Gold prices sink to 19-month low amid strong dollar
Gold prices shed over one per cent on Thursday to hit their lowest in more than 19 months, with the US dollar holding steady near a recent peak as concerns about a Turkey crisis and China’s economic health weighed on emerging market currencies.
Spot gold was down 0.8 per cent at $1,164.71 an ounce, as of 0055 GMT. Earlier in the session, the bullion fell as much as 1.2 per cent to $1,159.96, its lowest since January 2017.
US gold futures were down 1.1 per cent at $1,172.7 an ounce.
The dollar index, which measures the greenback against a basket of six major currencies, was up about 0.1 per cent at 96.756, after climbing to a more-than-13-month high at 96.984 in the previous session.
The United States on Wednesday ruled out removing steel tariffs that have contributed to a currency crisis in Turkey even if Ankara frees a US pastor, as Qatar pledged $15 billion in investment to Turkey, supporting a rise in the Turkish lira.
The United States on Wednesday imposed sanctions on a Russian port service agency and Chinese firms for aiding North Korean ships and selling alcohol and tobacco to Pyongyang in breach of US sanctions aimed at pressuring North Korea to end its nuclear programs.
Some emerging market countries pared their holdings of US Treasuries in June, data from the US Treasury department showed on Wednesday, in what analysts viewed as a move to support their currencies as the Federal Reserve started raising interest rates this year.
US retail sales rose more than expected in July as households boosted purchases of motor vehicles and clothing, suggesting the economy remained strong early in the third quarter.
Britain’s inflation rate rose in July for the first time in 2018, keeping the squeeze on many households’ budgets, but there were signs that the pick-up was a blip and inflation might fall faster than the Bank of England thinks.
China’s state planner pledged on Wednesday to keep debt levels under control even as Beijing rolls out fresh stimulus to support the stumbling economy as a trade war with the US deepens.
The Perth Mint, Australia’s largest precious metals refinery, depository and mint, on Wednesday announced a new gold-backed exchange-traded fund (ETF) with a low-price management fee, entering the field of lower-cost competitors on the New York Stock Exchange.
GCC debt issuance on track to hit $53b
GCC sovereign debt issuance, which witnessed another strong first half, is on track to exceed $50 billion in 2018, according to Fisch Asset Management.
In the first half, led by a multi-tranche sovereign bond transaction of Saudi Arabia, issuance reached $30 billion in the hard currency market, the Zurich-based asset manager said, predicting that full-year issuance could surpass 2017 levels.
In 2017, GCC sovereigns issued a record $50 billion in international debt, helping push total GCC issuance – public and private – over $100 billion for a second consecutive year. Despite this, reduced austerity and stronger commodity prices helped confidence return to the region, pushing benchmark yields lower, while international benchmark rates edged higher or were little changed, according to data from NBK Group.
Philipp Good, CEO at Fisch Asset Management, said the robust performance by the GCC primary markets stands out as particularly strong when compared to the broader emerging market trend, where aggregate issuance is lagging significantly behind 2017 levels. He said the emerging market segment has faced considerable headwinds this year, which have included higher US interest rates, weaker local currencies, and intensified threats to free trade.
“These factors, among many, have negatively impacted the performance of external debt products. These negative returns have, in turn, impaired inflows. Nonetheless, we do expect performance and inflows across emerging markets to improve meaningfully in the second half of the year, and we expect the GCC to continue issuing at a brisk pace,” said Good.
Fisch is projecting total sovereign debt issuance in the GCC to hit $53 billion by year-end, led by Saudi Arabia’s anticipated $16 billion. Abu Dhabi and Dubai have so far issued $5 billion and $1.5 billion bonds. Kuwait is expected to issue debt of $8 billion, Oman $7.5 billion and Bahrain $3 billion.
On the other hand, S&P Global Ratings has predicted that sovereign borrowing in the Middle East and North African countries, particularly the GCC, could further decline this year to $181 billion in the wake of fiscal consolidation and higher oil prices, S&P Global Ratings said in a recent report.
