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Don't Buy Dubai - From IPO Bubble To Bear Market In 2 Months

Tyler Durden's picture




 

Less than 2 months ago we highlighted the effervescence of Dubai's equity markets when a "shell" of a company with no actual operations (but big plans) was 36x oversubscribed. We asked at the time if investors would ever learn... and it seems just weeks later, that a few are getting the joke. Dubai's General Financial Market Index is down 20.3% - a bear market - since just after that exuberant IPO hit the market. Is Dubai another leading indicator on the world's slowly rolling dissatisfaction with various asset classes?

 

 

Charts: Bloomberg

 

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Mon, 06/23/2014 - 10:54 | 4885522 Headbanger
Headbanger's picture

Coming to a """market""" near you!

Mon, 06/23/2014 - 10:58 | 4885546 max2205
max2205's picture

It's all Chinese to me

Mon, 06/23/2014 - 11:05 | 4885576 Headbanger
Headbanger's picture

I say it again the biggest Black Swan now is the U.S. dollar losing its status as world currency which would ignite a massive inflation spike here as the dollar become worthless and effectively de-fund the US military.

The world would literally explode then!

And all because Obama.

Mon, 06/23/2014 - 11:10 | 4885594 Zirpedge
Zirpedge's picture

I think the smart money now is standing behind a strong dollar. You can align your antisocial tendencies with the ambition of the Chinese and Russians. Just another sunshine patriot on wrong side of history once again headbanger.

Mon, 06/23/2014 - 11:12 | 4885598 Headbanger
Headbanger's picture

Not at all. 

The point here is this is why the Federal Reserve is going to raise rates

No go fuck yourself. Again.

Mon, 06/23/2014 - 11:18 | 4885623 Zirpedge
Zirpedge's picture

Your obviously a liberal troll. "because Obama" sealed it. No self respecting conservative would be stupid enough to give Obama credit for anyhting. You just make anyone oriented on the political right sound stupid. Can we flag this troll?

Mon, 06/23/2014 - 12:40 | 4885925 stant
stant's picture

He's a Canuck, red blue team is a spectator sport to him

Mon, 06/23/2014 - 11:19 | 4885624 JRobby
JRobby's picture

Winning friends all over the place with "smart money"  insigts. 

Mon, 06/23/2014 - 11:22 | 4885635 Zirpedge
Zirpedge's picture

Not here to win friends, friendo. Just saying it like it is.

Mon, 06/23/2014 - 11:24 | 4885638 JRobby
JRobby's picture

You are a Troll with nothing better to do or some disruptive motives.

I'm sorry that it doesn't work anymore. Perhaps Cialis? (Not An Advertisement)

Mon, 06/23/2014 - 11:27 | 4885646 Zirpedge
Zirpedge's picture

I'll bite, so if I come here to call it as I see it and it doesn't fit your narrow worldview, I must be a troll. But the guy who says " because Obama" then drops some F'bombs for shits and giggles passes your sniff test?

Mon, 06/23/2014 - 11:35 | 4885668 JRobby
JRobby's picture

Obama is irrelevant. Not sure why you bring POTUS up? 

Mon, 06/23/2014 - 16:13 | 4886800 lasvegaspersona
lasvegaspersona's picture

Not sure if I should interrupt the name calling with a serious comment but I agree Obama is a late comer to the dollar destruction party. I do not see how they maintain a 'strong dollar' however. QE has destroyed any appearance of that. We seem headed for a dying dollar as it can no longer meet the needs of a functioning fiat currency. The obligations of the USG cannot be met with any scenario except severe inflation or default. The Fed is just keeping things together...barely.

I'd like to be all gung ho USA, USA but I don't want to be thought of as an imbecile by future readers. I am amazed that things have gone on as long as they have but this is a show that we have seen many times before. Like a Shakespere play, there can be many different performances but you can't change the ending.

Mon, 06/23/2014 - 11:13 | 4885602 29.5 hours
29.5 hours's picture

 

 

"the dollar become worthless and effectively de-fund the US military."

Ah, an anti-war optimist. We need those now more than ever.

"all because Obama"

All because crony capitalism. Obama is too mediocre and pathetic to take the blame for the big stuff.

