MOP 6.00 Closing editor: Luís Gonçalves Publisher: Paulo A. Azevedo Number 718 Thursday January 29, 2015 Year III
Owls of delight
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t’s conquered the US and Australia. Now American restaurant chain Hooters is betting big in Asia. With plans to enter Macau with its female sex appeal and ‘girl next door’ sizzle. Renowned worldwide for their cleavage-plunging, short shorts waitresses, the chain has already proved a huge success in Phuket. A six-year sweep through Asia is planned. With diversification high on the territory’s menu, Hooters could be the distraction that fits the bill PAGE
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Junkets’ listing not so easy
Food pushes tourist prices up 2.43 pct PAGE 5 Citic Bank expects profit increase in 2014 PAGE 6
Headwinds buffeting Macau junkets seem unstoppable. Plunging revenues have already elbowed several promoters out of the market. While Beijing’s anti-graft campaign continues at full steam. Some of the biggest players are now having problems listing in Hong Kong. Apple Daily reports that Iao Kun Group and Sing Hou Entertainment could fall foul of mounting concerns about their business model
Land deal between China Star and CSI progressing PAGE 6
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Customs bust fake electrical supplies for Cotai PAGE 3
Feeling blue The Federation of Trade Unions says they have received complaints. Regarding nonresident workers being authorised work permits but never coming to Macau to work. The union suspects some companies are abusing foreign labour quotas
www.macaubusinessdaily.com
January 28
Name
%Day
China Resources Powe
6.54
Hang Lung Properties
3.42
Hengan International
1.90
Hands up for hand‑outs
Tingyi Cayman Island
1.54
Wharf Holdings Ltd/T
1.54
Sands China Ltd
-1.25
The Macau Gov’t has been busy. Handing out MOP114.8 million via four of its funds. Science and Technology, Culture, Tourism, and Energy Conservation. All in the last quarter. The Science and Technology Fund distributed almost two-thirds - MOP79.6 million - with Macau University of Science and Technology (MUST) grabbing the biggest slice
China Resources Ent
-1.59
Lenovo Group Ltd
-1.90
China Life Insurance
-2.04
Bank of Communicatio
-2.22
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Progressing Swiftly
Pass to the Mainland
HSI - Movers
Macau Pass is confident. Announcing yesterday that it’s talking to the gov’t about joining a national city card programme in Mainland China. If all goes well, Macau Pass card users could pay for bus fares and consume via their cards in 50 mainland cities. Chinese authorities say Macau could get the green light about July
On its way to internationalisation. The yuan has reached fifth position in the global payments ranking. Displacing the Canadian dollar and getting closer to the Japanese yen. The RMB is rapidly edging towards the Swift basket of currencies
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Source: Bloomberg
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2 | Business Daily
January 29, 2015
Macau
Tough road ahead for Iao Kun, Sing Hou HK listing Anti-money laundering concerns, Beijing’s campaign against graft and junket business models are major considerations in the approval of their listing plans Stephanie Lai
sw.lai@macaubusinessdaily.com
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big obstacle may stand in the way of Macaubased VIP gaming promoters Iao Kun Group Holdings Co. Ltd. and Sing Hou Entertainment Group Ltd. in their bid to list on the Hong Kong Stock Exchange due to concerns about Beijing’s anti-graft policy and the business model of the junket business here, Hong Kong’s Chinese language newspaper Apple Daily has reported. Iao Kun, already listed on Nasdaq in New York, re-submitted its application proof to get a dual listing on the Hong Kong Stock Exchange earlier this month following its lapsed attempt to do so last year. Another smaller-scale local VIP gaming promoter, Sing Hou Entertainment, also submitted application proof to seek a Hong Kong listing in late November last year. The lapsed attempt for Iao Kun to get listed in Hong Kong last year is due to the fact that the gaming promoter had failed to deliver sufficient documents prior to the deadline, Apple Daily reported yesterday citing an unidentified source; the report does not specify which documents are missing. The newspaper further cited the source saying that the concerns of the Listing Committee of the Hong
Kong Stoc k E x ch a n g e over the monitoring of money laundering has also contributed to Iao Kun’s unsuccessful attempt to get listed last year. Business Daily approached Iao Kun seeking further verification of its listing process but did not receive feedback by the time the story went to press. “Still, I’m quite confident that Iao Kun can eventually get listed in Hong Kong successfully, as their corporate information is relatively more transparent and they’re already a Nasdaq-listed
firm,” an executive director of a local VIP gaming promoter remarked to Business Daily, who asked not to be identified. The junket boss said that his company also planned to list in Hong Kong after five years. “But I do think that it’s better for the gaming promoter to have a more diversified business portfolio aside from purely running VIP gaming promoting, and state that in the listing application document,” said the junket company’s boss, “That may get them a bigger chance to get listed.” The factors of the risky
nature of VIP gaming promoters’ business model, its sector stability and Beijing’s anti-graft policy are among the Hong Kong Stock Exchange’s Listing Committee’s considerations when assessing their bids to list in the city’s stock market, Apple Daily reported citing remarks from Ronald Wan, chief China adviser at Asian Capital Holdings Ltd.
Listing ambitions Iao Kun and Sing Hou Entertainment have expressed their listing ambitions at a
time when Macau experienced weakened high roller business last year, with junkets struggling against the backdrop of the slowing China economy and Beijing’s persistent anti-graft drive. VIP gross gaming revenue here, which occupied 60.5 per cent of total casino revenue, amounted to MOP212.54 billion for 2014 – a fall of 10.9 per cent from the MOP238.52 billion of the previous year, official data states. Despite the downturn seen in high rollers’ earnings, Iao Kun and Sing Hou Entertainment are not the only local junket promoters seeking access to Hong Kong’s stock market. Macau’s veteran junket investor Jack Lam Yin Lok and his associated parties assumed control of 65.85 per cent of Hong Kong-listed Sinogreen Energy International Group Ltd. in September last year, a move following which the firm then underwent a major board reshuffle and shift of operation focus to the junket business here. Earlier this month, an approved name change also saw Sinogreen Energy replaced by the new name of Jimei International Entertainment Group Ltd. – making it the second locally-based junket operator after Neptune Group Ltd. that has sought successful access to the Hong Kong Stock Exchange.
Workers union questions non-resident workers quota scheme The Federation of Trade Unions says they have received complaints regarding non-resident workers being authorised work permits but never coming to Macau to work. The union suspects some companies are abusing foreign labour quotas Joanne Kuai
joannekuai@macaubusinessdaily.com
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he Federation of Trade Unions (FAMO)’s subordinates Northern District Workers Service Centre and Praça de Ponte e Horta Workers Service Centre has released its 2014 year in review, saying that they had followed up on 1,624 cases involving 1,939 individuals. Housing ranks number one in the cases the union had to deal with, which reached a total of 645 cases. Cases regarding labour affairs and welfare and security totalled around 40 per cent of the number of cases. The union revealed that they had received three cases where nonresident workers were authorised to have working permits but were never arranged to come to Macau to
work. One case involved dozens of workers of a sub-contractor on the Light Railway Transit project. The union said that these companies asked non-resident workers to sign documents saying that they ‘voluntarily’ wanted to take non-paid leave or extend the date of their working contract to take effect without paying the employees. Vice chairwoman of the union, legislator Ella Lei Cheng I, said that these companies are abusing the nonresident workers quota scheme. She believes this would eventually hurt local residents’ rights to be employed. In addition, Ms. Lei revealed one complaint from a local resident saying that when searching for a
job at the Labour Affairs Bureau some companies registered to hire crane operators at a monthly salary of MOP11,000. But the job has a market price of over MOP1,000 per day. The union suspects that these companies did not intend to hire any locals at all but planned to import cheap foreign labour instead. The union pledged to follow up on such cases. Other cases in the labour area mainly focused on unreasonable layoff, compensation for work accidents, overlapping holidays that hurt workers’ rights to take holidays and opinions regarding legislation on minimum wages. Ella Lei pointed out one case saying that a worker who had
suffered from a work accident and was instructed by the doctor and legal medical expert to take 712 days off was deemed by the consultation committee and the insurance company to be only eligible to receive compensation for 365 days. She said such cases indicate that current legislation lacks effect in protecting victims of work accidents. The legislator said that currently the Legislative Assembly is studying the revision of the compensation scheme of work accidents and occupational sickness, Article by Article. She added that the union would transfer relevant suggestions so that the mechanism could better protect workers’ rights.
