MOP 6.00 Closing editor: Joanne Kuai Number 698 Wednesday December 31, 2014
Publisher: Paulo A. Azevedo
Packaging Macau
Year III
Every cloud has a silver lining. Gaming revenue may be in the doldrums but the number of visitor arrivals keeps rising. In November, more than 1.16 million visitors arrived on package tours. Representing a whopping increase of 51 per cent y-o-y. Hotel occupancy stood at 90 per cent while guests stayed, as usual, just 1.4 nights in the territory PAGE
3
Incomes rising
2014 Year in Review It’s been an eventful year. And that’s an understatement. Business Daily picks out the highlights of this rollercoaster 12 months. The Year of the Horse has turned out to be a bucking bronco. But it hasn’t all been doom and gloom
HSI - Movers December 30
Name
%Day
China Overseas Land
3.40
China Resources Land
2.45
Li & Fung Ltd
0.84
China Mengniu Dairy
0.79
MTR Corp Ltd
0.63
China Shenhua Energy
-2.36
Hutchison Whampoa L
-2.57
PetroChina Co Ltd
-2.85
China Resources Ente
-3.06
CNOOC Ltd
-3.35
Source: Bloomberg
PAGE 6, 7,8 & 9
I SSN 2226-8294
An 18.9 per cent increase y-o-y. The Gross National Income of Macau reached MOP327.78 billion in 2013. Implying that the ‘yearly average income’ of residents should have reached some MOP587,000 last year
Brought to you by
www.macaubusinessdaily.com
PAGE 2
Happy Yuan Year More progress on the RMB front. The process of making the yuan an internationalized currency continues. The China Gov’t has announced lighter restrictions for banks trading the yuan from 2015
PAGE 10
Pachinko operator Niraku seeks Hong Kong listing PAGE 4
China’s stock exchanges reforms make markets dream PAGE 11
South Korea closer to rate cut as factory output rises PAGE 12
2014-12-31
2015-1-1
2015-1-2
10˚ 20˚
11˚ 17˚
10˚ 16˚
2 | Business Daily
December 31, 2014
Macau GNI per capita reached MOP587K last year The growth of GNI topped that of GDP last year, totalling 327.78 billion patacas, implying that the ‘average income’ of residents should have reached some 587,000 patacas last year Kam Leong
kamleong@macaubusinessdaily.com
T
he Gross National Income (GNI) of Macau reached 327.78 billion patacas in 2013, a jump of 18.9 per cent year-on-year. This suggests that the GNI per capita of Macau residents was 586,681 patacas, the latest survey by the Statistics and Census Service (DSEC) shows. According to DSEC, after removing the effect of prices, the city’s GNI in 2013 had increased by 15.8 per cent year-on-year. The growth was higher than that of Gross Domestic Product (GDP) during the same period, which was up 11. 9 per cent year-on-year. Nevertheless, the total amount of GNI is some 65.69 billion patacas behind that of GDP, which totalled 413.47 billion patacas at current prices in 2013. GDP and GNI are always perceived as two different sides of a coin. GNP, as defined by DSEC, refers to the total income earned by residents from an economy by
engaging in various economic activities within or outside the economy, which equals GDP plus income earned by resident investors from abroad, minus income earned by non-resident investors from investment in Macau. However, DSEC has a different definition for ‘residents’ from the authorities here in the survey. The ‘resident’ in this survey is referred to as ‘individuals or institutions of an economy who maintain their centre of economic interest within the territory of that economy’, DSEC writes. More specifically, an individual resident refers to a person who has stayed or intends to stay in that economy for at least 12 months, irrespective of nationality or legal status.
External factor income In fact, last year, ‘nonresidents’ in Macau earned more than ‘residents’ outside of the city.
In 2013, the total outflow of external factor income, which reflects income earned by non-resident enterprises and investors from investment in the Special Administrative Region, reached 87.7 billion patacas, which is a year-onyear growth of 26.2 per cent. The increase, according to DSEC, is primarily due to the increase of some 30 per cent in direct investment income by some non-resident enterprises and investors from investment in Macau, totalling 78.96 billion patacas. In addition, portfolio investment income and other investment income also registered increases of 82.9 per cent and 0.4 per cent, reaching 373 million patacas and 7.21 billion patacas, respectively. Meanwhile, the total inflow of external factor income, which refers to income earned by resident enterprises and investors from aboard, also posted growth of 18.6 per cent year-on-year, reaching a total of 22.01 billion patacas.
This is attributable to the increase of 43.3 per cent in portfolio investment income of 6.56 billion patacas in 2013, as well as 22.7 per cent
growth in other investment income of 13.94 billion earned by residents, enterprises and investors overseas, according to DSEC.
Hengqin land auction reserve price 600 mln yuan Bidders have to be hi-tech enterprises that are experienced in marine engineering equipment. All parties from Mianland China, Hong Kong and Macau are welcome Joanne Kuai
joannekuai@macaubusinessdaily.com
A
plot of land that occupies a gross floor area of around 108,421 square metres in Hengqin New Area has been listed on auction for a reserve price of no less than 600 million yuan, as announced last Saturday by the Zhuhai Public Resources Trading Centre, which was commissioned by the Land and Resources Bureau of Zhuhai. According to the notice published online by the Bureau, the land, serial number 2014-24 under Zhuhai Hengqing Land and Resources, comprises one parking lot area plus another
parcel for comprehensive use. The Zhuhai authorities also said that eligible buyers from Mainland China, Hong Kong and Macau can all join the auction although such parties have to comply with the Hengqin New Area Industrial
Development Guideline and must be enterprises primarily engaged in the marine engineering business and have more than five years of relevant experience. Individual buyers or joint ventures will not be accepted.
The gross floor area of the plot is around 108,421 square metres, of which some 55 per cent is designated for business and office area, 20 per cent for commercial area and 25 percent for serviced apartments. The initial price for each square metre is 5,800 yuan. The bidder that successfully acquires the land will have to wholly own a company, of which the registered capital will be no less than 100 million yuan, within one month of acquiring the land for a mainland enterprise, and six months for a Hong Kong or Macau enterprise. The Zhuhai Public
Resources Trading Centre also announced the auction results of two other plots of land on Hengqin Island. A parcel that occupies some 38,900 square metres for developing business and sports facilities was sold to Zhuhai Huafa Sports Development Co Ltd., for more than 200 million yuan. The plot is next to the Hengqin International Tennis Centre and is expected to be developed as an area of support facilities for the tennis centre. Another plot of around 29,000 square metres for cultural and creative use was acquired by Purple Dragon (China) Limited for 104 million yuan.
Business Daily | 3
December 31, 2014
Macau
November visitor arrivals on package tours up 51% Visitor arrivals on package tours totalled some 1.16 million in November 2014, up 51 per cent, while the hotel occupancy rate stood at 90 per cent, up 2 percent, data from the Statistics and Census Service reveals Joanne Kuai
joannekuai@macaubusinessdaily.com
Source: DSEC
I
nformation from the Statistics and Census Service (DSEC) indicates that visitor arrivals on package tours soared some 51% yearon-year to 1,165,000 in November 2014, attributable to a 71% surge in visitors from Mainland China, with those from Guangdong Province (334,000) rising by 21%. Visitors from Taiwan (63,000) increased by 9%, while those from the Republic
of Korea (36,000) and Hong Kong (33,000) dropped by 1% and 6%, respectively. In the first eleven months of 2014, visitor arrivals on package tours reached 11,152,000, up 25% year-on-year. The Bureau’s data also shows that outbound residents using services of travel agencies totalled 129,000 in November 2014, up 5% year-on-year; those travelling on package tours
totalled 47,000, with the main destinations Mainland China (76% of total), Taiwan (6%), Hong Kong (5%) and the Republic of Korea (5%). In the first eleven months of 2014, outbound residents using services of travel agencies totalled 1,406,000, up 7% year-on-year. With regards to the local hospitality industry, there were 98 hotels and guesthouses operating as at
the end of November 2014, providing 28,000 guest rooms, up 1% from a year earlier. The territory’s 5-star hotels accounted for 66% of total supply, with 18,000 rooms. A total of 902,000 guests checked into hotels and guesthouses in November 2014, up 2% year-on-year. Guests from Mainland China (590,000) increased by 14%, while those from Hong Kong (99,000) decreased by
22%. The average length of stay of guests remained as November 2013, at 1.4 nights. The average occupancy rate of hotels and guesthouses increased by 2 percentage points year-on-year to 90%, with 4-star hotels leading at 92%. In the first eleven months of 2014, hotel guests totalled 9,828,000 up by 1% year-onyear; the average occupancy rate stood at 87%, an increase of 4 percentage points.
