Macau Business Daily, Feb 9, 2015

MOP 6.00 Closing editor: Sara Farr Publisher: Paulo A. Azevedo Number 725 Monday February 9, 2015 Year III

Suncity boss: VIP sector not replaceable, full-smoking ban worsening drop | Page 4

Walking a fine line

There’s change in the air. Wells Fargo says President Xi Jinping wants casino growth in step with that of the Chinese economy. This envisages 10pct growth in revenues only. Thus, recent restrictions imposed on the industry and travel are here to stay. ‘Macau gaming is entering a new normal of tighter policy and more moderate forward growth,’ says the US bank.

Positive drivers still exist but ‘need to be sustained,’ it says. Stable gaming revenues, improved credit growth, and local government support are cited.

Plus new liquidity generated by the two new casinos. And a likely rebound of stocks prior to Studio City and Galaxy opening Page

Interview

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Asian casinos crackdown

An Aussie winemaker in Portugal

China’s anti-corruption campaign that shooed high-stake gamblers from Macau’s gaming tables is now spreading its wings to reach corrupted Chinese gambling in foreign casinos all over Asia

Peter Bright moved to Portugal in the 1980s. And has called it home ever since.

The Aussie winemaker has not been idle.

Developing various companies there, he’s currently involved with Terra D’Alter.

Which produces some 1.2 million bottles of wine a year. He talks to Business Daily about the maturing consumer markets of Hong Kong and Macau. And the myth of wine corks

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Back to the future

February 6

Name

Hengqin FTZ reaches out Transparency is key. The public’s complained. And so have legislators. Now the government will adopt a ‘licensing system for petroleum product imports.’

For a more timely grasp of fuel price changes to be publicly disclosed. Currently, local retail prices fail to reflect the sharp fall in global oil prices. The ‘licensing system’ existed before 2008, and is now to resume, authorities say

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%Day

Galaxy Entertainment

7.10

Sands China Ltd

3.09

Cheung Kong Holdings

2.46

Tingyi Cayman Island

2.21

Hutchison Whampoa L

1.95

China Shenhua Energy

-1.67

Belle International

-1.93

Power Assets Holding

-2.11

China Mobile Ltd

-2.22

China Overseas Land

-3.16

Source: Bloomberg

I SSN 2226-8294

Geography and history have a commercial value.

Macau is expected to play a pivotal role in the development of Hengqin Island. As many as 610 financial enterprises are already established there.

But authorities want to double that in Hengqin’s Free Trade Zone by next year. Macau’s unique Portuguesespeaking country connections can hopefully attract overseas investors. Preferential policies are also expected to be of interest to MSAR enterprises

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2 | Business Daily

February 9, 2015

Macau

Beijing caps Macau gaming growth China’s President Xi Jinping wants the casino industry here to expand at a rate closer to the Chinese economy, Wells Fargo says. The ‘new normal’ for Macau casinos is now a 10 per cent annual growth in revenues with the local government already adhering to Beijing’s strategy. The US$100 billion market dream has been postponed from 2020 to 2025 Luís Gonçalves

luis.goncalves@macaubusinessdaily.com

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he Chinese government wants the Macau gaming industry to grow at a rate closer to its economy and is targeting a 10 per cent annual rate as the ‘new normal’, a Wells Fargo report says. The new guideline from Beijing means that recent measures launched here like visa restrictions, UnionPay regulations and table limits are here to stay and will not go away, the US bank maintains.

The Chinese government is keen to not let Macau expand too fast – as it did in 2013 - and will allow the city’s gaming industry to grow per year with a margin of only a few percentage points above that of the Mainland economy. China is expected to expand at a 6 to 7 per cent rate in the next few years.

‘Macau gaming is entering a new normal of tighter policy and more moderate forward growth’ is the main conclusion of the 2015 Wells Fargo annual report on the city and the fourth edition since 2012: ‘Tighter policy setting likely keeps market growth limited to 10 per cent’, the document says, adding that as the Chinese customer comprises 95 per cent of Macau gaming revenues the market will likely adjust to Beijing’s influence, the document says.

Follow the leader And the first one to adapt – or adopt – to the

As always with Macau, nothing is static and transparency is low new line of thought from Xi Jinping regarding the local gaming sector is the MSAR Government, it transpires: ‘We believe the Macau Government has embraced the ‘new normal’ environment, evidenced by the changes in government leadership and a tough stance on smoking, dealer labor, and gaming tables’.

If the information collected by the US bank is correct and becomes a reality, this means that all the big six gaming operators here will have to review their long term plans. Most of the analysts were predicting that when the new wave of ten integrated resorts casinos came online in 2017, annual revenues would go up by 15 to 17 per cent.

Not 10 per cent.

But the new demands from Beijing will jar with industry forecasts made when companies decided to invest in Cotai 2.0. Wells Fargo warns that for 2016 and 2017, the casino revenues here have to increase at least 10 per cent per year to absorb the new supply, mainly the six biggest properties like Sands’ Parisian,

Wynn Palace or Melco’s Studio City. ‘Generally, low conviction over the timing, number of gaming tables and return of the new properties in Cotai creates additional uncertainty around the market outlook’, Wells Fargo analysts wrote.

This will force the industry here to manage a very thin line between profitability and Beijing’s wishes.

Postponed success With a lower growth rate for the upcoming years, the famous long term secular success history of Macau that every operator, official or investor likes to use when describing the city, is still on, but will take longer. Wells Fargo estimates that with an annual 10 per cent growth, the Macau gaming industry will only become a US$100 billion market in 2025 and not in 2020 as previously predicted.

The US bank assumes it is taking a more conservative approach to the city’s future warning that forecasts here could easily change. ‘As always with Macau, nothing

Wells Fargo

New normal

is static and transparency is low’, says Wells Fargo.

For the near-term, the Wells Fargo outlook is less optimistic than that of its peers. The US bank expects revenues to decrease this year by 12 per cent, being one of the first investors to predict a double-digit drop in 2015.

As the market estimates a recovery of casino operations in the second half of 2015, Wells Fargo notes that ‘few point to hard evidence as to why growth will resume, besides easy comparisons’.

Describing the second leg of this year as a ‘stabilisation’, the gaming revenues rebound is expected to be driven by the VIP segment due to additional junket capital from the two new properties opening this year (Galaxy Phase II and Studio City). ‘We expect the mass market to grow from the two new openings but expect same-store mass revenue to

Macau Economic Association VP: Golden days of gaming industry over Jack Chang Chak said that the gaming industry will be affected by the Mainland’s new economic policies, which will focus more on sustainable growth than increasing GDP João Santos Filipe

jsfilipe@macaubusinessdaily.com

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he vice president of the Macau Economic Association, Jack Chang Chak Io, believes that the best years of the gaming industry are behind it and that growth will be more balanced in the future.

“The era of big economic growth for the casino industry is over”, Jack

Chang said in an interview with bilingual newspaper Plataforma.

“The restructuring of the Mainland economy and more focus on sustainable growth and less on Gross Domestic Product growth is going to influence the future of the gaming operators”, he claimed.

remain relatively flat’, the report says.

But unlike the previous crises in the Macau gaming industry, in 2009 and 2013, the recovery this year will not be as fast or as strong because it is ‘very unlikely’ that Beijing will underwrite another huge economic and fiscal stimulus in the economy as it did in the past: a move that drove a ‘hairpin-like’ rebound led by VIP gamblers.

For Jack Chang, however, the gaming industry will also feel the consequences of growing local competition that has been developing in places like Singapore, Vietnam and the Philippines, and that may start up in future in other regions such as Japan and Taiwan.

For gaming stocks, the ‘new normal’ will put prices in a correction mode with investors revising down expectations: Expect stocks to remain range-bound this year as estimates and valuations adjust to the ‘new normal’. Wells Fargo stresses that significant overhangs and uncertainty over longterm growth could keep incremental buyers on the sidelines while valuations are not quite ‘washed out’ enough for value investors.

The US bank says that positive drivers for the gaming industry still exist in Macau for 2015 but ‘need to be sustained’. These include stabilisation signs of gaming revenues, the improvement of credit growth, the support for a second-half recovery by local government, the new liquidity generated by the two new casinos and the likely rebound of stocks prior to Studio City and Galaxy opening.

According to the vice president of the Macau Economic Association, another factor that is likely to have an impact on the gaming industry is that the younger generation may tend to be less interested in gaming than their predecessors.

Concerning local competition, Mr. Chang said he did not believe that the Central government would authorise more gaming areas in the country in addition to Macau due to the social and political risks it would bring the Mainland.

“People are not only focused on the bright side of the gaming industry. They also tend to see the negative impact of it and in relation to this industry there are many social problems such as criminal activities and corruption”, he stressed in the interview.

Mr. Chang said that following the liberalisation era, the gaming industry will now be more controlled and regulated. He also said he believed that the chances of the Macau Government issuing another gaming licence are “very little”.

Business Daily | 3

February 9, 2015

Macau Full smoking ban likely in casinos next year The Health Bureau is targeting implementing a full smoking ban in casinos in 2016, the head of the tobacco prevention and control office of the Bureau, Mr. Tang Chi Ho, told media on the sidelines of public broadcaster TDM’s Macau Forum programme yesterday. But the official remarked that he could not predict whether the full casino ban suggestion – which is a part of the amendment to the tobacco control law here – could pass smoothly through the Legislative Assembly.

Gov’t to increase transparency on oil prices disclosure

Macau Airport passengers increase 3 per cent to 430,000

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government statement released over the weekend has announced that the administration would soon adopt the ‘licensing system for petroleum product imports’, by which it claims that a more timely grasp of the price changes of fuel could be disclosed to the public.

The announcement came on Saturday following a meeting between Secretary for Economy and Finance Lionel Leong Vai Tac and leading delegates from the Macau Economic Service and Consumer Council, at which they concluded a plan to replace the existing imports declaration system for fuel importers with a ‘licensing system’ – one in which the government could have a ‘more timely grasp’ of information of imported petroleum products, in particular the related price changes.

The plan to ‘resume’ the licensing

system – which was actually practiced in Macau prior to 2008 – was decided

by Chief Executive Fernando Chui Sai On and Mr. Leong, the announcement released from the Office for the Secretary for Economy and Finance stated.

