MOP 6.00 Number 516 Friday April 11, 2014
Publisher: Paulo A. Azevedo
Macau Airport’s duty free service is to go to the highest bidder via tender. The winning bid needs to invest at least 4.48 million patacas. The Airport’s operator wants to open the duty free service when King Power Duty Free (Macau)’s exclusive concession expires in November Page 3
Year III
Great hopes and last chances. The croupier’s dream Page 8
Name-and-shame bad debt website in trouble Page 6
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An absolute steel A joint venture between companies linked to Hong Kong-listed contractor China State Construction International Holdings Ltd lines up a steel works project in Macau worth 377 million patacas Page
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All that glitters
Authorities announce co-operation between Hong Kong and Shanghai stock markets. Investors can trade certain companies’ shares listed on both sides. Markets react well and stocks jump.
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Sands China Ltd
6.81
Lenovo Group Ltd
4.91
China Resources Ent
4.04
Cathay Pacific Airwa
3.75
Bank of Communica
-1.15
Sino Land Co Ltd
-1.16
China Overseas Lan
-2.33
Ping An Insurance G
-3.00
China Resources Lan
-3.35
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HK-SHG markets link
When Kenny Leong returned home he decided to have a say about the status quo of Macau’s business and political landscape. In a way nobody else has done, with satiric videos
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Lights, camera, irony
Tencent Holdings Lt
Source: Bloomberg
To jewellers, last year’s gold rush was heaven on earth. Now sales of gold and jewellery remain flat due to weakening customer demand and slower economic growth on the mainland
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Sin Fong contractor accountable for building collapse risk Page 2
Fewer residents applying for government income supplement Page 4
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April 11, 2014
Macau
Cement sins Sin Fong contractor has been held accountable for collapse risk. In a public statement the contractor for the building announced that he wanted liabilities to be cleared via legal procedures Stephanie Lai
sw.lai@macaubusinessdaily.com
Secretary Lau Si Io presides press conference yesterday
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he technical director and contractor for Sin Fong Garden, which suffered a nearcollapse in October 2012, have been identified as the parties accountable for the building’s construction flaws, a supplementary investigation led by the government has confirmed. On October 10, 2012 all of the 140-plus households in Sin Fong Garden in Patane had to be evacuated after one of its support pillars in the car park collapsed, threatening the whole building structure. The residential building remains sealed off. An administrative investigation conducted by
the government concluded that the technical director for the Sin Fong Garden construction project, Ernesto Sales, and contractor Ho Weng Pio should be held accountable for the poor quality of the concrete support pillars for the car park, director for Land, Public Works and Transport Bureau Jaime Roberto Carion told a press briefing regarding the investigation results yesterday. The contractor company for the Sin Fong Garden construction was Weng Fok Engineering and Construction Ltd, a subsidiary of property development firm Companhia de Construção
e Investimento Ho Chun Kei Limitada. In a press release issued yesterday, Ho Weng Pio – who wrote in his name and for the Weng Fok company – stated that he hoped that the liabilities for the Sin Fong Garden’s near-collapse incident can be cleared via judicial procedure soon. Mr Ho also noted in the press statement that both he and his company, along with the Sin Fong Garden home owners, were “deeply distressed” by the building’s near-collapse incident. A supplementary investigative report, conducted by a team of engineering scholars from
the University of Macau and National Taiwan University in December last year, also concluded that the demolition of an industrial building next to Sin Fong Garden or the foundations works of the residential project Soho Residence located at a nearby construction site should pose no major influence on Sin Fong’s own building structure. Sin Fong Garden’s core structural flaws lie in the substandard quality of some of its support pillars in the car park, the investigation team noted. This finding echoes that of the first official investigation report released by the government in April
last year. Director of Legal Affairs Bureau André Cheong Weng Chon noted in the briefing yesterday that the latest investigation findings can serve as evidence for Sin Fong residents pursuing litigation. “The residents can adopt conservatory measures to try to ensure compensation [through civil litigation],” Mr Cheong said. “With these new [investigation report] materials, our departments can conduct a detailed analysis again and consider if there are any traits that can prove that criminal elements were involved,” he added.
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April 11, 2014
Macau
Airport opens duty free services to tender Airport operator CAM wants to select two companies to operate the duty free service with investments worth at least 4.48 million patacas (US$560,000) via tender Tony Lai
tony.lai@macaubusinessdaily.com
M
acau International Airport Co Ltd (CAM) yesterday launched a public tender to look for two companies for the airport’s duty free service, requiring the winning bidder to invest at least 4.48 million patacas (US$560,000). The 54-day tender underscores the airport operator’s desire to open up the duty free service market after its exclusive concession with King Power Duty Free (Macau) Co Ltd expires in November. CAM said in a press statement yesterday that the public tender will last from yesterday to June 2, and hopes to “select two bidders to provide worldclass duty free services to passengers” at Macau International Airport. A CAM spokeswoman confirmed with Business Daily that King Power - sole provider of duty free services in the airport since 1995 – is obligated to participate in the bidding process if the company wishes to continue operating in the airport. King Power, currently occupying some 2261.6 square metres, was not immediately available for comment yesterday regarding whether it will join the tender process. According to the company’s website, Pansy Ho Chiu King, co-chairwoman of MGM China Holdings Ltd, is one of the shareholders of the company. CAM intends to pick up two separate companies to operate one duty-free area occupying 1,122 square
metres plus another 1,130 square metre area, according to the tender document. The airport operator also said in the document that the successful bidder must invest in retail space at “no less than 4,000 patacas per square metre” to improve the facilities. With the area varying from 1,122-1,130 square metres, this means that the future service provider must invest at least 4.49 million-4.52 million patacas. The airport operator declined to disclose the current duty free revenue of the airport. CAM only said in the
tender document that the “duty-free/ retail spending rates per passenger [in the airport] are substantially higher than the spending rates in other airports in the Asia Pacific region, Europe and the Americas.” According to previous statements by CAM, its average non-aviation revenue per passenger, mainly from duty-free service and food and beverage, reached 95 patacas in 2012, up nearly 80 percent from 53 patacas in 2009. CAM’s overall revenue from non-aviation business reached 494 million patacas last year, against
about 426 million patacas in 2012. The duty free service providers have to pay CAM monthly rents of 600 patacas per square metre, as well as commissions, according to the tender document. It is not the first time in the past year that CAM has opened its sub-concession services. The company is now reviewing bids for private aviation ground handling, passenger and crew services. But it has failed to open up the sectors of aviation fuel and in-flight catering, as there is a lack of interested firms.
Valuable steel China State Construction inks JV for 377mil-pataca project
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ompanies linked to Hong Kong-listed contractor China State Construction International Holdings Ltd have formed a joint venture for a steel works project in Macau worth 376.9 million patacas (US$47.1 million). The contractor informed the Hong Kong Stock Exchange in a filing on Wednesday night that its subsidiary CSHK Engineering Ltd and its sister firm China Construction Steel Structure Corp Ltd had formed a company incorporated here on
Wednesday for the project. The latter holds 70 percent of the shares of the company, while CSHK controls the remainder, the filing said. The filing did not specify what the steel project here is, only adding that the main contractors of the project are other CSC subsidiaries - China State Construction Engineering (Hong Kong) Ltd and China Construction Engineering (Macau) Co Ltd. CSC announced in May last year that CSC Hong Kong and CSC Macau had
been appointed as main contractors of the HK$10.5-billion (US$1.35-billion) deal for the maiden Cotai casino-resort project of MGM China Holdings Ltd.
CSC’s gross profit from its operations here posted an 87 percent rise from the previous year to HK$123.7 million last year. “Backed up by public construction
and mega casino projects, Macau’s construction market continues to flourish,” the contractor said in another filing last month. T.L.
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April 11, 2014
Macau
Fewer claiming government top-up Fewer residents are applying for the government income supplement Sara Farr
sarafarr@macaubusinessdaily.com
T
he number of applications approved for the government’s income supplement totalled 6,255 in 2013, a drop of 13 percent compared to that of the previous year. This is the lowest figure on record since the implementation of the scheme in 2008. The Financial Services Bureau announced this week that the number of permanent residents in property management receiving income supplements totalled 2,967, with each receiving an income supplement of 3,387 patacas, around 32.5 percent of the total. According to official figures, the government spent some 30.8 million patacas with the income supplement in 2013, compared to 31.5 million the previous year. People in the manufacturing industry got a higher per capita income supplement at 7,606 patacas quar-
terly, followed by those in retail who got 5,244 patacas. This means that the manufacturing industry remains the lowest paid in Macau, followed by retail. People in property management received a per capita income supplement of 3,387 patacas each quarter, while those in the food and beverage industry got around 4,300 patacas, and “others” picked up 4,642 patacas. The scheme gives an eligible employee aged 40 or older cash to top up his or her income if it is less than 5,000 patacas (US$625) a month. The government raised the maximum income for eligibility for the scheme from 4,700 patacas last year. An employee is eligible if he or she works at least 152 hours a month, or 128 hours a month if employed in the textiles or garment industries. The supplement is paid quarterly.
