MOP 6.00 Closing editor: Sara Farr Publisher: Paulo A. Azevedo Number 721 Tuesday February 3, 2015 Year III
8 months in a row
The downward spiral continues. Y-o-y gaming revenues have now declined for eight consecutive months. In January, Macau casinos raked in MOP23.7 billion. Down 17.4 pct from a year ago. And the lowest since January 2011. Hopes are pinned on the new resorts, with the first opening in May. But before that, analysts are braced for what is likely to be a very poor February. Galaxy currently leads the pack in terms of market share with 22.5 pct Page 4
Pay slip
Best bank brands
The wage gap is widening. Local construction workers earn on average 37 pct more than non-local workers. Last year, the average daily difference was MOP348. And the difference increases going up the ranks for skilled and semi-skilled positions. While a local concrete formwork carpenter commands MOP1,242 per workday, his non-resident counterpart picks up just MOP649
Macau banks are moving in rarified circles. As many as five are represented in the top 10 of the global 500 Most Valuable Banking Brands: Commercial Bank of China, China Construction Bank, Bank of China, HSBC and Citibank. American outfit Wells Fargo, however, still tops the list
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HSI - Movers February 2
Name
%Day
Tencent Holdings Ltd
2.88
Henderson Land Devel
1.99
Hutchison Whampoa L
1.75
Year of the Boat
China Overseas Land
1.56
Lenovo Group Ltd
1.39
Li & Fung Ltd
-2.08
China Life Insurance
-2.29
It’s confirmed. The 444-room 4-star Harbourview Hotel at Macau Fisherman’s Wharf is set to have its grand opening on February 11. Just in time for Chinese New Year. Yesterday was the hotel’s soft opening. And represents the first of three new hotels coming on-stream in MFW
Ping An Insurance Gr
-2.30
Hengan International
-2.44
Want Want China Hol
-2.58
Source: Bloomberg
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Turning the corner
5
Ma richest, again
Brought to you by
New Era bus company is in the red. Losing as much as MOP1.81 million since taking over Reolian’s bus services. But it’s not all bad news. The company says in December 2014 it registered a profit of MOP2.43 million
Strategy outcome granted Jack Ma the millions he needed. To occupy the throne once more of richest Asian. He’s preparing for an eventual IPO for his payment firm Ant. But enjoying the results, it seems, before the action even starts
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2 | Business Daily
February 3, 2015
Macau
Mainland Customs to further embrace CEPA
New Era sees dawn after piling up losses
M
acau New Era Public Bus Co. Ltd. has accumulated losses of MOP1.81 million (US$226,630) since it took over bankrupt Reolian Public Transport Co. Ltd’s bus services in the middle of last year. Nevertheless, profits of MOP2.43 million were registered in December 2014, the general manager of the company, Daniel Fong, said at the company’s Chinese
New Year celebratory dinner on Sunday. The improvement was due to the operational costs of the company decreasing following the reduced fuel and gas product prices, the general manager said, indicating that the company will be in the black in 2015, local broadcaster TDM Radio reported. “If the gas price remains at the current level, with the
efforts of our colleagues, we believe that the loss will be turned to profit this year based on our analysis,” Mr. Fong said. Contacted by Business Daily, Mr. Fong declined to give further comments on the results of New Era, saying that there will be a press briefing by New Era on Thursday. In fact, according to TDM, the general manager also claimed on Sunday that New Era’s turnover had increased by 20 per cent since the takeover last year, indicating it was due to the higher motivation of drivers following the company’s improved remuneration scheme, whereby the highest salary earner can make MOP21,000. On the other hand, Mr. Fong said that New Era is striving to improve its score in the government’s review of bus services, hoping to reach 70 marks in 2015 from some 60 marks last year. In addition, the company is hoping to fully reach its frequencies standard as well as decrease the accident rate by 10 per cent. K.L
B
y the end of 2014, goods worth a total of US$8.56 billion had been imported to the mainland from Hong Kong and Macau, with preferential duty reaching some RMB4.71 billion. The latest data was released yesterday by the General Administration of Customs of China showing these figures since the Mainland-Hong Kong and Mainland-Macau Closer Economic Partnership Arrangement was put into practice in 2004. Goods from Hong Kong and Macau were worth US$8.47 billion and US$85.86 million, respectively, while preferential duty was 4.67 billion yuan and 44.18 million yuan, respectively. The spokesperson of the General Administration of Customs of China, Zhang Guangzhi, said that Customs would discuss the promotion of the electronic version of the certificate of origin in order to simplify procedures during border crossing and further promote the Mainland-Hong Kong and Mainland-Macau Closer Economic Partnership Arrangement. When meeting with the
Director General of the Customs Service, Lai Man Wa, in Beijing last week, Director of the Board and Minister of General Administration of Customs of China, Yu Guangzhou, said that both sides would work on more simplified border crossing procedures, enhance co-operation in law enforcement, and better communicate on major projects, such as the Hong Kong-Zhuhai-Macau Bridge. The newly inaugurated Macau Customs Chief, Lai Man Wa, also pledged to enhance co-operation under the ‘one country, two systems’ framework with her mainland counterparts.
Business Daily | 3
February 3, 2015
Macau In one year: 20,000 more new cars and motorcycles
Five ‘Most Valuable Banking Brands’ represented in Macau
L
The 500 Most Valuable Banking Brands list has been published, with five banks represented in Macau making it into the top ten. In total, some 16 institutions on the list operate in the Special Administrative Region João Santos Filipe
jsfilipe@macaubusinessdaily.com
F
ive banks represented in Macau have made it into the top ten of the 500 Most Valuable Banking Brands list, which is published every year by the consultancy firm Brand Finance and banking industry publication The Banker. The top ten includes the Chinese banks Industrial and Commercial Bank of China (2), China Construction Bank (4) and Bank of China (9), all part of the Chinese big four, and all represented in Macau. The other banks to make it into the top ten that operate in Macau are the British HSBC (3) and the American Citibank (5). In 2014, Chinese banks managed to perform stronger than their foreign counterparts and as a result managed to climb onto the list, as explained by the publications. ‘Citi, Bank of America and Chase, America’s 2nd, 3rd and 4th most valuable bank brands, have been overtaken by both ICBC and China Construction Bank. When the world’s bank brands are ranked by the brand value they have added this year five of the top six are Chinese. China Construction Bank has added more than any other, US$7,463 billion since the 2014 study, to reach a total of US$26.4 billion’, it is highlighted about the emergence of the Chinese big four in the list. However, looking at all the banks present on the list and considering the parent companies of banks present in Macau, a total of 16 institutions are operating in the Special Administrative Region, based in regions such as Portugal, Taiwan and Singapore. Regarding the 10 Most Valuable Banking Brands in Asia Pacific, Macau has four representatives all based in China. ICBC ranks first, followed
Position 1 2 3 4 5 9 31 48 52 56 74 96 185 213 216 279 343
ast year, more than 20,000 new cars and motorcycles started running on Macau’s streets taking the total number of vehicles here to 240,000. Today, there’s around one vehicle per 2.5 residents in the territory. According to data published by the Statistics and Census Service yesterday, the number of new registrations of motor vehicles (light cars and motorcycles) totalled 20,374, an increase of 6.4 per cent from a year ago. Motorcycle sales increased 18 per cent, the report said. In December alone, new vehicles registrations reached 1,933, up 19.2 per cent year-on-year. With more cars and motorcycles on Macau’s roads, traffic accidents also rose last year. The number of traffic accidents went up 6.3 per cent in 2014 to 16,024, while in December crashes increased by 18 per cent to 1,503. According to official data, the 240,000 cars and motorcycles currently plying Macau are 20 per cent more than in 2010, meaning 40,000 vehicles within the confines of the same available space. L.G.
Applications accepted for university student subsidies by China Construction Bank, which is second. Bank of China is fourth, following Agricultural Bank of China, while Bank of Communications (31st overall) is ninth in the Asia Pacific region.
Wells Fargo tops list While Chinese banks tended to perform strongly over the last year, Wells Fargo is still considered to have the Most Valuable Banking Brand. The North American institutions are the most represented in the top tier. ‘America’s banks remain the most valuable in the world. 60 American bank brands feature in the global top 500, with a cumulative brand value of US$201 billion. Wells Fargo is not
Bank Wells Fargo ICBC HSBC China Construction Bank Citi Bank of China Bank of Communications Standard Chartered China CITIC Bank DBS OCBC Bank (OCBC Wing Hang) Hang Seng Bank BEA Banco Comercial Portugues Caixa Geral de Depositos (BNU) Sinopac Holdings First Commercial Bank
Location United States China United Kingdom China United States China China United Kingdom China Singapore Singapore China China Portugal Portugal Taiwan Taiwan
Note: In same cases, such as in BNU and OCBC Wing Hang Bank, Business Daily adopted the value of the parent company
just the most valuable banking brand in the US but across the world. Its brand value now stands at just short of US$35 billion’, it is stressed, albeit the Chinese banks are gaining ground on their American counterparts. On the other hand, European banks have been struggling with the economic slowdown, impacting the value of their brand. ‘Hampered by slow growth in the Eurozone, a majority of brands from Western Europe have actually lost value and some have dropped out of the global top 500 altogether. The total brand value of Spanish brands in the table is -2 per cent, the UK -3 per cent, Italy -5 per cent, Germany -6 per cent and France -19 per cent’, the report notes.
Brand Value (US$ million) 34,925 27,459 27,280 26,417 26,216 20,392 7,124 5,162 4,897 4,416 2,787 2,113 794 605 594 422 343
T
he registration website and hotline of the Tertiary Education Services Office enables university students to apply for a ‘Learning Materials Subsidy Scheme for Tertiary Students’ in the academic year 2014/2015 as published in yesterday’s Official Gazette. Eligible students will get a subsidy of MOP3,000, with some 34,000 students expected to benefit from this scheme. The budget for the subsidy is around MOP102 million. Beneficiaries must be Macau residents studying a tertiary course of no less than two years’ duration either in the SAR or other institutions recognised by local authorities.
Gov’t establishes MOP250-280,000 academic research scholarship
T
he Secretary for Social and Cultural Affairs has signed a dispatch authorising the establishment of an academic research scholarship. The scholarship will be awarded by the Cultural Affairs Bureau as published in yesterday’s Official Gazette. Both locals and non-locals with a doctorate degree and academic research experience or with academic results publicly recognised can apply for the annual scholarship from March until May every year. The scholarship will be handed out yearly. Awards will vary: some will receive MOP250,000 and some MOP280,000. The amount will be determined by a special committee under the Cultural Affairs Bureau.