The officials’ decision came amid legislators’ concerns that the local retail price of fuel products fails to reflect the sharp fall in global oil prices over the past seven months.

The statement also mentioned that the government would act to speed up the legislation process of the law for consumer rights protection, a tool that the Consumer Council has mentioned before, saying it would be the authorised unit to collect price information about imports, and the wholesale and retail of products to be sold here, including petroleum products.

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he number of passengers using Macau International Airport (MIA) grew 3 per cent year-onyear in January surpassing 430,000 travellers, the Airport announced on Friday.

‘Passenger traffic continued to grow in January, Southeast Asia routes recorded the most significant growth, presenting 23 per cent increase and occupying 44 per cent of overall market share, showing gradually the success of developing international routes of MIA’, it was explained.

The growth was mainly attributable to the new Southeast Asian routes, which have counterbalanced the downtrend of gross gaming revenue.

‘With the growth slowdown in the Macau gaming industry, the passenger traffic of MIA still maintains an upward trend so far, with the

attraction of the Macau tourism market, as well as the recent joined Southeast Asian routes continuing to bring support to the entire market’, MIA said.

Despite the upward trend, however, the mainland China and Taiwan markets recorded a decline that the company defined as ‘slight’, without revealing a specific number.

‘It is believed that the drop is mainly due to the affect of relevant policies of Mainland China, as well as the Lunar New Year being in January last year; passenger traffic is expected to reach its peak in February’, MIA revealed.

The upward trend of passenger volume was also followed by aircraft movements, which increased 6 per cent year-on-year in January, involving over 4,700 aircraft.

J.S.F.

4 | Business Daily

February 9, 2015

Macau

Suncity boss: VIP sector not replaceable, full-smoking ban worsening drop The boss of junket operator Suncity Group, Alvin Chau, said in an interview with a Chinese-language media outlet that while some junkets are shutting down business he thinks that the VIP sector cannot be replaced by the mass market Kam Leong

kamleong@macaubusinessdaily.com

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lvin Chau Cheok Wa, owner and chairman of the city’s largest junket operator, Suncity Group Ltd., said that the closures of some VIP rooms in Macau was to be “expected” but claimed that the mass market could not replace the VIP sector.

The junket head said in an interview with local Chinese media outlet Macau Asia Satellite Television Company (MASTV) broadcast late last week that it was to be expected that the market would eliminate weaker contenders whilst the strongest would survive.

According to MASTV, the chairman of the junket operation perceives that the VIP business in Macau only loans money for gaming.

As such, following the antigraft policy of the central government, as well as some junket operators with bad debts, the closure of some of the VIP rooms could have been foreseen.

He indicated that this model of business in the VIP industry in Macau is also a reason leading to the slowdown.

“Won’t they lend [to VIPs] in Singapore, Korea, even Las Vegas or in Japan in the future? Of course they will.

It’s only because the scope

recognition by government and tourists.

of [the VIP industry] here is too small and concentrated [on loans] too much in the past, thus a negative bubble has been created,” he said.

Regardless of the VIP business slump, Mr. Chau told the media outlet that the sector is still very important for the whole industry, especially as revenues generated by the sector account for as much as 70 per cent of total gaming revenue.

“If there are no VIP rooms, [despite] the proportion of the mass market getting bigger, the drop in gaming revenue will remain serious,” he said.

20,000 signatures urge implementation of full smoking ban

Full smoking ban means bigger drop During the interview, Mr. Chau also said that he predicts that the VIP sectors will see their business drop by 15 per cent more following the implementation of a full smoking ban.

“Even Singapore, with its strict government, let gaming operators build indoor smoking rooms inside the casino when it opened the gaming market, [so that there are] smoking areas and non-smoking areas. I think that on such ‘cold days’ of the industry, if there’s no transitional period for the implementation of a full

smoking ban, or a smoking area [allowed] nearby [the gaming rooms] the revenues of the gaming industry will slump by at least 15 per cent,” he said.

Expanding his businesses in the Philippines, Malaysia and Singapore, Mr. Chau, however, told MASTV that Macau still has its advantages

in the short term, indicating that the competitors of the city’s junket operators are those in nearby regions, rather than themselves.

He indicated that the VIP industry should review and improve their business during the adjustment phase of the gaming industry in order to increase their

Meanwhile, local gaming union Macau Gaming Enterprises Staff Association, a subordinate of the Macau Federation of Trade Unions, handed a petition of nearly 20,000 signatures to government headquarters on Friday morning, urging the government to legislate on smoke-free casinos within this year.

The director-general of the Association, Choi Kam Fu, told reporters that the limits of fines punishing a casino not posting smoking ban signs is too low, and not an effective deterrent. It is suggested the government include records of violations of the smoking ban as one of the factors taken into consideration regarding the renewal of gaming licences during the interim review of the gaming industry, according to TDM Radio.

Recently, local gaming operator Melco Crown Entertainment Ltd.’s casinoresort City of Dreams was fined MOP100,000 (US$12,500) by the Health Bureau for failing to post a sign prohibiting smoking in a section of its casino.

Netanyahu allegedly 1,000 super luxury vehicles lobbied for gaming ply Macau streets legalisation in Japan

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enjamin Netanyahu, the Israel Prime Minister, lobbied for the liberalisation of gaming in Japan in order to help Sheldon Adelson, Las Vegas Sands chairman, open a casino in the country, it has been claimed. Japan is believed to have the potential to become one of the largest gaming markets in Asia.

The news published last week by Israeli daily newspaper Haaretz says that Mr. Netanyahu, on an official visit to Japan last year, approached a senior Japanese official to promote the legalisation of casinos in the country, a topic that was still under discussion

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at the time. The Israeli Prime Minister wanted to help his allegedly close friend Mr. Adelson secure an opportunity in the Japanese market if the casino bill was approved, the report said.

According to the article, Netanyahu approached the unnamed official in May of last year while on a tour of Japan meant to improve the economic relations between the two countries in the fields of commerce and high-tech.

Haaretz says the official was “shocked” by the approach and rejected it offhand, later revealing the conversation with the Israeli leader to his colleagues. The Israeli Prime Minister’s Office denied the report.

acau’s maximum speed limit on public roads may be 80km/h but for every kilometer of asphalt there are more than two super luxury cars. According to the Traffic Affairs Bureau, in September last year some1,096 super luxury vehicles registered locally for 450 kilometers of public roads.

Bentley leads the pack with 523 of its cars circulating in Macau. The second most popular manufacturer is Rolls Royce, with a total of 250 vehicles. This number is likely to increase as Stephen Hung, chairman of Louis XIII, who is building a new hotel complex in Cotai set to open in 2017, last year placed an order for 30 red-painted extended wheelbase Phantoms. The fleet order includes two cars that the British luxury

carmaker describes as the most expensive and luxurious Rolls-Royces ever built.

After the two British manufacturers, the most popular cars are Italian brands. Maserati has a total of 158 cars registered in Macau, while Ferrari has 131.

Lamborghini has 106 cars in the territory, including a Lamborghini Veneno, which has a sale value of €3.3 million (MOP30.1 million) excluding taxes.

The number of McLaren cars in Macau is less impressive, as only 13 units are on the road. However, one of them is the P1 Coupe model, of which only 275 units have been produced and cost US$1.35 million (MOP10.8 million).

According to data, as at September 2014 there were a total of 236,334 vehicles registered in the territory, 106,319 of which were passenger cars.

Business Daily | 5

February 9, 2015

Macau Sands China increases shuttle bus frequency Local gaming operator Sands China Ltd. announced last week that it had increased the frequency of its staff shuttle service since last Thursday, following complaints by workers that the shuttle buses are always ‘overcrowded’. According to an internal notice from the corporation, the frequency of all six shuttle-service routes for employees will be amended. Last week, Business Daily reported that a Sands China shuttle bus was stopped by police following a complaint by a staff member that it was ‘overloaded’. Public Security Police (PSP) said no prosecution had been made.

Pivotal role for Macau in Hengqin development João Santos Filipe

jsfilipe@macaubusinessdaily.com

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engqin has become a Chinese Free Trade Zone modelled on Shanghai’s and is now aiming to host around 1,500 financial enterprises by 2016. The neighbouring island, however, is relying on the ‘help’ of Macau to achieve this, as it hopes to attract investment from the Portuguese-speaking countries.

“Now, as a Free Trade Zone and with the successful co-operation with Macao as an example, we’re going to build a trade platform with Portuguese-speaking countries.

Currently, we’re in talks with Brazil and Portugal”, Chen Qian, Vice Director of the Administration Committee of Hengqin New Area told China Central Television (CCTV).

After Hengqin authorities lowered the threshold from US$10 billion (MOP80 billion) to US$4 billion (MOP32 billion) for Macau banks to invest in the area, Luso International became the first from Macau to enter Mainland China. This change has

helped boost the island’s financial industry, which now accounts for one third of Hengqin’s fiscal revenue.

Currently, some 610 financial enterprises operate in the region.

“Hengqin has undergone rapid development in the past six years since it was made a Special Economic Zone. And it will enjoy even more opportunities as a Free Trade Zone.

Geographically, it’s close to Hong Kong and Macau, so it’s building its pillar financial industry to connect with these hubs”, Mr. Chen said.

“We’ve just made some preferential policies for Macau; now their residents can buy real estate here on a mortgage and drive freely onto the island”, he added.

The co-operation between Macau and Hengqin has been strengthening in recent years. The Campus of the University of Macau is located in the area and more and more people are expected to move from Macau to the island, as residential and rental prices

SJM, Iao Lek’s Cotai construction deals amount to MOP2.3 billion

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acau casino operator SJM Holdings Ltd. has announced it is spending about MOP557 million (HK$541 million, US$71.4 million) on a new construction contract with one of its existing contractors for the Lisboa Palace project in Cotai, scheduled to open ‘in the fourth quarter of 2017’.

SJM entered into a new construction contract with Macau-incorporated Iao Lek Engineering Company Ltd. in which it would undertake ‘certain basement excavation, reinforced concrete structure and general builder’s work’ for the Lisboa Palace project, the casino operator told the Hong Kong Stock Exchange after trading hours on Friday.

