MOP 6.00 Closing editor: Joanne Kuai Publisher: Paulo A. Azevedo Number 699 Thursday January 1, 2015 Year III
Housing transactions rebound H
ousing transactions were up 12.8 per cent in November over October. Financial Services Bureau data also notes that average housing prices declined 13.7pct in the period. The Outer Harbour and Nam Van demanded the deepest pockets. While central Macau was cheapest. Uncompleted properties commanded the greatest premium at more than MOP100,000 per square metre Page
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Hands off
Lippo ink deal developing casino in Incheon, S.Korea
As you were. The city’s gaming regulator has no ‘new rules’ in mind regarding scrutiny of VIP gaming promoters and collaborators. DICJ says its’ reminders of criminal records is routine. “We will also remind casino operators here to update us on their VIP gaming promoters and collaborators’ lists whenever they come and go”, said a spokeswoman. About 200 licences have been issued for the city’s VIP gaming promoters
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Finance Ministry plans to reform fiscal reporting PAGE 8
Purchasing Managers’ Index for December contracts
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HSI - Movers December 30
High note
Name
Memorable, brilliant, golden. Last year’s performance by Chinese stock markets was remarkable. Shares trading in China reached their highest point in five years. Finally weaning punters off obsessive property speculation
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INTERVIEW
www.macaubusinessdaily.com
Day of the data Data can help profile gamblers. But can’t endow operators with vision. So says Adam Tanner, author of ‘What Stays in Vegas: The World of Personal Data. The Harvard University fellow encourages Macau to follow Las Vegas’ suit in diversifying its offerings
%Day
China Resources Ente
2.65
China Life Insurance
2.18
Bank of Communicatio
2.12
Bank of China Ltd
1.86
Industrial & Commerc
1.80
Galaxy Entertainment
-0.46
China Unicom Hong Ko
-0.57
Sands China Ltd
-0.65
Tencent Holdings Ltd
-0.71
MTR Corp Ltd
-1.09
Source: Bloomberg
I SSN 2226-8294
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NOTICE Business Daily will not publish on 2 January 2015 (Friday) and the following weekend. We will be back on Monday, 5 January. We wish all our readers and their families a Happy, Healthy & Prosperous New Year.
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January 1, 2015
Macau China Eastern launching Macau-Hangzhou flights China Eastern airline is to launch direct flights between Macau and Hangzhou in China on January 23, thus becoming the third carrier offering flights between the two cities. The airline is planning to provide two round-trip flights for the route per week, on Fridays and Sundays. Currently, two airlines operating flights on the route – namely, Air Macau and Xiamen Air, which offer two daily round-trip flights and one daily round-trip flight between Macau and Hangzhou, respectively. The new route that China Eastern will launch will be the carrier’s second route between Macau and a mainland Chinese city, following its daily Macau-Shanghai flights.
Shun Tak further extends deadline for Harbour Mile deal
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Gov’t to ink MOP419.5 mil urban E1 contract Zone E1, already delayed more than a year through reclamation works, costs even less than the lowest bid cast in the first public tender in 2013 Stephanie Lai
sw.lai@macaubusinessdaily.com
T
he reclamation project for new urban reclaimed Zone E1, a site adjacent to Taipa Terminal, is to cost some MOP419.5 million (US$52.5 million) with the works starting within the first quarter of 2015, following a year of delay. As disclosed in the Official Gazette yesterday, the government is to sign a nearly MOP419.5 million contract with the China Civil consortium. Engineering Construction Company (Macau) Ltd. and Hong Kong River Engineering Company Ltd. for the Zone E1 reclamation project will take 685 days to complete the works. The consortium was awarded the contract after the Infrastructure Development Office re-launched a public tender for the reclamation
project in June 2014. It had cancelled the public tender process in the previous year when two bidders submitted identical costs for Zone E1 reclamation works of MOP456 million – the lowest of the 11 bids. The cancellation of the public tender has invited lawsuits against the government by the two bidders, one a joint venture of Changjiang Waterway Bureau and Companhia de Obras de Construção and Engenharia Jiao Hang (Macau) Limitada, and another China Road and Bridge Corporation. The incidence has resulted in the E1 reclamation project being delayed from the third quarter in 2013 to the first quarter of 2015. Zone E, which occupies 73 hectares, comprises plots E1 and E2.
The 53-hectare E1 is adjacent to the Taipa Terminal, while the 20-hectare E2 plot is near the Macau International Airport on its southeast. The land filling works of the smaller plot E2 was completed in the fourth quarter of 2012. The government plans to have Zone E1 developed as a mixed commercial and residential site accommodating transport facilities for the land-scarce city. The consortium of China Civil Engineering Construction Company (Macau) Ltd. and Hong Kong River Engineering Company Ltd. won the Zone E1 reclamation project with the lowest bid of the eight bids received by the government. The highest bid submitted amounted to MOP692.88 million.
hun Tak Holdings Ltd.’s long awaited Harbour Mile scheme – on a waterside plot linking its part-owned One Central development to its Macau Tower complex – may have to wait another two years to be launched. Shun Tak Holdings Ltd has announced that the long stop date for completion of the Nam Van Site acquisition and the completion date of the site D acquisition have been further extended to 31 December 2016. The deadlines for both matters were supposed to be yesterday. Previous filings referred to the Nam Van area project as for ‘residential/commercial/hotel’ with a total gross floor area of 401,166 square metres. According to the company’s filing with the Hong Kong Stock Exchange yesterday around half past three which is after trading hours as the Hong Kong bourse only operates until noon - except for the extension of the completion dates, all the terms in respect of the acquisitions of the Nam Van Site and Site D remain unchanged. ‘Presently, the Macau Government is still in the process of reviewing the Master Plan, of which the Nam Van Site and Site D comprise a portion. It’s anticipated that the Macau Government requires additional time for finalizing the Master Plan’, the filing reads.
Business Daily | 3
January 1, 2015
Macau
Housing prices drop 14pct in November Housing prices went down and the number of transaction went up in November. Properties in the Outer Harbour and Nam Van reclamation areas were the most expensive while those in the central area of Macau were the cheapest Kam Leong
kamleong@macaubusinessdaily.com
H
ousing unit transactions rebounded month-on-month some 12.8 per cent in November, according to the latest data released by the Financial Services Bureau (DSF). The data also indicates that the average housing price in the city declined 13.7 per cent month-on-month. According to DSF, a total of 475 transactions were made in November, of which 404 were on completed property, while the remaining 71 were on property under construction. Despite more activity in the real estate market in November than in October the number of transactions still slumped some 40.5 per cent compared to the same period in 2013, when the total transactions achieved reached 798 in November. The livelier market, however, did not push up skyrocketing housing prices. In November, an average
price per square metre of MOP91,731 was posted, compared to an average price of MOP106,341 in October. Nevertheless, this still represents a year-on-year growth of 7.5 per cent. The lower property prices reflect the declining cost of real estate in Macau Peninsula and Coloane, which registered decreases of 16.8 per cent and 35.7 per cent month-onmonth in November 2014. In addition, Coloane saw a year-on-year drop of 9.12 per cent in property prices in the month. Housing prices in Taipa, however, continue to grow
– up 6.25 per cent monthon-month, and surging 31.48 per cent year-on-year, for an average cost of MOP121,607 per square metre in November. Housing in Coloane and on the Macau Peninsula cost an average MOP108,641 and MOP81,281 per square metre, respectively. According to DSF, the most expensive properties in the city are located in the vicinity of the Outer Harbour and the new reclamation area of Nam Van, where prices reached MOP132,691 per square metre. Six and tenyear old properties there even topped MOP140,514
Unemployment rate hovering at 1.7 pct The unemployment rate of 1.7 per cent had been steady for twelve months since last November
T
he unemployment rate of the city remained stable at 1.7 per cent during September and November although the underemployment rate increased slightly by 0.1 percentage point to 0.4 per cent. Meanwhile, the gaming, construction and retail trade sectors attracted more labour in the city during the three months, according to the latest data from the Statistics and Census Service (DSEC). The latest DSEC survey shows that the total labour force between September and November 2014 reached 403,100 while the participation rate increased to 74.4 per cent. Meanwhile, the total number of unemployed in Macau was only 6,900, which is similar to that between August and October. Fresh graduates searching for their first job accounted for 20.3 per cent of the total unemployed, down 5.7 percentage points compared to the previous period. The survey also shows that more people were working for the gaming business and construction industry in the three months. According to DSEC, the total number of workers in the two fields increased 1.6 per cent and 1.9 per cent period-onperiod, totalling 85,900 and 56,800 workers, respectively. However, manpower in
restaurants and similar activities as well as the hotel field saw their labour force diminish, down 0.8 per cent and 1.4 per cent, respectively, compared with those between June and August. The recreational, cultural and gaming sectors continued to occupy the most part of the labour force of the city, accounting for 24.5 per cent of the total, followed by the construction field and hotels & restaurants, of which employees accounted for 14.3 per cent and 14 per cent of the total, respectively. In addition, some 11.7 per cent of the total labour force were engaged in the wholesale & retail trade industries, while some 7.7 per cent and 6.5 per cent worked for real estate & business activities and public administration & social security during the three months, respectively. In comparison with SeptemberNovember 2013, the labour force participation rate increased by 1.2 percentage points while the unemployment rate decreased by 0.2 percentage points; the underemployment rate remained constant. In fact, the unemployment rate had stood at 1.7 per cent since last November when it fell from 1.8 per cent. K.L.
per square metre. Real estate in the central area of Taipa and Doca do Lamau in Macau are the second and third most expensive areas, costing MOP129,998 and MOP102,459 per square metre, respectively. Housing in the central area of Macau, meanwhile, is the cheapest, costing only MOP50,173 per square metre in November.
