Macau Business Daily, Dec 7, 2015

MOP 6.00 Closing editor: Luís Gonçalves Number 702 Wednesday January 7, 2015

Publisher: Paulo A. Azevedo

MICE insiders want visa policy overhaul

Year III

The gov’t wants to diversify the economy. And the MICE sector is one viable avenue. But the visa policy regarding business travellers has to move with the times, say industry insiders. A multiple entrance visa valid for a year is the answer, they say. Discretionary decisions by Immigration officials are turning away too many business visitors a year. And that’s not good for business PAGE

Digging in the Sands

2

Macau SME’s unaffected by gaming crisis The vice-president of Macau SME Enterprises Association says to Business Daily that local SMEs are more affected by the lack of human resources than by the slowdown of the gaming industry. High-end retail stores to suffer the most with declining casino revenues

PAGE 5

HSI - Movers January 6

Name

%Day

Tencent Holdings Ltd

5.73

China Unicom Hong Ko

0.57

Cathay Pacific Airwa

0.12

Want Want China Hol

0.10

China Mengniu Dairy

-0.16

China Life Insurance

-2.94

China Resources Land

-3.05

CNOOC Ltd

-3.20

Sands China Ltd

-3.49

Galaxy Entertainment

-4.32

Source: Bloomberg

I SSN 2226-8294

At your service Sometimes fact is stranger than fiction. Sands China’s alleged secret investigation of Macau Gov’t officials is the cornerstone of dismissed ex-Sands CEO Steve Jacobs’ case against the company for wrongful termination. Jacobs maintains he clashed with group chairman Sheldon Adelson over demands he collect information for the purpose of ‘leverage’.

A Nevada judge will rule if pertinent documents are admissible in the lawsuit against his former employer

www.macaubusinessdaily.com

PAGE

Extending the path.

Initiated in recent years, and especially noticeable in the last half of 2014. The services sector is driving the evolving Chinese economy

Page 8

7

TCM drivers win raise

Onward and upward

Local bus operator TCM will increase drivers’ salaries this month by 10 pct, despite conceding that its public transport operation is running at “serious loss”. Non-drivers and management may get an increment based on performance.

TCM is developing its chartered shuttle bus business to make ends meet

Lots going on at Macau International Airport. Traditionally, it has linked the MSAR to regional short-haul destinations.

Now it’s preparing to further diversify its passenger sources. And is already targeting flight connections to India and Indonesia

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PAGE 4

Gaming revenues to drop 8 pct in 2015 PAGE 6

Loans flat in November PAGE 5

Iao Kun’s turnover down 3 pct in 2014 PAGE 6

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2 | Business Daily

January 7, 2015

Macau

MICE sector requests multiple entrance business visa to Macau Visa-exempted visitors that come to Macau are too often denied entry by local immigration authorities. Representatives from the MICE industry say Macau should study the possibility of issuing one-year multiple entrance business visas in order to facilitate the booming MICE industry Joanne Kuai

joannekuai@macaubusinessdaily.com

A

n Italian businessman was conducting frequent business trips to Macau. In a short period of time he entered Macau for the third time but was told at Immigration that after his current entry permit had expired he would have to leave Macau and stay out of the territory for at least 50 days before re-entering.

A complaint was subsequently received by Macau Convention and Exhibition Association and the Association of Advertising Agents of Macau. The president of the Macau Convention and Exhibition Association, Alan Ho Hoi Meng, told Business Daily that Macau should study the possibility of issuing multiple entrance visas to business travellers that were valid for a year instead of simply granting a certain period of stay for visitors exempted from visas to better facilitate businessmen coming to Macau on legitimate business and investment trips. “Currently, Macau has no business visa for overseas buyers or investors”, said Mr. Ho. “Even though some are exempted from visas, if they come too often there is a possibility that they will be denied entry. It’s very inconvenient”.

It was not a singular case. Jean Jacques Verdun, a Frenchman living in Mainland China, is the founder of Delta Bridges Media Ltd. The company was established in Macau in 2008 and focuses on the Chinese and expat business community. He told Business Daily that even though he himself has never encountered any problem when entering Macau with a passport since he has his own business in Macau he has heard of complaints from other expats that were denied entry to Macau when travelling into the SAR too often or staying too long.

“I think it’s understandable that the

authorities deny their application”, said Mr Verdun. “Some of them stay in Macau for the maximum three months time and apply again right away. It’s as if they were living here. I have never had any problem entering Macau when visiting the city for a few days just for business trips”.

The Immigration Department of the Public Security Police Force told Business Daily that visitors that are exempted from a visa would be issued authorisation to stay upon arrival for generally 30 days to a maximum of 90 days. The hold is entitled to multiple entries within the limit of stay granted.

However, it is in their administrative regulations that if the authorities are in doubt about a visitor’s trip purpose or if they suspect the person is circumventing certain regulations and trying to stay in Macau and enter and exit the SAR frequently without

proper explanation the person would be denied entry or informed to stay out of Macau for a certain amount of time.

The Labour Affairs Bureau further explains that under the following circumstances a person that is not coming to Macau to travel doesn’t need to apply for any special permit: participating in convention and exhibition events that are approved by local authorities; cultural or academic exchange; sent by a foreign company that has an agreement with a Macau company and is in Macau for assisting or training programmes.

These individuals can stay in Macau for a total of 45 days within a span of six months. Other cases such as working or self-employed individuals have to go through the Macau Government Human Resources Office to apply for certain documents and then approach Immigration for

permission to stay.

Alan Ho indicated that Macau’s visa policies are relatively open as people from many countries in Europe, Southeast Asia and many other places are exempted from visas. But with Macau boosting its convention and exhibition sector as well as enhancing its role as a business and trade platform, more foreign business travellers and investors are coming to Macau on a regular basis, even regularly travelling between Mainland China, Hong Kong and Macau. “The restriction on entering Macau could hurt the business and investors’ impression of Macau,” said Mr. Ho. “We are meeting four legislators at the China Chamber of Commerce meeting on 14 January.

It’s our intention to bring this concern of ours to the legislators so that they can reflect it to the Public Security Police Force”.

Secretary Leong: Major task – “One centre, one platform”

S

ecretary for Economy and Finance Lionel Leong Vai Tac visited various associations in Macau on Monday, including the Neighbourhood Association and the Federal General Commercial Association of Macau Small and Medium Enterprises. He listened to their opinions on the policy address of Macau’s economic sector,

especially the business environment of local SMEs. Lionel Leong said Macau’s economy is slowing down and entering a phase of adjustment and enhancement and that there are some new economic phenomena with transformation of models stimulating development.

The Secretary reiterated that the

major task of the SAR Government is to promote the diversification of Macau’s economy and cement the establishment of ‘One centre, one platform’.

The SME representative voiced out during the meeting that the traditional industries, transport, hawkers in markets and the recycling industry

are facing operational difficulties, and urged the government to continue improving the business environment for local SMEs. They suggest the government increase support of the MICE industry and build brands of Macau’s own as well as enhance training for professionals in order to nurture talent for the needs of any sector.

Business Daily | 3

January 7, 2015

Macau

TCM awards drivers 10 pct pay rise, despite “serious loss” bus operation The transportation company says its operation of a public bus service is currently a loss-making venture, which is why it has to develop a private bus rental business. Regardless, TCM bus drivers can look forward to a salary hike this year Kam Leong

kamleong@macaubusinessdaily.com

L

ocal bus operator Sociedade de Transportes Colectivos de Macau SARL (TCM) announced yesterday an increase in the salary of its drivers of 10 per cent effective January this year.

However, the company revealed that the operation of its public transportation was running at a “serious loss”.

The company posted an announcement yesterday that the salary increase was given in gratitude to its hard-working drivers. Yet, other workers and the management of the company may not enjoy the same increase, as TCM announced that the wages of non-driver workers would only be increased based upon performance.

In addition, TCM indicated that its operation of a public bus service, which serves 13 of the city’s total routes, had been facing a loss due to its application for service fee

increase not yet being approved by the government.

‘As the government had not given approval to the company’s applications of increasing the service fee for the years 2012 and 2013, the service fee of the third section of the public bus service that the company runs still remains at the 2011 level, while the average salary of drivers has increased by more than 67 per cent accumulatively since 2011, [resulting in] the operation of [the company’s public bus service suffering a] serious loss’, the company wrote.

However, the Transport Bureau (DSAT) confirmed to Business Daily that the bus operators in the city had applied for a hike in service fees for three times since 2011, while the government had given the green light for such applications to TCM and Transportes Urbanos de Macau S.A.R.L. (Transmac) just

once in 2013.

Transmac deputy general manager Kuan Weng Kai also told Business Daily that the approvals from the government on service fee increase in 2013 should also respond to the bus operators’ requests in 2012.

According to the Official Gazette, the government had granted 166 million patacas (US$20.8 million) and 474 million patacas, respectively, in 2013 for TCM and Transmac for increasing their service fees between 2013 and 2018, from the original 811 million patacas and 2.33 billion patacas, respectively.

Business Daily tried to contact TCM representatives for further clarification on the service-fee increase issue that TCM mentioned in the announcement but were unable to reach them before the story went to press.

TCM claims that the recent operation of its private bus rental

service is to guarantee that the finances of the company are enough to keep its public bus operation stable, stressing that its private business had not affected the public bus service.

The bus operator is known to offer private buses for shuttling gaming corporation workers.

In 2011, a new bus service operation model came into force, bringing the city its third bus operator.

The new public bus service operation was divided into five sections by the government, of which the first and the fourth sections were granted to Transmac, which currently has 23 bus routes; the third section was granted to TCM, which now controls 17 routes, while the second and the fifth sections with 30 routes were given to Reolian Public Transport Co., Ltd., which was later taken over by Macau New Era Public Bus Company Ltd., an operator in which TCM holds the majority stake.

4 | Business Daily

January 7, 2015

Macau CAM: Targeting flight connections to India and Indonesia The city’s airport – primarily linking the MSAR to short-haul destinations in mainland China and Southeast Asia – is preparing to further diversify its passenger sources Stephanie Lai

sw.lai@macaubusinessdaily.com

M

acau’s airport operator said it would try to attract the launching of new flight routes connecting the territory to India and Indonesia this year to first operate on a charter basis, a goal that would see the very first mid-haul destinations linked to the city.