This latest deal signed with Iao

Lek means SJM would be spending an aggregate of approximately MOP2.3 billion with the contractor, counting the casino operator’s existing construction contracts signed with it for some preliminary site works for Lisboa Palace, according to the Friday filing.

The HK$30 billion Lisboa Palace project, which commenced in February last year, is designed to feature three 5-star hotels with a supply of some 2,000 rooms plus shopping, dining and entertainment facilities as well as a casino with approximately 700 tables and 1,000 slot machines – a figure that is subject to the ‘obtaining of applicable licences’, SJM said in an interim report released in September.

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Taxi violations reach 810 in Jan

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he latest data from the Public Security Police shows that in January, the police prosecuted 810 taxi violation cases. Among them, overcharging totalled 157 cases, or some 19 per cent; refusing to take passengers accounted for 129 cases, at 16 per cent; random parking resulting in hindering other vehicles to pass totalled 78 cases, or 10 per cent; stopping or parking on yellow lines accounted for 150 cases, or 19

per cent; other violations totalled 296 cases.

Public Security Police issued a statement last Friday saying that it would continue to co-operate with other relevant authorities and analyse the data and characteristics of taxi violation cases so that they can better deploy their forces and tackle such violations in order to protect the rights of residents and tourists in addition to protecting Macau’s tourism image.

in the MSAR have skyrocketed in recent years. This trend is expected to continue.

“In the following years, at least 45,000 workers will be brought to

Macau. So if you ask me, the only solution is Zhuhai and Hengqin Island”, the Managing Director of Jones Lang LaSalle in Macau, Gregory Ku, said last month.

6 | Business Daily

February 9, 2015

Macau

Pioneer plants himself in Portugal Based in Portugal, Australian winemaker Peter Bright says wine culture is thin on the ground in Mainland China and genuine wine consumption is very low.

However, wine markets in the SARs are maturing at a fair clip and Macau has a natural affinity for Portuguese wines. The oenologist also confided that the marketing of wine is mostly about personal recommendation, with social media an important tool Joanne Kuai

joannekuai@macaubusinessdaily.com

You’re an Australian but built your wine business up in Portugal. What’s the story behind that?

There were personal reasons – my first wife was Portuguese. It’s also because of the different regional cultures, which fascinated me.

Also, I saw the grape varieties there have huge potential. I went to Portugal when I was very young, in the 1970s. I returned in the 1980s and have been there since. I became involved in the development of some companies there and became quite successful.

Now I’m involved with two companies. We have a good partnership. The Terra D’Alter has been going since 2004. At the moment, we produce about 1.2 million bottles a year. We’re about one-third domestic market and two-thirds export. Our main markets are Europe and Brazil; because there’s this strong connection between Portugal and Brazil, it’s an important market.

And Angola, and then the United States, Canada, and then Asia.

The ‘Flying Oenologist’ Peter Bright is the archetypal Aussie.

Born in Sydney, he graduated in oenology from Roseworthy Agricultural College in 1977 and began his winemaking career working for big names such as Leo Buring of Barossa and then Lindemans.

By 1981, Peter had become one of the early breed of Australian ‘flying winemakers’, visiting Portugal to work on various projects including establishing the João Pires brand. He went on to make wine all over the world, especially in Argentina, where he was part of the pioneering movement to transform the country from a producer of bulk wines into bottler of premium varieties.

Peter is now recognised as one of the world’s most experienced and gifted winemakers. After 30 years of visiting and then living there, it is Portugal with which he is now most closely associated. Today, he is involved both as winemaker and business partner in various projects.

What is the purpose of this trip to Macau?

This is my fourth visit to Macau. I came here to see how the market is doing. Do some dinners, catch up and talk about the wines and maybe create some new customers here. Talk about the future with my local distributor and what we’d like to do, to expand scale. We’ve gradually been increasing our sales here and got more exposed to the market.

What kind of customers are you targeting?

I think they’re young, middle-aged, successful professional people, who have a little bit of extra money to spend and are curious to try something different, not just buy the same old what’s considered to be the best wines. They’re curious to try new things, try different food, different wine and travel.

As an expert in the field, what do you think is the oenologist’s role in the wine business?

Oenology is the science of winemaking. It deals with everything from selecting the site where we grow the grapes to marketing the wine, so we deal with a little bit of everything.

‘Oenology’ comes from the Greek word ‘wine’ - it’s all about wine science.

What do you think’s the most challenging part of the wine business?

Selling! I think so anyway because there’s so much competition.

No food product has as much diversity as wine does. You have lots of beers but with wines you have a thousand times more. It’s

What’s the trend in marketing strategies for wine?

Hong Kong and Macau are different – they’re very sophisticated wine markets, more than Singapore and Malaysia, in general

an incredibly diverse product, so there’s a lot of competition, whether from different countries or within the same country but from different regions. It’s the most diversified market in the world.

What’s the competitive edge of your products, then?

I think we’re very competitive. We have a very good ratio of quality to price. That’s very much what we’re about. We have to over-deliver.

Portugal has to over-deliver to get a position in the market, delivering better quality for the same price.

It’s a long-term project.

We see now as far as wine is concerned that utilising social media is an important marketing strategy. People talk about wine on social media. The strongest tool [in marketing] you can have for wine is personal recommendation. Because wine is so diverse and there are so many producers and it’s very expensive to advertise. It doesn’t have the margin for mass marketing like beer does or like soft drinks.

Wine is very small. It has to be some other marketing. It has to be through social media or critical acclaim – that’s how you sell your wine.

What’s the difference between the European and Chinese market in your opinion?

Europe is a traditional market.

It’s where wine comes from. In China, particularly, it’s very much based on brands – buying things that are deemed important and prestigious. Wines sold in China until now have been very much about buying a label rather than buying the wine. True wine consumption is still very low here. But Hong Kong and Macau are different – they’re very sophisticated wine markets, more

1953 – Born in Sydney, Australia 1977 – Graduated in Oenology from Adelaide University 1979 – First steps into Lindmans as a renowned oenologist 1981 – Moves to Portugal and starts working with João Pires Vinhos, Lda., owned by Francisco Avilez 1982 – Creates the ‘João Pires’ white wine, which to this day remains an important milestone in Portuguese whites 1986 – Creates the ‘Má Partilha’ wine 1992 – Wins the following trophies at the International Wine Challenge in London – Portuguese Wine of the Year with Tinto da Ânfora – Portuguese Red Wine with Má Partilha – Gold Medal with Quinta da Bacalhoa

than Singapore and Malaysia, in general. But Mainland China is slowly starting to [nurture a] true wine consumer. I think younger people are now starting to appreciate wine in China and social media in China is very strong.

What’s the difference between the Mainland Chinese market and the SARs?

People [in the SARs] buy wine because they like the wine, not so much the label. They are buying it for the wine’s quality. And Hong Kong is the much bigger market compared to Macau. Macau is a very polarised thing between the casinos / hotels market, and traditional Portuguese restaurants, the tourists’ market.

Business Daily | 7

February 9, 2015

Macau

What about market perception?

Wines with screw caps are probably not going to sell in Portugal.

With all the new tourism projects scheduled to open in Macau, do you think the wine market here will also change?

I’m not sure because a lot of customers in the casinos are from Mainland China. They don’t have much wine culture. But I think the people going to Hong Kong, they go there also because of the wine culture because they know they can get wine there at quite reasonable prices. It’s much cheaper in Hong Kong than Mainland China because of the tax.

Do you see Macau as a gateway to China or an even wider Asian market?

Macau, a little bit. I think probably Hong Kong is more the door to China than Macau. But Portuguese wines should be most naturally successful in Macau because of the strong Portuguese connection here. And it is. Many more Portuguese wines are sold here in Macau than in Hong Kong.

In Hong Kong, it’s more natural [to purchase] wines from New Zealand and Australia because they expect a connection with those countries and it pushes those wines there.

Do you have any intention of going into the Mainland China market?

We want to but we’re not going to put a big effort into it. It’s too crowded. And a lot of people have sold to China but the wines are not moving. The wines have been sitting in the shops but not moving. I saw that in Beijing last year, and in Shanghai.

In the wine industry, there’s this cork versus screw cap issue.

What’s your take on that?

From a purely scientific point of view, the screw cap is much better than a cork. People like the idea of a cork because it’s traditional, natural or whatever, but it’s not the perfect seal for wine. The perfect seal for wine is the screw cap because the concept that the wine has to breathe a little through the cork is not true. The bottles should be perfectly sealed. It’s the case for any food product.

From a purely scientific point of view, the screw cap is much better than cork. People like the idea of cork because it’s traditional, natural or whatever, but it’s not the perfect seal for wine

That’s right, because people are very nationalistic and want to support the cork industry. Also, there’s been a lot of psychological work done by the cork industry in Portugal, saying that if you don’t use a cork it would destroy the cork farms. We have to make adjustments for the local market.

For export, we sell wine with screw caps and each year more and more.

It’s been growing in Northern Europe - particularly in England, Denmark, Germany, Belgium and Holland. They accept screw caps now. You see more and more wine from France with screw caps, too, also from Italy and Spain.

Why do people become loyal to a certain brand; to Portuguese wine, for example?

Critical acclaim and social media are the things that can change Portuguese wine. You can’t go advertising in the streets, saying ‘Drink Portuguese wine’ or publish in magazines. I don’t think it makes a difference. People have to taste it and talk about it and the wine will speak for itself.

More a personal touch?

Very much so. Also, a very important thing about wine is to have a story. The wine has to have a story, some kind of history behind it. Something about each wine makes it individual, makes it different. Otherwise, people won’t remember it. The thing about wine is not just the drinking of the wine but the whole cultural thing surrounding it - with the food, the history, how it’s made, where is comes from, everything. It’s all a big package.

Terra D’Alter Sourcing fruit from across Alentejo, Terras d’Alter was created in 2004 when Bright partnered two wine producing companies in the region. Terra D’Alteruses grapes are produced in the Alter do Chão and Fronteira region, although it also sources grapes from suppliers in the Alto Alentejo according to specific requirements.

The Alentejo wine region in southeastern Portugal spreads in all directions from the historic city of Evora, an 80-minute train ride east from Lisbon. With five of its sub-appellations hugging the Spanish border, it is a hot, dry area that until the last decade was best known for producing over half of the world’s cork supply. In addition to producing many native grape varieties, the region has proved to be a gracious host to many international varieties, including Syrah and Cabernet Sauvignon.

