MOP 6.00
When less is less
Number 681 Thursday December 4, 2014
Publisher: Paulo A. Azevedo
Closing editor: Joanne Kuai
Beijing’s Parliament warns Macau “not to fall into endless political disputes” PAGE 5
T
he Public Investment Plan is important. PIDDA provides funds to build new schools, roads, bridges, ports and even renovate public transport here. But only if they’re spent. Just 14.8 per cent has been spent in the first 10 months of the year. That’s MOP2.1 billion of the available MOP14.8 billion. The Legislative Assembly is complaining that the government is now spending less on the city’s infrastructure than it did 3 years ago. It has become a perennial problem 3
Year III
PAGE
Still standing Not all doom and gloom. The real estate market seems unaffected by declining gaming revenue. Luxury residential prices are climbing because of increasing demand, says the industry. General housing prices have ceased to cool as well
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Are you being served? The Chinese tertiary sector. It showed the reverse face of the growth coin yesterday. It announced it will create more jobs than manufacturing. The service sector accounted for 46 per cent of Chinese economy last year
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2
8
HSI - Movers December 3
Name
%Day
Ping An Insurance Gr
2.54
Hong Kong Exchanges
1.59
China Resources Land
1.45
China Shenhua Energy
1.14
BOC Hong Kong Holdin
0.92
CNOOC Ltd
-3.32
Kunlun Energy Co Ltd
-4.10
Galaxy Entertainment
-5.06
Sands China Ltd
-5.08
China Resources Powe
-5.49
Source: Bloomberg
www.macaubusinessdaily.com
I SSN 2226-8294
Mass gaming jitters Deutsche Bank predicts more stormy weather. Mass gaming will post a negative quarter, it claims. For the first time. The smoking ban and table reclassification are two of the catalysts combining to disrupt Q4. Although the sector is expected to pick up next year
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2 | Business Daily
December 4, 2014
Macau
Luxury property prices climbing While gaming revenues plummet the real estate market seems unaffected. An estate agent predicts that prices of luxury residences, which they defined as those worth over MOP30 mln, will continue to increase in step with demand. General housing prices, meanwhile, have stopped cooling already, it is claimed Kam Leong
kamleong@macaubusinessdaily.com
D
emand for luxury residences have been climbing in the past two years, a property agency says, claiming the declining gaming revenue and gaming taxes are not likely to affect the ‘rich’ eyeing such prestige properties in the city. Hong Kong-based Centaline (Macau) Property Agency Ltd reviewed the luxury estate market for the past two years yesterday. The senior regional sales director of the realtor, Roy Ho, said that the average price per square foot of luxury residences had jumped by some 30 per cent, reaching 14,132 patacas per square foot. The local estate agency defines luxury residences as any flat, special unit or villa valued at more than 30 million patacas. “The rich people owning luxury residences probably don’t care about the dropping gaming revenues. Most of them have generous incomes so they don’t have to sell their properties in hand [following the dropping revenues]. In addition, they do not mind spending more to purchase [a luxury house] when they think it’s worth it,” the director of
the agency, Jacky Shek Po Tak, told Business Daily on the sidelines of the agency’s press briefing. Mr. Shek explained that the estate market in Macau is a user-based one. As such, it is very different from the stock market, in which buyers may be more easily affected by decreases in values. In addition, Mr. Ho said that the company does not see any drop in the price of luxury residences. On the contrary, he predicts that the price of high-end housing will continue climbing with more people in the city willing to spend more for a better quality residence, although he indicated that the supply of luxury housing remains limited. In fact, up to June of this year, only one per cent of 211,491 residential flats were recognised as luxury apartments, the agency said, quoting official data from the Statistics and Census Service. Meanwhile, agency data shows that the ‘most expensive’ deals involving luxury residences this year are valued between 50 million patacas and nearly 100 million patacas, of which only
three are detached villas, while the others are apartments. In addition, the property agency said that a bid was opened yesterday for a villa on Penha Hill: even though the owner is asking 350 million patacas, the agency received some eight enquiries within half a day. “Along with the increase in transactions on luxury housing, we predict that the price of this housing will surge in the market, while the price differential between luxury residences and normal apartments will get obvious gradually,” the agency concluded. Currently, the price difference between luxury apartments and normal flats are some 2,000 patacas per square foot, according to Mr. Ho.
Housing prices stop cooling Meanwhile, although general housing prices dropped by some 10 percent year-on-year in the third quarter of the year due to the market entering a so-called ‘adjustment phase’, Mr. Shek told Business Daily
that this period is over. “In the third quarter, we saw that housing prices had dropped by between 10 and 15 per cent [yearon-year]… Such adjustment period [of housing price] appeared not because the economy was turning bad or because people were losing their jobs, it was only due to the housing price [in the first half of the year] being a bit aggressive,” he said. In fact, the official data of the Financial Services Bureau (DSF) shows that the average housing price in October had already rebounded by 9.2 per cent month-on-month or 3.2 per cent year-on-year despite transactions decreasing by some 40 from the month earlier. According to the agent, following the housing price adjustment he sees support for the real estate market returning, estimating that transactions of housing will increase again if prices remain stable in the first half of 2015. Prices might be excited in the second half of next year, he said, by the [near] completion of the Hong KongZhuhai-Macau Bridge.
Business Daily | 3
December 4, 2014
Macau
Investment Plan Budget unspent: MOP27.3 billion From 2009 to 2013, the government didn’t spend 27.3 billion patacas of the Public Investment Plan (PIDDA) budget, a plan targeted to improve the city’s infrastructure. In 2013, PIDDA had the lowest execution rate in the last decade (39.6 per cent) - while this year the rate stood at only 14.8 per cent as at October Luís Gonçalves
Luis.goncalves@macaubusinessdaily.com
T
he Legislative Assembly criticised the government for spending less than 40 per cent of the budget for the Public Investment Plan (PIDDA) in 2013 but this year legislators will probably have even more reasons to complain. In the first ten months of this year the execution rate for PIDDA was only 14.2 per cent with the government spending merely MOP2.1 billion of the budgeted MOP14.8 billion. In an analysis of the 2013 government budget execution, legislators said that PIDDA registered ‘the lowest execution rate in the last 10 years’ at only 39.6 per cent. Authorities here spent MOP7.03 billion of the expected MOP17.8 billion, leaving MOP10.8 billion left to spend on several investments to improve the quality of the infrastructure in Macau. The PIDDA is a government plan to build new schools, roads, bridges, ports and even renovate public transport here. While the government has received record amounts of money from the casinos it has cut investment in the city to record levels. Last year was a clear example: revenues from direct taxes from gaming increased 18 per cent but expenditure in the Public Investment Plan decreased 49.6 per cent. The low execution rate of the public investment plan is an old story in Macau and one of the main contributors to the record growth of the fiscal surplus. According to data from the Financial Services Bureau (DSF), from 2009 to 2013 the government didn’t spend MOP27.3 billion of PIDDA money budgeted to improve the city’s housing, transportation and
Money unspent in PIDDA over the years in MOP Billion Period Value 2013
10.9
2012
5.9
2011
2.4
2010
1.4
2009
6.7
Total
27.3
Source: DSF
general infrastructure. The PIDDA execution rate is unlikely to improve this year, DSF figures reveal. From January to October this year, the rate was only 14.2 per cent. The government spent MOP2.1 billion of the MOP14.8 billion budgeted for the total of the year. The amount invested in PIDDA in the first ten months of the year was also 11.8 per cent lower than in the same period in 2013 and 59.3 per cent compared to 2012. If this trend is to last until the end of the year, the execution rate of PIDDA in 2014 will be even worse than in 2013. And another MOP10 billion left in public
14.8% Execution rate of PIDDA from January to October 2014
coffers to invest in the city. The Legislative Assembly report also reveals that the government is investing less in the city’s infrastructure compared to 2011, despite the economy growing by more than 30 per cent since then. Three years ago, authorities spent MOP8.9 billion via PIDDA with an execution rate of 77.5 per cent. Last year, PIDDA invested MOP7 billion and this year it will probably be even less. Between 2011 and 2013, Macau saw gaming taxes increase by 40 per cent from MOP94 billion to MOP126 billion. The budget in the Investment Plan for next year is 14.8 billion.
Health Bureau Education and Youth subsidies MOP227mln Affairs Bureau donates in Q3 MOP1.13 billion
T
he Health Bureau granted subsidies amounting to more than 227 million patacas (US$28.3million) in the third quarter of the year, the Official Gazette announced yesterday. Most of the subsidies, 76.2 percent of the total, were granted to Kiang Wu Hospital. According to the announcement, the private hospital received more than 173.3 million patacas in the third quarter of the year. Some 120 million patacas was granted to subsidise the in-patient service of the hospital, while some 14.6 million patacas was for the hospital’s outpatient and emergency services. In addition, the supportive care
centre for those suffering from terminal cancers also received 7.3 million patacas, while some 8.9 million patacas was granted for the hospital’s specific tests and examinations. Meanwhile, the second biggest beneficiary was the Macau Federation of Trade Unions (AGOM), which received more than 11.3 million patacas. Some 3.67 million patacas was disbursed to a total of 187 individuals who joined subsidiary medical courses and internships as medical staff. The amount that each individual received was between 8,000 patacas and 40,000 patacas. K.L.
T
he Education and Youth Affairs Bureau (DSEJ) distributed MOP1.13 billion during the third quarter of this year. In total the Bureau disbursed 667 different subsidies to schools, colleges, associations and individuals. The largest subsidy - MOP152.9 million - was spent on teaching staff for them to get professional qualifications, or as direct subsidies and rewards for the time they spent in their position. These payments are related to the school year of 2013/2014. Another large slice of the financial aid from DSEJ was handed out to schools. Saint Paul School alone received
MOP42.1 million to buy schoolbooks, provide free education and to participate in the School Healthy Cafeteria scheme. Next in the school ranking was the Fong Chong School (Escola Dos Moradores De Macau), which received around MOP38 million for providing education services. Santa Rosa de Lima College (English Section) received some MOP35.8 million. Other subsidies paid by the government involved financial support to individuals and associations in order to promote Macau education. The Special Administrative Region of Macau has a total of 77 schools with 120 different sections.
