Mbd aug 27 0

MOP 6.00

Free Trade Zone Opportunities

Closing editor: Joanne Kuai

The Guangdong Free Trade Zone. The Qianhai-Shekou Area of Shezhen is welcoming Macau firms. Particularly those engaged in finance, logistics and IT. The Qianhai authority head also noted Shenzhen’s intention to develop cruise tourism services with Macau

Year IV

Number 867 Thursday August 27, 2015

Publisher: Paulo A. Azevedo

Page 2

Mainland Visitors Drifting Away

Some 2.65 million visitor arrivals were recorded in July. A 3.8 pct drop y-o-y. More worrying is Landing loses the 6.1 y-o-y drop in the city’s major source market. Mainland Chinese travellers have discovered HK$144 mln in H1 Page 4 other destinations. And with favourable currency exchange are travelling further, too. Meanwhile, the National Tourism Administration has revamped the travel agency system. From next month, Chow Tai Fook and New World Development group tours to the SARs are obliged to use digital forms Page

3

invest in Qianhai

Page 5

Round peg, square hole

China’s home prices forecast to grow mildly this year

The slide in Asian currencies. Pressure is building on the Hong Kong dollar.

To the extent that the HKSAR could abandon the U.S. dollar peg, according to some

Rate cut not enough to stop another day of falling stocks

Page 8

Page 16

Page 8

HSI - Movers August 26

Bangkok Fallout

Name

Caution remains the watchword. Macau travel agencies have extended their cancellation deadline of Bangkok tours to September 10. The MSAR’s Tourism Crisis Management Office is still wary. With its travel alert to the Thai capital still in force following a deadly bomb attack.

Tourists are opting for Japan or South Korea, while others are saving their ‘credits’ for Christmas in Bangkok

www.macaubusinessdaily.com

Page 2

Collateral Damage China’s latest crackdown on underground banking. It will hurt junkets in Macau, says a Deutsche Bank note.

Meanwhile, police arrested 17 people this week after raiding pawnshops thought to be facilitating the illicit flow of money from China

Page 6

Retail

%Day

Kunlun Energy Co Ltd

+3.48

China Shenhua Energy

+2.52

CNOOC Ltd

+1.90

Cathay Pacific Airways

+1.59

CLP Holdings Ltd

+0.95

Li & Fung Ltd

-4.42

Want Want China Hol

-4.59

Tingyi Cayman Islands

-4.67

Hengan International

-5.08

Galaxy Entertainment

-5.64

Source: Bloomberg

Silver Lining

I SSN 2226-8294

Jeweller Chow Sang Sang’s overall turnover declined 1 pct to HK$9.24 bln in H1. Due to the Mainland economy and exchange rate fluctuations droving customers elsewhere. Profits increased 40 pct, however, thanks to a HK$729 million sale of shares

Page 5

2015-8-27

2015-8-28

2015-8-29

27˚ 32˚

26˚ 31˚

26˚ 30˚

2 | Business Daily

August 27, 2015

Macau Inflation slows to 4.76 pct in July The city’s consumer price index (CPI) decreased to 4.76 per cent in July from 4.91 per cent in June, the official data of the Statistics and Census Service (DSEC) shows. According to DSEC, higher residential rents, the higher cost of eating out and out-patient healthcare were the factors driving inflation last month. In addition, inflation for alcoholic drinks and tobacco surged to 28.11 per cent following the increase in tobacco tax last month. Meanwhile, housing and fuel prices, as well as healthcare costs, inflated 8.72 per cent and 5.98 per cent during the month, respectively.

Communication costs deflated 0.76 per cent year-on-year.

Retail sales drop 13 pct to MOP14.3 bln in second quarter The value of retail sales in the city registered a year-on-year decrease of 13 per cent during the second quarter of the year, amounting to only MOP14.3 billion (US$1.78 billion), according to the Statistics and Census Service (DSEC). The official data indicated sales of watches, clocks and jewellery, as well as motor vehicles, plunged 29 per cent year-onyear during the period. Some 21 per cent of total retail sales were generated by the sale of watches, clocks and jewellery, followed by goods in department stores and adult clothes, which accounted for 14 per cent and 10 per cent of the total, respectively.

Visitor expenditure plunges 24.7 pct in second quarter The city saw its visitors spend a total of MOP12.25 billion (US$1.53 billion) during the second quarter of this year, shrinking 24.7 per cent year-on-year, official data released by the Statistics and Census Service (DSEC) reveals.

The data indicated that overnight visitors in the city spent MOP9.58 billion in the territory during the three months, a year-on-year drop of 30.4 per cent, while spending by same-day tourists posted a year-on-year increase of 7.3 per cent, accounting for MOP2.67 billion of the total. On average, spending per visitor decreased by 22.1 per cent year-on-year to MOP1,688, while spending per head by visitors from China, the city’s biggest source of tourists, plunged 24.3 per cent to MOP2,012 from one year ago.

Non-resident worker numbers fall to 178,679 in July A total of 178,679 non-resident workers were working in the territory as at the end of July, which is a slight decrease of 1.02 per cent compared to 180,523 the month before, according to the latest data released by the city’s Human Resources Office. Yet, on a year-on-year comparison the number still represents an increase of 12.9 per cent. The month-on-month decrease is mainly due to a 6 per cent drop in the number of construction workers to 45,772 during the month. Of these imported labourers, 65 per cent were from Mainland China, while some 13 per cent and 8 per cent were from the Philippines and Vietnam, respectively.

Most of the workers, 26 per cent of the total, were engaged in the construction field, while some 13 per cent worked as domestic helpers.

Outbound Bangkok tours cancelled until September 10

M

acau Travel Industry Council president Andy Wu Keng Kuong said most of the city’s travel agencies have extended their cancellations of Bangkok tours to those departing on or before September 10, as the situation in the Thai capital is still uncertain following a deadly bomb attack last Monday.

The travel association head spoke of the industry decision to local broadcaster TDM Radio yesterday. However, he said tours

to the country’s northern city of Chiang Mai are not affected.

After the blast in the capital of the Southeast Asian country killed at least 22 and wounded more than 100, the city’s outbound tours to Bangkok departing on or before August 23 were announced cancelled last Tuesday.

According to Mr. Wu, travel companies have offered to change the destination of affected customers or to credit them for six months if the flights of their affected tours are operated by carrier Air Macau.

Shun Tak pulls out of budget airline Jetstar Hong Kong

H

ong Kong property development and shipping conglomerate Shun Tak Holdings Ltd. announced on Tuesday that it has pulled out of the business of the budget airline Jetstar Hong Kong, following the exit actions of partners China Eastern Airlines and Qantas Airways.

‘After reviewing ATLA's (Air Transport Licensing Authority) decision and having contemplated potential courses of action, on August 25, 2015, the board resolved not to further invest in the business of Jestar Hong Kong and proposed to terminate its establishment and proceed with its winding up,’ Shun Tak stated in the Tuesday filing.

In June, the Air Transport Licensing Authority in Hong Kong rejected the licence application for Jetstar Hong Kong on the grounds that it did not have its principal place of business in Hong Kong.

He said customers that decided to change their destinations primarily chose Japan or South Korea, noting there are also some deciding to keep the credits for Bangkok tours for Christmas.

The city’s Tourism Crisis Management Office has not yet taken down the travel security alert to the Thai capital that was issued last Tuesday, while Hong Kong authorities are also warning residents to avoid the Thai city with a red travel alert.

K.L.

Shenzhen authorities beckon SAR firms to Qianhai-Shekou

I

Shun Tak, China Eastern and Quantas each held a third of the budget airline venture.

‘The company does not consider that the winding-up of Jetstar Hong Kong would have any significant adverse impact on the financial and operational position of the group,’ Shun Tak said.

Jetstar Hong Kong was launched in March 2012 as a Hong Kongbased budget carrier flying to short-haul destinations in Asia.

The budget airline has been grounded for more than 2 years due to regulatory hurdles. Jetstar Hong Kong's application for a licence was challenged by Cathay Pacific on the grounds that the budget carrier had failed to meet the Basic Law's requirement of having its principal place of business in Hong Kong.

S.L.

n a press briefing held yesterday, the director of Shenzhen Qianhai Authority, Mr. Du Peng, said the Mainland city would welcome Macau firms engaged in finance, logistics and information technology to develop their business in the Guangdong Free Trade Zone Qianhai-Shekou Area of Shenzhen, where the preferential trade terms enjoyed by Hong Kong investments will also apply to those from Macau.

The Qianhai authority head also noted that Shenzhen will develop cruise tourism services with Macau in the future. He said that the Shenzhen authorities have been working on the plan to launch the so-called ‘Individual Visit Scheme’ for yachts travelling between the city and Macau.

The scheme is an initiative for yachts from Macau to be able in Mainland marinas as well as a plan for both Mainland and local governments to implement a simpler Customs clearance procedure for yacht owners and crews.

The scheme is slated for trial for Macau and Zhongshan City in Guangdong by the end of September, according to Macau's Marine and Water Bureau.

Business Daily | 3

August 27, 2015

Macau

July visitor arrivals down nearly 4 pct to 2.65 million Mainland Chinese visitor arrivals, the most important source of tourists for Macau, posted a decline of 4.5 per cent for the first seven months this year, official data shows Stephanie Lai

sw.lai@macaubusinessdaily.com

Stopping illegal trips

M

acau recorded a total of nearly 2.65 million visitor arrivals in July, an improvement from the previous month but still a drop of 3.8 per cent compared to a year ago, as the decline in Mainland Chinese visitors persists, according to latest data released by the Statistics and Census Service (DSEC).

