Macau Business Daily August 25, 2015

MOP 6.00

Tourism study surprise

Closing editor: Joanne Kuai

Irritable residents. A study says locals are irked by the growing number of tourists. Who are equated, it is claimed, with the deteriorating living environment.

The population engaged in the sector understandably express less resentment. But continuing negative attitudes could undermine the main driver of Macau’s economy

Year IV

Number 865 Tuesday August 25, 2015

Publisher: Paulo A. Azevedo

Page 2

Social Welfare Bureau Bows to Audit Criticism

Conflicting standards. Oral orders trumping written instructions. Poor monitoring and supervision of Consumer Council financial aid. The Audit Commission pulled no punches in its condemnation of the Social Welfare resolves flight cancellation disputes due to MERS Bureau. Saying uneven evaluation and administration had caused financial hardship for some Page 4 residents. The criticism was accepted. With resolutions to improve the system Page

3

Growing Business

Alvin Chau folds financial services business into GEM-listed firm

Page 6

Chinese farmers allowed to use property as collateral for loans

The life insurance sector grew 72 pct y-o-y in H1. Amounting to MOP5.65 bln in gross premiums. Meanwhile, claims totalled MOP1.3 bln, an increase of 37.9 pct y-o-y

Page 8

Current times hold similarities to 1994 crisis

Page 10

Page 4

Nightmare on Monday China’s stock markets slumped again yesterday. Giving up all their gains for the year on a massive sell-off that dragged down regional markets. Chinese markets plunged more than 9 per cent during the day

Page 8, 9 and 16

HSI - Movers August 24

Mixed Signals

The gov’t has to pay MOP200 mln compensation to Macau Cable TV. Because it failed to forbid antenna companies from illegally retransmitting TV signals. MCTV suffered losses of MOP238 million. But a ‘discount’ was made because of belated action and a conflicting shareholder

Page 5

%Day

CITIC Ltd

+0.29

Belle International Ho

-1.57

Link REIT

-1.75

China Unicom Hong Ko

-2.03

Bank of East Asia Ltd/T

-2.06

China Mobile Ltd

-7.93

Galaxy Entertainment

-8.02

CNOOC Ltd

-8.16

Tingyi Cayman Islands

-10.86

Kunlun Energy Co Ltd

-17.99

Source: Bloomberg

Gaming www.macaubusinessdaily.com

Name

Downsizing

I SSN 2226-8294

More layoffs. According to gaming labour union Forefront of Macau Gaming. Which claims junket operator Jimei has laid off employees with or without justification. An independent non-executive director of Jimei says ”cutting human resources is the trend” among local gaming promoters

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2 | Business Daily

August 25, 2015

Macau

Study claims residents irritated by tourists Two researchers from the University of Macau say the negative sentiment among the population towards tourism may end up hurting the main driver of the economy João Santos Filipe

jsfilipe@macaubusinessdaily.com

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acau residents are increasingly feeling, and expressing, negative sentiments towards tourism and ultimately the sector may struggle with this reality. The conclusion is part of a study by University of Macau researchers Glenn McCartney and Winnie Lei Weng In titled ‘House of Cards – An analysis of Macau’s residents’ support for tourism and casino development’.

‘A decade of rapid tourism development in Macau has shown more residents are becoming irritated by an increasing number of tourists and resulting congestion’, the study reads.

According to the study published in the academic journal Tourism and Hospitality Research, this negative sentiment among the population may end up hurting the main driver of the Macau economy.

“The negative sentiments

‘This split opinion suggests that fewer of the perceived benefits from Macau’s significant tourism growth and tax revenues to government coffers in recent years are reaching those working in other industries’, reads the study, explaining the reasons behind the divided views.

Diversified tourism

by Macau residents could impact the delivery of tourism services as many in the community work in tourism or live in a community close to a tourism location”, the authors explained.

Congestion problem

If on the one hand the economic benefits are acknowledged by the population, on the other hand the negative sentiment

is mainly driven by the ‘new’ environment in the territory caused by overcrowding and traffic congestion.

‘This research showed the resident sample were concerned more about noneconomic environmental and declining aesthetic conditions such as traffic congestion, overcrowding, and living costs with the hope of improved public transportation and

leisure with emphasis on casino development’, the study states.

Not surprisingly, residents involved directly in tourism are also the ones demonstrating a better attitude towards the sector, as they tend to be more directly affected by the benefits. The other residents tend to focus their attention more on the social costs.

In order to address this problem, McCartney and Lei suggest the government take into consideration measures to influence and limit the community and environmental impacts of the growth of the sector in the Tourism Master Plan currently being considered.

The good news for the Executive is that the population seems willing to accept the growth of tourism, providing it brings non-gaming elements to the territory.

Business Daily | 3

August 25, 2015

Macau

Audit report slams Social Welfare Bureau’s inept evaluations of financial aid There was no united standard for the Bureau’s service centres to evaluate applications for financial assistance in 2013, the Commission of Audit says, claiming the differing standards of the government department had caused qualified applicants to lose their chance of receiving subsidies Kam Leong

kamleong@macaubusinessdaily.com

T

he city’s Social Welfare Bureau failed to unify standards evaluating financial assistance applications among its sub-units in 2013, meaning the Bureau’s evaluations and approvals for such aid schemes may not be fair and just, the Commission of Audit says.

In 2013, the Social Welfare Bureau approved some MOP309.7 million (US$38.7 million) for individual and family-group applicants perceived to be economically impoverished. But the city’s audit authority indicated in a report released yesterday that the Bureau’s five social service centres had different evaluation standards for the 7,990 applications for financial assistance that it received in the year before.

‘The Social Welfare Bureau did not rule clear instructions for quantifying social benefits, such as cash handouts, that may be included in bank deposits and cash [of applicants]. This means every subordinate service centre has its own quantifying standards for evaluating applications,’ the Commission wrote in the report.

Different standards

Currently, applicants for government financial assistance need to be verified by the Bureau as being in severe economic straits based on the Minimum Subsistence Index of the year. To verify whether the applicants are economically impoverished, the government department will evaluate income as well as bank deposits and applicants’ cash. However, the Bureau will waive the official social benefits that applicants receive, such as cash handouts, as their income and bank deposits as these benefits may impact negatively on their applications.

But the Commission of Audit indicated that two service centres of the Bureau – Centre A and Centre B (without identifying them) showed

that they had very different standards on waiving the amount of cash handouts that applicants received.

‘Centre A waived the accumulative amount of cash handout of all available years, while Centre B only waived the amount for 2013, leading the two centres to have obvious different standards in evaluating applications.

Consequently, one application that is approved for financial assistance by Centre A may be rejected by Centre B,’ the audit authority found.

According to the report, the waived amount of cash handouts set by Centre A was MOP39,000, by adding up the total amount of cash handouts per permanent resident between 2008 and 2013, while the

waived amount set by Centre B totalled only MOP8,000.

“The difference in evaluating applicants’ deposits and cash cannot guarantee [the Bureau] treats every individual equally. It causes some applicants to be rejected by the government for financial assistance although they are indeed in need. [The different standards] cannot ensure its evaluation is fair and just to all applicants as well,” the Commission complained.

Oral orders trump written instructions

In addition, the Commission indicated that the Bureau’s oral orders to its frontline employees differ from its written working guidelines of economic aid.

‘These related oral orders were only passed to frontline staff after multiple oral transmissions, leading different workers to have different standards in evaluating the applications based on their interpretation [of the orders],’ it wrote.

According to the Commission, it had randomly inspected 20 application samples from Centre A and 10 from Centre B, discovering centre employees had missed one or more evaluation procedures or failed to collect the required documentation in 16 and 3 of the cases, accounting for 80 per cent and 30 per cent of the total, respectively.

‘The audit result shows that Centre A handled a total of 2,168 applications while Centre B received 221. Centre A handled 10 times more cases [than Centre B], and the frequency of Centre A not obeying the evaluation scheme is also higher,’ said the report.

On the other hand, the Commission found that the Social Welfare Bureau had granted rental

Social Welfare Bureau amends economic aid guidelines The Social Welfare Bureau responded that it agrees with the opinions presented by the Commission of Audit, claiming it had already conducted a full review based on the report. According to the Bureau, it has already amended its working guidelines for economic aid for its employees, regulating waiving the total amount of social benefits that applicants received in the recent three years, including cash handouts, pensions, disability subsidies, etc. The new regulations have been effective since July 1, according to the Bureau.

subsidies to two applicants who had already received the same subsidies from the city’s Housing Bureau, involving MOP74,950. However, the Commission said the social department had not discovered the issue prior to the audit report.

The report also slammed the Bureau for not reducing its cash in hand although it actually could.

The Commission indicated that a proportion of MOP4.35 million in financial assistance that the government granted by cash, accounting for 16 per cent of the total, could actually be distributed in non-cash ways, such as by cheque. It claimed that handing out cash had caused distributors of the financial aid to suffer unnecessary risks and pressure.

4 | Business Daily

August 25, 2015

Macau Brands

Trends

The Mighty Mini Raquel Dias newsdesk@macaubusinessdaily.com

1

956 was the year my mother was born. Perhaps more importantly (to history, not myself) 1956 was also the year the UK suffered some of its worst fuel shortages, caused by the Suez Crisis (an invasion of Egypt in late 1956 by Israel, followed by Britain and France). As petrol was once again rationed and prices boomed, the market was just begging for a cool, small, pocket-friendly car.

You guessed right; the Mini was the perfect solution.