4 | Business Daily
December 4, 2014
Macau MTEL landline service underway Fixed-line telecommunications service provider MTEL Telecommunication Company Ltd has started offering land-line lease services, following the company’s firstphase completion of network coverage of around 33 percent of households across the Macau SAR. According to a report in Chinese language Ou Mun Daily, prices will be between 10 and 20 per cent lower than the current market price. SMEs can also get up to 35 per cent off compared to prices offered by local telecom operator Companhia de Telecomunicações de Macau SARL (CTM). MTEL has pledged to invest about MOP1 billion (US$125 million) in supplying the telecom services and related infrastructure construction.
Foreign official MIA records over bribery bill effective 5 million passengers early 2015 João Santos Filipe
jsfilipe@macaubusinessdaily.com
Local compliance with the United Nations Convention also authorises law enforcement here to take foreign bribing party into custody if found in the city Stephanie Lai
sw.lai@macaubusinessdaily.com
T
he number of passengers using Macau International Airport has surpassed 5 million since the beginning of the year as at November, which is an increase of 9.4 per cent in comparison with the previous year. In fact, the MIA says that the number recorded from January to November is almost the same as the whole of 2013, when just over 5 million used the facility. As for the number of aircraft movements for the first eleven months of the year there was an increase of 8 per cent to 47,000 in relation to the same period of 2013. Last year, in total there were 48,000 aircraft movements, which means the Airport is headed for a new record. In relation to November alone passenger volume was recorded at over 450,000, which is a year-on-year increase of 9.5 per cent compared to November 2013 when 410,000 used the airport. Aircraft movements posted over 4,600, an increase of 11.5 per cent year-on-year from 4,400. The upward trend of the passenger
traffic of MIA has been boosted with the increasing number of tourists visiting Macau. In November, Southeast Asia and Mainland China route markets remained the major markets and presented continuous growth, occupying 39 per cent and 34 per cent of total passengers, respectively. The Taiwan market accounted for 27 per cent of total passenger volume but this number is likely to continue to increase, as from 17 December onwards the low-cost carrier Tigerair Taiwan is set to launch its MacauTaipei route, with Macau-Kaohsiung following the next day.
Corporate
T
he Legislative Assembly is targeting implementing the bill that extends its anti-corruption prevention and sanctioning scope to foreign public officials and officials of public international organisations by the beginning of next year, as the city hurries to adopt the United Nations Convention Against Corruption, legislator and head of the Assembly’s second permanent committee Chan Chak Mo said yesterday. The scope of the law does not only target local citizens that bribe foreign officials or civil servants but states that the Macau administration is obliged to take a bribing party from any signatory country that has signed the convention into custody if found in the city, legislators from the sub-committee noted. “For instance, if a UK citizen has bribed a Swiss official or civil servant in Switzerland, and this bribing person is spotted in Macau,” Mr. Chan explained to media after attending a closed-door meeting between legislators and legal consultants, “as this law applies, we are obliged to take this person into custody.” “The lawyers can then argue what laws should be applicable to process the case or where the respective trial should take place,” the legislator added. “But without this law, we
cannot even take the [foreign] suspect into custody.” Mr. Chan said that the bill could be handed to the Legislative Assembly for a final reading by December 17, and was expected to be implemented at the soonest by the beginning of next year. The bill, which is based on compliance with the United Nation’s Convention Against Corruption, states that the city’s graft watchdog Commission Against Corruption will be the authorised unit to investigate any corrupt acts related to external trade, where public officials and officials of public international organisations outside Macau are the bribed party. Local compliance with the convention suggests the adoption of the penalty as listed in Article 339 of Macau’s Penal Code against the briber that offers interests to civil servants, which is a maximum threeyear imprisonment. The United Nations Convention Against Corruption came into effect in China in February 2006, and similarly applied to Hong Kong and Macau. But it was only this year that the legalisation process for compliance with the convention began. As of November this year, there are 140 signatories to the United Nations Convention Against Corruption.
First Data, BNU collaborate to serve businesses First Data Merchant Solutions (FDMS) Macau, First Data’s direct-to-market merchant acquiring business in Macau, and Banco Nacional Ultramarino (BNU), a leading commercial bank, have announced a strategic alliance to provide merchant services and payment solutions for merchants in Macau. “Our alliance with BNU bank highlights our commitment to servicing the growing market of Macau. Macau SAR sees 30 million visitors yearly and FDMS is well positioned to help merchants in tourism, retail and hospitality better serve these visitors with our suite of innovative products and solutions and global payment expertise,” Ravi Pochiraju, General Manager of FDMS, said. The agreement allows FDMS, through BNU, to provide full service acquiring and processing capabilities for Macau merchants, including point-of-sale and e-commerce services. The alliance comes at a time when FDMS and BNU see merchants in Macau increasingly demand more efficient payment solutions to provide enhanced customer payment experiences and engagement. Pedro Cardoso, CEO of BNU, said “We are pleased to be able to collaborate with FDMS, a world leader in payment services. With BNU’s experience and customer base and FDMS’s strong leadership position in Asia Pacific and secure and stable payments platform, we see great opportunities to help our customers grow.”
Business Daily | 5
December 4, 2014
Macau
Beijing delegate: “Macau shouldn’t fall into endless political disputes” At a Basic Law talk, Beijing official Li Fei warned that people here should not “copy political models from other countries” and “politicise their requests” Stephanie Lai
sw.lai@macaubusinessdaily.com
W
hile Hong Kong’s Occupy Central pro-democracy demonstration has persisted for over two months, Beijing’s major delegate from the National People’s Congress, Li Fei, signalled at a talk here yesterday that Macau should not “fall into” any similar political disputes as seen in its neighbouring city. Mr. Li, the deputy secretary-general of the Standing Committee of the National People’s Congress, spoke yesterday at a talk organised by the Macau Basic Law Promotion Association, an event which the city’s Chief Executive, Fernando Chui Sai On, and former director of the State Council’s Hong Kong and Macau Affairs Office, Lu Ping, also attended. At the talk, Mr. Li commented on the democracy model of Hong Kong and the ongoing Occupy Central
protest - the first time he had made a public remark about the movement since it started on September 28. “The ‘incident’ seen in Hong Kong has already made it clear to its people how the city should develop its democracy...” Mr. Li said yesterday, referring to the Occupy Central movement. “After this storm, the Hong Kong people should cherish
the Basic Law more and the democratic [rights] stipulated by the law.” Hong Kong is to see its first election where the chief executive is ‘directly chosen’ by voters in 2017, for which China’s legislature ruled that candidates must be approved by more than half of a special nominating body known as the Election Committee. The
central authority’s stance has incited the large-scale Occupy Central movement since the beginning of October, when pro-democracy activists sought to fight for a more liberal democracy model by taking over the Central business district and Mongkok in Kowloon. At the talk on the city’s Basic Law yesterday, Mr. Li stressed that the people here that have to express opinions should always keep their voices “rational” and “obedient to the law” while not “politicising their requests”. He also warned that Macau should not “copy” the political model of other countries and “fall into endless political disputes”. Unlike Hong Kong, there is not yet a set agenda for the Macau administration to pursue a direct election for the post of Chief Executive. The National People’s
Congress’s top delegate noted yesterday that any changes to be introduced to the electoral laws here – namely, Appendix one and two in the Basic Law that stipulate the election model for the Chief Executive and Legislative Assembly – will require a wide consensus by society and approval by the central authorities. Outside the issue of the Basic Law implementation, Mr. Li also briefly commented about the city’s gaming industry, saying that the dominant position of the industry “does not fit the overall interests” of Macau. Although not espousing any anti-graft policy during the talk, Mr. Li noted that the “overall interests” of Macau should not be solely focused on the city’s economic growth pace and gaming revenue; he said mainland China’s social and economic security and stability are also important concerns.
6 | Business Daily
December 4, 2014
Macau Brands
Trends
Versace’s Signature Raquel Dias newsdesk@macaubusinessdaily.com
S
houlder bags have been coming back strong. Most designers have put out their own version of the classic cross-shoulder bag. Forget the bulky Tottes; it seems this season it’s all about the smaller, more versatile bag. For the coming season we had a closer look and the mini version of the Versace D. Signature bag. The new D. Signature Mini Shoulder bag collection mixes military elements with the brand’s iconic Medusa head, highlighting the Maison’s craftsmanship. It comes in a variety of colours, making it almost a collectible. The line just confirms the entrée of the Italian brand in the serious game of designer bags. The craze, that went strong in the 90’s, has been the turf of a few well known brands. Louis Vuitton, Dior and Hermes are the big names followed by Gucci, Fendi and Prada. However, Versace has intact shown a more aggressive behaviour in its bags collection, as the recent season has seen a lot of statement pieces from them. The fuller version of the bag has been presented in many collections and once more the strong point for the AW14. It’s soft black suede with intricate tattoo-inspired embroidery and contrasting calf-hair panelling. It’s finished with a short leather shoulder strap and the house’s iconic gold-tone Medusa hardware.
