Good morning, lovely people. We’re wrapping up a busy week with a compact issue to send you off into the weekend.

It’s a mixed bag of news here at home, with the biggest stories being Adnoc Drilling’s sale of a USD 935 mn stake to investors, and Eagle Hills’ EUR 3 bn investment in Latvia. Also worth your attention this morning: We have fresh data out on the economy in 2023, indicating continued growth of the non-oil economy.

WEATHER- It’s more of the same in both Dubai and Abu Dhabi this weekend, with Dubai seeing the mercury hit 39°C today and 40°C tomorrow, before rising to a sweltering 42°C on Sunday. Expect a low of 30°C tonight. Abu Dhabi will be slightly cooler, with highs of 33°C on Saturday and 35°C on Sunday, and a low of 31°C tonight.

PUBLIC SERVICE ANNOUNCEMENTS-

#1- Companies with licenses issued in January and February have until next Friday, 31 May to submit their corporate tax registrations, the Federal Tax Authority said in a statement. Companies that fail to submit their registration applications by next week’s deadline will face a fine of AED 10k, the Finance Ministry said previously.

You can register via the Federal Tax Authority’s EmaraTax platform.

#2- Applications to register in the Economy Ministry’s unified registry for family businesses are now open, state news agency Wam reports. Family companies should submit requests to the licensing authority that issued their economic license, which will forward the applications to the ministry. Decisions will be based on companies’ compliance with the regulations and conditions stipulated in the Family Businesses Law.

Background: The ministry launched the unified registry in December 2023 to build a comprehensive and standardized database of family businesses, and improve governance. Registrations are voluntary for family businesses.

WATCH THIS SPACE-

#1- Microsoft to send G42 AI infrastructure? Microsoft’s agreement with International Holding Company-backed tech and AI group G42 could move forward to a “second phase” that would see the US tech giant exporting “crucial components of AI technology such as model weights” to G42, Microsoft President Brad Smith told Reuters last week. Smith did not disclose a timeline for this phase of the project.

ICYMI #1- Microsoft invested some USD 1.5 bn in G42 to position the UAE as a “global AI hub.” The firms also inked an agreement earlier this week to build a USD 1 bn geothermal data center in Kenya.

Potential hiccup: The transaction requires approval from the US Department of Commerce after the Biden administration made it mandatory in October for large AI systems makers to share details with the government amid growing concerns about regulating AI exports. “Congress still has not received a comprehensive briefing from the executive branch about this agreement,” raising concerns that “the right guardrails are not in place to protect sensitive US-origin technology from Chinese espionage,” Reuters cites Republican Congressman Michael McCaul as saying.

ICYMI #2-G42 had offloaded all its stakes in Chinese businesses in a bid to reportedly appease US partners. Reports out at the time claimed that G42 held private talks with the US Commerce Department’s Bureau Industry and Security for G42 to scale down its investments in Chinese businesses, which ultimately paved the way for Microsoft’s investment. G42 could back away even more from China, including giving up its use of Huawei telecom equipment, which Washington “fears could provide a backdoor for the Chinese intelligence agencies,” according to the New York Times.

Not entirely off the table: Microsoft said its agreement with G42 has safeguards “to protect Microsoft’s technology and prevent it from being used by Chinese entities,” including a ‘know your customer’ rule to determine who is using Microsoft’s technology. Microsoft can impose financial penalties on G42 for breach, with the penalties enforceable in arbitration courts in London. The company is also seeking out alternative options to protect its technology, such as physically separating parts of data centers where AI chips and model weights are stored, and restricting physical access. “I suspect by the time we’re done, we’re going to end up with a regulatory regime or trade export control approach that will be applicable broadly and not just to Microsoft and G42,” Smith said.

#2- Adia-backed National Grid to raise GBP 7 bn in share sale: LSE-listed British energy distributor National Grid — in which Abu Dhabi Investment Authority (Adia) holds a 3% stake — plans to raise GBP 7 bn in fresh capital by offering shareholders new shares via a rights issue, the company said in a disclosure. National Grid will launch the share sale as part of a five-year GBP 60 bn investment plan.

DATA POINTS-

#1- Institutional-grade buildings in Abu Dhabi logged a 94% occupancy rate in 1Q 2024, up from 92.5% the previous year, according to commercial real estate agency CBRE Middle East’s UAE Office Market Review 1Q 2024 (pdf). Neighboring Dubai saw its occupancy rate increase by a little over one percentage point to 91.3% during the quarter. Occupier demand in Abu Dhabi primarily stemmed from government-linked entities, particularly in on-shore locations, while financial services — including hedge funds and asset management firms — drove demand in Dubai.

ICYMI- Dubai saw a 35.8% y-o-y surge in office rental registrations in 1Q 2024, while Abu Dhabi saw a 9.1% y-o-y increase in total office rental contracts.

Rental rates surged across both emirates: Abu Dhabi’s Grade B office space registered the highest rental growth rate in the emirate in 1Q at 9.7%, followed by Prime (6.6%) and Grade A (3.4%) developments, the report adds. Dubai witnessed more pronounced rental increases across its Prime (7.6%), Grade A (17.9%), Grade B (21.6%), and Grade C (16.8%) rents.