Eric Fong, director of the marketing department with local airport operator Macau International Airport Co Ltd (CAM), said that the company was already in contact with a few airline companies – mostly budget carriers – from India and Indonesia, which had expressed interest in launching routes linking here.

“We have Citilink [an Indonesiaheadquartered budget carrier] that shows interest in applying to run charter flights connecting here and to Bali, and another Indonesian carrier that is also interested in running a route that links up to here,” Mr. Fong said.

“India’s SpiceJet is another operator that we’ve always been in contact with, and this year we may come up with a more feasible flight plan; at the same time, we’re also working with Jet Airways [India-based legacy carrier] to see how we can co-operate in running flights”, he said..

Macau’s airport handled a total of 5.48 million passengers last year, representing a year-on-year rise of 9 per cent, CAM’s latest figures show. The main source of the city’s flight passengers are from mainland China, Taiwan and Southeast Asian countries – namely Malaysia, the Philippines, Singapore, Thailand, Indonesia and Vietnam.

“We have facilities and slot time available to accommodate more newcomers to launch flights here”, Fong told. “And Macau’s stable economy - as well as the rise of many new casinoresort projects - are also positive factors that can give airlines confidence in launching flights to here.”

The airport operator’s goal for this year is to have the interested carriers from India and Indonesia first launch flights that are connected to here on a charter basis prior to an eventual shift to scheduled flights – a move that represents the city’s link to its first mid-haul destinations, which are at least five hours distant from the MSAR. Indian budget carrier SpiceJet’s former chief executive Neil Mills first expressed an interest in flying the route three times a week in August 2012. The budget carrier was on the verge of opening a route between New Delhi and here having obtained approval from India’s civil aviation authority last year, although no flight plans henceforth materalised.

“SpiceJet has actually tested its route to China as it has established flights to Guangzhou, but then now they do not run this route on a daily basis anymore”, said Mr. Fong, “... but for India and Indonesia, we see that there is support for the flight routes from the visitor arrival figures”.

For the first eleven months of 2014, some 152,789 visitors arrived here from India – of which 4,938, or only 3.2 per cent, entered the territory via Macau Airport. The nearly 5,000 visitors from India that have come here via the local airport in the JanuaryNovember period represents a rise of 7.1 per cent, a much more moderate growth pace when compared to the 30.6 per cent seen in the same period in 2013 and 40.7 per cent in 2012.

Meanwhile, the city welcomed 168,311 visitors from Indonesia in the first eleven months of last year, of which only 10,862 entered via the local airport. The 10,862 visitors from Indonesia that flew to Macau represent a 15.7 per cent drop yearon-year, a much widened decline compared to the 0.6 per cent drop recorded in the same period in 2013.

Mainland’s Big Three airlines enjoy share boost

M

ainland China’s state-owned airlines – Air China, China Southern Airlines and China Eastern Airlines - have seen their shares rise for two days following Beijing’s cut in fuel surcharge that came into effect on Monday.

In the latest adjustment, fuel surcharges have been halved to 30 yuan (MOP38.5) per person per flight for domestic routes longer than 800 km; for the shorter domestic routes, the fuel surcharges have been adjusted from 30 yuan to 10 yuan.

The adjustment in fuel surcharges by the authorities follows as the cost of jet fuel dropped to the lowest level in years.

‘The cost of jet fuel dropped by 917 yuan per tonne to 4,795 yuan per tonne for January 2015’, the Civil Aviation Administration of China announced in a notice on its official

website. ‘This is the lowest since October 2009’.

Following the implementation of the adjusted fuel surcharge, the stocks of the Big Three state-owned carriers all saw rises on Monday and Tuesday.

Air China has led the rise in shares: the airline’s shares rose by 4.18 per cent to close at 8.98 yuan on the Shanghai Stock Exchange yesterday; China Southern Airlines’s shares rose 1.79 per cent to close at 5.69 yuan, while China Eastern Airlines’s shares rose 1.98 per cent to close at 5.66 yuan yesterday.

Air China and China Eastern have a presence here with flights connecting Macau to major mainland cities. The city’s flag carrier Air Macau is also a subsidiary of Air China. Of the 23 airlines currently operating at Macau’s airport, seven are mainlandheadquartered carriers.

SL.

Government of the Macao Special Administrative Region MACAU GOVERNMENT TOURIST OFFICE NOTICE The Macau Government Tourist Office hereby announces an invitation to tender for the “Macau Tourism Industry Development Master Plan Service Provision”, in accordance with the approval of the Secretary for Social Affairs and Culture dated 5th of December of 2014.

From the date of publication of the present notice, interested bidders may visit the Macau Government Tourist Office Reception Counter, located in Alameda Dr. Carlos d’ Assumpção, no. 335-341, “Hotline” Building, 12th floor, Macau, to view the Tender Program and Terms and Conditions of the Tender within the working hours, and pay MOP 500.00 (five hundred patacas) to obtain the copies.

For any further enquiries, please visit the Macau Government Tourist Office website (http://industry.macautourism. gov.mo) to submit your enquiries starting from the day of publication of the present notice until 10 days before the tender submission deadline. All replies will be posted on the same website.

The maximum price limit for the tender is MOP 20,000,000.00 (twenty million patacas).

Criteria for tender evaluation and their respective percentages are as follow: - Appreciation of the planning task (35%); - Planning methods and programme of work of the phases (20%); - Price (15%); - Experience (30%).

Bidders must submit the tender written in Chinese, Portuguese or English, within the working hours by 17:45 hours on 2nd of March of 2015, to the Macau Government Tourist Office Reception Counter, located in Alameda Dr. Carlos d’Assumpção, no. 335-341, “Hotline” Building, 12th floor in Macau and shall submit the provisional guarantee fee of MOP 400,000.00 (four hundred thousand patacas). The provisional guarantee fee shall be paid by: 1) cash deposit to the account of “Tourism Fund” at Banco Nacional Ultramarino of Macau; 2) bank guarantee; 3) cash, cashier’s order or mark good cheque deposit directly to the Macau Government Tourist Office, cashier’s order or mark good cheque should be made payable to “Tourism Fund”; 4) wire transfer directly to the account of Tourism Fund, at Banco Nacional Ultramarino of Macau (account no. 8003911119).

The tender opening session will be held in the Auditorium of the Macau Government Tourist Office, located in Alameda Dr. Carlos d’Assumpção, no. 335-341, “Hotline” Building, 14th floor in Macau, at 10:00 hours on 3rd of March of 2015.

In case of the services of the Macau Government Tourist Office are suspended owing to typhoon or force majeure, the scheduled closing date and time for submission of tender, as well as the date and time for opening the tender shall be extended to the next working day that follows immediately.

According to the article n.º 27 of Decree-Law n.º 63/85/M, of 6th July, the legal representatives of the Bidder should be present during the tender opening session for any complaints and/or to explain any doubts regarding their respective tender.

Macau Government Tourist Office, on 18th of December of 2014.

Director Maria Helena de Senna Fernandes

Business Daily | 5

January 7, 2015

Macau

SMEs unaffected by dropping gaming revenues, vice-head of SME association says The vice-president of Macau SME Enterprises Association said that local SMEs are affected by the lack of human resources more than by the slowdown of the gaming industry Kam Leong

kamleong@macaubusinessdaily.com

T

he slowdown of the gaming industry and its plunging gross gaming revenue (GGR) may only affect the highend retail stores in the city, while local SMEs are unlikely to be affected, says Daniel Iong, vice-president of the Macau Small and Medium Enterprises Association.

“The dropping gaming revenue is mainly due to the anti-graft polices [of the Chinese Government] as well as the visa and UnionPay restrictions which drove highrollers away from Macau.

Thus, this may affect highend retailers, such as jewellery stores. Nevertheless, the declining GGR is not creating problems for SMEs”, Mr. Iong told Business Daily in a phone interview yesterday.

The city’s GGR slumped in December 2014 by 30.4 per cent year-on-year, leading the city to have seen its very first annual negative growth in this revenue.

“Dropping GGR does not mean that society would ]likewise] sag… For example, the F&B industry [and] following the increase in the number of tourists I don’t see they are facing any problems”, he maintained.

In fact, the vice-president

says that human resources are a more difficult issue for SMEs, in addition to rent.

“There are two [casino] projects to be opened this year…how to distribute [evenly] the human resources at an unemployment [rate] of 1.7 per cent will be [an issue] as it will be more difficult for SMEs to hire workers”, Mr. Iong perceives, revealing that many SMEs in the city are increasing the salary of their workers by between 4 and 6 per cent in 2015.

“They [SMEs] are more likely being forced to raise salaries just to keep manpower”, he said, claiming that some SMEs may give pay rises of 10 per cent to workers performing well.

Asked by Business Daily whether the SMEs can actually afford such salary hikes, Mr. Iong said, “They have to do so even though they may not be able to afford the hike. Even if they cannot they would rather cut expenses on other items”.

Despite local SMEs likely being affected by manpower scarcity rather than the plummeting GGR, it was reported by Chineselanguage newspaper Macao Daily earlier the week that the city’s souvenir retailers did suffer in the second half of 2014 as GGR started to drop.

The newspaper quoted an unidentified retailer saying that the souvenir retail industry has seen the best performance during the first half of 2014 in the past five years. However, the source indicated that the performance of the industry had started turning south in the second half of 2014. In particular, the industry had seen a ‘rare decrease’ in its sales year-on-year during the last quarter of 2014, following the number of ‘high-spending’ customers falling off.

In addition, the Chinese newspaper reported another source from the MICE industry who perceived that the adjustment in the gaming industry had presented opportunities for MICE. The newspaper quoted the source saying that the gaming corporations may seek more co-operation with the MICE industry, as they are required by the government to develop more non-gaming elements.

Loans flat in November

M

oney supply in Macau dropped in November, the Monetary Authority of Macao said yesterday, adding that the loan-to-deposit ratio of the banking sector rose from a month earlier, after loans stayed flat whereas total deposits declined.