Uncompleted more expensive than completed On the other hand, prices of uncompleted properties are more expensive than those
completed by MOP58,593 per square metre, costing MOP137,948 per square metre on average. All the properties under construction on the Macau Peninsula, Taipa and Coloane cost more than MOP100,000 per square metre. In particular, prices in Taipa again topped the list, at MOP172,174 per square metre, while those in Macau and Coloane cost MOP124,889 and MOP110,001, respectively. Meanwhile, for completed property, prices averaged out at MOP79,335 per square metre in November. Those on the Macau Peninsula cost MOP77,238 per square metre, while those in Taipa cost MOP89,943 per square metre. Related data for Coloane is not available as only one transaction was made on a completed property on the island during the month.
4 | Business Daily
January 1, 2015
Macau Brands
Trends
Higher Jewellery Raquel Dias newsdesk@macaubusinessdaily.com
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igh jewellery is an important part of retail and shopping in Macau. Wherever you go, you will notice that jewellery shops tend to congregate together. It used to be a few years back that these would usually belong to three different categories. It would either be a Chinese/Hong Kong-based reseller, like Chow Tai Fook, a pawnshop or a great Western name such as Cartier, Bulgari etc. In the first type you would be able to find a little of everything. Big gems and 24k gold are an everyday occurrence and you know what your money is buying: carat, size and colour. Brands like Bulgari, Tiffany’s and Cartier offer something more. They offer design, new techniques and that special feeling of exclusivity that often accompanies a higher price tag. In recent years, however, a new type of jewellery shop has been appearing in town. Smaller brands, often referred to as designer jewellery, are making their way into the market with a different target in mind. They don’t want to be mass marketed and they don’t have an ‘entry level’ line and they certainly don’t mass produce. Two examples available on the market are Charme at Sands Macau and Sunluxe at One Central. There you would find truly unique pieces, original designs and flawless craftsmanship. Since last week you have a third option. Carrera y Carrera just opened its doors with a reasonably sized boutique at MGM. The 130 year old brand is still family owned and will certainly leave you in awe. Their creations are bold, high quality and numbered. All of them - no exceptions - are handmade in Spain in the brand’s small atelier. Wearing any of the pieces will be like wearing a piece of art to which very few will ever have access.
Macau losing appeal for Hong Kong tourists Overall visitor arrivals have been climbing since 2011, but not from Hong Kong Kam Leong
kamleong@macaubusinessdaily.com
T
he city has been receiving fewer tourists from Hong Kong since 2011 although residents there remain the second largest source of visitors to Macau, the latest survey released yesterday by the Planning Department of Hong Kong reveals. A survey entitled ‘Northbound Southbound 2013/14’ conducted between February 24 and March 9, 2014 by the Hong Kong Government department showed that there were a total of 53,200 cross-border passenger trips recorded between the two Special Administrative Regions during the two-week survey period. The total number of crossboundary trips between the cities indicates that the average daily
Macau-Hong Kong passenger trips had decreased by 2 per cent compared to the same survey that was conducted in 2011. According to the Hong Kong department, about 56 per cent of the trips between Macau and Hong Kong were made by people living in Hong Kong, while 20 per cent of the trips were made by people residing in Macau. The remaining 15 per cent, meanwhile, were made by people living on the Mainland, which had jumped by 14 per cent to a daily average of 7,900, compared to the 2011 survey. It is true that the interest of Hong Kong people visiting Macau has decreased since 2011. According to official data from Macau’s Statistics
and Census Services (DSEC), visitor arrivals from Hong Kong started falling off from more than 7 million in 2011 to only some 6.8 million in 2013, down 10.8 per cent, or some 3.5 per cent annually. DSEC data shows that visitor arrivals from Hong Kong during the first eleven months of 2014 reached a total of 5.89 million, which is, however, a year-on-year drop of 5.1 per cent. In fact, tourists from Hong Kong accounted for some 20 per cent of the total number of visitor arrivals from January to November of 2014, following visitors from Mainland China, who accounted for nearly 68 per cent of the total in the eleven months.
International Entertainment ‘still reviewing’ Suncity deal
I
nternational Entertainment Corp. saw its shares soar by nearly 20 per cent yesterday while the company noted that it was still reviewing its position in relation to the possible acquisition of 70 per cent of economic interest in Macau’s major VIP gaming investor Suncity International Holdings Ltd. International Entertainment, the company controlled by the Hong Kong billionaire Cheng Yu Tung, saw its shares rise by 19.54 per cent to close at HK$3.12 at noon yesterday. In an announcement filed with the Hong
Kong Stock Exchange after trading hours yesterday, the company noted that it was not ‘aware of any reasons’ for the increases seen in the share price and trading volume of the shares. International Entertainment has seen its shares fluctuate wildly in the past three days: its shares rose by as much as 50.87 per cent upon closing of trade on Tuesday after falling 19 per cent the previous day. In the announcement filed yesterday - the same day when International Entertainment’s exclusivity period for buying 70 per
cent economic interest in Suncity expired - the Hong Kong-listed company said it had no intention of extending a new deadline although noting that it was still reviewing the possible acquisition in Suncity. ‘The directors wish to emphasise that no definitive agreement in relation to the possible acquisition has been entered into by the company or any of its subsidiaries with any party as at the date of this announcement”, International Entertainment stated in the filing. S.L.
Business Daily | 5
January 1, 2015
Macau Lippo land deal on South Korean casino project
Gaming regulator clarifies scrutiny of VIP gaming promoters
Xi also urged the city to diversify Macau’s economy, which depends on casino gambling for more than 80 percent of its revenue. He said that the city should nurture new growth areas and turn the former Portuguese enclave into a world tourism and leisure centre. Xi’s anti-corruption drive has scared off high rollers, or the socalled VIPs, and led to six straight months of decline for Macau’s casino revenue this year. Junket operators are the middlemen who bring in high stakes bettors to casinos and provide them with credit to gamble. They also work with agents who introduce clients and representatives who can commute between China and Macau to service high-end players and collect gambling debts, according to Siu. Macau will start cracking down on illicit money channelled through the city’s casinos with China’s Economic Crimes Investigation Bureau leading the initiative, the South China Morning Post reported last week. This will give the Bureau electronic access to all transfers through statebacked China UnionPay Co.’s bank payment card in order to identify suspicious transactions, it said. With Bloomberg
K.L.
The regulator stressed it does not intend to introduce ‘new rules’ for scrutinising the city’s VIP gaming promoters Stephanie Lai
sw.lai@macaubusinessdaily.com
professor of gaming research at Macao Polytechnic Institute, said over the phone.
Economic Diversification
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he city’s gaming regulator said it had no ‘new rules’ in mind regarding scrutiny of VIP gaming promoters and collaborators here apart from issuing reminders to submit documents that included proof that their agents had no criminal record. Macau’s Gaming Inspection and Coordination Bureau told Business Daily that in November and December, it issued letters reminding casino concessionaires here that the promoters of high-stake gamblers must submit documents, including proof of them having no criminal record, when applying to register for the setting up of business. “It is actually a regular measure. And we will also remind casino operators here to update us on their VIP gaming promoters and collaborators’ lists whenever they come and go”, a Bureau spokeswoman informed us, adding that the regulator has no new rules in mind regarding the scrutiny of VIP gaming promoters. The spokeswoman added that the Bureau does not interfere in the setting up of accounts for gaming promoters used for handling their daily business with their agents.
Currently, there are about 200 licences issued for the city’s VIP gaming promoters; about 5,000 people are registered as their gaming collaborators, according to the Bureau. Despite the gaming regulator stressing that it did not intend to introduce any new rules concerning scrutiny of VIP gaming promoters here, Beijing has signalled the strengthening of supervision of the gambling industry in Macau. During a whirlwind visit to the territory last month, Chinese President Xi Jinping called for the Macau government to strengthen its supervision of the gambling industry that relies on high rollers for twothirds of its casino revenue. Macau is seeking to curb money flows because of concerns that illegal funds are being taken out of the mainland into the territory via junket operators. “The government wants to make sure the gambling industry is more regulated because if you want to build a world tourism centre you want to remove the negative impression that the industry projects”, Carlos Siu, an associate
The Civic and Municipal Affairs Bureau (IACM)
Wishes You a Happy New Year of 2015
T
he consortium of the subsidiaries of Lippo Limited and U.S. gaming operator Caesars Entertainment Corporation obtained a conditional deal to acquire land for developing a casino project in Incheon, South Korea at a price of some US$95.9 million (HK$734 million) on Monday, after being given the green light by the Korean authorities on the project in March. Hong Kong-listed Lippo Limited informed Hong Kong Stock Exchange on Monday evening after trading hours that the consortium which its wholly-owned Lippo Worldwide is under had entered a conditional land sale and purchase agreement with the vendor, MIDAN City Development Co., Ltd. The consortium, named LOCZ Korea Corp, comprises Caesars Korea and OUE International as well. Meanwhile, the parent company of OUE International and the vendor company MIDAN are also partly owned by Lippo Limited, at 38.5 per cent and 55 per cent, respectively. The land that the consortium is to purchase occupies some 89,170 square metres. However, the Lippo filing shows that the land includes two phases. Only Lippo Worldwide and OUE International have the right to jointly nominate an entity to purchase and obtain the title to the Phase 2 land. In fact, the consortium was only approved by the Ministry of Culture, Sports and Tourism of the Republic for the casino project in March on reapplication. The company is allowed to design, develop, construct and own the project in the East Asian country. LOCZ Korea Corp is not the first joint venture eyeing the gaming businesses in South Korea. Paradise City, invested in by South Korean gaming operator Paradise Co Ltd as well as Japanese Sega Sammly Holding Inc, is scheduled to kick off in 2017.
