Inflation in Abu Dhabi decelerates

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WHAT WE’RE TRACKING TODAY

THIS MORNING: Pakistan tests equity exit ramp with the UAE

Good morning, wonderful people. We’re kicking off the final workweek of the year with a rather slow news day.

Abu Dhabi’s inflation decelerated slightly in November, supported by transport prices — the second-largest component of the consumer basket — dropping during the month.

AND- We look at the year that has been in the UAE’s banking sector, from the impact of a global monetary easing cycle to the continued push for financial inclusion and digitization. Look for more of our Year in Review stories over the next several days.

Israel became the first UN member state to formallyrecognizeSomaliland's independence on Friday, a move that could alter the security architecture of the Red Sea and give Addis Ababa the legal cover it needs to proceed with its contested 50-year port lease at Berbera. Israeli leader Benjamin Netanyahu framed the recognition as an expansion of the Abraham Accords, with Somaliland’s leader, Abdirahman Mohamed Abdullahi, saying his enclave would join the framework.

The UAE, Arab League, and African Union all condemned Israel’s actions, with the UAE’s permanent representative to the Arab League Hamad Obaid Al Zaabi calling the move “an assault on [Somalia’s] sovereignty and territorial unity.”

The diplomatic fallout moves to New York today. That’s when the UN Security Council will convene for an emergency session at Somalia’s request.

Will Donald Trump be the spoiler? While Prime Minister Benjamin Netanyahu framed the move as being in the “spirit of the Abraham Accords,” US President Donald Trump appeared to pour cold water on the idea. In an interview yesterday, Trump dismissed the prospect of immediate US recognition and downplayed Somaliland’s strategic offers, calling its bid to host a US military port “no big deal.”

BACKGROUND- Landlocked Ethiopia signed a memorandum of understanding with Somaliland in early 2024 seeking 20 km of coastline for a naval base and commercial port in exchange for future recognition.

The strategic context: Israel's recognition places it at the center of a scramble for the Red Sea, with the UAE, Turkey, and Ethiopia all vying for control of strategic ports like Berbera.

Watch this space

INVESTMENT — Pakistan tests equity exit ramp with the UAE: Pakistan is exploring an equity-linked transaction to settle a USD 1 bn liability to the UAE, potentially using Fauji Group as the vehicle, Pakistan Today cites Pakistan’s Deputy Prime Minister Ishaq Dar as saying. While details of the liability weren’t disclosed, we previously reported that UAE banks extended a USD 1 bn Islamic financing facility to Pakistan in Ju ly. The proposal landed as President Mohamed bin Zayed Al Nahyan was in Pakistan for talks on trade and investment.

How it’s being set up: The debt-for-equity swap would see the UAE take a stake in Fauji Group — one of Pakistan’s largest conglomerates — instead of an allcash repayment. Fauji is anchored in fertilizers with operations spanning cement, energy, food, and financial services.

What to watch: Pakistan has been working to stabilize its balance sheet by shifting bilateral liabilities into investment-linked arrangements and easing pressure on FX reserves. If it goes through, the agreement could become a template for how Pakistan restructures external liabilities, and how Gulf capital prices sovereign risk beyond straight lending.

Still leaning on rollovers: Dar added that a separate USD 2 bn UAE loan could also be rolled over. As we previously reported, the UAE has already rolled over USD 2 bn in repayments multiple times as Pakistan works to stay aligned with its USD 7 bn IMF program.

The big story abroad

With a holiday-shortened business week yet to begin in the west, the global business press is once again going long on geopolitics, offering deep dives into inconclusive talks yesterday between US President Donald Trump and Ukraine’s Volodymyr Zelenskyy. Trump called the talks to end the war in Ukraine “excellent” and said they had made “a lot of progress.” Zelensky was less enthusiastic.

We’ll see as the day wears on whether the Santa rally in equities continues… Asian markets opened mixed this morning.

…but commodities are doing well: Silver rallied to a record high north of USD 80 per ounce, gold edged higher, and Brent crude poked above USD 61. You can thank geopolitical tensions, a weaker USD, and Beijing making all the right noises about supporting domestic growth in 2026.