Mass market to drop 9 per cent in 4Q For the first time, the mass segment will post a negative quarter in Macau. The implementation of the smoking ban and table reclassification are two of the drivers for the plunge, says Deutsche Bank. Next year, mass revenues are predicted to increase 4.7 per cent, a third of this year Luís Gonçalves
Luis.goncalves@macaubusinessdaily.com
T
he years of 30 per cent annual growth are gone. The mass market is suffering a reality shock this year and even the new wave of Cotai openings – up until 2017 – is unlikely to change these growth rates from the most profitable segment in Macau. In the near term, one thing is certain. The mass segment is not immune to the gaming slowdown in Macau. Deutsche Bank predicts that the mass market will post its first quarter of negative results in the last three months of the year. The revenues will decline by 8.7 per cent in the fourth quarter to US$4.039 billion with casinos here making US$400 million less than in the same period last year. The segment will continue to struggle in 2015 with a recovery likely to happen only in the second quarter of 2015 (a growth of 1.9 per cent). In the first three months of next year, however, the revenues from mass players here will still decrease 3 per cent year-on-year. “With mass table revenue falling 12.6 percent in the month (December) and with the implementation of the mass gaming area smoking ban, table reclassification activity continues to skew segment results”, wrote the German bank in a report published
yesterday. Las Vegas Sands and SJM continue to be the leaders of the mass market in Macau, with a 31 per cent and 23.5 per cent share, respectively, in the January to November period. These two operators alone account for more than half of mass revenues here. Even with a ‘red quarter’, the mass segment performance for the year will be saved. Deutsche Bank estimate revenues from mass tables will amount to US$17.8 billion in 2014, 15.8 per cent more than in 2013.
However, in the future, mass revenue growth will be much softer than of late, even with operators moving tables from VIP room to mass floors and new casinos openings in Cotai. The mass segment is reaching maturity. For 2015, the bank predicts mass revenues will climb 4.7 per cent year-on-year, a third of what’s expected for 2014. For 2016 and 2017, when the new 10 megacasino projects are online here, the revenues from mass floors will increase 12 per cent, far from the 30 per cent growth rates of the 2011 to 2013 period. In 2017, with Cotai 2.0 at full steam, the Macau gaming industry will be a 50/50 market between VIP and mass. That year, the former segment is expected to generate US$23 billion in revenues and the latter US$25 billion. For the overall Macau market, Deutsche Bank now predicts gaming revenues to drop by 1.8 per cent in 2014. This quarter, gross gaming revenues here will drop 21.8 per cent, likely the worst quarter of the current gaming crisis. The VIP segment will suffer a severe blow with revenues plunging 28.9 per cent in the fourth quarter (yearon-year) and 10.8 per cent in total for the year.
Interest income boosts Emperor Capital profit The group registered during the fiscal year of 2013/2014 a jump of 41.8 per cent in profits. Emperor Capital, which has activities in Hong Kong, the United States, Mainland China and Japan, posted a 72.8 per cent increase in interest income revenues João Santos Filipe
jsfilipe@macaubusinessdaily.com
T
he growth of interest income in the financing segment boosted Emperor Capital Group’s profit by 41.8 per cent from HK$155.7 million to HK$220.8 million for the fiscal year of 2013/2014, the company announced yesterday in a filing with the Hong Kong Stock Exchange. In one-year time revenues from interest income increased 72.8 per cent from HK$183.2 million to HK$320 million. From the total interest income, around 51 per cent (HK$164 million) came from margin and initial public offer financing. Around 46 per cent (HK$147 million) was generated by loans and advances. Bank deposits contributed 3 per cent (HK$8.9 million).
As for the locations of the revenue, Hong Kong is the largest source of income, followed by the United States and then the other locations, such as the United Kingdom, Mainland China and Japan. The neighbouring Special Administrative Region generated 95 per cent (HK$518.6 million) of the total income (HK$546.4 million), while the United States generated 4.9 per cent (HK$27.4 million), and the other locations the remaining 0.1 per cent (HK$0.4 million). As for the future, the group is focused on the Mainland China and Asia Pacific markets. Hong Kong is seen as a gateway to those markets. ‘Against a backdrop of large worldwide investor base and abundant capital pool, the group is optimistic
about capitalising on Hong Kong’s unique position as the gateway to the mainland and the Asia Pacific market’, the final results of Emperor Capital Group explained. ‘Interest income from the money lending business will continue to serve as the Group’s major revenue contributor’, it further added regarding the strategy of the company. The results for the year also stressed the efforts and success of the group in changing from a traditional local brokerage house to a financial institution. Emperor Capital is a financial institution based in Hong Kong, which is part of the Emperor Group that also controls the Emperor Palace Casino in Macau.
Business Daily | 7
December 4, 2014
Macau
Phua attorneys dispute 14K triad claim Three filings with a US District Court and legal documents seen by Business Daily say such claims were made ‘recklessly or with intent to mislead’ Sara Farr
sarafarr@macaubusinessdaily.com
A
ttorneys of Paul Phua have filed legal documents with a US District Court refuting claims that the Macau gambling kingpin had connections with or was a member of the 14K triad. “The allegation that Mr. Phua is a member of the 14K Triad is false. We now finally know that the U.S. Government had no serious basis for that claim,” one of his attorneys, Tom Goldstein, said in a statement. His lawyers are trying to have the judge dismiss evidence seized during a search, which they claim was ‘warrantless’ after FBI agents had the Internet service of the Caesars villas they were in shut down in order to pose as technicians and observe the extent of the allegedly illegal operation. One of the three court filings seen by Business Daily states that ‘the application falsely asserts that various defendants were known members of organised crime, that defendants are criminal associates of each other, that defendants made suspicious requests for electronic equipment, and that defendants engaged in suspicious financial transactions.’ It continues, ‘it does all of this in an effort to suggest a link between defendants – who resided in villas 8881 and 8882 – and an alleged illegal sports book that the [FBI] agents thought might be located in villa 8888.’ An intelligence report on Paul Phua Wei Seng dated October 23, 2014 concludes that Paul Phua is not a member of the 14K triad society. But due to ‘restrictions’ it was unable to corroborate this with the authorities of both Macau and Hong Kong. However, the report says it refutes the allegation ‘with extreme confidence.’ The report was conducted by an Asian-based risk consultancy with significant experience in the gaming industry. It states that references to the 14K triad are made by law enforcement in the US and not informed sources in Macau and Hong Kong. The report also says that while it is possible that junket operators have contacts with organised crime, it cannot be assumed that all junkets
are triad group members, and it is also possible that a junket operator here has no ties whatsoever with triad members. According to a US government report used in court, it was the Royal Malaysian Police that in November 2008 determined Mr. Phua was a member of the 14K triad, and that between November 2007 and January 2008, he was in the United States. And while one of the three court filings says an FBI agent stated he was aware of the 2008 report, ‘the report admits that the Malaysian police did not provide any descriptive information regarding Phua.’
Property by inheritance All the properties of Secretary-elect Raimundo do Rosário are in Portugal
A
ll property assets that belong to the Secretary-elect for Transport and Public Works are in Portugal, a source with knowledge of the matter has told Business Daily. Yesterday, this newspaper published all the assets declared by the new cabinet and other top officials following Macau’s biggest political reshuffle since the handover. Raimundo Arrais do Rosário, who is returning to Macau after heading the Macau Economic and Trade
Representative Office of the European Union in Brussels and in Lisbon for many years has declared five residential units and 18 buildings according to the declaration database on the official website of the local courts. Unlike other members of the government, all the properties “are in Portugal, which is not clear in his declaration”, the same source told this newspaper. Besides that, we are told, “all rustic and urban buildings were inherited by Mr. Rosário’s wife”. A. L.
‘The government’s oft-repeated claim that Phua is a high-ranking 14K triad member is thus based entirely on one sentence in a report that itself is based entirely on a snippet from another report, that is in turn based on an unsubstantiated assertion from an unidentified individual in another country… Moreover, the report is six years old,’ the court filing reads. Paul Phua is originally from Malaysia but has strong ties to the Macau gaming world as a highprofile poker player. Prior to his arrest in Las Vegas, he had been arrested and detained in Macau for
illegal bookmaking during the FIFA World Cup. Soon after his release on bail, he departed Macau in his private jet on June 23 for Las Vegas, where he was accused of conducting illegal online betting on the FIFA World Cup. Last month, US prosecutors accused Paul Phua of having bribed his way out of Macau custody. Police in Macau, however, were quoted as saying by local Chinese-language media that Paul Phua and 21 others had been arrested for running illegal gambling business related to the World Cup. The suspects were transferred to the Public Security Police station and deported from Macau.
8 | Business Daily
December 4, 2014
Greater China 50 bln yuan fund to fight pollution China plans to launch a 50 billion yuan (US$8.13 billion) environmental protection fund in stepped-up efforts to reduce widespread pollution, the official China Securities Journal reported yesterday. The fund would receive investment from the National Development and Reform Commission (NDRC) and the Ministry of Finance, the paper said, and would attempt to beef up investment in critical sectors through low or no-interest loans. Beijing has struggled to incentivize local governments and Chinese companies to step up their pollutionfighting efforts.
Services sector CGN Power growth quickens Hong Kong I This week’s two surveys painted a mixed picture about the labour market, which Chinese leaders say is a crucial consideration when setting policy
Port Hedland shipments to China fall Australian shipments of iron ore to China from Port Hedland, which handles about a fifth of the world’s seaborne trade, fell 8.5 percent in November from a near-record high in October, port data showed. The drop to 29.0 million tonnes in November, from 31.71 million the month before, according to Pilbara Ports Authority, came as prices for the steel-making mineral continued to slide. November had one less day than October, so daily shipments of iron ore totalled 968,000 tonnes compared to 1.02 million.
GM says auto sales up General Motors Co and its Chinese joint ventures sold 310,094 vehicles in China in November, up 5.3 percent from the same month a year earlier, the U.S. automaker said yesterday. That follows a 3.2 percent year-on-year rise in October and a 15.2 percent rise in September. The company’s sales in the first 11 months of the year totalled 3.18 million vehicles, up 10.1 percent from the same period a year earlier. GM has said it plans to invest US$12 billion in China between 2014 and 2017 and build five more plants to ramp up its manufacturing capacity.
