Heads You Win, Tails I Lose! 16 August 2024
Latest data released by ValuStrat will stagger some readers. It estimates that villa prices in the following ten Dubai communities have more than doubled over the past four years.
| Location AED million | 2020-2021 | July 2024 | %age |
| Arabian Ranches | 2.7 | 6.6 | 144.4 |
| Dubai Hills Estate | 5.2 | 12.3 | 136.5 |
| Emirates Hills | 28.8 | 69.2 | 140.0 |
| Green Community West | 4.4 | 9.1 | 107.0 |
| Jumeirah Islands | 4.6 | 12.9 | 180.4 |
| Jumeirah Park | 3.7 | 8.2 | 121.6 |
| Palm Jumeirah | 10.7 | 27.3 | 155.0 |
| The Lakes | 2.7 | 6.0 | 122.2 |
| The Meadows | 3.5 | 8.2 | 134.2 |
| Victory Heights | 4.5 | 9.9 | 1.20.0 |
Source: ValuStrat, KT Research
Prices at the start of the pandemic were already heading south and started to dip even further but then, with the introduction of working from home and the fact that population movement had been severely curtailed, the demand for villas, townhouses and bigger apartments jumped, as residents started moving into larger units; the demand for bigger units, (both villas and apartments) rocketed with many looking for extra space for home schooling and remote working, along with a stand-alone outside garden Throw into the mix the successful handling of the pandemic which began a marked influx of overseas high-net-worth individuals, attracted by many positive factors that have already been extolled many times. Then when life started to return to some form of normality, the influx of talented entrepreneurs and HNWIs saw demand, and then prices, move rapidly higher. The global real estate consultancy commented that “given the current market conditions, we anticipate an additional 10% increase in villa values during the second half of the year”.
The latest Real Estate Regulatory Authority’s Rental Index, updated in March, indicates that Dubai rents had increased on the year in the range of 8% to 15%. Average rents have surged 64%, compared to pre-pandemic figures, and 16% in Q2. It is a fact that recent times have seen a higher number of renewals, compared to new leases, as tenants look at renewing in existing premises since new leases continue to be higher than renewals; indeed, there was a 14% increase in the number of renewals in Q2. According to a study by Cushman & Wakefield Core, Q2 rents for villas and apartments in the affordable, mainstream and luxury sectors have risen by 21%, 12% and 1% and 27%, 19% and 14%; these increases show the benefit of renewing. The consultancy posted that the highest annual rental increases for villas were in Jumeirah Village Circle (40%), Jumeirah Park (22%), The Springs (14%) and The Meadows (14%), and for apartments – Discovery Gardens (32%), Dubai Sports City (28%) and Dubailand (24%). Lately, there have been signs that transaction volumes may have plateaued in both villa rentals and secondary residential sales; city-wide villa rents, at 13%, lag behind the 22% rise seen for apartment rents. It is evident that there is a catch-up at the lower end of the market, recovering from historically lower bases, as the big prime market increases were seen in mid-cycle, (2022-2023), and are now stabilising. With such rental increases, one thing is certain – household income is not keeping up with soaring rents. Many tenants, who will be spending more of their income on rents, will have to sacrifice purchases of other household items, (or eat into their savings) but there is only such much they can afford – and there has to be an inevitable tipping point sometime in the future.
JLL’s Global Real Estate Perspective has ranked Dubai among the few global cities – including Bangkok, Berlin, Stockholm, Hong Kong, Jakarta, Paris and Warsaw – with accelerating property market growth. The real estate consultancy notes that the emirate’s real estate has been consistently outperforming its global peers in terms of capital appreciation and rental returns over the past three and a half years, driven by the huge interest from foreign investors and residents since 2021; over the period, it has witnessed double-digit increases in property prices. Some of the factors behind Dubai’s popularity include the fact that it is still much more affordable than other major locations, (such as New York, Hong Kong, London and Paris), has higher returns than most of its competitors, offers a world-class quality of life/safety/security, with excellent infrastructure and global connections. The study noted that property market growth is slowing in Brussels, Sydney, London, Amsterdam, Madrid, Milan and Kuala Lumpur, whilst rental declines have been noted in Beijing, Boston, Chicago and Washington DC while rents in New York, Singapore, Manila, Shanghai, San Francisco and some other cities are bottoming out. Earlier, a Knight Frank report indicated that only Manila luxury property prices last year were higher than Dubai’s average 15.9% returns.
