China Southern Airlines advanced to a seven-month high after saying it is in negotiations to sell a stake to American Airlines, the world’s biggest carrier.

The negotiations are over “a possible major strategic cooperation with American Airlines involving, among others, proposed issue of shares of the company and other business cooperation”, Asia’s largest airline by passengers said in an exchange filing on Sunday. The stock, which resumed trading on Monday in Hong Kong, gained 0.7 percent to HK$5.49, the highest closing level since August 16.

Trading in the Guangzhou-based operator had been suspended since March 23 it was reported that the Texas-based American Airlines would probably make an investment of about US$200 million in China Southern’s Hong Kong-listed shares through a private placement. The companies have not reached a binding or definitive agreement and the cooperation may or may not proceed, China Southern said. The American Airlines spokeswoman Polly Tracey declined to comment.

For American, a deal would strengthen its presence in the Chinese market after rival Delta Air Lines acquired a minority stake in China Eastern Airlines in 2015. China Southern would be the last of the nation’s top three airlines to bring in a non-mainland Chinese strategic investor. Cathay Pacific Airways, based in Hong Kong, owns about 18 per cent of flag carrier Air China Ltd.

“All big US carriers will be making deals of one kind or another with major airlines all over Asia and certainly within China,” said Robert Crandall, former chairman of American. “These things are going to grow and because of the network nature of the airline industry, everybody is going to play and everybody needs to play.”

An agreement will help boost the expansion plans of China Southern, which indicated in January that it was considering bringing in strategic investors. The carrier has been adding routes to Australia, New Zealand and countries in South East Asia as it competes with China Eastern and Air China. A tie-up will increase China Southern’s visibility in the United States, said Will Horton, a senior analyst at the CAPA Centre for Aviation in Hong Kong.

“China Southern may be the largest airline in Asia but it’s relatively unknown in the U.S.,” Horton said. “US consumer mindset changes if American is putting cash in: China Southern isn’t just another airline or partner, it’s a carrier American believes in.”

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Shares of China Southern will remain suspended in Shanghai until further notice, the carrier said separately.

China Southern and its subsidiaries have ordered more than US$15 billion of new aircraft from Boeing and Airbus since 2015 as more people fly in the world’s most populous nation. The International Air Transport Association predicts China will surpass the US to become the world’s biggest air travel market in terms of passengers by 2024.

* Bloomberg

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Qatar said it will announce major new investments in the United Kingdom this week, deepening the countries’ trade ties as it prepares to quit the European Union.

The emirate’s prime minister, Sheikh Abdullah bin Nasser bin Khalifa Al Thani, is leading a delegation of more than 400 officials and business executives to London and Birmingham to a two-day meeting with UK counterparts, according to government statements. The visit concludes on Tuesday, a day before the UK prime minister Theresa May plans to start the two-year clock on Brexit negotiations by invoking Article 50 of the Lisbon Treaty.

“Qatar has great confidence in the UK, and this confidence will be demonstrated in the additional investments we will make over the next decade,” Mr Al Thani said Monday as the event opened at London’s Grosvenor House Hotel. He disclosed no details about prospective deals.

Qatari investments would help to cushion the economic fallout from Brexit on both sides. Ahead of the break, the UK is taking steps to maintain foreign investments, going as far as to provide written assurances to Nissan in an effort to stem competition from other EU members that want to poach talent and capital.

Qatar, too, has a big stake in keeping the UK economy and asset prices strong during and after Brexit. It is the world’s biggest producer of liquefied natural gas, and delivers 90 per cent of the UK’s imports of the fuel. The emirate stepped in to invest billions in Barclays during the global financial crisis and has built up a stock and property portfolio worth more than £40 billion (Dh184.63bn) over the past decade.

The delegation to the UK this week includes the chief executives of Qatar Investment Authority (QIA), Qatar Petroleum and Qatar Airways. George Iacobescu, the chairman and chief executive of Canary Wharf Group, partially owned by QIA, and Xavier Rolet, the chief executive of the London Stock Exchange Group, another portfolio company, are also attending the investment forum.

