MOP 6.00
Lacklustre sparkle
Closing editor: Luís Gonçalves
The never-ending luxury crisis. Chow Tai Fook, the world’s largest listed jewellery chain by sales, saw the value of its retail sales fall 6pct in Q2. Weak sales in Hong Kong and Macau were cited. The jeweller saw net income plunge 25 per cent for the fiscal year ending March. Heavy discounts have been introduced to move inventory
Year IV
Number 832 Friday July 10, 2015
Publisher: Paulo A. Azevedo
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U-TURN?
Discussions on the universal smoking ban in casinos have started. With casino operators heartened by Alexis Tam’s comments. Originally, the Secretary for Social Affairs and Culture wanted to limit the number of tourists from Mainland China to Macau. Yesterday, however, his speech in the Legislative Assembly suggested a U-turn. “We are confident in our work of promoting Macau and increasing the number of tourists. There is huge potential to attract more tourists”, the Secretary said. The smoking ban vote is scheduled for today Page
2
Tobacco tax to boost grey market
Pages 9&10
July 9
Awaiting developments
Far quicker to watch paint dry. But the DSSOPT moves inexorably forward. Maybe. The city’s Land, Public Works and Transport Bureau has yet to conduct land swaps for six parcels of land acquired from land grantees for public projects and private projects. Including Wynn Macau, MGM China, and Galaxy Macau
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Investment www.macaubusinessdaily.com
Angel card shuffle trademark arguments rebuffed Page 6
HSI - Movers
Page 3
Beijing’s moved swiftly. To arrest nosediving markets. Stocks rebounded yesterday. While authorities stepped up probes into illegal trading activities promising retribution
Available Windsor Arch units sold out Page 6
MGM Resorts International sells two Reno casinos Page 8
A price gap of nearly MOP40. The likely retail price difference in a packet of cigarettes sold here and in Zhuhai. That is, once the new MSAR tobacco tax is introduced. Tax will leap from 33pct to 70pct. Encouraging a sharp rise in the grey market, says a trade chamber
Stable signs
Kwan Tsui Hang urges competition for energy market Page 7
Name
%Day
Hong Kong Exchanges
+14.85
China Resources Land
+11.77
China Overseas Land &
+10.67
Want Want China Hol
+8.58
Tencent Holdings Ltd
+8.31
China Petroleum & Che
-0.49
CLP Holdings Ltd
-0.62
Bank of China Ltd
-0.69
Link REIT/The
-1.88
Bank of Communicatio
-5.26
Source: Bloomberg
Embryonic entrepreneurs
I SSN 2226-8294
Start with MOP100. Local youths can ‘practise’ big business in Hengqin. Courtesy of the Sun Kian Ip Group, eager to seed and grow budding entrepreneurs. The company wants to assist 10,000 youths start their own business. Using the company’s Young Entrepreneurs Building in Hengqing as the investment vehicle and escalating costs. They forecast a drop of 34 pct in revenues this year, with 2016 still in the red
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2015-7-10
2015-7-11
2015-7-12
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26˚ 31˚
27˚ 32˚
2 | Business Daily
July 10, 2015
Macau Guangdong and Macau promote multi-destination travel Macau Government Tourist Office (MGTO) has embarked upon a joint sales mission to Malaysia and Singapore together with five tourism entities, namely the Tourism Administration of Guangdong Province, Tourism Administration of Guangzhou Municipality, Zhongshan Municipal Tourism Bureau, Zhuhai Culture Sports and Tourism Bureau plus the Tourism Administration of Shaoguan Municipality. The six entities joined hands to expand overseas markets and promote international visitation, branding their cities as one regional destination by promoting their multi-destination tour routes during the mission. The joint delegation comprises nearly 60 members, which is the biggest in recent years.
Full casino smoking ban prompts U-turn on Mainland visitor cap The changes to the smoking law started to be discussed yesterday, with the vote on the first reading taking place today. However, casinos received good news from the Secretary for Social Affairs and Culture, Alexis Tam João Santos Filipe
jsfilipe@macaubusinessdaily.com
T
he discussion on the universal smoking ban in casinos brought good news for casino operators from Alexis Tam. Originally, the Secretary for Social Affairs and Culture wanted to limit the number of tourists from Mainland China to Macau but yesterday his speech in the Legislative Assembly suggested a U-turn. “We are confident in our work of promoting Macau and increasing the number of tourists. There is huge potential to attract more tourists”, the Secretary said when asked about the consequences to the casinos and junket operators of the universal smoking ban. While the first reading of the controversial changes to the law on smoking started
to be discussed yesterday, the session had to be interrupted due to the duration of the interventions and will be resumed today for the vote. The impact of the ban on casino revenues was one of the most mentioned concerns of the members of the AL. “After our conversation with the gaming workers and the gaming concessionaires I came to realise that most of the gaming workers support our policy banning smoking in casinos. These workers understand that their income may suffer from these measures”, the Secretary for Social Affairs and Culture, Alexis Tam, said yesterday in the AL. “More than 83,000 workers are risking their life every day because of smoking in casinos”, he added.
Regarding the concern of Legislative Assembly members that the smoking ban will increase the number of unemployed in Macau, the Secretary said that the immigration law offers a solution to the problem. “We don’t believe we will increase unemployment by implementing a full smoking ban in casinos. There are around 170,000 non-resident workers and we have the mechanisms for them to leave”, Mr. Tam said. “There is an unemployment rate of 1.7 per cent. This is very close to full employment”, he added.
Tax on tobacco jumps to 70 per cent
During yesterday’s session of the AL, an increase in
the tax on tobacco products consumption was approved. According to the changes introduced to the law, tax will now account for 70 per cent of the cost of tobacco products, which means that for every cigarette unit bought in Macau the consumer will have to pay MOP1.5 and MOP4,326 per kilogram of cigars or cigarillos. While the law was approved with 26 votes for and 2 against, AL members Fong Chi Keong and Kou Hoi In expressed their concern for the tobacco companies and people working in such companies. “The sellers of tobacco products in Macau are going to be the most harmed by this policy. Consumers can always cross the border to
Zhuhai where the difference in the price is already very significant. This is going to directly impact the activities of the sellers and probably some of them will have to shut down their companies and fire their workers”, Kou Hoi In said. If on the one hand, Lionel Leong explained, that the law was based on the decision to protect the health of the citizens rather that increase the government’s revenue from taxes, on the other hand he promised to launch measures to support Small and Medium Enterprises. “We understand that the sellers of tobacco products will have a harder life. But in relation to SME’s if they are impacted by this policy we are available to support them so they can change the nature of their activity”, he said. In relation to the number of tobacco companies operating in Macau, the Director of the Economic Services, Sou Tim Peng, said that 14 companies manufacture tobacco products in the territory and that 90 per cent of production is exported, while 10 per cent is consumed domestically. For her part, the Directorgeneral of the Macau Customs Service, Lai Man Wa, promised to intensify measures to prevent and fight tobacco smuggling activities. All members of AL also approved yesterday the date of September 3 as a mandatory holiday to mark the ‘70th Anniversary of the Chinese People’s AntiJapanese War and World Anti-Fascist War Victory Commemoration Day’.
Business Daily | 3
July 10, 2015
Macau Trade chamber voices illicit tobacco trade concerns A price gap of nearly MOP40 may result comparing the retail price of a packet of cigarettes sold here and in Zhuhai once the new MSAR tobacco tax comes into effect, a trade chamber says Stephanie Lai
sw.lai@macaubusinessdaily.com
recommendations. This change would mean that tobacco tax will occupy around 70 per cent of the retail price of a packet of 20 cigarettes from the current 33 per cent.
Sceptical
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acau’s Trade Chamber of Tobacco Companies questions how effective the illicit tobacco trade here can be curbed by Customs, as legislators have already approved a threefold increase in tobacco tax and an upcoming rule restricts the number of cigarettes travellers can bring into the territory free of duty for private consumption. In a letter published in Chineselanguage Macao Daily News, the trade
chamber said it strongly opposed the government’s proposed increase in tobacco tax, the ban on electronic cigarette sales, and the ban on displaying tobacco products at sales points. The Legislative Assembly approved the government’s proposal to increase tobacco tax yesterday, with the tax on each cigarette raised to MOP1.50 from the current MOP0.5, thus following the World Health Organization’s (WHO)
The trade chamber’s deputy director, Andrew Chan Hou Lam, is sceptical about the effect this new restriction will have on the illicit tobacco trade here. “With so many people crossing the inland borders here, and the huge amount of Mainland Chinese labour working here as well, it’s not difficult to ask them to help bring cigarettes from Zhuhai to here,” said Mr. Chan. He added that a price gap of close to MOP40 is likely to result comparing the retail price of a packet of cigarettes sold here and in Zhuhai once the tobacco tax increase comes into effect in the MSAR. The trade chamber deputy head also questions whether the city’s Customs can effectively check the likely illicit tobacco trade taking place between the Mainland and here, given
the huge number of travellers crossing the border on a daily basis. The Health Bureau has issued statements in the past two days saying that higher taxes on tobacco products would be healthier for Macau’s people and its government finances, noting an estimate that economic losses caused by smoking will be as much as MOP6.7 billion (about US$837.5 million) in 2020 – a level much more than the government gets from taxing tobacco. However, Andrew Chan is sceptical of the effect of the tobacco tax increase in reducing the number of smokers. “In 2011, the government conducted research that said of every 1,000 people here, 169 were smokers; after a tobacco tax increase came into force, the number of smokers only went down to 164 in 2014 for every 1,000 people here,” Mr. Chan said. In 2011, the government raised the tobacco tax here by 150 per cent, which Mr. Chan claims led to an immediate 60 per cent loss in imports of tobacco products for the whole year.
