#42 - August 2017

Island for all the Senses

Founded on the vision of a “beyond luxury” hideaway, Velaa Private Island is a truly ultimate escape; a destination in itself. Indulge in a therapy at My Blend by Clarins Spa, rejuvenate at our snow room and Cloud 9 pod, conquer the climbing wall, relish a game of squash or tennis. Treat yourself to a lavishing tasting menu in our overwater signature restaurant Aragu.

Take a tour of the Indian Ocean with Velaa’s own miniature submarine and enjoy any of the latest technology gadgets of our water sports center, even improve your golf strokes at our 9-holes golf course Academy by Olazabal.

We cater to every heart and soul.

p02-05_advert.indd 2

Advertising Wealth Arabia mag_08.indd Všechny stránky

8/16/17 10:03 AM

T.: +960 6565 000 reservations@velaaisland.com www.velaaprivateisland.com facebook.com/velaaisland velaaprivateisland

p02-05_advert.indd 3

8/16/17 10:03 AM

09.08.17 13:42

CONTENTS

ISSUE FORTY TWO - AUGUST - SEPTEMBER 2017

26

Editor's

LETTER

Greetings, all Welcome to the 42nd issue of WEALTH Arabia.

We have some fascinating stories for you this issue. The debate on globalisation has been raging on for years but the tide has turned since Brexit—if the path forward is the path back, what will the long-term effects be? Read more on page 10.

The author Ernest Hemingway likely needs no introduction, but it’s not every day that you get the chance to speak to a Hemingway himself. When I sat down with John Hemingway, grandson of Ernest, to talk about the line of luxury pens released by Montegrappa, the conversation went far deeper than that. We spoke about his grandfather’s true nature, the short story that affected him the most, and how he keeps writing with his grandfather’s legacy weighing down on him. Read more on page 40.

Beyond that, there’s still much to explore. I hope you enjoy it.

Till next time,

William Mullally

4

p04-05_Contents.indd 4

OPINION

10

06

The new normal

NEWS & ANALYSIS

08

The latest analysis from the investment world

INVESTMENT

10 16 20 24 26 30

The underestimated perils of deglobalisation

16

Embracing green investment Economics and earnings to set the pace for H2 Futures vs. commoditybacked ETFs Ensuring their financial future

30

FXTM: Second guessing OPEC

WWW.WEALTHARABIA.NET

8/16/17 10:04 AM

Chairman Saleh F. Al Akrabi Chief Executive Officer ROBIN AMLÔT Managing Editor GEORGINA ENZER Sales Director OMER HUSSAIN

36

EDITORIAL editorial@cpifinancial.net

ADVERTISING sales@cpifinancial.net

Editor, WEALTH Arabia WILLIAM MULLALLY William@cpifinancial.net Tel: +971 4 391 3718

Business Development Manager WEALTH Arabia DANIEL BATEMAN daniel@cpifinancial.net Tel: +971 4 3752526

EDITORS MATT AMLÔT matt@cpifinancial.net Tel: +971 4 391 3716

33

Where to invest in Saudi Arabia

40

AVIATION

36

JESSICA COMBES jessica@cpifinancial.net Tel: +971 4 364 2024 NABILAH ANNUAR nabilah.annuar@ cpifinancial.net +971 4 391 3718 Contributors Toby Nangle Mihir Kapadia Shelley Wren Diego Biasi Michael Lok Hussein Sayed Anjali Anand

Boom, baby

LUXURY PRODUCTS

40

An ode to a master

Chief Designer BUENAVENTURA R. JALUAG, JR. jun@cpifinancial.net

MOTORING

44

Senior Designer FLORANTE MAGSAKAY florante@cpifinancial.net

Tesla Model X

HNWI CHAT

50

Sitting down with Karen Ruimy

46

Creative Designer ANA MAKSIĆ ana@cpifinancial.net

Business Development Managers NIKHIL MATHUR nikhil@cpifinancial.net Tel: +971 4 391 3717 MOHAMED MAKSOUD mohamed@cpifinancial.net Tel: +971 4 391 5320 SIMON MOTWALI simon.motwali@ cpifinancial.net +971 4 4335321 London Bureau ISLA MACFARLANE isla@cpifinancial.net Tel: +44 7857 429476 Finance Manager SHAIS MEMON, ACCA, CMA Shais.memon@ cpifinancial.net Tel: +971 4 391 3727 Data Analyst NADINE ABOUZEID nadine@cpifinancial.net

Administration & Subscriptions Online Content Manager enquiries@cpifinancial.net SIYA PAINAYIL Tel: +971 4 391 4682 siya@cpifinancial.net Tel: +971 4 391 3709 Tel: +971 4 391 3722

Head Office P.O. Box 502491, Dubai Media City Dubai, UAE Fax: +971 4 390 9756

www.cpifinancial.net WEALTH WARNING! Remember, if you wish to act on any of the information you read in WEALTH Arabia, consider taking independent advice first. WEALTH Arabia is written for a general audience and the information contained herein may not be appropriate for your personal circumstances.

Cover 42.indd 24

Registered at the Dubai Media City Printed by United Printing & Publishing – Abu Dhabi, UAE © 2017 CPI Financial FZ LLC All rights reserved. No part of this publication may be reproduced or used in any form of advertising without prior permission in writing from the Managing Editor.

8/13/17 1:18 PM

Don’t miss your copy of WEALTH Arabia. Subscribe now, full details at: www.wealtharabia.net and on Twitter @wealtharabia.

ISSUE FORTY TWO - AUGUST - SEPTEMBER 2017

p04-05_Contents.indd 5

5

8/16/17 10:04 AM

OPINION

Tackling US protectionism T

here are many explanations for Trump’s rise, but the most convincing one, to me, is how well he played into the political refrains of the past.

He was the “law and order” candidate, for example, echoing Nixon, and of course, he was the protectionism candidate as well, the main talking point of so many conservatives from the pre-National Review William F. Buckley Jr. days.

“Economists are totally in agreement that protectionism is really bad economic policy,” Dr. Marie Owens Thomsen, Chief Economist at Indosuez Wealth Management told me recently.

Bad economic policy, yes, but a natural reaction too. “People are frustrated that they don’t take part in this trend as much as those at the top end of the income bracket. In the 1920s, the US gave in to those pressures in the face of huge protests in unison from all of the economists—I believe there were 1001 economists who signed a letter and begged the president not to sign this bill, but he did sign the protectionism bill anyways.”

6

p06_Opinion.indd 6

Yes economists all agree, but why does it keep coming back? “We have the pressure because of the poor income distribution”, said Dr. Owens.

If protectionism is so bad for the US economy, how do we stop it? By shaming voters into voting for neoliberals who will continue the same policies that got us here in the first place?

Here’s an idea—don’t treat the symptom, treat the disease.

“The one fiscal policy I would really like to see in the US is income distribution—I would like to tax the rich more and give more money to the poor people. How you do this can be discussed, but countries manage to do this quite well. Europe is the world’s champion of income distribution. Europe offers very similar living standards to those in the US, if not better, so clearly it hasn’t harmed the European economy. The countries that do this best are the Scandinavian countries,” said Dr. Owens.

Of course, none of this will happen with Trump in office. “Trump’s current proposals will worsen income inequality, which I find really perturbing,” said Dr. Owens.

But politicians like Trump will continue to prey on people’s fears and go in the wrong direction until the problem is tackled head on—and that could signal bad news for the global economy.

William Mullally

WWW.WEALTHARABIA.NET

8/16/17 10:05 AMUntitled-1 1

Untitled-1 1 p06_Opinion.indd 7

06/02/2017 14:05 8/13/17 1:27 PM

NEWS & ANALYSIS

Thomson Reuters

A

ccording to Thomson Reuters, physical demand for gold was up 17 per cent in the first half of the year compared to the same period a year earlier, but this still leaves demand languishing far below former levels. Indian gold demand in Q2 2017 surged by 126 per cent year-on-year, the highest level in the last six quarters. But what will the rest of the year hold?

Given the introduction of the Goods & Services Tax (GST) in India there is a relative hiatus in imports to that crucial market at present and this is leaving gold prices susceptible to softness, not least as it is often Indian demand that responds positively to price weakness. While this means that the Northern Hemisphere summer is likely to see subdued prices we expect this to be a passing phase, albeit one that may well see prices temporarily drop below $1,200. “However, we continue to expect prices to recover later in the year as there is both a seasonal upturn in demand in Asia and a recovery in western investment.

The latter may well be buoyed by geopolitical instability and/or potential correction to equity markets. Indeed, the S&P 500 is already in its second longest bull run since WWII.�

8

p08_News.indd 8

WWW.WEALTHARABIA.NET

8/16/17 10:06 AM

NEWS & ANALYSIS

Mario Camara, Head of MENA region for Saxo Bank

I

n an uncertain global financial environment, tech stocks have risen in popularity as their growth potential tends to remain positive. In the UAE, four of the top five most traded stocks in the first half of 2017 are in the tech sector: Apple Inc., Alphabet Inc. C Share, Amazon.com Inc., Gemalto NV and Panera Bread Co., the only non-tech stock to make the top five, according to Saxo Bank’s analysis of its UAE investors.

While investors predict continued slow growth for Apple Inc. –the expected outlook for 2017 is a modest rise of five per cent– the company’s appeal remains attractive in the UAE and globally because it gives access to the world’s most profitable smartphone maker and remains a wildly profitable company with a large and loyal customer base.

“With the technology sector up 18 per cent year-to-date, it remains a stable pocket of growth in the current macroeconomic environment. The tech sector continues to retain investor optimism in the wider GCC region as Apple Inc., NVidia Corp., and Alibaba Group Holding Ltd came out on top as the most traded stocks so far this year.”

ISSUE FORTY TWO - AUGUST - SEPTEMBER 2017

p08_News.indd 9

9

8/16/17 10:06 AM

INVESMENT

The underestimated perils of deglobalisation IF GLOBALISATION IS STOPPED, THE FORCES OF DISINFLATION THAT SUPPORTED THE 35- YEAR BOND BULL MARKET WOULD BE UNDERMINED, THREATENING THE VALUATIONS OF ALL FINANCIAL ASSETS, WRITES TOBY NANGLE GLOBAL CO-HEAD OF ASSET ALLOCATION AND HEAD OF MULTI-ASSET, EMEA, COLUMBIA THREADNEEDLE INVESTMENTS

G

lobalisation is often blamed for the world economy’s ills. Many commentators attribute rising populism in the West to years of wage stagnation attributed to globalisation. In our view, deglobalisation would be costly and disruptive for all regions of the world.

Globalisation’s achievements, and the degree to which we rely on them, are underestimated. What would happen to people, companies and financial markets, if modern globalisation was dismantled, as populist politicians in both the US and Europe have threatened?

