MOP 6.00
Gearing up
Closing editor: Joanne Kuai
Auto Italia increased its profits to HK$6.5 million during the first six months of the year. Attributable mainly to the group’s revenue and profit generated by its financial services division. Plus the completion of the acquisition of a non-wholly owned subsidiary. Maserati will be an official event car sponsor at this year’s Macau Grand Prix
Year IV
Number 877 Thursday September 10, 2015
Publisher: Paulo A. Azevedo
Page 4
Bus Companies Queue for Public Concessions
All change! Public bus operator Transmac expects to sign a new contract with the gov’t by January Vai Hoi Iong’s term as 1. Making it the last bus company to convert its contract from service contract to public concession President of Environmental Protection Fund extended format. As per TCM and Macau New Era. The amendment follows harsh CCAC criticism. ‘New kid on the Page 4 block’ Macau New Era says they’ve been in the black since February under the public concession format Page
2
HK brokers probed Hong Kong’s securities regulator is on the trail. Investigating whether brokers and hedge funds in the city violated licences. In particular by creating and trading Chinese investment products. The probe covers international securities firms and Hong Kong units of Chinese brokers
Page 11
Caesars fined US$8 mln over money laundering controls
Page 7
Chinese authorities are trying to stem FX outflows amid a recent increase in the activity
Page 8
Analysts say Mainland markets impacted by government intervention
Page 10
HSI - Movers September 9
Name
Black Sheep
Le Saunda’s two SAR markets paint a grim picture. With profits down 30 pct in 1H to around HK$67.8 m. The increase in operating costs and discounts offered during the sell-off season are cited as additional factors
www.macaubusinessdaily.com
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Word Games What’s in a word? Quite a lot according to academics mulling the responsible gaming campaign slogan. They believe ‘Don’t gamble when you are drinking’ or ‘Don’t drink when you are gambling’ trump the current line.
Page 5
Retail
%Day
China Petroleum & Che
+8.48
Bank of China Ltd
+7.40
Henderson Land Devel
+7.10
China Shenhua Energy
+7.05
PetroChina Co Ltd
+6.78
Swire Pacific Ltd ‘A’
+1.40
Link REIT
+1.19
Galaxy Entertainment
+0.85
Cathay Pacific Airways
0.00
Li & Fung Ltd
-0.20
Source: Bloomberg
Wipeout
I SSN 2226-8294
Cool California surfwear chain Quiksilver was once riding high. But recently filed for bankruptcy in the US. The company lost 79 pct of its market value this year. European and Asian operations are not affected, it says. Of 7,000 stores around the world as at April, two are in Macau
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2 | Business Daily
September 10, 2015
Macau
Transmac hopes to see contract conversion by Jan. 1, 2016 Transmac will be the last company following fellow bus operators TCM and Macau New Era to work under a public concession format Stephanie Lai
sw.lai@macaubusinessdaily.com
C
ity public bus operator Transportes Urbanos de Macau SARL (Transmac) said it would like to see the successful switching of the service provider contract for its transport service to a public concession contract by January 1 next year, which will make the company the last to reach such an arrangement with the government. “We would like to see the switching done soon. And we hope that by January 1 2016 we will be able to sign this agreement with the government,” said Mr Kent Lei, the deputy general manager of the operation department at Transmac. Mr Lei and the other representatives from fellow bus operators Transportes Colectivos de Macau SARL (TCM) and Macau New Era Public Bus Company spoke
to media after attending a radio programme held at TDM Chinese Radio yesterday. However, Mr. Lei refused to further elaborate upon the negotiation terms over the switching of the contract to media. The amendment to be made to the service provider contract signed with TCM and Transmac is prompted by criticisms made by the Commission Against Corruption (CCAC) in November, 2013. The service purchase format signed with the bus operators TCM and Transmac, which spans 7 years starting from August 2011, stipulates that the bus companies do not keep the bus fare but get a regular service charge from the government. But the Commission called this format a “poor
use of public money” and suggested the government switch the service provider contract with the bus operators into a public concession contract. Deputy general manager of TCM, Mayling Leung, told reporters that her company expected to see the amendment to the contract to enter into effect within this year. The government already signed a new public concession contract with Macau New Era last year. Macau New Era, a bus company in which TCM actually holds a majority stake, has replaced bankrupt Reolian Public Transport Co. Ltd. TCM is a locally established company alongside fellow bus operator Transmac, but TCM was acquired by state-owned conglomerate Nam Kwong (Group) Company Ltd. via its subsidiary China Travel Service (Macao) Ltd. back in January 2012. Currently, TCM runs the smallest proportion of routes of the city’s 72 bus routes: TCM runs 17 routes without any route expansion conducted so far, while Transmac runs 23 routes and Macau New Era 32 routes.
