11 novembre 2008 Par La Rando

UAE ‘faces slower real estate growth’

Fujairah: The UAE faces a slowdown in loan growth and real estate activity as it grapples with the fallout of the global financial crisis, policymakers said. States in the world’s biggest oil-exporting region are expecting the global problems to put the brakes on a regional econ-omic boom supported by six years of high oil prices. But Gulf economies sitting on surplus oil revenues would continue to post growth as they push ahead with a monetary union plan that has gained momentum during the financial turmoil, UAE Central Bank Governor Sultan Nasser Al Suwaidi said. « The slowdown will be imposed on us… in everything we will see contractions, » he told reporters on the sidelines of a meeting in Fujairah, one of seven emirates in the UAE federation. « But I think we will still be growing in all directions in a very comfortable way. » His comments echoed those of Mohammad Al Abbar, chairman of Dubai-based Emaar Properties, who said growth in the emirate’s real estate sector could slow to 9 per cent from 13 per cent due to the global downturn. The global crisis could bring Gulf Cooperation Council (GCC) members closer together as five of them, including Saudi Arabia, strive to launch a single currency by a 2010 deadline that had been derailed for years, Al Suwaidi said. The UAE, which pegs its currency to the dollar, opted not to track the latest US interest rate cut, he said. The UAE’s benchmark overnight repurchase rate was left at 1.5 per cent after the 50-basis-point US cut on October 29. By contrast, the Kuwaiti benchmark is 4.5 per cent and Saudi Arabia’s is 4 per cent. « Coordination and cooperation with GCC countries is very important and [their rates] are way above us. We didn’t want to create a bigger gap, » he said. Speaking of the effect of the financial crisis on monetary union, he said: « I would say it gives us more enthusiasm and more energy to push forward to achieve monetary union. » Prior to releasing Gulf notes and coins, Gulf states could set the terms of a numerical currency « at any time », he said. Reuters

11 novembre 2008 Par La Rando

Qatar Airways gets $500m loan for three Boeing planes

Qatar Airways (QA) said yesterday it has secured a $500 million (Dh1,836m) 12-year finance lease from BNP Paribas, Bank of Tokyo-Mitsubishi, Deutsche Bank, Standard Chartered Bank and Sumitomo Mitsui Banking Corporation Europe for the purchase of three Boeing 777 aircraft. The aircraft are scheduled for delivery by the year-end, the Doha-based carrier said in a statement. « The closing of this deal at a time of extreme liquidity stress in the international banking markets was a testament to close co-operation between Qatar Airways and the lending group, » it said, adding Qatar Airways is enjoying the trust of large financial institutions. « This financial arrangement shows the confidence international lenders have in Qatar Airways as an airline with a strong vision to grow its international network and strengthen its market presence, » said Qatar Airways’ Chief Executive Akbar Al Baker. With Standard Chartered Bank acting as facility agent and security trustee for the deal, the financing structure ensures the deal financed – 100 per cent of the purchase cost of the aircraft – achieves a loan to aircraft value profile, which would meet the requirements of international aviation finance banks while also appealing to regional lenders, it said. Qatar Airways currently operates 64 Airbus and Boeing aircraft from its Doha hub to 83 destinations across Europe, Middle East, Africa, South Asia, Far East and North America. The carrier’s current order comprises orders for 80 Airbus A350s, 60 Boeing 787s and 32 Boeing 777s, with deliveries of the latter having started in November 2007. Qatar Airways is also a customer of the superjumbo Airbus A380 with five aircraft on order, scheduled for delivery from 2012. business24-7.ae

11 novembre 2008 Par La Rando

What’s in store at the Dubai Mall

It’s big in every sense of the word – a vast retail temple of glass and marble stretching over the equivalent of 50 football fields. Complete with one of the world’s biggest indoor aquariums, an Olympic-sized ice rink and one of the largest cinemas in the Middle East, The Dubai Mall is a landmark like no other. The UAE’s latest attraction at the foot of the world’s tallest building has more than 3.77million sq ft of retail space and will be home to 1,200 stores once fully complete. Star retailers include the 55,300 sq ft chain of high-end UK retail giant Waitrose and toy store Hamleys. The two main department stores Galeries Lafeyette from France and Bloomingdale’s from the US will open in 2009 and 2010 respectively. The Dubai Aquarium and Discovery Centre, home to 33,000 animal species, is already attracting visitors while other entertainment venues, such as the Sega Republic gaming zone and children’s play area KidsZania, will be open in 2009. Of the 160 food and beverage outlets to be opened, 40 are already operational at the food court on level two. Visitors can access the mall from the Sheikh Zayed Road through the Old Town development or from the Financial Street Road, Emaar Boulevard, Downtown Burj Dubai and through the newly-opened bridge off Interchange One. There is parking for 14,000 cars. Adrian Murphy business24-7.ae