“We expect the 13 Mena sovereigns we rate will borrow about $181 billion this year from domestic and international commercial sources, down six per cent or $11 billion from 2017,” said S&P primary credit analyst Trevor Cullinan.
In 2017, sovereign debt fell 30 per cent. The decline will result from fiscal consolidation measures across the GCC and the uptick in oil prices, which will likely push down net-oil-exporting governments’ financing needs, said the ratings agency in a report.
Fisch noted the potential inclusion of the GCC region in the JP Morgan EMBI Index, with official phase-in expected to commence in early 2019, to be particularly relevant. The contemplated combined index weighting for the region may be more than 12 per cent, as compared with the current allocation of zero per cent.
“To put the significance of this potential weighting into context, the combined weighting of index heavyweights China, Russia, and Brazil is currently just over 11%. This index inclusion will have a very positive impact on the investment demand dynamic for the GCC, as index-based funds will allocate more capital to the region – a process that has already begun, as confirmed by the recent positive price action of the GCC’s sovereign bonds,” said Good.
Kuwait is likely to contribute meaningfully to the remaining issuance total in 2018. Although such issuances are not catalyzed by raised regional debt ceilings alone, improved oil prices are set to play a critical role in the demand and supply dynamic for Kuwait and the wider GCC, having a direct impact on multiple budgetary factors across the region, as well as driving positive investor sentiment, said Fisch.
In addition to Kuwait, Saudi Arabia may also consider returning to the market. The Kingdom already came to the market with a jumbo-sized transaction, as did Qatar. Fisch believes that the Saudi sovereign may opportunistically tap the markets again in the second half, while Qatar is less likely to return. On that basis, GCC sovereign issuance for the remainder of the year is likely to be dominated by Kuwait, Saudi Arabia and possibly the UAE.
While the GCC region has, in the past, traded at a tighter credit spread relative to other emerging market peers, the sharp correction in oil prices in 2015 has reversed that relationship, with the GCC region trading with a higher risk premium versus the broader peer group. Fisch views current trading levels as attractive, particularly so given the recovery in energy prices.
“Looking at the emerging market asset class in the context of the broader markets, we believe that the asset class deserves a higher portfolio allocation than it currently enjoys. A combination of predominantly robust fundamentals, along with much more compelling valuation characteristics, mean that emerging markets will offer plenty of attractive opportunities as 2018 progresses. We expect each region in the emerging market space to offer a unique set of risks and opportunities. In many ways, it can be argued that the risk-reward dynamic is particularly compelling for the GCC region,” said Good.
EMAAR development’s H1 profit up 68%
Emaar Development, property development arm of Emaar Properties, reported a net profit of Dh1.82 billion during the first six months of 2018, an increase of 68 per cent compared to Dh1.08 billion during the same period last year.
The company said revenue for the first six months of the year was Dh6.99 billion, underpinned by the progress in construction and timely project delivery. This is 119 per cent more than the H1 2017 revenue of Dh3.19 billion.
It reported total sales of Dh6.23 billion during H1 2018. Emaar now has a total sales backlog of over Dh38.50 billion, majority of which will be recognised as revenue over the next three to four years. Emaar Development’s net profit grew 73 per cent in the second quarter of 2018 to Dh997 million, compared to Q2 2017 at Dh575 million. Revenue for Q2 2018 was Dh3.72 billion, 145 per cent more than the Q2 2017 revenue of Dh1.52 billion. In the first half of the year, Emaar Development launched the sale of over 3,600 residential units across its mega developments in Dubai. It now has a development pipeline of over 60 residential projects in the UAE with over 28,000 units. Mohamed Alabbar, chairman of Emaar Development and Emaar Properties, said the company will continue to seek opportunities for developing property assets that create long-term value for our stakeholders.