4 | Business Daily
July 10, 2015
Macau opinion
Gov’t yet to conduct land swaps
Phantom of the Soap Opera
The public works department has not confirmed whether the new urban reclaimed zones will be the source of the yet‑to‑be-completed land swaps Stephanie Lai
sw.lai@macaubusinessdaily.com
Pedro Cortés
Lawyer* cortes@macau.ctm.net
P
ursuant to the decision not to take back 16 plots of undeveloped land, the Commission Against Corruption of the Macau Special Administrative Region (CCAC) has been called upon by the Chief Executive to comment upon the legality and rationale of the administrative procedures involved. I would not want to be in the position of the Commissioner when drafting the report and providing the necessary recommendations for improvements. On the other hand, it seems that there is a fear of assuming responsibility for what public opinion and a few legislators have already censured. Since having the honour of residing in Macau, I have always felt the sense of assigning liability to third parties. The creation of a group of studies - the infamous public consultation - with conclusions that do not really reflect what people feel is often used to justify a certain decision. Truth be told, in the concrete case aforementioned it seems that some kept their plots of land whilst others, in the same apparent situation, had their land confiscated by the government. There are other ongoing situations that require urgent government determination in order to prevent future disputes due to the lack of decisiontaking until at least last year when the new Secretary for Public Works assumed office. As a matter of fact, and from an outsider’s perspective, there have been cases waiting for a decision since the beginning of the century. The new Secretary seems to have done the possible and the impossible in coping with the (in)activity of the last decade. More than that is to somehow be compelled to assume political responsibility for a period in which Lisbon was his permanent function. I’ve often heard that those who don’t make decisions are always capable and competent because they don’t make mistakes. BY contrast, those who act, decide, opt and choose to proceed put themselves in the spotlight for criticism from all sides. But they make the difference and will be recognized; maybe not in the short-term but in the long-term for the options taken. The palpable sense of fear of public opinion should not constitute a barrier for the governors of any state. People will decide with the principle of public interest the lighthouse for such decisions. The welfare of Macau people cannot be postponed - or we may see in one or two decades Macau become one of those phantom places where there will be visits to the former, rather than current, gaming mecca. *Part-time Lecturer at the Chinese University of Hong Kong
T
he city’s Land, Public Works and Transport Bureau (DSSOPT) has indicated that it has yet to conduct land swaps for six plots of land parcels the government has acquired from land grantees for public projects as well as private projects, including plots granted to Wynn Macau and MGM China on the Macau Peninsula and Galaxy Macau in Cotai. The MSAR Government has a total of 10 land swap cases pending since before the handover in 1999, the Bureau said in a statement published on Wednesday. Of these 10 cases, the government has completed land swaps with private land owners for only 4 parcels so far, which involves the government having swapped land for
developing a Mong-ha social housing complex project (‘Mong Sin’ Building), Seac Pai Van public housing project, and two road projects in the Patane and Fai Chi Kei district on the Macau Peninsula. The government, however, has yet to swap land for the plots granted to Wynn Macau and MGM China on the Macau Peninsula as well as Galaxy Macau on Cotai, as the plots located in ZAPE and in Cotai that had originally been granted to third-party private landwners later underwent a change in land usage purpose for the development of the resort-casino business, the Bureau explained. The government is also to swap land with private landowners pertaining to the building of the Golden Lotus
Square on Macau Peninsula and its plan to convert the Iec Long Firecracker Factory in Taipa into a theme park, according to the statement. Upon Business Daily’s enquiry, the Bureau stressed that it “had no information” about whether any land parcels from the five new urban reclaimed zones are to be reserved as sources for land swaps for the private landowners. The government is still consulting the public until August 8 on the urban planning for the five newly reclaimed areas throughout Macau, which occupy 350 hectares. ‘The government reiterates that it will be handling land swaps cautiously,’ the Wednesday statement read, ‘...It will strictly follow the new Land Law and related regulations.’
Chow Tai Fook quarterly retail sales fall 6 pct on Hong Kong, Macau
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how Tai Fook Jewellery Group Ltd., the world’s largest listed jewellery chain by sales, saw the value of its retail sales fall 6 per cent from April to June due to weak sales in Hong Kong and Macau. Same-store sales fell by 7 per cent in Mainland China, and were down 24 per cent in Hong Kong and Macau in the first fiscal quarter ending June, the jeweller said in a statement on Thursday. Hong Kong-based Chow Tai Fook has been hurt by China’s slowing economy and a government-driven
austerity campaign, which have prompted shoppers to cut back on luxury purchases. The jeweller saw net income plunge 25 per cent for fiscal year ending March as stores in Mainland China, Hong Kong and Macau suffered. The jeweller cut prices for some of its diamond-set products by as much as 30 per cent in June, in a bid to reduce inventories bloated by weaker-than-expected sales in the city, said Bloomberg Intelligence retail analyst Catherine Lim. Bloomberg
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July 10, 2015
Macau
Available Windsor Arch units sold out Local buyers of the complex are primarily purchasing the units for self-use rather than for investment, developer says
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epresentatives of the luxury residential complex opposite the Jockey Club – Star River Windsor Arch – say all of the units put on the market for sale have already been sold out, estimating the project will be ready for occupation this year. Project developer Victory Real Estate Development’s managing director William Kuan Vai Lam told reporters yesterday that the company’s 500-odd units in six blocks of the complex had all been purchased over the past two to three years, with 90 per cent of buyers local independent residents. The units are valued at MOP10,000 (US$1,250) per square foot on average, the MD claimed, whilst declining to reveal the total sales that the developer has notched up. According to Mr. Kuan, the local buyers of the complex have primarily purchased the units for self-use rather than investment. Asked by reporters whether he thinks that the purchase ability of local residents for properties is still strong given the downturn of the economy, Mr. Kuan said the property market will
bounce back following the adjustment period. “I believe that Macau residents have collected a certain amount of capital as the deposits of residents in local banks are very high. Hence, I think the property market will still have room to develop after undergoing the current adjustment period which [appeared] primarily due to residents’ psychological factors”.
The entire Windsor Arch project, comprising 10 blocks occupying a total area of 18,530 square metres (199,455 square feet), was originally slated to be completed and ready for occupation in 2010. The 10 blocks, each 47 storeys high, offers 857 units and 1,800 parking spaces. Having withheld four blocks for sale, Mr. Kuan expects that the sales of these
blocks will open next year. However, the exact time, and prices, will depend upon the real estate market and the overall economy of Macau, he claimed. Meanwhile, the businessman admitted that the delay in the completion of the project was due to changes in design, as well as the infrastructure [establishment[ of the Light Rail Transit (LRT) in the later stage.
“The infrastructure of LRT did affect construction of our project a bit, mostly on the exterior part. However, following our discussion with the government, the issue has been resolved… Meanwhile, we have been improving our project based on market demand, such as increasing the height of each floor and changing some small flats to luxury ones”, he claimed. K.L.
Angel card shuffle trademark Corporate arguments rebuffed Aux Beaux Arts at MGM MACAU receives The Japanese company, who took the matter to court, has failed to prove that its product has a ‘distinctive character’
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apanese company Angel lost its battle for the registration of its trademark on its product and the tri-dimensional trademark on its card shuffle after the Court of Second Instance ruled that the product lacked a ‘distinctive character’. The decision by the Court of Second Instance puts an end to a legal ‘conflict’ that unfurled in 2008. Initially, Angel – which is mainly involved in the sale of playing cards – started the process with the Macau Economic Services (DSE) for the registration of its card shuffle in June 2008. The process requested the registration of the trademark on the product – which is supposed to protect products – and its tri-dimensional trademark – used to protect the shape of a product. However, Macau Economic Services decided on December 2008 to deny these requests because the card shuffle lacked a ‘distinctive character’, which is essential to guaranteeing such trademarks. This effectively means that the product shape is not enough to distinguish it from other products in the market.
Disagree
As Angel did not agree with the ruling, the company decided to take the issue to the Primary Court. Here
the decision was again unfavorable to the cards manufacturer because the court decided that the shape of the product was motivated by technical specifications required for the operation of the machine and as such it lacked a ‘distinctive character’. Arguing that the buttons, height and width of the shuffler card machine as well as the external configuration and shape are different from other products in the marketplace, which would give to the machine a distinctive character, the Japanese company appealed to the Court of Second Instance. Once again, the decision taken early this week by the Second Instance Court confirmed the previous ruling. The court argued that the functions of the product that the company wants to register are similar to all the other products in the marketplace, which are used to store playing cards and allow dealers to distribute them to players. The court also stressed that the tri-dimensional shape of the playing cards shuffle of Angel is the result of the functions of the machine rather than the result of decorative options. The Court of Second Instance also refused the idea that the product, which is said by the company to be well-known in Macau, had a secondary meaning associated with the Japanese brand.
highest recognition from Wine Spectator For the fourth consecutive year, MGM MACAU’s Aux Beaux Arts French restaurant has been awarded by the internationally acclaimed magazine Wine Spectator for its comprehensive wine list and sophisticated menu pairing. This year, Aux Beaux Arts garnered the Grand Award, the highest level of recognition under the Restaurant Wine list Awards category. Mr. Stéphane Soret, Executive Director of Beverages of MGM MACAU, said:
“It is our honour to be awarded the highest recognition from an influential publication like Wine Spectator, and it is an affirmation that our wine list is recognised by other professionals in the industry. I would like to take this opportunity to express my gratitude to Mr. David Chang, Assistant Sommelier, Ms. Nadege Marie Lagenette, Restaurant Manager of Aux Beaux Arts, and the excellent service provided by the team.”