6 | Business Daily
January 1, 2015
Macau
Adam Tanner: Follow Las Vegas in its diversification strategy
Adam Tanner, Harvard University fellow and author of ‘What Stays in Vegas: The World of Personal Data’, says the more transparent a casino the more likely it is to win business from its competitors. With growing trust, customers are willing to give more personal data to companies with the latter optimising promotions and loyalty. In the long run, transparency is in the business interests of every enterprise, Tanner says Luís Gonçalves
luis.goncalves@macaubusinessdaily.com
China is running an anti-corruption and anti-lavish spending campaign. Do you think Beijing might be interested in the amount of information Macau casinos likely have about Chinese gamblers? To be honest, I don’t know. If most VIP clients are coming here through junkets, the information about them is with the junket companies, not with the casinos. But it could be interesting to find out what percentage of clients here join the loyalty programmes. Companies who are transparent about what they do with their clients’ data will win the loyalty programme race. If you tell people the data you collect from them and what you do with it, then they’ll go to your casino. When customers are uncomfortable about what a casino does with their personal data, they’ll probably not gamble there. A more transparent casino is likely to win more business than its competition. The more you trust a company, the more willing you are to give personal data. But high rollers could be afraid to come to Macau and have their spending exposed one day? If that trend is correct, Chinese gamblers are likely to go to other destinations in Asia or Las Vegas because those markets are more transparent with data and more reliable. I don’t know if the Chinese government can oblige Macau casinos to share information about their clients. Macau is going through a revenue crisis these days; how do you think Vegas would react in the same situation? In Las Vegas, what is becoming more important is non-gambling revenue. The gambling industry suffered a lot after the 2008 crisis because they had so much investment going on and revenues were dropping fast. So they started looking for all possible sources of income to overtake the recession, like great entertainment, great dining. This is because a lot of people with no interest in gambling still want to go to Las Vegas. Diversification is a hot topic here. Could Las Vegas be a good example for Macau to follow? Certainly, yes. Vegas has amazing shows like Cirque du Soleil. Elvis Presley, Frank Sinatra and Michael Jackson all played in the city’s casinos. Those shows were big moneymakers. And even sports like golf or boxing; if you have Celine Dion or Elton John playing at Caesars Palace, you’ll attract a lot of customers. But these big shows are also much more expensive to have in Macau than in the U.S. Yes, but casinos here could host shows with famous Chinese or
I see a lot of reasons to have a convention business in Macau
Asian artists that will attract a lot of people. You could also have great circus, magician shows. It’s your first time in Macau; what are the major differences you feel compared to Vegas? There are interesting contrasts. What struck me the most was the level of drinking in casinos. Here they have bottles of water, in Las Vegas you never see water. Never. Free drinks is one of the main attractions in the US casinos for going gambling. If you have an alcoholic drink it may ease you up when you’re gambling, but here no, gamblers are very focused and don’t like to be distracted by anything. That’s a big contrast. Do you think the smoking ban will work in Macau? Smoking is allowed in most casinos in the United States. America has launched a huge global anti-smoking campaign and it’s forbidden to smoke almost anywhere in the country. However, casinos are an exception. A high percentage of gamblers smoke and you see it often on slot machines, for example. But in the U.S. it’s a bit different than here. There, slot machines generate most of the income for casinos. And some slot machine players say there’s a rhythmic thing about the slot machine that’s like an addiction similar to smoking. People like to drink, to smoke and to play the slot machines, and these things always come together. It’s like a ritual… Yes, and if you take one of those things - either smoking or drinking - you’re disrupting a ritual and worse, interrupting the revenues. Of course, if you reduce smoking it has the advantage of improving the health of gamblers and visitors. There’s a public health benefit with a smoking ban but it may also mean lost revenue. If people are spending five to ten minutes every hour to smoke, it’s 5 to ten minutes you’re losing revenues. If the law is for everyone, at least you’re not losing customers to the competition.
Macau is heading for a second wave of big openings in Cotai. Did you see similarities with Vegas in 2008 when the biggest operators were making huge investments? Despite being highly sophisticated in gathering customer data and appealing to customers and running their operations well on a daily basis they had this problem of massive debt just before the financial crisis in 2008. And that’s something that overshadows them. You can build an amazing house with some great architecture but if an earthquake hits you’re still going to have troubles. For the Chinese market, Macau has the advantage of speaking Cantonese that will still be attractive even if Singapore or Korea is amazing. If you’re a Chinese speaker you’ll probably feel more at home here than anywhere else. Of course, the major disruption is if China once decides to legalise gambling in the country or in some parts. But Las Vegas is still a success despite competition from other US regions. Las Vegas has done quite well over the decades even if gambling has become available in a lot of regions in the U.S. And that’s because it has amazing properties that are so impressive to look at and also because the city created a big convention business that brings thousands to the city. Consumer electronic shows and some other signature events take place in Las Vegas every year. Vegas is quite successful in diversifying its business from gambling to conventions, sports and shows. But unlike Vegas, Macau has more competition in entertainment or conventions just around the corner with Hong Kong or even Zhuhai If you have incredible entertainment, hotels and great dining, then there are attractions for having conventions here. Conventions are never held in Pittsburgh, for example; they’re held in fun places where people want to go. I see a lot of reasons to have a convention business in Macau.
Transparency will be in their business interests in the long run
“What Stays in Vegas: The World of Personal Data – Lifeblood of Big Business – and the End of Privacy as We Know It” In Las Vegas, no company knows the value of data better than Caesars Entertainment. Many thousands of enthusiastic clients pour through the ever-open doors of their casinos. The secret to the company’s success lies in their one unrivaled asset: they know their clients intimately by tracking the activities of the overwhelming majority of gamblers. They know exactly what games they like to play, what foods they enjoy for breakfast, when they prefer to visit, who their favorite hostess might be, and exactly how to keep them coming back for more. Caesars’ dogged data-gathering methods have been so successful that they have grown to become the world’s largest casino operator, and have inspired companies of all kinds to ramp up their own data mining in the hopes of boosting their targeted marketing efforts. Some do this themselves. Some rely on data brokers. Others clearly enter a moral gray zone that should make American consumers deeply uncomfortable. We live in an age when our personal information is harvested and aggregated whether we like it or not. And it is growing ever more difficult for those businesses that choose not to engage in more intrusive data gathering to compete with those that do. Tanner’s timely warning resounds: Yes, there are many benefits to the free flow of all this data, but there is a dark, unregulated, and destructive netherworld as well. “What Stays in Vegas: The World of Personal Data – Lifeblood of Big Business – and the End of Privacy as We Know It” tells the human stories about entrepreneurs and firms gathering personal data and the consumers about whom data is gathered. The greatest threat to privacy today is not the NSA, but good-old American companies. Internet giants, leading retailers, and other firms are voraciously gathering data with little oversight from anyone.
Business Daily | 7
January 1, 2015
Macau Profile
Adam Tanner Adam Tanner is a fellow at Harvard University’s Institute for Quantitative Social Science. From 1996-2011 he worked for Reuters News Agency as Balkans bureau chief based in Belgrade, Serbia, San Francisco bureau chief, and reporter posted in Moscow, Berlin and Washington D.C. He contributes a column for Forbes. Mr. Tanner writes about the business of personal data and published last September “What Stays in Vegas: The World of Personal Data – Lifeblood of Big Business – and the End of Privacy as We Know It”
Caesars doesn’t have the most impressive casinos in Las Vegas. They don’t have gondoliers like The Venetian or fountains like Wynn. But they have a lot of customers who gamble regularly in their casinos because they received better or special treatment. In the book there’s a case of a Los Angeles gambler who goes to Vegas every weekend and spends a thousand dollars. He likes the other hotels better but Caesars is giving him free chips and other benefits, because the company knows him through its data. And between choosing from a thousand dollars of free chips or a better hotel he chooses chips.
business interests in the long term.
A more transparent casino is likely to win more business than its competition
In the end, the famous saying of ‘What happens in Vegas, stays in Vegas’ was always a myth? Well, your personal data stays with the company. But at least casinos know what you did in Vegas… The company knows but doesn’t share it. They know everything that goes on in public spaces, how much you gamble, how much you eat, how many nights you stayed, but they don’t know what happened in your bedroom. The bottom line in my book is that people should be informed about the data companies are gathering and have a choice in deciding if they want to share it or not. I’m encouraging people to think about it before they share data, what happens to your data, and how it might be used. The ones more transparent should be the ones seen as more reliable. Transparency will be in their
So data from clients is getting increasingly important for operators? In a developed economy, personal data become an incredibly powerful weapon for marketing. Las Vegas is a very interesting place to study that. Casinos there are very sophisticated in their loyalty programmes, surveillance cameras and other client related issues. Marketing is first based on public records and then commercial information from clients on top of that. More people married in Las Vegas than anywhere else, so you have tons of data. One of the parallels with Macau is that if you have a casino and a lot of competition, how do you attract more people to your property? One of the main conclusions of your experience with Caesars in Vegas is that the high roller is probably not the most important client? The woman that spent a hundred dollars a night twice a week turns out to be a client worth five or ten thousand dollars per year, so she’s a valuable customer and should get special treatment, Caesars decided. When she felt special she kept coming back. In Macau, you see a lot of promotions and loyalty programmes that offer you an iPad or even a chance to go to outer space, which is quite an extraordinary promotion. What’s the biggest challenge for casinos in terms of data?
The more you trust a company, the more willing you are to give personal data. When customers are uncomfortable about what a casino does to their personal data, they’ll probably not gamble there
The major problem is to identify who’s the likely gambler. It’s not correlated with income. You could be rich and not a fan of gambling or be a middle class guy and have huge interest. Even people who spend US$200 on a dinner may not be interested in gambling but could be a potential guest for your hotel or your entertainment shows. And of course, national differences apply. Finding a gambler in the U.S. is different from here. Collecting data from your customer is a better option than building lavish properties?