With the goal of acquainting the world with Portuguese wines, Terra D’Alter’s stated objective is to introduce premium quality Alentejo wine into the international market.

Terra D’Alter is distributed in Macau SAR by Vinomac Fine Wines Limited.

8 | Business Daily

February 9, 2015

Greater China Progress in ChinaASEAN FTA talks The second round of negotiations on an upgraded China-ASEAN Free Trade Area (CAFTA) has made “notable progress”, China’s Ministry of Commerce said.

Service trade, investment, economic cooperation, simplified trade procedures were discussed during the negotiation, the ministry said. China proposed “an upgraded version” of CAFTA in September of 2013. The first round of negotiation began in September last year in Vietnam. China is ASEAN’s largest trading partner, while ASEAN ranks as China’s third-largest trading partner. China aims to elevate bilateral trade with ASEAN to US$500 billion by the end of this year and US$1 trillion by 2020.

Nepotism at Sinopec uncovered China’s anti-corruption watchdog said on Saturday that it had uncovered evidence of graft at China Petrochemical Corp (Sinopec Group), warning the stateowned oil giant to take strong action to eradicate kickbacks, nepotism and theft.

Sinopec must take steps to stop “power-for-money dealings” and prevent the loss of state assets, the Central Commission for Discipline Inspection said. Some executives are suspected of corruption in areas of project construction, supply, sales, joint-ventures, and overseas operations, the agency said in a statement on its website. It also said businesses set up by families and relatives of managers have profited from their connections.

Porsche to recall 14,571 cars Germany’s Porsche will recall 14,571 cars in China due to defective camshaft adjusters, the national quality watchdog said. Recalled cars include several imported Panamera models made from April 2009 to September 2011 and two imported Cayenne models made from March 2010 to September 2011, the General Administration of Quality Supervision, Inspection and Quarantine said in a statement on its website. The cars are safety hazards as the bolt on the camshaft adjuster may loosen or break, it said, adding that Porsche will replace the defective components for free.

Gold consumption drops Gold consumption tumbled 24.7 percent year on year to 886.1 tonnes last year, industry data showed. The plunge was mainly attributed to a drop in consumption of gold bars, which posted a year on year decrease of 59 percent and amounted to 155.1tonnes in 2014, according to data released by China Gold Association (CGA).

The data also showed that consumption of gold jewellery went down by 6.9percent year on year to 667.1 tonnes. Consumption for industrial use dropped 10.6 percent to 43.6 tonnes in 2014.

China, Algeria partner for progress China and Algeria will work together to achieve further progress in their bilateral ties, officials of the two countries said.

During a meeting with Algerian Prime Minister Abdelmalek Sellal, visiting Chinese State Councillor Yang Jiechi said the purpose of his visit to Algeria this time aims to facilitate the implementation of the consensus made by state leaders of the two countries, to strengthen high-level dialogue and to develop cooperation in various fields so as to further enrich China-Algeria comprehensive strategic partnership.

Imports slump producing The slide is the sharpest since May 2009 Pete Sweeney

C

hina’s trade performance slumped in January, with exports falling 3.3 percent from year-ago levels while imports tumbled 19.9 percent, far worse than analysts had expected and highlighting deepening weakness in the Chinese economy.

Largely as a result of the sharply lower imports - particularly of coal, oil and commodities - China posted a record monthly trade surplus of US$60 billion.

The data contrasted sharply with a Reuters poll which showed analysts expected exports to gain 6.3 percent and the slowdown in imports to slow to 3 percent, following a better-thanexpected showing in December. The poll had also forecast a trade surplus of US$48.9 billion.

The slide in imports is the sharpest since May 2009, when Chinese factories were still slashing inventories in reaction to the global financial crisis. Exports have not produced a negative annual reading since March 2014.

The dismal trade performance will increase concerns that an economic slowdown in China - originally considered a desirable adjustment away from an investment-intensive export model toward one based on domestic consumption - is at risk of derailing.

The government is expected to

KEY POINTS Jan exports -3.3 pct y/y, imports -19.9 pct y/y Exports -12 pct m/m, imports -21.1 pct m/m Jan data distorted due to holiday effects Follows positive surprise in December Slide in commodities imports contributes to record trade surplus lower its GDP target to around 7 percent this year, after posting 7.4 percent in 2014 - the slowest pace in 24 years.

Chinese economic indicators in January and February are typically viewed with caution given the distortions caused by the shifting week-long Lunar New Year holiday, and while the analyst median estimate was for a rise, the range of estimates was extremely wide.

However the data - in particular the import data - is worrisome even

after accounting for cyclical factors; last year the new year holiday idled factories and financial markets for a week in January, but this year the

Innovation drives angel investment growth in China Compared with nearly 350,000 angel investors in the U.S., China only has around 500 angel investors who are actively engaged

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hina’s encouragement for mass entrepreneurship and innovation has driven the growth of start-ups as well as angel investments.

Surong360.com, a P2P (peer-topeer) lending platform for college students and alumni, said it obtained an investment of tens of millions of yuan this week.

It is among a wave of new companies benefitting from angel investment in China. Angel investment is made by affluent individuals or institutions which provide capital for a business start-up, usually in exchange for convertible debt or ownership equity.

Launched in 2013, Surong360 is a platform to lend and borrow money, make small investments or purchase using instalments. It had millions of registered users across 2,000 universities by the end of 2014.

Although China’s broader economy is slowing, its young entrepreneurs are driving a wave of start-ups that have become a bright spot for the economic landscape and an important engine for future growth.

The number of newly founded companies in China surged almost 46 percent year on year to 3.65 million in 2014, which has been a boon for the country’s angel investments.

Zero2IPO Group, an integrated

We made the investment decision immediately after knowing the project, which is unique and creative service provider in China’s venture capital and private equity industry, reported in late January that Chinese angel investment institutions had completed 766 investment deals last year, soaring 353 percent from the previous year.

The disclosed value of the deals reached more than US$526 million, a jump of 161.7 percent year on year, said the report.

China’s innovation policy and high returns are believed to be main reasons driving growth of angel investments, said Lin Dakun, an analyst of the group.

China has released a string of measures to create an amicable environment for innovation and

Cha Li, angel investor

entrepreneurship in order to power growth and generate jobs.

Over the past two years, many Chinese provinces and regions have set up angel investment funds led by the government to help private investment institutions provide financial support to start-ups.

Chinese angel investors prefer technology, media and telecom industries. These sectors made up 80 percent of the fund recipients in 2014, Lin said.

Xinhua

Business Daily | 9

February 9, 2015

Greater China

g new trade surplus record

holiday comes in late February and January was a full month of business as usual.

“It’s a very strange data print,”

said Andrew Polk, economist at the Conference Board in Beijing, noting that exports tended to be less effected by the holiday than other indicators,

but added he was more concerned by the implications of the startlingly negative import figure.

“The import data suggests a substantial slowdown in the industrial sector. The first quarter looks to be pretty horrible.”

Investors had hoped that the announcement of domestic stimulus spending plans, combined with moves to ease monetary policy, including a reduction in banks’ reserve requirement ratios on Wednesday, would restore confidence and boost demand in China’s struggling manufacturing sector.

However, many analysts believe measures taken so far to boost yuan liquidity are insufficient to do much more than offset surging capital outflows. Advocates of more aggressive action will seize on the weak January trade data to support their case.

Chinese imports have fallen every month since October, seen as reflecting weak domestic demand, and the scale of January’s drop was mostly due to an across-the-board fall in import volumes of major commodities.

For example, coal imports dropped nearly 40 percent to 16.78 million tonnes, down from December’s 27.22 million tonnes, and China also appeared to cut back on its strategic stocking of crude oil

imports, which slid by 7.9 percent in volume terms.

Imports from Australia and the Russian Federation, both major fuel and commodity suppliers, slid by 35.3 percent and 28.7 percent, respectively.

European headache Chinese officials had predicted that monetary easing measures in Europe would boost demand for Chinese goods, and analysts polled

by Reuters had also been optimistic that signs of economic strengthening in the United States would support exports.

However, the data showed that while exports to the United States rose by 4.8 percent year-on-year to US$35 billion, exports to the European Union slid 4.6 percent to US$33 billion in the same period.

Exports to Hong Kong, South Korea and Japan were also down, with exports to Japan slumping over 20 percent.

During 2014, China’s total trade value increased by 3.4 percent from a year earlier, short of the official target of 7.5 percent, and some analysts have raised questions about whether export data was inflated by fake invoicing as firms speculated in the currency and commodities markets.

Auditors’ Chinese units settle with U.S. SEC The deal with the SEC notably does not suspend the firms from practicing as accountants for China-based companies listed on U.S. markets Sarah N. Lynch

U

.S. regulators reached a historic accord with the China-based units of the “Big Four” accounting firms after a lengthy dispute stemming from their refusal to turn over audit documents in connection with companies being investigated for fraud.

The Securities and Exchange Commission

said the Chinese units of Deloitte, Ernst & Young, PricewaterhouseCoopers and KPMG would each pay US$500,000 and admit that before 2012 they did not produce documents the agency had requested.

The settlement lays out the process that the firms must follow for future record requests and also details the

consequences that may face if they fail to follow it.

The firms can face an automatic six-month suspension, however, if they fail to produce documents or provide records that the SEC deems to be deficient.

The SEC could also start new fast-tracked enforcement actions or revive this case, which is suspended pending the outcome of future cooperation from the accounting firms.

If the case is reopened, the firms would need to appeal it before the full five-member commission. But if they cooperate with all document requests, the SEC will dismiss the case after four years.

In a joint statement, the Big Four said they were pleased to resolve the matter.

“The firms’ ability to continue to serve all their respective clients is not affected by this

The firms’ ability to continue to serve all their respective clients is not affected by this settlement ‘Big Four’ statement

settlement,” they said.

The SEC first sued the Big Four firms in 2012 after it could not get access to audit work they had done for numerous companies

Reuters

suspected of accounting fraud.

The firms have said providing the documents would violate Chinese secrecy laws and urged the U.S. and Chinese governments to work together on a long-term solution.