Video power to the masses Business founder Kenny Leong wants to change Macau, one video at a time Raquel Dias
newsdesk@macaubusinessdaily.com
“H
ello, I’m Kenny” is how the funny and creative sketch “pissed off, man | the 9000$ Macau FIX”, starts. As this article goes to press, Kenny Leong’s Youtube video - with his strong remarks on business practices and politics - has notched up more than 15,500 views since late March. Kenny Leong, a Macau-born Chinese, emigrated in the early 90’s to Toronto but decided to return home after finishing his education in New Media, where he focused mainly on film. “When I read Eckhart Tolle’s book ‘The Power of Now’ I was inspired; I decided I needed to do something with my life. Coming to Macau seemed like the right step”, he tells Business Daily. Once back, he tried to find jobs in the SAR; one of the casinos even offered him a 15,000-pataca salary but he eventually turned them down. “I don’t care about the money; I want to do something I’m proud of”. He eventually founded Cycon Entertainment, a video production company, with three friends. The group is best known for I Food Macau, the most downloaded app. in town. As he arrived in town last year, the biggest surprise was what he describes as “culture shock . . . I felt people didn’t feel free to say what they meant”, he explains. That is why, and without any political
affiliations, he decided to make a series of videos on his own time, pro bono. “When I first talked to my friends about the Pissed-off video they all advised me not to do it but I felt I needed to . . . I really don’t care about money”, he insists again. “I don’t mind working for free if it’s something I believe in, and can be completely independent”. The pissed-off 27 year-old really aims to ‘kill’. During the video’s four minutes, Kenny speaks about the government’s easy way out by paying Macau residents MOP9,000. The quick fix doesn’t really do much in a city where there’s no universal healthcare system or where simple issues like public transportation are being ignored, he complains. In a quirky aside, he speaks in Cantonese but throws a few English words into the mix as well as subtitling it. Kenny’s Youtube channel SHOOTANDCHOP has pulled in 2,055 subscribers and offers various short films, from anti-drug campaigns to a well executed “artists series”, in which several local artists critique their work. He has already gained recognition in town. Fundação Oriente has recognised him with “Best Local Entry Award Winner” for its “Sound and Image Challenge” so if you want to know what all the fuss is about catch his video on www. macaubusiness.com
“. . . I felt people didn’t feel free to say what they meant”
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April 11, 2014
Macau
Jewellery store lose lustre Sales of gold and jewellery remain flat so far this year owing to several factors such as weaker demand following last year’s gold rush, jewellers report Tony Lai
tony.lai@macaubusinessdaily.com
T
he sales of gold and jewellery in Macau this year have so far been lacklustre due to weakening customer demand and slower economic growth on the mainland, say jewellers. Chow Tai Fook Jewellery Group Ltd, the world’s largest jewellery retailer, informed the Hong Kong Stock Exchange in a filing on Wednesday that its revenue from operations in Macau and Hong Kong had dropped 3 percent year-on-year in this year’s first quarter. The fall was due to a decline of 9 percent in the store’s growth in the two territories, despite “meaningful contribution” from the sales of new stores in both Macau and Hong Kong, said the company, citing unaudited data. Chow Tai Fook attributed the decline in the same store sales of both cities to “weakening customer traffic during the period”. Lei Chi Fong, president of the Macau Goldsmith’s Guild, said other local jewellers had also suffered flat
Right now is a sluggish period following the splendid growth of last year Lei Chi Fong, president of the Macau Goldsmith’s Guild
sales in the first three months of this year. More than 90 jewellers are members of the goldsmith guild here. “It’s like a cycle,” Mr Lei, also managing director of Seng Fung Jewellery Co Ltd, said. “Right now is a sluggish period following the splendid growth of last year.”
Dining al fresco Strict government rules haven’t accommodated outdoor seating for restaurants and cafes for quite some time
O
utdoor dining has (theoretically) been a thing of the past since 2009, when the government ceased issuing outdoor seating licences to restaurants and cafes. According to a report in this month’s issue of Macau Business, uncertainty surrounds whether the government will resume issuing such licences in the future, which fall under the auspices of the Civic and Municipal Affairs Bureau. “The Civic and Municipal Affairs Bureau must try to keep the equilibrium between pushing forward economic development and upholding the public interest,” it is quoted as saying. One of the reasons that outdoor seating is deemed unsuitable is the fact that many Macau streets are too
narrow and are burdened with a heavy flow of pedestrian traffic. Which is not always the case, however, in parts of Taipa and Coloane. Currently, some 21 premises offer outdoor seating, the report says. In the last two years, the Civic and Municipal Affairs Bureau has received two requests from cafes and restaurants to offer an outdoor seating area, neither of which have been approved. Even before the licence freeze, businesses say getting a licence was “tricky,” requiring a lot of paper work. The process was also quite lengthy, despite the bureau saying it took only 30 working days. Read the full report in this month’s issue of Macau Business, available at newsstands or online at www. magzter.com
Gold prices suffered the biggest drop in three decades in April last year, triggering a rush to buy gold and gold products in the Greater China region. Official figures show that retail sales of jewellery and watches here totalled over 20.46 billion patacas (US$2.56 billion) last year, increasing by 30 percent from the previous year. “Some customers may have already over-bought gold products
during the craze last year, so they don’t have to buy much now,” Mr Lei said. The guild president said the weaker mainland Chinese economy so far this year and the mainland’s crackdown on corruption may also have impacted the consumer sentiment of mainlanders, the largest income source for local jewellers. Analysts have predicted that the mainland’s economic growth in the first quarter of this year may head to the slowest quarterly growth since the financial crisis of 2008-09. Mainland exports last month also declined 6.6 percent from the previous year, mainland authorities said yesterday, contrary to analysts’ median estimate of a 4.8 percent increase compiled by Bloomberg. The news agency quoted Zhang Zhiwei, chief China economist at Nomura Holdings Inc in Hong Kong, as saying “Economic momentum may have stalled temporarily in March.” But the goldsmith’s Mr Lei is not overly pessimistic about this year’s gold and jewellery sales, saying: “As I have said, there will be ups and downs. Sales will grow robustly again after an adjustment period.”
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April 11, 2014
Macau Brought to you by
Graduates wanted Macau will need around 14,000 more qualified workers by 2015
HOSPITALITY Minute figures The number of visitors that arrive in Macau on packaged tours has risen steadily throughout the years. In the last three years, the average annual growth rate stood just below 20 percent. Visitors from Asia typically represent more than 99 percent of the total. What is left in terms of visitors coming from other continents is virtually insignificant. Last year, the average number of visitors coming from non-Asian places as part of packaged tours amounted to no more than 6,000 per month. These are minute figures and they have been declining. In 2010, the corresponding total was close to 86,000, a change that is equivalent to a loss of about 15 percent.
V
arious industries will require a number of qualified workers over the next couple of years. The hospitality, meetings and conventions industries alone will need as many as 14,300 qualified workers. But even providing 2,000 will be an uphill slog, Macau Business reports this month. The forecasts provided by the Tertiary Education Services Office reveal that Macau will need up to 850 more nurses and over 1,500 more teachers between 2012 and next year. At least 330 more social workers are needed to plug the gap.
The report quotes the head of the Tourism Research Centre at the Institute for Tourism Studies, Leonardo Dioko, who says that the shortage of highly qualified workers forecast for the hospitality industry may be a distortion. According to him, not all positions need necessarily be filled by graduates. “Qualified workers can mean workers with some years of work experience already, or technically or vocationally trained people who are more ready to work in frontline or in back-office operations such as security management,
housekeeping, and technology maintenance, etcetera”. Other industries facing labour shortages include Macau’s healthcare system, where “resources must be allocated to the expansion of intakes of nursing students,” the nursing director at the Macau University of Science and Technology, Helena Li Yuk Lin, said. The full story on the pressing need for more graduates can be read in this month’s issue of Macau Business, available at newsstands or online at www.magzter.com
“Debtors’ blacklist” boss arrested Police arrest the website operator for naming and shaming alleged casino cheats, following six-month investigation The first thing that is immediately visible in the monthly flows of visitors from the other continents - and, also, the three biggest individual countries contributing to the records, the United States, the United Kingdom and Australia - is the great variability in their size throughout the year. That seasonality is associated with the holiday patterns in the countries of origin. The Americas lead the ranking in most of the period observed but their trend is pointing downward. The top spot is currently being disputed with Europe. The numbers for the latter region have remained more stable, oscillating most of the time around 2,500 persons per year. The decrease in American visitors was precipitous in the middle of 2013, driven by the sharp decline in visitors from the US, and has only partially recovered since then. Oceania figures are neatly tracking those from Australia, its main point of origin for visitors. We leave Africa aside here. Monthly numbers from that continent are extremely small and, in the period shown here, the annual figure never went beyond 300 people. J.I.D.