11 novembre 2008 Par La Rando

UAE-made jewellery to glitter in China

UAE jewellers are planning an aggressive expansion into China which they believe will continue to boom despite the worldwide economic turmoil. China is an emerging retail market for diamonds and jewellery with growth fuelled by the economic growth along the coastal belt and demand from the prosperous young generation. And jewellers in China say they would welcome partnerships with Middle East companies. The US diamond market, traditionally the world’s largest, is reeling because of the credit crunch and liquidity crisis and this has had a knock-on effect on suppliers in Hong Kong. But the domestic Chinese market remains strong. « We already have a presence in Hong Kong, which is the gateway to the mainland Chinese market, » Damas Managing Director Tawhid Abdullah told Emirates Business. « We are going slowly and steadily and are looking for the right partner to explore the Chinese jewellery market. Our objective is to get closer to Chinese customers through a suitable partner. Our long-term plan is to have a presence in all the major provinces. To start with we will open at least 25 outlets in China, the minimum needed to have any impact on the market there. » Dubai-based Damas is no stranger to overseas expansion – it has stores in 18 countries and operates 50 outlets in India through a partnership with a local company. Amit Dhamani, CEO of Dhamani Jewels, one of the largest fine jewellery chains in the Middle East, said: « China and the UAE can work together in many segments of the jewellery trade. We can have production facilities there and the domestic retail market for jewellery and diamonds is huge. « The Chinese population is a major attraction for any diamond chain – about 10 million Chinese couples get married every year. We are also planning to expand our business in mainland China. The diamond business all over the world is facing a crisis but the Chinese market seems to be the light at the end of a dark tunnel. » William Wong, CEO of Hong Kong-based jeweller Luk Fook Group, said: « As Chinese people are getting richer and richer, demand for diamond jewellery is growing rapidly. « The demand is higher in northern China, which accounts for 60 per cent of the total market, than the southern part. Southern consumers prefer gold jewellery and demand peaks in the October-November marriage season. « About 50 per cent of our sales, worth HK4 billion (Dh1.9bn) comes from China and we have not been much affected by the slowdown in Japan and the US. « We are not worried about Middle East firms entering the Chinese market. There is a considerable difference between the precious metal markets in China and the Middle East. Dubai jewellers will take time to learn about the Chinese market. We would like to have a strong partner from Dubai. » He said the high and volatile gold price had boosted demand for diamonds. « The average spend on diamonds in China is $500 (Dh1,840) per transaction. The higher end purchases go up to $150,000. Middle East investors should know the difference in rules and consumer attitudes in northern and southern China. « Hong Kong companies, which have been badly hit by the economic slowdown in the US, are now focusing on the mainland market. Until recently 50 per cent of Hong Kong’s diamond exports went to the US. » Luk Fook has 380 outlets in the Hong Kong, Macau, elsewhere on the mainland, Canada and the US. Kent Wong, Director and General Manager of Chow Tai Fook Jewellery China, said: « We have 800 outlets all over the country and every year we have seen double-digit growth in the market. « Even now, when the economic tsunami has hit Hong Kong jewellers exporting to the US market, Chinese consumers continue to show a traditional appetite for jewellery. « Consumers in mainland China prefer to invest in 24-carat gold jewellery as an investment and as an ornament for daily use. All our outlets have been doing well but the outlets along the coastal belt have been doing particularly well. » Wong said the coastal cities had witnessed strong growth following economic reforms and product lines aimed at younger buyers were doing exceptionally well. « Young Chinese couples spend in the range of $50 to $200 per jewellery piece. Rich Chinese consumers spend an average of $1,000 per piece. » Mark Wong, Chief Purchasing Officer of the diamond department of a leading Chinese company, said new shopping malls and conventional department stores were both important channels for the sale of diamond and gold jewellery. « The average investment to open a new shop in China is $600,000. Compared with the US or Hong Kong the crime rate is very low on the mainland. About 95 per cent of Hong Kong jewellers have shifted their production to China. « UAE companies will have to establish partnerships with experienced Hong Kong firms to successfully penetrate the Chinese market. » China is the fifth largest diamond consumer in the world, with sales soaring from $230m in 1995 to $1.2bn in 2007. More than 2.5 million diamond jewellery items are sold annually on the mainland. VM Sathish business24-7.ae