The city’s number of July visitor arrivals is 17.8 per cent more than the previous month. But in July, the number of Mainland Chinese visitors decreased 6.1 per cent year-on-year to 1.76 million, with those travelling under the Individual Visit Scheme (IVS) dropping 5.3 percent to 824,536.

The second and third major source of Macau’s visitors, Hong Kong (586,136) and Taiwan (93,443), both showed slight yearly increases in visitation in July, according to official data. Visitors from South Korea, which has seen rapid growth in recent years, dropped 22.5 per

Glenn McCartney and Winnie Lei Weng In suggests that the city’s residents are increasingly feeling and expressing negative sentiments towards tourism, driven by factors such as traffic congestion and an inadequate public transport system.

These sentiments could ultimately impact the delivery of tourism services as many in the local community are working in tourism or live in a neighbourhood close to a tourism location, the authors of the study concluded.

cent year-on-year to 37,050 in July.

For the first seven months of this year, Macau received a total of 17.4 million visitors, representing a yearon-year decline of 3.5 per cent.

The decline is registered as the most important source for the city’s visitors, Mainland China, has seen a 4.5 per cent drop in visitor arrivals

(at 11.5 million or 66 per cent of overall arrivals) for the January to July period. In the same period, fewer visitors travelled here from most Southeast Asian countries, with fewer long-haul visitors coming from Russia, Europe and the U.S..

A new study conducted by University of Macau researchers

Travel agencies booking group trips to Hong Kong and Macau are urged to use digital forms for government approval starting from September 1 in order to curb illegal travel operators in Guangdong Province who might cheat Mainland tourists travelling in the two cities, state-run news agencies Xinhua and China Daily reported this week.

Digital forms can help monitor travel groups and deal with tourist complaints more efficiently, the head of China National Tourism Administration’s supervision and management division, Peng Zhikai, was quoted as saying. By the end of this year, all outbound tourism in groups will adopt digital forms only, the administration said.

Guangdong Province was chosen for the pilot project because it is “an important source of outbound tourists”, Peng said.

For the first six months of this year, a total of 3.98 million Mainland Chinese tourists have travelled here on package tours, with 37.5 per cent or 1.49 million from Guangdong Province, DSEC data shows.

4 | Business Daily

August 27, 2015

Macau MGTO organises media release workshop for hotel industry Macau Government Tourist Office (MGTO) held a workshop titled ‘Upgrading Media Releases in the Internet Era’ for hotel industry personnel and MGTO staff on 25 and 26 August to enhance their knowledge and skills in media communication. The Tourist Office invited the Executive Editor of Travel Impact Newswire, Imtiaz Muqbil, to give a talk in the workshop about changes in the global and regional world order, revolution in the tourism industry as well as useful skills about media releases. The Office says it will keep on helping the tourism and related sectors to upgrade their service quality in accordance with the goal of building Macau into a World Centre of Tourism and Leisure.

Landing loses HK$144 mln in H1

C

hina real estate developer Landing International Development Ltd. saw its loss widen to HK$143.9 million (US$ 17.9 million) for the first half of this year from HK$129.7 million one year ago.

In a filing with Hong Kong Stock Exchange yesterday the developer

said its revenues posted a year-onyear increase of 14.2 per cent to HK$109.2 million during the period, compared to HK$95.7 million one year ago.

Having acquired a casino in Hyatt Regency Jeju Hotel on Jeju Island in South Korea in June 2014, the

Hong Kong-listed company said the performance of the Korean casino had notably improved during the six months after its re-opening following the suspension of operations since October 29 last year to January 18 this year for renovation.

‘Due to the change of customer

focus and marketing strategy and the strengthened managerial and professional support after the rebranding and re-opening in January 2015, the performance of the Jeju Casino improved significantly during the period,’ the company wrote, indicating it shared the profit from the casino business of around HK$24.5 million.

The developer also claimed in the filing that the construction of its collaborative integrated resort project Myth-History Park on the Korean island with its partner, Singaporean casino operator Genting Singapore Plc, ‘has progressed in full swing’, expecting the project would be ‘well built and managed by a quality and experienced management team.’

According to the company’s filing, the facilities of the Jeju project are expected to open progressively from 2017, while the entire development is slated to be completed by 2019.

K.L.

Business Daily | 5

August 27, 2015

Macau Asia Insurance profits up MOP1.8 million The company Asia Insurance generated a profit of MOP29.37 million during the fiscal year of 2014 for its operations in the territory, according to data published yesterday in Macau’s Official Gazette. The results of Asia Insurance represent an increase of 6.5 per cent year-onyear from the MOP27.57 million profit registered during the fiscal year of 2013. In 2014, the gross premiums of the company amounted to MOP200.07 million while gross claims totalled MOP54.34 million.

Chow Tai Fook and New World Development invest in Qianhai

C

Sale of shares increase profit of Chow Sang Sang The jewellery group saw its revenues decline during the first six months of the year although additional income from sales of shares boosted profits by 40 per cent João Santos Filipe

jsfilipe@macaubusinessdaily.com

T

he sale of shares in Hong Kong Exchanges and Clearing Limited for HK$246 million boosted the profit of jeweller Chow Sang Sang during the first half of the year. According to the interim report for the first six months of the year, the company generated a profit of HK$729 million, up 40 per cent from HK$519.8 million for the same period of 2014.

However the bad news for the company is that the overall turnover of the group declined one per cent to HK$9.24 billion from HK$9.33 billion. Turnover from the jewellery business went down one per cent HK$8.17 billion from HK$8.21

billion and from other businesses dipped three per cent to HK$1.12 billion from HK$1.08 billion.

The decline of turnover was explained by the economic environment on the Mainland plus exchange rate fluctuations, which drove consumers to other markets.

‘The official record of visits to Hong Kong by Mainland Chinese may have shown a rise of 5.9 per cent yearon-year during the first five months of 2015; however, actual spending by these visitors did not bring much cheer to the luxury retail sector’, the company explained. ‘Exchange rate fluctuations caused price differences that made it worthwhile for consumers

from the Mainland, and even those from Hong Kong, to shop in Japan and Europe for luxury goods’, it was added.

In spite of the tricky environment, which has also been prompted by the slowdown in the Mainland economy and the anti-corruption crackdown in the People’s Republic of China, the board of directors of Chow Sang Sang said: “Despite the testing of new lows by gold and platinum prices in the month of July we do not expect any dramatic change in the operating environment for the rest of the year.

The direction of consumer spending seems to point to more affordable goods”.

how Tai Fook Jewellery Group and New World Development are indirectly investing RMB350 million (MOP435.5 million) to develop a high-end luxury shopping complex in Qianhai in Shenzhen, according to a filing sent yesterday to the Hong Kong Stock Exchange. Of the total RMB350 million, RMB120 million will be used as registered capital.

Yesterday, the two groups announced the framework for the joint venture company, which indirectly through subsidiaries will result in Chow Tai Fook Group investing around RMB280 million and New World Development [NWD} RMB70 million. On August 3, the companies had already announced that they had been awarded the tender by Shenzhen Qianhai Development Investment.

The project to be developed is a high-end luxury shopping complex comprising a site occupying approximately 11,366 square metres, with permissible total gross floor area of around 18,790 square metres. The tender also said that the building is limited to four storeys and will have to include at least 200 car-parking spaces.

“The directors of NWD consider that the development and operation of the project are consistent with the core business strategies of the group and enable it to expand its business to Qianhai”, the directors of the group, which is involved in property and department store operation, explained.

“The Chow Tai Fook Jewellery Group will benefit from the joint venture by having a presence in Qianhai, Shenzhen, which is a fast developing area in the PRC”, the directors of the group said in the filing.

The family of Hong Kong billionaire Cheng Yu Tung controls the two groups, the chairman of which is the son of billionaire Henry Cheng Kar-Shun.

J.S.F.

Corporate

Fireworks spectacular at Mandarin Oriental

Ritz-Carlton brings the magic of French savoir-vivre

As Macau is welcoming the 27th International Fireworks Display Contest in September and October, Mandarin Oriental, Macau, as one of the best places to watch the show, is offering a Fireworks Celebration package. By booking the Fireworks Celebration accommodation package, guests can watch the spectacle

In celebration of the official opening of The Ritz-Carlton Café, an authentic French style brasserie located at Galaxy Macau™ - The Promenade, The Ritz-Carlton, Macau is collaborating with Hong Kong’s famous food and travel columnist, Walter Kei. Underscoring his passion for travel, gastronomy and photography, Walter will

through their room’s floor-to-ceiling windows and delight in Chef Dominique Bugnand’s French cuisine at the hotel’s signature Vida Rica Restaurant. Nonresident guests can watch the fireworks from Vida Rica Restaurant and Vida Rica Bar, with both offering celebratory menus for the event.

bring his ‘Réminiscence Moments à France

by Walter Kei’ photo exhibition to Macau from September 18 to October 18, 2015. In conjunction with the exhibition, The RitzCarlton, Macau will offer a special menu to take guests on an unsurpassed culinary journey to France to create indelible memories that will last a lifetime.

6 | Business Daily

August 27, 2015

Macau Brands

Trends

Fly me to the moon Raquel Dias newsdesk@macaubusinessdaily.com

A

s the Mid-Autumn Festival approaches, we start hearing about the ubiquitous mooncake. The traditional pastry is a must-try at this time of the year and is mostly appreciated as a gift. Not only is the cake itself important but also the presentation in which it’s shown. Every year, hotels and bakeries innovate recipes and designs.

The mooncake itself has a story. It is said that it played an important role during the fall of the Yuan Dynasty.

Mongol rule was supposedly overturned by the Ming revolutionaries who used these cakes as a medium to pass their messages. Some stories say they used hollow cakes, taking out the egg yolk inside, to hide these messages. Others suggest they used the custom of imprinting the Chinese characters on the top of the cake to create a kind of puzzle that could be put together.