Currency in circulation grew 3.3 per cent whereas demand deposits dropped 7.7 per cent. Money supply (M1) decreased 5.9 per cent from one month earlier and quasimonetary liabilities dropped 0.4 per cent. The sum of these two items (M2), decreased 1.1 per cent to MOP484.3 billion. On an annual basis, M1 and M2 rose 3.9 per cent and 8.7 per cent, respectively.

Resident deposits decreased 1.2 per cent from October to MOP473.6 billion. Non-resident deposits dropped 2.5 per cent to MOP228.1 billion. Public sector deposits with the banking sector increased 2.0 per cent to MOP90.9 billion.

As a result, total deposits with the banking sector dropped 1.2 per cent from a month earlier to MOP792.5 billion.

Domestic loans to the private sector stayed flat in November, recording a marginal increase of 0.1 per cent from October to MOP331.6 billion. Of this, MOP93.0 billion was MOPdenominated and MOP212.3 billion was denominated in Hong Kong dollars, representing 28.0 per cent and 64.0 per cent of the total, respectively. The loan-todeposit ratio for the resident sector at end-November rose 0.4 percentage points from the previous month to 58.7 per cent. The ratio for both the resident and nonresident sectors also grew by 1.1 percentage points to 85.8 per cent.

6 | Business Daily

January 7, 2015

Macau

Deutsche Bank: Gaming industry will shrink 8 per cent in 2015 The latest report by the German bank expects gross gaming revenue to drop from MOP352 billion in 2014 to MOP322 billion in 2015. This year can be considered a turning point for the industry, they say, as supply is expected to outstrip demand João Santos Filipe

jsfilipe@macaubusinessdaily.com

G

ross gaming revenue is going to drop 8 per cent this year, which is expected to be a turning point in the Macau gaming industry, according to the latest report, released yesterday, by Deutsche Bank. In 2015, supply is expected to outstrip demand and drag down betting price.

‘Overall, we cut 2015 gross gaming revenue growth assumption from 0 per cent year-on-year to -8 per cent yearon-year. While the market already expects new casinos will drive visitor demand in 2015-17, we think they have ignored the negative impact of supply on pricing’, the report, written by research analyst Karen Tang, posits.

This will result in a gross gaming revenue drop from MOP352 billion in 2014 to MOP322 this year, which means that the industry will lose around MOP30 billion in the course of a year.

Galaxy Phase II and Studio City are slated to begin operating this

year, kicking off the second wave of casino openings in Cotai. However, the report questions the capacity of supply necessary to increase demand due to the ongoing antigraft campaign gathering momentum in Mainland China.

‘We are concerned that in the current anti-corruption environment, next year’s supply may not be able to stimulate enough demand to see a positive GGR growth’, it is explained.

However, the current environment fanned by the Central Government is not the only factor negatively affecting the industry. The Macau Government has tightened its regulations in relation to VIP gaming promoters, UnionPay devices and transit visas, which according to the German bank are also affecting the gaming sector.

The report’s prediction for the VIP segment during 2015 foresees a fall of 11 per cent, despite an increase in the number of VIP players.

‘We believe [that] while the number of VIP players may still grow the average bet size of these VIP players will be significantly lower than in the last five years’, it says.

According to the German bank this segment is reflecting a change in the nature of VIP gamblers, whose wealth tends to be more based on industries related to the Internet and consumer services than to coal mining Gross Gaming Revenue (MOP/billion) and property, as has been the case in

the last five years. These new riches are

Q1 Q2 Q3 Q4 Total expected to be spent less in gambling than by previous generations.

2014 102.199 90.887 82.855 75.579 352 The trend in the mass market is also expected to be negative. As the 2015* 75.082 77.478 83.069 86.264 322 second wave of casinos starts to open during the second quarter, the results Variation (%) -26.5 -14.8 0.3 14.1 -8 are expected to increase 2 per cent year-on-year. However, overall the

*Prediction by Deutsche Bank segment is expected to shrink 4 per

cent during the whole year due to a 10 per cent decline in the first half of the year.

One of the most important factors that explains the decline of the mass market is table yield. According to the report on the mass market, table yield peaked in the first quarter of last year with an average of MOP103,000 per day. However, by 4Q2014 it was reduced to MOP89,000 per day. For 2015, mass market table yield is expected to drop 16 per cent to an average of MOP75,000 per day.

Deutsche Bank also expects that gaming operators will have to deal during 2015 with rising costs on staff salaries and in the promotion of the premium mass market, which means providing non-gaming complementary offers, such as free rooms, free transport and discounts.

Iao Kun’s rolling chip turnover down 3 per cent The VIP promoter’s rolling chip turnover was down 3 per cent year-on-year in 2014. However, a drop of 48 per cent year-on-year in December served as a warning sign for the company looking ahead to 2015

I

ao Kun Group’s rolling chip turnover decreased 3 per cent year-on-year in 2014, from US$17.04 billion (MOP136 billion) in 2013 to US$16.60 billion (MOP133 billion), the company announced yesterday. Rolling chip turnover is a measure used by casinos to quantify the overall volume of VIP gaming room business.

Last year, the VIP gaming promoter achieved an average of US$1.38

billion (MOP11.0 billion) rolling chip turnover per month while in 2013 it posted an average of US$1.42 billion (MOP11.3 billion) per month.

While the decrease of 3 per cent year-on-year may look soft, for the month of December alone there was a drop of 48 per cent year-on-year, from US$1.36 billion (MOP10.9 billion) in December 2013 to US$0.71 billion (MOP5.7 billion) last month.

The drop of the rolling chip

turnover for the gaming promoter during the last month of 2014 is in line with the trend of Gross Gaming Revenue. In December GGR decreased 30.4 per cent year-on-year from US$4.2 billion (MOP33.5 billion) to US$2.9 billion (MOP 23.3 billion).

This was the largest drop ever of gaming gross revenue in the Special Administrative Region of Macau since the liberalisation of the industry.

Iao Kun Group Holding Company

Limited is a VIP gaming promoter involved in the promotion of five VIP rooms in Macau, which are placed in StarWorld Hotel and Casino, Galaxy Macau, Sands Cotai Central, City of Dreams and Le Royal Arc Casino.

The Company’s VIP rooms are primarily focused on high stakes baccarat, a game which accounts for approximately 88 per cent of total Macau casino winnings.

J.S.F.

Business Daily | 7

January 7, 2015

Macau

Secret probes into Macau officials

by Sands China may end up in court Sheldon Adelson (left) and Steven Jacobs

S

ands China’s secret investigation of Macau Government officials, allegedly ordered by its billionaire chairman Sheldon Adelson, won’t remain under wraps for much longer if a fired CEO gets his way.

Steven Jacobs, locked in a fouryear battle with Adelson, wants a Nevada judge to let him use a report on the probe to support his wrongful termination lawsuit. Jacobs contends he was ousted in 2010 as chief executive officer of the China unit of Las Vegas Sands Corp. because he clashed with Adelson over demands he collect information on Macau officials to exert “leverage” on them.

Jacobs claims the report by a Hong Kong risk consultant and two others that looked at alleged ties between Sands China associates and Chinese organised crime will expose the company to “serious political and legal problems”. Sands has argued that Jacobs “stole” the documents when he was fired, and that they’re legally off-limits for use in the lawsuit.

‘These reports contain extremely sensitive, highly confidential, nonpublic information, consisting of proprietary and highly confidential business and strategic information’, Sands China said in a November 26 court filing.

A hearing on the matter is set for today in state court in Las Vegas, where the case has been bogged down over whether it belongs in Nevada or should be heard in China.

Four Years Jacobs, who has repeatedly accused Sands of stalling, said in a December 24 court filing that the company’s legal manoeuvres “have tied this matter in knots for four years and brought this case to a standstill”.

The hearing comes at the same time that the Chinese Government is trying to cut off the flow of illegal money through the gambling enclave.

Chinese President Xi Jinping’s bid to catch “tigers and flies” in an anti-corruption drive has contributed to the first decline in annual casino revenue in Macau.

Sands China has increased scrutiny of Macau junket operators in a move that may lead to a shakeout among the middlemen who account for twothirds of the betting in the world’s largest casino hub, a person familiar with the matter said in April.

Organised Crime Any possible business ties with organised crime figures overseas may have detrimental consequences for Sands in the U.S. Casinos in Nevada and other U.S. states are closely monitored by gaming regulators to keep out organised crime, which through mob bosses such as Bugsy Siegel and Meyer Lansky had a big hand in running the gambling businesses in Las Vegas during the early boom years before large corporations entered the market and built family and conventionoriented resorts.

In 2010, MGM Mirage (MGM) sold its stake in an Atlantic City, New Jersey-based casino rather than sever its ties with the daughter of Macau gambling magnate Stanley Ho, who state regulators alleged had ties with criminal groups.

The Macau officials, probed by Hong Kong consultant Steve Vickers of International Risk Ltd., aren’t identified in public court records.

Wrongful Termination Adelson has said the investigation of the officials was commissioned

by Jacobs, not by the company, and that he didn’t learn about it until after Jacobs had been fired, according to a March 2013 court filing in the wrongful termination case.

“I never asked or authorised Jacobs to conduct a private investigation of or ‘create a dossier’ on Macanese officials”, Adelson said in his court declaration. “We believe unequivocally that Jacobs initiated the investigation on his own for his own purposes”.

Jacobs contends Sands is engaged in “a game of doublespeak” because the company first disavowed any

involvement in the reports and now argues that they should remain confidential or be barred as evidence.

Jacobs returned at least some of the original documents to Sands and kept copies for himself, according to court records.

A second report Sands wants to keep out of court is a background investigation of Cheung Chi Tai, an alleged member of a Hong Kong organised crime group known as a triad who has been involved in operating VIP rooms in Macau casinos.

VIP Clubs According to Hong Kong court records, Cheung was one of the owners of Neptune Group Ltd., a listed company that invested in junket operators. According to Neptune’s 2014 annual report, it operated VIP clubs on Sands China properties.