4 | Business Daily
February 3, 2015
Macau
Gaming industry suffers January blues as revenues drop 17pct Gaming operators are seeing revenues cut for an unprecedented period of eight months, as the crackdown on corruption and the smoking ban continue to hit the industry João Santos Filipe
jsfilipe@macaubusinessdaily.com
M
acau casinos’ gross gaming revenues in January dropped to their lowest level since 2011 as operators cashed in MOP23.748 billion (US$2.97 billion) for the first month of this year, data published yesterday by the Gaming Inspection and Co-ordination Bureau reveals. The last time gaming revenues hit such a low point in January was in 2011, when gaming operators generated gross revenues of MOP18.571 billion (US$2.33 billion) in the first month of the year. In relation to January last year, casino revenues shrank 17.4 per cent from MOP28.739 billion (US$3.60 billion) to MOP23.748 billion. Revenues have now been dropping for an unprecedented eight consecutive months since the market was liberalised in 2002. Also in 2014, it was the first time on calendar-year terms that gaming revenues had decreased, dropping 2.6 per cent from MOP360.7 billion (US$44 billion) in 2013 to MOP351.5 billion (US$45.2 billion). The January fall in revenues is within the expectations of gaming analysts that predicted earlier last month that revenues would decline between 16 and 18 per cent. Macau revenues have been dragged down by the corruption crackdown driven by the President of the Central Government Xi Jinping, which has ensnared VIP gamblers, and by the adoption of a stricter transit visa policy that is hurting the mass market. Another factor that has been said by industry analysts to be affecting gaming revenues was the implementation on October 6 of a stricter anti-smoking policy inside gaming venues. Concerning the coming months, the situation is not likely to change until the new resorts start to operate in May, according to respected CLSA analyst Aaron Fischer. However, the worst has yet to come in terms of gaming revenue decline.
Market Share by Gaming Operator June
July
August
September
October
November
December
January
24.90%
24.10%
22.40%
20.90%
23.50%
22.60%
23.60%
21.90%
22%
23.10%
24.60%
21.80%
23.70%
22.50%
20.65%
20.40%
Galaxy
21.10%
20.60%
21%
22.90%
21.40%
21.50%
20.15%
22.50%
MPEL
12.20%
12.40%
13%
12.70%
14.30%
13.40%
14.90%
14.70%
MGM
10.30%
8.70%
8.90%
10.80%
8.20%
11%
10.50%
10.10%
Wynn
9.50%
11.10%
10.10%
10.90%
8.90%
9%
10.20%
10.40%
Total
100%
100.00%
100.00%
100%
100%
100%
100%
SJM Sands China
“It will be close to a 40 per cent fall for sure. February this year will represent the worst month in terms of percentage decline”, said Fischer in an interview with Business Daily early last month. In terms of market share Galaxy Entertainment Group is back on top with 22.5 per cent, according to data compiled by Business Daily. With Galaxy Phase II and Broadway at Galaxy opening on May 27 the position of the group founded by Lui Che Woo seems comfortable in this respect. SJM ranked second in terms of market share, with Sands third.
Landing Jeju groundbreaking Feb. 12
C
hina real estate developer Landing International Development Ltd. has announced that it is to hold a groundbreaking ceremony on February 12 to kick off the construction work of its new casino project ‘Myth-History Park’ on Jeju Island in South Korea. The developer filed with the Hong Kong Stock Exchange on Sunday evening stating that there will be a groundbreaking ceremony held by its direct non-wholly owned subsidiary Landing Jeju Development Co., Ltd. (Landing Jeju). According to the filing by the developer, it is permitted by the Korean authorities to develop and construct a gaming and integrated
100% Source: Business Daily
resort occupying a total gross floor area of approximately 306,763 square metres, comprising premium hotels and villa hotel and other conferencing and exhibition facilities. Following the news release of the groundbreaking ceremony, the shares of the company rose 2 per cent yesterday morning since the stock market opened. The casino project is a 50-50 joint venture by Landing Int’l and Genting Singapore Plc. The two companies are investing some US$2.2 billion in the project, which targets Chinese gamblers, according to its first announcement of the project in February 2014. K.L.
Corporate ICBC issues Chimelong Platinum Card Industrial and Commercial Bank of China (Asia) Limited (ICBC) and Guangdong Chimelong Group Co. Ltd. have joined hands to issue the ICBC Chimelong Visa Platinum Card and UnionPay Dual Currency Platinum Card. According to a company statement, platinum cardholders can enjoy a 50 per cent discount on purchasing the first admission ticket of the Chimelong Paradise, Chimelong Water Park, Chimelong International Circus, Chimelong Safari Park, Guangzhou Crocodile Park, Zhuhai Ocean Kingdom and Zhuhai Chimelong International Circus City. ‘For every HKD/RMB 1 spent with the ICBC Chimelong Platinum Card, cardholders will be entitled to 0.5 per cent cash rebate. The rebate amount will be calculated on a monthly basis, and shown in the next monthly statement. ICBC Chimelong UnionPay Dual Currency Platinum Card has both HKD and RMB accounts on one card, thus you can spend or withdraw in the local currency across the Mainland and Hong Kong, and enjoy a waiver of foreign exchange fees when spending in RMB and foreign currencies,’ the statement added.
BNU, Asia Miles launch co-brand credit card Banco Nacional Ultramarino (BNU) and Asia Miles have launched the BNU Asia Miles Visa Card, allowing its cardholders to earn Asia Miles directly through spending. The card is available in all 18 BNU branches, and in two card types – Platinum Visa and Gold Visa, the company said in a statement, adding that advantages include the exclusive Asia Miles earning rate in Macau – for Platinum Card, 1 Asia Mile will be earned for every MOP10 spent in Macau, Hong Kong and mainland China or MOP5 spent for overseas transactions; auto-converted into Asia Miles for free. Pedro Cardoso, CEO of BNU, said the goal is to “bring to customers the advantages of earning Asia Miles while they use their card for daily normal purchases”. Stephen S Y Wong, CEO of Asia Miles, said, “This partnership represents a great opportunity for Asia Miles to extend our footprint in Macau. I believe that the many exciting and unique benefits of the card will enhance members’ experiences.”
Business Daily | 5
February 3, 2015
Macau
Pre-CNY grand opening for Harbourview Hotel The 444-room hotel at Macau Fisherman’s Wharf had its soft opening yesterday, and is set to have its grand opening on February 11 Stephanie Lai
sw.lai@macaubusinessdaily.com
M
acau casino and hotel operator Macau Legend Development Ltd. said yesterday that Harbourview Hotel, the first of its three new hotels in the waterfront theme park Macau Fisherman’s Wharf, will have its grand opening on February 11 – just prior to the upcoming Chinese New
Year holiday. The new 444-room hotel, completed in November last year following over a year of construction, had its soft opening yesterday, Macau Legend announced in a filing with the Hong Kong Stock Exchange yesterday morning. ‘The company has received all the
necessary licences for the operation of the Harbourview Hotel, the first new hotel in the redevelopment of Macau Fisherman’s Wharf,’ Macau Legend revealed in its filing. The casino operator also noted that with the opening of Harbourview Hotel it would enhance gaming facilities at the Macau Fisherman’s
Wharf by allocating 35 additional gaming tables to Babylon Casino, which is connected to the new hotel via a footbridge. The 35 additional gaming tables were granted by the city’s casino regulator Gaming Inspection and Co-ordination Bureau (DICJ) last year, and comes as a table allocation via Sociedade de Jogos de Macau S.A. (SJM). SJM provides the gaming licence for Macau Legend, headed by former legislator and businessman David Chow Kam Fai. Macau Legend currently operates two casinos in the city: Pharaoh’s Palace Casino in the Landmark Hotel and Babylon Casino in Macau Fisherman’s Wharf. By the end of the third quarter of last year – prior to the approval of the 35 additional gaming tables – Macau Legend had 150 gaming tables in operation, the company said in its third quarter results report. The redevelopment of Macau Fisherman’s Wharf is expected by Macau Legend to boost its gaming tables to 500. ‘As the redevelopment of Macau Fisherman’s Wharf progresses, the board expects that more gaming tables will be granted by the DICJ to the company on an incremental basis to support the redevelopment of Macau Fisherman’s Wharf,’ Macau Legend said in yesterday’s filing. The overhaul of the waterfront Macau Fisherman’s Wharf calls for three more new hotels to the site with the 4-star Harbourview Hotel the first completed for occupation. Housing no gaming facilities, the Harbourview Hotel is directly connected to a slot hall called Flamingo Casino via a footbridge. Co-chairman and chief executive officer of Macau Legend David Chow told media in November that his company was in talks to have a Macauslot sports betting centre set up in the slot hall. Sociedade de Lotarias e Apostas Mutuas de Macau, Limitada [SLOT, commonly branded as Macauslot] holds the monopoly to run the non-racing sports betting on football and basketball matches here. Business Daily approached Macau Legend for an update on the gaming facilities that the Flamingo Casino will house and its operational date, but did not receive a reply by the time the story went to press.
Success Universe expresses interest in gaming licence Currently running on the SJM licence, Success Universe boss Hoffman Ma has expressed interest in bidding for its own gaming licence – if such an opportunity is permitted by the Macau Government in future
T
he operator of the city’s Ponte 16 casino Success Universe Group Ltd. said it has an interest in acquiring a gaming licence of its own, although Macau has yet to start the mid-term gaming licensing review regarding the extension of the current gaming licences. “If there’s an open bid for the gaming licence, for sure we’ll be interested,” said executive director and deputy chairman of Success Universe Hoffman Ma Ho Man – as quoted by Chinese-language Hong Kong Economic Journal in an article published yesterday. Casino Ponte 16, one of Sociedade de Jogos de Macau S.A.’s (SJM) 14 ‘satellite’ casinos, is 51 per cent owned by SJM while Success Universe acts as the third-party promoter controlling most of the business on the site.