“Qatar doesn’t see Britain leaving the EU as impacting their relationship and it may be an opportunity for it to be stronger,” Rachel Pether, an adviser at the Sovereign Wealth Fund Institute, said in Dubai.

Protecting the value of Qatari assets in the UK -– which range from Harrods department store, a stake in Sainsbury grocery chain and upmarket properties such as the Savoy Hotel and the Shard tower – is not the only motivation behind the emirate’s road show. Lower oil prices have sapped government revenue, forcing Qatar, the richest country in the world on a per-capita basis, to issue Us$9bn bonds in May. Officials are seeking more investment flows as the country diversifies its economy away from oil and gas and continues a $200bn infrastructure upgrade before the Fifa 2022 World Cup.

“We want to attract institutional money from the UK, especially through our forthcoming exchange-traded fund that will list on the Qatar Stock Exchange,” said Fahmi Alghussein, the chief executive of the Doha-based asset manager Amwal, who plans to attend the London trade event.

One indicator of Qatari appetite for investment in the UK is continued purchases of real estate, both by the state fund and individuals. Foreign investors see the top end of London’s property market as an attractive haven, with the pound’s slump offsetting political uncertainty, according to Laurence Ronson, sales director at Ronson Capital Partners. That is despite the fact that owners are holding back while the value of their homes stagnates and in many of the best districts of the capital, decline.

“London looks like exceedingly good value in terms of a weakened sterling,” said Mr Ronson, who is developing two luxury buildings in the capital. “We’ve seen that with Chinese, Middle East and American money looking at opportunities. All the doom and and gloom that has been predicted post-Brexit has not happened. In fact, the economy is growing.”

* Bloomberg

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Running five Facebook community groups is intensely time-consuming for Abu Dhabi resident Freya Jaffar. And what used to be a seven day-a-week hobby for the British-Pakistani mum-of-four has now expanded into a business operation.

Ms Jaffar spends up to 18 hours a day online running Abu Dhabi Q&A (36,000 members), Abu Dhabi Property (21,900 members), Middle Eastern Ladies Lifestyle (5,600 members), and two new groups: Abu Dhabi Classifieds (1,600 members) and Flaunt Your Recipe (250 members).

Ms Jaffar moved to Abu Dhabi with her family in 2008, setting up her most successful group, Abu Dhabi Q&A, four years later as a way for residents to share information.

“I was finding that nothing online was accurate – companies wouldn’t have websites, phone numbers wouldn’t work, and there was no citizens advice bureau to give you a solid answer,” she says. “I thought I’d create a little group among the people I knew in Abu Dhabi, and it just took off from there.”

Residents started turning to Abu Dhabi Q&A when they needed answers to questions such as where to register your car or simply the best hairdressers in town.

The group has grown significantly in the past 18 months, and Ms Jaffar says she now gets about 3,500 membership requests a month, about half of which she accepts. “The others either seem fake or are in an­other country,” she says.

Then six months ago she turned the community group into a business after someone referred to her as a “social media influencer” at a speaking event.

“I had no idea that’s what I was, because I’m not trained in communications,” she says. “I realised that I could have a measured amount of advertising that pays for the time I devote.”

Since licensing her business, Ms Jaffar is now contacted by about three companies a day, although she allows a maximum of two adverts a week on the group. “Anything more than that disturbs the model,” she says. “It’s still 80 per cent Abu Dhabi Q&A. The integrity of the group is more important for me than making money.”

Ms Jaffar also started up Dubai Q&A, which at 1,383 members has failed to gather the momentum of its Abu Dhabi counterpart.

Nicholla Henderson Hall, a Briton who runs the social media marketing agency Hendall Digital, says Dubai has a very different social media crowd to the capital. “Abu Dhabi is a smaller community and everything is within a sphere of reference, whereas in Dubai you have ­micro-communities such as Arabian Ranches, Silicon Oasis and Jumeirah, and that’s reflected on social media. The smaller, more intimate groups – what I call the suburb groups – are more successful in Dubai.”