Casinos seem to compete with properties, not with loyalty programmes. That strategy has worked also. Steve Wynn built a volcano in Vegas in the 80’s. It’s very impressive and drew a lot of attention. From there, he built other properties. Caesars is more about the data to know its customers, Wynn is more about ‘let’s build this and people will come’. But sometimes data gives you the wrong strategy like Caesars in Macau. Caesars had the opportunity to have a licence here but their projections showed there’s no way Macau was going to work. Based on the data, Caesars lost an incredible opportunity. Data doesn’t tell you everything, especially regarding the future. No data ever told you that people wanted to buy iPods but Apple was visionary. Despite the data, you’ll always need some vision, especially for casinos. Caesars made a long-term agreement with Celine Dion and when the company was bought by Harrah’s the new board was shocked by the amount of money they were paying her. But they also noted how much their business improved on the nights she was performing. So, you always need some kind of vision. But it could not work also. A lot of people had a lot of vision in Atlantic City and now they’re having big losses. Data is not predicting that China one day will liberalise gambling. Any projections that you have now will be totally disrupted if new casinos open in China.
8 | Business Daily
January 1, 2015
Greater China C.bank to maintain steady credit growth China’s central bank said yesterday it will use various monetary tools to maintain adequate liquidity and reasonable growth in credit and social financing. In a statement summarising its fourth-quarter monetary policy committee meeting, the People’s Bank of China also said it would continue to implement prudent monetary policy, while pushing ahead with interest rate and yuan exchange rate reforms. It also noted that China’s economic growth remained within a reasonable range. Policymakers have rolled out a series of stimulus measures this year as economic growth shows signs of faltering.
Hong Kong shares close up 1.2 pct in 2014 Hong Kong shares finished up yesterday on a shortened half day of trade, gaining 1.2 percent in 2014. That marks the widest performance gap versus mainland indexes since 2007. The Hang Seng index rose 0.4 percent, to 23,605.04 points, while the China Enterprises Index gained 1.2 percent, to 11,984.69. The China Enterprises Index rose 11 percent for the year, buoyed by the rally in mainland markets. Total trading volume of companies included in the HSI index was 1.0 billion shares. Hong Kong markets reopen on Friday.
Senior officials sacked for deadly blast Chinese government has sacked two senior officials and will prosecute 18 others following an explosion in August at a car parts factory that killed 146, the country’s worst industrial accident this year, state media reported. A room filled with metal dust exploded in Jiangsu province at the Kunshan Zhongrong factory that polished wheel hubs for car makers, including General Motors Co. Kunshan city’s Communist Party boss Guan Aiguo and mayor Lu Jun have been removed from their posts, while deputy provincial governor Shi Heping has been given an administrative punishment, Xinhua said.
Train makers surge on merger Shares in China’s biggest train makers China CNR and CSR Corp jumped yesterday after the two firms confirmed that they will merge. CNR was set to open up 44 percent and CSR up 33 percent in early trading in Hong Kong. CNR and CSR, which are already the world’s largest train makers thanks to robust domestic sales, halted trading on October 27. The merger will create a US$26 billion company that Beijing hopes will be able to compete with the likes of Germany’s Siemens and Canada’s Bombardier for global rail deals.
Tibet’s 2014 GDP growth up 12 pct The economy of Tibet Autonomous Region, in southwest China, grew 12 percent in 2014, a regional economic work conference was told yesterday. Tibet’s gross domestic product (GDP) is expected to hit 92.5 billion yuan (US$15.11 billion) this year, maintaining its double-digit growth since 1994. “Tibet’s sustained, rapid and sound development continued in 2014,” said the Communist Party of China’s Tibet Autonomous Region secretary, Chen Quanguo. The per capita net income of farmers and herdsmen in the region hit 7,471 yuan in 2014, up 14 percent year on year.
Fiscal reform plans unveiled China urgently needs fiscal reforms to improve budget management and let the central government reassume more spending obligations
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hina yesterday published detailed plans to reform its fiscal reporting system, a step toward dealing with the massive debts accrued by local governments in recent years and reallocating budgetary control back to the central government. The Ministry of Finance has ordered governments at all levels to gradually begin producing fiscal reports based on an accrual accounting instead of the current cash management system. China urgently needs fiscal reforms to improve budget management and let the central government reassume more spending obligations, reducing the need for local governments to borrow heavily or to sell land to raise revenues for key social services. “The plans are promulgated to adopt the comprehensive fiscal report system based on accrual accounting to fully and accurately reflect the fiscal status of governments at all levels, their operations and sustainability of fiscal polices in the medium and long term,” the Ministry of Finance said in a document published in China’s central government website. Under an accrual accounting model, governments report their fiscal status on the basis of rights and responsibilities established on receivables, while cash management bases reports on fiscal income and
spending on actual payments made at the end of fiscal periods. Adoption of such a system will require governments at all levels to publish detailed balance sheets in a standardised form instead of simply throwing statistics up in an ad-hoc fashion, and will make budgeting processes much transparent and
accurate, analysts say. China plans to establish a commission to work out standards for the new system and to promulgate all related details in 2015, the ministry said on the website www.gov.cn. Trial compilation of government fiscal reports based on the new accounting standards will be carried
China plans to establish a commission to work out standards for the new system and to promulgate all related details in 2015
China’s Minister of Finance Lou Jiwei
U.S. expects China investment treaty talks to intensify A report repeated Washington’s cautious optimism over the policy shift, but it also urged Beijing to move more swiftly on implementation
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he United States plans to step up negotiations with China for a treaty to free up investment flows, the Obama administration said in a report released ahead of a key juncture in talks to boost business between the two countries. Washington and Beijing are working to seal a bilateral investment treaty, or BIT, to limit the sectors in which foreign investment is restricted, which currently range from telecommunications to soybean crushing. By early 2015, the two nations are due to exchange offers detailing which industries would remain off-limits. “The United States looks forward to intensified negotiations with China in order to reach agreement on a BIT,” the Office of the U.S. Trade Representative said in its annual report to Congress on China’s compliance with its commitments as a member of the World Trade Organization. Last year, China announced plans for economic reforms that would reduce government involvement in its massive economy and reduce restrictions on foreign investment. The USTR report repeated Washington’s cautious optimism over the policy shift, but it also urged Beijing to move more swiftly on implementation.
China and the United States already have a trade relationship worth more than US$600 billion a year and the Chinese market is an important source of revenue for some U.S. companies The report also detailed U.S. complaints over China’s economic policies, from lax protection of intellectual property rights to export subsidies. Washington wants China to allow its government offices to buy more U.S. goods and
services, and noted that China has submitted a revised offer to join a global agreement aimed at creating a level playing field for foreign companies competing for government contracts. The USTR’s wish list for China includes reducing market access barriers, more transparency, less discrimination, requiring stateowned enterprises to compete with other enterprises on a level playing field, and a stronger legal system. Reuters
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January 1, 2015
Greater China out in 2016 and 2017, and the overall system will be fully established by 2020. In the meantime, China will work on amending the Accounting Law and Budget Law and related regulations to make them compliant with the latest progress of the fiscal reporting reform, the announcement said. To support reforms to the budgeting system, China’s parliament approved changes to the Budget Law earlier this year, allowing local governments to issue bonds directly for the first time. Regulators have also experimented with allowing local governments to issue debt directly through a pilot programme under way, while banning them from using the problems-ridden local government financing vehicles (LGFVs) to raise funds. Reuters
Firms fined record US$26m for polluting river Premier Li Keqiang announced in March that the country was “declaring war” against pollution
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ix Chinese companies have been fined US$26 million for discharging tens of thousands of tonnes of waste chemicals into rivers, state media said, the biggest such penalty ever in China. The firms in Taizhou in the eastern province of Jiangsu were sued by a local environment protection organisation and were found to have dumped 25,000 tonnes of waste hydrochloric acid into two rivers, the Xinhua news agency reported. A court in the city ordered the companies to pay 160 million yuan (US$26 million) in fines earlier this year, the highest ever penalty in Chinese environmental public interest litigation, and a higher court upheld the punishment, it said. In August, 14 people involved in the case were sentenced by another court to prison terms of two to five years for causing environmental pollution, it added. The previous heaviest penalty for polluting the environment was a fine of 37.14 million yuan meted out to three defendants in neighbouring Shandong province, also for contaminating rivers, according to an earlier report by the Southern Weekly newspaper. Three decades of rapid and unfettered industrial expansion have taken a heavy toll on China’s environment, and Communist leaders have been concerned by an increasing number of angry protests over the issue.
Recent studies have shown that roughly two-thirds of China’s soil is estimated to be polluted, and that 60 percent of underground water is too contaminated to drink. Meanwhile residents of cities such as Beijing and Shanghai are regularly confronted with hazardous smog levels. Premier Li Keqiang announced in March that the country was “declaring war” against pollution, and a series of measures have been announced, but
questions remain over enforcement. China in April amended its environmental protection law -- the first such move in 25 years -- imposing tougher penalties and pledging that violators will be “named and shamed”. But holding polluters legally accountable has proved difficult in a country where local governments are often focused on driving growth. AFP
Factory activity closes year with contraction The PMI data was slightly higher than a preliminary “flash” reading of 49.5 but down from the final 50.0 in November
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ctivity in China’s factory sector shrank for the first time in seven months in December, a private survey showed yesterday, highlighting the urgency behind a series of surprise easing moves by Beijing in the past two months. The weak performance will add to the debate over whether Beijing needs to roll out more support measures to avert a sharper economic slowdown or fast-track market reforms to stimulate demand - or both. The report puts a final sluggish stamp on what has been a surprisingly grim fourth quarter for the world’s second-largest economy, which is expected to grow at its slowest pace this year in nearly a quarter of a century. “Domestic demand led the slowdown as new orders contracted for the first time since April 2014. Price contraction deepened,” said Qu Hongbin, chief economist for China at HSBC. “We believe that weaker economic activity and stronger disinflationary pressures warrant further monetary easing.” The final HSBC/Markit Purchasing Managers’ Index
(PMI) for December came in at 49.6, just below the 50.0 level that separates growth from contraction. The number was slightly higher than a preliminary “flash” reading of 49.5 but down from the final 50.0 in November. Total new orders contracted for the first time since April, albeit slightly, although new export orders increased.