Talking to the Hong Kong media outlet, Mr. Ma expressed his belief that local junket operators and satellite casino operators would also be interested in gaining a gaming licence of their own if the Macau Government decides to launch an open bid for a new gaming licence. The six gaming concessions and sub-concessions of Macau will expire in 2020 and 2022. The local government has mentioned several times recently that it is set to start the mid-term gaming licensing review this year, which will serve as a basis for the government to shape future gaming development. In a gathering with media on January 18, when asked whether a new gaming licence will be issued prior to the expiry of the existing gaming concessions, Secretary for
Economy and Finance Lionel Leong Vai Tac declined to directly respond. At the time, the Secretary only stressed that the government would examine the non-gaming elements developed by the casino operators, and whether they have executed the promises made in their concession contracts and had fulfilled their corporate social responsibilities. A report released last month by Hong Kong-based Steve Vickers and Associates Ltd. (SVA) suggests the possibility of the Macau Government endorsing a ‘local competitor’ as a gaming concessionaire. ‘The concessionaires expect easy renewals but the visibility of US companies, such as Las Vegas Sands and Wynn Resorts, and nationalist feelings in China could tempt the government to endorse a local
competitor,’ says SVA in its chapter on Macau in the report 2015 Asia Risk Assessment. SVA is a specialist risk mitigation, corporate intelligence and risk consulting company. Speaking to Hong Kong Economic Journal, Mr. Ma said that the issue of gaming licensing would be a decision made by the central and local government taking into account China’s overall interests, especially the mutual development with Zhuhai and Hengqin Island in Guangdong Province. The Success Universe boss also believes that the Macau market can still “accommodate one or two more gaming licence holders” in the face of the new wave of new casino-resort openings over the course of the next two years. S.L.
6 | Business Daily
February 3, 2015
Macau Brands
Trends
Signing up for gold Raquel Dias newsdesk@macaubusinessdaily.com
T
he Lunar New Year is a millennial celebration, with each of its12 animal signs often turned into elegant representations in the various mediums available. It’s also worth remembering that during any given year certain signs might need some protection. If you have a look at the circle below you’ll see all 12 sings have an opposite animal. The Goat (Sheep or Ram) has the Ox as it’s opposite. That means people born under this sign are in opposition. Experts suggest they wear a Horse pendant to shoo the Goat away. For other signs, the soothsayers say it’s O.K. to wear your own animal or even the Goat as a pendant. Gold’s always auspicious so even if you’re not a believer it never hurts to follow tradition. The TLS 24k gold pendants are available in every sign and are a good choice. If you want something more refined, Chopard chooses to celebrate what they call ‘The most artistic of the Chinese zodiac signs’ - the Goat. To do this, the brand has created a special themed dial driven by an ultra-thin L.U.C movement. Peaceful and creative, the Goat fights against injustice without ever losing its temper (so we’re told!). Let’s hope the year ahead stays true to character.
Thai Airways to reduce Bangkok-Macau flights
T
hai Airways International is planning to reduce the frequency of its flights to Macau due to a deep restructuring plan involving cutting costs and staff redundancies. The first stage is to reduce or halt the loss-making routes, of which Macau is included. Speaking to Thailand’s Nation TV, the airline’s president,
Charamporn Jotikasthira, said that 10 per cent of Thai’s existing network would be cut. The Bangkok-Macau connection will see a reduction of frequencies, with Mr. Jotikasthira not detailing how much. The Macau route is operated by Thai’s budget carrier Thai Smile and offers 14 flights per week.
PokerStars hiring in Macau
The changes will likely be applied in the second half of the year, together with the end of flights from Bangkok to Madrid, Moscow, Los Angeles and Seoul (from Phuket). Thai Airways registered a US$280 million loss in the first three quarters of last year, a performance that triggered the restructuring plan.
IPIM: Macau SME’s can learn from Korea
F
P
okerStars is hiring in Macau after the new owner of the biggest online poker company, Amaya, launched plans to expand the company’s staff and invest in casino and sports betting, New Jersey Poker Online reported. Currently with 1,500 employees, PokerStars is willing to hire at least 70-plus, with some coming from Macau and 27 related to the casino industry. Amaya is a Canadian gaming company that paid US$4.9 billion to acquire
PokerStars to become the world’s market leader in online poker. From Macau, PokerStars needs to fill two event management positions: an assistant tournament director fluent in Chinese and English, and an events co-ordinator for PokerStars Macau. Prior to the PokerStars deal, Amaya focused on providing products and services to other businesses in the gaming industry. The company was founded in 2004 as a maker of software for electronic poker tables.
ollowing recent experiences in mainland China, Japan and Taipei, the Macao Trade and Investment Promotion Institute (IPIM) wants to improve local small and medium-sized enterprises’ (SME’s) know-how with a new seminar and trip to South Korea. The goal, says IPIM, is to ‘enable SMEs to understand more about marketing, promotion and management practices adopted by overseas enterprises’. In order to pursue ‘creative innovation and business transformation’ IPIM is going to organise on February 7 a training seminar on the ‘Best Practices of Branding, Marketing and Human Resources Management of Korean Enterprises’ with the Korea Franchise Association (KFA). The seminar will include the presence of experts who will share their experiences in branding and management strategies, application of technology and successful cases. The SME training programme, followed by a study trip to Seoul, will ‘include site visits to enterprises in various industries; hence, enabling participants to learn more about the successful business practices of overseas enterprises’, wrote IPIM.
Business Daily | 7
February 3, 2015
Macau
Construction wage gap widens In 2014, a local construction worker in Macau earned 37 per cent more than a non-resident one, with wage inequality growing the more skilled the employee, official data reveals. Meanwhile, non-resident real wages were 2 per cent lower than in 2010 Luís Gonçalves
luis.goncalves@macaubusinessdaily.com
W
ith the price of building materials increasing over the years and with huge projects in the pipeline - the new Cotai casino resorts are a prime example – construction companies here decided to cut costs through workers’ salaries, namely the nonresident ones. Official data from the Statistics and Census Bureau reveals that despite an inflation of 6 per cent, and rent prices doubling every year, real wages in the sector have simply lagged behind. Since 2010, the real wages (discounting inflation) of a local construction worker increased 29 per cent, while overall wages (including those of locals and non-residents) in the sector decreased by 2 per cent. This difference means that the salaries of non-resident workers dropped by much more than 2 per cent (DSEC does not cite a separate figure for this index). As with every average, it hides some truths. And one is that resident
workers’ salaries are increasing at the same speed as construction materials, while non-resident employees are seeing their wages drop, widening the distance with their local colleagues. By the end of 2014, a non-resident construction worker earned almost 40 per cent (37 per cent) less than a local one (MOP607 versus MOP955). But the difference increases as you go up the ranks for skilled and semiskilled positions. For instance, a concrete formwork carpenter from Macau could command MOP1,242 per workday, while a non-resident in the same position received MOP649, or almost half. Companies are also facing increases in construction materials costs. Since 2012, prices have risen by 10 per cent, with the cost of concrete skyrocketing 70 per cent up to December of last year. To accommodate this cost, construction firms had to cut or reduce staff costs, probably hiring more nonresident workers, data suggests. From
Sub-committee unanimously agrees to amend AL Organisation Law
T
he Second Standing Committee of the Legislative Assembly (AL) did not have any objections to the bill amending the current Organisation Law of the Legislative Assembly, which suggests expanding the legislature’s structure by two divisions and five departments, in addition to increasing the number of staff under permanent contract to 84 from 51. The bill, the first reading of which was passed last month, was discussed by the standing committee yesterday morning. The president of the committee, Chan Chak Mo, told reporters after the closed-door meeting that the committee did not find any problem with the bill. In addition to the expansion of the structure of AL, the bill suggests distributing 30 salary points to field
staff and those on 24-hour duty call as compensation. However, the legislator expressed concern about whether the government could hire all of the new staff needed, meaning the total number of Assembly staff would increase by 64 per cent from the current number. He indicated that it is currently difficult to recruit people in the city, especially interpreters, claiming the position of vice secretary-general in AL has been empty since 2008, despite the salary of the position reaching more than 900 salary points, which is equivalent to that of a vicehead of a bureau. The Organisation Law of AL was established in 2000. Only two amendments have been made, in 2008 and 2010, respectively. K.L.
2010 to 2014, the price of construction materials went up by 29 per cent (together with local workers) but overall wages decreased 2 per cent. In the fourth quarter, construction workers’ wages increased 6.1 per cent from the previous quarter with skilled and semi-skilled salaries going up
by 6.2 per cent in line with inflation in the period. Unskilled workers, on the other hand, saw their salaries reduced by 0.5 per cent. In terms of construction materials, prices registered an upward variation of 2 per cent (concrete) to a drop of 3.8 per cent for steel bars.
8 | Business Daily
February 3, 2015
Greater China Tougher fiscal law China is making it harder for its regional governments to get ad hoc cash transfers from central authorities in another step to reform its fiscal system and reduce wasteful public spending. Central government regularly transfers cash to regional authorities via fiscal transfers to ease their financial burden, as they are responsible for nearly 80 percent of all public spending but get only half of the fiscal income. Yet these transfers are sometimes abused by local governments, which submit unnecessary investment projects to the central government for approval to get the money that is disbursed under special transfers.
20 to be indicted in financial scam Twenty people have been transferred to the Procuratorate and are to be indicted in north China’s Hebei Province for a 5.39 billion yuan (US$862 million) fundraising scam, local authorities said. A total of 36,000 people across the country claimed that they invested 5.39 billion yuan in the illegal fund-raising scheme by HJJGold Investment Group based in the city of Langfang, the city government said in a press release. The group, which claimed to have more than 3,000 outlets nationwide, promised high returns for gold investment and bank saving-like wealth management products.
Managing Mexican project suspension China’s top economic planner yesterday urged the Mexican government to properly handle the aftermath of its suspension of a high-speed rail (HSR) project, which had affected Chinese enterprises. A spokesperson from the National Development and Reform Commission said that China regretted Mexico’s decision to suspend the HSR project, which would have connected Mexico City with the central state of Queretaro. Mexico needs to “value and properly cope with the huge manpower and money Chinese enterprises invested in the project bid, and carry out measures for further bilateral cooperation”, said the spokesperson.
Crowd control system to be rolled out Beijing is using a crowd analytics system to prevent stampedes at major commercial areas. It is hoped that the system will be rolled out nationwide. Beijing has used the system, which was developed by the Beijing Municipal Institute of Labour Protection (BMILP), for five years. The system provides real-time data on crowd density, distribution and flow and can identify crowd patterns that indicate potential danger. So far, it has been installed at four popular tourist areas in Beijing -- Xi’dan, Shichahai, Dashilan and Tian’an Men.
