Macau business daily, Mar, 4, 2015

MOP 6.00 Year III

Number 741 Wednesday March 4, 2015

Publisher: Paulo A. Azevedo

Closing editor: Luís Gonçalves

Housing prices drop 11 pct in January PAGE 2 | Almost 250 taxi violations in CNY alone PAGE 8

Skyfall

N

ot quite as bad as investors feared.

But still a staggering drop from any perspective. February gaming revenues recorded the biggest fall ever in Macau.

Plunging 48.6 pct Y-O-Y. Operators made half – or MOP19 billion less – than in February 2014. Regardless of vanishing VIPs or unfavourable Y-O-Y comps Sands China clawed the biggest market share, followed by SJM. PAGE

Goldless

HSI - Movers

High-end and luxury goods sales in Macau plummeted 30 pct over CNY. While imports of gold jewellery merchandise in January plunged 56.5 pct. Market leader Chow Tai Fook says gold sales tanked 38 pct in Hong Kong and Macau. Lei Chi Fong, President of the Macau Goldsmith’s Guild, believes China’s anti-corruption campaign continues to cast a pall

Name

6

March 3

PAGE 3

SunBurned

%Day

AIA Group Ltd

2.11

Galaxy Entertainment

2.04

Hang Lung Properties

1.82

Sands China Ltd

1.70

Sun Hung Kai Propert

0.99

China Unicom Hong Ko

-2.21

Bank of China Ltd

-2.23

China Overseas Land

-2.31

Bank of Communicatio

-3.26

China Life Insurance

-3.75

Source: Bloomberg

I SSN 2226-8294

“We’re feeling the impact”.

So said SunCity’s president of marketing strategy yesterday of Macau’s declining gaming revenues. However, the company is about more than gambling, he says. The junket operator is determined to turn SunCity into an international brand. And is still interested in supporting the Macau Grand Prix

Brought to you by

PAGE 6

E-Puree

www.macaubusinessdaily.com

Infant formula. Buying sprees and empty shop shelves. Perhaps a thing of the past as Internet business peaks. European producers and delivery services are fuelling a sector that authorities have not yet tackled

Page 10

Indifference

Indifferent? Local respondents appear unfazed by Macau’s big issues. A survey finds the economy taking second place to daily concerns. The majority of interviewees – 83 pct – don’t have the economic recession on their minds.

When it comes to the 2015 Policy Address, rents and transportation are uppermost in their calculations

PAGE 4

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2 | Business Daily

March 4, 2015

Macau

Housing prices drop 11 pct in January The market is cooling, in terms of prices and transactions. Official data reveals that the average housing price had dropped by 11 pct in January. Former legislator Ung Choi Kun predicts that prices may continue to drop, but only for big flats Kam Leong

kamleong@macaubusinessdaily.com

T

he property market started cooling in January, official data released by the Financial Services Bureau (DSF) shows, indicating that the average price of a residence was MOP85,717 per square metre – down 11.1 per cent compared to December 2014.

Compared to January 2014, however, residential prices in the first month of the year still posted a slight increase of 1.3 per cent.

According to DSF, homes that are still under construction continued to be substantially more expensive than completed flats.

In January, homes under construction were priced at MOP123,949 per square metre. Despite this representing a drop of 14.8 per cent compared to the

MOP145,555 of December 2014, it also indicates an increase of 18.3 per cent year-on-year.

Meanwhile, prices for completed flats were rather more stable, amounting to MOP77,927 per square metre in the first month of this year, representing a month-onmonth decrease of 6.2 per cent, or a year-on-year drop of 1.3 per cent.

In terms of district, homes in Macau are still the cheapest albeit the smallest on average.

In January, residential flats on the Peninsula occupied an average gross floor area of 57 square metres, costing MOP80,415 per square metre.

Flats in Taipa offered the biggest space, occupying 95 square metres on average and costing MOP94,325 per

square metre. Meanwhile, real estate in Coloane is the most expensive, where homes of an average 88 suqare metres fetch MOP121,746 per square metre.

Fewer transactions Official data also showed that the property market had been even more silent in January. The total number of transactions dropped 19.6 per cent, amounting to only 336 deals, compared to the 418 transactions of December 2014.

On a year-on-year comparison, the number of transactions in the first month of the year plunged by more than double, down 55.7 per cent.

According to DSF, most of the transactions were made

on homes on the Peninsula, which accounted for 277 of the total. Deals made on residential flats in Taipa and Coloane accounted for 44 and 15 of the total, respectively.

Ung Choi Kun: Prices for big flats to fall this year Meanwhile, former legislator Ung Choi Kun, President of the Association of Property Agents and Realty Developers of Macau predicts that housing prices may only cool off for bigger residential flats, which he referred to those occupying at least 1,500 square feet (139.92 square metres).

According to Chineselanguage newspaper Macao Daily, the Association head anticipated on Monday that

the transactions of homes measuring a minimal 1,500 square feet will increase this year, anticipating prices will thus decrease.

However, prices for smaller flats will remain at the current level, he said, claiming the average prices will stay between some MOP7,000 per square foot (MOP75,040/square metres) in 2015.

Refuting concern that panic selling may appear in the property market due to the slowing economy, Mr. Ung did indicate that the market will be healthier if the government cancels the special stamp duty, which it introduced in 2011 to combat skyrocketing housing prices.

The duty comprises a levy of 20 per cent of the selling price if the owner of a property sells it within one year of purchase, or 10 per cent if the owner sells the property between one and two years of buying it.

Nevertheless, Mr. Ung claimed that the real estate market will not be affected even if the government does not cancel the special tax.

In addition, he reckons that the government should loosen the regulations on home mortgages, indicating that the industry is professional enough to analyse the financial status of mortgage applicants objectively.

Gaming employment down 1.8pct Industry reduced staff by 1,600 people between November 2014 and January 2015

S

ome 85,400 people were employed by the gaming industry in Macau, down by 1.8 per cent in the period from November 2014 to January 2015 compared to 87,000 in the previous three-month period of October to December last year.

The latest figures released yesterday by the Statistics and Census Service (DSEC) show that while employment in this sector dropped by just under 2 per cent, it was also the biggest source of employment here, accounting for 24.1 per cent of Macau’s total employment industry.

Employment by industry shows that the construction sector was the second largest employer at 14.6 per cent, followed by the hospitality industry at 13.7 per cent, wholesale and retail at 11.1 per cent, real estate and business at 7.8 per cent, and public administration at 6.8 per cent. Domestic work accounted for 5.7 per cent of the territory’s overall employment industry.

The biggest drop in the employment sector was registered in that of the hospitality industry, down 4.5 percent, meaning as many as 26,700 people

were employed compared to 27,900 in the previous period. Following this sector was that of restaurants, which recorded a 2.3 per cent drop in the number of employees to 27,700 from 28,300.

As many as 58,200 people were employed in construction, down 1.4 per cent, while the retail trade employed a total of 35,000 people, down from 35,200, in the November 2014 to January 2015 period from the previous one.

Macau’s unemployment rate remained stable at 1.7 per cent from

the November 2013 to January 2014 period.

The labour force here was 404,500, while the labour force participation rate dropped slightly by 0.1 percentage points to 74.3 per cent this period over 74.4 per cent in the previous period.

As many as 397,800 made up Macau’s total employment, down by 800; while the number of unemployed was 6,700, down 300 in the period in question. The underemployment rate also remained unchanged at 0.4 per cent from that of the previous period.

S.F.

Business Daily | 3

March 4, 2015

Macau

Luxury goods sales drop 30 pct during CNY High-end and luxury goods sales dropped sharply during Chinese New Year.

Chow Tai Fook’s gold sales plunged 38 per cent in the Hong Kong and Macau market Joanne Kuai

joannekuai@macaubusinessdaily.com

During Chinese New Year, we can see that high-end consumption has shrunk slightly Lei Chi Fong, President of Macau Goldsmith’s Guild

T

he latest data from the Statistics and Census Service issued yesterday shows that in January this year gold jewellery merchandise imports dropped 56.5 per cent compared to the same period last year.

The value of gold jewellery imports in the first month of this year was MOP641.3 million, while it stood at MOP1.47 billion in January 2014.

Handbags and wallets dropped 35.3 per cent to MOP265 million in January 2015 from MOP410 million the same month last year.

According to TDM Chinese Radio’s report, local industrial representatives say that during this year’s Chinese New Year, high-end goods and luxury goods continued dropping by 20 to 30 per cent compared to the same period last year.

“This year (during Chinese New Year), we can see that high-end consumption has shrunk slightly,” said Lei Chi Fong, President of the Macau Goldsmith’s Guild.

“Domestic consumption and rational consumption didn’t see a big change.”

Lei Chi Fong added that the anticorruption campaign in Mainland China may continue to exercise its impact on the Macau market.

Foreign investors in the short term may change their marketing strategy due to high rent and restructure their business. But he said he believes that the industry will develop healthily in the long tern.

HK, Macau sales plunge Chow Tai Fook’s gold sales during the Chinese New Year holidays also

M & S opening new store at Venetian, closing 5 Shanghai stores

B

ritish retailer Marks & Spencer said on Monday that it will continue to expand its business in Macau whilst it is closing five of its stores in Shanghai, China. The retailer said a new store occupying 1,000 square metres will open in the Venetian Macau this November, the second it has opened in the Special

Administrative Region. The company will close five of 15 stores in the Shanghai region by August this year, following a review of its growth plans in the country. Meanwhile, the retailer said it would continue expanding its Hong Kong market, where it currently has a total of 18 stores and 4 standalone food stores.

support this story. The group’s gold products’ same-store sales growth decreased by 14 per cent compared to a year ago.

In Chow Tai Fook Jewellery Group Limited’s unaudited key operation data for the Chinese New Year (CNY) period from 5 to 22 February 2015 released at the end of last month to the Hong Kong Stock Exchange (HKSE) shows that Hong Kong and Macau and other markets

suffered a 24 per cent drop in retail sales value growth compared to the corresponding CNY period last year from 17 January to 3 February 2014.

However, the whole group has seen a nine per cent increase in retail sales value mainly attributable to the 22 per cent increase in the Mainland China market. Samestore sales growth in the Mainland market saw 11 per cent increase but the Hong Kong, Macau and other markets saw a 39 per cent plunge.

In terms of same-store sales growth by product, gold products dropped 14 per cent in general, and 38 per cent in Hong Kong, Macau and other markets. Gem-set jewellery, on the contrary, saw a tremendous increase in the Mainland market, which grew by 62 per cent, although still dropping 17 per cent in Hong Kong and Macau and other markets.

The filing with the HKSE also noted that ‘same-store sales’ for the CNY period is the revenue from self-operator POS existing as at 22 February 2014 and which had been opened prior to 1 April 2014.

Revenue from wholesale and other channels are excluded.