11 novembre 2008 Par La Rando

Emirates posts Dh284m profit in H1

High fuel costs sent Emirates’ net profits for the first six months ending September 30, 2008, down 88 per cent to Dh284 million ($77.3 million) from Dh2.36 billion for the same period in 2007. The airline said its fuel spending in the first half of this year more than doubled to Dh9.2bn from last year’s Dh4.1bn. Emirates’ operating revenues, meanwhile, increased by 31 per cent to Dh22.1bn, while the passenger traffic was up 11 per cent; passenger yield increased by 20 per cent and cargo tonnes went up 13 per cent. The seat factor averaged 78.3 per cent, down slightly on 79.7 per cent for last year, against a 13 per cent increase in capacity. With regards to projections for the next six months, Emirates’ President Tim Clark told Emirates Business: « I am not sure we would be able to recover the first half losses six months prior to that, but we would be able to recapture our profit targets faster with fuel prices coming down. After all, fuel costs took a straight hit to our bottom line. » Crude oil prices averaged $122 per barrel for the first six months of the financial year, up from an average of $67 for the same period last year. Clark said he expects fuel price to stay between $65 and $85 a barrel in the second half of the airline’s financial year and « hopefully even lower ». « If that happens and things go as they are going right now with our forward bookings looking good, I remain cautiously optimistic that we would be ahead of the game for our financial year 2008-2009, » he said, adding that the airline’s bookings looked up in January and February next year. Shuaa Capital’s Vice-President for Research, Kareem Murad, on the other hand, says that the airlines across the world, including Emirates, would experience lower load factors. « Emirates would be able to recover some of the losses it incurred in the first half of its financial year but I do not know to what extent. This is because a drop in load factors is going to kick in resulting in lesser revenues, besides the ongoing global financial crisis, » Murad told Emirates Business. Clark, meanwhile, said that the airline is going full steam with its fleet expansion plans besides adding new routes to its network. « Even though there is high volatility in the market right now, we are managing the business fine. And don’t forget that we are equally exposed to the fuel side of things just like other airlines in the world, » he said. He further said that the airline is also looking to cut costs further in order to restore its profit growth. Shweta Jain business24-7.ae

11 novembre 2008 Par La Rando

Falcon to offer regular flights to destinations in Abu Dhabi

Regular flights to internal destinations in Abu Dhabi are to be offered for the first time by executive jet and helicopter operator Falcon Aviation Services. The company will also consolidate service between Abu Dhabi’s Emirates Palace and Dubai’s Burj Al Arab. « Without doubt this new launch and expansion in the private aviation sector reflects the growth and development taking place in the UAE, » said Lieutenant General Sheikh Saif bin Zayed Al Nahyan, Minister of Interior. Captain Salem Al Kayoumi, Chairman of Falcon Aviation Services, said: « We will be launching this kind of service for the first time in Abu Dhabi, which has a vast area, to meet demand from the major economic sectors. « We will offer both executive jets and helicopters for tourism, medical emergencies and transportation. « With the huge economic growth taking place in the UAE and the region, private aviation services will have a lot to offer to companies as part of benefits to their employees, such as tourism and health insurance. » Al Kayoumi was speaking at an event organised by Falcon Aviation Services at Al Bateen airbase to announce its expansion plans. The company currently has 11 helicopters, which are valued at $61 million (Dh224m), and two corporate jets, worth $65m. It has confirmed orders to add a further 16 executive jets worth $318m and 10 helicopters worth $119m to its fleet by 2012. Chief Executive Officer Philip Markham said: « In the helicopter business, to reach the minimum required return on investment, we need to fly each aircraft for 600 hours per year. For corporate jets the annual number of hours required is 700 per aircraft. But we see new players coming into the market and lowering their prices, which means we have to fly more hours per aircraft to reach our revenue targets. « From our experience in Dubai we have targets for high season and low season. For the low season our forecasts dropped by a third over the summer but in the high season the results were better than we expected. « When some markets slow down the other segments will keep us going and that is why we offer diversified services. We offer our products and services to the higher end of the market, including individuals with high disposable incomes. » Prestige Jet and Royal Jet provide services to Abu Dhabi’s government and private corporate sectors but only Falcon Aviation Services has both jets and helicopters in its fleet. Rami Eljundi business24-7.ae

