Macau business daily, 2015 July 31

Closing editor: Luís Gonçalves

MOP 6.00

Job generator He remains optimistic.

Secretary for Economy and Finance Lionel Leong Vai Tac cites his faith in the non-gaming sector to generate jobs. Linked to the big casino properties scheduled to open soon. The employment environment here is still “healthy”, he insists

Year IV

Number 847 Friday July 31, 2015

Publisher: Paulo A. Azevedo

Page 2

Future Shock

The next decade will be revealing. Even pivotal. Macau’s population will increase 17.5 pct to 750,000 souls. Or 110,000 more than the current residents here, says the Policy Research Office. A rapidly ageing population and a diminishing local labour force lie in wait. Exacerbating the current balance between labour demand and supply. The city can handle it, says Office Director Lau Pun Lap. But the stars, the planets and policy will have to align fortuitously Page

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Page 5

OTC shares Shenzhen and Shanghai stock markets are dominating the news. But Chinese investors and companies enjoy what is known as the New Third Board. An over-the-counter exchange where shares are freely traded. And is dealing better with the slump

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Merchandise exports increase 17.6 pct in June Page 6

Float like a butterfly, sting like a bee

Wynn Resorts has taken a body blow. Operational profit in Q2 plunged 36.8 pct. Primarily driven by main market Macau’s weak performance. Profits here dropped 43.5 pct; and 23.5 pct in the US. CEO Steve Wynn remains “sanguine”. Confident that smoking lounges will continue, and that the Wynn Palace opening on March 25 will bolster his premium patron business

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Property www.macaubusinessdaily.com

Genting HK forgoes Korea casino to focus on cruises Page 8 As Macau heads toward Vegas-Style makeover, MGM seeks to adapt Page 9

Sunny side up Australia’s largest egg producer is arriving in the city. Via an exclusive distribution agreement signed with Century Food. Sunny Queen is entering the Macau and Hong Kong food markets, boosted by the recent ChAFTA (China-Australia Free Trade Agreement). Which scraps tariffs on agricultural products traded between the two countries

Package tour visitors drop 17.5 pct in June Page 5

LRT to serve Cecil Chao’s Coloane resort

HSI - Movers July 30

Name

%Day

Kunlun Energy Co Ltd

+2.68

China Resources Powe

+1.55

China Mobile Ltd

+1.06

China Resources Land

+0.94

CITIC Ltd

+0.88

Ping An Insurance Gro

-1.65

Industrial & Commerci

-1.83

BOC Hong Kong Holdin

-1.90

China Shenhua Energy

-2.27

China Life Insurance C

-2.53

Source: Bloomberg

I SSN 2226-8294

Step by step. Hong Kong businessman Cecil Chao Sze Tsung’s residential and hotel project is moving albeit slowly. The Seac Pai Van, Coloane complex could abut an LRT extension. Public works officials are edging towards a green light

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2 | Business Daily

July 31, 2015

Macau

Lionel Leong: Non-gaming sector will bring more jobs Secretary for Economy and Finance Lionel Leong said more job opportunities are being created following the rise of non-gaming elements here Stephanie Lai

sw.lai@macaubusinessdaily.com

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acau’s Secretary for Economy and Finance Lionel Leong Vai Tac (pictured) said yesterday that he was still optimistic about the city’s employment environment with more job opportunities available following the rise of non-gaming elements. Nevertheless, the government would continue to keep a close watch on whether declining gaming revenue had impacted sectors other than the casino industry.

“We believe that following the establishment of the gaming operators’ large-scale facilities here, accompanied by more nongaming elements, more employment opportunities have arisen from there,” Mr. Leong said on the sidelines of an event yesterday.

The Secretary added that the employment environment here is still “healthy”, having observed the positions and remuneration terms offered to jobseekers at the job fair he recently visited.

“At the same time, we’ll closely follow whether the impact the gaming revenue change [fall] has on the casino industry here spreads further to other sectors, causing changes to employment opportunities,” he said.

The city’s unemployment rate stood steady at 1.8 per cent for the April-June period, as compared to the previous March-May period, according to the latest data released by the Statistics and Census Service.

The labour force in the April-June period numbered 405,400 while the

Government hopes to see more casino operators ‘buy local’ The Macau Government hopes more gaming operators can join the initiative of purchasing from local suppliers, as this can help the city’s small and medium companies (SME) to benefit from “the fruits of economic development” and is in line with the government’s policy to aid small companies, Secretary for Economy and Finance Lionel Leong Vai Tac remarked to media yesterday. He was speaking in light of the launch of a local supplier support programme launched by Sands China Ltd. and the Macao Chamber of Commerce. The gaming operator said in 2014 alone its operational spend reached MOP12.5 billion from a total supplier base of 2,213 companies, with 83 per cent of that going to local suppliers and SMEs.

labour force participation rate was 73.9 per cent.

The unemployment figure still stood at a very low level despite the city’s economy entering an “adjustment phase”, the Secretary remarked.

Macau’s unemployment rate stood at only 1.7 per cent from the first quarter of 2014 to the first quarter of 2015.

Speaking to the media yesterday, Mr. Leong also noted that the Labour Affairs Bureau and Human Resources

Office will continue to observe the gap in job skills required and salaries offered by the city’s recruiters and jobseekers. On-the-job training supported by the government will be in place to overcome such a gap, the official said.

Jobseekers number climbs 34 pct vs. Q1 There were still around 2,500 jobseekers searching for a recruitment match by the end of the second quarter on the Labour Affairs Bureau’s database

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total of 2,194 jobseekers approached the Labour Affairs Bureau to land a new job during the second quarter of this year, the latest employment service data released by the Labour Affairs Bureau (DSAL) reveals.

The number represents a 34 per cent increase compared to the first quarter of this year, when 1,638 individuals registered their information at the DSAL. Among the jobseekers registered in the second quarter, 42 per cent were aged 45-59, while another 40 per cent were aged 2544. More than half of these jobseekers had graduated from secondary school, In addition, 43 per cent of the jobseekers registered their information because of the termination of their previous labour contract; 36 per cent sought a change of working

environment; 11 per cent had just arrived in Macau; and another 5 per cent are searching for their first job.

By the end of the second quarter, the Bureau reported that 2,493 jobseekers were still searching for a recruitment match.

Casino positions most sought after

Casino positions were the most sought after amongst registered jobseekers in the second quarter of this year, followed by clerks, sales assistants, security guards, and construction site workers.

Of these five types of position, the construction site workers position showed the greatest salary gap (at MOP4,397 or US$551) between employers’ offer and employees’ demand.

Jobseekers would like to earn an average monthly salary of MOP15,603 as sales

assistants, while employers only offered MOP11,206.

Clerks have the narrowest gap (at MOP2,360) between employers’ offer and employees’ expectations.

While jobseekers would like to earn an average monthly salary of MOP11,158 as casino workers, employers

were offering MOP8,798 for the position.

With regard to registered recruitment, the most employed positions in the second quarter of this year were those of waiters/ waitresses, cleaners, chefs, entry-level construction workers and sales assistants.

The recruited cleaners were at the bottom of the wage ladder at a monthly average of MOP6,914; by contrast, entry-level construction workers were offered the highest salary level of the five positions at a monthly average of MOP12,583.

J.K.

Business Daily | 3

July 31, 2015

Macau

Population to reach 750,000 in 2025 Macau will also face the problems of ageing and a diminishing labour force a decade ahead, the latest official population policy report predicts. The city will still be able to accommodate the increase despite the growth in population Kam Leong

kamleong@macaubusinessdaily.com

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he city’s population will hit around 750,000 in 2025 from the current 640,700, the Policy Research Office (GEP) predicts in its latest population policy report, which also indicates that the imbalance in labour force demand and supply will continue to grow.

According to the report released yesterday, the city’s population will reach 710,000 in 2020 at an average annual growth rate of 1.9 per cent between 2014 and 2020, while the growth rate is expected to slow down to 1.1 per cent

between 2020 and 2025 as all the gaming projects are slated to open before 2020.

In addition, a decade later, the city will start to become an ageing society with the elderly population reaching 16.3 per cent of the total, while average life expectancy will increase to 84.6 years old.

The director of the Office, Lau Pun Lap, said during the press briefing yesterday that the ageing problem will exacerbate the current balance between labour demand and supply.

In fact, he claimed that

the labour force supply by local residents has failed to fulfil demand in recent years. According to official data cited by the report, in 2014 the total demand for manpower reached 528,000.

However, the supply by local residents accounted for only some 302,000.

Foreseeing the demands for manpower will continue to climb following more casino projects opening in the coming years, the report said the participation rate of the city’s labour force will gradually drop.

Courts: Joseph Lau, Steven Lo case not subject to appeal

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acau’s Court of Second Instance collegial panel has ruled that Hong Kong businessmen Joseph Lau Luen Heng and Steven Lo Kit Sing’s grounds for challenging the verdict of having been found guilty of bribery and money laundering has failed. Both were sentenced in March last year by the Court of First Instance to five years and three months in jail.

The ruling produces immediate and definitive effects, which means the verdict is final and is not susceptible to further appeal, according to a statement by the President of the Court of Final Appeal’s Office issued on Wednesday night.

After being sentenced to prison in Macau for bribery, 63-year old Joseph Lau Luen Hung dodged a bullet as Hong Kong does not currently have an extradition agreement with the Macau SAR. Lau and Lo were each sentenced to five years and three months in March last year over the payment of HK$20 million to disgraced

former Public Works Secretary Ao Man Long to secure land for the luxury property project La Scala. As Hong Kong and Macau have yet to establish an extradition agreement between them, the pair will not be imprisoned unless they voluntarily visit Macau.

In an exclusive interview with Business Daily published yesterday, the Secretary for Administration and Justice, Sonia Chan Hoi Fan, declined to comment on whether the extradition agreement to be signed with Hong Kong can apply to cases predating the agreement, stressing that both Macau and Hong Kong are still mulling the content of the agreement which cannot be disclosed in detail at the moment.