Highlighting soft demand, output prices declined for the fifth consecutive month, with many companies surveyed saying they were cutting prices due to increased competition. This in turn prompted firms to reduce output for the second consecutive month, although the rate of contraction was tiny. Employment weakened for the 14th straight month,
although the pace of job shedding slowed. Hurt by a sagging property market, unsteady exports and cooling domestic demand and investment, China’s economic growth is expected to slow to a 24-year low of 7.4 percent this year, although surprisingly weak fourth-quarter data has some analysts wondering whether that might be too optimistic. Many market watchers
expect Beijing to lower its annual growth target to 7 percent next year, from 7.5 percent in 2014. Faltering factory output, rising deflationary pressures, sliding industrial profits and increasing non-performing loans highlight the policy challenges facing Beijing in 2015. Authorities need to not only encourage more lending by banks, but also find a way to stimulate genuine demand. The central bank unexpectedly cut interest rates in late November for the first time in more than two years in bid to keep down borrowing costs and support growth. It has also loosened some lending restrictions. Hope of more stimulus measures have fuelled a sizzling rally in China’s stock markets despite the weakening economy and deteriorating profit margins. China’s main share indexes look set to end the year as the world’s best performers, with gains of nearly 50 percent. China’s official factory PMI, which tends to focus more on larger, state-owned firms, will be released today. Reuters
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January 1, 2015
Greater China
Money rates fall sharply in 2014 on policy easing Traders expect more cuts in official rates Lu Jianxin and Pete Sweeney
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hinese money rates dropped sharply as 2014, a consequence of how Beijing in the second half abandoned a tight liquidity stance and then made back-door liquidity injections and surprised with an interest rate cut. For 2015, with data pointing to lingering weakness in growth, the market widely
expects the People’s Bank of China (PBOC) to continue easing. Traders expect more cuts in official rates and - the market fails to respond - a reduction in banks’ required reserve ratios (RRR), when would let them lend significantly more. “The policy trend is clearcut,” said a dealer at a major Chinese state-owned bank in
Shanghai who expects both rate and RRR trims. “The only questions are when and how many times.” For Alex Wolf, emerging markets economist at Standard Life Investments in Edinburgh, the November rate cut signalled policymakers “are shifting monetary policy more towards supporting growth. While policy this year
has been characterized by stop-and-go cycles, this move signals a more substantial shift towards prioritizing growth over reform.” The rate “sends the signal that we should expect general credit expansion through other policy instruments”, he said. This past year opened with China markets desperate for
While policy this year has been characterized by stop-and-go cycles, this move signals a more substantial shift towards prioritizing growth over reform Alex Wolf, emerging markets economist, Standard Life Investments
cash and intimidated by a central bank which engineered massive cash crunches in June and December 2013, part of a running campaign to curb the bulging shadow banking sector. But things changed dramatically in the second half, as economic indicators began to consistently surprise on the downside, and bank lending slid. In response, the PBOC changed tactics, dropping the short-term yet transparent cash management tools that prevailed in 2013 in favour of back-door injections for longer periods of time. And on a Friday night in November, it cut guidance lending rates. Prior to the November 21 announcement, the PBOC said it had pumped 769.5 billion yuan (US$124 billion) of three-month loans into banks via a new tool in JulySeptember and had offered 1 trillion yuan in loans to the China Development Bank. In the last 2014 move, the central bank adjusted the way it calculates loan-to-deposit ratios (LDR) at Chinese banks in such a way as to release even more liquidity into the system.
Fixed income implies more easing China’s interest rate swaps (IRS) staged a dramatic fall in October, as investors bet that weak economic data would force the PBOC to cut benchmark deposit rates. Following the November cut, IRS are pricing at a level that implies another rate cut, with the benchmark two-year IRS quoting at 2.53 percent on Thursday, compared with 2.75 percent for China’s oneyear deposit rate. Reuters
Fosun to buy US insurer to help finance acquisition spree Fosun’s Guo is seeking to broaden the conglomerate’s access to capital in order to fund a series of acquisitions he hopes will transform the group’s business model Lawrence White and Avik Das
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hinese conglomerate Fosun International Ltd is making its first foray into the U.S. insurance market and buying property and casualty insurer Meadowbrook, a deal that it said would help it secure funds for further acquisitions. The deal, the latest in a buying spree by Fosun that has seen it spend more than US$4 billion in two years, would also be the first full purchase of a U.S. insurer by a Chinese company and comes as the Beijing government encourages local firms to extend their reach beyond emerging markets to Western financial firms. Fosun, owned by billionaire businessman Guo Guangchang, said in an exchange filing it would buy Meadowbrook Insurance Group for about US$433 million. The cash deal of US$8.65 per share represents a 24 percent premium over Meadowbrook’s closing price on December 29, the companies added.
“The Group regards the development of insurance business as a major approach to access longterm high-quality capital,” Fosun said in the filing. A China-based Fosun spokeswoman declined to comment further. In the past two years, those deals have largely been funded with bank credit and leverage, but now Guo hopes to gain a more sustainable source of funds by buying into financial firms. In May, Fosun bought Portuguese insurer Fidelidade for US$1.29 billion, bolstering its assets and easing the pressure on its balance sheet. Guo, who Forbes estimates has a net worth of about US$4.3 billion, is also involved in a takeover bid for French holiday operator Club Mediterranee SA with Italian tycoon Andrea Bonom. The group has also expressed interest in bidding for Portugal’s Novo
KEY POINTS Fosun to buy Meadowbrook Insurance for US$433 mln Deal is first full purchase of U.S. insurer by Chinese firm Fosun eyeing banks, insurers to access long-term capital Group’s balance sheet stretched by US$4bln spree Banco SA, the new bank created in the wake of the failure of Banco Espirito Santo SA, Chinese media said. Fosun, which has a market capitalization of about US$9.10 billion, is into insurance, industrial operations,
investment and asset management. The Meadowbrook deal, which has been approved by both companies’ boards, is expected to close in the second-half of 2015. Meadowbrook will maintain its headquarters in Southfield, Michigan and will operate under the Meadowbrook brand name. Reuters
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January 1, 2015
Asia
Lower volume leads Singapore Exchange to reform SGX is looking to individual investors to boost Southeast Asia’s biggest stock market after trading volume this year tumbled the most since the 2008 global financial crisis
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he bourse will cut the standard lot size for equity transactions to 100 shares from 1,000 shares on January 19, a move that the Society of Remisiers says will make Singapore stocks more affordable for investors seeking to trade in smaller parcels. The average value of shares traded daily on the exchange tumbled 25 percent to S$1.05 billion (US$794 million) this year as investors deserted the market after an unexplained US$6.9 billion plunge in the value of three commodity companies over three days in October 2013. Trading volume fell 37 percent in 2008 at the height of the global financial crisis. “Retail investors had been buying the small caps because they are more affordable, but many have been burnt following the penny-stock crash and have stayed away from the market,” Ernest Lim, a trader with CIMB Securities in Singapore, said by email. “Cutting the board lot size will likely attract such investors back into the market.” The smaller transaction size was announced by regulators in August as part of efforts to restore market confidence following the penny-stock rout. It means an investor will only have to spend S$2,059 to make a trade in DBS Group Holdings Ltd. at yesterday’s closing price, excluding broker fees, versus S$20,590 under current rules. The bourse will also impose a minimum trading price of S$0.20 on mainboard shares as low-priced securities are more susceptible to excessive speculation and potential market manipulation, according to the August statement. Investors will
be required to lodge collateral worth 5 percent of trades and provide more information about short positions.
Trading disruptions While the change is encouraging, some investors could be put off by trading disruptions at SGX in recent months, according to Jason
Retail investors can now afford to buy the more expensive blue chip shares, which were previously out of reach for some retail investors. These are more attractive and less risky investments than penny stocks Jimmy Ho, president, Society of Remisiers
Hughes, head of CMC Markets in Singapore. The bourse opened its securities market 3 1/2 hours late on December 3 because of a software error, less than a month after halting trading for more than two hours on November 5 due to a power-supply failure, triggering a public apology from CEO Magnus Bocker and criticism from the city’s financial regulator. “The damage from these outages is going to be larger than any benefit from reducing the board lot sizes,” Hughes said. “Given that the outages happened in a short period of time, it certainly had an impact on SGX’s reputation.”
Share move “Cutting the board lot sizes should help encourage more retail investors to enter the market,” said Jimmy Ho, president of the Society of Remisiers, which represents stockbrokers who work entirely on commissions. The number of young professionals starting to invest in the stock market has been increasing, Lynn Gaspar, head of retail investors at SGX, said by phone on December 19. About 29 percent of the 71,000 individuals who opened new trading accounts with the Singapore bourse’s central depository in the past 12 months were people aged 25 years and under, compared with 19 percent three years ago, she said. The reduction of the minimum board lot “really opens up the market in a big way and allows the average Singaporean to be included,” Gaspar said. “We see more investors moving
into the blue chips, both existing and new ones.”