Business Daily | 7
July 10, 2015
Macau
Local youth investment opportunities in Hengqin Starting from MOP100, local youths can have a taste of being an investor and developer for a property project in Hengqin that aims to lease offices to young entrepreneurs and SMEs at lower prices. The brainchild of Sun Kian Ip Group, the company said the investment scheme will serve as a course for youths to learn how to be an entrepreneur Kam Leong
kamleong@macaubusinessdaily.com
L
ocal property developer Sun Kian Ip Group announced yesterday the launch of a Young Entrepreneurs start-up scheme which seeks to assist 10,000 youths in the city to start their own business by inviting them to invest a minimal MOP100 (US$12.5) in the company’s Young Entrepreneurs Building in Henging. The five-year scheme is open to both permanent and non-permanent residents in the territory, and Mainland Chinese students studying in Macau, as long as they are aged between 18 and 45 years old. For residents, the cap on their investment is set at MOP100,000 whilst Chinese students cannot invest more than MOP10,000. The minimum investment amount for both types of applicants is MOP100. According to the president of the preparation committee for the scheme, entrepreneur William Kuan Vai Lam, the Young Entrepreneurs Building will be located in San Kian Ip’s 50 billion yuan joint-integrated commercial
development project MixC with Chinese developer Chinese Resources in Hengqin on a plot occupying 1,000 mu. Mr. Kuan said the company will grant between 20 and 30 mu from their 1,000-mu land plot for the building, the construction of which is slated to be finished within 2 to 3 years. He estimated that the total amount of investment that the company plans to collect from participants will account for between 20 to 30 per cent of the total investment in the building. “This scheme is not just about buying and selling…It allows our participants to join the development of the whole project, participating in the fields of IT, engineering, administrative management or even sales and marketing. They will actually join to build the project from nothing in the view of investors,” Mr. Kuan said, adding the company will also provide business training courses
Kwan Tsui Hang urges gov’t to introduce competition to energy market
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egislative Assembly (AL) member Kwan Tsui Hang says the government must scrap the contract with Sinosky for the supply of natural gas and prepare for the introduction of competition in the energy market. “Since the contract was signed the supply of natural gas has not been enough nor stable, which contravenes what is defined in the contract. Also, the company has failed to define a long-term plan for the supply of natural gas. All these delays have resulted in missed opportunities in terms of the introduction of clean energy to Macau”, she said yesterday in the Legislative Assembly. “There are negotiations between the
government and the company to resolve these issues. However, if there is no agreement, the contract has to be scrapped to protect the interests of the people.” The AL member also requested the government to introduce competition to the energy market concerning natural gas. “In recent years, the energy market has gone through substantial changes. While fuels are cheaper, natural gas is more expensive. The government has to review its policies for energy and natural gas and prepare the introduction of competition to this market”, she added. J.S.F.
to ‘incubate’ these participants into entrepreneurs. The future Young Entrepreneurs Building will sell or lease their units at a rate lower than the market price to other young entrepreneurs and SMEs for office or commercial use. However, participants in the programme will have priority in purchasing the venues at a discounted price, Mr. Kuan said.
Profits
The scheme will officially start on January 1 next year, while the account of the project will be settled five years later. Participants will glean profits based on their investment. “After calculating our profits after tax, we will donate 10 per cent of the total profits to local charities, and another 10 per cent will be put into a
fund that supports the development of young entrepreneurs. The remaining profits will be distributed to the participants based on their investment amount,” the committee president said. Meanwhile, Mr. Kuan noted that the capital they collect from the youths will be under the management of a local bank as a fund, meaning the cost of constructing the building will actually be paid by the company. The participants can also quit the scheme if they want to, the businessman said, claiming the company will refund them their invested capital, plus an interest rate based on the annual inflation rate. The scheme will open for application from October 1 this year. K.L.
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July 10, 2015
Gaming Detroit casinos reverse trend, revenues up 4.8 pct Once a bankrupt town, Detroit is back in the game, namely in casinos. The city’s three casinos have been on a roll this year, reversing what had been a gradual decline in gambling revenue. The gaming revenues were up 4.8 percent during the first six months of this year compared with last year, according to figures released Wednesday by the Michigan Gaming Control Board. For just the second quarter, the revenues were up 4.3 percent compared with the second quarter 2014.
MGM Resorts International sells two Reno casinos
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GM Resorts International has announced that it has sold its Reno casino holdings to Eldorado Resorts for US$72.5 million. The operation gives Northern Nevada company ownership of Circus Circus Reno and a remaining 50 per cent stake in the Silver Legacy. It also gives Eldorado Resorts
the full ownership of the Silver Legacy and marks the end of MGM’s presence in Reno, Las Vegas Review Journal has reported. To be completed by the end of the year, the agreement will give Eldorado seven casinos in five markets, including three resorts in downtown Reno. Eldorado CEO Gary Carano
said in a statement that, “the acquisition is expected to be accretive to our operating results upon closing, builds the critical mass of our gaming operations and fortifies our position in the increasingly attractive Reno gaming market”. Silver Legacy, Circus Circus Reno and the Eldorado Reno property are connected
by a 200-foot wide skyway corridor. The sale will end MGM’s casino operations in Reno. Circus Circus Las Vegas was not part of the transaction, the Las Vegas based paper said. Media business outlet Vegas Inc. also reported that once the transaction closes Eldorado will control seven properties in
five markets — the company runs other casinos in Reno, Louisiana, Pennsylvania, Ohio and West Virginia.
Third in a row
The sale marks the third time in recent months that MGM has sold properties it acquired when the company’s predecessor, MGM Mirage, bought Mandalay Resort Group in 2005. In a statement, Dan D’Arrigo, MGM’s executive vice president, chief financial officer and treasurer, said that the company has had a long relationship with the family at the helm of Eldorado Resorts, whom he said “share many of the same core values as MGM”, Vegas Inc. said. “We believe that joining the Eldorado family will provide our employees with significant opportunities to grow and prosper," D’Arrigo said in the statement. Carano said the deal furthers a long-term vision of expansion for Eldorado, which merged with MTR Gaming Group last year. “Upon completing the transaction, we will own the three leading downtown Reno casino resorts at a time when the Reno market and the surrounding region is recovering and attracting new businesses that should drive long-term economic support,” Carano said in the statement. MGM is continuing to grow in a big way, too — outside Nevada. The Las Vegasbased casino giant is building new resorts in Maryland, Massachusetts and Macau.
Paulson close to Caesars unit restructuring deal The deal would extract better terms for the creditors than a previous version that has failed to garner enough support
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aulson & Co. is among the creditors closing in on a deal intended to salvage a bankruptcy plan Caesars Entertainment Corp. is pushing to restructure its insolvent operating unit, according to two people with knowledge of the matter. The hedge fund firm controlled by billionaire John Paulson and other junior debt holders of Caesars Entertainment Operating Co., including Canyon Partners and Soros Fund Management, are discussing the plan with the casino company, said the people, who asked not to be identified because the talks are private. The deal would extract better terms for the creditors than a previous version that has failed to garner enough support, the people said. Caesars has tried for months to line up enough senior creditors to
win approval of a proposal to cut lower-ranking debt, allow the parent to retain a stake in the operating unit and halt related lawsuits against its private equity owners, Apollo Global Management LLC and TPG Capital. Representatives for Paulson, Canyon, TPG and Las Vegasbased Caesars declined to comment. A spokesman for Apollo didn’t immediately respond to telephone and e-mail requests seeking comment while a representative for Soros didn’t immediately return messages after business hours. The negotiations are happening while the company and its private equity sponsors continue confidential talks with a group of higher-ranked, first-lien bondholders to amend the restructuring support agreement to which they had previously agreed, said two of the people. Bloomberg
John Paulson, head of Paulson & Co. investment management firm
Business Daily | 9
July 10, 2015
Greater China
June consumer inflation edges up While producer price index cooled to -4.8 percent in the same month
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hina's consumer inflation edged up slightly in June while stubbornly weak producer prices fell again, data that could increase worries about a sluggish Chinese economy which is also smarting from a stock market rout. China's consumer inflation quickened to 1.4 percent year-on-year in June, beating market expectations. Analysts polled by Reuters predicted the index would come in at 1.3 percent, compared with 1.2 percent posted for May. The producer price index cooled to -4.8 percent in June, the National Bureau of Statistics said yesterday. This marks its 39th straight month of declines. The market had expected producer prices to fall 4.5 percent on an annual basis after a decline of 4.6 percent the prior month. Kevin Lai of Daiwa Capital Markets in Hong Kong said that given what's going on in the markets, "there
KEY POINTS June CPI +1.4 pct y/y (f’cast +1.3 pct, prev mth +1.2 pct) June CPI flat m/m June PPI -4.8 pct y/y (f’cast -4.5 pct, prev mth -4.6 pct) must be pressure on the central bank to ease to counter deflation pressure. There must be a lot of negative wealth effect from the stock market, which is deflationary. That means in the next few months we may see further downward pressure on CPI." Li Huiyong, economist at Shenyin & Wanguo Securities in Shanghai, said inflation was still at a low level "The data continues to point out the weak domestic demand in the
real economy. Given the stabilising of consumer prices, we think there are still room for the central bank to ease its monetary policy," Li said. "They are more likely to cut the amount of cash that banks must hold as reserves in the coming months." China's anaemic economy has had a difficult year. A steady stream of policy-loosening steps has not revived activity. Worse, a swooning Chinese stock market that has plunged nearly one-third in the past month, wiping out around US$4 trillion so far, has further rattled confidence. To calm panicky investors, China has in the past week launched a rescue plan for plunging share prices that includes halting initial public offerings and ordering Chinese brokerages and fund managers to buy at least 120 billion yuan (US$19.3 billion) of stocks. But the measures have yet to calm the stock market, which shed 7 percent on Wednesday.