“Whether this [the La Scala] case emerges or not, the legal assistance [regarding fugitive transfer] is essential. And we hope that we can soon settle the agreement with Hong Kong and with Mainland China,” the Secretary remarked.

J.K.

As such, the Office suggests the government implement policies to release the potential unused labour force in the city, such as females and workers older than 55 years old, whose labour participation rate amounted to 61.3 per cent and 60.4 per cent in 2014, respectively. “[The government] can strengthen its employment assistance to help women take care of their careers and families simultaneously.

In addition, it can establish more beneficial conditions to encourage older labour to continue their work,” Mr. Lau said.

However, asked by reporters about the estimated gap between labour demand and supply for 2020 and 2025, the GEP head declined to give exact numbers, saying they may be affected by many different factors in the future, such as whether the government’s policies in releasing unused labour can be effective.

Capacity

Following the growth in population, the city’s density will also increase to support 22,700 persons per square kilometre. However, Mr. Lau indicated that the population of 750,000 persons in 2025 is

still affordable for the Special Administrative Region.

The policy research office perceives that the city’s lack of land resources constrains capacity most.

Admitting population capacity is pressured, the Office indicated that there is still room for the capacity to expand if public facilities can be better developed in the future.

“Supposing our population really reaches 750,000 in 2025, as long as our public facilities, urban planning and traffic can systain their improvements in the coming 10 years, the city can still support such population,” Mr. Lau said.

In addition, the Office perceives the capacity pressure can be relaxed following the development of Hengqin, and the 24-hour border policy, enabling more imported labour to move out of Macau.

According to Mr. Lau, the proportion of imported labour living in the territory has decreased to 60 per cent of the total from 80 per cent following the implementation of the 24-hour border policy.

He expects the proportion to drop by more 10 to 20 per cent in the future, which will help Macau enhance its capacity.

4 | Business Daily

July 31, 2015

Macau opinion

Brown side of security

Pedro Cortés

Lawyer cortes@macau.ctm.net

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don’t like Chris Brown’s music or what he represents. Of him, I can only recognise the problems he had with Rhianna in the past.

Moreover, I’ve just managed to go to the new Cubic location two or three times.

Nonetheless, I can recognise that he is an international name in the show biz firmament and the fact that it was announced he would come to Macau seduced lots of tourists to the territory, especially from Hong Kong. According to some friends, the police made a routine raid in the middle of the concert. Now, I’m not against police raids per se and what they signify in terms of what is the best place to live in terms of security: Macau.

That notwithstanding, when we hear about diversification, about Macau as an entertainment destination, about international events, artists and stars, it doesn’t seem very wise to launch a raid in the middle of a concert in a place where the emergency exits are not exactly in profusion, at 2:00am in the morning. I wasn’t present but allegedly the concert was suspended for two hours in order that the police could do their job.

If I were a Hongkonger or a clubber from another location, I’d think again before returning to Macau. The respect I have for the authorities makes me conclude that there was surely a misunderstanding and I’m certain that they calculated the risks.

But wouldn’t it have been wiser - more diplomatic - to have descended upon the venue at the end of the concert?

I’m also sure that the impact was minimum and that the routine nature of the police action won’t bear consequences in terms of future artists coming to Macau to perform in our entertainment and nightlife hotspots.

The idea of coming to Macau for a weekend and enduring the imposition of a police raid in the middle of a concert doesn’t strike a positive note with anyone.

I can recognise that this will be even more frequent in the near future, considering other measures in place. It’s not good for the international image of entertainment that Macau has already painstakingly built.

Our city needs to be wisely managed in all respects, especially in the downturn period gaming is currently experiencing. Those that were caught off guard and paid for the privilege may not return and we may have lost a few sources of mass market revenue or of hotel rooms and restaurants (i.e.) to the real economy. With a plethora of new venues to open in the near future hosting international world-class events, it might not have been the best timed or thought out raid ever. *Part-time lecturer at the Chinese University of Hong Kong

Cecil Chao's Coloane project could abut LRT line Public works officials noted that the plot ratio allowed for the mixed residential and hotel project has already taken into account the reserving of space for an LRT extension Stephanie Lai

sw.lai@macaubusinessdaily.com

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ong Kong businessman Cecil Chao Sze Tsung's mixed residential and hotel project located in Seac Pai Van, Coloane could see a light rapid transit (LRT) extension nearby, as public works officials said on Wednesday that its initial examination of the project plan has already taken into account the reserving of space nearby to build an extension line.

Mr. Chao's Hong Kong-listed Cheuk Nang (Holdings) Ltd. is planning to build a project comprising over 1,100 flats, a hotel and a shopping mall with car parking spaces on the 9,045 square metre site on the southern side of Estrada de Seac Pai Van, termed ‘Golden Cotai No.1’, according to the company's filings and the government's draft approval of the project. The ‘Golden Cotai No.1’ project is located opposite a golf course and is near the Seac Pai Van public housing complex.

Secretary for Public Works and Transport Raimundo Rosario and the Urban Planning Committee discussed the project on Wednesday in a meeting at which some of the

committee members questioned the plot ratio allowed for the project and whether space had been reserved for the building of an LRT extension.

In response to the committee's questions, the chief of the urban planning department of the Land, Public Works and Transport Bureau (DSSOPT), Lao Iong, said sufficient space has been reserved for expanding the road and constructing the LRT.

Golden Cotai

The government consulted the public in 2013 about its proposals to build an LRT route that connects Macau's crossing point at Lotus Bridge, a new hospital to be built next to Seac Pai Van Reservoir and the Seac Pai Van public housing site. Speaking on Wednesday, however, Mr. Rosario noted that the government had yet to finalise a route plan for the LRT extension in the Seac Pai Van area.

According to the government's draft approval of the Golden Cotai No.1 project, the maximum plot ratio allowed for the project is 14.2 times – with the residential part 9.8 times and the hotel 4.4 times.

The maximum height allowed for Mr. Chao's project is 90 metres above ground.

The government suggests the company return 2,609 square metres of land to the government to serve the purpose of building a public road.

At the moment, the government has yet to issue an urban condition plan for Mr. Chao's project. An urban condition plan is a document issued by the public works department that determines a project's construction area, height cap and plot ratio once it has processed the opinions collected from the Urban Planning Committee and the public.

The draft approval of Mr. Chao's project does not specify that it will contain any gaming elements.

But of the two written public opinions DSSOPT has received about the project, one of them opposes the construction of a hotel and a casino on the site, stating that the Seac Pai Van area should be a residential neighbourhood with more public facilities installed.

Business Daily | 5

July 31, 2015

Macau

Package tour visitors down 17.5 per cent in June Macau felt the first impact of the MERS outbreak in Korea as visitors from the country decreased 42.2 per cent and outbound residents travelling to Korea dropped 75.1 per cent João Santos Filipe

jsfilipe@macaubusinessdaily.com

Australia’s largest egg producer enters Macau market

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he number of visitors on packager tours dropped 17.5 per cent year-on-year in June to 707,000 from 856,800 in June 2014, the Statistics and Census Services revealed yesterday. For the first six months of the year, however, the number still increased 1.4 per cent year-on-year to around 4.9 million.

The data published yesterday already demonstrates the influence of the South Korea Middle East Respiratory Syndrome (MERS) outbreak as the number of Korean visitors on package tours alone declined 42.2 per cent to around 16,400. Concerning the number of outbound residents travelling to South Korea using the services of travel

agencies it went down 75.1 per cent to 1,400.

Mainland China continues to be the main source of visitors to Macau but during June the number of visitors went down 16.7 per cent year-onyear to around 565,900. However, the data for June shows that this was a general trend as all main markets registered declines. Excluding South Korea, the number of visitors from Thailand (-27.6 per cent), Taiwan (-26.4 per cent), Japan (-25.3 per cent) posted the steepest drops.

During the six months of the year the hotel occupancy rate was also negatively impacted as the average occupancy hotel rate was 78.1 per cent, a decline of 7.8 percentage points against an average occupancy

of 84.5 per cent during June 2014.

Not surprisingly, the number of hotel guests also declined 1.9 per cent year-on-year to 859,000. However, if the first six months of the year are considered, then the decline is more abrupt at 7.6 per cent to 4.91 million guests.

Also, in June the number of locals travelling to Mainland China, Hong Kong and abroad was weaker than one year ago. In the last month, a total of 121,000 locals travelled outside Macau using the services of travel agencies, a decline of 3.5 per cent year-on-year. However, the sectors are still expanding as for the first half of the year the number of residents using these services to travel expanded some 3.9 per cent to 737,000.

ustralian egg producer Sunny Queen is joining the Macau and Hong Kong food markets through an exclusive distribution agreement signed with Century Food.

The agreement was announced on Tuesday, and during a first phase Century will develop the Australian shell eggs and egg products business through the supermarket and food service channel in Macau and Hong Kong.

The partnership was boosted by the recent ChAFTA (China-Australia Free Trade Agreement) between China and Australia which scraps tariffs on agricultural products traded between the two countries, the companies explained.

“Century's strong and reputable partnership with its Chinese partners and its track record and experience in the Chinese market are poised to create a solid foundation for our combined success in the food sector in China. We are confident that this agreement with Century has provided Sunny Queen with excellent business opportunities”, the CEO of Sunny Queen, John O'Hara, said about the agreement.

“I am delighted with the successful launch of our new business unit with Sunny Queen, a major player in the food sector. We all look forward to advancing Century Food, beginning with Sunny Queen, and to prospering as China continues to urbanise and develop for decades to come”, the President and CEO of Century, Sandy Chim, said.

In the Macau and Hong Kong markets the operation of Century will be managed by new Vice-President Alan Sin, who, according to the company, is a 17-year veteran food and beverage distribution executive.

J.S.F.

Corporate

H&M flagship store opens August 14 H & M, Hennes & Mauritz AB (H&M) is counting down for the opening of its biggest store in Macau at Galaxy Macau.

The vast full-concept flagship store is set to open on August 14, 2015 at 10:00am.

