Market Updates

Market update

Investors repose trust in UAE’s economic resilience

Rise in business licenses indicates early revival of economy after coronavirus. The UAE economy has once again proved its resilience, showing an early sign of recovery by posting a nominal growth of 0.64 per cent in business licenses last month, latest data shows.

The total number of business licenses issued across the country in September reached 652,885, a rise of 4,201 compared to 648,684 in July, according to statistics from the National Economic Registry of the Ministry of Economy.

This rise reflects the continuity of business and trade in the UAE, following an unstable period in March and April despite strict restrictions on movement to contain coronavirus in the country.

Analysts and economists termed the rise in business license last month as a positive economic indicator and said it reflected investors’ trust in the UAE economy.

UAE Ranked 1st in MENA on Global Competitiveness 

The Global Competitiveness report saw UAE take the 1st position in MENA region and 9th globally, for the fourth year in a row.

The World Institute for Management Development (IMD) released their global competitiveness yearbook report for the year 2020, with countries from around the world being ranked on key parameters. Each parameter contributes to an overall ranking score, for which the UAE took 9th position, fortifying its place in the Top 10 countries of the world. The UAE joined the rankings only in 2017, and from that year, it has been in the Top 10 for four straight years.

The report covers 338 indicators, of which UAE was ranked 1st on 23 of them. For a further 59 indicators, UAE took a spot in the Top 5, while for another 106 indicators, it got a place in the Top 10. According to the Federal Competitiveness and Statistics Authority, the performance is a mere reflection of its sustained performance on macro-indicators such as vision, strategy and culture.

The UAE came well ahead of countries such as US, UK and Germany. Its top performances were on the parameters of absence of bureaucracy, tax evasion, personal income tax rate and % of females in the parliament.

How COVID-19 has impacted the running of the GCC & MENA Courts and Arbitration Centers 

COVID-19 poses an unprecedented threat to the lives of people and communities across the world. In the context of legal disputes, courts and other forums have been forced to adapt their usual business practices for the safety of their employees, as well as the practitioners that use them and the wider community they serve.

Whilst the full economic implications of the COVID-19 pandemic are still unfolding, courts and arbitration centers in the GCC & MENA have taken swift action to ensure the continued health of key stakeholders, without forgoing their responsibilities to the people they serve. The use of technology to mitigate, as best as possible, the impact of the global pandemic on the business community has been a strategic part of each forum’s response to the COVID19 restrictions.

That said, as up to 30% of the workforce of all organizations are now allowed to work from their offices following recent announcements easing COVID-19 restrictions in GCC & MENA, we anticipate steps will be taken by courts, and arbitration centers alike, that gradually introduce measures to return to business-as-usual working practices over the next few months.

Dubai’s non-oil economy stabilizes in September 2020 

Dubai’s non-oil economy stabilized in September on the back of a resurgence in business confidence as lockdown restrictions eased, the IHS Markit Dubai survey on Thursday showed.

Business activity witnessed an uptick for first time since February with the Purchasing Managers’ Index data signaling an end to the recent downturn across Dubai’s economy, as the region relaxed measures designed to stop the spread of coronavirus.

Businesses saw a tentative rise in new work as activity levels strengthened, although payroll numbers were again reduced sharply. Confidence about the business outlook continued to improve, reaching the highest since March.

The headline IHS Markit Dubai PMI rose from 46.0 in May to the neutral 50.0 mark in August, to signal no change in overall business conditions at the end of the Third quarter.

DFM to reopen its trading floor for investors as of August 7 

Market resumed work from Trading Floor early August with a gradual return of its employees

he Dubai Financial Market (DFM) on Sunday announced that it is reopening its Trading Floor and Customer Affairs counters for investors as of Tuesday July 7, 2020, with the strict implementation of precautionary measures for the safety of clients and employees.

The DFM resumed work from the Trading Floor early August with a gradual return of all its employees and brokers to work. As of August 14, 2020, all DFM employees returned back to office work.

Coronavirus: Abu Dhabi reopens some public parks and beaches 

Following an extensive period of sterilization, Abu Dhabi’s Department of Municipalities and Transport (DMT) has announced that some public parks and beaches in the emirate will open tomorrow, July 3.

Entry to the facilities Abu Dhabi city, Al Ain and Al Dhafra region will be conditional on pre-booking through the Smart Hub platform, the DMT said in a press statement. Visitors must also update their health status on the Al Hosn app confirming they have tested negative for COVID-19.

Once at the venue, every visitor will be subject to a body temperature check. The facilities will operate at 40 per cent occupancy.

The announcement follows the recent unveiling of DMT’s first-of-its-kind campaign – The Hygienic City with the slogan #itstartswithyou. The campaign reminds every resident that they have a vital role to play in preventing the virus from spreading and that wearing a face mask is a must.

 

With $34.7b net profit, GCC banks well-placed to absorb losses: Credit Rating Agency

Banks in the GCC region will see profits fall this year as economies shrink amid the coronavirus outbreak and lower oil prices, but have adequate capital underpinning their solvency, A reputed Credit Rating Agency Investors Service said in a report.

GCC banks rated by A reputed Credit Rating Agency, have a cushion to absorb losses thanks to their aggregate net income of around $34.7 billion in 2019, said the report.

“The economies of all six GCC countries will contract, sapping the banks’ two main income streams – interest on loans, and fees and commissions – while provisioning charges for loan losses will rise sharply,” A reputed Credit Rating Agency reported. “The banks’ capital will remain adequate, however, underpinning their solvency.”

“Economic recession will weigh on the creditworthiness of both corporate and household borrowers,” said the Credit Officer. “Banks will feel the effects through rising non-performing loans, requiring higher provisioning charges, which are expected to increase significantly from $11.7 billion recorded for rated banks for 2019.”

The GCC region may see a second wave of bank mergers and acquisitions that will be driven by economic rationale in the post Covid-19 era.

The pandemic lockdown will halt the growth of GCC Islamic and conventional banks this year as they focus on preserving asset quality rather than business expansion.

 

Market Intelligence AW Holding

The market saw a drastic increase in domestic cases during the first half of 2020. There were increase in debt cases across industry & sector which gave us a foresight into the upcoming tough times all through 2020 – 2021. The economic relief provided by the governments across GCC & MENA are coming to an end and hence the impact of the defaults will start to pick up and recoveries in most industries will start. There are many companies which are realizing the need for a debt management partnership in the region and hence are willing to associate for collection of unsecured portfolios of their receivables, which is a never seen before change in the market. The collections industry as other industry should brace for a challenge as the economy overall shows -5 % contraction with major industry sectors showing increase in cases: General Trading – 41%, Manufacturing – 16.94 %, Logistics – 11%, Financial Services – 9.8%, Construction – 8.8%, Engineering – 7.90%, Healthcare – 3.10%, Technology – 2%

By :

Nitin Subramanian

(Corporate Manager – AW Holding)