Business Daily | 3
January 29, 2015
Macau Customs bust fake electrical supplies for Cotai gaming project Customs said that they had received a tip-off that some gaming project construction sites in Cotai are using counterfeited electrical supplies. Customs launched a raid and found 1,281 fake wiring duct and cable trays worth over MOP170,000 on the construction site as well as in an electrical supply shop in the Northern District. Three men and one woman were held by Customs for investigation. The shop owner from Hong Kong, aged 66, was prosecuted and the case has been handed to the Public Prosecutor’s Office. Customs said that the brand of products were a specified brand that the gaming operator ordered in large quantities; the suspects used bogus products to gain more profit. The products were to be used for elevators and the qualities need to be cautiously controlled otherwise they would be hazardous both in economic and safety terms.
Macau Pass plans to join city card union on Mainland After joining the programme, Macau Pass card users can pay bus fares and spend via the cards in some 50 mainland cities. Chinese authorities say it is likely that Macau can join between June and July this year, while Macau Pass said the scheme is still under discussion with the Macau Government Kam Leong
Kamleong@macaubusinessdaily.com
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ocal stored-value card issuer Macau Pass SA said yesterday that it is discussing with the government about joining a national city card programme in Mainland China, enabling Macau Pass card users to pay bus fares and to consume via their cards in mainland cities which have joined the programme. A representative of the Chinese authorities, meanwhile, indicated that the service may be implemented between Macau and the Mainland this summer. Macau Pass held a seminar on the feasibility of Macau joining the programme yesterday. On the sidelines of the event, the director of the public transportation service centre at the Ministry of Housing and Urban-Rural Development of China, Ma Hong, told reporters that she perceives that Macau Pass has the ability to join the national programme. “According to the discussion with Macau Pass, we estimate that Macau can join the programme between June and July this year. Of course, before
that we still have some work to do like upgrading the system of the IC cards,” she said. Nevertheless, the Deputy General Manager of Macau Pass, David Lao said he is still not sure about the exact timing of the implementation of the service, claiming the company is still having initial discussions with the Macau Government. “Actually, we are ready for the technique [required] and the service. However, as it relates to both the [Macau and Mainland] Government, it is more like a social issue than a business issue. Hence, the implementation [of the service] is eventually dependent upon the support of the government,” he told reporters, indicating the new service will target those frequently travelling between Macau and the Mainland. If Macau successfully joins the programme, founded in 2008, residents will be able to spend via the local stored-value cards in some 50 mainland cities.
Financial Intelligence Office prepares to sign Memorandum of Understanding with UK
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he Secretary for Economy and Finance, Leong Vai Tac, has authorised the Director of the Financial Intelligence Office (GIF), Ng Man Seong, to sign a Memorandum of Understanding with the United Kingdom concerning the prevention and repression of money laundering and terrorist financing activities. The date for the signing of the Memorandum of Understanding with the Financial Intelligence Unit, which is integrated into the British National Crime Authority, was not revealed but the decision of Leong Vai Tac came into effect on 14 January of this year and was published in Macau’s Official Gazette. These types of memorandums allow the exchange of information among financial intelligence units worldwide. All information exchange under this agreement can only be
used for intelligence and will be kept strictly confidential. Since its establishment, the Financial Intelligence Office has already signed memorandums of understanding with more than 12 financial intelligence units of different jurisdictions, which include Hong Kong, Korea, Indonesia, the Philippines, Malaysia, Australia and Japan.. The dispatch signed by Leong Vai Tac is part of the procedure to sign these memorandums. Usually the Chief Executive delegates the power to the Secretary for Economy and Finance, who in turn assigns the power to the Director of GIF, which at the moment is Ng Man Seong. Memorandums of Understanding are usually written using the international model of the Egmont Group, which is the international body of financial intelligence units.
In fact, in May 2014 the local card issuer expressed its interest in the Chinese market, claiming it would issue a new type of stored-value card that had the function of China UnionPay’s QuickPass. Despite such a card not yet being launched, the company issued a new chip-card in December 2014, of which users can increase the value,
read the remaining balance and check the transaction records via their smartphones running Andriod systems. In addition, Chinese online payment platform Alipay, owned by the Alibaba Group, launched a new service in the same month to enable its users to purchase a Macau Pass card in advance before travelling here.
4 | Business Daily
January 29, 2015
Macau Brands
Trends
Colour me Faber-Castell Raquel Dias newsdesk@macaubusinessdaily.com
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hen I write the name Faber Castell I’m sure most readers will associate the brand with the famous coloured pencils. The deep green tins with a colourful array of pencils are a cosy memory from childhood. However, the company has a number of lines and product categories other than their finearts instruments. One of those, the house’s premium brand, is Graf Von Faber-Castell. You can visit the recently opened shop in Galaxy Macau. You will certainly appreciate the beautiful and intricate designs of each piece. The most traditional line in the brand has to be the classic graphite pencils with an integrated sharper, which could be used for a pencil extender or a cap. The end of the pencil houses an eraser and all the metallic parts are either platinum-plated or sterling silver (925/1000). The elegant piece is called ‘The Perfect Pencil’. Since 2003, the German company has introduced the ‘Pen of the Year’. Each year, one is launched, showcasing the craftsmanship and attention to detail that have come to be expected of the brand. The most recent model is dedicated to the ‘Roi Charmant’, King Frederick II, later called the Great (1712-1786) of Prussia and Elector of Brandenburg. The philosopher, artist, musician, strategist, lawmaker and enlightened monarch changed the face of Europe and paved the way for the enlightenment period. The ‘Sanssouci, Potsdam’ Pen of the Year comes with an 18-carat, bicolour gold nib that is run in by hand. An end-cap protects the rotary knob of the plunger mechanism of the plungertype fountain pen. You can choose between platinum or gold-plated.
Subsidies galore The Macau Government has handed out as much as MOP114.8 million via four of its funds – Science and Technology, Culture, Tourism, and Energy Conservation Sara Farr
sarafarr@macaubusinessdaily.com
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he Science and Technology Fund distributed a total of MOP79.6 million in subsidies to different schools, institutions and individuals in the fourth quarter of last year. Figures released yesterday in the Official Gazette show that of the overall fund some MOP18.7 million went directly to the Macau University of Science and Technology (MUST), of which MOP6 million went towards the financial support of the Lunar and Planetary Science Laboratory, a partner laboratory of the Key Laboratory of Lunar and Deep Space Exploration, as the first payment. Another MOP6 million went towards the same university’s financing of laboratory equipment of Chinese traditional medicine, also as a first payment. GPI (Macau) Ltd. received MOP400,000 as the first payment for a distributed solar power refrigeration intelligent system. A student from the University of Saint Joseph received MOP1.35 million on her own for ‘petrology and geochemistry of igneous rocks from Macau’. This is also only the first payment of a study on the ‘implications for the crustal evolution of Southern China’. And a total of MOP31.6 million went towards the University of Macau. From the descriptions listed as to where the funds would be used, a great deal included 3D printers. In addition, the Culture Fund
handed out subsidies totalling MOP19.5 million in the fourth quarter of last year. As much as MOP8.4 million went to students in Bachelor and Master’s degrees in the culture and arts fields, primarily to cover tuition fees. Also included in this total were prizes and awards, as well as scholarships within the field. Seven associations received a subsidy of between MOP1,700 and MOP10,000 to participate in the 6th Shenzhen Cartoon and Animation Fair. The Macau Artists Society received a total of MOP176,560, of which MOP95,000 alone went towards the publishing of three visual arts works, while MOP50,000 went towards another such work, official figures show. When it comes to the Tourism Fund, a total of MOP762,000 was handed out to a number of associations and groups in the fourth quarter of last year. The great majority, ranging in amounts of around MOP3,000, went towards the staging of a Chinese Opera. Official data released yesterday shows that the Macau Association of Retailers & Tourism Services received MOP248,000 to organise a ‘self-learning training session’, while Kai Fong Neighbourhood Association received MOP215,000 to host the New Year’s countdown in the Three Lamps district. These two alone made up slightly more than two-thirds of
the total fund distributed between the months of October and December last year.
Eco-friendly subsidy Macau’s Environmental Protection and Energy Conservation Fund gave out a total of MOP14.9 million in the months between October and December last year. A total of 145 beneficiaries received subsidies ranging between a few thousand patacas up to MOP500,000. According to the Official Gazette, all the subsidies were given as part of the fund’s financial support plan to help small and medium-sized enterprises (SMEs), individuals, associations and companies purchase energy saving and environmentally friendly equipment and products. The company receiving the single largest subsidy amount was Lei Seng Construction Ltd., with a fund of MOP500,000, followed by Kam Tat Lei Investment and Restoration Company Ltd. with a subsidy of just under MOP498,230, while Mazda Macau Ltd. received a subsidy of just over MOP464,000 in the fourth quarter of last year. These four funds alone – Science and Technology, Culture, Tourism, and Energy Conservation – totalled MOP114.8 million that the government handed out to individuals, schools, associations and companies between October and December last year.