Cheung is also named in a 2011 Hong Kong appellate court ruling as a triad boss who allegedly issued an order that the arms and legs of a barber-turned-junket-agent be broken, and on second thoughts that the man should be killed for taking a gambler to Macau who had won a lot of money. The plot wasn’t carried out because one of the conspirators told police, according to the ruling.

The Wall Street Journal reported last month that Hong Kong police ordered Cheung’s assets frozen as part of a money-laundering investigation.

An unidentified executive with Neptune Guangdong Group, an associated company of Neptune Group, said Cheung isn’t among the company’s current investors, according to the newspaper.

Representatives of Neptune Group and Neptune Guangdong didn’t respond to e-mails seeking comment on their affiliation with Cheung. Efforts to reach Cheung were unsuccessful.

There’s also a reference to Cheung in a criminal case the U.S. brought against a group of Asian high rollers who were accused last year of running an illegal World Cup betting operation out of Caesars Palace in Las Vegas.

One of the men arrested had a scanned picture of Cheung’s passport on his laptop that identified him as ‘Boss’.

Senate Committee A U.S. Senate investigative committee has identified Cheung as one of the nine leaders of the Wo Hop To Triad, the Justice Department said in a court filing.

Jacobs, in a revised version of his lawsuit filed December 22, claims one of the issues he and Adelson clashed over was whether the board of directors should be informed about findings related to media reports that the company was conducting business with Chinese organised crime syndicates.

The third document Sands seeks to keep sealed is a background check on Heung Wah Kong, also known as Charles Heung, a Hong Kong movie producer.

Vickers, former commander of the Royal Hong Kong Police’s Criminal Investigation Bureau, spoke at an April symposium at the University of California at Berkeley about the role of organised crime in moving money from mainland China, where gambling is illegal, to Macau, into which visitors are restricted from bringing large amounts of cash with them.

“The scale of this money is beyond all belief”, Vickers said in a panel discussion. He said that the actual amount of money being wagered in Macau was as much as six times the official figure he estimated as US$50 billion a year because of what he called side betting in the casinos’ VIP rooms.

With side betting, gamblers in a VIP room agree ahead of time that, for example, a US$1,000 chip is a US$10,000 chip or a $100,000 chip, Vickers said. The off-thebooks amount that is bet doesn’t go to the casinos but into the pockets of organised crime, according to Vickers.

“The scale of it has shocked everybody”, Vickers said. “This is where politics, business and organised crime - the rubber - meets the road in Macau”.

Bloomberg

8 | Business Daily

January 7, 2015

Greater China

Services PMI peak at 3-month high The labour market was also buoyant, with the employment sub-index hitting an 18-month high as companies expanded Xiaoyi Shao and Kevin Yao

C

hina’s services sector grew at its fastest pace in three months in December as new orders remained strong, a private survey showed, an encouraging sign of strength even as manufacturing activity slows and the property market softens.

The robustness in the services sector contrasted sharply with surveys last week which showed Chinese factories were struggling at the end of 2014, suggesting a further loss in economic momentum.

Those findings reinforced expectations that more stimulus measures are on the cards, either in the form of more liquidity injections by the central bank, interest rate cuts or reductions in the amount of reserves banks must hold to encourage them to lend.

“Given the traditional industrial sector is still under pressure, more policy loosening is necessary,” said Zhou Hao, ANZ economist in Shanghai.

“Recent moves by the central bank showed they

actually kept a relatively loosening policy stance to lift growth, even though they seem to not want to send a strong easing signal.”

The HSBC/Markit Services Purchasing Managers’ Index(PMI) picked up to 53.4 last month from November’s 53.0, well above the 50-point level that separates growth from contraction in activity on a monthly basis.

A sub-index measuring new business cooled slightly to 53.9 in December from a 2-1/2 years high of 54.2 in November, but remained well in expansion territory.

The labour market was also buoyant, with the employment sub-index hitting an 18-month high as companies expanded.

Chinese leaders suggested last year they could tolerate somewhat slower economic growth as long as labour markets remained healthy.

But services firms were not so optimistic on the outlook.

A sub-index for business expectations for the year ahead dipped to the lowest level since August 2014, with many firms saying increasing

HSBC services PMI hits 3-month high in December

competition was dampening their pricing power.

“The services sector continued to hold up well amidst the manufacturing downturn, providing some counter-weight to the downward pressures on the economy,” said Qu Hongbin, chief China economist at HSBC. “We continue to believe that there is insufficient demand in the overall economy and more (policy) easing measures are

warranted in the coming months.”

Flagging growth A similar official survey released last week showed similar strength, with the services PMI rising to 54.1 in December from November’s 53.9. That survey focuses more on larger, state-owned firms.

Hurt by a sagging housing market as well as slowing d o m es t i c d e m a n d a n d investment, China’s economy

is expected to grow at its slowest pace in 24 years in 2014, with annual growth seen at 7.4 percent.

With weakness in property and fixed investment expected to persist for much of this year, and bad loans likely to rise, some economists have urged Beijing to set a 2015 growth target of 7 percent for 2015, compared with 7.5 percent for 2014.

After saying for months that China doesn’t need any big economic stimulus, the central bank unexpectedly cut interest rates in November for the first time in more than two years to support growth.

It has also loosened some lending restrictions to persuade banks to make more loans and injected funds into the banking system in an attempt to bring down high funding costs.

Those moves may have bought the central bank some time to see if conditions improve, though many economists still expect more rate cuts as well as reductions in banks’ required reserve ratios (RRR) this year.

Reuters

Government to accelerate projects t

The approvals contrast with past moves to boost growth via infrastructure in which the g

C

hina is accelerating 300 infrastructure projects valued at 7 trillion yuan (US$1.1 trillion) this year as policy makers seek to shore up growth that’s in danger of slipping below 7 percent.

Premier Li Keqiang’s government approved the projects as part of a broader 400-venture, 10 trillion yuan plan to run from late 2014 through 2016, said people familiar with the matter who asked not to be identified

as the decision wasn’t public. The National Development and Reform Commission, which will oversee the projects, didn’t respond to a faxed request for comment.

The move illustrates concern

among officials that China’s planned shift to a domestic-consumption driven economy has yet to produce enough growth momentum. The yuan rose, halting a two-day decline, and Australia’s dollar -- a proxy for

Premier Li Keqiang’s governm approved the projects as part broader 400-venture, 10 trillion yuan

Business Daily | 9

January 7, 2015

Greater China U.S. solar tariff review could halve Chinese cells duties

China approves 20 IPOs

The U.S. International Trade Commission must rule on this last step before the tariffs go into effect. A decision is due next month Ehren Goossens

U

.S. tariffs on Chinese solar cells may be halved after a Department of Commerce review of duties, boosting margins of manufacturers and installers.

The review of 2012 import tariffs recommended that the countervailing and anti-dumping duties levied on most Chinese solar manufacturers be reduced from a combined 31 percent to around 18 percent, the department’s International Trade Administration said in its preliminary results released January 2.

Manufacturers of solar panels, including JinkoSolar Holdings Co. and Canadian Solar Inc., and customers, such as installers SolarCity Inc. and Vivint Solar Inc., are likely to see “a substantial potential improvement to U.S. margins,” Philip Shen, analyst at Roth Capital Partners LLC in Newport Beach, California said today in a research note.

The U.S. and China are caught in a dispute over role of government in aiding renewable energy companies that originated with a case brought

by SolarWorld AG, a German solar manufacturer with a factory

in Oregon. SolarWorld asked the Commerce Department in 2012 to apply tariffs to solar cells imported from China.

After the tariffs kicked in, imports of panels with cells made in Taiwan boomed, and SolarWorld said a year ago that Chinese makers had shifted production to skirt the duties.

Biggest impact The final determination is not expected until early May or

The Obama administration will set duties on solar products from China and Taiwan that may exceed more than 200 percent combined

June, said Shayle Kann, analyst at GTM Research in Boston by e-mail. The biggest impact will be on new imports, with shipment cash deposit rates likely drop to about 15 percent, Kann said.

Chinese solar companies are required to set aside a cash deposit equal to the percentage of duties owed on products being imported to the U.S. that will be refunded if the final determination rate is lower.

A World Trade Organization body said last month U.S. duties on panels made in China violated trade rules, reversing an earlier finding, in response to China’s appeal of a WTO finding earlier this year.

The Obama administration said December 17 that it will set duties on solar products from China and Taiwan that may exceed more than 200 percent combined.

The Commerce Department also completed a plan to include in the tariffs any solar panels assembled in China, regardless of the origin of the cells.

Bloomberg News

to spur GDP

government gave the green-light to projects individually

ment of a plan

China due to its shipments of iron ore and other commodities used in construction -- climbed after the news.

“It’s part of China’s efforts to stabilize growth, and the news will help to boost market confidence,” said Julia Wang, a Hong Kong-based economist with HSBC Holdings Plc. “Infrastructure investment will continue to be a major driver for China’s economic growth.”

The approvals contrast with past moves to boost growth via infrastructure in which the government gave the green-light to projects individually. They are part of efforts to respond to weak output, according to the people.

Project funding The projects will be funded by the central and local governments, state-owned firms, loans and the private sector, said the people. The investment will be in seven industries including oil and gas pipelines, health, clean energy, transportation and mining, according to the people.

They said the NDRC is also studying projects in other industries in case the government needs to provide more support for growth.

The NDRC’s spokesman, Li Pumin, said last month China would encourage investment in those areas.

The Economic Observer newspaper reported December 26 on its website that an official from the NDRC’s

year and announced an interest-rate cut on Nov. 21.

Not 2008

Infrastructure investment will continue to be a major driver for China’s economic growth Julia Wang, economist, HSBC Holdings, Hong Kong

Zhejiang provincial bureau said the government had approved more than 420 infrastructure projects needing investment of more than 10 trillion yuan.

Rail investments may exceed 1.1 trillion yuan this year as investments in the previous four years lagged behind the five- year plan for 20112015, Han Siyi, an analyst at Shenyin & Wanguo Securities, said at a conference in Shanghai yesterday.