China-India FMs hold talks Chinese Foreign Minister Wang Yi and his Indian counterpart Sushma Swaraj held talks on bilateral ties in Beijing. As two large developing countries, China and India pursue an independent foreign policy of peace, and both countries attach priority to developing relations with their neighbouring countries, Wang said, noting that China cherishes the strategic and cooperative partnership with India. Last September, Chinese President Xi Jinping visited India, and leaders of both countries set a goal for building closer China-India development partnership, Wang said.
HSBC factory PMI contract
Output recovered for the first time since October, although only marg
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ctivity in China’s factory sector shrank for the second straight month in January, a private business survey showed yesterday, as the new year got off to a rocky start for the world’s second-largest economy. The slack performance, including a 15th month of shrinking factory employment, will add to the debate over how and whether Beijing will accelerate policy easing, with most bank economists calling for a combination of rate cuts and increased liquidity to spur productive investment. The final HSBC/Markit Purchasing Managers’ Index (PMI) for January came in at 49.7 on a seasonally adjusted basis, just below the 50.0 level that separates growth from contraction. The number was slightly lower than a preliminary “flash” reading of 49.8 but higher than the final 49.6 in December. “Demand in the manufacturing sector remains weak and more aggressive monetary and fiscal easing measures will be needed to prevent another sharp slowdown in growth,” said Hongbin Qu, China chief economist at HSBC. The dour data mirrored two official reports released by the government on Sunday which showed weakness in China’s manufacturing and services sectors last month. The official PMI - which is biased towards large Chinese factories unexpectedly showed manufacturing activity shrank for the first time in
nearly 2-1/2 years and firms saw more gloom ahead. “We think targeted measures remain the first policy option,” said Tim Condon at ING. “The November policy rate cut was preceded by complaints by Premier Li about the lack of credit flow to businesses and we will be looking for similar hints to gauge the likelihood of a bazooka stimulus,” he said,
adding that he didn’t consider the sub-50 official reading particularly surprising given seasonal factors and wider economic trends. In the private survey, there was marginal expansion in new orders and new export orders, though both were revised downward from the earlier “flash” estimates. Jobs shrank for the 15th consecutive month, but the rate
Kaisa CEO leaves amid unclear future Bondholders are worried it may become the first Chinese homebuilder to default on its foreign bonds Umesh Desai
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hina’s Kaisa Group said yesterday that its chief executive officer has resigned - a further blow to the embattled property developer despite having sold some assets at the weekend to ease its short-term cash worries. The company said Jin Zhigang had quit “to devote more time to his personal career development” and would continue as executive director. It added that there had been no disagreement with the board. It was not immediately clear who would be replacing Jin, who had been at the helm since 2012. Company officials were not available for comment about his successor. Kaisa, a homebuilder based in the southern Chinese city of Shenzhen, is struggling to meet its debt obligations following the abrupt departure of a string of senior executives and a local government block on its property sales. Kaisa said on Sunday that Sunac China Holdings would buy two of its units in Shanghai and acquire majority stakes in two others. At least 28 court filings requesting an asset freeze were made by onshore creditors against Kaisa and its subsidiaries between January 6 and
January 9 in Shenzhen, according to records in the city’s Intermediate People’s Court, involving 17 financial institutions.
Rescue hopes Kaisa’s bonds plunged in December after Shenzhen sales were blocked but they had started to recover on rising hopes of a white knight rescue deal. However yesterday its bonds due 2020, on which the company missed a coupon payment deadline last month, were down 11 points at 61/66 from their overnight levels. Investors are mindful that the projects sold at the weekend are in Shanghai, while Kaisa’s problematic projects that are subject to sales blocks are in Shenzhen. However some analysts said Sunday’s deal could be the first step in a series of transactions between Kaisa and Sunac. Credit rating agency Standard & Poor’s said it was still doubtful though that Kaisa would be able to meet its upcoming debt obligations, despite the asset sale. Yip estimated the company needs to repay a total of 5 billion yuan in
KEY POINTS CEO resignation comes after string of executive departures Asset sales announced on Sunday to inject US$380 mln into Kaisa Kaisa’s offshore bonds surrender some gains
onshore and offshore loans by the end of June. Kaisa also has coupon payments due on its 2017 and 2018 bonds in March, according to Thomson Reuters data. Possible political problems are also adding to the slow progress on resolving Kaisa’s problems, with the reason for the sales blocks in Shenzhen still unclear. Reuters
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February 3, 2015
Greater China Shadow banking growth slowing
ts for 2nd month
ginally, with muted demand keeping a lid on it
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KEY POINTS HSBC/Markit final PMI level 49.7 vs Dec 49.6 Employers shed jobs for 15th month Output rises marginally, first gain since Oct
slowed, with the sub index reading at 49.5 in January compared to 49.3 in December. The slide is keeping pressure on Beijing to increase the pace at which workers migrate into services from once high-paying factory jobs, a challenging proposition given weak investment in retraining. More worrisome was the sharp slide in input costs, which fell at their
Although new financing channels are on the rise according to Moody’s
steepest rate since March 2009, with lower prices for oil and steel playing major roles in the decline. Ordinarily, cheaper energy prices would be good for China, one of the world’s most intensive energy consumers, but most economists believe the phenomenon is a net negative for Chinese firms because of its impact on ultimate demand. “Lower commodity prices mean that China’s own energy, mining and metals-processing firms are suffering. And when this big group of firms cuts back on capital spending, demand for machinery and industrial products weakens,” wrote Thomas Gatley of Gavekal Dragonomics in a recent research note. “Add in the on-going slump in construction activity, and the commodity correction means 2015 is shaping up to be the worst year for Chinese industry since the global financial crisis.” Reuters
egulatory measures to curb China’s shadow banking growth appear to be having an effect and have prompted a shift in credit activity back to the formal banking system, Moody’s Investors Service said yesterday. But Total Social Financing (TSF), of which shadow banking is a component, continued to grow more quickly than nominal gross domestic product (GDP), leading to higher overall leverage in the economy, the ratings agency said. “Although shadow banking has continued to grow, it has done so more slowly in recent quarters as regulatory measures to rein in the sector’s growth appear to be having an effect,” Michael Taylor, Moody’s Chief Credit Officer for Asia-Pacific, said in a news release. The ratings agency estimated that shadow banking assets reached 45 trillion yuan (US$7.25 trillion) at the end of 2014, amounting to 71 percent of GDP, compared to 66 percent at the end of 2013. “Maturity mismatches and contagion risks to banks are two of the most concerning factors in the shadow banking system,” it said. “Risks from property sector exposures remain elevated with an on-going downturn in the sector and slowing GDP growth. Real estate and infrastructure account for one third of all trust loan exposures.” It also noted that financing activities were shifting to new areas, such as e-financing platforms and
Maturity mismatches and contagion risks to banks are two of the most concerning factors in the shadow banking system Moody’s press release
margin financing in the equity market, which has helped fuel a blistering rally in mainland China shares. Banks are indirectly financing some of this lending through their shortterm purchases of loan assets from securities firms. The share of margin finance in the daily stock transaction surged to above 16 percent at end-2014, from an average of only 7 percent in 2013, it said. Data last week showed cautious Chinese banks issued far less credit in December, driving cash-starved companies into the shadow banking system in a blow to Beijing’s efforts to crack down on the risky sector. Reuters
Ma regains spot as Asia’s richest Thanks to Ant Financial IPO preparation Zijing Wu and Sterling Wong
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libaba Group Holding Ltd. Chairman Jack Ma regained his spot as Asia’s richest person with a higher valuation for the company’s finance affiliate ahead of a stock sale that also created a dozen new billionaires. Zhejiang Ant Small & Micro Financial Services Group Co., which owns payments processor Alipay, is valued at about US$50 billion, according to people familiar with the matter. Ant Financial is weighing a private placement before going public in 2016, and details of the planned fundraising aren’t finalized, the people said last week, asking not to be identified because the discussions are private. The latest valuation for Ant Financial boosted Ma’s fortune by about US$10 billion to US$36.4 billion as of Friday in New York, according to the Bloomberg Billionaires Index, overtaking Amazon.com Inc.’s Jeff Bezos. The new billionaires from the bigger valuation include
As Alibaba expands in global markets, so could Alipay. If technology companies do well, then their owners become billionaires Cyrus Mewawalla, CM Research, managing director
the e-commerce giant’s Chief Executive Officer Jonathan Lu and Chief People Officer Lucy Peng. “The entire e-payments market has just started,” said Li Yujie, an analyst at RHB Research Institute in Hong Kong. “In the future, Alipay will capture a lot of
this market. When it goes public, it will produce many new billionaires.” Lu and Peng, both cofounders of Alibaba, each have a fortune valued at about US$1.8 billion, based on their stakes in Ant Financial, according to the Bloomberg Billionaires Index. Shao Xiaofeng, who joined Alibaba in 2005 and has been its chief risk officer in the past 2 1/2 years, has a fortune of about US$1.2 billion, according to the index.
‘Formidable room’ “It’s got formidable room for growth,” said Cyrus Mewawalla, managing director of London-based CM Research Ltd. “As Alibaba expands in global markets, so could Alipay. If technology companies do well, then their owners become billionaires.” Bob Christie, Alibaba’s spokesman, declined to comment on the new valuation and billionaires. Other Alibaba co-founders and senior executives also emerge as stakeholders of Ant
Financial. Chief Operating Officer Daniel Zhang and the other eight shareholders each have a net worth of more than US$1 billion, according to the index. Zhang and CEO Lu are among the Alibaba executives who are on the board, along with Ma and Vice Chairman Joseph Tsai, who has a US$5.8 billion fortune. The other senior executives include President Jianhang Jin, Trudy Dai, Alibaba’s chief customer officer, Jian Wang, chief technology officer, and his deputy Peng Jiang. Other billionaire shareholders are Eddie Wu, Zeng Ming, Tiger Wang and Judy Tong.
