MOP 6.00 Closing editor: Luís Gonçalves Publisher: Paulo A. Azevedo Number 849 Tuesday August 4, 2015 Year IV
Gaming Revenue Rout Rolls On July gaming revenue results are out. Giving the gaming industry no reason to celebrate yet again. That said, July posted the fifth consecutive improvement in revenues. Austerity thus remains on the backburner for now, according to the Secretary for Economy and Finance. But gaming revenues continued to freefall, dropping 34.5 pct or MOP10 billion. Investors wait patiently for real stabilisation Page
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Construction workers’ daily wage growth slows in Q2
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Quarter of a million problem
Dragged down A key gauge of Chinese manufacturing activity has plunged to a two-year low in July. According to an independent survey announced yesterday. The latest data suggests the world’s second largest economy faces downward pressure in Q3
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HSI - Movers August 3
Junkets Junked
30 pct fewer junkets. That’s since 2013. The Association of Gaming and Entertainment Promoters of Macau says the city now has 60 fewer VIP gaming operators since then. 213 operators have been whittled down to no more than 148
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Interview www.macaubusinessdaily.com
Exports of CEPA goods drops 12.3 pct in July HSBC profits increase 10.6 per cent on back of HK earnings
It seemed like a good idea. But the celebrity kitchen area didn’t catch fire. And the Guangdong and Macau Branded Products Fair failed to reach its visitor target. Co-organiser Macau Trade and Investment Promotion Institute (IPIM) confirmed an attendance of over 128,000. Business matching sessions, however, lived up to expectations
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Sweet and Sour
The gov’t wants to cap the number of vehicles. But while it ponders the situation, the numbers keep growing. At the end of June, Macau had 243,966 registered vehicles. Or 4.9 pct more than a year ago
Lisboa Palace construction workers ‘sacked unreasonably’
Name
%Day
HSBC Holdings PLC
+1.94
China Resources Powe
+1.30
Hang Seng Bank Ltd
+0.44
MTR Corp Ltd
+0.14
Power Assets Holding
-0.14
Belle International Ho
-2.73
Galaxy Entertainment
-2.80
PetroChina Co Ltd
-2.86
China Life Insurance C
-3.33
China Mengniu Dairy C
-4.28
Source: Bloomberg
Cash Kingdom
I SSN 2226-8294
It’s rapidly found favour with locals and visitors alike. Ocean Kingdom received 30 pct more visitors Jan-July y-o-y. With the opening of another two new hotels the neighbouring island complex now offers almost 5,000 hotel rooms. In 2014, eight million people visited the amusement park
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August 4, 2015
Macau Social Welfare Bureau to hand out MOP15mln The Social Welfare Bureau has announced that it will continue to hand out the second instalment of subsidies to 3,860 eligible vulnerable families starting this month. The expected total amount will reach some MOP15 million. The Social Welfare Bureau says the 2,076 families registered with the government will receive the money starting from August 5. Another 1,784 families that have their applications processed through other associations or organisations would start receiving the money from August 17. The special living subsidy scheme has been in place since 2003.
Junkets plunge a third from 2013 peak Compared to 2013, Macau now has about 30 per cent or 60 fewer junkets here operating under unfavourable market conditions, a local junket association says Stephanie Lai *
sw.lai@macaubusinessdaily.com
A
gainst a backdrop o fpersistently unfavourable market conditions, the city now has 30 per cent or about 60 fewer VIP gaming operators working here when compared to the most prosperous year of 2013, the Association of Gaming and Entertainment Promoters of Macau told Business Daily. Since the onset of closures and restructuring of the local VIP gaming promoters’
operation since last year Macau now has less than 180 junkets running businesses here – of which about 148 actually own or still operate gaming in VIP rooms, the president of the junkets’ trade association, Kwok Chi Chung, told us. “This number [148] is about 60 fewer than the peak time of about 213 VIP gaming operators in business in the city back in 2013, when Macau had robust gaming results,” Mr. Kwok said.
The Association’s president talked of the rough estimate on the junkets’ scaledown taking into account the recent reports of two more junkets shutting down their VIP rooms in the city’s casinos. Macau junket AG Group is closing its VIP room in Wynn Casino effective September 1, according to an internal notice to the junket’s employees published by local gaming labour union Forefront of
Macao Gaming in its social media page published over the weekend. AG Group currently operates five VIP rooms in Wynn, L’Arc and Galaxy Macau, respectively, according to the junket’s official website. Another junket company, Sai Tai Wu, which is of a smaller scale, is suspending its business effective August 1, the labour union wrote in the company’s internal notice to employees. The company has operated VIP rooms in Altira and StarWorld casino, Hong Kong’s Chinese-language media Apple Daily reported.
VIP blues
Of the market-wide VIP gaming performance in July, analysts from Credit Suisse AG in Hong Kong said in a research note on Monday that they expected the segment – which represented 20-25 per cent of July EBITDA - to remain weak given a flattish rolling volume compared with June, despite stronger seasonality and visa relaxation.
“Our local junket contacts note that during the A-shares correction some of their players withdrew deposits for the stock market margin call, leading to tighter capital in the junket system. But the trend has stabilised,” the Credit Suisse analysts wrote. VIP customers, who once accounted for the bulk of gaming revenues, have sidestepped Macau to avoid scrutiny, say junket agents who organise these gamers’ trips. Some have also been hard hit by China’s slowing economy, the agents added. Macau’s VIP baccarat gross gaming revenue for the second quarter occupied about 55.5 per cent of the city’s casino gross gaming revenue, a fall from around 70 per cent before early 2014, government data shows. The city’s VIP baccarat gross gaming revenue for the second quarter dropped 42.2 percent year-on-year to MOP31.57 billion, having declined by 42.1 per cent to MOP37.67 billion in the first quarter. *with Reuters
Almost a quarter million vehicles in the city At the end of June, Macau had 243,966 registered vehicles, 4.9 per cent more than a year ago, despite the government’s declared intention to cap the number of vehicles Joanne Kuai
joannekuai@macaubusinessdaily.com
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here were 243,966 licensed motor vehicles in Macau at the end of June, up 4.9 per cent year-on-year, according to the latest transport and communications statistics released by the Statistics and Census Service (DSEC) yesterday. The Macau Government has talked of capping the number of vehicles in town as traffic congestion has emerged as one of the major problems in the city, but little has eventuated. However, a draft on the revision of motor vehicle taxation is expected to be submitted to the Legislative Assembly in the third quarter of this year. The official data from DSEC also shows that the new registration of
motor vehicles in the first half of this year increased 2.3 per cent (10,046 vehicles) compared to a year ago.
Traffic accident casualties totalled 388 in June, with two killed. In the first half of 2015, the number of traffic accidents totalled 7,617 cases, up
1.3 per cent year-on-year, resulting in 2,675 casualties including nine fatalities. Gross weight of seaborne containerised cargo surged 26.5 per cent year-on-year to 22,725 tonnes in June, and increased by 8.3 per cent to 133,077 tonnes in the first half of 2015, according to data revealed by DSEC. Macau International Airport handled 2,263 tonnes of air cargo in June, up 5.2 per cent year-on-year. In the first half of 2015, inward air cargo (3,486 tonnes) and outward air cargo (7,364 tonnes) increased 10.1 per cent and 3.1 per cent, respectively, compared to the same period of last year. Taiwan remained the major origin and destination of air cargo.
Business Daily | 3
August 4, 2015
Macau
Guangdong and Macau Branded Products Fair welcomes fewer visitors Co-organiser Macau Trade and Investment Promotion Institute (IPIM) said attendance reached over 128,000, a decrease of 5.2 per cent despite several new entertainment elements, such as a kitchen area with celebrities making appearances
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his year’s Guangdong and Macau Branded Products Fair wrapped up on Sunday with attendance exceeding 128,000, co-organiser Macau Trade and Investment Promotion Institute (IPIM) said, although the number of visitors represents a decline compared to that of last year. It was hoped that several new entertainment elements, such as a kitchen area with celebrities making appearances, would attract more visitors but the number of visitors dropped year-on-year by 5.2 per cent from some 135,000 visitors last year, based on official data announced by IPIM recently. Nevertheless, IPIM claimed that the 128,000 visitors to the four-day
fair still fuelled sales and led to fruitful business-matching for exhibitors from Guangdong and Macau. According to IPIM, some 815 business matching sessions were organised for enterprises from Guangdong Province, Portugal and Macau during the four days, covering an array of branded products, such as food and beverages, daily necessities, home appliances, clothing and accessories, tableware, and cultural and creative crafts.
Co-operation
In addition, one co-operation agreement involving a food products agent and marketing was signed between Jiangmen and Macau enterprises. On the other hand, few
Lisboa Palace construction workers ‘sacked unreasonably’
initial co-operation intent agreements for product agents were signed by Dongguan and Shantou enterprises with local companies. To promote the development of the local cultural and creative industry and provide more opportunities for young entrepreneurs to run their businesses, this year’s fair established new exhibition areas of ‘Young Business Starters’ and ‘Cultural and Creative Industries for Young Entrepreneurs’ for the first time. A young entrepreneur and food products wholesaler noted that the products fair had given him an opportunity to learn from enterprises of a similar nature regarding successful experiences in procurement strategies and marketing skills, according to IPIM. The fair also functioned as a platform for Portuguese-speaking country companies seeking business opportunities in China. The spokesman of a Portuguese enterprise said the fair had allowed them to adjust their sales and product packaging strategies according to market demand through direct contact with the consumers, in addition to enabling them to approach wholesalers and traders. The products fair, starting last Thursday at the Convention and Exhibition Centre of Macau Fisherman’s Wharf, occupied a total of 6,000 square metres. The fair accommodated 289 booths, of which 107 featured Macau specialty products, while the other 182 booths were taken by exhibitors from Guangdong Province.
ome 30 local construction workers working on the construction site of gaming operator SJM Holdings Limited’s Cotai Project Lisboa Palace claimed yesterday that they had been unreasonably fired by project contractor Companhia de Construção & Engenharia Shing Lung Ltd. According to local broadcaster TDM Radio, workers representatives went to the city’s Labour Affairs Bureau to seek help yesterday. They claimed that they were suddenly dismissed on July 31 having worked on the formwork part of the construction site for more than two months, and have been banned from entering the site to reclaim their own tools since the dismissal. However, the contractor of the project, Shing Lung, denied it had directly hired these local workers, claiming the recruitments were made by its sub-contractors, the broadcaster said. On the other hand, the local workers queried the enforcement of police in combating illegal workers in the city, claiming there is a new group of workers speaking Mandarin Chinese on the construction site of the new gaming project, who ‘suddenly disappear’ whenever there is an inspection by the authorities.