China has sought ways to stimulate growth without resorting to fullblown stimulus as it seeks to keep a lid on total debt that is now more than 200 percent of gross domestic product. The central bank added liquidity into the banking system last

“It’s not 2008 again,” Zhao Xijun, a finance professor with Renmin University of China in Beijing, said in reference to a 4 trillion yuan stimulus China unleashed at that time. “When China launched the big stimulus package in 2008 to deal with the global financial crisis, China wanted nothing but faster growth; now China is focusing more on quality, efficiency and sustainability.”

China’s total fixed-asset investment in the first 11 months of the year was 45.1 trillion yuan. Infrastructure spending totalled 9.8 trillion yuan in transportation; environment and water management; and the supply of heat, gas and water, according to National Bureau of Statistics data compiled by Bloomberg.

Deutsche Bank AG analysts on Monday cut their expansion projections for this quarter to 6.8 percent, reinforcing their call for the central bank to step up monetary stimulus.

“We expect growth to surprise to the downside in Q1 and policies to surprise on the loose side in 2015,” Deutsche Bank economists led by Hong Kongbased Zhang Zhiwei wrote. China will be hit by a “double whammy” of slowing property investment and a sharp decline in land sales by local governments, the analysts wrote.

Bloomberg News

China’s stock market watchdog has approved the initial public offerings of 20 firms, around double the number it approved on average last year. The move is seen aimed at tempering the country’s red-hot stock market, which gained more than 40 percent in the fourth quarter last year. “Apparently, regulators are increasing new share supplies amid the recent market bull run,” the semi-official China Business News said in a report yesterday. “The market expects the number of IPOs hitting the market will continue to increase.”

GM says 2014 China sales up General Motors Co and its Chinese joint ventures sold a record 3,539,970 vehicles in China in 2014, up 12 percent from the previous year, the U.S. automaker said yesterday. For the month of December, GM sold 357,375 vehicles, a rise of 31.9 percent from a year earlier. The monthly gain followed a 5.3 percent year-on-year rise in November and a 3.2 percent rise in October. GM has said it plans to invest US$12 billion in China between 2014 and 2017 and build five more plants to ramp up its manufacturing capacity.

Kuala Lumpur clearing business authorized Bank of China has been authorized to conduct RMB clearing business in Kuala Lumpur, Malaysia, China’s central bank said. The authorization came after a mutual cooperation memorandum was reached between the two nations’ central banks, said the People’s Bank of China, China’s central bank. RMB clearing business in overseas markets has become a major tool in promoting globalization of the RMB, the Chinese currency. So far, such business has been established in China’s Hong Kong and Macao, as well as foreign cities including Singapore, London, Frankfurt, Seoul, Paris, Luxembourg, Doha, Toronto and Sydney.

PwC sees 60 pct more IPOs in 2015 China is likely to see 60 percent more initial public offerings in 2015 as the securities regulator improves capital market operations, said international auditor PwC. Lin Yizhong, managing partner of PwC (PricewaterhouseCoopers) Chinese mainland and Hong Kong, said around 200 Chinese companies are forecast to raise 130 billion yuan (US$21 billion) on the Shanghai and Shenzhen bourses this year. In 2014, the two handled 125 IPOs with a combined value of 78.6 billion yuan. The Shanghai stock exchange is likely to deal with 60 IPOs with a value of 48 billion yuan.

China gives redundant officials the boot More than 15,800 civil servants were transferred, given early retirement or were simply fired from overstaffed departments last year, the Communist Party of China Organization Department revealed.

About 40,000 officials in China at or above deputy county head level were deemed surplus to requirements last year, and the remaining 25,000 are still waiting to be “handled”, according to the organization department statement. The department began dealing with the overstaffing problem last January, with many superfluous officials simply dismissed. Some were asked to retire, others transferred to vacant posts in other departments.

10 | Business Daily

January 7, 2015

Greater China

China’s upbeat housing sentiment rolls into 2015 Sixty percent of China’s major cities recorded a rise in sales volume in December Clare Jim

C

hina’s stronger-thanseasonal property sales in December point to a recovery in market sentiment thanks to looser housing and monetary policy, with the upbeat momentum expected to swing into 2015, analysts said.

But with oversupply still looming large, any recovery especially in home prices - is likely to be slow, tempering hopes that housing could provide a badly needed boost to the Chinese economy as it struggles to overcome the slowest growth since the global financial crisis.

“December sales figures were a positive surprise because they were better than the September and October figures which were traditionally the golden and silver month,” Macquarie analyst David Ng said.

“They’re stimulated by loosening policies.”

Ng said however that sales would see slow, healthy growth rather than a big rebound.

China’s top listed residential developer China Vanke reported a 129 percent surge in sales in the last month of 2014 from a year earlier, while sales over the same period for mid-sized Country Garden leapt 167 percent.

Sixty percent of China’s major cities recorded a rise in sales volume in December, according to housing data researcher CRIC, with firsttier cities rising the most, up more than 15 percent from November and over 45

percent from a year earlier.

China has put in place a series of stimulus measures including interest rate cuts to spur home buying demand and market liquidity since the third quarter.

Betting on even looser policy to come, investors have been snapping up property shares, pushing the property sub-index in Shanghai to its highest since February 2008.

But housing supply remains excessive despite the pick-up in sales, with only two major

cities out of 23 seeing a decline in inventory at the end of December, CRIC data showed.

“Inventory is high. We can’t raise prices until after the market digests them, “ said a chief executive officer of a developer based in southern Guangdong province. “The sales went up but prices didn’t; it won’t be easy for us to raise prices.”

China’s new home prices fell for the 11th consecutive month in November by an annual 3.7 percent, the biggest drop since 2011.

Property sales hit 132.2 million square metres, the highest level in 11 months, though still down 11 percent from a year earlier.

The Chinese Academy of Social Sciences (CASS) said in a report last month it expects home prices in first and second-tier cities to continue to fall in 2015 on high inventory, while prices in third and fourth-tier cities would stabilise.

In terms of full-year results,

a breakdown of sales figures also underscores the increasing polarisation between large and small players, leading to quicker consolidation. CASS forecasts that half of the developers will “vanish”.

China has an estimated 50,000 developers although only 80 account for close to 40 percent of market share.

The largest companies tend to grow faster. Seven developers with over 100 billion yuan in sales, including Dalian Wanda Commercial Properties and Evergrande Real Estate, on average sold 24 percent more in 2014, while those with 30-100 billion sales grew at 14.6 percent, according to housing researcher China Index Academy.

Unlisted state-backed Greenland Group said its 2014 contracted sales jumped 50 percent from a year earlier to 240.8 billion yuan, topping China Vanke for the first time.

Reuters

Business Daily | 11

January 7, 2015

Asia

Philippine inflation slows Full-year average inflation was 4.1 percent Karen Lema

The central bank of Philippines

P

hilippine annual inflation eased for a fourth straight month in December on sliding oil and power prices, giving the central bank more flexibility to keep interest rates steady for a longer period or even lower them to support growth.

The Southeast Asian economy slowed to its weakest in more than five years in the third quarter and full-year growth is set to miss the government’s target of 6.5-7.5 percent.

Consumer prices in December rose 2.7 percent from a year earlier, the lowest since a 2.1 percent rise in August 2013 and below the 3.0 percent forecast by economists in a Reuters poll.

Inflation has started to slow after hitting a peak in July and August due to cheaper food and fuel prices.

That has allowed the central bank to leave its key policy rate on hold at 4.0 percent for a second meeting last month after five consecutive tightening moves to keep prices in check.

“Given the manageable inflation outlook over the policy horizon, there may be greater scope in the months ahead for policymakers to focus on facilitating and maintaining supportive conditions for domestic demand,” Amando Tetangco said at a breakfast forum after the data.

Full-year average inflation was 4.1 percent, slightly above the midpoint of the central bank’s 3-5 percent target for 2014.

Annual core inflation, which strips out volatile items, slowed to 2.3 percent in December, against a 2.6 percent forecast in a Reuters poll.

The central bank now expects average inflation in 2015 of 3.0 percent, compared with a previous 3.7 percent forecast. It had said inflation will further ease to 2.6 percent in 2016 against a previous estimate of 2.8 percent.

Low inflation bolsters expectations the Bangko Sentral ng Pilipinas (BSP) will stand pat on rates in the first half of the year.

But at least one analyst said there was a small chance the central bank’s next move would be an interest rate cut to support economic growth amid a benign inflation environment.

“The global decline in crude prices is stimulus in itself, definitely the price impact both directly and indirectly should give more elbow room to the BSP,” said Patrick Ella, analyst at Security Bank in the Philippines. The central bank next meets on February 12.

Elsewhere in Asia, Thailand and South Korea reported easing inflation, giving their central banks leeway to cut interest rates. Indonesia, however, saw its inflation accelerate to its fastest in almost six years in December.

Reuters

Toyota to give away fuel-cell patents to boost industry The announcement came after Toyota last month rolled out the world’s first mass market fuel-cell car

T

oyota will give away thousands of patents for its fuel-cell cars, it said yesterday, in an effort to encourage other automakers into the new industry.

The world’s largest vehicle maker said it will allow royalty-free use of about 5,680 patent licences, including 1,970 related to fuel-cell stacks and 3,350 concerning fuel-cell system control technology.

The firm also said the free patent licences will include about 290 items related to high-pressure hydrogen tanks.

The cost-free licences will be allowed “through the initial market introduction period” of fuel cell vehicles (FCV), which the company expects to last until about 2020.

Toyota will also open about 70 patent licences related to hydrogen stations -- the equivalent of gas stands for internal combustion vehicles, and a vital link in the chain for drivers -- indefinitely for

Toyota is going one step further as it aims to promote the widespread use of fuel cell vehicles and actively contribute to the realisation of a hydrogen-based society A Toyota hybrid model

manufacturers and operators.

“By allowing royalty-free use of FCV-related patent licences, Toyota is going one step further as it aims to promote the widespread use of FCVs and actively

contribute to the realisation of a hydrogen-based society,” the automaker said in a statement.