Business Daily | 5
January 29, 2015
Macau
American Hooters brings girl next door to Macau The restaurant chain is coming to the Special Administrative Region as part of its strategy to expand operations in Asia. The expansion to Macau will be conducted by Destination Resorts Co., which also runs the first restaurant of the American brand to open in Southeast Asia João Santos Filipe
jsfilipe@macaubusinessdaily.com
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merican restaurant chain Hooters is planning to enter Macau in six years, as part of its strategy to expand throughout Southeast Asia with 30 new eating places. The company announced the decision after the success it achieved with the first restaurant it opened in the region in Thailand. The expansion is going to be conducted by Destination Resorts Co., which was the company that imported the American brand to Phuket. ‘After introducing the world-famous restaurant concept to Thailand with the opening of Hooters Phuket, international franchisee Destination Resorts Co. has set its sights on Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, as well as Hong Kong and Macau’, Hooters of America revealed last week. The American brand Hooters is famous for its waitresses, who sport a uniform that mixes a white top with a low cleavage and orange shorts. The concept of the Hooters Girl in United States is based on female sex appeal and on the ‘girl next door’ concept. In Asia, as is already happening, the operations will be under the command of Destination Resorts Co., an international company
related to tourism activities, hospitality and restaurants. The brand, which primarily targets the American mass market, will enter Macau at a time when mass market is assuming more importance for gaming promoters. “The moment the doors opened to Hooters Phuket we realised the tremendous opportunity to greatly broaden our efforts to develop the Hooters brand across
Asia,” said Gary Murray, CEO, Destination Resorts Co. “We pride ourselves on introducing fresh, exciting concepts to our guests, and the unparalleled Hooters dining experience fits that profile.” This strategy, however, is mainly focused on expanding operations in Thailand and investing heavily in Hong Kong and the Philippines markets in the coming years.
“Following the warm welcome of Hooters Phuket, we’re confident our esteemed franchise partner will realise continued success as we work together to spread Hooters wings in additional markets”, senior vice president of global development of Hooters America Mark Whittle said. “Destination Resorts Co. brings a wealth of hospitality and restaurant industry expertise, overseeing premier
resorts and travel destinations in multiple Asian markets”, he added. Hooters of America restaurant chain first opened in 1983 in Clearwater, Florida. It currently has 415 working restaurants in over 27 countries. The name Hooters refers to the owl logo, a bird known for its hooting calls, but is also slang for the prominent part of a lady’s anatomy.
Food products drive tourist Milan Station acquires all prices up 2.43 pct Chaodai equity interests
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he latest data from the Statistics and Census Service (DSEC) shows that the Tourist Price Index (TPI) for the fourth quarter of 2014 increased by 2.43 per cent year-on-year to 145.71. The increase is mainly attributed to rising costs for restaurant services and dearer prices of local food products, which are up by 8.48 per cent and 6.22 per cent, respectively. The entertainment and cultural activities index has increased by 5.28 per cent, while clothing and footwear is up by 4.42 per cent. By contrast, the price index of hotel accommodation decreased 2.65 per cent compared to the same period of the previous year. On a quarterly comparison, hotel room rates during the National Day holidays, the Macau Grand Prix and Christmas holidays pushed the price index of accommodation up
significantly by 24.43 per cent. The fourth quarter of 2014 saw a 7.82 per cent increase quarter-onquarter. The price index of clothing and footwear rose 6.33 per cent. Transport and communications rose by 5.54 per cent, attributable to ferry tickets to and from Hong Kong and increased taxi fares. The average TPI for the whole year of 2014 increased by 5.15 per cent year-on-year to 139.6, with marked increases recorded in accommodation (8.73 per cent), restaurant services (6.37 per cent), clothing and footwear (5.73 per cent) and food, alcoholic drinks and tobacco (5.22 per cent). The price index of transport and communication, and miscellaneous goods, however, decreased by 0.82 per cent and 0.57 per cent, respectively year-on-year. J.K.
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ong Kong listed handbag retailer Milan Station Holdings Ltd. has created a company project comprising Standpoint and J&C to acquire the entire equity interests of Chaodai. The announcement was first made on December 30 in relation to a memorandum of understanding between the companies. However, Monday’s filing with the Hong Kong Stock Exchange details the outline of the framework agreement on the acquisition of equity interests of Chaodai. ‘According to the framework agreement, Standpoint and J&C will form the project company. At formation, the project company will be owned as to 90 per cent by Standpoint and 10 per cent by J&C, which is the same as their respective shareholding percentage in Milan
Station Internet,’ the filing reads. Once the acquisition is complete, J&C will transfer its 10 per cent shareholding in Milan Station Interne to Standpoint. Through the acquisition, Chaodai ‘will become well positioned in terms of financial and human resources and wider business networks to explore the cross-border online business under the brand name and the trademark ‘Milan Station’ for better return on their investments,’ the filing reads. Milan Station planned to expand its retail points in the city’s ‘clubhouses’ amid booming sales here, the company said in August last year. To further boost sales growth, Milan Station said in its interim results report that it planned to increase the number of sales points from six to ten in ‘exclusive clubhouses’ in Macau. S.F.
6 | Business Daily
January 29, 2015
Macau Land deal between China Star and CSI progressing
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director and chairman in February last year. He is now serving a six-year sentence in prison and is expected to file an appeal.
ong Kong-listed gaming services firm China Star Entertainment Ltd. has revealed that it has not yet entered the supplemental property leasehold rights agreement with purchaser Bestmix Holdings Ltd. According to a filing by China Star on Tuesday after trading hours, the leasehold right agreement had to be executed on or before January 27 by China Star, Bestmix Holdings and Sociedade de Turismo e Diversões de Macau, S.A., a gaming company owned by tycoon Stanley Ho Hung San. The deadline for the leasehold rights agreement, one of the satisfactions to complete the whole disposal agreement, has now been extended to February 28, the filing said. The purchaser of the land, Bestmix Holdings, is 51 per cent owned by Hong Kong-listed property development company CSI Properties Ltd. The deal, according to a filing by China Star in November, involves an initial consideration of HK$2.23 billion (US$287.5 million). Meanwhile, the gaming firm estimates that it would realise a gain of HK$1.65 billion from the disposal. The four plots of lands involved in the deal are adjacent to Hotel Lan Kwai Fong, Macau Polytechnic Institute, Forum de Macao and Golden Lotus Square, of which the property leasehold rights are held by China Star’s subsidiary Triumph Top Ltd. The subsidiary of China Star purchased the plots of land for HK550 million from STDM in 2010. In fact, the firm originally planned to develop the four plots of land into a luxury residential and commercial complex but said in its November filing that ‘the Macau Government requires a longer time to study the impact of the proposed development of the properties as combined sites on traffic, the environment and cultural heritage in the surrounding area before the grant of an approval.’
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Citic Bank predicts 4pct profit increase for 2014
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hina Citic Bank Co. Ltd. is expecting to record a 3.85 per cent increase in total profits for 2014, the company said in a filing with the Hong Kong Stock Exchange. The company’s preliminary annual results show total profit is expected to reach 5.4 billion yuan for last year, up from the 5.3 billion yuan registered a year earlier. Operating profit is expected to reach 5.4 billion yuan for the whole of last year, up by 4.05 per cent from
5.2 billion yuan in 2013. Total assets also registered an increase of 13.7 per cent to 413.9 billion yuan for the twelve months ended December 31, from 364.1 billion yuan for the whole of 2013. The company’s overall operating income also registered a preliminary increase of 19.3 per cent to 124.7 billion yuan, from 104.6 billion yuan a year earlier. In its 2014 interim report, the company had said two events that
could affect the global market mentioned in the bank report are the armed conflicts between Russia and the Ukraine and the ongoing war between Israel and Hamas in Gaza. “Although the economic future is looking brighter, the Group will remain vigilant on potential uncertainties that might affect the global market”, chief executive officer Zhang Xiaowei said at the time of the future outlook. S.F.
Carson Yeung’s brother‑in‑law appointed CEO of Birmingham Int’l
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irmingham International Holdings Ltd., which owns English football team Birmingham City, announced on Tuesday that the company had appointed Chui Cheong Ma, the brother-in-law of its former executive director and chairman Carson Yeung Ka Sing, as the Chief Executive Officer (CEO) and Managing Director of the company with immediate effect. According to the filing of the company filed with Hong Kong Stock Exchange on Tuesday after trading hours, the company, however, did not enter into any service contract with the new CEO, who has no fixed term of service for the company. In fact, it is believed that the former boss of the company, Carson Yeung, is still acting as the shadow director of the company. According to a recent filing by the company this month, the company held an extraordinary general meeting requested by two shareholders in December 2014 to remove Mr. Ma and Shing Cheung as vice chairman and chairman of the company, respectively.