Such a situation would lower the speed limit at which economies could grow without hitting inflationary roadblocks— shortening and localising economic cycles.

From an investment perspective, it could prove the catalyst that halted the 35-year bond market rally, challenging valuations across asset classes.

‘OLD’ VERSUS

is unique about today’s form of globalisation.

In distinguishing old globalisation from new, we are indebted to the economist Richard Baldwin’s masterly analysis, from which we draw heavily. Under ‘old globalisation’, international trade rose considerably but companies’ supply chains tended to be geographically attached to their end products. In other words, the entire process of, say, creating a product made by an American company largely took place within the United States itself.

‘NEW’&GLOBALISATION DIEGO BIASI, ‎CO-FOUNDER CEO, QUERCUS INVESTMENT PARTNERS To understand what the consequences DISCUSSES THE POTENTIAL OF RENEWABLES AND GREEN ENERGY FOR of deglobalisation might be for financial markets, it is important to understand what THE MENA REGION ...cont. on pg 12

10 10

p10-13_Investment.indd 10

WWW.WEALTHARABIA.NET

8/16/17 10:07 AM

PHOTO:SHUTTERSTOCK/BY THANIT PKC

GLOBALISATION HAS CREATED PROBLEMS, BUT DEGLOBALISATION COULD CREATE MORE.

ISSUE FORTY TWO - AUGUST - SEPTEMBER 2017

p10-13_Investment.indd 11

11

8/13/17 1:47 PM

INVESMENT

cont. from page 11

That is not the case for large multinational firms operating within the framework of ‘new globalisation’ today.

Under new globalisation, not only supply chains, but stages of production that might in yesteryear all have been the domain of individual firms, have become tradable as businesses have increasingly focused on their specific area of added value—be it their branding, distribution, design, manufacturing, logistics etc. Figure 1 describes the process by which a single firm’s proposition is first fractionalised (outsourcing often employment-rich aspects of a production process to third parties), and

12

p10-13_Investment.indd 12

then dispersed (where these outsourced stages of production can be bid for by firms around the world).

Recognising this shift, where stages of production are outsourced overseas, emerging economies have lowered tariffs to enable employment to flow to their markets. Technological advances and greater harmonisation of institutions globally, including the rule of law and regulations, have made it more attractive for companies to employ cheaper labour abroad than domestically. Firms have globalised their supply chains, lowering their governanceadjusted unit labour costs (unit labour

costs adjusted for an estimation of costs and risks associated with heightened governance issues—managerial, political, environmental, legal, etc—which serve to introduce risks and complexity to a firm).

At an aggregate economy-wide level, all nations should gain from trade openness, because they can specialise according to their comparative advantage, but the shift to new globalisation has led to developed market workers in stages of production most vulnerable to off-shoring and automation losing bargaining power.

Employment income appears to have been a poor way to distribute the

WWW.WEALTHARABIA.NET

8/13/17 1:47 PM

PHOTO:SHUTTERSTOCK/BY CRM

PROTEST AGAINST THE TRADE AGREEMENTS IN BRUSSELS, BELGIUM–A SIGN OF THE RISING SENTIMENT AGAINST GLOBALISTATION.

gains of globalisation across members of developed market societies. Unbundling of employment has had two main groups of beneficiaries. The first group are workers in emerging economies, because of the jobs created. Globalisation has allowed China to lift millions of people out of poverty. China’s per capita income increased fivefold between 1990 and 2000, from $200 to $1,000.20 Between 2000 and 2010, per capita income continued to rise at the same rate, from $1,000 to $5,000, moving China into the ranks of middle-income countries.

The second group are companies whose

profits margins improve because of the efficiency of fractionalising their production processes, and whose markets have grown. Whilst (largely developed market based) managers of global firms have seen their fortunes soar, the experience of the median developed market citizen has been mixed.

DEGLOBALISATION ON THE AGENDA

Peter Navarro, director of the National Trade Council in Donald Trump’s administration, likes to blame China for the lack of employment and equitable

distribution in the US. As chief trade adviser, he has pledged that one of the administration’s priorities is to unwind and repatriate the international supply chains on which many US multinational companies rely, taking aim at one of the pillars of the modern global economy.

“It does the American economy no longterm good to only keep the big box factories where we are now assembling ‘American’ products that are composed primarily of foreign components,” he told the Financial Times. “We need to manufacture those components in a robust domestic supply chain that will spur job and wage growth.” ...cont. overleaf

ISSUE FORTY TWO - AUGUST - SEPTEMBER 2017

p10-13_Investment.indd 13

13

8/13/17 1:47 PM

FIGURE 1 cont. from page 13

Trump’s administration is just one example of a government seeking some form of deglobalisation, with very real consequences for companies that depend on international supply chains and those who invest in them. In trade policy, we have already seen some of Trump’s campaign trail threats put into action with the early scrapping of the Transatlantic Trade and Investment Partnership (TTIP) and the TransPacific Partnership (TPP). The promised Border Adjustment Taxation regime has substantial implications for multinational firms, as well as being inflationary for households, and potentially destabilising for bond and currency markets.

ADVANCING CAPITAL OVER LABOUR

Today, governance-adjusted unit labour costs are still lower in emerging markets than those in developed markets, but the gap is shrinking fast. Labour is still relatively cheap versus capital/automation in a wide variety of sectors. Deglobalisation could disrupt this calculation. By introducing tariffs or tarifflike policies the relative wages of developed market labour against emerging market labour would narrow. The gap between automation costs and emerging market labour would also narrow. Rather than competing against developed market labour, emerging market labour are in many cases competing against expensive robots.

14

p10-13_Investment.indd 14

Protectionist policies that make emerging market workers more expensive to developed market firms appear likely in many cases to accelerate the process of automation over the rehiring of developed market manufacturing workers. But insofar as firms are today allocating away from developed market manufacturing bases and towards emerging market manufacturing bases on cost grounds, increasing emerging market manufacturing costs through tariff and non-tariff barriers will likely nonetheless enhance developed market bargaining power at the margin.

Demographic dynamics will influence what choice companies make, depending on whether more protectionism is introduced.

China’s working population may already have peaked. Yet in other less developed regions, the working-age population is expected to continue to rise significantly until at least 2040. Were globalisation to continue unchecked, this growing population represents to companies a set of new workers, and new markets. At a human level it represents a billion people who would otherwise be denied the opportunity to trade out of poverty on terms overtly rigged against them.

CONCLUSION: A NEW WORLD (INVESTMENT) ORDER

Today globalisation is far from complete.

Tariff and non-tariff barriers still need to be taken down to enable newly emerging

populations to participate in the global trading system. Globalisation has been largely paused since the Global Financial Crisis, but attempts to further integrate the global economy in the form of TTP and TTIP have been scuppered since the election of President Trump, and the UK exit from the European Union threatens to alter the character of the world’s largest free-trade zone, giving it a more protectionist attitude.

Halting globalisation would fundamentally change the rules of the game for companies, workers and investors alike. Crucially, the 35year bond bull market has ridden on the coat tails of new globalisation, with the so-called ‘Great Doubling’ of the global labour force playing a key role in creating a disinflationary environment. Globalisation has led to falling neutral real interest rates—as labour costs have fallen—in turn lowering bond yields.

This has allowed corporate profit margins to rise and asset prices to boom.

A deglobalisation scenario would negatively impact several kinds of firms. Not least because they would need to spend time, and incur costs, working out how to adjust to the new environment. Stock picking would become harder, as the dynamics we have understood to date would change. In such a scenario, likely to produce few winners, rigorous research and regular engagement with companies operating worldwidewouldbevitaltoavoidmakingmistakes based on an approach to investment that only applied in the past.

WWW.WEALTHARABIA.NET

8/13/17 1:47 PM

Protectionism produces few winners

DAVID DUDDING, GLOBAL EQUITY PORTFOLIO MANAGER Firms operating within other sectors are also at risk under a US-led deglobalisation scenario. For example, if Mexico chose to retaliate against unlawful tariff measures by rejecting the validity of US patents, the pharmaceutical industry’s profits would be put at risk. This would reduce the incentive for US multinational firms to innovate and create potentially life-saving medicines.

There are other types of companies that could be affected if their intellectual property rights were no longer respected, as agreed previously within the framework of the World Trade Organisation (WTO), including IT firms.

Some firms which have a high proportion of their value-add based in the US but which sell outside of the US would also suffer in the event of counter measures. These include Boeing, the leading aircraft manufacturer, which is a major US employer.

Furthermore, industries where domestic substitutes for raw materials do not exist and which already have low margins would suffer. These include the refinery and apparel sectors.

Other firms that have exposure to end-demand in regions geared to trade growth, or non-domestic government spending, could also see their current business models under threat.

Companies that sell in the US but create most of the value within their production processes elsewhere might also suffer, especially if they face competition from within the US. These include firms such as French wine and spirits producer Pernod Ricard. Brown-Forman, a US wine and spirits company, which both sells and produces a reasonable amount of its beverages within the US, would meanwhile benefit to a degree – though the firm also exports outside of the US. The few possible winners from US-led deglobalisation include companies with a low proportion of US sales and low US value-add that compete with US firms. Such companies—operating in Europe, Australasia and the Far East—could gain from lower competition. This is only in the event of reciprocal tariffs being erected.

ISSUE FORTY TWO - AUGUST - SEPTEMBER 2017

p10-13_Investment.indd 15

15

8/13/17 1:47 PM

Embracing green investment DIEGO BIASI, ‎CO-FOUNDER & CEO, QUERCUS INVESTMENT PARTNERS DISCUSSES THE POTENTIAL OF RENEWABLES AND GREEN ENERGY FOR THE MENA REGION 16

p16-19_Investment.indd 16

WWW.WEALTHARABIA.NET

8/13/17 1:49 PM

PHOTO:SHUTTERSTOCK/BY THANIT PKC

INVESMENT

that they are currently at the beginning of a steep learning process. However, it is great to see many MENA countries, namely the UAE, making committed progress towards understanding how to manage the changing energy market, how to create the right environment for investors and how to develop the renewable energy market in the most efficient way.

In terms of the growth of the renewable energy sector in the MENA region, I believe we are currently watching the same movie that we were watching in Europe 10 years ago, especially given that the MENA market is currently following the same development trends of more mature markets. This means the Middle Eastern and North African region is set to undergo an exponential growth period of approximately seven to eight years, followed by steady growth, as it progresses towards the European market in its current state.

RENEWABLE RENEWABLE ENERGY ENERGY IS IS HERE HERE TO TO STAY, STAY,AND AND IS IS A A MUCH MUCH MORE MORE INVESTMENT-FRIENDLY INVESTMENT-FRIENDLY OPTION OPTION THAN THAN EVER EVER BEFORE. BEFORE.

Describe the development of the renewable energy sector globally. How does this compare with efforts from MENA countries?