H1 saw DMCC welcome 1k new members bringing its portfolio to almost 25k, as the world’s leading free zone for commodities trade and enterprise now represents 15% of all the emirate’s foreign direct investment, (11% higher on the year), and accounts for 7% of the emirate’s GDP. The strategy going forward is to consolidate its major real estate projects in Uptown Dubai and Jumeirah Lakes Towers, while expanding its network in high-value sectors like AI and Web3.
The growth of DMCC’s business district has been driven by strong performance across several sectors, including:
Technology two hundred and twenty-six new companies, including fourteen in gaming and nine in AI
DMCC Crypto Centre 11% increase to sixty-four new companies, including seven Virtual Asset Service Providers
Energy one hundred and fifty new companies, bringing the total to over 3.26k – the largest for any single industry within DMCC
Financial grew by 8.5%, with one hundred and forty new companies
Others there were solid additions in agriculture, precious stones, and metals.
The Dubai Integrated Economic Zones Authority had another successful year, with 2023 posting record-breaking results, with total trade across its economic zones 33.0% higher at US$ 76.84 billion. DIEZ’s economic zones, including Dubai Airport Free Zone, Dubai Silicon Oasis and Dubai CommerCity, contributed 13.5% in 2023, (2022 – 11.4%), to Dubai’s non-oil trade. Imports and exports both recorded solid growth – up 48% to US$ 42.94 billion and more than sevenfold to US$ 2.13 billion; re-exports through DIEZ reached US$ 31.63 billion. Key trading partners included:
China with US$ 24.50 billion in trade, equating to a 32.8% growth rate
India with US$ 4.33 billion, marking a 51.7% increase
Iraq with US$ 4.22 billion, showing a growth rate of 7.7%
Vietnam with US$ 4.20 billion and a growth rate of 172%
United States with US$ 3.35 billion (110% growth)
Turkey with US$ 2.86 billion (83.6% growth).
In the year, DIEZ saw a 15.3% increase in the number of registered companies, with total employment across its zones exceeding 70k.
Dubai Statistics Centre reported that the emirate’s July inflation rate dipped to 3.32% – its lowest level this year. However, housing/utilities/fuels, which account for more than 40% of the consumer price index, rose 6.76%, on the year – its highest so far in 2024; transport prices also rose by an annual 0.18%, compared with 3.32% in June. Other increases were noted in the prices of furnishings/household equipment/routine household maintenance, (0.35% – 0.68% in June), food/beverage (2.46% – 2.35% June), and education (3.7% – 3.7% in June). There were annual declines recorded in the prices of restaurants/accommodation services, (0.31% – 0.79% in June), recreation/sports/culture, and information/communication.
Next Monday, 19 August, will see a Central Bank of the UAE auction of Monetary Bills (M-Bills), comprising four issues of M-Bills Treasury bonds– twenty-eight days up to AED 2,500 million (US$ 681 million), fifty-six days up to AED 2,000 million (US$ 545 million), one hundred and forty days up to AED 3,000 million (US$ 817 million) and three hundred and eight days up to AED 12,000 million (US$ 3,270 million).The Issue Date is next Wednesday (21 August), with the four maturity dates being 18 September, 16 October, 08 January 2025 and 25 June 2025. During 2024, theCBUAE announced twenty-six Monetary Bills(M-Bills) tenders.
The Central Bank of the UAE (CBUAE) imposed an administrative sanction on an unnamed insurance company operating in the UAE, pursuant to Article 33 (2) (a) of the Federal Decree-Law No. (48) of 2023 regarding the Regulation of Insurance Activities. Following a central bank inspection, it was found that the insurance company had deficiencies in its regulatory policies and procedures, in violation of the Guidance on the Personal Data that can be collected for Insurance Policies dated 18th April 2022. Accordingly, the CBUAE has imposed a warning on the insurance company, in relation to the activity and a direction that the insurance company refrain from such activity.
DP World Limited posted H1 financials showing, on a reported basis, revenue 3.3% higher, at US$ 9.34 billion, adjusted EBITDA down 4.3%, to US$ 2.50 billion, with an adjusted EBITDA margin of 26.8%. Robust expansion in its Americas, Europe, Asia Pacific, and Jebel Ali markets ensured that like-for-like gross container volumes grew by 6.1%. Capex was 9.2% higher at US$ 994 million, with investments of US$ 593 million, US$ 278 million, US$ 122 million and US$ 1 million in Ports/Terminals, Logistics/Parks/EconomicZones, Marine Services and Head Office. 2024 capex guidance sees US$ 2.0 billion set aside for expenditure in Drydocks World, London Gateway, inland logistics (India), Dakar (Senegal), East Java, Callao (Peru), Jeddah, Dar Es Salam, DP World Logistics (Africa) and Fraser Surrey Docks (Canada). There is no doubt that this year has been topsy turvy for the industry and DP World, marked by a deteriorating geopolitical environment and disruptions to global supply chains due to the Red Sea crisis.
