Happy Days are Here Again

Posted on February 18, 2012 by howesdubai

There are continuing positive signs that Dubai is coping well despite the financial malaise which is inflicting most of the world.

As Dubai continues its quest to become the biggest shopping and leisure destination in the world, this week’s news is that the jewel in its crown, Dubai Mall, is planning to extend by a further 1 million square feet. Already the world’s largest mall, this is indicative that the emirate is striving to satisfy the demand from residents and the increasing number of overseas visitors. Last year, this mall had 54 million visitors – up by a very impressive 15% on 2010.

As further evidence of the boom in the retail sector, one of the older malls – Al Ghurair Centre – is currently carrying out a Dhs 2 billion expansion.

The past six years has witnessed a 60% increase in Dubai retail space and this phenomenal growth appears to be continuing unabated.

The strong performance of flydubai is another Dubai success story. Established only in July 2008 – when it ordered 50 Boeing 737-800s for US$ 3.74 billion – the company has propelled itself to become the fastest growing airline in the world. Since its first flight in June 2009, flydubai has expanded rapidly and now services nearly fifty destinations. Not bad progress in less than three years!

Further evidence of the burgeoning trade links with the US came with recent data showing that UAE imports in 2011 were at a record high of US$ 15.9 billion. With exports of only US$ 2.4 billion, the trade deficit between the two countries came to US$ 13.5 billion compared to US$ 10.7 billion in 2010.

With Emirates recently announcing a US$ 18 billion purchase of 50 Boeing 777s, Dubai is playing its part in making the UAE the single largest market for American goods in the MENA region.

The Dubai Financial Market General Index continues to confound its critics. Now trading at 1540, it is a very impressive 13.73% up since the start of the calendar year.

More welcome news on the local front with reports that Abid Al Boom is repaying Dh 1 billion he allegedly embezzled from investors six years ago. If only others would follow this move!

However, on the global front, Greece appears to be teetering on the edge of inevitable disaster and it may be better if the country ditched the euro now. If further money is poured in, then the repercussions for the rest of Europe and the world will be catastrophic.

Our immediate worries are actually nearer home and we await – with some trepidation – the unfolding events in both Iran and Syria.

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Dubai – Good News Week Two

Posted on February 11, 2012 by howesdubai

I see that former England cricket captain, Michael Atherton, has joined the long list of Poms who seem to delight in finding faults with anything associated with Dubai. Maybe he should concentrate his efforts on trying to improve the performance of the woeful team that he once led.

But in contrast to much of the world, more good economic news continues to emanate from this Gulf emirate.

Some 2011 company results have just been published with more due out in the next few days.

Dubai Islamic Bank has seen a 25% surge in profits over the year whilst bellwether stock, Emaar, had an impressive 50% jump in Q4 profits. Meanwhile Tamwheel seems to have rid itself of all its previous problems by posting a massive 400% profit improvement in Q4.

The local stock market – like many others around the world – was down in the doldrums last year but 2012 is another story. The Dubai Financial Market General Index is up 9.1% so far this year – a lot better than the FTSE 100 which has gained 5.9% over the same period.

This week has seen the conclusion of yet another successful Dubai Shopping Festival with estimates that the month long event brought in over 4 million visitors and increased retail sales by over US$ 4 billion and was a boon for the local tourist industry.

On the global front, following a foray into Facebook going public, analysts have valued the social media company in excess of US$ 95 billion.

Meanwhile it appears that two mining giants – Glencore and Xstrata – are merging with the new entity being valued at US$ 80 billion.

The conundrum is why a company with Revenue of US$ 3.8 billion and profits of US$ 1.5 billion has a valuation more than a company with Revenue of US$ 180 billion and profits of over US$ 12 billion? Hopefully this is not the start of another dot.com bubble!

As indicated in an earlier blog, it is only a matter of time before the Greek patient succumbs to its terminal financial problems and returns to trading in drachma. Nobody knows the real impact this will have on the Eurozone but it could be the start of a long hot summer of discontent across the continent.

Here we just have to be mindful of what is happening over in Iran and hope that world leaders come to their senses and take appropriate action in Syria.

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Dubai – Good News Week

Posted on January 31, 2012 by howesdubai

There is a perception in the marketplace (whatever that may be) that Dubai is again  proving its many sceptics wrong and is in a much better financial position than it was a year ago.

