Macau Business Daily, Sept 26, 2014 by Business Daily

MOP 6.00 Closing editor: Luis Gonçalves Publisher: Paulo A. Azevedo Number 634 Friday September 26, 2014 Year III

Sports breathing new life into industrial buildings

ndustrial buildings. Not the first thought as a home to sports. But the idea is catching on. Several sports venues are popping up in these backwater complexes. Baseball, football, skiing and snowboarding are leading the way. Small companies see these ‘ugly ducklings’ as a way to grow and fend off skyrocketing rents. Business Daily speaks to some who took the leap of faith. And believe they’ve scored big by doing so

www.macaubusinessdaily.com

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Crouching tiger, hidden dragon

Polytech’s profits drop 50% with property revaluations

Junkets are suffering. Some are being squeezed out of business. Others are regrouping. Beijing’s anti-graft campaign is taking no prisoners. Resulting in the gaming industry’s worst performance for years. Some junkets are shifting players elsewhere in the region. But it’s not just the tigers that are feeling the heat

Tsing Tsao boosts revenues from Macau

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2015: Rally year

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CTM to invest MOP1.1 billion by 2015

HSI - Movers September 25

Name

A poll predicts that next year will be very fruitful. For Asian stock markets. Especially for Chinese indexes. A slowing economy in China has translated into a mild 2014. But new revitalising measures can make the difference

4G is the new mantra. CTM is betting big on the new technology. And is taking the opportunity to take stock of marketing opportunities. The incumbent telecom company will invest more than a billion patacas to improve and develop its current and future services over two years. Full fibre optic coverage is on the radar

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Lawrence Ho gets 25 pct salary bump Melco Crown Entertainment is in the money. So is CEO Lawrence Ho, whose salary has been bumped up a quarter to US$2.5 million. Company profits are healthy, and Ho sees bright prospects ahead. Studio City opens next Summer. And City of Dreams Manila later this year

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%Day

Want Want China Ho

2.31

Tingyi Cayman Island

0.96

Hang Lung Properties

0.64

Lenovo Group Ltd

0.51

Swire Pacific Ltd

0.49

AIA Group Ltd

-1.44

CNOOC Ltd

-1.55

Bank of Communicati

-1.58

Sands China Ltd

-2.94

Galaxy Entertainmen

-3.54

Source: Bloomberg

I SSN 2226-8294

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September 26, 2014

Macau

Indoor sports to gentrify industrial buildings During his election bid for another term in office in August, Chief Executive Fernando Chui Sai On said that his future government may consider gentrifying industrial buildings to serve commercial and trade purposes as well Kam Leong

kamleong@macaubusinessdaily.com

uring his election bid for another term in office in August, Chief Executive Fernando Chui Sai On said that his future government may consider changing the gentrification of industrial buildings so that they may serve commercial and trade purposes as well. Ironically, a series of novel sport venues have been unveiled this year, ‘revitalising’ such buildings. The owners of these indoor venues, hosting baseball, skiing and football, shared with us the reasons for moving into the ‘unpopular’ buildings, and expressed their opinions on the new idea that the CE mentioned. The original plan was to revitalise residential buildings to resolve the housing problems of the city. This, however, requires the agreement of all landlords of the building, thus only a very few succeeded. The CE also admitted the flaw and difficulty of such a programme in August, saying that he may take Hong Kong as a reference to study how to convert such buildings into industrial-commercial and trade use. In addition, he may revisit the percentage of agreements required from landlords. “Of course it’s a good idea. I even think that maybe we’re even a bit

Macau Ski and Snowboard Macau Ski and Snowboard is the first place in the city offering indoor ski machines enabling residents to experience skiing and snowboarding. “The very chief reason [of opening the snowboard and ski venue] is that we are ski lovers,” one of the founders, Ms. Tong, said. The idea arose when Ms. Tong was taken by friends to ski on a snow-covered mountain and discovered it was not possible to enjoy the sensation knowing nothing about it. Discovering that Hong Kong had an indoor ski course, she tried, claiming, “It really worked; then we started researching a lot of information about setting up a similar venue in Macau to promote the sport,” she said. Meanwhile, the ski machine was also developed by one of the founders as importing such machines from America was financially unviable.

slower [than Hong Kong]. In terms of business or promoting some less common sports or activities, this new direction could help a lot,” said Joanne Tong, the representative of Macau Ski and Snowboard, the first venue in the city to offer indoor skiing facilities. Although trying to bring something new to Macau people, Ms. Tong admitted that looking for a suitable place for such activities was challenging - the rent of shops and the size that the ski machine required very much limited her options. “We looked at many different places; from industrial buildings to street-level shops as our skiing machine requires a high ceiling. In fact, we [had not] considered industrial buildings at first,” Ms. Tong said, “However, we’d have totally given up the idea of promoting the ski and snowboard [concept] in the city if there’d only been shops available because we really cannot afford the rent of those [large] shops.” The other two sports venues, according to their owners, also picked up on the idea of industrial buildings to set up their businesses for similar reasons to the Ski and Snowboard operation – a large sized unit and affordable rent.

Meanwhile, one of the founders of indoor football field Sun Soccer Sports Stadium, Miguel Sou Chan You, also agrees with this possible new direction for industrial buildings. “You know it’s been very hard for local SMEs to sustain their businesses, even though many offices have moved into industrial buildings as they cannot afford the rent of commercial buildings or shops. However, the general public may not have any interest in going to industrial buildings. In fact, if the government is able to beautify or revitalise industrial buildings, that would benefit the business of the SMEs,” Mr. Sou concludes. “Internal innovation is also important as many auxiliary facilities of industrial buildings are very old, such as the lifts. In addition, some industrial buildings close at a certain period of time, which may not benefit some businesses,” said Pak Chan.

Same-sort complex Roy Chan, the director of the baseball centre, however, does not believe that the suggested new direction will bring only positive effects.

September 26, 2014

Macau “Attracting more businesses to industrial buildings may lead to rent going up before the effect is seen,” he said. He suggested, instead, that the government gather similar businesses or activities under one roof to really gentrify and revitalise a building. “What if we focus more on the ‘promotion’ of less common industries or businesses in industrial buildings, such as cultural design or

Sun Soccer Sports Stadium Sun Soccer Sports Stadium is the second indoor football field in the city. The four founders - who are football lovers and think there are not enough football fields in the city - had dreamed of having their own football field for many years. They started planning last September and finally ‘scored’ in May. “We even looked for land to build a football field on but every inch of the land in Macau costs a lot so that idea was quite impossible,” said Mr. Sou. Seeing that indoor football fields in Hong Kong were doing well, the founders were reminded that an industrial building was a possible place to make their dream come true. According to Mr. Sou, they invested nearly three million patacas in the venue, hoping it could breakeven next year.

sport venues like us? For example, gathering indoor sports venues in one building may make the whole building more appealing.” Mr. Chan said, perceiving that such type of complex may be recalled by residents more easily when looking for things to do in their leisure time. Mr. Sou also had a similar concept, saying, “As in Hong Kong, all the stores selling fashion clothes may gather in one building; when people talk about that building, they will go to shop in that building as there are many [fashion outlets].” Hiding inside these old buildings which now primarily serve as industrial factories or offices and are unlikely to attract residents to notice, these new types of sport venue have to rely on social media or their own customers to spread information about their businesses by word of mouth, the interviewees claimed.

Rent According to these owners whose businesses are located in the northern part of the city, they are paying between 20,000 patacas (US$2,500) and 70,000 patacas in rent per month. Considering the current rents reasonable, however, they anticipate that increases will be unavoidable in the near future. Centaline Property concluded recently that the average price of industrial buildings had increased year-on-year by 20 percent during the first half of this year. The senior regional sales director of the company, Roy Ho, told Business Daily yesterday that the increase will cool down in the second half

and next year but “the rental market will remain very active and I believe the rent will climb step by step,” he said. Asked whether the future possible implementation of the new direction may significantly influence the rent, Mr. Ho believes that the rent will not be pushed “too high . . . as the government now only has the target but not the measures”. “It is not unlikely that the makeover can be easily done even if the government loosens the percentage of landlords’ agreement to 80 percent as Hong Kong does. It’s because this percentage is still quite high that it’s not easy to [convince] all the landlords that you need to.” “But in general, this new direction is advantageous for the city,” he concluded.

Baseball Base The city has never been a fan of baseball, compared to football and basketball. But realizing that there is no baseball culture in the city, Mr. Chan decided to develop and promote the sport in Macau. Opening in March, Mr. Chan’s baseball centre offers residents two main elements of the sport – batting and pitching. According to him, an indoor baseball centre serves more like an entertainment place for Macau people, “as most of them have no idea about baseball”. In addition, courses are offered to residents who want to learn more about the sport.

September 26, 2014

Macau Brought to you by

Polytech Asset profits drop 50pct The property developer posted a profit of HK$29.9 million for the first half of the year. Revaluation of properties here and suspension of oil production in Kazakhstan were two main factors for the decrease in gains

HOSPITALITY

Sara Farr

sarafarr@macaubusinessdaily.com

Bumper Year August set a new record in terms of visitors. More than 3.08 million people crossed our borders. That figure corresponds to a growth of 7.5 percent relative to the previous record, reached in the same month last year. With just eight months accounted for, 2014 has already five results among the top 10 best ever monthly scores. On current trends, this year will set a new annual record in terms of visitors. Their number is likely to exceed 32 million by the end of the year, setting the annual growth rate close to or above 8 percent. The average number of visitors for the year will in that case stand above 2.5 million (possibly even 2.6 million) for the first time.