Nevertheless, the latest filing on Tuesday indicated that the two heads of the company will remain as vice chairman and chairman, suggesting that Mr. Ma is taking up three positions in the company – namely, CEO, managing director, and vice chairman, simultaneously. Stating that Mr. Ma is the brotherin-law of the former boss, the company also wrote in the filing that ‘[Mr. Ma] does not have any interest in the shares of the Company.’ In addition to managing Birmingham Int’l, Mr. Ma is the first vice chairman and an executive director of Hong Kong-listed Sing Pao Media Enterprises Limited, which owns Chinese-language newspaper Sing Pao Daily News. On the previous Saturday, a former financial officer of the company, Jerry Ko, was arrested by Hong Kong police on suspicion of stealing around HK$30 million (US$3.75 million) but was released on bail later. The former chairman, Mr. Yeung, was found guilty of laundering HK$721 million at a trial in Hong Kong and resigned as executive
Corporate Shelter Group Celebrates Valentine’s Day Shelter Italian Bar & Restaurant Macau, located in SOHO, Level 2, The Shops at The Boulevard, City of Dreams have designed authentic northern Italian Valentine’s menus to delight every loved soul on this romantic evening. It’s once again that time of year when couples express their love for each other with chocolates, cards, flowers and the occasional creative gesture. While love is permeating the air and social media, Shelter is running a social media game. Finish the sentence “My perfect Valentine’s evening is____________” on our social media posts for a chance to win Shelter’s VIP card and/or a Valentine’s Set Dinner. Five most creative and loving sentences will be the lucky winners. Stay tuned at www. facebook.com/macaushelter.
Business Daily | 7
January 29, 2015
Gaming
Atlantic City’s credit rating cut to junk by Standard & Poor’s
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tlantic City, New Jersey’s struggling gambling hub, has had its credit rating cut to junk by Standard & Poor’s because of Governor Chris Christie’s appointment of an emergency-management team to oversee its finances. The four-level cut, from BBB+ to BB, on Tuesday follows a similar move on January 23 by Moody’s Investors Service, which cited the same reason. Moody’s cut its grade six levels to Caa1, five steps below S&P’s lowered rating. The reduced credit ratings follow the Republican governor’s decision this month to appoint over the city a management team that includes Kevyn Orr, who shepherded Detroit through its record US$18 billion municipal bankruptcy. Orr will serve as a consultant, with Kevin Lavin taking the role of emergency manager.
The order ‘requires the emergency manager to prepare and recommend a plan, within 60 days, to place Atlantic City’s finances in stable condition and provides the explicit authority to use any and all lawful means, including restructuring the city’s operations and adjusting its debts to achieve that aim,’ S&P said in its report. ‘Third-party intervention is often more draconian than the actions taken to date and has a greater likelihood of being detrimental to bondholders,’ S&P analyst Lindsay Wilhelm said in the report. Christie, 52, has struggled with a five-year plan to turn Atlantic City around. Casino revenue fell to US$2.5 billion last year from a high of US$5.2 billion in 2006, state figures show, as Pennsylvania, Delaware, Maryland and New York expanded gambling. Bloomberg
Trump casino creditors seek to fight Icahn Group’s claims
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committee of Trump Entertainment Resorts Inc.’s unsecured creditors have asked for court permission to sue a lender group led by billionaire Carl Icahn, saying some of its claims on the casino company’s assets are not valid. A successful lawsuit could bring in ‘tens of millions’ of dollars, the unsecured creditors said in a filing Tuesday in U.S. Bankruptcy Court in Wilmington, Delaware. The committee, which includes representatives of a casino workers’ union, needs a bankruptcy judge’s permission to pursue the case. ‘The committee’s investigation to date has revealed assets worth tens (and perhaps even hundreds) of millions of dollars that are excluded from’ the Icahn lenders’ collateral,
according to the filing. Otherwise some of those liens securing claims are faulty and can be thrown out, the unsecured creditors said. The filing continues the strife between Unite Here Local 54 and the Icahn lender group - which pushed to scrap the union’s contract and cut employee benefits. Allan S. Brilliant, a lawyer for the Icahn lenders, declined to comment on the request to sue. The unsecured creditors would receive almost nothing under a restructuring plan that gives Icahn control of the company’s two Atlantic City, New Jersey, casinos through a conversion of debt into equity in the reorganised company, according to court papers. The committee argued that
because Trump Entertainment gave up the right to pursue the lawsuit in return for being allowed to use its cash during reorganisation, the unsecured creditors must act on the company’s behalf. If they are denied, then the claims will be lost. In the heavily redacted court filing, the unsecured creditors challenged the Icahn lenders’ claims on Trump Entertainment’s cage-cash, which is used to pay gamblers’ winnings. Access to the cage-cash alone would increase unsecured creditors’ recovery 12-fold, the committee said. The committee also questioned some actions taken by the Icahn group. Blocking a sale of the nowclosed Trump Plaza appeared to be motivated by Icahn’s ownership of the competing Tropicana Casino,
according to the committee. ‘Instead of an open casino hotel, under new ownership, free of the Icahn parties’ yoke, the Plaza is shuttered, its workers unemployed, and its trade creditors unpaid -- all casualties of the Icahn parties relentless strategy’ to make it Trump Entertainment’s only option, the committee said in the filing. The committee said if it’s allowed to sue, it may bring additional claims as more information is uncovered in documents produced by the lenders. Trump Entertainment filed for bankruptcy September 9 and shut the Trump Plaza days later. Four Atlantic City casinos closed last year as the seaside resort lost gambling business to casinos in surrounding states. Bloomberg
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January 29, 2015
Greater China
Yuan ranks fifth for global payments The dollar and the euro remained the two most-used currencies globally in December Fion Li
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he yuan overtook Canada’s dollar to rank fifth for use in global payments, bolstering the case for the International Monetary Fund to endorse it as a reserve currency. The proportion of transactions denominated in yuan climbed to a record 2.17 percent in December, from 1.59 percent in October, Society for Worldwide Financial Telecommunications said in a statement. Later this year, the IMF will conduct the next twice-a-decade review of the basket of currencies in its Special Drawing Rights that members can count toward their official reserves. The basket currently comprises U.S. dollars, euros, yen and the British pound. “The yuan has a very high chance of being chosen as a reserve currency in the next IMF review,” said Nathan Chow, an economist at DBS Group Holdings Ltd. in Hong Kong. “The yuan could even surpass the yen in the rankings this year.” China is the world’s second-largest economy, behind only the U.S., as well as the biggest exporter and the yuan passed the euro in 2013 to become the second-most used currency in global trade finance. The nation is promoting greater usage of its currency by appointing clearing banks in the world’s financial centres and expanding a program that allows yuan held offshore to be invested in its domestic capital markets. The dollar and the euro remained the two most-used currencies globally in December with respective shares of 44.6 percent and 28.3 percent, according to Swift, a Belgium-based financialmessaging platform. The pound ranked third with 7.92 percent and Japan’s yen was fourth with 2.69 percent.
Global push The People’s Bank of China will promote yuan internationalization in an orderly way this year, according to a January 20 statement published on its website. Over 50 global central
The yuan has a very high chance of being chosen as a reserve currency in the next IMF review Nathan Chow economist DBS Group
banks and monetary authorities already hold yuan as part of their reserves, DBS’s Chow said. The Singapore dollar became directly exchangeable for yuan in Shanghai in October, adding to direct trading links China’s currency had with the U.S., Australian and New Zealand dollars, the pound, the yen and the euro. Switzerland and China last week agreed to establish yuan clearing in the European country, expanding a network that’s grown to include London, Paris, Sydney and Bangkok in the past seven months. The yuan capped its biggest twoday drop against the dollar since 2008 on Monday, as a slide in the euro bolstered demand for the greenback. The euro sank to a 13-year low versus the yuan after the European Central Bank’s announced a bond-buying program and a weekend election in Greece boosted the risk the country will leave the 19-nation currency.