4 | Business Daily

March 4, 2015

Macau opinion

Balancing tourist flows

José I. Duarte Economist

83 per cent of residents unconcerned about economic slowdown The majority of residents here are not concerned about the economic slowdown or increasing calls to diversify the economy. Housing policy dominates worries, a survey regarding residents’ expectations of the upcoming Policy Address for 2015 reveals Stephanie Lai

sw.lai@macaubusinessdaily.com

T

he issue limiting the number of visitors continues in the public agenda and several people have recently commented on the topic. This is a relevant matter for Macau and one that can easily be mishandled and become a source of avoidable conflicts. Some care in framing the issue is thus warranted.

First, let’s recognise that a problem exists.

Traffic congestion, crowded tourist areas, observable (and breathable) pollution and very audible noise do not need to be demonstrated. They are visible and patent. It is a typical problem of congestion with observable negative impact on the life of local residents and the quality of their environment. As such, it deserves attention and doing nothing is not a defensible option unless one can prove that any feasible action will have negative wellbeing impact.

Economic analysis and public policy routinely deal with similar problems.

Circulation in the public streets is unrestrained until congestion becomes significant and its costs rise. Then, we accept that authorities set up various tools to minimise it or control its rise – adopting taxes that make ownership and operation of vehicles more expensive, setting up circulation and parking fees in more congested areas, limiting or forbidding circulation in certain areas or periods, to name but a few. There is nothing extraordinary there. In its essence, we deal here with the same type of problem.

Of course, we must also recognise that it touches on more diversified interests and sensibilities. Both in Macau, where visitors are the bread and butter of many, and on the other side of the Border Gate, where most of our visitors come from. But, in rigor, the issue is not to limit the visitors coming from China per se but to achieve a better flow of overall visitors in a way that balances the various interests at stake.

This is a typical matter for public policy and one worthy of serious attention. There are three essential pillars to such policy.

The first is to make the cost of visiting the city higher for the types of tourists that contribute more to congestion and less to residents’ income. As quotas are notoriously difficult to set and control, that will mean, essentially, finding ways of making very short tourist excursions more expensive. The aim is to make their trip less worthwhile and, by the same token, make the visit for longer-term visitors comparatively cheaper and more enjoyable.

The second is to diversify the factors of attraction and, namely, to do so in ways which promote or facilitate events and activities enabling tourists to flow over wider city areas and longer day periods.

Third, to recognise that optimal policies are unlikely to be defined on paper at the outset. Proper monitoring and fine-tuning mechanisms should be put in place to adapt policies as circumstances require.

The worst option would be to let things get worse until they are beyond repair and the city bursts at the seams.

Macau’s Policy Address for 2015 will be delivered on March 23 by the Chief Executive of Macau Fernando Chui Sai On

A

slowdown in the city’s overall economy against the backdrop of a continuous slump in gaming revenues has not proved cause for alarm by the majority of residents here, who are primarily concerned about housing policy and bus services, according to the latest survey released

by Association of Macao New Vision.

According to the findings of the survey conducted by the nonprofit research team, which seeks to divine residents’ expectations of the upcoming Policy Address for 2015, the top three policies favoured by respondents are the faster construction of public housing units, a continuation of the existing property curbs and better monitoring of the bus service.

Speeding up public housing construction and a call for property curbs have been the top concerns by respondents for both last year’s and this year’s Policy Address, according to the Association.

The rest of the top ten policies favoured by respondents are the speeding up of medical service reform, controlling inflation, protecting local employment, increasing social welfare subsidies, cultivating local talent, improving education and promoting a diversified economy. Of these items, the diversification of the local economy is of least concern to respondents,

Last week, Secretary for Economy and Finance Lionel Leong confirmed a new drop in GDP for the last quarter of 2014 and the current quarter

according to the survey.

The research team noted in the findings that the overall slowdown in the local economy, dragged down by the continuous plunge in the city’s gaming revenues, has not overly unsettled residents.

Macau’s gross domestic product (GDP) for the third quarter last year fell by 2.1 per cent in real terms, maring it the first negative quarterly growth since 2009, according to the Statistics and Census Service.

Speaking to the media last week,

Secretary for Economy and Finance Lionel Leong Vai Tac confirmed the negative outlook for the GDP figure for the last quarter of 2014 and the current quarter, while gross gaming revenues here have continued to fall since June last year.

According to the survey, only 16.57 per cent of respondents are concerned about the city’s economic policy. A majority at 72.41 per cent of respondents are interested in policy related to social affairs and welfare, which are largely financed by the city’s gaming tax revenue; only 3.62 per cent are concerned about Macau’s political system and legal affairs.

This latest released survey, conducted from February 9 to 11 via computer-assisted telephone interviewing (CATI), covered samples collected successfully from 774 interviewees.

Macau’s Policy Address for 2015 will be delivered on March 23 by the Chief Executive of Macau Fernando Chui Sai On in the Legislative Assembly.

The government announced in November last year that for 2015 the cash handout scheme is set to continue in tandem with a continuation of the tax relief policies.

Business Daily | 5

March 4, 2015

Macau Li Ka Shing ranks 17th in Forbes billionaire list Li Ka Shing is the top billionaire in Asia according to a Forbes World’s Billionaire list.

The owner of Watson’s stores and Park ’n’ Shop supermarkets - dubbed Superman - in one year climbed from 20th to 17th with US$33.3 billion (MOP266 billion). The U.S. magazine list is topped by American Bill Gates with a net worth of US$79.5 billion (MOP635 billion). The founder of Microsoft topped the list in 2014, too.

Illegal UnionPay transactions total MOP784mln in 2014 So far this year, as many as five such cases have been reported involving amounts of as much as MOP260 million

T

he total value of illegal UnionPay transactions through mobile cardswiping machines amounted to MOP784 million for the whole of 2014, according to figures provided by the Judiciary Police and cited by Portuguese news agency Lusa.

This amount refers only to 47 cases reported but so far this year that number stands at five. However, only in the first couple of months of this year illegal transactions have totalled MOP260 million, onethird of the total reported for the whole of 2014.

These transactions are illegal in Macau because they are made with mobile card-swiping machines from UnionPay China and others from third parties. This then means that UnionPay International is not receiving the percentage it’s entitled to per actual transaction conducted outside Mainland China.

The cases reported involve a total of 124 suspects, including

23 women. Of the total, 100 are from Mainland China, 20 from Macau, three from Hong Kong and one from Taiwan.

“Following an investigation by the Public Prosecutor’s Office, the suspects from Mainland China were handed over to the Immigration Services by Public Security Police in order to be extradited. Of these, 12 men and two women were still subject to a fine ranging from between MOP10,000 and MOP50,000,” the Judiciary Police said.

The majority of reported cases involve casinos, and took place on the streets outside or even in the hotel rooms of casino hotels.

“In the last few months, the police found that some of the criminals committing such crimes sought the aid of middlemen to contact casino clients, alleging they could provide such illegal services at very low interest rates.

Afterwards, the clients were taken to a private vehicle,

parked close to the casinos, where the illegal transaction took place,” Judiciary Police explained.

Once these cases were uncovered, the Monetary Authority of Macau confirmed media rumours that the regulating body had ordered the removal of such mobile card-swiping machines from UnionPay China starting on July 1, 2014. It also ceased the cash withdrawal options from jewellery stores inside

casinos due to these illegal transactions.

Last December, the regulator asked Macau banks to make available a list of businesses deemed ‘high risk’ in terms of money laundering and that used UnionPay China cards, Hong Kong newspaper South China Morning Post (SCMP) reported at the time.

When asked by Lusa, two sources from the banking industry said that the letter in question from the Monetary

Authority asked for a monthly report about businesses and stores that had UnionPay machines and payment options provided by the banks here. Payments of more than a certain amount also had to be declared, however. The amount was not disclosed.

Analysts say that this was one of the factors that first led to the drop in gaming revenues for the month of June 2014, as it impacted gamblers’ bets.

Lusa/Business Daily

Merchandise imports down 1.2 pct in January

T

he city’s total merchandise imports for January 2015 decreased slightly by 1.2 per cent year-on-year to MOP8.53 billion (US$1.06 billion), with total trade of the Special Administrative Region reaching MOP9.49 billion, representing a very slight drop of 0.8 per cent year-on-year, the latest data released by the Statistics and Census Bureau (DSEC) shows.

In fact, the slight drop in total imports was due to the overall imports of consumer goods dropping 14.9 per cent year-on-year to some MOP4.76 billion.

In terms of country of origin, 35.6 per cent of the city’s imports were from Mainland China, amounting to MOP3.04 billion, an increase of 3.9 per cent year-on-year. Europe

and the USA were the second and third biggest sources of the city’s imports, accounting for 21.3 per cent and 9.7 per cent of total imports.

Despite the decline in total imports, the city’s total merchandise exports increased slightly by 2.9 per cent year-on-year in January, amounting to MOP960 million, compared to MOP933 million during the same period last year.

Of the exports, domestic exports grew 8.7 per cent year-on-year, amounting to MOP186.2 million while re-exports increased 1.6 per cent, reaching MOP774.2 million.

Hong Kong, remaining the major destination of the city’s exports, received 64.2 per cent of the total exports of Macau, up 8.5 per cent year-on-year.

However, the city’s exports to Mainland China decreased by 4.7 per cent, amounting to only MOP122 million. Other markets, such as Europe and the USA received 28 per cent and 53.3 per cent less exports from Macau, compared to the same period last year.

Meanwhile, exports of nontextiles increased 4.5 per cent year-on-year to MOP884 million,

of which the value of clocks & watches and tobacco jumped 26.4 per cent and 143.8 per cent yearon-year, reaching MOP124 million and MOP55 million, respectively.

Exports of textiles and garments, on the other hand, totalled MOP77 million, down 12.4 per cent compared to the same period last year.

K.L.

6 | Business Daily

March 4, 2015

Macau

Gaming revenues plunge a record 48.6 pct in February Gaming operators’ revenues plunged last month to MOP19.5 billion, having hit MOP38 billion in February 2014. Sands China returns to the top in terms of market share João Santos Filipe

jsfilipe@macaubusinessdaily.com

L

ast year, the celebrations of the Chinese New Year heralded the best ever period for gaming operators in Macau; with the start of the Year of the Horse gaming revenues raced to MOP38 billion. However, times have changed and the Year of the Sheep has rammed revenues to MOP19.5 billion, equating to a drop of 48.6 per cent and the largest ever year-on-year decline registered in the Macau gaming industry.

According to data released yesterday by the Gaming Inspection and Coordination Bureau (DICJ) during the first two months of 2015 gaming revenues accounted for MOP43.3 billion, representing a decrease of 35.1 per cent in comparison to the same period in the previous year when revenues were MOP66.7 billion.