The announcement came after Toyota last month rolled out the world’s first mass

market fuel-cell car -- the four-door Mirai sedan -- in Japan.

The car -- whose name means “future” in Japanese -- will hit the US and some European countries,

including Britain, Germany and Denmark, in 2015, Toyota has said.

It hopes to sell more than 3,000 units of the car by the end of 2017 in the United States, and up to 100 annually in Europe.

Fuel-cell cars are seen as the Holy Grail of green cars as they are powered by a chemical reaction of hydrogen and oxygen, which produces nothing more harmful than water at the point of use.

But a limited driving range and lack of refuelling stations have hampered development of fuel-cell and their cousin, all-electric cars, which environmentalists say could play a vital role in cutting greenhouse gas emissions and slowing global warming.

The Mirai can travel about 650 kilometres without refuelling, some three times further than an electric car, and its tank can be filled in a few minutes like gasoline engine vehicles, according to Toyota.

AFP

12 | Business Daily

January 7, 2015

Asia

Bangladesh inflation eases for fifth month SGX derivatives trading to hit record The volume of derivatives trading at the Singapore Exchange rose to a record 120 million contracts in 2014, up 7.4 percent from 2013, the exchange said yesterday. The FTSE China A50 futures volume almost doubled to 41 million contracts from 22 million contracts in 2013. The total trading value on the securities market, however, fell 25 percent year on year to 266 billion Singapore dollars (US$200 billion) in 2014. The average daily trading value also fell 25 percent to 1.1 billion Singapore dollars.

The total market capitalization grew by 6.1 percent to 998 billion Singapore dollars.

Not so bad Aussie trade deficit Australian Bureau of Statistics figures showed yesterday the country’s trade deficit in November 2014 was 925 million Australian dollars (US$753 million), not the 1.6 billion Australian dollars (US$1.3 billion) previously predicted.

A surge in liquefied natural gas (LNG) exports accounted for the better than expected result, the Australian Broadcasting Corporation reported. But November’s deficit was 5 percent higher than October’s. Imports were up 0.7 percent and exports rose 0.6 percent, thanks to LNG exports.

S.Korean imposes rice import tariff South Korea confirmed yesterday it had begun to impose a tariff of over 500 percent on rice imports from the start of the year, but added that five members of the World Trade Organization had raised concerns over the level. Asia’s fourth-largest economy wants to protect farmers after scrapping a cap on politically sensitive imports of the main staple in line with international trade commitments made via the WTO. In September, it set the tax at 513 percent, saying that was the highest rate possible under parameters set by the WTO.

India to allow auctions for iron ore India passed an executive order to allow the auction of minerals such as iron and bauxite, a government official said, as it does for coal, to help arrest a fall in output and cut imports. India used to hand over mining licences to firms without any competitive bidding, leading to complaints of illegal mining and inviting judicial curbs. This choked the industry that contributes nearly 2 percent to Asia’s third-largest economy.

Steelmakers such as Tata Steel and Jindal Steel and Power have their own iron ore mines.

Headline inflation could pick up in coming months, however, as political unrest flares again, threatening supply disruptions

Unrest is still a main problem in Bangladesh’s stability

B

angladesh’s annual inflation in December eased for a fifth straight month to its lowest level in more than two years, but price pressures could climb again on renewed political unrest.

The consumer price index in December fell to 6.11 percent from a year earlier, the lowest since October 2012, from 6.21 percent in November, officials at the Bangladesh Bureau of Statistics said yesterday.

Food prices were 5.86 percent higher than a year earlier in December, lower than November’s 6.44 percent rise. In contrast, non-food inflation picked up to 6.48 percent from 5.84 percent.

Food prices declined on the back of

weaker global commodity prices and lower vegetable prices, while non-food inflation has trended up in recent months due to a rise in transportation costs, house rents, education and medical expenditure, a senior bureau official said.

Headline inflation could pick up in coming months, however, as political unrest flares again, threatening supply disruptions.

Bangladesh faced an indefinite nationwide blockage of roads, railways and waterways from yesterday as the opposition party intensified protests to topple the government.

Four protesters were killed in clashes between activists of Bangladesh’s ruling party and opposition supporters

on Monday on the first anniversary of disputed national polls that the opposition party boycotted.

“There is every possibility that inflation will go up again due to ongoing political unrest that would disrupt supplies,” said the bureau official, who asked not to be identified.

Inflation in Bangladesh accelerated to 7.35 percent in the last fiscal year that ended in June, from 6.78 percent the previous year, exceeding a target of 7 percent.

Food prices went up in the last financial year as supplies of basic foodstuffs were affected by frequent transport blockades and unrest in the run-up to elections in January.

The government aims to hold inflation at 6.5 percent in the current fiscal year. The central bank has kept its key policy rates unchanged since February last year, when it cut rates by half a percentage point on a slower economic growth outlook.

In June, however, the central bank raised banks’ reserve requirement ratio by 50 basis points, its first increase since 2010, in a move to mop up excess cash to cool inflationary pressures.

Reuters

India expects to raise US$10 bln from mobile airwave auction The base price has been set at 39.80 billion rupees for the relatively more efficient 900 Mhz band airwaves

I

ndia said it expects to raise 648.40 billion rupees (US$10 billion) from a new auction of mobile phone airwaves, intended to help carriers expand their services in a fast-growing market and the government to bolster its strained finances.

The auction, likely to be held next month, comes at a time when weak tax receipts in a sluggish economy are making it tough for India to meet its ambitious fiscal deficit target of 4.1 percent of gross domestic product for the year to March, 2015.

Of the estimated revenue of US$10 billion, the government expects to book 160 billion rupees, or a quarter of the total proceeds, in this fiscal year, said an official statement issued after the cabinet approved the auction guidelines.

India, which traditionally sold airwaves to run mobile services through a state-selection process, switched to an open auction in 2012 after a scandal over mis-selling of

permits that led to cancellations of many telecoms licenses.

India’s mobile market is the world’s second biggest, with more than 900 million mobile phone users, and carriers including sector leader Bharti Airtel and Vodafone’s local unit need more airwaves to expand their operations.

The federal cabinet approved a base price of 36.46 billion rupees for every megahertz (MHz) of nationwide spectrum in the 800 MHz band to be auctioned, said the statement.

The base price has been set at 39.80 billion rupees for the relatively more efficient 900 Mhz band airwaves, excluding Delhi, Mumbai, Kolkata and Jammu & Kashmir, and 21.91 billion for the 1,800 MHz band except for in Maharastra and West Bengal.

A total of 380.75 MHz in these three airwave bands will be put to auction, said the statement, adding details on the 2,100 MHz airwaves will be announced later and the auction for the same may happen simultaneously.

Reuters

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Business Daily | 13

January 7, 2015

Asia

Bank of Japan delivers 26% annualized return going long Longer bonds are more vulnerable to losses if interest rates rise on domestic or external shocks

J

apanese corporate bonds maturing in more than 10 years delivered investors a 26 percent annualized return last month after the central bank extended purchases. Bank of America Corp. says they will likely keep outperforming in 2015.

Longer notes returned 8.76 percent in 2014 compared with 1.77 percent for all Japanese corporates and 7.8 percent for global company debt, according to Bank of America Merrill Lynch index data. December’s performance was the best in 21 months.

Buyers of longer-dated corporate debt were rewarded as increased Bank of Japan bond purchases pushed fouryear government yields below zero, while average corporate yields reached a record low of 0.27 percent.

The risk is that longer bonds are more vulnerable to losses if interest rates rise on domestic or external shocks, even with tapering of stimulus unlikely before 2018, according to Daiwa Securities Group Inc. “Super-long bonds are extremely profitable when credit risk is falling across the board,” said Yusuke Ueda, a

Tokyo-based credit analyst at Bank of America. “There’s still room for yields on very long-term bonds to tighten, while there is almost none on shorterterm bonds. Super-long bonds could easily outperform again this year.”

Gains on longer corporate debt were

There’s still room for yields on very long-term bonds to tighten, while there is almost none on shorterterm bonds. Super-long bonds could easily outperform again this year Yusuke Ueda, Tokyo-based credit analyst, Bank of America

44 times those of shorter debt last month, according to Bank of America Merrill Lynch data. One-year to threeyear corporate notes provided investors gains of 0.594 percent on annualized basis.

‘Credit bus’ “There is no need to be pessimistic just because you are late getting on the credit bus,” wrote Daiwa’s Toshiyasu Ohashi, the chief credit analyst in Tokyo, in the report analysing BBB rated companies. “With bonds offering yields becoming more and more scarce, it is waste to exclude Tokyo Electric’s bonds from one’s investable universe.”

The BOJ decided in October to extend the average remaining maturity of the JGBs it holds to as long as 10 years from seven years and to boost its Japanese government bond holdings by 80 trillion yen (US$672 billion) a year, an amount exceeding Argentina’s annual economic output.

Yoshihiro Nakatani, a senior fund manager in Tokyo at Asahi Life Asset Management Co., says he prefers shorter-term corporate notes with lower ratings and wider credit spreads than super-long debt sold by higherranked issuers.

“It is easy for spreads on superlong bonds usually issued by higherrated issuers to widen when there is market volatility,” said Nakatani at Asahi Life Asset, which manages 942 billion yen in assets. “There is also downside ratings pressure on JGBs, and many higher-rated issuers that sell super-long bonds are susceptible to parallel rating cuts.”

Bank of Japan headquarters in Tokyo

Bloomberg News

Malaysian state investor 1MDB hires new chief 1MDB is a cross between a sovereign wealth fund and a private investment vehicle Yantoultra Ngui and Saeed Azhar

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ebt-ridden state fund 1 Malaysia Development Bhd (1MDB) said that it had hired an Abu Dhabi-based Malaysian investment banker as its new President and group executive director, who will embark on a review of the firm’s business.

Arul Kanda succeeds 1MDB’s chief executive officer Mohd Hazem Abdul Rahman, who departs less than two years after his appointment in March 2013 amid criticism for leading the company into further debt.

Kanda, who starts at 1MDB immediately, said his priority will be to review the fund’s operations.