The SEC sued the Big Four and a fifth firm called Dahua, which was previously a member of the BDO international network, in its own in-house administrative court.

Last year, SEC Administrative Law Judge Cameron Elliot issued a scathing ruling that called for a six-month suspension of the Big Four from doing audit work for China-based companies listed in U.S. markets.

Since then, the Big Four firms have been in settlement talks with the SEC. Many experts said a suspension could have wide-reaching effects for public companies in China that rely on the firms to review their books.

As the SEC’s case proceeded, the agency finally broke some new ground in its talks with Chinese regulators and started to receive the documents it wanted.

Andrew Ceresney, director of the SEC’s enforcement division, said in a Friday press call that the settlement was a “positive step in attempting to preserve the forward momentum in obtaining these documents.”

Reuters

10 | Business Daily

February 9, 2015

Greater China

A casino table in Manila, Philippines

Corruption crackdown reaches foreign casinos As Chinese gamblers opt for casinos in countries including the Philippines, South Korea, Vietnam, Cambodia, Australia and Singapore Stephanie Wong and Billy Chan

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hina is starting a crackdown to stop foreign casinos from luring its citizens to gamble overseas, as the government extends its campaign against corruption that’s already prompted high-stakes gamblers to avoid Macau.

The authorities will focus its assault on casino operators from neighbouring countries that have set up offices “to attract and recruit Chinese citizens” to gamble abroad, Hua Jingfeng, a deputy director at China’s Ministry of Public Security, said at a briefing held in Beijing on Friday.

Galaxy Entertainment Group Ltd. led gains among Macau casino shares after news of the crackdown, jumping 7.1 percent by the close of trading in Hong Kong for its biggest rise since April 2014. While shares reacted positively on the anticipation players would return to Macau from overseas casinos, the overall tone is still negative, Credit Suisse Group AG analysts said.

While marketing of gambling activities has generally not been allowed in China, “re-iteration of this anti-gambling by the official means we don’t see little room near term for China to relax visa trends to Macau soon,” Credit Suisse analysts led by Kenneth Fong wrote in a note.

‘Big market’

Macau’s government is stepping up regulations of the gambling industry, including tightening scrutiny on junket operators

Chinese President Xi Jinping’s two-year battle against corruption and Macau’s stricter travel rules have deterred high-stakes gamblers from entering Macau, the world’s biggest gambling hub that relies on so-called VIPs for a majority of the city’s revenue. Some Chinese gamblers have instead opted for casinos in countries including the Philippines, South Korea, Vietnam, Cambodia, Australia and Singapore.

“Some foreign countries think of us as a big market, and we have already

investigated a series of related cases,” said Hua, according to a People’s Daily transcript of the briefing, where the ministry announced a wider clampdown on online gambling and prostitution.

Hua, deputy director of the ministry’s bureau of public security management, didn’t specify the countries.

Cambodia casino The crackdown on foreign casinos’ representative offices won’t impact existing gamblers, who already know those casinos, or on new VIP players, who’re brought to them by junket operators, according to Fong.

“Having a much stronger control over the casino representative office in China means this will make their job more difficult to find new players,” Fong said, adding that it will hit the recovery for new premium mass market players, referring to highstakes bettors who don’t rely on junkets for gambling loans.

NagaCorp Ltd., which has a casino in Cambodia, is trying to woo more higher-spending Chinese gamblers to its property by working with more Macau’s junket operators, the middlemen who bring in Chinese high rollers for casinos, Chairman Timothy McNally said in an interview.

The company is hiring more people in Macau and mainland China and working with travel agencies to draw more customers, McNally said.

Echo Entertainment Group Ltd., operator of Sydney’s only casino, is taking more bets by Chinese VIPs, Chief Executive Officer Matt Bekier said in an interview this week.

Room closures Macau junket operator David Group, which was closing three of its seven VIP rooms in the city amid the industry downturn, has said it is taking more wealthy customers beyond Macau to Asian centres with more relaxed visa approval process, such as Manila, Vietnam and South Korea.

Macau’s government is stepping up regulations of the gambling industry, including tightening scrutiny on junket operators and the use of China UnionPay debit cards at casinos in Macau to obtain cash for gambling.

A hotel executive who’s a nephew of casino tycoon and SJM Holdings Ltd. founder Stanley Ho was arrested last month in the largest bust of a prostitution ring in the city’s history, in a sign that Xi’s crackdown was expanding to include long-tolerated vices.

Bloomberg News

Business Daily | 11

February 9, 2015

Asia

Australia’s Abbott brings forward leadership vote Discontent over Abbott’s leadership style came to a head after he bestowed a knighthood on Prince Philip Jason Scott and Phoebe Sedgman

A

ustralia’s Prime Minister Tony Abbott brought forward a vote on challenging his leadership today as he sought to end disunity plaguing his government less than half way through its first term.

The Liberal Party needs to hold the vote “as quickly as possible and put it behind us,” Abbott, 57, told reporters in Sydney yesterday. Two of his own lawmakers tabled a motion last week seeking to declare the leadership vacant, amid unrest about Abbott’s inability to reverse the government’s slumping poll ratings.

The threat to Abbott comes three months before a budget that needs to quell public anger sparked by last year’s spending cuts whilst repairing a deficit forecast to hit A$40.4 billion (US$31.5 billion) this financial year.

Whoever leads the world’s 12th-largest economy past next week faces the task of uniting the party and winning back voters.

A ballot on Abbott’s leadership can go ahead if more than half of the Liberal Party’s 102 lawmakers back the so-called spill motion when they gather in Canberra at 9 a.m. today, a day earlier

My role as deputy is to support the leader, not to change the leader Julie Bishop, Australia’s Foreign Minister

Australian Prime Minister Tony Abbott holds a brief press conference to announce a leadership challenge against him by fellow liberal party members in Sydney

than scheduled. Foreign Minister Julie Bishop, 58, and Communications Minister Malcolm Turnbull, 60, tipped by local media as potential successors to Abbott, have said they support the prime minister.

“I’m in the cabinet, of course I support the prime minister, everyone supports the prime minister,” Turnbull

told reporters in Sydney yesterday. He declined to say whether he would stand against Abbott should the motion to declare the party’s leadership positions vacant succeed.

Bishop’s stance Liberal lawmaker Luke Simpkins sent an e-mail to

party colleagues on Friday saying they must bring concerns about Abbott’s leadership to a head by holding a vote for a spill, citing in part Abbott’s recent decision to bestow a knighthood on Queen Elizabeth II’s husband, Prince Philip.

Both Turnbull and Bishop would win over some voters to the Liberal Party were they to lead it, according to a February 5 Reachtel automated phone survey of 3,502 voters selected at random. While 34 percent said they would vote for the party with Abbott as leader, support rose to 44 percent

under Turnbull and 41 percent under Bishop, it said, without providing the survey’s margin of error.

The survey also had Abbott’s Liberal-National coalition trailing Labour, 45 percent to 55 percent, on a two-party preferred basis, meaning it would lose government were an election to be held now.

Secret ballot Senior Cabinet members including Finance Minister Mathias Cormann, Defense Minister Kevin Andrews and Employment Minister Eric Abetz have said they would vote against the spill.

Abbott said Saturday his party’s standard procedure when holding spill motions and leadership votes was for a secret ballot.

For voters and Abbott, the turmoil has grim echoes of the internal battles and public sniping that overshadowed Labour’s almost six years in power.

“The only question for our party is do we want to reduce ourselves to the level of the Labour Party in dragging down a first-term prime minister,” Abbott said yesterday.

Bloomberg News

India to inject US$1.1 billion to bolster 9 banks The move is part of Prime Minister Narendra Modi’s goal to help banks boost credit and meet tighter capital-reserve requirements Siddharth Philip and Anto Antony

S

tate Bank of India and Bank of Baroda are among nine stateowned Indian lenders that will receive 69.9 billion rupees (US$1.13 billion) in capital as the government bolsters their risk buffers amid rising bad loans.

State Bank, the nation’s biggest lender by assets, will get 29.7 billion rupees, while Bank of Baroda will take 12.6 billion rupees, the finance ministry said in an e-mail statement.

The government has adopted new criteria to reward more efficient banks with extra capital, the ministry said.

The infusion is from the budget for the financial year to March 31.

The move is part of Prime Minister Narendra Modi’s goal to help banks boost credit and meet tighter capitalreserve requirements as slower economic growth and the highest interest rates among major Asian economies erode borrowers’ ability to repay loans, causing soured debt

to rise. The government invested 140 billion rupees in state-run lenders last year and set a target of 112 billion rupees for the current one.

Stressed assets at government banks rose to almost 13 percent of lending as of September 30, the highest level since 2001, central bank data show. The ratio stood at 4.4 percent for privately owned banks.

The numbers don’t mean the nation’s banking system is close to a crisis, Reserve Bank of India Governor Raghuram Rajan said in an interview to Bloomberg TV India on February 4 in Mumbai.

No crisis Annual loan growth at statecontrolled lenders fell to 8 percent as of September, two percentage points less than the country’s banking system, the data show.

Bad loan provisions at Bank

of Baroda and ICICI Bank Ltd., the largest private lender, have surged, according to their most recent quarterly earnings. Bad-loan provisions at ICICI rose 41 percent, while Bank of Baroda set aside 12.6

billion rupees for soured credit, versus 7.6 billion rupees a year earlier.

The government typically injects money into the banks it controls by buying their shares.

Bloomberg News

12 | Business Daily

February 9, 2015

Asia S. Korea’s auto exports fall Auto exports declined last month as Japanese currency’s weakness hurt competitiveness of local carmakers in overseas markets, a government report showed yesterday. Auto exports slid 2.8 percent from a year earlier to 249,675 units in January, according to the Ministry of Trade, Industry and Energy. The slide came as the weak Japanese yen damaged price competitiveness of domestic carmakers. The yen/dollar exchange rate jumped 13.7 percent from a year earlier to 118.37 per dollar in January. Weak demand from Eastern Europe, including Russia, also contributed to the January auto reduction.