With news sparse, there’s lots of stocktaking about 2025 — and looking ahead to 2026 and beyond — if you’re in the mood:

With chants of “bubble” rising, the guy who engineered the Big Short is now shorting Nvidia and Palantir at the same time as top AI startups have amassed a USD 150 bn war chest;
Politico has a deep look at who’s up and who’s down in the 2028 US presidential race;
The New York Times’ Roger Cohen thinks 2026 could be a turning point for peace in our region.

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Weaker transport prices ease Abu Dhabi inflation to 0.9% in November

Abu Dhabi inflation cools, even as housing + utilities prices rise at four-year record: Abu Dhabi’s consumer price index cooled to 0.9% in November, down from October’s reading of 1.5%, according to data (pdf) from the Abu Dhabi Statistics Center. On a monthly basis, inflation fell 0.3%, after having inched up 0.7% in October, separate data (pdf) shows, indicating that broad inflationary pressures in the capital are dissipating under the weight of falling transport prices.

Housing + utilities, furnishing lead the charge: The housing, water, electricity, and gas and other fuels segment — the heaviest-weighted component of the consumer basket — saw prices rise 3.9% y-o-y in November. Furnishing, householding equipment and routine household maintenance also inched up 5.9%. Inflation in these two categories rose at the fastest pace over the last four years. The ins. and financial services sector posted a 6.6% y-o-y increase, remaining unchanged from the previous month. While this is far below the 14.4% peak seen in April, it remains one of the fastest-growing categories in the emirate’s price index.
The clothing and footwear segment hit its lowest pace in four years, down 13.2% in November. Transport prices — the second-largest component — returned to deflation territory (-2.9%) after a brief uptick in October. Meanwhile, both education and health services prices saw no growth this year.

On a monthly basis, recreation and culture (+4.5%) recorded the highest increase, followed by a steady 0.7% m-o-m rise in housing, water, electricity, and gas costs. Clothing and footwear (-4.1%) and transport costs (-3.4%) contracted significantly, while personal care and miscellaneous goods (-0.8%), hospitality (-0.2%), and food and beverages (-0.1%) all pared back slightly.
Abu Dhabi prices remain significantly cooler than Dubai, where inflation hit 2.73% in November, easing from an October peak of 3.36% — the highest level registered this year.

The bigger picture

Earlier this month, the Central Bank of the UAE lowered its inflation forecast for this year by 0.2 percentage points to 1.3%, which it attributed to falling food and energy costs. Meanwhile, the IMF revised our inflation forecast to 1.6% in 2025 — a significant downgrade from the fund’s earlier estimate of 2.1%.

UAE banks scale overseas as FAB backs Nigeria, ADCB lends to Uzbekistan

UAE lenders are stepping up cross-border activity, with First Abu Dhabi Bank (FAB) and Abu Dhabi Commercial Bank (ADCB) extending large-ticket financing into Africa and Central Asia.

#1- FAB doubles down on Africa: FAB underwrote a USD 1.1 bn loan from the UAE to Nigeria to help finance the Lagos-Calabar Coastal Highway — one of the country’s largest infrastructure projects, according to a statement from Nigeria’s presidency.

Not just a road: The Lagos-Calabar project is a planned 700-km, c. USD 13 bn Atlantic corridor linking Lagos to the oil-rich Niger Delta, Bloomberg previously reported. Built in phases under a public-private model, it’s a wager on logistics, trade, and coastal real estate. Nigeria is stacking financing tranche by tranche, including a USD 747 mn facility in July for an earlier section.

What we know: FAB is carrying USD 626 mn of the new facility for Phase 1, Section 2 of the highway, covering a 55.7-km stretch linking Lekki to Ode-Omi. Afreximbank underwrote the loan with FAB, providing the remaining USD 500 mn; the funding comes with partial risk cover from the Islamic Corporation for the Ins. of Investment and Export Credit.