Salik posted impressive H1 figures with increases across the board – revenue 4.9% higher on the year, at US$ 300 million, (with toll usage contributing 87.1% of total revenue at 4.9% higher at US$ 260 million), EBITDA, up 6.5% to US$ 201 million, profit before tax 9.2% to US$ 163 million and net profit at US$ 148 million. Revenue-generating trips came in 4.9% higher at 238.5 million. A US$ 148 million dividend – equating to US$ 0.0198 per share – was approved, to be paid on 05 September.
Parkin posted a 6.0% hike in H1 net profit to US$ 54 million, with revenue, helped by 743k parking penalties, 10.0% higher, at US$ 115 million. Over the six-month period, public parking spaces increased by 1.7% (2.9k) to 177k spaces, compared to a year earlier.
Amanat Holdings posted a 17.0% hike in H1 revenue to US$ 118 million, attributable to a 26.0% rise from a strong performance in its education sector, (with a 3k student register), as EBITDA nudged 1.0% higher, to US$ 42 million, with an 18% increase in education partially offset by a decline at healthcare due to a one-time prior year gain and near-term revenue pressure in the UAE. Excluding the prior year one-time gain, both adjusted EBITDA and net profit before Tax and Zakat increased by 8% and by 13% to US$ 28 million. Its closing cash balance at 30 June was at a healthy US$ 131 million. An interim US$ 20 million dividend, equating to US$ 0.0082 a share, was endorsed by the Board.
Union Co-op’s H1 results see an improvement in both revenue and net profit – by 5.0% to US$ 545 million, (driven by sales growth across Dubai branches), and by 32.3% to US$ 54 million. Net profit after tax increased by 20.6% to US$ 44 million, factoring in new corporate taxes, amounting to US$ 5 million, and 32.3% to US$ 54 million. This growth is attributed to strategic initiatives that enhanced profitability and revenue; its loyalty program now has 990.1k cardholders. Additionally, Union Co-op opened a new branch in Silicon Oasis, enhancing its footprint and service capabilities. The retailer saw spend on community initiatives 33.3% higher, on the year, at US$ 3 million.
The DFM opened the week on Monday 12 August 85 points (2.0%) lower the previous fortnight and gained 39 points (0.9%), to close the trading week on 4,234 by Friday 16 August 2024. Emaar Properties, US$ 0.16 lower the previous three weeks, was flat, closing on US$ 2.22 by the end of the week. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.65, US$ 5.27, US$ 1.59 and US$ 0.34 and closed on US$ 0.66, US$ 5.40, US$ 1.61 and US$ 0.34. On 16 August, trading was at eighty-one million shares, with a value of US$ 49 million, compared to one hundred and nine million shares, with a value of US$ 66 million, on 09 August.
By Friday, 16 August 2024, Brent, US$ 2.40 higher (3.1%) the previous week, gained US$ 0.27 (0.3%) to close on US$ 79.77. Gold, US$ 45 (1.8%) lower the previous week, gained US$ 77 (3.2%) to end the week’s trading at US$ 2,508 on 16 August 2024 – the first time its has closed any week above the US$ 2.5k level.
The International Energy Agency has lowered its global oil demand growth forecast by 30k to 950k bpd, citing weakness in Chinese crude imports, where oil demand contracted for a third consecutive month, driven by a slump in industrial inputs, including for the petrochemical sector; crude oil imports sank to their lowest level since the stringent lockdowns of September 2022. It expects Chinese oil demand to grow by 300k bpd this year, and 330k bpd in 2025, but with the “risk skewed to the downside”. The IEA noted that “Chinese oil demand growth has gone into reverse due to a slowdown in construction and manufacturing, rapidly accelerating deployment of vehicles powered by alternative fuels and comparison to a stronger post-reopening baseline.” Even with a seemingly never-ending real estate crisis, near-flat sluggish consumer spending and a manufacturing slowdown, Q2 GDP jumped by 4.7% on an annual basis.