As China seeks reserve-currency status for the yuan, it’s unlikely to allow sharp declines and may even favour a modest appreciation trend, according to Liu Hong, an economist at BOC Hong Kong Holdings Ltd. The nation’s two-year sovereign bond yield of 3.12 percent compares with minus 0.16 percent for Germany and minus 1.19 percent for Switzerland. “If the euro continues weakening and involves a cost to hold, other central banks will be looking for alternatives,” Davis Hall, global head of foreign exchange and precious metals advisory at Credit Agricole SA’s private-banking unit, said in a January 28 phone interview. The yuan emerges as “a more and more viable” option as the PBOC is likely to keep a liquid trading environment for the currency, while it’s impossible that China will have negative interest rates, he said. Bloomberg News
Two new billionaires emerge with Shenzhen stock rally The Shenzhen Stock Exchange Composite Index is the best performer in Asia after Indian equity markets
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rally in shares on China’s Shenzhen Stock Exchange has made Xiao Fen and Ruan Hongxian billionaires as their companies’ stocks climbed. Xiao, chairman of Shenzhen Fenda Technology Co., a consumer electronics company that invested in a maker of Google Glass-like products, has a net worth exceeding US$1 billion as the stock surged to a record. Ruan, who owns China’s third-biggest publicly traded drugstore chain, also has a fortune of more than US$1 billion, according to the Bloomberg Billionaires Index. The Shenzhen Stock Exchange Composite Index, which tracks shares on the smaller of China’s two stock
exchanges, has jumped 8.7 percent this year, making it the best performer in Asia after Indian equity markets. Xiao’s Fenda Technology has surged 49 percent since the start of the year, while Ruan’s Yunnan Hongxiang Yixintang Pharmaceutical added 19 percent. The Shenzhen index dropped 0.7 percent at the close, reversing a gain of 0.3 percent. Ruan’s stock jumped to an 11- week high, while Xiao’s company extended gains to a record. Xiao, 52, controls more than half of Fenda Technology along with his wife and daughter, according to exchange filings. The stock, which jumped by the daily limit of 10 percent on Tuesday, added 3.5 percent to 40.71 yuan at the Shenzhen close.
Fenda Technology shares are recovering from a 15 percent drop in the fourth quarter, its worst threemonth performance. The bulk of Xiao’s net worth comes from the 52 percent stake he owns with his wife and daughter, while his cash is based on an analysis of dividends, insider transactions, asset sales and taxes. In February 2014, Fenda Technology said it bought a 20 percent stake in Beijing-based Alto Tech, which earlier this month introduced Cool Glass ONE, the product similar to Google Inc.’s technology eyewear, according to its website. Ruan, 50, and his wife also control about 52 percent of Kunming-based Hongxiang Yixintang, according to
exchange filings. He became a billionaire as the stock jumped 6.6 percent to 49.03 yuan at the close in Shenzhen. Hongxiang Yixintang’s executives answering the main line declined to transfer the call to Ruan for a comment on his net worth. The company, which is a retailer and wholesaler of both Chinese and Western medicine, was started by Ruan as a traditional herbal medicine shop in 1981 in Yunnan, a southwestern province, according to the company’s website. Ruan stepped down as the company’s president earlier this month to focus on his role as the chairman, he said in his resignation letter. Bloomberg News
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January 29, 2015
Greater China
HK continues to be world’s freest economy Singapore ranked second with 89.4, followed by New Zealand, 82.1, Australia, 81.5 and Switzerland, 80.5
Alibaba rates consumer credit-score The financial services affiliate of Alibaba launched yesterday a system that will use the e-commerce giant’s data trove to assess the creditworthiness of Chinese consumers and businesses with little or no history at traditional lenders. The credit-scoring system, Sesame Credit, will mine user data as well as payment histories from Alibaba Group Holding’s various platforms, Ant Financial Services Group in a statement. Chief Data Scientist Yu Wujie said the system would take into consideration, among several factors, whether consumers are active Internet users, have a stable residential address and have been using the same mobile phone number for a long time.
370 reform measures in 2014 China’s central authorities rolled out 370 reform measures in 2014, unprecedented in both scale and intensity, according to a Xinhua News Agency report. The report took stock of China’s reform throughout last year, the starting year for comprehensively deepening reform. It said China had generally accomplished the 80 reform objectives set by the central leading group for this overhaul in 2014. The report listed major reform measures including slashing exorbitant incomes of state-owned enterprise managers and relaxing over 700 administrative approvals among others.
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ong Kong continued to be the world’s freest economy, despite a slight drop in total score from last year due to the decline of perceived level of corruption, the Hong Kong government said yesterday. The 2015 Index of Economic Freedom Report released by the Washington based Heritage Foundation on January 27 (Washington, DC, time), revealed that Hong Kong has been ranked the world’s freest economy for 21 consecutive years with an overall score of 89.6 (on a scale from 0 to 100). Among the 10 Economic Freedom Components measured in the report, Hong Kong continued to come in first in business freedom, trade freedom and financial freedom; second in investment freedom. Hong Kong’s overall score edged down 0.5 points from last year was mainly due to a drop in the ranking in “freedom from corruption” in the index, which, a government spokesman said, was ascribed to high-profile cases that impacted perceptions about corruption in the special administrative region. In respond to the report, local graft-buster Independent Commission Against Corruption (ICAC) said, extensive media coverage on some of
Despite corruption cases involving senior politicians, Hong Kong preserved first position in the ranking. (Pictured) Hong Kong Council
the cases, including the prosecutions and convictions of a former senior government official, may have affected respondents’ impression. Rafael Hui, Hong Kong’s former Chief Secretary, and Thomas Kwok, co-chairman of Sun Hung Kai Properties, a local major developer, were found guilty in a corruption case in December. Yet, the ICAC said, these isolated cases should not be seen as an indicator of deterioration in the probity situation in Hong Kong. According to the 2014
Narrower decline for property sales China’s property sales will continue their steady downward progress in 2015, rating agency Moody’s said yesterday. A Moody’s research note said that the property sales will decline by between 0 percent and 5 percent in 2015, compared to a 7.8 percent decline in 2014. Moody’s attributed the slightly reduced decrease to policy changes including greater availability of mortgages and improved buyer sentiment. Property prices will remain under pressure as developers push price incentives to boost sales. New projects and weaker GDP growth will also suppress prices.
Foxconn seeks to slim workforce over time
Spring Air Asia’s most valuable budget carrier
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China’s Spring Airlines Co Ltd has seen its share price more than double within just six days of listing on the Shanghai stock exchange, making it Asia’s most valuable budget carrier. Spring’s shares gained the daily limit of 10 percent each day since hitting the debut maximum of 44 percent on January 21. That made the airline worth 15.29 billion yuan (US$2.45 billion), pushing Malaysian low-cost carrier (LCC) AirAsia Bhd into second place with a market capitalisation of US$2.13 billion.
Labour costs have more than doubled since 2010 aiwan’s Foxconn Technology Group, the world’s largest contract electronics manufacturer, would like to slim its massive workforce with the help of automation, and for now will work on stabilising its headcount, the company told Reuters. Under its flagship unit Hon Hai Precision Industry Co Ltd , the group currently employs about 1.3 million people during peak production times, making it one of the largest private employers in the world. As a key Apple supplier, the company has had a solid run in recent years, but faces declining revenue growth and rising wages in China.
Special assistant to the chairman and group spokesman Louis Woo did not specify a timeframe or target for any reduction in headcount, but noted that labour costs had more than doubled since 2010, when the company faced intense media scrutiny following a spate of worker suicides. When asked if the company seeks to reduce overall headcount, Woo said it would be done over time as a goal and that the company had internal targets, but he could not disclose figures. Hon Hai said later it would maintain its employee count at more than a million worldwide but would “decrease the magnitude of our hiring in the
ICAC Annual Survey conducted by an independent research company, only 1.5 percent of respondents had come across corruption in the past 12 months, showing a very low level of corruption. “We are keenly aware of competition from other economies within and outside the region. We always try to keep up with the latest global economic developments, and strive to enhance our competitiveness,” the spokesman said. Xinhua
We’ve basically stabilised (our workforce) in the last three years. We would like to stabilise our employee headcount no matter how fast we are growing in the future Louis Woo Foxconn group’s spokesperson
coming years”. There are no immediate plans for reducing staff, it said. Revenue growth at the conglomerate tumbled to 1.3 percent in 2013 and only partially recovered to 6.5 percent last year after a long string of double-digit increases from 2003 to 2012. Growth in smartphone sales will halve this year from 26 percent in 2014, according to researcher IDC, while PC sales will contract by 3 percent. Automation will be key to keeping labour costs under control in the longterm, Woo said, as the company pushes to have robotic arms complete mundane tasks currently done by workers. But Woo noted that company chairman Terry Gou’s previously stated goal of 1 million robots was “a generic concept” rather than a firm target. Reuters
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January 29, 2015
Greater China
Regulators intensify scrutiny of insider share sales Some analysts fear that a loss of confidence could quickly turn to panic as ordinary investors bail out of shares
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hinese securities regulators are intensifying their scrutiny of share sales by insiders at listed companies, state media reported, as Beijing tightens its grip on a stock market rally which some fear is being twisted by market manipulation. The official China Securities Journal said yesterday that the China Securities Regulatory Commission (CSRC) has begun reviewing every instance of a share sale in which a designated company insider managed
to sell at the top of a price spike. The move addresses concerns that insiders have been abusing inside information to cash out of their positions at a profit at the expense of ordinary shareholders. The CSRC has made no official announcement to this effect, and the article did not specify the source for its information. The report follows a crackdown on the country’s largest three brokerages for improper margin trading.