To support the economy, China's central bank cut its lending rates for the fourth time in seven months in June, and lowered the amount of cash that some banks must keep as reserves. But the easier supply of credit has not visibly boosted China's real economy as firms that need the money the most, such as small businesses, are still encumbered by prohibitively costly bank loans. Most analysts believe China could lower rates yet again, alongside further reductions to the reserve requirement ratio to ensure the economy grows by around 7 percent for the full year, as targeted by the government. The government is due to release second-quarter gross domestic product data on July 15 and many economists expect growth to dip below 7 percent, which would be the weakest performance since the global financial crisis.
Police visit regulator to probe ‘malicious’ short-selling Sources did not specify the illegal activities or identify any individuals under investigation
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hinese police visited the office of the country's securities regulator yesterday to investigate clues that suggest "malicious" short-selling of shares, state news agency Xinhua said, the latest effort by authorities to prevent a further meltdown in the stock market. The country's stock markets have plunged roughly 30 percent over the last three weeks, with a series of increasingly aggressive attempts by authorities so far having failed to stem the massive exodus from a oncebooming market.
Citing unidentified sources, Xinhua said Vice Minister of Public Security Meng Qifeng had led a team to the office of the China Securities Regulatory Commission yesterday morning. The investigation shows that authorities will "punch back" against illegal activities with a "big fist", Xinhua said in its official microblog. It did not specify the illegal activities or identify any individuals under investigation. The stock market rout has rattled investor confidence and raised concerns that it could pose an even bigger
Some members of the Chinese public have started to demand the resignation of Xiao Gang, the head of China’s securities regulator
Reuters
threat to the world economy than the Greek debt crisis. In Beijing's most drastic step yet, the securities regulator banned investors who own more than five percent of their shares from paring their stakes in the next six months. Some members of the Chinese public have started to demand the resignation of Xiao Gang, the head of China's securities regulator, and a Reuters search online on Thursday showed that some of these calls were censored by authorities. Searches for the term "Xiao Gang step down" on Baidu and Weibo, China's biggest search engine and its version of Twitter, respectively, showed the phrase "according to relevant laws, regulations and policies, some search results cannot be displayed". However, searching on homonyms for Xiao Gang's name in Weibo yielded postings that called for his resignation. Reuters
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Greater China China-South Africa ties “at best time”: Xi The ties between China and South Africa are at the best time in history, with strong development momentum, Chinese President Xi Jinping told his South African counterpart, Jacob Zuma, yesterday. The two leaders met ahead of the BRICS and Shanghai Cooperation Organization summits both to be held in the south-western Russian city of Ufa. Xi recalled the state visits he and Zuma had paid to each others’ countries over the past two years, during which they mapped out long-term and comprehensive plans for bilateral cooperation.
Steelmakers lose US$2.7 bln Large Chinese steelmakers’ losses in core business more than doubled during the first five months from a year earlier as tumbling steel prices plunged producers into red, a top official of the China Iron & Steel Association (CISA) said yesterday. CISA members, comprising of 101 big mills, posted a loss of 16.48 billion yuan (US$2.65 billion) in steelmaking business for January-May, which was 10.36 billion yuan more from the same period of last year, according Zhang Guangning, CISA’s chairman. Chinese steel prices are at their lowest in more than 20 years.
Canada eyeing AIIB membership opportunities Canada’s decision on whether to join the Chinese-led Asian Infrastructure Investment Bank (AIIB) will be in part determined by the scope for Canadian businesses to compete for projects it funds, Canadian Finance Minister Joe Oliver said. Canada said in April that it was actively considering joining the AIIB, despite U.S. and Japanese reservations, but it was not among the 50 nations which signed the articles of agreement last week. “Our government is monitoring developments to determine, among other things, the opportunity for Canadian companies to compete for infrastructure projects,” Oliver said.
Fosun to buy German bank Fosun International Ltd will buy German private bank Hauck & Aufhäuser Privatbankiers for up to 210 million euros (US$231 million) in an agreed deal, the companies said on Wednesday, the first Chinese takeover of a German bank. The Chinese conglomerate said the acquisition would enhance its banking and asset management capabilities, expand its financial markets and fund custody services, and allow it to better access other business opportunities in Europe. Small German wealth managers like Berenberg Bank, MM Warburg and Metzler have faced competitive pressure from the country’s large savings.
SuperGroup makes move into Mainland SuperGroup, the British company behind the Superdry fashion brand, has signed a joint venture deal to take its clothes into China, it said yesterday, stepping up its push for a global presence. The firm, whose trademark jackets, hooded tops and jogging bottoms are popular with teenagers and twentysomethings, has over 160 stores in Britain and elsewhere in Europe, with goods sold in over 100 countries including concessions and online. Expansion is planned in countries such as Germany and Austria, but it has also moved to gain exposure to the United States, and now China.
Market stops falling after new measures Regulator banned shareholders with large stakes in listed firms from selling Koh Gui Qing and Kazunori Takada
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eijing’s increasingly frantic attempts to stem a stock market rout were finally rewarded as Chinese shares bounced around 6 percent yesterday, but the costs of heavy-handed state intervention are likely to weigh on the market for a long time. The rebound came after China’s securities regulator, in its most drastic step yet to arrest the slump, banned shareholders with large stakes in listed firms from selling. The banking regulator said separately it would allow lenders to roll over loans backed by stocks. The CSI300 index of the largest listed companies in Shanghai and Shenzhen raced higher to close up 6.4 percent, while the Shanghai Composite Index bounced 5.8 percent for its biggest daily percentage gain in six years. But China’s malfunctioning stock markets remained semi-frozen, with the shares of around 1,500 listed companies worth around US$2.8 trillion - roughly half the market - suspended, and many of those still trading propped up by state-directed buying. “The authorities are capable of slowing the selling and extending market support,” said Mark Konyn, chief executive officer at Cathay Conning Asset Management Ltd in Hong Kong. “However, this high level of intervention comes at a significant cost. Such intervention locks up ownership of shares, reduces liquidity and creates an overhang that could plague the market for years.” More than 25 percent has been knocked off the value of Chinese shares since mid-June, and for some global investors the fear that China’s market turmoil will destabilise the financial system is now a bigger risk than the crisis in Greece. “We are inclined to believe that Beijing will escalate policy responses until they start working,” said economists at Credit Suisse in a research note. “If market conditions do not stabilize, we expect a statement of ‘whatever it takes’ from the Chinese government, given that social stability is at stake and financial systemic risks are evident.”
The United States has voiced worries the stock market crash could get in the way of Beijing’s economic reform agenda.
Reform derailed?
The plunge in China’s previously booming stock markets, which had more than doubled in the year to midJune, has created a major headache for President Xi Jinping and China’s top leaders, who are already grappling with slowing growth. Beijing, which had made handing a “decisive” role to the market a centrepiece of its economic reforms, has responded with a battery of support measures, including an interest rate cut, suspension of initial public offerings and enlisting brokerages to buy stocks, backed by cash from the central bank. “The government will be able to stabilise the market because they have a lot of tools in the toolbox,” said Christopher Moltke-Leth, head of institutional client trading at Saxo Capital Markets. “But it is concerning that the Chinese government doesn’t allow market forces
KEY POINTS CSI300 and Shanghai Composite indexes rise around 6 percent Shareholders with more than 5 pct stakes barred from selling No foreign “QFII” investor hold stakes of 5 pct or more Police investigate “malicious” short selling Shares of nearly 1,300 companies suspended on China exchanges
to work, and that’s something China must change over time.” The Global Times, an influential tabloid published by the Communist Party’s official newspaper, invoked the “national team” in an editorial rallying support behind the authorities’ efforts to turn the market tide. “While there are disaster victims everywhere in China’s stock market, the other scene is that the ‘national team’ is truly taking action,” the paper said.