Gaming revenues have now been declining for nine consecutive months since June last year and are just a quarter away from dropping for a whole year. This notwithstanding, the decline of 48.6 per cent remains within the range expected by most analysts,

MOP18.5 billion

The amount in revenues that casinos here “lost” last month compared to a year ago who were predicting a decline of 45 to 55 per cent.

The drop in gaming revenues is primarily driven by the VIP segment, according to Union Gaming Research analyst Grant Govertsen and Deutsche Bank analyst Carlo Santarelli.

“We believe the biggest culprit for the weak month was the alreadytroubled VIP segment,” Govertsen told Reuters. “Ultimately, while we believe

there was a pickup in VIP headcount, gaming volumes just weren’t there.”

In a report dated 26 February, Santarelli forecast that VIP revenues alone would drop 40 per cent yearon-year during the first quarter from MOP65 billion to MOP39 billion.

In the industry, the crackdown on corruption initiated by President Xi Jinping and visa restrictions on Mainland visitors wanting to come to Macau have played a major role in decline gaming revenues. According to gaming promoter company Neptune, in 2014 the VIP segment dropped 11 per cent, creating many difficulties for smaller junket operators, many of whom face the possibility of closure.

In terms of market share, Sands China leads the industry with 23.3 per cent, according to data revealed yesterday by Deutsche Bank. The company controlled by Sheldon Adelson is followed by SJM (23.1 per cent) and Galaxy (21.5 per cent), Melco Crown (14.4 per cent), MGM China (9 per cent) and Wynn (8.6 per cent).

July

August

September

October

November

December

January

February

SJM

24.1%

22.4%

20.9%

23.5%

22.6%

23.6%

21.9%

23.1%

Sands China

23.1%

24.6%

21.8%

23.7%

22.5%

20.7%

20.4%

23.3%

Galaxy

20.6%

21%

22.9%

21.4%

21.5%

20.2%

22.5%

21.5%

MPEL

12.4%

13%

12.7%

14.3%

13.4%

14.9%

14.7%

14.4%

MGM

8.7%

8.9%

10.8%

8.2%

11%

10.5%

10.10%

9%

Wynn

11.1%

10.1%

10.9%

8.9%

9%

10.2%

10.4%

8.6%

Total

100.00%

100.00%

100%

100%

100%

100%

100%

100%

SunCity feels impact of declining gaming revenues The president of marketing strategy of the company said yesterday that the company is feeling the impact of Macau’s declining gaming revenues. At this juncture, however, the goal of the company is to turn SunCity into an international brand

G

aming promoter SunCity Group has been affected by declining Macau gaming revenues, the president of marketing strategy Choong Yoon Ming said yesterday on the sidelines of a press conference announcing the World Series Baccarat Championship organised by the company.

“In percentage terms the drop is not that much. Gaming depends on the market and sales but as far as it concerns us, we feel the impact”, Mr. Ming said. “We have got to take a different approach. Got to be more careful about the market.

And of course we’re diversifying; we’re not only in gaming but also in development and entertainment.”

Choong Yoon Ming also revealed

that the group is interested in starting to operate in City of Dreams, Manila and that this operation may be concluded within this year.

Yesterday, SunCity hosted the final leg of the World Series Baccarat Championship tournament that set two new Guinness World Records for the ‘greatest prize money for a baccarat tournament’ and the ‘greatest prize money for a baccarat tournament – individual’ with prizes of HK$119 million and HK$100 million, respectively. The previous records were US$5 million (HK$39 million) and US1$ million (HK$7.6 million). The CEO of the company, Alvin Chau, and Guinness World Records Great China Adjudicator Lisa Hoffman also attended the event.

“This tournament shows that entertainment is really an important business for SunCity. We hope this will help us make SunCity a big brand internationally and we expect this tournament to continue in the future”, Choong Yoon Ming said of the event.

Concerning other non-gaming events, he said that the company is interested in continuing as one of the sponsors of the Macau Grand Prix, which takes place in November. Last year, the company was the main sponsor of the event.

“We have not decided yet if we’re going to be the main sponsor this year.

But we are interested in continuing to be one of the sponsors of the Grand Prix. We want to contribute to the development of Macau,” he said.

J.F.S.

Wynn Resorts blocking Elaine Wynn from board Wynn Resorts Ltd. is seeking to block Elaine Wynn – a major shareholder, long-time director and twice former wife of the company’s Chairman and Chief Executive Officer Steve Wynn – from its board. Elaine Wynn said she is reviewing all of her options now after being removed from the board of Wynn Resorts Ltd., the casino company led by her ex-husband, Chairman and CEO Steve Wynn.

“This news is extraordinarily disappointing,” she said in an e-mailed statement, “not just because I, as the co-founder of Wynn Resorts, have devoted my life to making this company a success but because the decision excludes the last woman director from the board.” Elaine Wynn, 72, has been embroiled in litigation with her ex-husband over her 9.4 per cent stake in the Las Vegas-based casino company. The dispute dates back to an agreement the couple had with Kazuo Okada, an early Wynn Resorts investor, that gave Steve Wynn control over shares held by all three. Elaine Wynn, whose 9.54 million shares are valued at about US$1.36 billion, sought to end that agreement in 2012, a move Steve Wynn is fighting. Okada’s holding was redeemed by the company in a separate dispute. Wynn Resorts said in a regulatory filing last week it wouldn’t re-nominate Elaine Wynn. The board cited her lack of independence under Nasdaq-listing standards and the impact of the dispute on ‘the atmosphere in and effectiveness of her participation on the board.’ Elaine Wynn told the company she intends to nominate herself for a board seat at the April 24 annual meeting in Las Vegas if removed, according to last week’s filing.

Business Daily | 7

March 4, 2015

Macau

Fortunes go from bad to worse as CNY gamblers vanish

X

u Meihua joined hundreds of thousands of fellow Chinese tourists who travelled to Macau over Lunar New Year last week.

She wasn’t there to gamble, though.

The 58-year-old accountant dropped by casinos owned by Wynn Macau Ltd., Sands China Ltd. and SJM Holdings Ltd. to snap photos and window shop. Travelling with her sister and husband to the world’s biggest gambling hub, she was more interested in taking in the sights than spending money at the baccarat tables.

“I don’t plan to gamble at all; I don’t have that much money,” said Xu, recording a dancing water fountain with her smartphone on February 23. “Why would I risk thousands of yuan?”

Macau’s troubles are turning from bad to worse. A slide in gambling revenue last year is threatening to turn into a rout as middle-income consumers join high rollers in pulling back. As so-called VIPs avoid the enclave in the wake of China President Xi Jinping’s clampdown on graft, the country’s economic slowdown, as well as new restrictions on visas and smoking, have also deterred mass market gamblers.

Players failed to materialise during what is traditionally one of the busiest weeks of the year, prompting analysts to slash their estimates for gambling in February. Casino revenue is now projected to plunge 53.5 per cent for the month, according to the median estimate by eight analysts surveyed

by Bloomberg, compared to the 40

per cent drop forecast before the holiday started.

‘Shockingly bad’ That would mark the ninth straight month of decline, the longest losing streak since monthly records started in 2005. The city’s casino regulator is expected to release monthly gaming data by March 4.

The Lunar New Year, which started February 19, was “shockingly bad” for Macau gaming, DS Kim, an analyst at JP Morgan Chase & Co., wrote in a note on February 25.

Gambling numbers over the holiday period were “very disappointing to us, as it was nearly 40 per cent below what we had anticipated”.

While a decline from VIP gambling was expected as these high-stakes players tend to arrive a week later to avoid the crowds, “we understand even premium mass demand remained very muted, primarily due to the deteriorated player mix”, Kim wrote, cutting his February forecast to a slump of as much as 55 per cent, from a 45 per cent expected drop.

Galaxy Entertainment Group Ltd. shares fell 2 per cent. Wynn Macau dropped 1 per cent, while Melco Crown Entertainment Ltd. declined 1.4 per cent. The benchmark Hang Seng Index jumped 0.5 per cent after China’s interest rate cut on Saturday.

This holiday, the Year of the Goat, is in sharp contrast to the Year of the Horse last February. That month was the Macau casino industry’s

Corporate Two-Michelin star guest chef José Avillez returns to Vida Rica restaurant Mandarin Oriental, Macau welcomes Chef José Avillez back to Vida Rica Restaurant for a feast of gourmet delicacies from 17 to 19 March 2015, following his successful debut last year. Chef Avillez’s restaurant, Belcanto, in Lisbon was awarded a second Michelin star this year and he will be returning to Macau to tantalise diners’ senses with his new interpretations of Portuguese cuisine, based on traditional recipes with contemporary inspiration.

Chef Avillez will present a six-course degustation dinner menu, featuring dishes such as low-temperature smoked egg yolk, pea stew purée, pancetta and Périgord truffle; beef oxtail with foie gras, chickpea, and onion purée with Nisa cheese; and lemon-lime globe, priced at MOP1,288 per person. Guests can also embark on a taste journey with his four and five-course set lunch menus at MOP398 and MOP498 per person, respectively. All menus offer a choice of wine pairing with selected vintages from Portugal.

best ever as they raked in MOP38 billion (US$4.8 billion). This year’s downturn comes despite a record high of more than 800,000 Chinese tourists flooding Macau in the first seven days of the Year of the Goat.

Unlucky year “Perhaps the Year of Goat isn’t a lucky year for casinos,” Victor Yip, an analyst at UOB-Kay Hian Holdings Ltd. said in an interview, adding that the VIP gambling business still accounts for at least 60 per cent of Macau’s gambling revenues. “It won’t work if you only get retail customers but very few VIP gamblers as they fail to boost the gross revenue.”

The recent wave of Mainland Chinese visitors also spent less than before, a further blow to the fine-dining eateries, luxury retail malls, and highend hotels that casinos have set up next to their gambling halls. Excluding gambling, per-capita shopping expenses

by Chinese tourists dipped 32.8 per cent to 1,079 patacas in the fourth quarter of 2014, according to data from the Macau Government.

Average occupancy at 3 to 5-star hotels for the Golden Week period of the Chinese holiday, which ran from February 18 to 24, fell 6.9 percentage points to 87.5 per cent, while average room rates declined 15.4 per cent, the Macau Government Tourist Office announced on February 26.

Analysts had looked to the opening of new projects on Macau’s Cotai strip later this year by operators

This holiday, the Year of the Goat, is in sharp contrast to the Year of the Horse last February

such as Galaxy Entertainment and Melco Crown Entertainment Ltd. as a glimmer of hope. Even those prospects are starting to look questionable amid concerns the Macau Government will allow fewer gambling tables at the new resorts.

“We envisage a scenario where the Macau Government could lower the allocation of tables to indicate it is more serious about ’controlling’ growth in gaming,” Anthony Wong, an analyst at UBS Group AG, wrote in a report February 24, citing concerns raised by corporate management teams.