6.6%
decline in European visitors on packaged tours, January and February, on previous year
Stephanie Lai
sw.lai@macaubusinessdaily.com
T
he founder and operator of the website “Wonderful World” - that named and shamed Macau casino gamblers for alleged bad debts - has been arrested for alleged breach of the data protection law, while providers of debtors’ information posted online would also face similar charges, Judiciary Police confirmed with Business Daily. After more than half a year of investigation, Judiciary Police arrested the operator and business development director of website 99world.com on Wednesday, for “failure to comply with the obligation to protect personal data”, according to article 37 of the data protection law, police spokesperson Choi Iat Peng told Business Daily. Under the article, offenders can be imprisoned for one year maximum or fined up to 1.2 million patacas (US$150,249). The dual-language Chinese-English website is infamous for its blacklist of debtors posted along with the amount of debt owed plus personal photos, names, and in some cases mobile phone numbers half covered. Many of the debtors, according to the website, are from mainland China. “We have yet to confirm if all of these personal information [details] provided online are from gaming promoters,” Mr Choi told Business Daily, adding that the police have yet to confirm if all the debts listed on the website are gaming-related or whether they have
identified the other operators running the website. Mr Choi said that the case has already been passed to the Public Prosecutor’s Office for further investigation. Business Daily viewed the website yesterday, which still posted debtors’ information in the “Rogue” section despite the fact that Judiciary Police have already ordered the website operators to take all data offline. “We’re also charging the operator with the crime of disobedience as he did not obey our order to remove these debtors’ information,” Mr Choi told Business Daily. The “Wonderful World” website is hosted by a Singapore server, according to information released to the media by police. A legal source familiar with the case said that the instigators of pursuing gaming debts by posting debtors’ information online, namely the information providers in the case for “Wonderful World”, could face similar charges to the website operator. “These instigators have also violated the data protection ordinance, under which the general rule to apply is a maximum imprisonment of one year or a fine for 120 days, where each day the fine can range from 50 patacas to 10,000 patacas,” said the source, Business Daily attempted to reach the operator of the website by phone for more information on how to deal with the possible legal charges but has not received a call back by the time this story went to press.
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April 11, 2014
Macau Lacklustre VIP performance drags market down More reports on slower April casino revenue Tony Lai
tony.lai@macaubusinessdaily.com
M
ore brokers have zeroed in on the fact that casino performance so far this month has slowed from March by 14-23 percent, thanks to sluggish results from the VIP market. Credit Suisse released a research note this week stating that average daily casino revenue reached only 886 million patacas (US$110.75 million) in the first week of this month.
This represents a drop of 23 percent from the last week of March, as well as a 15.3-percent decline from the average daily revenue of 1.05 billion patacas so far this year, the broker said in a client note. The broker noted that the performance of the VIP market was sluggish this month after solid results in the past two months. But it added that the revenue from the mass market still enjoyed “ideal” growth, increasing so far in April by 20 percent over the previous year. Barclays Capital also released a research note this week saying that the low win rate in the VIP rooms has affected this month’s performance. Casinos here took in 866 million patacas on average in the April 1-7 period, down 14 percent from the daily average of
Credit Suisse says April average daily casino revenue has dropped 23% compared to March
1 billion patacas last month, according to Barclays. Brokerage Wells Fargo Ltd already said in a note on Monday that the daily revenue so far this month was down by up to 21 percent from March due to inclement weather. The latest official figures show that gaming revenue
expanded some 19.8 percent from the previous year to nearly 102.2 billion patacas in the first quarter of this year, following a 13.1-percent growth in March. But Credit Suisse said the weekly revenue could “fluctuate”, due to the different win rates of casinos.
It expects that April’s gaming revenue can still grow in the low double digits over the previous year. Barclays believe that gaming revenue will expand between 10 percent and 16 percent this month, likely posting up to 32.83 billion patacas.
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April 11, 2014
Macau
Between a bright future and a last chance The profession of croupier possesses a somewhat negative social aura. For some candidates the profession might herald a bright future, while for others it’s simply the last chance of a job. Here are the dreams and ambitions of a new wave of graduates, comprising local residents of different ages from diverse academic backgrounds Viviana Chan
Zhang Lili
Becoming a croupier is my last chance to find a way out in my life
I now feel an inclination for maths and I study until two or three in the morning to memorise baccarat formulae
50 year old Chan Kan Lon
Mike Lau
support, he entered the gaming industry. “I believe that, as a croupier, the future will be brilliant”, he said. The will to become a croupier has helped him to develop a recently found appreciation for mathematics, a subject that had brought him only bad grades during high school. “I now feel an inclination for maths and I study until two or three in the morning to memorise baccarat formulae”, he said. Mike’s mother also worked in a casino but “she wasn’t able to become a croupier, since that position is reserved for a higher class”, he declares with pride. Still, although the mother supports his choice, the father
is against it. “My father is worried that I’ll fall into the bad habits of other casino employees”, he says. Regardless, he was able to convince him to fund his tuition because the parent values studying above all else. Zhang Lili, 30 years old, is equally convinced that a job at the gaming tables brings good prospects and that’s why she, too, enrolled in the Lucky Gaming Center, having secured a resident ID card just two months prior. Born in Jiangsu province, Lili graduated in the food and beverage area in an inner China professional school and currently manages a team of waiters in a casino restaurant
Leong Chi Weng
T
he gaming sector’s economic boom has reached every corner of Macau and influences the daily life of residents, especially those looking for a new job. Thus, many of them seek out croupier training programmes, like those offered by the Lucky Gaming Center, managed by the Macau Federation of Workers Associations (FAOM). Only 23 years old, Mike Iau quit his job as a swimming teacher at the Dom Bosco College at the end of March, deciding to concentrate on learning the correct techniques to enable him to become an accomplished croupier. According to what he told JTM, during breaks between Lucky Gaming’s classes the local youngster studied for two and a half years in Zhuhai and became a lifeguard, following a series of training sessions at the Macau Swimming General Association. For six years, he worked as a lifeguard and swimming instructor at the college but know confesses that it was a “very boring” profession. He stressed that his wages weren’t enough to meet daily expenses so, with his mother’s
although she’ll quit that job if she lands a croupier position. The schedules of the new profession don’t scare her, since her current place of work also operates 24 hours a day. Although living in Macau for over eight years, the young woman stresses that she is not a frequent casino visitor, so she does not worry about any of the usual problems associated with working in that area, such as gaming addiction. Zhang’s first contact with gaming came in the form of the Hong Kong movie series “God of Gamblers”. “Gamblers are portrayed as heroes, possessing wonderful card playing techniques”, said the mother of a three-year old. She believes that “being a croupier is wonderful” and that her entry into the gaming world will be a proud achievement, mainly for her family, living in inner China. She points out that, “when Mainland people speak of Macau, the impression you have is that there’re nothing but casinos here. It’s great to be a part of this great industry”. She also thinks that current opportunities in the restaurant business don’t compare with a croupier’s job.
A profession spanning several generations These FAOM courses, however, are being sought by older candidates as well. Chan Kan Lon will be 50 years old this year and after working in a trade agency for nearly two decades as a quality control technician he decided that it was time for a new challenge. His previous company was seriously affected by the gaming sector’s liberalisation and he was told that his salary would be cut in 2014. “Becoming a croupier”, he said, “ is my last chance to find a way out in my life”. Chan’s family was non-committal when he informed them of his decision because they knew there were no better options available to maintain their quality of life. Before enrolling in the Lucky Gaming Center, Chan tried several times to find a job elsewhere, including through the Labor Affairs Bureau, but “the results were not satisfactory”. As a parent of two sons – a 14 yearold and a 12 year-old, “the school’s best students” - Chan Kan Lan is extremely proud of his family and he’s more than willing to sacrifice for his sons’ future. He is prepared to work another ten years to pay for their studies. At 48, Leong Chi Weng faces a similar situation, having worked for over a decade in a printing company and now as a casino security guard. With a pregnant wife, Leong is adamant that he will spare no effort in guaranteeing a good future for his baby. Born in Macau, Leong admits that he was never tempted to try his luck betting in a casino, so he’s not fearful of falling foul of gaming addiction. His opinion is that the temptation is “manageable” and that it all comes down to strong willpower and individual attitude, and not forgetting the role of family education. “My father always told me that what you do is not important, as long as it doesn’t involve gaming”, he added. Although hopeful that a croupier future is waiting for him, he’s not making any big plans yet. “I still don’t know if the casinos will hire me”, he says, while admitting that it would be an important step in his life enabling him to earn one third more than he earns now. “To become a croupier is the only chance I have to be promoted”, he concluded. Exclusive JTM/Business Daily
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April 11, 2014
Greater China
Keeping an eye on the online banks New Internet finance products offer more advantages than traditional ones but involve proportionally associated risks
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n Wednesday morning, online finance product Yu’ebao handed out 1.43 yuan for each 10,000 yuan (US$ 1,626) of investment to its users. This represents an annualized interest rate 5.37 percent, much higher than the current benchmark deposit rate offered by banks of 3 percent, but it is not the highest among similar products. Though adored by an exploding number of customers, online finance products are under scrutiny by banking regulators and commercial banks are fighting for deposits they used to own. Experts at Boao Forum for Asia seem to believe that the likes of Yu’ebao are neither angels nor demons, and regulation will lead to development of both traditional banking and innovative “wealth management”. Justin Yifu Lin, economist and professor with the National School of Development at Peking University, told a panel discussion on Wednesday that online finance will help both people and economic growth, to some extent. Since Alipay launched Yu’ebao in June 2013, plenty have followed suit with similar products. As more and more clients transfer deposits elsewhere, banks are also cobbling together high interests products. Yu’ebao customers invest in a money market fund and
make handsome profits from their balance while enjoying the liquidity of demand deposits. More than 81 million users had deposited 500 billion yuan by the end of February. Alipay said last month that Yu’ebao offers a way of collecting small amounts of money from customers to raise the total funds available in the real economy when those small amounts enter the financial system. “However, online finance will not resolve all of China’s problems,” Lin said. Online products mainly support consumption and small and medium enterprises, rather than helping technological progress and industrial upgrades, crucial for sustainable growth. The country needs diverse financial services to meet the needs of different industries, Lin said. Chen Zhiwu, a professor of finance at Yale School of Management, said online finance is conducive to inclusive growth, but its significance is over exaggerated. The explosive growth of Yu’ebao is not just a result of integrating the Internet with finance, but of supervision loopholes, according to Chen. Regulatory authorities had lagged behind, but moved to keep up last month. In mid-March, the central bank stepped up supervision for online finance and
All client materials and information are put online, so there are great risks from hacker attacks and Internet failures Ma Weihua, Wing Lung Bank chairman
suspended virtual credit cards and payments via code scanning, which involved Alipay and Tencent, another Internet company with finance products. In response to deposit outflow, four state-owned banks have lowered their limits for transferring money to Alipay via mobile phone apps for each transaction, each day and each month. The Industrial and Commercial Bank of China, the largest by market value, lowered the daily limit from the previous 50,000 yuan to only 5,000 yuan and the monthly limit from 200,000 yuan to 50,000 yuan at the end of February. “We should set some basic requirements and thresholds for the development of online finance to avoid unfair competition,” Yan Qingmin, vice chairman of
March crude imports drop Official data yesterday registered a drop to less than 6 million barrels per day (bpd) after three months of high inbound shipments and gains in fuel product inventories
KEY POINTS March imports 5.54 mln bpd, down 7.8 pct on mth, up 2 pct on yr Q1 imports up 8.3 pct on yr to 6.06 mln bpd Crude imports lowest since 13-mth low hit in Oct 2013 Brent crude futures hit a two-month high above US$112
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nd while the imports were up 2 percent compared to the same month a year ago as state-oil firms started up larger term contracts with suppliers such as Iraq and Russia, analysts said the shipments may drop further in the second quarter as refineries enter a peak maintenance season.