 

 

Mon, 06/23/2014 - 11:13 | 4885604 Headbanger
Headbanger's picture

Another fucking idiot weighs in.

 

Mon, 06/23/2014 - 11:21 | 4885632 Zirpedge
Zirpedge's picture

sheesh, angry name calling little troll here, with a filthy mouth. Maybe if you had the capacity to counter an argument and not engage in name calling, we'd give you more credit. Just a tip for your next libtroll profile.

Mon, 06/23/2014 - 11:58 | 4885778 goldhedge
goldhedge's picture

You are a retard for believing Republicans are different from Democrats in their aims on the bigger (Global) picture.

 

Mon, 06/23/2014 - 16:05 | 4886754 thunderchief
thunderchief's picture

Hi Zirpedge,
Not alot a lot of liberals or conservatives here since I've been reading, but definitely one ignoramus asshole as of today.

Mon, 06/23/2014 - 10:55 | 4885525 Dr. Engali
Dr. Engali's picture

DoBuy the fucking dip.

Mon, 06/23/2014 - 11:04 | 4885569 NoDebt
NoDebt's picture

Why not? Chart may look like a train-wreck at first, but if you notice, it had a 20% dip back in Aug/Sept 2013, too.  And it didn't do too shabby after that.

 

Mon, 06/23/2014 - 12:54 | 4885986 Crazy Or Not
Crazy Or Not's picture

Anything connected with Dubai is a tank.
The whole GCC area is a minefield.
If you have some awesome connections - go for it. Otherwise buyer beware.
Sheraton Hotel in Qatar is sinking into the sand.....

Yes it is built on sand! - think about that for a few minutes 30 floor towers built on sand in an eathquake region?
With concrete mixed in 50ºC ( 120ºF) - when concrete needs time to reach full strength?
Using Ice and Seawater - cos in summer there is not enough freshwater to go around !!!
And using codes that are less than half of USA European codes for n/sq/ft loadings.....weak loads but much cheaper!

They don't care about quality.....'cos they´ll be running with the cash - yours!

Mon, 06/23/2014 - 10:54 | 4885526 orangegeek
orangegeek's picture

some text Yellen - he needs to buy this with moar printable cash

Mon, 06/23/2014 - 10:58 | 4885544 Devotional
Devotional's picture

looks like the Gold chart. Fine, thumbs down me damnit but it's the truth!

this dude hangs his head in shame ...

/no sarc

Mon, 06/23/2014 - 11:01 | 4885559 NoDebt
NoDebt's picture

I was thinking more along the lines of the NASDAQ chart, circa 2000-2001.

Mon, 06/23/2014 - 11:00 | 4885553 Skateboarder
Skateboarder's picture

"Hey, let's make an artificial oasis in the desert and build an indoor ski resort."

Mon, 06/23/2014 - 12:58 | 4886009 Crazy Or Not
Crazy Or Not's picture

Skateboarder:

If it's big and shiney ....keeps the themepark delusional stupified long enough to part with their Visa......

Mon, 06/23/2014 - 11:10 | 4885595 coulous
coulous's picture

Just snow !  winter in dubai !!

Mon, 06/23/2014 - 11:11 | 4885601 Quinvarius
Quinvarius's picture

So what is the big fraud theya re are going to lay on the US before this thing implodes?

Mon, 06/23/2014 - 11:14 | 4885607 paddy0761
paddy0761's picture

Just a normal A-B-C correction. BTFD sheeple.

Mon, 06/23/2014 - 11:15 | 4885611 JRobby
JRobby's picture

Another sign of imminent collapse

Mon, 06/23/2014 - 11:19 | 4885625 yogibear
yogibear's picture

William Dudley of the NY Fed keep telling your PhD trainees to keep buying stocks.

Yellen, Williams,Dudley, Evens, Rosengren and the rest of the infinite money printers start buying up homes as well.

Keep those plates all spinning or else they will begin to break.

LOL, Zimbabwe or bust.

Mon, 06/23/2014 - 11:33 | 4885665 BullyBearish
BullyBearish's picture

When they so obviously ignore inflation, juice the numbers, collude with their partners in other countries/regions to the extent thay are now...THEY ARE ALL IN!!  And it's only taken them 6 years of wealth transfer to get to this point.  Even some ex-FEDites, members of the chosen are questioning what the FED is now doing and the complete lack of oversight by our wonderful elected officials.  They own it all and as long as AMERICA lets them, they'll continue down this path.