More action
The China Securities Regulatory Commission (CSRC) said on its website late on Wednesday that holders of more than 5 percent of a company’s stock would be barred from selling for the next six months. The CSRC, which warned on Wednesday of “panic sentiment” gripping a market dominated by ordinary retail investors, said it would deal severely with any shareholders who violated the restriction. The prohibition is unlikely to have much impact on foreign investors. No Qualified Foreign Institutional Investor (QFII), one of the main channels of foreign investment in China, holds more than 5 percent of a Shanghai or Shenzhen listed company. Foreign investors with more than a 5 percent stake in Chinese firms are all strategic investors. As the daily barrage of official measures to prop up the market continued, the banking and insurance regulators announced a series of moves to ease margin lending requirements and terms on stock-backed loans. Two Chinese development banks said they would not sell Chinese stocks, but would look to increase their holdings. Some analysts believe more government action will be necessary in the coming days, as investors seeking to cut their risk exposure head for the exit on the back of any bounce. “It is far from calling it a victory for the rescuers as more than half of listed companies are not trading in the market,” said Du Changchun, analyst at Northeast Securities in Shanghai. Reuters
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July 10, 2015
Asia
Australian employment proves surprisingly resilient The government’s measure of job vacancies is at its highest level since late 2012 Wayne Cole
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ustralian employment defied expectations and rose for a second month in June to suggest the labour market was on the mend, a sliver of bright news amid the global gloom over China and Greece. Yesterday’s data from the Australian Bureau of Statistics showed 7,300 new jobs were added in June, when analysts had forecast a drop of 5,000 as payback to May’s 39,900 jump. The jobless rate ticked up to 6.0 percent from a one-year low of 5.9 percent, but again was under forecasts. The detail was also upbeat with a solid 24,500 gain in full-time jobs and an increase in hours worked. “It’s a decent set of numbers, enough to sustain the shallow downtrend in unemployment we’ve seen since last October,” said Michael Blythe, chief economist at CBA. “It shows the economy is in reasonable shape despite the many concerns out there at the moment.” Investors are still wagering the Reserve Bank of Australia (RBA) will have to ease again given recent steep falls in the value of resource exports. Prices for iron ore, Australia’s single biggest export earner, plunged
KEY POINTS Employment +7,300 in June vs forecasts of -5,000 Unemployment at 6.0 pct, full-time jobs jump 24,500 Upbeat data help counter unease over China, Greece
over 10 percent on Wednesday alone to their lowest in a decade. Interbank futures imply a 50 percent chance of a further easing by September, rising to 88 percent in December.
Labour market surprises
Yet Australia’s labour market is proving to be unexpectedly resilient. Job gains have beaten market forecasts for six of the past eight months and
annual employment growth of 1.9 percent is only just below that of the United States. The RBA has suggested that wages are growing so sluggishly - the slowest pace since the early 1990s - that it is making labour more attractive for businesses to take on. If so, it could mean that unemployment might not rise to the 6.5 percent level that the central bank has long predicted.
Indeed, RBA Governor Glenn Stevens made an oblique reference to the divergence in his July policy statement, noting the jobless rate was little changed recently. “To us, that observation is significant,” said Ivan Colhoun, chief markets economist at NAB. “Normally, an unchanged unemployment rate would be associated with an economy running broadly at trend.” “As such, we would continue to assess there being little prospect of any near-term rate cut, barring some significant development offshore.” Reuters
Indian business dreads lifting of Iran sanctions Exporters say firms from Germany, Italy and France that once dominated in Iran will be back selling consumer products ranging from clothing to cars Nidhi Verma and Manoj Kumar
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ndian businessman Pankaj Bansal is losing sleep. He says that any nuclear deal under which global powers lift sanctions against Iran could wipe him out. Bansal’s trading firm has expanded as rivals were shut out of Iran by Western sanctions aimed at forcing Tehran into a nuclear compromise. Talks to finalise a deal have run deep into overtime but may wrap up today.
He is one of thousands of exporters who enjoyed a three-year run because India did not back the sanctions. In that time, India’s exports to Iran doubled to US$5 billion, helping to halve its bilateral trade deficit. Now, they could be forced aside by European and U.S. competitors just as Asia’s third-largest economy reels from a 20 percent export slump prompted by a global slowdown in trade.
The revival of India’s historic friendship with Iran, shared with Russia and Venezuela, does hold the promise of long-term trade gains. Yet short-term pain looms for oil buyers and banks that benefited from sanctions-related payment delays.
Helping hand
A delegation of Indian exporters met Finance Minister Arun Jaitley last
week to lobby for support to help them cope with a revival of competition for the Iranian market. They came away empty handed. Yet millions of farmers too would face a hit from the easing of sanctions on Iran, a buyer of basmati rice, soymeal, sugar, barley and meat. Under sanctions, Iran paid a premium of up to 20 percent over global prices to buy from India. “Iran is shifting to other suppliers like South American countries. They are supplying at much lower prices compared to India. We cannot compete,” said B.V. Mehta, executive director at the Solvent Extractors’ Association of India.
Europe’s edge
Iranian delegation (L) has engaged in intensive negotiations in recent weeks in order to finalise an agreement to lift sanctions
Indian exporters say firms from Germany, Italy and France that once dominated in Iran will be back selling consumer products ranging from clothing to cars, and pitching for big-ticket contracts like the delayed Tehran metro.
India’s oil ministry fears that Iran could award the right to develop the giant Farzad B gas field to Europeans who can deploy the latest technology and commit billions of dollars to modernising the OPEC member state’s oil-and-gas infrastructure. Refiners in India, the world’s No.4 oil consumer and Iran’s top client after China, want Iran to sweeten terms on crude deals to boost imports, which fell by 23 percent over January-June. With the fall in crude oil prices and decline in volumes, total imports from Iran have fallen from a record US$13.8 billion in 2011/12 to US$9 billion in 2014/15. Exports peaked at US$5 billion in 2013/14 before falling back last year. Trade ministry officials say that the economic boost to Iran from the lifting of sanctions could offer opportunities for Indian pharmaceutical, IT and commodity firms. Reuters
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Asia
Bank of Korea holds rate and reduces growth forecast The majority of analysts see the central bank holding rates for the rest of the year Christine Kim and Choonsik Yoo
KEY POINTS BOK holds policy rate at 1.50 pct (Reuters poll 1.50 pct) BOK cuts 2015 GDP growth forecast to 2.8 pct vs 3.1 pct Consensus view is for rates to remain steady awhile
Bank of Japan’s Governor Lee Ju-yeol
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outh Korea’s central bank cut the country’s economic growth forecast but kept interest rates steady at a record low yesterday, cautiously signalling that the economy was still reeling from weak consumption and exports. The central bank governor’s cautious remarks and downgrades for growth this year and next, appear to leave the door open to more easing
if needed, economists said. The Bank of Korea’s monetary policy committee left the base rate at 1.50 percent, a decision that was unanimous and widely expected. It cut rates in June in a pre-emptive move on the assumption growth would slow, Governor Lee Ju-yeol said. Lee said the BOK’s 2015 growth forecast was downgraded to 2.8 percent from the previous 3.1 percent
mainly due to a sharp slowing in economic activity during the AprilJune period and growth would pick up to exceed 3 percent next year. “The local economy will recover going forth as MERS subsides and on expansionary macroeconomic policies, but the growth path faces high uncertainties,” Lee told reporters, referring to the outbreak of the Middle East Respiratory Syndrome (MERS) that has considerably hurt consumption since late May. He said the government was preparing to announce fresh measures targeting household debt this month, but did not elaborate. Previous
Indian inflation to nudge up May factory growth rate to stay steady
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ndian data to be released in coming days is likely to show consumer price inflation nudged up slightly in June and factory output growth little changed in May, pointing to a gradual
improvement in industry, according to a Reutears poll. The median forecast from a survey of 30 economists this week put inflation at 5.10 percent in June compared to May’s 5.01 percent.
The Reserve Bank of India, which has already cut the repo rate three times this year, is closely monitoring the effect of monsoon rains on inflation to determine whether there is leeway to ease policy further.
comments from policymakers indicate the measures would be aimed at curbing rising debt and keeping the overall financial system sound. Lee declined to say how far rates could be cut but said the debt crisis in Greece and markets turmoil in China heightened uncertainties over South Korea’s economic growth prospects. Local financial markets showed little reaction to the expected rate decision, focusing more on volatile Chinese markets and developments in Greece. “The 2.8 percent growth forecast was a bit lower than the market’s consensus. The (additional) rate-cut views in the market probably aren’t going to disappear completely as the central bank or the finance ministry are convinced growth will stay true to its path,” said Kim Sang-hoon, fixedincome analyst at KB Investment & Securities. HSBC said in a report that given that the supplemental budget may not provide a strong enough kick to growth, the monetary easing cycle was likely not over. The majority of analysts see the central bank holding rates for the rest of the year to observe the effects of the four rate cuts made since last year as well as from the 11.8 trillion won (US$10.4 billion) supplementary budget the government proposed to parliament earlier this week. Earlier yesterday, the government unveiled a trade financing package worth around US$14 billion to help exporters overcome the challenges posed by a slowing Chinese economy and declines in the yen and euro. Inflation is expected to gradually pick up during the second half of the year but will remain relatively subdued as domestic demand struggles to recover amid low global commodity prices. The central bank also trimmed growth and inflation forecasts for 2016.