18 cases of illegal gaming-related ads in past two years But the fines involved in the posting of illegal adverts only totalled 30,000 patacas, the gov’t admits Stephanie Lai
sw.lai@macaubusinessdaily.com
I
n a reply to a legislator’s written enquiry, the government says it has handled a total of 18 cases related to illegal advertisement postings of gaming activities from the beginning of last year to the present, for which the total fines applied have amounted to only 30,000 patacas (US$3754.8). The figures were noted by the thenchief of public works Secretary’s office Mr. Wong Chan Tong in response to legislator Chan Meng Kam’s enquiry about illegal ads seen in the city encouraging access to online gaming websites. The reply, which was dated December 15, was only made public yesterday. As regulated by local law No. 7/89/M, advertisements that feature gaming activities as their main content
are banned in the city. Violation of the rule can result in a fine of 2,00012,000 patacas for an individual offender; or a fine of 5,000-28,000 patacas for a legal person that violates the rule. In the reply to Mr. Chan’s enquiry, Mr. Wong Chan Tong said that the government had launched a total of 18 cases investigating illegal advertisements related to promoting gaming activities in the past two years, delivered via mobile phone junk messages and banners posted outside residential buildings. The reply stated that administrative penalties, of which the total fines amounted to 30,000 patacas, had already been applied regarding illegal postings that involved “several gaming venues, telecommunication companies
and transporation companies”. Business Daily has approached Macau Economic Service – the department responsible for regulating advertisement activities – for more information on the penalties applied to the offenders as mentioned by Mr. Wong but had not received a reply by the time the story went to press. ‘Targeting the outdoor gaming advertisements seen recently, the Economic Service has already sent staff to check on cars [that have illegal advertisement postings on them] travelling in the Border Gate district, the Outer Harbour Ferry Terminal, the exit of the Friendship Bridge at Taipa side and in St Paul Ruins’, Mr. Wong wrote. ‘The government will definitely exercise a penalty for any cases of violation’.
In a joint action with the Zhuhai police and Bureau of Telecommunications Regulation, Judiciary Police arrested four mainland Chinese in the Border Gate district in early November for the crime of sending junk mobile phone messages promoting online gambling websites to people crossing the ZhuhaiMacau border. According to the police at the time, the charges laid against the four arrested mainland Chinese from Fujian Province included the improper use of computer data and involvement in a criminal gang.
4 | Business Daily
December 31, 2014
Macau Brought to you by
Int’l Entertainment shares fluctuate amid uncertainty over Suncity deal The company saw shares increase by nearly 51 per cent with stake purchase deal in Suncity yet to be concluded Stephanie Lai
HOSPITALITY Consolidation, continued Most visitors to Macau come from what is conventionally called Greater China; that is, the mainland, Hong Kong and Taiwan. In the last year, for example, 90 per cent of all visitors to the region came from these three source markets. This year up to November, that value is slightly higher, standing marginally below 91 per cent. As the end of the year approaches, and with only the December figures inevitably missing, the available figures for visitors to Macau point to similar features as those already seen in previous years. Namely, the increasing weight of Mainland China and the relative losses of Hong Kong and Taiwan. In fact, it must be noted that while overall figures have shown a neat upward trend over time, the behaviour of the various regions has displayed noticeably different features. If we compare the figures for the period between January and November for the last two years, it becomes apparent that the main driver of visitors’ growth is the number of same-day visitors from the mainland. Their total rose, between 2012 and the current year by 31.6 per cent. Total figures for both Hong Kong and Taiwan are currently below the corresponding ones two years ago, by 3.5 per cent and almost 18 per cent, respectively. For each same-day visitor lost from either Hong Kong or Taiwan, the region got 11 additional mainland ones.
sw.lai@macaubusinessdaily.com
I
nternational Entertainment Corp., the company controlled by the family of Hong Kong billionaire Cheng Yu Tung, saw its shares fluctuate wildly in the past two days as its conclusion of the deal to acquire 70 per cent of economic interest in VIP gaming investor Suncity International Holdings Ltd remains uncertain. The Hong Kong-listed International Entertainment Corp’s share price rose by 50.87 per cent to close at HK$2.61 per share yesterday, having fallen 19 per cent on Monday. The staggering rise seen in International Entertainment Corp’s shares followed after the company released a filing post-trading hours on Monday that it was ‘not aware of any reasons’ for the decrease seen in its share price and the increase in its trading volume of the shares. In the same filing, the company also noted that it had not reached any ‘definitive agreement’ with relation to the possible acquisition of 70 per cent of economic interest in Macau’s VIP gaming investor Suncity International Holdings Ltd. International Entertainment announced on January 9 that it had entered into a term sheet with Suncity, saying that it had agreed to buy a 70
per cent stake in Sun City Gaming Promotion Co. At the time, International Entertainment noted in the filing that it had agreed to pay as much as HK$7.35 billion (US$947.8 million) for the deal. The deal would allow International Entertainment to be entitled to all the net profit from gaming promotion operations by Sun City Gaming Promotions Co Ltd. International Entertainment is controlled by the family of Hong Kong businessman Cheng Yu Tung, who has been a longtime partner of Stanley Ho Hung Sun, founder of Macau gaming
concession SJM Holdings Ltd. Cheng’s family also controls Hong Kong property developer New World Development Co Ltd and jewellery chain Chow Tai Fook Jewellery Group Ltd. When contacted by phone yesterday, Suncity International declined to update its progress of the possible acquisition of a stake in International Entertainment. The exclusivity period of the intended acquisition expires today, a date that has been extended from June 30 following an announcement International Entertainment made on June 27.
Pachinko operator Niraku seeks Hong Kong listing With Dynam Japan leading the way to a Hong Kong listing in 2012, now Japanese pachinko operator Niraku is following suit seeking to raise US$100 million – US$200 million, reports say
J The number of overnight visitors also grew. It posted a more modest rate of 22.6 per cent in the two years combined. For this type of visitor, the figures for Taiwan just held in the period: they had an almost insignificant rise of 578 visitors, equivalent to an increase of 0.15 per cent since 2012. Hong Kong overnighters dropped by 15 per cent.
19.6%
rise of mainland sameday visitors, Jan-Nov, on previous year
apanese pachinko hall operator Niraku GC Holdings Inc. submitted application proof to get listed on the Hong Kong Stock Exchange on Monday. The company is reportedly seeking to raise US$100 million (HK$775.7 million) to US$200 million. According to the application proof made available on Monday, some parts of the document – those related to the timetable of the intended listing and the pricing of shares for the planned launch – are still blanked out. But Niraku noted in its application document that the proceeds from the listing would be used for the opening of five new suburban pachinko halls in northeast Honshu, Japan over the next two years, as well as investing in information technology systems. The sole sponsor of Nirahu’s intended listing is Shenyin Wanguo Capital (H.K.) Ltd. Citing unidentified sources, Hong Kong’s Chinese-language financial
wires reported yesterday that Niraku was seeking to raise US$100 million to US$200 million from the initial public offering. Niraku, founded in 1950, operates 54 pachinko halls in Tokyo and surrounding areas, as well as the northeastern prefectures of Fukushima and Miyagi on Honshu island in Japan, according to its website. The company’s home prefecture of Fukushima was devastated by an earthquake and tsunami in March 2011. Niraku said in its listing application document that its gross pay-ins from the pachinko and pachislot business for the six months ended September 2014 was 90.99 billion yen (US$831.8 million), which represented a fall of 24.6 per cent from 120.67 billion yen in the same period last year. The pachinko operator’s gross pay-ins for the year ended March 31, 2014 have experienced a 2.4 per cent year-onyear dip to 236.45 billion yen.
The company also disclosed that its profit for the six months ended September this year was down by 42.3 per cent to 937 million yen, which is largely due to a retirement payment of 600 million yen made to Mr. Tatsuo Taniguchi, a director of Niraku GC Holdings Inc. and a brother of the company’s chairman Hisanori Taniguchi. If Niraku gets listed on the Hong Kong Stock Exchange soon in the coming year it will be the second pachinko operator listed in Hong Kong following Dynam Japan Holdings Co., a Tokyo-based pachinko company that led the way to the city with an IPO in August 2012. Dynam Japan has already invested about US$85 million in casino operator Macau Legend Development Ltd in the past year and a half, and is pending the SAR Government’s approval to operate pachinko machines in one of its partner’s casinos in the city. S.L.
Business Daily | 5
December 31, 2014
Macau
6 | Business Daily
December 31, 2014
Macau
THE YEAR IN REVIEW 2014 was a year that left many wondering what’s in store for a territory that relies on gambling as its overriding economic driver. In the first half, Macau was buzzed by the Reolian saga, and discontented casino workers took to the streets during the summer months. Gross gaming revenue embarked upon its seven‑month downward trend closing the year on a negative note, with analysts calling this a ‘choppy’ twelve months. Here’s a look at the highlights and lowlights of each of the year’s months Sara Farr
sarafarr@macaubusinessdaily.com
January
T
he year kicks off with Macau sellers of shark’s fin products reporting a sharp decline in business volume, amid pressure from environmentalists and Beijing’s drive against conspicuous consumption by officials. The government is also given a three-month deadline to find a solution for third bus operator Reolian Public Transport Co Ltd. before the company’s assets are seized by creditors and its services wrapped up. A fortnight later, the government announces that the current bus service agreement with the three operators will be replaced by concessions. Still in January, the government
starts to ponder imposing a cap on the growth of electronic gaming in Macau casinos. Secretary for Economy and Finance Francis Tam Pak Yuen says the current cap on traditional live dealer numbers might continue after 2022. Local travel agents announce they are keen on offering tours to Chimelong resort on Hengqin Island. The announcement is made only two days after Hong Kong travel agencies advertise two-day package tours to the resort. The University of Macau predicts that the SAR’s economic growth will be driven by visitor spending and investment, with 9.1 per cent GDP growth projected for 2014.