“Fashion-loving Macau customers will enjoy the experience and fantastic range of products we are about to bring to them in the bustling shopping centre of Galaxy Macau. The new flagship store will be offering kidswear for the very first time in Macau, bringing affordable and sustainable

fashion and quality to everyone interested in fashion,” says Magnus Olsson, Country Manager of Greater China.

On the grand opening day, H&M will offer one MOP500 gift card to the first customer in the queue and a MOP100 gift card to the next 149 customers. A limited edition H&M tote bag will be gifted to the first 150 customers in line. The store opens from 10:00am-11:00pm Monday to Thursday and from 10am-12:00 midnight Friday and Sunday.

Sheng Kung Hui and Galaxy hold Responsible Gaming roadshows Macau Sheng Kung Hui and Galaxy Entertainment Group (‘GEG’) recently joined hands to hold Responsible Gaming roadshows themed ‘How to help someone with gambling problems’ in all of their properties. The roadshows sought to promote responsible gaming knowledge for team members to recognise the importance of responsible gaming in order to develop a positive attitude to gambling. They

featured interactive booth games, bulletin board displays and on-site counselling with more than 1,200 team members participating.

This year marks the second year that GEG and Sheng Kung Hui Gambling Counselling and Family Wellness Centre has organised the roadshows which took place from 16th to 28th July in StarWorld Macau, Galaxy Macau™, Broadway Macau™ and three City Clubs.

6 | Business Daily

July 31, 2015

Macau

Merchandise exports increase 17.6 pct in June Re-exports of clocks and watches jumped 58 per cent year-on-year while domestic exports of tobacco fell 25.2 per cent year-on-year Kam Leong

kamleong@macaubusinessdaily.com

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he city’s total merchandise exports jumped 17.6 per cent year-on-year to MOP923 million (US$115 million) last month, the latest data released by the Statistics and Census Services (DSEC) reveals.

According to official data, the value of re-exports in the city increased by 27.7 per cent yearon-year in June, totalling MOP790 million, of which re-exports of clocks

and watches even jumped 58 per cent year-on-year.

Nevertheless, the value of domestic exports in the month saw a year-on-year decline of 20 per cent to MOP133 million, due to domestic exports of tobacco decreasing 25.2 per cent to MOP24 million.

Meanwhile, total merchandise imports in June posted a decrease of 0.1 per cent year-on-year to MOP6.76 billion, with the city’s merchandise

trade deficit in the month amounting to MOP5.84 billion.

Accumulatively, external merchandise trade reached MOP48.12 billion in the first half year of 2015, up 0.6 per cent compared to the MOP47.83 billion of a year earlier.

The interim value of merchandise exports during the period grew 8.7 per cent year-on-year to MOP5.45 billion, of which the value of reexports, amounting to MOP4.53

billion, surged 12.1 per cent yearon-year while that of domestic exports decreased 5.1 per cent year-on-year to MOP922 million.

The merchandise trade deficit during the six months widened to MOP37.21 billion, following the total value of merchandise import dropping 0.3 per cent to MOP42.67 billion.

More than 93 per cent of the city’s total exports were non-textile products during the first half of the year, at MOP5.09 billion, a year-onyear jump of 9.3 per cent.

Of non-textile products, the export value of clocks and watches saw the most notable year-on-year growth, surging 35.1 per cent to MOP792 million. In addition, the export value of electronic components rose 27.7 per cent year-on-year to MOP394 million.

However, exports of machines, apparatus and parts dropped 33.8 per cent year-on-year to MOP618 million.

Total exports of textiles and garments, meanwhile, totalled MOP367 million in the six months, a year-on-year increase of 1.5 per cent.

Mobile phone imports soared 43.4 per cent year-on-year to MOP4.39 billion during the first half of the year, while imports of food and beverages posted a year-on-year increase of 6.1 per cent, amounting to MOP5.84 billion.

Imports of consumer goods, however, declined 8.2 per cent yearon-year to MOP25.2 billion, driven by the imports of gold jewellery dropping 32.2 per cent to MOP3.43 billion.

In terms of destination, Hong Kong remained the most popular for the city’s export activities. During the six months, merchandise exports to Hong Kong totalled MOP3.37 billion, a year-on-year lift of 10.5 per cent. In addition, exports to Mainland China grew 20.1 per cent year-on-year to MOP847 million, while those to the European Union and the United States decreased 16.2 per cent and 39.9 per cent year-on-year to MOP131million and MOP97 million, respectively.

On the other hand, merchandise imports from Mainland China, which is the biggest source of the city’s imports, increased 13.7 per cent yearon-year to MOP15.8 billion during the six months, while those from the European Union fell 11.2 per cent year-on-year to MOP9.64 billion.

Retailer Veeko profits jump 124 pct

Dynam Japan revenue drops 1.3 pct in 1Q

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omen’s clothing and cosmetic retailer Veeko International Holdings Ltd. saw its profits attributable to shareholders for the fiscal year ended March 31 surge nearly 124 per cent yearon-year to HK$102 million (US$12.3 million), driven by the strong increase in the profits generated by its cosmetics segment.

The company recorded a turnover of HK$1.99 billion in the last fiscal year, a yearon-year jump of 23.3 per cent.

Some 72.6 per cent of the turnover was generated by the Group’s cosmetics business Colourmix, accounting for HK$1.45 billion, according to the consolidated annual report that the company filed with the Hong Kong Stock Exchange on Tuesday.

The Colourmix stores

of the company posted a segment profit of HK$110.4 million during the year, soaring 127.7 per cent year-on-year compared to HK$48.5 million one year ago. ‘The cosmetics business contributed materially to the Group’s results,’ the company wrote in the report.

According to the retailer, it had a total of 81 Colourmix Stores as at March 31 this year, of which 76 were in Hong Kong, four were in Macau, and one was in Mainland China.

Meanwhile, the company’s fashion business, running under the brands Veeko and Wanko, saw its turnover fall 7 per cent year-onyear to HK$548 million.

Nevertheless, the profit earned from the sector grew 20 per cent year-on-year to HK$17.2 million.

As at the end of March, the retailer had a total of 165 fashion stores, with 82 located in Hong Kong and Macau. The turnover of its fashion business reached in the two Special Administrative Regions posted a slight decrease yearon-year to HK$421 million from HK$421.2 million, accounting for 76.8 per cent of the total fashion turnover of the company.

‘Looking forward, beauty and skincare products have become the daily necessities for consumers, indicating that the cosmetics business will be less susceptible to adverse changes in the market, and that the cosmetics business will continue to be the main source of revenue and the growth engine for the Group,’ the retailer anticipated.

K.L.

ynam Japan Holdings Co., Ltd. has released its unaudited quarterly revenue information of the group for the three months ended 30 June 2015. In a filing with Hong Kong Stock Exchange on Tuesday, the company said its total gross pay-ins, which represent the amounts received from pachinko balls and pachislot tokens rented to customers less utilised balls and tokens, decreased by 2.8 per cent to 207,136 million Japanese yen (US$1,676 million) from 213,035 million yen for the first quarter ended 30 June a year ago.

The total revenue decreased by approximately 1.3 per cent to 36,388 million yen compared to the same period last year. The company said in the Tuesday filing that during the first quarter, the utilisation

of pachinko machines showed a downward trend for the whole industry.

With respect to the company, the utilisation mainly in high playing-cost halls was on a downturn yearon-year. Correspondingly, gross pay-ins and revenue in high playing cost halls decreased and as a result total gross pay-ins and revenue were lower than the performance in the previous corresponding period.

From January 2015, the company implemented measures to improve the utilisation of high playing-cost halls including renovation of halls. On the other hand, gross pay-ins and revenue from low playing-cost halls increased year-on-year through the new hall openings due to the outcome of strategic focus on low playing-cost halls.

8 | Business Daily

July 31, 2015

Macau

Wynn Resorts profit plummets 72 pct in second quarter The decline in gaming revenues in Macau and Las Vegas has severely affected the performance of the company. Steve Wynn, however, expressed confidence that smoking lounges will continue to exist in Macau casinos João Santos Filipe

jsfilipe@macaubusinessdaily.com

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he net income of Wynn Resorts declined 72.3 per cent year-on-year to US$56.46 million (MOP450.8 million) from US$203.9 million (MOP1.638 million) during the second quarter of this year, the company announced yesterday. Overall net revenues for the second quarter declined 35.8 per cent year-on-year to US$1,041 million (MOP8.3 billion) from US$1,412 million (MOP11.3 billion).

The dive in profits of the

company was driven by the decline of the income both in Macau – the largest market of the company – and Las Vegas due to the weakness of the gaming segment, the company said. The EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) of the two markets combined dropped 36.8 per cent year-on-year to US$295.4 million from US$467.4 million.

In relation to the Special Administrative Region, Adjusted Property EBITDA

went down to US$173.4 million from US$307 million, a 43.5 per cent decline yearon-year during the quarter.

Regarding the value of the EBITDA decline, it cannot be considered a surprise as six analysts surveyed by the news agency Bloomberg had a median estimate for the EBITDA of US$173.5 million. During the same period the occupancy rate of the Macau properties dropped to 96.4 per cent from 98.4 per cent, resulting in average daily revenue (ADR)

of $321, while one year ago it generated ADR of $334.

Meanwhile, the US market generated an Adjusted Property EBITDA of US$122 million, down 23.9 per cent from US$160.4 million in the second quarter of 2013. In terms of hotel room occupancy it remained the same at 88.4 per cent while Average Daily Revenue increased to US$289 from US$283.

Question mark over Macau

During the presentation of the company’s results, the Chairman and CEO of the gaming operator, Steve Wynn, commented on the most

pressing topics affecting the industry, in particular the full smoking law, saying “Macau continues to be more of a question than a certainty”.

He also expressed his confidence that smoking lounges may be allowed inside casinos in spite of the changes to the law proposed

by Secretary for Social Affairs and Culture Alexis Tam. “I was glad to see that they allowed the smoking rooms.