One of those Dubai-based groups currently swelling in numbers is British Mums Dubai, with 9,500 members. Founder Jemma Schilbach launched the sister site britishmums.com six months ago, which relies on advertising and sponsored content to fund the website, editorial content and events.

“We saw an urgent need to make information for our community more accessible as we have almost a million activities a year in our Facebook group alone, and therefore information was disappearing too quickly,” says Ms Schilbach.

But turning a community page into a business comes with its challenges.

Ms Henderson Hall also runs the 45,000 member-strong Facebook group Muscat – Where Can I find, which she set up while living in Oman six years ago. She charges Dh1,000 a week to advertise on the group, but says it hasn’t been an easy model to monetise. “Businesses want to advertise for free, or to pay a very minimal fee to use the space. Plus when the audience don’t engage with the promotion, they feel that it’s our fault.”

Another hurdle, she says, is getting businesses to pay up. “We now don’t let businesses promote until payment has been received,” she adds.

As the interest in social media marketing grows, Ms Jaffar and Ms Henderson-Hall have both been invited to events to advise others.

“People want to know how to grow their own groups,” says Ms Henderson-Hall. “You need to create that line of trust and authenticity, and a space where you can communicate openly. Some people are very natural at that, but for others it takes more time and they need to learn that skill set.”

Ms Henderson Hall and Ms Jaffar held their own networking event this month at the Marriott Hotel Al Forsan in Abu Dhabi, charging Dh200 a ticket. About 40 turned up, and another event is planned for May.

But not all Facebook influencers have successfully monetised their group. American Gina Dillon runs Freecycle Abu Dhabi, Khalifa City Community, UAE Housemaids and Abu Dhabi Kids; they have a combined membership of 68,000 people. In November 2015, she and a partner purchased an annual business licence for Dh30,000 to run community events.

“What I wanted to accomplish from a social enterprise was events that furthered the mission of my groups, and provided a stipend for my efforts,” she explains. “But I found the cost prohibitive. In the end, I decided my efforts were philanthropic.”

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Luxury-home owners in London’s best districts, of whom 41 per cent are from overseas, are turning to companies such as Airbnb and property brokers to secure income as their properties languish on the market.

Others are trying to boost leasing income with shorter contracts after long-term rents in the most expensive districts fell 5.1 per cent in the year through February.

For overseas landlords, the devaluation of the pound is also hurting their returns and prompting them to look for ways to generate revenue.

Frustrated after searching for a buyer for two years, the owner of one luxury apartment overlooking London’s Hyde Park decided to rent it out for £1,500 (Dh6,920) a night.

“It was a very lofty valuation and I think they’ve always been chasing the market,” said Hasan Hasan, the co-founder of the property broker Xenyos, which is handling the rental. Now the landlord, a developer trying to sell the property at a reduced price of £8.65 million after a refurbishment, will at least recover some of his investment while he waits for a buyer, he said.

The number of London properties listed on Airbnb almost doubled in a year to 50,000 at the end of 2016, according to data compiled by broker Jones Lang LaSalle. The London Mayor Sadiq Khan warned the city’s policymakers this month that the rise of short-term rentals risks making fewer homes available for permanent residents.

A record 35,000 new high-end London properties – enough to cover Hyde Park twice – are planned in the coming decade, 40 per cent more than in 2014, according to the consulting firm Arcadis. Sales of London homes under construction in 2016 dropped to their lowest in four years, leaving developers with a record inventory of unsold properties, after tax increases dented demand for high-end homes.

That has encouraged sellers to offer properties for rent while they wait for the market to recover, according to the Knight Frank associate Tom Bill. The number of properties available to rent in London’s best districts rose 20 per cent in the six months through February, according to research published by the broker.