Leonard Percy Lord, captain of the British motor industry, made his mind up to design a car that followed a set of specific rules. The car should be contained within a box that measured 3.0×1.2×1.2 m, with passenger accommodation occupying 1.8 m of the 3.0 m length.

The engine, for purposes of cost, should be an existing unit. The small team of six first presented the car in 1959 and, well, the rest is history.

The car instantly became an icon of its time, a symbol of cool. A small car that keeps its status is no small feat, and a small car that survives this many decades certainly deserves more than a second glance.

The newest model is not only cool, it’s powerful, too. The latest John Cooper Works model, or JCW for short, is mighty. The power plant is a 2-litre 4-cylinder with direct fuel injection, a turbocharger integrated in the exhaust manifold and Valvetronic plus VANOS camshaft control. It is the most powerful Mini in history, reaching 100km/h in 6.1 seconds with the auto – 0.2 of a second faster than the manual.

Looks are important too, and this one is a winner, rocking the British Racing Green and the red stripes.

Life insurance sector grows 72 pct y-o-y in H1

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he life insurance sector grew 72 per cent year-on-year during the first half of 2015 to MOP5.65 billion in gross premiums from MOP3.29 billion, according to the data revealed by the Monetary Authority of Macau (AMCM).

At the same time, the total claims amount in the life insurance sector also increased but at a slower rate.

During the first six months of this year,

total claims amounted to MOP1.30 billion, an increase of 37.9 per cent year-on-year from MOP0.94 billion in the first six months of 2014.

During the first six months of 2015, the total amount of gross premiums of the non-life insurance sector went up 8.5 per cent to MOP1.12 billion from MOP1.03 billion in the first half of 2014.

In terms of non-life insurance,

Consumer Council helps resolve flight disputes

A

s a result of the MERS outbreak in June, many travellers opted to cancel their flight tickets for Korea. The Consumer Council said it had received 46 complaint cases in which customers could not get in touch with the airline company for ticket cancellation. All disputes were resolved after follow-up by the Council.

The MERS outbreak in Korea happened earlier in the high season, and residents were advised not to travel to Korea by the governments of all regions. Macau’s Consumer Council said it received 79 cases regarding flight ticket cancellation during June and July, while around 50 complaints were resolved by extending the valid period of the flight tickets, a change of destination, or ticket cancellation with service charges.

The Council indicated that 46 cases involved customers purchasing tickets online from the airline company website but were unable to contact

the airline company when trying to cancel their tickets.

Customers approached the Council for help, which finally reached the airline company, with its registered office in Korea, and succeeded in helping customers resolving their cases and meeting their needs.

The Council added that a lot of

gross claims also recorded significant growth - amounting to MOP359 million, up 27.1 per cent year-on-year on the MOP282.5 million registered in the first half of 2014.

Employees’ compensation insurance registered the highest gross premiums and gross claims values of MOP253.4 million and MOP110.4 million, respectively.

J.S.F.

customers now tend to purchase their flight tickets online from airline companies registered overseas, which involves issues such as applicable laws and enforcement, with procedures for handling disputes consequently more complicated.

Prepayment consumption entails all kinds of risk, thus customers are advised to check the background information of the website and make sure it is reachable. Payment by credit card is better than transfers through bank accounts since customers may ask the credit card company to terminate the transaction should the website shut down or when services or products cannot be provided.

Business Daily | 5

August 25, 2015

Macau

Government to pay MOP200 million to MCTV in court ruling The Court of Second Instance has denied the government’s right to appeal a decision that would actually benefit the Special Administrative Region by MOP38 million João Santos Filipe

jsfilipe@macaubusinessdaily.com

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he Court of Second Instance (TSI) has confirmed the decision of the Administrative Court (TA) that ruled that the Special Administrative Region (SAR) must pay MOP200 million to Macau Cable TV (MCTV). The information was revealed by the Macau Courts webpage. The decision comes after an appeal from the government that would have actually benefited MCTV. Originally, the government was to compensate MCTV because it had failed to comply with its duties, as defined in the Terrestrial Subscription TV Service Concession Contract signed with MCTV, by allowing public antenna companies to illegally retransmit TV signals.

While the Administrative Court found MCTV to have suffered losses amounting to MOP238 million which was supposed to be the compensation amount, it eventually decided that the government would only have to pay the TV company MOP200 million.

The decision to reduce the compensation was based on two reasons. First, MCTV could have taken the government to court earlier to minimise its losses instead

of waiting for 11 years before taking legal action. Second, the largest shareholder of MCTV [Mr. Lam Io Fun] is also the largest shareholder of Kong Seng Paging, which until

2007 was one of the ‘major public antenna companies’ involved in the illegal TV retransmission, according to the decision of the court.

However, in a move that even the judges of TSI consider surprising, the government decided to appeal the ruling to cut the compensation. The Executive argued that while it agreed with the reduction, the legal decision lacked proper justification.

‘To tell the truth, the legitimacy to appeal from this decision lies with the party [MCTV] that saw the ruling of the TA cutting a piece (MOP38 million) of the whole pie (MOP238 million)’, the decision of the judges reads to stress the countersense of the appeal.

The TSI ended up denying the appeal because it says the government lacks legitimacy to appeal a decision that already benefits the SAR and that in case it won the appeal would actually benefit MCTV.

6 | Business Daily

August 25, 2015

Macau Imperial Pacific warns of H1 loss Hong Kong-listed Imperial Pacific International Holdings Ltd. said in a filing that it is expected to record a significant increase in net loss for the six months ended June 30, 2015 as compared to a year ago. Imperial Pacific, which is investing in a casino project on the island of Saipan, said the loss was mainly attributable to the amortisation of prepaid casino resort developer licence payments and increased costs in developing the integrated resort business on the island, the decrease in accrued revenue from sharing of profit stream as well as the recognition of share-based payment expenses as a result of the grant of share options. Imperial Pacific is also an investor in the profit stream of Macau junket operator Heng Sheng Group.

Chau folds financial services business into GEM-listed firm Alvin Chau, who heads junket firm Suncity Group, is incorporating loss-making financial service businesses into a firm called Sun International Resources

M

acau junket boss Alvin Chau Cheok Wa is incorporating loss-making financial services businesses valued at HK$147.3 million (about US$20 million) into Hong Kong-listed Sun International Resources Ltd., a company listed on the Growth Enterprise Market (GEM) and engaged in the equine trade and online games of which Chau also owns a major interest.

The connected transaction was announced in a filing with the Hong Kong Stock Exchange last week, which announced that Sun International Resources are acquiring the securities and asset management businesses at a consideration of HK$147.3 million from the vendor Sun International Financial Group Ltd. Sun International Financial Group is half owned by Alvin Chau, with the remaining half by Ms. Yeung So Mui, the spouse of Sun International Resources Ltd.’s chairman and executive director Cheng Ting Kong.

Chau and Yeung are each a substantial shareholder with interests of about 47.14 per

cent held in Sun International Resources.

Sun International Resources’ scope of operation includes the equine business based in Melbourne and the provisioning of gambling software systems to ‘luxury cruise companies’, the company says on its official website. The securities and asset management businesses that Sun International Resources are to acquire have registered two consecutive years of losses, according to

the filing. For the years ended March 31, 2014 and March 31, 2015, the losses that these businesses registered have exceeded HK$61.24 million, the filing information shows.

The acquisition has yet to be approved by Sun International Resources’ independent shareholders.

Chau and Yeung have also offered a breakeven guarantee provision on the acquisition deal with Sun International Resources, according to the filing.

In the event that the securities and asset management businesses fails to achieve a before-tax profit for the year ending March 31, 2016, the vendor shall compensate Sun International Resources for the shortfall.

Business potential

Despite the loss-making performances seen in financial services and the recent volatility of the stock market, the executive director of Sun International Resources,

Lui Man Wah, remarked to Hong Kong media that he still believed the securities businesses had room to grow.

Mr. Lui said that Sun International Resources is planning to expand the margin financing business following completion of the acquisition deal. The company is also preparing to launch new products for its asset management business, to which it hopes to attract HK$500 million to HK$1 billion in capital within one year of launch, Mr. Lui was quoted as saying.

Whether or not Sun International Resources will be raising capital from its shareholders will depend upon market conditions, Mr. Lui said. He noted that the company now has sufficient capital, and that its line of credit stands at about HK$150 million.

As at the end of June, the vendor of the deal Sun International Financial Group had about 900 clients, of whom 70 per cent are from Hong Kong while the rest are from Mainland China and Southeast Asia, Mr. Lui told media.

S.L.

Corporate

City of Dreams and Altira Macau launch Malaysian gourmet tour

The Ritz-Carlton celebrates Mid-Autumn festival

City of Dreams and Altira Macau, members of Melco Crown Entertainment Limited, are offering a variety of Malaysian culinary traditions as a way to promote the rich and diverse variety of Asian flavours for locals and visitors to enjoy. From now until September 30, Golden Pavilion, R Bar, Wave and Asia

For this year’s festivities, The RitzCarlton, Macau is taking this traditional celebration to new heights at its authentic Cantonese restaurant, Lai Heen - the highest Chinese fine dining restaurant in Macau -- with two exceptional mooncakes as well as a limited-time menu over the festive period.

Kitchen at City of Dreams, as well as Altira Macau’s Monsoon, will feature a selection of ethnic Malaysian cuisine, infused with the flavours of China, India and Portugal, which are not only scarce in Macau and Hong Kong but have had a profound influence upon the unique gastronomy of Macau – Macanese cuisine.

The first 100 guests to make any mooncake purchase will receive a complimentary jar of Lai Heen XO sauce.