Mon, 06/23/2014 - 11:39 | 4885680 Peak Finance
Peak Finance's picture

Wasen't Dubai Financial Activity a leading indicator from the last crash?

I seem to remember stories about BMW's and Mercades being abondoned in long term parking lots and their real estate tanking, while thing wre still peachy here.

Mon, 06/23/2014 - 13:17 | 4886086 Crazy Or Not
Crazy Or Not's picture

I seem to remember stories about BMW's and Mercades being abondoned in long term parking lots...

Yep Now the banks  with use of INTERPOL !!! are chasing the expats to try to get those car loans collected THE GUARDIAN SAYS :

http://www.theguardian.com/law/2014/may/22/britons-jailed-losing-jobs-bounced-cheques-sharia-law-interpol-arrests

Collection companies like http://www.bilkish.com/ are getting a mauling in the western press...

....don't know if they're collecting debts or just human rights lawyers?

Mon, 06/23/2014 - 11:46 | 4885719 FEDupwithDC
FEDupwithDC's picture

Couldn't some of the ramp up be attributed to MSCI reclassifying the UAE as "emerging" from "frontier" effective June 2014?

Mon, 06/23/2014 - 14:01 | 4885883 Dubaibanker
Dubaibanker's picture

The market cap of Dubai Financial Market is not even USD 80.2m. It does not even matter on any scale. It is insulated from everyone and does not impact anyone and yet in the last 20 years Dubai has built companies competing on a global scale such as Emirates Airlines, DP World, Jebel Ali Port, Emirates NBD Bank, Emirates Aluminium, Burj Khalifa, Palm Jumeirah, Dubai Mall, Dubai Duty Free, hundreds of hotels including home grown chains such as Jumeirah Group and Address Hotels brand, DIFC financial centre and DIFC English court system etc. These do not include companies from other emirates such as Mubadala, Etihad Airways, Air Arabia, Aramex couriers, wealth of ADIA, Global Foundries, Masdar Solar, Cleveland and Mayo clinic arrival, Ferrari World, new free zones, nuclear plant etc none of which existed just 5-10 years ago.

However, the index was as follows over the last 3 years:

Jan 2012: 1,344

Jan 2013: 1,666

Jan 2014: 3,418

Highest level in 5 years : 5 May 2014: 5,406

Since Jan 2012, market remains up by 219%

Since Jan 2013, market remains up by 157%.

Since Jan 2014, market remains up by 25%.

Although it has declined from its peak on 5 May 2014, but some external catalysts such as Iraq crisis, FIFA World Cup 2022 withdrawal fears from Qatar and ever rising GBP and EUR and of course the over heated stock market have caused this fear psychosis in the local market. High EUR/GBP or low EUR/GBP have impact on this small market in Dubai. There is a high degree of correlation of Dubai economy with EUR. High EUR/GBP causes inflation here with inflows while low EUR/GBP leads to lack of money flows though Dubai has been trying to change this by focusing more on tourism but as of date the impact remains and is probably lower than 5 years ago. For example, Saudis are the No. 1 tourists in Dubai, Indians are second and British are third in numbers. Indians, Iranians and British used to be the highest in the past.

Despite over tightening the real estate market vis a vis 5 years back by introducing the following elements has been stable and picked up and reached pre 2009 crisis levels already in 2014. (None of the rules below existed 5 years ago).

1. 4% property tax on every sale

2. Ban on flipping properties and regulation on brokers and bans on hundreds of brokers.

3. Introduction of adequate escrow and other relevant real estate regulations.

4. Clause of 40% downpayment prior to allowing sale of any property

5. Clause to construct on land in 2 years else forfeiture of land

6. 25% minimum downpayment on first property by foreigners and 35% thereafter. Foreigners are the predominant buyers in Dubai real estate market.