The world’s top energy consumer took in 23.52 million tonnes, or 5.54 million barrels per day (bpd), of oil in March, according to the General Administration of Customs, down 7.8 percent on a daily basis from 6.01 million bpd in February. China’s crude imports had held at more than 6 million bpd over
China turns net fuel exporter 1st time since 2010 –Citi the December-February period, hitting a record high 6.63 million bpd in January. But oil product inventories surged over the same period, indicating real demand was soft - underlined by China turning net oil product exporter in March for the first time since January 2010, according to a Citi research note.
the China Banking Regulatory Commission said. The government should adopt different supervision measures for different products, such as wealth management and peer-topeer credit. It should also coordinate regulations and make innovations to suit the new reality, he said. Ma Weihua, chairman of the Hong Kong-based Wing Lung Bank Ltd., said that before online finance products can rule out associated risks, “a more cautious attitude in supervision is no bad thing.” “All client materials and information are put online, so there are great risks from hacker attacks and Internet failures,” Ma said. Supervision should prioritize Internet security, especially the security of user information, he said. Xinhua
“China’s crude imports fell in March from the previous two months as demand recovered more sluggishly than usual after the Chinese New Year holidays and as refineries were likely wary of high product stocks,” Barclays analyst Sijin Cheng said. “As some major refineries will have scheduled maintenance in April to May, crude runs and imports are likely to remain muted in early second quarter,” Cheng said. Sinopec Corp shut down its 160,000-bpd Changling refinery for maintenance from late March, the company has said. PetroChina Co Ltd plans to shut down its 410,000-bpd Dalian refinery for about two-month overhaul in April-May. China’s crude imports were also lower last month compared to the few months previous amid continued worries about economic growth in the world’s second-largest economy. The country’s overall exports unexpectedly fell for the second straight month in March and imports dropped sharply, intensifying concerns about weak manufacturing. Together, the oil and trade data helped to undermine a two-day rally in oil prices, with Brent dropping back as much as 50 cents after the customs report was released. “We are seeing a further pullback in oil because China’s trade numbers fell short of expectations,” said Ben Le Brun, a markets analyst at OptionsXpress in Sydney. Reuters
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Greater China HK banks raise deposit rates Banks in Hong Kong are now offering higher interest rates than their mainland cousins on new renminbi (RMB) currency deposits as the recent sharp fall in the Chinese currency dampened investor interest in holding Chinese assets. These aggressive measures will help bolster the offshore yuan liquidity pool which is under pressure from the weakness of the “redback” and the emergence of more offshore yuan centres. With HSBC and Bank of China Hong Kong leading the way in raising deposit rates, smaller banks are likely to follow suit.
March iron ore imports surge China’s iron ore imports rebounded in March from a 13-month low hit the previous month, customs data showed yesterday, boosted by rising steel production, increasing supplies of overseas iron ore and a drop in prices. The world’s largest iron ore consumer increased imports of the steelmaking raw material to 73.96 million tonnes, up 21 percent from 61.24 million tonnes in February, the lowest since February 2013, data showed. Imports were nearly 15 percent higher than a year ago, according to Reuters’ calculations.
PBOC injects 55 billion yuan China’s central bank will drained 114 billion yuan (US$18.39 billion) from the money markets through forward bond repurchase agreements yesterday, traders said, meaning it will inject a net 55 billion yuan into the market this week. That will mark the first time it has injected funds on a net basis since the end of January. The People’s Bank of China (PBOC) drained funds by issuing 70 billion yuan worth of 14-day repos and 44 billion yuan in 28-day repos. The PBOC conducted a net drain of 62 billion yuan from the market last week.
Copper imports rebound Imports of copper rose 10.8 percent in March from February on expectations of increased seasonal demand through the second quarter, although shipments were still well off a record high hit in January. The resilience of imports by the world’s top copper consumer could support global prices, which fell about 5 percent last month, the sharpest loss since June. Yesterday, copper traded at US$6,612 per tonne, down 0.3 percent after the Chinese data was released. March imports rose 31 percent from year ago, but were down from a record 536,000 tonnes in January.
Li announces SHG-HK bourses Hong Kong and China have been in talks to expand mutual access, for the cross-selling of funds and easier access to capital markets
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hina’s securities regulator and its Hong Kong counterpart said yesterday they would allow mainland investors to trade shares in designated companies listed in Hong Kong, while letting Hong Kong investors buy selected Shanghai-listed shares. The China Securities Regulatory Commission (CSRC), in a joint statement with the Hong Kong Securities and Futures Commission, said the pilot scheme would be limited to companies already listed in both Shanghai and Hong Kong, as well as selected other blue-chip companies. Trading volumes will be subject to overall and daily quotas, the agencies said in a statement published on the CSRC website. “Allowing mutual investment in Shanghai and Hong Kong stocks is an important opening of China’s capital markets,” the statement said. “It will facilitate the connection of the capital markets of the two areas, promoting the bilateral opening of the capital markets, among other multiple positive factors.” During the trial period, Hong Kong investment in mainland stocks will be limited to an overall quota of 300 billion yuan (US$48 billion) overall and a daily quota of 13 billion yuan.
KEY POINTS Pilot programme announced in joint statement by regulators Significant step towards China’s capital market opening Investment limited to blue chips and dual-listed shares Programme to launch after 6-month preparation period Premier Li in the Boao Forum for Asia Annual Conference with other Asian-Pacific leaders
Mainland investment in Hong Kong stocks will be limited to 250 billion yuan overall quota and 10.5 billion yuan daily quota. Hong Kong will also require mainland investors to be institutions or individuals with 500,000 yuan in their accounts. The pilot project will launch after a preparation period of about six months. The regulators said the move would help China’s efforts to internationalise its currency, the
Soybean imports to fall Chinese soybean imports will drop as processors cannot cover their costs with a bird flu outbreak sapping demand for the animal feed ingredient they make
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mports to the country, which typically buys 60 percent of the oilseed traded in the world, could fall below 15 million tonnes in the third quarter from 18.25 million in the same period last year, traders and industry officials said. That would likely cap a rally in global prices as it would coincide
with bumper supplies from Brazil and Argentina hitting the market. Chicago Board of Trade frontmonth soybeans edged lower on Thursday after climbing to their highest since July in the last session when the U.S. Department of Agriculture cut its forecast for ending stocks.
Zendai on South African city development Zendai Property plans to break ground next year on an US$8 billion new city development near South Africa’s commercial capital Johannesburg, its chairman said on Wednesday. The 1,600 hectare “Modderfontein New City” will include offices, a light industry park, housing for 100,000 people, schools and entertainment centres and is expected to take at least 15 years to complete. The 84 billion rand (US$8 billion) development will see 3 billion rand in infrastructure spending in the next three years, with initial construction to focus on schools and houses.
yuan, and create new investment channels for yuan held outside China. But the statement did not specify whether participants in the pilot would be allowed to convert yuan to Hong Kong dollars and vice versa, or whether only yuan funding could be used for the pilot. The announcement follows a statement yesterday by Chinese Premier Li Keqiang previewing the movement. “We will actively create con-
Soy crops are spread almost all over the world
“If you crush beans in China today you lose US$80-US$100 a tonne,” said a Singapore-based senior executive with a global trading company that has processing facilities in China. “This is really discouraging people from buying beans and we expect the real impact will be felt in the third quarter.”