In Macau and Hong Kong, you will find that a big part of the festival includes going out at night with lanterns.

Children used to carry paper lanterns in the shape of animals but today there’s a plethora of designs on the market. One explanation for the tradition has to do with the tale of star-crossed lovers.

Whatever the origins, it is definitely de rigueur to offer the delicious cakes and to run to the streets with your lantern aglow.

Crackdown on underground banking to hit gaming sector The latest Deutsche Bank report confirms the crackdown in Mainland China is affecting the gaming industry and questions the popularity of Macau among Chinese travellers these days João Santos Filipe

jsfilipe@macaubusinessdaily.com

T

he crackdown on underground banking announced by the Ministry of Public Security in Mainland China is likely to impact the Macau gaming industry by tightening junket liquidity, according to the latest report from Deutsche Bank.

“Macau junket agents often use the underground banking system to transfer money out of China to fund VIP players at Macau casinos. Yearto-July, the junket VIP roll is down 52 per cent. We think the heightening scrutiny of China’s underground banking system and cross-border money transfers may impact junket agents’ ability to move money into and out of Macau” analyst Karen Tang wrote. “We think this campaign is the result of China’s efforts to control capital outflows, especially after the recent RMB depreciation”.

The German investment bank also stresses that liquidity issues have been pressuring the VIP segment despite the relaxation of the transit visa. At the same time, junkets have been turning some of their attention to stock investment on the Mainland.

“The VIP market has not improved since the relaxation of transit visas on July 1 because junket liquidity has remained very tight. In early July, some junket agents withdrew deposits in Macau to fund margin calls for stock investments in China”, the report explains.

Concerning the gaming operators, Deutsche Bank believes that Galaxy Entertainment Group and Wynn Macau will be more impacted by this hit to the VIP market because they have a higher exposure to it, namely 27 per cent to 29 per cent of EBITDA [Earnings Before Interest, Taxes, Depreciation and Amortization].

Premium and mass going away?

According to the same report there are more reasons also affecting the Macau industry, one of which is that Mainland tourists seem to be heading to other destinations. In respect to this point, the fact that many currencies have been depreciating in other places is encouraging tourists to visit Europe or Japan more.

“This year, outbound travel has suddenly taken off in China because of the RMB’s relative strength versus other countries’ currencies. Despite the recent CNY depreciation, since July 2014, against the RMB, the Australian dollar has depreciated by 20 per cent, the Euro by 16 per cent, the Japanese Yen by 16 per cent, and the South Korean Won by 11 per cent”, the report says.

However, there are also signs that even mass market tourists may feel more attracted to locations other than Macau. “It seems that Macau is no longer as popular among Chinese travellers as it was a few years ago. In fact, for the first time in years, Macau has fallen off the ‘Top 10 summer destinations’ list, according to a survey conducted by Ctrip, China’s largest online travel agency”.

According to the report, in 2014 the Special Administrative Region occupied 8th place in Ctrip’s Top 10 outbound destinations for Chinese during the summer.

17 arrested in money laundering crackdown as China downturn fears grow

P

olice in the global gambling hub of Macau have arrested 17 people this week after raiding pawn shops thought to be easing the illicit flow of money from China, whose slowing economy is prompting authorities to try and curb capital flight.

Macau, the only place in China where citizens are allowed to gamble in casinos, has long been considered a money laundering blackspot, susceptible to unchecked capital flows in and out of China.

The problem has persisted for years, but recent stock market turmoil and signs of growing strain in China’s economy are pushing Chinese and Macau authorities to tackle it.

Over the past week, China’s central bank and the public security ministry announced a new antimoney laundering pact and a threemonth crackdown on underground banking.

Macau police said they investigated five jewelry and telecommunication shops on Monday that were allegedly involved in fraudulent bank card usage.

They seized 11 mainland card payment terminals for state-backed China UnionPay cards, records of illegal transactions and cash of

MOP13.5 million (US$1.7 million), police said on their website.

Hong Kong-listed casino stocks have fallen between 30 percent and 42 percent since the start of 2015, underperforming a 10 percent fall in the Hang Seng benchmark over the same period.

Reuters

Business Daily | 7

August 27, 2015

Gaming

Christie-backed betting law in New Jersey blocked by court A ban on sports gambling at New Jersey’s casinos and racetracks will remain in place after a federal appeals court again rejected Governor Chris Christie’s bid to lift it violated federal provisions.

He blocked the new law again last year.

Partial repeal

A

state statute repealing a ban on sports betting can’t circumvent a 1992 federal law barring such activity in all but Nevada and three other states, the U.S. Court of Appeals in Philadelphia ruled Tuesday.

The appeals court also rejected an attempt by New Jersey in 2013 to legalize gambling.

The ruling is a setback for Christie as he seeks to boost the state’s shrinking gambling industry amid increased casino

competition from neighboring states. The National Football League and four other sports organizations sued to block the law signed by Christie last October that sought to overcome the legal hurdles.

The law violates the U.S. Professional and Amateur Sports Protection Act, or PASPA, a divided three-judge panel ruled.

“We acknowledge New Jersey’s salutary purpose in attempting to revive its

troubled casino and racetrack industries,” the judges said in a 2-1 opinion. “We now turn to the primary question before us: whether the 2014 Law violates PASPA. We hold that it does.”

State Senator Raymond Lesniak, a Democrat and the main sponsor of the bill, promised to appeal.

In 2012, U.S. District Court Judge Michael Shipp blocked a similar law authorizing sports gambling, ruling it

New Jersey had argued that the new statute was different because it was a partial repeal of pre-existing prohibitions.

Ted Olson, an attorney for the state, likened the purpose of the new statute to “decriminalization” in a March 17 hearing.

During the hearing, judges in the appeals court debated the differences between repealing a law and authorizing one.

“Authorize and repeal are not equivalent,” Olson argued.

“What the 2014 law is doing is effectively revising the licenses held by the casinos, allowing them to take bets,” Judge Maryanne Trump Barry said.

Barry was one of two judges to rule against the law.

Judge Julio Fuentes dissented, saying the 2014 law “renders

the previous prohibitions on sports gambling nonexistent.”

After the repeal, “it is as if New Jersey never prohibited sports gambling in casinos, gambling houses and horse racetracks,” Fuentes wrote.

“Therefore, with respect to those areas, there are no laws governing sports wagering and the right to engage in such conduct does not come from the state,” he wrote. “Rather, the right to do that which is not prohibited stems from the inherent rights of the people.”

Full court

Lesniak said he would cite the Fuentes dissent in asking the full Third Circuit court to take the case on appeal. He said he expected the New Jersey Racing Association and state Senate to join that effort.

The suit was brought by the NCAA, the NFL, the National Hockey League, the National Basketball Association and Major League Baseball.

Bloomberg

th

2nd Half Page Ad Charity Golf 2015 Business Daily outlined.indd 1

8/25/2015 10:40:27 AM

8 | Business Daily

August 27, 2015

Greater China

Bets grow Hong Kong may scrap peg The flight-to-safety bid has made the Hong Kong dollar expensive versus rivals Michelle Chen and Saikat Chatterjee

B

ets are growing of a possible scrapping of a historic peg of the Hong Kong dollar against the greenback, after China's surprise devaluation of the yuan this month sent financial markets into a tailspin and stoked fears of a global currency war.

One month implied volatility on the Hong Kong dollar - an indicator of expected price swings - jumped to 2.23 on Monday, the highest level in a decade. It was much higher than 1 on August 11 when the People's Bank of China weakened the yuan by 2 percent.

"The Hong Kong dollar is seeing a classic flight to safety bid. Investors are de-risking their portfolios and moving funds into Hong Kong dollar bonds and cash," said Hayden Briscoe, Asia Pacific fixed income director at AllianceBernstein, who is part of a team that manages US$250 billion globally in fixed income.

The flight-to-safety bid has made the Hong Kong dollar expensive versus rivals.

"Given currency slides across Asia, the Hong Kong dollar now looks significantly overvalued," said Kevin Lai, an analyst at Daiwa, adding that the peg would come under tremendous pressure in case of severe credit stress in China and capital outflows following the U.S. Federal Reserve's policy normalisation.

Given currency slides across Asia, the Hong Kong dollar now looks significantly overvalued Kevin Lai, analyst, Daiwa

"Hong Kong is caught in a pincer movement between a prospective U.S. monetary policy tightening and the continued slowdown and travails of the mainland economy with whom Hong Kong's economic cycle is increasingly more correlated," said Mole Hau, Asia Economist at BNP Paribas.

The so-called currency board arrangements means the Hong Kong Monetary Authority (HKMA) is unable to use independent interest rate policy to influence the domestic economy and may have its work cut out if the Fed's eventual tightening

triggers big capital outflows.

In the last round of mass capital outflows in 1998, Hong Kong's economy contracted 6 percent and endured deflation for years after the Asian financial crisis, but the dollar peg survived.

Government officials have reassured that the peg will be retained.

"I don't think the Hong Kong dollar has come to a stage that the peg has to be changed with no choice like what happened to the Swiss franc," said Raymond Yeung, an analyst at ANZ.

Many emerging market currencies, including the Malaysian ringgit, Indonesian rupiah and Brazil's real, have slumped to their weakest levels against the dollar in over 10 years as capital fled their slowing economies.

The latest country to join the currency war, Kazakhstan, devalued its tenge by more than a quarter last Thursday.

The Hong Kong dollar rose close to its strong end of trading yesterday and traded at 7.7506 per dollar, up from 7.7616 on August 11. The local currency has been pegged at 7.8 to the U.S. dollar since 1983, but can trade between 7.75 and 7.85.