There was no reason not to and Secretary Tam, who is very concerned about public health, finally felt as if it was okay to allow the smoking rooms to continue. And that is a good thing”, Mr. Wynn said.

Sanguine Steve Wynn announces Palace opening The US$4.1 billion Wynn Palace resort in Macau will open on March 25 next year, the Chairman and CEO of the company revealed yesterday during the presentation of the results.

“I’m comfortable about the March 25 date. The government happily gave us 100 per cent of our last final request for construction labour and so we’re fully staffed at 7,000 construction workers.

So we’re pretty sanguine at the moment”, Wynn said.

“Although anything is subject to change”, he added.

Genting Hong Kong forgoes Korea casino to focus on cruise business Upon completion of the deal, Lading International will own 100 per cent of the Jeju casino

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enting Hong Kong Limited has announced that Pearl Concept, an indirect whollyowned subsidiary of Genting Hong Kong, will sell back its 50 per cent interest in Magical Gains, managing the casino business of Grand Korea in Jeju Island, to Landing International according to its filing with the Hong Kong Stock Exchange after trading hours on Wednesday.

The sale and purchase agreement, upon completion, will allow Landing

International, a Chinese real estate developer, to be the registered and beneficial shareholder of 100 per cent of the issued share capital of Magical Gains.

The aggregated consideration payable by Landing International to Pearl Concept for the sale shares and the loan made to Magical Gains previously shall be 130 billion Korean won, equivalent to approximately HK$864 million.

Last November, Pearl Concept

subscribed for 100 new ordinary shares in Magical Gains and made that loan for a combined aggregate amount of around HK$917.4 million.

The deal is subject to the satisfaction of certain customary conditions precedent on or before December 31 2015 or the date on which Landing International’s shareholders’ meeting is convened to obtain their approval.

Genting Hong Kong recently acquired Crystal Cruise, LLC

According to the CEO of the company, in spite of the fact that the Macau market is increasingly focused on the mass market, the 1,700-room integrated resort will continue to tackle VIP and premium mass market clients.

“We enjoy a segment of the market that we want to continue to enjoy: the upper premium, the VIP business and the top end of the mass market. We enjoy that advantage today and we intend to increase that advantage by opening the Wynn Palace”, he explained.

which is a global luxury cruise line operator. In the Wednesday filing, the company said that the reason for the disposal transaction is that it will enable the company to focus on and put more resources into expanding its cruise and cruise related business.

The casino project on Jeju Island in South Korea kicked off construction work in February and is expected to complete by 2017.

Landing and Genting were investing some US2.2 billion in the project, which occupies a total gross floor area of around 306,763 square metres, and targets Chinese gamblers.

Genting is part of the Malaysian travel and resorts conglomerate Genting Group. The acquisition of Crystal Cruises was priced at US$550 million. According to a previous Genting filing, Crystal Cruises generated US$8.9 million in net income in 2014.

J.K.

Business Daily | 9

July 31, 2015

Macau

As the city heads toward Vegas-Style makeover, MGM seeks to adapt MGM gets two-thirds of its revenue in Las Vegas from non-gaming amenities, while here, like most of Macau’s casinos, it gets less than 10 per cent. MGM China Chief Executive Officer Grant Bowie plans to accelerate growth here without giving a target

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unning a casino in Macau used to be a simpler affair: build a world-class hotel, have junket agents bring in high rollers from China and design attractions to draw the crowds in.

Now, as Macau’s casino bosses face the worst downturn they’ve ever seen, MGM China Holdings Ltd. Chief Executive Officer Grant Bowie is focusing on adapting his company to the Portuguese enclave’s transformation into a family-oriented venue - more of a Las Vegas, less of an Atlantic City. He’ll also need to cater to Chinese tastes.

“We’re living in Macau in one of the biggest economic consumer experiments in the world,” the 57-year-old New Zealand native said in a recent interview. “The length of stay, building capacity, building a reason to be here, building a destination of appeal - those are the challenges.”

Macau casinos for years have ridden a boom driven by Chinese hardcore gamblers, whose bets turned the city into the world’s largest gambling hub. In the past year, gaming revenue plunged back to 2010 levels as China’s anti-graft crackdown kept those big spenders at bay.

Operators are spending $27 billion to build new resorts, ramping up hotel rooms, retail shops and designing attractions that they hope will get Chinese tourists to stay longer and spend more than the $7.7 billion last year.

At MGM’s only casino in Macau, revenue dropped 33 per cent in the first quarter, and a third of its junket operators, the middlemen who arrange gambling trips and lend money for the high rollers, closed their VIP rooms, Bowie said.

Vegas Transition

Las Vegas has experienced its own transformation. Over the past century, it changed from a deserted railroad town to a four-mile Strip that is home to seven of the U.S.’ top 10 grossing nightclubs and has restaurants that rival those of New York and Los Angeles, according to Macquarie Capital (USA) Inc. In Las Vegas, MGM China’s parent MGM Resorts International, which controls more land on the Strip than any other operator, is a leader in nongaming, according to Macquarie. In May, it held a boxing match between Floyd Mayweather and Manny Pacquiao with fans spilling out to its 10 casinos there, driving bets to a record.

It gets two-thirds of its revenue from non-gaming amenities, while MGM China, like most of Macau’s casinos, gets less than 10 per cent.

Bowie plans to accelerate growth there, without giving a target.

Pricey hotels

With fewer customers, gambling houses “have to be creative and think out of the box to come up with ways of luring in new customers to Macau,” said Richard Huang, an analyst at Nomura Holdings Inc.

Everything in China is on steroids, everything goes faster

Hotel prices also need to come down to make the market more attractive, Bowie said. Macau has the priciest Asian hotel rooms costing US$203 on average, compared with US$149 in Las Vegas, according to HRS, a hotel reservations company.

MGM China, which according to Barclays Plc has the smallest share of VIP gambling in the second quarter at about 9.9 per cent, is building a new HK$23 billion (US$3 billion) project in Macau’s developing Cotai gambling district. The company also has among the smallest share of the mass market.

The resort, with an exterior designed to look like a stack of Chinese jewel boxes and due to open in the fourth quarter of next year, will almost triple MGM China’s number of hotel rooms.

One big challenge Bowie faces is how to adapt to the fast-changing tastes of Chinese consumers, who demand more unique experiences as they travel more around the world. MGM China will enlist Chinese artists and marketers to help, said the former president of Steve Wynn’s Macau unit.

“Everything in China is on steroids, everything goes faster,” Bowie said at a restaurant in his Macau resort, overlooking an 8-metre tall cylindrical aquarium, a Chinese symbol for good luck.

Chinese tastes

The one thing he’s sure of is that directly importing Western shows wouldn’t work. Cirque du Soleil - a Canadian theatrical circus - pulled its Sands China-based show in Macau in 2012 due to disappointing ticket sales.

“Some of this is trial and error - you can’t afford to put all your eggs in one basket,” said the former tourism professor at the University of Queensland in Australia.

MGM China’s parent has one weapon that might put it ahead of other foreign casino operators: a working partnership with Beijing.

It has teamed up with the Chinese Foreign Ministry’s Diaoyutai State Guesthouse to build luxury hotels together in some of the nation’s richest cities and is hosting an international lion dance competition in Beijing in collaboration with the Macau casino.

In a country where the advertising of gambling is banned, the partnership helps improve exposure for its brand, Bowie said.

“There’s no question that working in China is about building relationships,” Bowie said. “We should always be sensitive and you should never feel comfortable.”

Bloomberg

10 | Business Daily

July 31, 2015

Greater China

Great short seller is now a bull predicting big gain The investor says Chinese shares have room to rise as more domestic speculators pile into the market Trista Kelley

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on Carnes is about the last person on Earth you’d expect to turn bullish on China’s stock market.

This is a man who built his career on wagers against Chinese companies, bets so successful that one researcher ranks the 41-year-old among the best short sellers worldwide -- more effective than industry giants from Carson Block to David Einhorn.

Carnes’s bearish research caused such a stir in 2011 that he fled China and had to fight off fraud allegations. The ordeal landed one of his colleagues in a Henan province prison.

So when Carnes says he’s now an advocate of investment in China Inc. -- with a 111 percent rally forecast for the Shanghai Composite Index -- it’s worth paying attention. His optimism is all the more striking given it comes at a time when many international money managers are turning bearish, put off by what they see as bubbly valuations and unjustified government intervention to prop up share prices after a US$4 trillion rout.

For Carnes, the bull case is simple.

The stock market’s surge to a sevenyear high in June caught most Chinese

investors by surprise, and they’re determined not to miss the next buying opportunity. In a country where household wealth surged to an estimated US$21 trillion last year, less than 10 percent of the population is invested in equities.

“A lot of people missed out on the bull market,” Carnes said by phone from his office in Vancouver. “This violent correction is a huge buying opportunity for them.”

Alfred Little

Carnes, who started his investment career in 1992 with US$3,000 of savings from a part-time job at a South Carolina fried chicken joint, has been researching Chinese shares for at least a decade. Around 2009, he started focusing on short-sale opportunities in companies he suspected were inflating their financial statements.

To shield against authorities who frowned on negative publicity for Chinese firms, Carnes created a fake online identity -- Alfred Little -- that he used to broadcast his views.

It was a winning strategy. His record of public bets ranked first among more than 28 short sellers

last year tracked by Activist Shorts, a website that analyses bearish research.

At least eight Chinese companies he targeted have since de-listed or been charged with fraud.

Prison time

Carnes also made enemies along the way. After one Alfred Little report in 2011, targeting a Toronto-listed miner of silver in China, he got threats of violence and decided to leave the country.

Mainland authorities charged his Chinese-born colleague, Kun Huang, with defamation and Huang served two years in prison. Carnes’s use of the fabricated Alfred Little identity led to fraud allegations by Canadian securities regulators, which got dismissed in May. After all that, Carnes and Huang are back together in Vancouver, managing about US$10 million and overseeing a team of seven analysts in China and North America. Their firm, Eos Holdings LLC, runs money for Carnes’s family and a few friends, his charitable foundation and Eos employees. He doesn’t accept funds from outside investors.