In addition, the Executive Chef of Lai Heen, Chef Bill Fu, brings to the table the highest level of craftsmanship. Every single dish is meticulously prepared for a one night only Mid-Autumn dinner menu.

Business Daily | 7

August 25, 2015

Macau FMG: Jimei fires 20 workers and will fire more Labour union Forefront of Macau Gaming said the layoff involves both reasonable and unreasonable dismissals. Meanwhile, a non-executive director of Jimei, Kwok Chi Chung, said cutting the costs of human resources is what every junket operator in the city is doing Kam Leong

kamleong@macaubusinessdaily.com

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ocal gaming labour union Forefront of Macau Gaming (FMG) claims that junket operator Jimei International Entertainment Group Ltd. fired some 20 VIP gaming workers this month and is planning to lay off another group at the end of the month.

The president of the association, Ieong Man Teng, told Business Daily in a phone interview yesterday that he had received requests for assistance from two of these workers.

“The laid-off workers can be divided into two groups – those reasonably dismissed and those unreasonably dismissed.

For workers who were fired by the operator without a proper reason, they have actually been compensated by their boss based on the labour law.

We now need to see how we

can complain to the Labour Affairs Bureau or if there is anything else we can do,” Mr. Ieong said.

According to the labour union head, the workers who have been fired by Jimei are primarily those with bad performance records. But the company’s unreasonable dismissals involve workers who have just come back to

the city following business trips.

Trend

Mr. Ieong also told us that the junket operator plans to fire more workers by the end of the month although he is not sure of the details.

“We are not clear about how many [workers] they are to fire. We don’t have the related

THERE ARE THINGS WE DON’T DO BUT WE DO • Advertising • Branding & marketing consulting • Marketing strategy • Creativity • Design

information right now,” he said.

Nevertheless, an independent non-executive director of Jimei, Kwok Chi Chung, told Business Daily yesterday that “cutting human resources is the trend”, although he claimed that he is not clear about his company’s plan to fire more workers by the end of the month.

Mr. Kwok, who is also the chairman of the city’s Gaming Junket and Entertainment Association (AMJEM), indicated that nearly all of the city’ junket operators are cutting their manpower costs amid the gaming downturn.

“Under the current situation… when the [operating] costs are that high, what should we do if we don’t cut manpower?” asked the junket Association director.

During the second quarter of this year, gross gaming revenues of the city’s VIP baccarat dropped 42.2 per cent year-on-year to MOP31.57 billion, occupying about 55.5 per cent of the city’s total gaming gross gaming revenue of MOP56.87 billion during the period, which is a further plunge in share from the 58.3 per cent posted for the first quarter.

There are men and women who give human kind their perseverance, their genius, their generosity and, in some cases, their own life.

Those people and their actions are our inspiration.

•••

info@goldfishmacau.com +853 2833 1258

8 | Business Daily

August 25, 2015

Greater China

Stocks sin as state in

More than 800 stocks fel

S

A stock investor walks by a screen at a brokerage house in Huaibei, Anhui province yesterday

tocks plunged the most since 2007 as government support measures failed to allay investor concern that a slowdown in the world’s second-largest economy is deepening.

The Shanghai Composite Index tumbled 8.5 percent to 3,209.91 at the close to erase its gains for the year.

The Hang Seng China Enterprises Index of Chinese stocks in Hong Kong fell 5.8 percent to its lowest level since March 2014. Futures on the CSI 300 Index declined by the 10 percent daily limit.

Worsening economic data and signs of capital outflows are undermining unprecedented government attempts to shore up the country’s US$6 trillion stock market. While China said over the weekend it will allow pension funds to buy shares for the first time, a speculated cut in bank reserve ratios failed to materialize.

“This is a real disaster and it seems nothing can stop it,” said Chen Gang, Shanghai-based chief investment officer at Heqitongyi Asset Management Co. “If we don’t cut holdings ourselves, the fund faces risk of forced closure. Many newly started private funds suffered that recently. I hope we can survive.”

More than 800 stocks fell by the daily 10 percent limit on the Shanghai Composite, including China Shenhua Energy Co. and China Shipbuilding Industry Co. The gauge has tumbled

Farmers allowed to use property as loan collateral Under the new project, both land use rights and property could be pledged to secure bank loans, said a cabinet document Dominique Patton and Kevin Yao

C

hina will launch a pilot programme allowing farmers to use their land and property as collateral for loans, the State Council said yesterday, the latest step to bolster support for the cashstarved farm sector.

The move is aimed at deepening financial reform and stepping up financial support for farmers, said China’s cabinet.

China’s farm sector employs almost a third of its 1.4 billion people but its share of GDP has declined over the years and productivity on the country’s tiny farms are low.

Beijing has repeatedly called for more modern, larger farms but farmers struggle to get loans to expand as they have no assets to use as collateral. All land in China is owned by the state.

Heilongjiang province, China’s breadbasket in the northeast, and eastern Shandong province have already begun experimenting with the use of land rights as collateral.

Banks are reluctant to take them (land and property rights) as collateral. The most important step is allowing them to be traded freely Dang Guoying, senior researcher, Chinese Academy of Social Sciences

Under the new project, both land use rights and property could be pledged to secure bank loans, said a cabinet document, which added that farmers’

interests would be strictly enforced.

“We will steadily and appropriately conduct the pilot programme on the use of the two rights (land and property) as collateral, on condition that risks will be controlled and on the basis of relevant laws and policies on rural and reforms,” said the Council.

It added that the central bank will encourage financial institutions to participate in the pilot and step up support for qualified institutions through relending, while the banking regulator will study

“differentiated” policies in setting capital adequacy ratios.

It will also maintain the ‘red line’ in arable land, a minimum area mandated by the government to be reserved for growing crops to protect food security.

Some experts have argued however that farmers should be allowed to use their contracted land rights as collateral, rather than their operating rights.

Contracted rights are derived from the collective land owner or local government to households for 30 or 40 years.

The households can then lease the right to use the land to others.

“Operating rights are only awarded for a few years, and this doesn’t earn much income,” said Cheng Enjiang, senior research fellow at Victoria University in Australia specialising in rural finance in China.

“Contracted rights is more long-term and can generate an income stream (which could be more valuable to banks as collateral),” he said.

Dang Guoying, a senior researcher at the Chinese Academy of Social Sciences, a top government think-tank, said banks will be cautious in taking land and property rights as loan collateral given that such rights cannot be traded freely.

“Banks are reluctant to take them (land and property rights) as collateral. The most important step is allowing them to be traded freely,” Dang said.

Reuters

Business Daily | 9

August 25, 2015

Greater China

nk most since 2007 ntervention fails

Taiwan does not exclude propping up stocks

ll by the daily 10 percent limit on the Shanghai Composite 38 percent from its June 12 peak to wipe out more than US$4 trillion of value.

The Hang Seng Index sank 5.2 percent in Hong Kong. The gauge’s relative strength index declined to 15.1, the lowest since the aftermath of the October 1987 stock market crash. A level below 30 signals to some traders losses are overdone.

Taiwan’s Taiex index slid as much as 7.5 percent, before paring losses to 4.8 percent.

Stock valuations

Economic growth slowed to 6.6 percent in July, according to Bloomberg’s monthly GDP tracker. China’s first major economic indicator for August signalled a further deterioration as a private manufacturing index fell to the lowest level in six years.

“China’s economy is pretty ugly and some sectors have bubbles,” said Wu Kan, a Shanghai-based fund manager at JK Life Insurance Co., who’s keeping his holdings unchanged. “Selling pressure around global markets is also weighing on local sentiment. The Shanghai Composite may fall to around the 3,000- point level.”

Stocks on mainland bourses traded at a median 61 times reported earnings on Friday, according to data compiled by Bloomberg. That’s the most among the 10 largest markets and more than three times the 19

The news on pension funds over the weekend was positive, but not having the expected required-reserve ratio cut or any other larger measure seems to have disappointed investors Gerry Alfonso, Shanghai-based trader, Shenwan Hongyuan Group

multiple for the Standard & Poor’s 500 Index.

Stock outflows

Yuan positions at the central bank and financial institutions fell by the most on record last month, a sign capital outflows have picked up.

Chinese equity funds were the biggest contributors to more than US$4 billion of outflows in Asia excluding Japan in the week to August 19, EPFR

Global said. Margin traders reduced holdings of shares purchased with borrowed money for a fourth day on August 21.

Industrial and Commercial Bank of China Ltd., the second largest, fell the most since January 19 with a 9.7 percent slump. Agricultural Bank of China Ltd. slid 9.3 percent.

PetroChina Co., long considered a favourite holding of state-linked rescue funds, tumbled 4.9 percent.

The State Council, or cabinet, on Sunday announced it will allow pension funds to invest as much as 30 percent of their total net assets in stocks. Pension funds had net assets of 3.5 trillion yuan (US$547 billion) by the end of 2014, Xinhua News Agency reported.

The move is the latest attempt by the government to support the equity market, after arming a state agency with more than US$400 billion, banning selling by major shareholders and telling state-owned companies to buy stocks.

“The news on pension funds over the weekend was positive, but not having the expected required-reserve ratio cut or any other larger measure seems to have disappointed investors,” said Gerry Alfonso, a Shanghai-based trader at Shenwan Hongyuan Group Co. “But it is questionable whether even with one the market would have rebounded.”