Home prices rising mildly in 2015 Property sales bottomed out during the first half of 2015 after declining for more than a year Xiaoyi Shao and Koh Gui Qing

KEY POINTS Home prices seen +2.0 pct y/y in 2015, +3.0 pct in 2016 More than half of respondents say home sales to keep improving Full-blown recovery unlikely due to high unsold inventories Bigger cities to see sharper price gains

C

hinese home prices are expected to rise modestly this year thanks to government support measures for the sector, relieving some pressure on the faltering economy, a Reuters poll showed yesterday.

Reuters

Home prices are likely to rise 2 percent in 2015 from a year earlier, and 3 percent in 2016, according to the median of the poll, which surveyed 14 economists and property market analysts between August 18-25.

Signs of stability in the property sector could ease fears of a sharper slowdown in China’s economy, which is heading towards its weakest rate of expansion in 25 years due to a combination of cooling demand at home and abroad.

But pick-ups in home prices and sales are unlikely to turn into a full-blown recovery for the sector any time soon, as large inventories of unsold homes weigh on the market and discourage new investment and construction, dampening demand for everything from cement and steel to furniture and appliances.

Property sales bottomed out during the first half of 2015 after declining for more than a year, propped up by a barrage of government support measures since last September, including a series of interest rate cuts and lower downpayment requirements.

Home prices rose 0.3 percent in July from June, the third straight month of gains, though they were still down 3.7 percent from a year earlier, official data showed last week.

“Favourable credit policies have released pentup demand and driven up home prices. We expect

home transactions in 2015 to surpass last year’s volume,” said Jason Hu, head of research at Chinese property consultant Holdways in Beijing.

Sales improving

While 10 of 14 respondents in the poll expected no broad recovery in the property market this year, eight of 13 expect home transactions to keep improving in the coming month. Not everyone replied to each question.

“Loosening monetary policy and favourable supervision measures have greatly reduced the costs of buying homes. The sustained owner-occupier demand will support the market to recover,” said Xu Gao, chief economists at Everbright Securities in Beijing.

Six of 13 respondents thought authorities would take more steps to lift the market, while the rest believed they would not step in.

Given China’s property market is diverging between cities in terms of performance, analysts thought bigger cities would see sharp price rises this year due to strong housing demand.

Respondents said China’s property markets are overvalued, a view unchanged since January 2012 when Reuters started the poll.

Reuters

Business Daily | 9

August 27, 2015

Greater China Banks face risk to strong fee growth from stocks tumble

China Life Insurance net profit rises

However, analysts warned that fee income growth could slow down in the second half of 2015 as a chunk of the banks’ non-interest income Engen Tham and Shu Zhang

S

tock market rout is set to add to the pain of China’s banks, already grappling with slowing profit growth from a surge in bad loans and a series of interest rate cuts, by curbing robust growth in their fee-generating business.

The nation’s five biggest lenders are expected to report higher nonperforming loans (NPLs) and smaller profit growth from their core lending business when they announce interim results this week, led by Industrial & Commercial Bank of China today.

As lending has become less profitable and more risky, Chinese banks have hastened their switch to fee and commission income, which currently makes up some 20-30 percent of total income for domestic lenders.

“Bank managers said that they are targeting 40 to 50 percent,” said Xingyu Chen, analyst at Phillip Securities in Hong Kong.

Banks’ non-interest income comes from investment banking revenues and custodian, clearing and wealth management product fees, among other things.

A loan officer at a top-five Chinese bank said his branch is now focused on developing products to be bought and sold between financial institutions.

“It’s not a question of supply, we have money, but there is no demand,” he said.

KEY POINTS China banks face margin pressure after latest interest rate cut Big five lenders likely to report higher bad debts Market turmoil may interrupt strong fee growth

Commercial bank NPLs have increased for 15 consecutive quarters, surpassing US$1 trillion for the first time in seven years for the period ended in June, data from the banking regulator shows.

“There is no sign of a turning point,” said Ma Kunpeng, a Shanghai-based banking analyst at Sinolink Securities.

China Merchants Bank, the nation’s sixth-largest commercial bank, said this week its net fee and commission income in the first half of 2015 made up around 30 percent of total net operating income against 25 percent in the year-ago period.

And smaller Ping An Bank said non-interest income made up around 30 percent of its total income in the first half, a historic high.

But analysts warned that fee income growth could slow down in the second half of 2015 as a chunk of the banks’ non-interest income, especially of the smaller lenders, is tied to the Chinese stock markets that have tumbled 40 percent since mid-June.

Reuters

PBOC steps up cash injections as yuan intervention drains funds

The country’s biggest insurer by market value, reported an expected 71 percent rise in first-half profit yesterday, boosted by bumper sales of life insurance products and gains on its investment portfolio. China Life had last month signalled the sharp profit rise, which is in line with its peers, as life insurers benefit from an increase in customers from a fast-growing middle class. Net profit for the six months to June 30 reached a record 31.5 billion yuan, up from 18.4 billion a year earlier, China Life said in a filing with the Shanghai stock exchange.

PBOC injects 140 bln yuan China’s central bank said yesterday it injected 140 billion yuan (US$21.8 billion) into the interbank money market via short-term liquidity operations (SLOs). The loans, which mature in six days, have an average interest rate of 2.3 percent, the People’s Bank of China (PBOC) said in a statement on its website. The PBOC launched SLOs in 2013 to supplement its other monetary policy tools. The facility is mainly used to provide one- to three-day direct lines of credit to commercial banks, though loans with other maturities are occasionally used.

CNOOC first-half net profit slumps China’s top offshore oil producer CNOOC Ltd said its consolidated firsthalf net profit fell 56.1 percent, as a precipitous drop in crude prices offset higher production. The company reported a net profit of 14.73 billion yuan (US$2.30 billion) for the first half, compared to the 33.6 billion profit a year earlier, according to a filing with the Hong Kong stock exchange. The results are unaudited. Net production of oil and gas for the first-half was up 13.5 percent on year to 240.1 million barrels of oil equivalent.

Major banks have been seen selling dollars toward the close of onshore trading in Shanghai on most days since yuan devaluation August economic data delayed due hina’s central bank added The seven-day rate rose one basis show. The yield on 10-year notes to parade

C

the most funds via openmarket operations in six months, replenishing the supply of cash in the financial system as it buys yuan to prop up the exchange rate.

The People’s Bank of China auctioned 150 billion yuan (US$23.4 billion) of seven-day reverserepurchase agreements, more than the 120 billion yuan that matured.

It also sold 60 billion yuan of threemonth treasury deposits on behalf of the Ministry of Finance at 3 percent, the least since 2010, data compiled

by Bloomberg show.

“Interest rates are at a tolerable level for the PBOC,” said Chen Peng, a fixed-income analyst at Fortune Securities Co. in Shenzhen. “The central bank may be concerned that too many injections could bring unnecessary additional depreciation pressure to the currency, and that’s why we don’t think any reserverequirement ratio cuts will come any time soon.”

The overnight repurchase rate climbed one basis point to a fourmonth high of 1.86 percent as of 4:35 p.m. in Shanghai yesterday, according to a weighted average compiled by the National Interbank Funding Centre.

point to 2.55 percent.

The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, increased two basis points to 2.58 percent, data compiled by Bloomberg

Banks have become more reluctant to lend and we expect the PBOC to offer liquidity support Liu Dongliang, Shenzhen-based analyst, China Merchants Bank

due July 2025 was little changed at 3.48 percent, according to National Interbank Funding Centre prices.

That’s the lowest since the end of July.

Tightening concern

Major banks have been seen selling dollars toward the close of onshore trading in Shanghai on most days since a surprise yuan devaluation on August 11. The intervention removes funds from the financial system and risks driving borrowing costs higher unless the monetary authority releases additional cash. China’s foreignexchange reserves will drop by some US$40 billion a month for the rest of this year, according to the median of 28 estimates in a Bloomberg survey this month.

“Banks have become more reluctant to lend and we expect the PBOC to offer liquidity support,” said Liu Dongliang, a Shenzhen-based analyst at China Merchants Bank Co. “The amount was smaller than expected.”

The monetary authority injected a net 150 billion yuan last week using reverse-repurchase agreements. It also added 110 billion yuan via its Medium-term Lending Facility.

Bloomberg News

China will delay release of its August inflation and factory output data along with other economic indicators, the government said yesterday, due to disruptions caused by preparations for a military parade to commemorate World War Two next month. Publication of consumer and producer price data for August will be pushed back by a day to September 10 at 0130 GMT, the National Bureau of Statistics said. The release of factory output, retail sales and fixed-asset investment data will also be delayed by a day and announced at 0530 GMT on September 13 instead, the agency said.

Credit guarantee firms tax break granted China’s industrial ministry reiterated yesterday it is scrapping corporate taxes for credit guarantee firms that cater to small- and medium-sized companies.

Firms that guarantee loans that on average are worth less than 30 million yuan (US$4.7 million) will be eligible for the tax break, the Ministry of Industry and Information Technology said on its website.

10 | Business Daily

August 27, 2015

Greater China

Zhou serving as circuit breaker, under pressure to ease more Before Tuesday’s move, Chinese central bank head had already lowered the required reserve ratio twice this year, with an additional move targeting certain banks

Z

hou Xiaochuan probably isn’t finished yet.

Even after cutting interest rates for the fifth time since November and telling banks they can hoard less cash, the People’s Bank of China governor remains under pressure to do more to support the world’s No. 2 economy amid the biggest slide in stocks since 1996.

“A circuit breaker is needed to dispel excessive pessimism and restore confidence,” says Frederic Neumann, co-head of Asian economics research at HSBC Holdings Plc in Hong Kong.