The renewable energy sector has been evolving and expanding globally over the past decade, driven to a large extent by the growing interest and attention from governments and investors around the world. This momentum, which originally started in Europe, will no doubt continue globally with strong growth for the next 10 to 15 years, driven by the increasing

attention to environmental issues from governmental bodies and their common aspiration to reform the sector towards greater levels of sustainability. When considering that the global installed capacity for renewable energy is set to increase 70 per cent by 2030, this represents significant development in the sector worldwide.

While MENA governments are interested in boosting the renewable energy sector, for both environmental and economic reasons, it is my opinion

In your opinion, how lucrative are investments in the renewable energy sector?

The UAE is a strategic choice for investors seeking to take advantage of the renewable energy sector, especially as the GCC plans to invest $100 billion in renewable energy in the next 20 years.

This sector is therefore becoming more and more attractive for investors for a number of reasons. First of all, the low risk nature of investments in the industry and the boost driven by incentives makes it a far more profitable investment compared to those in the traditional energy sector.

Additionally, the renewable energy sector is generally de-correlated from the rest of the financial market, so there is a huge investment opportunity for long-term investors, and a higher level of potential returns could be generated. ...cont. overleaf

ISSUE FORTY TWO - AUGUST - SEPTEMBER 2017

p16-19_Investment.indd 17

17

8/13/17 1:50 PM

INVESMENT

The scenario with renewable energy infrastructure is similar: you can build your own assets or you can have someone build them for you. In the renewable energy sector, I believe the best decision would be to let the specialists do their job.

Generally, there are two scenarios for tapping into renewables— individuals can invest directly as firsttime investors—which we frankly all are because the market is so new, or they seek the services of a specialist, who will build the investment portfolio for them. The second route—seeking a specialist—for sure will increase your chances to build assets of a much higher quality and will be more profitable over the long-term.

Considering how young this sector is, and given that all investments in renewables can in some sense be seen as bespoke, these investments are far more sophisticated than they may at first seem. As far as the practical realities are concerned, sourcing high quality investments, and completing and managing them efficiently is of importance, because at the end of the day it will reflect an investor’s profit and loss statement. Ultimately, this is the main difference between a self-made investment and a well-managed process.

DIEGO BIASI, C ‎ O-FOUNDER & CEO, QUERCUS INVESTMENT PARTNERS

cont. from page 17

Secondly, the renewable energy sector is much easier to forecast compared to other infrastructure investments due to the simple nature of the technology applied and the way investments are structured. Renewable energy projects are also less dependent on market fluctuations, incentives and swings, driven by different macroeconomic factors, or any subjective relationships, due largely to their readily available sources of clean energy. Consequently, it is easier to build and manage investments to generate bigger returns, with lower

18

p16-19_Investment.indd 18

risk for investors, especially when compared to other infrastructure or financial sectors.

In what ways can an investor tap into renewables? How do these structures work?

I always tend to compare this sector to the automotive sector—if you want a car, you can either build it yourself or you can buy one. The difference here is that if you build your own car, it will be of a far lower quality than if you buy from a car manufacturer.

How do you view on green bonds and what is your expectation of the uptake in MENA? Green bonds are relatively new to the MENA market, but I believe they have vast potential to become an efficient tool for more structured investors. Quercus has issued the largest green bond in Italy in December last year, worth EUR 125 million, which was oversubscribed three times over by international institutional investors.

As for our expectations relating to the MENA region, green bonds are still waiting in the wings. It is definitely something that will take place, but we are at a relatively early stage of an exciting industry, just as it did in Europe. While it may take three to five years for the market to flourish, now is the time to invest, and the green bond

WWW.WEALTHARABIA.NET

8/13/17 1:50 PM

The UAE is a strategic choice for investors seeking to take advantage of the renewable energy sector, especially as the GCC plans to invest $100 billion in renewable energy in the next 20 years. – Diego Biasi, C ‎ o-Founder & CEO, Quercus Investment Partners

route is certainly an attractive source of financing compared to the more traditional methods. We are witnessing a big appetite for this type of asset within the renewables sector, especially for long-term investors with more sophisticated investment styles, like insurance companies.

What challenges do you anticipate in pushing this market segment forward?

The biggest challenge facing the MENA region is that local players have to import know-how and experience from more advanced markets, where equipment and access to financial services are easier to source. It is important to highlight that the MENA region still has much to learn from the growing bank of knowledge more advanced markets have developed in the renewable energy sector.

While this experience is certainly something that Europe is ready to share, it adds weight to the argument that investors in the MENA region should seek the services of a specialist, who will build and manage investments on their behalf. Ultimately the MENA investor is in a very good position, as following the advice and guidance of an experienced specialist will prevent them making some of the same mistakes that were made in Europe.

What are the untapped opportunities in this area?

It helps that the MENA market is in its infancy, as there is great potential for strong and sustainable developments.

This potential is underpinned by regional government driven initiatives, such as Dubai Electricity and Water Authority (DEWA) making a commitment to solar power with its Mohammed Bin Rashid Al Maktoum Solar Park development, currently the largest single-site solar project in the world.

Regarding untapped opportunities, there is rising interest in this region, especially on the part of the Global Climate Committee, to reallocate capital which is less invested in the traditional forms of energy, like oil and gas, and more into renewable sources.

This will lead to a strong renewable energy infrastructure and ultimately a strong investment environment.

What distinguishes Quercus, as a leading international investment advisor, is our solid experience in structuring and constructing renewable energy assets based on comprehensive know-how and an operational track record. We see growing opportunities to provide clients with our services based on our solid experience in the renewables sector. We see opportunities in due-diligence, in consulting on building or acquiring assets and helping clients

manage assets after construction projects or acquisition transactions. This is why we have decided to open our Dubai-based office, to serve the MENA region.

What is your outlook on this for the short term?

An energy revolution has started in the last few years, which represents a transition away from oil and gas towards renewable sources.

This is happening now, and evidence can been seen in recent governmental milestones, such as the recent announcement that 200 electric car charging stations will be installed across Dubai, double the present number, under the second phase of the Green Charger initiative. The same initiative has targeted at least two per cent of government vehicles must be hybrid or electric by 2020, increasing to 10 per cent by 2030.

This indicates the beginnings of a vast investment opportunity that is set to grow for decades as more counties adopt renewable energy advancements. The MENA renewable energy environment is becoming more attractive to foreign investors, and we are witnessing a growing flow of investments into the region. We are confident that these investments will generate positive returns as long as they are managed correctly and with assistance of experienced specialists in the field.

ISSUE FORTY TWO - AUGUST - SEPTEMBER 2017

p16-19_Investment.indd 19

19

8/13/17 1:50 PM

Economics and earnings to set the pace for the next half-year

MICHAËL LOK, GROUP CHIEF INVESTMENT OFFICER AND CO-CEO ASSET MANAGEMENT, UNION BANCAIRE PRIVÉE (UBP), SHEDS LIGHT ON THE FALL'S TOP TRENDS 20

WWW.WEALTHARABIA.NET

p20-22_Investment copy.indd 20

8/13/17 1:56 PM

PHOTO:SHUTTERSTOCK/ SNEHIT

INVESTMENT

elections, potential Italian elections, Brexit negotiations, plus the start of campaigning for the US 2018 Congressional elections—just as in the first half, economics and earnings will be key market drivers.

Despite lingering political and geopolitical risks, the outlook remains positive and world growth should hold up, close to 3.6 per cent in both 2017 and 2018. Although oil price volatility has surged recently, prospects in the main regions are encouraging, with growth likely to rebound to two per cent in developed countries and to near five per cent across emerging countries.

PROSPECT OF NEW EURO ZONE DEAL

THE SECOND HALF OF 2017 WILL BE FILLED WITH TWISTS AND TURNS FOR INVESTORS TO WEATHER.

T

he first half of 2017 was unusual in many ways. Politically, after years of uncertainty, stability prevailed in Europe, as centrists pushed back populism in the Netherlands, Austria and France. In contrast, the world cringed as the US withdrew from the global stage under President Trump, and instead engaged in domestic wrangling.

The second half of 2017 promises its share of political events—including China's National Party Congress, German federal

The election of Emmanuel Macron has the potential, both in France and the Euro zone, to speed the pace of activity and reform. His programme is liberal and pro-European; if implemented, it should boost the French economy, whose growth has remained on a one per cent trend since the financial crisis, and also show Europe that France is capable of far-reaching change.

Labour market reform, due next September, should give the economy more flexibility and herald other significant measures.

However, any corporate tax cut and revision of labour costs face major fiscal constraint, as France’s budget deficit to GDP is above three per cent, suggesting a delay until 2018 to bring that deficit back below the three per cent target for credibility among other EU governments.

Macron has an ambitious programme for the Euro zone (joint budget, investment plan and new political project), pleasing Angela Merkel, who has signalled that Germany will welcome discussions after its elections.

The German chancellor has reform plans of her own: her electoral programme targets significant family tax cuts (up to EUR 30 billion) and more public spending, departing from the recent unpopular fiscal austerity.

The combination of French reforms and increased German spending invigorates the European political project potentially lifting Euro zone economic growth closer to the US trend of two to 2.5 per cent. If European integration expands, this raises the prospect of

a federal budget, a rebalanced policy mix and reduced influence of central bank action.

Britain's economic and political outlook has darkened. June's election saw the loss of the Conservative majority and weakened Prime Minister Theresa May, now forced to strike a deal with the Democratic Unionist Party.

Meanwhile, the domestic economy flags and there is no apparent budgetary or monetary stimuli. As Brexit negotiations start, the EU has the upper hand and can impose its own agenda making it difficult for the UK to strike separate trade deals alongside Brexit talks.

Furthermore, the debate on a soft-versus-hard Brexit is back, generating sterling volatility and uncertainty.

In the US, Trump's plans to pass new tax legislation seem increasingly unlikely this year. However, recovery from the seasonally slow first quarter should keep US growth in the two to 2.5 per cent range for the rest of 2017. Fundamentals remain strong for consumers with positive sentiment even without promised tax cuts and the economy is close to full employment with faster wages growth than expected in the next quarters (as labour supply tightens), house prices rise greater than inflation, and wealth effects supporting confidence. Volatility in manufacturing and fiscal uncertainty could potentially impact investment but consumption should continue to drive growth.

Approaching the National Party Congress, China’s growth remains stable at just below seven per cent ahead of 2018's planned reforms and policy initiatives. President Xi Jinping aims to consolidate power, preserve a stable economic environment, promote longterm growth and prevent potential threats to financial stability from non-performing loans and shadow banking.

PREPARING MARKETS FOR A NEW GLOBAL MONETARY REGIME

Post financial crisis, central banks have run aggressive monetary policies, through low or negative interest rates and asset-purchasing.

