MOP 6.00
Turning up the heat
Closing editor: Luís Gonçalves
And so it continues. The ongoing saga of reaching an agreement with Macau’s only importer of natural gas, Sinosky Energy (Holdings) Co. Ltd. Legislator Kwan Tsui Hang is pushing the gov’t for a resolution. Saying the concession contract has been breached and individuals should be held accountable
Year IV
Number 851 Thursday August 6, 2015
Publisher: Paulo A. Azevedo
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Wheels, Reels and Deals It’s official. The next, second multi-billion dollar casino property on Cotai 2.0 has an inauguration date. Studio City will open on October 27. Melco Crown CEO Lawrence Ho is also sticking to his gaming guns. Requesting authorities to grant 400 new gaming tables to the resort. Based on its ‘stand-alone’ resort features. And his confidence in “the launch of Asia’s Entertainment Capital” as a catalyst for Macau’s improved fortunes Page
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www.macaubusinessdaily.com
Resident deposits slip to MOP477.4 bln in June Page 6
HSI - Movers August 5
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Up one year, down the next. Macau and China’s business jet market stalled last year. And the trend is likely to continue throughout 2015. Hong Kong-based business aviation consultancy Asian Sky Group say the combined markets of Greater China are ‘very much in decline’. Citing the usual political and economic suspects
Penalty clauses. Long underutilised as a tool of ‘persuasion’ by the Public Works Bureau. But now back in the frame for major projects. Li Canfeng, Director of the Land, Public Works and Transport Bureau (DSSOPT) accepts the critical obsevations of the Audit Commission. Thus, a review of the current mechanism is underway, says Li
Three tenders for traffic light control bid
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The IMF calls for ‘significant work’. This with regard to reviewing the inclusion of China’s currency in its basket of ‘special drawing rights’ reserve currency. The executive board will make its final decision in November
Penalty clauses in the works
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Hutchison HK interim profits soar 57 pct
Still reserved about currency
High flyers maintain low profile
City saw fewer companies incorporated in Q2
Property
%Day
China Mengniu Dairy C
+4.98
Tingyi Cayman Islands
+4.02
CNOOC Ltd
+2.76
Galaxy Entertainment
+2.45
HSBC Holdings PLC
+1.86
Cheung Kong Property
-1.10
Power Assets Holding
-1.28
Henderson Land Devel
-1.36
Bank of East Asia Ltd/T
-1.63
Li & Fung Ltd
-2.73
Source: Bloomberg
Toss a coin
I SSN 2226-8294
Centaline Macau expects housing transactions to drop 50 pct in July vis-avis June. Residents travelling on summer holidays and stock market turbulence are cited. Local realtor Jackey Shek Po Tak, however, says housing prices would not drop and forecasts an upturn in Q4
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August 6, 2015
Macau Three tenders for traffic light control The Transport Bureau has received three tenders for traffic light control at an open-bid meeting that took place yesterday morning. The three tenders range from MOP3.9 million to MOP13.6 million. All propose a working period of 210 days. The Transport Bureau says the company that finally wins the bid would have to provide facilities and all services, such as handing over, testing, installing, training, support, and maintenance. The Bureau added that the standards for granting the bid would be based on price, as well as the technical parts of the traffic lights control, work description and teamwork ability.
China’s business jet market stalled last year, likely to continue Consultancy Asian Sky Group has noted a market slowdown in business jets for the whole of Greater China in 2014, which is likely to persist this year due to China’s anti-graft policy and slowing GDP growth Stephanie Lai
sw.lai@macaubusinessdaily.com
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he business aviation market of Greater China has been experiencing a slowdown due to the ongoing antigraft policy of Beijing and slower economic growth in the country, Hong Kongheadquartered business aviation consultancy Asian Sky Group said recently in a report. The combined markets of China, Hong Kong, Macau and Taiwan have been ‘very much in decline’, as the growth of the delivery of new jets last year only hit
15.5 per cent, a drop of 5 per cent from the growth rate achieved from 2012 to 2013, the consultancy’s Asia Pacific Business Jet Fleet Report Year End 2014 noted. From 2005 to 2012, deliveries of new jets to greater China expanded by about 20 per cent a year, the New York Times reports, quoting industry data. The net number of aircraft added to greater China in 2014 was 59, versus 64 in 2013 and over 100 in 2012, the report said. Spending fears linked to Beijing’s corruption
crackdown and the slowing pace of GDP growth in China has accounted for the business aviation market slowdown seen last year, and is likely to remain a negative factor affecting buying sentiment this year, Asian Sky Group concluded from the report.
Slowdown
Macau, an economy largely supported by casino earnings, has also seen a slowdown in the growth of business aircraft movements. The city saw over 1,300 business jet movements for
the first half of this year, representing a year-on-year growth of 14 per cent, data from airport operator Macau International Airport Co Ltd (CAM) shows. Growth has slowed from the 29.7 per cent of annual growth seen in the first half of 2014. According to CAM’s information, the growth in business aircraft movements has been about 30 per cent in 2013 and 2014, respectively. The number of business jets in service here has been 11 in 2014 and 2013, respectively, vis-a-vis 14 jets
Fewer companies incorporated in Q2 The 11 pct drop in the number of new companies formed in Q2 is in marked contrast to the double-digit growth of the previous two years
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ess than 1,300 new companies were incorporated in the city in the second quarter of this year, down 11 per cent or 160 fewer companies established compared to the year-prior period, the latest data from Statistics and Census Service (DSEC) shows. The drop in the second-quarter incorporation of new companies was also in marked contrast to the over 20 per cent year-on-year growth seen in the same quarter of 2014 and 2013.
Along with fewer companies incorporated here in the second quarter, the value of registered capital also shrunk by nearly 68 per cent to MOP368 million (US$47 million). That is due to the 87.6 percent plunge seen in the registered capital from newly established companies engaged in financial services, recreational, cultural and other services, DSEC said. The total registered capital from companies in this category - only 65 of them
were incorporated in the second quarter - amounted to over 30 per cent or MOP115.5 million of the overall registered capital of newly formed companies. By type of business, a majority of companies newly formed in the second quarter were wholesale and retail, and business services, a trend consistent with the previous quarter, the census service's data shows. According to size of registered capital, 65 per cent or 841 of these
in 2012, the consultancy’s report says. For the Greater China market, Asian Sky Group predicts that the business aviation market will slow overall in 2015 with the growth of new jet deliveries hitting just 9.3 per cent. The consultancy also cites the existing backlog of the Chinese leasing companies as another major influence on new aircraft deliveries by manufacturers this year, adding that these leasing companies are unlikely to place any new orders in 2015. The bearish outlook on the Chinese market of business aviation is not shared by China Business Aviation Group, which even predicted a comeback year, New York Times reported. The newspaper quoted China Business Aviation Group’s chief executive Jason Liao saying that he expected orders to grow more than 15 per cent this year on the back of China’s recent stock boom, which has fuelled some wealthy clients’ placing orders for business jets. These buyers had become rich on China’s bull market’s high returns before share prices slumped in June and July.
new companies formed in the second quarter were registered with less than MOP50,000, suggesting that many of these start-ups were small-sized companies. The capital of the new companies incorporated in the second quarter came mainly from Mainland China (MOP234 million), which occupied 63.7 per cent of the overall registered capital. But in terms of shareholder profile, a majority at 826 new companies were established solely by Macau shareholders; 155 joint ventures were formed by shareholders from Macau and other countries or regions. In the first half of this year, a total of 2,749 new companies were incorporated, up 6.6 per cent from a year earlier. The total value of registered capital decreased by 60.6 per cent year-on-year to MOP524 million. S.L.
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August 6, 2015
Macau Sulu Sou quits as head of New Macau Association Pan-democratic Sulu Sou Ka Hou has resigned as director of the New Macau Association (NMA) effective September 1. He said in an announcement that the reason for the resignation is that he will go to Taiwan for a Master’s programme. Meanwhile, the incumbent vice-director of the pan-democracy group, Scott Chaing Meng-hin, who has served the Association for more than ten years, will succeed as Association director. Mr. Sou was elected as the director of New Macau in July last year.
Govt’: No agreement with Sinosky yet
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he government has not yet reached an agreement on longterm natural gas supply with Macau’s only importer of natural gas, Sinosky Energy (Holdings) Co. Ltd., said Arnaldo Ernesto dos Santos, Co-ordiantor of the Energy Sector Development Office (pictured), in a written reply to legislator Kwan Tsui Hang’s enquiry. The legislator pointed out that the government granted a 15-year concession contract to Sinosky in 2007, but although half of that term has passed the company has failed to secure a stable supply of natural gas or price. Kwan Tsui Heng said that the company has seriously breached the concession contract and urged the government to find a solution as soon as possible as well as holding individuals accountable. Energy Sector Development Office Co-ordinator said that the company has been struggling with its operation as the selling price in Macau is below the price paid to import the natural gas.