11 novembre 2008 Par La Rando

Dubai bourse leads Gulf stocks slide

Stock markets in the oil-rich Gulf states continued to bleed on Tuesday, led by the Dubai bourse, as investors remained jittery over the pessimistic global economic outlook. Investors are becoming increasingly concerned over the future of Gulf economies as the price of oil, the main source of income, has dropped sharply coupled with reports of heavy losses by Gulf investments abroad. That is bound to force governments to cut public spending, the main driver of economic activities in the six-nation Gulf Co-operation Council (GCC), which pumps just under a fifth of the world’s crude supplies. The Dubai Financial Market (DFM) dived nearly 7.3 per cent to 2,343.15 points at close, a four-year low, after shedding more than nine per cent in the previous two days. The DFM Index was again dragged down by the market leader, property giant Emaar, which dipped a massive 9.9 per cent to a new record low of Dh3.74. Emaar, the largest publicly traded real estate firm in the Middle East with projects worth $100 billion (Dh367bn) underway, has so far dropped more than 75 per cent this year. The firm, in which the government of Dubai holds a 30-per cent stake, has lost 30 per cent in the past two weeks alone and more than 60 per cent in the past three months. Its price is way under its book value. The real estate sector, the largest in the DFM, shed 9.8 per cent and telecoms lost 9.9 per cent. However, in an upbeat assessment, Emaar chairman Mohammed Alabbar told a World Economic Forum meeting in Dubai on Monday that « domestic demand for real estate continues to outstrip supply, and it will be so for several years ». Also in the UAE, the Abu Dhabi Securities Exchange slumped 4.9 per cent to 2,975.28 points, below the key 3,000-point mark, with the leading real estate sector shedding 8.8 per cent. Banks were down four per cent and energy sank 7.6 per cent. The Saudi market, the largest in the Arab world, was trading down almost five per cent to below 5,500 points at mid-day. The Tadawul All-Shares Index (TASI) was dragged down by the leading petrochemicals sector, which shed 6.2 per cent, and banks, which dropped 5.2 per cent. The market leader, petrochemicals giant SABIC, was down 5.7 per cent after its chairman Mohammed Al Madi said on Monday that prices of its products lost 50 per cent in the past six weeks, affecting the fourth quarter results. SABIC has lost about 35 per cent in the past two weeks. Kuwait Stock Exchange, the second biggest Arab bourse, finished down 2.16 per cent at 9,056.10 points for the first time since August 2005. The leading banking sector was down three per cent and investment firms sank 3.5 per cent. The KSE Index has slumped more than 42 per cent since June 24 when it reached its peak of 15,654 points. The market failed to respond to statements by the Kuwait central bank, which said a crisis at the Gulf Bank, troubled by large losses in derivatives deals, was totally under control. Doha Securities Market closed down 6.25 per cent at 6,342.48 points, its lowest level in more than 20 months. It has lost 14.3 per cent in the past three days. The smaller Muscat Securities Market, the only Gulf bourse to close on Monday slightly up, ended down two per cent while the Bahrain Stock Exchange dropped 2.74 per cent. AFP