K.L.
K.L.
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August 4, 2015
Macau ID bureau to simplify procedures In order to simplify the application process and internal procedures for the certificate of personal data and the certificate of having no children in Macau, starting from 3 August 2015, holders of the electronic Macao SAR Resident Identity Card need not submit a photograph when lodging an application for the above-mentioned certificates. The Identification Services Bureau will print the card face photo of the identity card on the certificates. The relevant measure will enhance the security of certificates and simplify formalities of application for citizens.
Visitors to Hengqin Chimelong Ocean Kingdom up 30 pct With the opening of another two new hotels in the resort, the neighbouring island complex now offers almost 5,000 hotel rooms Joanne Kuai
joannekuai@macaubusinessdaily.com
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huhai Hengqin Chimelong Ocean Kingdom theme park received 30 per cent more visitors from January to July compared to the same period last year, according to a press statement by the Guangdong Chimelong Group Co., Ltd. The statement doesn’t specify the number of visitors received during the period but says in 2014 Ocean Kingdom welcomed more than 8 million visitors. With the opening of the Circus Hotel and Penguin Hotel this year, added to the existing Hengqin Bay Hotel, the resort now offers around 5,000 hotel rooms.
Exports of CEPA goods drops 12.3 pct in July The city’s sales to Mainland China under the Closer Economic Partnership Arrangement (CEPA) totalled more than MOP6.35 million
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he city’s exports of goods to Mainland China under The Closer Economic Partnership Arrangement (CEPA) posted a fall of 12.3 per cent month-on-month in July, the latest official data released by the Economic Service Bureau (DSE) reveals. According to official data, the value of the city’s exports to Mainland China via CEPA totalled more than MOP6.35 million (US$793,545) last month, dropping by some MOP886,985 from MOP7.24 million of the previous month. In addition, the export value of CEPA goods in July - the second lowest this year - only outshone the MOP5.75 million of February. The total value of CEPA goods the Mainland imported from the Special Administrative Region amounted to nearly MOP58 million between January and July this year. Meanwhile, the accumulative value of the export activity totalled MOP623.6 million since the implementation of CEPA in 2004.
Certificate
In terms of trade in services, the Bureau approved one new certificate of
‘Macau Service Supplier’ last month. The certificate is for local firms to operate their businesses in Mainland China. Thus, the total number of certificates that the government issued to local companies increased to 491. Most of the companies that received such certificates are engaged in transport services, such as freight forwarding agencies, logistics and transport, amounting to 298, or accounting for 61 per cent of the total. Meanwhile, some 47 and 41 other certificates were given to local enterprises providing medical and dental services, and convention and exhibition services, accounting for 10 per cent and 8 per cent of the total, respectively. Other companies were issued the certificates for operating in China are primarily involved in real estate services, travel agencies and tour operators, as well as construction and related engineering services, amounting to 32, 19 and 16, accounting for 7 per cent, 4 per cent and 3 per cent of the total, respectively. K.L.
The press statement quoted the Director of the Chimelong Group as saying Chimelong is being managed and operated to international standards and the group aims to build the brand into an international brand.
New facilities
The theme park has been making efforts to add new attractions and facilities. A 5D castle theatre had its grand opening on Children’s Day this year. The 13-minute 5D film was self-produced by Chimelong together with an Academy award-winning Hollywood company according to Chimelong’s statement. An ice theatre presenting a play performed by robotic penguins is also expected to attract more tourists, especially children. The theatre is located in a restaurant inside the Penguin Hotel. Meanwhile, the second phase of the resort is also under construction. It will include another animal park, indoor Ocean Kingdom park, and a new pavilion for the International Circus Park.
100 million yuan Hengqin Free Trade Zone’s crossborder renminbi business was officially launched on July 13. The new policy allows companies in Hengqin to borrow money from Macau and Hong Kong banks, according to the announcement of the Guangzhou branch of the People’s Bank of China (PBOC). Industrial and Commercial Bank of China (ICBC) Macau Branch processed four loans on that day, including to Zhuhai Chimelong Investment Company, according to a press statement from the bank. The total amount of four loans reached 240 million yuan, while Zhuhai Chimelong Investment Company received some 100 million yuan. According to the ICBC Hengqin branch, the Chimelong loan was the biggest amount of the first batch of agreements signed in Hengqin after the new policy was put into place.
Corporate Mercedes-Benz C 300 AMG Edition available in Macau Comfort with extraordinary driving pleasure The best knows no alternative. Adding to the countless success stories of the MercedesBenz C-Class, Mercedes-Benz is now introducing a particularly powerful variant to the C Class family – the MercedesBenz C 300 AMG Edition. The comfort and extraordinary driving pleasure are superb as always. The Mercedes-Benz C 300 AMG
Edition is equipped with a 1,991cc inline four-cylinder petrol engine that manages to generate a maximum output of 245 hp and maximum torque of 370 Nm. This model features a 7G-TRONIC PLUS automatic transmission that has been optimised with respect to fuel consumption and efficiency without compromising driving pleasure. The list price in Macau is HK$599,000
Business Daily | 5
August 4, 2015
Macau
Gaming revenue down 34.5 per cent in July, austerity postponed Since opening Phase II and Broadway, Galaxy has secured second position in the market in terms of share, according to Business Daily calculations João Santos Filipe
jsfilipe@macaubusinessdaily.com
G
aming revenue plunged 34.5 per cent year-on-year to MOP18.6 billion (US$2.3 billion) in July from MOP28.4 billion (US$3.6 billion) in 2014, the Gaming Inspection and Co-ordination Bureau announced yesterday. Revenue from the Macau gaming market has been dropping like a stone for fourteen consecutive months although the pace of decrease has been slowing for the last six months. While in February there was a decrease of 48.6 per cent year-on-year, the pace of the drop has been slowing consecutively until reaching 34.5 per cent year-on-year in the last month.
SJM Sands China Galaxy MPEL MGM Wynn TOTAL
Oct 23.5% 23.7% 21.4% 14.3% 8.2% 8.9% 100%
Nov 22.6% 22.5% 21.5% 13.4% 11% 9% 100%
In relation to the first half of the year, gaming revenue dipped 36.7 per cent year-on-year and now totals MOP140.3 billion (US$17.6 billion), while in the first half of 2014 it accounted for MOP221.5 billion (US$27.7 billion). In terms of market share, and according to the calculations of Business Daily, Sands China achieved a share of 23.8 per cent and retains the leadership it assumed in March. The second place is occupied by Galaxy Entertainment with a 22.6 per cent share of the market. Since the opening of Galaxy Macau Phase II and Broadway the operator has
Dec 23.6% 20.7% 20.2% 14.9% 10.5% 10.2% 100%
Jan 21.9% 20.4% 22.5% 14.7% 10.1% 10.4% 100%
Feb 23.1% 23.3% 21.5% 14.4% 9% 8.6% 100%
Mar 23.2% 21.4% 20.1% 13.9% 10.2% 11.2% 100%
become the second player in Macau. SJM Holdings occupies third place (20.3 per cent). In the second half of the table sit Melco Crown (14.2 per cent) followed by MGM China (9.7 per cent) and Wynn Macau (9.4 per cent).
Austerity not necessary yet
After the gaming revenue figures for July were known, the Secretary for Economy and Finance, Lionel Leong Vai Tac, issued a press release saying that for the moment austerity measures will not be implemented by the government. The justification comes from the fact that the average gross gaming revenue per month
Apr 21.7% 24.1% 20.0% 12.8% 9.6% 11.8% 100%
May 21.9% 26.5% 18.5% 14.2% 9.1% 9.8% 100%
Jun 21.8% 22.6% 22.2% 14.4% 10.2% 8.8% 100%
during this year still exceeds MOP20 billion, which was considered in the revised budget for this year. However, the government warned that if gaming revenues reach a value below the average of MOP20 billion per month, then austerity measures will be “immediately” implemented. As for last month, the average gross gaming revenue accounted for MOP20.037 billion. The Executive also promise to adopt a “prudent posture” in managing public finances while keeping a close eye on gaming operators and junket promoters to secure the rights of local workers.
Jul 20.3% 23.8% 22.6% 9.7% 14.2% 9.4% 100%
Source: Business Daily
Still no stabilisation for local gaming industry Casino shares in Hong Kong underperformed the overall market yesterday. Wynn Macau tumbled 4.6 per cent, MGM China Holdings 3.7 per cent and SJM and Galaxy Entertainment were both down 2.8 per cent. Sands China Ltd. lost 1.2 per cent
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he downward spiral of Macau’s casino industry is abating, albeit slightly, as a revenue slump eased a fifth straight month in July, the same month the city relaxed rules for Chinese citizens entering the gambling hub. “We haven’t seen a firm stabilisation yet,” said Tim
Craighead, an analyst with Bloomberg Intelligence. “The second half of the year has a good chance to see a revenue inflection, with new resorts coming on stream and Chinese stimulus measures hopefully supporting consumer activities.” The world’s largest gambling hub has seen revenue
decline since June 2014, hurt by an economic slowdown in China and Beijing’s anti-graft campaign that deterred highstakes gamblers. Starting July 1, Macau’s government allowed Mainland China passport holders to visit more frequently and stay longer, a surprise easing of entry rules that gave hope it would be
the first of more supportive policies.