Balance sheets grew swiftly, accounting for an ever-higher proportion of GDP, prompting ...cont. overleaf

ISSUE FORTY TWO - AUGUST - SEPTEMBER 2017

p20-22_Investment copy.indd 21

21

8/13/17 1:56 PM

INVESTMENT

MICHAËL LOK, GROUP CHIEF INVESTMENT OFFICER AND COCEO ASSET MANAGEMENT, UNION BANCAIRE PRIVÉE (UBP)

cont. from page 21

the collapse of both risk premia on risky assets and long-term interest rates so boosting global asset prices.

World growth now appears solid with key economies improving without stimuli, and central banks beginning to tighten policy despite inflation being temporarily low. As the US cycle has matured, the Fed began a moderate rate-tightening cycle set to continue in 2017 through 2018. It will probably simultaneously start a multi-year balance sheet reduction by ending coupon reinvestment on MBS and government bonds. Similarly, with declining unemployment and strengthening Euro zone growth, the ECB seems set to follow the Fed: its QE programme should end in 2018, and negative deposit rates should not last either. China's central bank has already tightened policy to curb the housing bubble and increase banking regulation. The Bank of England has also hinted at withdrawing

22

its monetary support, with fears of escalating inflation and sterling weakness.

To reflect these moves, central banks have a more neutral and even slightly hawkish tone, ending a decade of abundant and cheap money. In the coming years, short-term rates will increase and global liquidity will probably retreat, leading to fiscal tightening and a rising cost of capital. Withdrawing central bank backing will trigger a major shift as their asset buying has distorted supply and demand on money and bond markets, particularly in Europe. Economies and markets alike must now manage without the safety nets of accommodative monetary policy.

NON-US EQUITIES OUTPERFORM

As US growth expectations rebound and with robust growth in other economies, global equities will continue to outpace global bonds

over the rest of 2017. Equity returns should be more modest than the 12 per cent in the first half of 2017 while absolute returns on bonds face more headwinds in the months ahead.

The outperformance of non-US equities over the US will continue, a trend that emerged in Q2 2017 after years of US dominance. This trend reversal, especially between Europe and the US, should remain as the Merkel-Macron partnership develops.

As Japanese domestic reform momentum with new political leadership in 2012 boosted their equities, so should European equities benefit both from Macron's new policies in France and from the reinvigorated Angela Merkel. With European growth already strong, increased reform momentum could extend the economic cycle in the Euro zone, and also raise European companies' earnings growth.

In contrast, UK Brexit negotiations constrain equities relative to European peers.

Despite lagging behind in Q1 2017, Japan continues to deliver earnings growth across its stable corporate sector. Unlike the US and Europe, where company values grow when they meet and beat earnings expectations, Japanese corporates' P/E multiples have declined in recent years as investors question sustainability. With growth from proactive cost management, plus buybacks and increased dividends, Japanese equities look set to continue outperforming in the second half of 2017.

Perhaps surprisingly, emerging markets (EM) have boosted equity investors' returns since 2017 began, rising nearly 19 per cent.

The valuation gap between EM and their developed market peers has narrowed but remains historically wide. In addition, the cyclical rebound in Chinese equities in 2017's first half (+26 per cent) looks set to continue, as China pivots its policy regime towards its ‘One Belt, One Road’ programme of infrastructure building across Asia and Africa. Balance sheets at China's newly-sponsored financial institutions— the Asian Infrastructure Investment Bank and the Silk Road Fund—also lend support.

Looking at sectors, technology, having risen by nearly 18 per cent year-to-date, saw its first substantial correction in June.

WWW.WEALTHARABIA.NET

p20-22_Investment copy.indd 22

8/13/17 1:56 PM

Valuations should improve here, especially with such earnings potential. Any unwinding of decidedly one-sided positions across global technology names provides an opportunity for investors to add to their exposure at attractive valuations.

Banking started strongly in 2017 but falling long-term yields and weakening US growth expectations weighed on performance in Q2. Rebounding world growth in the second half of the year, plus a rising trend in government bond yields, supports the cyclical recovery story for banks providing an opportunity for financial sector investors in Europe, Japan and, to a lesser extent, the US. Global healthcare names rose 16 per cent in June, leaving investors increasingly having to rely on earnings growth to drive returns instead of re-ratings that have rewarded them so far this year. The healthcare earnings outlook is positive but the ending of a P/E ratio expansion-led rally warrants increased caution for the rest of 2017.

Energy companies have underperformed massively since the start of the year, but it still seems too early to return to the sector. Oil prices potentially drive downward revisions to earnings estimates while dividends could reduce if oil prices slide again.

The current low-volatility environment gives investors the opportunity to buy relatively cheap downside protection as equities' elevated valuations create vulnerability to a potential volatility spike. Unlike previous cycles, where long-duration bonds could provide much of this protection, with current government bond yields and central banks' new normalisation, it is clear that fixed-income assets may no longer provide protection as before.

CENTRAL BANKS’ EXIT STRATEGY SHOULD RESTORE TERM PREMIA, PUSHING UP REAL RATES

Fixed-income markets delivered a reasonable four to five per cent total return in the first half of 2017 and will continue to require critical risk management.

The global central bank shift should strengthen in the second half of 2017. In the US, the gap between Fed guidance and market pricing widened in Q2.

While markets assume subdued inflation will cause central banks to wind down monetary stimulus even more slowly, despite tightening labour markets, this single argument is not sufficient to question the Fed’s rate-normalisation policy.

The market is underpricing the path of Fed rate hikes over the next 12 to 18 months, allowing floating-rate notes to benefit from rate rises.

Looking ahead, monetary policy focus is likely to turn away from the Fed towards the ECB. Mario Draghi’s June speech marked a potential turning point on rates, a trend expected to continue.

But rather than causing growth to slow, higher bond yields signal that economic prospects have improved everywhere with fading deflation fears. Currently, the curve seems excessively flat, considering fundamentals. As central banks move towards a less dovish and more neutral stance so there follows a bearish steepening of the curve and higher real rates supporting a short duration on portfolios.

Credit investors face historically low yield differentials compared with government bonds (spreads). Corporate debt fundamentals remain strong, but spreads inadequately compensate investors for prospect of rising interest rate volatility. A shift towards non-directional bond strategies can tactically capitalise on changing volatility.

For fixed-income, that emerging market debt remains one of the few areas where investors receive fair compensation for both credit risk and chances of increased interest rate volatility. Active management with limited exposure to interest rate movements is key to preserving wealth in fixed-income.

Though late in an already long economic cycle, investors must continue to manage the risks of elevated valuations in many global equity and bond markets. In particular, current market conditions and the potential impact of higher interest rates on portfolios have become a worry. Hedge funds therefore present an alternative to fixed income to respond to this change in the market giving their fund managers opportunities to exploit.

Hedge fund strategies can provide portfolios with diversification benefits. High valuations and wider performance dispersion across regions and sectors play to the strengths of proactive hedge fund managers. As for gold, with clear upside risk to real interest rates, the metal loses appeal in providing insurance against future uncertainties ahead.

ISSUE FORTY TWO - AUGUST - SEPTEMBER 2017

p20-22_Investment copy.indd 23

23

8/13/17 1:56 PM

INVESTMENT

Futures vs. commodity backed ETFs MIHIR KAPADIA, CEO AND FOUNDER OF SUN GLOBAL INVESTMENTS WRITES FOR WEALTH ARABIA ABOUT THE BENEFITS OF EXCHANGE TRADED FUNDS

T

he great attraction of Exchange Traded Funds (ETFs) as an investment vehicle is the range of options they open up for all investors from an institutional investor to inexperienced retail investors. All can invest in them knowing they will have the advantage of low costs and in many cases, good liquidity.

THE BIG DEBATE

The debate about what backs a commodity ETF is nearly a decade old, dating back to the creation of the first precious metal and oil trackers in 2004 and 2005. Looking back at these debates

24 24

p24-25_Investment.indd 24

gives the investor a fair understanding of what can be used to back a commodity ETF and what cannot.

Precious metal ETFs, currently one of the most popular in emerging markets, can and are usually backed by actual physical chunks of the precious metal.

The cost of storage is affordable and there is a well understood methodology surrounding the trading, storage and delivery of the metals. However, in the case of oil, the situation is not as clear.

One overlooked fact is that there is no single standard of unit for 'Oil'–unlike gold where the globally accepted standard is the LBMA 400 oz. gold delivery bar.

Oil and natural gas do not have a globally accepted standard. Instead there are several variants.

The question is often ‘Does the investor want WTI, Brent, Dubai, Heating Fuel, or Jet?’ These are just a few different derivatives of the term 'oil' or ‘gas’. So the oil investor needs to know exactly what kind of that variant of oil they wish to have exposure to. Furthermore, an investor has many other issues to consider when it comes to exposure selection.

Unlike gold or other precious metals, oil is not available in spot form. Precious metals can be stored cost effectively and efficiently and most importantly are

WWW.WEALTHARABIA.NET

8/13/17 2:07 PM

globally fungible; therefore access to the spot price is not only desirable but also easily obtainable. Oil however does not meet these criteria.

A holder of WTI oil cannot use their position to settle a trade in Brent oil.

In addition, the spot WTI price is only paid to holders of oil already delivered to Cushing, Oklahoma, where delivery for spot WTI oil is specified. For physical holders of Brent, delivery is not an issue as it is a waterborne contract. Unless you have oil on-board a ship in the right geographical area and with the correct distillate qualities you can't use your oil to settle a Brent futures contract!

Therefore all non-precious metal commodity ETFs have to use futures or derivative markets to offer the investors their chosen commodity exposure.

An investor purchasing a Brent oil ETF is actually buying exposure to an oil index, such as the Bloomberg Brent Oil Index; the index will have certain rules over the rolling of the futures contracts as the futures exposure gets close to expiry and other exposure related issues.

As a futures index is used to determine the ETF's performance, the investor is now exposed to the issues regularly faced by futures investors such as contango and backwardation.

The investors may believe that they have bought spot

exposure and is likely to be disappointed by the performance of the ETF. Purchasers of precious metal ETFs of course do not suffer the same divergence.

BUT WHY WAS THIS?

The ETF market was initially created in the US in the early 1990s and one of the very first ETF's issued was SPY, or the S&P 500 tracker managed by State Street.

This ETF holds all 500 underlying stocks in the S&P 500 physically, which means the ETF derives all of its performance from the underlying individual holdings in the ETF. The US market continued with the physical methodology and is still the world's largest ETF market and today in the US, most issuers were not banks.

In the European landscape back in the early 1990s era, the only issuers of passive investment instruments were the banks.

The banks only offered their clients' nontradable certificates. With the creation of the European ETF market in Germany in 2000, many European banks decided to list some of their certificates on the Deutsche Börse and Europe's ETF market was off and running!