Emaar Development’s main launches in the first six months of 2018 include: The Grand, an exclusive collection of ultra-luxury apartments, penthouses and podium-level townhouses, in Dubai Creek Harbour; Socio and Collective, innovative concepts for co-living spaces in Dubai Hills Estate; Beach Vista and Sunrise Bay in Emaar Beachfront and Grande in Downtown Dubai, among others. During Ramadan and summer, Emaar offered several value-added offers for customers, which contributed to increased sales.
Radisson Hotel, Dubai Damac Hills launched
Damac Properties has signed a landmark agreement with Radisson Hotel Group (RHG) to develop and launch the ‘Radisson Hotel, Dubai Damac Hills’, its first, newly launched Radisson-branded property worldwide located on a golf course, the Trump International Golf Club Dubai at Damac Hills.
The planned 481-key hotel property comprises of one and two-bedroom suites, and offers investors an opportunity to purchase units operated by the Radisson Hotel Group with strong returns of up to six percent guaranteed for the first three years, on their property investment.
“Dubai’s increasing appeal as a global tourism destination gives direct and indirect investors access into the sector’s growth, as Dubai is set to continue welcoming increasing numbers of tourists well into 2020,” said Hussain Sajwani, chairman of Damac. “Our partnership with Radisson Hotel Group offers investors a unique opportunity to invest with two globally recognised industry leaders, and own a part of this exclusive property.”
Radisson Hotel, Dubai Damac Hills is already under construction and set to welcome its first guests in Q4 2019. The hotel will have two restaurants, modern leisure facilities comprising of a gym, spa, kids club and an outdoor swimming pool, as well as meeting space covering 600m².
Elie Younes, executive vice president & chief development officer, Radisson Hotel Group, said: “We are delighted to enter into partnership with Damac Properties, one of the most prominent and respected real estate developers in the region, and we appreciate their commitment and vision to develop such an exciting project.”
“We have seen Dubai continue to strengthen its position as one of the world’s most visited cities and remain firmly on track to meet its tourism objective of attracting 20 million visitors per year by 2020. We are further delighted to introduce our new upscale Radisson brand to the region, with its own mark of Scandinavian inspired hospitality which we are confident will appeal to the varied and evolving needs of international travelers visiting Dubai,” added Younes.
Dana gas H1 profit rises 4% to Dh88 million
Sharjah-based Dana Gas on Tuesday said its first-half profits rose four per cent year on year to Dh88 million.
The company posted second-quarter net profit of $10 million (Dh37 million), $2 million lower due to the one-off sukuk restructuring costs.
The restructuring has delivered a 50 per cent reduction in sukuk profit rate to four per cent, reducing annual debt service costs by an estimated 63 per cent.
“We have delivered a strong financial performance with profits up to $24 million [Dh88 million] and up to $50 million [Dh183 million] excluding one-off sukuk costs, a 117 per cent increase. The reduction in the sukuk profit rate will improve the company’s financial position and ability to fund future dividends,” said Patrick Allman-Ward, CEO of Dana Gas.
Revenue increased six per cent to $236 million (Dh865 million) as a result of higher realised prices mainly for condensate, which contributed $33 million (Dh121 million), helped offset a production decrease in Egypt and the UAE, which together had an impact of $19 million (Dh70 million).
On an operating basis, the Dubai-listed firm said gross profit increased by 39 per cent to $82 million (Dh300 million) due to improved price realisation and cost control.
The sukuk restructuring has recently been completed with the issuance and listing of a new sukuk.
“The new sukuk is a fair and consensual deal for the benefit of all our stakeholders and received over 90 per cent votes in favour from shareholders and sukuk holders. It is a ringing endorsement that the overwhelming majority of sukuk holders chose to remain invested in the company.”
The company’s cash position as of June 30, 2018, increased to $613 million (Dh2.25 billion), despite the dividend distribution of $95 million (Dh348 million), a slight increase on year-end 2017.