The RBI has targeted consumer price inflation at 6 percent by January and 4 percent by March 2018. “If the monsoon revives in the next fortnight and sowing remains on track during July, which is a critical month for kharif planting, risks related to food inflation would recede, boosting the likelihood of a reduction in the repo rate,” said Aditi Nayar at ICRA. A Reuters poll released last week showed economists expected the RBI to keep the policy rate unchanged at a policy review next month, but cut it to 7.0 percent in the final quarter. The RBI last cut its policy repo rate on June 2, lowering it to 7.25 percent, bring the total reduction since it began easing in January to 75 basis points. June’s rainfall data has been encouraging and fears India might experience a second year of drought have remained unfounded. But July
Reuters
is a key month for planting crops and poor rains could drive food prices up sharply. The poll’s median forecast showed industrial production rising 4.1 percent in May, matching April’s growth. Data released on June 30 showed core infrastructure output grew 4.4 percent in May, its first rise in three months and fastest in six months. “On balance, initial signs of pick-up in the core sectors alongside lagged recovery in domestic and external demand conditions point to a slowpaced improvement in the production trend this year,” said Radhika Rao at DBS. The volatile output data stands in contrast to other recent activity indicators that showed weak overall demand slowed factory growth while India’s service sector contracted for a second month in a row in June. Reuters
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Asia Japanese machinery orders at 7-yr high Recent signs suggest that firms may be changing their cautious investment approach Tetsushi Kajimoto
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he value of Japan’s core machinery orders rose to a 7-year high in May and were up for the third-straight month, adding to recent evidence of a steady pick-up in spending by firms and raising hopes of a more durable economic recovery. Yesterday’s data and a key central bank survey last week suggest Corporate Japan is finally starting to buy into Prime Minister Shinzo Abe’s radical ‘Abenomics’ stimulus policies aimed at sparking sustainable growth in the world’s third-largest economy. The 0.6 percent rise in core orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, beat economists’ median estimate of a 5.0 percent drop, Cabinet Office data showed. The Cabinet office said the value of core orders, which exclude those of ships and electric power utilities, reached its highest levels since June 2008. “Machinery orders turned out pretty strong. That indicates a positive trend for capital spending for the time being,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute. Japanese firms had long been hesitant to boost capital spending despite ultra-low borrowing costs made possible by years of loose money policies from the Bank of Japan. Policymakers are eager for firms to invest their earnings in plant and
KEY POINTS May core orders +0.6 pct m/m vs forecast -5.0 pct Manufacturers’ orders +9.9 pct; Service sector -4.0 pct Capital spending seen on uptrend thanks to corporate profits equipment, hoping for a virtuous cycle of investment, higher wages and consumption to revitalise the economy. Recent signs suggest that firms may be changing their cautious investment approach. Last week’s BOJ quarterly tankan survey showed big companies plan to boost capital expenditure at the fastest pace in a decade in the current fiscal year to March 2016. Record profits and ample cash have encouraged companies such as industrial robot maker Fanuc Corp to increase capital investment. Even Sony Corp, which is struggling with weak sales of mobile and other gadgets, is boosting investments in areas such as sensors and videogames. Moreover, despite worries over the Greek debt crisis and a slowdown in China - Japan’s biggest trading partner - higher corporate spending promises
Greek debt crisis, China’s slowdown pose some risks Cabinet Office keeps view that core orders are picking up
to bolster growth from an expected slowdown in the second quarter. “We believe that business investment will remain the bright spot in terms of economic growth in coming quarters,” said Marcel Thieliant, economist at Capital Economics. The BOJ is expected to sit tight when it meets to review policy next week, but many analysts expect the bank to be forced into deploying additional stimulus later this year as inflation is seen struggling to accelerate towards its ambitious 2 percent target. Reuters
Local Indonesian leaders withhold budget before polls Hidayat Setiaji and Gayatri Suroyo
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Sluggish government spending, particularly on infrastructure projects, has prevented a rebound in Indonesia’s economy, which is expected to have stayed below 5 percent in Q2 for the second straight quarter. “The home affairs minister will form a team to speed up budget disbursement to kick start economic
The Vietnamese Transport Ministry has estimated the Mekong Delta would need around 87 trillion Vietnamese dong (nearly US$4 billion) in the 2016-2020 period to invest in important infrastructure projects, local newspaper Saigon Time Daily reported yesterday. The ministry said in its recent report that 64 trillion Vietnamese dong of the total funding would go to road projects, 6.5 trillion Vietnamese dong to waterway developments and 1.5 trillion Vietnamese dong to aviation facilities. Hefty funding is being sought for construction of My Thuan-Can Tho expressway, Dai Ngai bridge linking Tra Vinh and Soc Trang provinces.
Indonesian ministry softens tone on airlines rule Transport ministry said it would help airlines struggling to meet a deadline to improve their finances, softening its stance after concerns about the measures sent AirAsia Bhd’s shares plunging to five-year lows. Ministry officials had told reporters less than a week ago that 13 airlines including AirAsia had to repair their stretched balance sheets by the end of July or risk being shut down. Yesterday, the ministry issued a statement saying it would “help and support” these airlines to improve their finances, but did not mention anything about shutting them down.
Fast Retailing’s 9-month profit up Japan’s Fast Retailing Co Ltd yesterday reported a 36 percent jump in nine-month profit, lifted by the strength of its Uniqlo casual-clothing chain at home and abroad as well as a boost from a weaker yen. Operating profit totalled 189.27 billion yen (US$1.6 billion) in the September-May period, up from 139.70 billion yen a year earlier, Asia’s biggest apparel retailer said in a statement. Fast Retailing said Uniqlo Japan’s operating profit had risen 22 percent compared with the same period last year, driven by brisk sales of its HeatTech line and ultra-light down garments.
NZ could fight obesity with taxes
More than 500 local government officials have on average spent only around 25 per cent of their regional budgets
egional Indonesian leaders are withholding nearly $20 billion of government funds, including money for social assistance programmes, while they wait for the start of election campaigns in August, palace officials said yesterday. The delay in fund disbursements, which represents around 13 percent of the national budget, is contributing to the worst slowdown in Southeast Asia’s largest economy since 2009. Only 1 percent of the 250 trillion rupiah (US$18.75 billion) allotted to regencies and cities from the national government in this year’s budget has been spent, Coordinating Minister for Economics Sofyan Djalil said yesterday. A senior palace official, who asked not to be identified because of the sensitivity of the subject, told Reuters: “The local governments are delaying this because they would like to spend the money closer to the local elections.”
Vietnam needs US$4 bln for infrastructure
growth. They will visit regions to see what the problem is,” Djalil said. The central bank forecast growth to reach the higher end of its 5-5.4 percent target this year if the government was able to speed up spending. Indonesia’s more than 500 local government have on average spent only around 25 percent of their regional budgets in the first half of this year, said Reydonnyzar Moenoek, director general of regional finance at the home affairs ministry. Central Java Governor Ganjar Pranowo, who represents one of Indonesia’s most populous provinces, said some spending had been slow but denied funds were being withheld for political purposes ahead of elections. “We’re very careful in terms of social help and grants. Everything must be verified because if it turns out to be fictional, we will be arrested,” Pranowo said. Reuters
Health-related taxes and subsidies on food could change eating habits and prevent thousands of early deaths in New Zealand, researchers said yesterday. The researchers said they wanted to address gaps in existing evidence on food taxes and subsidies that had hindered their uptake in many countries. The study by the universities of Auckland and Otago, in collaboration with Oxford University in Britain, tested economic policies in a computer model based on household food expenditure, demand in response to price changes, mortality rates, and known links between diet and disease risk factors.
Japan’s average LNG spot price at US$7.60/mmBtu Liquefied natural gas (LNG) spot prices for buyers in Japan, the world’s top consumer, averaged US$7.60 per million British thermal units (mmBtu) in June, the same as in April, trade ministry data showed yesterday. Japan’s Ministry of Economy, Trade and Industry (METI) did not publish average LNG spot price for May due to a lack of sufficient trades, the sign of tepid global demand for the fuel. That marked the first time that no prices have been published since Tokyo started surveying spot LNG prices in March 2014.
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International Putin to strengthen liberal economy Russia is not going to respond to the Western sanctions by closing off its market, but on the opposite, will improve business climate with greater openness and freedom, President Vladimir Putin said Friday. “Russia will create the most possible liberal, predictable and transparent conditions for the investors,” Putin told a session at the on-going Saint Petersburg International Economic Forum here. Putin stressed Russia wants to cooperate with everyone on the basis of equality, as Asia-Pacific and BRICS countries, as well as “traditional” western partners, are specifically mentioned as Moscow’s primarily choices.
U.S. deficit down in fiscal 2015 The U.S. budget deficit shrank by US$52 billion during the first nine months of fiscal 2015 from a year ago as tax receipts grew faster than spending increases, the Congressional Budget Office said on Wednesday. The 14 percent reduction to a US$314 billion gap for the October-June period comes as the Republican-controlled Congress and President Barack Obama look headed toward a showdown over next year’s government spending. Obama has warned that unless domestic spending cuts are eased, he could veto the measures. That could set up another possible government shutdown on October 1.