Business Daily reported previously that Sinosky registered losses of MOP29.8 million last year, according to the results for 2014. Since 2006, the company has accumulated losses of MOP177.1 million. Mr. S a n to s s a i d th a t th e government has been in talks with Sinosky but no agreement has been
reached and there is no timeframe for the negotiation. However, he stressed that the government will not [remain] in a delaying manner and will resolve the problem as soon as possible. He attributed the problem of Sinosky to various factors, generally citing internal and external factors as well as ‘unexpected situations
globally and regionally’. Santos said the government would not give up, and if no consensus can be arrived at the matter may be addressed in accordance with the concession contract. The energy sector head also admitted that Macau’s natural gas market is relatively small, making is hard to attract major energy enterprises with huge funding, good techniques and high strength. Previously, legislator Kwan Tsui Hang also urged the government to scrap the contract with Sinosky for the supply of natural gas and prepare for the introduction of competition in the energy market. Sinosky Energy is a joint venture between Macau Natural Gas Co. Ltd. and China Petroleum & Chemical Corp. (Sinopec) and its relationship with the government has been one of ups and downs. Secretary for Transport and Public Works Raimundo Rosário commented recently that if no consensus can be reached, the worst scenario would be the cancellation of the concession.
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August 6, 2015
Macau
DSSOPT mulling introduction of penalty clauses
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he Public Works Bureau has set up a special task force to study the suggestions of the Audit Commission on public works and is reviewing its current mechanism, said Li Canfeng, Director of the Land, Public Works and Transport Bureau (DSSOPT) in a written reply to legislator Chan Meng Kam’s enquiry. The legislator slammed
the government for the poor supervision of public projects, naming the ventilation system at the Border Gate bus terminal, the Science Bureau, the Taipa Central Park and the quality issue of public housing buildings. Chan questioned the authorities for having little to no supervision or penalty system in place to manage public works, directly
resulting in the poor quality of many projects. Mr. Chan pointed out that the government had failed to supervise the inspection company with regard to the Taipa Central Park case. He urgesd the government to review the current administrative system and put the accountability system into practice. The DSSOPT director said in his reply that the
Local realtor forecasts housing price increase in fourth quarter
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ocal realtor Centaline Macau Property Agency Ltd. says housing transaction volume decreased 50 per cent in July compared to June and expects the trend to continue in the third quarter. Residents travelling in the summer holidays as well as the turbulence of the stock exchange has been attributed to the lower housing transaction volume. However, Jackey Shek Po Tak, directof of Centaline Macau, says housing prices would not drop and forecasts an upturn in the fourth quarter of this year. Mr. Shek made the remarks yesterday afternoon on the sidelines of a press conference warning residents against telecommunication fraud and encouraging awareness of the real estate agent law.
Fellow local realtor Ricacorp (Macau) Properties Ltd. also attributes the stock market’s unstable performance as the reason for the drop in July housing transactions. In a press release published on Tuesday, Ricacorp said that Fai Chi Kei area is badly hit, as July transactions dropped by around 40 per cent compared to June. However, the company says some residents are keen on upsizing and want to seize the timing to buy as the current price is 30 per cent lower than its peak. Ricarcorp says that in July transactions in Fai Chi Kei mainly involved the Praia, the only property equipped with a big clubhouse and where the average price stood at HK$7,700 per square foot, a 15 per cent drop compared to its high point.
Bureau accepts the Audit Commission’s report and is reviewing the current system, including the supervision and internal working methods. Li Canfeng named a few measures, including promptly dealing with construction working time extension application, and enhancing supervision on outsourcing works, such as supervision. Li stressed that if the supervision company
failed to fulfil the obligation, penalties would be applied and the contract even terminated. In addition, the DSSOPT director said the Bureau along with the Infrastructure Development Office (GDI) and the Transportation Infrastructure Office (GIT) - is reviewing the mechanism for tender evaluation, especially in introducing compensatory penalties on public works projects. Li said the government will study the possibilities based on current laws and may introduce penal clauses in future public works contracts in order to push the contractors to finish their job on time.
Iao Kun rolling chip turnover plummets 72 per cent in July
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ocal junket operator Iao Kun Group Holding Company Ltd. has announced that its rolling chip turnover generated by the city’s VIP rooms has plunged 72 per cent year-on-year, shrinking US$1.16 billion (MOP9.28 billion) last month. According to yesterday’s announcement, its rolling chip turnover of VIP business amounted to only some US$0.44 billion in July, compared to US$1.60 billion during the same period last year. Meanwhile, the win rate for the month was 4.52 per cent. Rolling chip turnover is a measure used by casinos to quantify the overall volume of VIP gaming room business. Compared to the group’s rolling chip turnover of US$0.54 billion in June this year, the US$0.44 billion that the junket earned last month
also represents a month-on-month drop of 18.5 per cent. This suggests that the company’s business has underperformed the trend in the city’s gaming revenues. Last month, Macau posted gross gaming revenues of a year-on-year decrease of some 34.5 per cent to MOP18.6 billion. On a month-onmonth basis, the amount represents a rebound of 6.9 per cent from MOP17.4 billion in June. Meanwhile, accumulatively, Iao Kun generated a total of US$4.36 billion, or US$0.62 billion per month, during the first seven months of this year, plummeting 61 per cent, compared to US$11.03 billion, or US$ 1.58 billion per month on average for the first seven months of 2014. K.L.
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August 6, 2015
Macau
Studio City opening October 27 Melco Crown CEO, Lawrence Ho, expects to be authorised to install 400 new gaming tables in the resort the company declared yesterday as “the launch of Asia’s Entertainment Capital” João Santos Filipe
jsfilipe@macaubusinessdaily.com
The opening of Studio City shares a lot of similarities with the opening of City of Dreams, which opened during the 2009 financial crisis. We hope Studio City will be the catalyst to take the market out of the current situation Lawrence Ho, Melco Crown Entertainment’s Co-Chairman and CEO
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he US$3.2 billion Studio City will open on 27 October, Cochairman and CEO of Melco Crown Entertainment, Lawrence Ho, announced yesterday. During the ceremony the son of Stanley Ho also said that he hopes that the new integrated resort can be a catalyst for the gaming market. “The opening of Studio City shares a lot of similarities with the opening of City of Dreams, which opened during the 2009 financial crisis. We hope Studio City will be the catalyst to take the market out of the current situation”, Lawrence Ho said. “Studio City is very special. Macau has never seen something like it. It has significant attractions and we are hopeful that these attractions will increase the number of visitors”.
In terms of gaming areas, Melco Crown is expecting a licence to install 400 gaming tables in the property. Lawrence Ho explained that Studio City is a new stand-alone project, as opposed to Galaxy Phase II, which he considered an expansion, and as such he is hoping to get that number. In March, Galaxy secured a licence to install only 150 tables in their new properties. “Of course we were concerned about the table allocation that they got. We’re still hopeful that the government will reward us for our contribution to Macau over the past 10 years”, he said. “Our competitor is not really in the same league as us because their project is more of an expansion, while this is a stand-alone resort. We certainly hope to get more
than our competitor and to get the 400 gaming tables”, he stressed. “Unlike some of our competitors who had ridiculous requests for gaming tables, like 1,000, 700 or 500, we have always been consistent for the last four years asking for 400 gaming tables. But we are in the government’s hands”, he said. “Depending on the table allocation we have a very flexible layout in our gaming floor setup and so we can adjust”.
Asia’s Entertainment Capital
Studio City is a Hollywood inspired casino-resort that will add another 1,600 rooms to Macau. In addition to the gaming areas, it will offer attractions such as the ‘Golden Reel’, the world’s highest figure-8 Ferris wheel, a Batman-themed 4D flight
simulation, and 5,000 multi-seat entertainment centre, among other attractions. The project is said by the company to be the launch of Macau as Asia’s Entertainment Capital and was designed to attract the Chinese middle-class. “Studio City was always built to take advantage of its location, which is next to the Lotus Bridge border, and to focus on mass and have a big visitor traffic. The Mainland will always be the biggest market for Macau”, he commented before explaining that it will be difficult for the territory to attract a significant number of tourists from very distant locations. During the ceremony, the President of Studio City, Jay Dee Clayton, announced that the sales of rooms started online last Monday.
Hutchison HK interim profits soar 57 pct
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utchison Telecommunications Hong Kong Holdings Ltd. saw its profit attributable to shareholders jump 57 per cent yearon-year to HK$580 million (US$72.2 million) during the first half of the year, driven by notable improvements registered in its mobile business in Hong Kong and Macau. The telecommunications operator told Hong Kong Stock Exchange on Tuesday that its turnover generated in the first six months of the year amounted to HK$11 million, which, compared to HK$623 million one year ago, surged 77 per cent year-on-year. The company has also declared a dividend of 5.20 HK cents per share for the six months, which is an increase of 22.4 per cent compared to 4.25 HK cents per share distributed for the same period last year. The significant growth of the
company’s profit is due to its turnover of mobile business in Hong Kong and Macau soaring 108 per cent yearon-year to HK$9.24 billion during the first half from HK$4.44 million one year ago. In addition, EBITDA that the company reached in the two Special Administrative Regions in the mobile segment also registered a year-on-year increase of 42 per cent to HK$870 million. ‘The increases were mainly due to increased mobile turnover, enhanced customer quality and continued focus on operating efficiency following a planned strategy to focus more on margin and profitability,’ the Group wrote in the filing. Nevertheless, as at the end of June, the company was serving fewer customers than one year ago. According to the filing, the number
of customers that the operator was serving declined to 2.9 million from 3.2 million in Hong Kong and Macau, due to the number of postpaid customers narrowing to 1.5 million from 1.7 million. On the other hand, the operator’s
fixed-line service revenue during the six months reached HK$1.9 million, generated by the corporate and business market continuing to post an increase of 4 per cent to HK$581 million during the six months. K.L.