New Openings
Wynn Macau Ltd. tumbled 4.6 per cent to HK$15.28 by the close of trading in Hong Kong with MGM China Holdings Ltd. dropping 3.7 per cent, and SJM Holdings Ltd. and Galaxy Entertainment Group
Ltd. both down 2.8 per cent. Sands China Ltd. lost 1.2 per cent. The Hang Seng Index fell 0.9 per cent. Gross gaming revenue has fallen 36.7 per cent year-todate, and may fall 30 per cent for the whole of 2015, according to the median estimate of 11 analysts surveyed by Bloomberg. The industry is expected to rebound with a 4.5 per cent gain in 2016, according to the median estimate of 10 analysts. The industry’s decline has been easing since February when revenue plunged by a record 48.6 per cent, and sets “a trend we expect to continue through the remainder of the year,” Sterne Agee CRT analyst David Bain wrote in a note on July 27. Casino operators are hoping a wave of new resorts will draw tourists and gambling revenue back to Macau, with Galaxy opening two new gambling resorts in May, marking the city’s first new casino projects since 2012. Melco Crown Entertainment Ltd. is expected to announce an opening date for its $3.2 billion Studio City resort this week. Bloomberg
6 | Business Daily
August 4, 2015
Macau Brands
Trends
That little black dress Raquel Dias newsdesk@macaubusinessdaily.com
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ou might not know this but it wasn’t until very recently that black became a thing in the fashion industry. Until Miss Coco Chanel decided to go out in a black dress and pearls, black was used for two purposes only: Mourning or working. That’s righy, only the poorest class of people would dress in black and the reason was simple: it was a lot easier to keep clean. In the era of the industrial revolution, with all the dust, coal and dirt, most could not afford to wear light-coloured clothing. That is why, still today, we use the terms ‘white collar’ and ‘blue collar’. The first refers to the middle-upper class who worked in offices and could afford to wear white shirts, the second to the factory workers who had to dress in dark-coloured uniforms. So you see, Coco Chanel was not just making a fashion statement; she was truly making a bold and rebellious move, as she was known for. Dressing women in black back then was probably as controversial as putting them in trousers. But she did it. In 1926, she published her design in American Vogue, the magazine called it Chanel’s Ford (after the black Model-T) and women everywhere adored it. You can argue that when a woman designs for women, she knows best. Chanel certainly did. Sure, it was great to wear all the colours of the rainbow, but when push comes to shove, we want something that looks good and is easy to wear. In an instant, the black dress, or LBD, became appropriate for any possible circumstance.
Construction workers' daily wage growth slows in Q2 The Q2 average daily wage was MOP704, up 7.2 pct year-on-year and is a slowdown from the 9 per cent of the same period in 2014 and 2013 Stephanie Lai
sw.lai@macaubusinessdaily.com
T
he average daily wage growth of construction workers employed here slowed yearon-year in the second quarter when compared to the same quarter in 2014 and 2013, the latest data released by the Statistics and Census Service (DSEC) shows. The second-quarter average daily wage of construction workers was MOP704 (US$90), down 3 per cent quarter-on-quarter but has increased by 7.2 per cent compared to a year ago. The quarterly decline seen in construction workers' wages has been due to “an increase in low-wage workers engaging in infrastructure construction”, the census service said. The 7.2 per cent year-on-year growth seen in the second-quarter construction workers' average daily wage has slowed from the 9 per cent growth seen in the same quarter in the two previous years, the official data indicates. A quarterly decline of 3.3 per cent was seen in the average daily wage of
skilled and semi-skilled construction workers, which reached MOP707 in the second quarter of this year. But the figure was about 7 per cent higher than a year ago. The average daily wage of structural iron erectors, the costliest of the principal occupations in the skilled construction works sector, dropped 0.9 per cent quarter-onquarter to MOP927 in the April-June period. This is also the category that shows the second biggest wage gap between local and non-resident workers in the second quarter, which amounted to MOP584 as locals could earn MOP1,343 as a structural iron erector, while non-residents earned only MOP759.
Construction materials
Concrete formwork carpenter is the occupation that saw the biggest wage gap between local and non-resident workers in the second quarter, which amounted to MOP670 as locals earned MOP1,359 while non-residents pocketed less than
MOP690, the official data shows. The overall average daily wage of a concrete formwork carpenter was MOP860 in the second quarter, up by a quarterly 1.9 per cent and was the second costliest amongst the principal construction works. Meanwhile, the average daily wage of an unskilled construction worker was MOP405 by the second quarter, up 3.1 per cent compared to the previous quarter and 4.7 per cent higher than a year ago. After discounting the effect of inflation, the second-quarter wage index of construction workers (98.2) decreased slightly by 0.2 per cent quarter-on-quarter in real terms, whilst that of local construction workers (124.9) increased by 2 per cent. The second-quarter price index of construction materials for residential buildings (131.6) edged up 0.2 per cent quarter-on-quarter, but was 2 per cent higher than a year ago, the census service's data shows.
Business Daily | 7
August 4, 2015
Macau Galaxy announces salary increase effective July Local gaming operator Galaxy Entertainment Group has announced a salary hike for its eligible workers who joined the company prior to April 1 this year, effective from July, according to an internal notice of the company. However, in the notice, the gaming operator did not indicate the percentage of hike, claiming ‘eligible team members will be notified of their new salary by individual letter’. Meanwhile, the company indicated in the notice that it expects the ‘new normal’ of the Macau economy will continue pressuring its profits.
HSBC profits increase 10.6 per cent on back of Hong Kong earnings In Macau, the London-based company is closing its non-life insurance branch despite the company generating 45.7 per cent of its total profits in neighbouring Hong Kong
H
SBC Holdings profit before taxes increased 10.6 per cent year-on-year during the first half of the year to US$13.63 billion from US$12.34 billion in 2014. The results were boosted by a strong performance in Hong Kong, to where the London-based bank is considering moving its headquarters. The fact that stock connection between Shanghai-Hong Kong generated an equity flow above expectations was also essential for the results
presented yesterday by the multinational. “Although equity flows into emerging markets retreated, equity volumes in Hong Kong and Mainland China expanded markedly with the Shanghai-Hong Kong stock connect system surpassing all expectations in terms of flows in both directions. As a result, HSBC’s wealth management revenues in Hong Kong from equities, mutual funds and asset management increased significantly”, the Chairman of the bank, Douglas Flint, explained in
the earnings report. In terms of the breakdown of the profits before taxes, more than two thirds were generated in Asia, which amounting to US$9.40 billion of US$13.63 billion, representing 69 per cent of the total profit. The Hong Kong market alone generated US$6.23 billion of the total profit (45.7 per cent). The numbers concerning Macau were not revealed. Europe is the second most important market for the bank, where it generated US$2.21 billion (16.2 per cent). Finally,
the Middle East and North Africa generated US$0.90 billion (6.6 per cent), North America US$0.69 billion (5 per cent) and Latin America US$0.43 billion (3.2 per cent). The results come after the company announced in June that it would reduce the number of jobs by around 50,000, most through the sale of businesses in Brazil and Turkey but also from the closedown of unprofitable units. In Macau the company is involved in banking and life and non-life insurance.
However, the non-life insurance branch, which acts in the territory under the name of HSBC Insurance is currently running down operations, according to the Monetary Authority of Macau. Yesterday, HSBC announced the sale of its Brazilian operations to the local bank Banco Bradesco for US$5.2 billion. This operation will bring to an end the involvement of the company in Brazil, where it has had a presence since 1997. J.S.F.
8 | Business Daily
August 4, 2015
Greater China
Investors bu wealth prod
The products are part of that facilitates lending ou Justina Lee
A
larmed by a rout that wiped US$4 trillion of value from Chinese stocks, investors are driving demand for bonds by returning to wealth-management products (WMPs). The average expected yield of WMPs fell to 4.8 percent last week, compared with 5.1 percent three months ago, according to data from Chengdu-based consultancy CNBenefit. This shows more investors are diverting funds from equities to fixed-income wealth products, says Ping An Securities Co., a unit of China’s second-largest insurer. The inflows have helped pushed the 10-year sovereign yield down 12 basis points in July, the first drop in three months, to 3.48 percent. While a 10 percent decline in the Shanghai Composite Index sparked memories of the 35 percent plunge from June 12 that shook investor confidence, an ascendant bond market will help achieve the Chinese leadership’s goal of pushing down borrowing costs to support an economy expanding at the slowest pace in six years. “A lot of money has flowed back from stocks to banks, which
In broken markets, a US$310 billion stock is transformed The five most volatile stocks among the 100 largest members of the Bloomberg World Index are all Chinese Kyoungwha Kim and Sarah McDonald
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etroChina Co. has about 11 billion barrels of oil reserves, half a million employees and sales that exceed the annual economic output of South Africa. Not too long ago, stats like that were important to traders of PetroChina shares. Now, they could hardly matter less. As state-linked funds intervene to prop up the nation’s sinking stocks, PetroChina has transformed into a speculative bet on how much money the government is plowing into equities on any given day. The US$310 billion oil producer’s top weighting in the benchmark Shanghai Composite Index makes it an ideal target for funds trying to influence the broader market. The result has been a surge in PetroChina’s volatility to the highest level among the world’s 100 biggest companies -- fluctuations so big that they top 95 percent of the stocks in America’s small-cap Russell 2000 Index. The swings are another sign of how state
intervention is leading to price distortions in the world’s second-largest equity market. “This market is not a stock market that’s driven by fundamentals,” Donald Straszheim, the head of China research at New York-based Evercore ISI, said in a July 30 interview on Bloomberg Television. “It’s a government operation. Beijing is calling the tune, day by day.” A gauge of 30-day price swings in PetroChina’s Shanghai-listed shares jumped to the highest since December 2007 last week. The stock moved at least 4 percent on half the trading days in July, including a record 9.6 percent plunge on July 27. The oil company’s shares fell 4.7 percent at the close yesterday, while the Shanghai Composite dropped 1.1 percent. At 82, PetroChina’s level of volatility is so high that the most comparable stock in the U.S. is Gastar Exploration Inc., an energy company with
a market value of just US$134 million.
