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Top financial news 2019- 5 events that disrupted the world

What 2019 financial events shaped the new global economic landscape for years to come?

Aramco went through with its IPO pledge and now anyone can own part of the world's most valuable company UAE and Dubai's property prices and the trends leading to today's real estate expectations on the road to Expo 2020 How Digital Transformation put its mark on every sector and industry

2019 is nearing an end, but not before closing with a bang, as Aramco makes its debut listing on Tadawul and shares start trading today. This year was marked by major events that rocked the world from its foundation and we list the 5 most important below.

1-Brexit

Putting Boris Johnson’s plan for Brexit into action will be a “major” challenge for the government to deliver the infrastructure and staffing needed, and due to new customs arrangements for Northern Ireland, said BBC recently. 

The PM, elected on the 24 of July, 2019, has said the UK will fully exit the EU by December 2020 if he wins the election and MPs approve his plan. But it’s been that kind of tumultuous journey for Brexit before and since Johnson took over as PM.

In January, Theresa May remained Prime Minister after surviving a vote of no confidence by 325 to 306, BBC reports.

Next, the Brexit deadline was extended from March 29 to April 12 bringing further Brexit volatility in financial markets both locally and globally, marked by widespread investor caution and a 14% drop in business investment.  A sluggish UK housing growth diverted attention to Dubai’s properties market.

Two months of political uncertainties took its toll on the Pound Sterling, shedding some 1.7% against the US Dollar since Theresa May’s resignation announcement on May 24.

The Pound surged past the psychologically-important 1.25 level, reaching its highest in two months versus the Dollar, on hopes in September that a Brexit deal can be reached before a new October 31 deadline. To add to matters already gone bad with 0.2% growth in EU GDP, On October 18, the US imposed tariffs on $7.5 billion worth of European goods. 

On October 28, the EU agreed to delay UK’s Brexit decision until Jan. 31.

Read: Chinese Yuan can advance further on US-China trade agreement; APAC currencies might gain further 2-3%

2-US-China trade war

The US and China have, in principle, lately agreed to discussing rolling back tariffs on each other’s goods in phases. This will be done in the same proportion and simultaneously.

The trade war started last July when US President Donald Trump followed through on months of threats and imposed sweeping tariffs on China for alleged unfair trade practices.

So far, the US has slapped tariffs on $550 billion worth of Chinese products. China, in turn, has set tariffs on $185 billion worth of US goods. 

In August 2019, China’s top trade negotiator Vice Premier Liu He called for calm. Liu said the escalation of the trade war was “against the interest of China, the US, and the entire world”. 

Risk appetite was expected to remain soft amid intensifying concerns over the global economic landscape made worse by the trade war. Sentiments have since improved on hopes of a phased deal between the two economic poles. 

But there are surprises, like this one. China’s Communist Party has ordered all state offices to remove foreign hardware and software within three years, the Financial Times reported, in a move which could hit major U.S. firms including Microsoft, Dell and HP. The policy has been dubbed “3-5-2” because the replacement of the technology will happen at a pace of 30% in 2020, 50% in 2021, and 20% in 2022, the newspaper said. The move by the Chinese government aims to protect against an escalation of tensions with the U.S.

Read: Aramco’s retail strategy has worked, raising $25bn. Come Wednesday, will shares go up for investors?

3- Saudi Aramco launched the world’s greatest IPO

Saudi Aramco’s long-fabled $2 trillion IPO, coming from the world’s most profitable country got the world listening and watching. The IPO is currently unfolding, and while it is uncertain if a $2 trillion valuation will be reached, the company is expected to raise record levels of capital. As of this writing, the IPO has raised $29.4 billion, as per Reuters.  

But this is a story with deep implications on oil production and prices. In a recent Vienna OPEC meeting, the oil cartel along with non-members known as ‘OPEC plus’ agreed to take 500,000 barrels off the market until March 2020, at least. It is believed that Saudi is spearheading this move and shouldering most of the cuts, hoping to increase the price of oil from a current Brent at $64 and with it increase the company valuation. 

23% of the institutional portion of Saudi Aramco’s initial public offering went to non-Saudi investors, the head of Investment Banking at National Commercial Bank, Wassim al-Khatib, told Al Arabiya news channel on Monday, according to OilPrice.com.

OPEC cutting production and boosting oil prices could help to deliver a final valuation closer to the $2 trillion. The Saudi Aramco IPO and Brent crude oil prices will fly in December, according to Matein Khalid.

