa, UAE | Leave a comment

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