The main contributors to growth this year have been same-day visitors. In the period between January and August, more than 11 million same-day visitors traversed Macau borders. That value represents a growth of 12.8 percent relative to the same period in 2013. The number of overnighters also grew but at a much lower rate, at 2.7 percent. As a result, the cumulative number of visitors this year, up to August, reached 21.1 million people, a rise of 7.9 percent relative to the same period in the previous year. That figure is the equivalent of almost 20,000 additional daily visitors, when compared to the average daily number of visitors recorded in 2013. The concerns and restrictions announced on individual visas do not seem to have had a major impact. Both overall numbers and the total number of visitors under the individual visa scheme keep rising. The latter rose almost 20 percent this year up to August, and 72 percent relative to the same period in 2010.

99,171

Visitors’ daily average, Jan to Aug 2014

rofits dropped 50 percent to HK$29.9 million in the first six months of the year over that of the same period in 2013 for property developer Polytech Asset Holdings Ltd. But the company “remains optimistic about the medium to long-term economic outlook for Macau,” chairman Or Wai Shuen said in Polytech Asset’s interim report filed with the Hong Kong Stock Exchange. The drop in profits was mainly due to the “decrease in the revaluation gains from the group’s investment property portfolio and the continued suspension of the oil production in Kazakhstan,” the chairman said. The company’s underlying net profit for the first half of the year amounted to HK$10.3 million, a drop of 73 percent from HK$37.5 million a year earlier. These came from “the disposal of certain car parking spaces at Va Iong in Macau and the group’s residential project in Tuen Mun, in Hong Kong, as well as the one-off exchange gain in the oil segment,” according to the interim report. Meanwhile, the company’s balance of cash and cash equivalents amounted to HK$179 million between January and the end of June, down from HK$209 million a year earlier. However, total borrowing was less than in the first six months of last year. For the first half of the year, total borrowing amounted to HK$2.13 billion versus HK$2.25 billion in the same period in 2013.

In Macau, Polytech Asset’s major property developments include luxury residential building Pearl Horizon on the Peninsula as well as commercial property Lotes T+T1, in addition to its major investment property – the Macau Square – of which it owns 50 percent. The presale programmes for both Pearl Horizon and Lotes T+T1 were put on hold when the new law on property sales came into effect in June 2013.

However, Mr. Or said, the presale of the two projects is expected to be launched again “within two years of their respective construction when all relevant requirements for presale can possibly be fulfilled.” Polytech Asset also produces and explores for oil in Kazakhstan and owns an ice making distributor in the neighbouring SAR – the Hong Kong Ice and Cold Storage Co Ltd.

Tsingtao Macau, HK post 5 percent profit increase Revenues up 13.5 percent here, outperforming Mainland market Sara Farr

sarafarr@macaubusinessdaily.com

singtao beer revenues from Macau, Hong Kong and overseas increased by 13.5 percent to RMB243 million (MOP316 million, US$39.6 million) in the first half of the year from RMB214.1 million in the corresponding period a year earlier, Tsingtao Brewery Co Ltd announced in its interim report filed with the Hong Kong Stock Exchange. While the company separates its segments by region, that of Macau, Hong Kong and overseas are combined. Profits for this segment totalled

RMB26.3 million between January and July, according to the company’s financial results. That is an increase on the RMB25.2 million profit posted in the same period a year earlier. Total revenue from external customers in Hong Kong and Macau increased to RMB126.7 million for the first six months of the year from RMB122.2 million in the corresponding period in 2013. The company’s overall net profit was RMB186.7 million (MOP239.1 million, US$29.9 million) for the

first six months of the year, a 74.8 percent drop from the RMB741.1 million recorded in the same period a year earlier. On the other hand, the company’s revenues increased to RMB9.99 billion from RMB8.94 billion. Tsingtao Brewery’s consolidated net profit – including that of the main company and its subsidiaries – was RMB1.44 billion for the months between January and the end of June, a slight increase of 1 percent compared to the same period a year ago.

September 26, 2014

Macau

CTM pulls out all the stops for 2015 During the course of this year, the company will invest MOP500 million and it has already sets its eyes on the next, when it plans to spend at least MOP600 million more. The main focus of the investment will be 4G services João Santos Filipe

jsfilipe@macaubusinessdaily.com

ompanhia de Telecomunicações de Macau SARL (CTM) plans to invest MOP500 million this year in order to expand and develop its current services and is setting aside an extra MOP600 million for 2015. The largest share of the future investment will be used to run the fourth generation (4G) wireless telecommunications services. “This year, we are investing MOP500 million in our network. Next year we’re increasing our investment by no less than 20 percent [MOP600 million]”, Declan Leong, CTM’s Vice President of Network Services, said yesterday during a press conference to present the company’s modernisation plans. “Next year, we are going to focus on 4G and on achieving 100 percent fibre coverage of Macau”, he added.

By next year, the government of Macau expects to have telecommunication companies running 4G services in the territory. In order to accomplish this the Executive is issuing four 8-year licences. The bidding process for the licences is open until November 18. “For the time being, we are developing our bidding document. We still have two months until the deadline, which we’re going to meet. According to our efforts

studying 4G we are confident that we are going to make a good bid”, Mr. Leong said about the bidding process and CTM’s application. Declan Leong did not quantify how much CTM would be willing to pay to secure a 4G licence. “For the time being, we’re paying what is necessary. But if there is a relaxation in the value paid to the government, it means that there’s room to offer better prices to the customer”, he

Lawrence Ho’s salary bumped up 25 percent Melco Crown Entertainment net income jumped in the first half to US$383.2 million, with its CEO also profiting from the results. His annual salary was increased half a million to US$2.5 million João Santos Filipe

jsfilipe@macaubusinessdaily.com

elco Crown Entertainment increased the annual salary of Lawrence Ho Yau Lung from US$2 million to US$2.5 million, the company revealed in its first-half interim report. The wage of the cochairman, chief executive officer and executive director was raised in April by US$0.5 million. The results of the company for the first sixth months show that net income attributable to Melco Crown Entertainment increased from US$234.8 million to US$ 383.2 million. During the same period, net revenues reached US$2.56 billion, a 4.8 percent increase. The company also updated the information about Studio City, the new cinematically-themed casino and resort that is going to open in Cotai and expand the exposure of the group to the mass-market. The company announced that the development of the project that is going to cost US2.3 billion remains on track to open in mid-2015. Melco Crown is also aiming to expand its capacity for the premium end of the market

with the fifth tower of City of Dreams. This project should start operating in the first half of 2017. At the moment, Melco Crown Entertainment controls City of Dreams and Altira Macau casinos here. From next year, the company will also expect to start running Studio City. Beyond Macau’s shores, Melco Crown is investing in an integrated resort in the Philippines - City of Dreams Manila. The project is due to open later this year.

explained. As for the value of the 4G market in Macau, the Vice President of Network Services said that the company is still making its calculations. “Up to this moment, we’re still focused on the bidding document. At the same time, we’re doing the inventory of equipment. At this stage, it’s still too early to quantify the market. We need to define our packages and how much we’re going to charge before we have

an accurate number”, he said. In November, MTEL Telecommunication Company Limited will enter the telecommunication market, being the first competitor of CTM. However, the increase in competition is not perceived negatively by CTM, even if it will mean that the company no longer enjoys a 100 percent market share. “We supported the liberalisation of the market and are happy to have a new player. We welcome this competitor”, Mr. Leong said. “The objective of CTM and its shareholders is to continuously increase its revenues. But if we only focused on the traditional telecom services there will be a limit for it to grow. However, if we invest in new services there is more room for the market to grow and every player can earn more in spite of market share”, he added.

September 26, 2014

Macau

Former HK official plays down mainland cash gift

former top Hong Kong official testifying at his corruption trial Wednesday played down suggestions he was given HK$11 million (US$1.4 million) in 2007 by a China official overseeing Macau and Hong Kong affairs. In testimony earlier this week Rafael Hui, the city’s former chief secretary, said he had received a payment of around HK$11 million from an undisclosed source in Beijing. He and property tycoons Thomas and Raymond Kwok are among five people charged with offences related

to payments and unsecured loans amounting to HK$34 million. The charges do not relate to any payments by Beijing. The case has shocked Hong Kong, where the Kwoks’ Sun Hung Kai Properties is the biggest developer by market capitalisation and owns some of the most recognisable real estate including the 118-floor International Commerce Centre. Hui told the court he was approached in 2007 by Liao Hui, then the head of China’s Hong Kong and Macau Affairs Office, who urged him

to stay on as chief secretary, the South China Morning Post reported. The former chief secretary declined Liao’s request, saying that the salary was not enough to sustain his luxurious lifestyle and that he would look for work in the private sector. Hui was then told by co-defendant Francis Kwan later in the year that someone in Beijing had passed money to him (Kwan) meant for Hui. But Kwan refused to reveal the donor’s identity. Hui said he then met Liao again in Beijing in March 2008, where Liao told him “I’ve helped you already, don’t overspend any more”, the Post reported, leading to speculation Liao could be the origin of the payment. But in fresh court testimony Wednesday Hui played down any suggestion the money came from Liao. “I didn’t say director Liao paid the money himself,” Hui told the court. “When I asked him (Kwan), my focus was on why there was this money for me in Beijing,” Hui said. “He said someone in Beijing contacted him,” he said. “He was clearly saying that he could not tell me.” The prosecution centres around claims that the tycoon brothers had bribed Hui to be their “eyes and ears” in the government. The billionaire brothers, who jointly chair Sun Hung Kai, were arrested along with Hui in a major swoop by graft investigators two years ago.