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Greater China
link paving the way
ditions to establish a transaction interconnection mechanism for the Shanghai and Hong Kong stock exchanges, to push forward the twoway opening of capital markets in mainland China and Hong Kong,” Li said at the Boao Forum for Asia in China’s southern island province of Hainan. Hong Kong Finance Minister John Tsang also said yesterday that Beijing was preparing a new round of opening up to overseas investors
KEY POINTS China’s Q3 bean imports may fall below 15 mln T Crushers losing $80-$100/T on negative margins State stock sale may further discourage buying
China’s stocks of soybeans, crushed to make cooking oil and animal feed ingredient soymeal, have swelled due to soaring imports in the last few months. China imported 15.35 million tonnes of the oilseed in the first quarter, up 33.5 percent on a year earlier, according to official Customs data issued on Thursday. Imports in March were 4.62 million tonnes, marginally lower than 4.808 million tonnes shipped in February. But demand for soymeal has been hit by outbreaks of bird flu, as well as falling pork prices, cutting appetite by as much as 20 to 30 percent in the February-March period, analysts said. As a result, soybean importers have cancelled up to 600,000 tonnes of South American soybean cargoes for shipment between March and May, trade sources said last month. The country has also cancelled around a million tonnes of U.S. corn, also used to feed animals, citing the presence of an unapproved genetically modified strain. But trade sources
including a Hong Kong-Shanghai mutual investment scheme.
Cross-selling Both markets represent a combined 23.5 billion yuan (US$3.8 billion) of daily cross-border trading. Investors will be able to trade 10.5 billion yuan of Hong Kong-listed stocks through the Shanghai exchange, and 13 billion yuan of mainland shares through Hong Kong, the China Securities Regulatory Commission said in a statement on its website. Linking the exchanges will “further improve the opening and healthy development of capital markets in China and Hong Kong,” Premier Li Keqiang said yesterday at the Boao Forum for Asia Annual Conference, before details of the quota were announced. Stocks with a primary listing in Shanghai have a market value of US$1.94 trillion, compared with US$3.56 trillion for Hong Kong, data compiled by Bloomberg show. Hong Kong and China have been in talks to expand mutual access, paving the way for the crossselling of funds and easier access to capital markets for investors and companies. The People’s Bank of China said in January last year that it has started preparations for the qualified domestic individual investor program, or QDII2, which will enable individuals to invest in overseas capital markets. In August 2007, China unveiled a so-called “through- train” program, in which citizens could invest directly in Hong Kong stocks, helping to push the benchmark Hang Seng Index to a record that October. Reuters and Bloomberg News
say the clampdown is being used to shield farmers from the supply glut and weak prices. An outbreak of bird flu in southern Guangdong province in January forced chicken farms to scale back on restocking, following huge losses last year after the culling of millions of birds.
Trade unexpectedly falls Investors are monitoring prospects for additional stimulus as the government grapples with protecting growth while reining in credit risks
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hina’s exports and imports unexpectedly fell in March, underscoring the depth of an economic slowdown as Premier Li Keqiang said the nation will roll out more policies to support growth. Overseas shipments declined 6.6 percent from a year earlier, the customs administration said in Beijing yesterday, attributing the drop partly to distortions from inflated data in early 2013. Imports fell 11.3 percent, leaving a trade surplus of US$7.71 billion. Asian stocks and the Australian dollar pared gains after the report added to concern that expansion in the world’s second-largest economy will deteriorate further. The government is taking steps including railway spending and tax relief to support growth while avoiding monetary measures such as cutting banks’ reserve requirements or the scale of stimulus used to counter the financial crisis in 2008. “The recovery in global demand remains tepid, even as the recovery in global activity is now wellentrenched,” Louis Kuijs, chief Greater China economist at Royal Bank of Scotland Group Plc in Hong Kong, said in a note yesterday. Kuijs said he would caution
against interpreting the trade data as showing that growth is “slowing down precariously” because March 2013 export gains were inflated by 11.8 percentage points due to overinvoicing aimed at disguising capital inflows. The customs administration reported March 2013 export growth of 10 percent.
Stimulus prospects Investors are monitoring prospects for additional stimulus as the government grapples with protecting growth while reining in credit risks and rolling out changes to the structure of the economy. Central bank Governor Zhou Xiaochuan yesterday reaffirmed the government’s commitment to market-driven changes during a visit to Shanghai’s free-trade zone. Li last week outlined measures including railway spending and tax relief to support growth as economists estimate that gross domestic product rose 7.3 percent in the first quarter from a year earlier, which would be the slowest pace since 2009. Zhou on Wednesday reiterated that markets should play a “decisive” role in the economy. Bloomberg News
Going global Companies discuss the problems of internationalization at Boao Forum for Asia (BFA) 2014 Annual Conference
State reserves sale? Plans by Chinese authorities to sell state reserves in May could add to the glut in soybean supplies, further denting imports. “The government may try to sell as much as possible,” said an industry analyst with an official think-tank. “The government is ending its soy stockpiling programme this year and shifting to target prices.” Beijing will have stockpiled more than 3 million tonnes of domestic soybeans this crop year when the programme ends in April. It also holds 2-3 million tonnes from the 2011 harvest and 800,000 tonnes from the 2012 harvest, analysts said. Crushers are losing 500-600 yuan (US$81-US$97) for processing a tonne of soybeans, compared with a 600 yuan profit in the fourth quarter of last year during peak consumption and when some shipments were delayed. The fat margin in the fourth quarter prompted China to purchase 27.7 million tonnes of U.S soy so far in the current marketing year to August, 2014. China bought a total of 21 million tonnes of U.S. soybeans the year before. In addition to the purchases from the United States, Chinese buyers have also booked more than 20 million tonnes of new-crop South American beans. Reuters
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hinese firms are venturing overseas to tap the global market, but many feel shackled due to cultural and financing difficulties, analysts said at an ongoing international forum. With the government wanting the market to play a decisive role in allocating resources, it means fiercer competition for Chinese firms and will lead them to seek overseas resources, said Liu Chuanzhi, chairman of Lenovo Holdings, at the on-going Boao Forum for Asia (BFA) 2014 Annual Conference. He and fellow delegates were speaking during a discussion on Chinese firms going global at the forum on Wednesday evening. Since China’s reform and openingup in the late 1970s, Chinese accumulated overseas investment topped 600 billion U.S. dollars by the end of 2013, with new investment worth 104.5 billion U.S. dollars alone last year, according to Zhang Guobao, president of the China Overseas Development Association. Chinese firms are increasingly trying to become major global players by acquiring their more renowned foreign peers. Chinese IT company Lenovo acquired IBM’s PC division in 2005, bringing more brand recognition to Lenovo and an increased market share both at home and abroad.
“The acquisition was not easy. It took a lot of work in market research, corporate cultural integration and adjustment of the management team and strategies,” said Liu. However, Lenovo is only one of a few to survive and thrive after a merger and acquisition (M&A). There were 99 successful overseas M&A deals made by Chinese companies last year. About 70 percent of Chinese firms’ overseas M&A efforts have failed mostly due to cultural integration problems or legal barriers, said Ma Weihua, chairman of Wing Lung Bank Ltd., and former president and CEO of China Merchants Bank (CMB). The integration of rigid western KPI (key performance indicators) management system with flexible and human-oriented Chinese business culture is key for new mergers, Liu said. But for Ma, the biggest headache for Chinese companies in their global push is multi-tier financing difficulties. Chinese firms cannot take domestic loans abroad to support business overseas, and private enterprises feel they are being disadvantaged as they lack the support that their stateowned counterparts may enjoy from policy banks. Xinhua
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Asia GrainCorp wins bid to cut oversight Australia’s regulatory watchdog will reduce regulation at one of GrainCorp’s grain terminals after competition was boosted by new rivals, likely fuelling speculation of a renewed bid for the company. The Australian Competition and Consumer Commission (ACCC) said yesterday that new rivals meant GrainCorp’s terminal at Newcastle in New South Wales state, one of eight the company runs, was now operating at a disadvantage. The Australian government last November rejected a A$2.8 billion (US$2.6 billion) bid for GrainCorp by Archer Daniels Midland Co, citing a lack of competition for the company’s east coast grain handing operations.
Aussie job jump A housing boom has also given people confidence to spend more freely
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ustralian jobs growth sped past forecasts for a second month in March and drove the jobless rate to its lowest in four months, holding out the hope that unemployment may have peaked much earlier than anticipated. The local dollar jumped half a cent to its highest in almost five months
after data showed a net 18,100 new jobs were created in March, well above forecasts of just 5,000. That came on top of a rousing 48,200 increase in February and brought gains for the year so far to a hefty 88,000, according to the Australian Bureau of Statistics.
The marked step-up in hiring pushed the jobless rate down to 5.8 percent, an unusually large drop from February’s decade-peak of 6.1 percent and a major surprise for analysts who had feared it was heading inexorably higher. “The job market is showing signs
Consumers apply price pressure Bank of Japan board member Ryuzo Miyao said yesterday gains in consumer spending are being driven by improving underlying demand that in turn should increase upward pressure on prices. “High stock prices are not the only reason that consumer spending is recovering,” Miyao said in the text of speech to business leaders in Okayama, western Japan. “A mechanism is in place that is stimulating underlying demand. This is boosting corporate earnings and leading to improvements in labour and wages.” Miyao said Japan’s economy could continue to grow above its potential rate. Australian Bureau of Statistics headquarters is based in Australia’s capital Canberra
S.K. finance ministry warns on won gains South Korea is closely monitoring foreign capital flows and financial markets and said the recent rapid rise in the value of the won was undesirable, a senior finance ministry official said yesterday, pushing the local currency off a near six-year high. Choi Heenam, director general at the Ministry of Strategy and Finance, said the short-term spike in the won’s volatility stemmed from market herd behaviour and was “undesirable”.