Most of Europe's early ETFs were little more than listed certificates, i.e. issued as debt by the issuing investment bank. After the Lehman crisis the

investment bank risk was unacceptable to many investors and there was a rush to collateralise the investors’ money or protect the investment against an issuer default or bankruptcy. Since then the issuance of synthetic ETFs in Europe has been greatly reduced and many issuers have shifted their platforms from synthetic or swap backed to physically backed platforms.

Problem solved! Well not really, no, and this is because investors still have to understand and pay attention to collateral pools, why? Because many issuers of physically backed ETFs lend the investors' stock out to other stock lending desks to be used by professional market participants to settle short trades or to arbitrage market anomalies. Why do the issuers do this?

Because they get paid, and in return for lending the stock out the issuer takes in collateral, the same collateral which back the swap of synthetic ETFs. Few markets, such as India for instance—ban stock lending to ensure that this is the case; all stock has to be in custody onshore in India. This means purchasers of such ETFs know that their ETF is physically backed and the fund retains complete control and direct ownership of bonds the investor has decided to invest.

ISSUE FORTY TWO - AUGUST - SEPTEMBER 2017

p24-25_Investment.indd 25

25

8/13/17 2:07 PM

Securing their financial future

WITH MORE UAE WOMEN INVESTING IN PROPERTY, SHELLEY WREN, DISTRIBUTION MANAGER AT IP GLOBAL, WRITES FOR WEALTH ARABIA ABOUT THE TREND 26

p26-29_Property.indd 26

WWW.WEALTHARABIA.NET

8/13/17 2:23 PM

PHOTO:SHUTTERSTOCK/BY DMITRY BIRIN

PROPERTY

A VIEW OF DUBAI MARINA, ONE OF THE MOST SOUGHT AFTER AREAS FOR INVESTORS.

T

o many women, money is no longer a dirty word. Female millennials are now tasked with repaying student loans themselves, fighting for wage equality and are choosing to marry later in life. Therefore, women are holding their own purse strings and are more financially astute than ever.

Due to these evolving lifestyle choices, modern women have a larger disposable income than in previous years and are looking

for new ways to actively grow their net-worth, rather than passively leaving it in the bank.

Consequently, investing is no longer a domain dominated solely by men as more and more women are looking to purchase property.

According to the annual YouGov survey of more than 1000 UAE adults, recently conducted by IP Global, it found that 64 per cent per cent of women in the UAE plan to invest in property in the next 12 months, compared to 74 per cent per cent of men.

Why has property investment become so attractive to women, when compared to other assets? Firstly, property provides a steady income stream. When choosing a buy-to-let option, the value comes from the rent generated. If you choose the right property, the rent will cover the operating costs, but more importantly it can also cover, in some situations, mortgage repayments as well. By collecting a steady, recurring monthly income through rent, ...cont. overleaf

ISSUE FORTY TWO - AUGUST - SEPTEMBER 2017

p26-29_Property.indd 27

27

8/13/17 2:23 PM

PROPERTY

SHELLEY WREN, DISTRIBUTION MANAGER AT IP GLOBAL

cont. from page 27

your initial cash investment is paid back, in addition to your mortgage.

Another advantage of investing in property is that it is viewed as a more stable, less volatile asset. When reviewing how other asset classes have performed over the last decade, property has consistently fluctuated less than world commodity and equity markets. According to the YouGov survey, 33 per cent per cent of UAE residents prefer to invest in property in their home country rather than stocks, shares or bonds (21 per cent). A reason for this could be that property not only provides confidence and security due its stability, but it also gives owners a physical sense of comfort due to its tangibility.

However, before investing in real estate, undertake proper due diligence, such as researching the income, capital gains and inheritance tax implications of a property and its specific location. Many people think that buying real estate is an investment ‘whatever the street, whatever the city’ and this is most definitely not the case. As much as possible, emotion should

28

p26-29_Property.indd 28

be left at the door, literally, when it comes to property investment.

A compelling advantage of purchasing property is that it diversifies an individual’s investment portfolio. Diversification enables the mitigation of risk. Investing in a wide range of assets and asset classes ensures that even if unforeseen events unfold and risks rise, not all investments within the portfolio are affected.

As mentioned previously, when events such as stock market retreats or plunging oil prices occur, the effects tend to take longer to feed through to real estate compared to most other markets. Property’s investment fundamentals, which include steady population growth and long-term regeneration investment, are unique to this asset class.

Of course not all female investors are the same. I have found that the motivation for purchasing property differs according to a women’s age. Younger women are looking at a longer-term investment, as they are viewing their finances more on an independent basis, whereas previously it was deemed a joint effort when one settles down with a partner.

In comparison, older women are often looking for a buy-to-let purchase to supplement their future pension.

So where are women looking to invest?

According to the YouGov study, 33 per cent per cent of UAE residents plan to invest in property in their home country while 13 per cent per cent have plans to invest in property overseas in the next year.

When choosing a location, we advise our clients to assess the PIE acronym: population, infrastructure and economy.

When a location’s population is growing, so will the demand for housing, and in most cases property prices. Berlin, for example, has a 40 per cent per cent housing deficit as its population is expected to grow by 400,000 by 2030. A government’s approach to regeneration and improvements to transport and infrastructure often correlates with rising population density, further increasing an asset’s value. A great example of this is Liverpool, in the UK, where the city has been steadily regenerating for over three decades, including the GBP 1 billion retail district Liverpool One, and the GBP 5 billion plan to transform Liverpool’s Northern Docks.

This stimulated the city’s economy which is currently worth GBP 29.5 billion. Finally, a robust and diverse economy makes a great investment opportunity as house prices continue to rise.

Women are choosing to invest in property because it is often the best and most secure option to provide a stable and solid income, while simultaneously boosting their net-worth. No longer dependent on their spouse, women are actively securing their financial freedom by purchasing tangible assets like real estate. Property can not only be gifted to future generations, but also when purchased independently, it is, for many, a commendable life achievement. As women continue to fight for equality, property is just another market where playing field has become more level.

With 30 years of experience working across the Middle East’s wealth management sector, Shelley Wren has developed a deep understanding of financial services and real estate investment. Shelley now works for IP Global, a leading full-service property investment company.

WWW.WEALTHARABIA.NET

8/13/17 2:23 PM P in L adver

p26-29_Property.indd 29

8/16/17 10:09 AM

THE BUILDING BUILDING OF OF THE THE PETROLEUM PETROLEUM THE EXPORTING COUNTRIES COUNTRIES (OPEC) (OPEC) IN IN EXPORTING VIENNA,AUSTRIA. AUSTRIA. VIENNA,

Second guessing OPEC

HUSSEIN SAYED, CHIEF MARKET STRATEGIST AT FXTM ANALYSES THE LATEST PREVAILING INVESTMENT TREND FOR WEALTH ARABIA 30

p30-32_Investment.indd 30

WWW.WEALTHARABIA.NET

8/13/17 2:38 PM

INVESTMENT

PHOTO:SHUTTERSTOCK/ SNEHIT

CRUDE OIL CHART SOURCE: SAXOBANK

C

rude oil has fallen far from its pre-2014 highs, when it flew over $100 per barrel, uplifted by strong demand. Since then, a new reality has set in. The roaring demand that acted as a tailwind has died down to a whisper. The bull market for black gold has been over for quite some time now.

As a result, investors cast around for clues to the next step on a daily basis.

Traders are second guessing OPEC's next moves, but this is proving to be difficult and complex. The winds of change for the oil price blow here and there but a clear direction hasn't yet emerged.

Oil prices stay range bound broadly speaking, between $43 and $53 per barrel.

Beneath the headlines about OPEC's negotiations over supply cuts is the small print. Read it carefully: past decisions do not predict future decisions. Meaning that the guessing game has to be played carefully. When the markets believe that OPEC will extend its supply-cut deal the price rears its head over $50 per barrel.

Optimism like this drove prices at the beginning of 2017, but by the middle of the year this momentum tapered off.

When pessimism sets in, as it did in the wake of the Qatar crisis, the oil price takes the elevator towards its relative comfort zone of $43 per barrel.

Pessimism aside, it can be argued that OPEC's measures to limit supply have had a longer-term effect. They prevented Brent Crude from plummeting to its 2016 lows of below $40 per barrel. The alternative of an uncontrolled price spiral

was potentially catastrophic. Everyone remembers that period in OPEC's history. The glut was characterised by low oil prices, reduced oil revenues and uncertainty. The circumstances forced GCC countries to ramp up their economic transformations. Reducing reliance on oil revenues—while being key to economic development—was painful. The oil price rout affected other countries like Nigeria and Russia just as much. Nigeria went through a stage of rampant inflation.

Russia's currency weakened considerably, forcing central bank interventions to shore up the ruble.

Economic hardships over the last three years set off a marked hardball approach in the oil markets. The US Shale industry sensed a golden opportunity to cash in on the market conditions. It boosted production towards the end of 2016. The US oil industry used economies of scale and efficiencies to catch up and overtake its international rivals.

In 2017, the recovery and increase in US oil production acts as a partial counterweight to OPEC's cuts. The price is thus suspended in its current limited range.

US oil production activities kept pushing forward in the first half of 2017. ...cont. overleaf

ISSUE FORTY TWO - AUGUST - SEPTEMBER 2017

p30-32_Investment.indd 31

31

8/16/17 10:09 AM

INVESTMENT

OPEC CRUDE OIL PRODUCTION BASED ON SECONDARY SOURCES, TB/D

cont. from page 31

The industry is emboldened by President Trump's support for the domestic producers. The clearly protectionist policies heavily favour US oil. The administration is determined to reduce reliance on imported oil. This is underlined by the number of new rigs in action. As of the first week of July, Baker Hughes reported a rise to 763 from 756 rigs. The oil price felt the pressure immediately.

Looking ahead to the rest of the year, OPEC will have little choice but to keep limits on its output. There is a fight for market share, but at what cost?

The increase in US production might not translate into an improved bottom line in the near term. Can US producers afford to keep increasing their costs given the fundamental global oversupply? That is the nine-million-barrels per day question. At the moment, OPEC

32

p30-32_Investment.indd 32

is standing politely aside by limiting production in order to reach the point of drawing down on stockpiles. That door of opportunity may not be open for very much longer if disagreements heat up further between OPEC members.

Should the oil markets return to a freefor-all unlimited production before global demand picks up again, further damages may be felt.

In another scenario, OPEC may pull together and even increase cuts into 2018. In this case, the oil price is likely to see support. There would still be many questions and complexities. For example, would non-OPEC countries like Russia be included in further output cuts?

With the US and Russia recently back on speaking terms, OPEC's negotiating power to extend a supply-cut deal with Moscow may be trimmed. Now that peace appears to be taking hold in Syria,

one of the main wedges between Russia and the US is being eased out.

The potential of Syria’s oil production recovering and returning to international markets is another factor to take into consideration.