Evaluation of social housing in final stages

he deputy director of the Housing Bureau, Kuoc Vai Han, has revealed that the evaluation of the latest applications for social housing has now entered the final stages, when replying to an interpellation by legislator Si Ka Lon. According to Ms. Kuoc, the Bureau had received a total of 6,146 applications by the end of August. However, it was found that more than 70 percent of the applicants’ documents were not sufficient, which consequently delayed evaluation as they were asked to submit the missing information. In addition, she said that the Bureau had approved a total of 15,531 applications for social housing in the previous four application periods, namely 2000, 2003, 2005 and 2009.

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September 26, 2014

Macau

Junkets feel Beijing’s anti-graft squeeze

acau’s casino junket operators are feeling the squeeze as China’s anticorruption drive blows a hole in the world’s biggest gambling hub. Some are shifting players elsewhere, like the Philippines and Vietnam; others are quitting the business. Chinese President Xi Jinping’s near two-year crackdown on corrupt officials and tycoons has hit revenues at Macau’s high-rolling VIP lounges, and analysts predict that this year could be the worst on record with, at best, low single-digit growth, although ‘mass market’ gamblers are taking up some of the slack. The so-called ‘big whale’ gamblers, who don’t blink at dropping HK$1 million (US$129,000) on a single bet, are thinner on the ground as China’s economy loses steam and eats away at their asset wealth. The junkets on commission from the casinos to bring in the high-rollers, lend them money and settle their debts - are less willing to extend generous credit terms as it’s tougher these days to chase those debts. And local authorities and those with ties to Beijing are leaning on the junket operators – often informally over a quiet drink or hot pot dinner – to gather information on Chinese officials suspected of corruption who may be laundering money through Macau. “I can’t sleep at night. There are just too many problems,” said one 54-year-old junket operator who didn’t want to be named because of the sensitivity of the issue. “I’m not optimistic about the future of the VIP junket industry here.” “Beijing isn’t directly controlling but is putting subtle pressure on the authorities here. There’s more information gathering, and it’s harder now for even low-level [Chinese] officials to come here to gamble.” The Macau-born businessman, who manages VIP tables in Galaxy Entertainment Group’s golden

I can’t sleep at night. There are just too many problems Junket operator

turreted Galaxy Macau resort, said he was trying to get out of the business after more than 20 years. He noted that other junkets were luring customers to casinos overseas that have greater growth potential - and are further from Beijing’s prying eyes.

Asking questions Of Macau’s 220 licensed junket firms, at least 15 have shut up shop in the big casinos this year, according to a recent Daiwa Capital Markets report. The VIP business has traditionally brought in close to two thirds of Macau’s gaming revenues - of $45 billion last year, more than seven times those of Las Vegas - but analysts predict that will drop to nearer a half. “Controlling corruption is part of the business. China wants to help Macau. Both the central and Macau governments are helping Macau grow,” said Chien Lee, former chairman and CEO of Iao Kun Group, a junket that has applied to list shares on the Hong Kong Stock Exchange. In June, a high profile junket boss was interviewed in Hong Kong by Chinese investigators to provide

information on Chinese officials gambling in Macau, said two people with direct knowledge of the matter. In separate cases, more than half a dozen people operating in the junket business were detained in Wynn Resorts Wynn Macau casino late last year. In April of this year, the wife of Cheung Chi Tai, one of the owners of leading junket Neptune Group, was detained in Hong Kong along with HK$200 million (US$25.8 million), local media reported. Cheung Chi Tai, named as an alleged triad member at the money laundering trial of Carson Yeung, the former owner of English soccer club Birmingham City, could not be reached for comment. Hong Kong police say they don’t comment on individual cases. Industry executives say Beijing doesn’t want to stamp out the junket industry in Macau and is supportive of those operating within the rules and who are transparent about their business. “The government wants to support Macau. It needs the junkets for Macau to work,” said an operator at a leading junket.

Beauty parade “They’re just trying to put a collar on the junkets, not eliminate them,” said Steve Vickers, a former commander of the Royal Hong Kong Police Force’s criminal intelligence bureau and now CEO of Steve Vickers Associates, a Hong Kong-based risk consultancy. “They want the ability to pull financial levers, so junkets need to be acceptable and under supervision.” Vickers likened the situation to a junket beauty parade, “where some are paraded as winners, and some as losers.” Dore, a former Top 10 junket operator, said in June it was quitting the business, stating it “provides limited room for long-term growth development for the group.”

The Macau Government is encouraging the gambling industry, which brings in over 80 percent of the Special Administrative Region’s tax revenues, to diversify. Suncity, a leading junket with interests from property and finance to entertainment and media, has been chosen as the official sponsor of the annual Macau Grand Prix, which features Formula Three motor-racing. The company, led by 40-year-old Alvin Chau, a member of a Chinese parliamentary advisory body, is listing part of its business on the Hong Kong Stock Exchange through a deal with International Entertainment Corp, a company owned by the family of Hong Kong tycoon Cheng Yu-tung. An executive at Heng Sheng, another leading Macau junket, said Beijing’s anti-corruption campaign was lasting longer and going deeper than expected, and was adding to the pressure from tight liquidity and fragile trust in the industry after one junket agent fled with up to US$1.3 billion in April. The flow of VIP room revenue in August, at HK$40 billion, was half of June’s levels, and Heng Sheng may close its VIP tables at Sands China Ltd’s Cotai Central and Venetian casinos, according to an internal sales note made at an investor meeting where the executive spoke earlier this month. A Heng Sheng investor last month announced plans to build a US$3 billion casino resort complex on the western Pacific island of Saipan. While analysts predict VIP revenues could drop by up to a fifth over the rest of this year, casino and junket executives hope a visit by Xi to Macau in December will bolster support. “Beijing knows it needs to support Macau because if the gaming industry doesn’t do well there will be a lot of trouble here. At the same time, Beijing is the one that suffers all the social costs,” said the locally-born junket operator. Reuters

September 26, 2014

Gaming

Caesars’ assets insufficient to satisfy lenders value if a borrower fails to meet its obligations, less the value of the defaulted debt.

Caesars Palace

ields on bonds from a Caesars Entertainment Corp. unit are diverging in a sign that the casino company will be unable to satisfy warring creditor classes and increase the odds of a bankruptcy. “It’s difficult to understand how a workout would take place and bind classes outside of bankruptcy,” said Janegail Orringer, a credit analyst who follows casino bonds at Alliance Bernstein Holding LP, which manages US$486 billion. “I don’t assign a high likelihood of success to an out of court outcome,” she said by telephone. While the company has enough assets to mollify its most senior creditors and has already come to an arrangement with unsecured bondholders, there isn’t likely to be enough left for middle-ranking lenders, according to Chris Snow, an analyst at debt research firm CreditSights Inc. The difference in yields between its first-lien notes due in June 2017 and its secondlien securities maturing in December 2018 has widened to 43 percentage points from 26 points on June 30, before creditor talks began. Those bonds are obligations of Caesars Entertainment Operating Corp., the division that owns most of the parent’s casinos and which will run out of cash by early 2016, according to reports by Goldman Sachs Group Inc. and JP Morgan Chase & Co. Its first-lien creditors would benefit from a speedy restructuring of its US$18.3 billion of debt, while secondlien bondholders would do better to keep getting interest payments on notes that yield as much as 65 percent and are likely to receive little in a bankruptcy.

Apollo, TPG The parent company, loaded with debt by Apollo Global Management LLC and TPG Capital in a US$30.7 billion deal at the peak of the last takeover boom in 2008, is talking with senior creditors of the operating unit to craft a restructuring plan that reduces borrowings and curbs US$2.15 billion in annual interest expense, four people with knowledge of the matter who asked not to be identified because the discussions are private, said last week. Gary Thompson, a spokesman for Las Vegas-based Caesars, Charles Zehren, a spokesman for Apollo at

If they can get the first-lien creditor group on their side, it might enhance their ability to cram down the seconds Chris Snow, CreditSights analyst

Rubenstein Associates Inc. and Lisa Baker, a TPG spokeswoman at Owen Blicksilver Inc., declined to comment.

to convince a wider pool to accept the deal. Some debt-holders who have purchased credit-default swaps that would profit from a bankruptcy and others with multiple classes of Caesars securities may be unwilling to sign on to a restructuring that helps some of their holdings at the expense of others. Investors in the parent company’s stock that also own the operating unit’s second-lien bonds, for example, might see their equity positions benefit while their bonds decline from a deleveraging transaction. A Caesars bankruptcy would trigger settlements of US$27.8 billion of credit-default swaps contracts that are used by hedge funds, banks and other investors to hedge against losses or wager on the company’s creditworthiness, according to Depository Trust & Clearing Corp. data as of September 19. Even after accounting for contracts that offset each other, swaps traders would be on the hook for as much as US$1.96 billion in payouts on the derivatives. The contracts pay the buyer face

The cost of protecting against a default through March 2015 has surged this week to 43.6 percent upfront, from 13 percent on September 19, according to data provider CMA. That means it would cost US$4.36 million to protect US$10 million of Caesars obligations. The operating company, which owns 22 U.S. gaming properties from the flagship Caesars Palace Las Vegas to Horseshoe Tunica in Mississippi, has lost money since 2009, according to regulatory filings and data compiled by Bloomberg. Its net loss for the 12 months through June 30 was US$3.29 billion, wider than the full year deficit of US$2.99 billion in 2013. Properties owned by the operating company generated 6.5 percent less revenue in the year ended June 30 than the US$6.3 billion collected in 2013 as casino revenue dropped, according to regulatory filings.