However, the agency noted that the weakening demand in China has been offset by “demand in advanced economies, especially for US gasoline, has shown signs of strength in recent months,” and “the US economy, where one-third of global gasoline is consumed, has outperformed peers, with a resilient service sector buttressing miles driven.” There is the danger that the oil market may be oversupplied next year, by an average 860k bpd, even if Opec+ does not go ahead unwinding some production cuts. (Currently the plan is to gradually lift voluntary production curbs of 2.2 million bpd on a monthly basis from October 2024 to September 2025). This week, Opec’s latest oil demand forecast sees a reduction of 135k bpd to an increase of 2.1 million bpd from its earlier July 2023 forecast for this year, and a reduction of 65k bpd to 1.8 million bpd in 2025.
LHR, one of the world’s busiest airports, is concerned that following the introduction of the government’s GBP 10 per person electronic travel authorisation system, it has seen passenger numbers dip by 90k. The ETA scheme, launched in November last year, is aimed at passengers entering or transiting through the UK without legal residence or a visa. Currently, the ETA scheme applies to passport holders from the six GCC countries, (UAE, Qatar, Bahrain, Kuwait, Oman, Saudi Arabia), and Jordan, but it is scheduled to be rolled out to the rest of the world later in the year. LHR, describing the situation as “devastating for our hub competitiveness”, has complained that passengers, from the seven countries, currently included in the scheme, are choosing alternative routes and/or bypassing the UK altogether. Last month, about eight million people passed through LHR, outperforming other European airports, including Amsterdam’s Schiphol and Charles de Gaulle in Paris.
Ryanair is planning to buy back up to US$ 872 million more of its shares over the next nine months due to a stronger than expected cash position, driven partly by the delayed delivery of new Boeing aircraft. In May, it posted a US$ 763-million share buyback, (its first since the pandemic), that should be completed by the end of this month. Even though air fares had softened somewhat, the Irish-based carrier, Europe’s largest carrier by passenger numbers, is going ahead with the follow-on buyback because of its current strong cash flow, brought on by strong traffic growth and the delivery delays which “considerably delayed planned capital expenditure.” Furthermore, no new aircraft are expected to be delivered before late 2027. On the news, Ryanair shares moved up 4.4%, by the end of the day’s trading.
A relatively new concept to the industry is Wizz Air launching an ‘all you can fly’ subscription, which offers customers unlimited flights for an annual fee of US$ 549. The discounted price for the annual pass, which is limited to the first 10k applicants, will be available until today – 16 August – and then rise to US$ 600. From next month, subscribers will be able to travel to destinations in Europe, North Africa, the Middle East and Asia by booking an available flight at least three days in advance and pay a flat fee of US$ 11. It seems that at some “airports of preference”, the offer has been sold out with a message, “in the case that you are unable to select your preferred airport, please note that the limit has been reached and Wizz Air is unfortunately unable to offer you a Wizz All You Can Fly membership at this time.” On its website, it also warns that seat availability was not guaranteed to membership holders and would depend on “several external and internal factors.” The past year has been anything but smooth for the Hungarian carrier. In the UK it has faced heavy criticism for its customer service and flight delays, with the consumer group ‘Which’ naming it the worst airline for UK flight delays, for the third consecutive year, and also as the worst performing carrier for its customer service. This month, Hungary’s competition authority imposed a US$ 850k fine on Wizz Air for misleading communications, including for how it encouraged customers to purchase more expensive travel packages. The budget airline also posted a 44% decline in Q1 profit, whilst cutting its profit forecast for the entire 2024 year.
Notwithstanding concerns – such as rising jet fuel prices, global economic turbulence and plane delivery delays – Tui posted a record-breaking Q2, amid “strong demand” for holidays, with total revenue 9.0% higher, at a record US$ 6.40 billion; underlying earnings before interest and tax was up 37% to US$ 254 million. Europe’s largest tour operator TUI said all its divisions had performed well, including its hotels, tours and cruise businesses, with nearly six million holidaymakers travelling with the firm in Q2 – and noted that summer bookings were up 6%, while prices were 3% higher. It also posted that “destinations with Spain, Greece and Turkey again proving to be most popular”. TUI acknowledged it had also benefited from the collapse of its German rival FTI in June.