German trade surplus hits record high Exports rose at their fastest pace this year in May and the trade surplus hit a record high, boosting expectations that Europe’s largest economy will pull off stronger growth in the second quarter after expanding modestly in the first. Seasonally adjusted exports climbed unexpectedly by 1.7 percent on the month while imports increased by 0.4 percent, widening the trade surplus to 22.8 billion euros, its highest since the data was first collected in 1991. Economists polled by Reuters had expected exports to slip by 0.8 percent and imports to rise by 0.9 percent.
Mexico unveils measures to protect steel Mexico unveiled news measures to protect its struggling steel industry as slack global demand, oversupply from China and cheap imports from Russia have hammered steelmakers in Latin America’s second largest economy. The measures come a month after Mexico imposed provisional import duties on hot-rolled steel from Germany, China and France amid an anti dumping investigation. Later in June, the government announced import duties on cold-rolled steel sheet from China. An Economy Ministry statement said the measures include adding 86 steel products to the “sensitive merchandise” list.
Software update may have triggered NYSE trading halt A computer malfunction that forced the New York Stock Exchange to suspend trading for more than three hours on Wednesday probably stemmed from a software update that went awry, Bloomberg reported, citing two people briefed on a preliminary review. The New York Stock Exchange, a unit of Intercontinental Exchange Inc, reopened at 3:10 p.m. EDT (1910 GMT) after being halted shortly after 11:30 a.m. EDT. NYSE said the outage was due to an internal technical issue and not the result of a cyberattack. Other exchanges were trading normally.
World food prices fall further in June June’s reading was the lowest on the index since September 2009
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lobal food prices fell in June, continuing an almost uninterrupted slide since April 2014, led by falling dairy and sugar prices, the United Nations food agency said yesterday. The Food and Agriculture Organization’s (FAO) food price index, which measures monthly changes for a basket of cereals, oilseeds, dairy, meat and sugar, averaged 165.1 points in June, down 1.5 points or 0.9 percent from May. High global production, a strong U.S. dollar and cheaper crude oil have helped cap food prices over the past year and the index has been declining for more than a year, punctuated by a brief stabilisation in October. World cereal production is set to be
“good” in 2015, FAO said, forecasting overall output at 2.527 billion tonnes, fractionally above a forecast made in May, but still 1.1 percent below last year’s record harvest. FAO senior economist Concepcion Calpe said the supply situation was “very comfortable”, but serious financial instability in parts of the world could cause future price movements. “There is a lot of uncertainty today. You have the crisis in China, the crisis in Greece ... we are in a more uncertain environment if we compare with previous months,” Calpe said. While sugar and milk prices fell sharply in June, cereals and oils prices firmed and meat prices remained stable. Maize crops in Europe and South America are set to be larger than
U.S. bank earnings to be hit by bond trading slump Banks’ fixed income, currencies and commodities trading businesses were hurt the most, say experts Lauren Tara LaCapra
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any Wall Street banks are expected to report underwhelming secondquarter results next week, after light bond market activity in the spring worsened into a downturn by June, analysts said. Investor worries spanned the globe last quarter, ranging from fiscal woes in Greece to crashing stock markets in China, to concerns that the U.S. Federal Reserve will not be able to raise interest rates later this year. As the concerns worsened with less certain outcomes, investors pulled back from markets to avoid getting burned, analysts said. In the 13 days that passed between investor conferences in late May and early June, top Bank of America Corp executives changed their characterization of trading revenue
from flat-to-down to simply down. Deutsche Bank analysts downgraded Goldman Sachs Group Inc in late June partly because of expected weakness in trading. “Despite the fact that there was a lot of news flow and headlines coming out, particularly surrounding Greece, this didn’t translate into a pickup in activity,” said Steven Chubak, an analyst who covers big banks for Nomura. “Because of the uncertainty, many people were on the side-lines in June.” Banks’ fixed income, currencies and commodities (FICC) trading businesses were hurt the most, Chubak and other analysts said. Nomura forecasts an 8 percent revenue drop for that business across Wall Street, compared to the second quarter of 2014.
previously expected, thanks to better weather conditions, boosting the overall outlook for coarse grains production. “Favourable worldwide conditions for cereal crops will lead to betterthan-expected production this growing season at the global level, despite continuing apprehension over El Niño,” FAO said in a statement. “But concerns are growing over a sharp shortfall in maize grown in sub-Saharan Africa as well as poor production in other food insecure hotspot areas,” it added. Prospects for rice production in Asia and India have also deteriorated, prompting FAO to cut its production forecast by 1.2 million tonnes to 499 million tonnes, barely 1 percent higher than the 2014 harvest. Reuters
JPMorgan Chase & Co will be the first to report second-quarter earnings on Tuesday morning. Analysts expect JPMorgan to record US$1.44 in profit per share, on average, down 1.4 percent from the same period a year earlier, according to Thomson Reuters I/B/E/S. Analysts expect Goldman Sachs, which reports on Wednesday, to have earned US$3.92 in profit per share, down 4.5 percent from the same period a year earlier. Morgan Stanley, which has a smaller bond-trading business and performed particularly poorly in the year-ago period, is expected to produce earnings of 74 cents per share, up 23 percent yearover-year. That bank reports earnings on Monday, July 20. The average earnings forecasts for Bank of America, which reports on Wednesday, and Citigroup Inc, which reports on Thursday, are significantly higher than the year-ago period because of big legal costs in the second quarter of 2014. However, analysts are forecasting weak capital markets revenue for both banks. Mike Mayo, a long-time banking analyst with CLSA, also expects banks to report weak second-quarter trading results, but he is more interested to hear what executives will say about the future for Greece, China and interest rates than what is in the rear view mirror. He noted that, unlike the past few years, investors are focused on the health of their core businesses instead of their legal negotiating tactics. Reuters
Business Daily | 15
July 10, 2015
Opinion Business
wires
Knowledge for progress
Leading reports from Asia’s best business newspapers
Kevin Watkins
Director of the Overseas Development Institute, a leading UK think tank on international development and humanitarian issues
TAIPEI TIMES Research institutes have cut their forecasts for the nation’s GDP growth, which might struggle to stay above 3 percent this year after major economic barometers fared disappointingly in the first half. Research institute Academia Sinica trimmed its projection to 3.24 percent from the 3.42 percent it estimated in December last year. DBS Bank made a larger downward revision, from 3.4 percent to 2.7 percent, on concerns over zero growth last quarter from three months earlier, while ANZ Banking Group Ltd went even further, lowering its GDP growth forecast from 3.78 percent to 2.81 percent.
THANH NIEN NEWS Citibank NA, a unit of Citigroup Inc, said it will get the go-ahead soon from Vietnam’s central bank to set up a subsidiary in the country, which would make it the seventh wholly foreign-owned lender to operate in Vietnam. The U.S. lender said the State Bank of Vietnam (SBV) governor would grant it a letter of acceptance, in principle, in Washington on Wednesday, witnessed by Communist Party chief Nguyen Phu Trong, who is on a landmark visit to the United States.
PHILSTAR The government should consider adjusting taxes on fuel prices while international oil prices remain weak, a senior Department of Finance official said yesterday. Finance Undersecretary Gil Beltran said the government should take advantage of the current low inflation environment. Inflation eased to a 20-year low of 1.2 percent in June from 1.6 percent in May amid lower increases in the prices of housing, utilities and food. The average rate for the first six months of the year stood at two percent.
BANGKOK POST The (Thailand) Public Debt Management Office will propose speeding up investment in two double-track rail routes that have been delayed for several months. The related state agency failed to sign contracts as scheduled in March for the 185-kilometre section from Jira junction in Nakhon Ratchasima to Khon Kaen worth 25 billion baht and the 167-km length from Prachuap Khiri Khan to Chumphon worth 17 billion baht, said deputy director-general Theeraj Athanavanich. The cabinet has already given the nod for investment in the Nakhon Ratchasima-Khon Kaen route.
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ome 236 years ago, a young governor from the American state of Virginia broke the mould on education reform. In his Bill for the More General Diffusion of Knowledge, Thomas Jefferson called for “a system of general instruction” that would reach all citizens, “from the richest to poorest.” It was the first step in the creation of the American system of public education – an institution that helped to propel the country’s rise to global prominence. By the early twentieth century, the United States was a global leader in public schooling. Investments in education provided a catalyst for economic growth, job creation, and increased social mobility. As Claudia Goldin and Lawrence Katz have shown, it was American “exceptionalism” in education that enabled the country to steal a march on European countries that were under-investing in human capital. As world leaders gather this week for the Oslo Summit on Education for Development, the lessons from this experience could not be more relevant. In fact, with the global economy becoming increasingly knowledge-based, the education and skills of a country’s people are more important than ever in securing its future. Countries that fail to build inclusive education systems face the prospect of sluggish growth, rising inequality, and lost opportunities in world trade. In this context, some of today’s discussions on education sound curiously anachronistic. Harvard economist Ricardo Hausmann recently berated what he describes as the “education, education, education crowd” for advocating an “educationonly” strategy for growth. It was an impressive attack on
a view that, to the best of my knowledge, nobody holds. Of course education is not an automatic route to growth. Expanding education in countries where institutional failure, poor governance, and macroeconomic mismanagement stymie investment is a prescription for low productivity and high unemployment. In North Africa, the disharmony between the education system and the job market left young, educated people without decent opportunities – a situation that contributed to the revolutions of the Arab Spring. None of this detracts from the vital role of education – not just years of schooling, but genuine learning – as an essential component of growth. Extensive research – from the work of Adam Smith to Robert Solow and Gary Becker and, most recently, Eric Hanushek – confirms the importance of learning in building productive human capital. One step up the standard deviation score on the OECD’s Program for International Student Assessment is associated with a 2% increase in a country’s long-run per capita growth rate. Education may not be a quick fix for slow growth. But try naming a country that has sustained an economic transformation without advances in education. Economists at the World Bank have contributed a few straw men of their own to the education debate. In one contribution, Shanta Devarajan criticizes the view that education is an essential public good that governments should finance and deliver, arguing that it should instead be considered a private good, delivered through markets to customers – that is, parents and children – seeking private returns. The problem is that education is self-evidently not a public good – in the real world, few things are.