“We believe a low allocation for the first project could negatively impact sentiment on all future projects initially,” he wrote, noting that while table capacity of new projects are in the 400-500 range, “the recent concern has been that some new projects might obtain well below 200 tables”.

Insufficient tables means a new casino resort can accommodate fewer gamblers, hitting revenue. There are also “soft factors”, according to Wong, pointing out that insufficient tables could make a large casino floor “look empty and lack energy, impacting player sentiment.”

Xi’s campaign In December, President Xi urged Macau to wean itself off its reliance on casinos and turn the city into a world tourism and leisure centre. Xi’s campaign against corruption within weeks after he became head of the ruling Communist Party in late 2012 has snared more than 100,000 “flies and tigers,” or low and high-level officials, according to official data.

Macau’s gambling revenue is expected to fall another 8 per cent this year, according to the median estimate of nine analysts surveyed by Bloomberg, after the industry posted a 2.6 per cent drop in 2014.

The Chinese city remains way ahead of its closest global competitor in Las Vegas - gaming revenue was 351.5 billion patacas (US$44 billion) in 2014, about seven times bigger than that of the Strip.

The tourist Xu, for one, is cheering on the Chinese President’s crackdown, saying.

“I’m proud of President Xi because he’s doing something significant and difficult. Who knows whose money these guys in casinos are spending; if they’re officials, they could be spending mine.”

Bloomberg

8 | Business Daily

March 4, 2015

Macau 2015 MIECF from 26-28 March

The 2015 Macao International Environmental Co-operation Forum and Exhibition (2015 MIECF) will be held in Macau from 26 to 28 March, at which a total of seven speeches will be delivered. This year’s theme is ‘Green Economy – Clean Air, Blooming Business Opportunities’.

For the first time ‘air quality’ is the main topic of the event. MIECF is an event initiated by the SAR Government, with the strategic goal of nurturing the environmental business, technology and information exchange between the Pan Pearl River Delta Region in Southern China and international markets. It debuted in 2008.

Almost 250 taxi violations in CNY alone

T

he latest data from the Public Security Police reveals that in January and February police prosecuted 1,333 taxi violation cases. Of these, overcharging totalled 421 cases, or some 32 per cent; refusing to take passengers accounted for 279 cases, at 21 per cent; random parking resulting in hindering other vehicles to pass totalled 91 cases, or 7 per cent; stopping or parking on yellow lines accounted for 183 cases, or 14 per cent; while other violations totalled 329 cases.

During the Chinese New Year holiday - or the last ten days of February - a total of 244 taxi violation cases were prosecuted under the joint operation launched by the Public Security Police and Transport Bureau.

Overcharging totalled 132 cases, or some 14 per cent; refusing to take passengers accounted for 58 cases, at 54

per cent. Police say that from the data collected in the last two months, overcharging and refusal to take passengers account for the lion’s share of the total cases prosecuted - 700 cases and 53 per cent.

Public Security Police issued a statement yesterday saying that it would continue to co-operate with 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.

Police also appeal to taxi drivers to obey the law and regulations in order to create a better and healthier taxi industry and gain the trust and support of society. Meanwhile, it also appealed to residents and tourists to report any violation with details for follow-up.

Spotlight on Hengqin Island Giordano’s net profit A report issued by the American for 2014 down 38 pct Chamber of Commerce in South China says that Hengqin might be the solution for Macau to expand the scope of attractions beyond its current domain

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he American Chamber of Commerce in South China (AmCham) has issued its 2015 special report on the state of business in South China. In the chapter on Macau, it said that as Macau is quite geographically small, the government is thinking about ways to expand the scope of attraction outside its current domain and Hengqin could be the solution.

‘As “China’s southern door to the world,” Hengqin triples Macau in size, providing the city with the necessary space to build facilities that are essential for leisure tourism, such as wetland parks and theme parks, as well as new resorts and hotels closer to nature,’ the report reads.

AmCham added that Hengqin would also offer many precious opportunities to small and medium-sized enterprises, especially in the areas of medical science and innovative industries. A formal document titled Administrative Measures on Registration of Hengqin Zhuhai Special Commercial and Economic Zone has been promulgated to create a better business environment by simplifying registration formalities.

A plan to upgrade the status of Hengqin Island in Zhuhai (connected to Macau by bridge) from Special Economic Zone to a Free Trade Zone was approved by the central government

The clothing retailer saw sales decline in Greater China and Asia Pacific during last year, including Hong Kong and Macau

C

in August 2011. The new policies will aim for discriminative Customs management on the 106.5-square kilometre island. Overseas goods shipped to the island – except for goods that cannot enjoy free duties according to related regulations – will enjoy import duty exemption but will still be subject to tariffs if they are destined for other parts of Mainland China.

The chamber also issued its 2015 White Paper on the Business Environment in China yesterday.

According to the American Chamber of Commerce in South China the White Paper offers a summary of China’s impressive accomplishments since ‘opening up’ and examines the key influences on the business environment in present-day China, such as national policy initiatives and the global economic crisis.

J.K.

lothing retailer Giordano International Ltd. saw net profit for 2014 fall by 38.46 per cent to HK$408 million (US$52.6 million) on the back of a drop in group-wide sales, the company said in submitting its consolidated figures to the Hong Kong Stock Exchange yesterday.

Giordano sales revenue declined by 5.18 per cent year-on-year to HK$5.55 billion for 2014, where a decline in retail sales is seen not only in Greater China but in the Middle East and the rest of Asia Pacific as well – including Singapore, Malaysia, Thailand and Australia.

The results filed yesterday did not contain a separate breakdown for Giordano’s sales performance in Macau. But the company ran 79 sales outlets in Hong Kong and Macau in 2014, after the company had closed nine stores during the year.

Giordano sales in Hong Kong and Macau declined by 6 per cent to HK$978 million in 2014, while its comparative same-store sales also declined by 5 per cent.

The clothing retailer said that the sales decline reflected the change in the nature of visitors from Mainland China and hence a slowing down in the retail market of Hong Kong.

Giordano’s operating profit in

Hong Kong and Macau decreased by a year-on-year 48 per cent to HK$75 million last year.

Accounting for the results in the Hong Kong and Macau segment, the company said ‘high upward rental pressure in prime locations’ has driven it to develop the weighting of the shop mix towards residential areas where sales densities are lower.

‘We believe this is a prudent strategy and are exiting unprofitable prime location shops where rent increases are excessive,’ Giordano noted in its Hong Kong and Macau segment results.

‘We expect rent pressure to ease during 2015 and will look to reestablish more prime locations when this happens,’ the filing read.

Giordano’s retail revenue in Hong Kong and Taiwan, an important market for the clothing retailer, stood at HK$1.64 billion for 2014 and accounted for 31.5 per cent of the company’s total retail revenue at HK$5.2 billion.

The company’s gross profit margin has also declined by 2.7 percentage points to 58 per cent, which it attributed to price discounting in markets where price competition was fierce and a rise in purchasing cost due to South East Asian currencies.

S.L.

Business Daily | 9

March 4, 2015

Greater China

China to simplify SOE off-shore financing process Top political advisory body starts session The Third Session of the 12th National Committee of the Chinese People’s Political Consultative Conference (CPPCC), the country’s top political advisory body, opened yesterday in the Great Hall of the People in Beijing. A total of 2,153 members of the CPPCC National Committee will discuss major issues concerning the country’s development during the annual session.

Hong Kong firm invests in Vietnam A private-equity, real estate and financial investment player Hamon Group and Vietnamese property company SonKim Land have signed an agreement to develop a high-end property project in southern Ho Chi Minh (HCM) City, local media reported yesterday. The project is called Gateway Thao Dien. The project will cost US$100 million and offer 546 units in four towers, including three towers with upscale apartments for sale while the fourth will have serviced apartments, a daily paper reported.

Broker plans US$1.6 bln Shanghai IPO Orient Securities Company Limited, the joint venture partner of a Citigroup unit, plans to raise 10 billion yuan (US$1.59 billion) in an initial public offering (IPO) on the Shanghai stock exchange, the brokerage said. Orient Securities plans to issue up to 1 billion shares, it said in a prospectus posted on the Shanghai stock exchange website. The funds will be used for working capital purposes and to expand business, among other things. Orient’s IPO was one of 24 deals approved by the securities regulator.

US probe into Lenovo use of Superfish Connecticut Attorney General George Jepsen’s office said on Monday it has launched an investigation into Lenovo Group Ltd’s sales of laptops preloaded with Superfish software, which the U.S. government last month warned made users vulnerable to cyber attacks. The office said that Jepsen last week sent letters to Lenovo, the world’s biggest personal computer maker, and privately held software maker Superfish asking them to provide information, including contracts and emails that discuss their partnership. A Lenovo spokesman said the company has seen Jepsen’s letter “and will cooperate in responding to the query.”

Ivory traders find haven online China’s booming e-commerce websites have carried thousands of advertisements for illegal wildlife products including ivory, rhino horn and tiger bone, a wildlife trade monitoring network said yesterday. More than half of such products offered online in recent months are ivory, the British group TRAFFIC found in a survey of 15 Chinese retail websites over a two year period. Conservationists say China is the world’s largest consumer of illegal ivory, with skyrocketing demand fuelling the slaughter of tens of thousands of African elephants each year.

Currently, foreign fundraising activity requires a cumbersome approval process

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ff-shore investment and fundraising procedures for Chinese state-owned enterprises (SOEs) will soon be simplified, media reported yesterday.

The People’s Bank of China (PBOC) and related government bodies have already submitted a proposal to streamline “going out” procedures for Chinese firms to the State Council, a central bank official told Shenzhen-based Securities News.

“In the future, restrictions on overseas investment and financing by Chinese SOEs will be eased, and firms won’t have to apply for permission to fundraise in foreign markets on a case by case basis,” said Guo Jianwei, a deputy director of the central bank’s renminbi policy department.

Guo’s statement did not specify when the new policy might be approved by the State Council, China’s cabinet.

The statement by the central bank official follows a similar policy move in the Shanghai Free Trade Zone earlier in February. Currently, foreign fundraising activity requires a cumbersome approval process which

Firms will be able to freely choose whether to issue renminbi debt in Hong Kong or whichever off-shore market they choose Guo Jianwei PBOC’s renminbi policy department deputy director

has raised costs for firms and made issuing short term offshore debt, in particular, difficult and costly.

Moreover, non-financial firms have only been permitted to issue yuandenominated debt in Hong Kong.

Financial firms are also allowed to issue renminbi debt in London, Singapore and Taiwan.

China is in the midst of a largescale crackdown on off-balance sheet fundraising which, in combination with a slowing economy and rising concerns over corporate indebtedness, has pushed up borrowing costs over the past year.

Two interest rate cuts since November - the latest on Saturday - will likely help bring borrowing costs lower for some firms, but the Chinese government is eager to offset the crackdown on domestic shadow finance by easing access to capital markets, including those off-shore.