Bloomberg News

Largest telcos reshuffle chairmen In telecommunications, the last big sector overhaul took place in 2008 and ushered in a consolidation that halved the number of operators

C

Resources Land says H1 core profit up State-backed property developer China Resources Land Ltd said on Monday core profit rose 32 percent in the first six months, helped by the improving property and consumer retail market. The Shenzhen-based company said it will open four shopping malls in the second half to expand its commercial properties portfolio, following a national consumption recovery since the second quarter. “Sector policies and monetary policies are likely to remain loose,” the country’s eighth-biggest developer said in a statement. “First-time homebuyers and first-time upgraders remain as the mainstream and healthy demand for property.”

Tingyi Q2 profit slides as economy weakens China’s largest food and beverage maker, Tingyi (Cayman Islands) Holding Corp, said second-quarter net profit tumbled 12.5 percent on a slowing economy and that the outlook for the industry remains challenging. Tingyi, owner of the Master Kong brand, said profit fell to US$90.7 million in April-June, while revenue dropped 6.4 percent from a year ago to US$2.55 billion. For the first-half, profit fell 14.8 percent to US$197.7 million while revenue dropped 11.5 percent. But Tingyi Chairman Wei Ing-Chou said in a filing he was cautiously optimistic about business prospects in the second half.

Taiwan negotiators in Fuzhou for tax talks

Tim Culpan

hina Mobile Ltd. named a senior bureaucrat to run the world’s largest phone company as the government prepares to reform its sprawling state sector.

Shang Bing, vice minister of the country’s communications regulator, takes over from Xi Guohua, the company said in a statement yesterday. The chairmen of smaller rivals China Telecom Corp. and China Unicom (Hong Kong) Ltd. swapped places, they said in statements citing the State Council or cabinet.

The leadership reshuffle coincides with government plans for sweeping reforms to a US$16 trillion government-owned sector as the economy heads toward its slowest growth in 25 years.

Shang takes on the task of building earnings at a company serving more than 800 million customers while meeting government directives to cut tariffs and boost network coverage.

China Mobile, the world’s 10th mostvaluable listed company, and its two rivals have also agreed to pool their phone tower assets in a holding company to reduce duplication.

“A change of top management

Taiwan’s vice finance minister, who is in charge of a large fund the government can tap to support shares, said yesterday he is “highly concerned” about the plunge of the island’s stocks and does not rule out the possibility the fund will be used in due time to prop them up. Vice Finance Minister Wu Tang-chieh made the comments to Reuters over the telephone. He is in charge of the National Security Fund, which manages about T$500 billion (US$15.6 billion). The benchmark index was down about 5 percent at 7,394.83 points.

does signal Chinese government actions and progress in pushing reforms,” said Michelle Ma, an analyst at Bloomberg Intelligence. “Investors are hoping the reforms could revitalize growth and improve efficiency in the telecom sector.”

China Mobile slid 7.9 percent as of the close in Hong Kong yesterday, its biggest loss since November 2008, while the Hang Seng China Enterprises Index fell 5.8 percent.

China Telecom dropped 6.5 percent, the most since December 2008. China Unicom declined 2 percent.

Job swaps

China is mapping out the biggest shake-up of state companies in decades. It is considering reducing the role of the State-owned Assets Supervision and Administration Commission and dividing its duties between separate asset management firms, people familiar with the plans have said.

In telecommunications, the last big sector overhaul took place in 2008 and ushered in a consolidation that halved the number of operators.

The government has replaced the

leaders of its largest phone companies every few years. Yesterday’s changes included Chang Xiaobing and Wang Xiaochu swapping roles. Chang becomes chairman of China Telecom while Wang is appointed chairman of China Unicom.

China Mobile, the world’s largest phone company by both market value and subscribers, on August 20 reported its first quarterly profit rise in two years as governmentmandated cuts in handset subsidies and growth in mobile-Internet usage boosted margins.

At the same time, Premier Li Keqiang has ordered mobile operators to speed up their 4G rollout and invest in improving network speeds, the Ministry of Industry and Information Technology said in April.

China Mobile’s Shang, who joins from his post as MIIT’s deputy chief, becomes at least the third ministry vice-chief to take over as head of the company, which is majority owned by the government. Xi replaced Wang Jianzhou, a former planning chief at the then Ministry of Information, a precursor to MIIT. Bloomberg News

A Taiwan delegation, headed by Straits Exchange Foundation (SEF) chairman Lin Join-sane, arrived in Fuzhou, Fujian Province, yesterday for talks with mainland negotiators. In his welcoming address, mainland-based Association for Relations Across the Taiwan Straits (ARATS) president Chen Deming said the 11th SEF/ ARATS talks will cover cross-Strait taxation cooperation, civil aviation safety, and cross-Strait travel. According to Chen, the interval between this weeks’s talks and the 10th round in February last year, which was held in Taipei, is the longest since talks resumed in 2008.

Tianjin death toll up to 129 Rescue authorities updated the death toll from the Tianjin warehouse explosions to 129, with 44 others missing, yesterday.

They had put the figure at 123 on Sunday afternoon. All the dead have been identified, including 76 fire-fighters, seven policemen and 46 other people. The missing people include 28 fire-fighters, four policemen and 12 others. Meanwhile, 610 people remain hospitalized, 39 of them in serious condition. A total of 187 injured people have been discharged from hospital.

10 | Business Daily

August 25, 2015

Greater China

Yuan depreciation evokes parallels with 1994 Devaluation 21 years ago is often cited as a proximate cause to the subsequent emerging markets crisis, while the Fed rate rise the same year was the trigger, according to Lombard Street Research

A

sia’s biggest economy is slowing, the Federal Reserve is about to kick off an interest rate tightening cycle, and China has just devalued its currency. That chain of events back in 1994 eventually touched off a round of competitive currency devaluations that helped trigger the Asian financial crisis, featuring bank and corporate failures and recessions across much of the region.

Is the current market turmoil foreshadowing yet another regionwide bust? There are certainly parallels, but important differences as well. This time around, Asian economies have stronger current account balances, fiscal positions and foreign exchange reserves that provide a thicker buffer against turbulence.

Risks are building nonetheless as China’s surprise yuan policy U-turn on August 11 sends ripples across the globe from Vietnam to Kazakhstan and threatens vulnerable emerging market economies from Brazil to Turkey. The global selloff deepened yesterday, with U.S. index futures signalling more losses.

China’s yuan devaluation comes on top of a steep slowdown in the world’s second-biggest economy and Asia’s biggest (Japan was No. 1 back in 1994) and a commodities slump that is hurting nations from Brazil to Australia, Malaysia and South Africa.

Chinese companies now threaten to displace exports from Asian and emerging market competitors just as the U.S. Federal Reserve prepares to raise interest rates for the first time since the global financial crisis.

‘Nasty storm’

“A nasty storm is probable, not just possible” in countries like Brazil and South Africa, said Stephen Jen, cofounder of London-based hedge fund SLJ Macro Partners LLP.

Before 1994, Asia was the darling of the investment world and viewed by some as a late-20th century growth miracle. That euphoria didn’t last long.

This year, China’s surprise currency move has prompted Vietnam to devalue the dong.

Kazakhstan’s currency tumbled more than 20 percent against the dollar last Thursday when the country relinquished control of its exchange rate. The South African rand and Turkey’s lira have extended losses.

‘Downward adjustment’

“A downward adjustment cycle in Asia began in 2013 -– this cycle has been and will remain painful,” Morgan Stanley economists including Chetan Ahya in Hong Kong, wrote in a report yesterday. While the downturn is likely to persist, “we believe a 199798 scenario is unlikely.”

A more domestic debt profile, the presence of persistent disinflationary pressures, current account surpluses, flexible exchange rates, and adequate FX reserves give policy makers in the region better control over liquidity conditions, they wrote.

The Asian crisis was about indefensible currency pegs to the dollar, inadequate foreign exchange reserves, and heavy exposure to hot money inflows, says Stephen Roach, a senior fellow at Yale University.

Dollar debt

Today’s circumstances are different on the first two counts. Yet there’s one disturbing similarity: China’s exposure to about US$1 trillion of dollar-denominated bank debt as the yuan carry trade starts to unwind after the People’s Bank of China’s devaluation, said Roach, who was chief global economist for Morgan Stanley during Asia’s financial crisis.

A weaker local currency adds to the debt burden for China’s already

But I do not anticipate a crisis or even very tense moments in Asia.

The main reason is that the Asian Crisis of 1997 already cleansed Asia’s financial system and Asia’s resilience ought to be higher Stephen Jen, co-founder, SLJ Macro Partners LLP hedge fund

pressured companies, who’ll now have to pay more yuan for their U.S. dollar repayments.

Asia also faces a new vulnerability, the sheer dependence of regional economies on a China that is decelerating, said Roach. In the mid-1990s, the robust U.S. economy was the main buyer of products from the region.

The yuan will fall to 6.5 against the dollar by the end of this year and 6.9 at the end of 2016, bringing it close to a 10 percent depreciation, according to Bank of America Merrill Lynch.

Yuan ripples

Jen estimates that a 10 percent depreciation in the yuan will create 5 to 20 percent moves in the rest of Asia.

In Asia, Vietnam, Thailand, South Korea and Malaysia are more

vulnerable to the devaluation, while in Europe Hungary and Poland are at risk and Turkey may suffer the most, according to Lombard Street Research economist Shweta Singh in London.

Not everyone agrees Asia is primed for another crisis. The idea the yuan devaluation then triggered a sequence of events that culminated in a crisis is “the old canard that just won’t be slaughtered,” said David Loevinger, a former China specialist at the U.S. Treasury who is now an analyst at fund manager TCW Group Inc. in Los Angeles.