EasyHotel, backed by easyJet founder, Stelios Haji-Ioannou, is reportedly for sale at US$ 520 million and is attracting wide interest, including from private equity firm TPG. The chain, founded in 2004, which trades from fifty sites in eleven countries, including nineteen in the UK, employs about three hundred and thirty staff; it has a 4k room portfolio and plans a further one hundred and twenty hotels over the next four years, with financing through Santander UK. No longer a listed company, it is 79.1% owned by ICAMAP Investments and Ivanhoé Cambridge, with Stelios’s easyGroup thought to own the vast majority of the remaining shares.
Just as grocery price inflation rises, latest data from Kantar Worldpanel spells good news for Tesco and Sainsbury’s, (who in the twelve weeks to 04 August saw their market share rise 0.5% to 15.3%); both seem to be taking business away from the other two major retailers – Asda and Morrisons. However, with the former struggling, the latter is back to sales growth and looks to have stabilised its market share attributable to the performance of its French chief executive who used to run the domestic operations of French grocery giant Carrefour. Asda is indeed heading towards becoming a basket case, as its market share slumps 1.1% to 12.6%. In 2003, it overtook Sainsbury’s to become the market’s second-biggest player, with a market share of 17.0% to 16.1%. Ten years later, Sainsbury’s regained its second position, with Asda in a downward spiral from 2020. That year, Walmart sold a majority stake in Asda, then valued at US$ 8.77 billion, to the private equity company TDR Capital and to brothers Mohsin and Zuber Issa; Walmart retained a 10% stake which allowed the retailer access to its buying power. From the start, Asda was too highly geared, with the two brothers raising US$ 3.55 billion by selling a bond secured against Asda’s property assets and injected just US$ 1.0 billion of their own capital at risk. Within a year, a reported falling out over strategy between the Issas and Roger Burley, saw Asda seeking a new chief executive. A search for a new incumbent proved fruitless and, in early 2022, the search was suspended – but is now back on for the right candidate who could be in line for a US$ 12.9 million annual salary. Last year, the Competition and Markets Authority investigated why fuel sold at Asda outlets was on the expensive side, noting that the previous leader, when it came to cutting petrol and diesel prices, had lost its competitiveness. Additionally, in July 2023, at a meeting with the Business Select Committee, the brothers were criticised for their opaque accounting, with Mohsin Issa failing to answer several questions on whether Asda had increased its profit margins on fuel since the takeover. At the same time, stability was further undermined by constant speculation that the brothers had fallen out, which was denied at the time, but come June 2024, Zuber Issa agreed a deal with Asda to sell his take his 22.5% shareholding to TDR – giving the latter a controlling 67.5% stake. He steps down from EG’s board but pays US$ 293 million to EG Group for its remaining UK forecourts. Asda is managed by Mohsin, who lacks experience in the supermarket sector, but has ex M&S supremo, Lord Rose of Monewden as chairman since 2021 and the experienced Michael Gleeson as CFO. Declaring that Mohsin needed to relinquish day-to-day running of Asda, Lord Rose added: “We need a full-time fully experienced retail executive to come in… we always said Mohsin was a particular horse for a particular course. He is a disrupter, an entrepreneur, he is an agitator. We’ve added a significant number of stores, and we’ve changed a lot, but it now needs a different animal”. It seems that Asda should appoint a seasoned sector veteran as a full-time chief executive to drive the retailer to improve results quickly – otherwise, we may be seeing another Wilko in its final months.
The board of Hargreaves Lansdown has recommended to shareholders that they should accept a US$ 6.88 billion bid by a consortium, consisting of CVC, Nordic Capital and Platinum Ivy, which is owned by the Abu Dhabi Investment Authority. UK’s largest investment platform, based in Bristol, (which the consortium has agreed to keep their head office there), employs some 2.4k staff. The company’s founders, Peter Hargreaves and Stephen Lansdown, own 26% of the shares in the firm they founded in 1981 which has grown to a customer base totalling some 1.8 million. The two recognise that the company now requires substantial investment in an “extensive technology-led transformation”, in order to drive the next phase of growth and development.
A survey by UK’s Competition and Markets Authority, polling 17k personal current account customers, ranked Monzo the best bank in the UK for customer satisfaction, followed by Starling Bank and JP Morgan’s Chase. Account holders were requested to rate the quality of the services provided by their bank, including online banking, overdraft arrangements and their “in-branch” experience. There was probably little surprise to see the Royal Bank of Scotland, owned by NatWest, holding all the others up in seventeenth position behind Virgin Money and the Co-operative Bank in fifteenth place. The survey also asked how likely customers were to recommend them to friends and family, with the digital banks – including Monzo, Starling and Chase – dominating the top positions. Monzo was also placed in top spot in a separate CMA survey of more than 19k business current account customers, with HSBC coming last. Interestingly, the regulator has made it compulsory for large banks to take part in the rolling survey, which has its results updated every six months, and they must display the findings “prominently online and in-branch”.