There’s tons and tons of money in China, and that money has to go someplace... I don’t think giant bull markets like this end that quickly Jon Carnes, short seller

“I really have to give him credit for fending off these problems, getting up and dusting himself off,” said Block, the founder of Muddy Waters LLC who rose to fame with a successful bearish wager against Sino-Forest Corp. in 2011. He met Carnes five

Lagarde says Beijing strong enough to weather stock plunge The IMF head said no one should be surprised that Chinese authorities have taken steps to “maintain an orderly movement” Andrew Mayeda

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hina’s economy should prove resilient enough to withstand the stockmarket rout that has prompted unprecedented efforts by the Chinese government to stem the decline, IMF Managing Director Christine Lagarde said.

“We believe the Chinese economy is resilient, and strong enough to withstand that kind of significant

variation in the markets,” Lagarde said in an online press conference from Washington. She noted that Chinese stocks have still appreciated significantly over the last year, even after dropping almost 27 percent since June 12.

“It’s not a very wellestablished, long-standing market that has been around for decades and decades, as

It’s a relatively young market, and there is an element of a learning curve, both by the market players, by those who invest, by those who raise capital and of course by the authorities as well Christine Lagarde, IMF Managing Director

has been the case in either the United States or some of the European Union markets,” she said.

The International Monetary Fund has urged China to eventually unwind measures taken to stem the selloff, a person familiar with the matter said this month.

In an effort to bolster consumer confidence and prevent soured loans backed by equities from infecting the financial system, China banned large shareholders from selling stakes, ordered state-run institutions to buy shares and let more than half of the companies on mainland exchanges halt trading.

Temporary measures

The Washington-based fund told the Chinese government that while interventions in general are appropriate to prevent major disorder, prices should be allowed to settle

through market forces, said the person, who is familiar with IMF discussions on the issue and asked not to be identified because the talks are private. Chinese officials assured the lender that the measures should be considered temporary, the person said.

The IMF is in discussions with China over adding the yuan to its Special Drawing Rights basket of currencies alongside the dollar, euro, yen and pound. China’s request to join is subject to approval from the IMF board and may hinge on whether the yuan, officially called the renminbi, is deemed “freely usable.”

The IMF didn’t link its concern over the stockmarket intervention to the fund’s review this year of whether to endorse the yuan as a reserve currency, said the person.

Lagarde said the stockmarket interventions shouldn’t “unduly derail” the prospects for the yuan to be included in the SDR basket. The IMF has been comforted by the “very significant reforms” the Chinese have made to their financial system, she said.

Such reforms “will be conducive one day, when the time comes, once all the signals are checked positively” to the yuan being included in the SDR basket, she said.

Bloomberg News

Business Daily | 11

July 31, 2015

Greater China 102 banks allowed issuing certificates of deposit China will allow 102 banks to issue largescale certificates of deposit, up from only nine previously, an industry association said yesterday. The expansion is aimed at letting more banks participate in the pricing of China’s financial products and promoting the country’s interest rate reforms, the association, called the Market Interest Pricing Self-Discipline Mechanisms, said in an announcement. The nine Chinese banks, including the “Big Four” state lenders, became China’s first batch of banks approved to issue large-scale certificates of deposit on June 15, an earlier official statement said.

Carson Block, the famous founder of Muddy Waters, pays credit to Jon Carnes’ work. He still represents the bearish face of short sellers regarding China though

years ago and the two have worked together on China research.

One short

While Block remains a sceptic on Chinese markets, Carnes says the Shanghai Composite may surge to a record 8,000 in the next 18 months. His stock picks include U.S.-listed E-Commerce China Dangdang Inc. and Jinpan International Ltd., a maker of power distribution equipment. He’s also looking for buying opportunities in Shanghai.

The only thing Carnes is shorting these days is the Direxion Daily FTSE China Bear 3X Shares exchangetraded fund, better known by its

YANG ticker on U.S. exchanges. The wager is a bullish one, paying off when Chinese shares surge.

Carnes’s optimistic stance contrasts with a bearish shift by many of his international peers.

Foreign investors sold Shanghai stocks through the city’s cross-border exchange link for the past three weeks, with outflows accelerating after the government banned stake sales by major shareholders and allowed more than 1,400 companies to halt trading.

China cynic

At 67, the median price-to-earnings ratio for stocks on mainland bourses

is on par with its level at the peak of China’s equity bubble in 2007.

“I generally think there are better risk/reward opportunities than going long in China,” Block said. “He’s probably less of a cynic about the world and about China than I am.”

The nation’s household wealth -- estimated at US$21 trillion by Credit Suisse Group AG in 2014 -- is primarily tied up in real estate, bank deposits and unlisted businesses. Just 8.8 percent of respondents in the latest China Household Finance Survey had equity holdings in the second quarter of 2015.

Bloomberg News

Taiwan GDP growth hitting 2-year low

Domestic banks investigating exposure to markets Chinese banks have been investigating their exposure to the stock market from wealth management products and loans collateralized with stocks, the China Securities Journal reported yesterday, citing unidentified bank officials.

The report did not identify any banks by name, but said that many banks had been ordered by their headquarters to conduct the checks. One bank executive told the newspaper that the lender’s headquarters had launched the investigation in late June.

QFII quota rises The outstanding amount of China’s dollar-denominated Qualified Foreign Institutional Investor (QFII) programme rose to US$76.6 billion by July 29, from US$75.54 billion at the end of June, the foreign exchange regulator said yesterday. The QFII scheme was created by China to allow foreigners to invest in Chinese capital markets.

The economy grew an annual 3.37 percent in the first quarter Baidu to buy back US$1 bln shares

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conomy is expected to have slowed to its weakest level in two years in the second quarter, as China and other major markets bought less of the island’s line of key technology products.

A preliminary reading on gross domestic product (GDP) is forecast to show the economy expanded 2.67 percent in April-June from the same period last year, the slowest growth since 2013, a Reuters poll showed.

Exports, the main driver of Taiwan’s economy, shrank 9.8 percent in the second quarter from the year-ago period as shipments of its signature tech goods ebbed amid fitful global demand.

A slowdown in China, Taiwan’s biggest export market, has been a major drag on growth.

The outlook for exports doesn’t offer much optimism either, with some companies tempering expectations ahead of the typically strong Christmas shopping season.

AU Optronics, the world’s No.4 flat panel maker, warned investors in a briefing on Tuesday that the company is cautious about business in the second half of the year.

Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s top contract chip maker and a supplier of Apple Inc, also gave a downbeat outlook guidance for the third quarter.

In June, the central bank kept the discount rate - the rate at which

the central bank lends to financial institutions mainly for short term purposes - at 1.875 percent, where it has been since July 2011.

Many analysts expect monetary policy to remain accommodative for the rest of the year to support the economy.

Adding to the economic headwinds, domestic demand has softened amid a sluggish stock market and a cooling property sector.

Taiwan cabinet recently introduced a stimulus package to boost exports and investments. That came after it

had trimmed in May its 2015 full-year GDP to 3.28 percent and said exports would contract this year.

In 2014, driven by Apple’s highly anticipated launch of new iPhone models, the island’s tech shipments and overall export orders soared to records.

The preliminary GDP figures will be released on Friday, while revised figures will be made available 2-3 weeks later, with more details and a media briefing.

Reuters

Baidu Inc, China’s biggest internet search engine company, said yesterday it will buy back shares worth US$1 billion after the company’s stock price slid following a weak earnings report earlier this week. The repurchases will take place over the next 12 months and be funded from the company’s existing cash balance, New York-listed Baidu said in a statement. Baidu shares have fallen 14 percent since July 27, when it reported lower-than-expected second-quarter profit. The company’s plan to spend aggressively on connecting online smartphone users to offline services raised investor concerns on margins, triggering the shares’ worst two-day drop since late 2008.

Turbulent markets drive a jump in equity trading The bull run in China’s share markets that collapsed last month drove a 36 percent rise in global equity trading volumes during the first half of 2015, according to data released on Wednesday. Share trading on the Shanghai and Shenzhen exchanges jumped 166 percent during the first half compared with the second half of 2014, the World Federation of Exchanges (WFE) said. This boosted the total value of share trading to us$59 trillion during the first half, 36 percent up compared with the second half of 2014 and 58 percent up year-on-year.

12 | Business Daily

July 31, 2015

Asia

Japan eyes GDP contraction for the second quarter The underlying weakness in output could reinforce a view that the economy probably slowed sharply in April-June from the prior quarter Tetsushi Kajimoto

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apan’s factory output rose modestly in June after a big drop in the prior month, highlighting worries of a second-quarter economic slump as exports weaken and manufacturers are saddled with large inventories.

Analysts expect the economy to bounce modestly in the current quarter, helped by a pick-up in private consumption as household incomes improve, but some warn of a prolonged lull as China’s economic slowdown takes its toll on external demand.

Industrial production rose 0.8 percent in June from the previous month, trade ministry data showed yesterday, exceeding a median market forecasts for a 0.3 percent gain after May’s 2.1 percent drop.

“You cannot rule out the possibility of output sliding for two straight quarters to September, forcing the economy to stall,” said Koya Miyamae, senior economist at SMBC Nikko Securities. “The main risk is China’s slowdown, which will keep a drag on exports.”

Reflecting expectations of a gradual pick-up in factory activity

ahead, manufacturers surveyed by the ministry expect industrial output, which accounts for roughly 18 percent of Japan’s gross domestic product, to rise 0.5 percent in July and 2.7 percent in August.

Still, the underlying weakness in output could reinforce a view that the

economy probably slowed sharply in April-June from the prior quarter, or even contracted, keeping the central bank under pressure to deploy fresh monetary stimulus.

The factory data, which is strongly correlated with economic growth, will be closely scrutinised by the

Bank of Japan, along with a batch of indicators due on Friday.

The BOJ is widely expected to keep monetary policy steady next week and is in no mood to act any time soon, arguing that the economy will emerge from a soft patch in the current quarter, helping inflation hit its ambitious 2 percent goal by around September next year.