New investor One such investor is Michael Thong, a 20-year-old student who has just started his two-year national service with the military. He was accompanied on December 18 by his brother Christopher, a 27 year-old airforce pilot, to open his first stock trading account at Phillip Securities Pte’s branch in the eastern suburb of Marine Parade. “I have done well in the stock market,” said Christopher Thong, who said he started buying shares 10 years ago with S$3,000 in capital, which has grown to a six-figure sum. “I’m encouraging my brother to get started. He has a lot of time to read up on finance and investing in the army camp.” Nicholas Wong, who started working as a remisier a year ago with Phillip Securities, Singapore’s largest brokerage by number of clients, said he’s getting more interest from new investors ahead of the change. There were a total 1.66 million trading accounts with the central depository as of the end of November, compared with 1.3 million in 2008, according to SGX data. “So far, I’ve got a number of retail investors opening new trading accounts, ahead of the reduction in board lot size,” Wong said as he helped a new client fill out documents at the brokerage’s headquarters in the central business district. “This would benefit retail investors with smaller budgets.” Bloomberg News
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January 1, 2015
Asia Vietnam’s economy expands 5.98% Vietnam’s economy grew 5.98 percent in 2014, the highest for three years, despite a festering banking crisis and damaging anti-China riots, authorities said yesterday. The figure -- higher than last year’s increase of 5.42 percent and 5.25 percent in 2012 -- marks “a positive sign,” according to a statement on the website of the General Statistics Office. The communist nation is still struggling with a number of economic troubles including bad debts in the banking system, weak economic competitiveness and inefficient production.
Palm output may slump 20%
South Korea inflation eases Policymakers have said they expect the inflation rate to rise to around 2 percent late in 2015 Christine Kim
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outh Korea reported its lowest inflation in more than 15 years, which could reinforce expectations for an interest rate cut early in 2015 - though the central bank governor seems to feel there’s no hurry for one. December’s consumer price index rose 0.8 percent from a year earlier, Statistics Korea said yesterday.
The increase was the smallest since September 1999’s 0.8 percent annual rate and matched the median forecast for December in a Reuters poll. A key factor for low inflation was low energy prices. “Sluggish domestic consumption growth will continue to contribute in pulling down inflation next year,” said Ma Ju-ok, an economist at Kiwoom
Palm oil output in Malaysia will decline this month and next as severe flooding disrupts harvesting in the largest exporter after Indonesia, exacerbating a seasonal drop in production, according to RHB Investment Bank Bhd. Output may contract by as much as 20 percent in December from 1.75 million metric tons in November, according to Alvin Tai, an analyst at the bank who’s covered the plantation industry for 11 years. There’ll be significant reduction in harvesting, he said by phone in Kuala Lumpur.
Bangladesh tea prices end climb
Tea prices in Bangladesh fell at the weekly auction, snapping a seven-week run of gains, on subdued demand and lower supply of premier-quality leaf. Bangladeshi tea fetched an average 191.02 taka (US$2.40) per kg, compared with 192.96 taka at the previous sale, said an executive with National Brokers Ltd. About 2.23 million kg was offered at the auction centre in Chittagong, of which 24 percent went unsold. In the previous auction, nearly 2.3 million kg was offered, with nearly 17 percent remaining unsold.
Philippine gov’t confiscates fake medicines Philippine authorities have seized 660 kilograms of counterfeit medicines worth millions of pesos from Pakistan, a senior government official said. The shipment, totalling 17 pallets, arrived in the Philippines on board a Thai Airways flight from Karachi, Pakistan via Bangkok on December 19, said Bureau of Customs (BOC) Commissioner John Sevilla. The shipment will be turned-over to the Food and Drug Administration and the Intellectual Property Office for further investigation and estimated value, Sevilla said.
Securities in Seoul who anticipates one rate cut in 2015’s first quarter. Policymakers have said they expect the inflation rate to rise to around 2 percent late in 2015 as consumption accelerates as part of economic recovery. But some analysts say low inflation gives the Bank of Korea (BOK) more room to cut its benchmark rate to aid recovery. This year, the central bank reduced it to 2 percent following 25
KEY POINTS December inflation pace at lowest since Sept 1999 BOK gov: monetary policy should not be chained to inflation Some analysts say low inflation gives the Bank of Korea (pictured) more room to cut its benchmark rate to aid recovery
Analysts see another rate cut in Q1 2015
Widodo makes biggest change to Indonesia fuel subsidies This marks the second act in efforts by the President to fix the country’s energy subsidy system Fitri Wulandari, Eko Listiyorini and Sharon Chen
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ndonesia will cap the diesel subsidy and scrap aid for gasoline beginning today, the biggest changes to a decades-old system that has tied up budget funds and bloated energy imports. President Joko Widodo’s government will implement a fixed diesel subsidy of 1,000 rupiah (US$0.08) a litre effective January 1, Energy Minister Sudirman Said told reporters in Jakarta yesterday. The subsidy for gasoline will be scrapped, said Sofyan Djalil, coordinating minister for economic affairs. The government will pay gasoline distribution costs for areas outside of Java, Madura and Bali, Said explained. This marks the second act in efforts by Widodo, known as Jokowi, to fix the country’s energy subsidy
A lot of credit must go to Jokowi, he’s upping the game to the point of changing the game by capping the upside to subsidies Vishnu Varathan, Mizuho Bank
system, having raised fuel prices in November less than a month after he took office. While Indonesia is still behind India and Malaysia, which scrapped government spending for keeping diesel and gasoline prices low earlier this year as oil costs plunged, yesterday’s announcement moves Southeast Asia’s biggest economy closer to a similar dismantling. “A lot of credit must go to Jokowi, he’s upping the game to the point of changing the game by capping the upside to subsidies,” said Vishnu Varathan, a Singaporebased economist at Mizuho Bank Ltd. “This is what we were looking for. A market-based price mechanism would be very desirable and I think global oil price trends have allowed them to move in that direction a lot more smoothly and a lot sooner.”
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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January 1, 2015
Asia basis point trims in both August and October. At the end of 2012, the central bank set a target of keeping inflation during 2013-2015 at between 2.5 percent and 3.5 percent on average. In both 2013 and 2014, the rate averaged 1.3 percent, thanks in large part to falling raw-material prices.
Governor’s comment
India to halt tax breaks for carmakers India’s car sales are set to miss an earlier growth target of 5-10 percent for fiscal 2015 set by the Society of Indian Automobile Manufacturers Rajesh Kumar Singh and Aditi Shah
The BOK’s next policy meeting is January 15. In his New Year’s address yesterday, Governor Lee Juyeol made a comment that might indicate resistance to another cut based solely on low inflation. “It could be undesirable to manage monetary policy solely to achieve the inflation target at a time when inflation has been consistently low due to supply factors,” the governor said. Ronald Man, an economist at HSBC, said the likelihood of another BOK cut “is higher if the government also delivers reforms. This is similar to 2014, when the central bank lowered interest rates to coordinate policy with the government.” Annual core inflation, which strips out volatile agricultural and oil products’ prices, rose 1.6 percent in December, is rising at the same pace seen in November. On a monthly basis, the inflation index showed no change in December. The poll had forecast a 0.1 percent decline from November. A finance ministry official told Reuters that despite December’s low inflation, there is no concern that the economy will fall into deflation. Reuters
The changes for January can take effect tomorrow without parliamentary approval under the current budget, Minister Djalil said. The new system will need to be sent to the legislature for approval under the 2015 budget, due to be submitted in first week of January, he said. “We will bring this to the parliament and God willing, parliament will agree with the government” because it will save a lot of money, Djalil said. The price of diesel in January will be 7,250 rupiah a litre, compared with the current subsidized price of 7,500. The retail price for kerosene will be set at 2,500 rupiah a litre, the same as the current price, and gasoline will be 7,600 rupiah per litre next month, lower than the current subsidized rate of 8,500. Authorities will announce retail diesel and gasoline prices on a President of Indonesia Joko Widodo’s (pictured) fuel subsidy shake-up to free funds for development spending
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ndia will not extend tax breaks to automakers beyond December 31, a senior government official told Reuters, as the government looks to shore up its stretched finances before the end of the financial year despite the potential impact on car sales. The decision comes at a time when weak tax receipts in a sluggish economy are making it difficult for India to meet its ambitious fiscal deficit target of 4.1 percent of gross domestic product for the year to March 31, 2015. A tax break was first granted in February to revive sluggish car sales and later extended until the end of the year. Automakers had been hoping the concession, amounting to 3-6 percent of the price of a car before the imposition of all duties, to continue in the new year. “Duty concessions will lapse. We are not extending it,” the official, who has direct knowledge of the matter, told Reuters. He declined to be identified because the information had not yet been made public.
monthly basis and they will fluctuate in line with international prices, the government said.
‘Big deal’ “This is a big deal,” OverseaChinese Banking Corp. economist Wellian Wiranto wrote in a report. “Subsidies were supposed to eat up more than 13 percent of total expenditure in 2015 originally, but now whittled down to a mere 1 percent. The country can now look ahead to how best to improve living standards, rather than look over its shoulders all the time for oil price risk.” Jokowi’s fuel subsidy shakeup to free funds for development spending, along with a clean-up of the energy industry, is encouraging some investors. Indonesia’s bonds advanced
India’s car sales, which rose 3.8 percent in the eight months from April 1 against the same period last year, are set to miss an earlier growth target of 5-10 percent for fiscal 2015 set by the Society of Indian Automobile Manufacturers. “To the extent the excise duty goes up, car prices will go up,” said R.C. Bhargava, chairman of Maruti Suzuki, India’s biggest carmaker. “It will temporarily affect sales ... but I don’t think it will have any long-term impact,” he said,
adding that the company has yet to hear from the government on the matter. Rising input costs have already forced automakers including Indian units of General Motors, Nissan, Hyundai, BMW and Mahindra & Mahindra to announce price rises from next month. India will also end tax breaks on consumer durables, the government official said without elaborating further.
last week, with the 10-year yield falling by the most since October, on optimism the government would move forward with plans to curb fuel subsidies. The rupiah rose 0.1 percent today to 12,436 per dollar taking its gain over the past two weeks to 1.8 percent, according to prices from local banks.