French billionaire, Patrick Drahi’s telecoms company Altice first acquired a 12.1% shareholding in the BT Group in June 2021 and since then has built his stake to 24.5% which he has now sold to India’s Bharti Enterprises for a reported US$ 4.11 billion. There had been speculation for some time that he had been trying to divest this investment to pay down some of the estimated US$ 60 billion worth of debt that Altice has accumulated. Over recent months, BT’s share price has suffered because of speculation that he was going to sell and when the news did eventually arrive, BT’s shares rose by as much as 7.5%. The Starmer government will also be relieved because there was concern that when Altice lifted its shareholding to 18% in December 2021, the then Johnson administration indicated it would intervene in the event of him making a full takeover bid. Now it is wait and see time what the Indian company’s true intentions are, which may include building synergies between the UK and India in areas such as AI, engineering and research and development on 5G networks.
In what would be the year’s biggest snacking buyout, Mars is to invest US$ 36.0 billion to acquire Kellanova – makers of Pringles and Pop-Tart. Prior to this deal, the largest take over by Mars was in 2008, when it acquired Wrigley for US$ 23.0 billion. The mega-size and family-owned confectioner already has brands including Twix, Bounty, Milky Way, M&Ms and Skittles. Market experts have noticed that with the cost-of-living crisis still on-going, consumers have been leaning towards cheaper own-brand junk food, along with the move towards healthier snacks. Kellanova was spun off from Kellogg’s in 2023 and sells snacks along with cereal outside North America.
A move that shocked the market saw the sudden demise of Starbucks’ chief executive after only two years in the position, to be replaced by Brian Niccol, the head of Mexican grill chain Chipotle. This comes after the coffee chain has suffered from flagging sales, allied with a backlash to sharp price increases and long waits for drinks, as well as boycotts sparked by the Israel-Gaza war and staff disputes in the US, where thousands of whom have voted to join a union, tarnishing its progressive reputation. Q2 sales fell 3% annually amid weakness in the US and China. Activist investors such as Elliott Investment Management, a firm known for taking stakes in companies and pushing for leadership and other changes, have also been piling on pressure for a change. The new incumbent has led Chipotle since 2018, helping the brand recover from a crisis, after food poisoning outbreaks, and overseeing a doubling of sales during his six-year tenure; furthermore, the burrito-maker’s share price skyrocketed from US$ 7 to more than US$ 50, whist 1k new stores were opened, along with the introduction of robotic grills and automated processors to make guacamole. Shares in Starbucks jumped more than 20%, following the announcement, whilst Chipotle stock lost more than 9% after his departure was announced.
It appears that with Air China finalising the new C919 test flights, by the end of August, having successfully completed its first test flight on 03 August, the time for the country’s three main carriers to start commercial operation is fast approaching. The test model had a two-class configuration – eight in business and one hundred and fifty in economy. In July, China Eastern Airlines, the world’s first operator of the plane, received its seventh C919, with maiden commercial flights beginning in May 2023. With the C919 also reportedly receiving positive feedback from the European Union Aviation Safety Agency (EASA), this will inevitably help the aircraft gain a larger share of the European market and attract more international customers. As an increasing number of C919s enter commercial service and add flight hours, it will inject more confidence and win more orders from users and potential customers, and it could soon join Boeing and Airbus as a global player in the sector dominated by the current duopoly; prior to the C919’s entering the international market, it will have to obtain all the airworthiness certifications and approval by respective civilian aviation administration authorities of overseas countries.
With EY still working on its books, following last month’s administration, it is reported that Rex’s debts totalled US$ 329k, owed to 4.8k creditors. The Australian airline, also known as Regional Express, was placed into voluntary administration on 30 July, after grounding its services between major cities. (It is known that the business had trouble accessing materials – including parts – and had been affected by a pilot shortage). By 02 August, the airline had sacked five hundred and ninety-four staff, including three hundred and forty-three employees from its capital city routes, serviced by its Boeing 737 aircraft, and two hundred and fifty-one from across other parts of the business, including its regional division, which is still continuing to operate. Administrators also told creditors that the capital city services were not viable and would not resume, even if a buyer for that division of the business is found, with all of its Boeing 737 aircraft having been returned to their lessors. However, the administrators have already seen keen interest from several parties about purchasing the business and they are confident that Rex’s regional business days will continue.