China Life
It’s not just PetroChina getting whiplashed. The five most volatile stocks among the 100 largest members of the Bloomberg World Index are all Chinese. They include China Life Insurance Co., Bank of China Ltd. and China Petroleum & Chemical Corp. Price swings on the Shanghai Composite climbed to the highest level since 1997 last week. “Government support induces speculation,” said Ronald Wan, the chief executive at Partners Capital International in Hong Kong. A lack of transparency from authorities about their support measures is also fuelling volatility. After a government rescue package helped drive a 16 percent rebound in the Shanghai Composite from its July 8 low, that support appeared to vanish without warning last week’s Monday,
when the gauge plunged 8.5 percent. The rout left analysts to guess whether officials shifted their policy stance or were just overwhelmed by a flood of sell orders. China’s measures to stabilize the stock market, including suspending initial public offerings, are temporary, the securities regulator said on Friday.
Earlier in the week, it denied speculation support funds had exited the market. For investors who still care about fundamentals, the best place to trade PetroChina shares may be on Hong Kong’s exchange, where volatility in the company’s stock is 64 percent lower and valuations are 45 percent cheaper. Bloomberg News
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August 4, 2015
Greater China
urned by rout buy ducts as bonds gain
Authorities freeze US fund Citadel’s account
China’s opaque shadow-banking network utside the regulated banking system
A lot of money has flowed back from stocks to banks, which then have a stronger demand for allocation Yan Yan, analyst, China Guangfa Bank
then have a stronger demand for allocation,” said Yan Yan, an analyst at China Guangfa Bank Co. in Shanghai. “When stocks were doing very well, banks needed to boost yields for WMPs to retain funds, but now their motivation to do so is weaker.” WMPs are popular in China, offering yields higher than the legally capped deposit rate of 3 percent and a perceived implicit guarantee from the banks that sell them. Their assets were 15 trillion yuan (US$2.4 trillion) at the end of 2014, according to the latest available data from the China Banking Wealth Management Registration System.
Shadow banking
The products are part of China’s opaque shadow-banking network that facilitates lending outside the regulated banking system. Regulators are trying to curb such financing and turn the wealth industry into an assetmanagement business. The China Banking Regulatory Commission in December urged banks to directly invest money raised from WMPs.
Asia dividend funds turn to Mainland Nichola Saminather
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sian dividend-paying equity funds are reducing investments in traditional safe bets in favour of companies with rising dividend pay-outs to guard against investors selling out from the funds when U.S. interest rates rise. Dividend funds usually invest in stable assets that yield more than bonds and pay predictable returns, but these will become less attractive to investors amid rising returns from Treasuries when the Federal Reserve starts to hike rates. Some fund managers say they are shifting from traditional favourites such as investment trusts, telecoms and utilities to emerging market companies offering faster earnings growth and cheaper valuations. Dividend funds are buying Chinese state-owned enterprises, Indian banks and Taiwanese technology firms, where pay-outs, although currently lower, show promise of rising over time. “Absolute dividend yields might be slightly lower but the prospects for growth are much better, particularly if the Fed starts to increase rates,” said Robert Davis, who manages the Asia and emerging markets high dividend funds of NN Investment Partners.
Companies listed on China’s CSI300 index offer an average dividend yield of 1.5 percent and India’s Sensex 1.4 percent. In comparison, firms in Australia yield 6 percent, Singapore and Hong Kong 3.3 percent, and Taiwan 3.8 percent. While funds are nervous about China’s turbulent share markets and government intervention to halt plunging prices, dividend funds say they are buying cheaper and less volatile Hong Kong-listed shares of Chinese companies. “We still believe in the mid- to long-term structural reform story in China, albeit it will take longer than our original expectations,” said Sat Duhra, who manages Henderson’s Asia dividend income fund. “We mostly hold H-shares which offer genuine value at this point.”
Attractive dividends
With U.S. rates near zero, it will be sometime before Treasury yields become competitive with dividend funds. A m o n g NN I P f u n d ’ s t o p holdings are Taiwan Semiconductor Manufacturing Co, China Petroleum & Chemical Corp - one of China’s state-owned enterprises which has
Managers of WMPs, which are savings plans that banks sell to circumvent lending restrictions, invest about 70 percent of their assets in fixed-income and bank deposits, according to China Banking Wealth Management Registration System data. “WMP yields are to a large extent the risk-free rate to the general public, so this shows funding costs are falling across society,” said Shi Lei, head of fixed-income research at Ping An Securities. Managers mostly buy three- to five-year corporate notes with a rating of at least AA, Shi said. The five-year yield on such bonds fell 33 basis points in July to 5.13 percent. It dropped to 5.11 percent on July 24, the lowest since 2010. “WMP yields should have fallen earlier this year, but in April and May, the heated stock market gave them a new investment target,” Li Linxia, a CNBenefit researcher, said in an e-mail. “Now that stocks are getting more volatile, the funds WMPs had invested in equities are gradually being taken out, and fewer newly issued products are entering stocks.” Bloomberg News
paid generous dividends - and Shinhan Financial in South Korea, where a new law taxing excess corporate cash has led to several dividend “surprises.” Dividend funds will also attract capital as central banks are still easing in Europe and Asia, said Peter Monson, who co-manages Nikko Asset Management’s Shenton Asia Dividend Equity Fund in Singapore. Three of the five Asia ex-Japan equity vehicles with the most investment fund inflows from January to June were dividend funds, drawing US$5 billion between them, according to data from Lipper, a Thomson Reuters unit. That compared with US$241 million a year earlier, when two of them saw net outflows. The Shenton Asia fund prefers Taiwanese technology companies, whose strong and sustainable cash flows support both investment and pay-outs, Monson said. Monson also likes India’s “incredibly profitable companies generating substantial amounts of cash flow.” “Asian earnings have continued to grow,” said Citi Asian strategist Markus Rosgen. “Not so in Europe, Middle East and Africa or Latin America.” Henderson’s fund too is boosting holdings of dividend-growth stocks. Holdings include Bharti Infratel in India, and Gree Electric Appliances and Zhengzhou Yutong Bus in China. “Even if bond yields go up, if a stock increases its DPS (dividend per share) by 50 percent, 100 percent, that stock will perform very differently to a stock that’s just high yield and doesn’t have any kind of growth,” Henderson’s Duhra said. Reuters
China’s markets regulator has frozen a trading account linked to Citadel Securities, a unit of the U.S. group that also owns hedge fund Citadel LLC, as Beijing battles against speculators to prop up China’s ailing stock markets. The regulator, which has declared war on “malicious” short selling, has been at the forefront of a government-orchestrated campaign to prevent a meltdown in the two main stock markets, which have tumbled some 30 percent since mid-June. The Citadel statement did not say why the Shenzhen-based trading account had been suspended.
Cheung Kong to sell Shanghai complex Cheung Kong Property Holdings, owned by Asia’s richest man Li Ka-shing, is seeking to sell a large commercial development in Shanghai in what could be the largest real estate transaction in China, according to two industry sources with knowledge on the matter. Local media reported late last week that the Hong Kong developer is asking for as much as 20 billion yuan (US$3.22 billion) to sell the Century Link development that includes a shopping mall and twin office buildings totalling 269,000 square meters and is scheduled to open next year.
Domestic Airbnb-like Tujia to expand overseas Tujia, a Chinese vacation rental company similar to home rental firm Airbnb Inc, said yestrday it had raised US$300 million from a group of investors to expand its business overseas, increase marketing and offer new products. The deal values Tujia at more than US$1 billion, the Chinese company added without disclosing the size of the stake the investors bought. By comparison, Airbnb, which operates around the world, is valued at US$20 billion. Hong Kongbased All-Stars Investment Ltd, which has invested in Chinese smartphone maker Xiaomi Inc and taxi hailing app Didi Kuaidi, led the funding round.
C.bank lends US$47 bln to banks in July PBOC injected 292.9 billion yuan (US$47.2 billion) into banks in July to boost lending, it said yesterday, in yet another step to bolster growth in China’s cooling economy. A total of 250 billion yuan of six-month medium-term lending facility were injected into unidentified financial institutions. A separate 42.9 billion yuan of pledged supplementary lending was made to China Development Bank to fund the refurbishment of shanty towns.
Beijing police bust fake government recruiters Police arrested a group of fake government employers who were tricking job seekers into paying bribes to get a position in China’s central government. More than 30 non-locals were duped into paying around 600,000 yuan (US$96,660) after attending recruitment seminars organized by a non-existing committee, Beijing authorities said. A man surnamed Zhou, who reported the crime on July 7, said a self-claimed official from the committee promised an “operation fee” of 800,000 yuan could ensure a post in a central ministry. The information led to the arrests of three people while they were holding another seminar.