Xiaomi enters wearables Xiaomi Technology Co Ltd and other Chinese companies have joined a US$40 million investment in U.S. wearables start-up Misfit, the first time the world’s third-biggest smartphone manufacturer has taken a stake in a U.S. mobile-device maker. Misfit, which claims to make the biggest-selling activity and sleep tracker in China, said yesterday it has raised new financing from Xiaomi, e-commerce company JD.com Inc., and venture-capital firms GGV Capital and Shunwei. GGV partner Hans Tung will join Misfit’s board of directors. Shunwei partner Tuck Koh will become a board observer. Both are Xiaomi investors.
Another budget airline debuts China’s third low-cost carrier, 9 Air, launched its first flight on Tuesday afternoon, with its cheapest ticket priced at 9 yuan (US$1.47). The inaugural flight took off at 1 p.m. from Guangzhou, capital of south China’s Guangdong Province, and landed in the western Guangdong city of Zhanjiang 70 minutes later. Guangzhou-based 9 Air was founded in February this year as a budget subsidiary of privately owned Juneyao Airlines. It is the third low-cost carrier to operate in China after Spring Airlines and China West Air.
A group of hospitality workers. The official services PMI showed the labour market shrank for the fifth consecutive month in November
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hina’s services sector grew slightly faster in November, two surveys showed yesterday, a welcome respite to a run of underwhelming data but still unlikely to allay concerns about the softening Chinese economy. The encouraging reports about the services sector, which creates more jobs than factories, contrasted sharply with data out on Monday that suggested growth in China’s manufacturing industry slid to its lowest in at least six months in November. That prompted some economists to predict that China would cut interest rates again in coming months after doing so unexpectedly on November 21 to stoke growth in the world’s second-largest economy. “Things have gotten worse rather than better,” said Louis Kuijs, an economist at RBS in Hong Kong, adding that any bottoming out in China’s sagging housing market is unlikely to lead to a solid rebound next year. “I predict one more rate cut to lower lending rates to 5.25 percent in the first quarter,” he said. The official non-manufacturing Purchasing Managers’ Index, or PMI, rose to 53.9 in November from October’s 53.8, well above the 50-point line that separates growth from contraction on a monthly basis. A separate services PMI published by HSBC/Markit inched up to 53.0 last month from October’s 52.9, as new orders rose at their quickest pace in 2-1/2 years. The official services PMI showed the labour market shrank for the fifth consecutive month in November as the employment sub-index hovered at 49.5, while the HSBC/Markit survey showed firms were still hiring as companies expanded their businesses. Accounting for about 46 percent of China’s economy last year, the services sector has weathered the growth slowdown better than factories, and authorities want it to overtake manufacturing as the bigger driver of activity in coming years.
Flagging growth Hurt by a sagging housing market, slowing domestic demand and investment and unsteady exports, China’s economy is forecast by some
analysts to be headed towards its worst slowdown in 24 years this year with annual growth seen at 7.4 percent. Sources told Reuters after the rate cut that policymakers feared fourth-quarter growth could dip below 7 percent, despite a flurry of fiscal and monetary policy support measures earlier in the year. In a sign that companies were feeling the drag of an unsteady economy, business expectations softened in both services PMIs. A sub-index measuring business confidence for the year ahead dipped to a three-month low in the HSBC/ Markit poll, while the official PMI showed the index hit a 10-month trough. Both indices held above the 50-point level, however. “Downside pressures on the economy still persist,” said Qu Hongbin, an economist at HSBC in Hong Kong, adding that he expected further policy easing in coming weeks. After saying for months that China doesn’t need any big economic stimulus, the central bank unexpectedly cut interest rates last month by 40 basis points, its biggest reduction since November 2008 at the height of the global financial crisis. Kuijs said the rate cut could be an attempt by authorities to alleviate the debt repayment pressures faced by some companies in sectors that are plagued by falling prices and a glut of unsold goods. Reuters
(Future) policy will be dependent on data. If the leadership can get away without easing the policy stance further, they will Louis Kuijs RBS economist
The company received co ‘cornerstone’ investors
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GN Power Co Ltd, China’s largest nuclear power producer, raised US$3.2 billion after pricing its Hong Kong initial public offering at the top of expectations amid a scramble to invest in a sector primed for growth as Beijing promotes atomic energy. The 8.82 billion new shares on offer were priced at HK$2.78 each after being marketed in an indicative range of HK$2.43 to HK$2.78, Thomson Reuters publication IFR reported yesterday, citing people familiar with the plans. That would value the offering at HK$24.52 billion (US$3.16 billion), the second-largest in the Asia-Pacific region so far this year. A listing by Chinese property developer Dalian Wanda Commercial Properties Co, expected later this month, could be worth up to US$6 billion. As a nuclear energy provider, CGN Power is set to benefit from China’s efforts to curb environmental pollution by diversifying its energy generation away from fossil fuels. In a draft IPO prospectus, it said it plans to use proceeds partly to expand installed capacity with nine new power generating units. CGN Power wasn’t immediately available for comment on the IPO’s pricing. Its debut on the Hong Kong
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December 4, 2014
Greater China
prices IPO at top of range
PetroChina leads shale expansion in Southwest
ommitments worth US$1.33 billion from 18
The project will start operations by the end of the year and begin commercial production in 2017 Aibing Guo
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Inside Qinshan Nuclear Power Plant
stock exchange is set for December 10. The company received commitments worth US$1.33 billion from 18 ‘cornerstone’ investors, helping secure demand for the deal before it was launched to retail and other institutional buyers. Cornerstone investors receive a guaranteed allocation in exchange for agreeing to retain their stakes for a set period. Among cornerstone investors are hedge fund Och-Ziff Capital Management Group LLC, Singapore sovereign wealth fund GIC Pte Ltd and Asia’s biggest hedge fund Hillhouse Capital. Each of these three put US$100 million into the IPO. ABC International, Bank of America Merrill Lynch and China
International Capital Corp (CICC) were hired as sponsors of the IPO, with BNP Paribas, CLSA, Goldman Sachs, ICBC International and Morgan Stanley also acting as joint global coordinators. Reuters
KEY POINTS IPO priced at HK$2.78 per share, debut due Dec 10 To use funds to increase nuclear power capacity
etroChina Co. and three partners will invest over US$4 billion to drill for gas in the nation’s most productive shale fields. China’s biggest energy producer has joined Sinochem Group and two local state enterprises to form the venture in the south-western city of Chongqing, according to a statement posted to the municipality’s website today. Chongqing holds over 2 trillion cubic meters of exploitable shale gas, according to the municipal government. So far, most of its development has been centred on the Fuling site run by China’s No. 2 oil company, China Petroleum & Chemical Corp. China’s land and resources ministry estimates the nation’s reserves at about 25 trillion cubic meters, the world’s largest. The venture should “substantially increase shale gas exploration in Chongqing” to the benefit of all partners and the local economy, said Sun Zhengcai, Chongqing’s top official, according to the Chongqing Daily, the city’s official newspaper, which covered the project’s launch ceremony yesterday. Two calls to PetroChina’s Beijingbased spokesman seeking comment went unanswered.
China should surpass its 2015 shale gas output target of 6.5 billion cubic meters, Yue Laiqun, a ministry researcher, said at a conference in Beijing today. Still, that’s only a small proportion of the 30 billion cubic meter-goal set for 2020 and a sliver of the 266 billion cubic meters produced by the U.S. in 2012. Difficult geology, lack of infrastructure and limited exploration rights have all put the brakes on China’s shale ambitions. PetroChina owns 40 percent of the new project. Chongqing’s State Development and Investment Corp., Sinochem, and the Chongqing Institute of Geology and Mineral Resources hold 39 percent, 20 percent and 1 percent respectively, according to a report from the 21st Century Business Herald newspaper. The venture plans to drill 16 testing wells and 360 production wells for a total investment of 26.05 billion yuan (US$4.2 billion). It has a registered capital of 6 billion yuan and will explore an area of 15,600 square kilometres (168,000 square feet), about 50 times larger than China Petroleum’s Fuling block, the newspaper said. Bloomberg News
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Greater China
SHG-HK stock connect starts with pricing disconnect The Shanghai Composite Index has gained over 16 percent since the connector launch date was announced on November 10, and is up about 30 percent year-to-date, far outperforming Hong Kong’s miserly 1.5 percent gain this year Pete Sweeney
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ong Kong shares in dual-listed Chinese firms are trading at deep discounts to their onshore versions, despite the recent launch of the Hong Kong-Shanghai stock connect scheme that channels crossborder stock investment between the two markets. The lack of price convergence has confounded fund managers and revealed shortcomings in the stock connect’s design because shares are not fungible between exchanges. Theoretically, because the stock connect enables two-way investment flows, prices should converge as investors arbitrage away the differential. That has not happened. The A-H share premium index, which measures price differences for dual-listed companies in both markets, has risen sharply since the stock connect launched in mid-November. A value over 100 indicates that shares in dual-listed companies are cheaper in Hong Kong than in Shanghai. On Tuesday it stood at 111.94, its deepest discount since July 2013. Bank of Communications , one of China’s five largest banks, closed at 5.96 yuan (HK$7.52) in Shanghai on Tuesday, but in Hong Kong it traded at HK$6.58 (5.2177 Chinese
“Keep in mind that true arbitrage is not possible through stock connect; that is, you can’t buy through stock connect and sell onshore and vice versa,” said Nick Ronalds, head of equities at industry association ASIFMA in Hong Kong. A huge rally on the mainland has added to the disconnect. “H shares aren’t at the centre of attention in China, the Chinese government and people are still focused on A-shares,” said Xiong Yepeng, a sales associate at China Securities. But some view the discount as a buying opportunity, betting that future reforms to mainland markets will sustain the rally and encourage convergence. Indeed, some point to Chinese retail investors’ new interest in blue-chip financial stocks, which they had scorned for years, arguing the pilot programme has already had a synchronizing effect. “There might still be price gap between the two markets, but the price movement will become more and more correlated, while A-shares will definitely take the lead position,” said Raymond Chen, portfolio manager at Keywise Capital in Beijing, adding that A shares will generally react more quickly to domestic developments as they are “closer to information.” Reuters
Bullish trend in SHG stock exchange side of the SHG-HK has created a pronounced gap, that is easing currently
yuan)- a 12 percent discount. Tianjin Capital Environmental Protection Group’s Hong Kong shares traded at half its price on the Shanghai bourse. Olivier D’Assier, Asia Pacific managing director for Axioma, a risk management company that helps design stock indices in China and elsewhere, blamed speculators. He said the chasm between the indices narrowed dramatically in the run-up to
the stock-connect’s launch, but quickly reappeared once trading began. “The gap narrowed because speculators thought people are going to jump on this, but they didn’t, so now (the speculators) are selling back,” he said. Assier was referring to the weak take-up of the programme’s investment quota. Southbound flows from Chinese investors were anaemic - unsurprising
considering the paperwork and capital requirements and foreign inbound flows have been slacker than expected due to technical and legal concerns. “Just opening the door a little crack and not changing any of the policies wasn’t going to be enough,” said Assier. Unfortunately for traders, there is no easy way to profit from the distortion because the shares are not fungible - mutually interchangeable.