But some analysts are bracing for fresh BOJ stimulus as early as October, with signs of weakness in the economy adding to doubts whether inflation will accelerate as quickly as the central bank projects.

BOJ board member Koji Ishida signalled his reluctance to top up an already radical stimulus programme, though he sounded less convinced about the economy’s recovery prospects.

“There’s a risk the recent softness in exports and output may hurt corporate sentiment just when companies were beginning to turn more aggressive on investment,” he told business leaders in Kyoto, western Japan.

Reuters

Singapore’s GIC sees opportunities in China market turmoil Singapore’s other sovereign investor, Temasek Holdings, also said earlier this month it was also willing to bet on China despite the volatility

S

ingapore sovereign wealth fund GIC is finding fresh opportunities to invest in the volatile China market amid restrictions imposed by the regulator on investors who own large stakes in Chinese companies.

“It did open up some opportunities for people like us which take a longer-term view and we don’t have such kinds of liquidity constraints.

That is a clear positive,” Lim Chow Kiat, group chief investment officer, told Reuters as the fund unveiled its annual report.

Lim said that in view of the restrictions, some investors

were selling shares in which they had minority stakes due to redemption pressure, allowing long-term investors to step in.

China’s securities regulator earlier this month took the drastic step of banning shareholders with stakes of more than 5 percent from selling shares for the next six months in a bid to halt a plunge in stock prices.

GIC does not disclose its exact exposure to China, but its annual report said North Asia - China, Taiwan, Hong Kong and South Korea accounted for 15 percent of its portfolio for the period ended March 31.

Temasek’s underlying China exposure stands at 27 percent, second only to its Singapore exposure.

GIC is the world’s eighthbiggest sovereign wealth fund, managing US$344 billion in assets, according to Sovereign Wealth Fund Institute.

Lim said the latest gyration in China’s stock market was a result of “very aggressive market speculation”, but added he did not expect the episode to upset on-going economic reforms.

“We don’t see this as amounting to something that would distract or derail their efforts and their determination

to get the economy on a sustainable path,” he said.

According to StreetSight data, based on a July 21 filing, GIC Pvt Ltd had invested in 52 listed stocks in mainland China which were valued at nearly US$7 billion.

GIC’s latest annual report yesterday showed that over a five-year period, its portfolio returned 6.5 percent per annum in U.S. dollar nominal terms, compared to 12.4 percent in its previous fiveyear period ended March 2014.

GIC achieved a 20-year annualised real rate of return of 4.9 percent for the financial year ended March 31, while in

U.S. dollar nominal terms, it posted an annualised return of 6.1 percent over 20 years.

This means that US$100 invested with GIC in 1995 would have grown to US$327 yesterday, it said.

“We cannot expect this level of returns to continue.

The current high asset prices are likely to result in low returns over the next 5 to 10 years,” GIC said.

“The sharp rise of asset prices, when the global economy is still struggling to gain a firm foothold, makes the investment environment particularly uncertain and unpredictable.”

Reuters

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Business Daily | 13

July 31, 2015

Asia Pacific trading partners stuck on medical monopoly periods

S. Korea’s energy import declines South Korea’s energy import shrank in the second quarter as cheaper oil reduced costs of energy imports, customs data showed yesterday. Energy imports were valued at US$22.46 billion during the April-June period, down 34.9 percent from the same period of last year, according to the Korea Customs Service (KCS). The ratio of energy imports to the total imports during the second quarter fell to 20.3 percent from 26.3 percent a year earlier. The lower cost of energy imports came as global oil prices declined in the quarter.

A U.S. proposal would set up a forum to debate currency issues among finance officials from TPP countries, separate from the trade agreement Ami Miyazaki and Krista Hughes

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acific trading partners are deadlocked over intellectual property protections, including monopoly periods for next-generation drugs, Japanese Economy Minister Akira Amari said.

Amari said he saw no sign of the United States backing down on a demand to protect for 12 years data used to develop biologic drugs, which are made from living cells.

Australian Trade Minister Andrew Robb has said he sees no legitimate reason to extend past five years.

“There is still a huge gap over patents,” Amari told reporters after Wednesday’s plenary session. He said talks between ministers from the 12 countries negotiating the Trans-Pacific Partnership (TPP).

Many are concerned that longer monopoly periods will push up the cost of state-subsidized medicines and delay the introduction of cheaper alternatives, although pharmaceutical companies say the

opposite is true.

People briefed on the TPP talks saw signs of progress on other sticky issues, such as Canada’s dairy market, as farmers kept up pressure for Canada to allow in more imports.

The Canadians Agri-Food Trade Alliance says 90 percent of the country’s farmers rely on exports, from canola to beef. Canada is at a disadvantage compared to Australia in exporting beef to Japan, after tariffs on Australian beef were cut under a bilateral trade deal.

“That disadvantage is new this year and will continue to grow if there is no deal,” Canadian Cattlemen’s Association international relations director John Masswohl said.

For its part, Japan is demanding that the United States increase its quota for low-tariff imports of Japanese beef to 3,000 tonnes per year from the current 200 tonnes, Japanese lawmakers with knowledge of the discussions told Reuters.

Officials from TPP countries are also discussing ways to prevent unfair manipulation of currencies to gain an export advantage, a U.S. Treasury official said.

A U.S. proposal would set up a forum to debate currency issues among finance officials from TPP countries, separate from the trade agreement.

The U.S. Treasury said the move was aimed at meeting congressional demands for a tougher stance against currency manipulation, but the move stops short of the sanctions many lawmakers want.

U.S. Democrat Sander Levin, whose state of Michigan is home to automakers such as Ford Motor Co worried about competition from Japan under the TPP, said any agreement on currency had to be effective.

“There are discussions going on to see if a provision can go beyond having meetings of ministers,” he said.

Reuters

South Korea central bank sees recovering consumption

Indonesia budget will lift spending about 10 pct Indonesia’s budget for 2016 will propose spending about 10 percent more than this year, but the bulk of expenditures will be for fixed items such as civil service salaries and interest payments, Vice President Jusuf Kalla said. He told a meeting proposed spending will be 2,095 trillion rupiah (US$155.8 billion).

The 2015 revised budget approved early this year called for spending 1,984 trillion rupiah, but the Finance Ministry has said about 80 trillion rupiah of that probably won’t be spent. Traditionally, the government spends less than budgeted, in part because of bureaucratic inefficiency.

Idemitsu to buy most of Showa Shell’s stake Japan’s second-biggest oil refiner, Idemitsu Kosan Co, will buy a onethird stake in smaller refiner Showa Shell Sekiyu from Royal Dutch Shell for about US$1.4 billion, the Anglo Dutch oil firm said in a statement. A source told Reuters in December that Idemitsu aimed to buy shares in Showa Shell in a tender offer that could be worth as much as 500 billion yen (US$4 billion).

Should Idemitsu take control of Showa Shell it would bring it closer in size to top Japanese refiner JX Holdings Inc in the highly competitive sector.

Exports will also rise, but slowly, in tandem with improvements in the global economy, according to the report Wealthy Thais keep developers busy

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entral bank said yesterday it expects to see continuing modest inflation as tepid consumption and weak global oil prices keep a lid on price pressures.

The Bank of Korea said in a biannual report on inflation that inflation faces upside risks from a possible rise in oil prices and spikes in fresh produce prices due to bad weather.

Inflation faces downward risks from the recent Iran nuclear agreement, further falls in global oil prices due to the dollar’s broad strength, delayed recovery in domestic consumption, and possible cuts in utility costs, it said.

The central bank report said domestic consumption is expected to return to its previous recovery path after authorities this this month announced South Korea was effectively out of danger from Middle East Respiratory Syndrome, which broke out in late May. Exports will also rise, but slowly, in tandem with improvements in the global economy, according to the report. Consequently, the output gap will narrow in the second half of the year versus the first half. An output gap indicates actual output is lagging the economy’s full potential.

The report comes as inflation in

South Korea remains low and well under the bottom tier of the central bank’s 2.5 to 3.5 percent target band, which it will revise within the year.

June inflation stood at 0.7 percent on-year, a five-month high but still contained.

Both the central bank and government have attributed weak inflation to supply-side factors,

mainly low commodity prices. The Bank of Korea has forecast inflation will reach 0.9 percent this year and 1.8 percent in 2016.

The statistics agency will announce July inflation on August 4.

A Reuters poll found it was expected to come in at 0.7 percent, steady from June.

Reuters

Thai property developers are raising record funds in the domestic bond market to finance high-end residential projects in a stumbling economy that appears to have hurt all but the affluent. Developers issued 54.2 billion baht (US$1.55 billion) of bonds in the first half of this year - a record for a six-month period and equal to 74 percent of the debt sold by developers for the whole of 2014, according to the Thai Bond Market Association.

Raising funds from the debt market is much cheaper than bank loans.

New Zealand new home approvals see rise in June New home approvals in June were up 2 percent year on year, the New Zealand government statistics agency said yesterday, as the government claimed that it was tackling the country’s housing crisis.

Last month, 2,042 new dwellings were consented nationally, but the number was down 4.1 percent from May, according to a statement from Statistics New Zealand. The biggest rise was in Auckland, New Zealand’s biggest city and home to a quarter of the population, where house prices have been rising so sharply that the central bank has warned they are a risk to the country’s financial stability.

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July 31, 2015

International Deutsche Bank’s profit overshadowed by legal costs The bank warned that its new performance targets were at risk from heavy legal charges as it set aside 1.2 billion euros (US$1.31 billion) for fines and settlements and reported quarterly earnings largely in line with expectations. Germany’s largest bank by market value said it might not reach its 2020 performance targets, which include a return on tangible equity of over 10 percent compared to 5.7 percent now, should fines and settlements continue to batter the bank’s bottom line. The results are Deutsche Bank’s first under new boss John Cryan.