‘Not happy’ The US$50 billion valuation for Ant Financial is about twice the minimum threshold required for the company’s IPO, according to Alibaba’s prospectus. Ma has controlled Ant Financial, including the Alipay payments business, since spinning off the finance operations into a new company in 2011,
citing foreign ownership restrictions. Ma was ranked China’s wealthiest on the Bloomberg Billionaires Index in August, based on the earlier valuation for Ant Financial. He briefly overtook Hong Kong property tycoon Li Ka-shing for the top spot in Asia in December. “I was really not happy in the past three months when people say Jack Ma is the richest person of China,” Ma said in an interview with Charlie Rose last month. “When you have US$1 billion, that’s not your money -- that’s the trust society gives.” Ant Financial hasn’t hired investment banks, one of the people said. The company is planning an A-share sale in China while not ruling out a dual listing, another person familiar said. Alipay, which is similar to PayPal, has more than 800 million registered users. Its mobile application has 190 million active users and handles 45 million transactions a day, the company said in October. Bloomberg News
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Greater China
PBOC delaying trading band changes Under the current exchange-rate system, a move to the limit would prompt the central bank to intervene, adjust the reference rate or widen the band
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hina’s central bank is too preoccupied with supporting the economy to contemplate widening the yuan’s trading band this year, a Bloomberg survey shows. Of 22 analysts polled in the past week, 14 forecast there will be no changes made in 2015 to the range in which the currency can move. Four predicted a move in this half of the year, three said they expected a revision in the third quarter and one chose the October-December period. The People’s Bank of China allows the yuan to diverge a maximum 2 percent from its daily reference rate and 15 respondents said the limit will probably expand to 3 percent in the next adjustment.
The best time for band widening is when the spot rate trades closer to the reference rate Liu Dongliang, analyst, China Merchants Bank
“Attempts to engineer a soft landing will see 2015 full of policy measures but not a widening of the band,” said Peter Rosenstreich, head of market strategy at Swissquote Bank SA in Gland, Switzerland, whose yuan estimates were the second most-accurate in the latest rankings compiled by Bloomberg. China is loosening control of its currency and interest rates as Premier Li Keqiang gives market forces a greater role in the world’s secondlargest economy, which expanded in 2014 at the slowest pace in 24 years. A widening of the yuan’s trading range may make the exchange rate more volatile, heightening the risk of capital outflows that can lead to increases in borrowing costs. The PBOC cut its benchmark interest rates in November for the first time since 2012.
Band pressure A widening of the yuan’s trading band is unlikely without sustained pressure on the existing limits, Gareth Berry, a foreignexchange strategist at UBS AG in Singapore, wrote in a research note last week. The March 2014 expansion was announced after the currency traded within 0.1 percent of
the strong end of the allowed range on most days between October 2012 and May 2013. Prior to that, the band was widened in April 2012 from 0.5 percent, and before that from 0.3 percent in May 2007. The yuan dropped 0.75 percent to 6.2510 per dollar in Shanghai last month, following a 2.4 percent loss in 2014. An estimated US$110 billion left the country in the last quarter, an acceleration from US$82 billion in the previous three months, according to a Jan. 15 report by Daiwa Capital Markets.
Signal risk “It’s not a good time to widen the trading range when there’s relatively great depreciation pressure for the yuan,” said Liu Dongliang, a Shanghai-based analyst at China Merchants Bank Co., the nation’s sixth-largest lender. “The market could misread it as a signal that PBOC is allowing further yuan declines.” Investors shouldn’t totally rule out the possibility of a wider band this year as China is bolstering its efforts to make the yuan more popular in global trade, according to Banny Lam, co-head of research at Agricultural Bank of China International Securities Co. in Hong Kong.
The nation’s top leaders will hold annual meetings in March to decide on economic goals and policies. The yuan overtook Canada’s dollar to become the fifth most-used global payments currency in December, the Society for Worldwide Interbank Financial Telecommunications said last week. Transactions denominated in yuan climbed to a record and HSBC Holdings expects it will pass Japan’s yen next quarter as Asia’s top currency in trades. China in November cut interest rates for the first time in two years. “A more flexible exchange rate makes sense as China is keen to open up its capital account,” said Lam. “Band widening could occur in the second quarter after the leadership completes their assessment of the economy, which may start rebounding with the stimulus measures.” “The current trading band is sufficient to allow the exchange rate to absorb some of the pressure from swings in hot money flows,” said Tim Condon, Singapore-based head of research at ING Groep NV in Singapore. “2015 is a complicated year with the authorities juggling the need to sustain growth in the face of downward pressure with the need to advance reforms.” Bloomberg News
Reforms to speed up agriculture modernization This is the 12th consecutive year in which the document has focused on agriculture and rural issues
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hina will step up reforms and innovation to speed up agricultural modernization in 2015, according to a key policy document released by the Party and the Government. As the Chinese economy, under the “new normal,” shifts from highspeed to medium-to-high-speed growth, it has become a key issue to continue consolidating the position of agriculture as the foundation of the economy and to further increase farmers’ income, said the document. The “No. 1 Central Document” refers to the first major policy document of each year released by the Central Committee of the Communist Party of China and the State Council. The document listed 5 aspects and 32 points for detailed government work on reforms related to the “three rural issues”, agriculture, rural areas and farmers. According to the document, China will strive to transform the development mode of agriculture, boost policies that benefit farmers, push forward the building of new socialist countryside, deepen rural reforms and strengthen rule of law in dealing with rural issues.
A document urged making transition to modern agriculture as quickly as possible
This year’s document put more emphasis on “strengthening reform and innovation,” compared to the one of 2014, Zhu Lizhi, a research fellow with the Chinese Academy of Agricultural Sciences told Xinhua. China’s agricultural modernization is expected to accelerate with the help of the new policy document, Zhu added. Highlighting the role of agriculture, the document said a strong agricultural sector is the prerequisite of a strong China. Instead of mainly pursuing high
The document encourages farmers to eschew ancient methods
output and relying on resources consumption, China should put equal emphasis on quantity, quality and benefits, and attach importance to competitiveness, technological innovation and sustainable growth, it added.
The goal is to blaze a modern agriculture development path featuring high efficiency, product safety, resource saving and environment friendliness, said the document. Xinhua
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February 3, 2015
Asia
SGX CEO boosts China focus The Singapore bourse is seeking to attract investors to a broader range of asset classes as appetite for trading shares in the city-state stagnates
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ingapore Exchange Ltd., Southeast Asia’s biggest bourse, will hire more people in China as it seeks to sell more of its products in Asia’s largest equities market, Chief Executive Officer Magnus Bocker said. SGX will appoint a senior executive in China to build its business and relationships, Bocker said in an interview on January 29. The bourse posted its first quarterly profit growth in more than a year in the last three months of 2014 after a world-beating rally in Chinese stocks spurred demand for hedging instruments. Revenue from derivatives jumped 46 percent, spurred by a 183 percent surge in volume on Chinese stock futures, according to the exchange.
at SGX headquarters. “We need to grow our headcount in China. We will more than double what we have today in the next few years.” Bocker said SGX’s future performance will depend on its ability to attract new clients and sell more products to existing customers, emphasizing the need to have a presence in key markets. The bourse has sales and marketing offices in Beijing, Hong Kong, Tokyo, Mumbai and London. Longer term, the exchange will look at opportunities to tap North America, the world’s biggest derivatives market, Bocker said. “The number of new clients using our products is very high and we’re not losing the old ones,” Bocker said.
Growth opportunities
The outlook for derivatives is looking very bright. Demand for China A50 remains strong given the positive interest in China equities Benjamin Ong, analyst, Phillip Securities
SGX wants more global investors to use its Chinese products, “whether it’s China A50, indices or commodities,” Bocker, 53, said
Derivatives transactions climbed 52 percent to 40 million in the fiscal second quarter, with trading of FTSE China A50 futures increasing to more than 17 million contracts, according to SGX. China A50 contracts, which track the country’s 50 biggest stocks, along with those for Japan, India and iron-ore, are among SGX’s most actively traded derivatives. There are about 40 companies seeking approval from the U.S. Securities and Exchange Commission to introduce exchange-traded funds that will invest in the China stock market and these ETF providers would be potential clients for A50 futures, Bocker said.
Bond platform The Southeast Asian bourse plans to start a bond trading platform by
the middle of this year, to complement its equities, commodities and foreignexchange products. To strengthen its derivatives business, SGX said last month it will increase technology-related spending by S$20 million (US$14.8 million) to as much as S$75 million this year as it accelerates the upgrade of its trading and clearing platform. This would enable the bourse to handle more derivatives transactions and operate on a 24-hour basis by the end of 2016. The exchange currently trades equity-index and commodities futures for more than 18 hours on weekdays.
Trading disruptions The bourse decided to upgrade its platform after suffering its second trading disruption in less than a month in December, prompting the Monetary Authority of Singapore to say it will take supervisory action if needed. An independent committee formed to investigate the incident will probably submit its findings in March. “It’s our job to keep the markets open,” Bocker said. “Any disruption is very serious for us. We need to really learn from that.” While derivatives accounted for 39 percent of revenue in the last quarter, up from 32 percent a year earlier, cash-equity trading remains an important business for SGX, Bocker said. Last month, SGX cut the standard lot size for equity transactions to 100 shares from 1,000 as part of efforts to restore market confidence following the penny-stock rout that erased US$6.9 billion in market value over
three days in October 2013 and triggered lawsuits by companies including Goldman Sachs Group Inc. and Royal Bank of Canada seeking to recover money owed by customers.
Market surveillance Volatility isn’t limited to small caps, with the volume of Keppel Land Ltd. shares surging in the two days before trading was suspended on Jan. 21 ahead of parent Keppel Corp.’s S$3.23 billion buyout offer. “This is a serious issue for all markets,” Bocker said. “We are continuously monitoring the market. Anything that we see as abnormal is reported and investigated.” Since Bocker became CEO in December 2009, SGX shares have fallen 2.1 percent through last week. During that time, the exchange rolled out a S$250 million equities trading platform in August 2011 that can execute transactions in 90 microseconds and last year introduced a kilobar gold contract. Bocker said SGX has been able to build its platform, is ready for the next step and is in a stronger position than five years ago, something “I’m very proud of.” When asked about his future plans, Bocker, whose tenure expires in June, said “I have no reason to believe I will leave Singapore.” SGX will continue to extend its global reach and introduce new products to help investors manage their risks, Bocker said. “Distribution and products go hand in hand,” Bocker said. “Don’t expect that the client always comes to you.” Bloomberg News
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Asia Korean current account surplus down South Korea’s current account surplus inched down to a seasonally adjusted US$7.66 billion in December last year from a revised US$9.64 billion surplus in November, central bank data showed yesterday. Exports in December rose 4.5 percent from a month earlier to US$51.7 billion while imports gained 6.7 percent to US$43.9 billion to produce a goods account of US$7.8 billion, all on seasonally adjusted terms, the Bank of Korea data showed. Without adjustment for seasonal patterns, the current account surplus stood at US$7.22 billion in December.