7. Recent 10% discount if commited to hold property until completion clause.

8. Issuance of bonds to enhance liquidity in this market by various top corporates.

9. Developer to put 25% downpayment prior to approval of any project.

10. Most important of them all, issuing bonds in the name of the top Ruler owned entity recently bringing transparency to the Middle East for the first time and taking a pioneering and leadership position in the Middle East by disclosing ownership of all assets in a prospectus.

This has enhanced this market as compared to just 5 years ago and all above were not in place just 5 years ago. In addition, magnificent and iconic assets were handed over and completed in the past 5 years such as the Burj Khalifa, Palm Jumeirah, Armani hotel, Atlantis Hotel, Al Barari project, 2 airport extensions, new metro, new tram, new free zones etc which were under construction 5 years ago. The UAE population has doubled from approx 4m in 2003 to over 8.5m in 2013. 

Another statistic, in 1996, less than 1m tourists used to visit Dubai, this number jumped to 6m in 2006 and in 2013, Dubai attracted over 11m tourists. Dubai now aims to attract 20-25m tourists by 2020.

Dubai airport used to be one of the smallest in the world in 1996, it became large but not quite Top 10 in 2006, and in 2013 it ended being the 2nd busiest airport in the world just behind Heathrow, watch out for 2015 because 2014 will be slow due to a half a billion dollar airport repair of runways due to which hundreds of flights have been cancelled and hundreds more diverted to neighboring airports.

Dubai had just 373 hotels in 2003, they built 238 hotels in Dubai between 2003-2013 and are at 611 hotels as on date. They intend to build over 500 hotels in the next 5 years effectively doubling the hotel sector size over the next 5 years including promoting budget hotels. The occupancy rates remain astonishingly high at over 85% across the board and some at over 95% and during Nov-Mar peak season, room rates almost tripled last year! On New Years eve, room rates were higher than USD 4k for the 31st night! Almost all hotels which is over 611 hotels in Dubai and over 200 in other emirates were ALL sold out.

Some of the new mega projects include, a new downtown, a Dubai canal, a metro extension, several new residential cities, dozens of towers which are carefully sold to selective buyers, train and a tram project, bringing 500,000 medical tourists latest by next year, building over 22 hospitals, several new malls, a park bigger than Hyde Park, expanding power plants and water plants, getting nuclear power online by 2017 are some of the new projects that have already started, not to mention a large railway project connecting the rest of the Middle East. Lest I forget, the largest caviar plant in the world too and some new manufacturing as well. And they even got the EXPO 2020 project. Dubai was also upgraded to Emerging Market status since June 2014.

Dubai is here to stay, regardless of market movements, the vision and leadership of this city and country has been a beacon of hope for the tumultous region.

Due to all the above activity, the market should mature and new IPO's are expected because price of solid companies like DP World is already at original 2007 IPO levels (take that Citibank shares). Dubai may be small but it punches more than its weight not only in the region but around the world. 

Just wait for the new Dubai Mall IPO within the next few months....which is the largest IPO in Dubai ever. Hopefully it will increase liquidity in the market and bring new investors along with funds from the passive index investors effective this month being Emerging Market MSCI funds. Over the last year, stock market activity has again resumed and become active. 

While the market may not rise much whether in stocks or real estate (because lot of it is cash driven and not super highly leveraged unlike 5 years ago) but it will not decline massively however a 10% to 20% downward movement from the peak is quite likely during the summer (due to oncoming Ramadan/Eid/extremely hot summer season, school holidays, weak global sentiment and extremely high pricings etc). The top end real estate, above USD 2-3m levels, will remain insulated from any downward movements, in my view.

Mon, 06/23/2014 - 12:31 | 4885890 LostandFound
LostandFound's picture

I live here in Dubai and the real estate is at the same price as pre-crisis 2008 levels. 

I would like to say this is a temporary correction, but i am not too sure, one thing i am sure about is that there is no fucking liquidity in this market, everyone is hoarding cash and not getting paid. 

At somepoint business out here will hit a wall. 

Mon, 06/23/2014 - 12:35 | 4885908 LostandFound
LostandFound's picture

wow DubaiBanker you just put me to shame with your knowledge sharing, notwithstanding that, there is no liquidity (particularly in the development and construction industry)

Mon, 06/23/2014 - 12:43 | 4885944 Dubaibanker
Dubaibanker's picture

Yes I agree...there is low levels of liquidity but the big boys or the Govt will pickup assets cheaply if anyone goes bust which people have a habit of going bust every year, with or without a crisis. Foreign banks leaving the shores of Dubai regularly are a good indicator since Lehman's demise in 2008.