”We’re sceptical” Sales at the parent company fell to US$8.56 billion last year from US$10.1 billion in 2008. It’s been unprofitable every year since 2009, with losses forecast for 2014 and 2015 in a Bloomberg analysts survey. Through other units, the parent controls casinos including the Paris and Flamingo in Las Vegas as well as online gaming assets like the World Series of Poker and Slotomania. Moody’s Investors Service rates the operating company’s debt Caa3 with a negative outlook, a rating that indicates “very weak creditworthiness relative to other domestic issuers.” Standard & Poor’s rates the company an equivalent CCC-. “In a sense, it’s a tug-of-war,” Snow said. “Even if you get one constituent on board with the plan, we’re sceptical you can come up with a scheme that is satisfactory with all the parties.” Bloomberg

‘Cram down’ Caesars’ Chief Executive Officer Gary Loveman said in a September 12 statement that the company was “committed to working constructively with creditors to deleverage” its most indebted unit “and create a path toward a sustainable capital structure.” Once it reaches an accord with its first-lien creditors, Caesars may pressure second-lien bondholders to accept a distressed exchange, CreditSights’s Snow said by telephone from New York. “If they can get the first-lien creditor group on their side, it might enhance their ability to cram down the seconds,” he said. In a distressed-debt exchange, borrowers offer to swap their outstanding securities for obligations that are in some way inferior. Investors who agree to the exchange believe they will receive a better return than if the company filed for bankruptcy.

Creditor conflicts Even if Caesars is successful in obtaining approval for a debt-cutting proposal from the creditors who’ve engaged in private talks, it will have

Corporate

Macau Tower named ‘Best Business, Incentive Venue’ Macau Tower Convention & Entertainment Centre has been awarded the title of ‘Best Business & Incentive Venue (HK& Macau) of the Year’ at the 2014 China Travel & Meetings Industry Awards held in Beijing. Rogier Verhoeven, executive director of Shun Tak Holdings Ltd and president of the group hospitality division, said, “Mainland China is an important market to our company and we are delighted to have won its recognition. Looking ahead, we will continue to expand our product diversity and enhance our service quality to solidify the Tower’s position as the city’s world-class centre for MICE.” China Travel & Meetings Industry Awards was jointly organised by two travel magazines - Travel Weekly and Events - with a judging panel comprising professionals and experts from the tourism industry.

September 26, 2014

Greater China

Foreign firms to get more access to delivery market The country will streamline license approval procedures and encourage mergers and acquisitions

hina will further open the domestic express delivery market to foreign enterprises to help develop a modern tertiary sector, authorities said. The State Council, China’s Cabinet, decided at a meeting chaired by Premier Li Keqiang to fully open the country’s domestic package delivery business to qualified foreign companies. The country will streamline license approval procedures and encourage mergers and acquisitions, even those launched with foreign capital, within the necessary review system. China’s international delivery business has become

basically open to overseas capital, while domestic markets in major cities have gradually become available to foreign players. The authorities believe that allowing in foreign competitors, a move promised when China entered the World Trade Organization, will push home-grown delivery businesses to up their game. The country is relying on the sector to power the development of the whole tertiary industry, driving demand and propping up employment amid the economic slowdown. China’s delivery sector is booming with annual growth surpassing 50 percent in

The domestic enterprises still need much improvement to establish a global network Wei Jigang, researcher, Development Research Centre of the State Council

recent years. About 8.16 billion deliveries were made in the first eight months of this year and combined revenue amounted to 123.04 billion yuan (US$20 billion). However, hidden peril still lies in the way along with fast expansion. “Rapid growth is not good phenomenon all the time,” said Xu Yong, industrial analyst from cecss.com. “Service quality may be sacrificed as express companies pursue nothing but business volume, which has led to cut-throat competition.” Driven by a exportoriented economy, China has made its goods available in around 230 countries and regions in the world, but an embarrassing fact is that no Chinese express companies can deliver merchandise among all those countries. “However, the four international express giants have the capability. So the domestic enterprises still need much improvement to establish a global network,” said Wei Jigang, researcher with the Development Research Centre of the State Council. Experts believe Chinese home-grown enterprises can learn the ropes from their international peers that have already had their own mature business mode.

“Those big international companies only focus on business of high added-value and trust the less profitable one to a third party,” Xu said. Another option may be market segment, as the companies have to establish their own expertise in delivering a certain kind of goods, such as electronics and clothes. “Large companies can specify their business division, while small firms can also provide customized services,” Xu said, stressing more subdivisions will result in the better quality in the sector. The good news is some of China’s leading express companies including SF Express and Yunda have started to build up their advantages in their specific fields. In addition, experts have urged companies to innovate their structures, business models and technologies to keep abreast of changing market demands. “We need a market which is unified but open, competitive but in good order, and can protect the interests of consumers so that the sector can be strong, not only in China, but also in the world,” said Yong Hu, an industrial insider. Xinhua

ASEAN + 3 agree on joint agriculture scheme ASEAN+3 countries are implementing activities especially in the areas of food security and bio-energy, climate change mitigation and adaptation

SEAN+3 (China, Japan and South Korea) countries have agreed on joint approach in an agriculture and forest products promotion scheme for 2015-19, an official statement said yesterday. According to a joint press statement of the 14th meeting of ASEAN+3 Ministers on Agriculture and Forestry, a total of 6,730 tons of rice were stockpiled under the ASEAN+3 Emergency Rice Reserve Agreement, of which 6,150 tons have been distributed to the Philippines to help typhoon Haiyan victims. ASEAN agriculture ministers also encouraged Japan to expand its establishment of Food Value Chain in some ASEAN member states through public-private partnership cooperation to a regional level. ASEAN+3 countries also reaffirmed the ASEAN+3 cooperation on food, agriculture and forestry as one of the main vehicles towards the long-term goal of building an East Asian community with ASEAN as the driving force and encouraged the plus three countries to continue supporting the implementation of the roadmap for an ASEAN Community 2009-

6,730

tons of rice stockpiled under ASEAN+3 Emergency Rice Reserve Agreement

Asean headquarters in Jakarta, Indonesia

2015 and contribute to the ASEAN Community Post- 2015 Vision. As chair of the meeting, Myanmar’s Agriculture and Irrigation Minister U Myint Hlaing stressed the need for ASEAN+3 countries to closely supervise the various ongoing activities under the ASEAN+3 Cooperation Strategy Framework, urging the ASEAN+3 countries to

closely cooperate with each other to tackle the challenges posed by natural and man-made disasters and the challenges by climate change and to achieve the sustainability of natural resources. During a meeting with Myanmar President U Thein Sein on the sidelines of the meeting Wednesday, Chinese Minister of Agriculture

Han Changfu emphasized technical exchange for production of quality strains and cooperation in prevention of deforestation in Myanmar’s northernmost Kachin state. ASEAN+3 countries are implementing activities especially in the areas of food security and bioenergy, climate change mitigation and adaptation, sustainable forest management, agricultural research and development, control and eradication of trans- boundary pest and animal diseases and human resources development. Xinhua

September 26, 2014

Greater China Regulator to slowly loosen currency controls China will gradually loosen its foreign exchange restrictions under its capital account as the next step in its economic reforms, the currency regulator said yesterday. Guo Song, the head of the capital account department at the State Administration of Foreign Exchange, the currency regulator that overseas China’s US$3.99 trillion of foreign exchange reserves, made the comments at a press briefing.

China fuels Airbus jet demand

Airbus raised its 20-year forecast for jet demand, citing growth in emerging markets, with China on the brink of becoming the world’s aviation powerhouse. The European plane maker said it saw strong demand for widebody long-distance jets as airport constraints force airlines to upgrade from smaller planes on some routes, and said it might speed up production plans for A330neo and A350 jets. Airbus sees total demand for 31,400 passenger and freighter aircraft between 2014 and 2033, an increase of 7 percent from its previous rolling 20year forecast.

Huawei to invest in fixed broadband R&D

China share markets to gain through 2015 Somewhat better economic readings recently may also provide a short-term boost to the Chinese stock market

tock markets in China and other parts of East Asia are set to rally over the next year as prices remain relatively cheap compared with U.S. and European shares, though the pace of rising U.S. interest rates may cap gains, Reuters polls showed. Many of these stock markets have lagged a global bull run this year amid worries over China’s slowing economy, though Beijing is widely expected to roll out more stimulus measures in coming months to shore up growth. The Shanghai Composite Index is seen rising over 3 percent to 2,425 points by the end of the year from Wednesday’s close of 2343.57, and then rise another 7 percent in 2015, the survey conducted over the past week showed. It has advanced about 10 percent so far this year, with the bulk of the gains coming in recent months as investors bet on further policy easing. That comes despite widespread concerns about a falling property market and no clear drivers for a major pickup in growth. But to many investors, stock prices there look relatively cheap after a steep fall in 2013 and the first half of this year.

The Shanghai Composite Index is seen rising over 3 percent from now. Shanghai Stock Exchange (pictured)

Central Bank governor walking a tightrope Wall Street Journal said President Xi Jinping is considering replacing Zhou Xiaochuan

Huawei Technologies Co Ltd., the world’s largest telecommunications equipment maker, said it would invest more than US$4 billion in fixed broadband technology research and development (R&D) in the next three years. Huawei, which has shifted its focus to the mobile device market in recent years, said in a statement on Thursday that fixed broadband - the pipes connecting homes and offices remained a “key direction for strategic investment.” The Shenzhen-based company said it would research basic technologies such as photonics used in fibre optic cables as well as software-defined networking.