KEY POINTS Dual China-Hong Kong listings gap highest since 2013 Investors expected stock connect launch to narrow gap Distortion said to be result of pre-launch speculation
Luxembourg to fast-track approvals to use SHG-HK link The move will make it much easier in theory for many large institutional investors to use the Chinese stock link
Behind its Mediaeval facade, Luxembourg hosts headquarters of an important number of funds and firms that enjoy the Grand Duchy’s benevolent tax policy
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urope’s main funds regulator has introduced a “fast-track” procedure for approving mutual funds
that wish to participate in a landmark Hong Kong-China equity trading scheme. The announcement, made by the Association
of the Luxembourg Fund Industry (ALFI) on Tuesday, comes amid growing industry frustration over European regulatory hurdles that have prevented many asset managers from participating in the Hong Kong-Shanghai Stock Connect scheme. L u xem b ou rg’ s Commission de Surveillance du Secteur Financier (CSSF) will fast-track applications from mutual funds sold to retail investors, also known as UCITS, whose investment policy already permits exposure to China shares and which only need to adapt their existing paperwork, ALFI said. The move will make it much easier in theory for
many large institutional investors to use the Chinese stock link, although how many funds will benefit from the new process in practice is unclear. More than 13,000 mutual funds are domiciled in low-tax Luxembourg and regulated by the CSSF, but only a small proportion of them already invest in Chinese shares through cross-border investment schemes known as QFII and RQFII. Currently, the CSSF has approved one UCITS fund to use Stock Connect and has just two other applications for it pending. Reuters reported last week that the CSSF’s concerns
about investor protection prevented most EU funds from participating. Market participants said the CSSF wants to ensure that Chinese shares EU savers buy through the link-up can be adequately monitored and recovered should the bank that guards the stocks - the custodian bank - or one of the exchanges, go bust. The China trading scheme makes it tough for funds and custodians to fulfil these obligations, because Shanghai shares are physically held in China through an unusually complex three-tiered structure involving the custodian, the Hong Kong clearing house, and the Shanghai clearing house. Reuters
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Asia
Australian economy slows in Q3 That was grim news for the Liberal-National government since nominal growth is what drives tax receipts Wayne Cole
Treasurer Joe Hockey has already conceded that coming budget deficits will be much larger than first projected
odds of a cut in rates, which have been stuck at a record low of 2.5 percent for 15 months now. Interbank futures imply a better than 70 percent probability of a rate cut by mid-2015, having shown almost no chance of a move as recently as a month ago. While the Reserve Bank of Australia (RBA) this week reiterated its steady outlook for policy, it also cautioned that a further fall in the local currency would be needed to keep the economy above water.
Incomes squeezed
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ustralia’s economy unexpectedly slowed last quarter as sliding prices for resource exports took a heavy toll on incomes, a substandard result that stoked speculation that interest rates would have to be cut again. The local dollar shed half a U.S. cent to a four-year low after gross domestic product (GDP) rose just 0.3 percent
in the third quarter. That was less than half the pace analysts expected, and the slowest since early 2013. Growth for the year held steady at 2.7 percent, but was likely to suffer this quarter given the recent rout in global commodity prices. “It’s a very disappointing result,” said Michael Workman, a senior economist at Commonwealth Bank.
“Nominal GDP contracted as falling resource prices hit incomes, and those prices dropped a lot more this quarter, so there’s more pain to come.” “This will encourage the market to fully price in another cut in interest rates, though it’s not clear whether 25 basis points would really make that much difference.” Indeed, investors have already been narrowing the
The report from the Australian Bureau of Statistics showed the value of all goods and services produced was A$1.6 trillion (US$1.3 trillion) in the year to September, or about A$67,600 (US$56,784) for each of its 23.5 million people. Growth was supported by surging resource output as a decade-long boom in mining investment comes on line. As a result, net exports added 0.8 percentage points to GDP in the quarter, and no less
Singapore Exchange warned for relapsing MAS, in a statement yesterday, instructed SGX’s CEO and board to conduct a review to address any shortcomings leading to the day’s delay
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Reuters
KEY POINTS Software error delays opening, says defect is rectified Market opened at 12:30 p.m. instead of 9 a.m.
Aradhana Aravindan and Saeed Azhar
ingapore Exchange Ltd (SGX) came under fire yesterday after stock trading was interrupted for a second time in a month, piling pressure on a bourse and CEO grappling with low trading volume and struggling to attract large listings. A software error delaying opening was soon rectified. But it came on the heels of a power failure that halted stocks and derivatives trading for several hours on November 5, prompting the Monetary Authority of Singapore (MAS) to call the latest lapse “unacceptable”. The delay deals a fresh blow to the ambitions of Chief Executive Magnus Bocker to make the bourse one of Asia’s largest through initiatives such as increased focus on derivatives. “I cannot speak for myself, but on the ground I assess that most remisiers want him (Bocker) to leave,” said Jimmy Ho, President of the
than 1.6 percentage points for the year. However, prices for many of those resources have been on the slide for months now, pressuring company profits, wages and business investment. Capital expenditure was particularly weak last quarter, slashing 0.6 percentage points from GDP. Sliding engineering investment accounted for half of that fall. The impact was evident in measures of national income, which statisticians use as a benchmark for living standards generally. Real net national disposable income fell 0.3 percent in the third quarter, a second straight quarter of decline. Likewise, nominal GDP measured in current dollars, before adjusting for inflation, dropped for the first time since 2009. Treasurer Joe Hockey has already conceded that coming budget deficits will be much larger than first projected and is likely to lay out more dire numbers in his mid-year financial review due this month.
Central bank calls lapse “unacceptable” Society of Remisiers. Bocker, whose contract expires in June, led an US$8 billion bid for Australia’s ASX Ltd in 2010 which was blocked by the Australian government. “MAS will not hesitate to take supervisory actions against SGX if necessary,” MAS said. It did not specify
what action it would take, but in the past has reprimanded and fined financial institutions. SGX said its securities market opened at 12:30 p.m. (0430 GMT) instead of its usual 9:00 a.m. The pre-open routine began at 12:00 p.m. and trading ended at 5:00 p.m. as usual. All securities, including its 7 listed
retail bonds, were affected by the delay. SGX said it delayed trading to enable member firms to reconcile client positions, and rectify any errors in end-ofday processing for December 1 on the securities clientaccounting system hosted by SGX on behalf of dealers. “Obviously never good
SGX dealing with lower volumes, lack of large listings
to have technical failures, whoever it is to blame,” said Hugh Young, managing director of Aberdeen Asset Management Asia, which owns shares in SGX. SGX reported a 16 percent fall in net profit in its fiscal first quarter due to lower share trading volume. During the quarter, the average daily value of securities traded on the exchange was 27 percent lower. Interest in SGX’s smalland mid-cap market in particular has yet to recover from a penny stock crash last year. The bourse suspended trading in three interlinked companies after a plunge in their share prices wiped out billions of dollars in their combined market value. Reuters
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Australia probes bitcoin crime links Regulators around the world are wary after the Mt Gox bitcoin exchange filed for bankruptcy in Tokyo earlier this year Byron Kaye
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top Australian law enforcement agency is investigating bitcoin’s role in organised crime, a senior official said, just as politicians and financial regulators embrace the digital currency as a legitimate part of modern business. The investigation into bitcoin’s crime links by one authority as others embrace it highlights the crossroads governments have reached as they struggle to regulate the five-year-old “cryptocurrency”, a method of making anonymous payments which has surged in popularity around the world. Australian Crime Commission Executive Director Judy Lind revealed for the first time that investigators will monitor “misuse of virtual currencies to facilitate criminal activity” at a national and international level, under an operation named Project Longstrike. “We know that virtual currencies including bitcoin are used as payment methods to facilitate illicit trade on the dark net,” Lind told Reuters in a statement, referring to a hidden part of the Internet where information can be shared anonymously and without revealing the location of its source. “Organised crime groups continue to make use of dark nets to harbour trading in illicit commodities, including child exploitation material, illicit drugs and firearms, stolen credit card and identity data, and hacking techniques.” Project Longstrike is just the latest example of Australia’s determination to crack down on bitcoin-enabled crime. Last month, Australia said it
extradited to the United States the alleged primary moderator of Silk Road, a website where people bought illegal drugs like heroin using bitcoins. In October, police seized Queensland state’s first bitcoin automated teller machine five months after it opened, with media reporting police believed it was being used by a former motorcycle gang member to deal crystal methamphetamine. Regulators around the world are wary after the Mt Gox bitcoin exchange filed for bankruptcy in Tokyo earlier this year, saying it lost some 850,000 bitcoins - worth about US$300 million at current prices - in a hacking attack. Like many countries, Japan has allowed bitcoin trading to continue without establishing a full set of rules on its legal status. U.S. authorities are yet to agree to cohesive laws, while the United Kingdom is seen as a world leader because it has classified bitcoins as a currency. Australian authorities are also trying to facilitate legal bitcoin trades in a country where use of the currency is exploding. Between its 23.6 million people, Australia has an estimated 7 percent of the US$5 billion worth of bitcoins now circulating, with reports of online retailers, real estate agents and even pubs accepting bitcoin payments. The Australian Taxation Office has published a guide for bitcoin traders on how to declare their investments, and a parliamentary inquiry is trying to lay the groundwork for a broader regulatory approach to the
digital currency. But David Glance, director of the University of Western Australia’s Centre for Software Practice, said Australia appeared to be sending mixed messages. “Politicians singularly fail to understand what (the digital economy) is all about. They latch onto trends and buzzwords,” he said, referring to the tax office guidelines and parliamentary inquiry. “There still isn’t a problem that bitcoin solves, other than buying drugs,” he added. Dark net sites including Silk Road and its successor Silk Road 2.0 did about US$3 billion of turnover annually in the year to November, Glance said, equivalent to more
Politicians singularly fail to understand what (the digital economy) is all about. They latch onto trends and buzzwords David Glance University of Western Australia’s Centre for Software director Practice
than half the total bitcoins now in circulation.