Won keeps steady
New central bank governor Lee Juyeol, held interest rates steady yesterday, as expected, while it evaluated low inflation at home and uncertainties abroad. All 31 analysts polled by Reuters said the central bank would keep rates unchanged yesterday, while the majority favouring a hike towards the end of the year was unchanged from March’s survey. Recent indicators have shown South Korea’s economy slowly on the mend, with inflation creeping up, but slowdown in China and possible fallout from policy tightening in the U.S.
Foreign debt costs declining in Sri Lanka The country expects its foreign borrowing costs to decline even as the country’s growing wealth forces a shift towards commercial lenders as a source of funds
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entral bank chief, Ajith Nivard Cabraal, said yesterday borrowing costs had been falling, and that he expected they would continue to do so. “In the case of foreign borrowing, we have seen a substantial tightening of the interest rates,” central bank governor Cabraal told the Reuters Global Market Forum. Sri Lanka’s ability to borrow via ‘soft’ loans with easier terms has greatly reduced following its elevation by the International Monetary Fund to lower middle-income nation status from lower income country. The Indian Ocean island nation had foreign debt totalling 2.96 trillion rupees (US$22.67 billion) by 2013, the most recent central bank data shows. Of that, loans made on commercial or non-concessional terms totalled 1.47 trillion rupees (US$11.24 billion), a 93.7 percent jump in three years during which annual foreign debt service payments also more than
Ajith Nivard Cabraal
doubled to 312.15 billion rupees. In December, the IMF cautioned Sri Lanka over its high debt ratio, which was 78.3 percent of its US$67 billion economic output last year, down from 81.9 percent in 2010. Rating agencies and economists have also warned of potential risks due to the increase in borrowing on commercial terms. Sri Lanka has borrowed in recent
years from international capital markets and from China to repair infrastructure neglected during its 26-year war against Tamil Tiger separatists, which ended in 2009. On Monday, it sold a US$500 million, five-year sovereign bond at a yield of 5.125 percent, marking a sharp in its cost of funding from January, when it placed a US$1 billion bond of the same maturity at a yield of 6 percent. Sri Lanka first sold bonds internationally in 2007. “The bulk of Sri Lanka’s borrowing have been from local sources which had been at very high rates, which now have compressed quite substantially,” Cabraal said. Opposition politicians and some economists have criticised Sri Lanka’s economic data as unreliable, saying some figures have been manipulated by the authorities to help attract investment. The government and central bank have rejected such claims. Reuters
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Asia of stabilising with unemployment having peaked or pretty close to it,” said Savanth Sebastian, an economist at fund manager CommSec. “There is no question that the economy has lifted and it is pretty clear that the transition in activity from mining to housing construction has been a case of so far so good.” The upbeat report should underpin the Reserve Bank of Australia’s optimism that the economy is picking up speed and that there is no need to cut interest rates further from their record low of 2.5 percent. The futures market had already priced out any chance of another easing and has been toying with the idea of a hike by year-end, giving it a probability of around 40 percent. That is one reason the local currency has climbed more than four cents in as many weeks, although the higher it goes the more pressure it puts on trade-exposed sectors of the economy.
Pace quickens The latest rise in employment took annual jobs growth up to 1.1 percent and nearer the 1.5 percent pace needed to absorb new entrants into the workforce and stop the unemployment rate from rising further. Forward-looking indicators of labour demand suggest that target is well within reach. Job advertisements in newspapers and on the Internet rose for a third straight month in March to reach 132,925, according to a survey by ANZ out this week. That jelled with the government’s measure of vacancies, which rebounded by 2.6 percent to hit 142,700 in the
KEY POINTS Employment rises 18,100, beating forecasts of 5,000 Jobless rate drops unexpectedly to 5.8 pct, 4-month low
Australian treasurer criticizes U.S. reform
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Leading indicators point to further pick-up in labour demand three months to February. Dun & Bradstreet’s latest survey of business found 22 percent intended to employ new staff this quarter, against 12 percent that planned to cut back. As a result, its employment expectations index rose to its highest since early 2011. A housing boom has also given people confidence to spend more freely, which could keep a lid on unemployment in the year ahead. “We’ve seen a few improvements in the employment trend in the first three months of 2014,” said Su-Lin Ong, a senior economist at RBC Capital Markets. “You’d have to argue that the headline plus the detail all underscore a pretty strong report.” “What the labour market is doing is stabilising, improving after what was a pretty tough 2013. That’s broadly consistent with the economy which started to pick up in Q4 of last year and that seems to have translated and carried over into 2014.” Reuters
nternational Monetary Fund members must find a way around a deeply disappointing impasse in the U.S. Congress over reforms to the global lender, Australian Treasurer Joe Hockey said on Wednesday. Hockey hit out at delays in implementing changes agreed by the Group of 20 bloc of advanced and developing nations in 2010, which he said were letting down the international community and were entirely the fault of the U.S. Congress. “I am deeply disappointed that the IMF quota and governance reforms that the G20 agreed to in 2010 have still not been implemented and that the path forward for ratification is now highly uncertain,” he said at an event organized by Johns Hopkins University. “The failure to finalize this issue diminishes America’s global standing instead of enhancing it.” The reforms would give more power to emerging markets such as Brazil and China and increase the IMF’s resources. Australia chairs the G20 this year and Hockey said there would be a joint meeting of G20 nations and the IMF’s International Monetary and Financial Committee on Friday
to work on practical solutions to the problem. IMF members had to look at ways to ensure that the IMF had enough resources during the delay in implementing the 2010 reforms, and also to deliver more balanced representation, Hockey said. Some G20 officials have suggested moving ahead on the reforms without the United States, although U.S. approval would be necessary for any major decision to go forward because of Washington’s controlling share of IMF votes. Hockey declined to detail the options under consideration, but said: “The fact is that doing nothing is not an option, there needs to be action.” A bid to get the U.S. Congress to approve IMF reforms was dropped last month amid concerns that it could hold up a bill providing aid to Ukraine. Some Republican lawmakers have complained that the reforms would cost too much at a time of deficits and budget cuts or lessen U.S. influence at the IMF, which supporters of the reforms denied. IMF Managing Director Christine Lagarde has said she would continue to work for the reforms. Reuters
BoJ governor gives major boost to yen Japan’s central bank governor, Haruhiko Kuroda, gave the yen its biggest boost in over seven months but sends Tokyo stocks tumbling
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uroda seized the opportunity to speak directly to financial markets on Tuesday, when the Bank of Japan (BOJ) introduced live news conferences, reinforcing his core message that the recovery in the world’s third-biggest economy was steadily banishing 15 years of deflation. Nearly a year after unleashing an unprecedented burst of asset purchases -printing money to buy government bonds and forcing long-term bond yields lower- Kuroda has been consistently bullish about achieving his 2 percent annual inflation target. But with entrenched expectations that the BOJ would take further easing measures in the next few months, he spoke more forcefully than before - and was heard in real time. Previously, his media briefings after BOJ decisions were not broadcast live. Instead, reporters were prevented from publishing his remarks until the briefing ended, when summary headlines would spill out on traders’ screens in a single barrage. Tuesday’s hour-long, live presentation featured some unusually strong language, and it hit its mark.
KEY POINTS
Governor Haruhiko Kuroda has impacted with his first Live Speech to markets
BOJ’s Kuroda surprised with hawkish tone in first live briefing Stronger tone aimed at correcting expectations of further easing Central bank’s policy and yen outlook unchanged
“I guess Governor Kuroda always appears to be brimming with selfconfidence, but for people seeing him for the first time, this must have been vivid,” said Izuru Kato, chief economist at Totan Research. “He was so confident, he may have seemed hawkish.” Most of about a dozen economists and market participants interviewed after Kuroda’s performance said their forecasts had not changed but that the bookish central banker’s bullishness may have pushed back market expectations of
further stimulus. Most also said the yen’s pop was likely the result of short positions - investors betting that the Japanese currency would fall - getting squeezed, rather than a new uptrend for the yen, which has dropped sharply during Kuroda’s year of easy money. The U.S. dollar fell more than 1 percent against the yen on Tuesday after Kuroda’s remarks, accelerating its decline in overseas trade to 101.55 yen, its lowest level since March 19. The Tokyo stock market, already closed for the day when Kuroda
spoke, tumbled 2.1 percent on Wednesday.