Vietnam-Laos inaugurate customs model Vietnam and Laos officially opened “one-stop-shop” customs model at the Lao Bao-Densavan international border gate between the two countries, according to the state-run Vietnam News Agency (VNA). Speaking at the inauguration, Vietnamese Deputy Prime Minister Nguyen Xuan Phuc and his Lao counterpart Somsavad Lengsavath highly appreciated efforts and close cooperation among the Vietnam-Laos special working team, which was managed by the two countries’ foreign ministries, Vietnam’s central Quang Tri province and its Lao neighboring Savannakhet province, reported the news agency.

Indonesia in efforts to shift fuel reliance The Indonesian government has accelerated its efforts to reduce dependency on fossil fuels, whose output is dwindling, and to replace it with abundant gas. The move aimed at reducing air pollution.

Indonesia’s state-owned oil and gas firm PT Pertamina expects to operate 44 gas refilling stations on main Java Island and Bali Island this year, rising from 18 at present, said Basuki Trikora, vice president of directorate for marketing of domestic gas of the firm said. It was expected that all gas refuelling stations “can be operated all at this year end,” he said at the PT Pertamina headquarters.

Aussie state could have nuke industry South Australia, home to one of the largest uranium deposits in the world, will conduct an inquiry into the potential benefits and risks of establishing a nuclear industry there, the state government said on yesterday. South Australian Premier Jay Weatherill said a commission would be set up to investigate the potential of the nuclear industry to deliver economic growth and combat climate change, and to examine the risks involved. Australia’s uranium reserves are the world’s largest, according to the World Nuclear Association, accounting for almost a third of known global deposits.

Australian wind farms face wipe-out from political impasse Wind farms are Australia’s No. 2 renewable energy source Byron Kaye

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ustralia faces a A$17 billion (US$13.3 billion) exodus of investment from its wind farm industry because of a political deadlock, threatening to deal the country a major economic blow and kill hopes of meeting a self-imposed clean energy target.

Some 44 Australian wind farm projects, about half overseasfunded, have been shelved since a new conservative government said it wanted to cut state support for the industry a year ago, with investors and operators saying they are considering either downscaling or leaving the country altogether if it succeeds.

Even Australian wind farm companies such as Infigen and Pacific Hydro have effectively shelved their Australian operations, with Infigen saying it plans to pour all its financial muscle into the more amenable U.S. market.

“It’s a difficult time at the moment, and the policy uncertainty is the main cause of it,” said Shaq Mohajerani, an Australian spokesman for wind

farm company Union Fenosa, owned

by Spanish energy giant Gas Natural.

“We’re still considering all options on how to proceed. The parent company will provide us with the strategy.”

A Gas Natural spokesperson said the firm had an “attractive backlog” in Australia but “we are waiting for the whole development of the new framework for renewable energy and hope our presence ... in the country can be maintained”.

Wind power in Australia is not the only renewable energy sector to be affected by uncertainty over government subsidies or actual cuts.

In Europe, Germany has scaled back support for solar power over the past few years, leading to a flood of insolvency filings by solar firms and a shrunken market.

Italy’s plans to cut subsidies for solar power firms have prompted an investor exodus. Retroactive solar subsidy cuts have also happened in Spain, Greece, Bulgaria and the Czech Republic over the past couple

Bangladesh business community protests US$10-billion losses Finance Minister A.M.A Muhith said the blockade was having a “severe” impact on businesses outside the capital

T

housands of business leaders protested in the Bangladesh capital yesterday against a month-long campaign of antigovernment violence that they say has cost the economy nearly US$10 billion.

Garment factory owners and other business leaders joined hands and waved national flags in Dhaka and other major cities, calling for an end to the opposition-led strikes and nationwide transport blockade.

Protesters told the Dhaka rally the economy suffered 750 billion taka (US$10 billon) in losses in the 33 days since opposition leader Khaleda Zia called the protests to try to topple the government.

“We’ve seen with great concern that non-stop blockade and strikes since the

beginning of the year have crippled the economy,” said Kazi Akram Uuddin Ahmed, president of the Federation of Chambers of Commerce and Industry.

Former Premier Khaleda Zia called the protests to try to topple the government

of years, putting off new investors as governments try to rein in energy costs and cut debt.

Wind farms are Australia’s No. 2 renewable energy source, behind hydropower but ahead of solar, providing a quarter of the country’s clean energy and 4 percent of its total energy demand. But while households can collect rebates for installing their own rooftop solar panels, wind farms rely on “certificates”, or tradable securities handed out by the government, to offset costs.

That support hit a roadblock a year ago when new conservative prime minister Tony Abbott ordered a review of the country’s target for clean energy use by 2020, which ultimately recommended slashing it by a third, in line with falling overall energy demand. A lower target would mean a lower certificate price.

The centre-left Labour opposition, whose support the government needs to lower the target, refused to budge on the higher target it set when in power in 2009, resulting in an

The garment sector, the mainstay of the economy, has alone lost nearly US$4 billion as the campaign halts exports to Western retailers who are being forced to look to other countries to fill orders, he said.

On Saturday Finance Minister A.M.A Muhith said the blockade was having a “severe” impact on businesses outside the capital and the economy might not reach 7.2 percent projected growth this year.

Zia called the indefinite blockade of roads, railways and waterways after police confined the former two-time premier to her office on January 3 as she tried to mobilise protests.

Some 79 people have been killed in the violence, as opposition activists firebomb trucks, buses and cars to try to enforce the blockade.

Zia denies her Bangladesh Nationalist Party (BNP) party is behind the violence, but has vowed to continue the blockade until Prime Minister Sheikh Hasina agrees to new polls.

Zia leads a 20-party opposition alliance which boycotted a general election last year on the grounds it would be rigged.

Bangladesh is the world’s second largest garment exporter after China. The sector provides jobs for four million people, mostly women, and has spurred economic growth to over six percent a year in the last decade.

editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Luis Gonçalves, Michael Armstrong, Sara Farr, Stephanie Lai, Óscar Guijarro, Kam Leong, Joanne Kuai GROUP SENIOR ANALYST José I. Duarte Brands & Trends Raquel Dias Creative Director José Manuel Cardoso Designer Francisco Cordeiro WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.

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Business Daily | 13

February 9, 2015

Asia impasse that has effectively seen the industry grind to a halt.

A spokeswoman for U.S.-owned GE Australia & New Zealand, which has stakes in several renewable energy projects, said further investment “will only occur once investor confidence in the policy environment is restored.

For this to happen, bipartisan support regarding the future of the renewable energy target is essential.”

The Australian arm of Spanish infrastructure group Acciona, the world’s largest renewable energy firm, has frozen about A$750 million of wind farm projects because of the stalemate, said local managing director Andrew Thomson.

“When you’re a subsidiary (of a global business), you’re competing for capital, you’re competing for your budget allocation next year,” he said.

“If the parent company can’t see that there’s a stable environment it becomes really difficult to get traction.

For us at the moment it’s a really difficult sell.”

If the renewable energy target is cut, “it’s the type of jolt to industry that basically would create such an upheaval that you would have a mass exodus”, said Alex Hewitt, managing director of Bulgarian-Polish-U.S.backed windfarm operator CWP Renewables, which has A$1.5 billion of projects on ice.

“I can’t say whether we’d completely exit the country, but you would be looking at such a level of reduction in the level of investment into people in the company that it would be very significant,” Hewitt said.

KEY POINTS PM Abbott wants to cut state support for industry Labor opposition won’t back cutting clean energy target Uncertain support regime is causing a freeze in investment Some predict an exodus of investment

Reuters

EU trade deal boosts Pakistan exports The textile industry is the backbone of Pakistan’s exports, making up more than 50 percent of the country’s total overseas shipments Masroor Gilani

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akistani exports to the European Union increased by more than a billion dollars after a landmark trade deal last year which made its products more competitive, the commerce minister told AFP. The EU signed a law in late 2013 granting Pakistan so-called “GSP-plus” status, which means firms pay no tax on certain categories of goods exported to the 27-nation bloc for 10 years.

The EU makes GSP-plus conditional on implementing international conventions on human and labour rights, and there have been fears Pakistan’s decision to end a moratorium on executions could affect the deal.

Pakistan’s key textile industry in particular welcomed the agreement, which came into force in January 2014, and in an interview with AFP commerce minister Khurram Dastgir Khan hailed its impact.

“As a result of GSP-plus, Pakistan’s exports to the EU have increased by US$1.08 billion during the period January to October 2014 as compared to the same period in 2013,” Khan said.

Exports to the EU in January-October 2014 totalled US$6.38 billion, up by just over 20 percent from the US$5.3 billion recorded in the corresponding period in 2013, he said.

Before GSP-plus, textile exports faced customs tariffs of between 6.4 and 12 percent and leather goods and footwear up to six percent, he said.

Rights concerns Khan played down the possibility that resuming executions could threaten GSP-plus status.

“There is no legal obligation to EU regarding death penalty, though they have expressed concern over it,” Khan said. “They understand our situation that GSP-plus would help us create jobs and when we create jobs, it keeps young men and women away from terrorism.”

Pakistan has executed 22 convicts since Prime Minister Nawaz Sharif lifted a six-year death penalty moratorium in the wake of a Taliban massacre at a school.

Opposition to the death

Now these exports have duty-free access in EU and it has helped Pakistani products to become more competitive vis-avis its competitors, including Bangladesh, India and Vietnam Khurram Dastgir Khan, Pakistan commerce minister

penalty is a key EU policy and the bloc’s mission in Islamabad condemned the resumption of executions in December.

But EU diplomats in Islamabad have said that while they are concerned about the return to hangings, the development was unlikely to affect the GSP-plus arrangement immediately.

Improving the economy after years of drift and sluggish growth under the last Pakistan People’s Party government was a key pledge in Sharif’s election campaign in 2013, when he was swept to power for a third term.

The International Monetary Fund (IMF) said this week the government’s

reform programme – tied to a US$6.6 billion loan from the Washington-based lender – was on track.

“Economic activity and the external position continue to improve, driven by prudent monetary and fiscal policies and helped by lower oil prices and robust remittances,” IMF mission chief Jeffrey Franks said.

Growth for 2014-15 is expected to hit 4.3 percent and the budget deficit for end-December was below the target, the IMF said.

But the government has so far struggled to improve a long-running energy crisis, with hours-long electricity blackouts still a near-daily reality.

Power and gas shortages have hampered industry and held back GDP growth, which experts say needs to hit seven percent in order to provide enough jobs for new entrants to the workforce.