A sharply weaker yuan since late 2014 has also raised concerns over capital outflows, and easier access for Chinese firms to offshore markets is one way to counter this.

Reuters

Rate cuts just the start as growth slows Analysts say that easing is unlikely to significantly raise growth

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actory employment has been falling for more than a year in the workshop of the world as Chinese growth slows, and analysts expect more intervention by the central bank after its second interest rate cut in just three months.

The weekend’s rate reduction comes as authorities contend with rising deflationary threats in the world’s second-largest economy and an unusually weak currency.

Communist Party leaders are seeking to prevent the growth deceleration from careening out of control.

Gross domestic product (GDP) expanded 7.4 percent last year, its slowest pace in 24 years, and recent indicators show signs the slowdown is continuing.

Slack manufacturing -including employment declines in the sector according to surveys for banking giant HSBC- consumer inflation plunging to its lowest in five years, three years of factory price deflation and a drop in the yuan currency have also sounded alarm bells.

Describing China’s domestic economic situation as “bleak”, Jeremy Stevens, Beijing-based Asia economist at South Africa’s Standard Bank, says the People’s Bank of China (PBOC) had no choice but to cut rates again.

A newspaper in the north-eastern city of Shenyang reported last week that the monthly wages on offer at a migrant workers’ employment fair were 300 to 500 yuan (US$50 to US$80) lower than last year.

New-found urgency Chinese leaders say that the investment-fuelled double-digit growth of years past is no longer sustainable and they are seeking a “new normal” of gradually slower

We are particularly worried that consumption growth presents a large downside risk for the Chinese economy in 2015 Jeremy Stevens, economist South Africa’s Standard Bank

expansion led by consumer spending.

The annual session of China’s Communist-controlled parliament, the National People’s Congress (NPC), opens Thursday with an address by Premier Li Keqiang. He is expected

to reduce the official GDP growth target for this year to around 7.0 percent, from 7.5 percent previously.

But finding the policy sweet spot is proving difficult, with the massive stimulus Beijing unleashed after the 2008-2009 global financial crisis not an option.

The timing, coming at the end of the extended Chinese New Year holiday and just before the start of the NPC, “indicates a new-found degree of urgency to lower interest rates amid downward pressures on growth and inflation”, RBS economist Louis Kuijs wrote in a report.

Analysts broadly expect more rate reductions and other measures to be implemented.

“Chinese policymakers have to do more and we expect them to do so,” Societe Generale economist Yao Wei said in a report.

She called for a broad policy assault, including the PBOC injecting more liquidity to the banking system through further reductions in the reserve requirement ratio, the percentage of funds banks must keep on hand.

Tax cuts and spending by the central government need to be intensified, mortgage rules should be further loosened if the housing market fails to perk up and liberalisation of China’s corporate sector including reform of state-owned enterprises should be accelerated, she said.

Analysts at Barclays meanwhile, expressed pessimism about the overall effect of looser policy.

Monetary easing was necessary to “prevent downward growth and a deflation spiral”, they said in a report, stressing they see downside risks to their 2015 growth forecast of 7.0 percent.

AFP

10 | Business Daily

March 4, 2015

Greater China

Infant’s formula purchasing moves to Internet

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s Chinese consumers fret about whether locally produced infant formula is safe, the Dutch postal service has a burgeoning new line of business: exporting milk powder to China.

Dried milk has become one of the main items customers send to China via PostNL NV, helping drive a 13 percent increase in fourth-quarter parcel shipments, The Hague, Netherlands-based mail delivery company said February 23. Danone makes infant formula under the Nutrilon brand in that country, while Mead Johnson Nutrition Co. has been increasing Dutch production to help supply China, which consumed a third of the industry’s US$62 billion in global sales last year.

PostNL’s success is emblematic of a worldwide boom in the flow of baby food to China in quantities that range from single cans sold via Amazon. com Inc. to 25 metric-ton orders through suppliers on Alibaba.com.

Since a 2008 infant formula scandal that hospitalized 50,000 babies, the Chinese have sought out foreign-made brands. That’s accelerating now with the development of online marketplace sites such as Alibaba Group Holding Ltd.’s Tmall.com and Taobao. Bpost SA, the Belgian postal service, has also reported growth in milk powder.

“There are so many safety issues about milk powder and my baby needs it everyday,” said Vina Chen, a 31-year-old mother of a 15-month old girl in Nanjing. She orders online, through a shopping agent, or has it sent by an aunt in Sydney, preferring Bellamy’s Organic from Australia

because it’s less well-known, limiting the risk of receiving fakes. “We are extremely cautious.”

Emmanuel Faber.

Top quality

Leapfrogging technology

“The consumer in China -- mothers, paediatricians -- consider the bestJust as many consumers in quality milk in the world comes from emerging markets skipped fixed lines Europe,” Faber told reporters in Paris and leapfrogged to mobile phones, on February 20. Most of Danone’s e-commerce may play a bigger role in European sales growth in the fourth countries that don’t have very developed quarter came from exporting products retail industries, to Asia.

Nestle SA Chief A grey market Executive Officer for foreign infant Paul Bulcke said formula has at a Feb. 19 sprouted since press conference melamine-tainted in Vevey, milk killed six Switzerland. The infants in China owner of the in 2008. The Gerber brand substance, used to aims to work with make plastics and big e-commerce in tanning leather, sites to boost sales. can disguise C h i n a diluted milk by c o n s u m e s making it appear about US$19 to contain more billion of baby protein. food annually, “If you think of making it the the scandals, the Emmanuel Faber, CEO biggest market reality is that we Danone for such in the West hear products after about the worst, sales more than but there’s stuff doubled in five going on all the years, according time,” said Robert to Euromonitor.

Waldschmidt, About 30 an analyst at percent of baby Liberum Capital formula consumed there is ordered in London. In 2011, China Mengniu via the Internet, following a “very, Dairy Co. said mouldy cattle feed led very quick shift” in purchasing to excessive toxins in its milk. patterns, according to Danone CEO The practice of buying products

The consumer in China -- mothers, paediatricians -consider the best-quality milk in the world comes from Europe

China consumes about US$19 billion of baby food annually

abroad has become known as “haitao,” and sometimes it’s done through middlemen who help handle payment and delivery. Duty isn’t paid on about US$1.5 billion of infant formula sold online, according to Mead Johnson Chief Executive Officer Peter Kasper Jakobsen.

Tighter rules Last year, customs authorities tightened rules by requiring importers to inform them of orders and payments beforehand, according to Fung Business Intelligence Centre. The government will probably take further measures, said Kasper Jakobsen, who recently met Chinese Vice Premier Wang Yang in Chicago to discuss the matter.

“China is acutely aware of the fact that they must get a grip on all of the different sales channels,” he said at a February 17 investor presentation.

To be sure, PostNL isn’t banking on the milk-powder delivery business continuing as it has been for the longterm. Milk powder is one reason for the Dutch package shipper’s forecast of mid-single-digit parcel growth this year, though it could drop off, Chief Executive Officer Herna Verhagen told investors on February 23.

“The reason for mentioning it over here is because we do think it’s rather incidental than sustainable,” she said.

However the trade develops, Danone plans to adapt and expand its export business to China.

“This channel will exist in a big way in the future,” CEO Faber said. “And possibly not only for infant nutrition.”

Bloomberg News

Business Daily | 11

March 4, 2015

Asia

Abe becomes latest Japanese lawmaker tainted by funding allegation Cabinet scandals were among the difficulties that forced Abe to step down as prime minister in 2007 Isabel Reynolds and Takashi Hirokawa

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ust a week after the resignation of his farm minister, Prime Minister Shinzo Abe has become the latest Japanese politician to be tainted by allegations of financial impropriety.

Abe will look into accusations in a Sankei newspaper report that a local chapter -headed by the prime minister- of the ruling Liberal Democratic Party broke funding laws, Chief Cabinet Secretary Yoshihide Suga told reporters in Tokyo yesterday.

The newspaper reported that the chapter got a 500,000 yen (US$4,170) donation from a company in line to receive government subsidies.

While Abe’s support rate has remained steady despite a series of scandal-linked resignations from his cabinet in recent months, opposition grilling of ministers over financial blunders has slowed budgetary debate and is delaying his economic and defence agenda. Cabinet scandals were among the difficulties that forced Abe to step down as prime minister in 2007, though the impact of the latest report is hard to read, according to analyst Steven Reed.

The opposition’s focus on scandals will continue, said Reed, a professor of political science at Chuo University in Tokyo, who is writing a book on corruption in Japanese politics. “There’s no reason for them to stop.”

The Yomiuri newspaper

will first of all investigate the facts and then deal with it appropriately.”

Koya Nishikawa resigned as agriculture minister last week after parliamentary debate was stymied by questions over his accepting money from a sugar company while involved in negotiations for a regional trade agreement.

Kyodo reported later yesterday that Abe’s chapter got at least 1.74 million yen in donations from two companies that receive government subsidies.

Double blow

Japanese Prime Minister Shinzo Abe

published a list of politicians it said had received similar contributions, including Economy Minister Akira Amari and several from opposition parties including Katsuya Okada, leader of the Democratic Party of Japan.

Amari said yesterday he would return a donation.

School minister Education Minister Hakubun Shimomura, who is also embroiled in a separate funding scandal, told reporters he plans to give back an “inappropriate” donation of 100,000 yen received by his party office in 2009, Kyodo News reported.

(Japanese law) forbids a lot of things that are standard practice in other countries Steven Reed professor of political science Chuo University Tokyo

The news agency said his office got the money from a person who was a lender to a company with connections to organized crime.

Companies are not allowed to make donations to a political party chapter or funding group within a year of being notified that they will receive government subsidies, according to the Sankei.

However, if politicians are unaware the companies are being subsidized, they will not be prosecuted.

“He didn’t know that the company in question received government subsidies,” Suga told reporters when asked about the donation to the prime minister’s chapter. “He

Rising Singapore interest rates sting mortgage borrowers

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he era of ultra-easy money is drawing to an end for Singapore mortgage holders, with domestic interest rates rising at their fastest pace in a decade in a country that already ranks among the world’s most expensive places to live.

The three-month Singapore interbank offered rate (Sibor), used to set floating-rate mortgages, climbed to 0.78756 percent yesterday. It has gained 33 basis points so far this year, exceeding all the annual increases since 2005. Analysts expect the rate to end 2015 at around 1.0 percent.

The surge has been fuelled by the Singapore dollar’s weakness against the greenback. A softer Singapore dollar can put upward pressure on local interest rates as investors seek higher yields as compensation for holding a weakening currency.