Big banks support mortgage rule China’s four major commercial banks have expressed veiled support for a mortgage policy change by the central bank rumoured to be launched in the near future. Bank of China (BOC) said it has authorized local branches to adjust their practice based on market and policy changes, applying adjusted loan application methods. BOC said its practice will be market oriented and they will carry out active measures to meet rational housing demands. Releasing a nearly identical statement, the Agricultural Bank of China said it will put mortgages for first-time home purchases as priority.

hinese central bank Governor Zhou Xiaochuan, an advocate of pro-market financial reforms, may lose his job in a reshuffling that follows internal battles over overhauling the economy, the Wall Street Journal reported. Chinese President Xi Jinping is considering replacing Zhou, the paper reported, quoting officials with knowledge of the plans. The top contender to head the People’s Bank of China (PBOC) is Guo Shuqing, a former banker and securities regulator who is currently governor of eastern Shandong province, the paper said. Xi wants more allies in top government, military and Communist Party positions, and personnel changes were expected around a major party meeting next month, the newspaper said. It added that no final decision has been made about the central bank post. In a statement to the Wall Street Journal, the PBOC said Zhou, 66, would not be stepping down soon. Zhou, who has led the central bank for the world’s second-largest economy since 2002, has been the architect of broad financial reforms that have spawned fledgling capital markets, liberalized some interest rates and broken the peg between China’s yuan and the U.S. dollar.

Zhou Xiaochuan, current PBOC Governor

Christian Lundblad, professor of finance at the University of North Carolina at Chapel Hill, said Zhou leaving would increase uncertainty about whether China wanted to slow the pace of reforms designed to open the economy. “If this means they are going to be moving away from that in the face of concerns about a slowdown (in growth), I’m disappointed,” he said.

Zhou was reappointed as the PBOC chief in March 2013, although he had already reached the normal retirement age of 65 for cabinetranked Chinese officials.

Economy stumbles China’s economy has stumbled in recent months. It is at risk of falling short of the government’s 7.5

September 26, 2014

Greater China But equity analysts, always a bullish lot, seem to have discounted most of those risks, calling instead for a rally that looks hinged on the easy liquidity provided by the People’s Bank of China.

KEY POINTS For poll data click on Shanghai, Hong Kong, Seoul shares expected to rise Attractive valuations to drive East Asian stock markets Rising U.S. interest rates to limit rapid gains

“We’ll see some funds switching back from developed countries to seek opportunities in other markets,” said Ben Kwong, director at KGI Asia. Thomson Reuters I/B/E/S estimates show Chinese stocks are currently trading even lower than their 12-month forward earnings outlook, indicating there may be more room for appreciation. A preliminary purchasing managers survey showed China’s vast factory sector picked up a bit of momentum in September, although the heftiest job cuts in 5-1/2 years and falling house prices that run a real risk of turning into an outright crash will likely keep a lid on gains. The housing market, which accounts for about 15 percent of the economy, is going through one of its worst downturns. Chinese developers are trying hard to sell properties by slashing prices, while local governments are easing restrictions and allowing people to buy multiple homes.

Hong Kong, Korea stocks to extend rally The one notable exception is India. Mumbai shares have rallied by more than a quarter this year on anticipation of and follow-through after a landslide election in May of the first majority government in New Delhi for three decades. The BSE Sensex is expected to touch 32,500 by end-year, gaining nearly another quarter on top of that rally. That would probably make it one of the best performers on world equity markets. The latest Reuters poll also suggested the Hang Seng Index will put in a very strong performance during the remainder of the year. It is expected to soar to 25,750 points by December from Wednesday’s 23,921.61, an almost 8 percent rise, outperforming most its peers. It is then seen surging to 28,000 by the end of 2015. The Korea Composite Stock Price Index (KOSPI) is expected to rise nearly 5 percent from now until the end of the year to reach a 3-year high, after gaining a modest 1.2 percent so far in 2014. From then until the end of next year, it will likely add another 6 percent to reach 2,275 points. However, analysts cautioned the U.S Federal Reserve’s next move, after the end of its stimulus programme expected in October, could lead to money flowing out of the region and into U.S. stocks and bonds. Reuters

Upgrading technology to improve economy Analysts believe the measures will not only start a new round of innovation but also spur fixed asset investment

hina will use tax breaks to encourage enterprises to upgrade their equipment and increase research and development (R&D) efforts to improve the manufacturing industry. Companies that bought new R&D equipment and facilities after Jan. 1 or possess minor fixed assets will have taxes reduced based on value, according to an executive meeting of the State Council, China’s Cabinet, presided over by Premier Li Keqiang. Imported high-tech equipment will also enjoy tax deductions in aviation, bio-medicine production, manufacturing of railway and ships, electronics production including computer and telecommunications, instrument production and those used in making IT products and software. The move aims to prompt technical improvement of companies, especially innovation of small and medium-sized enterprises, according to the meeting. The meeting also asked government organs to implement the new measures as soon as possible to arm “Made in China” with advanced technology and equipment, encouraging more competitive products with high added value.

Analysts believe the measures will not only start a new round of innovation but also spur fixed asset investment, and in the bigger picture contribute to stabilizing economic growth. Zhu Jianfang, chief economist of CITIC Securities, said the measures will lighten burdens of enterprises in the real term and prompt the upgrade of outdated equipment. Combined tax deduction of A-share listed companies is expected to reach 233.3 billion yuan (US$38 billion) in the first year after the policy takes effect, equal to 7.8 percent of their total cash flow in 2013, according to the calculation of the Shanghai Stock Exchange (SSE). Zhu said three aspects of problems will be eased, citing weak domestic demand and investment amid slowing economic growth, lagging equipment in manufacturing sector and low technical level of homegrown companies. Zeng Gang, analyst from the SSE, expects the move to help China’s manufacturers greatly improve their global competitiveness and produce more self-invented merchandises. Xinhua

Currency regulator uncovers fake trades We do not think a Authorities have found nearly US$10 billion worth of deals change in leadership so far and 15 cases may be linked to criminal fraud at the central bank hina has found nearly US$10 so far and 15 cases may be linked but also provide illegal channels would suggest anything billion worth of falsified trade to criminal fraud, said the State for cross-border capital flows,” Wu transactions more than a Administration of Foreign Exchange, Ruilin, vice-head of the management about a switch year after the fake trades were first China’s currency regulator which and inspection department at the uncovered, the currency regulator said also manages the country’s US$3.99 regulator told a press briefing. in the orientation Some banks were found to have yesterday, adding that a crackdown trillion foreign exchange reserves. of macro-economic had now stamped out the practice. Global commodity markets were neglected their duties in checking the To evade China’s capital controls rattled in June when an investigation authenticity of deals, which increased or monetary policy and sneak money in or out of the into a trade fraud in China showed fraudulent behaviours, Wu said.

Nicholas Consonery, director for Asia at the Eurasia Group

percent growth target, raising investor expectations that policymakers would further loosen fiscal and monetary policy to stoke growth. However, senior leaders, including Premier Li Keqiang, have publicly ruled out any dramatic policy easing, saying China cannot always depend on easy credit to lift its economy. Instead, he said authorities would only make “targeted” adjustments in the economy as needed. The central bank, which unlike its peers in the developed world does not have autonomy over monetary policy, has refrained from steering public expectations about its next move. A trained engineer, Zhou has been known for close ties to Western officials, and has been the object of ire from conservatives within the Communist Party. Reuters

world’s second-biggest economy, some companies create artificial trade invoices that are not backed by an actual exchange of goods or services. Authorities have found nearly US$10 billion worth of such deals

companies had used fake receipts at a port in Qingdao in east China to obtain multiple loans secured against a single cargo of metal. The incident prompted global banks and trading houses to fire off a series of lawsuits over their estimated US$900 million exposure to other related cases. “Fake trades not only increase the pressure of hot money inflows,

Since the crackdown started last April, investigations into falsified transactions have been expanded to 24 provinces and cities this year, he added. For now, however, China does not see any big rise or fall in its capital flows, Guo Song, the head of the capital account department said separately at the briefing.

Fake trades not only increase the pressure of hot money inflows, but also provide illegal channels for crossborder capital flows Wu Ruilin, vice-head of the management and inspection department, State Administration of Foreign Exchange Ports and containers were involved in the latest famous Quingdao port fraud

Reuters

September 26, 2014

Asia Biz sentiment in S. Korea worsens Confidence among South Korean businesses worsened even after fiscal and monetary stimulus packages came out, reflecting no expectations for policy-driven recovery, a government report showed yesterday. Business survey index (BSI) for the fourth quarter, which gauges outlook for business conditions for the upcoming quarter, fell below the benchmark 100 for the first time in three quarters at 97, down 5 points from the previous quarter, according to a survey conducted by the Korea Institute for Industrial Economics and Trade (KIET) on 354 local firms between September 3 and 23.

NZ relies on traditional investment countries Despite frequently hearing that they live in the Asian century, New Zealand investors are still very much focused on traditional English-speaking markets, figures from the government statistics agency showed yesterday. Of New Zealand’s 171.2 billion NZ dollars (US$137.17 billion) total investment abroad at the end of March, 58.1 percent was in Australia, the United States and the United Kingdom, according to Statistics New Zealand. And the arrangement was reciprocal, with 62.3 percent of the 322.3 billion NZ dollars (US$258.23 billion) of foreign investment in New Zealand coming from the same three countries.