“Demand in the long-let market has not been very strong after the Brexit vote, but property owners need to maintain their profit,” said Gao Xiang, the president of JC International Property, a broker that specialises in Chinese and Japanese investors in London. “The price-to-rent ratio is far less than investors expect.”

Landlords will see cuts in tax breaks for mortgage-interest payments starting next month. The growing pressure on returns has sparked interest in short-term leasing, according to Mr Hasan, whose company has recently taken on properties in the South Kensington and Notting Hill districts that had previously been long-term rentals.

“The tax changes for smaller investors have had a real effect – in some cases they are looking at loss-making properties,” he said at a luxury apartment his company manages in London’s Maida Vale district.

Many landlords are unaware that there is a 90-day limit on short-term rentals for entire homes, or deliberately seek to subvert it. That prompted Airbnb to announce in December that it would bar London listings for longer than the permitted period unless they have the correct approvals. Previously, almost a quarter of the homes listed for rent in their entirety on the website had exceeded that limit, said the researcher IPPR in a report sponsored by Airbnb.

Overseas buyers have another incentive to seek higher returns from short-term rentals. The pound has fallen about 16 per cent against the dollar since the United Kingdom voted to leave the European Union on June 23. That means pounds paid in rent will not go as far in servicing mortgage payments.

“My biggest concern is the scale, cost and currency of overseas mortgage debt secured against new build homes, particularly by Asian buyers,” said the real estate researcher Neal Hudson. “Anecdotal evidence suggests that many of these buyers have been using local mortgages to fund their purchases.”

Among Xenyos’ current short-term rental listings are several apartments in Chelsea Bridge Wharf, an apartment block in the Nine Elms districts developed by Berkeley Group. One of those homes is financed with a mortgage from a Saudi bank, Mr Hasan said, underlining the owners’ desire to maximise returns.

“The central London housing sales and rental markets have been weak in recent years and this has put pressure on developer and investor returns,” Mr Hudson said. “With a large number of new homes expected to complete this year, prices in both sales and rental markets could come under further downward pressure due to increases in supply.”

* Bloomberg

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The Hong Kong-listed aircraft lessor BOC Aviation reported a 22 per cent jump to record full-year net profit on Monday, supported by growth in global air travel, and signalled an upbeat industry outlook.

As airlines increasingly opt to lease planes, Asian lessors are investing billions of dollars to expand, having won backing from cash-rich banks and financial investors. Last year, BOC Aviation raised US$1.1 billion in the biggest IPO by an aircraft lessor.

Last week, the company said it had ordered 13 new Boeing 737 MAX 8 aircraft.

“Airlines are attracted by the 737 MAX 8’s lower operating costs and fuel efficiency, and we are delighted to announce the inclusion of these additional aircraft as we build our future delivery pipeline,” said Robert Martin, BOC Aviation’s chief executive.

BOC Aviation’s net profit rose to $418 million in the year ended December 31 on a 9 per cent increase in total revenue and other income to $1.19bn.

“The economies that are commodity-based are beginning to pick up. Growth in domestic markets – Brazil, Russia, India and China – particularly towards the end of the year was good,” said Mr Martin.

The Singapore-headquartered firm, which has a portfolio of 284 aircraft, expects to take record deliveries of over 75 aircraft this year.

BOC Aviation said the market for aircraft funding remains strong, with the company having over $4bn in committed facilities.

Global demand for air travel in January rose 9.6 per cent, the sharpest increase in more than five years, boosted by surging demand in domestic passenger markets in India and China.

* Reuters

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Emaar Malls said on Monday it had submitted an $800 million bid for Middle Eastern online retailer Souq.com.

The bid has so far not been accepted by Souq.com’s shareholders, Emaar Malls said in a bourse statement.

“Emaar Malls has submitted a bid of US$800 million for Souq.com in line with the strategy to align e-commerce with physical shopping,” said the statement signed by Ahmad Thani Al Matroushi, vice chairman of Emaar Malls.

Speculation about a potential sale of Souq has been circulating for months with Amazon linked to the purchase of the site as recently as last week.