February
M
ore than 1,000 casino workers from union Forefront of Macau Gaming take to the streets in a demonstration against the ‘relentless expansion’ of the casino industry. The government announces it will not grant all the gaming tables the casino operators have requested for their new resorts in Cotai, and say that there should be no increase in the number of gaming concessionaires. Official figures show gambling revenue grew by 40.3 per cent yearon-year in February to MOP38 billion, a new monthly record and its fastest rate of expansion since October 2011. Work on the new border crossing in Ilha Verde is slated to
start midway through 2015 and completed in 2016, China’s official news service announces. Beijing gives the green light for Macau to further develop and diversify its economy by granting it land in Guangdong Province. Macau imposes a 21-day ban on live poultry imports from mainland China after confirming an H7-type avian influenza virus in a batch of 1,000 live chickens imported from Zhuhai. The court approves a three-month extension, buying the government more time to find a new investor for bankrupt bus company Reolian. Foreign exchange reserves fall to their lowest in two years, totalling MOP122.1 billion, down 6 per cent from a year earlier.
March
H
ong Kong billionaire Joseph Lau Luen Hung says he plans to purchase four subsidiaries that own a number of properties in Macau and Hong Kong, one of which is the La Scala project at the heart of his bribery trial. ICBC Macau raises US$320 million in 10-year notes. Fund managers purchase 53 per cent of the notes, followed by insurers at 22 per cent, financial institutions at 13 per cent, private banks at 10 per cent and corporates at 2 per cent. Bakeries in Macau are ordered to stop using recycled oil products from Taiwan after tainted products are found in the latest food scandal. Macau hosts this year’s APEC
meeting, where members discuss plans to increase the number of air routes in the region as well as more passenger-friendly airports. Casino workers continue to threaten more protests and even strike if their demands aren’t met. Four 4G service licences are up for grabs, which means telecoms can start providing services by 2015. Reports emerge that the construction of the Hong KongZhuhai-Macau Bridge could face delays but authorities assure it’ll all be complete by 2016. The Hong Kong stock market stumbles on the Occupy Central protest. Macau gaming revenues drop again.
Business Daily | 7
December 31, 2014
Macau April
O
verseas Chinese Banking Corp (OCBC) announces it will acquire Wing Hang Bank and Macau’s 13 branches of Banco Weng Hang for HK$38.4 billion. Legislator José Pereira Coutinho asks the government to consider demolishing the Macau Dome to make way for more public housing. This month, the government is all about setting up funds and lifting credit ceilings. There’s a new MOP160 million fund that covers both residents and non-residents in claims against employers. SMEs’ credit ceiling is increased to MOP900,000. A new incentive scheme will allow local residents to pursue
studies abroad or undertake professional training. Poultry traders demand 30 per cent more subsidies after a second ban is implemented. The start-up fund for Macau Basic Channels, Ltd – a government-owned TV company created to solve the public antenna mess – is MOP10 million for its first five years of operation. Authorities announce cooperation between the Hong Kong and Shanghai stock markets, whereby investors can trade certain companies’ shares listed on both sides. Both markets react well and stocks jump. Thirty-three Macau projects are recommended to Hengqin Island authorities. These comprise a total value of RMB140 billion.
May
T
he government starts reviewing mainland Chinese transit stays after data shows that only 20 per cent of these visitors continued onward journeys overseas. One year after scaling back ferry trips due to the new tourism law introduced in mainland China, ferry operators resume schedule as normal. Investors expect Macau casinos to see gross gaming revenues climb by at least 15 per cent this month alone. Mass market gains expected to top 30 per cent due to the Golden Week effect. The bill on the one-off compensation for the city’s top officials becomes a major focus of public anger and discontentment that sees as many as 20,000 people protest. The government
agrees to drop the bill but only temporarily. Macau ranks 29th freest economy in the world, dropping 10 places in the last two years alone. But its overall score is well above world and regional average, according to an American think tank. The SAR, however, ranks right at the top in trade freedom. The government confirms it’s in talks with a local transport company to take over bankrupt bus operator Reolian’s services and staff. China UnionPay Co. is looking at curbing the illegal use of card devices for gamblers who cash in tens of billions of yuan in Macau. Gaming operators and analysts say this could impact the mass market. Macau authorities say it will step up measures to oversee the use of such cards here.
June
C
asinos’ gross gaming revenue drops for the first time in five years to MOP27.2 billion. Hong Kong considers imposing a cap on the number of mainland Chinese tourists. Macau is wary of following in the same footsteps for fear of hurting the economy. New Era enters the bus operator market. The company is majority owned by TCM, which now controls two-thirds of the city’s bus network. A survey finds that Macau is one of the cheapest places for expats to live in Asia Pacific, ranking 35 out of 63 locations. Authorities shorten the number of days mainland
Chinese can transit in Macau from seven to five. For every infringement within 60 days, visitors will be allowed to transit one day only. Macau representatives are in South Korea where, along with 16 other jurisdictions, they seek the ‘right to be forgotten’ by Internet giant Google. The first bitcoin ATM machine is installed, allowing users to top up their bitcoin balance by using cash or vice versa. A MOP5.1 billion betting network is dismantled, with police arresting 26 people and confiscating computers, cell phones and betting bulletins. Panda Sam Sam dies of kidney failure.
8 | Business Daily
December 31, 2014
Macau July
T
he Monetary Authority orders all UnionPay China terminals out of casino jewellery stores by July 1. Bus operator New Era officially takes over Reolian and starts operations. The Chief Executive’s electoral college is chosen and is well represented by casino industry movers and shakers; namely Pansy Ho, Francis Lui, Ambrose So and Angela Leong. Chui Sai On announces his intention to be Chief Executive for a second term. Macau Conscience, Macao Youth Dynamics and Open Macau Society announce they will hold a civil referendum. The minimum wage is increased to MOP30 an hour for cleaning and security sectors. Legislators want it
extended to all sectors but anticipate an uphill battle. Junket operator Suncity wins the open tender and pays MOP16.6 million to title sponsor this year’s Macau Grand Prix. Macau is granted another 10 square kilometres of land, reclaimed land but in Hengqin, after Guangdong Governor Zhu Xiao Dan visits here. Gambling kingpin Paul Phua and seven others are arrested in Las Vegas for operating an illegal World Cup gambling ring there. This follows Phua’s deportation from Macau in June. Thousands of casino workers start a long wave of protests against gaming operators, demanding quicker promotions and equal pay.
August
R
ussian banks and companies eye Macau after being shut out of Western funding markets due to new sanctions imposed by Washington and Europe over the Ukraine crisis. Casino worker protests continue, leading some gaming operators to respond by increasing pay and handing out bonuses. But analysts predict labour costs will double if companies shell out more to retain staff. The government suggests setting up a sting operation to catch drivers breaking the rules, a move cabbies welcome. Public tenders for taxi licences will also be revamped under government consideration. Analysts say a decelerating mass market will be the operators’ biggest
problem as they start to revise down Macau gross gaming revenue growth for the rest of the year as monthly revenues continue dropping. The Monetary Authority says Macau may invest more ‘advantageously’ if there is public consensus that returns are in direct proportion to investment risk. Land reclamation for Zone E1 in Taipa is delayed and works won’t start until the first quarter of 2015, the Infrastructure Development Office (GDI) says. Chui Sai On is nominated Macau’s fourth Chief Executive, making this his second term in office. Late night border crossing is approved. One of the three land borders will be open 24 hours.
September
H
ong Kong billionaire Joseph Lau Luen Hung says he plans to purchase four subsidiaries that own a number of properties in Macau and Hong Kong, one of which is the La Scala project at the heart of his bribery trial. ICBC Macau raises US$320 million in 10year notes. Fund managers purchase 53 per cent of the notes, followed by insurers at 22 per cent, financial institutions at 13 per cent, private banks at 10 per cent and corporates at 2 per cent. Bakeries in Macau are ordered to stop using recycled oil products from Taiwan after tainted products are found in the latest food scandal. Macau hosts this year’s
APEC meeting, where members discuss plans to increase the number of air routes in the region as well as more passenger-friendly airports. Casino workers continue to threaten more protests and even strike if their demands aren’t met. Four 4G service licences are up for grabs, which means telecoms can start providing services by 2015. Reports emerge that the construction of the Hong Kong-Zhuhai-Macau Bridge could face delays but authorities assure it’ll all be complete by 2016. The Hong Kong stock market stumbles on the Occupy Central protest. Macau gaming revenues drop again.