Wild west Senator Sam Dastyari, who is running the parliamentary inquiry, said bitcoins offered a way to “shake up” Australia’s “stale” banking industry. A regulatory system is needed that policed crime without restricting the currency, he said. “There is going to be a place for some kind of digital-style currency. There is inevitability that it will play some kind of role,” Dastyari said. “Do you go and start regulating it first, or wait for the IMF to do it first and come on board?” Australia could soon see the world’s first direct share market listing of a virtual currency exchange, in a sign of how rapidly bitcoin businesses are entering the mainstream. Melbourne-based start-up Bitcoin Group hopes to raise A$20 million (US$17 million) and plans to file a prospectus by Christmas which will not include financial forecasts. Bitcoin Group Chief Executive Officer Sam Lee compared the currency to the early “wild, wild west” days of the Internet, and shrugged off concerns that it mainly served as a vehicle for illegal transactions. “We’ve moved far beyond that now,” he said. “We expect (bitcoin currency) to clean itself up as more capital and more smart people flow into the ecosystem.” Reuters
editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Luciana Leitão, Luis Gonçalves, Michael Armstrong, Sara Farr, Stephanie Lai, Óscar Guijarro, Kam Leong, Joanne Kuai GROUP SENIOR ANALYST José I. Duarte Brands & Trends Raquel Dias Creative Director José Manuel Cardoso Designer Francisco Cordeiro WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.
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December 4, 2014
Asia WB raises Vietnam’s growth forecast The World Bank said yesterday it has revised its forecast for Vietnam’s economic growth this year to 5.6 percent from 5.4 percent previously, after the government said it expects the economy to accelerate this year. The revision is part of the World Bank’s bi-annual report reviewing Vietnam’s economic performance ahead of a meeting between donors and the government on Friday. On Tuesday, Vietnam’s Prime Minister Nguyen Tan Dung said economic growth this year could be more than 5.9 percent, supported by exports, quickening from 5.42 percent in 2013.
S.Korean exports seen up South Korea’s exports are expected to rise an annual 4.3 percent in 2015, a report from the country’s representative trade body showed, which would be the biggest gain since 2011 but still below the robust growth rates seen in earlier years. Exports are expected to pick up on increased offshore demand and more working days compared to 2014, the Korea International Trade Association (KITA) said in a statement yesterday. However, the pending start to U.S. Federal Reserve’s rate tightening cycle and prolonged weakness of the yen remain risks to the exports outlook, it added.
Thai PM forecasts 2015 GDP growth Thailand’s prime minister said yesterday he expected economic growth of 2-3 percent next year as the global economy recovers. General Prayuth Chan-ocha told reporters that the economy was expected to grow around 1 percent this year, as suggested by the state planning agency. But his 2015 growth projection is much lower than the 3.5-4.5 percent predicted by the planning agency and 4.8 percent by the central bank.
ANZ Bank settle swaps sales issue ANZ Bank has admitted it engaged in misleading conduct over the sale of interest rate swaps to New Zealand farmers, and will pay NZ$19 million (US$14.83 million) in compensation, the country’s consumer watchdog said yesterday. The Commerce Commission, which started legal proceedings against the bank last year, said ANZ had accepted it breached fair trading laws in the way it marketed and sold the products to some rural customers between 2005 and 2009. Interest rate swaps are financial derivatives that allow borrowers to manage the interest rate exposure on their debt.
S.Korean foreign reserves shrink South Korea’s foreign reserves shrank for a fourth consecutive month in November as the dollar continued to strengthen against major foreign currencies including the euro and sterling, the central bank said yesterday. Foreign reserves held by South Korea fell to US$363.10 billion by the end of November from US$363.72 billion at the end of October, the Bank of Korea said in a statement. The central bank said the euro fell 1.2 percent against the dollar while the pound slipped 1.7 percent in October, leading to an overall decline in its foreign reserves.
Indian services gain momentum The survey showed input costs for services firms fell for the first time in over five years in November
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ctivity in India’s services sector expanded at its fastest rate in five months in November, driven by surging new orders as firms cut prices on tumbling raw material costs, a business survey showed yesterday. The outlook was clouded, however, by business confidence slumping to a more than seven-year low. The HSBC Services Purchasing Managers’ Index (PMI), compiled by Markit, rose to 52.6 in November. Growth in October had stalled at 50, the level that demarcates growth from contraction. “Despite the uptick in order flows, business sentiment deteriorated, reminding us that continued policy action that addresses investor concerns is needed to sustain growth momentum,” said Pranjul Bhandari, chief India economist at HSBC.
Reserve bank of India headquarters in Delhi
The new business sub-index accelerated to 52.5 in November, its highest since July, signalling improving demand as firms cut prices for the first time in over four years. A sharp fall in global crude oil
prices coupled with softer food costs lowered consumer inflation in India to 5.52 percent in October. The survey showed input costs for services firms fell for the first time in over five years in November. Indian economic growth slowed to 5.3 percent in the third quarter of 2014 from 5.7 percent in the prior quarter. The Reserve Bank of India kept key interest rates unchanged on Tuesday but hinted at a possible cut early next year if inflation remained subdued and the government controlled the fiscal deficit. The government has identified key areas for reform, such as raising foreign investment caps on various sectors and reducing subsidies, although most of those plans have yet to be implemented. Reuters
Mongolia restarts bidding for giant coal project New prime minister Chimed Saikhanbileg has identified Tavan Tolgoi as a priority to energise the country’s flagging economy
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ongolia has re-launched an international tender to develop its giant Tavan Tolgoi coal project as it tries to boost a flagging economy hit by falling commodity prices and a decline in foreign investment. The latest attempt has drawn interest from Hong-Kong listed Mongolia Mining Corp (MMC), U.S.based Peabody Energy Corp and Japan’s Itochu Corp, despite weak global coal prices. Tavan Tolgoi holds around 7.5 billion tonnes of coking coal, but Mongolia’s cash-strapped government has struggled to finance its development, and little progress has been made since an international bidding process collapsed in 2011. The Mongolian Mining Corp (MMC) said on Monday that it has formed a consortium with “certain
independent parties” to submit a bid for the project, located around 300 kilometres from the Chinese border. Interested firms had to notify the Mongolian government of their intention to bid for the block before a December 1 deadline, with a shortlist expected to be released by December 15, MMC said. The firm declined to give further details of its bid, when contacted by Reuters. Erdenes Tavan Tolgoi, the stateowned entity in charge of the project, did not immediately respond to requests for comment. In 2011, the western block of the project was awarded to a consortium consisting of Peabody, a team of Russian and Mongolian firms, and the Shenhua Group, China’s biggest coal producer, but the result was annulled after rival bidders from
Otsuka search re-positioning with Avanir acquisition The deal is expected to close in the first quarter of 2015
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apanese drugmaker Otsuka Holdings Co Ltd plans to buy U.S.based Avanir Pharmaceuticals Inc. for about US$3.5 billion to expand its neurologic drug portfolio ahead of an expiration of a key drug patent. Otsuka said subsidiary Otsuka Pharmaceutical Co Ltd would pay US$17 per share in cash, or a premium of 13.3 percent to Avanir’s closing price on Monday. The deal, Otsuka’s biggest according to Thomson Reuters data, comes as the company aims to beef up its product pipeline ahead of a socalled “patent cliff” after April 2015,
when its U.S. patent for schizophrenia drug Abilify expires and opens the way to generic competition. Its global sales of Abilify totalled 575.7 billion yen (US$5 billion) in the last fiscal year, around 40 percent of the total for Otsuka Holdings. The United States is the biggest market for the drug. Japanese companies, helped by cashrich balance sheets and encouraged by an ageing domestic population, are looking overseas for growth. Otsuka will launch a tender offer within 10 business days to purchase all outstanding shares of Avanir, the
Japan and South Korea branded the decision unfair. Peabody spokesman Chris Curran, said the firm would be “an active participant” in the current tender. Itochu, which submitted a joint bid with Sumitomo, Marubeni and Sojitz in 2011, said it had also notified Mongolia that it was interested in getting involved. South Korea’s Daewoo International and LG International, both part of a consortium bid in 2011, said they would not participate. Along with the Oyu Tolgoi copper mine, run by Rio Tinto, Tavan Tolgoi is seen as crucial to Mongolia’s efforts to convert its mineral wealth into economic gains, but both have been caught up in a debate about the role of foreign firms in the country’s development. Reuters
companies said. Otsuka Pharmaceutical President Taro Iwamoto said the deal would “bring together Otsuka’s experience and business track record in the area of mental illnesses with Avanir’s strengths in neurologic diseases”, according to a statement. Avanir developed Nuedexta, which treats pseudobulbar affect, a neurological disorder characterised by involuntary outbursts of crying or laughter. But it failed to win approval from the U.S. Food and Drug Administration for a migraine drug device in November, a few weeks after the regulator had raised questions regarding some data submitted as part of the marketing application. After the deal, Avanir will operate as a unit of Otsuka America Inc. and will partner with Otsuka to enhance its development and marketing efforts in central nervous system-related disorders. Goldman Sachs advised Otsuka, while Centerview Partners advised Avanir. Reuters
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International Agreement reached about Kurd’s oil Turkey has welcomed an agreement between Iraq’s government and autonomous Kurdish region over the budget and oil exports. “We see this reconciliation as a positive development in terms of international security of energy supplies and our country’s energy cooperation with Iraq,” the foreign ministry said in a statement. The ministry also said the agreement would help solve problems between the central government in Baghdad and Iraqi Kurdistan, and ultimately help Iraq’s security and the development of its energy sector.
