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NATIONAL BANK OF OMAN Q4 NET PROFIT SLIPS 19.9PC

Dubai: National Bank of Oman (NBO), the sultanate’s third-largest lender by assets, posted on Thursday a 19.9 per cent fall in fourth-quarter net profit. The lender made a profit of 13.68 million rials ($35.5 million, Dh130 million) in the three months to December 31, experts calculated based on previous financial statements in lieu of a quarterly breakdown. This was down from 17.07 million rials over the same period of 2015. EFG Hermes had forecast the bank would make a quarterly net profit of 14.35 million rials, while Gulf Baader Capital Markets had estimated 13.50 million rials. NBO reported a net profit for full-year 2016 of 55.8 million rials, down from 60.1 million rials in 2015, a bourse filing showed.

GCC BONDS OFFER SWEET SPOT IN RATTLED WORLDWIDE MARKET

Dubai: With many risks attached to the developed market in terms of uncertain fiscal policy under the new Trump administration and its probable impact on inflation, and real rate of returns, fund managers are cautious and want to have a defensive approach. In terms of total returns for 2016, the JP Morgan Middle East Bond index gave a near 7 per cent return, after having an initial sell-off in January. This compares with near 10 per cent returns on the JP Morgan Corporate emerging market bond index, but was riddled with huge volatility and risks. So, fund managers are advising to invest in GCC bonds, which are low on risk and volatility. “Given the environment that we have this year in terms of greater uncertainty on interest rates, and political outcomes, you may want to be in more defensive mode. So you may want to be invested in higher quality bonds, and you may want to invest in regions or areas which have less volatility, like less exposure to interest rates and dollar strength,” Abdul Kadir Hussain, Head of Fixed Income Asset Management at Arqaam Capital told.

OFF-PLAN DEMAND SUSTAINS DUBAI FREEHOLD MARKET LAST YEAR

DUBAI: A surge in off-plan sales in the second half of the year made sure Dubai’s property market did not see a steep decline in transaction volumes in 2016 compared with the 2015 tally. Based on Reidin-GCP data, overall freehold transactions closed 2016 with 23,579 units against 2015’s 24,326 — a dip of only 2.3 per cent. In both November and December, more than 2,000 — this includes off-plan and ready — units apiece were sold, with the final month tallying 2,445 units. (June saw the highest sales tally, of 2,495 units, as per the data.) These had their impact in the overall value generated by freehold property sales through last year. The Reidin-GCP data estimates Dh18.04 billion in off-plan units being sold against 2015’s Dh20.18 billion. That amounts to a 11 per cent decline as against the 21 per cent experienced by ready properties — Dh18.22 billion from Dh23.12 billion in 2016. At the half-way mark last year, it was felt that the downturn would exact a heavy toll on off-plan buying activity, as secondary market values kept dipping and a tight economy made it difficult for potential buyers to commit. Developers with ongoing projects were going slow with project schedules, expecting this would slow down new supply hitting the market and remaining unsold. The thinking then was why should developers take on more off-plan launches and add to the uncertainty. But everything changed around the time of Cityscape 2016, when Dubai’s leading developers started aggressively going after mid-market options rather than stick with only luxury. By targeting mid-market in new or emerging locations, they were able to bring down the average selling price across the board, including for ready properties and those available in the secondary market.

Off-plan launches in Dubai South, individual communities in Dubailand and Nshama’s Town Square all figure prominently in the 2016 tally. “Opening up of new suburban areas like Dubai South and Town Square and higher frequency of launches in IMPZ (now known as Dubai Production City) were instrumental,” said Sameer Lakhani, Managing Director of Global Capital Partners. “All of this indicates the structural shift towards affordable housing is well and truly underway.” (IMPZ off-plan transactions were up 67.6 per cent, selling 414 units to 2015’s 247.) According to market sources, the pace of off-plan activity picked up considerably in the fourth quarter, with even upscale tower launches offering more of studio units and thus keeping entry-level prices accessible for a wider base of investors.

INTL CITY RETAINS BEST YIELD GENERATOR STATUS

Dubai: Two of Dubai’s oldest mid-market freehold communities are still offering investors the best yields — International City (with a fairly robust 9.65 per cent) and Discovery Gardens (at 9.2 per cent). It remains the case even with the rental declines freehold communities in Dubai experienced all through last year, according to data from Reidin-GCP.

“Even though yields in both areas have fallen slightly on a year-on-year basis (reflecting falling rents for the year), they remain the highest income generating assets,” said Sameer Lakhani, Managing Director at the consultancy Global Capital Partners. “This does not come as a surprise, as structurally speaking, there has always been a trade-off between capital gains and yield in Dubai real estate since the advent of freehold.

“These areas were always in high demand from a tenancy perspective, and this has been one of the reasons why they have attracted high levels of investor interest.” Yield calculations are pretty straightforward — divide what a property generates as rents (minus such sundry costs as maintenance costs, etc) by the value of the property.

At a time when Dubai’s freehold market is yet to get back into a sustained turnaround phase, and which would then lead to higher property values, yields are what counts for investors. And they seem to seeing optimum returns in the mid-market, as is the case with International City and Discovery Gardens.