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August 4, 2015
Greater China
Private survey forecasts factory activity shrinks most in 2 years Slowdown is forcing many Western companies to take a hard look at their businesses there, leading many to reduce investments, costs and product lines
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hina’s factory activity shrank more than initially estimated in July, contracting by the most in two years as new orders fell and dashing hopes that the world’s secondlargest economy may be steadying, a private survey showed on Monday. The report followed a downbeat official survey on Saturday that showed growth at manufacturing firms unexpectedly stalled, reinforcing views that the cooling economy needs more stimuli even as it faces fresh risks from a stock market slump. Fears of a full-blown market crash have added a new sense of urgency for policymakers in Beijing, with many analysts expecting more support measures to be rolled out within weeks. The final, private Caixin/Markit China Manufacturing Purchasing Managers’ Index (PMI) dropped to 47.8 in July, the lowest since July 2013, from 49.4 in June. That was worse than a preliminary “flash” reading of 48.2 and marked the fifth straight month of contraction, as indicated by a reading below 50. New orders reversed into contraction last month after growing in June, while factory output shrank for the third consecutive month to hit a trough of 47.1, a level not seen in more than 3-1/2 years. The survey showed deteriorating business conditions forced companies to cut staffing levels for the 21st straight month. Factories also had to reduce selling prices to a six-month low due to increasing competition, squeezing profit margins. “We believe the stock market panic
in early July chilled economic activity, which is what the manufacturing PMIs picked up,” ING economist Tim Condon said in a research note ahead of the Caixin PMI release. But Condon said the factory weakness may be transitory if unprecedented stock market support measures from Beijing in recent weeks succeed in halting panic selling. The official factory Purchasing Managers’ Index (PMI) at the weekend was also weaker than expected, falling to 50.0 in July from June’s sluggish growth reading of 50.2. The official survey focuses more on larger companies. While growth in the services sector picked up slightly, offsetting some of the drag from persistent factory weakness, services companies reported new orders were cooling and said they were cutting jobs at a faster pace. China Glass Holdings Ltd on Friday became the latest in a growing list of firms issuing profit warnings due to weakening demand, saying it expected to post a first-half loss. China’s slowdown is also forcing many Western companies to take a hard look at their businesses there, leading many to reduce investments, costs and product lines and to tackle increasing bad debts. “We had five fabulous years in China, of course, where we grew strong double-digit, and it has been gradually slowing down. Currently, in China we had negative order intake,” Frans van Houten, chief executive of Dutch electronics group Philips NV, told analysts last week.
“Going forward, we need to be much more modest on expectations with regard to China growth; that’s just being realistic,” he said.
More support measures
The People’s Bank of China (PBOC) has already cut interest rates four times since November and repeatedly loosened restrictions on bank lending in its most aggressive stimulus campaign since the global financial crisis. Beijing has also intervened heavily in recent weeks to try to stabilise tumbling stock markets, which has raised questions over its commitment to free-market reforms, seen as essential for its planned transition from an export-led economy to one based on consumption and services. While there is little evidence yet that the 30-percent stock market slump since mid-June has hit spending, analysts say wild price swings will rattle consumer and business confidence and could dampen activity in the financial services sector if Beijing can’t keep investors from fleeing the market. Buffeted by softening investment growth, unsteady domestic and foreign demand and a cooling housing market, China’s growth is widely expected to grind to its lowest in a quarter of a century this year at 7 percent, from 7.4 percent in 2014. After months of weakness, industrial output, retail sales and investment all grew slightly more than expected in June, raising hopes that earlier policy easing measures were finally starting to take effect.
KEY POINTS July factory activity shrinks more than feared - private survey Official reading showed growth stalled, services edged up Reinforces expectations of more policy easing soon Stock market slump adding fresh risks for economy
In an acknowledgement of the difficulties that lay ahead, China’s Politburo, the decision-making body of the Communist Party, promised last week to step up policy adjustments to keep growth stable. If the stock market steadies, ING’s Condon said Beijing will still need a continued turnaround in its housing market to hit its 7 percent growth target for this year. However, while home sales and prices are showing signs of improving slowly in bigger cities after a yearlong slump, a massive overhang of unsold homes could keep real estate under pressure well into next year, deterring developers from starting new construction. Reuters
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August 4, 2015
Asia
Indonesia’s second quarter growth expected to be slowest since 2009 A central bank official has said Bank Indonesia will have room to cut its key rate, which has been kept at 7.50 percent since February
Full-year GDP growth may even be lower if we don’t see any improvement in the pace of fiscal spending going forward Gundy Cahyadi, economist, DBS
Indonesian government (pictured on the presentation day) is facing a bureaucratic bumpy road to release its budget
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ndonesia’s economic growth is expected to have slowed in the second quarter to the weakest level in nearly six years, despite the government’s promise to jumpstart the economy after a dismal first quarter. Yet, in the six months through June, President Joko Widodo’s administration has only disbursed 10 percent of funds earmarked for investment, while spending less than 40 percent of its budget. Trade data was also discouraging, as exports and imports tumbled for an eighth straight month in June.
“High frequency indicators - including loan growth, vehicle sales, government budget disbursement and trade suggest weak activity on almost all fronts,” said Chua Hak Bin, an economist with Bank of America Merrill Lynch. The median forecast of 22 analysts in a Reuters poll is for growth at 4.61 percent, even weaker than the 4.71 percent growth posted in January-March. The failure to galvanise the economy was reflected by weak corporate earnings.
PT Astra International Tbk, a major conglomerate, PT Semen Indonesia Tbk, the country’s largest cement maker and PT Indofood Sukses Makmur Tbk, one of the world’s biggest instant noodle makers, have all disappointed. A rare bright spot was foreign direct investment (FDI), which on an annual basis grew at its fastest pace since 2013 in the second quarter, according to investment board data that excludes investment in banking and the oil and gas sector.
Manufacturing activity looked to have stayed weak, contracting for a tenth straight month in July, according to a Nikkei/Markit survey that said factories had shed jobs at the fastest pace since the survey began in 2011. The grim outlook for the second quarter pointed out to a sluggish full-year growth, analysts said. The median estimate for full-year growth was at 4.9 percent according to a recent Reuters poll, well below the 5.3 percent they had forecast at the last poll in April. The central bank has said it will be cautious over
using interest rate cuts to support growth, as it has to assess the impact on the exchange rate, inflation and expectations that U.S. interest rates will rise. A central bank official has said Bank Indonesia will have room to cut its key rate, which has been kept at 7.50 percent since February, once the Federal Reserves ends the uncertainty in global markets by raising rates. Reuters
Australian home price surge to keep RBA at bay Price pressures outside of housing remain well contained though Wayne Cole
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ome prices across Australia’s capital cities surged in July as demand in Sydney and Melbourne remained red hot, presenting an increasingly high hurdle to further cuts in interest rates even as the wider economy struggles. Annual growth in home values picked up to 11.1 percent, from 9.8 percent in June. Most of the gains were concentrated in Sydney, where prices were up over 18 percent for the year, while Melbourne advanced by 11.5 percent. The second straight month of sharp price rises comes as regulators tightened the screws on investment lending by banks aiming to temper a boom in borrowing for buy-to-let. Indeed, the heat in housing is a major reason the Reserve Bank of Australia (RBA) central bank is widely expected to hold rates at 2 percent at its monthly policy meeting today. A Reuters poll of 21 analysts found all but one expected rates to stay
steady this week and most predicted no more cuts at all for this cycle. “There are concerns that the benefits of cutting rates further could be outweighed by the costs,” says Paul Bloxham, chief economist Australia at HSBC. “The authorities already have significant concerns about the exuberance in the Sydney housing market. This could pose a risk to growth in the future if prices were to correct lower.” The risk of a pullback can only grow as prices race higher. Yesterday’s figures from property consultant CoreLogic RP Data showed prices across all of Australia’s major cities surged 2.8 percent in July, on top of a 2.1 percent jump in June.
Crazy prices
Tim Lawless, head of research RPData, noted that since home prices began to take off back in May 2012, Sydney had boasted gains of almost 48 percent while Melbourne added 32 percent.
KEY POINTS Home prices jump in Sydney, Melbourne amid loan clamp down Broader inflationary pressures well contained RBA almost certain to hold rates at today meeting It was those sorts of numbers that led RBA Governor Glenn Stevens to call the Sydney market “crazy” and to warn that ever lower rates could backfire if they encouraged an unsustainable spike in prices. Yet the rise in values is also bolstering household wealth and helping offset weakness in wages. Lawless estimated that the total value of Australian housing had
Reserve Bank of Australia Governor Glenn Stevens called the Sydney market “crazy”
increased by just over half a trillion dollars in the past 12 months to reach A$6 trillion. That compares with outstanding housing debt of around A$1.3 trillion. A monthly measure of consumer price inflation from TD Securities and the Melbourne Institute rose at an annual pace of 1.6 percent in July, comfortably below the RBA’s target band of 2 to 3 percent. Reuters
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August 4, 2015
Asia
Indian companies demand central bank action Some economists worry the RBI is excessively focused on prices Rafael Nam and Suvashree Choudhury
I’m disappointed with the RBI… I just don’t know if they care enough about the industrial sector Praveen Sood, chief financial officer, HCC group
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hen India’s Hindustan Construction Ltd (HCC) was building a bridge in 2008 to transform the congested commute in Mumbai, its stock was at a record high as low interest rates had sparked a construction boom. Today, like many small- and mid-sized Indian firms, Hindustan Construction is struggling, after a borrowing binge that saw its debt
surge from US$674 million in fiscal year 2007/2008 to US$1.6 billion in 2014/15, according to Thomson Reuters data. Companies are still struggling to recover from those years of exuberance, and say that Reserve Bank of India (RBI) Governor Raghuram Rajan’s caution in cutting rates despite historically low inflation is making it harder for them to get back on track.