Consumption props up Swiss economy Switzerland’s economy grew 0.6 percent in the third quarter from the previous three months, twice as fast as expected and helped by private consumption and exports of chemical and pharmaceutical products, data showed on yesterday. Quarterly growth was the fastest over the last year and marked a pick-up after the economy virtually stalled in the second quarter. Gross domestic product rose by 1.9 percent year-on-year, ahead of expectations for 1.4 percent and up from a revised 1.6 percent in the prior quarter, the State Secretariat for Economics said.
Europe inaugurates space launcher venture Aerospace groups Airbus and Safran formally inaugurated a joint venture to pool their space launcher activities yesterday, aiming to secure the future of the Ariane rocket and cut costs in the face of U.S. launch rival SpaceX. The announcement came after 20 European nations agreed at ministerial talks in Luxembourg to launch the Ariane 6 in 2020. It follows conditional approval for the planned venture from European Union anti-trust regulators last week. The venture will employ 450 people and will be called Airbus Safran Launchers.
Eurozone economy looking set to contract in the new year The new business sub-index fell below that mark for the first time since the middle of last year Jonathan Cable
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eavy discounting failed to stop euro zone business activity growing less than thought last month, a survey showed yesterday, suggesting the bloc’s economy may contract again early next year. “The region is on course to see a mere 0.1 percent GDP growth in the final quarter of the year, with a strong likelihood of the near-stagnation turning to renewed contraction in the new year unless demand shows signs of reviving,” said Chris Williamson, survey compiler Markit’s chief economist. A Reuters poll last month predicted 0.2 percent economic growth this quarter and 0.3 percent next. Markit’s final November Composite Purchasing Managers’ Index (PMI), based on surveys of thousands of companies across the region and seen as a good indicator of growth, sank to 51.1 from October’s 52.1, missing an earlier flash reading of 51.4. November was the 17th month the index has been above the 50 level that separates growth from contraction. But the new business sub-index fell below that mark for the first time since the middle of last year, dropping to 49.7 from 50.8 and suggesting a further downturn in December. A PMI covering the region’s dominant service industry fell to 51.1 from October’s 52.3, shy of the flash 51.3, and showed firms have been cutting prices for three full years now to drum up business. The output price index came in at 47.1.
KEY POINTS PMIs point to renewed GDP contraction next year Heavy discounting fails to stop growth waning New orders fall for first time since July 2013
Further price cutting, together with signs of economic performance deteriorating in the core countries, will concern the European Central Bank which is battling to reinvigorate the economy and drive up dangerously low inflation. Annual inflation dipped to 0.3 percent in November, deep into the ECB’s “danger zone” for price moves, although the central bank is not expected to alter its already very loose policy when it meets on Thursday. The central bank is offering banks
long-term cheap loans and buying covered bonds and asset-backed securities. However, facing resistance from Germany, there is only an even chance it will buy government bonds, a Reuters poll found last week. “Survey results indicate that policy initiatives currently announced have yet to have a meaningful impact on business or consumer confidence in the region, and that more aggressive measures are likely to be needed, and quickly implemented, if another recession is to be averted,” Williamson said. Reuters
U.S. consumers face higher Fed rates differently
Russia conducts US$700 million-worth The risk is if the Fed can’t slow the main share of the economy, it may have to turn more aggressive should it fail of interventions The Russian central bank said yesterday to cool the overall expansion it had conducted 36.87 billion roubles (US$700 million) worth of forex market interventions on December 1, its first interventions since November 10 when it floated the rouble. After the central bank published the data on interventions, the rouble fell slightly after opening broadly flat earlier in the morning.
Venezuela recession to stretch into 2015 Venezuela’s economy will contract again next year even if oil prices stem their steep fall and recent fiscal reforms give the economy some steam, according to the United Nations’ body for Latin American and the Caribbean. The OPEC country’s economy is seen contracting 3 percent this year and 1 percent next year, the Chile-based Economic Commission for Latin American and the Caribbean said in a report on Tuesday. “The calculation of minus 1 percent is based on,” Daniel Titelman, director of the Economic Development Division, told Reuters in an interview.
Simon Kennedy
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he U.S. consumer may keep on spending even when the Federal Reserve starts raising interest rates next year. As central bankers signal an intention to raise their benchmark for the first time since 2006, a key question for the world’s largest economy in 2015 is whether it can weather tighter monetary policy. The answer, according to Wells Fargo Securities LLC, is that it will with ease given that consumers may not be as responsive as they once were to interest-rate shifts. That’s critical as household spenders still determine two-thirds of the economy. Led by John Silvia, the economists at the Charlotte, North Carolina-based bank analysed the links between spending and interest rates both before the 2009 recession and after. They found that since 1994, consumer spending fell 1.29 percent
for every 1 percent increase in creditcard borrowing costs. But since the end of the contraction the elasticity has shrunk to suggest a decline in spending of just 0.44 percent for the same increase in rates. “Changes in monetary policy are not likely to have as large of an effect on the pace of consumer spending next year as they have in the past,” said Silvia and colleagues in a November 24 report, in which they predicted the Fed’s benchmark will rise to 1 percent at the end of next year from near zero.
Access to credit Why the change? The Wells Fargo economists posit that credit availability and usage remain lower relative to previous expansions and that a lot of the borrowing which has occurred is mainly for a fixed term, such as loans for education and autos.
A toughening on financial regulations in the wake of the crisis may have also reduced access to credit, while weak income growth also may mean less taken up. “While a higher interest rate environment may incentivize saving behaviour, we expect interest rates next year to still be too low to make much of a significant difference in overall saving behaviour, another support for consumer spending growth,” said Silvia and colleagues. The risk is if the Fed can’t slow the main share of the economy, it may have to turn more aggressive should it fail to cool the overall expansion. “If monetary policy has less of an effect in keeping a lid on economic growth in the years ahead, there could be some challenges for the Federal Reserve to keep the domestic economy from overheating,” said Wells Fargo. Bloomberg News
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December 4, 2014
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TAIPEI TIMES Property transactions contracted 24.1 percent last month from a year earlier as potential buyers adopted a wait-and-see attitude ahead of the nine-in-one elections on Saturday last week, government data showed. The cautious sentiment might persist as the Cabinet reshuffle unfolds, bucking earlier expectations of a quick recovery following the end of the elections, analysts said. Real-estate transfers totalled 17,871 units last month, down by 24.1 percent from the same period last year and 4.8 percent from October, as the local elections dampened buying interest, said Andy Huang, a researcher at Evertrust Rehouse.
VIETNAM NEWS Overseas Vietnamese’s remittances via commercial banks and economic organisations in HCM City in the first 11 months of the year was estimated at US$4.4 billion, according to the HCM City branch of the State bank of Viet Nam (SBV). Total overseas Vietnamese’s remittances in 2014 will exceed US$5 billion, compared with US$4.8 billion last year. An official at SBV’s HCM City branch said the ratio of remittances invested in business and the real estate sector was higher than of the previous years. Vietinbank said this year Viet Nam would remain one of the top 10 remittance countries worldwide.
THE NEW ZEALAND HERALD New Zealand Post, the state-owned mail delivery service, sold its Australian Couriers Please business to Singapore Post for A$95 million. The unconditional deal with the Australian subsidiary of Singapore Post was signed yesterday, and is expected to be completed on December 15, NZ Post said in a statement. The New Zealand SOE kept the unit’s assets and liabilities confidential in its 2014 annual report as a result of the decision to sell it, and had previously valued the courier firm’s goodwill at US$38.2 million and its brands at US$21.6 million as at June 30, 2013.
PHILSTAR The Philippine government is luring Australian companies to participate in the bidding of eight major infrastructure projects under the public private partnership (PPP) scheme worth P183 billion. PPP Centre executive director Cosette Canilao said she has invited companies in Melbourne and Sydney to join the bidding for PPP projects including the operation and maintenance of six airports, a regional prison facility, and a port project to be rolled out by the Aquino administration over the next few months.