Much of the country’s stock market rally, which has seen major indexes gain as much as 50 percent in recent months, has been supported by the exuberant usage of leverage by the retail investors that conduct the majority of transactions on Chinese exchanges. Some analysts fear that a loss of confidence could quickly turn to panic as ordinary investors bail out of shares, causing a sharp collapse in share prices as occurred in the
aftermath of a similar rally in 2009, but this time the collapse would do greater damage given the amount of debt incurred by speculators in the run-up. Stock investors have proven highly sensitive to signs that Beijing is going to suppress the rally by tightening up on the supply of credit, however, with a sequence of crackdowns on margin finance and other fundraising forms setting off a sharp one-day collapse last week, with markets only recovering after regulators saying they did not intend to suppress the rally. Reuters
The move addresses concerns that insiders have been abusing inside information
China accuses Alibaba of failing to fight counterfeits Alibaba said it had removed 90 million listings for products that breached intellectual property rights before its IPO Lulu Yilun Chen
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libaba Group Holding Ltd. has a “credibility crisis” fuelled by its failure to crack down on shady merchants, counterfeit goods, bribery and misleading promotions in online malls, the Chinese government said. The scathing report by the State Administration for Industry & Commerce accused Alibaba of allowing merchants to operate without required business licenses, to run unauthorized stores that co-opt famous brands and sell fake wine and handbags. Alibaba employees took bribes, and the e-commerce giant didn’t fix flaws in customer feedback or internal credit- scoring systems, the report said. “For a long time, Alibaba hasn’t paid enough attention to the illegal operations on its platforms, and hasn’t effectively addressed the issues,” the
report said. Bob Christie, a spokesman for Alibaba, said the Hangzhou- based company couldn’t immediately comment. At a meeting with SAIC officials in July, Alibaba acknowledged that problems exist on its platform and said it would improve monitoring efforts and increase communication with regulators, the government said.
Selling contraband Though the meeting was held in July, the report wasn’t published until now to avoid affecting Alibaba’s initial public offering, the government said. Yesterday’s release came the day after a posting on one of Alibaba’s official Weibo accounts said government inspectors applied standards inconsistently and didn’t
give merchants enough time to respond to accusations. The post was written as a letter to the official responsible and said he wasn’t treating China’s biggest e-commerce operator fairly and his methods were flawed. Alibaba has worked to get rid of counterfeits as it expands internationally, saying it removed 90 million listings for products that breached intellectual-property rights before its IPO. The crackdown is part of Alibaba’s plan to build its reputation now that it is Asia’s largest technology company with a market value of US$254 billion. In December, Alibaba said it spent US$160.7 million from the beginning of 2013 through November to block counterfeit products and boost consumer protection. Alibaba founder Jack Ma, China’s richest man, said last week he wants to
reach 2 billion customers through his websites.
Fake transactions SAIC said Alibaba was still allowing the sale of contraband such as fake cigarettes and alcohol, and items “that threaten public safety” such as knives and phone-tapping devices. “A huge number of merchants” haven’t registered for operating licenses and are engaging in illegal behaviour that includes bribing Alibaba employees and misleading customers during sales promotions on November 11 and December 12, it said. “Some operators on the platform have created fake transactions and deleted negative comments to improve their own and others’ reputations,” the report said. In a separate January 23 report on China’s e-commerce industry, SAIC said it found that sites sold fake cigarettes, wine, mobile phones and handbags. Only 19 of 51 samples sold via Alibaba’s Taobao.com were authentic, a second report said. Bloomberg News
Alibaba not only faces the biggest credibility crisis since its establishment, it also casts a bad influence for other Internet operators trying to operate legally China’s State Administration for Industry & Commerce report
A report said that only 19 of 51 samples sold via Alibaba’s Taobao.com were authentic
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January 29, 2015
Asia
Singapore joins the ranks of easing The city-state rarely alters policy outside of its two regular reviews in April and October
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ingapore’s central bank yesterday unexpectedly eased monetary policy ahead of its scheduled review in April, in a move that extends decisive shifts by global policymakers to counter deflationary pressures and slowing growth. The Monetary Authority of Singapore (MAS) said in a statement that it is reducing the slope of its policy band for the Singapore dollar in response to “a significant shift” lower in domestic inflation since its last review in October, 2014. The surprise easing, the first since MAS eased policy in October 2011, sent the Singapore dollar skidding to 1.3570 per U.S. dollar, its weakest since August 2010. “Since the last Monetary Policy Statement in October, developments in the global and domestic inflation environment have led to a significant shift in Singapore’s CPI inflation outlook for 2015,” the central bank said in a statement. The central bank - which targets the exchange rate for policy setting instead of interest rates - said that it would continue to stick with a policy of allowing the Singapore dollar to appreciate modestly and gradually against a basket of currencies. “While the slope of the band is reduced, MAS maintained the modest appreciation stance, while keeping the centre of the band and width of the band unchanged,” said Christopher Wong, a senior FX analyst at Maybank in Singapore. “This is not a move to neutralise
the pace of appreciation. Meaning MAS still keeping modest appreciation stance but reduced pace.” Singapore rarely alters policy outside of its two regular reviews in April and October. The last unscheduled statement on monetary policy came in July 2005 after China abandoned its fixed-rate exchange policy. Yesterday’s move follows similar surprises in global monetary policymaking, including the Bank of Canada’s shock rate cut last week and a larger-than-expected bondbuying stimulus programme by the European Central Bank - all of which were aimed at fighting off the threat of deflation from plunging oil and slowing global growth. The central bank cut its inflation forecast for the year for both headline consumer price index (CPI) as well as core CPI. It cut its inflation forecast for 2015 to -0.5 pct to 0.5 percent, from the 0.5 percent to 1.5 percent it had expected in October. The central bank said this measured adjustment to the policy stance is consistent with the more benign inflation outlook in 2015 and is appropriate for ensuring mediumterm price stability in the economy. Singapore’s economy has also been tepid, with growth slowing more than expected in the fourth quarter as the manufacturing sector contracted in the face of erratic global demand, raising concerns about the outlook for 2015. Reutersx
Australian core inflation surprisingly high The largest increases came in tobacco, holiday travel and the cost of buying a home
inched up only 0.2 percent in the fourth quarter, while the annual pace of inflation slowed to 1.7 percent from 2.3 percent. While the quarterly rise in underlying inflation was high, the annual pace still moderated to around 2.25 percent, from 2.55 percent in the third quarter. That took it closer to the floor of the RBA’s long-term target band of 2 to 3 percent. The Australian Bureau of Statistics reported outright price falls for petrol, consumer electronics, mobile phones, drugs and fruit and vegetables in the quarter. The largest increases came in tobacco, holiday travel and the cost of buying a home. “When you look at the details, it’s still pointing to a well-behaved inflation environment,” said SuLin Ong, a senior economist at RBC Capital Markets. “It’s probably suggesting the RBA won’t do anything next week, but clearly it does not rule out some action potentially further down the track. That is very much in line with global developments.” Reuters
The floor of the Reserve Bank of Australia’s long-term target band is between 2 to 3 percent
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ustralian inflation braked to the slowest annual pace in two-and-a-half years last quarter as petrol prices plunged, yet surprisingly sharp rises in core inflation still dimmed prospects for a cut in interest rates next week. The Australian dollar surged almost a full U.S. cent after yesterday’s data showed key measures of underlying inflation increased by 0.7 percent in the fourth quarter, compared to the
previous quarter. That topped market forecasts of a 0.5 percent rise and was taken as diminishing the chances of an imminent cut in rates from the Reserve Bank of Australia (RBA). “There’s no smoking gun here that points to a rate cut,” said Shane Oliver, chief economist at AMP Capital Investors. “You could argue there’s room in here for the Reserve Bank to cut if it
so wishes, but the inflation numbers themselves aren’t going to drive that.” Market speculation about a rate move has been intense as an outbreak of policy easing stretching from the eurozone to Canada to India is pressuring other central banks to follow, if only to prevent their own currencies from rising. Neither did inflation seem an insurmountable bar in Australia. The headline consumer prices (CPI)
KEY POINTS CPI rises 0.2 pct q/q, slows to 1.7 pct y/y in Q4 Underlying inflation above forecasts at +0.7 pct q/q Markets scale back chances of a rate cut next week
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Asia
Thai central bank holds rates The central bank said it would not use interest rates to handle capital movements Orathai Sriring and Kitiphong Thaichareon
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hailand’s central bank yesterday left its benchmark interest rate unchanged at 2.0 percent, a level that still “supports” a struggling economy that it asserted is improving. The rate hold was expected by 16 of 20 economists in a Reuters poll. But a recent wave of monetary easing in the face of disinflation, including an unexpected move by Singapore early yesterday, created some uncertainty about the Thai decision. At its first meeting of the year, the monetary policy committee voted 5-2 to hold the one-day repurchase rate. The last meeting, on December 17, had an identical vote. Thailand’s junta, which took power in May, has been struggling to get the economy back on track as the country’s two main growth engines exports and domestic demand - have not been firing well. The 2014 growth rate will be announced on February 16 by the state planning agency. The central bank forecast only 0.8 percent, the weakest since flood-hit 2011. Last Friday, Finance Minister Sommai Phasee said the decision belonged to the Bank of Thailand (BOT), but he felt there “must” be an interest rate cut to help the sputtering economy. After yesterday’s meeting, the BOT said the economy improved in the
KEY POINTS Committee votes 5-2 to keep rate at 2.0 pct; two wanted 25 bps cut Says current rate level still supports economic recovery Economy to grow more than 4 pct y/y in Q1 -cbank Policy rate unchanged since March fourth quarter of 2014, and that it expects annual growth in JanuaryMarch - when there was a contraction a year earlier - will be more than 4 percent. The central bank said it would not use interest rates to handle capital movements, showing it sees rates as a less effective tool in managing fund movements.