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August 6, 2015
Macau Brands
Trends
The Macallan Rare Cask Raquel Dias newsdesk@macaubusinessdaily.com
“Some would call this an obsession. We call it The Macallan.”
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f you’re a fan of single malt Whisky, Macallan must be among your favourite tipples. Since 1824, The Macallan name has been a guarantee of craftsmanship and quality. All stories of whisky making begin with wood and the Macallan might well be the epitome of this, From every acorn planted to the handcrafting of the oak casks culminating in the meticulous selection of these casks maturing at the distillery to create every Macallan whisky. The brand has just launched The Macallan Rare Cask in Asia, in a series of events that took place in Hong Kong, and the result is as good as ever. Not only is Rare Cask the embodiment of high quality single malt whisky, it represents great wood management - one that showcases complexity and depth, and proves that Rare Cask comes from the broadest spectrum of casks; 16 different profiles identified by the master whisky maker and from the most extensive range of cooperages in Spain. With a rich mahogany red hue, The Macallan Rare Cask showcases two of the greatest strengths of the brand exceptional oak casks and natural colour – which, combined with knowledge, skill, passion, commitment and creativity, make it a must try.
Resident deposits slip to MOP477.4 bln in June Resident deposits fell 0.9 per cent in June, while private domestic loans jumped 2.4 per cent in the month Kam Leong
kamleong@macaubusinessdaily.com
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he city’s banking sector saw deposits from local residents decrease 0.9 per cent monthon-month to MOP477.4 billion (US$59.7 billion) in June, despite demand deposits jumping 15.5 per cent month-on-month during the period, the latest data released by the Monetary Authority of Macau (AMCM) reveals. The drop in residents’ deposits was driven by the decrease in residents’ different kinds of bank deposit, such as savings deposit, notice deposit, and time deposit, all of which registered month-on-month declines of 2.2 per cent, 33.4 per cent and 2.9 per cent, respectively. Of resident deposits, Macau patacas (MOP) and US dollars (USD) increased at respective rates of 1.1 per cent and 3.9 per cent in June from May. However, HK dollars (HKD) and Chinese yuan (CNY) deposits of residents fell 2.8 per cent and 0.9 per cent monthon-month, respectively. Meanwhile, deposits of nonresidents grew 7.1 per cent monthon-month, amounting to MOP266 billion. In addition, public sector deposits with the banking sector increased 2.5 per cent to MOP121.7 billion, according to AMCM data. In total, the banking sector saw deposits in the territory slightly rise month-on-month by 1.9 per cent to MOP865 billion, of which HKD deposits accounted for 41.3 per cent of the total. Meanwhile, the city’s official currency - MOP - only accounted for some 18.3 per cent of the total. In addition, the share of CNY and USD
The drop in residents’ deposits was driven by the decrease in residents’ different kinds of bank deposit, such as savings deposit, notice deposit, and time deposit, all of which registered monthon-month declines of 2.2 per cent, 33.4 per cent and 2.9 per cent
in terms of total deposits amounted to 13.7 per cent and 22.5 per cent, respectively.
Loans
Local banks’ domestic loans to the private sector posted a month-onmonth increase of 2.4 per cent in June, totalling MOP376 billion. Most of these loans were denominated in HKD, accounting for 65.7 per cent of the total, or MOP247 billion. Some other MOP100.7 billion-worth of loans was MOP-denominated,
accounting for 26.8 per cent of the total. Meanwhile, the banks granted loans of MOP3.1 billion and MOP22.8 in CNY and USD, respectively. In terms of the economic sector, loans to the exhibition and conference sector and the gaming industry dropped respectively by 35.1 per cent and 9.3 per cent during the second quarter compared to the first, AMCM said. However, loans to transport, warehouse and communications, as well as education, surged 18.6 per cent quarter-on-quarter. External loans granted by local banks last month totalled MOP385.7 billion, representing a month-onmonth jump of 4.8 per cent, of which more than half, MOP195 billion, was denominated in USD. Loans denominated in MOP, HKD and CNY, meanwhile, accounted for 1.6 per cent, 22.2 per cent and 19.7 per cent of the total, respectively. The loan-to-deposit ratio for the resident sector at the end of June grew 1.6 percentage points from the previous month to 62.8 per cent. The ratio for both the resident and nonresident sectors rose 1.4 percentage points to 88.1per cent, according to AMCM. As at end-June, currency in circulation had dropped by 1.8 per cent month-on-month. Money supply (M1) increased by 12.1 per cent month-on-month and quasi-monetary liabilities fell by 2.7 per cent. The sum of these two items (M2), meanwhile, decreased month-on-month by 0.9 per cent to MOP488.8 billion.
Business Daily | 7
August 6, 2015
Macau
Zhuhai Opera House ready by May
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ike two shells emerging from the sea, the Zhuhai Opera House is expected to complete construction by May next year and to be operational by August, according to local Chinese media Macau Daily. Following an international design competition attracting 33 entries, it’s now being built off the coast of Yeli Island at Xiangzhou Bay in the neighbouring Zhuhai Special Economic Zone.
Costing over 1.08 billion yuan (US$174 million) to be built, the opera house in Guangdong Province is touted as China’s first opera house to be built on an island. Perched on 50,000 square metres of reclaimed land, the 90-metre high ‘big shell’, will house a concert hall with 1,550 seats. The smaller theatre, known as ‘little shell’, stands 60 metres tall and will accommodate 550 people. The acoustics system is being supplied by Marshall
Day Acoustics, who says that the Opera House will be fully equipped with staging and technical infrastructure to support the performances of opera, musical theatre, ballet, and symphony orchestras. The small theatre is suited to performances of spoken theatre and chamber music. The Opera House, along with the Zhuhai Museum, the Urban Planning Exhibition Hall and the Cultural Centre, involves a total expenditure of more than two billion yuan, which represents the largest investment in this sector since the city was established as a Special Economic Zone in 1980. According to the latest information published by the Zhuhai Statistics Information Network, the city welcomed 5,186,000 overnight visitors in June, a 5 per cent increase compared to the same period last year.
Consumer Council starts 2nd phase on-site evaluation on ‘Certified Shops’
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he Consumer Council started its second phase of on-site evaluation on its ‘Adherents’ and ‘Certified Shops’ in early August. The Council indicates that continuous inspection ensures stability in the services provided by ‘Adherents’ and ‘Certified Shops’, with shops’ continuous improvement also helping to safeguard consumers’ rights. The Consumer Council finished its first phase on-site evaluation on about 1,500 of its ‘Adherents’ earlier, and
the second phase evaluation just started earlier this month. The Council aims to ensure the service quality of all shops being assessed through continuous inspection, and encourages self-improvement among its ‘Adherents’ and ‘Certified Shops’. The Council indicates that the assessment team has been trained specifically to conduct the evaluation; each ‘Adherent’ or ‘Certified Shop’ is given comments for improvement for enhancing their service quality Assessments of ‘Adherents’
and ‘Certified Shops’ include on-site evaluation and mystery shoppers, etc., qualified ‘Adherents’ and ‘Certified Shops’ will be awarded the ‘Certified Shop’ emblem for the next year and are classified into different classes according to their scores, and those with excellent performance will be awarded the ‘Class A’ award. The grading system on ‘Adherents’ and ‘Certified Shops’ helps to ensure quality of the shops and encourages them to further enhance both their services and products.
MGTO promotes Macau in Taiwan
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aiwan continues to rank as the third biggest visitor market to Macau, said Macau Government Tourist Office Director, Maria Helena de Senna Fernandes. She made the remarks when promoting Macau’s tourism in Taiwan, for which a road show and an exhibition will last until the end of this week. Ms. Senna Fernandes said that Taiwanese visitor arrivals to Macau totalled 460,000 in the first half of this year, maintaining the record from the corresponding period of last year. Taiwanese visitors staying overnight in Macau topped 200,000, posting a year-on-year increase of 2.25 per cent. The week-long ‘Fun Summer in Macau - Tourism Carnival’ is currently running at the Huashan 1914 Creative Park in Taipei. Through creative activities and partnering a locally famous online illustrator, the event seeks to promote Macau’s diverse elements of tourism and encourage more visits by Taiwanese to the city.
To celebrate the tenth anniversary of the Historic Centre of Macao’s inscription on UNESCO’s World Heritage List in 2005, the Macau Economic and Cultural Office in Taiwan has partnered MGTO and the Cultural Affairs Bureau to co-host an exhibition titled ‘Colours of Macau – Appreciation of Macau Cultural Heritage from Various Angles’ at Huashan 1914 Creative Park in Taipei until 9 August. The exhibition showcases Macau’s achievements in heritage conservation over the past years in terms of legislation, architectural preservation and archaeological work. The exhibition also reveals the city’s continuous efforts to preserve its intangible cultural heritage as well as the revitalisation of historic monuments. Through the photo displays and descriptive captions, it’s hoped that Taiwanese visitors can know more about the cultural gems of the Historic Centre of Macao.