The yuan devaluation of a generation ago was more symptomatic of other problems facing the region at the time and not a causal trigger of the ensuing crisis, said Glenn Maguire, a Singapore-based economist at Australia & New Zealand Banking Group Ltd. Because Asian currencies are no longer rigidly pegged to the dollar, as many nations hit hardest in the last crisis were, the region now has a greater ability to adjust to changing circumstances, he said.

Slower lift-off?

The outlook for U.S. monetary policy is also very different. While the Fed raised rates aggressively in 1994, a worsening outlook for global growth and an appreciating dollar means the probability of an increase in interest rates next month has fallen below 50 percent, Credit Suisse Group AG says.

The parallels with this year include vulnerabilities in “a bunch of the emerging world countries,” including the whole of Latin America, Turkey and South Africa, said Shane Oliver, head of investment strategy at fund manager AMP Capital Investors Ltd. in Sydney, which oversees about US$114 billion.

“China has set the cat among the pigeons,” he said.

Bloomberg News

Business Daily | 11

August 25, 2015

Asia

India ready to defend rupee Central bank governor ready to use FX reserves as markets tumble Suvashree Choudhury and Karen Rebelo

KEY POINTS Rajan - India better placed than other countries Rajan - rate cuts to respond to inflation, not public pleading Indian shares, rupee slump as global markets reel

I

ndia’s central bank governor Raghuram Rajan said he was ready to deploy foreign exchange reserves to curb volatility in the currency as turmoil in global markets sent domestic shares down more than 4 percent and the rupee to its lowest since late 2013.

Still, Rajan, speaking at a previously scheduled appearance at a banking conference yesterday, added India was in a good position relative to other countries to withstand the current global markets volatility sparked by steep falls in Chinese equities.

Rajan said India’s macro-economic problems were “under control,” and noted that the central bank remained focused on helping economic growth by bringing down inflation.

Rajan also reiterated any rate cuts would be carried out in response to inflation and not to “public pleading.” The comments came as India’s Finance Minister Arun Jaitley is stepping up pressure on the central bank to ease monetary policy further.

“India is better placed compared to other countries with low current account

deficit, and fiscal deficit discipline, moderate inflation, low short term foreign currency liabilities, very sizeable base of forex reserves,” Rajan said.

“We will have no hesitation in using our reserves when appropriate to reduce volatility in the rupee.”

Rajan’s comments come as the benchmark BSE index tumbled as much as 4.2 percent to its lowest since October 2014, while the rupee fell to as low as 66.52 per dollar, its weakest since September 2013.

Analysts believe India’s

markets will remain relatively more insulated than other countries.

India has steadily built up its FX reserves to a record high of more than US$355 billion since Rajan took the helm of the RBI in September 2013, when the rupee was in the midst of its worst crisis in more than two decades.

But a slowdown in India’s annual consumer price inflation to 3.78 percent in July, its lowest level on record, has sparked increased calls for the RBI to cut rates further to help boost an economic growth rate widely seen as middling.

Yet after bringing down the repo rate by threequarters of a percentage point to 7.25 percent so far this year, the RBI kept its policy rate on hold at its last review earlier this month as it sought more clarity on inflation.

“Rate cuts should not be seen as goodies that the RBI gives out stingily after much public pleading,” Rajan said.

“Instead, what is important is sustained low inflation,” he added. “And rate cuts are a natural consequence that the RBI has no hesitancy in delivering.”

Reuters

Thailand plans measures to speed up investment The economy has consistently missed government targets, putting pressure on the military junta ruling the country Pracha Hariraksapitak

T

hailand plans to introduce short-term economic measures to help low-income earners and farmers as well as speed up investment projects, a new deputy prime minister said yesterday, as the military government seeks to boost the flagging economy.

Southeast Asia’s second-largest economy has yet to regain traction more than a year after the army seized power in May 2014 to end months of political unrest, with exports and domestic demand stubbornly subdued.

The economy has consistently missed government targets, putting pressure on the junta to reshuffle the cabinet to try to lift growth as a weak economy could undermine support for the generals.

“We plan measures to help farmers, the grassroots and low income earners. I would call these shortterm measures, aiming at moving the economy,” Somkid Jatusripitak, appointed last week to oversee the economy, told reporters. He gave no further details on the measures.

KEY POINTS Aims to invest in all sectors to speed up economy Says economic fundamentals remain strong

Prime Minister Prayuth Chan-ocha in the centre

The junta would also speed up all major investments, not only infrastructure projects, Somkid said.

“The government will invest in every cluster to distribute growth across the nation while seeking international cooperation in all aspects in order to build up trade cooperation,” he said.

Somkid said Prime Minister Prayuth Chan-ocha had asked him

to push ahead on the government’s economic measures and the cabinet was ready to give support.

He said he would meet with the business sector on Thursday to seek cooperation in driving the economy forward.

Somkid also said the country’s economic fundamentals remained strong and viewed the global slowdown as short term.

The national planning agency last week cut its economic growth forecast for this year again to 2.73.2 percent from 3.0-4.0 percent.

Many economists believe that is too optimistic. Growth in 2014 was only 0.9 percent.

The economy grew 0.4 percent in April-June from the previous quarter, with tourism the key driver. A bomb in Bangkok last week, which killed 20 people, has dealt a further blow to the economy.

Reuters

12 | Business Daily

August 25, 2015

Asia

Singapore July core inflation edges higher Headline CPI has been falling on a year-on-year basis since last November Masayuki Kitano

S

ingapore’s core inflation edged higher in July, but growing uncertainty about the outlook for growth and prices was seen likely to keep open the possibility of further monetary easing.

The Monetary Authority of Singapore’s (MAS) core inflation gauge rose 0.4 percent in July from a year earlier, higher than the median forecast of a steady 0.2 percent year-on-year forecast in a Reuters survey.

The contribution of recently declining electricity prices to lowering core inflation was diluted by a slight slowing down in the rate at which power prices fell in July, allowing in some core CPI inflation, in addition to higher services prices.

Analysts said the rise in core inflation was not enough to rule out the possibility of further monetary easing.

“The confluence of a sharp shift lower in global oil prices, CNY (Chinese yuan) devaluation, as well as significant global economic headwinds, challenges the core inflation and growth trajectory pencilled in by MAS during its April macroeconomic review, as well as the current monetary policy settings,” said Weiwen Ng, an ANZ economist in Singapore.

KEY POINTS Core CPI +0.4 pct y/y vs +0.2 pct forecast All-items CPI -0.4 pct y/y vs -0.2 pct forecast Analysts says monetary easing in Oct can’t be ruled out

Such developments could “elicit a monetary response at the upcoming October meeting,” he added.

The MAS core inflation gauge is the focus of monetary policy and excludes the cost of private travel by road and accommodation, which are more likely to be influenced by administrative policies than economic pressures.

Core inflation might slow down in August, given the falls in oil prices to fresh 6-1/2 year lows this month,

said Franics Tan, an economist for United Overseas Bank.

While UOB analysts have a baseline scenario of the MAS keeping policy steady in October, the outlook is uncertain, he added. “Our base case is still no change...but it’s really tough to know,” Tan said.

The all-items consumer price index fell from a year earlier for the ninth straight month in July, declining 0.4 percent.

Reserve Bank of New Zealand warns about housing crisis Yesterday the government introduced a tax bill to Parliament that would require income tax paid on any gains from homes bought and sold within two years

N

ew Zealand’s biggest city, Auckland, now has one of the world’s most expensive housing markets, with property investors driving a growing risk to the country’s economy and financial stability, the central bank warned yesterday.

House prices in Auckland -- home to a quarter of New Zealand’s population -surged by 24 percent over the past year, compared with 3 percent for the rest of the country, Reserve Bank

of New Zealand (RBNZ) deputy governor Grant Spencer said.

“This has stretched the price-to-income ratio for the Auckland region to nine, double the ratio for the rest of New Zealand, and places Auckland among the world’s most expensive cities,” Spencer said in a published speech in Auckland.

“New housing supply has been growing, but nowhere near fast enough to make a dent in the existing housing shortage. In the meantime,

net migration is at record levels, and investors continue to expand their influence in the Auckland market.”

Investors now accounted for 41 percent of Auckland house purchases, up 8 percentage points since late 2013.

“We have seen a particular increase in purchases by smaller investors and investors reliant on credit.

Half of the new lending to investors is being written at loan-to-value ratios of over 70 percent,” said Spencer.

Headline CPI has been falling on a year-on-year basis since last November, dragged down by a slide in global oil prices as well as falls in rents and some private transport costs.

Benign readings on core inflation coupled with lacklustre economic growth outlook have prompted some analysts to predict the MAS will ease monetary policy at its next rate review in October.

Most analysts, however, expect the central bank to keep policy steady amid expectations of inflation rising next year, according to recent Reuters surveys.

“This trend is increasing the risk inherent in the Auckland market. The increasing investor presence is likely to amplify the housing cycle, and worsen the potential damage from a downturn, both to the financial system and the broader economy.”

The RBNZ was aiming to avoid a sharp fall in house prices that might lead to banks tightening lending and economic contraction setting in.

In May, the RBNZ had modified its loan-tovalue ration (LVR) policy for mortgage lending by commercial banks to specifically target Auckland residential investors, while easing restrictions in the rest of the country.

However, the RBNZ was unlikely to raise interest rates for some time due to the current weakness in export prices, economic activity and inflation.

Also yesterday, the government introduced a tax bill to Parliament that

Reuters

would require income tax paid on any gains from homes bought and sold within two years, excluding on an owner’s main home, inherited property or relationship settlement transfers.