“Further support measures in the coming weeks and months will be needed.”

Equities around the world initially rallied on Tuesday after the PBOC said it will cut the one-year lending rate by 25 basis points to 4.6 percent and lowered the required reserve ratio by 50 basis points for all banks. In the U.S., a gain of as much as 2.9 percent in the Standard & Poor’s 500 Index was erased in late trading. Zhou swung into action two weeks since

a devaluation of the yuan and a deceleration in his economy ignited fears about the outlook for global growth.

“This is a positive development that will help curb investor anxiety about a pronounced slowdown in China’s growth,” said Tim Condon, the head of Asian research at ING Groep NV in Singapore. “It should curb contagion to global markets.”

The fresh easing reinforces efforts by policy makers to deliver on Premier Li Keqiang’s 2015 growth goal of about 7 percent.

That is being jeopardized by deflation risks, over-capacity and a debt overhang, which leave the economy poised for its slowest expansion since 1990. Industrial production, investment and retail data all trailed analysts’ estimates in July.

More cuts

Surprise devaluation

Shane Oliver, head of investment strategy at fund manager AMP Capital Investors Ltd. in Sydney, is among those predicting further reductions in rates and the reserve ratio. He anticipates China will cut its benchmark lending rate to 4 percent by year-end, using an arsenal unavailable to counterparts such as the Federal Reserve which already run key rates near zero.

“China’s monetary policy is way too tight,” Oliver said.

“Further easing in both interest rates and the reserve ratio will be needed.”

The easier conditions for banks may have been necessitated by a need to offset a drying up of liquidity in markets following the surprise decision of August 11 to devalue the yuan. The PBOC subsequently bought its currency to stabilize the exchange rate and curb capital outflows. China Merchants Securities Co. estimated the policy action is the equivalent of releasing 700 billion yuan (US$109 billion) into the financial system.

“If the central bank keeps defending the yuan, the cut is apparently not enough and it has to do more,” said Yao Wei,

a Paris-based China economist at Societe Generale SA. The economy still faces downward pressure and the task of stabilizing growth, adjusting its structure, pushing reforms and improving living standards is very challenging, the PBOC said in a Q&A-style statement released after the move. Given volatility in global financial markets, “we need to use monetary policy tools more flexibly,” it said.

Changed tack

China has halted intervention in the stock market so far this week as policy makers debate the merits of an unprecedented government campaign to support share prices, according to people familiar with the situation.

Some officials argue that falling stocks will have a limited impact on the world’s second-largest economy and that the costs of supporting the market are too high, said one of the people, who asked not to be identified because the deliberations are private.

“With the government’s efforts to prop up equity prices

through direct purchases in tatters, policymakers have changed tack,” said Mark Williams, chief Asia economist at Capital Economics Ltd. in London.

“The move may halt the market slide but we suspect the primary motivation is to shore up confidence in the state of the wider economy.”

Before Tuesday’s move, Zhou had already this year lowered the required reserve ratio twice, with an additional move targeted to certain banks. Officials are also acting to boost lending including at the country’s policy banks.

Tuesday’s shift drew comparisons with past crisisfighting efforts from the Fed and other key central banks to act aggressively to protect economies from slowdowns and financial markets from selloffs.

“It is really no different from any other central bank,” said Roberto Perli, a partner at Cornerstone Macro LLC in Washington and a former Fed economist. “When things get hairy, it eases.”

Bloomberg News

Business Daily | 11

August 27, 2015

Asia

Currency volatility upsets Asian growth plans Central banks from South Korea to Thailand have deferred rate cuts, which would put further downward pressure on vulnerable currencies Vidya Ranganathan

F

aced with falling exports and deflation risks, it suited much of Asia to let their currencies drift lower, until China’s abrupt devaluation triggered a tide of volatility that is upsetting not just their currency management but also their growth strategies.

China’s 2 percent devaluation on August 11 added to evidence that its economy was struggling, and overseas it caused a ripple of panic that a currency war was in the offing.

Currencies and stock markets in the region have since tumbled to multi-year lows, pulling global markets in their wake, as worries about China played into broader concerns about global growth, a collapse in commodity prices and the timing of a rise in U.S. interest rates.

Suddenly, in a region still haunted by memories of destabilising currency devaluations during the 1997/98 Asian crisis, the option of a gently sliding currency has been taken off the table by a free-fall that threatens a destabilising flight of capital, sharp market swings and a spike in the cost of funds.

Central banks from South Korea to Thailand have deferred rate cuts, which would put further downward pressure on vulnerable currencies, with the result that growth and stimulus plans are likely to take a back seat.

Bank Indonesia kept its main interest rate unchanged at a policy review last week, making clear currency stability is foremost among its priorities, even though the economy has slowed to its weakest pace in six years and inflation is falling.

“We will not follow competitive devaluation,” Indonesia’s central bank Governor Agus Martowardojo said this week.

KEY POINTS China’s devaluation upsets Asia’s gentle depreciation Rate cuts on back burner to avoid further volatility Asia still haunted by currency chaos of 1997/98 crisis Citibank cuts Asian growth forecast for 2015

The central bank said it was aggressively intervening in the rupiah markets and even mopping up shortterm cash to stop investors speculating against the currency.

Indonesia is particularly vulnerable after a sharp loss of 14 percent in the rupiah against the dollar so far this year, low forex reserves and a heavy dose of foreign money in its debt markets.

But even central banks such as India’s and Singapore’s are unlikely to be able to cut rates while markets remain volatile.

“Asian authorities have got to be willing to stomach high interest rates for a while,” said Cliff Tan, head of east Asian markets research at Mitsubishi UFJ in Hong Kong.

Capital Economics analysts Gareth Leather and Daniel Martin said in a note to clients that Malaysia and Indonesia might even be forced to raise rates “if the currency sell-off became a rout”.

Citibank has already cut its Asian growth forecast for 2015 to 6 percent from 6.1 percent, citing the volatility associated with China’s weakening of the yuan, its slowing growth and the possible adverse policy reaction among other countries.

It cut its forecast for Thailand’s growth to 2.7 percent from 3.5 percent.

Unwelcome volatility

Though Thailand has admitted its economy will be weaker than forecast and had welcomed depreciation in the baht as a remedy, its central bank voted to keep rates steady in August and alluded to financial market volatility as a factor. The baht hit its weakest levels since 2009 this week and most of the baht’s 8 percent losses this year against the dollar have been in the past couple of months.

“It’s clearly a bit uncomfortable.

I would expect them to start to think this is unwelcome volatility rather than

welcome depreciation,” said Richard Yetsenga, global head of financial markets research at ANZ in Sydney.

South Korea’s central bank turned swiftly defensive of the won this week as it hit its lowest in nearly four years, selling dollars to slow the won’s decline.

That’s a turnabout from its tactics earlier this year to weaken a currency that had become less competitive against Japan’s sharply weaker yen. It also kept rates unchanged this month, two days after China’s devaluation.

MUFJ’s Tan reckons Asian central banks could coordinate policies better and be more proactive in using their trillions of dollars in currency reserves to defend their currencies.

“Asian central banks are already on the defensive, but the question is a strong versus a weak defence.

“They have a chance to prove that, by driving rates up and making it very expensive to hold these shortterm positions.”

Reuters

12 | Business Daily

August 27, 2015

Asia

Thailand to quicken investments worth to lift economy All the ministry’s investment plans for both fiscal years are expected to boost growth by one percentage point this year Pracha Hariraksapitak and Kitiphong Thaichareon

T

hailand will speed up investment in 17 mega projects worth nearly US$47 billion in fiscal years 2015 and 2016, the new transport minister said yesterday, as pressure mounts on the military-led government to revitalise a flagging economy.

Southeast Asia’s second-largest economy is yet to regain momentum more than a year after a coup in May 2014 ended political unrest, with exports and domestic demand persistently sluggish.

The government will try to open bids for six dual-track rail projects and a motorway this year, while pushing ahead on four electric train lines, Arkhom Termpittayapaisith, appointed last week in a reshuffled cabinet, told reporters.

Investments in all the projects will be worth 1.66 trillion baht (US$46.66 billion) - stimulus that will be welcomed by investors at a time when a slowdown in China and turmoil in its markets threaten to knock back global growth.

Arkhom said some 40 billion baht approved earlier for road repairs

KEY POINTS 17 mega projects for 2015, 2016 fiscal yrs - transport minister Finmin says to offer more investment incentives for investors

should be disbursed from next month, and helping lift the economy in the second half after it grew 2.9 percent in the first half.

All the ministry’s investment plans for both fiscal years are expected to boost growth by one percentage point this year, Arkhom said. The fiscal year runs from October 1 to September 30.

The national planning agency last week cut its 2015 economic growth forecast again to 2.7-3.2 percent from 3.0-4.0 percent, and many economists

believe that is still too optimistic.

Growth in 2014 was just 0.9 percent.

Separately, Finance Minister Apisak Tantivorawong said the government would offer special incentives to Thai and foreign investors, “so they can decide to invest now, rather than wait until the economy improves.” The minister didn’t provide any specific details of the incentives.

The government would accelerate smaller projects nationwide to inject money into the economy, Apisak said.

Fimin says to seek financial aid for low-income people next week He said he would propose to the cabinet next week to give financial aid to farmers and low-income earners via village funds. “It will be enough to help the economy from sliding further,” he added.

The financial aid is part of a planned short-term economic package, which is expected within a month.

Forget inflation, Aussie bonds signal prices to miss RBA targets Benjamin Purvis

I

f the bond market is to be believed, the Reserve Bank of Australia should be more worried about prices rising too slowly rather than too quickly.