Business Daily | 9
December 31, 2014
Macau October
A
s many as 1,000 gather in Macau in solidarity with Hong Kong’s Umbrella Movement on China National Day. Protests in the neighbouring SAR mean more tourists flocking to Macau, with Golden Week seeing a 14 per cent increase in visitation from a year ago. It isn’t just the prodemocrats taking to the streets on National Day. As many as 1,000 casino workers take industrial action against gaming giants SJM, MGM and Galaxy by calling in sick. The price of ferry tickets to and from Hong Kong increase by 3 to 6 per cent. The full smoking ban comes into effect on October 6; and while analysts predict casinos could lose as much as
US$1.5 billion in revenues they also warn the jury’s still out. Health authorities say City of Dreams is violating the smoking ban after it is reported casinos are circumventing the new law. OCBC Wing Hang opens a total of 80 branches across Macau and Hong Kong, following a HK$38.4 billion deal. Gaming revenues drop for a fifth straight month, with Golden Week revenues alone tanking as much as 30 per cent. A US report finds no progress in Macau’s political reform. And Francis Tam announces he will no longer be the Secretary for Economy and Finance in Chui’s new administration.
November
T
his year’s Grand Prix will cost an extra MOP10-25 million, with the total budget to reach MOP200 million for the four-day event. Macau inks an open sky agreement with Taiwan. Health authorities warn Melco Crown it could face a MOP100,000 fine for breaching the smoking ban. The ‘yellow taxi’ company ceases operations on November 6. The Umbrella Movement in Hong Kong continues for another month, with private sector businesses feeling the heat and reporting drops in revenues and profits. Companies say the protests are killing trade in Macau, too, where many have businesses. Big-name jewellers are particularly affected. Hong Kong’s Secretary for Transport and Housing says an extra HK$5 billion will be needed
to complete the Hong Kong-ZhuhaiMacau Bridge portals. But Macau authorities refuse to confirm if it’s keeping within its budget of RMB1.98 billion. Before the official announcement is made, media reports name Lionel Leong as Francis Tam’s successor as Secretary for Economy and Finance. Analysts warn Macau gaming revenues could drop even more than initially expected, and forecast negative growth through the first quarter of 2015. The government promises tighter control over local employment agencies, which for years has lacked professional guidance. Macau holds its second Business Awards, recognising the commitment of individual talent and companies. Shanghai-Hong Kong Stock Connect is officially launched on November 17.
December
A
month after the ‘yellow taxi’ company ceases operations, the government announces 100 new cabs will be on the road this month. Chui Sai On announces the names of his new administration, with little or no surprises. Chui and his new team assume office on the 15th anniversary of the establishment of the SAR presided over by Chinese President Xi Jinping. While in Macau, Xi announces China will give the SAR another two pandas, given Sam Sam’s death by kidney failure in June. Hong Kong police finish clearing out all the Umbrella Movement sites in the neighbouring SAR following a court injunction. Protestors and pro-democratic legislators from Hong Kong are barred from entering Macau on December 19 and 20 during
Xi’s two-day visit. Umbrellas are also prohibited from being used at the airport and sites Xi is scheduled to visit despite the rain. Disposable raincoats are offered instead. Three hundred protestors take to the streets here demanding universal suffrage. Three land crossings to mainland China have their hours extended, with the Hengqing/Cotai border crossing now open 24 hours. Calculations show that the gaming crisis is likely to cost the government two months’ tax, following another decrease in gaming revenues in November. While gaming revenues have been recording negative growth since June, the opposite is true of luxury property prices. Home prices already in the MOP30 million bracket will continue to increase along with demand, property agents forecast.
10 | Business Daily
December 31, 2014
Greater China December inflation estimated at 1.4 pct China’s consumer price index (CPI), the main gauge of inflation, is estimated to grow by about 1.4 percent in December from a year earlier, the latest report from the Bank of Communications (BOC) said. The National Bureau of Statistics (NBS) is expected to release the December CPI data next week. China’s CPI rose by 1.4 percent year on year in November, the slowest increase since November 2009, when it rose 0.6 percent, according to the NBS. Stable food prices since the beginning of December may cause the December CPI growth to stay flat compared with last month.
FTA with Middle East to accelerate China will speed up free trade talks (FTA) with six countries on the Arabian peninsula and begin trade negotiations with Israel next year, state media said yesterday, as Beijing accelerates efforts to sign such agreements. China and members of the Gulf Cooperation Council - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates - started free trade talks in 2004, and a deal will help China cut costs on energy imports from the region, the official China Daily said.
CNOOC starts Aussie operation China National Offshore Oil Corporation (CNOOC), China’s largest offshore oil producer, has announced that operations have begun at the country’s first overseas large liquefied natural gas (LNG) supply base. The move is important in developing China’s natural gas industry and securing clean energy supply to China, according to the CNOOC. The LNG supply base, located at the Queensland Curtis LNG project in Queensland, Australia, will supply CNOOC with 8.6 million tonnes of LNG annually for 20 years. CNOOC signed LNG agreements with BG Group to purchase interests in the project in 2010 and 2013.
Banks to see fewer restrictions on yuan trading The new rules simplify application procedures for trading status in the foreign exchange market, and ease requirements for banks to exchange the yuan and foreign currencies in their capital reserves Lu Jianxin and Pete Sweeney
C
hina will relax restrictions on banks’ yuan trading starting in 2015, in a small but significant move towards relaxing its capital controls. The changes will replace daily caps on banks’ foreign exchange positions with weekly limits, and for the first time establish unified standards for total foreign exchange positions that banks can hold. The State Administration of Foreign Exchange (SAFE) published a set of new rules yesterday to simplify 14 sets of related regulations and add new provisions liberalising banks’ forex trading practices. “The timing is well chosen,” said a senior dealer at a major European bank in Shanghai. “With the dollar strengthening globally and emerging market currencies suffering from lingering weakness, it is good time to relax restrictions.” The yuan has lost 1.3 percent so far this month and looks set to close the year down 2.8 percent in
the face of bearish pressure which is expected to last well into 2015. Starting from Thursday, SAFE will only check banks’ position compliance status each week, according to the new rules published in the regulator’s website, www. safe.gov.cn, leaving them leeway to short dollars within that period, traders said. However, SAFE appeared to discourage this interpretation in its statement.
“While banks manage their positions on a weekly basis, their average daily positions should be kept within the limits defined by SAFE,” the regulator said, in what traders said was an apparent signal that banks should not go too far. While position caps for shorting dollars will remain unchanged, SAFE has published standards for total forex positions that will apply to everyone. Banks previously needed to apply for quota individually.
Gold imports seen stabilizing next year Prices are headed for a second annual loss after plunging by the most in three decades last year Alex Davis
Three Gorges output tops Total electricity output of the world’s largest hydropower project--the Three Gorges Project, has exceeded 200 billion kilowatt hours (kwh) this year, the China Three Gorges Corporation (STGC) announced. The output is a historical high and more than twice the electricity demand of Beijing, the company said in a press release. Beijing city’s electricity consumption in 2013 stood at 91.3 billion kwh. It also said that 200 billion kwh is the equivalent of saving 100 million tonnes of coal and preventing the emissions of carbon dioxide and sulphur dioxide by 200 million tonnes and 2 million tonnes, respectively.
Boom of high-tech start-ups The year 2014 witnessed 13,000 hightech start-ups in Zhongguancun, Beijing’s technology hub, 3.6 times more than that in 2010, a Zhongguancun official briefed. Guo Hong, administrative head of Zhongguancun Science Park, was participating in a national televised conference on high-tech parks held by the Ministry of Science and Technology. Guo estimated, corporate in the science park generated a total revenue of more than 3.5 trillion yuan (US$560 billion) in 2014. Guo said Zhongguancun was on its way to becoming a globally significant innovation hub by 2020.
C
hina’s gold imports from Hong Kong in 2015 may hold around this year’s levels as physical demand in the world’s biggest consumer remains stable and as the country considers easing restrictions on imports. Net imports have slumped 32 percent to 692 metric tons from January through November compared to the same period last year, according to Bloomberg calculations based on data from the Hong Kong Census and Statistics Department. The figures don’t represent all imports of the metal by China, which doesn’t publish such data. Prices are headed for a second annual loss after plunging by the most in three decades last year as the dollar’s rally and a surge in equities cut demand for the precious metal as a store of value. China’s demand may
total as much as 950 tons this year, down from last year’s record 1,275.1 tons, Albert Cheng, managing director for Far East region at the World Gold Council, said December 3. Demand this year held up compared with a long-term trend and is higher than 2012 levels, he said. “Physical gold demand is actually really stable and there is no reason the Chinese people, whether rich or poor, will change their preferences for gold as gifts,” said Mark To, head of research at Wing Fung Financial Group, a trader and refiner in Hong Kong. China is said to be considering easing restrictions on gold imports. The nation began offering international institutions access to yuan-based gold contracts in Shanghai’s free-trade zone in September in a move seen as an effort to extend its influence over prices.