The NSW government is establishing a task force to crack down on offences in the property sector, including underquoting, with over one hundred complaints YTD. An example of the practice involves a newly renovated trendy Sydney two-bedroom home was recently put on the market, with a buyer’s guide of US$ 1.0 million, netting many potential buyers with a budget south of US$ 1.1 million. At the subsequent auction, bidding had started at US$ 1.2 million, before being sold for US$ 1.4 million. This underquoting is against the law if the agent issues a buyer’s guide that is well below their reasonable estimate of the property’s likely selling price. Not all cases are being reported and it appears that the practice has become so common that many do not even realise its illegality, and those who do, do not bother to complain because the consequences are inadequate. The government watchdog has issued fifty-five fines so far this year, totalling US$ 75k – equating to just US$ 1.5k per fine – a miserly figure when the average commission earned by a real estate agent, from a US$ 1.32 million property sale, is usually more than US$ 26.3k. The problem for potential buyers is that they spend money on paying a conveyancer to look through the contracts, to carry out all the checks needed, spending thousands of dollars for no reason which also costs them time and causes an enormous amount of stress over properties they were never in the running for through no fault of their own. NSW Strata and Property Services Commissioner John Minns acknowledged underquoting was “happening more often than the complaints we’re receiving”. The Victorian state government launched a task force in 2022 to stamp out underquoting, which has since handed out more than US$ 660k in fines for those not complying. However, until the watchdogs bare their teeth, and start handing out bigger fines and suspending errant agents, this problem will not go away. (In Dubai something similar seems to be happening on some occasions – when selling a property, an agent may advise that a higher price could be obtained so as to obtain exclusive selling rights, but then it is sold at a lower price).
It seems that New Zealanders, frustrated by the cost of living, high interest rates and fewer job opportunities, are leaving in ever increasing numbers, as the country experiences slow economic growth, (Q1 – 0.2%), sticky inflation (3.3%), rising unemployment (4.7%) and high interest rates; this week, its central bank cut interest rates for the first time in over four years, but rates are still at 5.5% – a sixteen-year high. Latest statistics show that a record 131.2k left the country, (with a population of 5.3 million), in the year ended 30 June 2024, with a third heading for Australia; 80.2k of the departees were citizens – almost double the numbers seen leaving prior to the pandemic.
Norway’s sovereign wealth fund made a tidy 8.16% (US$ 138 billion) profit in H1 bringing its total value to US$ 1.70 trillion, driven by rising stock markets, especially in the tech sector. It is estimated that the fund owns an average 1.5% of all listed global stocks. It invests the country’s oil and gas production profits, in inter alia bonds, real estate and renewable energy projects.
China’s July retail sales of consumer goods went up 2.7% year-on-year, and 0.7% on the month, to US$ 528.8 billion. The National Bureau of Statistics also noted increases in other sectors, including retail sales in urban areas – up 2.4% to US$ 457.8 billion – with the corresponding figure for rural areas reaching US$ 70.92 billion, up 4.6% on the year, the country’s catering revenue at US$ 61.64 billion, 3.0% higher, and retail sales for the seven months’ YTD, rising 3.5% to US$ 3.83 trillion.
Driven by booming new growth drivers and strong exports, China’s July industrial output expanded 5.1% on the year and 0.35%, compared to June. This index, which measures the activity of enterprises each with an annual main business turnover of at least US$ 2.8 million saw 80% of industries and nearly 60% of products registering year-on-year increases. The equipment manufacturing sector contributed 2.4% to the entire industrial output growth, with H1 figures for the combined profits of major industrial enterprises up 3.5%, on the year, to US$ 491.4 billion.
The chances of the Fed cutting rates next month improved when the Labor Department posted that July US consumer prices rose at the slowest pace since March 2021 – with prices 2.9% higher on the year, and 0.1% on the month. This report was closely watched after last month’s weaker-than-expected jobs spooked the market and led to a mini stock crash and fears of an early recession. The three major stock indicies in the US were little changed after the report. With inflation continuing its downward trek, allied with the rise in the unemployment rate and a slowdown in other labour market indicators, it is all but certain that rates will come down next month. Although pressure is mounting for a September rate cut, as inflation nudges slowly to its 2.0% target, the central bank still has to exercise caution about signalling the path ahead, pointing to last month’s uptick in UK inflation, after the BoE had recently cut rates.