The five-year breakeven rate, which shows debt investors’ expectations for annual consumer-price gains, dropped to 1.86 percent yesterday, the lowest this year and below the RBA’s core inflation target of 2 percent to 3 percent. Employee pay growth is running at the slowest pace in at least 17 years, commodities are sliding and the boost to prices from a declining Australian dollar could peter out if the currency stabilizes.

While RBA Governor Glenn Stevens has signalled a reluctance to keep cutting interest rates amid Sydney’s buoyant housing market, unemployment reached the highest level in 13 years and falling commodity prices are weighing on income from resource exports. The rout in global stocks helped push the probability of another reduction this year to 63 percent yesterday in Sydney from 39 percent a week earlier, according to swaps data compiled by Bloomberg.

“You’ve got very low wages growth, particularly in services sector employment,’’ said Michael Knox, Brisbanebased chief economist at

Morgans Financial Ltd. “What’s stopped the RBA from cutting rates to respond to that has been that the Australian dollar has been falling and import prices have been rising as a result of that fall in the Australian dollar.

We think that the big fall in the currency is over.’’

Global disinflation

The risk posed by disinflation has weighed on central bank policy rates from the U.S. to Europe and Japan, and now that Australia isn’t receiving the boost it once did from mining it could become a more salient issue for the RBA too.

Australia’s consumer price index rose by just 1.5 percent

in the second quarter from a year earlier, while the trimmed mean gauge that strips out the effects of volatile elements such as energy increased by 2.2 percent.

The central bank said in its most recent quarterly eco n o mi c u p d a t e t h a t “inflationary pressures remain contained’’ and price gains are “forecast to remain consistent with the target.’’

Managing inflation

Colonial First State Global Asset Management expects RBA policy will remain stable. It reckons the market is overstating Australia’s disinflationary risks and sees value in buying inflation-

Reuters

linked bonds that mature in five years or less.

“Our view is that the RBA has historically been very good at managing inflation and that in the period ahead it will,’’ said Annette Mullen, the Sydney-based head of rates at Colonial First State.

“It’s very difficult to see how measured inflation over the next two-to-three, five-year period stays below the bottom of the band.’’

Swaps markets were pricing in 33 basis points of additional easing over the next year from the RBA, which has already taken its cash rate to an unprecedented low of 2 percent.

If the Australian dollar stabilizes as Morgans Financial’s Knox anticipates and the inflationary impact of the declining currency dissipates “then you’ve got the overwhelming downward pressure of low levels of wages growth, particularly in the services sector putting downward pressure on core inflation,’’ he said. “We still see two more rate cuts.’’

Bloomberg News

editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Michael Armstrong, Stephanie Lai, Óscar Guijarro, Kam Leong, Joanne Kuai GROUP SENIOR ANALYST José I. Duarte Brands & Trends Raquel Dias Designer Francisco Cordeiro WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.

Business Daily is a product of De Ficção – Multimedia Projects Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 editor editor@macaubusinessdaily.com newsroom newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com

Business Daily | 13

August 27, 2015

Asia Philippine Q2 GDP growth rebounding

S.Korea July dept store Efforts to reverse months of slow government spending have borne sales revised down fruit with second quarter expenditure up more than 12 percent South Korea’s top department store sales in July were slightly worse than previously estimated, revised government data showed yesterday, but they still managed a mild pick up from a steep fall seen in June. Combined sales at department stores run by Hyundai Department Store, Lotte Shopping and Shinsegae Co Ltd inched up 0.7 percent in July from a year ago, a trade ministry statement said. This was revised down from a 0.9 percent rise seen in preliminary figures released earlier this month and compared to a 11.9 percent drop in June.

Karen Lema

T

he Philippine economy is expected to have rebounded in the second quarter on higher government spending, although faltering exports and global markets turbulence triggered by a slowdown in China are seen tempering the growth outlook.

Gross domestic product in Southeast Asia’s fifth-largest economy is forecast to have risen 2.0 percent in the second quarter from the previous three months, according to a Reuters poll, after growth slipped to a sixyear low of 0.3 percent in the March quarter.

Today’s data are expected to show growth slightly accelerated an annual 5.6 percent, compared with 5.0 percent in the first quarter, setting the Philippines apart from many of its Asian peers that are either slowing or in a sluggish growth phase.

Efforts to reverse months of slow government spending have borne fruit with second quarter expenditure up more than 12 percent from last year.

On top of that, analysts say strong domestic consumption probably helped offset the contraction in farm output and weak exports.

But with a slowdown in China and turmoil in its own markets and globally posing a growing risk to

India to auction 20 major iron ore mines Philippine central bank

the Philippine economy, analysts are counting on Manila to meet its spending targets to support economic growth.

The downturn in China, Philippine’s third-biggest export market, has hit many Asian economies reliant on shipments to the world’s second-biggest economy.

“The main headwind to growth remains the persistent delay in infrastructure delivery. We believe that there is a lot of room for the government to support economic growth,” said Eugenia Victorino, economist at ANZ bank in Singapore.

Government officials have said the Philippines can still hit the lower end of its 7 to 8 percent growth target this year, but economists are less

India not in favour of depreciating rupee Rajan said India needed to work on making its economy more competitive

R

eserve Bank of India Governor Raghuram Rajan said he was not in favour of depreciating the Indian rupee and joining a global wave of monetary measures that have weakened currencies, according to a newspaper interview yesterday.

The comments, in an interview with The Economic Times, reiterate Rajan’s frequent criticisms of the competitive devaluations he has said is occurring globally because of actions taken in the euro-zone,

Japan, and most recently China.

Instead Rajan said India needed to work on making its economy more competitive, while noting India is now “quite healthy” and in a better position to handle global turbulence than it was in 2013.

“Unnatural movements in other currencies do certainly impinge on us and we would not want to take the route of making ourselves a less attractive destination for investments which would be one quick and sure

optimistic and are forecasting growth at 6 percent.

“There is still a lot of catching up to be done in line with the 2015 fiscal program. But the improvements in the second quarter are likely to continue in the second half and hopefully in the first half of 2016 when El Nino’s effect could be at its highest,” said Jose Mario Cuyegkeng, economist an ING bank in Manila.

The Philippine central bank left its policy rate steady for a seventh straight meeting this month, citing low inflation and strong domestic demand.

It has said it was ready to act to protect its inflation targets and ensure financial markets remain stable. It next reviews policy on September 24.

Reuters

way of depreciating our own exchange rate,” Rajan was quoted as saying.

“I would rather say that let us focus on making our economy more flexible so that we can absorb some of these changes.”

The devaluation of the yuan and growing fears over the Chinese economy have caused large falls across emerging markets, including India, pushing the rupee to a two-year low of 66.76 to the dollar on Tuesday.

The moves in the yuan, which were followed by China’s latest cut in interest rates on Tuesday, have sparked some market expectations the RBI may also ease monetary policy to avoid destabilising inflows and to help out exporters.

India has seen hefty flows from foreign investors, who have bought shares worth US$5.8 billion and debt worth US$8 billion so far in 2015.

“I don’t think we are in panic mode by any stretch of imagination... We are in vigilant mode,” Rajan said.

“I have no doubt that we have enough ammunition, reserves, good policies to withstand that.”

Reuters

I don’t think we are in panic mode by any stretch of imagination...

We are in vigilant mode Raghuram Rajan, Reserve Bank of India, Governor Reserve Bank of India headquarters

India will auction about 20 major iron ore mines this year in its first such sale ever, a top government official said, as it looks to revive its corruption-tainted mining industry. India’s mining sector has been mired in controversy over illegal allocation of resources. Once the world’s third-biggest iron ore exporter, the country now imports the steelmaking ingredient due to a court-led crackdown on illegal mining. The government hopes auctions will help curb wrongdoing. Mine sales will bring India closer to its target of tripling its steel capacity to 300 million tonnes by 2025.

Fed rate hike biggest risk to South Korea The biggest risk facing South Korea’s economy in the second half of the year is the U.S. Federal Reserve’s pending interest rate hike, a Bank of Korea board member said yesterday. “We have many risks facing our economy in the second half. The biggest one is the Fed’s rate hike and there is a chance global financial markets may move in extremely volatile ways after the hike,” said Chung Haebang in opening remarks for a press lunch. Chung said the government and the central bank were preparing responses for future risks.

Indonesian cement maker in massive buyback Indonesia’s state-controlled cement maker PT Semen Indonesia said it plans to buy back up to 1 trillion rupiah (US$70.85 million) of its shares as their market value fell, but some other state firms said they have yet to decide whether to buy back their shares or not. “In the near future we will do buyback because we don’t want to lose the momentum,” Ahyanizzaman, finance director at Semen Indonesia, told Reuters yesterday, adding that the company has yet to appoint the broker that will conduct the buyback.

Air New Zealand expects strong earnings Air New Zealand Ltd forecast strong earnings growth in the current year as it posted record annual net profit thanks to more passengers and lower fuel prices.

The national carrier, which is 52 percent state-owned, announced a net profit of NZ$237 million (US$153.22 million) in the year to June 2015, up 24 percent from the previous year. Revenue jumped 6 percent after the airline increased capacity in domestic and international routes.

In a statement the company said it expected to achieve “significant” earnings growth this financial year with capacity to grow 11 percent as it expands its international routes.

14 | Business Daily

August 27, 2015

International South African mine industry job plan targets platinum South Africa’s mining industry, unions and the government have committed to a broad plan to stem job losses, including boosting platinum by promoting the metal as a central bank reserve asset, according to a draft agreement seen by Reuters yesterday. The parties also said they would strive to delay lay-offs, sell distressed mining assets instead of closing them, and look at ways of streamlining the legal process which employers must follow to cut jobs. The agreement is expected to be signed on Monday next week after its details were hammered out on Tuesday.