“It probably makes more sense to have the fixed fuel subsidy because it’s more transparent, considering the uncertainties about oil price after its recent slide,” Gundy Cahyadi, an economist at DBS Group Holdings Ltd. in Singapore, said before the announcement. “It’s probably going to be easier for the government to eventually do away with fuel subsidies altogether once they move to the fixed subsidy.” Jokowi increased the price of gasoline and diesel by 2,000 rupiah per litre on November 18, prompting the central bank to raise its benchmark interest rate to guard against inflation. Some 276 trillion rupiah was earmarked for fuel subsidies in the 2015 budget prior to the price increase, equivalent to 13.5 percent of total spending.
More transparent Indonesia has been subsidizing fuel since the first oil price shock in the 1970s and kept prices at less than US$0.20 per litre until 2005, according to a World Bank report published in March. Dismantling the subsidy program is a political hot potato -- protests accompanied past price increases and riots spurred by soaring living costs helped oust dictator Suharto in 1998.
Reuters
Bloomberg News
14 | Business Daily
January 1, 2015
International Fed report warns on deflation The chance of U.S. inflation falling below 1 percent in 2015 is at a five-year high, and the risk of deflation is growing more likely, an analysis of market data released by the Minneapolis Federal Reserve Bank showed. Federal Reserve policymakers should take such changing market expectations into account when they make policy decisions, Minneapolis Fed President Narayana Kocherlakota and several of the bank’s top economists said in a paper published on Tuesday.
BP forex desk reviewed BP reviewed the activities of its inhouse foreign exchange traders, the British oil and gas group said, after the Financial Times reported that BP was investigating whether its traders were involved in rigging the currency market. The newspaper’s report cited a person familiar with the matter as saying BP’s internal review of its currency trading operations in London was “on-going.” The FT reported that the investigation was prompted after a Bloomberg report cited undated messages sent to BP’s employees by a network of foreign-exchange traders at four major banks about planned currency trades “sometimes hours before they happened.”
Hedge funds appetite grows Wealthy investors are poised to put at least US$90 billion into hedge funds next year, even after returns have largely been lacklustre this year, research firm eVestment said. Fresh demand from pension funds, endowments, and insurers looking for alternatives to traditional stock and bond holdings will fuel next year’s flows, the researchers wrote in a report. The appetite for hedge funds remains strong even after the US$300 billion California Public Employees’ Retirement System said in September it was pulling out of hedge funds because they are too costly and complicated.
U.S. consumer confidence rises U.S. consumer confidence increased in December, bolstered by a brightening jobs situation that left perceptions about economic conditions at a high last seen in February 2008, according to a private sector report released. The Conference Board, an industry group, said its index of consumer attitudes rose to 92.6 from an upwardly revised 91.0 the month before. Economists expected a reading of 93.0 for December, according to a Reuters poll. November was originally reported as 88.7.
Kenya’s economic growth slows Kenya’s economic growth slowed to 5.5 percent in the third quarter due to a sharp drop in tourism following attacks in the country, but benefited from robust construction and agriculture sectors, data showed. The economy remains on course to grow 5.3-5.5 percent this year as forecast by the government. Third-quarter growth eased from 5.8 percent in the second quarter and was down from a revised 6.2 percent in the third quarter of last year. The revision came after a rebasing of the economy last month that put gross domestic product about 25 percent higher from previous estimates.
U.S. easing of light crude export ban to pressure market Traders said that most U.S. ultra-light oil supplies would end up in Europe Henning Gloystein
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ormal U.S. government approval to ease a 40-yearold ban on exports of crude oil will squeeze Asian producers already scrambling to cut costs amid diminished revenues due to a crash in energy prices and weaker currencies. The Obama administration on Tuesday bowed to months of pressure over the ban on exports of most domestic crude, taking steps expected to unleash a wave of ultra-light shale oil known as condensate onto global markets. And while earlier shipments of North American condensate stalled after initial buying interest from Japan and South Korea, the addition of supplies as demand cools is likely to trigger more aggressive discounting by producers trying to defend market share in Asia, the world’s biggest net oil buyer. Traders said that most U.S. ultralight oil supplies would end up in Europe, as a rise in freight costs has made long-distance shipments to Asia uncompetitive. Still, they said, the addition of U.S. oil supplies would ripple through the markets. “If the U.S. can undercut West Africans in Europe, then that may force Nigeria and Angola to try and offer their supplies to Asia. And in between all that you have the Middle East suppliers offering steep discounts to everybody,” one oil trader said. This competition for the attention of buyers in Asia will put the region’s own producers under cost pressure as revenues tumble, likely triggering project cancellations. “Oil-exporting countries such as Malaysia may have diminished government revenues from falling energy prices and this could exacerbate their debt issues,” said Daniel Ang, investment analyst at Singaporebased Phillip Futures.
An oil pumpjack in Texas
KEY POINTS Most U.S. light crude expected to go to Europe, not Asia But ripple effect to create pressure for Asian discounts Asian producers already hit by falling prices, weak currencies Oil and LNG prices have dropped 50 pct in 2014 Analysts expect prices to remain low well into 2015
“If prices do continue to fall and persist for a long time ... oil rig developments could be re-evaluated if the cost for extraction continues to exceed the cost per barrel,” he said. Malaysia’s economy relies heavily on oil and natural gas sales, which have both seen prices halve this year, weakening the ringgit and making it hard for companies there to pay for imports valued in U.S. dollars. Most analysts say they expect oil prices to fall further in 2015 before a rebound happens, with some forecasts going as low as US$40 a barrel. “The imbalance between supply and demand will grow in first-half 2015,” U.S. PIRA Energy Group said this week in a report before the formal easing of the U.S. export ban. PIRA said in a previous note that although current oil prices would mean many North American operators would not be able to cover costs, they may not shut down production but instead cut expenses. Reuters
Venezuela enters recession Maduro’s government has not managed to get the inflationary spiral under control
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enezuela confirmed that it has entered recession, while annual inflation topped 63 percent, exacerbating the outlook for an economy already hit by crippling shortages and crashing oil prices. The South American oil giant’s economy shrank 2.3 percent in the third quarter, after contracting 4.8 percent in the first quarter and 4.9 percent in the second, the central bank said, the first time it has released the country’s growth figures this year. That is a new blow for leftist President Nicolas Maduro, whose approval rating is at a low of 24 percent going into legislative elections next year that could force the followers of late socialist firebrand Hugo Chavez from power for the first time since 1999.
Analysts had said for months that Venezuela was likely in recession. But the diagnosis had not been confirmed by official statistics, which the central bank, in violation of its own rules, has released only irregularly as the economy has worsened in recent months. The inflation rate, a figure that had not been released since August, came in at 4.7 percent for the month of November and 63.6 percent for the year -- among the highest in the world. Maduro’s government has introduced mandatory price cuts and rent controls in a bid to rein in the increases, but has not managed to get the inflationary spiral under control. Falling crude prices have taken a massive extra toll on a country that
gets 96 percent of its foreign currency from oil. According to Maduro, Venezuela’s oil export price has plunged from US$95 a barrel in September to US$48 yesterday. He accused the United States of waging an “oil war” to hurt major crude producers like Venezuela and Russia, both currently at odds with the Americans. A boom in shale oil in the United States has upended the world market, causing crude prices to hit a string of five-year lows in recent weeks. Producers’ cartel OPEC added to the downward momentum last month by ruling out a production cut -- a decision pushed through by wealthy Gulf states over Venezuela’s furious opposition. AFP
Business Daily | 15
January 1, 2015
Opinion Business
wires
Five reasons for slow growth
Leading reports from Asia’s best business newspapers Michael Spence
Nobel laureate in economics and Professor of Economics at New York University’s Stern School of Business
THE TIMES OF INDIA It so happened in 2014 that inflation hit a perfect-zero for wholesale prices and the retail one also more than halved to 4.4 per cent, still it was not good enough for the much-awaited cut in interest rates. As the ghost of the past — when inflation levels were at skyhigh levels — continued to haunt the macroeconomic scenario, the policymakers took a view that it was the ‘base effect’ of high price rise rates a year ago, that has resulted in so low inflation levels.
THE STRAITS TIMES Bank lending picked up pace in November thanks to mostly to an increase in loans businesses, after three straight months of flat performances. Overall lending in November stood at US$608.2 billion, a 0.6 per cent increase from the US$604.4 billion logged in October, preliminary data from the Monetary Authority of Singapore out today showed. Bank loans had plateaued around the US$604 billion mark for the three months from August to October. Loans to businesses rose 0.8 per cent in November compared with the previous month to US$372.8 billion.
VIETNAM NEWS The Prime Minister instructed relevant agencies and ministries yesterday to speed up the issuance of legal documents guiding the implementation of laws recently approved by the National Assembly. At the monthly cabinet meeting, PM Nguyen Tan Dung said that while these legal documents had improved in quality, many of them did not reflect reality and were not feasible. The Government is expected to issue at least 100 legal documents to guide the implementation of 18 new laws today. The PM instructed all relevant agencies to meet the deadline for the issuance of these legal documents.
PHILSTAR Dominant carrier Philippine Long Distance Telephone Co. (PLDT) and Ayala-controlled Globe Telecom Inc. see no let up in the intense competition in the capital intensive telecommunications industry. PLDT chairman Manuel V. Pangilinan expects intense competition to go beyond 2014 dragging the bottom line of telecom providers in the country. “We expect competition to remain keen in the fourth quarter of the year, and possibly beyond 2014 as well,” Pangilinan said. This prompted PLDT to slash its profit guidance for 2014 due also to the changing revenue-mix in the telecom industry.