Over the twelve months, prices for appliances, cars, petrol (down 2.2%), airline tickets and furniture have fallen, offset by rising prices for household staples, housing (which accounts for 70% of inflation over the past year, with rents 5.0% higher), grocery – up 1.1% and car insurance soaring by 18.0%. Such rises will be an important issue in the upcoming presidential election and will be the main reason why the Fed may well decide to slash rate by 0.5%.
This week, Nationwide, (reducing rates by up to 0.2% across its two, three and five-year fixed rate offers), and Halifax, (reducing its three-year remortgage products by up to 0.37%), have become the latest lenders to announce further mortgage rate cuts. The former’s lowest rate – 3.83% – is part of a five-year fix at 60% LTV deal, which comes with a £1,499 fee. Nationwide offers first-time buyers 4.19% for a five-year fixed rate at 60% LTV with a £999 fee along with selected two, three and five-year switcher rates up to 95% LTV will also be cut by up to 0.20% with rates starting from 4.06%. However, it seems that the leading lenders are more reliant on those who can afford a big deposit, as people with low, or no, deposits miss out on lower rates.
The Office for National Statistics indicated that Q2 UK unemployment was O.2% lower on the quarter at 4.2% and that annual age growth was at its lowest rate in two years at 5.4% – with public sector pay growth, at 6%, higher than the private sector’s 5.2%; estimated vacancies fell by 26k to 884k in Q2. The percentage of people who are out of work and looking for a job dropped to 4.2% in July. The worrying statistic is that 22.2% of the population, known as being economically inactive, are out of work and not looking for a job. When price rises (measured by inflation) are factored in, wages rose 3.2%. However, the indicators show that despite these figures, there were other signs that the jobs market was “cooling”, due to high numbers of vacancies, redundancies and those not actively seeking work. Commenting on the labour market, Chancellor Rachel Reeves noted that there was “more to do in supporting people into employment”. Moreover, the figures could pave the way for more interest rate cuts by the end of 2024, as declining pay growth shows that “domestic inflationary pressures are subsiding.”
The UK’s inflation rate has risen for the first time this year – by 0.2% to 2.2% – and slightly above the BoE’s long-standing 2.0% target, driven by energy prices declining by less than they did a year ago, whilst services inflation figure, although falling, could still remain above 5% due to air fares, package holidays, hotel prices and wage growth. It is obvious, to many observers, that the fight against inflation is a battle yet to be won. It is widely expected that inflation will continue to nudge higher, peaking at 2.75%, by year-end, before falling below 2.0% sometime next year. Meanwhile, with interest rates having been cut by 0.25% last month, to 5.0%, there is every possibility that there could be a further 0.25% reduction announced at the next rate-setting meeting on 19 September.
July retail sales grew by 0.5%, following a “mixed picture” across sectors, with the Office for National Statistics indicating it was a “poor month for clothing and furniture shops and falling fuel sales despite prices at the pump falling”. The increase, following a marked decline the previous month, when sales volumes were impacted by poor weather, was helped by strong sales in department stores and non-food shops, but Euro 2024 failed to lift spending at food stores. In June, petrol and diesel sales jumped by 2.2%, and despite petrol and diesel easing by US$ 0.018 and US$ 0.014, sales of motor fuel showed dipped by 1.9%. It appears that many are delaying purchases of big-ticket items, as the cost of living crisis is still a major factor squeezing consumer budgets; there was a 0.6% decline in shops selling household goods such as furniture.
Continuing its recovery from last year’s mini-recession, UK’s Q2 economy grew by 0.6%, having expanded by 0.7% the previous quarter, and driven by the services sector, specifically in the IT industry, legal services and scientific research; both the manufacturing, (although growth was noted in June), and construction, (down 0.1%), sectors witnessed Q2 output falls. Although GDP grew in Q2, growth was flat in June, not helped by strike action by junior doctors. However, most areas of the economy are still being impacted by almost static high interest rates, with many businesses reporting modest activity for the summer months “no doubt affected by still high interest rates”. The country needs the incoming Starmer government to keep its manifesto commitment of introducing long-term infrastructure investment plans, and for the prime minister to “take the brakes off Britain”, including changes to the planning system to build houses and infrastructure. There are some positive signs of economic improvement and maybe, Rishi Sunak threw in the towel too soon but whenever he would have called the election it would have been a case of Heads You Win, Tails I Lose!
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