Eskom wants compensation if Glencore can’t supply coal South Africa’s Eskom said yesterday it wants compensation from Glencore’s mining subsidiary Optimum if it is unable to supply coal to its Hendrina power plant.

Administrators for Glencore’s South African coal mining subsidiary suspended the firm’s supply agreement with Eskom last Thursday while the mining unit undergoes a financial rescue programme. “If they are unable to provide coal to us, they need to compensate us for not meeting their obligations. We have a three year agreement with them,” Eskom spokesman Khulu Phasiwe told Reuters.

U.S. regulator sued for withholding GMO info A food safety advocacy group sued an arm of the U.S. Department of Agriculture on Tuesday, saying it illegally withheld public information on genetically engineered crops. The lawsuit, brought by the Centre for Food Safety (CFS) against the USDA’s Animal and Plant Health Inspection Service (APHIS), claims the regulator has routinely failed to respond as required to requests for records that relate to many concerns with the GMO crops. The lawsuit accuses the agency of violating the Freedom of Information Act dozens of times, unlawfully withholding information for more than 13 years.

Airbnb to start collecting taxes in Paris Online home-rental marketplace Airbnb Inc. said on Tuesday it would begin collecting and remitting tourist taxes from guests on behalf of rental apartments in Paris. Airbnb, whose most popular city is Paris with more than 50,000 listings, said it would collect 0.83 euro (US$0.95) per person per night for reservations made in Paris on or after October 1.

The company, which matches people wishing to rent out all or part of their homes to temporary guests, said the tax process would gradually be extended to other cities across France.

Schlumberger to buy Cameron in US$14.8 bln deal Schlumberger Ltd, the world’s No.1 oilfield services company, said it will acquire oilfield equipment maker Cameron International Corp in a deal valued at US$14.8 billion. Cameron shareholders will get US$66.36 - US$14.44 in cash and 0.716 of a Schlumberger share - for each share held. The offer represents a premium of 56.3 percent to Cameron’s Tuesday close.

U.S. data signal economy’s resilience At July’s sales pace it would take 5.2 months to clear the supply of houses on the market, down from 5.3 months in June Lucia Mutikani

U

.S. consumer confidence hit a seven-month high in August and new single-family home sales rebounded in July, suggesting underlying strength in the economy that could still allow the Federal Reserve to raise interest rates this year.

Other data showed moderate gains in house prices in June, which should support consumer spending and keep home purchasing affordable, especially for first-time buyers.

“This is evidence of the ‘some further improvement’ in the economy that the Fed is waiting for to raise rates. They are so close, they need just a little more confirmation,” said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.

The Conference Board said its consumer index jumped 10.5 points to 101.5 this month, the highest reading since January, amid optimism over the labour market. The survey, however, was conducted before a global equity markets sell-off that began last week, which has diminished the chances of a U.S. rate hike next month.

Although sentiment could retreat in September, economists said any decline was likely to be modest. A strong labour market, lower gasoline prices and an improving housing market also are seen supporting consumer confidence.

The survey’s so-called labour market differential, which closely correlates to the unemployment rate in the employment report, was the most favourable since January 2008.

The share of consumers expecting an increase in incomes slipped, but fewer anticipated a decline.

In a separate report, the Commerce Department said new home sales increased 5.4 percent to a seasonally adjusted annual rate of 507,000 units.

Those sales, which account for 8.3 percent of the market, were up 25.8

percent compared to July of last year.

The reports, which added to a steady stream of data that have painted an optimistic picture of the U.S. economy, helped boost U.S. stocks, which enjoyed their biggest rally of the year before surrendering the gains and ending lower.

Market sentiment also was supported by China’s second interest rate cut in the past two months.

The dollar rose against a basket of currencies, while prices for U.S. government debt fell.

Gaining steam

The prospects of a U.S. rate hike next month already had been dealt a blow before the recent global markets turmoil, with the minutes of the Fed’s July 28-29 policy meeting highlighting policymakers’ concerns about persistently low inflation.

New home sales rose in three of the four U.S. regions last month,

Gambling firms set for US$7.8 bln tie up Analysts pointed to significant scope to cut costs through the removal of duplication within the two businesses

B

etfair and Irish rival Paddy Power have agreed in principle on a 5 billion pound (US$7.85 billion) merger to stake a claim to leadership of the online gambling market in Britain.

Discussions were continuing to finalise an all-share merger but key terms have been agreed to create one of the world’s largest online betting and gaming groups with revenue of over 1.1 billion pounds, the companies said yesterday.

The betting sector has seen a string of deals this year as companies

respond to higher tax bills in Britain and tighter regulation by looking to bulk up and better compete in an online market buoyed by the increasing use of mobiles and tablets.

“We fundamentally believe this industry is all about scale,” said Betfair Chief Executive and ex-Paddy Power Chief Operating Officer Breon Corcoran, who would lead the new group.

“By putting together two distinct but phenomenally strong brands, we’ll have a market leading position in the UK, Ireland, Australia and in the United States,” he told Reuters.

touching a 14-month high in the Northeast.

The housing market is gaining steam, with data last week showing home resales jumped to a near 8-1/2year high in July and ground-breaking on new home building climbing to its highest level since October 2007.

The recovery in the sector, which touches almost all spheres of the economy, is being driven by the tightening labour market. A third report showed the S&P/Case Shiller composite index of 20 metropolitan areas in June gained 5.0 percent yearover-year compared to a gain of 4.9 percent in May. The Commerce Department said the stock of new houses for sale increased 1.9 percent to 218,000 last month, the highest level since March 2010. Still, supply remains less than half of what it was at the height of the housing boom.

Reuters

Under the terms, Paddy Power shareholders would own 52 percent of the group with Betfair investors owning the rest. Immediately prior to completion, Paddy Power shareholders would receive a special dividend of 80 million euros (US$91.9 million).

The new group would be the market leader online in the UK with a share of 16 percent, according to industry data, passing a merged Ladbrokes Coral group on 14 percent, as well as William Hill and privately owned Bet365.

Paddy Power Chairman Gary McGann would keep his role in the combined group, while its CEO Andy McCue would become COO. Betfair finance chief Alex Gersh would also stay put.

The gambling sector is seeing a wave of mergers. Last month bookmakers Ladbrokes and Gala Coral struck an all-share deal, creating a 2.3 billion pound betting group. 888 and GVC Holdings are locked in a bidding war for online gambling firm Bwin.party Digital Entertainment.

Reuters

Business Daily | 15

August 27, 2015

Opinion Business

wires

Fed ‘put’ no cause for relief

Leading reports from Asia’s best business newspapers James Saft

Reuters columnist

TAIPEI TIMES Taiwan Semiconductor Manufacturing Co, the world’s largest contract chipmaker, yesterday said it plans to shut down a solar subsidiary at the end of this month due to persistent losses, signalling its exit from the green energy industry. The closure would shave NT$0.07 from TSMC’s earnings per share this quarter, the Hsinchu-based company estimated. TSMC’s late entry into the solar market and its lack of economies of scale placed it at a considerable cost disadvantage, the company said in a statement.

The company said it would continue to provide product warranties to existing clients.

THE KOREA HERALD Lotte Group launched a task force on governance reform yesterday following criticism over its murky ownership structure that was laid bare in a bitter family squabble over control of the retail giant. The task force, which comprises 20 executives as well as outside attorneys and accountants, is charged with mapping out plans to list Hotel Lotte, the group’s de facto holding firm in South Korea, and enhance corporate transparency, Lotte said in a press release. Lotte, the country’s fifth-largest family-run conglomerate, which was founded in Japan decades ago, operates businesses in both South Korea and Japan.

PHILSTAR Washington-based think tank Centre for Technology Innovation (CTI) has ranked the Philippines 15th out of 21 countries in terms of access and usage of affordable financial services.

The Philippines earned 68 percent of the total possible points based on the 2015 Brookings Financial and Digital Inclusion Project (FIDP) Report prepared by John Villasenor, Darrell West, and Robin Lewis.

The FIDP report is the first of a series of annual reports examining financial inclusion activities around the world. It ranked the 21 countries which have committed to improving financial access and usage using 33 indicators.

VIETNAM NEWS The HCM City Department of Industry and Trade will launch its first online shopping day on Saturday. Tran Vinh Nhung, the department’s deputy director, said yesterday that “Vui la mua, tin la sam” (Happy to buy, trust shopping) will last only 24 hours. Promotions in 31 product categories with 10,000 kinds of products will be offered in hopes of attracting consumers who still mistrust online shopping.

The online shopping day is an extension of the Autumn Online Shopping Day held by the Ministry of Industry and Trade on August 28.

Federal Reserve headquarters

F

uture risk-adjusted returns look poor from here, but if the Federal Reserve deploys its safety net they will be worse still.

Monday’s savage markets selloff inevitably brought with it rising expectations that the Fed would once again swoop in to the rescue, this time by delaying, perhaps indefinitely, a September hike in interest rates.

Be in no doubt, this is the fabled ‘Fed put,’ the self-reinforcing idea that the U.S. central bank will act as safety net and uncompensated insurance agent to private risk takers.

And it worked, as it has since the days it was known as the ‘Greenspan put’, a description of how the Fed would provide liquidity and reassurance in bad times but do little to stand in the path of rallies.

Stocks on Monday first plunged, with the Dow Jones industrial average falling more than 1,000 points, or 6.42 percent, at the opening then recovering nearly 900 points only to move lower to end the day down 588, or 3.58 percent.