Philippines posts budget surplus The Philippine government incurred a budget surplus of 29.9 billion pesos (US$672 million) in August as the hike in revenues outpaced that of spending, the Department of Finance (DOF) said yesterday. DOF data showed that the August budget surplus was 36 percent higher than the surplus registered in the same period last year. Figures from the DOF also revealed that government expenditures in August grew by 5 percent on year to 140.12 billion pesos (US$3.14 billion). Expenditures in the January to August period rose by 6 percent on year to 1.3 trillion pesos (US$29.21 billion).

S. Korea’s industrial power sales rise Industrial electricity sales in South Korea rose last month on brisk production activity in steel, chemical and machinery equipment sectors, a government report showed yesterday. Power sales in the industrial sector, a barometer of industrial activities, increased 2.3 percent from a year earlier to 22.31 billion kilowatt-hours in August after rising 4.3 percent in the prior month, according to the Ministry of Trade, Industry and Energy. The slower growth came as some automakers went on partial strikes. The summer vacation reduced working days, which led to a 0.1 percent fall in exports.

Myanmar investment message undermined by politics Parliamentary elections will take place next year, for the first time since President Thein Sein embarked on the reforms that dismantled control by the military

he rapid economic transformation of Myanmar, less than two years after transitioning from military control and opening itself to the world, is not without its rough patches, the nation’s top economic minister said. At the same time, George Soros, one of the earliest investors in Myanmar’s economy and even more so its social reform, said he was troubled by the slowdown in reforms ahead of next year’s elections. Still, he believes multinational companies must be involved in one of Southeast Asia’s last untapped areas. Soe Thane, Myanmar’s Coordinating Minister for Economic Development, oversees roughly 11 different economic ministries. The former commander of the Myanmar Navy likened the reform process to driving along a potholed street. Describing a complicated web of land ownership rules and regulations, he expressed hope it would be fixed in the next year. “I think we will have a comprehensive umbrella law on land policy and land use within six months to a year,”

Myanmar’s President Thein Sein has undertaken a fast economic transformation of the country

NZ central bank head says NZ$ at unjustified level The RBNZ has regularly voiced its concern about the high currency, but has also admitted that it’s largely powerless to affect the value other than at the margins

ew Zealand’s central bank chief yesterday renewed his warning that the local dollar was at unjustifiable and unsustainable levels, raising the prospect of intervention and sending the currency plunging to a one-year low. Reserve Bank of New Zealand Governor Graeme Wheeler picked up where he left off in the bank’s monetary statement two weeks ago, saying the New Zealand dollar was not reflecting the fall in commodity prices. “The Bank’s analysis indicates that the real exchange rate is well above its sustainable level, and also above levels justified by short-term business cycle factors,” he said in a statement. The comments knocked the New Zealand dollar, the tenth most traded currency globally, by more than half a cent to a one-year low of US$0.8006. “The speech itself was another

intervention threat. The Reserve Bank is saying that even down at these levels the kiwi is too high,” said Westpac senior currency strategist Imre Speizer. Wheeler did not directly touch on whether the RBNZ had been intervening in currency markets to lower the kiwi’s value, but suggested that some conditions for such action have been met. “Unjustified and unsustainable are important considerations in assessing whether exchange rate intervention is feasible. Another consideration is whether conditions in the foreign exchange markets are conducive to intervention having an impact on the exchange rate,” he said. Wheeler said the RBNZ considered the currency unsustainable if it was trading clearly away from its long run levels, and its level was considered unjustified if it was inconsistent with the prevailing economic factors.

KEY POINTS RBNZ governor says NZD levels unjustified, unsustainable Analysts say renews intervention threat NZ dlr falls to one-year low The kiwi, hit a three-year high of US$0.8839 in July, but has since fallen 9 percent as commodity prices have fallen sharply, its tightening policy has been paused, and the U.S. Federal Reserve is expected to raise rates at some point next year. Reuters

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September 26, 2014

Asia Soe Thane told Reuters on the side-lines of a Myanmar investment conference. “And after that, we have to go for water reform. It’s a big issue for agriculture, forestry, industrial development,” he said. Parliamentary elections will take place next year, for the first time since President Thein Sein embarked on the reforms that dismantled control by the military, which ruled the Southeast Asia nation since seizing power in a 1962 coup. While the U.S. has suspended economic sanctions, they have not been lifted entirely and large swaths of the Myanmar economy remain off limits because of rules governed by the U.S. Treasury’s Office of Foreign Assets

Things have come to a standstill because the elections are now casting a shadow on the activities. I hope it will restart after the elections, because it does need to be restarted George Soros, Investor

Control (OFAC). OFAC maintains the Specially Designated Nationals (SDN) List, a so-called black list that forbids U.S. nationals or companies from doing business with persons or entities listed. Given the country’s history of military control and its persisting influence over the economy, plus a legacy of drug trafficking, the names of a significant number of Myanmar nationals and companies can be found on the SDN list. “It is better than nothing that reforms were suspended, but we prefer lifting them,” Soe Thane said. Soros, who sat beside Soe Thane during a panel discussion, said that 20 years after establishing an office for his Open Society Foundation in Myanmar, he had “stuck it out.” The reforms process had been “a wonderful experience, up until about half a year ago,” he said. There is still a land grab under say, said the billionaire investor, and American companies need to be careful about the provenance of titles on properties in order not to fall afoul of OFAC. However, Soros said he believes multinational corporations cannot ignore Myanmar, where the government expects foreign direct investment will grow to more than US$5 billion in the fiscal year starting in April. Soros has invested several million dollars through businesses run by Serge Pun, chairman of the SPA Group, he said, but not directly. “We would be eager to do it in the areas of banking, finance and agriculture. This is where we feel the country, the people, need this investment most,” Soros said. Reuters

S. Korea wealth fund doubling research staff The new staff will fuel two new funds that Korea Investment Corp. is about to kick off

orea Investment Corp., the country’s US$76 billion sovereign wealth fund, plans to almost double its research staff to pick stocks for two new funds that may eventually comprise 30 percent of its equity holdings. KIC will probably increase the research unit to about 60 people by 2017 from the current level of 32, said Rhee Keehong, the fund’s deputy chief investment officer and research head. KIC, which only invests overseas, had about US$35 billion in stocks and US$25 billion in bonds last year, with the remainder in alternative assets and other investments. The sovereign fund’s hiring plans follow a February announcement by Korea’s US$418 billion state pension that it will double investment staff in an effort to boost returns as the population of Asia’s fourth-largest economy ages. The ability to choose the right stocks will become more important in coming years as the U.S. Federal Reserve reduces monetary stimulus that fuelled a 145 percent

rally in the benchmark index for global equities from its 2009 low, according to Rhee. “They will be Warren Buffett-style investments,” he said in an interview at his office in Seoul yesterday. The KIC fund has a stake of about 0.7 percent in Bank of America Corp., the U.S. lender that got a capital injection from Berkshire Hathaway in 2011, according to data compiled by Bloomberg. KIC, which set up its research unit in January, manages about 70 percent of its stock and debt investments internally, with the rest handled by outside money managers. The fund posted a 9.1 percent gain last year and had an average annual return of 8.3 percent in the five years through 2013. It has about 170 staff in total. KIC’s new funds, which are likely to be called “Global Champion Portfolio” and “Global Equity Portfolio,” will concentrate on picking companies that have an investment value of three to five years, Rhee said. Bloomberg News

Manila’s port gridlock chokes off Philippine economy A law banning truck routes has provoked a massive container jam in the capital’s port Secretary Gregory Domingo said this month the economy could have clocked 7 percent growth if not for the port problems.

Earnings, govt revenue hit

Cranes and squatters at Manila North Harbor

hilippine furniture maker Betiscrafts Inc. should have delivered a shipment of custommade chairs to Middle East customers last month. But a cargo from China of imported fabric needed for the upholstery has been held up by severe congestion at Manila’s main port, where containers have piled up since February when a daytime ban on trucks plying the city roads came into effect. Worried about the hit to the economy, the government intervened on September

13 to end the 7-month long ban, although the move may have come too late for many companies that ship to Western markets for the critical Christmas season. Electronics manufacturers, garment makers and food producers are facing delays and rising costs due to the backlog at the choked port, which handles more than 80 percent of foreign trade, holding back growth in Southeast Asia’s fifth-largest economy. “I never expected that the situation will turn as bad as

this,” Myrna Bituin, owner of Betiscrafts, sighed. “We are at a loss. We are under a lot of stress. I could not deliver, and if I don’t deliver then my clients abroad will also lose business.” The port woes embody the huge challenges still facing President Benigno Aquino to modernise the country’s dilapidated roads, ports and airports that are constraining growth. Annual growth in the second quarter quickened to 6.4 percent, the fastest in Asia after China, but Trade

The port congestion has resulted in a stack of problems stuck cargo, rising costs of transporting products by truck, as well as widespread traffic jams brought about by trucks queuing to collect cargo Benigno Aquino, Philippines President

The port gridlock was an unintended consequence of a local government plan to improve traffic and reduce pollution in the city of Manila - the truck ban on the city’s roads lasted for 16 hours daily from 5 am. In a sign of the impact, imports fell in annual terms in May and June, and exports slowed in July. Some firms have reduced hours or put workers on unpaid leave, pointing to weakness in production, said Sergio Ortiz-Luis, President of the Philippine Exporters Confederation. The government is worried too. Tax collections in August came in US$339 million below target, and the main tax agency blamed the supply-chain mess for crimping corporate profits. With the backlog of 20,000 containers expected to take months to clear, there are worries about the impact on exporters of electronics goods, the nation’s biggest foreign exchange earner after remittances from overseas workers. Reuters