‘Headlong expectations’ Kuroda chose his live debut to tell investors, in unusually strong language, that “Japan is making steady progress towards 2 percent inflation. I don’t think there is a need to take additional measures now.” He added: “As always, I remain convinced about the prospect for achieving our price target.” He stressed that the economy would recover
briskly from a national sales tax implemented last week that Japan’s labour markets were tight and that growth had almost caught up with its potential. He even went so far as to say that the BOJ could adjust policy in either direction. And yet, while this all surprised some investors, prominent BOJ watchers saw a change only in delivery. “His stance hasn’t changed but he conveyed his intention to change market expectations of additional easing - to correct the headlong expectations for easing,” said Hideo Kumano, chief economist at Dai-ichi Life Research Institute. To be sure, not everyone was impressed. “It gave the market a message that he had no choice but to read a draft that his staffers prepared for him, which is an image of the old BOJ culture,” said Kyoya Okazawa, head of global equities at BNP Paribas, who called the presentation “uninspiring”. As it has done every meeting since last April’s easing, the BOJ kept its commitment to increase base money, its key policy gauge, at an annual pace of 60-70 trillion yen (US$580-US$680 billion). Bloomberg News
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International Banks test Swedish government threats Sweden’s government said it won’t criticize banks for ladling out bigger cash rewards to shareholders while warning the industry to gird for tighter rules that will limit the scope for future dividends. Banks “must understand that we will increase our demands when it comes to capital going forward” and “take that into account when they make forecasts for dividends,” Financial Markets Minister Peter Norman said in an interview in Stockholm after a speech yesterday. It’s “the shareholders’ privilege to decide how big dividends they want to pay,” he said.
Carrefour sales match estimates France’s largest retailer, reported first-quarter revenue that matched analysts’ estimates as a recovery at its Spanish and Belgian units contrasted with weakness in Italy and China. Revenue fell 3.7 percent to 19.8 billion euros (US$27 billion), Boulogne-Billancourt, France-based Carrefour said yesterday. That matched the median of 13 analysts’ estimates compiled by Bloomberg. Sales at stores open a year or more advanced 0.7 percent, excluding currency swings. Carrefour, which is weighing selling a stake in its Brazil unit next year, is focusing on price and convenience as it seeks to cement a revival in France.
Troubled return to bond markets in Greece
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reece was set yesterday for a milestone return to bond markets with a five-year debt sale that also sends a major signal that the Eurozone debt crisis is fading. The debt issue comes four years after Greece was rescued from impending bankruptcy and was frozen out of borrowing normally. Hours before the sale, a powerful car bomb exploded outside the Bank of Greece in central Athens but nobody was hurt as police had time to clear the area. A return to borrowing on the bond markets represents an important milestone in Greece’s financial resurrection after two EU-IMF bailouts. The bond sale, timed a day before a scheduled visit by German Chancellor Angela Merkel, is designed to raise 2.5 billion euros (US$3.6 billion) according to the finance ministry. But according to reports, offers of some 17 billion euros from lenders have already accrued for Webnesday’s issue. The last issue of five-year bonds four years ago had an interest rate of 6.1 percent, but experts believe that
Greece might pay investors a rate of return as low as 5.0 percent this time. Athens’ move was welcomed by the IMF, which along with the European Union and the European Central Bank has provided monetary support for the troubled economy.
Car bomb blast The government condemned the car bomb attack, with state spokesman Simos Kedikoglou telling Skai Radio: “The terrorists aim to change the agenda. We will not allow that.” The vehicle, a stolen Nissan packed with 75 kilograms (165 pounds) of explosives, blew up around 02:55 GMT as it was parked on the pavement facing a central bank building near headquarters, police said. The car was almost entirely destroyed by the explosion, TV footage showed, and debris and broken glass was scattered across a wide radius, an AFP reporter on the scene said. Internet news website Zougla and the Efymerida ton Syndakton newspaper were informed of the planned attack by telephone one hour beforehand.
Marks & Spencer apparel lead slowdown
Marks & Spencer Group Plc, the U.K.’s largest apparel retailer, reported a smaller-than- anticipated decline in fourth-quarter general merchandise sales as demand for women’s clothing picked up. Non-food sales at stores open at least a year fell 0.6 percent in the 13 weeks ended March 29, the London-based retailer said today in a statement. That compares with a 0.9 percent median decline estimate of 19 analysts surveyed by Bloomberg News. Food revenue on the same basis advanced 0.1 percent, topping the median estimate for no change.
RBS to scrap dividend share Royal Bank of Scotland and the U.K. government agreed to scrap the state’s rights to preferential dividends, bringing the lender closer to making pay-outs to shareholders and a return to private ownership. RBS said in a statement on Wednesday that it will pay the U.K. Treasury a 320 million-pound (US$537 million) dividend in 2014, and eventually at least 1.18 billion pounds more to retire the dividend rights completely, “with flexibility as to timing. The retirement of the dividend access share will in the future allow the board of RBS to state more clearly a dividend policy to existing and potential investors,” the company said.
Police bomb disposal experts gather evidence at the site of an explosion in the centre of Athens, Greece
Athens found itself frozen out of debt markets in 2010 after it revealed its public accounts had been falsified, and was forced to seek a bailout from the European Union and International Monetary Fund (IMF) to avoid defaulting. In return for the bailout funds, Greece has had to institute a host of deeply unpopular reforms including streamlining its bloated public sector, moves that have sparked regular strikes and protests in a country suffering a sixth straight year of recession and with a staggering 28-percent unemployment rate.
Bond issue follows protests The announcement of the return to debt markets came on the same day as protesters launched the first antiausterity strike of 2014, following five general strikes the previous year. The strike shut ferry services to the country’s world-famous islands, disrupted air travel and closed pharmacies and government offices. The so-called “troika” of the European Union, the European Central Bank and the IMF first bailed out Greece in 2010 with a programme worth 110 billion euros. When that failed to stabilise the economy, they agreed a much tougher second rescue in 2012 worth 130 billion euros, plus a private-sector debt write-off of more than 100 billion euros. Fiscal reform under EU-IMF tutelage has brought upgrades to Greece’s debt standing by ratings agencies in recent months -but Greek bonds still carry junk status. The 2012 debt haircut traumatised many investors at the time, and some were unimpressed with Thursday’s sale. “Given its low rating, regardless of the pricing level, we’re not intending to participate,” said Joszef Szabo, Head of Global Macro at Aberdeen Asset Management. AFP
Louis Vuitton: la vie en rose results Moet Hennessy Louis Vuitton (LVMH) reported its fastest fashion and leather-goods sales growth in two years
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he stock rose as much as 4 percent in Paris trading. Firstquarter fashion and leathergoods sales climbed 9 percent on an organic basis, Paris-based LVMH said yesterday in a statement after European markets closed. That was the fastest growth since the first quarter of 2012. Analysts predicted a 6 percent sales gain. “The clear highlight in the first quarter was the much better-thanexpected performance in fashion and leather,” Eva Quiroga, an analyst at UBS, wrote in a note to investors. She has a buy recommendation on the stock. LVMH is introducing more expensive products at handbag maker Louis Vuitton, while increasing investment at some of its smaller fashion brands amid competition from lower-priced labels such as
Michael Kors and Coach Inc. Italian rival Prada SpA last week forecast slowing same-store sales growth in the financial year through January 2015, citing a strong euro and weakening demand in China. LVMH doesn’t report earnings at the end of the first quarter.
Weak cognac The cognac business is struggling due to a clampdown by Chinese President Xi Jinping’s government on lavish spending on banqueting and gifts. Sales of wines and spirits fell 3 percent on an organic basis. Analysts predicted growth of 3 percent. It was the unit’s first decline since the fourth quarter of 2009, according to Mario Ortelli, an analyst at Sanford C. Bernstein in London. “Stellar” fashion and leather-
goods sales were “overshadowed by a contraction in wine and spirits and lower- than-expected growth in watches and jewelry,” Ortelli wrote in a note to investors. He has an outperform recommendation on the stock. Total revenue advanced 4 percent to 7.21 billion euros (US$10 billion), LVMH said. Analysts predicted 7.4 billion euros, according to the median of 17 estimates compiled by Bloomberg. Pernod Ricard SA, which makes Martell cognac, said February 13 that first-half sales to China fell 18 percent on an organic basis as the government continued to restrict spending. Weak cognac sales led the company to reiterate a forecast for a “significant double-digit decline” in profit this year. Bloomberg News
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A Surplus of Controversy Kenneth Rogoff Professor of Economics and Public Policy at Harvard University
The Times of India With Abhijeet Group failing to meet the conditions of a corporate debt restructuring (CDR) proposal it put up before banks, its lenders are now hoping for a strategic investor to enter the scene and pump in fresh funds. This beleaguered business group has put up a CDR proposal for a couple of its companies- Corporate Power Ltd and Corporate Ispat Alloys Ltd (CIAL). Both have been lent over Rs 6,000 crore by a consortium of bankers led by State Bank of India and Bank of India.
The Star SapuraKencana Petroleum Bhd’s second largest shareholder, Seadrill Ltd, has reduced its stake in Malaysia’s biggest independent oil and gas contractor by offering up to 230 million shares at the market’s close on Wednesday. In a placement done via a book-building exercise, the shares were priced at RM4.30 each, valuing the deal at RM989mil. Shares in SapuraKencana were last traded at RM4.45 on Wednesday. Sources said the deal had attracted strong interest from local and foreign long-term institutional funds. Following the transaction, Seadrill’s interest in SapuraKencana will be reduced by 3.8% from 12%.
VietNam News Viet Nam and France will facilitate economic and trade ties on the basis of open dialogue and trust. Consensus was reached in the talks held between Minister of Planning and Investment Bui Quang Vinh and French Minister of Foreign Affairs and International Development Laurent Fabius in Paris on Monday. The talks were part of the agenda during Vinh’s visit to Paris to attend the second high-level Viet Nam-France economic dialogue. The ministers described the potential for mutual benefit from developing economic ties as huge.