Projects to boost electricity production are in the pipeline, including a 6,600-megawatt coal-fired energy park along the Arabian Sea coast west of Karachi, but these have yet to yield results.

AFP

14 | Business Daily

February 9, 2015

International Moody’s profit beats estimates Credit rating agency Moody’s Corp reported a better-than-expected quarterly profit, driven by strong growth in its analytics business and higher debt issuance in the United States. The company also forecast full-year earnings per share of US$4.55 to US$4.65, largely above the average analyst estimate of US$4.57. The analytics division, which sells financial research and data for assessing risk, reported a 23 percent rise in revenue to US$312.4 million in the fourth quarter ended December 31. Strong financial service offerings and a jump in corporate deal making boosted Moody’s analytics unit, according to Benchmark Co analyst Edward Atorino.

Spurring growth to centre stage at Istanbul G20 meeting Turkey’s Deputy Prime Minister has said that pushing G20 member nations to meet reform commitments would be key Nick Tattersall

No deal yet to restart Cyprus aid A troika of international lenders said that talks aimed at restarting aid to Cyprus had fallen short of an agreement, and they stressed the need for Nicosia to fully reinstate a foreclosure law. “Given the further suspension of the effective application of the foreclosure framework, reaching staff-level agreement on the review was not possible during this visit,” the European Commission, European Central Bank and International Monetary Fund said in a joint statement after talks in Cyprus this week.

Greece says no cash problem Greece said it had no short-term cash problem and that it will hand its European Union partners a comprehensive plan next week for managing the transition to a new debt deal. The EU has warned time is running out to avoid a financing crisis in Greece. The new left-wing government in Athens has rejected the austerity that was forced upon the country by an EU/ International Monetary Fund bailout and instead says it wants a “bridge agreement” until it has negotiated a new deal.

Oil price exacerbated by hedging Oil’s dramatic price fall since mid-2014 cannot be explained by changes in production and consumption alone, with hedging and energy firms’ high debt levels also playing a part, the Bank for International Settlements (BIS) said.

The BIS compared oil’s recent fall, which saw prices collapse to below US$50 a barrel from levels of above US$100, with declines in 1996 and 2006 and concluded that unlike on previous occasions, this time oil production has been close to expectations and consumption was only slightly below forecasts.

Cross-border lending on the mend in the euro zone Cross-border lending is growing in the euro zone for the first time since the bloc’s financial crisis prompted banks to retreat from highly indebted countries such as Spain, Greece, Ireland and Italy.

Cross-border bank credit grew by 1 percent in the year ended September in the euro area, the first increase since the last quarter of 2008, according to statistics released on Saturday by the Bank for International Settlements (BIS). The overall increase masks big differences on a country by country basis with cross-border loans to France and Italy growing by 9 percent and 4 percent respectively while cross-border lending to Spain and Germany contracted by almost 6 percent and 4 percent.

Istanbul hosts G20 meetings this year

F

inance ministers and central bankers face a tough task coordinating action to spur global growth at G20 meetings this week, with major economies running at different speeds and monetary policies diverging.

Concern over the ability of the United States to sustain the global economy as most other parts of the world slow will be high on the agenda as the Group of 20 leading economies hold talks in Istanbul today and tomorrow.

With Greece’s woes casting a shadow over Europe again, cheap oil playing havoc with inflation and growth forecasts, and the strengthening dollar posing a threat to emerging market economies, the meetings come at a critical time.

“There is a lot at stake,” IMF Managing Director Christine Lagarde said in a blog post published on Friday.

“Without action, we could see the global economic super tanker continuing to be stuck in the shallow waters of sub-par growth and meagre job creation.”

Turkey’s Deputy Prime Minister Ali Babacan, who is in charge of the economy, has said tackling sluggish global growth and giving low income nations more voice will be priorities for Turkey’s G20 presidency.

The former will be easier said than done.

U.S. Treasury Secretary Jack Lew said last week the United States could not be “the sole engine of growth” and a senior U.S. official said Washington’s message going into the meetings would again be that Europe is not doing enough.

Canadian Finance Minister Joe Oliver said “kick-starting global growth will be front and centre” at the G20 meetings.

“The euro area is confronting flat growth and deflation. Beyond Europe, the growth rates of key emerging economies -- China and India -- are

losing steam,” Oliver said last week.

“Geopolitical crises -- in Ukraine, Iraq, and Syria -- pose serious risks, complicating the recovery ... And though America is carrying the world economy at the moment, that is simply not sustainable.”

Germany, Europe’s largest economy, is likely to argue that rising domestic demand and plans to increase public spending show it is doing what it can, according to European sources familiar with the G20 agenda.

Delicate balance Babacan has said that pushing G20 member nations to meet reform commitments made at previous meetings would be key, a strategy he dubbed: “Keep your word, or explain”.

Coming good on commitments made at the G20 summit in Brisbane

Without action, we could see the global economic super tanker continuing to be stuck in the shallow waters of sub-par growth and meagre job creation Christine Lagarde IMF head

last November could add more than US$2 trillion to the global economy and create millions of new jobs over the next four years, Lagarde said.

The G20 came into its own during the 2007-09 financial crisis when it put together a global stimulus package, but the challenge now is far more delicate, with diverging monetary policies one of the causes of the global turbulence.

The U.S. Federal Reserve looks set to raise interest rates this year, a stark contrast to impromptu cuts from India to Australia, Canada to Denmark, as well as China’s cut in bank reserve requirements and the abrupt end to the Swiss franc cap.

A senior Canadian finance official said the G20 communiqué would probably emphasise the importance of central bank actions in sustaining demand growth and said the Fed and Bank of England had voiced support for other central banks doing what they needed to support growth.

Turkey’s own monetary policy may also be in the spotlight. Its central bank is under government pressure to cut interest rates ahead of a June election despite stubborn inflation.

“Interest rates are what shape inflation. If you keep the rates high, the inflation will be high too but if you cut it, inflation will also fall. There are still people who don’t understand this,” Turkish President Tayyip Erdogan said last week, sending the lira to a record low.

A source close to French Finance Minister Michel Sapin said Greece would be discussed, but noted the situation was very different to a few years ago, with protection mechanisms in place and European markets less sensitive to its woes.

France has also asked to discuss the fight against terrorist financing, an important topic for Turkey given the fight with Islamic State militants taking place just over its southern borders in Syria and Iraq.

Reuters

Business Daily | 15

February 9, 2015

Opinion Business

wires

Leading reports from Asia’s best business newspapers

PHILSTAR

The rise of the frugal economy Navi Radjou Jaideep Prabhu

Silicon Valley-based innovation and leadership adviser Professor at Cambridge Judge Business School, University of Cambridge, and winner of the 2013 Thinkers50 Innovation Award and Director of the Centre for India & Global Business

The country’s exports growth could have eased in December amid a moderation in US manufacturing activity during the period, UK-based investment bank Barclays said. The bank has forecast that outbound shipments could have increased 4.1 percent year-on-year in December, slower than the 19.7-percent rise in November. ISM data showed the purchasing manager’s index (PMI), fell to a revised 56.5 in December from 58.7 in November. Latest data showed this picked up slightly to 56.7 in January. The PMI reflects the strength of the manufacturing sector, and also the economy as a whole.

THE JAPAN NEWS U.S. beef exports to Japan in 2014 rose 13.6 percent from the previous year to US$1.58 billion, hitting a record high for the first time in 11 years, the U.S. Meat Export Federation said. Japan-bound exports grew for the 10th consecutive year.

The previous record high was marked in 2003, before exports were affected by the outbreak of bovine spongiform encephalopathy (BSE). The result, which confirmed that demand for U.S. beef among Japanese consumers remains high, could affect bilateral discussions between Japan and the United States over Trans-Pacific Partnership multilateral free trade talks, informed sources said.

THE TIMES OF INDIA Maharashtra and the National Capital Region (NCR) have cornered 49% of the total foreign direct investment inflows into the country since April 2000, according to commerce and industry ministry data. Maharashtra attracted maximum foreign inflows at US$70.41 billion, about 30% of total foreign direct investment (FDI) inflows during April 2000 - November 2014.

The National Capital Region (NCR) including parts of Uttar Pradesh and Haryana, received US$45.77 billion foreign direct investment during the period.

NCR accounted for 19% of the country’s total FDI. During the period, India received US$236.46 billion foreign inflows, according to the data.

THE NEW ZEALAND HERALD How much do your kids know about money? Experts say improving children’s financial literacy is as easy as explaining what you are doing when you pay your bills and giving them a bit more control over their pocket money.

A Cambridge University study found that how we behave with our money as adults is decided by the time we are 7, when most children can recognise the value of money. Most 7-year-olds were capable of planning ahead, delaying a decision until later and understanding that some choices were irreversible.

Helsinki is building a “mobility on demand” system that seamlessly combines multiple shared- and public-transport services in a single payment network

I

n a famous 1937 essay, the economist Ronald Coase argued that the reason Western economies are organized like a pyramid, with a few large producers at the top and millions of passive consumers below, is the existence of transaction costs – the intangible costs associated with search, bargaining, decisionmaking, and enforcement.

But with the Internet, mobile technologies, and social media all but eliminating such costs in many sectors, this economic structure is bound to change.

Indeed, in the United States and across Europe, vertically integrated value chains controlled by large companies are already being challenged by new consumerorchestrated value ecosystems, which allow consumers to design, build, market, distribute, and trade goods and services among themselves, eliminating the need for intermediaries. This bottomup approach to value creation is enabled by the horizontal (or peer-to-peer) networks and do-it-yourself (DIY) platforms that form the foundation of the “frugal” economy.

Two key factors are fuelling the frugal economy’s growth: a protracted financial crisis, which has weakened the purchasing power of middle-class consumers in the West, and these consumers’ increasing sense of environmental responsibility. Eager to save money and minimize their ecological impact, Western consumers are increasingly eschewing individual ownership in favour of shared access to products and services.

As it stands, nearly 50% of Europeans believe that, within a decade, cars will be consumed as a “shared” good, instead of privately owned, and 73% predict the rapid growth of car-sharing services. BlaBlaCar, Europe’s leading car-sharing service, now transports more passengers monthly than Eurostar, the highspeed rail service connecting London with Paris and Brussels.