Sluggish GDP growth prediction for Latin America A drop in internal investment, coupled with a slowdown in consumption growth, has largely contributed to a reduction in domestic demand

Nokia, Alcatel-Lucent post strong results Shares in telecom network gear makers Nokia and Alcatel-Lucent jumped yesterday after both posted strong second-quarter results, giving a positive signal ahead of their pending merger. Nokia’s 15.6 billion euro (US$17 billion) acquisition of Alcatel-Lucent announced in mid-April aims to position the company to better compete with market leader Ericsson and low-cost Chinese powerhouse Huawei, by forging a strong number two in mobile with a more complete product line. But with competition in the sector remaining intense and demand from telecom operators soft, some investors still have concerns about the marriage.

Shell to axe 6,500 jobs on lower oil prices Royal Dutch Shell is to axe 6,500 jobs this year and step up spending cuts to deal with an extended period of lower oil prices which contributed to a 37 percent drop in the oil and gas group’s second-quarter profits.

The Anglo-Dutch company also said it was planning more asset disposals as it pushes ahead with its proposed US$70 billion acquisition of BG Group, bringing total asset sales between 2014 and 2018 to US$50 billion. Shell said it anticipated 6,500 staff and direct contractor reductions in 2015 from a total of nearly 100,000 employees.

Britain’s recovery gives boost to Santander profits A buoyant performance from its British business helped Spain’s Santander to increase second-quarter revenues, offsetting a weaker home market and driving an 18 percent rise in net profit. The strong growth is a positive sign for the bank’s boss Ana Botin, who has embarked on plans to boost profits by expanding the group’s lending rather than through acquisitions.

Europe’s economic recovery is starting to help and a turnaround in the British market has made this the biggest engine of Santander’s profits, ahead of Brazil.

NXP posts 89 pct rise in Q2 net profit NXP, set to become Europe’s largest chipmaker after buying U.S.-based Freescale, booked an 89 percent rise in second-quarter net income driven by strong sales of payment chips, but forecast weak third-quarter growth in its auto unit. The Dutch company, formerly known as Philips Semiconductors, also said revenue for the fiscal second quarter ended July 5 rose 11.6 percent to US$1.51 billion. Revenue from its high-margin security chips used in “chip and pin” credit and debit cards and other payment systems rose 39 percent to US$276 million, while revenue from automotive electronics rose 8 percent to US$310 million.

Alicia Barcena, executive secretary of the Economic Commission for Latin America and the Caribbean

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atin America and the Caribbean countries’ economy will only grow by an average of 0.5 percent in 2015, according to new projections made by the Economic Commission for Latin America and the Caribbean (ECLAC).

The figures were released on Wednesday at a press conference in Santiago, with South America’s economy anticipated to contract by 0.4 percent, Central America and Mexico to grow by 2.8 percent, and the Caribbean up 1.7 percent, respectively.

In terms of individual countries, Panama will lead with a growth of around 6 percent in gross domestic product (GDP), followed by Antigua and Barbuda (5.4 percent), and the Dominican Republic and Nicaragua (both at 4.8 percent).

The ECLAC report stated that this lukewarm performance resulted from internal and external factors.

The sluggish external demand led to a fall in the price of basic products as well as higher volatility and uncertainty in international financial markets.

“Kick-starting growth in both short and long term requires stimulating public and private investment in a complex environment,” said Alicia Barcena, executive secretary of the ECLAC. The economic study also revealed that the low growth will have a negative impact on the labour market. The ECLAC estimates that the unemployment rate in Latin America and the Caribbean will climb to an average of 6.5 percent, up from 6 percent last year.

The ECLAC also noted that the capacity to stimulate economic growth depends on each country’s ability to implement right policies to attract investment, which is key to diminishing the impact of external economic shocks.

It also reminded countries that investment is related to individual productivity. So public policies are necessary to help productivity and serve as beacons for private investment.

To further improve private investment environment, the ECLAC encourages countries to offer financing for small and mediumsized enterprises, especially in the long term.

Xinhua

Fed says economy improving Most economists forecast that U.S. economic growth will pick up after a lacklustre first half and that the Fed will begin tightening monetary policy in September Howard Schneider and Michael Flaherty

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he U.S. economy and job market continue to strengthen, the Federal Reserve said on Wednesday, leaving the door open for a possible interest rate hike when central bank policymakers next meet in September.

Following their latest two-day policy meeting, Fed officials said they felt the economy had overcome a first-quarter slowdown and was “expanding moderately” despite a downturn in the energy sector and headwinds from overseas.

They nodded in particular to the “solid job gains” seen in recent months.

“On balance, a range of labour market indicators suggest that underutilization of labour resources has diminished since early this year,” the Fed said in a policy statement that kept rates unchanged.

That language and other small changes in the statement mark an upgrade in the central bank’s view of labour conditions since its last policy meeting in June, when it said labour slack had “diminished somewhat.”

The Fed also said it now only needs to see “some” more improvement in

the labour market, a qualification that analysts said strongly suggested it believes the recent solid U.S. job gains will continue.

“They slightly lowered the hurdle for a rate hike by adding the word ‘some’ to their conditions required for further improvement in the labour market,” said Shyam Rajan, head of U.S. interest rate strategy at Bank of America Merrill Lynch.

Although the Fed may have ramped up expectations of a rate hike in September, it didn’t give a clear signal of its plans. Besides the additional improvement on the labour front, it said it also needed to be more confident that low inflation will rise to the 2 percent medium-term target.

U.S. Treasury prices were largely unchanged after the Fed statement.

U.S. stocks rose and the dollar was stronger against a basket of currencies.

‘Baby steps’

The Fed’s policy statement also retained language saying that risks are “nearly balanced,” suggesting it is still more concerned about a new economic downturn rather than of rapidly rising inflation.

Central bank officials and market analysts have been waiting to see if weak economic growth in the first part of the year signalled the beginning of the end of an expansion, or merely a pause.

The verdict now seems firm.

“The Fed is taking baby steps towards a rate hike. Enough improvements have been made in the labour market that the Fed only needs a little more confirming evidence to say it is time,” said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management.

Most economists forecast that U.S. economic growth will pick up after a lacklustre first half and that the Fed will begin tightening monetary policy in September, according to a Reuters poll published last week.

And Wall Street’s top banks still target September as the most likely time for an initial Fed rate hike, according to another Reuters poll published earlier this month.

With no meeting scheduled in August, the Fed will have two months of data to analyse before deciding whether to hike rates for the first time since 2006.

Reuters

Business Daily | 15

July 31, 2015

Opinion Business

wires

Letting China’s bubble burst

Leading reports from Asia’s best business newspapers

Michael Spence

Nobel laureate in economics, is Professor of Economics at New York University’s Stern School of Business and Senior Fellow at the Hoover Institution

THE PHNOM PENH POST Cambodia is expected to reach a GDP per capita of US$1,220 this year, putting it on course to being a lower-middle income economy, said Commerce Minister Sun Chanthol, who was attending a meeting with Macau entrepreneurs in Phnom Penh. Based on a Ministry of Economy and Finance projection, the figure will be a jump from the 2014 estimate that put the GDP per capita at US$1,123 for last year. Srey Chanthy, an independent economic analyst, said given Cambodia’s growth trajectory for the first half of this year – in particular agricultural and garment exports, tourism and construction – this projection “might be realistic”.

VIETNAM NEWS More than 593,000 international visitors arrived in Viet Nam in July, a rise of 5.1 per cent year-on-year and 12.1 per cent month-on-month, according to the General Statistics Office (GSO). Despite this month’s positive figure, the number of foreign holidaymakers still dropped 9.4 per cent to an estimated 4.39 million in the first seven months of the year, GSO said. During the review period, visitors from Cambodia fell by 43.9 per cent. This was followed by Laos with 36.1 per cent; Thailand (31.2 per cent); mainland China (24.4 per cent) and Hong Kong (14.7 per cent).

BANGKOK POST The long-delayed development of the Dawei deep-sea port and special economic zone is making progress, with a tripartite Joint High-Level Committee meeting scheduled for next Wednesday in Myanmar to discuss more details. The meeting also marks a milestone as the Myanmar government is due to sign construction deals with two leading Thai construction companies to develop the first phase of the megaproject.

Thailand and Myanmar agreed in June 2013 to set up DSEZ with an equal shareholding and initial investment of 12 million baht, far below the 100 million proposed earlier. The company is registered in Thailand.

TAIPEI TIMES Siliconware Precision Industrial Co, the world’s No. 2 chip packager, yesterday said net profit for last quarter was its highest quarterly showing in five-and-a-half years, but it expected revenue to decline 12.42 percent sequentially this quarter due to weak demand amid a longer-than-expected inventory correction. Revenue is expected to drop to between NT$18.6 billion (US$590.05 million) and NT$19.8 billion this quarter from last quarter’s NT$21.24 billion, chairman Bough Lin told an investors’ teleconference.

Gross margin is set to fall to between 22.5 percent and 24.5 percent this quarter from 27.2 percent last quarter.

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he problems with China’s economic-growth pattern have become well known in recent years, with the Chinese stock-market’s recent free-fall bringing them into sharper focus. But discussions of the Chinese economy’s imbalances and vulnerabilities tend to neglect some of the more positive elements of its structural evolution, particularly the government’s track record of prompt corrective intervention, and the substantial state balance sheet that can be deployed, if necessary.

In this regard, however, the stock-market bubble that developed in the first half of the year should be viewed as an exception. Not only did Chinese regulators enable the bubble’s growth by allowing retail investors – many of them newcomers to the market – to engage in margin trading (using borrowed money); the policy response to the market correction that began in late June has also been highly problematic.

Given past experiences with such bubbles, these policy mistakes are puzzling. I was in Beijing in the fall of 2007, when the Shanghai Composite Index skyrocketed to almost 6,000 (the recent peak was just over 5,000), owing partly to the participation of relatively inexperienced retail investors.

At the time, I thought that the greatest policy concern would be the burgeoning currentaccount surplus of over 10% of GDP, which would create friction with China’s trading partners.