Corporate
CEM and CSCTC host ‘Healthy Eating’ Induction Cooking Contest The ‘Healthy Eating’ Induction Cooking Contest - organised by CEM, and coorganised by the Catering Services & Cooking Training Centre of Macau Federation of Trade Unions, and supported by Macau Professional Nutritionist Association - is now open for registration. Macau residents aged 18 and over who are not professional chefs are welcome to participate in the contest. By encouraging
participants to design healthy and nutritious recipes, the contest seeks to promote awareness of the importance of healthy diet and balanced nutrition among the public. In addition, participants will be cooking dishes at the site to experience the advantages of induction cooking, which boasts of a heat conduction efficiency of 90%, much higher than the 40% of flame cookery, and one third shorter cooking time.
CAM Participates in IATA Communicators Conference Macau International Airport (CAM) was invited to join the Communicators Conference organised by International Air Transport Association (IATA) from 29th – 30th July 2015. Ms. Miley Kou, Officer of the Corporate Communication & Policy Research Office of Macau International Airport Company Limited (CAM) and Ms. Erica Ieng, Public Relations Supervisor of the Administration of Airport Company Limited (ADA) represented the company at the conference.
Themed ‘Dialogue with Masters of Civil Aviation Public Relations’, the conference invited many experts of civil aviation public relations from Asia Pacific to present typical scenarios and experiences of crisis communication according to the needs and characteristics of Chinese airlines and airports. The communication strategy and crisis public relations from an international perspective showed participants how to cope with crisis public relations and arrive at the best solutions for new challenges.
8 | Business Daily
August 6, 2015
Gaming
MGM Resorts rises as CEO outlines plans to boost stock price The predictability of cash flows at regional resorts and growing profit in Las Vegas boost the potential for an REIT structure, Jim Murren said
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GM Resorts International rose the most since March after reporting better-thanexpected quarterly results and outlining plans to boost the stock price. The shares advanced after Chief Executive Officer James Murren made his most favourable comments yet on the potential for a real estate investment trust for MGM Resorts’ casinos. The company will decide by year end. He also said MGM Resorts may expand the Crystals Mall in Las Vegas, with an eye to selling the retail property and other non-gaming assets there at CityCenter. “We’re not opposed to the structure,” Murren said on a call on Tuesday with investors when asked about putting MGM Resorts’ casinos in a REIT. The company is under pressure from Land & Buildings Investment Management LLC, which has called on Murren to sell casinos or spin off properties into a REIT. The CEO is also contending with the potential sale of a 16 per cent stake in the company held by MGM Resorts’ largest shareholder. Kirk Kerkorian, who died in June, leaving a will that directs his estate sell the stock in an orderly fashion. The predictability of cash
flows at regional resorts and growing profit in Las Vegas boost the potential for a REIT structure, Murren said. “Which is why for the first time, we’re willing to say that we’re months away from coming up with a conclusion to our board,” Murren said. MGM Resorts, which also reported better than expected second-quarter results, rose 9.6 per cent to US$21.75 at the close in New York
yesterday. That marked the biggest advance since March 17. The stock is up 1.7 per cent this year.
Quarterly Profit
The company unveiled an initiative it said will boost adjusted earnings before interest, taxes, depreciation and amortization by US$300 million annually through 2017. The plan, which will increase revenue and cut
costs, is expected to show results starting in the second half of this year. Second-quarter earnings excluding some items totalled 19 cents, the Las Vegas-based casino operator said in a statement. Analysts predicted 11 cents a share, the average of estimates compiled by Bloomberg. Sales declined 7.6 per cent from a year earlier to US$2.39 billion, also topping estimates,
Genting Singapore shares dip as currency losses hit profit The profit slump is mainly due to ‘fair value loss on derivative financial instruments’ following unfavourable market conditions and unrealised foreign-exchange translation losses, company says
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enting Singapore Plc fell the most in six years after the casino operator warned of a significant fall in second-quarter profit on derivative and currency
losses, amid a downturn in gambling by Mainland Chinese. Genting Singapore fell as much as 11 per cent, the biggest slump since May 2009. The shares were
down 6.1 per cent in Singapore yesterday, against the 0.3 drop on the benchmark Straits Times Index. The profit slump is mainly due to ‘fair value loss on derivative financial instruments’ following unfavourable market conditions and unrealised foreign-exchange translation losses, Genting Singapore, which operates Resorts World Sentosa, said in a statement. It expects adjusted earnings before interest, taxes, depreciation and amortisation for the quarter ended June 30 to be comparable with the previous three months. “Currency headwinds have been plaguing Singapore gaming operators for quite a while from all their primary segments such as China, Indonesia and Malaysia,” said Grant Govertsen, an analyst at Union Gaming Group in Macau. “That has been impacting results over the past several quarters”.
as gains in Las Vegas tempered a slump in Macau. MGM Resorts, like other casino operators in Macau, has seen a slide in business as Chinese high rollers cut back amid economic weakness and a government crackdown on corruption. Murren said on Tuesday that the company isn’t actively trying to sell the Mirage hotel and casino. Bloomberg
Gambling revenue in Singapore and Macau has slumped as Chinese high rollers curb spending to avoid scrutiny amid President Xi Jinping’s crackdown on corruption. Genting Singapore’s net income plunged 73 per cent to S$62.7 million ($45.4 million) in the three months ended March 31.
Jeju Projects
Separately, Landing International rose 2.7 per cent in Hong Kong trading after announcing it would buy out cruise operator Genting Hong Kong’s 50 per cent stake in Magical Gains, the owner-operator of a casino on Korea’s Jeju island. Genting Hong Kong, a sister company of Genting Singapore, fell 2.9 per cent. Genting Singapore will remain Landing’s joint venture partner on another project on the Korean island, to be named Resorts World Jeju, Landing said in the statement late Tuesday. Marina Bay Sands, another Singapore casino resort owned by Sheldon Adelson’s Las Vegas Sands Corp., reported last month adjusted property EBITDA fell 6.4 per cent in the second quarter on a constant currency basis due to a drop in rolling chip revenue. Rolling chips typically refer to high-stakes, or VIP, gambling. Genting Singapore said it will provide more details of its financial performance when it unveils earnings on August 13. It said it is still finalising its second-quarter accounts. Bloomberg
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August 6, 2015
Greater China
IMF staff urges no rush to add yuan to currency basket The yuan, also known as the renminbi, meets the requirements as a significant currency in terms of international trade, but also has to be judged to be “freely usable”
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he International Monetary Fund should put off any move to add the yuan to its benchmark currency basket until after September 2016, IMF staff said in a report which showed a mixed performance of the renminbi on meeting key financial norms. The report, published on Tuesday, comes after Beijing launched a major diplomatic push for the yuan to be added to the IMF’s Special Drawing Rights basket as part of its long-term strategic goal of reducing dependence on the dollar. The IMF board is scheduled to make a decision in November on whether to include the yuan in a basket of currencies comprising dollars, euros, pounds and yen, although the decision could be pushed back if policymakers decide they need more information. Delaying any change in the basket for nine months through September 2016 would avoid disrupting financial market trading on the first day of the new year, the staff report said. A senior IMF official said reserve asset managers would need about six months notice to adjust to a change. The yuan, also known as the renminbi, meets the requirements as a significant currency in terms of international trade, but also has to be judged to be “freely usable”, or widely used to make international payments and readily traded on foreign exchange markets.
IMF Managing Director Christine Lagarde has said adding the yuan to the Special Drawing Rights basket is a “question of when”
The report shows a mixed performance on financial criteria. Although the currency is increasingly used in cross-border transactions and heavily traded in Asia, it is only thinly traded in North America and is not commonly used in international debt securities. Data was missing for some variables, the report said. The senior IMF official said there was no set checklist of indicators to guide the decision and no “off-on” switch on whether the yuan would make the grade at the planned review. But he said politics would play no role in the decision, which will govern
the mix of currencies that countries like Greece receive as part of disbursements from the IMF. “They should be able to use it directly or they should be able to sell it immediately,” the official said.
Different views
Analysts interpreted the IMF delay differently, with some inferring the IMF wanted to see a more freely traded yuan before including it as a reserve currency. Others said the delay seemed technical, aimed at giving the market more time to prepare.
“The IMF article implies a large likelihood of SDR inclusion - otherwise the technical preparation would not be necessary,” UBS economist Wang Tao said in a note to clients. IMF Managing Director Christine Lagarde has said adding the yuan to the basket is a “question of when”. European members of the Group of Seven major industrialized economies - Germany, Britain, France and Italy - favour adding the yuan to the basket quickly. Japan, like the United States, is more cautious, officials have said. The yuan has made huge strides since Beijing’s last push for more formal international recognition of the currency, as global financial leaders were struggling to deal with the fallout of the sub-prime and banking crisis. Chinese Premier Li Keqiang in March asked Lagarde to push for inclusion, saying Beijing would speed up the convertibility of the yuan on the capital account and open domestic individual cross-border investment and foreign institutional investment in China’s capital market. Siddharth Tiwari, director of the IMF’s strategy, policy and review department, said in a document released with the report on Tuesday that the IMF executive board would decide on the extension proposal later this month. Reuters
July services activity quickens to 11-month high A sub-index measuring new business jumped to 54.0 from June’s 52.2 while the employment sub-index also edged up
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ctivity in China’s services sector expanded at its fastest pace in 11 months in July, thanks to stronger new business, a private survey showed yesterday, a welcome development at a time factories in the world’s second largest economy are struggling. The services Purchasing Managers’ Index (PMI) compiled by Caixin/Markit rose to 53.8 from June’s 51.8. The July level is the highest since August 2014 and marks a 12th straight month of expansion. A reading above 50 points indicates growth on a monthly basis, while one below that points to a contraction. A sub-index measuring new business jumped to 54.0 from June’s 52.2 while the employment sub-index also edged up, indicating increased hiring on stronger new businesses. Both input prices and selling prices increased in July, indicating a slight pickup in inflationary pressure. The Caixin PMI report did not specify if there was an
impact on the services sector from the crash in the country’s stock markets from mid-June. A sharp rally early in the year had boosted performance for banks and brokerages, and gave a much needed lift to the cooling economy. The official services PMI released on Saturday showed that activity quickened slightly in July from the previous month. The relatively resilient services sector could help offset some downward pressure on the economy as the manufacturing sector struggles to cope with weaker demand at home and abroad. The final Caixin/Markit factory survey showed activity contracted the most in two years in July while the official PMI showed manufacturing growth unexpectedly stalled. The official surveys focus on large, state-owned firms, while the private ones measure activity across small to medium-sized firms, which are facing tougher financial and operating conditions. The services sector has accounted for the bigger part
of China’s economic output for at least two years, with its share rising to 48.2 percent last year, compared with the 42.6 percent contribution from manufacturing and construction.