Revenue Minister Todd McClay said in a statement that the two- year “bright line” would make it clear that all property buyers, including overseas buyers, who bought and sold a residential property within two years, would be taxed on their gains.

The main opposition Labour Party said the RBNZ was having to “carry the can” for the government’s failure to tackle the Auckland housing crisis.

Labour housing spokesperson Phil Twyford said in a statement that the government’s Productivity Commission had predicted that Auckland’s housing shortfall would rise from 32,000 now to 60,000 by 2020.

Xinhua

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Business Daily | 13

August 25, 2015

Asia IMF urges Philippines to shun tax perks

Indonesian central While the personal income-tax rate of as much as 32 pct is among bank not to follow competitive devaluation the highest in Southeast Asia, tax revenue is still below 14 pct Indonesia’s central bank governor said that Bank Indonesia was always in the market to stabilise the rupiah’s movements against the dollar and will not take part in competitive devaluation. “In other countries, weakening the currency is to maintain competitiveness, but Indonesia depends on primary material exports and will not really benefit from a weakening rupiah. We will not follow competitive devaluation,” Agus Martowardojo said, adding that he believes the rupiah is undervalued and its decline has overshot.

Siegfrid Alegado

T

he Philippines must end unnecessary perks for industries so it can cut among the highest income taxes in the region without eroding the fiscal gains the economy has achieved, the International Monetary Fund’s representative said.

Removing incentives for property developers, power-plant operators and miners will help plug a revenue shortfall that’s hampering the government’s ability to improve collection, IMF’s Philippine representative Jay Peiris said in an August 20 interview in Manila.

The country must limit benefits only to industries that really need it, like manufacturing, he said.

“The big boys aren’t paying, and then you squeeze everything from workers,” Peiris said. While the personal income-tax rate of as much as 32 percent is among the highest in Southeast Asia, tax revenue is still below 14 percent of the country’s gross domestic product.

Peiris said the tax holidays and duty-free import of equipment offered by the Philippines are among the most generous incentive in the region. Yet the country has lagged its neighbours in attracting foreign direct investment: FDI rose 66 percent to a record US$6.2 billion last year, still the least among

major Southeast Asian countries, according to the United Nations Conference on Trade and Development.

“The most important deterrent to FDI here is weakness in infrastructure,” Peiris said. Investing more in infrastructure will “attract more FDI,” he said.

Cash hand-outs

Exemptions for industries led to 144 billion pesos (US$3.1 billion) in foregone revenue, equivalent to at least 1.5 percent of GDP in 2011, according to the Department of Finance.

Proposals to reduce these incentives have languished in Congress for more than two decades.

The need to improve collection is acute as Aquino targets expansion of 7 percent to 8 percent this year.

Philippine economic growth slid to a three-year low of 5.2 percent in the first quarter as government spending faltered.

President Benigno Aquino, whose term ends in June 2016, is seeking to increase spending in next year’s budget by 15 percent from this year.

While his administration has cracked down on tax evaders and streamlined government spending and collection, “it’s definitely not enough” to sustain

The big boys aren’t paying, and then you squeeze everything from Vietnam’s bad debts rise workers Jay Peiris, IMF’s Philippine, representative

fiscal gains, Peiris said. “The risk is on the revenue side.”

The government’s failure to boost spending has distracted attention from revenue collection, Peiris said. The country also needs to do away with secrecy laws protecting bank accounts from government scrutiny, he said.

“Tax reform should be on top of the agenda for the next administration,” Peiris said. “I’m all for reducing personal income tax. You can also recoup it from excise tax on fuel as oil prices are down.”

Bloomberg News

Abe offers understanding to BOJ in its struggle for inflation

Bad debts in Vietnam’s banking system rose to 3.72 percent of loans in June from 3.15 percent in May, although lending has grown more quickly than previously estimated, central bank data showed. The State Bank of Vietnam revised up credit growth in the first half of this year to 7.86 percent against the end of 2014, from its previous estimate of 5.78 percent, the bank said on its website. Loans in the banking system at end-June were 4,282.6 trillion dong (US$191 billion).

Indonesia extends some tax incentives Indonesia has extended its tax incentives for “pioneering” industries such as oil refinery and infrastructure to help attract more investment into the country as economic growth has slowed to its weakest in six years.

Indonesia is now offering a tax reduction of between 10 and 100 percent for up to 15 years to firms investing a minimum of 1 trillion rupiah (US$71.5 million) in certain industries, the finance ministry said in a statement on its website yesterday. The tax break can be extended for an additional five years if companies obtain permission from the finance minister.

The BOJ adopted the 2 percent goal in January 2013 after it struck a pact with Abe’s government to end 15 years of deflation Bangladesh expects Joji Mochida another IMF instalment

The International Monetary Fund (IMF) would release another instalment of loan of US$1 billion early next month, said Bangladesh Finance Minister Abul Maal Abdul Muhith on Sunday. “I believe another installment of IMF’s loan will be released by the end of this month or early next month as all the conditions will be fulfilled,” Muhith said. The minister made the remarks after a meeting with visiting IMF Executive Director Dr Rakesh Mohan at his secretariat office. The conditions are amendment to VAT act and international audit to Bangladesh Petroleum Corporation (BPC).

J

apanese Prime Minister Shinzo Abe said he “understands” the central bank’s inflation target is getting more difficult to achieve as energy prices slump.

“With oil prices plunging, we think it’s unavoidable that it hasn’t been able to achieve its original objective,” Abe said in parliament yesterday.

“We understand the Bank of Japan’s explanation that achieving the target is in fact getting difficult.”

The comments suggest that the government is -- for now -- sympathetic with Governor Haruhiko Kuroda’s (pictured )plight, as a sell off in stocks, commodities and oil prices deepens, threatening to damage confidence and stoke deflationary pressures.

Data Friday are forecast to show the BOJ’s key inflation gauge falling below zero for the first time since Kuroda introduced record monetary stimulus more than two years ago.

Abe said he has “confidence in Kuroda’s skill.”

The central bank chief boosted the BOJ’s asset purchase program last October as a drop in oil prices threatened to intensify a “deflationary mind-set” in the economy. The 2

percent inflation goal that he sought to reach in about two years when he began the stimulus plan in April 2013 will be achieved around the six months through September 2016, Kuroda said on Aug. 7 when the BOJ kept its policy unchanged.

The BOJ adopted the 2 percent goal in January 2013 after it struck a pact with Abe’s government to end 15 years of deflation. The stimulus that Kuroda unleashed months later drove down the yen, supporting export-oriented parts of Japan’s economy while boosting import prices

-- sparking a backlash from some politicians concerned about the extra costs heaped on households.

The economy risks a weak rebound from a contraction last quarter, with consumer confidence falling to a sixmonth low in July and manufacturers loaded in June with the most inventory since 2009.

Some economists cut their forecasts for the economy last week after data showed gross domestic product slid an annualized 1.6 percent in the three months through June, making.

Bloomberg News

Developer AP Thailand sees revenue hitting target Developer AP Thailand Pcl said yesterday it expected revenue this year to reach a target of 25.3 billion baht (US$707.49 million), with a deadly bomb blast in central Bangkok last week having no impact on sales of its projects.

It expected presales to meet a target of 28.3 billion baht (US$791.39 million) and planned to launch 15 new housing projects in the second half, Vittakarn Chandavimol, chief marketing officer, told a press briefing.

14 | Business Daily

August 25, 2015

International Denmark to borrow 14% more in 2016 Denmark’s new government said it will need to borrow 14 percent more in 2016 after cutting its economic forecasts and predicting wider budget deficits. The need for krone-denominated financing will grow to 144 billion kroner (US$22 billion) in 2016, according to the finance ministry in Copenhagen. Including foreign-currency debt issuance, the government plans to borrow 167 billion kroner next year. “The data suggest the government will have to produce a tight budget with less to spend on welfare than expected,” Helge Pedersen, chief economist at Nordea in Copenhagen, said by phone.

Russia’s ruble falls to lowest this year Battered ruble dropped yesterday to its lowest point this year as Asian and European stock markets nose-dived over concerns about the Chinese economy.

Russia’s dollar-denominated RTS index fell 4.21 percent at opening as the ruble tumbled to 70.92 against the dollar, its weakest against the greenback since December 2014. The ruble-denominated Micex meanwhile dropped by 1.76 percent. The plunge in oil prices and Western sanctions over Moscow’s role in the Ukraine crisis have pummelled the Russian economy in recent months, with the ruble collapsing in value.

Libya’s state power firm to restart maintenance Libya’s state electricity firm is in talks with Turkish firms to get them to return to carry out badly-needed maintenance work at power plants in the North African nation, a senior official with the Libyan company said. Libya has been hit hard by power outages as fighting between rival factions damaged plants, interrupted the grid and made the import of spare parts more difficult. A delegation from Tripoli just visited Turkey for talks with Turkish companies to discuss security measures so they can return to Libya, acting executive manager at state power firm GECOL said.

Anglo American sells two mines to Audley The company is to sell two Chilean copper mines to investment firm Audley Capital for US$300 million, the company said yesterday, as it delevers its balance sheet to help combat a global slump in commodity prices. Orion Mine Finance Group is principal co-investor with Audley for the open-pit Mantos Blancos and Mantoverde mines. The deal includes conditional future payments which could boost the eventual price tag by US$200 million, Anglo American said. Following a review last year Anglo American said it would divest assets that did not meet its return criteria.