Making climate promises count Stéphane Dion Member of Canada’s House of Commons and former Minister of the Environment of Canada
Éloi Laurent
Senior economist at OFCE /Sciences Po, teaches at Stanford University
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his year will be one of the warmest on record. Over the last decade, greenhouse-gas emissions have accelerated, and the atmospheric concentration of carbon dioxide has increased in the past year at the fastest rate in nearly three decades, reaching a level that is 15% higher than in 1990. As the latest report by the Intergovernmental Panel on Climate Change (IPCC) emphasizes, the disconnect between an intensifying climate crisis and stalled international negotiations has never been greater. Needless to say, a lot is riding on next year’s United Nations Climate Change Conference in Paris, which could shape strategies to reduce global greenhouse-gas emissions until 2050. But the summit is unlikely to deliver the global agreement that is so badly needed, unless world leaders broaden their focus to include not only emissions reduction, but also carbon pricing. A growing number of experts – including those at the International Monetary Fund, the OECD, and the World Bank – agree that no climate plan can be successful without an effective and efficient carbon-pricing system. The IPCC has concluded that if a single global carbon price is not established soon, it will be virtually impossible to prevent global warming from surpassing 2ºC above preindustrial levels – the threshold
The onedimensional approach based exclusively on emissionsreduction targets is preventing even the regions that have been most active on climate change, such as the European Union, from making sufficient progress
beyond which the most devastating effects of climate change would become unavoidable. The one-dimensional approach based exclusively on emissions-reduction targets is preventing even the regions that have been most active on climate change, such as the European Union, from making sufficient progress. Yet, in late October, EU member states agreed on a new policy framework for climate and energy for 2030 – one that, like the EU’s 2020 climate and energy package, lacks a solid foundation. The EU’s established goal of reducing greenhouse-gas emissions by 40% by 2030 is supported only by non-binding energy-efficiency and renewable-energy targets. Devoid of true carbon-pricing reform, the deal depends on the EU’s derelict Emissions Trading System. The result is a set of impressive-sounding commitments without instruments for effective implementation. The same can be said of the widely touted new bilateral agreement between the United States and China, the world’s two largest carbon emitters. Given the deadlock that previously prevailed, the deal represents welcome progress; but it, too, lacks adequate instruments to support its ambitions. The Paris summit next year needs to produce a more substantial agreement, with national emissions-reduction
targets underpinned by adequate and coordinated tools for implementation, including a trial global carbon price. On an issue as urgent as climate change, there simply is no room for ambiguity. The first step toward creating such an agreement is to initiate a debate, supported by academic research and scientific evidence, aimed at determining a desirable global carbon price and outlining the linkages between current and future prices, taking into account equity, efficiency, and effectiveness. Such a debate – not emissions-reduction targets guaranteed only by states’ “political will” – will be the mark of a successful summit. In fact, no outcome would be worse than a “feel-good” agreement composed of vague, unenforceable targets. The US government’s recent statements in favour of a “political” agreement rather than a “legally binding” accord is yet another indication that official declarations alone will produce precisely such a result. In the longer term, a constructive debate in Paris on an appropriate global carbon price could pave the way for the development of a new, polycentric approach to climate governance that would value territorial and local initiatives, in addition to national efforts. At that point, discrete carbon prices could gradually converge toward a single price, as has occurred with prices for commodities like oil. EU leaders often boast to their global partners of their commitment to mitigating climate change. And they may be right. But, so far, the EU has stood out more because the rest of the world is lagging than because it has designed a truly effective strategy to address the problem; its recently concluded agreement could actually serve as a counter-model for next year’s summit. The price of carbon effectively amounts to the price of human wellbeing on this planet. If Europe truly wants to lead the fight against climate change, it should bring the issue of a harmonized carbon-pricing system to the negotiating table in Paris. In doing so, it would launch a critical shift toward a comprehensive and, for the first time, effective climate agreement. Project Syndicate
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Closing Taiwan’s Ma resigns as KMT chairman
China allows interbank FX trade for brokers
Taiwan leader Ma Ying-jeou (pictured) stepped down as chairman of the ruling Kuomintang (KMT) party yesterday. Ma made the announcement at the meeting of the party’s Central Standing Committee. According to the party charter, the island’s deputy leader Wu Den-yih, who ranks first among the KMT’s seven vice chairpersons, will serve as the acting chairman. Hung Hsiu-chu, who ranks third among the vice chairpersons, will serve as the acting KMT Secretary-General, replacing Tseng Yung-chuan who resigned on Saturday. Ma urged the acting chairman to hold a chairmanship election as soon as possible.
Guotai Junan Securities has received regulatory approval to start trading in the interbank foreign exchange market, making it the first non-bank to enter the business. The move would represent the latest step by Beijing to liberalise the country’s tightly-controlled financial markets. It marks the biggest reform in its forex market since the central bank doubled the daily trading range for its yuan currency in March. Guotai Junan will be allowed to trade in the spot market, settle and sell foreign exchange and engage in renminbi and foreign exchange derivatives business, the sources said.
GF Fund plans more U.S. ETFs on assets demand The ChinaBond Composite Total Return Index, which tracks both sovereign and corporate debt, gained 11 percent this year and is set for the biggest annual advance since 2008
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F Fund Management Co. is expanding its range of exchangetraded funds that invest in China’s US$9 trillion bond and stock markets to meet rising global demand. “We’re very interested in the U.S. ETF market, and are talking with our partners to list more ETF products there, including A-shares,” said Nathan Lin, CEO of unit GF International Investment Management Ltd., referring to stocks listed in China. The Hong Kong-based asset manager has allocated 1 billion yuan (US$162.6 million) of its quota under the Renminbi Qualified Foreign Institutional Investor program to the US$50 million Global X GF China Bond ETF, which was the first such fund to access China’s interbank bond market. The fund is looking to fill the rest of the quota in the first quarter of 2015 and then apply for more, said Lin. RQFII allows yuan raised offshore to be invested in China’s domestic securities. Bonds and equities in
the most since 2009. The interbank market accounts for more than 90 percent of outstanding bonds by value, ChinaBond data show. The Global X GF China Bond ETF that listed in the U.S. on November 19 tracks the S&P China Composite Select Bond Index, which has 45 percent allocated to central state-owned companies’ debt, 23 percent in sovereign notes and 32 percent in quasisovereign bonds. It was the second such product in the U.S., after Van Eck Global and China Asset Management Co. started an ETF investing in onshore exchange-traded bonds on November 11, which has attracted US$19.8 million. At the same time “pricing on the interbank bond market is more efficient, given its volume and depth,” he said.
ETF frenzy
the world’s largest emerging market are heading for the biggest annual gains since at least 2009 as China opens up its capital markets to global investors. The central bank cut interest rates last month for the first time since 2012 and HSBC Holdings Plc. and Barclays Plc. predict there will be another two reductions to support the economy before the middle of next year.
India announces move to fast-track US investments
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Economists predict this year’s growth will be the slowest in more than two decades at 7.4 percent. “The turning point for the economy may not come soon, but policy-wise, the worst has been left behind,” Lin said in a phone interview. The expectation of relatively loose monetary environment and government support for the economy will be supportive for
bonds and stocks, he added.
Bull market The ChinaBond Composite Total Return Index, which tracks both sovereign and corporate debt, gained 11 percent this year and is set for the biggest annual advance since 2008, while the Shanghai Composite Index jumped 31 percent,
Money managers have now registered almost 40 ETFs tracking China’s shares and debt with U.S. regulators. The US$646 million Deutsche X-trackers Harvest CSI 300 China A-Shares ETF, the largest in the U.S., closed 5.3 percent above the value of its holdings on November 26, marking a record premium to its underlying assets. GF International is also studying the possibility of listing products in other markets, including Hong Kong and London, as it plans to set up a unit in London and an office in New York, according to Lin.
HK yuan interbank rates jump
Top train makers finish merger plan
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ndia yesterday announced a move to speed up approval for US investments, just weeks after the two countries settled a global trade dispute and President Barack Obama agreed to visit. A new Indian government committee will “identify bottlenecks” faced by US firms wanting to invest in the country, where foreign companies must contend with byzantine regulations and large amounts of red tape. “The committee will facilitate and fast-track investment from US companies in India,” said a commerce ministry statement. The right-wing government headed by Prime Minister Narendra Modi has already relaxed some rules for foreign investors since storming to power in May. The latest move comes after New Delhi and Washington settled a bitter row over food subsidies last month. Obama subsequently accepted an invitation to attend India’s Republic Day celebrations in January. The United States invested US$806 million in India in the 2013-14 financial year, six percent of total foreign investment in the country, according to government figures.
uan interest rates in Hong Kong surged to a 17-month high as a cross-border stock trading program decreased the Chinese currency’s supply in the city. The one-week interbank offered rate rose 62 basis points to 4.7 percent, while the one-month tenor climbed 24 basis points to 3.93 percent, according to Treasury Markets Association fixings. Both were the highest since June 28, 2013. The overnight rate jumped 104 basis points, or 1.04 percentage points, to a four-week high of 5.39 percent. International investors have bought a net 45 billion yuan of Shanghai shares since the link’s November 17 debut, out of a limit of 300 billion yuan. Mainland investors purchased a net 4.2 billion yuan, from an aggregate quota of 250 billion yuan. The total value of Chinese stocks traded climbed to a record 529.4 billion yuan yesterday, data compiled by Bloomberg stretching back to 2005 showed, as the Shanghai Composite rose to a three-year high. About 30 percent of the 13 billion yuan northbound daily quota under the link was taken yesterday, the most in eight days.
AFP
Bloomberg News
Bloomberg News
wo major Chinese train makers have completed a first draft plan for their merger, which was first announced over a month ago, a source with the authorities said. The companies, CSR Corp. and China CNR Corp., have submitted their plan to the State Council for further discussion and approval, a source in the State-owned Assets Supervision and Administration Commission said. But 21st Century Business Herald cited insiders from the government and companies who said that CSR will purchase all CNR shares via secondary public offering, and the latter will delist from the capital market. The two companies are both listed in Shanghai and Hong Kong, with a combined market value of about US$30 billion. Their shares have been suspended for over a month, and the merger was first announced on October 27. The merger will create a new giant train manufacturer, renamed China Railway Vehicle Corp., which is expected to hold total assets of over 300 billion yuan (nearly US$50 billion). Xinhua