A cross between a sovereign wealth fund and a private investment vehicle, 1MDB is chaired by Malaysian Prime Minister Najib Razak. But it has faced criticism over the US$11 billion in debt it has taken on after buying power plants, its investment decisions and the high fees paid to Goldman Sachs for handling bond issues.

The management change may further delay a longexpected US$3 billion initial

KEY POINTS 1MDB hires Arul Kanda as new President and group exec director Arul starts at 1MDB with immediate effect - statement Company to undertake strategic review of its business

1MDB is chaired by Malaysian Prime Minister Najib Razak

public offering (IPO) of its power plant assets, sources aware of the discussions told Reuters.

“I can’t see the IPO happening for now. They have to sort out many things,” said one banking source aware of the matter. Another said the power business is targeting a listing in the second quarter of this year, rather than the first quarter.

One person familiar with

the matter said talks on the IPO have gone quiet because of “internal restructuring”.

The person declined to elaborate.

The people spoke on condition of anonymity as there were not authorised to discuss the matter publicly.

The company had planned meetings in January with potential cornerstone investors for IPO, sources said previously.

Its power plant IPO was expected to reduce its high debt. However, plans for the sale have been delayed several times due to a longerthan-expected due diligence process and debt refinancing negotiations.

“It is time for the company to silence its critics and deliver against its stated objectives,” 1MDB chairman Lodin Wok Kamaruddin said in the statement.

Kanda, who is a Malaysian national, is a trained barrister and had previously worked at Barclays and Credit Agricole with experience in restructuring and corporate finance. In his last role, he was Executive Vice President and Head of Investment Banking at Abu Dhabi Commercial Bank.

He was involved in the restructuring of a number of firms in the Gulf, including Kuwait’s Global investment House.

Reuters

14 | Business Daily

January 7, 2015

International Brazil’s new finance minister unveils plans Brazil’s government must make difficult budget cuts to improve investor confidence and restore economic growth, the country’s new Finance Minister Joaquim Levy said. At his swearing-in ceremony in Brasilia, former treasury chief Levy said the fiscal adjustments will require the participation of society as a whole and will involve spending cuts and possible tax hikes. Levy named his policy-making team at the same event, tapping former finance ministry official Marcelo Barbosa Saintive to replace Arno Augustin as Treasury Secretary.

Irish to see higher than expected budget deficit Ireland’s budget deficit is likely to have fallen by less than expected in 2014, a finance ministry official said, as a jump in year-end government spending prompted some concern that fiscal discipline may be slipping. Dublin emerged from an EU/IMF bailout just over a year ago after a seven-year austerity drive, which has helped restore investor confidence but took some 30 billion euros, or about 20 percent of annual output, out of the economy. Ireland’s deficit fell to around 4 percent of gross domestic product at the end of 2014.

U.S. auto sales end 2014 strong Automakers reported strong December U.S. sales, boosted by falling gasoline prices, but industry executives and analysts cautioned that growth would slow in 2015 after five years of rapid recovery from the recession. General Motors Co easily beat analysts’ expectations, logging a 19 percent gain to 274,483 vehicles, the best December for the No. 1 U.S. automaker in seven years. Ford Motor Co’s December sales of 220,671 were up just 1.2 percent, missing expectations. Even as the pace of sales growth is expected to slow this year, modest growth seen by analysts is still encouraging.

Euro zone economy ended 2014 poorly ECB President Mario Draghi fanned expectations he would take bolder steps when the Governing Council meets on January 22 Jonathan Cable

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he euro zone economy ended 2014 with its worst quarter for over a year as further price cutting failed to significantly drive up business activity, adding pressure on the European Central Bank to act, surveys showed.

Also of concern to policymakers, the surveys highlighted an on-going downturn in France and Italy and only a stuttering performance in Germany, Europe’s largest economy.

“The weakness of the PMI in December will add to calls for more aggressive central bank stimulus, including full-scale quantitative easing, to be undertaken as soon as possible,” said Chris Williamson, chief economist at survey compiler Markit.

Markit’s final December Composite Purchasing Managers’ Index (PMI), based on surveys of thousands of companies across the region and seen as a good indicator of growth, missed an earlier flash reading of 51.7, coming in at 51.4.

While beating November’s 16-month low of 51.1 and marking the 18th month the index has been

above the 50 level that separates growth from contraction, Williamson said the indicator pointed to fourth quarter GDP growth of just 0.1 percent.

“The euro zone will look upon 2014 as a year in which recession was avoided by the narrowest of margins, but the weakness of the survey data suggests there’s no guarantee that a renewed downturn will not be seen in 2015,” Williamson said.

Last week, ECB President Mario Draghi fanned expectations he would take bolder steps when the Governing Council meets on January 22, saying the central bank stood ready to respond to the risk of deflation.

Risks of a deflationary spiral consumer price data for the euro zone due today is widely expected to show a fall in annual terms - will push the ECB to buy sovereign debt early in 2015, a December Reuters poll showed.

A composite PMI sub-index showed firms have been cutting prices for nearly three years. It came in at 48.1, up from November’s 47.6.

KEY POINTS PMIs point to Q4 GDP growth of 0.1 pct Further discounting not enough to reverse slowing growth Downturn ongoing in France and Italy, Germany stuttering That on-going discounting had only a marginal effect on a PMI covering the region’s dominant service industry as it nudged up to 51.6 from November’s 51.1, missing a flash 51.9.

And some of that activity was again driven by firms running down old orders. A PMI covering backlogs of work was below 50 for a seventh month at just 47.8, well shy of the 48.6 flash reading. Reuters

Xoom says US$30.8 mln transferred fraudulently Money transfer company Xoom Corp said US$30.8 million were fraudulently transferred to overseas accounts, sending its shares down as much as 17 percent in extended trading. The company also said Matt Hibbard resigned as chief financial officer effective immediately.

Hibbard took over from Ryno Blignaut just last month. Blignaut will be the acting CFO and chief risk officer, Xoom said in a filing. Xoom said employee impersonation and fraudulent requests targeting its finance department were discovered on December 30. The company said it believes no customer’s data or money was involved and its systems were not impacted.

Verizon approaches AOL on potential deal Verizon Communications Inc. approached AOL Inc. about a potential acquisition or joint venture to expand its mobile-video offerings, Bloomberg reported, citing people with knowledge of the matter. Verizon has not made a formal proposal to AOL, and no agreement is imminent, Bloomberg said, citing people who asked not to be named.

Egyptian business posts fastest growth In a sign that the economy is slowly recovering, output rose at its fastest level in three months in December

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usiness activity in Egypt expanded at its fastest rate in three months in December, a survey showed yesterday, with rising output and export demand bolstering a fragile economic recovery.

The HSBC Egypt Purchasing Managers Index (PMI) for the nonoil private sector rose to 51.4 points in December, from 50.7 points the previous month, reaching its highest level since registering a near-record 52.4 points in September.

Readings above 50 indicate an expansion in activity while those below 50 point to a contraction.

Four years of political turmoil since the 2011 uprising that toppled autocrat Hosni Mubarak has battered Egypt’s economy and frightened off tourists and investors.

The government is trying to strike a

balance between cutting its deficit and reviving economic growth, which at 2.2 percent in the 2013/14 fiscal year remains too slow to create enough jobs for a youthful population of 87 million.

In a sign that the economy is slowly recovering, output rose at its fastest level in three months in December, with the output sub-index reaching 51.8 points, while the new orders index rose to 52.8 points.

The rise in new orders was driven by foreign demand, with new export orders rising to 52.4 points in December, one of the strongest growth rates recorded in that area since the PMI survey was launched in 2011.

Egypt has been steadily resolving legal disputes with foreign investors and promising reforms of its stifling bureaucracy before a March conference it hopes will help attract billions of

dollars in foreign investment.

The government aims for economic growth to accelerate over the next few years and reach 5.8 percent annually in three years’ time, although the deficit is likely to stay at around 10.5 percent of gross domestic product.

However, the PMI’s employment sub-index, which showed growth in jobs in September for the first time in 2-1/2 years and went on to record three straight months of marginal increases, declined in December, recording 49.7 points.

Companies were also grappling with sharply rising costs that they were unable to pass on to customers.

The PMI showed the sub-index of selling prices declined to 49.7 points in December, while the input price index jumped to 57.7 points.

Reuters

Business Daily | 15

January 7, 2015

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Catching a falling knife in the oil market

TAIPEI TIMES The official Purchasing Managers’ Index rose to 50.1 last month, from a marginal decline of 49.2 in November last year, as local manufacturers reported stagnating business despite the holiday season, the Chung-Hua Institution for Economic Research (CIER) said. The growth last month was marginal, as firms tend to exercise caution and lower their inventory levels. The sub index on new orders, likely the most critical gauge given the nation’s heavy dependence on exports, climbed to 50.2 last month, from a contraction of 47 in November, the CIER report said.

John Kemp

Reuters market analyst

PHILSTAR More households borrowed from local banks as of the third quarter of 2014 to pay for their home and car purchases, Bangko Sentral ng Pilipinas data showed. Consumer loans rose 21 percent to P849.7 billion as of end-September last year from P702.6 billion in the same period in 2013.

The latest level is also six percent higher than the P804.1 billion recorded in end-June.

The increase was driven by a 25-percent jump in residential real estate loans to P382.5 billion from P306.4 billion and a 20-percent climb in auto loans to P217.4 billion from P181.1 billion.

THE KOREA HERALD South Korea’s top tech giant, Samsung Electronics Co., ranked No. 2 in research and development (R&D) spending for the second consecutive year in 2013, data showed yesterday. According to the Korea Institute of Science and Technology Evaluation and Planning (KISTEP), which cited the data compiled by the European Commission, Samsung spent 10.16 billion euros (US$12.12 billion) on R&D projects in 2013, lower than the 11.7 billion euros by German carmaker Volkswagen AG. U.S.-based Microsoft Corp. with 8.2 billion euros followed the German carmaker, with Intel Corp. also holding a comparable figure of 7.6 billion euros.

THE AGE Two men have been arrested for allegedly conspiring in a US$110 million home loan fraud against a collection of Australia’s biggest banks.