Exacerbating the Singapore dollar’s fall and boosting Sibor, the central bank in late January allowed the currency to appreciate at a slower pace. Most economists polled by Reuters expect the Monetary Authority of Singapore to further

37 pct household mortgages rising by the end of 2014

ease policy next month. Analysts say three-month Sibor may stabilise as the Singapore dollar adjusts to the policy shifts. Mortgage borrowers will probably feel more impact from the rising Sibor in the second half of 2015, as interest rates on mortgages tend to be set every three months, said Michael Wan, an economist at Credit Suisse.

Singapore’s real estate has already been stung by government measures aimed at cooling the market, particularly in the high-end privatehomes segment. Higher mortgage rates will dampen the broader home market dominated by governmentbuilt housing now in the private sector and owned by ordinary Singaporeans.

The impact on discretionary spending by households will likely be more evident in the second half, Wan said.

In October last year, two female cabinet members stepped down on the same day.

Trade and industry minister Yuko Obuchi resigned over allegations of improper use of political funds, and Justice Minister Midori Matsushima, quit over claims she breached election laws.

While the sums involved are relatively modest in the latest series of scandals, pressure over similar breaches resulted in two LDP premiers resigning in quick succession after Abe in 2007 and helped the Democrats win by a landslide in 2009, Reed said.

“Japanese law is so exceedingly restrictive that you have to break the law in order to win,” said Reed.

“It forbids a lot of things that are standard practice in other countries.”

Bloomberg News

Most economists polled

by Reuters expect the Monetary Authority of Singapore to further ease policy next month The outstanding amount of household mortgages rose nearly 37 percent to S$216.7 billion (US$158.84 billion) at the end of 2014 from 2010 in a period of near zero interest rates.

A typical floating-rate loan for a government-built flat is worth about S$300,000 with a tenure of around 25 years. If the loan was taken at the start of 2014, the interest rate would have hovered near 1.3 percent through the year, with three-month Sibor roughly around 0.4 percent. The monthly loan repayment, consisting of principal and interest repayments, would have been about S$1,170. Assuming the mortgage rate is now re-set to 1.68 percent based on current Sibor levels, the repayment would increase by roughly S$50, said Wayne Quek, a Singapore-based mortgage consultant.

Reuters

12 | Business Daily

March 4, 2015

Asia

Australia’s RBA holds rates… for the time being

Investors are still pricing in at least one more cut by the RBA

Wayne Cole

A

ustralia’s central bank held its cash rate steady yesterday to confound calls for a cut and sending the local dollar sharply higher, though it did leave the door wide open for an easing at future policy meetings.

The currency jumped half a U.S. cent after the Reserve Bank of Australia (RBA) said it was too early to follow February’s quarter point cut to a record low of 2.25 percent.

“The Board judged that, having eased monetary policy at the previous meeting, it was appropriate to hold interest rates steady for the time being,” RBA Governor Glenn Stevens said after the bank’s monthly policy meeting.

“Further easing of policy may be appropriate over the period ahead.

The Board will further assess the case for such action at forthcoming meetings.”

The explicit easing bias was likely intended to limit upward pressure on the Australian dollar, given how many other central banks have joined the global rush to the bottom on rates.

Investors are still pricing in at least one more cut by the RBA, though the implied probability of a move in April shrank to around 60 percent, from near 100 percent previously.

“Every meeting from here is live,” said Tom Kennedy, an economist at JPMorgan.

“In terms of timing, the obvious one which stands out would be in

May, when we get the statement of monetary policy, a new round of CPI forecasts and the bank will be able to explain their actions in more detail.”

Interbank futures took yesterday’s decision hard as the market had priced in around a 54 percent chance of an easing this week. Fifteen of 29 analysts in a Reuters poll had also tipped a move this week.

Many argued the stimulus was needed to revive an economy that has

KEY POINTS RBA keeps rates at 2.25 pct, following February cut from 2.5 pct Says further easing might be needed at future policy meetings Australia dollar jumps as other central banks add to stimulus

been running below trend for more than two years, pushing up unemployment and dragging down inflation.

Particularly worrying was recent data showing mining investment in full retreat after a decade of madcap expansion, while other sectors seemed unprepared to fill the gap.

Home building hot Fortunately the hundreds of billions spent on expanding mining production has led to a huge increase in export volumes which is flattering the country’s trading accounts.

The current account deficit shrank to A$9.6 billion in the fourth quarter of 2014, against forecasts of A$11 billion. Net exports added a healthy 0.7 percentage points to gross domestic product (GDP) in the quarter, according to data from the Australian Bureau of Statistics.

The GDP report is due today and analysts have been looking for a rise of around 0.5 percent in the quarter and 2.5 percent for the year.

That annual rate would actually be faster than the United States managed in 2014, but would still be sub-par for a nation that used to average at least 3.25 percent.

Low mortgage rates have certainly worked their magic on housing, with approvals to build new homes jumping 7.9 percent in January, when analysts had expected a small decline.

RBA’s decision (headquarters pictured) surprised many analysts

Approvals to build apartments surged almost 20 percent in January alone surpassing detached houses for the first time ever - in a plus for construction jobs and consumer spending.

Less welcome to policy makers has been a surge in borrowing for property investment which is fuelling rapid price rises. Home prices in Sydney rose 1.4 percent in February to be 13.7 percent higher over a year, according to property consultant CoreLogic RPData.

Reuters

Mongolia fined for expropriating uranium assets The penalty would be a heavy imposition on the country, which has some US$1.3 billion in reserves following a sharp slump in coal revenue

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ongolia has been ordered to pay about US$100 million to Canada-based Khan Resources as compensation for cancelling its uranium licences in a long-awaited decision from an international tribunal.

Khan Resources took Mongolia to international arbitration four years ago after the government cancelled its licences over the Dornod uranium project in 2009, handing the asset to Russia’s ARMZ. Khan had claimed US$354 million in compensation, including interest, but the international arbitration tribunal based its calculation of US$100 million, including interest and costs, on previous offers made for the Dornod asset.

“We are very pleased with

A hundred million - I’m sure it can be managed by the government, although I’m sure it won’t be easy.

It’ll constrain Mongolia’s finances further Badral Munkhdul Cover Mongolia chief executive

the Tribunal’s ruling that the expropriation of the Dornod asset violated Mongolian law,” Khan CEO Grant Edey said in a statement.

The ruling comes just as Mongolia’s new prime minister, Chimed Saikhanbelig, has been trying to revive foreign investment after previous governments rattled investors by backtracking on mining agreements, changing investment laws and cancelling mining licenses.

A Mongolian Mining Ministry spokesman had no immediate comment.

The penalty would be a heavy impost on the country, which has some US$1.3 billion in reserves following a sharp slump in coal revenue, said Market intelligence group Cover Mongolia.

“A hundred million - I’m sure it can be managed by the government, although I’m sure it won’t be easy. It’ll constrain Mongolia’s finances further,” said Badral Munkhdul, Cover Mongolia chief executive.

Khan’s CEO said foreign investors would be closely watching whether the government meets its obligation.

“While the current government of Mongolia has taken certain progressive action to diminish the harmful acts of former regimes, western investors and governments will scrutinize the Mongolian government’s action in this matter as the rule of law also dictates prompt payment of compensation,” Edey said.

Reuters

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

March 4, 2015

Asia Japan wages rise 1.3 pct Japanese wage earners’ total cash earnings in January grew 1.3 percent from a year earlier and declines in real wages slowed for a third month, government data showed yesterday, a positive sign for Prime Minister Shinzo Abe’s plan to revive the economy. Real wages, which are adjusted for inflation, fell 1.5 percent year-on-year in January, slower than a 1.7 percent annual decline in December. Abe has publicly called on companies to raise base pay for labour union workers during spring negotiations, which is vital to generate a virtuous cycle of higher consumption.

South Korean inflation hits 16-year low

SGX signs crossborder funding pact Securities market authorities from Singapore, Malaysia and Thailand signed an agreement to enable crossborder capital raising, part of a drive to develop economic linkages within the Association of Southeast Asian Nations (ASEAN). A joint statement issued yesterday by the Monetary Authority of Singapore and Singapore Exchange Ltd (SGX) said offerings of equity securities or plain debt securities would be subject to a streamlined vetting process. Both the home and host authorities would have to complete the review process at the same time and the prospectus for an offering should comply with ASEAN disclosure standards, it said.

Korean free trade deal strengthens fruit imports Australian horticulture exports to Korea have jumped since the start of a free trade agreement late last year, Australian officials said yesterday, boosting hopes for a similar benefit from a trade deal with China. No official data has yet been released, but Australian Bureau of Agriculture, Resource Economics and Sciences (ABARES), executive director Karen Schneider said there were early signs of strong demand for products which have had tariffs removed, including cherries, dried grapes and some nuts. The strong growth of Australian horticulture exports to Korea hints at a similar growth trajectory for Chinese exports.

Korean prices keep plummeting

S

outh Korea’s annual inflation in February slowest to a 16-year low yesterday as the recent collapse in global oil pressured consumer prices, backing expectations for another rate cut to ward off deflation in Asia’s fourthlargest economy.

The consumer price index rose 0.5 percent in February year-on-year, cooling from 0.8 percent in January, Statistics Korea data showed. It was lower than the median forecast of 0.8 percent in a Reuters survey and marked the smallest increase since July 1999.

“Worries over possible deflation will flare up, but we have to note that

this low inflation is due to supplyside factors while deflation usually comes when consumption is bad,” said Kang Hyun-kee, an economist at Taurus Investment & Securities.

“We’ll keep seeing low inflation until the second half of the year when oil prices start picking up.”

At its February policy review, the Bank of Korea held interest rates steady at a record-matching low of 2.00 percent for the fourth successive month on worries over growing household debt.

A majority of economists are predicting a rate cut either at the March 12 review, or in April to boost economic activity. Some analysts say

Indonesia sets Newmont deadline for Freeport smelter deal

The Indonesian Canon searches for more acquisitions government has Canon Chief Executive Fujio Mitarai said long urged the company had both the funds and willingness for more acquisitions this the companies year, even after a planned 23.6 billionto cooperate Swedish-crown (US$2.8 billion) takeover of network video surveillance leader Axis on a smelter AB. Asked about Canon’s offer for Axis, which represented a premium of nearly 50 percent to the share price prior to the announcement, Mitarai said he was only interested in acquiring quality companies.

Vietnam cuts rice export floor Vietnam has reduced the floor price for exports of 25-percent broken rice by nearly 3 percent to US$350 a tonne, with domestic prices easing as harvesting peaks amid thin demand, an industry body said. The floor, set by the Ho Chi Minh City-based Vietnam Food Association, came into effect on Monday, according to a statement from the body seen by Reuters. Exporters in the world’s third-largest shipper of the grain will continue to set prices for other export grades themselves. The floor was US$360 a tonne as of January 12.

Wilda Asmarini

N

ewmont Mining Corp’s Indonesian copper export permit will not be renewed beyond March 19 unless it strikes a deal with Freeport-McMoRan Inc to invest in the latter’s planned smelter, a mines ministry official said.