Eager to save money and minimize their ecological impact, Western consumers are increasingly eschewing individual ownership in favour of shared access to products and services

And the better-known service Uber is causing panic among taxi companies worldwide. Despite recent controversy, the company, founded in 2009, is valued at more than US$40 billion.

This shift in consumer attitudes extends far beyond transport.

The peer-to-peer home-sharing service Airbnb now rents more room-nights annually than the entire Hilton hotel chain. And the peer-to-peer lending market, which bypasses banks and their hefty hidden fees, surpassed the US$1 billion mark in early 2012.

The global market for shared

products and services is expected to grow dramatically, from US$15 billion today to US$335 billion by 2025, without requiring any major investment. The European Commission predicts that peer-to-peer sharing, now an income booster in a stagnant labour market, will evolve into a disruptive economic force.

The nature of horizontal networks supports this prediction. Such networks begin working long before they reduce transaction costs. By enabling ordinary people to do at home what, a decade ago, only scientists in large labs could do, the Internet economy is lowering the costs of research and development, design, and production of new goods and services in many sectors.

Thanks to low-cost DIY hardware kits like the US$25 Arduino or the US$35 Raspberry Pi, people are increasingly building their own consumer devices. Moreover, customers can now design and manufacture industrial-calibre products by using shared hightech workshops – so-called “fab labs” – equipped with CNC routers, laser cutters, and 3D printers.

Such changes are propelling the so-called “maker movement”: a legion of tinkerers who collectively can create products faster, better, and more cheaply than big companies can. Together, the maker movement and peerto-peer sharing platforms are empowering once-passive customers to become active “prosumers,” thereby spawning a frugal economy that can create value in a more efficient, costeffective, socially inclusive, and environmentally sustainable way.

Recognizing these benefits, some communities are actively supporting the maker movement and accelerating the development of frugal economies. For example, mayors of major cities – including New York, Tokyo, Rome, Santiago, and Oslo – are seeking to host Maker Faires, where ordinary

citizens showcase their ingenuity and engage with other makers.

Last June, US President Barack Obama hosted the first White House Maker Faire – declaring that “Today’s DIY is tomorrow’s ‘Made in America’” – and appointed a senior adviser to determine how to turn the maker movement into an engine of US economic growth. And New York City Mayor Bill de Blasio, who proclaimed September 15-21, 2014, “Maker Week,” and Barcelona Mayor Xavier Trias, who wants to build a “Fab City,” are trying to put their cities at the forefront of the global maker movement.

Meanwhile, in Vauban – a neighbourhood in the German city of Freiburg – 65% of electricity is produced by solar panels and a co-generation plant established and operated by local citizens. And Helsinki is building a “mobility on demand” system that seamlessly combines multiple shared- and public-transport services in a single payment network, with the goal of eliminating private car ownership by 2025.

A self-organizing frugal economy could generate billions of dollars in value and create millions of jobs in the medium term. But, of course, there will be losers: the large Western companies whose “more for more” business models, backed by huge R&D budgets and closed organizational structures, are not designed to serve the needs of cost-conscious and eco-aware consumers seeking more – and better – for less. In order to survive, these established companies will need to reinvent themselves as frugal enterprises that integrate digitally empowered “prosumers” into their value chains and strive to address market needs in a more eco-efficient and cost-effective way.

The transition to a frugal economy is happening. Traditional companies must get on board – or risk becoming obsolete.

Project Syndicate

16 | Business Daily

February 9, 2015

Closing Thai junta rejects Yingluck’s request to travel abroad China’s lunar probe tests orbit for moon sampling The Thai military junta has rejected a request by former Prime Minister Yingluck Shinawatra (pictured) to travel abroad, citing she is in the process of being indicted in the Supreme Court, a junta spokesman said yesterday. The National Council for Peace and Order (NCPO), which staged a coup to topple Yingluck’s government last May, turned down the request because the legal process of the case in which Yingluck has been accused of dereliction of duty in a controversial rice- pledging scheme has started, NCPO spokesman Winthai Suwaree was quoted by Bangkok Post as saying.

The service module of China’s unmanned test lunar orbiter has finished tests of orbiting technologies needed in a future sampling mission on the Moon. The orbiter conducted three times of tests between Friday and Saturday to modulate the speed, height and orbit in a simulative moon sampling mission, according to a statement of the State Administration of Science, Technology and Industry for National Defense yesterday. Such technologies will possibly be used in the country’s next lunar probe mission, Chang’e-5. The Chang’e-5 probe, expected for launch in 2017, will be tasked with landing on the moon.

QE also means free lunch for multinationals Swiss food giant Nestle was the first to see the interest rates on its euro-denominated debt fall into negative territory when the yields on bonds that expire in nearly two years fell below zero Angélina Boulesteix

G

ermany and France have been able to borrow at negative rates for some time, meaning investors are paying to loan Berlin and Paris money, but with interest rates falling further as the ECB gears up to launch quantitative easing, multinationals are also now getting paid to borrow.

The phenomenon is a result of investors seeking a safe place to park their money in debt markets where interest rates have been dragged down to ultra-low levels.

The need for low-risk instruments, and with little concern about inflation, has seen investors actually push the interest rate into negative territory for shortterm German and French government bonds.

“It is sort of a domino effect.

If sovereign bonds are paying less, then this ricochets and those of corporations will pay less and finally investors will enter uncharted territory,” said Christophe Quesnel, a trader at Oddo Securities, which specialises in corporate debt.

“For the first time, high-

rated corporate bonds are also trading at negative yields (Nestle), and many are nearzero (Shell, Novartis, Air Liquide, BASF, Sanofi, etc),” added RBS. The ECB has brought its main interest rate to just 0.5 percent as it seeks to boost growth in the eurozone by lowering borrowing costs.

Three more H7N9 cases reported in Guangdong

With the eurozone now hit by a bout of deflation thanks to falling oil prices, the ECB is about to launch quantitative easing (QE) in which it will buy up 60 billion euros (US$68 billion) of sovereign and corporate bonds per month.

This will have the effect of pushing down yields, or the

rate of return to investors, even further.

But why would investors accept paying to loan money to someone?

“It’s the effect of fear” about the delicate situation in Europe, said Juan Valencia, a credit specialist at Societe Generale CIB. “Investors are putting their money in the safest instruments, as they aren’t sure about getting their money back with other investments. Thus they are paying for the ‘privilege’ to loan to the most solid states and corporations,” he said.

The ECB’s QE programme, which will buy up over a trillion euros in bonds, will have a massive impact on the eurodenominated debt market which totals just 1.5 trillion euros.

Valencia said 900 billion euros of that debt already yields under one percent, and 400 billion less than 0.50 percent.

Some investors, such as pension funds and insurance firms, are required to place a certain percentage of their funds into bonds issued by countries and companies with

China’s deep-sea gas find holds over 100 bcm reserves

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A

secure credit ratings.

With the ECB entering the market, finding good returns in safe investments will get even harder.

“There is a compression process underway and everything is heading for zero,” said Valencia.

“Investors are thus being pushed to choose bonds of companies a little less safe or frankly to change assets to get a better return,” said Quesnel.

For companies “it is excellent news”, said Valencia, although he warned “just because money is practically free doesn’t mean that some companies won’t find themselves in complicated situations.”

Quesnel said the drop in borrowing costs shows “the ECB has done its job” and now “we need growth to pick up and unemployment fall so people consume.”

Valencia remarked that while “companies are overall in good shape after having made big efforts since the 2008 crisis”, to really prosper “they need growth and consumers.”

AFP

Former US ambassador optimistic about cooperation

F

he number of H7N9 human cases in south China’s Guangdong Province has reached 42 this year with three more cases reported, local health authorities said yesterday.

A 73-year-old man surnamed Deng in Guangdong’s Zhongshan city and a 56-year-old man surnamed He in Jiangmen city were confirmed infected with the bird flu, the provincial health and family planning commission said in a statement.

The two men are in critical condition.

A 52-year-old man surnamed Cheng recently diagnosed in Shenzhen city is stable, the commission said.

Guangdong is in the high-incidence period for bird flu, which occurs in winter and spring.

Thousands of chickens have been culled in Guangdong and Hong Kong this year. Several cities in Guangdong have taken measures to restrict live poultry trade.

In addition to Guangdong, Shanghai, Fujian, Jiangxi and Zhejiang in east China have all reported human cases of H7N9 this winter.

H7N9 is a bird flu strain first reported to have infected humans in March 2013.

deep-sea natural gas discovery in the northern part of the South China Sea has certified proven reserves exceeding 100 billion cubic metres, making it one of China’s biggest offshore finds, Chinese state television reported.

Offshore oil and gas specialist CNOOC Ltd announced the discovery last August after striking high flows of gas in the Lingshui 17-2 well, with per day production of 56.5 million cubic feet.

The well, at operational depth of 1,500 metres under the sea, was located about 150 kilometres (94 miles) south of the Chinese island province of Hainan.

The Ministry of Land & Resources has now estimated the reserves at 100 bcm, according to state television. The report said it would be one of the largest gas finds for offshore China, and would mark a breakthrough in drilling high-temperature and high-pressure reservoirs.

Analysts have said commercial development of the field would take years, and CNOOC Ltd’s latest plan to slash capex to counter low oil prices could affect drilling programs of more costly deep-water wells.

ormer U.S. Ambassador to China Gary Locke expressed confidence in the future of U.S.-China relations, noting that bilateral cooperation is “stronger than ever before.”

“The world is looking for the partnership between the United States and China to solve many of the problems,” Locke told Xinhua in an exclusive interview before delivering a speech titled “Vision and Hope for the United States and China” at the University of Southern California.

With this year’s Chinese Lunar New Year vacation drawing near, the number of Chinese tourists to the United States is expected to swell as the U.S. government has started issuing them 10-year multiple-entry visa.

The more people of the two countries visit each other, the better they will understand each other, said Locke, who worked during his tenure from 2011 to 2014 to push the two sides to reach a deal on visa extension.

“By giving students a five-year visa, by giving business travellers and tourists a 10-year visa, this will encourage more trips by the Chinese people to the United States,” he said.

Xinhua

Reuters

Xinhua