Hyundai eyes cell car competition with Toyota
Indonesia exports fall for third month But Bank Indonesia forecasts a recovery in 2015 growth of 5.4-5.8 percent Nilufar Rizki and Gayatri Suroyo
Hyundai Motor Co said it will lower the price of its Tucson fuel cell electric vehicle by 43 percent in South Korea and consider cutting prices of the car overseas to compete with models from the likes of Toyota Motor Corp. The South Korean automaker - the world’s fifth-biggest when paired with sister Kia Motors Corp - hopes to popularise fuel cell cars in its home market by cutting the price of the Tucson ix to 85 million won (US$77,189).
Bangladesh FX reserves fall in January Foreign exchange reserves edged down to US$22.04 billion at the end of January from US$22.31 billion in the previous month, but were up 22 percent from a year earlier, the central bank said yesterday. The reserves fell partly because of higher imports last month, a senior central bank official said. The reserves are enough to cover almost seven months of imports. Steady readymade garment exports and remittances from Bangladeshis working overseas, two mainstays for the nation’s economy, have helped build reserves in recent years.
Vietnam’s GDP growth to quicken Economic growth will quicken to an annual rate of 5.4 percent in the first quarter ending March, a government think-tank forecast yesterday. “This trend will continue in the following quarters and the growth target of 6.2 percent for the whole of 2015 is feasible,” the National Financial Supervisory Commission said in a report, echoing a government forecast of economic growth for the year. Yesterday’s forecast compares with gross domestic product growth of 5.06 percent in the first quarter of 2014 from a year before, government data show.
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ndonesia’s exports dropped for a third straight month in December as prices of the country’s main commodities fell, pointing to economic weakness in the fourth quarter of the year.
Southeast Asia’s largest economy posted a large improvement in its trade balance last year, with the deficit more than halving to US$1.88 billion from 2013, data from the statistics bureau showed yesterday.
Falling consumer prices raise expectations of Thai rate cut Though the military coup last year ended months of street protests that had hurt tourism and consumer and investor confidence Orathai Sriring and Kitiphong Thaichareon
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hailand’s consumer prices fell year-on-year in January for the first time since September 2009, as oil prices dropped, giving the central bank more room to cut interest rates to support a sputtering economy. A military-led government that seized power in May has struggled to revive growth in Southeast Asia’s second-largest economy as exports are sluggish and consumer demand remains subdued due in part to high household debt. With consumer prices falling, some analysts expect the Bank of Thailand (BOT) to cut its policy rate, which has stood at 2.0 percent since last March, when it holds its next policy review on March 11. “This will only put more pressure on the BOT to trim its interest rate in the
next rate meeting,” said Gundy Cahyadi, economist with DBS Bank in Singapore. The headline consumer price index fell 0.41 percent in January, weaker than the median forecast of a 0.25 percent rise in a Reuters poll. The last time consumer prices fell below year earlier levels was in September 2009. The central bank switched to targeting the headline CPI inflation rate in January, having earlier targeted the core inflation rate, which strips out fresh food and energy prices. From February onwards, the government will stop reporting the core inflation rate, but in January it was 1.64 percent, slightly above a 1.57 percent forecast in the poll. The central bank is targeting inflation in the effective range of 1.0 to 4.0
But that came from weaker imports instead of better exports. December exports fell 13.83 percent from a year earlier, pushing exports for the full-year to a 3.43 percent contraction.
percent. It expects actual inflation of 1.2 percent in 2015, while warning last week that falling international energy prices increased the chances of inflation in 2015 being below the target range. The central bank discounted the risks of deflation, however, as non-oil prices have not fallen and domestic demand continues to expand. January’s negative inflation was in line with the central bank’s estimate, spokesman Chirathep Senivongs Na Ayudhya told reporters yesterday. Deflation has led to monetary easing elsewhere in the world, but the BOT held its interest rate steady at its first policy meeting of the year last week. Lacklustre inflation data pointed more to supply- than demand-side problems, said Kobsidthi Silpachai, head of capital markets research at Kasikornbank in Bangkok. He expected the BOT to keep rates unchanged in March, even though there was room for a cut. Though the military coup last year ended months of street protests that had hurt tourism and consumer and investor confidence, the economy is still finding its feet. The central bank expects economic growth of 4 percent for this year and just 0.8 percent for 2014, the weakest since the country was devastated by floods in 2011. Official 2014 GDP is due to be released on February 16. Reuters
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February 3, 2015
Asia “The bad export performance in the fourth quarter still couldn’t prop up economic growth. We see a moderation of economic growth to below 5 percent in Q4,” said Joshua Pardede, economist with Bank Permata in Jakarta.
Pardede said a contraction in imports since September indicates a moderation in private consumption, the country’s main driver of growth. Imports in December declined 6.61 percent from a year earlier and were down 4.53 percent for the full year.
Fourth quarter slowdown
KEY POINTS Dec exports fall 13.83 pct y/y, down for third month Fall in imports indicates weakness in domestic consumption Fourth quarter economic growth seen decelerating
Slumping global commodity prices and a slowdown in big commodities importer, China, has taken a toll on Indonesia’s exports, which have contracted for three years in a row. “The fall in the cost of oil imports has, at least, helped push the trade balance into surplus, but the broader weakness in import demand suggests the domestic economy is still struggling,” said Dan Martin from Capital Economics in Singapore.
Indonesia’s economy is expected to decelerate in the fourth quarter. The central bank has predicted GDP would expand 4.9 percent in the quarter, the slowest pace since the third quarter of 2009, and 5.1 percent for 2014. Bank Indonesia forecast a recovery in 2015 growth to 5.4-5.8 percent, but said larger-than-expected price falls in eight main commodities in January could mean exports will take some time to recover. The fall in global oil prices, however, has enabled the government to remove gasoline subsidies while at the same time cutting pump prices. Consumer prices in January fell 0.24 percent from December, with annual inflation easing to 6.96 percent from 8.36 percent in December. But core inflation picked up slightly to 4.99 percent “indicating that underlying inflation persists despite an easing headline number,” said Gundy Cahyadi, economist at DBS Bank in Singapore, who sees Bank Indonesia holding interest rates steady although “the risks of a rate cut are increasingly high.” Reuters
Indian factory output drops to 3-month low The country is considered especially vulnerable to oil price shocks
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ndian factory output eased in January to a three-month low as new business slowed down, a key survey showed yesterday, suggesting more steps are needed from the government to boost growth. Banking giant HSBC said that its purchasing managers index (PMI) fell to 52.9 points in January, down from a two-year high of 54.5 the previous month. In the survey, which is seen as a harbinger of industrial expansion and economic health, a reading of more than 50 points suggests expansion while anything below indicates contraction. “The slip can partly be attributed to consolidation after two months of impressive upticks. New orders, both from domestic and international sources, also continued to grow, though at a slower pace than in December,” said HSBC chief India economist Pranjul Bhandari. Bhandari hoped the Reserve Bank of India (RBI) would announce “upfront rate cuts” as growth in Asia’s third-largest economy continues to be “sluggish” amid cooling inflation and falling commodity prices around the world.
HSBC expects RBI Governor Raghuram Rajan to cut interest rates by 75 basis points
India is considered especially vulnerable to oil price shocks since the country imports nearly 80 percent of its daily needs from various parts of the globe. HSBC expects RBI Governor Raghuram Rajan, a former chief economist at the International Monetary Fund, to cut interest rates by 75 basis points from 7.75 percent by June this year. The RBI has already ended its 20-month hiatus on rate cuts by announcing a surprise 25-basis point reduction early last month, citing lower inflation. AFP
Philippines faces challenge of unequal growth Job creation has still struggled to match the number of people looking for work; 42 percent of the population still live on less than US$2 per day Karen Lema and Nicholas Owen
We think that 2016 is critical in terms of the long-term outlook of the Philippines Philippines’ President Benigno Aquino (pictured) is aiming for growth of 7-8 percent
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he Philippines may surpass China to be Asia’s fastest growing economy this year, but its bigger challenge is working out how to sustain and share the gains of the past five years to secure longer-term prosperity. Since President Benigno Aquino came to power in 2010 and embarked on a reform and governance push, the Philippines has become a hot investment favourite and one of the fastest-growing economies in the world.
Investors now want to know how the Southeast Asian country will be able to sustain fiscal and economic policies that have spurred growth and reduced poverty after Aquino’s term ends next year. The Philippines defied the region’s slowdown in the fourth quarter by regaining momentum, bringing fullyear growth to 6.1 percent - the fastest expansion in Asia after China. This year, Aquino is aiming for growth of 7-8
Eugenia Victorino, ANZ bank
percent, while China’s growth is expected to slow to around 7 percent.
More inclusive Aquino has fought corruption and prioritised infrastructure improvements that are pivotal to raising growth potential. However, the economy is still mired with high unemployment.
The World Bank has said Philippine growth is now “more inclusive”, and there are signs benefits are trickling down. More than one million jobs were created in 2014 and unemployment fell to 6 percent, the lowest for at least a decade. Vibrant sectors, such as booming back-office firms, earn foreign exchange but don’t spread a lot of prosperity. “To have one of those jobs, you need some skills. At a minimum, decent command of English and computer literacy, but often a bit more than that,” said Dan Martin at Capital Economics. Manufacturing, the sector probably best able to raise productivity and the income of low-skilled workers, could benefit as low wages and a competitive currency help the Philippines grab some of the production that is leaving China because of rising costs.