“For an export permit extension for Newmont, we are still awaiting an agreement between Freeport and Newmont,” Coal and Minerals Director General Sukhyar told a news conference.

Indonesia has been in talks with miners about their plans to develop domestic smelting and processing facilities.

Smelting facilities will add value to Indonesian commodities-based economy

Early last year, Jakarta put in place export restrictions aimed at forcing mining firms to develop smelting and processing facilities so that Indonesia could refine all of its raw ores and concentrates.

“We share the government’s stated goal of increasing value-added mineral processing in Indonesia,” said Newmont spokesman Omar Jabara.

“As part of our MoU (memorandum

A majority of economists are predicting a rate cut either at the March 12 review, or in April to boost economic activity the central bank should join other countries in easing monetary policy when inflation is low.

Taurus Investment’s Kang believes the central bank will choose to observe oil prices for a while longer before deciding on easing policy further as core inflation has shown little volatility.

The government has blamed low commodity prices for the steady cooling in inflation pressures.

Policymakers, including the finance minister, have rejected the notion that the economy is slipping into deflation, instead saying prices are in a state of disinflation.

The finance ministry said shortly after the data release it sees demand-led price pressures increasing in the future as domestic consumption recovers.

Yesterday’s data showed oil-related products shaved 1.29 percentage points out of annual inflation in February.

On a monthly basis, the index posted no growth in February compared to an 0.5 percent increase seen in January, and a median forecast of 0.3 percent rise.

Annual core inflation, which strips out volatile food and fuel prices, stood at 2.3 percent in February, nearly unchanged from 2.4 percent in the previous month.

The central bank will announce its new inflation target later this year, which will be used for three years from 2016. Actual inflation has remained below the current band of 2.5 to 3.5 percent for much of the target’s existence.

Reuters

of understanding) with Freeport, we continue working with them in support of their plans to develop a smelter. (Newmont) also has concentrate supply agreements with two Indonesian companies planning to build domestic smelters.”

Although fellow U.S.-based miner Freeport is pushing ahead with expansion plans at Indonesia’s sole copper smelter at Gresik, Newmont has said multiple studies show its Batu Hijau mine cannot sustain a smelter on its own.

After a fractious nine-month export tax dispute, Newmont signed a deal with the government last year that allowed for the resumption of copper concentrate exports. But this agreement is set to end unless Newmont can show it is serious about domestic processing.

“If they really commit, they will be given an export permit extension,” Sukhyar said. “The time limit for us to give an export permit extension is March 19.”

Newmont and Freeport account for 97 percent of Indonesia’s copper output.

“We continue to advance our discussions with the government of Indonesia on an agreement for our long-term operating rights,” said Freeport spokesman Eric Kinneberg, adding the talks include such issues as royalties and taxes, domestic processing and refining, divestment, and local content.

“In parallel, we are advancing plans to construct new smelter capacity in Indonesia. A site has been identified and we are actively engaged in discussions on technical, commercial and partnership arrangements.”

Reuters

14 | Business Daily

March 4, 2015

International Swiss economy grows The Swiss economy grew twice as fast as economists forecast at the end of 2014, indicating resilience before the central bank scrapped a currency cap that was shielding exporters. Gross domestic product increased 0.6 percent in the three months through December, after an upwardly revised 0.7 percent a quarter earlier, the State Secretariat for Economic Affairs in Bern said in a statement yesterday. That’s more than the 0.3 percent median of 18 estimates in a Bloomberg News survey. Private and public consumption, as well as the balance of trade in goods, contributed to the rise in GDP.

Wildlife in danger by US$10 billion market Wildlife crime worth as much as US$10 billion annually threatens the existence of mammals, birds and trees ranging from rhinos to Spix’s macaws and rosewood, the United Nations said. Poaching of African elephants for ivory, which is reducing the population of the animals faster than they can reproduce, is worth US$165 million to US$188 million a year when the products are sold in Asia, while the rhino-horn trade last year was valued at between US$63 million and US$192 million, the UN Congress on International Trade in Endangered Species of Wild Fauna and Flora figures show.

Bank of England FX probe too soft A Bank of England probe into what central bank staff knew of malpractice in London’s foreign exchange market failed to scrutinise officials closely enough and was “seriously incomplete”, a senior lawmaker said yesterday. Last year, the BoE’s supervisory board commissioned an investigation by a top commercial lawyer, Anthony Grabiner, to look into what BoE staff knew about foreign exchange market malpractice. The investigation found that the BoE’s chief foreign exchange dealer had failed to escalate concerns that traders at other banks could be manipulating parts of the $5-trillion-a-day global market, which is centred in London.

Pricing models get economy award U.S. economist Stephen Ross was named winner of the Deutsche Bank Prize in Financial Economics yesterday for helping to create models that have helped markets assess prices for options and other assets for the past three decades.

The MIT professor and popular textbook author has developed concepts widely applied in the economics of uncertainty, corporate finance and decision theory.

The prize honours researchers whose work has influenced financial economics and macroeconomics. The last recipient, in 2013, was Raghuram Rajan, governor of the Reserve Bank of India and former chief economist at the IMF.

Pacific Islands forum appoints new leaders The Pacific Islands Development Forum (PIDF) has appointed its new leaders, the Suva-based PIDF Secretariat said yesterday. Amena Yauvoli, former permanent secretary of Fiji’s Foreign Ministry, has been appointed as the interim secretary general of the PIDF after a senior officials committee meeting, the secretariat said in a statement. Yauvoli replaced Feleti Teo, who resigned last month to take up his new appointment as executive director of the Western and Central Pacific Fisheries Commission.

Draghi’s QE moves to starting line Consumer prices in the 19-nation euro area fell 0.3 percent in February, half as much as the previous month and less than economists forecast

T

he euro-area economy has taken a step in the right direction.

While improving conditions over the past month won’t change Mario Draghi’s plan to start buying government bonds within days, continued economic recuperation may well stir a debate about when to end them. So far, officials have indicated the buying spree could be extended beyond its proposed timetable -- a less likely outcome if an easing in the region’s price slump and a drop in unemployment mark the beginning of a trend.

Draghi will have an opportunity in two days to add to details of the 1.1 trillion-euro (US$1.2 trillion) quantitative-easing plan, which was announced in January amid dissent from some policy makers.

After a Governing Council meeting in Nicosia, he’ll also unveil the ECB’s first growth and inflation forecasts for 2017, numbers that will have significance for the duration of QE. Consumer prices in the 19-nation euro area fell 0.3 percent in February, half as much as the previous month and less than economists forecast.

Unemployment dropped to 11.2 percent in January, the lowest since April 2012. While the data may indicate the worst is passing, the inflation rate still isn’t anywhere near the ECB’s goal, underlining the case for monetary stimulus.

Purchases under the expanded asset-purchase program are set to start as early as this week. When Draghi announced QE on January 22, he said it would continue for 19 months or until there’s “sustained adjustment” in inflation toward 2 percent.

In December, the ECB predicted inflation of 0.7 percent in 2015 and 1.3 percent in 2016. Draghi has said that the forecasts didn’t fully consider

The picture for the euro zone appears to be slightly rosier. At some point, long-term inflation forecasts and the bank’s commitment to purchase 60 billion euros of assets per month until September 2016 could limit the ECB’s flexibility and put it in an uncomfortable situation Carsten Brzeski, chief economist, ING DiBa, Frankfurt

an oil-price slump, indicating that projections for price growth this year will be cut. At the same time, those for economic expansion may be lifted.

German improvement Euro-area economic confidence rose in February to the highest level since July. Car registrations -an indicator for consumer spendingincreased the most in over a year in January, and a contraction in bank lending to companies and households came close to a halt.

European central banker Mario Draghi

Retail sales in Germany jumped 2.9 percent in January, more than all analysts in a Bloomberg News survey predicted. The release adds to signs that Europe’s largest economy is restoring its position as the region’s powerhouse, helping the euro area recover from its longest-ever recession.

Greek uncertainty The sluggish recovery was highlighted in a report this week that showed manufacturing barely expanded in February as French production plunged. Greece faces a return to recession after the country’s newly elected government under Prime Minister Alexis Tsipras rebelled against conditions of its bailout plan.

Should uncertainty from Greece fade after a four-month extension of the program and the euro-area economy continue to pick up, ECB officials may find themselves thinking about how to communicate an end of ultra-expansionary policy sooner than previously anticipated.

“Any potential exit will only be guided by our inflation mandate,” Governing Council member Bostjan Jazbec said in an interview in Ljubljana on January 29.

Bloomberg News

Barclays bank slides into annual net loss Firm’s CEO launched plans in May to shrink Barclays’ investment bank in a radical restructuring which will axe 19,000 jobs across the group

B

arclays fell into a net loss last year, the British bank said yesterday, hit by huge costs linked to its alleged role in the rigging of foreign exchange markets.

Barclays reported a loss after tax of £174 million (US$268 million, 239 million euros) for 2014 compared with a net profit of £540 million the previous year.

It has set aside £1.25 billion “for on-going investigations and litigation relating to Foreign Exchange”, including £750 million for the final quarter of 2014, the bank said in an earnings statement.

Barclays had announced in October a provision of £500 million for any eventual costs and fines linked to the probes.

The latest announcement from Barclays -which was at the heart also of the 2012 Libor interest-rate rigging scandal- comes as global regulators investigate the alleged rigging of foreign exchange markets around the world.

In Britain, watchdogs the Serious Fraud Office and the Financial Conduct Authority have launched probes into the alleged manipulation of the £3-trilliona-day forex market.

Barclays, which has been plagued by scandals in recent years, set aside another £200 million for compensation costs arising from the mis-selling of payment protection insurance.

The bank added yesterday that adjusted pre-tax profit -after stripping out charges and other exceptional itemsrose 12 percent to £5.5 billion in 2014.

Jenkins launched plans in May to shrink Barclays’ investment bank in a radical restructuring which will axe 19,000 jobs across the group by 2016, as he shakes up the scandaltainted company.

The Libor scandal meanwhile erupted when Barclays was fined £290 million in 2012 by British and US regulators for attempted manipulation of Libor and Euribor interbank rates between 2005 and 2009.

The scandal sparked the resignations of three Barclays senior board members, including ex-chief executive Bob Diamond, who was formerly head of the investment bank unit.

AFP

Business Daily | 15

March 4, 2015

Opinion Business

wires

Leading reports from Asia’s best business newspapers

PetroChina, Sinopec merger makes little sense

TAIPEI TIMES Consumer confidence picked up again last month, rising for the fourth consecutive month and hitting a 14-year high, as year-end bonuses and stock rallies boosted the wealth effect, a survey by National Central University showed yesterday. The Consumer Confidence Index rose to 89.44 last month, up 1.21 points from January, as five of the six component measures saw positive movements, the monthly poll showed. The sub index on stock investment outlook reported the biggest increase — five points — to 97.3 last month when the TAIEX rallied past 9,600 after the Lunar New Year holiday, the survey said.