It may be a small producer relative to other countries, but there are other strategic implications. The Eastern Mediterranean basin where Syria is located is a rising star in the non-OPEC oil-producing nations.

Russia and Turkey are jockeying for positions to influence energy development in the region. There are risks of confrontations and more complexity in the region’s geopolitical makeup. If OPEC decides to go on its own to make deeper supply cuts, there is a chance that non-OPEC countries other than the US could decide to seize their chance for more market share.

In relation to geo-political risks, some main sore points stand out, such as Venezuela’s long-running financial and political crisis. Rate cuts undermine the government’s ability to repay its debt, meaning that investment in critical economic sectors like energy are threatened.

Rivalry and confrontation are an everpresent risk between Azerbaijan and its neighbours. Should one or any of these risks escalate, the oil price may spike to $60 to $80 per barrel on a short-term basis.

The complexities should not make us lose sight of the big picture, however.

Supplies still outstrip demand and are foreseen to do so at least until the end of the year. This is the mathematical reality to which investors keep returning, and the reason that oil prices are range bound. Until demand is firmly back in place, pre-2014 prices appear to be out of reach, and second-guessing OPEC remains the prevailing investment trend in the oil markets.

WWW.WEALTHARABIA.NET

8/16/17 10:09 AM

INVESTMENT

Where to invest in Saudi Arabia ANJALI ANAND, SENIOR MANAGER, INVESTMENT RESEARCH & ANALYTICS AT ARANCA RESEARCH PROVIDES AN INSIGHT INTO THE THREE CONSUMER STAPLES STOCKS IN THE KINGDOM

C

onsumer staples, prized for their slow but steady growth in investment portfolios, are generating higher alpha than ever before.

They’ve not only been more resilient to the usual market headwinds but also have tremendous potential to grow, bolstered by technological disruptors and a growing consumer base among the world’s emerging market middle class.

Legacy brands, plain vanilla business models, and not nearly as much excitement as the technology space; that pretty much sums up affairs in the consumer staples industry. The same traits, however, make consumer staples stocks a quintessential part of any portfolio manager’s collection.

Higher returns, low volatility, and a less capital-intensive profile make consumer staples an especially attractive investment opportunity for the long-term.

If we consider a 15-year historical trend, the MSCI world consumer staples index recorded its highest average annual

returns of 7.2 per cent, almost double the MSCI world average annualised returns of 3.4 per cent. It also boasted the lowest volatility, 12.0 per cent vs. the MSCI world average of 18 per cent, which translates to far fewer fluctuations in the stocks’ pricing behaviour.

Conversely, the technology hardware and equipment sector recorded the highest volatility (+27.0 per cent) amongst all other sector indices at an average annualised return of two per cent, turbulence due mostly to the collapse of the tech bubble.

CONSUMER STAPLES ARE AT AN INTERESTING PHASE

Consumer staples are believed to be stimulating right now as its performance spread widens, while its valuation spread narrows. Since 2000, the MSCI world consumer staples index’s outperformance versus the MSCI world index is noteworthy.

The barometer has widened from 1.4x (December 2007) at the beginning of our

most recent period of recession to 1.9x (April 2017) right now, way ahead of the historical median (1.6x).

Early 2016 was turbulent for the global equities market, driven by factors such as instability in Chinese equities markets, a slump in global oil prices, disappointing GDP numbers, and corrections in other sectors such as technology, automotive, and banking.

Amid tough market conditions, consumer staples was the primary sector yielding positive returns, and investors flocked to what they’ve always considered a safe heaven. Accordingly, the spread between MSCI world consumer staples and MSCI world index, forward price-earnings ratio (P/E) peaked at 4.8x in January 2016 as investors rewarded consumer staples for its stable performance.

The spread has further narrowed to 1.4x in April 2017, far below the historical average of 2.2x, and we believe the current 1.4x valuation spread offers a noble entry ...cont. overleaf

ISSUE FORTY TWO - AUGUST - SEPTEMBER 2017

p33-35_Investment Saudi.indd 33

33

8/13/17 2:36 PM

INVESTMENT

cont. from page 33

point for long-term investors, as long as they pick the right names.

CONSUMER STAPLES REMAINED RESILIENT TO SHORT-TERM HEADWINDS

While the Brexit impacted short-term sales growth for global consumer staples; the overall industry is well shielded from such uncertainties. The outlook for consumer spending remains strong for the next couple of years, driven by growth from underpenetrated rural markets, premiumisation, growing health awareness, and niche brands. BMI Research forecasts 5.4 per cent annual sales growth for global food and non-alcoholic drinks in 2017 and an annualised average growth rate of 4.4 per cent until 2020.

Structural trends such as population growth, burgeoning middle class, rising urbanisation, increasing disposable incomes among working couples, and above all, a growing disposition among consumers for product and supply-chain innovations and digital disruption in the marketplace (through the emergence of e-commerce) offers multi-year growth

34

potential for consumer staples, especially in the emerging markets vis-à-vis developed economies.

CURRENT MIDDLE EAST MARKET DOWNTURN AUGURS WELL FOR CONSUMER STAPLES

Over the past year and a half, Middle Eastern equity markets have corrected sharply in the wake of slow economic growth, low oil prices, and geo-political tensions. Looking at the valuations, the market is now beginning to look ‘attractive’ with some large cap stocks trading at rock bottom. The current state of high volatility and low returns in the Middle East and Africa (MENA) region is a good spell for investors banking on stable returns in the consumer staple sector.

As stated in the IMF 2017 outlook for the Middle East region, “subdued growth prospects will keep underlying inflation low in the GCC region. Although energy price reforms are expected to temporarily push up headline inflation to about 3.5 per cent in 2016, inflation is expected to drop back to 2.5 per cent in 2017”.

As low inflation drives low consumer spending and growing price competitiveness in the GCC region’s food and beverages industry, it becomes all the more imperative to look for stocks that are fundamentally strong on growth and valuation metrics.

WHICH SAUDI COMPANIES WILL GENERATE THE MOST ALPHA?

Picking the right stocks is the key to capitalising on the consumer staples theme. Key stocks that seem to strike the right cords regarding fundamental performance metrics, with positive revenue growth trajectory and strong profitability (above peer average EBIT margin per cent), are—Almarai, Anadolu Efes Biracilik, Coca-Cola Içecek, Ülker Bisküvi Sanayi and Saudia Dairy & Foodstuff Co. They are among the top 15 consumer staples stocks in the Middle East region by market capitalisation.

On the valuation-return metrics, key stocks Abdullah Al-Othaim, Strauss Group, Saudia Dairy and Foodstuff

WWW.WEALTHARABIA.NET

p33-35_Investment Saudi.indd 34

8/13/17 2:36 PM

Company, Shufersal Ltd. and Mezzan Holding Co. are in the favourable zone right now. Among the top 15 consumer staple stocks (in the Middle East, by market capitalisation) they’ve logged higher than peer average (18 per cent) return on equity per cent on lower than peer average (20x) 12-month forward P/E for 2017E.

OUTLOOK ON THE TOP THREE CONSUMER STAPLES STOCKS

Saudia Dairy and Foodstuff Company (SADAFCO) have a strong market position in milk, tomato paste and ice-cream, even though the sectors are plagued by challenges such as low consumer spending and intense price competition. Expect a FY18E full-year top-line growth of 11 per cent on a stable margin of 14 per cent.

Despite a growing equity base, SADAFCO’s return on total equity has been rising, while its current dividend yield of 3.4 per cent

is meaningfully above the MSCI world consumer staples dividend yield of 2.6 per cent. The company’s zero leverage and healthy cash position as well is a positive sign for organic and inorganic growth. On the valuation front, the stock currently trades at a 12-month forward P/E of 14.0x, which is at a six per cent discount to its historical fiveyear average P/E of 15.0x.

For Ülker Bisküvi Sanayi, after a subdued top-line growth of three per cent in 2016, sales growth is expected to pick up again. Expect erstwhile levels of 13 per cent on a stable EBIT margin of 11 per cent by the end of 2017, driven by a better price mix from its chocolate segment and below industry-average volume declines in its biscuit segment. The Street expects a 41 per cent jump in earnings per share (EPS) at the end of 2017 to TRY 0.95 per share after a 11 per cent dip in 2016. On the valuation front, the stock currently trades at

a 12-month forward P/E of 20.9x, a modest three per cent discount to its historical fiveyear average P/E of 21.6x.

Almarai, a SAR 58.4 billion ($15.5 billion) integrated food and beverage provider in Saudi Arabia, is looking ahead to invest SAR 2.9 billion per annum between 2017 and 2020 to fuel its capacity expansion plans. The outlook remains poised for 2017, with expected full-year EPS growth of 11 per cent, ahead of eight per cent in 2016 on strong top-line performance. In the near-term, pressure on margins may ease off a little bit as low commodity prices, improved cost management, and restored production savings will offset high fuel and energy prices. Nevertheless, in terms of valuation, the stock currently trades at a 12-month forward P/E of 25.9x which is at a 23 per cent premium to its historical five-year average P/E.

ISSUE FORTY TWO - AUGUST - SEPTEMBER 2017

p33-35_Investment Saudi.indd 35

35

8/16/17 10:10 AM

AVIATION

THE BOOM SUPERSONIC JET SHOULD BE CHANGING THE WAY WE FLY BY AS EARLY AS 2023.

BOOM, baby

BOOM IS BRINGING SUPERSONIC TRAVEL INTO THE 21ST CENTURY, GIVING YOU MORE OF THE ULTIMATE LUXURY—TIME. WEALTH SAT DOWN WITH FOUNDER AND CEO BLAKE SCHOLL TO LEARN MORE How did your experience in the field lead to the concept of Boom?

I’m a software guy by training, went to school for career for computer science, started my career at Amazon, flying for fun since I was in college. I spent most of my career in a world where phones are getting better, computers are getting better, I can order something online and have it get to me in two hours, but the airplanes of today look a lot like the aeroplanes of the 1960s. We had a supersonic jet in Concorde, flew it for 27 years, let it get rusty, and put it in a museum.

36

p36_38_Aviation.indd 36

We’ve gone backwards! It’s a unique story in technology where we had a capability and then lost it, and went in the opposite direction. The motivation for Boom was to put the world back into aviation progress the way we had in the first 50 years of aviation but really haven’t had recently.

Tell me about the development of Boom. How did you improve upon what was already done in the past with the Concorde, in terms of efficiency?

The Concorde was designed 50 years

ago with slide rulers and wind tunnels.

Today, while we haven’t changed the performance of airplanes, the way they’re built has changed completely. We have new materials like carbon fibre composites. We have new engines that are quieter and more efficient. We have new methods to optimise aerodynamics. We’re taking the best of breed technology that’s flying on modern subsonic aircraft, and instead of trying to eek out one or two per cent more efficiency, we’re doing something more revolutionary, which is flights that are half as long.