Every government should be setting targets aimed explicitly at narrowing education disparities – linked to gender, wealth, and the rural-urban divide – and aligning their budgets with those targets
It is, however, a “merit” good, something that governments should offer for free, because of the wide-ranging private and social returns that might be lost if parents underinvest, or if the poor are excluded. For example, progress in education – especially girls’ education – is closely associated with improvements in child survival and nutrition, and maternal health, as well as higher wages. It is time to move beyond futile discussions based on flawed logic to focus on the real challenges in education – challenges that must be addressed, if we are to meet the Sustainable Development Goal of delivering high-quality primary and secondary
education to all by 2030. The Oslo summit presents an important opportunity to lay the groundwork for success. With 59 million primary schoolage children and 65 million adolescents out of school, that opportunity should be seized with both hands. A successful summit would advance four key imperatives. First, governments must commit more domestic funds to education. One background paper for the summit highlights the failure of successive governments in Pakistan, which now has the world’s second-largest out-ofschool population, to invest in education. At the heart of the problem are politicians who are more interested in facilitating tax evasion by the wealthy than improving learning opportunities for the poor. Second, international donors must reverse the downward trend in aid for education. Even with an enhanced resourcemobilization effort, roughly US$22 billion annually in aid will be needed to achieve universal lower-secondary education. That is around five times current levels. Beyond closing the aid gap, United Nations Special Envoy on Education Gordon Brown has rightly called for financing mechanisms to deliver education to children affected by conflict and humanitarian emergencies. Third, world leaders must get serious about inequality. Every government should be setting targets aimed explicitly at narrowing education disparities – linked to gender, wealth, and the rural-urban divide – and aligning their budgets with those targets. As it stands, the disparities are huge. In Nigeria, for example, urban boys from the wealthiest 20% of households average ten years of schooling, while poor rural girls in northern areas can expect less than two years. Yet, as another Oslo summit background paper shows, education finance is skewed toward the wealthy in most countries. Finally, governments and aid agencies must abandon market-based experiments, and commit to genuine systemwide reform. One key priority area is teachers, who need strong incentives, effective training, and dependable support systems to deliver real learning. After all, an education system is only as good as its educators. As world leaders gather in Oslo, millions of parents will be struggling to ensure that their children receive the education they deserve – one that will enable them to build better lives for themselves and their families. For these parents, schooling is a source of hope. We owe them and their children our best efforts. Project Syndicate
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July 10, 2015
Closing Malaysia’s central bank keeps policy rate on hold
MasterCard gets EU antitrust complaint over transaction fees
Malaysia’s central bank held its overnight policy rate at 3.25 percent yesterday, keeping policy steady while the Southeast Asian country and its markets were rocked by corruption allegations against Prime Minister Najib Razak (pictured). “For Malaysia, the latest indicators point to continued expansion of the economy in the second quarter, albeit at a more moderate pace,” Bank Negara Malaysia’s (BNM) monetary policy committee said in a statement. The central bank’s decision was as expected by a Reuters poll of economists. Inflation remains benign and a recovery in export growth depends on overseas markets.
MasterCard Inc. received an antitrust complaint from European Union watchdogs over concerns it’s “artificially raising” card-payment fees. The EU’s statement of objections targets measures thwarting cross-border competition among banks that offer card services to traders as well as excessive fees when foreign visitors go shopping in the 28-nation bloc, the European Commission said in an e-mailed statement yesterday. “We currently suspect MasterCard is artificially raising the costs of card payments, which would harm consumers and retailers in the EU,” said EU Competition Commissioner Margrethe Vestager.
Beijing opens crude import to independent refiners But new quota winners will still need licensed traders and import agents Florence Tan and Chen Aizhu
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hina is opening its crude oil imports to buyers outside of the state-owned sector, and independent refiners could get approvals for up to 600,000 barrels per day (bpd) in shipments this year. The volumes that could go to the independents are 50 percent higher than what was expected when the policy was announced in February as more of the private refineries qualify for quotas, trading sources with independent and state refiners said. This could lead to the world’s second largest oil consumer buying more crude in a market where values have been cut in half since mid-June last year by oversupply. “The granting of more crude import quotas to the independents is likely to provide further support to crude imports and exert more pressure on fuel oil imports towards year-end, with the impact expected to be more pronounced in 2016,” said Wendy Yong, an analyst with energy consultancy FGE. FGE expects China’s crude imports to rise by 10 percent in the second half of 2015 versus the first six months, with shipments to be up by 7 percent both this year and next. China’s crude imports hit a record 6.17 million bpd in 2014, a gain of
nearly 10 percent. In the first five months of this year, the imports then rose more than 4 percent compared with a year ago to reach 6.5 million bpd. China’s largest independent refiner Shandong Dongming Petrochemical won approval this week to import 150,000 bpd of crude, and Beijing has given an initial nod to Panjin Beifang Asphalt Fuel Co Ltd to import 140,000 bpd. Other applicants include Sinochem Corp-controlled Hongrun Petrochemical Co Ltd, CNOOCinvested Haike Chemical in Shandong province, the independent Lihuayi Group and several inland-based private refineries, the sources said. In 2013, in a first opening up of the crude import market, staterun ChemChina received a quota for 200,000 bpd. China regulates its oil imports via a quota system, with state refiners Sinopec Corp and PetroChina accounting for nearly 90 percent of the shipments. New quota winners will still need licensed traders such as Unipec and Chinaoil - trading arms of Sinopec and PetroChina and Sinochem Corp to act as import agents. Sinopec and PetroChina officials
KEY POINTS China may give 600,000 bpd in crude quotas to independents Independent refiners to push up China’s crude demand
Reuters
China households raise housing Greece’s debt deal to be reached by weekend investment in Q2
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nvestors began turning away from stocks and into real estate in the second quarter, a private survey of households showed, suggesting property may be returning to favour. The number of families that increased their spending in the housing market in the April-June period rose to 3.7 percent from 2.3 percent in the first quarter, a survey conducted by the China Household Finance and Survey Centre (CHFS) showed. The centre, which is a unit of China’s Southwestern University of Finance and Economics, runs a biennial survey of Chinese household financial behaviour. Meanwhile, sentiment on home prices in China picked up in the second quarter. An index of expectations on home prices increased to 111.8 in the second quarter from 93.5 between January and March, the survey showed. The trend suggested that potential home buyers have turned more optimistic on the housing market, which has shown signs of stabilising in recent months after a slew of government measures to support the sector. Reuters
were not immediately available for comment. Still, despite the rising number of importers, analysts said China’s economy, growing at its lowest rate in a generation, could hold back the overall import growth. “The major headwinds facing the teapot refining sector - including tighter domestic credit conditions, a ban on products exports and the continued slowdown in Chinese fuels demand growth - will limit the upside,” said Emma Richards of BMI Research.
TPP deal could be sealed in the next month
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reece’s Deputy Finance Minister Dimitris Mardas said yesterday that a debt deal with lenders will be achieved by this weekend to avert a catastrophic default and a Greek exit from the European Union (EU). “I am confident and I believe that even a bad agreement will lead to better results than the lack of any agreement,” Mardas told local media, while the finance ministry once again extended bank holidays and capital controls from June 29 to July 13. When the measure was introduced to avoid a collapse of the banking system caused by the liquidity shortage, the current government had said that banks would reopen on July 7, should a deal with creditors be sealed. As Athens continues a new round of negotiations with lenders, the bank holidays have been extended to Wednesday and now to next Monday. The critical eurozone and EU summit in Brussels on Sunday will decide whether Greece will get a deal and stay in the eurozone or face an exit.
ustralian Trade Minister Andrew Robb yesterday said a massive Pacific trade pact could be concluded in the “next three to four weeks” when the 12 nations involved are due to meet. Expectations that the Trans-Pacific Partnership (TPP), an accord that would encompass 40 percent of global trade, would be sealed this year increased after US President Barack Obama was last month given fast-track authority. “The critical thing was for the (US) president to get the authority,” Robb told. The ambitious TPP -- pushed by the United States but which excludes China -- has potential signatories including Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Supporters of the proposed deal have said it will free up trade in the region, reduce regulation and increase job opportunities. But critics have argued it would benefit big business rather than the general public, and lead to a rise in the price of medications, fewer Internet freedoms and environmental damage.
Xinhua
AFP