You can see that investors realize the time has changed and there is no more liquidityinduced speculation Mark To, head of research, Wing Fung Financial Group
China’s net imports totalled 87.2 metric tons in November, the highest since February, according to Bloomberg calculations based on data from the Hong Kong Census. Mainland China imported 149.3 tons last month, including scrap, compared with 111.4 tons in October and 107.4 tons a year earlier, data from the Hong Kong government showed. Bloomberg News
Business Daily | 11
December 31, 2014
Greater China Toyota to miss China’s 2014 sales target Company sells about 907,400 vehicles in China The State Administration from January-November, up 12.2 per cent of Foreign Exchange of China is simplifying 14 sets of banks related regulations
All banks with less than US$100 million worth of forex settlement business in the previous year will be allowed total positions of US$50 million on average by the end of each day in a week, with a maximum short position value of US$3 million, according to the new rules. Those recording a value between US$100 million and US$1 billion will be granted total positions of US$300 million and short positions of US$5 million. Those doing over US$1 billion of business can have total positions of US$1 billion and short positions of US$10 million. “Those banks that cannot meet their business demand via the abovementioned positions can apply to the SAFE for additional quotas,” the regulator said. The rules also apply to Chinabased foreign banks; overseas lenders that have more than one offices in China must appoint one key office to manage the positions, the rules said. Reuters
T
oyota Motor Corp is likely to miss its 2014 objective of selling over 1.1 million vehicles in China because of a fasterthan-anticipated economic slowdown and resulting price war in the local auto market. Toyota and its two Chinese joint ventures will miss the goal and will sell slightly more than 1 million vehicles in 2015, two company executives told Reuters. Researcher IHS Automotive puts sales at 1.09 million in 2014 and 1.15 million in 2015. The shortcoming reveals continued difficulty for Japanese automakers in China even as diplomatic relations recover from a territorial spat that turned Chinese consumers against Japanese goods. Compounding matters is an increase in models from premium German brands priced within reach of mainstream Japanese cars. The Japanese automaker has unofficially aimed for 1 million vehicles in China since 2010, coming close with 917,500 vehicles in 2013. But with economic growth nearing its slowest rate in 24 years, Toyota has had to revise sales plans gradually since the third quarter, said the executives, who were not authorised to speak with media on the matter and so declined to be identified. Projected 2014 sales for the automaker’s luxury brand Lexus, for example, are now roughly 75,000
cars from an original target of 85,000, they said. Toyota is scheduled to release full-year figures on January 6. Another reason for slower-thanplanned sales at Toyota - as well as at compatriots Nissan Motor Co Ltd and Honda Motor Co Ltd - is competition from premium German brands such as BMW, said one of the Toyota executives. Dealers of those brands have tried to meet planned growth rates by heavily discounting cars at the lower end of product line-ups, making prices comparable to non-premium Japanese cars.
917,500 vehicles sold in 2013 in China
For instance, BMW’s 3-Series starts at about 283,000 yuan while the most expensive version of Toyota’s Camry mid-sized sedan costs 275,000 yuan. Reuters
Blue chip-driven bull run hinges on stock market reforms The next step, market observers say, must be reforms that convince Chinese shareholders not to cut and run at the first signs policy report is wavering and the rally has peaked Lu Jianxin and Pete Sweeney
C
hina’s stock market is set to close out the year up around 50 percent buoyed by retail appetite for blue chip shares even as economic fundamentals stay weak and reforms loom. Shanghai’s finance-heavy SSE180 index has jumped 48 percent this quarter, outperforming its benchmark Shanghai Composite Index. In comparison, the smallcap ChiNext index, once the favourite of hit-and-run Chinese speculators who preferred small caps for their high volatility, is down 5 percent. Shanghai’s share index has risen to near 5-year highs and is set to be the best performer among leading markets worldwide in 2014. But whether the party lasts may depend on Beijing rolling out more policies to prop it up as buying has not been supported by fundamentals, analysts say.
Chinese blue chip shares began surging in September, in anticipation of a flood of foreign money coming through the Shanghai-Hong Kong stock connector scheme. That money hasn’t really shown up yet, but the central bank set off another, deeper rally with a surprise interest rate cut in November, that has many betting on an upcoming easing cycle that will benefit stocks. Much of that surge has been driven by retail investors making heavily leveraged bets, helped by a relaxation of rules restricting margin financing. But the cut in rates was prompted by deteriorating economic fundamentals: deflationary pressures, rising bad loans and sliding industrial profits, all of which are bad news for the financial blue chip companies leading the current rally. “While regulators cannot
change the investment culture overnight, reforms will represent a right step towards an improvement,” said Xiao Shijun, stock analyst at Guodu Securities in Beijing.
In the pipeline The guidelines for reforms were already delivered to securities regulators in May by China’s State Council - its cabinet-level political body. Analysts expect the establishment of a more transparent system for public listings early next year.
There is already a proposal to remove the China Securities Regulatory Commission (CSRC) from having to approve or disapprove of initial public offerings (IPO) and switch to a registration system, such as used in the United States, where the market decides who gets to list, when, and for how much. That will help address multiple problems: endemic opportunities for corruption in a system requiring official sign-off, distorted IPO firstday “pops” and a queue of hundreds of companies that wait for years to list.
It would also have a healthy effect on the secondary market by reducing the tendency of defunct companies to stay rotting on the exchanges, waiting to resell their tickers as shells at a premium for use in “backdoor listings.” In another move likely to be implemented in 2015, regulators are studying ways for state shareholders, who own 71 percent of the combined shares of listed firms in China, to stop directly managing the companies. Under the new proposed system called “market value management” by regulators, the shareholders will gradually stop backdoor intervention in management decisions. Instead, they will rely on using capital flows to influence management through transparent mechanisms such as share buybacks, private placements, spin-offs and acquisitions. Reuters
12 | Business Daily
December 31, 2014
Asia ST Engineering exec charged with bribery A Singapore court filed bribery charges yesterday against a former executive at Singapore Technologies Engineering Ltd, one of Asia’s largest defence and engineering groups. See Leong Teck, a former president of the company’s marine unit ST Marine, is the fourth former employees of the company to be charged with corruption this month. He was president of the company from December 1997 to February 2008, ST Engineering said. See was allegedly involved in bribing agents for Hyundai Engineering and Construction and Myanmar Five Star Line between 2004 and 2007 to win ship repair contracts.
South Korea factory output up Data support economists’ opinion predicting a cut in interest rates Christine Kim
in Hong Kong, who forecasts a rate cut early next year. “The low inflation environment certainly provides room for more monetary easing, from an inflation targeting perspective.” December inflation data is due today. According to the Reuters poll, the annual rate will be 0.8 percent, the lowest in more than 15 years. Most economists polled this month predicted a cut in interest rates early next year to aid on-going government stimulus measures while price pressures remain low due to falling oil and farm prices. South Korea’s benchmark rate is 2.00 percent, following two cuts of 25 basis points in August and October.
Record fall for S. Korean rates Deposit and lending rates in South Korea fell to record lows after the Bank of Korea (BOK) cut its benchmark interest rate to a record low of 2 percent, the BOK (pictured) data showed yesterday. Rates for new savings deposit averaged 2.1 percent in November, the lowest since the BOK began compiling the data in 1996. It was down 0.08 percentage points from the prior month. After peaking at 2.67 percent, the rate continued to fall from 2.57 percent in June to 2.36 percent in August and 2.18 percent in October.
Vietnam increase CBU imports Vietnam spent US$1.6 billion for imports of build-up unit (CBU) vehicles in 2014, an increase of more than 117.3 percent over last year, according to the Vietnam General Statistics Office yesterday. Accordingly, in December alone, Vietnam imported 10,000 CBU vehicles, the second consecutive month in the year with the auto imports reaching the 5-year record high of 10,000 units per year. For the whole year 2014, the country imported 72,000 CBU vehicles, a rise by 103.8 percent year on year, which accounted for nearly half of automobiles sold by the Vietnam Automobile Manufacture Association (VAMA) throughout the year.
Myanmar’s media expand channels The state-run Myanmar Radio and Television (MRTV) will introduce two new channels starting January 1, 2015, said a statement of the Ministry of Information published yesterday. The two new channels are MRTV News Channel and MRTV Entertainment Channel, some sports programs of which will be contributed by a private media, Shwe Than Lwin. The MRTV news channel will present daily news and events, weekly news-related programs and information about opportunities, education, health, telecommunication and infrastructural development, while the MRTV entertainment channel will be launched for children and adults, movie, video and education programs.