After Aquino Aquino, limited by the constitution to a single term in office, has improved public finances and boosted
investment in roads, ports and schools through publicprivate partnerships. Last summer, wrangles with the Supreme Court caused a seize-up of government spending, but it resumed after Congress passed a supplementary budget in December. “We’re very hopeful that the Aquino government will be able to release the funds to continue with its infrastructure programmes,” said Victorino. The outlook from mid2016, following the elections for a new president and half of Congress, is far less certain. Poor leadership in the past has sparked uprisings, largescale protests and military revolts, and populist politics have weakened national finances. Vincent Lazatin, head of the Transparency and Accountability Network, a think tank in Manila, reckons it will take longer than a single presidential term to entrench good governance and sound policies. “We definitely are very concerned about continuity of the reforms,” he said. Reuters
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International German a/c surplus hits new record Germany’s current account surplus is likely to have hit a new record of US$285 billion (252.30 billion euros) in 2014, beating China once more, its Ifo think-tank said yesterday in a report which may fuel criticism that Europe’s biggest economy is not playing its part to reduce global imbalances. Ifo said China was second with a current account surplus of about US$150 billion, followed by Saudi Arabia with about US$100 billion. German surplus was equivalent to 7.5 percent of gross domestic product (GDP), meaning it would once again breach the European Commission’s recommended upper threshold of 6 percent.
Greek leaders hunt allies in austerity fight The French government has so far offered the strongest encouragement to Greece
Exports boost UK manufacturing British manufacturing grew slightly faster in January thanks to a modest recovery in export orders, but factories cut prices at the fastest pace since 2009 to drum up business, a survey showed yesterday. Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) rose to 53.0 from 52.7 in December, beating a Reuters poll forecast for 52.6 and holding comfortably above the 50 mark that signals growth. The figures suggest manufacturing output is rising at a quarterly pace of around 0.2 percent, according to survey compiler Markit.
Maduro accuses Biden of coup plan Venezuelan head of state accused U.S. Vice President Joe Biden of heading a “bloody” plan to overthrow his government, which he said was announced to presidents and prime ministers of Caribbean countries. In a political event in the central state of Miranda, Maduro reiterated that he doesn’t know if U.S. President Barack Obama is aware of the plan. According to the Venezuelan president, Biden announced the plan at a recent energy meeting in Washington with Caribbean leaders who told him last week in Costa Rica during the Summit of the Community of Latin American and Caribbean States (CELAC).
Ryanair raises profit forecast Irish no-frills airline Ryanair yesterday raised its annual earnings forecast as it swung into a quarterly profit thanks to falling fuel costs and higher passenger growth. The airline posted net profit of 49 million euros (US$55 million) in the three months to the end of December compared with a loss of 35 million euros during the equivalent period in 2013, the Dublin-based company said in a results statement. Ryanair lifted its profit guidance for 2014/15 to between 840 and 850 million euros from a previous forecast of up to 830 million euros.
Julius Baer to cut about 200 jobs Swiss bank Julius Baer plans to cut around 100 million Swiss francs (US$107 million) of costs, including about 200 jobs, it said yesterday, blaming the recent surge in the Swiss currency. The value of the safe-haven franc rocketed last month after the Swiss National Bank unexpectedly ended its currency cap on the euro. Switzerland’s banks in particular are expected to be hard hit, because the bulk of their spending is in francs. Private bank Julius Baer, which employs around 5,250 staff worldwide, said it aimed to cut both personnel and general costs.
Newly appointed Greek Finance Minister Yanis Varoufakis arrives for the handover ceremony in the ministry of Finance in Athens, Greece, 28 January 2015
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reek Prime Minister Alexis Tsipras began the hunt for allies against German demands for austerity as his weekold government appealed to the European Central Bank not to shut off the money tap. Tsipras travelled to Cyprus yesterday before trips to Rome, Paris and Brussels, with Berlin not yet on the agenda. German Chancellor Angela Merkel wants to duck a direct confrontation and isolate him, a German government official said. The Greek leader, who issued a statement Saturday promising to abide by financial obligations, is seeking to repair damage after a rocky first week. Bond yields spiralled and bank stocks plummeted after Finance Minister Yanis Varoufakis said the country won’t take more aid under its current bailout and wants a new deal with its official creditors by the end of May. “We’re not going to ask for any more loans,” Varoufakis said after
meeting his French counterpart, Michel Sapin. “During this period, it is perfectly possible in conjunction with the ECB to establish the liquidity provisions that are necessary.” While euro-area officials want Greece to stick to the austerity demands of its existing bailout agreement, Tsipras is seeking a debt write-down so he can increase public spending. The danger is that the Greek financial system is left without funding long before the May deadline for a deal. At the moment, the country has a special dispensation from the ECB because it’s considered to be complying with the bailout program. That means its debt can be used in central bank refinancing operations even though it is rated junk.
‘No surprises’ “There will be no surprises if we find out that a country is below that
Euro zone factories post ‘meagre’ growth Earlier data from Germany showed factory growth was slower than previously thought there Jonathan Cable
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uro zone factory activity grew slightly last month as companies kept slashing prices, but a weakened currency did little to help drive new orders from abroad, a survey showed on Monday. “Euro zone manufacturing showed signs of pulling out of the doldrums at the start of the year, but the rate of expansion remained disappointingly meagre, vindicating the ECB’s decision to take drastic action,” said Chris Williamson, chief economist at survey compiler Markit. The survey’s results were mostly collected before the European Central
Bank announced a near-trillion euro quantitative easing programme as part of its bid to revive inflation and drive up growth. Markit’s final January manufacturing Purchasing Managers’ Index (PMI) was 51.0, in line with an earlier flash reading. Although it was a six-month high, it was only just above the 50 mark that separates growth from contraction. In December the index came in at 50.6. Firms cut prices in January at the steepest rate since mid-2013. Data on Friday showed prices fell at a recordequalling 0.6 percent across the 19
rating and there’s no longer a program that that waiver disappears,” ECB Vice President Vitor Constancio said at an event in Cambridge, England, on Saturday. Greek banks, which play a key role in funding the government, lost about 11 billion euros (US$12.5 billion) in deposits in January, according to four bankers who asked not to be named because the data were preliminary. The outflow accelerated from about 4 billion euros in December. Deposits totalled 160.3 billion euros at the end of 2014. Merkel wants to avoid getting drawn into a direct confrontation with Tsipras and is unlikely to agree to a face-to-face meeting, according to a German government official. The chancellor’s goal is to show Tsipras that he is isolated, the official said. What’s more, she sees little margin for manoeuvre on the conditions of any further support for Greece and is skeptical about Tsipras’s claims that he can raise revenue by cutting corruption and increasing taxes on the rich, the official added. Tsipras meanwhile has already started to roll back the austerity program. He asked for the resignation of Emmanuel Kondylis, chairman of the fund overseeing the country’s privatization program, and Paschalis Bouhoris, its chief executive officer, a spokeswoman for the fund said late Friday. The Greek Finance Ministry on Saturday hired Lazard Ltd. to advise on its debt strategy. Prior to the appointment, Matthieu Pigasse, the head of Lazard’s Paris office who has advised Greece in the past, said a 50 percent haircut would give Greece a “reasonable” debt burden. Bloomberg News
KEY POINTS Jan final euro zone factory PMI 51.0 Firms cut prices at steepest rate since mid-2013 Weaker euro does little to boost exports
nations using the euro in January. The euro has fallen more than 6 percent so far this year, which will make the bloc’s goods cheaper to outsiders, but new export orders in January picked up at a weaker pace than in December. An export orders sub index, which includes orders between countries within the currency union, stood at 50.7, in line with the flash reading but well below December’s 51.6. Earlier data from Germany, Europe’s biggest economy, showed factory growth was slower than previously thought there. In France, the bloc’s second biggest economy, activity shrank for the ninth month.
Business Daily | 15
February 3, 2015
Opinion Business
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Leading reports from Asia’s best business newspapers
A Greek burial for German austerity
TAIPEI TIMES The TAIEX could see a moderate correction before the Lunar New Year holiday, barring major economic catalysts, analysts said. Jih Sun Securities Investment Trust Co fund manager Paul Tsai said that markets in Switzerland, Singapore and other nations have taken measures to prevent inflows of “hot money” following the European Central Bank’s stimulus package. No major activity is expected ahead of the holiday since the US Federal Open Market Committee repeated last month that it would hold off on deciding when to raise its benchmark interest rate from zero, Tsai said.
Joschka Fischer
Germany’s foreign minister and vice chancellor from 1998 to 2005, was a leader of the German Green Party for almost 20 years
THE KOREA HERALD South Korea posted a trade surplus with Japan in the auto parts sector for the first time last year as Japanese carmakers widened sources of imports to lessen risks, industry data showed yesterday. According to the data provided by the Korea Trade-Investment Promotion Agency and the Korea International Trade Association, South Korea recorded an auto parts trade surplus of US$23.75 million with Japan last year, a turnaround from the previous year’s loss of US$84.33 million. This represented the first surplus for Korea in its car parts trade with the neighbouring country.
THE PHNOM PENH POST Australian-listed firm Donaco International, which currently has operations in Vietnam, has confirmed it is entering Cambodia’s already-crowded casino and gaming industry. The company announced on Friday that it had entered into an acquisition agreement to purchase the Star Vegas Resort and Club casino in Cambodia’s Poipet town in Bantey Meanchey for US$360 million. The acquisition is expected to be finalised in April. The acquisition is subject to completion of due diligence and customary conditions, the statement added.
INQUIRER As low fuel prices keep inflation subdued, monetary authorities may start considering easing policy settings to give the economy as much room as it needs to grow. US financial giant JP Morgan last week said a hike in interest rates this year was by no means assured. The Bangko Sentral ng Pilipinas (BSP), JP Morgan said, may even go back to easing settings, which will benefit consumers. The bank’s statements come ahead of the BSP’s first policy stance meeting on February 12. BSP Governor Amando M. Tetangco Jr. said a benign inflation outlook for 2015 would allow the central bank to keep rates steady.