Lagging fiscal stimulus The BOT said the two committee members wanting to cut rates cited higher global economy risks, low inflation - it was only 0.6 percent in
December - and “long implementation lag of fiscal stimulus.” In the past, the central bank has urged the government to speed up spending. The central bank said inflation might fall below its new target but did not see deflation. The policy rate has been held since March, when there was a 25 basispoint cut amid rising political tension. The army seized power in May in a bid to restore order. Although the May coup restored some confidence, domestic consumption has remained subdued, curbed by record-high household
C.bank says it doesn’t see deflation ahead
debt, and government spending has been slow. Faraz Syed, senior economist for Moody’s Analytics in Sydney, said the BOT “is hoping that fiscal stimulus would buttress demand in 2015, however we are yet to see the government provide any details on when this will occur. Reuters
Growth in Indonesian FDI commitments slows in 2014 By country, the biggest sources of FDI commitments in 2014 were Singapore, Japan, and Malaysia Gayatri Suroyo and Nilufar Rizki
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rowth in foreign investment commitments in Indonesia slowed in 2014, an election year, but interest is expected to pick up this year with a push by the new administration to speed up infrastructure projects and reduce red tape. Foreign direct investment (FDI) commitments to Southeast Asia’s largest economy rose 13.5 percent for full-year 2014, the Investment Coordinating Board (BKPM) said yesterday, much slower than the 22.4 percent increase in 2013. The head of the board said investors were in a “wait and see” mood last year. Parliamentary elections were held in April and presidential polls in July, with both candidates initially
claiming victory. Commitments rose 10.5 percent in the October-December period from a year earlier, compared with 16.9 percent in the third quarter, following a slowing trend since the beginning of the year. Actual spending figures were not immediately provided. President Joko Widodo, who took office on October 20, wants to spur economic growth from an estimated 5.1 percent in 2014 to 5.8 percent this year, mainly by relying on higher investment. He has set a modest target for FDI to reach 343.7 trillion rupiah (US$27.52 billion), up 12 percent from 307 trillion rupiah in 2014 for investments recorded by BKPM, which exclude data for banking as
well as the oil and gas sector. In an attempt to improve the investment climate, BKPM on Monday began to serve as a one-stop service for all investment licenses. Analysts said the move could help attract investors because they no longer have to fill in reams of forms and travel miles to get permits. Widodo also has to tackle other hurdles to investment such as land acquisition issues, and should provide tax incentives to attract more investors, said Juniman, a Jakarta-based economist with Bank Internasional Indonesia. The finance ministry has promised to revise several tax incentives. It has already scrapped a land tax that
companies paid while exploring for oil and gas, a move seen as a positive step by the industry. Indonesia needs huge FDI to help plug its wide current account deficit, predicted at 3 percent of gross domestic product this year, above the central bank’s healthy range. Commitments from China rose significantly in 2014, with China making it into the top 5 investors by country for the first time ever in the fourth quarter, said Azhar Lubis, deputy chief of BKPM. China’s investment commitments more than doubled to $800 million last year from US$328.7 million in 2013, ranking it eighth for the full year. Reuters
editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Luciana Leitão, Luis Gonçalves, Michael Armstrong, Sara Farr, Stephanie Lai, Óscar Guijarro, Kam Leong, Joanne Kuai GROUP SENIOR ANALYST José I. Duarte Brands & Trends Raquel Dias Creative Director José Manuel Cardoso Designer Francisco Cordeiro WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.
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Business Daily | 13
January 29, 2015
Asia
“Zombies” haunt Vietnam’s trade bonanza bid
S.Korea to reform distribution South Korea will aim to reform its product distribution structure this year in order to boost domestic consumption, which is expected to pick up in 2015 compared to last year, its vice finance minister said yesterday. “We have heard the recent fall in commodity prices, like oil, have not led to a decline in most product prices,” Vice Finance Minister Joo Hyung-hwan said at a meeting in Seoul to discuss inflation. Joo said the government attributes this price inflexibility to a complicated and monopolised distribution structure that limits competition.
Manufacturing and exports are largely driven by multinationals and state-owned energy and textile firms Lien Hoang and Mai Nguyen
Sony to cut 1,000 jobs Sony Corp plans to cut around 1,000 additional jobs in its struggling smartphone division as it tries to bring its electronics business back into the black, sources said yesterday. Sony, which has cut its earnings forecasts six times on Hirai’s watch, has forecast a 230 billion yen (US$1.95 billion) net loss for the business year to March, suspending dividend payments for the first time amid weakness in smartphones. The cuts would be in addition to the 1,000 jobs Sony already said it would eliminate in its mobile unit, the sources said.
LG says 2014 profit up
Prime Minister Nguyen Tan Dung has said Vietnam’s half-million companies are too few and too weak to compete
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guyen Nam owns an engineering services firm in Ho Chi Minh City that pays neither taxes nor any salaries. The flip side is it earns no revenue either. Nam calls it a “zombie”, a familiar term in communist Vietnam, where the government’s priority of luring foreign multinationals and resuscitating its own inefficient firms has left small and medium-sized enterprises (SMEs) in dire straits. Small enterprises are a vital link in Vietnam’s aspirations to become a global manufacturing dynamo as the country gears up to sign a slew of international trade deals, but many of these firms are uncompetitive, poorly managed and sunken by debt. A record 67,800 companies were shut last year - 60,737 in 2013 and 54,277 in 2012 - in an astonishing run of closures. “It’s really a waste,” said Nam, 34, who laid off staff as margins shrank. “It hurt, because it’s like...your own child and if you find it dying, you’ll feel very sad about that. That’s exactly what I felt.” SMEs make up nine-tenths of local companies, but firms such as Nam’s, survive only in name, accounting for millions of dollars in unpaid loans and taxes. It’s a headache for the state, which injected stimulus of US$9 billion to rescue firms in 2009, with limited success.
Partnership (TPP) is agreed that will slash tariffs among 12 countries worth 40 percent of global GDP, including Japan and the United States. A European Union trade deal and an integrated Southeast Asian market coming soon are also putting Vietnam on the radar of investors drawn by tariff perks, infrastructure improvements, cheap labour, tax breaks and political stability. However, the government has a lot more to do to win over foreign firms, which have invested an average US$11.3 billion a year since 2010. Most still import raw materials and can’t find good local suppliers, such as Samsung, which has US$11.2 billion of pledged investment in Vietnam but uses its firms only for packaging. “SMEs’ limited knowledge of the market become even more limited amid deeper integration,” said former central bank governor Cao Si Kiem, now chairman of Vietnam’s SME association. That strain is showing in the US$138 billion retail market, where weak spending has hurt local shops, compounded by expansion of operators keen to exploit the fastswelling middle class, among them
Global challenge looms Vietnam is climbing out of a halfdecade slowdown but manufacturing and exports of the US$184 billion economy are largely driven by multinationals and state-owned energy and textile firms. Supportive industries are woefully weak and few firms have the capital or expertise to join a supply chain for resident giants such as Samsung, LG Electronics, Microsoft and Intel. Such weaknesses could expose Vietnam as it braces for an influx of investment once a Trans-Pacific
Vietnamese firms will have to reform and change direction very strongly Le Dang Doanh former Vietnam’s government adviser
Aeon, Robinson Department Store and Lotte Shopping.