WWW.WEALTHARABIA.NET

8/13/17 2:51 PM

A CLOSER LOOK AT THE JET.

How will Boom be able to match the onboard experience of the GCC airlines?

I agree with your premise that GCC airlines are the best on the planet at making the air travel experience good—but the truth is that these are not yachts or cruise ships— you get on an aeroplane to get where you’re going. Spending less time on an aeroplane and more time doing the things you want to do from life—being with our friends, doing business—time is the ultimate luxury, we can’t get any more of that.

But on board, the flight is still long enough on a Boom Supersonic that it still has to be a great experience. There is a business-class cabin that is a wonderful experience—wide seats, great big windows.

There’s only one seat on either side of the aisle, so you don’t have to choose between aisle or window, everybody gets both.

There’s also a first-class cabin that has full lie-flat beds, two windows per passenger, a huge amount of room to relax, sleep, do work, or entertain yourself.

Is there potential for private jet?

Our focus isn’t private jets, but there are already private jet customers for Boom.

For a certain audience whose time is extremely valuable, there’s a place for it.

And medical emergencies as well.

There’s so many applications—getting people around is the most obvious one, but it could be a medical emergency, or even organ transplantations. Today, an organ is only good for about four hours ...cont. overleaf

ISSUE FORTY TWO - AUGUST - SEPTEMBER 2017

p36_38_Aviation.indd 37

37

8/13/17 2:51 PM

AVIATION

FOUNDER FOUNDER AND AND CEO CEO BLAKE BLAKE SCHOLL SCHOLL GIVING GIVING INSIGHT INSIGHT INTO INTO THE THE BOOM BOOM SUPERSONIC SUPERSONIC TECHNOLOGICAL TECHNOLOGICAL INNOVATION. INNOVATION.

cont. from page 37

for transplant, and how far can you take it?

There’s many interesting cargo-use cases.

Imagine you have your electronics company designing in California but manufactures in China? You could double the speed of iteration, cutting from 48 hours to 24. That’s a theme with Supersonic travel—it’s not about saving a few hours here and there, it’s changing what you can do in a day, and changing the places you’ll go. When you look at a place like Fiji on a map, then look at how it will take 30 hours to get there, you decide to maybe go somewhere else. But when it’s only seven or eight hours, you’ll choose to go places you otherwise wouldn’t go.

If you have a flight from Dubai to Sydney, it will only be a quick overnight flight, and so you can have a weekend in Sydney with zero days out of the office.

Isn’t that going to be great?

Is the audience for this only high net worth individuals?

Today we can do it for business class prices.

Anyone who can afford a front cabin seat, you can afford to get there in half the time.

But the initiative of the company is to make supersonic travel widely affordable. We have line of sight to make it more efficient, and the more efficient you can make it, the more affordable it is to more people.

38

p36_38_Aviation.indd 38

We’re starting off at a price point that’s roughly one quarter of what it cost to fly Concorde, and we’ll keep coming down over time.

Gulf is ideally positioned—a subsonic hub that connects east and west. I think there’s potential to build a supersonic hub here and have the world connect in the gulf.

How different is your organisation from the biggest aircraft manufacturers in the world?

If you look at the Boeings and the Airbuses of the world, they are large companies that work incrementally. The next Boeing is probably a few per cent more efficient than the last one, but if you squint it’s largely the same. They do a new clean-sheet aircraft about every 15 years.

You can do better as a young company, and move faster in many ways. We take inspiration from something that Elon Musk was able to do at SpaceX. People laughed at first, but he can now do things at a lower cost that no one else can match at these big organisations.

There’s a huge role for young companies and entrepreneurs to move faster and make more audacious goals that established players don’t.

Are you talking to the big GCC airlines?

We’re talking with everyone you’d be expecting us to talking with.

What potential do you see for supersonic travel in the GCC? The GCC is home to the world’s best airlines. We’re looking for the best partners to help bring supersonic travel to all over the world. Geographically, the

When do you expect deals to start being announced?

Virgin has ordered the first 10. We’ll have more to say later this year on launch airlines all over the planet.

When do you expect full operation?

We’re fans of speed so we’re doing this as quickly as we possibly can. The first aeroplane, the XP1 supersonic demonstrator is under construction now and will fly about a year from now in 2018. Once that flies, we’ll be able to test everything, and build a full-scale passenger aircraft that seats up to 55. That has to go through a very serious safety testing regulatory approvals process. By 2020 we should have the first pre-production aircraft flying, and then a three-year flight testing and safety testing process, with first passenger flights aimed for 2023. We’re doing this as half as humanly possible. We can’t skip any steps, so we’re doing it as quickly as we can.

WWW.WEALTHARABIA.NET

8/16/17 10:11 AM

Wealth H

Monday 27th November 2017 Godolphin Ballroom Jumeirah Emirates Towers www.wealtharabia2017.net Wealth House Ad 2017.indd p36_38_Aviation.indd 39 6

events@wealtharabia.net

+971 4 391 4682 8/9/1710:11 4:47AM PM 8/16/17

LUXURY PRODUCTS

ERNEST HEMINGWAY

40

WWW.WEALTHARABIA.NET

p40-43_Lux products.indd 40

8/13/17 3:04 PM

An ode to a

master

JOHN HEMINGWAY HAS WORKED WITH MONTEGRAPPA TO BRING TO LIFE A NEW COLLECTION OF PENS IN HIS GRANDFATHER ERNEST HEMINGWAY’S HONOUR. HE SAT DOWN WITH WEALTH TO REFLECT ON THE SERIES, AND HIS GRANDFATHER’S LIFE

ER

LDI

SO HE

T

J

ohn Hemingway, grandson of Ernest Hemingway, the Nobel Prize-winning author, and one of the most enduring writers of the 20th century, didn’t always know how significant his name was.

“I remember once, when I was 10 years old, I was in a boarding school. They took us to a ski resort in Vermont, I think it was. When I was renting some boots, the guy said, ‘oh Hemingway!’ that’s a weird name!

That didn’t give me an idea of what the name meant but thought, ‘I’ve got a weird name!’” he says.

Weird as it was—it wasn’t until he was a teenager that he knew what it really meant.

“It’s when I started reading his books, when I was about 13, when I went to live with my grandfather’s younger brother

Lester, in a house off Miami Beach on one of the islands there. I was really just amazed at this man who I never met, my grandfather. I thought, ‘Wow he wrote like this?’ That inspired me—I thought, well, why don’t you try something like that, John.”

“I was young, I didn’t understand what I was leading myself up to. I hear people say that Ernest Hemingway changed their life, and essentially the same thing happened to me. Before I started reading his books, I wasn’t interested in becoming a writer. I thought about becoming a lawyer or a doctor like my dad, I thought, no that’s what you should be doing,” John reflects.

A GRANDSON REFLECTS BACK

John Hemingway admires many things about Ernest as, while he does share his grandfather’s passion for writing, not many writers who have ever lived share his drive and discipline. ...cont. overleaf

ISSUE FORTY TWO - AUGUST - SEPTEMBER 2017

p40-43_Lux products.indd 41

41

8/16/17 10:12 AM

LUXURY PRODUCTS

Every day, he was there, at five o’clock in the morning, no matter what he had done the night before. I think he really had a visceral need to write.

– John Hemingway

N

RMA

ISHE

F THE

THE

R

ITE

WR

cont. from page 41

“As someone who isn’t predisposed naturally to discipline—my wife will tell you that my writing desk looks like a hurricane hit it. I really admire the guy’s writers’ discipline.

Every day, he was there, at five o’clock in the morning, no matter what he had done the night before. I think he really had a visceral need to write,” he says.

Hemingway has spent years digging into the lives of both his father and grandfather, and while it’s been several decades since he first started reading his grandfather’s work, it’s taken him years to fully process his writing, and to process the man himself.

“I found out much later on when I was writing my memoir of my dad that he was in fact a good father. I had a different opinion, but when I started reading the letters and started seeing how much he cared about my father and how helpless, in many ways, he felt to help him in that age when they didn’t even have the name for bipolar disorder. He was doing everything he could to help my father get back on his feet.

It must have been a tremendous burden on him, as he was someone who suffered himself.

And yet he was there for his kids, and I really admired that. “

42

He has also spent years processing both his father and grandfather’s explorations into gender, something her wrote about extensively in his book Strange Tribe. In doing so, he’s come to understand some of the most legendary aspects of his grandfather differently, including Ernest’s interest in bullfighting.

“I never knew when I wrote the book that Gertrude Stein was the one who sent him to see the Fiesta for the first time in Pamplona, because she thought that was something that he could use in the search for his voice as an author, and in his understanding of himself and humanity. I’m not an aficionado, but I do think bullfighting is an art form. One theory for the origins of bullfighting in Spain is that, in the bullfight, you have the celebration of the wedding, in which the bull is the man and the bullfighter, the matador, is the woman. In the various passes there, you have a courtship, and only when the bullfighter is ready to go over the horns, take his sword and put his sword into his heart to kill the bull instantly, is the union between the two.

That, I thought was a strange origin story

for bullfighting, and even stranger that Gertrude Stein would send a young Ernest Hemingway out to see this.

This all tied in with the idea that I was beginning to develop that he was not just interested in courage, and macho stuff, but he was looking for balance, and he was fascinated in the differences between men and women, and the similarities— and you can see this in many of his short stories,” he says.

Hemingway is still moved by those short stories.

“I think Ernest Hemingway was a great author not just because of the language that he used, but because of the themes—the way that he was able to write a short story like “The Clear DueHearted River”, which to me resembles the Japanese rock garden. In a sense, his very detailed description of the trip that he’s taking is a bit like raking the rocks— he’s emptying your mind of thoughts, and he’s focusing you on the one moment at the end of the story, where he’s thinking about where he’s going to fish on the last day. He thinks about these two deep pools that are covered in

WWW.WEALTHARABIA.NET

p40-43_Lux products.indd 42

8/13/17 3:04 PM

LER

L AVE

TR HE

T

trees—where I’ve been up to myself. He says, ‘It was there that you could find the really big fish, but to go there, would be tragic.” John closes his eyes as he recites the words.

“When I read that story again, it just telescoped on me that he was a true genius. What he’s saying there is that there’s things that you know, and things that you don’t know, and when you want to go for that knowledge, you better be careful, because beyond a certain point, there’s no turning back.

He still pushed himself out there. He, and my father, were not vacationers— they were travellers. That’s captured

by Montegrappa in that pen. He knows where the story begins, but he doesn’t know how it begins, whether there’s going to be a good or a bad ending.

That’s life.”

John pauses.

“Sometimes it’s difficult for me to write because I think, what could you say that’s ever going to get to that? But then I think, you’ve got your own voice, John, so you’ll write what you’re going to have to write.”