South Korea’s Hyundai facilities
S
outh Korea’s factory output in November rose at the fastest pace in four months, but patchy domestic consumption and low inflation are expected to support market views for an interest rate cut as early as the first quarter of 2015. The industrial output index rose by a seasonally adjusted 1.3 percent in November from October, Statistics Korea data showed yesterday. That beat the median forecast in a Reuters
poll for a 1.0 percent rise and was the fastest clip since July’s 1.6 percent gain. Still, output has been see-sawing between declines and rises, and analysts don’t see evidence there will be steady gains. “The level of industrial output has still not recovered from its drop since July and is tracking a strong sequential rate of contraction in Q4 2014,” said Ronald Man, an economist at HSBC
A mixed picture On a year-on-year basis, industrial output slipped 3.4 percent in November, compared to the Reuters survey’s median 2.5 percent fall and October’s 3.2 percent decline. Yesterday’s numbers showed the domestic consumption picture is still mixed, with service-sector output edging down a seasonally adjusted 0.3 percent in November on a monthly
Mysterious FX cycle may challenge yen bears in 2015 Since the introduction of a floating rate exchange system in 1973, the dollar has peaked against the yen every eight years with clockwork precision Shinichi Saoshiro
Y
en bears betting that the Japanese currency will keep declining for a few more years could be wrong-footed based on a mysterious 8-year pricing cycle that has proved accurate over the past four decades. That cycle calls for a long-term high in the dollar against the yen in 2015. That would run counter to the view of many currency specialists who expect the dollar, which hit a 7-1/2 year high against the yen this month, to keep rising beyond 2015. “The cycle has been explained by factors such as shifts in purchasing power, inflation trends and real effective exchange rates. But none are very convincing,” said Junichi Ishikawa, market analyst at IG
Securities in Tokyo. “We may have to accept it as a strange trait inherent to the currency pair.” These 8-year peaks, followed by significant troughs, have so far occurred in 1974, 1982, 1990, 1998 and 2007. The cycle has provided price chartists with fodder for analysis, although most market participants are at a loss to explain the phenomenon. The dollar has surged about 14 percent against the yen this year, supported by a divergence in monetary policy between the Bank of Japan and the U.S. Federal Reserve. Japan is promoting reflationary policies to revive is stagnant economy, while markets are anticipating rising interest rates in the United States as
its economy recovers. The dollar rose to 121.860 yen this month, its highest level since 2007, swinging from a record low of 75.311 in 2011. “The 8-year cycle could be broken this time around. The BOJ is conducting unprecedented easing. We also have to remember the previous 8-year cycles happened at a time when Japan still enjoyed a trade surplus,” said Daisaku Ueno, chief foreign exchange strategist at Mitsubishi UFJ Morgan Stanley. “The cycle dictates that the dollar will peak next year. But it is likely to keep rising for some time after 2015 unless the BOJ halts its easy policy next year,” said Ueno, who expects the dollar to peak in 2017.
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.
Business Daily is a product of De Ficção – Multimedia Projects Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 editor editor@macaubusinessdaily.com newsroom newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com
Business Daily | 13
December 31, 2014
Asia KEY POINTS Industrial output rises at fastest pace in 4 months
India clears order to ease land acquisitions in reforms push
Overall improvement seen but recovery pace still uncertain
Compensation to landholders will stay at four times the market price
Dec inflation expected to hit over 15-year low
Nigam Prusty and Krishna N. Das
basis while retail sales rose 1.9 percent from October. A statement from the finance ministry was cautiously optimistic over yesterday’s data, saying economic improvement is spreading while falling global oil prices, plus government efforts to boost the recovery, are expected to revive Asia’s fourth-largest economy next year. Further generating hope that the recovery pace may pick up in 2015, a business sentiment survey on Monday showed manufacturers’ confidence for conditions in January edged up to its highest level in 10 months, mostly on expectations for exports. Yesterday, central bank data showed that South Korea had a seasonally adjusted US$9.73 billion surplus in its current account in November, which is expected to bolster policymakers’ confidence about the economy’s fundamentals.
ndia passed an urgent executive order to ease land-acquisition rules in sectors like power, housing and defence to kick-start hundreds of billions of dollars in stalled projects, though investments are unlikely to flow in immediately. Restrictions on buying land, under a law championed by the last Congress government, are among barriers holding up projects worth almost US$300 billion. Several states had asked Prime Minister Narendra Modi to overhaul the law enacted in January. Finance Minister Arun Jaitley said projects in defence, rural electrification, rural housing and industrial corridors would not need to seek the consent of 80 percent of the affected landowners as mandated. They will also be exempt from holding a social impact study involving public hearings procedures that industry executives
Reuters
The cycle dictates that the dollar will peak next year. But it is likely to keep rising for some time after 2015 unless the BOJ halts its easy policy next year Daisaku Ueno, chief foreign exchange strategist, Mitsubishi UFJ Morgan Stanley
Others focused on energy-related developments as an incentive to keep supporting the dollar. “The United States could begin establishing itself as a resource exporter by 2016 thanks to its shale gas. The dollar already is a key reserve currency, but it will also earn status as a commodity currency that previously added allure to the Aussie,” Ishikawa at IG Securities said.
I
Still, there are strong arguments suggesting the 8-year cycle will remain intact, meaning the dollar reaches its pinnacle next year. A slowdown in China’s economy is a risk in 2015, which could undermine the U.S. economic recovery and weigh on the dollar. Japan’s economic policies, known as “Abenomics”, may lose their potency in 2015 and drive Japanese equities lower. Some suggest that could sap some of the dollar’s strength. In recent months the dollar has risen in tandem with Japanese stocks, which hit a 7-1/2-year high, as foreign investors in particular sold the yen to hedge their equities positions. “The trend will likely remain dollar positive next year, but the sort of rally we saw this year probably won’t be repeated,” said Koji Fukaya, president of FPJ Securities in Tokyo. “A rate hike by the Fed next year appears to be mostly priced in. In addition, Japan’s current account could improve on lower oil prices and reactivation of nuclear power plants. All this could see the dollar peak out in 2015 or 2016,” he said. Japan’s current account, the broadest measure of a country’s international trade, hit a record deficit in January but posted a surplus for the fourth straight month in October. Reuters
say can drag out the acquisition process for years. Compensation to landholders, however, will stay at four times the market price. An ordinance is an emergency measure that has to be passed by the next parliamentary session. Modi has already resorted to using it three times in his six months in office due to a lack of majority in the upper house of parliament. After the last parliament session ended in a legislative logjam on December 23, Modi passed two orders to let foreign firms raise their stakes in insurance ventures and allow commercial mining of coal. Parliament, which reconvenes in February, did not ratify the November ordinance on coal, forcing Modi to pass another ordinance to let the government auction coal mines and allow private companies to mine and sell the fuel. “Governments must act with determination. The government
must have the desire to implement its decisions,” said Jaitley, a key lieutenant to Modi, responding to opposition parties’ criticism that such ordinances undermine the parliamentary system in a democracy. Modi is also considering changes to the Mines and Minerals Development and Regulation Act to auction minerals like iron ore and bauxite. But the government has yet to take a decision on an ordinance for it, Jaitley said. Analysts reckon reform through ordinances has its risks. “While ordinances can be reissued once they lapse, they may not be perceived as a stable solution by investors wanting secure property rights,” HSBC Securities analysts wrote in a note. “We, however, believe it is an important step to signal the government is serious on reforms.” Reuters
THERE ARE THINGS WE DON’T DO BUT WE DO••• • Advertising • Branding & marketing consulting • Marketing strategy • Creativity • Design There are men and women who give human kind their perseverance, their genius, their generosity and, in some cases, their own life. Those people and their actions are our inspiration.
info@goldfishmacau.com +853 2833 1258 www.goldfishmacau.com
14 | Business Daily
December 31, 2014
International Eurozone loans still contracting Loans to the private sector in the euro area, a gauge of economic health, fell year-onyear in November, but by slightly less than in October, the European Central Bank said yesterday. The volume of loans to private businesses and households declined by 0.9 percent in November compared with the same month in 2013, a slightly lower rate than the drop of 1.1 percent recorded in October, the ECB said in a statement. The long and deep financial crisis in the 18 countries that share the euro has squeezed lending, thus dampening economic activity.
Russian sold US$80 mln in forex Russia’s Finance Ministry sold US$80 million in forex market interventions on December 26, the central bank said yesterday. The central bank publishes its interventions data with a time lag. The central bank has spent over US$80 billion defending the rouble this year, and the Finance Ministry recently started selling leftover foreign currency on its accounts to support the rouble.
Spanish prices fall Slumping oil prices pushed Spanish consumer prices down by the most in more than five years in December as euro-region policy makers consider boosting monetary stimulus. Prices dropped 1.1 percent from a year earlier, the most since July 2009, the Madrid-based National Statistics Institute said yesterday. The decline, based on a European Union measure, was the sixth in a row and bigger than the 0.7 percent drop forecast by economists in a Bloomberg News survey.