Having cut India’s main lending rate by three-quarters of a percentage point to 7.25 percent this year, the RBI is widely expected to keep it unchanged at its next policy review today, though market watchers predict one more cut by the end of the year.
For many bosses, that is not enough. The growing discontent comes as wholesale inflation has declined for eight consecutive months, while consumer inflation remains far from the double-digit levels less than two years ago and within the RBI’s target of 2 to 6 percent. At the same time, the Indian economy is widely seen as weak, with much scepticism over official data in May which showed its growth overtook China’s. Corporate profits are hurting. An analysis of 70 companies with a market capitalisation of at least US$100 million showed net income fell by 5 percent in April-June, the second consecutive quarterly decline, according to Thomson Reuters data. HCC, for example, reported last week that its April-June net profits slumped by about 70 percent to 80.2 million rupees. The builder is looking to sell additional shares and has sold stakes in a commercial complex in Mumbai and in a highway, with proceeds going to service debt or interest costs. Some economists now worry the RBI is excessively focused on prices, having this year shed its previous policy of managing multiple objectives towards one that targets consumer inflation while “keeping in mind the objective of growth”. Soumya Kanti Ghosh, chief economic adviser of State Bank of India, argues that weak commodity prices are keeping inflation down, giving the RBI scope to do more to help companies. “The RBI should also try to boost growth,” he said. Reuters
Snapdeal to raise US$500 mln from Asian firms The move is a show of faith from Alibaba, SoftBank and Foxconn in fast-growing Snapdeal Paul Carsten
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ndian online marketplace Snapdeal is set to raise $500 million in investment from Alibaba Group Holding Ltd, SoftBank Group Corp and Foxconn, the trading name of Hon Hai Precision Industry Co Ltd, a person familiar with the matter said on yesterday. The person, who declined to say how much Snapdeal would be valued after the investment, said the deal could be finalised within a few days at the earliest though it may also take weeks. Online tech publication Re/code first reported the investment on Sunday citing multiple sources, saying the deal had already concluded.
The Indian firm competes with Flipkart Online Services Pvt Ltd and the local subsidiary of Amazon.com Inc in the country’s online shopping market, which Morgan Stanley estimates will be worth US$102 billion by 2020. Snapdeal and SoftBank were not available for immediate comment. Alibaba and Foxconn declined to comment. The person was not authorised to disclose the matter and so declined to be identified. The deal represents Chinese e-commerce firm Alibaba’s first direct investment in India. Alibaba affiliate Ant
Financial Services Group in February agreed to buy 25 percent of Indian payment services provider One97 Communications.
In October, Snapdeal, which connects small businesses with customers in an online marketplace, secured a US$627 million
investment from Japan’s SoftBank, itself an early backer of Alibaba. Alibaba was in direct funding talks with Snapdeal in March, but opted to instead invest together with SoftBank and Foxconn, the person familiar with the US$500 million investment said. Foxconn founder Terry Gou told shareholders at an annual meeting two months ago that India is a key market this year for his group. In March, Snapdeal Chief Executive Kunal Bahl said his company was not looking to raise money immediately and was well capitalised for the next couple of years. Reuters
editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Luis Gonçalves, Michael Armstrong, Stephanie Lai, Óscar Guijarro, Kam Leong, Joanne Kuai GROUP SENIOR ANALYST José I. Duarte Brands & Trends Raquel Dias Designer Francisco Cordeiro WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.
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Business Daily | 13
August 4, 2015
Asia Indian factory growth bucks Asia trend Indian manufacturing activity expanded at its fastest pace in six months in July as new export orders accelerated, a business survey showed yesterday. The Nikkei Manufacturing Purchasing Managers’ Index, compiled by Markit, rose to 52.7 in July from June’s 51.3, bucking weakness seen across much of the rest of Asia. The 50-mark demarcates contraction from expansion. “This reflects stronger increases of new orders and output. Furthermore, the sector was also boosted by the quickest expansion in export orders since February,” said Pollyanna De Lima, economist at Markit.
Downtown Ho Chi Minh City
Vietnam’s fast rising property market leaves hard times behind
South Korea factory PMI up
U.S. research agency JLL rates Ho Chi Minh City as the fastest improver among the 120 cities in its Momentum Index My Pham
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rought to its knees when its property market bubble burst four years ago, Vietnam is riding into another boom, with construction starting in Ho Chi Minh City on two of the world’s tallest skyscrapers and buyers snapping up new projects fast. The speed of the market’s turnaround has been startling. Successful property transactions have doubled from a year ago, and developers have halved their unsold inventory from US$6 billion at the peak of the crisis at the start of 2013. “I can sell about three to five units per month now, much better than before, when I could only sell the same in the whole year”, said Dung, a freelance property broker in Hanoi, who asked to be referred to by her first name. The Southeast Asian country’s Communist government is hoping that lessons learnt from the last burst bubble will help prevent the latest property cycle crashing like the last one. Buyers and developers defaulted on loans, leaving banks crippled by toxic debt and unable to provide credit to tens of thousands of failing businesses. The empty shells of abandoned, halfbuilt condominiums and office blocks littered cities, showing how Vietnam had hit the wall.
We are seeing a lot of both local and foreign investors and developers trying to get a foothold Stephen Wyatt, Vietnam head, U.S. research agency JLL
Clearing up the mess, the state’s asset management firm has bought US$8 billion of non-performing loans a lot of which stemmed from real estate. The government is restructuring the banking sector. In 2013 it gave the real estate sector a US$1.4 billion stimulus and has placed stronger financial requirements on property developers. From July 1, the government relaxed rules on investment by foreign firms, foreign buyers and “Viet Kieu”, the overseas Vietnamese whose families fled their homeland when the communist north conquered the U.S.-backed south in 1975. The moves to open up the property market were the latest in a slew of reforms that experts say shows the party’s progressives are in the driving seat heading into a scheduled leadership change in January.
Buyers from overseas
Easing restrictions on buyers from overseas has had pronounced results. Vingroup recently held two sales opening events for projects exclusively targeting foreigners and “Viet Kieu” in Hanoi and Ho Chi Minh City. The property firm said it received deposits for 112 apartments within two hours. According to The Eastern, a condominium jointly developed by a Vietnamese and a South Korean company, 70 percent of units sold from May to July were to foreigners and firms buying accommodation for foreign employees working at Saigon Hi-Tech Park, home to firms like Intel and Samsung. Underlying demand, however, should also come from one of Asia’s fastest rates of middle class expansion, with the economy growing 6.28 percent in the first half of this year - the fastest pace since 2008. But it is the overseas money that excites realtors most. “There are 4.2 million Vietnamese overseas and about 30,000 foreign executives working here longterm,” Le Hoang Chau, president of Vietnam’s Real Estate Association, told Reuters. “That shows potential for a bright future.” Units launched in Ho Chi Minh City in the first half of this year were
174 percent up on the same period in 2014 and 91 percent up in the capital Hanoi, according to the Vietnam office of global commercial real estate firm CBRE. An average high-end apartment now fetches USx$1,800 per square metre in the southern commercial hub and US$1,600 in the capital, close to pre-crisis prices and up from US$1,600 and US$1,450 respectively in 2014, according to CBRE. Having helped restore investors’ confidence, Prime Minister Nguyen Tan Dung has demanded better oversight to make sure the property market does not lead the economy off another cliff. State-run firms have been told to shun non-core investments, having burnt themselves badly by earlier forays into property. Real estate firms need to show minimum capital of just under US$1 million and they have to deposit with the state, as surety for buyers, 1-3 percent of the value of new projects.
Towers of aspiration
Fired with ambition, developers in Ho Chi Minh City aim to give Vietnam two potential entries into the top ten list of the world’s tallest buildings. Ground breaking was done last month for the 461-metre Landmark 81, and will be carried out in the final quarter for the 86-storey high Empire City Tower. Dominating a neon-lit riverside metropolis, the two projects will represent a strong statement of intent for this rapidly rising emerging market. U.S. research agency JLL rates Ho Chi Minh City as the fastest improver among the 120 cities in its Momentum Index. “We are seeing a lot of both local and foreign investors and developers trying to get a foothold,” Stephen Wyatt, JLL’s country head in Vietnam, said. There’s much room for growth, with Vietnam’s market valued at US$21 billion in 2014 by Nomura Research Institute, compared with Thailand’s US$89 billion and Singapore’s US$241 billion. Reuters
Manufacturing activity shrank for a fifth consecutive month in July but the pace eased slightly from June, a private-sector survey showed yesterday, as the export-reliant economy struggles to regain momentum. The Nikkei/Markit purchasing managers’ index (PMI) on South Korea’s manufacturing sector edged up to 47.6 in July from 46.1 in June on a seasonally adjusted basis, Markit Economics said in a statement. The June reading was the lowest since September 2012, coinciding with the height of the deadly outbreak of Middle East Respiratory Syndrome (MERS).
Bangladesh’s FX reserves hit record Foreign exchange reserves hit a record US$25.46 billion at the end of July, the central bank said yesterday, fuelled by steady exports and remittances. The slower pace of import growth, on the back of a fall in global commodities prices, also helped to boost reserves about 19 percent over the corresponding period last year. The reserves are sufficient for seven months of imports. Bangladesh’s exports in the fiscal year that ended in June rose 3.35 percent from a year earlier, to US$31 billion, led by strong garment sales, even though the pivotal industry has suffered a string of fatal factory accidents.