The city’s emerging mid-tier areas where yields are likely to be higher than the average are in the Dubailand communities Arjan, Majan and Liwan, as well as Al Furjan and Dubai South. (Investors are already vesting a lot of expectations in Dubai South’s prospects. There are anecdotal tales of existing property owners in International City or a Discovery Gardens exiting their assets and then signing on for the off-plan launches that took place recently in Dubai South.) So, how do the upscale destinations measure up in realising optimum yields for its investors? A property in Downtown could be generating 6.06 per cent now while the Palm’s would be around 5.85 per cent, according to number crunching by Reidin-GCP.

 

OPEC’S MONITORING COMMITTEE DISCUSSING WAYS TO TRACK PRODUCTION

Abu Dhabi: The question that will define 2017 in the oil and gas world is how to commit countries to cut the amount promised, according to Essam Al Marzooq, Kuwait’s Minister of Oil, Electricity and Water, speaking at the Global Energy Forum in Abu Dhabi on Thursday.

He was referring to the Opec countries, in addition to 11 other non-Opec countries, who agreed to cut oil production in November 2016 to address the oversupply and raise prices after a two year crash.

“The commitment needs the cooperation of all 25 countries,” Al Marzooq said. “Work started in December with the five countries that make up the monitoring committee to create a mechanism that can inform us of each country’s compliance to the cuts.”

Al Marzooq has previously talked of monitoring exports to enhance the deal.

He went on to say that it was difficult to measure Opec commitment in the first month, but noted that the monitoring committee would continue to keep an eye on the average oil production over the next six months.

Al Marzooq added that the mechanism has the support of Opec Secretary General, Mohammad Sanusi Barkindo and Saudi Arabian energy minister Khalid Al Falih.

The monitoring committee will meet in Vienna at the end of this month, and a statement regarding the mechanism is expected, according to the Kuwaiti minister.

Al Mazrooq also said that Kuwait had already cut its production by more than what it committed to under the Opec deal. “We intend to lead by example,” he said.

UAE MONEY TRANSFERS SURGE AS EXPATS CASH IN ON STRONG $

Dubai: Outgoing remittances from the UAE surged on Wednesday as the US dollar strengthened against other major currencies including the pound sterling. The greenback has been on a winning streak against the British pound, Indian rupee, Philippine peso and other currencies, enabling UAE expatriates, whose dirham earnings are pegged to the US dollar, to send more money home. The UK currency dropped to its lowest level against the greenback on worries over the outcome of the upcoming Brexit negotiations, pushing expats’ remittance power higher. As of Wednesday, a dirham was equivalent to 0.224 British pound, up 1.8 per cent from 0.22 in the beginning of the year. At the same time, one dirham stood at 13.53 Philippine pesos and 18.56 rupees, up .31 per cent and .35 per cent, respectively. The surge in dirham’s value prompted expatriates to make a dash for the nearest exchange house, causing remittance transactions to Europe alone to jump by 25 per cent. “The sterling fell to its lowest level against the dollar yesterday,” noted Promoth Manghat, CEO of UAE Exchange Group. “We have always witnessed a spike in remittances when the major currencies weaken against the US dollar. Yesterday was no different, as we saw remitters cashing on the favourable exchange rate and remitting to UK and Europe.” “Our operations in the UAE reported an increase of 25 per cent in remittances to Europe, a sharp rise as compared to a regular day of the week,” added Manghat. Raghu Mandagolathur, senior vice president for research at Markaz, said that since the UAE dirham is pegged to the dollar, a rise in the value of the American currency would mean that the remittance value would also go up. “While low oil price has impacted remittance from the UAE (according to the World Bank) on account of lower earnings, a stronger dollar would negate the impact to a certain extent,” he told .

MUBADALA & IPIC MERGER TO CONCLUDE IMMINENTLY

Abu Dhabi: The merger of Mubadala Development Company and International Petroleum Company (Ipic) is set to be concluded in “a matter of weeks,” Mubadala CEO Khaldoon Al Mubarak said on Thursday in Abu Dhabi.

“We’re in the final stages of the merger. It’s a first quarter event,” he said. The two companies, which have combined assets of $130 billion (Dh477 billion), with Ipic and Mubadala having $65 billion each, are involved in what Al Mubarak described as “the largest merger in the history of the UAE, in terms of the size of the company we’re creating”. Al Khaldoon referred to another merger that is currently underway involving Mubadala, describing the National Bank of Abu Dhabi (NBAD) and First Gulf Bank (FGB) merger as still in its infancy, but expressed “high confidence” in the deal being “a very, very successful merger”. The Mubadala chief said that in the coming years, he expected the new bank to not only be a large entity in the country, but on a continent level and even globally. Shareholders of the two banks approved the merger in December 2015. “Mubadala has such global exposure round the world, so any changes that happen impact us. There’s a lot of elections and uncertainty coming this year. So 2017 is like 2016, difficult to predict,” he said. Following the merger of Mubadala and Ipic, Al Khaldoon said that the new company will be “more interested in the upstream production side than the exploration side of oil,” whilst he anticipated the oil price staying between $50 and $60 a barrel. After the merger, the fund will have a considerable stake in the midstream and downstream segment. Al Khaldoon though refused to confirm reports from last week that Mubadala was preparing to invest up to $15 billion in SoftBank’s technology fund.

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