The government has taken a series of steps since last year to try to put a floor beneath sputtering economic growth, including accelerating infrastructure spending and repeated
reductions in interest rates and banks’ reserve ratio. But growth is still expected to moderate this year to around 7 percent, the slowest in a quarter of a century. Reuters
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August 6, 2015
Greater China
Beijing to put security teams in major Internet firms The government published a draft cybersecurity law last month consolidating its control over data
Shanghai authorities granted a joint venture involving JPMorgan the right to raise funds in China to invest in overseas assets, a spokesman for the U.S. firm said yesterday. China International Fund Management Co (CIFM), a venture between J.P. Morgan Asset Management Ltd and state-owned Shanghai International Trust Co, received approval to raise US$100 million, making it the first domestic mutual fund to gain qualified domestic limited partner (QDLP) status. The new license is the latest move by the Chinese government to internationalise its currency and expand the use of its US$3.73 trillion foreign reserves.
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hina is planning to set up “network security offices” in major Internet companies and for websites so authorities can move more quickly against illegal online behaviour, the Ministry of Public Security said in a statement. Police should take a leading role in online security and work closely with Internet regulators, the deputy minister, Chen Zhimin, told a conference in Beijing on Tuesday. “We will set up ‘network security offices’ inside important website and Internet firms, so that we can catch criminal behaviour online at the earliest possible point,” Chen said, according to the statement. Authorities have been tightening control over domestic Internet in recent years and have at times admonished social media companies like Tencent Holdings Ltd and Sina Corp for failing to move quickly enough to remove pornography, scams, rumours or politically sensitive content. The government published a draft cybersecurity law last month consolidating its control over data, with significant potential consequences for Internet service providers and multinational firms doing business in the country. The law will strengthen user privacy protection from hackers
JPMorgan joint venture gets approval to invest overseas
Allowed bonds issuance for individual projects
and data resellers but elevates the government’s powers to obtain records on, and block dissemination of, private information deemed illegal. “As the country enters the Internet age, network security has become a national security issue and social stability issue, important to economic development and a serious day-today working issue for citizens,” the ministry said in the statement. The new measures would help protect personal information as well as helping prevent online theft, fraud
and rumour spreading, it said. Last month, the largely rubber stamp parliament passed a sweeping national security law that tightened government control in politics, culture, the military, the economy, technology and the environment. Cybersecurity has been an irksome area in relations with economic partners like the United States and the European Union, which see many recently proposed rules as unfair to foreign companies.
China said yesterday it would allow the issuance of bonds for individual projects for the first time, in another official step to develop the country’s debt market and boost corporate fund-raising amid a slowdown of the world’s second-largest economy. With immediate effect, issuers can apply to the National Development and Reform Commission (NDRC) to sell bonds if the proceeds will be devoted to one specific project, according to new rules published by the country’s top economic planner. Previously, bond issuance was only permitted for the expansion of an issuers’ business and those targeting a number of projects.
Reuters
Mainland firms said to approach Fortescue on infrastructure business
Sinopec denies report on recalling overseas staff
Talks with the Chinese firms are at an early stage Vinicy Chan, Brett Foley and David Stringer
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ebei Iron & Steel Group Co. and Tewoo Group Co. have approached Fortescue Metals Group Ltd. about acquiring a stake in the iron ore producer’s infrastructure assets, people with knowledge of the matter said. Fortescue jumped as much as 10 percent in Sydney, the most in more than two months. The state-owned Chinese firms are separately talking to Fortescue about investing in the infrastructure serving its operations in Western Australia’s Pilbara region, the people said. They may also consider buying stakes in some of Fortescue’s mines, for a total investment of about US$1 billion to US$2 billion in the Australian firm’s assets, two of the people said, asking not to be identified as the information is private. Fortescue, controlled by billionaire Andrew Forrest, said in March it would consider selling minority stakes in mines, railroads and ports. Iron ore prices have tumbled to the lowest since at least 2009 as the largest suppliers, including Rio Tinto Group, expanded production just as economic growth slowed in China.
Australia’s third-largest iron ore producer, which has US$7.2 billion in net debt, abandoned a previous plan to sell a stake in its infrastructure assets in 2013 after saying the offers
The market is responding to news of the Chinese interest... A deal that would allow it to cut its debt would help solve the biggest headache investors have with Fortescue Evan Lucas, markets strategist, IG Ltd., Melbourne
it got didn’t meet its objectives for value and terms. In March it sold US$2.3 billion of bonds after halting an earlier, larger offering amid the rout in commodity prices. Talks with the Chinese firms are at an early stage and may not result in a deal, the people said. Representatives for Hebei Iron & Steel and Tewoo declined to comment. Fortescue, which has a market value of US$4.3 billion, has held talks with Baosteel Group Corp. and Japanese firms about selling a stake in some of its mines, people familiar with the matter said in June. Hebei Iron & Steel, China’s largest steelmaker by production capacity, produced 47.1 million metric tons of steel and booked sales of 280.6 billion yuan (US$45.2 billion) last year, according its website. State-owned Tewoo, based in the northern Chinese port city of Tianjin, runs businesses including commodities trading, logistics, financial services and real estate. It had 114.8 billion yuan of total assets at the end of 2013, its website shows. Bloomberg News
National top oil refiner, China Petrochemical Corporation (Sinopec), on Tuesday denied media reports that it is bring nearly 40 percent of staff of its global unit back to China. The reports were inaccurate, Sinopec spokesman Lyu Dapeng said. The total number of Chinese staff in Sinopec’s global exploration and production unit, also its wholly-owned subsidiary, Sinopec International Petroleum Exploration and Production Corporation (SIPC), are only around 700, and 263 of them will be relocated back to China’s offices, under the company’s regular job rotation system, Lyu said.
Investor sentiment rebounds after stock rout Confidence in China’s stock market improved in July after the government stepped in to halt a share price slide, China’s official Shanghai Securities News reported yesterday. The newspaper cited a survey by China Securities Investor Protection Fund Corporation, a state-owned fund set up to protect the rights of securities investors, which said investor confidence in the stock market rose in July to 59.6, up 1.9 percent from June. The index is measured on a scale of 1 to 100, where a level above 50 signifies confidence.
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August 6, 2015
Asia
Currency war calls truce in Asia Pacific as Fed weighs lift Traders are pricing in about a 76 per cent chance the Fed will act at or before the Fed’s December meeting Netty Ismail and Anooja Debnath
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entral bankers across the Asia-Pacific region are laying down arms in the global currency war as they prepare for the Federal Reserve to raise interest rates. By dropping a call for a weaker exchange rate in his monetary-policy statement on Tuesday, Reserve Bank of Australia Governor Glenn Stevens followed the lead of New Zealand’s Graeme Wheeler, who toned down concern the kiwi dollar was too strong two weeks earlier. In Japan, Haruhiko Kuroda said last month he had no plans to expand the record monetary stimulus the central bank is pumping into the economy. That doesn’t necessarily mean an end to losses for the currencies of the region’s major developed economies. Rather, it shows the prospect of an increase in U.S. interest rates is relieving pressure on peers to loosen policy. Australia’s dollar has already tumbled to within a cent of strategists’ median prediction for year-end, while New Zealand’s kiwi and the yen dropped below their forecasts in June and July.
Indonesia posts slowest GDP growth in six years Consumption, investment and imports were all weaker Nilufar Rizki and Gayatri Suroyo
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ndonesia’s economic growth in the second quarter dropped to its slowest since 2009, with prices for commodity and energy exports remaining weak and President Joko Widodo unable to push badly needed infrastructure projects past bureaucratic snarls. Southeast Asia’s largest economy expanded 4.67 percent in April-June compared to the same period a year ago, better than a Reuters poll forecast of 4.61 percent, but still below the revised estimate of 4.72 percent growth for the January-March quarter. Falling commodity prices and the government’s strict regulation on shipments of ore
weighed on the mining sector, the head of the statistics bureau Suryamin said, resulting in the sector contracting 5.87 percent in the June quarter. Meanwhile, the government’s contribution to GDP failed to show much improvement on the first quarter. The government said it spent less than 40 percent of its budget up through June, with capital expenditure particularly weak. “We expect growth in the second half to pick up on the back of investment, although we don’t think government infrastructure spending will be as big as we initially expected,” said Leo Putra Rinaldy, an economist at Mandiri Sekuritas in Jakarta.