#2- The UAE ranked fifth globally in crypto adoption in 2023, with 30.4% of the population holding crypto — the highest percentage among the top-ranked countries, according to research from CryptoCasinos. The UAE scored 70.76 out of 100 based on metrics including the cost to mine one BTC, net income from mining one BTC, search volume per 100k, and the penetration of crypto among the population. Argentina sits at the top of the ranking with a score of 74.49, followed by the US (73.52), Colombia (72.89), and Ukraine (72.77).

#3-The banking sector is poised to grow 7-8% y-o-y in 2024, Director General of the UAE Banks Federation Jamal Saleh told CNBC Arabia (watch, runtime, 5:36). Saleh pointed to expectations for the GDP to expand 4% y-o-y, noting that the banking sector typically records growth at least at twice the rate of GDP.

Total bank assets crossed the USD 1 tn mark in 2023, with some UAE banks — such as First Abu Dhabi — having assets that top AED 1 tn.

Consumer confidence in the UAE banking sector has climbed to 90%, some 27 percentage points above the global average, Saleh said.

#4- The UAE ranked second globally as a commodity trade hub in commodity trade with a 50% score on the Commodity Trade Index, maintaining its 2022 rank, according to the Future of Trade report (pdf) by Dubai Multi Commodities Center. The index assesses the trading sectors of 10 countries by analyzing three commodity trade categories across 10 sub-indicators. The UAE placed first in the commodity endowment factors category with a 77% score, driven by its oil output, and ranked fourth in the institutional factors category, scoring 66% on the back of its flexible tax rates and resilient trade logistics infrastructure.

HAPPENING NEXT WEEK-

#1- President Sheikh Mohamed bin Zayed Al Nahyan will head to South Korea on a two-day visit next Tuesday, 28 May, at the invitation of South Korean President Yoon Suk Yeol, Wam reports. The state leaders will discuss ramping up cooperation in trade, investment, energy, and technology, in addition to regional and international developments. Marking the president’s first visit to Korea, the landmark working visit is expected to see the two countries sign a number of investment agreements and MoUs to bolster bilateral business cooperation, according to Korean news portal Korea.net.

#2- The Central Bank of the UAE (CBUAE) will auction four m-bills worth up to AED 15 bn Monday, according to a statement (pdf). Three of the m-bills are tap issuances, with the four having tenors ranging from 28 to 280 days.

Decoding central bank speak: M-bills are short-term securities issued in AED by the CBUAE at no interest. The bonds typically have maturity dates of one to 12 months and are not retrievable through any other listing. A tap issuance allows the CBUAE to more finely control money supply by allowing it the flexibility to continue selling bills past the initial auction date.

#3- A big week ahead for Arab diplomacy? The foreign ministers of Saudi Arabia, the United Arab Emirates, Egypt, Jordan and Qatar will join their 27 European Union counterparts in Brussels on Monday for talks. Look for the war in Gaza and the post-war order there to take center stage. Foreign Minister Prince Faisal bin Farhan, meanwhile, was in Tehran yesterday for the funeral of Iranian President Ebrahim Raisi. Bin Farhan was joined by the FMs of the UAE and Kuwait as well as the emir of Qatar.

THE BIG STORY ABROAD-

It’s a quiet day in the foreign press this morning, but Wall Street’s seesaw yesterday is on everyone’s minds.

The Dow Industrial Jones had its worst day yet this year, falling 1.53% despite the post-earnings rally in Nvidia, which had lifted the broader market earlier in the day. The S&P 500 was not far off, with more than 400 stocks in the red at the end of trading, despite notching record highs earlier in the day. Nasdaq was also down 0.39%. (FT | CNBC | AP | Bloomberg)

The reasons behind the drop? A mix of strong economic data, high treasury yields, and US Federal Reserve’s minutes from its latest monetary policy meeting dampened expectations of a rate cut in September.

Stock markets in the Gulf also had a bad day, with the ADX falling to its lowest level in two years, and the DFM down 0.8%, Reuters reports. Over in Saudi Arabia, the Tadawul was also down 1.3%, with almost all sectors in the red.

Speaking of the ADX: ADX-listed crypto conglomerate Phoenix Group’s is “monitoring” its share price after it dipped 7% on Wednesday, closing at AED 1.8, down from AED 1.95, in an ADX filing (pdf) yesterday. The company said it does not have any information that could negatively affect the share price or that hasn’t been shared with the market. Its shares fell another 7% yesterday to AED 1.68.

IN KEEPING WITH THE CAPITAL MARKETS THEME- Ethereum ETFs on the way? The US Securities and Exchange Commission approved rule changes that pave the way for the introduction of ethereum ETFs.(Financial Times | Bloomberg | CNBC)

ALSO GETTING ATTENTION- Elon Musk’s SpaceX could sell shares valuing the company at USD 200 bn in June, Bloomberg reports.