Clyde Russell Reuters columnist

THE STRAITS TIMES The Hong Kong and Singapore Budgets released last week highlight some long-term economic challenges facing both cities and how their respective governments differ in their policy response, Fitch Ratings said. The credit ratings agency noted that robust growth in both cities has been accompanied by a perception of widening inequality, leading to social and political pressures. Both also face long-term challenges, such as the rising income disparity, sustaining economic growth and ageing populations.

Singapore’s response has been to adopt “a more explicitly redistributionist fiscal policy”, the report noted.

BANGKOK POST Amid the growing outcry over the planned land and buildings tax, the Fiscal Policy Office (FPO) is rushing to soothe worries by providing a twoyear grace period after the law takes effect and another two years of discounted tax rates before charging the full rates. The Finance Ministry will set up a tax exemption for the first two years after it takes effect, and homeowners and landlords need pay only half the rates in the third year and 75% in the fourth year, director-general Krisada Chinavicharana said.

THE STAR With the Securities Commission spearheading the move to regulate equity crowdfunding (ECF) platforms, Malaysia has the opportunity to become the micro investment financial centre in Asia by allowing small and medium enterprises (SMEs) and start-ups better access to funds for growth.

Crowdfunding platform operator pitchIN, who is interested in becoming an ECF platform operator in Malaysia, said investors, especially angel investors, would also benefit from such regulations as there would be easy access to important information.

T

he market chatter over forming a giant Chinese oil major through merging PetroChina and Sinopec has ramped up again recently, but the motivations for such a deal struggle to stand up to scrutiny.

The Chinese authorities are mulling joining China National Petroleum Corp, the parent of PetroChina, and China Petrochemical Corp, the parent of China Petroleum and Chemical Corp, better known as Sinopec, the Wall Street Journal reported on February 18.

It should be noted that even if the authorities are considering such a move doesn’t necessarily mean it will happen.

However, the fact that the news has made it into the public domain most likely means the possibility is being considered.

It was also reported in other media that a merger between China National Offshore Oil Corp, the parent of CNOOC, with Sinochem Corp was under consideration as well.

The most often cited reason for creating a mega-oil company is to give China the means to compete on a truly global scale, as such an entity would no doubt eclipse Exxon Mobil as the world’s biggest non-state oil company.

While both PetroChina, the country’s largest oil producer, and Sinopec, the largest refiner,

are effectively state controlled, they operate differently to the models of national oil companies, such as those found in Middle East countries.

Currently they compete against each other in everything from oil and gas production, to refining, trading and retail sales.

Both companies have also pushed offshore through partnerships and acquisitions, and those ventures would also be competing against each other.

What is hard to see is how the benefit of creating a single, larger entity could outweigh the costs associated with such a move.

Yes, there would be the obvious synergies in cost savings by combining back office and operations, but only if, and this is a big if, the new combined company is prepared to be fairly ruthless in cutting jobs.

Chinese state-owned enterprises may in some ways resemble Western-style capitalist companies, but in other ways they don’t, and the emphasis on providing employment is one such difference.

It’s hard to see the government approving the massive redundancy programme that would have to accompany such a merger if Western-style cost savings were to be achieved.

Does China need a company bigger than Exxon Mobil to compete on the world stage?

Probably not, with both PetroChina and Sinopec being quite big enough currently to fund acquisitions and new ventures on the strength of their own balance sheets, not to mention the implicit guarantee from being controlled by the government.

The merger doesn’t necessarily make sense from a perspective of needing to scale up, or from the point of view of savings from cost-cutting. In fact, there are a number of reasons as to why it doesn’t make sense.

Opposite of merger more desirable Firstly, it goes against the grain of reforming China’s state-owned enterprises (SOE), a stated aim of the government.

A joined PetroChina and Sinopec would also control virtually all of the oil and gas chain in China, about 80 percent of both production and refining, and about 90 percent of retail sales.

Such concentration is unlikely to foster a competitive business environment in the energy sector, and is actually more likely to lead to monopolistic practices.

It’s possible that the buying clout of a merged entity would give it more negotiating power in talks with crude suppliers, but it’s doubtful this would be enough to offset the potential

pitfalls of creating a monolithic enterprise.

What it all comes down to is what would be the authorities’ motivation for making such a merger, especially when it seems to fly in the face of many of their stated aims?

If reform of the SOEs to improve competition and efficiency is the overarching aim, then the authorities would do better to look at the opposite of a megamerger, and consider asset sales and rationalisation of the vast operations of both PetroChina and Sinopec.

Reuters

What is hard to see is how the benefit of creating a single, larger entity could outweigh the costs associated with such a move

16 | Business Daily

March 4, 2015

Closing Taiwan export orders grow less than expected

China’s vice finmin says will keep fiscal policy proactive

Export orders at the start of the year fell short of expectations as the off-peak season softened overall demand, but no dents were seen in the island’s solid tech export engine. Orders showed sustained momentum from last year, during which they rose to a record annual amount driven by demand for smartphones, laptops and other technology gadgets. Taiwan’s export orders in January rose 8.1 percent from a year earlier to US$39 billion, but were down from December’s US$44.2 billion, data from the Ministry of Economic Affairs showed.

China’s vice finance minister Zhu Guangyao (pictured) said China’s fiscal policy will remain proactive going forward, but added that deflationary pressure is not as intense as in Europe.

The minister made the comments at the opening of the Chinese People’s Political Consultative Conference (CPPCC), an advisory body to the country’s parliament. The finance ministry is forging ahead with fiscal reforms in a bid to deal with the root cause of local government debt piles that have amounted to more than US$3 trillion. Thursday, Premier Li Keqiang is expected to cut this year’s growth target.

Taiwan orders Alibaba withdrawal after violation The Chinese e-commerce giant entered Taiwan in 2008 through Singapore-registered Alibaba.com Singapore E-commerce Private Ltd J.R. Wu and Faith Hung

T

aiwan has ordered Alibaba Group Holding Ltd to withdraw from the country within six months because the online retailer had violated investment rules required for a Chinese company, an economics ministry official said.

Alibaba has been fined T$120,000 (US$3,824) and must withdraw or transfer its holdings from its operation in Taiwan, Emile M.P. Chang, acting executive secretary for

It’s very strange.

In China, we’re viewed as a foreign company.

In Taiwan, we’re seen as a Chinese company the Investment Commission, told Reuters.

The commission falls under the Ministry of Economic Affairs and has authority over the review of Chinese investments in Taiwan.

Chinese investments into the island are regulated strictly because mainland China is still considered a political enemy despite growing trade and economic ties since the late 2000s.

China deems Taiwan a

2.1 bln yuan in 2014 to shore up press

C

Jack Ma, Executive Chairman, Alibaba Group

by remarking on Alibaba’s situation: “It’s very strange.

In China, we’re viewed as a foreign company. In Taiwan, we’re seen as a Chinese company.”

Ma did not elaborate on his company’s relations with authorities in Taiwan, where he is viewed as a celebrity among the young because of his business success and affable manner in his public speaking engagements.

The Alibaba Group on Monday said it intends to set up a T$10 billion fund to support the growth of entrepreneur-run businesses in Taiwan.

Chinese company renegade province and has not ruled out the use of force to take it back, particularly if the island makes a move toward independence.

Yesterday at a university event in Taipei, Alibaba Group Executive Chairman Jack Ma started a speech

Chang said the Investment Commission had been looking into the Alibaba situation since September and had requested documents from the company to clarify its shareholding, but those documents had not been provided.

“We will actively communicate with the authority and provide the required supporting materials to comply with the latest requirements,” Alibaba said in a statement late on Monday.

“Since Alibaba Group, the parent company of Alibaba. com, went public in the United States last September, the authority took a different view about the internal structure of Alibaba Group and deemed it as a mainland Chinese company.”

The Chinese e-commerce giant entered Taiwan in 2008 through Singaporeregistered Alibaba.com Singapore E-commerce Private Ltd, which Alibaba says established operations in Taiwan in accordance to regulations at the time.

The company said it will continue to clarify the issues and, if necessary, will take proper actions to protect the legitimate interests of Alibaba. com.

Reuters

China to centralise export tax rebate payments

Hong Kong retail sales plunge 14.6 pct in January

C

J

hina’s central government provided a total of 2.1 billion yuan (US$341.2 million) in 2014 to support press and publishing projects, the Ministry of Finance (MOF) announced yesterday.

Nearly 1,000 press and publication projects have been subsidized in recent years through more than 7.6 billion yuan in special funds earmarked for developing cultural industries, according to a statement posted on the MOF’s website.

The funds were mainly used for digitizing and upgrading, green printing, and brick-and-mortar bookstores.

According to the statement, the funds helped improve the content and public service of the publication industry.

China’s publishing, printing, and distribution industry had an operating revenue of 1,824.64 billion yuan in 2013, up 161.11 billion yuan or 9.68 percent from the previous year, according to an industry report released by Chinese Academy of Press and Publication in July 2014. The industry saw profits in 2013 increase 9.32 percent year on year to hit 144.02 billion yuan.

entral government will take charge of paying the entire rebate for companies taxed on export sales from this year, the cabinet said yesterday, to unify the rebate system and help dispel trading partners’ suspicions of unfair competition.

Previously, 7.5 percent of rebates were paid by local governments. Some trading partners, however, suspected local governments were paying more, to effectively subsidise companies in their regions and boost their competitiveness.

“This reform help reduce imbalanced tax rebate payments of different localities and create a unified national market so as to promote foreign trade and the economy,” the official Xinhua news agency reported.

Local governments will calculate the amount of export rebates they paid out in 2014, and provide that amount to the central government to cover rebate payments this year, the State Council said in a statement.

Channelling all payments through central government accounts could help reduce some doubts over the size of rebates received by China’s exporters.

Xinhua

Reuters

anuary retail sales fell by the most since April 2003 as Chinese tourist arrivals slowed and expenditure in the previous year was boosted by holidays.

Retail sales by value plunged 14.6 percent in January from a year earlier, according to government data released yesterday. Economists surveyed by Bloomberg News had a median estimate for a 6.1 percent decline.

“The negative impact of slowing Chinese growth on Hong Kong is becoming more obvious,” said Mole Hau, an economist with BNP Paribas SA in Hong Kong.

A slowdown in the Chinese economy and President Xi Jinping’s campaign against corruption and extravagance by officials are crimping tourist spending and hurting luxury retailers in Hong Kong. The sale of jewellery, watches and luxury items dropped by 21.4 percent in January from a year ago, the data show.

Mainland Chinese arrivals rose 3.3 percent in January from a year earlier, compared with a 23.3 percent increase for the same month in 2014.

Bloomberg News