The Phnom Penh Post Internet service provider (ISP) Emaxx yesterday said it would scrap its retail operations and invest US$148 million in telecommunications infrastructure with work beginning in October. Representatives from Emaxx hosted a news conference at the Sofitel Phnom Penh touting the move, which they say will elevate the company to become Cambodia’s largest wholesale optic fibre and 4G network supplier. Emaxx CEO Ai Min said the company had finalised the purchase of 3,000 kilometres of existing optic fibre network from Cambodia Fibre Optic Communication Network –a Chinese-owned telecommunications infrastructure supplier.
Framkfurt’s skyline, financial heart of Germany
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AMBRIDGE – When the US Treasury recently added its voice to the chorus of critics of Germany’s chronic current-account surplus, it underscored the deep disagreement over what, if anything, should be done about it. The critics want Germany to increase its contribution to global demand by importing more and exporting less. The Germans view the maintenance of strong balance sheets as essential to their country’s stabilizing role in Europe. Both sides’ arguments will certainly receive a full airing at the spring meetings of the International Monetary Fund and the World Bank. Unfortunately, the debate has too often been informed more by ideology than facts. The difference between what a country exports and imports can reflect myriad factors, including business cycles, demographics, investment opportunities, and economic diversification. It can also reflect the government’s penchant for running fiscal surpluses; after all, the current-account surplus, by definition, is the excess of public and private savings over investment. During the first half of the 2000’s, US policymakers chose not to worry about sustained current-account deficits, which peaked at above 6% of GDP. They argued at first that the deficits merely reflected the world’s attraction to superior US investment opportunities, an odd position given that the US was not growing especially quickly compared to emerging markets. Later, academic researchers identified more plausible reasons why the US might be able to run large deficits without great risk, as long as investors’ desire for diversification, safety, and liquidity sustained global
demand for US assets. But policymakers should have recognized that even these better rationales had limits, and that massive sustained current-account deficits are often a blinking red signal of deeper problems – in this case, over-borrowing by households to finance home purchases.
Keynesians look at these surpluses and say that the northern European countries should drive them down by running much larger fiscal deficits to boost domestic demand
In the case of Germany, of course, we are talking about surpluses, not deficits. And even though the surpluses exceed 6% of German national income and would seem to be on the same order of magnitude as pre-crisis US deficits, one must remember that the German economy is less than a quarter the size of the US (at market exchange rates). However, as the Center for
European Policy Studies’ Daniel Gros has pointed out, the issue is not simply Germany. Smaller northern European countries, including the Netherlands, Switzerland, Sweden, and Norway have been collectively running surpluses at least as large as Germany’s relative to national income, and, in absolute terms, their combined surpluses are even larger. So the issue obviously merits attention. But what is the cause, and is it related to policy? Certainly, no one can criticize northern Europe for exchangerate undervaluation. By almost any purchasing-power measure, the euro seems overvalued (and the Swiss franc even more so). Keynesians look at these surpluses and say that the northern European countries should drive them down by running much larger fiscal deficits to boost domestic demand. They have a point, but they grossly overstate the case. Many studies have shown that changes in private savings and investment tend to offset partly the currentaccount effects of higher fiscal deficits. For example, larger German fiscal deficits would hardly have been a decisive factor in Europe. Research by the IMF and others suggests that the demand spillovers from German fiscal policy to Europe are likely to be modest, particularly in the Eurozone’s troubled countries, like Greece and Portugal. Germany trades with the entire world. The European Commission has recently completed its own report on Germany’s surpluses, concluding that it is difficult to pin down the many factors underlying it, which of course is true. For example, Germany’s capital-goods exporters have benefited enormously from growth in China.
The Commission nonetheless argues persuasively that policies to promote public and private investment would tame the surpluses in the short term and strengthen German growth in the long term. One might add that there are still extensive impediments to competition in the service and retail sectors in many northern European countries. Removing them would increase consumption of all goods, including imports. And Germany is right to point out that its strong balance sheet underpins Europe’s fragile stability today. Would European Central Bank President Mario Draghi’s vow in the summer of 2012 to do “whatever it takes” to save the euro have been nearly as effective if investors doubted Germany’s underlying financial strength and resolve? At the same time, it is also true that Germany could have been more forthcoming and more liberal in using its balance sheet to defuse debt-overhang problems in periphery countries like Portugal and Greece, and perhaps even Ireland and Spain. The bottom line is that large sustained external imbalances are something that global policymakers do need to monitor closely, because, as the US housing bust showed, they can be an indicator of problems that need to be investigated more deeply. And critics of the surplus countries are right that there are two sides to every balance, and that policies in both surplus and deficit countries should be subject to review. But it is wrong to believe that simplistic answers, such as more fiscal stimulus or more austerity, are a panacea; more often, the underlying problems relate to debt, structural rigidities, low investment, and weak competitiveness. © Project Syndicate, 2014
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Closing China to free up deposit rates when time is right Portugal: Bailout exit decision by 5 May
China will choose a proper time to liberalise bank interest rates and gradually reduce its currency intervention to give the yuan more freedom to move, central bank governor Zhou Xiaochuan said yesterday. “We will choose a proper time to widen the floating range of deposit rates,” Zhou told reporters and delegates during the annual Boao forum. Zhou said last month deposit rates were likely to be liberalised in one to two years, but government economists and policy advisers told Reuters they believed the central bank was treading cautiously as economic growth slow.
The Portuguese government is going to take its decision on how to leave the financial assistance programme by 5 May, so as to present it at the Eurogroup meeting scheduled for then, the government said yesterday. Parliamentary affairs minister, Luís Marques Guedes, said that “it was at the last Eurogroup meeting before the end of their programme, I believe, that Ireland said how they were going to end their bailout”, adding: “Portugal is going to do likewise”.
Chinese invest 8 bln euros in Portugal
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hinese investments in Portugal have totalled 8 billion euros (around 88 billion patacas) in the last two years, according to Portuguese news agency Lusa. The secretary general of the Social Democrat party (PSD), Matos Rosa, is quoted as saying that “in retrospect, Chinese companies invested 8 billion euros in Portugal in the past two years, at a time when the investment was needed.” Mr Rosa met with Chinese
ambassador Huang Songfu in Lisbon, Portugal, in what was a courtesy call as part of the meetings PSD regularly holds with ambassadors there. According to the report, a highranking Chinese official is scheduled to visit Portugal in June. Although no name has been given, Mr Rosa is quoted as saying that the visit is important in order to accelerate business and friendship cooperation between Portugal and China. Initially, Chinese investments were
more in the financial sector but have since expanded into areas such as agriculture, dairy products and wines. These, Mr Rosa is quoted as saying, are “very important for producers and entrepreneurs.” These types of cooperation – financial sector first, and now agriculture – are seen as a sign of broader cooperation between the countries. The report quotes Mr Rosa as saying that Chinese factories have been set up in Portugal and that
this is a healthy kick-start for other Chinese companies looking to invest in the country and create Portuguese jobs, which is “very important” at this stage. “We teach the world about political and global cooperation, as is the case of Macau. Portugal needed help and outside credibility and the [Chinese] ambassador showed that China believes in Portugal, and that the country will overcome the crisis and is on the right track.”
Stocks jump on plans for cross Russia may change budget rules border investment
BlackBerry may consider exiting handsets
Hong Kong shares closed at their highest level in more than three months yesterday, lifted by news that Beijing’s securities regulator will allow crossborder stock investment between Hong Kong and Shanghai (see report on page 10). The announcement also boosted mainland indexes, with the Shanghai composite index reaching a two-month high. The Hang Seng Index ended up 1.5 percent, its highest close since Jan. 2. The China Enterprises Index of the top Chinese listings in Hong Kong increased 0.4 percent. The Shanghai Composite Index ended up 1.4 percent. The CSI300 of the leading Shanghai and Shenzhen A-share listings rose 1.6 percent. Both indexes closed at their highest since Feb. 20. The new rules will allow mainland investors to trade shares in designated companies listed in Hong Kong, and at the same time let Hong Kong investors buy shares in Shanghai-listed firms.
Russia may change its budget rules to reflect the addition of Crimea and its population of about 2 million people, First Deputy Prime Minister Igor Shuvalov was quoted as saying yesterday. Shuvalov told German daily Die Welt that Crimea - the Ukrainian Black Sea territory annexed by Moscow last month - needed investment in infrastructure that could not be covered by existing funds. Boosting the economy in Crimea is important to President Vladimir Putin’s hopes of keeping the support of the local population. “When a country gets 2 million new people ... which need big investments, this cannot be done by just diverting funds from existing state programmes,” he was quoted as saying, adding that the roads and ports required “serious investments”. Russian budget rules limit government borrowing to no more than 1 percent of output and link spending to the long-term oil price.
BlackBerry Ltd would consider exiting its handset business if it remains unprofitable, its chief executive officer said on Wednesday (Thursday in Macau), as the technology company looks to expand its corporate reach with investments, acquisitions and partnerships. “If I cannot make money on handsets, I will not be in the handset business,” John Chen said in an interview, adding that the time frame for such a decision was short. At its peak, BlackBerry shipped 52.3 million devices in fiscal 2011, while it recorded revenue on less than 2 million last quarter. Chen, who took the helm of the struggling company in November, said BlackBerry was also looking to invest in or team up with other companies in regulated industries such as healthcare, and financial and legal services, all of which require highly secure communications. Chen said small acquisitions to strengthen BlackBerry’s network security offerings were also possible.
Reuters
Reuters
Reuters