Emaar Malls said that if the bid was approved, the impact on the company’s profit for the quarter and for the year would not be material.

“This is an interesting development even though I think the Amazon transaction is almost wrapped up,” said Omar Kassim, founder of market platform JadoPado.com.

“This will give some shareholders pause as the delta between Amazon’s assumed offer of $650 million and Emaar Mall’s bid is $150 million. The management team have a fiduciary duty to their shareholders to achieve the best possible outcome.” ​

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__________________________________

Instant analysis by Sabah Al Binali:

The takeover talk around Souq.com has people talking about what, exactly, the valuation is. To me, that is not the instructive number.

The instructive number is how many years it took to get Souq.com to this point. Founded in 2005, Souq.com is now 12 years old. This is how long it takes to build a company.

If you’re lucky, or based in a large, rich economy like the US, you might get a sale faster than that. I think that it is an important lesson for all entrepreneurs, building a company is a decade long process.

Best of luck to the Souq.com team, they deserve it.

Sabah Al Binali is a weekly columnist for The National.

A major shake-up of Arabtec’s management is under way as part of its restructuring.

Hamish Tyrwhitt, the new chief executive who was appointed last November, told The National that “by two-to-three months’ time, probably 60-70 per cent of my direct reports will be new to the company”.

“I’ve already put in one of five regional directors to replace someone that had retired. I’ve got a CFO [chief financial officer] joining in two weeks who is a very experienced CFO with published companies who I have worked with for a long time [and] is going to be a terrific asset. Two other operating company MDs [managing directors] are on their way, a COO [chief operating officer] and a few other people.”

He said that the shake-up had not involved widespread sackings, and in many cases is merely replacing acting heads or roles that have been vacant.

“The CEO role at the holding company had been an acting role for over two years, the CFO role had been acting for over two years, the general counsel role has been an acting role for over two years, Efeco [its MEP subsidiary] hasn’t had an MD for, I think, 18 months.”

The company is also in the process of a strategic review to offload a number of investments and subsidiaries. Already accounts filed last week show that it disposed of an investment in Powercon Switchgear – a company that had net assets of Dh3.6 million, for Dh1.

It also de-recognised accounts for four subsidiaries in Saudi Arabia that had been up for sale for more than two years on the basis of a “discontinuation of major operations”. The subsidiaries were run as a joint venture with Saudi Binladin Group.

Mr Tyrwhitt said that although this joint venture “is not dormant”, it is one which is not likely to be active until Saudi Binladin can resolve its own cash flow issues.

“But providing that Binladin is still there, then we would do that,” he said. Although Arabtec has its own, 100 per cent-owned contracting entity in Saudi Arabia, Mr Tyrwhitt said this is “not a market that we are going to put a huge investment in” in terms of bidding for new work this year.

Instead, it plans to raise money through disposals, and to reinvest this on building other parts of the business, including a greater focus on infrastructure. He said that 75 to 80 per cent of current bids were for opportunities in the UAE, which matches its current revenue profile.

He said that there were a number of investments held by the company, including shares and minority stakes.

“We’re not an investment company, we’re a construction company. Once we’ve had a strategic review, I’d be looking at recycling that capital into the core of the business.”

He said the push into infrastructure it has identified as an area for growth can be done through existing companies, and with both existing and new management.

“All of the managers coming in have that ability.

“But even the employees – I can pull together thousands of people who have done heavy infrastructure projects. If you look at Midfield Terminal – that’s one of the most complex infrastructure projects ever undertaken. [Look at] Burj Khalifa – if you can build the Burj, you can certainly build a bridge.”

Nishit Lakhotia, an analyst with Bahrain-based Securities & Investment Company, said that Arabtec has already changed its management team several times during the past five years.

“We hope to see some stability now post this restructuring,” said Mr Lakhotia.

He argued that the disposal of non-core assets was a priority given that it is currently in a posi­tion of negative equity.