Slower price growth in UK residences
400 richest, US$92 billion richer The richest people on Earth got richer in 2014, adding US$92 billion to their collective fortune in the face of falling energy prices and geopolitical turmoil
T
he net worth of the world’s 400 wealthiest billionaires on December 29 stood at US$4.1 trillion, according to the Bloomberg Billionaires Index, a daily ranking of the world’s richest. Two of the year’s other biggest gainers were Warren Buffett and Mark Zuckerberg of the U.S. Buffett, the chairman of Berkshire Hathaway Inc., added US$13.7 billion to his net worth after the Omaha, Nebraskabased company soared 28 percent as the dozens of operating businesses the 84-year-old chairman bought over the past five decades churned out record profit.
Gates, Slim Buffett passed Mexican telecommunications billionaire Carlos Slim on December 5 to become the world’s second-richest person. Bill Gates, the co-founder of Microsoft Corp., was up US$9.1 billion during the year. The 59-year-old remains the world’s richest person with a US$87.6 billion fortune. Zuckerberg, the hoodie-wearing chief executive officer of the world’s largest social-networking company, gained US$10.6 billion as the Menlo Park, California-based business rose to a record on December 22. This year Facebook made headway in mobile, a business that has flourished as mobile advertising increased and marketing initiatives expanded with applications and video. Facebook’s acquisition of Instagram in 2012 for US$1 billion has also been paying off: A Citigroup Inc. analyst said on December 19 the photo-sharing app is worth US$35 billion.
Russia woes Nobody was hit harder than Vladimir Evtushenkov. Once Russia’s 14th-richest person, the 66-year-old lost 80 percent of his wealth, dropping him from the Bloomberg ranking. He was sentenced to house arrest by a Moscow court in September after According to Bloomberg News, U.K. house-price growth slowed to its weakest in more than a year in December, adding to evidence that the market for residential property is cooling. The annual gain in value dropped to 7.2 percent from 8.5 percent in November, the lowest rate since November 2013 and the fourth consecutive slowdown, Nationwide Building Society said in a statement on its website today. Prices rose 0.2 percent on the month for a third straight increase. The housing market has slowed this year, with home-loan approvals falling to their lowest in 16 months in October.
US fines Japanese shipper The US justice authorities fined Japanese shipper NYK US$59.4 million for conspiring with other companies to fix the prices of transporting cars to and from the United States. “NYK conspired to suppress and eliminate competition by allocating customers and routes, rigging bids and fixing prices for the sale of international ocean shipments of roll-on, roll-off cargo to and from the United States and elsewhere,” the Department of Justice said. NYK agreed to plead guilty to a onecount felony criminal charge in the scheme, which spanned the period of 1997-2012, and pay the fine.
Bill Gates still occupies the top place among the richest
a money-laundering investigation connected to the US$2.5 billion purchase of shares in oil producer OAO Bashneft. The court also ruled in favour of nationalizing his stake in Bashneft, which he controlled through publicly traded AFK Sistema. Evtushenkov’s fortune has fallen US$8.1 billion, the most of any Russian in 2014. Leonid Mikhelson has been the biggest loser in dollar terms among those remaining in the country’s 20 richest, dropping US$7.8 billion since the start of the year. The 59-yearold is the chief executive officer of OAO Novatek, Russia’s second-largest natural gas producer, which fell 44 percent during the year. He has a US$10.1 billion fortune, according to the Bloomberg ranking. Jeffrey Bezos, the chairman of Amazon.com, had US$7.2 billion trimmed from his fortune as the company lost ground in the cloud
computing market to crosstown competitor Microsoft Corp. Bezos, whose Blue Origin LLC space company won a contract in November to deploy rockets from NASA launch pads in Florida, is ranked 21st in the world with a US$28.7 billion fortune. Blue Origin will develop a space vehicle that isn’t scheduled to be ready until after 2020. Elon Musk’s space-exploration company is close to winning the certification it needs to begin deploying satellites for the U.S. military, according to an Air Force official. A contract win by Hawthorne, California-based SpaceX would be the first since the Pentagon opened the program in late 2012 to as many as 14 competitive missions. Musk added US$2.9 billion to his net worth, most of which was the result of a 50 percent gain by Tesla Motors Inc., the world’s largest electric-car manufacturer. Bloomberg News
Italian Finance Minister says slowdown finished The minister said the government would approve a package of measures in January to boost investment
R
ecent data show that the slowdown in the Italian economy has ended, Italy’s Economy Minister Pier Carlo Padoan said in an interview published yesterday. Italy’s economy, the most sluggish in the euro zone for more than a decade, has not posted a single quarter of growth in the last three years. “After three years of recession ... employment is starting to grow again,” Padoan told the Corriere della Sera newspaper, adding that would boost consumer and business confidence and kick-start growth in the euro zone’s third-largest economy. The government is forecasting economic output will fall 0.3 percent
this year, before rising a meagre 0.6 percent in 2015. The minister said the government would approve a package of measures in January to boost investment. These would include fiscal measures to support small companies, efforts to help non-financial entities like insurers give credit directly to companies, moves to reduce regulatory risk for foreign investors in Italy, and encouraging private investment in cultural activities, Padoan said. He also said Italy would avoid being put under budget surveillance by the European Commission and that its public debt, proportionately the second highest in the euro zone after
Greece’s, would start to fall in 2016. Italy will go ahead next year with stalled plans to sell state-owned companies and public real estate assets, aiming to raise funds and cut its debt, Padoan said. The treasury will put on the block post office group Poste Italiane, air traffic control operator Enav, a minority stake in utility Enel, and is working on privatising state railway operator Ferrovie, Padoan said. Italy’s government postponed the sale of these companies this year because of volatility on financial markets and delays in preparing wholly state-owned companies for listing. Reuters
Business Daily | 15
December 31, 2014
Opinion
wires
Radical goals for sustainable development
THE JAKARTA GLOBE
Barbara Unmüßig
Business
Leading reports from Asia’s best business newspapers
President of the Heinrich Böll Foundation
President Joko Widodo will launch national OneStop Integrated Service Centres, or PTSP, on January 26, to ease the issuance of investment licenses in the country, a minister said. Sofyan Djalil, the coordinating minister for the economy, said the one-roof policy was to help investors in taking care of permits in Indonesia, where the bureaucracy has a reputation for complicated procedures that cause confusion. Meanwhile, BKPM chief Franky Sibarani said the PTSP was the government’s commitment to easing the issuance of permits, in return attracting more investors.
TAIPEI TIMES The legislature’s Finance Committee passed a preliminary review of the draft act governing thirdparty payment services, paving the way for the faster development of local mobile payment services. Legislators hope to pass the act in the first half of next year. The committee performed a clause-by-clause review of three versions of the Payment Processing Institutions Act. The committee also lowered the threshold for local companies to launch third-party payment collection and transfer businesses by cutting the minimum paid-in capital requirement.
INQUIRER As the new year kicks in, the central bank will start phasing out all peso bills bearing old designs, regulators announced this week. Starting January 2015, the Bangko Sentral ng Pilipinas (BSP) will begin the yearlong “demonitization” process for all old peso bills with denominations of 5, 10, 20, 50, 100, 200, 500 and 1,000. These include bills still accepted as legal tender but have been out of production for years such as the green Emilio Aguinaldo five-peso bill and the brown 10-peso bill that has Andres Bonifacio and Apolinario Mabini on it.
VIETNAM NEWS The garment and textile export industry anticipates a good year in 2015 following its rapid growth in 2014, which indicated an export turnover that could possibly exceed US$24.5 billion. Experts disclosed that the impending free trade agreements would create breakthroughs for the sector’s export. Ministry of Industry and Trade’s Import–Export Department Director Phan Van Chinh shared that a huge potential could be seen for garment and textile exports to expand even in traditional markets.
United Nations plays a theoretical key role constrained by its members’ personal plans
L
et us imagine for a moment that we could change the world according to our wishes. Dramatic economic inequality gives way to social and political inclusion. Universal human rights become a reality. We end deforestation and the destruction of arable land. Fish stocks recover. Two billion people look forward to a life without poverty, hunger, and violence. Rather than paying lip service to climate change and resource scarcity, we start to respect and uphold the limits of our planet and its atmosphere. That was the aim in 2001, when the United Nations adopted the Millennium Development Goals. And it will be the aim next year, when the MDGs expire and the UN adopts a successor framework for environmental and development policy. The coming set of Sustainable Development Goals (SDGs) will seek to protect ecosystems, conserve resources, and, as with the MDGs, lift millions of people out of poverty. Combining environmental and developmental frameworks is a good idea – one that builds on the success of a host of legally binding international conventions and agreements crafted under the UN’s auspices to protect the climate, conserve biodiversity, uphold human rights, and reduce poverty. Though they may not be perfect – and, unfortunately, the countries that ratify them do not always achieve the targets – they have led to the creation of institutional processes that encourage countries to meet their promises and embolden citizens to hold governments accountable.