Japan manufacturing at 5-month high Japanese manufacturing activity expanded at the fastest pace in five months in July though not as much as initially expected, a private survey showed yesterday, suggesting economic growth may be slowly recovering after an expected second-quarter slump. The final Markit/Nikkei Japan Manufacturing Purchasing Managers Index (PMI) was a seasonally adjusted 51.2 in July, slightly below a preliminary reading of 51.4 but above a final 50.1 in June. The index remained above the 50 threshold that separates expansion from contraction for the third consecutive month.
Noble Group approached about potential investment Noble Group’s said a number of parties have approached the company about potential financing and investment options, and that it was refuting rumours that it did not have sufficient funds for a US$735 million bond redemption due today. The Singapore-listed commodities trader, which has seen its shares tumble since mid-February amid questions about its accounting practices, said it has readily available cash of well over US$1 billion. Noble also said it decided to bring forward the publication of its second-quarter results and a report by PwC on its accounting practices to August 10.
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International Euro zone factory activity steady Factory activity grew faster than previously thought in July, easing only slightly from June’s 14-month record pace as rising prices kept new orders in check, business surveys showed yesterday. July proved a fraught month for the currency union as Greece brushed with bankruptcy and, perhaps unsurprisingly, the country’s survey signalled the steepest downturn in its 16-year history. French factories also slipped back into contraction. Any signs the rest of the bloc shrugged off that turbulence will please European Central Bank policymakers and the Netherlands, Spain and Italy all enjoyed healthy growth.
UK manufacturing growth edges up British manufacturing growth picked up in July but new orders grew at the slowest pace in nearly a year, a survey showed yesterday, suggesting the factory sector would continue to drag on overall economic growth. The Markit/CIPS manufacturing purchasing managers’ index (PMI) rose more than forecast in July to 51.9. That was up from 51.4 in June - its lowest level in over two years - but well below an average of 54.3 recorded since April 2013, when Britain’s economy was starting its recovery.
U.N. agree sustainable development agenda The United Nations 193-member states agreed on Sunday on an agenda for the world’s sustainable development over the next 15 years that pledges to leave no-one behind and is now due to be formally adopted by world leaders at a summit in September. After two weeks of final negotiations and several all-night sessions, the sustainable development agenda of 17 goals and a declaration that covers implementation and review were agreed by consensus to replace eight Millennium Development Goals. There was a standing ovation and cheering by diplomats when the agenda was agreed.
Greece’s economic sentiment dives Economic sentiment hit its lowest level in almost three years in July, hurt by banking restrictions and political uncertainty in the country, a monthly report by the IOBE think tank showed yesterday. The index, which measures expectations in industry, services, retail, and construction along with consumer confidence, fell to 81.3 points last month from 90.7 in June, its lowest level since October 2012, according to the report. The report said that this was the result of unfavourable economic developments following a July 5 referendum Greece held on a cash-for-reform deal.
German carmakers buy Nokia maps German carmakers BMW, Audi and Mercedes, will pay around 2.5 billion euros (US$2.75 billion) to buy Nokia’s maps business, a transformational deal that will help them to develop self-driving cars. Daimler BMW and Audi will each hold an equal stake in the business, known as HERE, keeping it from falling into the hands of a new rivals which are emerging from Silicon Valley. The premium carmakers agreed to pay 2.5 billion euros. The deal has an enterprise value of 2.8 billion euros, including liabilities worth nearly 300 million euros, Nokia said.
Oil pushed to six-month lows by oversupply concerns The price has lost nearly 20 percent so far in the third quarter Amanda Cooper
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il fell to its lowest in six months yesterday, knocked by fresh evidence of growing oversupply and data highlighting slowing demand in China, leaving crude prices set for their weakest third-quarter performance since 2008. A Reuters survey last week showed oil output by the Organization of the Petroleum Exporting Countries (OPEC) reached the highest monthly level in recent history in July. Saudi Arabia and other key members are showing no sign of wavering in their focus on defending market share instead of prices, which have fallen 9 percent this year. The lack of a plan by OPEC to accommodate the return of more Iranian oil further fuelled supply worries. Iran expects to raise output by 500,000 barrels per day (bpd) as soon as sanctions are lifted and by a million bpd within months, its Oil Minister Bijan Zanganeh has said. “The market seems to again focus on the supply situation ... one of the difficulties is that Iran may be coming back and there is no obvious sign that OPEC will make room for them,” Ric Spooner, chief market analyst at CMC Markets in Sydney said. Brent crude oil touched a low of US$50.85 earlier in the day, its weakest since January 30. The price has lost nearly 20 percent so far in the third quarter, which would make this the biggest slide for the three months from July to September since 2008. U.S. crude fell 75 cents to
KEY POINTS Brent hits lowest since early Feb; WTI touches 4-month low OPEC oil output hits new high in July -Reuters survey Iran says to raise output by 500,000 bpd once sanctions lifted China manufacturing growth unexpectedly stalls in July
US$46.37 after hitting the lowest in four months at US$46.35. Frontmonth prices lost 20.8 percent in July, the biggest monthly drop since October 2008. Growth in Chinese manufacturing activity unexpectedly stalled in July as demand at home and abroad weakened, an official survey showed
on Saturday, adding to concern about the economy stemming from this quarter’s 15-percent drop in Chinese stock markets. Hedge funds and other speculators have slashed their bullish exposure to U.S. crude, or WTI, to the lowest in nearly five years, trade data showed on Friday, as local drillers continue to add rigs and pump at full throttle despite a global oil glut. “The Reuters survey on OPEC production is bearish, rig count is bearish ... the dollar is a touch stronger and the Chinese stock market is also down,” said PVM Associates analyst Tamas Vargas. Reuters
Canada calls October 19 election with focus on sluggish economy Opposition leader said current Prime Minister had presided over the worst economic growth record of any prime minister since 1960 David Ljunggren
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anadian Prime Minister Stephen Harper called a parliamentary election for October 19, kicking off a marathon 11-week campaign likely to focus on a stubbornly sluggish economy and his decade in power. Polls indicate Harper’s right-ofcentre Conservative Party, which has been in office since 2006, could well lose its majority in the House of Commons. That would leave him at the mercy of the two main centre-left opposition parties, which could unite to bring him down. Minority governments in Canada rarely last more than 18 months. Harper, 56, says only he can be trusted to manage an economy struggling to cope with the after-
effects of a global economic slowdown and a plunge in the price of oil, a major Canadian export. Opposition parties favoured “disastrous” policies such as higher spending and more debt, he said. Five of Canada’s last six election campaigns have lasted the minimum length of just over five weeks. The Conservatives have deep pockets and the campaign - the longest since the 1870s - could boost their chances by allowing them to run a wave of attack ads. Opposition parties say this is an abuse of the system. Harper said the long campaign would let voters properly examine the parties’ platforms and played down the idea he was trying to outspend rivals.
“In terms of the fact we are a better financed political party, a better organized political party and better supported by Canadians, those advantages exist whether we call this campaign or not,” he said after launching the election. Most recent polls show the Conservatives slightly trailing the left-leaning New Democrats (NDP), who have never governed Canada. The Liberals of Justin Trudeau trail in third. The NDP and the Liberals say Canada needs a change from Harper, who has cut taxes, increased military spending, toughened criminal laws and streamlined regulations governing the energy industry. Reuters
Business Daily | 15
August 4, 2015
Opinion Business
wires
U.S. oil storage becomes big business
Leading reports from Asia’s best business newspapers
John Kemp
Reuters market analyst
TAIPEI TIMES Transactions for existing homes in the nation remained flat last month from June, but the figure is a marked decline from the same period last year, with self-occupancy and relocation needs driving sellers to reduce prices slightly, major brokers said yesterday. Sinyi Realty Inc., the nation’s only listed broker, saw its overall trading volume of existing homes remain virtually unchanged last month from June but the figure marks a 10 percent decline from the same period last year, Sinyi researcher Tseng Chin-der said.
VIETNAM NEWS Of the 268 businesses that owed the Ha Noi Government back taxes, 136 have paid up more than VND700 billion (US$32.1 million) after being publicly named last week, according to the city tax department. Most of the money related to land-use tax payable for housing projects. A department official said outing the names of evaders is an effective measure to get businesses to pay taxes. However, after the department released a list of 600 dodgers, some were found to be wrong. Eight businesses did not belong while 27 others owed less than proclaimed.
BANGKOK POST The Bank of Thailand’s Monetary Policy Committee (MPC) is expected to keep its policy interest rate unchanged Wednesday, opting to assess the second quarter’s GDP before making further monetary easing, say economists. Charl Kengchon, Kasikorn Research Center’s managing director, said the rate-setting panel was likely to wait for the economic growth figure released on Aug 17 before evaluating its policy stance. A looming cabinet reshuffle, particularly for the government’s economic team, should also encourage the MPC to stand pat on the rate.
THE AGE The number of newspaper and online job advertisements slumped for the first time in three months in July, according to the latest Australian and New Zealand Banking group survey, suggesting employment growth could be slowing. ANZ said last Tuesday that total job ads, seasonally adjusted, slipped 0.4 per cent to 146,121 month on month, but remained ahead 9.3 per cent year on year. Of this, positions vacant on the internet fell 0.5 per cent, while newspaper ads grew 2.2 per cent. Australia’s official unemployment rate is likely to have remained steady at 6 per cent in July.