Deutsche Bank says rout ‘very serious’ The meltdown in global markets is “very serious” as it will weaken prospects for growth worldwide, said Henning Gebhardt, global head of equities at Deutsche Bank AG’s asset and wealth management unit. “We are expecting some adjustments for the global economic outlook -- especially triggered by weaker growth in emerging markets,” Gebhardt said in an e-mailed response to questions yesterday in Frankfurt. “The low oil price and the changed economic outlook will create another round of global earnings cuts.”

South Africa’s state giants hobble economy When Nelson Mandela took office in 1994 state entities became the engine of efforts to correct racial and economic imbalances

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he state-run corporations that have shaped South Africa’s economy and been part of its every day life for nearly a century are mostly in a state of collapse, threatening to crush already weak growth.

Economists estimate that underperformance and inefficiency in state-owned firms ranging from power utility Eskom to South African Airways (SAA) to the postal service is lopping 2-3 percentage points off annual growth.

State-owned companies, which currently account for about 20 percent of all capital investment, have arguably always been a drain on state resources.

They have underpinned the economy since the 1920s when enterprises such as Eskom and the South African Iron and Steel Corporation were set up to provide infrastructure, basic materials and services after the First World War. By the late 1980s the government directly or indirectly owned almost 40 percent of the industrial sector, greater than that in any country outside the communist bloc.

Many so-called parastatals were viewed as unprofitable, dependent on state funds, and their strong association with the apartheid government allowed cronyism to

flourish; jobs were reserved for whites, mainly Afrikaans men.

‘Monster’

When Nelson Mandela took office in 1994, state entities became the engine of efforts to correct racial and economic imbalances, sucking up vast resources to roll out electricity and other essential services to the black majority.

But affirmative action under President Jacob Zuma has bloomed into cronyism, analysts say, with competent candidates often overlooked in favour of political appointees. There are as many as 700 parastatals employing hundreds of thousands of people.

“We inherited a monster and we didn’t make it any better. With a few

KEY POINTS High CEO turnover at struggling utilities Critics say ruling ANC appoints cronies to key posts Strain on economy, small businesses suffer

President Jacob Zuma addresses audience in a speech at BRICS meeting

exceptions, I don’t believe overall we have quality leadership in the stateowned enterprises to drive economic growth,” said political analyst Gary van Staden of NKC African Economics.

Finance Minister Nhlanhla Nene singled out electricity shortages partly blamed on mismanagement at Eskom - as a “binding constraint” on GDP growth, forecast at an anaemic 2 percent this year.

Eskom, which halved its net profit in the financial year to March and needs to borrow more than 20 billion rand (US$1.6 billion) to refurbish its ageing infrastructure, has implemented rolling blackouts to avoid overwhelming the national grid.

It has been a revolving door for executives since a former boss, Jacob Maroga, was forced out in 2009, months after the national grid came close to collapse, forcing mines and smelters to shut down.

Since April, it has been led by respected former Treasury official Brian Molefe after his predecessor quit amid a probe into the running of the firm, as it suffered its worst power crisis since 2008. Its chairman also resigned.

‘Favours’

“It’s fair to say that many of the appointments are payback for favours, ways in which people are kept loyal, which can be extremely damaging,” said independent political analyst Nic Borain.

Nomura economist Peter AttardMontalto suggests a possible solution is to strip the government of the power to make senior appointments and force it to reassess empowerment.

Trying to contain a budget deficit of 4 percent of GDP and keep its credit rating above junk, Pretoria has vowed to curb bail-outs but has refused to consider privatisation, a thorny issue in a country with a high unemployment rate.

Reuters

UK employers raise growth outlook A rise in sterling and continued weak demand from the euro zone has weighed on Britain’s trade balance this year and left the economy heavily reliant on consumer spending

B

ritain’s economy will grow more strongly than previously thought this year and in 2016, an industry group said yesterday, as it also brought forward its prediction for the timing of Britain’s first rate hike in over seven years.

The economy will expand by 2.6 percent in 2015 and 2.8 percent in 2016, the Confederation of British Industry (CBI) said, up from forecasts of 2.4 and 2.5 percent it made in June.

The CBI said a pick-up in

household spending and investment, would more than offset a drag from foreign trade.

Against this backdrop, and in light of more hawkish comments from Bank of England officials recently, the CBI said it expected a rate rise in the first quarter of 2016 rather than in the second quarter, as it had previously expected.

He added that there were tentative signs that productivity was picking up.

“But the outlook on exports is somewhat muted,” John Cridland, CBI Director-General, said.

A rise in sterling and continued weak demand from the euro zone has weighed on Britain’s trade balance this year and left the economy heavily reliant on consumer spending. The government wants to see more investment in manufacturing to ensure the recovery is sustainable.

A separate survey conducted by EEF, a manufacturers’ association, painted a mixed picture of the sector’s outlook.

The number of companies engaged in product innovation this year rose to 64 percent from 59 percent in 2014. But for a second year in a row, manufacturers were increasingly worried about falling behind foreign competitors on innovation, something Britain spends less on than many other big economies.

The Bank of England has said it is watching to see if a nascent recovery in British productivity offsets the inflationary impact of rising wages.

Most economists expect the BoE to start raising interest rates in early 2016.

Reuters

Business Daily | 15

August 25, 2015

Opinion

Commodity rout unlike 2008 wires recession, no China to the rescue Business

Leading reports from Asia’s best business newspapers

THE STAR

Clyde Russell Reuters columnist

The Penang Goldsmith Association (PGA) sees the value of Malaysia’s gold jewellery exports dropping by 20% this year from the RM6.82bil last year, which is higher than the 10% drop in sales it had forecast in April. PGA adviser Joeson Khor told StarBiz that small and medium-sized gold jewellery manufacturers and exporters would have to fork out between RM700,000 and RM1mil in goods and services tax (GST) to import the gold bars used to make the jewellery products. “A smaller-sized company would need to spend between RM100,000 and RM200,000 to import the gold bars.

China’s imports of iron ore rose from 30.6 million tonnes in October 2008 to 68.97 million by January 2011 and 86.8 million by January 2014.

Imports of crude oil rose from 11.73 million tonnes in February 2008 to 23.29 million

by September 2010 and have been above 30 million tonnes a number of months this year.

China’s rising demand and some bullish forecasts that this would last for decades to come prompted resource companies to spend billions to boost capacity.

It’s not a lack of demand that has contributed to plunging iron ore, crude and coal prices, rather it’s markets that have moved to a structural surplus and the response of producers to continue oversupplying in the hope that their rivals will go bankrupt before they do.

THE TIMES OF INDIA The country’s youngest lender Bandhan Bank kicked off operations yesterday with a loan book of Rs 10,500 crore, 501 branches and 1.43 crore account holders. The bank has started business with a paid-up capital of Rs 2,750 crore, against the minimum prescription of Rs 500 crore, and plans to raise an additional Rs 480 crore by issuing shares to the International Finance Corporation (IFC) and the Government of Singapore Investment Corporation (GIC).

Bandhan, which started as an NGO in 2001 and later turned into a microfinance institute, is the first MFI to become a universal bank.

BANGKOK POST The integration of five tourism-related agencies under the aegis of the National Tourism Policy Committee is expected to improve the overall tourism industry. The proposal was recently approved by the National Reform Council. The Tourism Reform Subcommittee (TRSC), which worked on the initiative, believes reform is essential to maintain competitiveness and local residents’ confidence, as the sharp growth in visitor numbers has created a host of problems for local communities. This year, the World Tourism Organization ranked the overall competitiveness of Thai tourism at 35th among 140 countries and territories worldwide.

INQUIRER.NET The Philippines’ finance chief, Secretary Cesar V. Purisima, on Sunday hit China’s recent move to devalue its tightly controlled currency, which dragged regional currencies weaker. In a statement, the Department of Finance (DOF) noted that the largest devaluation of the Chinese yuan in 20 years resulted into “turbulence” across Asian currency markets. The Philippine peso, for one, dipped to five-year lows against the US dollar during these past two weeks following the yuan devaluation, alongside other currencies in the region. Purisima warned against “using exchange rate to shore up weak growth.”

W

ith the prices of many major commodities currently plumbing depths last seen six years ago, what are the chances of a repeat of the China-led boom that lifted resources out of the 2008 recession funk?

To answer the question it’s worth looking at what is the same and what is different about the weakness in commodity prices between 2008-09 and now, and the answer is not much is the same.

The main similarity is simply that prices are weak and have fallen precipitously in a relatively short period of time.

Brent crude fell by about 75 percent between the all-time high in July 2008 and the low in December that year.

So far it has dropped about 52 percent from the last year’s peak in June to the close of US$45.46 a barrel on August 21.

Benchmark London copper futures dropped about 67 percent between July and December in 2008, and they have slumped 22 percent since July this year to the close of US$5,055 a tonne on August 21.

The wider story for copper is that it has been trending lower since the record high in February 2011, having lost about half its value since that time.

Spot iron ore prices in Asia only date back to November 2008, when, in common with crude, copper, coal and many other commodities, they started climbing rapidly as the global stimulus kicked in.

Iron ore more than tripled between November 2008 and the record high US$191.90 a tonne in February 2011, and have now given back all of that gain to end at US$55.60 on August 21.

The rapid gains in commodity prices from the start of 2009 was largely driven by China’s stimulus spending, which sucked in huge amounts of raw materials as the country went on a building frenzy just at the time that domestic resource

companies ran out capacity to meet the increased demand.

It was always likely that commodity prices would overshoot in such a heated environment, and the 2011 peaks possibly can be ascribed to market exuberance.