11 novembre 2008 Par La Rando

Home finance market feels impact of crisis

The mortgage volume in the UAE has begun to take a dip due to slowing real estate activity and tightening liquidity, say experts. The home finance market is feeling the impact of the rising cost of borrowing and a fall in the appetite for off-plan properties, the GCC Home Finance Summit in Dubai was told. Tighter regulatory mechanisms were also reducing demand for home loans. « The forecast of lower economic growth and the tighter credit market will impact real estate supply and demand, » said Sundar Parthasarathy, Senior Vice-President and Head of Retail Assets at Abu Dhabi Commercial Banks (ADCB). « Eibor has appreciated significantly over Libor, reflecting the increasing cost of financing in the UAE. « The high cost of lending has made a number of banks planning to launch home finance programmes to delay their plans. » He said the tightening liquidity has pushed home finance providers to increase their mortgage rates and lower loan-to-value (LTV) ratios. ADCB has revised its mortgage rates from around 7.5 per cent to 9.5 per cent and has lowered its LTV ratio to 70 per cent from about 90 per cent. The need to find a 30 per cent deposit is putting substantial pressure on customers, he said, making it harder for them to obtain a home loan. « The business has come down and everyone is seeing the same scenario, » said Parthasarathy. « ADCB’s mortgage volume last month halved to Dh200 million from the usual monthly figure of Dh400m to Dh450m. « Mortgage applications went down from between 35 and 45 to 15 applications a month. Before the liquidity issue erupted interest rates in the UAE were more expensive than those in the US. « A few months ago UAE rates averaged between 7.5 and eight per cent, regardless of the tenor of the loan. That was 2.4 per cent higher than the US’ 5.6 per cent rate for a 30-year mortgage and 5.2 per cent for a 15-year loan. » Tamweel and Amlak have reduced their LTVs from 90 per cent to 75 per cent and 65 per cent respectively. HSBC’s home finance department reduced its mortgage LTVs from 85 per cent to 60 per cent on apartments and 70 per cent on villas. Anecdotal evidence suggests that the spread between mortgage providers’ property valuations and actual property prices has widened significantly. This means that loan-to-price ratios are increasingly falling below LTVs, putting further pressure on demand. Varun Sood, CEO, Home Finance, Tamweel, admitted that global conditions had put the sector under threat. « In the past there has been access to international securitisation and domestic funding. Now the domestic debt market has tightened up and the international debt and securitisation market has completely disappeared, » Sood said. « The volatility in the cost of construction materials such as steel has made pricing difficult. Then you have the increasing constraints from the regulatory body – this is good but it has seen the attraction of off-plan sales decline, » he said. Karen Remo-Listana business24-7.ae

11 novembre 2008 Par La Rando

Damac Properties lays off 200 employees

Sliding property sales and severe slowdown in the global real estate market have forced Damac Properties to slash 200 jobs at its Dubai office, The National reported. « The job cuts have been made across divisions including sales, marketing, recruitment and administration, » wrote the Abu Dhabi-based newspaper. Employees were given three months’ severance pay and were also issued a No Objection Certificate (NOC), to allow them to look for new jobs in Dubai, according to the newspaper. The company’s chief executive, Peter Riddoch, said the decision was ‘inevitable’. “We regret that we have to lose colleagues but we believe that taking an early decision was the right thing to do,” quoted the newspaper. According to the company’s senior vice president of communications, Niall McLoughlin, the number of jobs lost represent just 2.5 per cent of Damac’s total workforce, the daily reported. “Despite the cutbacks, Damac, which expects to deliver 7,100 units to home buyers in 2009 and 2010, remains hopeful that the Dubai property market will fend off the challenges of a global economic meltdown.” business24-7.ae

11 novembre 2008 Par La Rando

Panel to oversee realty projects

The Dubai Government has formed a high-level committee that will oversee and decide on the launch of future real estate projects in the emirate in view of the global economic slowdown, a top government official said yesterday. The committee, which was formed in October this year, consists of Dubai-based master developers and a few private developers, Nasser Al Shaikh, Director-General of the Dubai Department of Finance, told Emirates Business. « For the first time, a committee has been formed to oversee the real estate development in Dubai and help synchronise projects of various developers with the intention of securing future supply. » The panel will not be looking at projects that have already been launched, Al Shaikh said, adding, « no projects will be called off, and the committee will only decide on anything to be launched in future. « Master developers control 70 per cent of the supply in Dubai’s property market and if all these parties work together then we can strike a balance between the future demand and supply. However, we are not trying to influence or control supply in the market. » He said the committee will not govern private developers and they can continue with their projects. Perceptions that the UAE realty is set for a correction have strengthened recently. Prices are expected to peak in the first half of 2009, but a decline is expected in the second half of the next year. However, developers said analysts have failed to interpret and take note of the sound economic fundamentals of the emirate. Al Shaikh reiterated that infrastructure projects will continue and only the yet-to-be launched real estate developments will be under scrutiny of the committee. Ruling out government plans to inject any funds into the real estate sector, he said: « All the master developers have sufficient cash flow and they do not require funding from the government. » A draft law to settle property disputes is also being drawn up. Judge Abdul Qader Mousa, Head of Dubai property court told our sister publication, Al Emarat Al Youm, that the new law will replace the federal civil procedures law. Parag Deulgaonkar