Why it matters: The agreement underscores Abu Dhabi’s growing role in underwriting African infrastructure. As we reported last week, UAE capital is backing a USD 300 mn water-supply project in Mauritania via the Abu Dhabi Fund for Development.

#2- ADCB moves into Central Asia: ADCB extended a USD 300 mn, 18-month loan to Uztransgaz, Uzbekistan’s state gas transporter, UzDaily reports. The facility carries an interest rate of 3.1% plus SOFR, with a six-month extension option — though no details were disclosed on the specific use of proceeds.

UAE lenders are already active in Uzbekistan, with Mashreq having arranged a USD 88 mn syndicated loan for state-owned Agrobank last year.

Monetary easing notwithstanding, banks in the UAE had a good 2025

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2025 may have been the year of monetary easing, but the UAE banking sector still managed to eke out bottom line growth throughout the year. The Central Bank of the UAE (CBUAE) pushed through successive cuts in September, October, and December in line with the US Federal Reserve, bringing the base rate to 3.65%.

DATA POINT- In 3Q 2025, the country’s top 10 banks saw their aggregate net income rising 4.3% to reach AED 23.6 bn.

What’s behind the growth? Net interest income (even as interest rates came down) and income from fees and commissions were the primary engines of bottom line growth for UAE banks throughout the year. In 3Q 2025 alone, Alvarez and Marsal data indicated that fees and commission income rose 7.3% q-o-q and interest continued to play a big role, as net interest income edged up 5.0% to AED 26.5 bn.

These outcomes suggest a growing structural maturity within the UAE banking sector, a key takeaway for both investors and policymakers. Banks are increasingly independently managing their balance sheets, lessening their direct vulnerability to decisions made by the Fed.

International agencies give two thumbs up: Fitch Ratings and Capital Intelligence gave UAE banks a stable outlook, reflecting the strength of the sovereign rating at (AA-). While Moody’s adjusted its outlook to “stable” as a precautionary measure, S&P Global affirmed strong credit ratings, noting that risks associated with consumer lending — which grew by 13.6% annually to reach AED 540 bn — remain manageable.

The upshot: Rising appetite for credit

Domestic credit hit a record AED 2.5 tn by the end of October, driven by a balanced increase in local and foreign demand. This momentum is clearly reflected in the volume of banking assets, which grew by AED 650 bn in just 10 months to surpass the AED 5.2 tn mark. While some slowdown in credit demand growth was noted during the second quarter, strong economic pillars and rising household incomes ensured growth remained in positive territory. Consequently, UAE banks led the GCC region in terms of loan and revenue growth rates, enjoying the strongest net foreign asset position in the region.

Beyond the local market: Fitch reports show that international loans accounted for a quarter of the increase in total loan portfolios in the first nine months of the year, providing banks with diversified income streams.

Beyond interest rates: The financial inclusion push

Financial inclusion and digitalization has also been a hallmark of the year for the banking sector, with the CBUAE launching the National Strategy for Financial Inclusion (2026-2030), which specifically targets the empowerment of women, youth, and entrepreneurs.

As a key part of this strategy, the central bank abolished the minimum salary requirement for financing. This move is designed to open up the credit system to a large segment of new residents and low-income earners who were previously excluded.

Banks were also instructed to suspend a planned increase in minimum account balance requirements until further notice, after several major UAE banks raised the minimum balance for current accounts to AED 5k, from AED 3k, effective in June.

Gazing into the crystal ball

Major banks’ international operations are on track for more growth in 2026, with loan growth potentially accelerating to 17%, despite expectations of a slight long-term decline in margins to settle between 2.5-2.7%. That compression of margins is where the real challenge will begin, and banks’ performance will depend on their ability to maintain asset quality amid rapid expansion in consumer lending.

Consumer lending could grow as much as 10-12% next year, according to previous S&P Global forecasts, with further potential interest rate cuts seen as a tailwind as the Fed is expected to cut rates by another 50 bps in 2026. UAE banks are forecast to manage the risks they face, as the banking sector is strong enough to absorb any potential rise in consumer loan defaults, S&P noted.