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remarkable pattern has emerged since the 2008 global financial crisis: Governments, central banks, and international financial institutions have consistently had to revise their growth forecasts downward. With very few exceptions, this has been true of projections for the global economy and individual countries alike. It is a pattern that has caused real damage, because overoptimistic forecasts delay measures that are needed to boost growth, and thus impede full economic recovery. Forecasters need to come to terms with what has gone wrong; fortunately, as the post-crisis experience lengthens, some of the missing pieces are coming into clear focus. I have identified five. First, the capacity for fiscal intervention – at least among developed economies – has been underutilized. As former United States Deputy Secretary of the Treasury Frank Newman argued in a recent book, Freedom from National Debt, a country’s capacity for fiscal intervention is better assessed by examining its aggregate balance sheet than by the traditional method of comparing its debt (a liability) to its GDP (a flow). Reliance on the traditional method has resulted in missed opportunities, particularly given that productive public-sector investment can more than pay for itself. Investments in infrastructure, education, and technology help drive longterm growth. They increase competitiveness, facilitate innovation, and boost private-
sector returns, generating growth and employment. It does not take a lot of growth to offset even substantial investment – especially given current low borrowing costs. Research by the International Monetary Fund has indicated that these fiscal multipliers – the second factor overlooked by forecasters – vary with underlying economic conditions. In economies with excess capacity (including human capital) and a high degree of structural flexibility, the multipliers are greater than once thought. In the US, for instance, structural flexibility contributed to economic recovery and helped the country adapt to long-term technological changes and global market forces. In Europe, by contrast, structural change faces resistance. Fiscal stimulus in Europe may still be justified, but structural rigidity will lower its impact on longterm growth. Europe’s fiscal interventions would be easier to justify if they were accompanied by microeconomic reforms targeted at increasing flexibility. A third piece of the forecast puzzle is the disparity between the behaviour of financial markets and that of the real economy. Judged only by asset prices, one would have to conclude that growth is booming. Obviously, it is not. A major contributor to this divergence has been ultraloose monetary policy, which, by flooding financial markets with liquidity, was supposed to boost growth. But it remains unclear whether elevated asset prices are supporting aggregate
The same forces that are dramatically increasing the world economy’s productive potential are largely responsible for the adverse trends in income distribution
demand or mainly shifting the distribution of wealth. It is equally unclear what will happen to asset prices when monetary assistance is withdrawn. A fourth factor is the quality of government. In recent years, there has been no shortage of examples of governments abusing their powers to favour the ruling elite, their supporters, and a variety of special interests, with detrimental effects on regulation, public investment,
the delivery of services, and growth. It is critically important that public services, public investment, and public policy are well managed. Countries that attract and motivate skilled public managers outperform their peers. Finally, and most important, the magnitude and duration of the drop in aggregate demand has been greater than expected, partly because employment and median incomes have been lagging behind growth. This phenomenon preceded the crisis, and high levels of household debt have exacerbated its impact in the aftermath. The stagnation of incomes in the bottom 75% of the distribution presents an especially large challenge, because it depresses consumption, undermines social cohesion (and thus political stability and effectiveness), and decreases intergenerational mobility – especially where public education is poor. Sometimes change occurs at a pace that outstrips the capacity of individuals and systems to respond. This appears to be one of those times. Labour markets have been knocked out of equilibrium as new technology and shifting global supply chains have caused demand in the labour market to change faster than supply can adjust. This is not a permanent condition, but the transition will be long and complex. The same forces that are dramatically increasing the world economy’s productive potential are largely responsible for the adverse trends in income distribution. Digital technology and capital have eliminated middle-income jobs or moved them offshore, generating an excess supply of labour that has contributed to income stagnation precisely in that range. A more muscular response will require an awareness of the nature of the challenge and a willingness to meet it by investing heavily in key areas – particularly education, health care, and infrastructure. It must be recognized that this is a difficult moment and countries must mobilize their resources to help their people with the transition. That will mean redistributing income and ensuring access to essential basic services. If countering inequality and promoting intergenerational opportunity introduces some marginal inefficiencies and blunts some incentives, it is more than worth the price. Public provision of critical basic services like education or health care may never be as efficient as privatesector alternatives; but where efficiency entails exclusion and inequality of opportunity, public provision is not a mistake. One hopes that a growing awareness of the significance of these and other factors will have a positive effect on policy agendas in the coming year. Project Syndicate
16 | Business Daily
January 1, 2015
Closing Huawei 2014 smartphone sales rise by a third
President Xi calls for solidarity in reaching goals
Huawei Technology Co Ltd.’s smartphone sales rose by almost a third to US$11.8 billion in 2014, according to an internal memo seen by Reuters, showing the Chinese telecoms firm’s continued ascent in the global handset wars. The division shipped about 75 million smartphones in 2014, according to the year-end memo to employees sent by Richard Yu, the head of Huawei’s consumer business. Although that represented a more than 40 percent year-on-year increase, the figure lagged behind Huawei’s previously stated sales target of 80 million units.
Chinese President Xi Jinping called for strengthened solidarity to achieve goals and listening to the voice of the people during a new year gathering yesterday. Delivering the keynote speech at a new year celebration for the country’s top political advisory body Xi, also general secretary of the Communist Party of China Central Committee and chairman of the Central Military Commission, reviewed the CPC’s work in 2014. He discussed achievements in the fight against corruption, improving Party members’ work style and punishing formalism, bureaucracy, hedonism and extravagance.
Markets enjoy glorious 2014 The rise is good news for Beijing, as it has successfully convinced many Chinese investors to stop speculating on real estate and diversify into shares in Chinese companies Pete Sweeney
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hina stocks climbed to near 5-year highs on the last trading day of the year, as mainland markets ended the year up more than 50 percent - the best annual performance by a major global stock market in 2014 after years spent in the basement. “This year was a bit unexpected,” said Tian Weidong, chief director of research department at Kaiyuan Securities in Xi’an. “I think it took most people by surprise as they didn’t realise this sort of market was possible.” The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 2.2 percent, to 3,533.71, to end up 51.7 percent for the year. The Shanghai Composite Index gained 2.2 percent, to 3,234.68 points, up 52.9 percent year to date. The last time both indexes were at these levels was January 2010. The rise is good news for Beijing, as it has successfully convinced many Chinese
KEY POINTS Shanghai Composite Index closes up 52.9 pct in 2014 Best annual performance by major stock market this year Welcome respite from otherwise grim economic data investors to stop speculating on real estate and diversify into shares in Chinese companies. And it offers a welcome distraction from an otherwise grim economic performance. China looks set to post its slowest economic growth rate in decades, but the leadership can console themselves that its stock market, at least, was a world-beater, posting more than five times the annual rise of the Dow Jones Industrial Average.
But the SSEC index is still at roughly half the level compared with where it was prior to the global financial crisis, nor has it recovered to the peak hit during its last rally in 2009, a stimulus-fed frenzy that ended in a savage crash. Thus the current rally’s sustainability is also in question, given that it too has been strongly inspired by policy changes. The market was bolstered
by optimism over monetary easing earlier in the year and rallied strongly after interest rates were cut in late November. Mainland analysts are calling for another bull year in 2015, but that must be balanced against predictions that the Chinese economy is predicted to slow further, damaging earnings at some of the very blue chip banks that have led the rally.
Hong Kong shares close up 1.3 pct for year
Technical indicators also show the market is overbought, leaving it vulnerable to a correction in the near term. In fact, a Reuters poll of Chinese fund managers showed them reducing their equity allocation in the next three months.
China eases rules for overseas China home prices fall listed firms remittances faster in December
Former president Hu’s Chief of staff fired
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hina will no longer require local firms which go public abroad to get approval to remit foreign exchange raised in listings back home, seen as a small step toward relaxing capital flows. With immediate effect, overseas listed firms need only register their initial public offerings (IPO) or other fund-raising activities with the foreign exchange authorities and can then freely send back the funds they have raised, the State Administration of Foreign Exchange (SAFE) said in new rules published yesterday. Companies had to previously submit formal applications and win regulatory approval to send back the funds, as it was part of Beijing’s efforts to control cross-border flows as the yuan is not convertible under the capital account. The clampdown on speculative hot money flows into China had been a particularly uphill task because of many years of non-stop yuan appreciation since the Chinese currency’s landmark revaluation in 2005. But market conditions have changed this year, with the yuan weakening along with the dollar’s strength in global markets and lingering weakness of emerging market currencies.
alls in China’s housing prices accelerated in December, a survey showed yesterday as oversupply continued to weigh on the market and developers offered discounts to shore up their balance sheets towards the year-end. The average price of a new home in China’s 100 major cities was 10,542 yuan (US$1,700) per square metre this month, down 0.44 percent from November, the independent China Index Academy said in a statement. The decrease was faster than November’s 0.38 percent fall and marked the eighth straight month that prices have dropped, according to academy data. On a year-on-year basis, prices fell 2.69 percent in December, greater than the 1.57 percent recorded last month, the statement said. “Pressured by their annual sales targets and the need for liquidity generation, property companies continued to take the low-price strategy to promote sales, leading prices in the 100 cities to continue to fall,” said the statement. “Looking into 2015, the national market will still be under high inventory pressures... and downside pressures remain on house prices,” it added.
Reuters
AFP
Reuters
he former top aide to retired Chinese President Hu Jintao was dismissed from his ministerial position after being put under graft probe last week, paving the way for his eventual expulsion from the Communist Party. Sun Chunlan, 64, replaces Hu’s former chief of staff Ling Jihua, 58, as head of the Communist Party’s United Front Work Department, the official Xinhua News Agency said in a statement today. The department handles relations with non-party organizations and ethnic minorities, particularly in Tibet. Sun, a member of the ruling Politburo, was party secretary of the northern port city of Tianjin until yesterday, the only female provincial-level party chief in China. Ling’s dismissal so quickly after the announcement of the investigation into him indicates the party leadership under President Xi Jinping could accelerate the handling of his case. Ling’s brother-in-law, a senior public security official in north-eastern Heilongjiang province, was detained this week as part of widening probing into his case, Caixin reported yesterday. Ling was put under investigation for alleged serious disciplinary violations. Bloomberg News