Daily Brief of World Finance News &GCC News
Oil’s Sudden Rebound Is Exposing the Achilles’ Heel of Shale, Some Industries Won’t Have a Reopening Comeback, Dubai CommerCity to Open by Year-End
World Finance News
Asia’s Rich Brush Aside Risk to Snatch Up Chinese Developer Debt
Lockdowns across Asia’s largest economy have forced more than 100 builders into bankruptcy and the swelling ranks of the unemployed are a continuing threat for the indebted sector. Still, there’s the confidence that Beijing won’t allow a property collapse at a time of slowing economic growth.
Wealthy investors from mainland China and Hong Kong are very substantial buyers of Chinese developer U.S. dollar bonds.”
Private banks made up 32% of preliminary orders for a bond offering from home builder Country Garden Holdings Co. last week, a person familiar with the matter said. They accounted for 10% of the interest in Zhenro Properties Group Ltd.’s issuance, which helped reopen the high-yield bond market after a March sell-off made investors wary of junk-rated names.
banks have subscribed to $4.9 billion of Chinese high-yield bonds so far this year, up 36% from the period last year, data compiled by Bloomberg from available deal statistics show.
Chinese developers issued $26 billion dollars of USD bonds in the first quarter.
Oil’s Sudden Rebound Is Exposing the Achilles’ Heel of Shale
Oil prices have surged more than 75% in the U.S. this month.
The quick turnaround in oil markets is exposing the shale industry’s big weak spot: Lightning-fast production declines. Shale gushers turn to trickles so quickly that explorers must constantly drill new locations to sustain output.
It’s a phenomenon that’s ultimately attributable to the very geology of shale. To offset the decline curve, shale explorers used to keep drilling. And drilling. And drilling.
Unchecked by new drilling, oil production from U.S. shale fields probably would plummet by more than one-third this year to less than 5 million barrels a day, according to data firm ShaleProfile Analytics. That would drastically undercut U.S. influence in world energy markets and deal a major blow to President Donald Trump’s ability to wield crude as a geopolitical weapon.
America’s reliance on new drilling that 55% of the country’s shale production is from wells drilled in the past 14 months, according to ShaleProfile.
Oil Must merely trade above producers’ daily operating costs for them to avoid shutting in existing wells. Most shale players we assessed can, therefore, avoid shut-ins if WTI clears $15/bbl, though some need $20 or above.
Some Industries Won’t Have a Reopening Comeback
There will still be a U.S. economy after Covid-19. People are going to need food, shelter, entertainment, health care, transportation and so on. But the shape of that economy -- what people buy and what they do without -- will change.
The industry that seems unlikely to recover is higher education. The pandemic is accelerating trends that were already in place -- reductions in state funding for colleges, a decline in high-paying foreign students and a broad decrease in demand. It’
The restaurant industry, one of the most hard-hit, might fare better. A lot of people who patronized restaurants before the pandemic avoid eating out until treatment or a vaccine is available, restaurants and bars will be in trouble. These businesses never operated on fat profit margins anyway, and many can’t survive a 25% or 30% drop in traffic. Many will go out of business. Once the danger is gone, new eating and drinking establishments will appear to replace those that went bust. But m a
The rent a commercial property generates depends not just on the productivity or attractiveness of the tenant business, but on the attractiveness of the surrounding area. Gloomy streets and strip malls will reduce the rental income even from the parcels that are still occupied.
Retail will probably suffer even more than restaurants. For restaurants and bars, the alternative is dining in, which is often an inferior experience. But for physical stores, the alternative is online shopping, which can be more convenient and offer wider selections. The brick-and-mortar side of the industry was already under severe pressure before the crisis, and many analysts often spoke of a “retail apocalypse.”
Businesses that might never recover is movie theatres. Box-office revenues were already under pressure as TV show production values and the quality of TVs improved.
Public transit is another industry that might struggle to make it all the way back.
Manufacturing is a more difficult case to predict. Weaker overseas markets, disruption of supply chains and reduced demand from a host of industries point to an enduring slowdown.
Air travel is another hard call but tourism seems likely to rebound after the pandemic.
GCC NEWS
China Toppled by the Middle East as Emerging Dollar Bond Leader by bloomberg.com
Chinese borrowers are rising the rankings for emerging-market dollar debt sales again after slipping from the top spot for the first time since 2016. They have sold more than $5 billion in dollar notes in May, driven by corporate offerings from the likes of PC maker Lenovo Group Ltd. and Chinese state-owned oil titan Sinopec. That trails only issuance out of the United Arab Emirates, with $7.5 billion this month, boosted by a $3 billion deal from Abu Dhabi’s government earlier this week, data compiled by Bloomberg show.
70% of Dubai Companies Expect to Go Out of Business Within Six Months Due to Coronavirus Pandemic, Survey Says by cnbc.com
Almost half the restaurants and hotels surveyed by the Dubai Chamber expected to go out of business in the next month alone,
Of the respondents, more than two-thirds saw a moderate-to-high risk of going out of business in the coming six months: 27% said they expected to lose their businesses within the next month, and 43% expect to go out of business within six.
Dubai, which has one of the most diversified and non-oil dependent economies in the Gulf, relies on sectors like hospitality, tourism, entertainment, logistics, property and retail.
Some 74% of travel and tourism companies said they expected to close in that time, and 30% of companies in the transport, storage and communications expect the same fate.
“Full and partial city-lockdown measures are bringing demand in key markets to a standstill ... The double-shock impact is pushing economic activity down to levels not seen even during the financial crisis,” the Dubai Chamber wrote in its report released Thursday, entitled “Impact of Covid-19 on Dubai Business Community.”
But amid the current uncertainty, businesses in UAE’s seven emirates, as elsewhere across the world, are slashing salaries, putting employees on unpaid leave, and reducing staffing levels.
For a country that relies on an 80% expatriate population for much of its economic activity, the stakes are even higher: if residents can no longer find work, they will likely return to their home countries, depleting the consumer base needed to enable any economic recovery.
Dubai CommerCity to Open by Year-End by zawya.com
Dubai Commercity, the first of its kind project in the region to cater to the e-commerce industry, is scheduled to open by the end of 2020, said a senior official. The Dh3.2 billion project, a joint venture between Dubai Airport Freezone Authority (Dafza) and property developer Wasl, will tap the fast-growing e-commerce market which will grow 13 per cent to $26 billion by 2022. The GCC market will account for $11 billion and UAE will contribute $4.6 billion to the regional e-commerce industry.
Like the other free zones operating in the emirate, CommerCity will offer no corporate tax, no income tax, 100 per cent foreign ownership, full repatriation of capital and profit and no currency restrictions.
Dubai Economy has announced that 943 'DED Trader' licences were issued in the first quarter of 2020, an increase of 179 per cent over the same period last year as online shopping gained fresh momentum following the outbreak of coronavirus in the UAE and worldwide