No government is truly willing to tackle the causes of inequality and hunger, which would require making fair taxation and comprehensive welfare a top priority
But, though the SDGs will thus stand on solid legal ground, that ground must be developed further. For starters, global agreements and targets have not yet been put in place for major environmental challenges, including the destruction of fertile topsoil and global plastic production. Such agreements will be necessary to enable the SDGs to consider human rights, the environment, and development holistically. Researchers and civil-society
organizations have been calling for a reversal of soil degradation by 2020, and are pressing for at least one international panel of experts to meet at the UN to address this central aspect of global food security. Every year, 12 million hectares of land – an area the size of Austria and Switzerland – are lost to overuse and excessive application of fertilizers. The environmental impact is magnified by large-scale farming. The social consequences can also be severe: eviction, the loss of livelihoods, and violent conflict. The use of plastic must also be reined in. Since the 1950s, worldwide production has increased by a factor of one hundred. Every year, more than 280 million tons of plastic is produced, with vast quantities making their way into groundwater, rivers, and oceans – and onward up the food chain. Though plastic is not biodegradable, not a single country has pledged to prevent it from entering our environment. Another largely unexplored possibility would be to set targets for phasing out environmentally damaging and socially detrimental subsidies. Globally, such subsidies, like those offered by the European Union’s Common Agricultural Policy, run into the hundreds of billions of dollars, draining budgets and often doing nothing for the poor. Cutting them would not only remove perverse incentives; it would also free up money for education, universal health care, and infrastructure in rural areas, where it is needed to create income opportunities. Unfortunately, we are unlikely to get the world of our wishes. The SDG negotiations reflect
what is currently possible in a multilateral framework: relatively little. No government is truly willing to tackle the causes of inequality and hunger, which would require making fair taxation and comprehensive welfare a top priority. Such reforms would be more effective than any development aid, but for now they are off limits. The rules of the global economy also remain untouchable, making it nearly impossible to restructure financial and trade policies to ensure that they do not result in more poverty, unchecked climate change, and irreversible resource destruction. The language agreed upon so far is not reassuring. A timeworn commitment to economic growth at all cost is no answer to the question of how development can be balanced against the limits of our planet and the fact that billions of people live in poverty. In a finite world, infinite growth is impossible, and rising output will not put food on everyone’s table if the benefits of growth are not fairly distributed. It is not only the advanced countries that are impeding the creation of a bolder development agenda. Elites in emerging and developing countries are using the SDG negotiations primarily as a platform to call for international aid transfers. The UN is only as good as its members. We will know how good they are by the extent to which they view the SDGs as an opportunity to establish truly new priorities and truly universal goals for environmental and development policy in the twenty-first century. Project Syndicate
16 | Business Daily
December 31, 2014
Closing China’s first regional jet gets certificate
Shenzhen reports human bird flu case
First domestically produced regional jet model was officially certified yesterday, marking a crucial step forward for the jet’s entry into the market. The ARJ21-700 won the certificate after a series of examinations by the Civil Aviation Administration of China using the country’s airworthiness standards. ARJ21, short for Advanced Regional Jet for the 21st Century, is a type of regional liner designed and manufactured by the Commercial Aircraft Corporation of China (COMAC). Its economic life is designed to be 60,000 flying hours or 20 calendar years.
A resident of Shenzhen City in south China’s Guangdong Province has contracted the H7N9 strain of avian flu, local authorities said yesterday. The city’s health and family planning commission confirmed that Yang, 35, was suffering from H7N9 on Monday. Yang is in a local hospital and her condition has been described as critical. As Yang works as a maid, 28 people who had close contact with her have also been admitted to hospital for observation. This is the first case of a human contracting H7N9 in Shenzhen this winter.
Japan cuts corporate tax to spur growth After a decade of slow growth only about 30 percent of companies actually pay taxes Kaori Kaneko and Yuko Yoshikawa
Japan’s Prime Minister Shinzo Abe (R), ruling Liberal Democratic Party Shigeru Ishiba (2-R) and fellow lawmakers attend a special Diet session at the Lower House of the Parliament in Tokyo
J
apan’s ruling coalition has approved a tax reform plan that will cut corporate taxes from April and pledges further reductions in coming years in a bid by Prime Minister Shinzo Abe to boost profitability and bolster economic growth. The plan approved by Abe’s Liberal Democratic Party and its coalition partner Komeito yesterday would cut the overall effective corporate tax rate by 2.51 percentage points to 32.1 percent from April and then to 31.3 percent the following year. Abe pledged in June to lower the
corporate tax rate to below 30 percent over the coming years to help pull Japan out of nearly two decades of deflation. Earlier this year, he eliminated a levy on companies imposed in 2012 to help fund disaster relief. Takeshi Noda, chairman of the LDP’s tax panel, estimated that the corporate tax cut would amount to about 400 billion yen (US$3.32 billion) over the next two fiscal years. Abe hopes the tax cuts will encourage companies to raise wages, which would spur consumer spending, and to invest some of the US$1.9
Chinese listed firm convicted of IPO fraud
A
Chinese-listed firm was convicted of securities fraud by a court in central China’s Hunan Province for forging sales figures in its initial public offering (IPO) prospectus. The Intermediate People’s Court of Changsha City imposed a penalty of 8.5 million yuan (US$1.36 million) on Hunan-based Wanfu Biotechnology Agricultural Development Co., over IPO fraud, the company’s statement said, quoting the court’s verdict. Former chairman of the company Gong Yongfu was sentenced to three years and six months in jail and fined 100,000 yuan for IPO fraud and information disclosure violations. Wanfu Biotechnology was found to have inflated its revenues and net profits from 2008 to 2011 in order to qualify for an IPO, said the verdict. It concealed important financial facts and forged sales figures in IPO application materials and prospectus. As a result, it was listed on the Shenzhen bourse in 2011. This case exposed loopholes in enterprise management, IPO examination and issuance mechanism, and delisting rules in China, said Central South University economics professor Wen Fenghua. Xinhua
trillion in cash held by companies outside the financial sector. Japan’s top effective corporate tax rate is 34.6 percent, among the highest in the major economies. The average corporate tax rate stands around 25 percent among OECD economies. But after a decade of slow growth only about 30 percent of companies actually pay taxes. The rest are either unprofitable or have been able to apply credits from prior losses. In a change aimed to broaden the tax base, established companies would only be able to apply losses
Taiwan indicts two businessmen in latest food scandal
to write off half of reported income from 2017. That limit is currently 80 percent. The ruling coalition estimates it will be budget neutral in the third year as steps such as broadening the tax base will help cover shortfalls caused by the tax cut. “The focus is whether companies will pass funds arising from the tax cuts to capital spending and wage increases, which will lead to economic recovery,” said Satoshi Osanai, economist at Daiwa Institute of Research. “We think it will be difficult to achieve budget neutral in the third year. And in a long-term perspective, it will be an issue how the government will secure revenues and manage fiscal reconstruction.” Japan’s economy unexpectedly slipped into recession this year after an increase in the national sales tax in April hit consumer spending. The tax plan recommits to a further increase in that consumption tax to 10 percent from 2017. It also expands the Nippon Individual Saving Account program, which launched this year. That program allows individual investors to invest up to 5 million yen in stocks without being subject to taxes. The changes will allow larger annual investments and allow for investments on behalf of children. There were 7 million NISA accounts as of June. Reuters
Hyundai Motor to build two China plants
T
wo Taiwanese businessmen have been charged with using banned industrial dyes to adulterate food products, a case which prompted mass recalls in the island’s latest food safety scandal, prosecutors said yesterday. They sought a 20-year jail term for Lu Tien-jung on charges of food safety violations and fraud. His son and business partner Lu Chia-chien may face an 18-year jail term on the same charges, in addition to a fine of Tw$20 million (US$666,000) for each man. The pair, who run the Chien Hsin company at the centre of the scandal, were charged with manufacturing and selling soybean emulsifiers tainted with dimethyl yellow and diethyl yellow dyes which have been banned from food products since late 2008, said the Changhua district prosecutor’s office. “The defendants caused public health hazards that are difficult to estimate and seriously damaged the national image. Their crimes are severe but they have denied their intention to commit the crimes and shown no remorse,” it said in a statement. AFP
H
yundai Motor Co said yesterday it would build two factories in China, its first new manufacturing plants since 2012 as the South Korean automaker bets on growth in the world’s biggest car market even as the economy slows. Hyundai said the factories, which will start production in 2016 and 2017, would help it better compete with rivals including Volkswagen and General Motors. Affiliate Kia Motors Corp also said it would expand capacity at one of its three Jiangsu province factories to up to 450,000 vehicles by 2016 from 300,000 now. Hyundai said the factories - which are capable of producing 300,000 vehicles each - would help it and Kia maintain their market share of over 10 percent in China. The duo said they expect to have a combined China production capacity of 2.7 million passenger and commercial vehicles by 2018. Hyundai said construction of its Hebei province plant, to be located in city of Changzhou, will start in the second quarter of 2015. Reuters