“The government is facing challenges in revenue collection, which mean there could be spending cuts to control the deficit. Those spending cuts could come from infrastructure spending,” he added. On Tuesday Bank Indonesia Governor Agus Martowardojo said authorities were closely watching the risk of a further slowdown, while noting the uncertainties posed by an anticipated rise in U.S. interest rates that will probably suck money away from emerging markets like Indonesia. Although the government had not succeeded in improving spending in the second quarter, Finance Minister Bambang Brodjonegoro still believes GDP
Looking ahead, while we don’t think growth will slow further, we don’t see scope for much of a rebound either Gareth Leather, analyst, Capital Economics
growth will rebound significantly on the back of higher fiscal spending. “(Capital spending) may reach 80-85 percent which would make growth in the second half better,” he said on Tuesday. Brodjonegoro also said some fiscal policies were more effective in the second half, including tax incentives to attract investment, and a hike in the threshold of income tax to drive up people’s purchasing power. The government expects GDP growth of 5.2 percent this year, whereas the median forecast from a Reuters poll of analysts was for growth of 4.9 percent. Reuters
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Business Daily | 13
August 6, 2015
Asia “This is a temporary truce based on a Fed rate increase,” said James Rickards, author of “Currency Wars: The Making of the Next Global Crisis” and chief global strategist at money manager West Shore Funds. “These banks are going to stand pat in anticipation of” the Fed, “making the dollar stronger and their currencies weaker, with no further action by them.”
Flagging Fed
In his statement after leaving the main rate unchanged at an all-time low of 2 percent, Stevens referred to the prospect of higher U.S. borrowing costs and said the Aussie “is adjusting to the significant declines in key commodity prices.” It was the first time in more than a year that he refrained from signalling the currency was too strong.
Australia’s dollar jumped 1.3 percent, the most in two months, to 73.80 U.S. cents on Tuesday. That’s up from a six-year low of 72.35 cents on July 31 and compares with the 72 cents strategists predict for year-end. “Heat has come out of the currency wars,” said Sean Callow, a strategist at Westpac Banking Corp. in Sydney. The stronger U.S. dollar is “a key factor” here, he said. Even so, Stevens needn’t worry about a sustained Aussie rally, Callow said. New Zealand’s dollar is little changed since Prime Minister John Key, a former head of currency trading at Merrill Lynch, said July 20 the exchange rate had fallen faster than anticipated. The kiwi had tumbled to a six-year low of 64.99 U.S. cents on July 16, a week before Reserve Bank of New Zealand Governor Wheeler cut the main interest rate. That compares with strategists’ 65-cent median yearend forecast.
References omitted
Currency depreciation is approaching its limit given the rising risk of weaker demand from overseas investors Hideki Shibata, senior rates and currencies strategist, Tokai Tokyo Research Centre
Wheeler, in announcing the policy move, omitted previous references to the New Zealand dollar’s level being unjustified and unsustainable, a key criteria for intervention. He did say further declines in its value were necessary for the economy. “Central banks around the world have been waiting for the Fed to raise rates,” said Chris Chapman, a fixed-income trader at Manulife Asset Management in London. “The RBA and RBNZ have adjusted their comments” because they’ve seen “substantial declines this year and have probably reached levels they’re more comfortable with.” For Australia and New Zealand, the negative impact of having a weaker currency is starting to overshadow
the benefits, said Hideki Shibata, senior rates and currencies strategist at Tokai Tokyo Research Centre. “Currency depreciation is approaching its limit given the rising risk of weaker demand from overseas investors” for the nations’ securities, he said.
More explicit
U.S. central bank head Janet Yellen has been increasingly explicit in recent months about the potential for higher rates as the recovery in the world’s largest economy gathers pace. Fed Bank of Atlanta President Dennis Lockhart said in an interview with the Wall Street Journal that the central bank is close to a September rate increase. While West Shore’s Rickards says the Fed won’t raise borrowing costs from near zero this year, traders are pricing in about a 76 percent chance the Fed will act at or before the Fed’s December meeting. That’s based on the assumption that the effective fed funds rate will average 0.375 percent after the first increase. The yen has slumped 12 percent since the Bank of Japan last expanded its asset-purchase plan in October, and in June slid to a 13-year low of 125.86 to the dollar, weaker than the 125 median year-end forecast in Bloomberg’s survey. BOJ Governor Kuroda ruled out an expansion to bond purchases for now, even after the central bank trimmed its inflation forecasts. “The prospective Fed rate hike will do a lot of the heavy lifting on these FX crosses,” said Grant Peterkin, a money manager at Lombard Odier Investment Managers in Geneva, which oversees about US$170 billion. “They don’t need to be as explicit as they’ve been before.”
Thai central bank holds key rate Thailand’s central bank yesterday left its already-low benchmark interest rate steady again, signalling its belief that the weakening baht can aid exports and economic recovery better than a rate cut can. The Bank of Thailand said its 2015 growth forecast of 3.0 percent is being lowered again, due to poor exports, but said it won’t give the new one until Sept. 25. The Monetary Policy Committee (MPC) voted 7-0 to leave the one-day repurchase rate at 1.50 percent. In June, it also voted unanimously to hold, following 25 basis point cuts in March and April.
Australia new vehicle sales boast record July Sales of new vehicles in Australia rose 2.7 percent in July compared to the same month a year ago, reaching their highest on record for that month as consumers’ continued their love affair with sports utilities. The Australian Federal Chamber of Automotive Industries’ VFACTS report on Friday showed sales were 92,308 in July, compared to 89,865 for the same period last year. Sales were down 26.7 on June, which is typically a very strong month as dealers cut prices to clear stock for the end of the financial year.
South Korea’s forex fall
New Zealand unemployment up following population increase
South Korea’s foreign exchange reserves fell in July to their lowest level in three months and declined for the first time since January this year, central bank data showed yesterday. During July, reserves declined US$3.93 billion, bringing them to US$370.82 billion at month-end, Bank of Korea data showed. The central bank said the decline was mainly due to the weakening of some currencies that it owns, like the euro, against the dollar. According to statistics provided by the central bank, the euro fell 2.5 percent against the dollar in July while the Australian dollar slumped 5.0 percent.
Annual wage inflation was 1.6 percent, compared with annual consumer price inflation of 0.3 percent
Japan PMI services show slower expansion
U
nemployment rate edged up to 5.9 percent in the quarter ending June, despite a rise in the number of people in work, the government statistics agency said yesterday. The unemployment rate, which rose from 5.8 percent in the March quarter, came in parallel with a 0.3-percent rise, or 7,000 more people, in the number of people in work, according to Statistics New Zealand. “Even though employment grew over the quarter, population growth was greater, which resulted in a lower overall employment rate for New Zealand,” labour market and household statistics manager Diane Ramsay said in a statement.
“Despite lower quarterly growth, this is still the 11th consecutive quarter of employment growth, making it the second-longest period of growth since the period between 1992 and 1996.” Over the year to June, employment growth was still fairly strong at 3 percent, or 69,000 more people employed, with the manufacturing sector showing the strongest annual employment growth. “This is the first time since the December 2013 quarter that the construction industry has not been the largest contributor to annual growth in employment,” Ramsay said. Tertiary Education, Skills and Employment Minister Steven Joyce said it was pleasing to see continuing
Bloomberg News
job growth, despite some economic headwinds. However, the main opposition Labour Party said the figures showed projections of falling unemployment were proving wrong as jobs growth failed to keep up with population growth and migration. “Today’s unemployment figures show that there are now 148,000 New Zealanders out of work, 10,000 more than this time last year,” Labour finance spokesperson Grant Robertson said in a statement. “These are not just numbers. That is an extra 10,000 people and their families who are struggling to find the work and income they desperately need.” The Council of Trade Unions (CTU) said unemployment should have been falling after several years of economic growth. “While the employment rate is still high, the continuing strong net immigration may be crowding out people leaving education or out of work, who may be finding it even harder to find jobs than the statistics show,” CTU economist Bill Rosenberg said. “Along with increasing pressure on beneficiaries to find work, high net immigration is also holding down wage rises.” Xinhua
Japanese services sector activity expanded in July at a slightly slower pace than the previous month, a survey showed yesterday, suggesting only a moderate rebound in the economy after an expected contraction in the second quarter. The Markit/Nikkei Japan Services Purchasing Managers Index (PMI) fell to a seasonally adjusted 51.2 in July from 51.8 in June. The index remained above the 50 threshold that separates expansion from contraction for the fourth consecutive month. The index for new business rose to 53.2 from 52.6 to indicate the fastest growth since May 2013.
EU foreign policy chief to enhance EU-ASEAN relations EU foreign policy chief Federica Mogherini will visit Kuala Lumpur, Malaysia later this week, eyeing to strengthen relationship between the European Union (EU) and the Association of Southeast Asian Nations (ASEAN), the European Commission said on Tuesday. “Federica Mogherini, High Representative for Foreign Affairs and Security Policy and the Vice-President of the European Commission, will travel to Kuala Lumpur, Malaysia on 5-6 August as part of the EU’s drive to step up its engagement with ASEAN,” it said in a statement.