Read: Home Insurance – Low uptake exposing UAE Residents to risks

4-Declining prices of real estate in Dubai and the UAE

In April, 2018, S&P Global Ratings analysts announced that Dubai’s real estate prices could decline by 10 to 15% over the
 next two years, hit by new supply, geopolitical risks and the introduction of value-added- tax in the UAE.

By H1 2018, 27,600 transactions were made compared to H1 2017’s sales of 35,600. Average property prices fell 4%, and rental rates had declined by 14% in the UAE on average. Dubai’s property pipeline was expected to exert continued pressure on the residential market with an additional 10,000 units set to be delivered in 2018 and a further 70,000 before Expo 2020 – according to Chestertons.

The UAE Central Bank said in December 2018 that property prices decreased 7.4% QoQ in September, accelerating from a 5.8% decline in the previous quarter.

Data provided by Reidin showed median values for a one bedroom apartment in Dubai Marina to be worth circa AED1.248 million ($340,000) on 1st January 2015, and as of 1st January 2019, the value dropped to AED 998,400 ($271,000) ; a loss of around $70,000.

By February 2019, the DFM Real Estate & Construction Index fell about 7 %, the biggest weekly drop since May 2016. Oversupply was casting a cloud over Dubai developers and real-estate companies at the same time that the region confronted a slump in oil prices, around $55 Brent.

By August 2019, supported by new initiatives such as long-term visas for professionals and the provision of 100% business ownership, the property sector was witnessing interest from international investors and Expo 2020 Dubai was believed it will have more positive impact on the sector with 70% of 25 million arrivals being foreigners. 

In September 2019, the Rulers Office established a committee to oversee real estate development to balance the market’s supply and demand.

“Since the creation of Dubai’s Higher Real Estate Planning Committee, we have seen a 134% increase in property transactions,” said Sultan Butti bin Mejren. Director General DLD, late September. 

By the end of the year, analysts began talking about low property prices being the main incentives to begin looking for new homes in Dubai. Already, more than 5,000 property transactions were recorded with the Dubai Land Department in November, an 11-year high on a monthly basis.

Read: Digital technology empowering procurement teams to drive digital transformation: Bain & Company

5-Digital Transformation

The next big wave of innovation in financial services will be driven by incumbents starting with a blank canvas, or “Greenfield”, where existing firms break free from the constraints of their legacy systems, according to Oliver Wyman’s 2019 State of Financial Services report titled “Time to Start Again”, launched in January 2019. 

Telecom became the fast emerging digital transformation sector and application services trailblazer, according to a February 2019 research from F5 Networks. 80% of telecom professionals were executing on digital transformation plans, compared to 69% in other industries.

The sixth edition of Arab Luxury World, the Middle East’s leading luxury business conference, returned to the region on June 12th and  13th under the theme “Digital Transformation Focusing on Data and Premium Retail”.

In July, 2019, emploees in EMEA companies embracing workplace automation reported greater job satisfaction, customer satisfaction, and boosted productivity (72%) with more time for creativity.

Employees in highly digitized companies reported they benefitted from increased job creation (42%) as opposed to only 23% in less automated companies. And 36% of highly automated companies reported that they exceeded their financial goals compared to just 16% for others.

Banks meanwhile considered using blockchain technology to perform KYCs and address onboarding inefficiencies. Also, HSBC in the region was introducing ‘Pepper’, an artificial intelligence robot that is purported to add a ‘fun’ element to customer engagement. Providing a digital service was no longer optional, but a survival mechanism. Banks’ biggest challenges are fintech, IT companies and even telco companies, as everybody was trying to become a competitor.

According to management consultants McKinsey, effective use of digital technologies, such as cloud, the Internet of Things (IoT), mobility, artificial intelligence (AI), virtual reality (VR), big data and analytics could cut capital expenditure by up to 20% in the Oil & Gas industry.

According to the analyst firm Research and Markets, automotive industry investments of $19.57 billion in 2015 are expected to increase to $82 billion by 2020 as a result of growing digitalization and technology advancements. A new generation of “connected” and autonomous cars will produce 50 megabytes of data each second. That’s, on average, 20 gigabytes of data per day when on the road.

Still, in October, a survey by Strategy& found that just 5% of companies in Europe, the Middle East, and Africa implemented critical technologies that help to foster digitization.

More than 80% of industrial process manufacturers were piloting advanced technology, yet only 5-8% of industrial process manufacturers were ready for digital transformation.

Finally, the 4th Industrial revolution and the democratization of 5G combine to give AI, Machine learning, IoT, AR/VR, and robotization a real chance at redefining the business landscape for many industries, including aviation, ecommerce,  real estate, banking, hospitality and others.