Emirates REIT reports 9M 2025 results

Emirates REIT’s net income grew 25% y-o-y to USD 184.9 mn in 9M 2025, according to its earnings report (pdf).

Total property income was up 22% y-o-y to USD 59.6 mn, while its portfolio occupancy rose 2 percentage points y-o-y to 94% during the first nine months of the year. The company saw its financing to asset value ratio reduced by 16 percentage points to 20% as of the end of September. This contributed to the net asset value rising 37% y-o-y to USD 886 mn.

Total asset value also increased to USD 1.2 bn by the end of September, a 3.9% y-o-y rise, driven primarily by substantial net unrealized revaluation gains of USD 171 mn, climbing 15% y-o-y despite REIT’s prior sale of investment properties in the previous fiscal year. Emirates REIT’s funds from operations came in at USD 14 mn, flipping from a loss of USD 500k the previous year. This improvement was largely underpinned by stronger debt management, with net finance costs declining sharply to USD 17 mn, down 57% from the previous year.

Passive funds surge as narrow markets punish active managers in 2025

Passive funds come out on top while stock pickers bleed: 2025 was another punishing year for active equity managers. About USD 1 tn was pulled from active equity mutual funds, extending outflows to an 11th straight year, while passive equity ETFs pulled in more than USD 600 bn, according to Bloomberg Intelligence estimates.

Concentration did the damage: A small cluster of US mega-cap tech stocks accounted for an outsized share of market gains, reinforcing a decade-long pattern. Investors trying to keep up with the market have been increasingly cornered into holding those stocks (and little else), leaving diversified portfolios at a disadvantage.

The hit rate collapsed: Roughly 73% of US equity mutual funds trailed their benchmarks in 2025, the fourth-worst showing since 2007. Underperformance worsened after April’s tariff scare faded and AI enthusiasm reasserted tech leadership.

Breadth never showed up: On many days this year, fewer than one in five stocks rose alongside the broader market. The S&P 500 consistently beat its equal-weighted version — a clear signal that gains remained narrow and unforgiving for stock pickers.

Active still worked, just not at home: A handful of managers outperformed by stepping far outside US large caps. Dimensional Fund Advisors’ International Small Cap Value portfolio gained just over 50%, driven by exposure to non-US financials, industrials, and materials rather than Big Tech.

Why 2025 felt harsher than usual: The Financial Times points out that this year’s gainers were dominated by AI-linked stocks, Asian chipmakers, defense names, and precious metals, while US consumer and advertising stocks lagged — reinforcing sector and regional divides that made broad-based alpha elusive.

The identity crisis of “active”: With deviation proving costly, many funds drifted closer to index weights, blurring the line between active and passive while still charging higher fees. Bloomberg says that dynamic has made investors increasingly unwilling to pay for underperformance.

MARKETS THIS MORNING-

Asia-Pacific markets are starting the final trading week of the year on a mixed note. Japan’s Nikkei is down 0.5%, while Hong Kong’s Hang Seng Index and the Shanghai Composite are in the green in early trading. US futures are mostly trading flat ahead of the market opening later today.

ADX	10,033	0.0% (YTD: +6.5%)
DFM	6,134	-0.1% (YTD: +18.9%)
Nasdaq Dubai UAE20	4,918	0.0% (YTD: +18.1%)
USD : AED CBUAE	Buy 3.67	Sell 3.67
EIBOR	3.6% o/n	3.7% 1 yr
TASI	10,417	-1.0% (YTD: -13.5%)
EGX30	41,605	+0.9% (YTD: +39.9%)
S&P 500	6,930	0.0% (YTD: +17.8%)
FTSE 100	9,871	-0.2% (YTD: +20.8%)
Euro Stoxx 50	5,746	-0.1% (YTD: +17.4%)
Brent crude	USD 61.15	+0.8%
Natural gas (Nymex)	USD 4.48	+2.7%
Gold	USD 4,523	-0.7%
BTC	USD 87,912	+0.1% (YTD: -6.2%)
Chimera JP Morgan UAE Bond UCITS ETF	AED 3.76	-1.6% (YTD: +8.0%)
S&P MENA Bond & Sukuk	151.73	+0.1% (YTD: +8.4%)
VIX (Volatility Index)	13.60	+1.0% (YTD: -21.6%)

THE CLOSING BELL-

The ADX was flat on Friday on turnover of AED 428.4 mn. The index is up 6.5% YTD.