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International Standard Chartered halves dividend Standard Chartered halved its dividend and said it would raise capital from investors if needed, as new chief Executive Bill Winters outlined his thoughts on reviving a bank hit by a 44 percent slump in first-half profit. Shares in the Asia-focused lender rose 4.5 percent to 994.9 pence yesterday as investors welcomed Winters’ move to set a target to double return on equity to a minimum of 10 percent. That helped offset disappointment over the cut to the dividend for the first half of the year to 14.4 cents a share from 28.8 cents a year ago.
Fed’s Lockhart says ready for Sept. rate hike Atlanta Federal Reserve President Dennis Lockhart has said it would take “significant deterioration” in the U.S. economy for him to not support a rate hike in September, according to the Wall Street Journal. “I think there is a high bar right now to not acting, speaking for myself,” Lockhart said in an interview with the newspaper published on Tuesday. “It will take a significant deterioration in the economic picture for me to be disinclined to move ahead.” His comments add weight to the likelihood of a September rate hike.
Colombian Eurobonds before December Colombia could pre-finance next year’s borrowing needs, possibly with a euro-denominated bond before the U.S. Federal Reserve starts raising interest rates, Finance Minister Mauricio Cardenas told Reuters. Latin America’s fourth-largest economy has already issued US$2.5 billion worth of 30-year dollar-denominated debt in January and March at a record low 5 percent yield, covering external borrowing needs for 2015, according to Cardenas. But with US$3 billion in overseas borrowing projected for next year, Colombia may issue Eurobonds ahead of the U.S. interest rate hike that Cardenas expects will come in December.
U.S. groups aim to block Monsanto bid for Syngenta Several U.S. farm and consumer groups are working on strategies to derail a proposed tie-up of Monsanto Co and agricultural seeds and chemicals rival Syngenta AG, saying a combination of the market leaders would spell fewer and higher-priced products. Coalitions of opponents are being formed and market analyses being done, moves that underscore the hurdles U.S.based Monsanto will face in any deal to take over Swiss-based Syngenta. Monsanto, the world’s largest seed company, has yet to persuade Syngenta, the world’s top provider of agricultural chemicals, to even start negotiations.
Russia resubmits claim for Arctic shelf Russia said it has resubmitted a claim to the United Nations for some 1.2 million square km of the Arctic shelf, a drive to secure more of the mineral-rich region where other countries have rival territorial interests. The Russian economy is overwhelmingly reliant on natural resources and the Arctic’s estimated huge oil and gas reserves are expected to become more accessible as climate change melts and ice and technology advances. This prospect has attracted other nations, including Norway, the United States, Canada and Denmark while international energy companies are planning large drilling campaigns.
Euro zone’s July business growth exceeds expectations Services, which dominate the bloc’s economy, performed better than first thought Jonathan Cable
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uro zone business growth accelerated at the end of last month as companies largely put the Greek debt crisis behind them, suggesting the bloc’s economic recovery is on track, a survey showed yesterday. Greece’s flirtation with bankruptcy had threatened to wreck the currency union, but Athens agreed a framework bailout plan with its European Union partners in mid-July in exchange for stringent reforms and budget austerity. With conditions and sentiment improving in the bloc after the deal, Markit’s July final Composite Purchasing Managers’ Index (PMI) beat an earlier estimate of 53.7, settling at 53.9. That was shy of June’s fouryear high of 54.2, but the index has now been above the 50 mark that separates growth from contraction since mid-2013. The composite PMI pointed to third-quarter expansion of 0.4 percent, Markit said, in line with the expectations for the previous three months but less than the 0.5 percent median forecast in a Reuters poll taken two weeks ago. “The euro zone economy showed reassuring resilience in the face of the Greek debt crisis in July,” said Chris Williamson, Markit’s chief economist. “With survey results like these, the European Central Bank will no doubt see the euro zone recovery
as remaining firmly ‘on track’, supporting the view that the region looks set to grow by at least 1.5 percent in 2015.”
KEY POINTS July final euro zone composite PMI 53.9 Companies still cutting prices - but only just Service companies building up backlog of orders
U.S. factory orders rebound With the inventories-to-shipments ratio at a lofty 1.35, compared to 1.30 last September, manufacturers might be sitting on a pile of unwanted goods Lucia Mutikani
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ew orders for U.S. factory goods rebounded strongly in June on robust demand for transportation equipment and other goods, a hopeful sign for the struggling manufacturing sector. The Commerce Department said on Tuesday new orders for manufactured goods increased 1.8 percent after declining 1.1 percent in May. Factory activity has been stymied by a strong dollar and spending cuts in the energy sector after last year’s sharp plunge in crude oil prices. Tepid global demand also has weighed on manufacturing, which accounts for about 12 percent of the domestic economy. Those factors have eroded the profits of multinational companies like Caterpillar Inc., Procter & Gamble Co, the world’s largest household
products maker, and Whirlpool Corp, the global home appliances giant. Though there are signs that the energy spending drag is easing, the dollar’s strength will likely remain a constraint. The dollar has gained 15 percent against the currencies of the United States’ main trading partners since June 2014. Or d er s fo r tr a n s p o r t a t i o n equipment surged 9.3 percent in June, reflecting a 65.4 percent jump in aircraft bookings. There were increases in orders for machinery, furniture, fabricated metal products, electrical equipment, appliances and components.
Solid inventories
The Commerce Department also said orders for non-defence capital goods excluding aircraft - seen as a measure
Services, which dominate the bloc’s economy, also performed better than first thought. A PMI covering the sector came in at 54.0, above the flash 53.8. In June, it was 54.4, better than a four-year high. However, as in every month since early 2012, businesses cut prices to encourage business - although only slightly. The composite output price sub-index rose to 49.8 from June’s 49.4, its highest reading since it fell below 50 in April 2012. The price discounting and steady growth allowed service companies to build up a surfeit of orders, at the second fastest pace since mid-2011. The backlogs of work index rose to 51.1 from 50.8. Reuters
of business confidence and spending plans - increased 0.7 percent instead of the 0.9 percent rise reported last month. Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the gross domestic product report, increased 0.3 percent in June. Shipments were previously reported to have dipped 0.1 percent. Manufacturing inventories increased a solid 0.6 percent, which was more than the government assumed in its second-quarter GDP snapshot published last week. Coming on the heels of a report on Monday showing stronger construction spending in May and April than previously reported, economists said the sturdy increase in factory inventories suggested that second-quarter GDP could be revised to as high as a 3 percent annual pace. The Commerce Department reported last Thursday that the economy expanded at a 2.3 percent pace in the second quarter. It will publish its second GDP estimate for that quarter later this month. In the wake of the construction data, economists had said they expected second-quarter growth would be raised by at least fourtenths of a percentage point to a 2.7 percent pace. They forecast factory inventories adding another 0.3 percentage point. Reuter
Business Daily | 15
August 6, 2015
Opinion
Poor commodities: an asset without wires a central bank backer Business
Leading reports from Asia’s best business newspapers
James Saft
Reuters columnist
TAIPEI TIMES Owning a home is growing increasingly difficult for Taiwanese, with heavier mortgage burdens in the first quarter costing more than 50 percent of household income for residents in Taipei and New Taipei City, government data showed. Mortgage burdens rose to 68.63 percent of household incomes in Taipei and 55.27 percent in New Taipei City during the January-to-March period, far higher than the national average of 35.94 percent and the healthy level of 30 percent, the Construction and Planning Agency said in a report on its Web site.
THE STAR Petronas Gas Bhd (PetGas), which almost doubled its net profit in the second quarter ended June 30 to RM818mil, has appointed Tan Sri Shamsul Azhar Abbas as its new chairman. Shamsul, 63, was the former president of Petroliam Nasional Bhd (Petronas). He left the national oil giant after his contract expired on March 31. Shamsul has since joined the boards of MMC Corp Bhd and Enra Group Bhd. PetGas, in a statement to Bursa Malaysia, said it expected to benefit from Shamsul’s extensive experience in the oil and gas industry.
THE AGE The majority of Australia’s top listed companies areset to boost their dividend pay-outs this year, despite a rocky past financial year which saw the ASX 200 gain just 1.2 per cent. Bloomberg dividend forecasts estimate two thirds of the 113 ASX 200 companies reporting earnings this more are expected to increase their pay-outs. Shareholders in Oil Search can expect a 300 per cent increase in dividend per share, with the Papua New Guinea-based oil and gas company tipped to pay out A8¢ this year, compared with A2¢ this time last year.
THE STRAITS TIMES The (Singapore’s) Government will co-fund Changi Airport’s biggest expansion to date, including the construction of the future Terminal 5 (T5), with other stakeholders chipping in. Revealing this to The Straits Times in an exclusive interview last week, Senior Minister of State for Transport Josephine Teo said the final cost-sharing has not been decided. The project - expected to cost tens of billions of dollars - is an investment that is beyond the means of Changi Airport Group (CAG), its chairman, Mr Liew Mun Leong, had earlier told The Straits Times.