Only last week Dubai Holdings, owned by the Dubai government, announced that it would be repaying US$ 500 million (from its own internal cash flow), the full amount due on a bond, in February. And this after one of the dreaded rating agencies, Moody’s, had warned late last year that refinancing may be the only option available when this debt fell due.

It does seem that the authorities have got their house in order to a large extent but no doubt there will be problems along the way as Dubai tries to meet its debt obligations  of  around US$ 100 billion of which around 10% is due to mature this year.

Another promising indicator is the fact that most hotels are full. The Dubai Shopping Festival along with the onset of the exhibition season are two main drivers. The annual month-long shopping fest is expected to add Dhs 15 billion to the retailing coffers and bring in nearly four million visitors.

There is also no doubt that events in other holiday destinations – especially Tunisia, Egypt and Syria – have had a positive effect for the tourist industry here. Tourism revenue accounts for a third of Dubai’s economy and is set to contribute even more in the future.

Probably the single most cause for optimism is the positive contribution made by Emirates Airline to Dubai’s economy and its knock-on effect on the local economy.

Dubai Airport is probably the world’s fastest growing hub handling 51 million passengers in 2011. It is interesting to note that the aviation industry accounts for nearly 30% of Dubai’s GDP equal to over Dhs 80 billion and responsible for 250,000 jobs. Not one for resting on their laurels, future capital expenditure will be in the region of Dhs 30 billion. And all this at the existing airport – what about the newly planned facility, Dubai World Central, which has even bigger aspirations?

It will come as no surprise that Dubai Duty Free has become the world’s single largest airport retailer with annual sales almost topping Dhs 20 billion.

Even much maligned Dubai real estate sees signs of thawing. Evidently wealthy Iranians, Chinese and Indians are becoming more active at the top end of the market which has been further boosted by increasing numbers of exiles from the troubled regions of the area as a result of the Arab Spring.

Trade is growing particularly with India and China and there are other positive signs that recovery is taking a foothold. Not surprisingly, the Dubai economic model of ten years ago – reliant on real estate and financial services – has been replaced by more emphasis on trade and tourism.

The two clouds on the horizon, for Dubai are the Euro crisis and what will happen over the water in Iran. Time will tell what impact they will have as the emirate continues to prove the doubters wrong again.

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Why things are not so bad in Dubai!

Posted on January 23, 2012 by howesdubai

The debt to GDP (Gross Domestic Product) ratio is one of the main indicators used to measure the health of an economy. Obviously the lower the figure the better. The more services and goods produced by a country should ensure that it will be in a better position to pay off its debts.

What is currently happening is little short of mind boggling! At the end of 2011, it was reported that the US Debt Ratio went past 100% for the first time in its history with its debt having shot past US$ 15 trillion. In anyone’s language this is a huge sum with each citizen in hock to over U$ 48k.

But what is more worrying is that the USA just makes the top 20 of debtor nations with 17 European countries worse off. The usual suspects are all there and not surprisingly the Irish top the lot with a per capita debt of U$ 567k and debt to GDP ratio of 1382%.

The UK comes in at a distant number two with a ratio of 413% and a per capita debt of U$ 147k.

What is good news for us in the UAE is that the debt ratio for the country is south of 20% whilst Dubai comes in at shy of 40%.

It seems that universal growth rates are on the decline and this despite horrific forecasts this time last year, the economy is holding up well with 2011 growth at over 4% – almost double on the previous year. 2012 should see this growth pattern continue.

What will happen to property is anybody’s guess! One thing is certain – there are many other places in the world where housing markets will be a lot worse than what we have here in Dubai. Maybe the medicine taken over the past two years is finally curing the patient.

One word sums up currencies in 2011 – volatility. This year will see continued problems in Europe and do not be surprised to see the return of the drachma as the euro’s demise gains further momentum. If you have the ready cash, move it to the Turkish lira or Norwegian kroner and follow the example of the new Jamaican leader, who wishes to remove the queen as titular head of that country.

The UAE dirham – pegged to the US dollar will be a safe haven. A pity about the pitiful interest rates! (The banks however get their pound of flesh by charging exorbitant interest rates on occasions that they deem to lend to their clients).

Be wary of emerging markets especially when 2011 prices dropped over 20% in Brazil, Russia and China and 35 % in India. Maybe the market knows more than the plethora of investment advisers who extol the virtue of the BRIC economies. In comparison what’s wrong with the local Dubai market where stocks only fell by 17%?

And what about the oil?

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