Unsurprisingly the CBOE Volatility Index, which measures how sharply investors expect stocks to move, surged by as much as 90 percent to more than 50, its highest since January 2009. The VIX is sometimes called the ‘fear index’ because investors use volatility as a key metric of risk.

“There is a growing chorus that the Fed needs to bail the market out yet again and delay rate hikes, using the 1937 analogy

A market which recovers because the Fed comes to the rescue is not one you should want to buy

whereby early tightening resulted in a recession and massive decline in the Dow Jones Industrials,” Michael Gayed, chief investment strategist at Pension Partners, wrote in a note distributed to contacts and clients as stocks opened.

“This is complete and utter insanity. If all it takes is three days of stock market declines to cause everyone to flip their opinion on Fed policy direction, then we are in a shockingly fragile environment.”

And so must we be, because as the streak built to its fourth and most volatile day, traders have downgraded expectations

of a Fed hike at its September meeting to only about one in four, down from about one in two less than a week ago.

Economists were quick to backdate their calls on when the Fed will move. Barclays Bank shifted its call from September this year to March next year, citing financial market conditions.

Volatility can only be suppressed The Fed may choose to wait, and of course what is happening in markets is telling us something about economic conditions, particularly in China, which is rapidly slowing.

That said, a market which recovers because the Fed comes to the rescue is not one you should want to buy.

Firstly, while the Fed has shown it can suppress volatility through policy, that suppression seems to affect the distribution of volatility rather than its existence or quantity. We tend to get long periods, such as the one we may just be coming to the end of, during which volatility is unnaturally low.

That encourages risk taking, but that risk taking will tend to concentrate the suppressed volatility in hands not capable of analysing or managing it. In other words, silly people do silly things with money because they believe the Fed has their back.

Passing on a modest hike in rates with the unemployment rate at 5.3 percent will only reinforce that cycle, regardless of what is happening in China.

Secondly, an investor-saving

Fed might goose returns now but cannot do much about the longer-run potential of companies to create cash flow.

Stocks, and bonds, now are not particularly attractive and don’t show much promise of handsome returns over the medium term.

Using a Shiller price/equity ratio, which compares stock prices to a 10-year moving average of earnings, stocks are now quite expensive in a historical context. Even after today’s selloff, the S&P 500 is at a Shiller p/e of 24.21, a bit below where it went into the financial crisis of 2008 but below its peaks in 1929 and 1987.

Value investment house GMO, for example, is forecasting negative real returns over the next seven years for most major asset classes, with the notable exception of emerging stocks and bonds.

Arguably resource allocation will be worse because of an overly soft approach to managing markets, not better. That means that if we escape a correction due to Fed forbearance we should be less optimistic about future returns, not more.

In some ways the central bank is making the same mistake with investors that parents seem set upon doing with their children: mowing down all obstacles in their way and relieving them of responsibility and opportunity to grow.

Perhaps the Fed should stop preparing the path for the investor. You never know, it might work.

Reuters

16 | Business Daily

August 27, 2015

Closing Vice President stresses private investment in Africa

Bomb takes toll on Thai tourism

Chinese Vice President Li Yuanchao called on China and Africa to draw on private investment in their industrial cooperation when he addressed the fourth China-Africa People’s Forum in Yiwu of east China’s Zhejiang Province yesterday. The city is known as the world’s largest wholesale market for small consumer goods and is home to more than 3,000 African businessmen. As China works to upgrade its industrial mix, it has spare industrial capacity to transfer overseas and its private sector has lots of money to invest, know-how and management experience, Li said. The vice president urged African countries to create a sound environment to attract Chinese investors.

Thailand’s worst-ever bombing has caused a 17 percent fall in tourist arrivals, putting pressure on revenues vital to the military government’s moves to resuscitate a struggling economy. Average daily arrivals to Thailand fell from 85,000 before the deadly August 17 attack to 70,000 at present, the tourism ministry said yesterday, but officials were confident the slump was temporary and said annual targets remained unchanged. The government is aiming for 28.8 million arrivals and 2.2 trillion baht (US$61.82 billion) in revenue this year from tourism, which has become even more crucial as Southeast Asia’s second-biggest economy stutters.

Stocks slump as rate cut fails to stop US$5 trillion rout Chinese equities have lost half their value since mid-June boost the market for a second straight time as stocks ended lower after the last reduction in June.

Intervention cost

C

hina’s stocks extended the steepest five-day drop since 1996 in volatile trading as lower interest rates failed to halt a US$5 trillion rout.

The Shanghai Composite Index fell 1.3 percent to 2,927.29 at the close, after rising as much as 4.3 percent and declining 3.9 percent.

The cuts in borrowing costs and lenders’ reserve ratios were announced hours after the benchmark measure closed with a 7.6 percent drop on Tuesday.

Chinese equities have lost half their value since midJune, as margin traders closed out bullish bets and concern deepened that valuations are unjustified by the weak economic outlook.

The government has halted intervention in the equity market this week as policy makers debate the merits of an unprecedented rescue, according to people familiar with the situation.

“The prevailing sentiment is still that investors want to cash out, whatever

the government does,” said Ronald Wan, chief executive at Partners Capital International in Hong Kong.

The People’s Bank of China said it will cut the one-year lending rate by 25 basis points to 4.6 percent and lower the required reserve ratio by 50 basis points for all banks.

The move, which follows the biggest devaluation of the yuan in two decades earlier this month, comes amid signs of decelerating growth for the world’s second-biggest economy. A rate cut failed to

“The PBOC’s reserverequirement ratio cut cannot make up for the loss of liquidity resulting from the yuan’s depreciation,” Chia Woon Khien, Singaporebased portfolio manager at Nikko Asset Management Asia Ltd., said in an interview in Bloomberg’s office in Shanghai. “If we’re lucky, China’s economy will start to recover from the fourth quarter.”

The Hang Seng China Enterprises Index dropped for a ninth day, losing 0.9 percent at the close in Hong Kong, The Hang Seng Index slid 1.5 percent to a two-year low. The CSI 300 index fell 0.6 percent as losses for technology companies overshadowed gains for financial shares.

Some Chinese officials argue that falling stocks will have a limited economic impact and the costs of supporting the market are too high, said one of the people, who asked not to be identified because

deliberations are private.

Officials who back intervention say tumbling shares pose a risk to the banking system, the people said.

Technical indicators

Tom DeMark, who predicted this month’s selloff in Chinese stocks, said the Shanghai Composite Index may extend its decline by 13 percent should it stay below a critical technical level on Wednesday.

A failure to close above 3,200, or almost 8 percent higher than Tuesday’s level, may open the way for a move to 2,590, which would be the lowest since November, according to DeMark, founder of DeMark Analytics. An advance above that level, however, would signal the stock rout may be over, he said.

China’s margin debt has plunged by 1 trillion yuan (US$156 billion) from its June peak as stock traders close out bets using borrowed money.

A gauge of technology companies in the CSI 300 fell 6.1 percent, the biggest loss among 10 industry groups.

Hundsun Technologies Inc., which has a financial investment platform known as HOMS that allows trust firms and online lenders to provide leveraged trading facilities to clients, tumbled 10 percent. China Construction Bank Corp. paced gains for lenders, rallying 5.2 percent.

Bank of Beijing Co. surged 9 percent.

Bloomberg News

Mainland police summon 11 over National work safety chief sacked after Tianjin blasts stock market activities

Japanese gov’t downgrades consumer spending

J

C

C

apan’s government lowered its assessment of consumer spending and exports in August, a worrying sign that the economy is seeing just a tepid recovery from a contraction in the AprilJune quarter.

The government stood by its assessment that Japan’s economy is on track to recover but acknowledged the pace of improvement is patchy as worries stemming from the bursting of China’s stock-market bubble roil global financial markets.

Turmoil overseas is a threat to Japan, as this could undercut policymakers’ efforts to spur inflation with quantitative easing and nurture a flourishing private sector with business-friendly structural reforms.

Consumer spending has reached a plateau, the Cabinet Office said in its monthly report for August, which is a downgrade from last month’s assessment that consumption was showing signs of improving.

That marked the first time in 11 months that the Cabinet Office downgraded its view of consumer spending, according to the report.

Consumption has weakened partially due to a decline in spending on summer as a result of unusually cool weather.

hinese police have summoned 11 people including a financial journalist to assist investigations related to illegal stock market activities, state media reported, as the government targets volatility on the exchanges.

The Chinese government launched an unprecedented rescue package as the stock market plummeted 30 percent from mid-June, which included a crackdown on short-selling and funding a state company to buy shares on its behalf.

Authorities have accused a Caijing magazine journalist of allegedly colluding with others to manufacture and spread false information on securities and futures trading, the official Xinhua news agency reported late Tuesday.

The magazine confirmed journalist Wang Xiaolu was subpoenaed by police but defended his actions.

Wang wrote a story in July saying the securities regulator was studying plans for government funds to exit the market.

The China Securities Regulatory Commission (CSRC) quickly denied the Caijing story and labelled it “irresponsible”.

hina has sacked the head of its work safety regulator for suspected corruption, state news agency Xinhua said yesterday, following blasts that killed more than 100 people in the port city of Tianjin this month.

The ruling Communist Party’s graft watchdog began an investigation into Yang Dongliang last week following the massive explosions in a warehouse storing dangerous chemicals.

A total of 139 people are now confirmed to have died, while 34 remain missing.

A brief statement carried by Xinhua, citing the party’s organisation department which is responsible for personnel decisions, said Yang had been stripped of his position as chief of the State Administration of Work Safety.

He is suspected of “serious breaches of discipline and the law”, the report said, using the usual euphemism for corruption.

It gave no other details and it was not possible to reach Yang for comment. Officials are almost always fired soon after announcements of party graft investigations.

Reuters

AFP

Reuters