But the country’s leaders were far more concerned about the social consequences of the stock-market correction that soon followed. Although social unrest did not emerge, a prolonged period of moribund equity prices did, even as the economy continued to grow rapidly.

In 2008, it was a combination of exploding asset prices and excessive household-sector leverage that fuelled the global financial crisis. When such a debt-fuelled bubble bursts, its effects are transmitted directly to the real economy via household-sector balance sheets, with the reduction in consumption contributing to a decline in employment and private investment. It is much harder to find circuit breakers for this dynamic than for, say, that caused by balance-sheet distress in the financial sector.

Yet the Chinese authorities seem not to have learned the lessons of either episode. Not only did they fail to mitigate the risks, underscored in the 2007 collapse, that new retail investors introduce into the market; they actually exacerbated them, by allowing, and even encouraging, those investors to accumulate leverage through margin buying.

Making matters worse, when the current stock-market correction began in early June, Chinese regulators relaxed margin-buying restrictions, while encouraging state-owned enterprises and asset managers to purchase more stocks. The authorities, it seems, were more interested in propping up the market than allowing for a controlled price correction.

To be sure, China’s stockmarket bubble did not emerge until recently. Last October, when the Shanghai Composite Index was in the 2,500 range, many analysts considered equity prices undervalued.

Given relatively strong economic growth, rising prices seemed justified until about March, when the market, driven by mostly thinly traded small- and mid-cap stocks, shot to over 5,000, placing the economy at risk. (And, in fact, many still claimed that the rally was not unsustainable, as the stock

China needs prudential regulation that limits the use of leverage for asset purchases

market was trading at a forward price-to-earnings ratio of about 15, consistent with its ten-year average, in mid-April.)

But it was a bubble – and a highly leveraged one at that.

While periodic bubbles may be unavoidable, and no bubble is without consequences, a highly leveraged bubble tends to cause far more damage, owing to its impact on the real economy and the duration of the deleveraging process.

This is reflected in the persistently sluggish recovery in the advanced economies today.

Even the United States, which has fared better than most since the crisis, has recorded GDP growth of little more than 10% since the start of 2008; over the same period, China’s economy grew by about 66%.

Of course, with China’s household sector holding a relatively small share of equities

compared to real estate, the current stock-market slump is unlikely to derail the economy.

Nonetheless, as in 2007, the prospect that lost savings will trigger social unrest cannot be dismissed, especially at a time when tools like social media enable citizens easily to share information, air grievances, and mobilize protest.

As previous crises have shown, and as the current downturn in China has highlighted, steps must be taken to mitigate market risks. Specifically, China needs prudential regulation that limits the use of leverage for asset purchases. Here, the country already has an advantage: relatively high levels of equity and low mortgage-tovalue ratios typically characterize real-estate purchases by China’s household sector.

Moreover, once a market correction begins, the authorities should allow it to run its course, rather than prop up prices with additional leverage – an approach that only prolongs the correction.

If Chinese regulators allow the market to correct, sophisticated institutional investors with a long-term value orientation will ultimately step in, enhancing the market’s stability. In the interim, the use of public balance sheets to purchase enough equity to prevent the market from overcorrecting may be justified.

As China’s markets expand – the capitalization of the Shanghai and Shenzhen markets is on the order of US$11 trillion – they are increasingly outstripping policymakers’ capacity to manage prices and valuations.

The only practical way forward is for the Chinese authorities to focus on regulatory and institutional development, while following through on their commitment to allow markets to play the decisive role in allocating resources.

Project Syndicate

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July 31, 2015

Closing HKMA urges caution on U.S. rate hike

Malaysian central bank grips ringgit tightly

Investors in Hong Kong should manage investment risks prudently as the Hong Kong Monetary Authority (HKMA) believes a U.S. interest rate lift off is getting closer, Chief Executive of the HKMA Norman Chan said yesterday. In a statement released yesterday, the HKMA said it noted that the U.S. Federal Open Market Committee kept interest rates unchanged at its meeting Wednesday. Chan said the normalization of U.S. rates is likely to have material impact on global fund flows and asset markets, and may lead to greater market volatility.

Protecting the ringgit from political fallout out may end up costing Malaysia more than any bailout for the debt-ridden 1MDB state fund, given the rate at which the central bank has been using its reserves in recent weeks. Bank Negara Malaysia (BNM) has taken an iron-fisted approach, barely allowing the ringgit to move since early July as investors became increasingly unnerved by the deepening scandal over how 1MDB got into US$11 billion of debt.

Yesterday, the rumour mill went into overdrive forcing the central bank to deny that Governor Zeti Akhtar Aziz (pictured) was resigning.

China’s little secret: a thriving, free market in shares Beijing’s New Third Board has been left to its own devices and was a study of calm this week as turmoil again struck Shanghai and Shenzhen Elzio Barreto

F

ar away from the glare of China’s stock market chaos, stampede of sell orders and freeze on new listings, the spirit of free markets is alive and kicking right in the nation’s capital.

A small stock exchange set up in Beijing three years ago to attract small and mediumsized companies, the so-called New Third Board (NTB), is flourishing, even as Chinese authorities struggle to bend the nation’s main stock markets to their will.

China this month shut the door for new initial public offers on its two main exchanges to stop more money draining out of these markets, but the freeze did not apply to the NTB, which is not a formal exchange and is aimed at professional investors.

An over-the-counter market, the NTB has been a hive of new listings since the freeze in Shanghai and Shenzhen took hold, with a whopping 362 companies since July 3.

Developer Evergrande Real Estate has alone unveiled plans over the past four weeks to list a football club, a mineral water business and a unit that owns music rights, radio and TV stations and magazines.

The confidence of issuers in the NTB has been underlined by light government intervention.

“The New Third Board is a completely market-driven board. It lets the market

Boao Forum for Asia focuses on agriculture business

decide,” said Suzie Wu, managing partner at Beijingbased Tianxing Capital, a venture capital firm that has been one of the most active players in the New Third Board.

Tianxing has invested in about 360 companies and 223 of them are already listed in the NTB, Wu added.

“Without the board some of our portfolio companies may have never had the opportunity to access the

market and might not be able to sustain their business,” Tianxing’s Wu said.

China launched the NTB in 2012, but it has taken off since the government made a concerted effort last year to make it an option for small and medium-sized tech companies to list at home instead of the United States. So far in 2015, 577 companies have raised a combined 30.3 billion yuan (US$4.88 billion) through the end of June, according to data from the National Equities Exchange and Quotations (NEEQ), which runs the NTB. That’s more than double the 13.2 billion yuan raised in all of 2014 from 329 firms.

The queue of companies looking to list on the NTB - 827 firms planning to raise 58.4 billion yuan underscores the boom in demand for speedier listings targeted at professional investors.

The rapid pace of activity in 2015 has pushed the number of listed companies in the NTB to 2,922, more than the 2,800 listed in Shenzhen and Shanghai combined.

The NTB is still not for the faint of heart. Like the main exchanges, it has been a wild ride, with the NEEQ market-making index surging 150 percent in the first three months of this year before plunging as much as 50 percent.

And like the big exchanges, it has not been above suspicions of market manipulation in stocks, one of which, Anhui Hauheng Biotechnology Co Ltd, soared to a giddy and worryingly exact 99,999.99 yuan per share before hurtling back to earth.

The appeal of a quick listing in the NTB could also lure some Chinese firms back from U.S. exchanges.

Reuters

Markets slide as banks U.S. must wait for EU investigate their market exposure hedge fund “passports”

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C

t is up to entrepreneurs with bankable ideas to ensure agriculture growth and the ability to feed the region’s future population, the Boao Forum for Asia (BFA) conference in Sydney heard yesterday.

Feeding the future is one of the great questions confronting the Asian region, driven primarily

by Asia’s economic success, Geoff Raby, former Australian ambassador to China said.

“It’s putting enormous pressure on the region’s land and water resources,” Raby said.

As China’s middle class grows, the demand for high quality, green produce is expected to increase.

“To meet the new demand, it is not enough to rely on the development of China’s land,” New Hope Group Chairman Liu Yonghao said.

Liu said China’s traditionally sensitive agricultural products, such as rice, should be produced domestically, however he said outside of that, China will rely -- as it already does -- on importing other high quality agricultural products.

According to Deloitte, Australia’s agribusiness is one of the five leading sectors that have the potential to take over from mining as a key driver of growth in the Australian economy over time.

hina shares fell again yesterday after a report that banks were trying to get to grips with their financial exposure to the stock market slump in June added to a pall of uncertainty for investors.

Concerns about the level of borrowing to fund market positions have been magnified by the grey market - a loosely regulated network of stateowned commercial banks, trust companies, fund managers, and grassroots finance firms.

If banks decide to rein in their exposure to the stock market, it could squeeze a line of credit for potential buyers and so undermine confidence in a price recovery.

The benchmark CSI300 index of the largest listed companies in Shanghai and Shenzhen closed down 2.9 percent, while the Shanghai Composite Index closed down 2.2 percent.

Still, the performances were relatively calm compared with Monday, when stocks dropped more than 8 percent for their biggest one-day drop since 2007.

The China Securities Journal said yesterday that banks had been checking their exposure to marketa via wealth management products and loans collateralised with shares.

Xinhua

Reuters

H

edge funds from Guernsey, Jersey and Switzerland should be allowed to serve investors across the 28 country European Union, the bloc’s securities watchdog said yesterday.

The European Securities and Markets Authority (ESMA) also said it has not yet reached a view on whether hedge funds and other alternative investment funds from the United States should be given a “passport”.

The lack of advice is the latest friction between the EU and United States over recognising each other’s financial rules. A longstanding spat over derivatives regulation has yet to be resolved.

A passport would mean a non-EU fund, once authorised, would be allowed to market itself across the EU and not have to seek permission from each EU country it wants to operate in, a more costly undertaking.

Authorised EU hedge funds get a passport automatically.

The United States, like EU member Britain, is among the world’s top hedge fund centres but the ESMA said it could not reach a decision on whether U.S., Singaporean or Hong Kong funds should be granted passports.

Reuters