September 26, 2014

Asia

ADB trims Southeast Asia 2014 growth forecast The ADB trimmed its 2014 growth forecasts for Indonesia, Thailand, the Philippines, Vietnam and Singapore

he Asian Development Bank (ADB) has trimmed its growth forecast for Southeast Asia this year, citing factors such as political turmoil in Thailand earlier in the year and weaker commodity export prices in Indonesia. In its update to the 2014 outlook, ADB said yesterday that Southeast Asia was now expected to grow 4.6 percent this year, down slightly from its forecast in July of 4.7 percent and 5.0 percent forecast in April. The ADB trimmed its 2014 growth forecasts for Indonesia, Thailand, the Philippines, Vietnam and Singapore compared with

April, but raised its growth forecast for Malaysia to 5.7 percent from 5.1 percent, citing a rebound in the country’s exports. The ADB said growth in Southeast Asia was likely to accelerate in 2015 to 5.3 percent, although that was down from its July and April forecasts for 5.4 percent growth. “Next year, better performance in the major industrial economies and Thailand’s recovery from its slump will spur Southeast Asian growth to 5.3 percent,” it said. The ADB kept its 2014 and 2015 growth forecasts for China unchanged, saying

growth was likely to slip to 7.5 percent this year and 7.4 percent next year, compared with 7.7 percent in 2013. “A shrinking workforce and a sluggish property sector will tamp down growth...but economic stimulus and rising

GDP growth, pct

external and internal demand are expected to contain the impact,” it said, referring to China. The ADB kept its 2014 growth forecast for India unchanged at 5.5 percent. It also maintained its upgraded 2015 growth

Actual

Reuters

Forecast

2013

Subregion / Economy

forecast for India of 6.3 percent unveiled in July, up from its April forecast of 6.0 percent growth, citing expectations of economic reform by Prime Minister Narendra Modi’s new government.

2014

2015

SEPT

JULY

APRIL

SEPT

JULY

APRIL

CENTRAL ASIA

6.5

5.6

6.3

6.5

5.9

6.1

6.5

EAST ASIA

6.7

China

7.7

7.5

7.4

4.7

5.4

5.3

6.1

6.4

5.8

4.7

5.5

6.3

6.0

5.0

4.6

4.7

5.0

5.3

5.4

Indonesia

5.8

5.3

5.7

5.8

6.0

Malaysia

4.7

5.7

5.1

5.3

5.0

Philippines

7.2

6.2

6.4

6.7

Singapore

3.9

3.5

3.9

4.1

Thailand

2.9

1.6

2.9

4.5

Vietnam

5.4

5.5

5.6

5.7

5.8

THE PACIFIC

5.0

5.3

5.2

5.4

13.2

13.3

DEVELOPING ASIA

6.1

6.2

6.4

SOUTH ASIA India SOUTHEAST ASIA

Myanmar to issue foreign bank licenses However, no U.S. banks will be included on the list as none have representative offices in the country Daniel Bases

yanmar will announce an offer by the end this month for between five and 10 foreign banks to open branches in its rapidly expanding economy, the deputy central bank governor told Reuters on Wednesday. U Set Aung, speaking on the side-lines of the Myanmar Investment Outreach conference in New York, said there had been confusion over the timing of the announcement. “We said the selection process would be complete in the third quarter. As scheduled, the selection process is definitely going to be finalized by the end of this September and then we make the announcement immediately after, the selection process is finished,” Aung said.

This is the very first time we are going to allow the foreign banks to open 100 percent-owned branches inside the country to engage in corporate banking business U Set Aung, Myanmar’s Deputy Central Bank Governor

The conference, attended by three top ministers, the director of the country’s investment administration and Aung, attracted over 300 bankers, investors and diplomats eager for the nation to accelerate its economic development. “This is the very first time we are going to allow the foreign banks to open 100 percent-owned branches inside the country to engage in corporate banking business,” Aung said. However, no U.S. banks will be included on the list as none have representative offices in the country, which opened to the world through landmark reforms in late 2011 and 2012. Next year parliamentary elections will occur for the first time since President Thein Sein embarked on reforms

that dismantled control by the military, which ruled the Southeast Asian nation since seizing power in a 1962 coup. While the United States has suspended economic sanctions on Myanmar, they have not been completely lifted and large swaths of the economy remain off-limits because of rules governed by the U.S. Treasury’s Office of Foreign Assets Control. OFAC maintains the Specially Designated Nationals List, a so-called black list. This forbids U.S. nationals or companies from doing business with persons or entities listed. Given Myanmar’s history of being under military control and its still wide influence over the economy, plus its legacy of drug trafficking, a significant number of Myanmar nationals and companies are on the SDN list.

“For an American company, the banks don’t want to deal with Myanmar... banks are not willing to engage in any transaction, including transferring money in and out with Myanmar or any Myanmar entity, including a subsidiary of a law firm,” said Eric Rose, a lawyer whose New Yorkbased firm does business in Myanmar. There are 43 banks that have representative offices in Myanmar, of which 29 made proposals for their licenses, Aung said. Separately, Aung said the central bank, which operates as an agent for the Ministry of Finance, expects to hold its first Treasury bill auction in January to kickstart a secondary market for sovereign debt Reuters

September 26, 2014

Opinion

China’s measured wires embrace of India Business

Leading reports from Asia’s best business newspapers

THE KOREA HERALD South Korea’s top tech giant, Samsung Electronics Co., said yesterday it plans to stop sales of its low-end ATIV laptop line-up in Europe amid the slowing global PC market, following the path of its rivals. “We will no longer launch new versions of the Google Chromebook and ATIV in the European market, and instead will focus on high-end laptops and tablet PCs down the road,” an official from Samsung Electronics said. The company, however, said it will maintain the PC business in other areas, including the Asia-Pacific region.

Minghao Zhao

Research fellow at the Charhar Institute, a Chinese foreign-policy think tank, is an adjunct fellow with the Centre for International and Strategic Studies at Peking University

THE STAR Bank Negara will look at the country’s economic growth rate and inflation for any revision of the overnight policy rate (OPR) and expects the country’s gross domestic product (GDP) to exceed the 5%-5.5% forecast. “It is not just as straightforward as that, because we will look at the source of the growth and inflation adjustments. “If they are viewed to be of a permanent nature or whether it’s transitory and temporary, this would have implications on our decision (on OPR),” governor Tan Sri Dr Zeti Akhtar Aziz said.

VIETNAM NEWS Vietnamese companies were urged to carefully study the European Union (EU)’s requirements for imports to maximise opportunities arising from Viet Nam’s impending free trade agreement (FTA) with the trade bloc. The call was made at a conference that the Viet Nam Trade Promotion Agency held yesterday to seek ways for Vietnamese companies to optimise business advantages and expand further into the EU market. Negotiations for the EU-Viet Nam FTA began in 2012 and are entering the final round. The agreement is to be signed by year-end.

THE JAKARTA POST The Trade Ministry sought to clarify the effects of the launch of the ASEAN Economic Community (AEC) next year in a meeting with representatives from micro, small and medium enterprises (MSME) in Denpasar, Bali. “Businessmen must not worry about it. We will be left behind if we do not participate in the ASEAN Economic Community, as with its implementation, there will be a zero percent tariff rate applicable to imports,” the ministry’s spokesperson, Oke Nurwan, said on Wednesday as quoted by Antara news agency.

Chinese President Xi Jinping’s three-day visit to India, the main leg of a recent tour of Central and South Asia, sheds new light on China’s emerging approach to its neighbours, particularly Asia’s other giant. Recent subtle changes in Sino-Indian relations could prove to be enormously consequential for the world in the coming decades. Under Xi, China is adopting a new grand strategy which can be called “dual rebalancing”: implementing bold domestic reforms to regain economic momentum while overhauling China’s global posture and diplomacy, focusing on sources of risk in its near abroad. The Silk Road Economic Belt, which is focused on Central Asia, and the 21st Century Maritime Silk Road, which concentrates on the countries bordering the Indian Ocean’s shipping lanes, are leading initiatives on China’s foreign-policy agenda. Their success will depend, in large part, on whether China gets support from other great powers, specifically Russia in Central Asia and India in South Asia. China understands that India’s position on the world stage has been strengthening since the beginning of this century. India’s new prime minister, Narendra Modi, an aspirational and authoritative leader from Gujarat, one of the country’s most developed states, has promised to bring India’s economy out of a half-decade funk, enhance the living standards of his country’s have-nots, and boost the country’s standing as a global power. The trick for Chinese policy is to reconcile Modi’s ambitions with China’s strategic goals. Since Modi came to power, India has been basking in the adulation of major powers like Japan and the United States. Partly motivated by a desire to

counterbalance China’s rising geopolitical influence, Japan and the US have sought to draw India into a multilateral alliance consisting of democratic countries in the Asia-Pacific region. Indeed, Japanese Prime Minister Shinzo Abe has vowed to forge a “democratic security diamond” with the US, Australia, and India. During Modi’s visit to Japan in early September, Abe offered to invest US$35 billion in Indian infrastructure projects over five years, accelerate negotiations on civil nuclear deals, and boost bilateral maritime security cooperation. The two sides agreed to build up a “Special Strategic and Global Partnership,” leaving Chinese strategists to wrestle with the implications of deeper India-Japan ties. Likewise, despite an on-again off-again relationship with India since Bill Clinton’s presidency, the US continues to view the country as a “natural ally.” US cabinet members – Secretary of State John Kerry and Secretary of Defense Chuck Hagel – both visited India in recent months to try and woo Modi by promising improved economic and strategic ties. In the last three years, the US has surpassed Russia as India’s largest arms supplier. Modi’s government is desperate to diversity its sources of advanced weapons and become self-reliant in defence production. Barack Obama’s administration is now expected to do whatever it can to strengthen relations with India during Modi’s upcoming visit to Washington. As Nicholas Burns, a former under-secretary of state, has argued, US strategic interests in the century ahead will align more closely with India’s than with those of any other continental Asian power, making