Bribes for borrowing Shunned by banks, saddled themselves with bad debt ratios that are among Asia’s highest from careless lending, many SMEs are stuck in a credit trap. What irks business owners is that SOEs, notorious for graft and wastefulness, account for half of Vietnam’s credit and many nonperforming loans but still get preferential treatment. Nguyen Son has a publishing firm in Ho Chi Minh City that has published nothing since 2011. He says he paid a bribe to get a loan - with interest at more than 20 percent. “For ordinary people like me, it’s very difficult, but for big businessmen with support from authorities, from politicians, it’s easy,” he said. To be sure, a government paper last month outlined plans to improve domestic competitiveness, “with a socialist orientation”. It said bad loans would be settled, local goods promoted, procedures simplified and SMEs given better credit access. However, it did not say how the aims would be achieved. There are scattered signs of hope though. Vietnam’s textile factories are punching above their weight and could eclipse China in TPP markets. Last year, it shipped US$31 billion of garments and footwear, including a tenth of the world’s shoes. And as firms close in their droves, new ones are also setting up - 74,842 last year and 76,955 in 2013. Key to their survival, according to former government adviser Le Dang Doanh, is a shift in the state’s priorities to building a domestic business bedrock. “We’re excessively chasing after foreign firms...we can’t industrialise on the basis of foreign firms. We cannot say our brand is Samsung,” Doanh said. Reuters
South Korea’s LG Electronics yesterday said its 2014 operating profit rose 46 percent to 1.8 trillion won (US$1.66 billion), buoyed by strong demand for television sets as well as a turnaround in its smartphone business. The result was largely in line with analysts’ estimates for a 1.9 trillion won profit. LG said it had made a 1.2 trillion won profit for 2013. For the October-December quarter alone, LG booked a profit of 257 billion won, according to Thomson Reuters calculations based on the electronic goods maker’s prior disclosures.
Bradken says takeover deal fails Australian mining products maker Bradken Ltd said private equity bidders Bain Capital and Pacific Equity Partners pulled a US$730 million takeover proposal because of volatility in the commodities sector, sending its shares down by a third. Bradken said in a statement yesterday that the would-be buyers had walked away citing difficulties in obtaining financing due to volatility in global commodity and money markets. The proposal’s collapse underscores the stress that companies which service the mining sector have come under since plunging commodities prices.
Vietnam’s industrial production to fall Vietnam’s industrial production index is estimated to fall by 2.8 percent in January over the previous month, the General Statistics Office said yesterday. The office said in a monthly statistical report that the January index is likely to increase by 17.5 percent compared to the same period in 2014. Among the industries, the processing and manufacturing sector is estimated to grow by 19.4 percent year-on-year, contributing 12.3 percentage points to the overall growth.
16 | Business Daily
January 29, 2015
Closing HK chief executive to visit Guangzhou, Shenzhen
China’s forest products trade reaches US$138 bln
Hong Kong Chief Executive Leung Chun-ying (pictured) will visit Guangzhou and Shenzhen on January 30 to call on officials, according to local government website yesterday. HK Chief Secretary Carrie Lam will lead a government delegation to Shenzhen to co-chair a meeting with the city’s mayor. She will also accompany Leung to meet Communist Party of China (CPC) Shenzhen Municipal Committee Secretary Wang Rong after the meeting. Hong Kong’s Secretary for Constitutional & Mainland Affairs Raymond Tam, Secretary for Education Eddie Ng, Secretary for Development Paul Chan and Director of Information Services Patrick Nip will accompany the chief executive.
ThecombinedexportandimportvalueofChineseforest products like wood and bamboo climbed to US$138 billion last year, the state forestry administration (SFA) said yesterday. The figure represented growth of 9.5 percent from 2013. Total output of the forestry industry reached 5.26 trillion yuan (US$858 billion) in 2014, up 11.1 percent. Of the total, wood and bamboo products along with commercial forest planting each contributed more than 1 trillion yuan. China supports development of forestry tourism and recreational industries, biopharmaceuticals, flower and seedling trees planting, said Zhang Jianlong, deputy head of the SFA.
Apple takes high road in China smartphone standoff with Xiaomi The company plans to roll out around 20 new China stores by 2016 Adam Jourdan
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pple is steering clear of Chinese rival Xiaomi Inc’s low-price online strategy, ramping up store openings in China to harness its premium edge and fend off the fast-growing No.3 global smartphone maker. The U.S. firm’s quarterly results smashed Wall Street expectations with record iPhone sales in the holiday season and a 70 percent rise in China, powering the company to the largest profit in corporate history. Its result in China, as well as other emerging markets such as Brazil, marks a riposte to critics who questioned the firm’s strategy a year ago not to launch a cheaper phone to lure cost-conscious buyers from Xiaomi and Samsung Electronics Co Ltd. Apple plans to roll out around 20 new China stores by 2016, likely located in glitzy locations and rubbing shoulders with outlets for luxury brands such as Chanel and Hermes International SCA. For Apple, brick-andmortar stores help it maintain a premium image, from the
product to in-store service and even packaging, allowing the firm to charge far higher prices than rivals - vital to its enviable profit margins. “If you could only get an Apple product online, then there wouldn’t be the same user experience and so people might not be so willing to buy. After all, it’s an expensive product,” said Shi Xinchao, 24, a civil servant in Jiangsu province.
What’s next? Apple’s quarterly leap may be hard to replicate, with the launch of largescreen iPhones and a tie-up with telecoms operator China Mobile Ltd in late 2013 lifting last year’s numbers. “People had been waiting for large-screen iPhones for a long time. The demand had piled up and Apple hadn’t been able to meet it,” said Nicole Peng, research director for Canalys in China. Canalys data showed Apple outsold all other smartphone makers in China by units shipped in OctoberDecember 2014, making it
In the long run Xiaomi is more of a threat to Apple than say Samsung. But the way Apple fights that is to further differentiate, not by trying to compete on Xiaomi’s turf, which is low cost Ben Thompson, analyst, Stratechery.com
the country’s top seller for the first time. However, some were already asking what Apple’s next driver of growth in China
For Apple, bricks-and-mortar stores help it maintain a premium image, from the product to in-store service and even packaging
would be and how the firm would fend off Xiaomi’s longer-term challenge. Xiaomi unveiled the Mi Note earlier this month, its challenger to Apple’s iPhone 6 Plus. At 2299 yuan (US$371) for a model with 16 gigabytes of memory, the Mi Note costs almost two-thirds less than its Apple rival. The Chinese firm, which sold its first phone just over
three years ago, has also been moving into other personal and home devices that would be compatible with Xiaomi phones, helping it retain users. “This could lock in Xiaomi’s younger generation, low-income users from migrating to other brands like Apple,” said Gartner analyst C.K. Lu. Reuters
Qatar set to buy London’s Canary Wharf district
Wanted: Asia-focused banker H&M earnings miss forecast for StanChart’s top spot as investments weigh
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atar looked to have won a drawn-out bid to buy London’s Canary Wharf yesterday after the owner of the landmark office quarter said its main shareholders favoured a sale. The board of Songbird, which controls 69 percent of Canary Wharf Group, appeared to concede defeat despite stressing that the offer worth £2.6 billion (US$4.0 billion, 3.5 billion euros) remained undervalued. It added however that “the board... continues to believe that the offer does not reflect the full value of the business, its unique operating platform and its prospects”. Sovereign wealth fund Qatar Investment Authority (QIA), in partnership with US group Brookfield Property Partners, had in December proposed an improved “final offer” for Songbird. The cash bid, pitched at 350 pence per share, compared with a previous 295-pence-per-share or £2.2-billion offer that was rejected last November. QIA, which owns Harrods department store and the Shard skyscraper in London, already has a 28.6-percent stake in Songbird. AFP
tandard Chartered is seeking a leader with a tough-to-find mix of Asian experience and regulatory clout as it kicks off the search for a successor to CEO Peter Sands, investors, bankers and head-hunters told Reuters. The list of potential candidates is wide and includes Piyush Gupta, CEO of Singapore-based DBS, outgoing Westpac CEO Gail Kelly, National Bank of Abu Dhabi’s boss Alex Thursby, ANZ CEO Mike Smith and Antonio Horta-Osorio, CEO of Lloyds Banking Group. Sands steered the global bank out of the financial crisis and into a string of record earnings during his eight-year tenure, but is now under pressure from top shareholders after a surge in bad loans on the back of slower Asian growth hit profits and triggered a 43 percent slump in its share price. Three of the bank’s top 30 investors, fed up with the pace of Sands’ turnaround strategy, told Reuters in December Sands should be replaced, probably this year. Reuters
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ennes & Mauritz, the world’s No.2 fashion retailer, missed quarterly earnings forecasts as it spent heavily on new ranges and websites in its battle with cut-price rivals, a drive it plans to extend in 2015 with a new beauty line. H&M said on Wednesday pre-tax profit rose 7 percent to 7.80 billion Swedish crowns (US$953 million) in the three months ended November, missing analysts’ average forecast of 7.96 billion as it booked a staff incentive pay-out. The Swedish company is investing heavily in new concepts including sportswear and higherprice brands such as COS to try to protect margins over the long term as discount chains Primark and Forever 21 push prices down. It aims to keep that up in 2015, planning to add 400 stores to its current 3,511, bring online sales to another nine markets and launch a new range of beauty products, as well as speeding up expansion of upmarket brands including COS. Reuters