A RENEWED PARTNERSHIP

As a writer himself, Hemingway has joined forces with Montegrappa to produce a series of pens that honour the life and career of his grandfather.

“The first time I found out about Montegrappa was when I was in Bassano De Grappa, Italy and I had been invited there to open a new Hemingway Museum right across from the factory. The reason that it is there is because Ernest, my grandfather, been stationed there with the American Red Cross during the first World War.” The link goes further than that—Ernest Hemingway actually used Montegrappa pens for his correspondences during the war.

John Hemingway was invited across the street to the Montegrappa factory, and was introduced to Guisseppi Aquila, who told him that he wanted to do a collection of limited edition pens based on Ernest Hemingway.

“It captures four different aspects of his life—Hemingway the soldier, the writer, the fisherman and the traveller.

For me it’s important because I spent 22 years of my life in Italy. I know Italian fluently, and two of my children were born there, so it was a pleasure to connect with Montegrappa, which is a very good expression of artisan work and quality, and connect that to my grandfather, and the country that, more than any other, formed his as a writer,” says Hemingway.

The Hemingway Collection is divided into four ‘chapters’: The Soldier, The Writer, The Fisherman and The Traveller. Each of these chapters of his life is embodied in a pen, offered in the three types, including fountain pen, roller and ballpoint. In keeping with the accoutrements of the era, the packaging itself has been inspired by the notebooks used by reporters during the First World War. Each model in the four topics is a limited edition of 100 examples, totalling 300 pens for each subject. All pens in the series will be produced in celluloid with sterling silver trim. In addition to the silver editions, 10 examples of each of the three pen types, in each of the four chapters, are trimmed with 18k gold.

ISSUE FORTY TWO - AUGUST - SEPTEMBER 2017

p40-43_Lux products.indd 43

43

8/13/17 3:04 PM

MOTORING

A GLIMPSE OF THE

FUTURE

The Tesla Model X, now available in the Middle East, is unlike any driving experience you have had before 44

p44-49_Tesla.indd 44

WWW.WEALTHARABIA.NET

8/13/17 4:04 PM

PHOTOS: WILLIAM MULLALLY

THE TESLA MODEL X MAY BE THE MOST INNOVATIVE SUV IN HISTORY.

I

n 2006, the documentary Who Killed The Electric Car? was screened at the Sundance Film Festival in Park City, Utah. At the time, it played like an obituary. After all, the most famous electric car, the General Motors EV1, was discontinued in 2002.

It seemed as if we were never going to pursue the technology, as if it was a ridiculous fantasy we once had, and abandoned when it seemed unfeasible.

The film received great acclaim.

The discontinuation of the EV1 didn’t just inspire a documentary, however.

It also inspired a number of forwardthinking individuals to found Tesla Motors Inc. They had the idea to make electric cars that would actually feel like a technological innovation—beautiful, high-end, and providing something that no other car could. ...cont. overleaf

ISSUE FORTY TWO - AUGUST - SEPTEMBER 2017

p44-49_Tesla.indd 45

45

8/16/17 10:14 AM

MOTORING

THE MODEL X FEATURES 360 DEGREE SONAR SENSORS. cont. from page 45

The founding of Tesla made the end of the documentary, but even then, it didn’t seem possible. Fast forward over a decade, and we don’t need to tell you the rest of this story.

Tesla is now one of the most valuable brands on earth, and its two flagship products, the Model S

and the Model X, have transformed the automotive world. For UAE motor enthusiasts, however, it was, for a long time, something that we watched from afar.

In the summer of this year, that changed. Tesla finally, officially, became available UAE motorists.

The first question we asked ourselves when we sat down in the driver’s seat of Tesla’s SUV, the Model X, was—would it live up to the hype? After all, luxury cars have, for years, promised to be a brand new experience. Anyone who loves cars has learned to be immune to car-advertisement speak, and promises

CAPTION

46

p44-49_Tesla.indd 46

WWW.WEALTHARABIA.NET

8/13/17 4:04 PM

What causes this experience is Tesla’s electric powertrain, which accelerates the Model X from zero-100 kph in just over three seconds, and hitting a top speed of 250 kph, all while producing zero emissions. The battery too affects the driving experience, giving the vehicle a low centre of gravity and ideal weight distribution for exhilarating performance and superior handling.

But once you are used to it—the car is a dream, a true gift from a science fiction future.

SAFETY FIRST

of something all new has always meant something slightly-updated. Right?

When we turned on the Model X and put our foot down on the pedal, we can say this for certain—it was the first time that we truly felt, since we drove our first car so many years ago, that we were driving something completely new.

At first, this takes some adjustment.

When you accelerate, you feel the same as you do when the rollercoaster first pulls you forward on Space Mountain at Disneyland.

When you take your foot off the pedal, the car automatically starts to brake—so you have to find the right balance, learning to drive almost all over again.

How about safety? Built electric from the ground up, the Model X is designed to be the safest car on the road. According to Tesla, crash tests indicate that the Model X will receive a five star safety rating in all categories, the first SUV to ever do so.

The Model X has a large crumple zone to absorb the energy of a high-speed impact. The battery’s location on the floor gives the Model X an extremely low centre of gravity, reducing the risk of rollover common in most SUVs. Aluminium pillars reinforced with steel rails protect occupants and the battery, while improving roof stiffness.

The Model X comes standard with automatic emergency braking and side collision avoidance to prevent accidents from happening in the first place. It’s not just like any other car—Tesla makes the only standard AEB system that works at high speed.

The technology isn’t just surface-level innovation to make things look good—the Model X carries a forward-looking camera, radar, and 360 degree sonar sensors to enable advanced autopilot features.

Tesla’s over-the-air software updates regularly improve the sophistication of these features, enabling increasingly capable safety and convenience features such as Autosteer and Autopark, which, through the touch of a button, help steer and park the car using the sensors around it, bringing the Model X ever closer to autonomous operation.

It even works on air quality— something pivotal in the UAE, where air ...cont. overleaf

ISSUE FORTY TWO - AUGUST - SEPTEMBER 2017

p44-49_Tesla.indd 47

47

8/13/17 4:04 PM

MOTORING

THE FALCON WING DOORS ARE SURPRISINGLY CONVENIENT IN ANY LOCALE. cont. from page 47

quality is an issue that faces everyone. The front fascia is designed with a functional duct that pushes air through the first true HEPA filter system available in an automobile, allowing medical-grade air to fill the cabin, no matter what is going on outside.

48

p44-49_Tesla.indd 48

WINGS UP

One of the features that stands out the most are the winged rear doors. While they’re beautiful, are they practical? In fact, the Model X Falcon Wing doors are built for convenience and manoeuvrability. The double-hinged doors open up then out,

requiring only 30 cm of space to open on the side of the vehicle. Each door is equipped with capacitive, inductive, and sonar sensors to monitor surroundings and avoid contact with obstacles around the car, making it possible to park in tight spots.

WWW.WEALTHARABIA.NET

8/13/17 4:04 PM

THIS CAR IS FROM THE COLLECTION OF EMIRATI SUSTAINABILITY ADVOCATE MARYAM AL HABROOSH.

THE ON-BOARD COMPUTER IS UNLIKE ANY YOU'VE SEEN BEFORE.

The idiot–proofing goes even further than that—the car features the industry’s first auto presenting door, which automatically opens and closes as the driver approaches or exits the Model X. Who needs to even touch a door these days?

The touch screen, the heart of the experience, is a marvel—at a staggering 43 centimetres, the centre screen integrates media, navigation, communications, cabin control and vehicle data into one interface— designed to be as intuitive as possible. Many functions are mirrored on the instrument panel and are voice-activated to focus the driver’s attention on the road.

There’s one big question—how long does it last? The Model X comes with a 90 kWh battery providing customers a driving range of over 565 km (NEDC) on a single charge.

In addition to home charging, Tesla has designed a sophisticated electric vehicle

charging network, including Superchargers and Destination chargers.

There are currently two Supercharger sites in the UAE and three more planned by the end of the year. The advantages of these sites is that drivers can recharge their vehicles in minutes rather than hours, Tesla also has 32 Destination Charging locations now available, with at least 18 more operational in the next six months in the UAE. Prices start AED 332,500 for the Model X, although the one we have been driving, provided by UAE sustainability advocate Maryam Al Habroosh, was fully optioned, totalling AED 627,600.

ISSUE FORTY TWO - AUGUST - SEPTEMBER 2017

p44-49_Tesla.indd 49

49

8/16/17 10:14 AM

HNWI CHAT

Sitting down with Karen Ruimy KAREN RUIMY, DESIGNER OF KALMAR, AS WELL AS BEING A MUSICIAN, DANCER AND AUTHOR, SPEAKS TO WEALTH ABOUT THE LAUNCH OF KALMAR’S NEWEST KAFTANS What have you noticed about high net worth individuals today?

High net worth individuals are seekers. They are wealthy, but they realise that money is not their ultimate goal. Having only part of success is not success.

How did you find personal fulfillment?

I lead a path that is really exceptional. I really did everything for that in my life—my goal is always to be connected to the depths of who I am.

Each time I do that, I really have the most wonderful moment, and I can grab who I am, and finally be happy and have great energy. I don’t listen to people who tell me what to be—I’m in tune with what is my passion.

When I write, I bring people with me into that world, and I wanted to the same with my product.

How do the products you create embody that?

I’m a spiritual writer, and for me, well-being is super important.

I wanted to create sense, to realign yourself during the day to different energies. I think people need to take care of themselves, spend time with themselves to connect to who they are. With products you can help people do that and have awareness about it. So I created scents, body products, and clothing that loves you rather than is harsh to you. I wanted to create kaftans that are gorgeous—great cuts, great silk, made in Italy.

Our ethos is about respecting nature—using the best ingredients, using the power of plants, rocks and everything together. We want to ring a product that people really enjoy using, and reconnecting to themselves. We live in a world where people are all in a race of success but they’re not listening to themselves about what is success—for me success is listening to who you really are.

How do you think the luxury world will change?

I think there are too many brands—all fighting for the same thing. We have an overdose of brands who want to show they are the best. But I think brands are starting to understand they have to change— clothing brands are becoming lifestyle brands.

50

p50_HNWI chat.indd 50

MUSTAFA ABBAS

WWW.WEALTHARABIA.NET

8/13/17 3:35 PM

On-Road...

OFF-ROAD...

AUTONOMOUS...

All roads lead to the Dubai International Motor Show 2017.

Find the best drive of your life this November.

Subscribe to our latest news at dubaimotorshow.com Organised by

p50_HNWI chat.indd 51

Official Airline Partner

Official Courier Handler

Official Publisher

14 -18 NOV 2017 DUBAI WORLD TRADE CENTRE

#dubaimotorshow

8/13/17 3:35 PM

p50_HNWI chat.indd 52

8/13/17 3:35 PM