In the green: Abu Dhabi National Co. for Building Materials (+4.6%), Sharjah Cement (+3.0%) and RAKBank (+2.8%).

In the red: Hayah Ins. (-6.0%), Aram Group (-2.4%) and Americana Restaurants (-1.8%).

Over on the DFM, the index fell 0.1% on turnover of AED 191.5 mn. Nasdaq Dubai also closed flat on Friday.

CORPORATE ACTIONS — Salama widens the foreign-investor gate

Islamic Arab Ins. (Salama) is resetting who can own its stock. The insurer has raised the cap on non-UAE ownership to 49% from 25%, according to a DFM filing (pdf). The change — which takes effect 31 December and preserves a 51% minimum for UAE and GCC shareholders — broadens access to the company’s stock as it works through a balance sheet reset.

The bigger reset: The ownership tweak comes as Salama advances a two-step solvency plan we’ve been tracking, combining a share-capital reduction to offset accumulated losses with a planned AED 175 mn mandatory convertible sukuk to rebuild capital and meet Central Bank requirements.

CORPORATE ACTIONS — Aman plans for a restructure

Aman reports heavy losses, CEO to step down: Dubai Islamic Ins. and Reins. Company’s (Aman) board of directors has initiated a company-wide restructuring plan after the firm incurred losses exceeding AED 195 mn in 3Q 2025, equivalent to 86% of its paid-up capital, according to DFM disclosures here (pdf) and here (pdf). The company’s CEO Rached Diab (LinkedIn) has also resigned, citing personal reasons, according to a separate disclosure (pdf). Diab will retain his position until 31 March, 2026.

Behind the heavy losses: The deficit points to Aman’s longstanding ins. challenges, with the company citing subsidiaries and investments as the main reasons for its accumulated losses. The insurer scrapped a turnaround strategy that would have seen it exit the ins. sector and transition into an investment vehicle after counterparties terminated the underlying agreements.

Looking ahead: Aman will notify shareholders of Diab’s successor upon finalizing requisite procedures and obtaining the necessary approvals from the Central Bank of the UAE and regulatory authorities. The company expects to benefit from a projected upward performance in the local economy, according to a separate disclosure (pdf).

CALENDAR

DECEMBER

29-30 December (Monday-Tuesday): World Sports Summit, Dubai.

2026

JANUARY

1 January (Thursday): New Year, public holiday.

1 January: Client asset regime changes in Dubai International Financial Center take effect.

1 January: Amendments to the Tax Procedures Law and the UAE VAT Law come into effect.

9-11 January (Friday-Sunday): 1 Bn Followers Summit, UAE.

11-12 January (Sunday-Monday): IRENA Assembly, Adnec Center, Abu Dhabi.

11-15 January (Sunday-Thursday): Abu Dhabi Sustainability Week, Adnec Center, Abu Dhabi.

11-15 January (Sunday-Thursday): ADSW Dialogues, Adnec Center, Abu Dhabi.

11-15 January (Sunday-Thursday): WiSER Forum, Adnec Center, Abu Dhabi.

12-15 January (Monday-Thursday): Dubai International Project Management Forum, Madinat Jumeirah, Dubai.

12-15 January (Monday-Thursday): SteelFab, Expo Center, Sharjah.

13-15 January (Tuesday-Thursday): World Future Energy Summit, Adnec Center, Abu Dhabi.

13-15 January (Tuesday-Thursday): FESPA Middle East, Dubai Exhibition Center, Dubai.