But the decline in prices for many commodities started accelerating in 2014, just as it became increasingly evident that China’s economic growth was slowing and changing composition.

This was largely an engineered process by Beijing, which wanted to end the reliance on polluting heavy industries and export-led manufacturing and build a more sustainable base of a consumer-driven economy.

The point of this is that China is unlikely, and most likely unable, to repeat the stimulus efforts of 2009.

Demand muted, supply up While some additional spending on infrastructure is already in the pipeline, it won’t nearly match the boom seen in the years following the 2008 global recession.

The need for new infrastructure isn’t as great, local authorities are still overburdened with debt from the last stimulus, pollution is a major concern and there are question marks over whether global demand would be sufficient to absorb much increase in manufacturing exports.

This makes it unlikely that a demand-led revival is on the cards for commodities, even with the caveat that the Chinese economy is probably not in as a bad shape as the current worst fears of investors.

The other reason for thinking commodity prices aren’t on the verge of a rebound is supply.

At the start of 2009, when China started buying more and more raw materials, commodity producers were struggling to keep up.

Coal the template?

But the decline in prices for many commodities started accelerating in 2014, just as it became increasingly evident that China’s economic growth was slowing and changing composition

Some commodities appear further along the road to rebalancing, with coal perhaps leading the pack.

It was among the first to move into structural oversupply and the price of regional benchmark thermal coal at Australia’s Newcastle Port has been dropping for four-and-ahalf years, shedding some 58 percent of its value from the post-2008 peak in January 2011 to the close of US$57.77 a tonne on August 21.

But coal has traded largely sideways so far in 2015, and is down only 6.7 percent since January 2, indicating that despite a worsening demand outlook, prices may be close to a floor.

Unlike iron ore, copper and crude oil, coal has been leaving the seaborne market, with U.S. and Canadian producers largely absent from Asia and reduced shipments from top exporter Indonesia.

In contrast iron ore, crude and liquefied natural gas (LNG) are commodities still experiencing rising supply, suggesting that there is scope for further price declines in the absence of strong demand growth.

Like coal, they will most likely have to go through a long and painful process of re-balancing before any sustained price rise is possible.

The commodity rout of 2015 may look similar on price graphs as the plunge during the 2008 recession, but it has vastly different causes and dynamics.

This time around commodities are unlikely to be rescued by stimulus-led demand growth and structural oversupply appears to have the nasty habit of hanging around for longer than would appear economically rational.

Reuters

16 | Business Daily

August 25, 2015

Closing GM China joint venture building green car plant

Muji to open more stores in mainland

A General Motors Co joint venture in China will invest 3 billion yuan (US$470 million) to build a factory dedicated to green cars, a spokeswoman said yesterday. The plant will have annual capacity to build 200,000 “new energy vehicles,” a Chinese term used as a catch-all for electric and highly electrified cars, the spokeswoman said in an emailed response that did not say when the factory would be completed. SAIC-GM-Wuling, a three-way joint venture with SAIC Motor Corp Ltd and Wuling Motors Holdings Ltd, began construction of the plant on Friday in the south-western province of Guangxi.

Japanese retailer Ryohin Keikaku Co Ltd has boosted its sales in China by nearly a fifth this month and plans to accelerate store openings there, unfazed by worries about the world’s No.2 economy that have sparked a global stock selloff. Satoru Matsuzaki, president of the Muji store operator, said his company will open a flagship store in Beijing next year and wants to increase its pace of China store openings to 50 per year from 2017, from the current 30 to 35. Ryohin Keikaku is stepping up the chain’s expansion in China, its biggest territory outside Japan. As of end-May it had 128 stores in China.

China’s army of small investors still believes Almost all of China’s more than 90 million stock investors are individuals

I

nvestors who piled into China’s stock market at the government’s behest may have lost heavily in recent months, but many clung yesterday to hopes of official rescue even as markets erased the year’s gains.

Chinese trading screens were bathed in a sea of green -- the colour of falling prices in the country, where red has positive connotations and marks rising values -as the benchmark Shanghai Composite Index plummeted.

Retired factory worker Ni Dongxia, 72, sat calmly in front of a display in a trading room in Beijing which showed nearly all stocks in Shanghai and Shenzhen in the negative.

He has invested about half his savings in the stock market, but remained confident in authorities’ ability to handle the situation.

“The government won’t allow the stock market to fall too much and will help it rise again,” he said.

Ni’s fellow investors, most of them retirees, sat sipping tea from thermoses, chatting and occasionally walking over to one of the computers along the wall to make a trade.

Almost all of China’s more than 90 million stock investors are individuals,

The national leadership cares about the people.

How could they just let us lose all our money?

Ni Dongxia, retired factory worker

according to the China Securities Depository and Clearing Co -- more than the Communist Party has members. This differs from most developed countries, where institutions dominate.

Last year the government triggered a stock market boom by encouraging ordinary citizens, normally deeply wary of equities as investments, to open accounts and invest in shares.

With margin trading common -- where investors borrow to finance their activity, magnifying both profits and losses -- many will have made fortunes on the way up. But since markets turned after an unsustainable rise of more than 150 percent in the year to June 12, the picture has changed.

Ni admitted he did not know much about stock markets and mostly picked large state-owned companies that cropped up a lot in the newspaper, such as oil giant Sinopec and Agricultural Bank of China.

He said he started investing in the stock market after he retired and initially

only small amounts -- mostly out of boredom.

‘Walk into a casino’

Some were putting their money where their optimism was.

Authorities have launched broad interventions to try to restrain the drops, amid concerns they could impact on the real economy, but they have failed to arrest the drops in the face of worries over stalling growth and doubts about valuations.

The latest move came Sunday, when the State Council, China’s cabinet, said the national pension fund would be allowed to invest up to 30 percent of its net assets in stocks -- raising the prospect

of more than US$150 billion flowing into the markets.

Such news would normally drive the speculation-driven market higher, and Yin Dongqing, a housewife in her 30s, suspected authorities allowed Monday’s falls to give the pension fund a cheaper entry point.

“I think today’s fall is because the government is trying to let the pension fund enter the market, so they are digging a hole to lower the current level,” she said in Shanghai.

“The market will definitely rebound later, maybe after tomorrow,” she added. “I actually bought some financial shares today.”

“I think the market has no hope. Even if it rebounds, it will fall even more afterwards.

I don’t have much hope now,” office worker Lu Zhongjie told AFP. At the Beijing trading room retired bus driver Zhou Aiguo, 67, said: “I would never trust my savings with something like the stock market,” he added.

“The stock market is more like gambling. “I like gambling but I would never take the money I need to live on and walk into a casino.”

AFP

Bangladesh to approve proposal CITIC Securities posts fastest for new road to Myanmar H1 profit growth in 9 years

Park says South Korea won’t back off as crisis hits markets

B

S

C

angladesh’s economic policy-making body is all set to approve a proposal for constructing a new road to Myanmar, aimed at boosting bilateral trade, an official said yesterday.

A Planning Ministry official who did not like to be named said the Executive Committee of the National Economic Council will likely approve the proposal on Tuesday in a meeting with Prime Minister Sheikh Hasina in the chair.

The 540 million taka (about US$7 million) proposed new road will pass through Bangladesh’s two southeastern hilly districts - Cox’s Bazaar, some 292 km away from capital Dhaka, and Bandarban, some 316 km southeast of the capital city - which border Myanmar to the country’s east.

He said that in April this year the project for constructing the new road was finalized.

The proposed road aims at Bangladesh’s plan to develop bilateral trade with Myanmar as well as develop road connectivity with China and other nations in Southeast Asia, he added.

The project is expected to be completed by the end of June 2017.

hina’s biggest brokerage said its first-half net profit tripled, its fastest growth rate for the same period in nine years, as a stock market surge that began in November boosted trading fees and commissions.

Net profit for the six months to June jumped to 12.47 billion yuan (US$1.95 billion) from 4.1 billion yuan a year earlier, the company said yesterday. That matched preliminary results released in July.

Profits are likely to take a hit in the second half of the year, however, after Chinese stock prices swooned in mid-June, with shares losing more than 30 percent of their value in a matter of weeks, wiping out an estimated US$3 trillion of the market’s value.

CITIC, along with other large brokerages, had reaped huge profits from the surge in Chinese stocks which was spurred by interest rate cuts and the newly launched Hong Kong-Shanghai Stock Connect trading link.

Profits for China’s 22 publicly listed brokerages jumped almost five-fold on average in the first half, according to the Securities Association of China, on fees and commissions made from massive trading volumes.

Xinhua

Reuters

outh Korean President Park Geun Hye’s crisis-management skills are being tested as she faces a military standoff with North Korea that risks exacerbating turmoil in the country’s financial markets.

Park is trying to prevent tensions with Kim Jong Un’s government from erupting into open conflict while shoring up the economy from a market selloff that sent the Korean won to a four-year low and drained more than US$900 million from Korean equities in a week. So far, Park has chosen to present an image of strength, pledging not to cease cross-border propaganda broadcasts until North Korea apologizes for placing land mines that maimed two South Korean soldiers on August 4.

“We should never back off,” Park said yesterday in a meeting with aides, according to her office’s website. “To avoid a repeat of these provocations and instability we need a clear apology and a guarantee this doesn’t happen again. If not, the government will continue the loudspeaker broadcasts and take suitable measures.” Even with talks on-going, the North mobilized its submarine fleet and beefed up its artillery positions, while South Korea and the U.S. scrambled fighter jets.

Bloomberg News