The company’s audited accounts filed last Wednesday showed that it declared a Dh3.4bn loss as it wrote off Dh1.9bn in impairments.

Mr Lakhotia said that he hoped for an improved performance from the business given the scale of its most recently announced losses. “That they have taken everything in one quarter, now they want to start afresh, do this rights issue, start executing projects and show some profitability.”

Mr Tyrwhitt said that he had been chosen by the board to take over the company “based on a track record of doing it successfully in the past in other countries”.

He also pointed to the turn­around that has already begun at Dubai-based contractor Depa, where he was appointed as chief executive in April last year. His subsequent appointment to the dual role as chief executive at Arabtec (which is Depa’s biggest single shareholder, with a 24.3 per cent stake) came after demonstrating three quarters of profitability.

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The rally in crude prices and a cut in government spending meant that the Federal budget surplus was Dh4.5 billion higher in the first nine months of last year compared to the same period in 2015.

The surplus rose 130 per cent year-on-year during the period to almost Dh8bn compared to Dh3.48bn a year earlier, the Emirates News Agency (Wam) reported, according to its own analysis.

Benchmark Brent crude rose 31 per cent to US$49 a barrel from $37.22 between January and the end of September 2016.

For the whole of last year the budget was set for a negligible deficit, with revenue and expenditure estimated at about Dh48.5bn each.

In the first nine months of 2016, Federal revenue was about 7 per cent higher at Dh37.46bn compared to Dh35bn in the same period of 2015 while spending fell to Dh29.71bn from Dh31.6bn.

Revenue from fees for government services was flat year on year, according to Wam. Fees account for 75 per cent of Federal government revenue.

The UAE Central Bank governor Mubarak Al Mansouri said in November that the government’s moves to reduce expenses and increase revenue from non-oil sources was aiding the overall economic health of the country.

Since the price of oil began its sharp descent in 2014, governments in the region have reduced energy subsidies, cut spending and raised debt in international markets to prevent deficits from spiralling out of control. At the same time they have outlined ambitious plans to transform their oil-reliant economies with measures that include raising value-added taxation and selling off some stakes in major state companies like Saudi Arabia’s Aramco, the world’s largest oil producer.

The IMF, which has hailed the Arabian Gulf’s efforts to plug budget deficits, is projecting that the UAE’s economy grew 2.3 per cent last year and is forecasting it to expand 2.5 per cent this year, broadly in line with the Central Bank’s estimates.

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Emaar Malls weighed on the Dubai Financial Market on Sunday as reports circulated that the company was bidding against Amazon.com to buy the regional online retailer Souq.com.

Emaar Malls shares fell 0.78 per cent apiece on the day to close at Dh2.54 after news reports said the retailer was offering to pay US$800 million for Souq.com including a $500m convertible deposit.

“Investors will have been worried about two things with this deal,” said Sanyalak Manibhandu, head of research at NBAD Securities. “Firstly the pricing – is Emaar Malls offering too much? And secondly the convertible deposit – that could dil­ute the shareholding.”

While Emaar Malls was the strongest drag on the DFM General Index on Sunday, the index as a whole closed up 0.2 per cent at 3,468.48.

Union Properties was one of the biggest gainers of the day, closing up 3.8 per cent at 97 fils after the Dubai developer’s board recommended an 8 per cent dividend.

Like many global markets, the DFM index had soared at the end of 2016 after the election of Donald Trump, but since February 8, when the index closed at 3,725.93, it has slumped 7 per cent.

“It is unusual for the markets to price in so many positives for so long,” Mr Manibhandu added. “Since the US healthcare bill was scrapped on Friday the bears out there will be saying: ‘If Trump can’t deliver on this bill then can he really deliver on anything?’ “

The Abu Dhabi Exchange index closed down 0.67 per cent on Sunday at 4,465.19. Bank and property stocks were the biggest fallers as interest rate rises weighed heavily on the minds of investors.

FGB was the biggest faller, dipping 1.15 per cent to close at Dh12.85.

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