14 January (Wednesday): Global South Utilities Forum, Adnec Center, Abu Dhabi.

15 January (Thursday): Global Climate Finance Center Annual Meeting, Adnec Center, Abu Dhabi.

15 January (Thursday): Green Hydrogen Summit, Adnec Center, Abu Dhabi.

21-24 January (Wednesday-Saturday): Acres real estate exhibition, Expo Center, Sharjah.

28-29 January (Wednesday-Thursday): IBA Arbitration Day Conference, Abu Dhabi.

28-30 January (Wednesday-Friday): World Customs Organization Technology Conference, Adnec Center, Abu Dhabi.

31 January - 7 February (Saturday-Saturday): Mubadala Abu Dhabi Open, International Tennis Center, Zayed Sports City.

FEBRUARY

3-5 February (Tuesday-Thursday): The World Governments Summit.

4-6 February (Wednesday-Friday): Arab Actuarial Conference, Millennium Plaza Downtown Hotel, Dubai.

12-15 February (Thursday-Sunday): The Society for Incentive Travel Excellence Global Conference, Abu Dhabi.

9-13 February (Monday-Friday): The World Health Expo (WHX), Dubai.

10-11 February (Tuesday-Wednesday): Top Advisors and Investors Summit, Abu Dhabi.

MARCH

31 March - 2 April (Tuesday-Thursday): Arab Media Summit, Dubai.

26-28 March (Thursday-Saturday): Social Capital Conference, Dubai.

28-29 March (Saturday-Sunday): Emirates Congress on AI & Visionary leadership in Transforming Healthcare, Adnec Center Abu Dhabi.

30 March - 2 April (Monday-Thursday): IAAPA Middle East Exhibition and Conference, Adnec Center, Abu Dhabi.

APRIL

7-9 April (Tuesday-Thursday): Future Health Summit, Adnec Center Abu Dhabi.

13-15 April (Monday-Wednesday): AIM Congress, Dubai World Trade Center.

13-15 April (Monday-Wednesday): The International Glass Manufacturing Show, Dubai.

14-16 April: (Tuesday-Thursday): the International Property Show, Sheikh Zayed Rd, Dubai.

21-23 April (Tuesday-Thursday): UITP Public Transport Summit, Dubai.

MAY

11-15 May (Monday-Friday): Dubai Future Finance Week, Dubai.

11-13 May (Monday-Wednesday): AI Everything Global, Adnec Center.

19-20 May (Tuesday-Wednesday): Capital Market Summit, Madinat Jumeirah, Dubai.

19-22 May (Tuesday-Friday): Abu Dhabi Water and Energy Week, Adnec Center, Abu Dhabi.

JUNE

15 June-15 September (Monday-Thursday): Dubai Mallathon, Dubai.

JULY

31 July (Friday): Large businesses achieving annual revenues equal to or above AED 50 mn must appoint an accredited service provider for e-invoicing implementation.

Signposted to happen sometime in October 2026:

Abu Dhabi Space Week, Abu Dhabi.

DECEMBER

2-4 December (Wednesday-Friday): UN Water Conference, UAE.

Signposted to happen in 2026:

The UAE to host the Arab Competition Forum;
Investopia Global Talks, Tashkent.

Signposted to happen sometime in 2027:

1 January: Deadline for large businesses to implement e-invoicing;
1Q 2027: Completion of the first phase of Hassyan seawater desalination project;
31 March: Small businesses with annual revenues of less than AED 50 mn are obliged to contract with an accredited service provider for e-invoicing implementation;
31 March: Government entities are required to appoint an accredited service provider for e-invoicing implementation;
1 July: Deadline for small businesses to implement e-invoicing;
1 October: Deadline for governments to implement e-invoicing;
Abu Dhabi’s solar and battery energy facility, combining 5.2 GW of solar capacity and 19 GWh of battery storage, is set for commissioning.

Signposted to happen sometime in 2029:

Sibos 2029 organized by the Society for Worldwide Interbank Financial Telecommunication (SWIFT), Dubai;
The commissioning of the seventh phase of Mohammed bin Rashid Al Maktoum Solar Park.

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