If you will see, most developments are done by the Govt and all infra spending is by the Govt and remember an insider tip...The Chinese have just arrived in Dubai in banking, trade and real estate etc in the last couple of years and they will show more teeth from 2014 onwards.

There is enough liquidity but just not for the non locals. Locals are fine and the growth and boom is meant for them not for the rest of us. Most foreigner owned businesses have been struggling since the 2009 crisis and now the strongest ones are being tested because everyone has a different stretch limit based on their cash reserves. Stretch limits of the very best are being tested and more so in the next few months. This is not a market for the faint hearted!

Have you seen Arabtec shares lately?

Tue, 06/24/2014 - 01:56 | 4888396 LostandFound
LostandFound's picture

Thanks for this, i appreciate it

We are a tier 1 foreign contractor and we have never been tested so much with our cash reserves. Payment terms extending way into 100+ days after work is complete and the legacy debts are almost a write off

I have seen Arabtec's shares plunging over 40% in the last week or so? Hopefully it is just a correction to the 250% increase over the last few years

Dodgy that Aabar are the ones selling some of the stake of Arabtec, pump and dump...a little?

I still dont think they can deliver successfully all the projects they have won over the last two years.

Mon, 06/23/2014 - 14:21 | 4886330 johngerard
johngerard's picture

A friend of mine who regularly goes there for work tells me there is derelict new-build office/residential block after derelict new-build office/residential block, and that the atmosphere is generally downbeat business wise.

Might have something to do with the fact that WWIII may start soon enough not far away...

Mon, 06/23/2014 - 17:53 | 4887149 sandhillexit
sandhillexit's picture

Just trying to recap the high points:

Chemical attack by indeterminate actor threatens to draw US into Syria hellhole, threatening Russia's only Medit. port access.

Putin forks BHO's bacon out of the fire by supervising chemical disarmament of Assad/Alewite govt & leading Iran nuclear disarmament talks in Geneva.  

Bandar flies to Moscow, threatens safety of Sochi Olympics if Putin doesn't take hands off KSA warplans.

Putin counters with an iron ring of Cossacks around the Olympic village.  

Nuland turns up the gas on Ukrainian pot to give Putin something to worry about closer to home, smooth the path to take advantage of a weaker Assad. Putin parries by scooping up Crimea. 

Bandar waits for the next international party to shift the Iranian warfront away from Putin's precious Medit. ports.  Assad thinks he has survived again, just barely.  However, next day, Israel finds a hole in the fence in the Golan Heights and starts bombing raids.  Putin counters how?

Blitzkrieg I, nicely timed under cover of World Cup headlines, shifts the battleline between KingdomSA and Iran from Aleppo to Iraq-Highway1 give-or-take.  Iran counters,...how?  Blitzkrieg II should really be Shiite uprisings in Bahrain, Kuwait and Dubai.  So yeah, it's a bit dangerous up there on the high floors of Burq Khaifa (the Tall One).  It always starts near the tallest building.  

The fountains there are really splendid though.

https://www.youtube.com/watch?v=rkUsxrALjQs

Is it really a surprise that Dollars (USD and CAD) are up? 

(to be fair to WashDC, they are mostly bystanders in all this.  Like WileyC the results of our aggressive spending/flailing on the world stage for ten years are just catching up.  We knew it was coming, just weren't sure how or where.  Worst part of it is that our bankers in Shanghai haven't weighed in yet.  Everyone knows we can't afford another round.  

The Saudis are quite ill-mannered, ruining two major sporting events in one year.  The idea of "Olympic peace" doesn't seem to translate into Najd dialect.  Military curfew in the West Bank during World Cup seems pretty humorless  as well. Maybe its too dangerous to have viewing parties when big stuff is going down.  

It used to be that they just ruined everyone's August vacation by the sea.  

 

Tue, 06/24/2014 - 05:14 | 4888504 jubber
jubber's picture

Dubai in freefall this morning down 8%

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