Najam Shah and Aizaz Hassan have been charged with one count each of conspiracy to defraud, the Australian Securities and Investments Commission said. It is alleged the two men operated out of a financial services company in Melbourne’s western suburb of Footscray. ASIC released a statement on Tuesday said it alleged the two men used fake documents to support hundreds of loan applications on behalf of clients of Myra Financial Services without their knowledge.

“D

on’t try to catch a falling knife” is sage advice for investors trying to identify the trough in a market like oil following a sharp selloff.

Yet big moves also create the greatest potential for the mispricing of financial assets and commodities, which is what makes them attractive to contrarians and specialists.

Fear about catching a falling knife suggests the market is in the grip of an unsustainable oneway herd mentality (the precise opposite of the advice about not trying to pick the top of a bubble).

But with crude oil prices halving since June, the balance between risk and reward has shifted from further falls towards a rise in prices in the future.

Prices realised by oil producers in Texas have fallen below US$50 per barrel and those for producers in North Dakota are sub-US$40.

Prices are now too low to provide the cash flow to sustain drilling programmes and nowhere near enough to provide the financial incentive to make equity or debt available.

Painful adjustment Continental Resources, one of the largest producers in the Bakken, revised its capital budget for 2015 down for the second time in two months just before Christmas.

“This revised budget prudently aligns our capital expenditures to lower commodity prices,” the company said in a statement, putting a brave face on the enforced changes.

Lending to oil and gas explorers will slow sharply in the months ahead as banks and securities investors seek to reduce their credit exposure to the sector.

Even with cost reductions and improvements in efficiency to improve well economics, it is only a matter of time before U.S. oil production peaks and begins to fall if prices remain at current levels.

Prior to the Christmas holidays, the number of rigs drilling for oil across the United States had already fallen by 110 (7 percent) since early October, according to oil field services company Baker Hughes.

Hundreds more rigs will be idled in the next few months as existing drilling programmes are completed and much smaller ones are undertaken in 2015.

Continental, for example, said it will reduce its rig count from 50 to 34 by the end of the first quarter and average just 31 in 2015.

If those cuts are mirrored across the whole industry, an extra 550 rigs could be idled across the industry by the middle of this year, taking the rig count below 1,000.

In the very short term, U.S. oil output will continue rising as the record number of wells drilled before October are completed and enter their most productive phase.

However, decline curves for oil wells, especially shale wells, are very steep. Output falls to a half or even a third of its initial level by the end of the first 12 months.

Thousands of new wells must therefore be drilled each year simply to sustain output at its current level of more than 9 million barrels per day.

Drilling can become more efficient (faster time to depth, longer laterals, less time spent moving locations and rigging up, and targeting only the richest parts of the shale plays).

And costs can be reduced (cutting

Even with cost reductions and improvements in efficiency to improve well economics, it is only a matter of time before U.S. oil production peaks and begins to fall if prices remain at current levels

pay rates for contractors, day rates for rigs and fracturing equipment, and prices for sand and other materials).

But it is hard to imagine the industry cutting costs and raising efficiency enough in the short term to offset fully a 40 percent or more reduction in the number of rigs operating.

Balance of risks Successful speculating is all about the balance of risk and reward.

The conservative position when Brent and WTI prices were trading above US$100 per barrel was

to assume that prices would need to decline in the short to medium term to eliminate the obvious emerging imbalance in the market.

Now Brent and WTI prices are trading below US$60, and realised prices for many U.S. producers, who have been the marginal suppliers in the oil market, are below US$50 or even US$40, the conservative position is to assume there will have to be a limited recovery at some point to put the market back on a more sustainable trajectory.

Hedge funds and other money managers have started to think along these lines according to the position data contained in the U.S. Commodity Futures Trading Commission’s weekly report on Commitments of Traders.

Aggregate short positions betting on a further fall in the price of WTI-linked futures and options were cut 30 percent from the equivalent of 113 million barrels at the start of November to less than 78 million before Christmas.

By contrast, hedge funds long positions betting on an increase in prices have remained broadly steady at a little under 300 million barrels since the end of October, down from 450 million in June.

Those long positions have lost a substantial amount of money: as much as US$30 per barrel over the last two months.

However, the ratio of long to short positions, one way to measure the hedge fund community’s overall outlook on prices, plunged from 13:1 back in June to a low of just 2.5:1 in November but had edged up closer to 4:1 before Christmas.

If hedge funds are not bullish, they have become less bearish and more cautious about the probability of further large price declines.

Reuters

16 | Business Daily

January 7, 2015

Closing Chinese think tank launches recruitment

SIM card registration for fighting crime

The Chinese Academy of Engineering (CAE), one of China’s top think tanks, has kicked off biennial recruitment of new members after major revisions to its charter. Candidates will be nominated starting January 1, then go through two rounds of review by one of the CAE’s nine academic divisions before October, and secure their membership through a vote by the academy and a review by the presidium. The CAE downplayed its new member recruitment launch this year, without holding press briefings as in previous years.

China will intensify efforts to crackdown on crimes committed with unregistered SIM cards.

There are more than 130 million “black cards” in circulation at present, which refer to unregistered phone cards, which are used in cell phones or provide wireless Internet services. This, however, runs contradictory to a regulation passed by the government on September 1, 2013, which mandated that SIM cards must be registered with genuine identities. China Mobile, the nation’s largest wireless service provider, said yesterday that up to 16 percent of its users were unregistered.

Regulatory hurdles bar most funds from HK-Shanghai link The vast majority of European Union-regulated funds are awaiting the green light from Europe’s major funds regulators in Luxembourg and Dublin Michelle Price

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echnical and regulatory hurdles have so far kept most foreign fund managers from using a landmark Hong Kong-Shanghai trading link, forcing many to sit out a sizzling rally in mainland China shares.

Investor group, the Hong Kong Investment Funds Association (HKIFA), said yesterday that only 13 of 41 asset managers that responded to a survey indicated they had invested through Hong KongShanghai Stock Connect, in the first data on investor participation to emerge since the scheme launched on November 17.

“In general, we had a positive response from our members on the potential opportunities of using Stock Connect in the long term,” Bruno Lee, chairman of the HKIFA told a news conference in Hong Kong.

“But we do need more details before firms can fully leverage the scheme.”

Stock Connect allows

foreign investors to directly trade Shanghai shares via the Hong Kong exchange for the first time, but volumes have fallen far short of expectations.

The 13 managers who are using the scheme are primarily investing through Hong Kong-domiciled or unregulated funds, while

HTC posts third quarterly profit in a row

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aiwan smartphone giant HTC yesterday posted a third successive quarterly profit as the launch of a series of new products gave a lift to the resurgent brand.

The firm said net profit came in at Tw$470 million (US$14.7 million) in October-December, up 51.6 percent year on year. However, that is still down from the Tw$640 million profit in the previous three months.

Revenue rose 14.1 percent to Tw$47.87 billion, the first growth in three years, according to Bloomberg News, boosted by the launch of mid-tier handsets mainly targeting China and other emerging markets. The firm had forecast 12 percent growth.

In October HTC launched an array of new products and services, including the Desire Eye smartphone, the social video-editing application Zoe and its first camera, called RE. In the same month, it partnered with Google to unveil the Nexus 9 tablet dubbed “Lollipop” -- the world’s first tablet to run on Google’s latest operating system, Android 5.0.

AFP

U.S.- and Europeanregulated investors are grappling with the scheme’s settlement rules, its system for safe-keeping assets, and confusion over China’s share ownership rules, Hong Kong’s main investor group said.

The vast majority of European Union-regulated funds are awaiting the

green light from Europe’s major funds regulators in Luxembourg and Dublin, who have raised concerns over these investor protection issues, as reported by Reuters in November.

“Over 88 percent of the Hong Kong (funds) market is domiciled under EU governance, so those technical

HK to start second consultation on constitutional reform

and regulatory (questions) in Europe are a particular issue,” said Lee. The HKIFA is in discussions with the Hong Kong and mainland regulators to help iron out some of these wrinkles, while the Hong Kong authorities are also in discussions with overseas watchdogs, said Lee, adding that he expects the authorities to propose some solutions in the near future.

The Hong Kong Exchanges & Clearing has said it expects to resolve the settlement problem by the end of the first quarter.

The HKIFA received responses from 41 of its 64 member firms, mostly comprising global asset managers representing around US$20 trillion in assets. Just over half of the 41 firms said they expect to use Stock Connect to invest during 2015, while 47 percent “expressed interest” in the scheme.

Reuters

China expected to boost imports of protein-rich wheat

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ong Kong Chief Executive CY Leung announced yesterday that the second round of public consultation on constitutional reform will start on January 7.

Speaking before the Executive Council meeting in the morning, Leung called on people to express their views on constitutional development but stay within the framework set out in the Basic Law and the relevant decisions of the Standing Committee of the National People’s Congress.

The Hong Kong government will use different ways to collect people’s opinions during the consultation, he said, hoping that a consensus could be reached in a legal, rational and pragmatic manner.

Leung noted that the first round of consultation had already laid out the foundations for the second phase which should be more focused and completed in a shorter time.The chief executive made it clear that Hong Kong is a law-abiding city that will not tolerate illegal acts or attempts to pressure the Hong Kong government.

hinese wheat buyers are likely to step up imports of higher quality grains to meet a domestic shortfall even though total overseas purchases are forecast to tumble this year due to bumper production at home, analysts and traders said.

China, the world’s biggest wheat producer and consumer, has seen output climb to record levels in recent years, but it faces a shortage of the highprotein wheat it needs to meet growing appetite for noodles, bread and other baked products as incomes rise.

“Hard red spring wheat is in extremely short supply here in the domestic market because China’s own production of high-quality wheat was not satisfactory despite higher output,” said an analyst with an official think-tank who declined to be identified.

More demand for high-protein wheat could bolster prices for spring wheat traded on the Minneapolis Grains Exchange, which have risen 2.2 percent this week, as well as supporting hard red winter wheat futures in Kansas, up 1.5 percent.

Xinhua

Reuters

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