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ommodity investors stung by the four-year bear market made one simple mistake: investing in an asset class not backed by a central bank. Whereas equities and bonds have benefited from very meaningful support, direct and indirect, from central bank asset-purchase programs, commodities have not. That may or may not be good policy; certainly you can argue that the current downdraft in commodities prices reflects a singular lack of inflation risk in the global economy. That might argue for more quantitative easing, but given that what we’ve had so far has neither generated much inflation or kindled demand for raw materials, it would be hard to be too sure that more central bank buying of financial assets would help commodities prices. What the situation does underscore is the tremendous extent to which official policy, rather than performing analysis and bearing risks, makes or breaks investment strategy in the post-crisis world. Commodities are in the midst of a four-year bear market which has only intensified in recent months. The Thomson Reuters/ CoreCommodity CRB index, down 46 percent since April 2011, has fallen more than 30 percent in the past year alone. The causes for the fall, are of course, complex. Not only have energy prices fallen sharply, in part due to weak demand, in part due to improved efficiency and in part due to a strategic decision by crude producers to
make life difficult for emerging producers of shale and other energy sources. As well, China’s economy, which has been the dominant marginal buyer for most commodities for more than a decade, is both slowing rapidly and undergoing an historic shift away from investment and towards consumption, a change which implies less intensive demand for raw materials. Commodities are thus a bit of an unloved step-child in a world in which everyone’s new dad is a central bank. The Federal Reserve, European Central Bank, Bank of Japan and Bank of England have found it useful to buy government bonds, and sometimes other assets, at least in part because of the impact this has on other financial assets, making investors wealthier and financing easier to get and cheaper.
Lucky is the tool China has gone beyond this, stepping in to rescue its plunging equity market with an unparalleled intervention including financing lenders which in turn lend money for stock purchases. And official policy in China has been calibrated to ease and support the transition to a more consumption-oriented economy, thus hastening the arguably inevitable dampening effect this has on commodities prices. In this way financial assets, as opposed to commodities, have simply been lucky in that they are one of the few levers central banks have left to attempt to
At least in developed economies the fall in commodities, especially energy prices, is a bit of a break for policy makers, putting money in the pockets of consumers who might spend more or pay down debt
kindle demand and inflation. None of this is to say that policy should have supported commodities prices, though it is superficially attractive to put money into the pockets of the less well off who produce commodities, as opposed to the better off who own securities. At least in developed economies the fall in commodities, especially energy prices, is a bit of a break for policy makers,
putting money in the pockets of consumers who might spend more or pay down debt. It may be too that central banks in supporting asset prices are fighting a battle they cannot ultimately win, both with inflation and with the very inflated expectations investors have about how much they should earn. Investor William Bernstein has argued that as economies grow they naturally give rise to lower returns. Not only is there simply more capital, but technological innovation speeds up, making huge new investments obligatory. Society ends up wealthier but returns drop, though speculative bubbles tend to rise. As in tech companies, so is something similar seen in commodities, where new technology makes the use of commodities more efficient, and the sourcing of new supplies easier. The coming wave of high-yield bond defaults among energy producers may well be an excellent example of this phenomenon. We’ve got access to more energy but returns are not what investors hoped. We all end up with much more of what we want, be it energy, steel or mobile phones, but outside small niches like Apple it becomes much harder to both pay for new investment and make good returns. Much of this is self-reinforcing. So long as central banks see asset markets as useful tools for other ends the performance gap between financial assets and real ones may persist. Reuters
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August 6, 2015
Closing China says construction in South China Sea islands stopped
New energy vehicle production rapidly increases in Mainland
China has stopped construction in the South China Sea, the country’s foreign minister said yesterday, at a meeting of Southeast Asian foreign ministers where the disputed waters have taken centre stage. China and the Association of Southeast Asian Nations (ASEAN) agreed to speed up consultations on a Code of Conduct for the South China Sea, the foreign ministers of China and ASEAN member Thailand said yesterday. “China has already stopped,” said Foreign Minister Wang Yi, when asked if China had halted construction work in the South China Sea. “Just take an aeroplane to take a look.”
Chinese automakers produced 20,400 new energy vehicles in July, 3.5 times as many as the month last year, after the government promoted the sector, official data showed yesterday. They produced 12,345 new energy passenger vehicles last month, up 159 percent year on year. Production of new energy commercial vehicles surged 677 percent to 8,045 units, according to the Ministry of Industry and Information Technology (MIIT). The July data brought total output of new energy vehicles in the first seven months to about 98,900 units, up 300 percent over the same period last year. The MIIT did not provide figures for sales of such vehicles.
South Korea to launch yuan-won futures in early October The Korean bourse has received an increasing number of IPO inquiries from Chinese companies since Beijing halted new company listings Meeyoung Cho and Changho Lee
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outh Korea is pushing back the launch of yuan-won futures contracts to early October from an initial June target, having been delayed by the implementation of a widening in the trading band for stocks and futures, the head of Korea Exchange said. As part of efforts to boost activity in Seoul’s yuan-won market launched on December 1 last year, government and exchange sources had previously said they aimed for a possible June launch of the futures contracts. “We are launching yuanwon futures contracts as a hedging tool against currency risks as direct yuan-won trades will rise sharply and more trades will be made in yuan in the future,” Korea Exchange Chairman and Chief Executive Choi Kyung-soo told Reuters in an interview at his office in downtown Seoul.
We are launching yuan-won futures contracts as a hedging tool against currency risks as direct yuan-won trades will rise sharply and more trades will be made in yuan in the future
Choi added that Korea Exchange is looking to attract yuan-denominated bonds to the exchange to meet demand from South Korean investors seeking higher returns and Chinese firms looking to raise money in more stable markets.
China inquiries
Choi said the bourse has received an increasing number of IPO inquiries from Chinese companies since Beijing halted new company listings on its stock markets in July. There are 10 Chinese companies already listed in
South Korea. Last month China suspended IPOs as part of its efforts to prevent a collapse in its stock markets. The suspension left companies on the verge of listing looking for new ways to raise funds needed to grow their businesses. “There have been increasing ‘knocks’ from Chinese firms since China suspended IPOs,” Choi said when asked about any spill over effect from the latest measures taken by Chinese government to protect its stock markets.
Choi Kyung-soo, Chairman and Chief Executive, Korea Exchange
Choi, a former CEO of Hyundai Securities who was appointed in October 2013, said the exchange’s daily price band - which was doubled to 30 percent in either direction on June 15 - should eventually be scrapped, as such controls are not needed in a developed market. He said the exchange is not considering widening it further. Choi said he expects the exchange’s planned IPO to be launched at the end of 2016 or in the first half of 2017, if parliament gives its approval. The proceeds from the IPO will be used to fund acquisitions of foreign exchanges, or joint ventures with exchanges which do not have derivatives markets or have relatively less developed derivatives markets. Currently, the exchange is owned nearly 40 brokerages, all of whom have minority stakes. Reuters
EU’s Juncker expects Greek debt Alibaba partnership paves the accord by August 20 way for buying Bentleys online
Bad debts in Thailand spread from retail to small companies
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uropean Commission head Jean-Claude Juncker believes an agreement on a third bailout for Greece in return for more tough reforms is likely this month, hopefully by August 20 when Athens must make a key debt repayment. “All the reports I am getting suggest an accord this month, preferably before the 20th,” when Greece must repay some 3.4 billion euros (US$3.7 billion) due to the European Central Bank, Juncker told AFP in an interview yesterday. Officials from the Commission, the ECB, the EU’s bailout fund and the International Monetary Fund are currently in Athens working out the details of the new rescue worth up to 86 billion euros. The Greek government said Tuesday it expected an agreement by August 18. The negotiations in Athens, which took some time to organise, are now making “satisfactory” progress, Juncker said. He said if an agreement is not reached, “then we will have to arrange another round of bridge financing” similar to July, when Juncker scraped together an emergency loan of 7.0 billion euros so Athens could pay the ECB and make up arrears due to the IMF.
libaba Group Holding Ltd. pushed deeper into the car distribution business by partnering with a Chinese dealership group to provide online car sales. Under the deal, Alibaba’s Tmall e-commerce site will host a virtual dealership run by China Yongda Automobiles Services Holdings Ltd., according to the companies. To kick off the partnership, a Chevrolet Epica will be offered at a discount of as much as 40 percent through the site. The tie-up will also cover areas such as servicing, car financing, parallel imports and standardized nationwide pricing. Yongda distributes brands including Bentley and Jaguar Land Rover and will offer the luxury brands through the Tmall site in future, according to Wang Licheng, who heads Alibaba’s car division. The two companies plan to have 200 service points within two years for customers to pick up their cars after ordering them online. Traditional car dealerships are building their online presence to cater to the changing shopping habits of Chinese consumers, who can buy everything from shoes, refrigerators and now automobiles over the Internet.
AFP
Bloomberg News
opes that bad debts in the Thai financial system may have peaked this year are fading as more small companies and medium-sized enterprises default on their bank loans, hit by slowing domestic consumption and falling exports, particularly to China. The rising tide of non performing loans (NPLs) is spurring analysts to downgrade their outlook for Thai banks. Both the sector and individual banks such as Bangkok Bank and Siam Commercial Bank have been downgraded at least twice this year as souring loans and a stuttering economy eat into their profits. Thailand’s central bank has already twice lowered its forecast for the country’s economic growth, and is expected to cut its estimate for the third time in September. According to StarMine data, analysts have cut their forecasts for major Thai banks’ earnings by as much as 6 percent in the past 14 days after second quarter earnings were announced. Equally worrying is the increase in special mention loans (SMLs), loans that have been delinquent for one to three months but are yet to be declared non performing. Reuters