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ommercial crude stocks across the United States rose by 105 million barrels early this year to peak at 490 million barrels, the highest level in eight decades. Despite some draw downs in recent weeks, which have reduced inventories to 460 million barrels, stocks are still 92 million barrels higher than this time last year. And stocks could rise again at the end of the third quarter when U.S. refineries enter the traditional autumn turn around season. Yet the cost of storing crude has remained relatively modest throughout thanks to a big increase in tank farm and pipeline capacity added in recent years. Working storage capacity at refineries, tank farms and underground storage facilities in the United States has increased by 85 million barrels, almost 19 percent, since 2011. More than 45 million barrels of extra working capacity has been added in just the last two years, according to the U.S. Energy Information Administration (EIA). Over half the extra working storage capacity was in states along the U.S. Gulf Coast, with most of the rest added in the Midwest. In the same period, the amount of crude needed to fill pipelines and in transit by barge, tanker and rail has also jumped by 17 million barrels, as new oil pipelines and oil trains were added. Crude stocks at the end of March were 82 million barrels higher than in March 2013, according to the EIA (“Working
and net available shell storage capacity” May 2015). But with an extra 17 million barrels of oil in line fill and transit, and 46 million barrels of extra working capacity, the storage utilisation rate rose comparatively modestly from 56 percent to 63 percent. The availability of so much storage helps explain why the contango in U.S. crude futures has mostly been well below US$1 per barrel per month since the start of the year. Predictions that storage capacity would run out, which briefly pushed the contango beyond US$1 per barrel per month in February and March, proved wide of the mark. And there has been only relatively modest demand for the more expensive option of storing oil on tankers moored off the coast.
Storage model Storage is big business and very profitable under the right conditions. It has attracted significant interest from trading companies and third-party logistics suppliers (3PLs). Nearly all the extra working storage capacity in the United States has been added at tank farms and underground facilities rather than refineries. Many of the tanks are owned directly by traders or are available for hire. Much of the storage is designed to facilitate speculative plays and to take advantage of temporary market imbalances rather than meet immediate operational needs of the refining system for short-term supply security and blending. Pure storage companies make
Much of the storage is designed to facilitate speculative plays and to take advantage of temporary market imbalances rather than meet immediate operational needs of the refining system
money from leasing capacity. Merchants exploit the difference between the cost of storing and financing oil implied by the contango and the actual cost of borrowing funds and leasing tank space. Many companies now do both. Once facilities are constructed, there is an incentive to fill them, if and when it can be done profitably, to earn a return on the investment, which is why so much of the global stock build in the first quarter of 2015 turned up in the United States.
Construction of storage capacity tends to increase the amount of stock the market wants to carry by reducing the cost of stockpiling. Other major merchant storage facilities are available at Rotterdam, Saldanha Bay in South Africa, the Bahamas and Singapore, among other centres, and many are adding even more capacity. The merchanting and storage business model tends to draw surplus oil preferentially towards U.S. tank farms and the other storage hubs. At the same time, the United States is the only country to publish official weekly and monthly data on stocks in close to real time. There is a natural tendency to draw conclusions about the state of the global supplydemand balance on the basis of short-term changes in U.S. commercial stockpiles. But the U.S. storage model is not representative of stocks globally, so conclusions about the global supply-demand must be drawn carefully, both when stocks are rising and when they are falling. The oversupply in oil markets during the first half of 2015 was real, but the profitability of storage plays probably exaggerated the change in the overall stock situation in the short term. If the contango remains favourable - and it’s currently running at 50 cents per barrel per month between September and December - more crude will be imported and stockpiled in the United States this autumn to fill the tank farms again. Reuters
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August 4, 2015
Closing Chinese firms set up fund to support “Internet Plus”
Fewer Mainland companies go public in July
A direct investment firm with China’s largest securities trader worked with two partners to establish a 5 billion yuan (US$817 million) fund to invest in Internet-related start-ups. Gold Stone, a subsidiary with CITIC Securities, Ce Yuan Ventures, a risk investment company, and China Renaissance investment bank will pool money to invest in companies in Internet-based real estate, automobile, finance, agriculture and other sectors. The new team will support emerging sectors within the country’s “Internet Plus” initiative, offering venture capital investment and capital operations such as private financing, acquisitions and mergers and IPO on A shares Strategic Emerging Industries Board.
Fewer Chinese companies went public in July after the country’s stock regulator halted initial public offerings in two domestic brokerages, investment research company Zero2IPO said yesterday. Only 19 Chinese companies launched IPOs at stock exchanges worldwide last month, raising a combined US$2.03 billion, the company said. The number of IPOs in July were down 17.4 percent year on year and 64.2 percent month on month. Meanwhile, the money raised was down 38.4 percent and 89.3 percent, respectively. Twelve companies were listed in Hong Kong, five went public in the Chinese mainland and two listed in the United States, said Zero2IPO.
KEY POINTS Chinese IPOs raising A$83 mln this yr in Australia till end-Aug Full year expected to better 2014’s record A$109 mln raised Performance of Chinese listings in Australia poor
Australia growing as IPO destination for Chinese firms Of the 38 China-based companies to list in Australia since 1996, just five are trading at or over their issue price Byron Kaye
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foot massage franchise, a soccer boot maker and a camellia tree grower all hope they can end the curse on Chinese firms pursuing initial public offerings in Australia as a lengthy wait and market volatility discourage them from listing at home. As mainland-listed companies and investors reel from a $4 trillion stock market slump since June, Australia
is expected to attract bigger Chinese listings. About A$83 million (US$60.52 million) is expected to be raised in Australia by Chinese firms up to endAugust compared to A$59 million raised in the first eight months of last year, according to Reuters calculations. That puts them on course to top this year the record A$109 million they raised last year.
But the mostly small-cap companies must overcome not just a language barrier and cultural standoffishness about their business offerings, but also a reluctance by Australian investors to embrace an investment prospect which has underperformed severely. Of the 38 China-based companies to list in Australia since 1996, just five are trading at or over their issue
price, including companies which have been bought out since listing, analysis by Reuters shows. Just eight of the companies have their shares traded daily. “Unless you’ve got people on the ground who could do the due diligence, from a retail investor’s perspective, I wouldn’t say that’s the most suitable investment,” said Danial Moradi, equity strategist
at Melbourne-based Lonsec Stockbroking. “We wouldn’t have as equal access (to management), there would obviously be language barriers, and obviously businesses are run differently in China.” Still, Australia appeals as a listing location thanks to its proximity, maturity and modest scale, said Ross Lewin, whose funds management firm Brenowen Cross Capital is helping foot massage franchise Traditional Therapy Clinics raise A$15 million for an August 31 scheduled trading debut. “You can be a bit smaller in Australia and still be seen,” Lewin said. China has a warm bond with Australia because of the conflict-free history between the countries, said Paradigm Securities executive chairman Barry Dawes, who is helping Jiangxi province-based camellia and citrus grower Dongfang Modern Agriculture Holding Group raise A$50 million for an August 24 trading debut. “Chinese companies have to do even more to win the investors, to prove themselves in the market,” said Ting Jiang, company secretary of Fujian province-headquartered XPD Soccer Gear Group, which debuted in Sydney in May. Its shares last traded on July 31 at 21.5 Australian cents, compared to a 20 cent issue price. “With Australian companies, at least (investors) can see their assets. They are more confident in Australian companies.” Reuters
GSK re-hires China government relations linked to probe
S. Korea’s auto sales keep TAG Heuer to shut Hong Kong falling on soft overseas demand store as rental costs bite
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ritain’s GlaxoSmithKline PLC said yesterday it had re-hired Vivian Shi, a former Chinese government affairs executive at the firm who was the focus of an internal probe into information leaks alleging bribery at the company’s China unit. GSK was fined US$489 million last year after a Chinese police investigation concluded the firm had paid doctors to prescribe its drugs, underlining steep compliance risks for firms in the world’s second largest economy. Shi was named in the internal investigation carried out on behalf of GSK China into a series of emails alleging bribery by the British firm, and which were sent to Chinese government agencies and senior GSK staff, according to a June 2013 summary of the investigation seen by Reuters. The investigation did not prove Shi, who had left her job in 2012 and before the bribery investigation came to light, was behind the emails. China is the world’s second largest drug market by sales, where spending is set to hit as much as US$185 billion by 2018, according to estimates by IMS Health.
lobal auto sales by South Korean carmakers kept falling due to soft overseas demand that hampered robust demand from local consumers, industry data showed yesterday. Global auto sales by Hyundai, Kia, GM Korea, Renault Samsung and Ssangyong totalled 681,141 in July, down 5.0 percent from a year earlier. Domestic car sales in July increased this year on strong demand for sport utility vehicles (SUV), but overseas demand for locally-made cars remained weak on economic uncertainties in Europe and the expected rate hike in the United States. Local car sales rose 6.4 percent from a year earlier to 135,471 units in July, posting the monthly high in 2015. Top automaker Hyundai Motor, which saw a decline in local car sales in the first half, recorded a 0.5-percent gain in domestic auto sales in July on a yearly basis, and its affiliate Kia Motors logged a 13.9-percent increase in auto sales in the local market last month. Demand for SUVs was strong, with Hyundai’s new Santafe model becoming the best-selling car last month with sales of 9,942 units. Xinhua
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wiss watchmaker TAG Heuer is shutting a store in Hong Kong as high rental costs and declining numbers of customers weigh on profitability, according to the head of LVMH Moet Hennessy Louis Vuitton SE’s watchmaking activities. The brand has decided to close a store on Russell Street, one of the island city’s main shopping thoroughfares, Jean-Claude Biver said yesterday. “Traffic has diminished and rents have stayed high,” he said by e-mail. European luxury-goods makers have recently spoken out about the high rental costs in Hong Kong, with Gucci owner Kering SA saying it may close some of its shops and Burberry Group Plc trying to lower its rent bill. Luxury spending in Hong Kong has been suffering since China began taking measures against extravagance among government officials in 2012. Still, Hublot and Zenith may open two stores in Hong Kong next year as demand for those LVMH watch brands warrants expansion, Biver said. Those watchmakers currently have two stores each in Hong Kong. Bloomberg News