Since Modi came to power, India has been basking in the adulation of major powers like Japan and the United States. Partly motivated by a desire to counterbalance China’s rising geopolitical influence

India central to America’s strategic rebalancing toward Asia. Xi is confident that China can understand and satisfy many of Modi’s needs better than regional rivals like Japan. But China should not underestimate India’s determination to uphold its strategic autonomy in Asia’s shifting geopolitical landscape. During Xi’s visit, the two leaders signed 15 agreements in the fields of trade, finance, and culture. Xi committed China to invest US$20 billion in India over the next five years, particularly to modernize India’s decrepit and overused railway system. This compares with

just US$400 million, or 0.18% of India’s inward foreign investment, in Chinese investment from 2000 to 2014. China also promised to establish two industrial parks, in Gujarat and Maharashtra, as well as provide greater market access to Indian products, in an effort to allay India’s worries over the widening bilateral trade deficit, which has soared from US$1 billion in 2001 to more than US$40 billion today. Modi’s efforts to revive market-oriented reform and improve the country’s business environment will help to attract Chinese corporations eager to capitalize on India’s vast labour force, varied skill base, and geographical advantages. In addition, China wants to strengthen cooperation with India in regional and global affairs. India is likely soon to gain full membership in the Shanghai Cooperation Organization, the club of Central Asian and Asian states formed after the breakup of the Soviet Union. India’s “Connect Central Asia policy,” and its efforts to build a North-South Transit Corridor, would benefit development in Central Asia, a region of major concern to China, because it abuts the restless Chinese province of Xinjiang. As major aid providers and investors in Afghanistan, China and India also have common interests in stabilizing that country, and countering religious extremism and terrorism after NATO troops leave. Moreover, the two countries share similar interests in reshaping global economic governance, particularly by further strengthening cooperation among the BRICS (Brazil, Russia, India, China, and South Africa) and ensuring that climate change is addressed in a way that does not impede growth. But India’s lingering bitterness over the 1962 war with China remains. On many occasions, Modi has voiced suspicions about China’s growing footprint in disputed border areas. India’s sensitivity to potential Chinese encirclement is similar to China’s fears of encirclement by the US and its allies. That is why China is unlikely to develop its relations with India and Pakistan (with which China still values its all-weather partnership) on separate tracks, as the US did during the Bush administration. Xi’s visit to India strongly suggests that China is determined to engage with Modi in ways that are intended to inhibit the bilateral rivalry from intensifying. But, despite Xi’s investment pledges, it is far from certain that Asia’s two giants, both with growing global aspirations, can bridge the differences that continue to burden their relationship. Project Syndicate

September 26, 2014

Closing Singapore’s population grows to 5.47 million

Taiwan leaves policy discount rate unchanged

Singapore’s population grew to 5.47 million by the end of June 2014, up 1.3 percent from the 5.4 million a year earlier, the National Population and Talent Division (NPTD) said yesterday. The growth rate of 1.3 percent was the slowest in ten years, amid the tightening of immigration and foreign labour policies over the recent years. The citizen population of Singapore grew by 0.9 percent year on year to 3.34 million, while the population of permanent residents, or those foreigners who have been granted permanent residency but not citizenship, remained stable at 527,700.

Taiwan’s central bank kept its benchmark discount rate unchanged at 1.875 percent for the 13th straight quarter, as widely expected, after a policy meeting yesterday. The central bank said in a statement following its quarterly meeting that Taiwan’s domestic economic growth was steady and that inflation was mild and was expected to remain so in 2015. All 15 economists polled earlier by Reuters had expected the bank to leave the discount rate unchanged. The last time the central bank changed the policy rate was in June 2011, when the rate was increased to its present level.

Steel demand shrinks after 14 years Iron ore fell below US$80 a tonne this week for the first time since September 2009

hina’s steel consumption dropped this year for the first time since at least 2000 due to slower economic growth, leading to a surplus of iron ore in the country and a more than 40 percent plunge in prices of the steelmaking raw material. But top global miners like Vale and Rio Tinto, which have invested billions of dollars to ramp up output to sell more iron ore to China, are still convinced that Chinese demand has yet to peak with an urbanisation drive there expected to last at least another decade. Apparent crude steel consumption in China, the world’s top consumer and producer of the alloy, fell 1.9 percent on year to 61.9 million tonnes in August, Wang Xiaoqi, vice chairman of the China Iron and Steel Association, told an industry conference. “There are many reasons for this - the economy slowing and the economy undergoing restructuring. Steel consuming sectors have cut their demand,” Wang said yesterday. With China now focusing growth on consumption and away from investment that has fuelled years of massive expansion in China’s steel sector, Wang said: “From now, domestic steel output and consumption won’t rise along with economic growth.”

KEY POINTS Apparent crude steel consumption down in Jan-Aug Iron ore supply has exceeded demand in China Global ore miners convinced Chinese demand will remain firm

China’s steel consumption dropped 0.3 percent to 500 million tonnes in the first eight months of the year, he said. China’s economy got off to a weak start this year as first-quarter growth cooled to a six-quarter low of 7.4 percent. Beijing responded with a flurry of stimulus measures that pushed the pace up slightly to 7.5 percent in the second quarter, but soft July and August data suggest

the boost is rapidly waning. The decline in China’s steel consumption this year marks the first time demand has shrunk since 2000, said CLSA commodity strategist Ian Roper, who has tracked the data since that year. “We’ve been bearish for a while saying property construction activity has peaked, but maybe the scale of the decline will be faster than we anticipated,” Roper said.

“This reinforces our view that there will be a multiyear downtrend in demand for iron ore, and there’s no hope for a recovery in prices to anywhere near US$100/ tonne,” he added. Iron ore fell below US$80 a tonne this week for the first time since September 2009 and is on track for its biggestever annual drop amid a deep supply glut stoked by top, low-cost producers including Rio and Vale.

Shanghai rebar futures, which plunged more than 3 percent to a record low on Thursday, have shed around 30 percent of their value this year and could come under further pressure if output remains high amid poor demand. China’s crude steel output is likely to hit 826 million tonnes for the year, said Wang, up 6 percent from the official 2013 output figure released by the government but only slightly above the 822 million tonnes cited in August by leading steelmaker Baoshan Iron and Steel.

HK’s total exports up in August

Macau casino stocks slump on Hang Seng Index

Adobe to shut China research branch

he values of Hong Kong’s total exports and imports of goods both showed yearon-year increases, at 6.4 percent and 3.4 percent respectively in August 2014, the Census and Statistics Department announced yesterday. In August 2014, the value of total exports of goods (comprising re-exports and domestic exports) increased by 6.4 percent over a year earlier to 327.2 billion HK dollars (about US$42.2 billion), after a year-on-year increase of 6.8 percent in July 2014. Within this total, the value of re-exports increased by 6.4 percent to 321.9 billion HK dollars in August, while the value of domestic exports increased by 7.2 percent to 5.3 billion HK dollars. Concurrently, the value of imports of goods increased by 3.4 percent over a year earlier to 358.8 billion HK dollars in August, after a yearon-year increase of 7.5 percent in July. A visible trade deficit of 31.5 billion HK dollars, equivalent to 8.8 percent of the value of imports of goods, was recorded in August. Xinhua

acau casino shares declined yesterday, with Galaxy Entertainment Group Ltd. sinking to a one-year low, after CLSA Asia-Pacific Markets predicted revenue in the world’s biggest gambling destination will decline this year. Galaxy slid 3.5 percent to HK$46.35, the lowest close since August 2013, while Sands China Ltd. fell 2.9 percent to HK$41.30. The stocks led losses on the benchmark Hang Seng Index, which slipped 0.6 percent to 23,768.13. Casino operators are leading losses on the Hang Seng Index this year. Sands China and Galaxy each tumbled more than 33 percent in the period. Both stocks were among top performers on the gauge in the five years through December 31, 2013, data compiled by Bloomberg show. Galaxy, founded by billionaire Lui Che Woo, trades at 17.2 times reported earnings, down from a multiple of 109.3 in 2011 and compared with 10.4 for the Hang Seng Index yesterday. Bloomberg News

Reuters

S software giant Adobe will shut its research arm in Beijing by the end of the year, laying off 350 people, according to a statement, as foreign technology firms face a worsening business climate in China. US tech firms, including Microsoft and Qualcomm, have come under investigation over business practices, the latest in a series of industries to face tougher government scrutiny. However, Nasdaq-listed Adobe denies the move is a reflection of the Chinese market and says it is part of a broader strategy to place technical teams in fewer locations, according to the statement provided to AFP yesterday. “The move will not affect Adobe’s overall level of investment in R&D (research and development) and is not an indication of financial performance in China or worldwide,” the statement said. Adobe, which is based in San Jose, California, this month said net income for the three months ended August 29 slumped 46 percent year on year to US$44.69 million. AFP