Newly appointed Greek Finance Minister Yanis Varoufakis looks on during the handover ceremony in the ministry of Finance in Athens
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ot long ago, German politicians and journalists confidently declared that the euro crisis was over; Germany and the European Union, they believed, had weathered the storm. Today, we know that this was just another mistake in an on-going crisis that has been full of them. The latest error, as with most of the earlier ones, stemmed from wishful thinking – and, once again, it is Greece that has broken the reverie. Even before the leftist Syriza party’s overwhelming victory in Greece’s recent general election, it was obvious that, far from being over, the crisis was threatening to worsen. Austerity – the policy of saving your way out of a demand shortfall – simply does not work. In a shrinking economy, a country’s debt-toGDP ratio rises rather than falls, and Europe’s recession-ridden crisis countries have now saved themselves into a depression, resulting in mass unemployment, alarming levels of poverty, and scant hope. Warnings of a severe political backlash went unheeded. Shadowed by Germany’s deep-seated inflation taboo, Chancellor Angela Merkel’s government stubbornly insisted that the pain of austerity was essential to economic recovery; the EU had little choice but to go along. Now, with Greece’s voters having driven out their country’s exhausted and corrupt elite in favour of a party that has vowed to end austerity, the backlash has arrived. But, though Syriza’s victory may mark the start of the next chapter in the euro crisis, the political – and
possibly existential – danger that Europe faces runs deeper. The Swiss National Bank’s unexpected abandonment of the franc’s euro peg on January 15, though posing no immediate financial threat, was an enormous psychological blow, one that reflected and reinforced a massive loss of confidence. The euro, as the SNB’s move implied, remains as fragile as ever. And the subsequent decision by the European Central Bank to purchase more than €1 trillion (US$1.14 trillion) in eurozone governments’ bonds, though correct and necessary, has dimmed confidence further. The Greek election outcome was foreseeable for more than a year. If negotiations between the “troika” (the European Commission, the ECB, and the International Monetary Fund) and the new Greek government succeed, the result will be a face-saving compromise for both sides; if no agreement is reached, Greece will default. Though no one can say what a Greek default would mean for the euro, it would certainly entail risks to the currency’s continued existence. Just as surely, the mega-disaster that might result from a eurozone breakup would not spare Germany. A compromise would de facto result in a loosening of austerity, which entails significant domestic risks for Merkel (though less than a failure of the euro would). But, in view of her immense popularity at home, including within her own party, Merkel is underestimating the options at her disposal. She could do much more, if only she trusted herself.
Even before the leftist Syriza party’s overwhelming victory in Greece’s recent general election, it was obvious that, far from being over, the crisis was threatening to worsen
In the end, she may have no choice. Given the impact of the Greek election outcome on political developments in Spain, Italy, and France, where antiausterity sentiment is similarly running high, political pressure on the Eurogroup of eurozone finance ministers – from both the right and the left – will increase significantly. It does not take a prophet to predict that the latest chapter of the euro crisis will leave Germany’s austerity policy in tatters – unless Merkel really wants to take the enormous risk of letting the euro fail. There is no indication that she does. So, regardless of which side – the troika or the new Greek government – moves first in the
coming negotiations, Greece’s election has already produced an unambiguous defeat for Merkel and her austerity-based strategy for sustaining the euro. Simultaneous debt reduction and structural reforms, we now know, will overextend any democratically elected government because they overtax its voters. And, without growth, there will be no structural reforms, either, however necessary they may be. That is Greece’s lesson for Europe. The question now is not whether the German government will accept it, but when. Will it take a similar debacle for Spain’s conservatives in that country’s coming election to force Merkel to come to terms with reality? Nothing but growth will decide the future of the euro. Even Germany, the EU’s biggest economy, faces an enormous need for infrastructure investment. If its government stopped seeing “zero new debt” as the Holy Grail, and instead invested in modernizing the country’s transport, municipal infrastructure, and digitization of households and industry, the euro – and Europe – would receive a mighty boost. Moreover, a massive publicinvestment program could be financed at exceptionally low (and, for Germany, conceivably even negative) interest rates. The eurozone’s cohesion and the success of its necessary structural reforms – and thus its very survival – now depend on whether it can overcome its growth deficit. Germany has room for fiscal manoeuvre. The message from Greece’s election is that Merkel should use it, before it is too late. Project Syndicate
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February 3, 2015
Closing Sovereign funds to back Li Ka-shing O2 deal
Vietnamese are South Asia’s biggest savers
Some of the world’s biggest sovereign wealth funds are in talks to provide financial backing for Hutchison Whampoa’s acquisition of Telefonica’s British mobile business, the Telegraph newspaper reported, citing unidentified sources.The 10 billion pound (US$15 billion) move by Li Ka Shing’s Hutchison to merge its Three Mobile network with Telefonica’s O2 UK will make the group the top mobile operator in the country. The Telegraph said sovereign wealth funds including China Investment Corporation, Singapore’s Temasek and GIC, and one of Qatar’s big government-sponsored vehicles were in talks to provide a significant portion of the financing.
Among Southeast Asian countries and territories, Vietnam has the highest percentage of consumers pouring their spare cash into savings, but the lowest ratio of people investing in stocks, according to Nielsen Vietnam. Results released yesterday showed that up to 77 percent of Vietnamese channel their spare cash into savings, compared to 70 percent in Indonesia, 67 percent in Malaysia and 63 percent in the Philippines. Meanwhile, only 18 percent of local people invest their money in stocks, a relatively low ratio compared to 33 percent in Malaysia, 32 percent in Indonesia and 30 percent in Thailand.
CEFC China Energy preps for more open crude market Chen Aizhu
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EFC China Energy, a small chemicals and fuel company, is beefing up its oil business to get ready for more open domestic oil markets, hiring trading managers from state energy giants, building storage tanks and looking to invest in oilfields. The moves are signs that independent Chinese firms are expecting the government this year to lift at least some restrictions on the state-dominated oil and gas sector. China’s approval in December of the launch of crude oil futures in Shanghai raised the expectation that crude imports would be freed up to ensure greater participation in the yuan-denominated oil contracts. “Dealing crude is what a mature oil trader does. CEFC seems to be shifting to that role from an earlier image as a commodity trade financing player,” said a senior Beijing trader, referring to CEFC’s practice of using mixed aromatics to raise bank loans to profit from the currency arbitrage. Besides hiring trading executives from state oil companies, CEFC is due to start up an 18-million-barrel tank farm on Hainan island this year, its first such asset in China to store mostly crude oil. Traders with knowledge of CEFC’s activities said the company was also looking to acquire oil producing assets from abroad, possibly Africa. Owning upstream assets can be
key in winning quotas for crude oil imports, traders said. Guanghui Energy, an owner of oil and gas assets in Xinjiang and Kazakhstan, was licensed to import crude last year. CEFC has for the past few years been getting import quotas of about three million barrels a year, though any shipments have to fit into state refiners’ throughput and production plans. Cui Zhenchu, former head of crude oil trading at Sinopec Corp, confirmed he is now head of oil trading for CEFC
China Energy based in Shanghai. Zhang Xincheng, who quit last year as head of products at Hong Kong-listed Brightoil Petroleum, said he has now joined CEFC as head of its oil trading office in Singapore. Before Brightoil, Zhang was Cui’s colleague in Sinopec’s crude oil department. Liu Lei, a deputy trading manager of oil products with Chinaoil, trading vehicle of PetroChina, is the latest hire at CEFC’s Beijing operations, traders said.
Singapore attracted less fixed investments
Hong Kong’s retail sales down in December
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ingapore’s investment promotion agency Economic Development Board attracted 11.8 billion Singapore dollars (US$8.7 billion) in fixed asset investments last year, it said yesterday. The number was slightly lower than the 12.1 billion Singapore dollars in fixed asset investments in 2013, but it was in line with the agency’s forecast of 10 billion Singapore dollars to 12 billion Singapore dollars. The investments led to the creation of 16,100 skilled jobs, exceeding its forecast of 14,000 to 16,000 jobs, but down from the 21,400 jobs for the previous year. The total business expenditure per annum last year was at 7 billion Singapore dollars, while the value-added per annum was at 12.5 billion Singapore dollars. Both are in line with forecasts. The agency said it expects the level of investments in 2015 to moderate in line with Singapore’s stage of economic development as well as the increased uncertainty of the global economic environment. More emphasis will be placed on helping existing companies, it said. Xinhua
The firm has for the past few years been getting import quotas of about three million barrels a year
Liu declined to comment. None of the trading executives would discuss CEFC’s strategies for 2015, and the company’s press officer was not immediately available for comment. Prior to the recent hires, according to Cui and Liu Lei, CEFC also brought on board Liu Zhongqiu, a former vice president of Chinaoil who used to be the liaison executive for China National Petroleum Corporation’s overseas acquisition business. CEFC’s 2013 revenue topped 200 billion yuan (US$32 billion), the bulk of which came from its chemicals, fuel and crude oil business, according to CEFC’s website. CEFC owns 5 percent of Sinochem International, a fertilizer and seeds company. It also owns brokerage and banking assets, and it develops defence products for the military, according to the website. Reuters
US$32 bln
CEFC’s 2013 revenue
Taiwan’s manufacturing activity improves
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he value of total retail sales in December 2014 in Hong Kong fell 3.9 percent to HK$47.8 billion (about US$6.2 billion) from a year ago, the city ‘s statistics department said here yesterday. The sales of medicines and cosmetics rose 4.2 percent year-on- year in December, followed by food, alcoholic drinks and tobacco 7.4 percent, miscellaneous consumer durable goods 18.6 percent and motor vehicles and parts 0.5 percent. On the other hand, the sales of jewellery, watches and clocks, and valuable gifts decreased 16.3 percent, followed by wearing apparel 3.8 percent, commodities in department stores 5.3 percent, electrical goods and photographic equipment 4.4 percent and footwear, allied products and other clothing accessories 3.1 percent. For 2014 as a whole, the value of total retail sales went down 0.2 percent to HK$493.3 billion from a year earlier. Retail sales reverted to a year-on- year decline in December 2014, dragged mainly by a wider fall in the sales of jewellery, watches and clocks, and valuable gifts.
anufacturing activity continued to improve in Taiwan in January while the service sector also posted a better reading in the first month of 2015, according to a report by the Chung-hua Institution for Economic Research (CIER). Taiwan’s manufacturing purchasing managers’ index (PMI), a key measure of factory activity, stood at 53.5 in January, up 3.4 percentage points from December, showed the report. A reading above 50 indicates expansion, while a reading below 50 represents contraction. The PMI reading has been in expansion territory for two consecutive months in Taiwan, boosted by new orders and better output data. Meanwhile, Taiwan’s service sector, which contributes about 70 percent to its nominal gross domestic product, has expanded for six consecutive months, as suggested by the CIER non-manufacturing index (NMI). The NMI stood at 53.9 in January, compared with 53.6 in December. The HSBC Taiwan PMI posted 51.7 in January, signalling a moderate improvement in the health of the sector.
Xinhua
Xinhu