Better times
Abel Kwok Tong Cheong, deputy general manager of Macau New Era, told Business Daily that the bus company has begun to see results slip into the black since February working under a public concession format – a performance that has been boosted by rising bus fare revenue and more subsidies received from the government for its increase in bus trip frequencies, as well as lower fuel cost. Following the replacement of the bankrupt Reolian, Macau New Era registered a loss of MOP1.46 million for the period April 30, 2014 to December 31, 2014 under heavy investment made in operational expenses, the company’s gazetted results show.
“We are now stepping into a growth stage from our initial stage of stabilising our business last year,” Mr. Kwok told reporters yesterday. “At our opening last year, we had a daily bus trip frequency of 3,030; now this figure has already grown to more than 3,900.” Macau New Era has also obtained a 70.5 rating by the government in its half-yearly assessment of the bus operator’s service quality in the second half of last year, Mr. Kwok said. The government assessment is a gauge that affects the amount of subsidies it hands to the bus operator for its service. As stipulated in the public concession contract, which expires on June 30 in 2017, Macau New Era will follow a new payment plan for the bus operator where it will receive subsidies from the government for their operation as well as keeping fares that passengers pay. The subsidies are calculated from the deduction of the estimated operation cost from fares revenue. The government has the authority to set a cap to the subsidies that it hands to the bus operators: whenever the revenue generated from fares and other assets exceeds the bus operator’s expenses by 3 per cent, the operator would have to return the subsidies it received in excess to the government. But this subsidy cap can be up-adjusted to 4 per cent if the bus operator’s rating is 80 points or more from the government’s half-yearly assessment of its service quality. Now, with a fleet of 280 buses that will grow to 305 by the end of this year, Macau New Era is looking to add express buses that can help alleviate the passenger flow of the busiest routes, Mr. Kwok said. But the routes that these express buses will cover have yet to be announced.
Business Daily | 3
September 10, 2015
Macau
Quiksilver bankruptcy Le Saunda profits not affecting European down in Macau and Asian operations and Hong Kong For the first six months Indebted surfwear chain Quiksilver filed of fiscal 2015/16 the company for bankruptcy in the US but said the filing does not affect its European and Asian operations is expecting profits to dip around 30 per cent to around Stephanie Lai* HK$67.8 million because of operating losses in the Special Administrative Regions sw.lai@macaubusinessdaily.com
Q
uiksilver Inc., the California surfwear chain that lost 79 per cent of its market value this year, has filed for bankruptcy but said that the company’s European and Asian operations aren’t affected by it. Under a plan announced Wednesday, affiliates of lender Oaktree Capital Management LP will supply the chain with the US$175 million financing it needs to get through a restructuring. At the conclusion of that process, Oaktree will exchange its debt claim for a majority stake in a reorganised Quiksilver. The plan requires bankruptcy court approval. The Huntington Beachbased retailer replaced its top executives in March after restating earnings. In June, it scrapped its annual earnings forecast, saying a rebound would take longer than expected. The next
month, the New York Stock Exchange threatened to delist the stock because its price was so low. Quiksilver had already begun talking with potential bidders before filing for bankruptcy in Delaware, people familiar with the discussions said last week. The goal was a management-led buyout in which the company would retain its stores, said two of the people, who asked not to be identified because the process isn’t public. A sale in bankruptcy would allow the chain to abandon costly leases. As of April 30, Quiksilver had about 700 retail stores. The surfwear chain’s retail network currently embraces two stores in Macau – one in department store New Yaohan and another stand-alone store in Rua De Pedro Nolasco Da Silva in the shopping district of S. Domingos on the Macau Peninsula.
The chain, which was founded in 1969, sells wetsuits and helmets, as well as clothing aimed at ‘mountain and ocean lovers’ in its own stores and specialty surf and skateboarding shops. More than half of its sales come from outside the U.S. Quiksilver rode the fashion trend toward surfer and skater styles in the 1990s and early 2000s, along with names like Billabong International Ltd. and Pacific Sunwear of California Inc. The company, which teamed with athletes such as surfer Kelly Slater and skater Tony Hawk, sponsored surfing competitions around the world. But a shift in tastes - along with broader pressures on the apparel industry - took its toll. Following a period of expansion, Quiksilver struggled to compete with fast fashion retailers like H&M, which lured its teen customers with lower prices and on-trend clothes. The chain suffered a 13 per cent decline in sales last year, with its net loss widening to $309.4 million. It listed total debts of $826 million and assets of $337 million in its bankruptcy filing. *with Bloomberg
T
he operating losses in Macau and Hong Kong of the footwear and fashion accessories group Le Saunda are expected to depress profits by 30 per cent year-on-year during the first six months of fiscal year 2015/2016. This expectation was announced yesterday by the company in a filing with the Hong Kong Stock Exchange. “The Board expects that the consolidated profit of the Group for the first half of financial year 2015/16 may decrease by approximately 30 per cent compared to the same period of last year primarily attributable to an operating loss recorded in the Hong Kong and Macau business segment for the first half of financial year 2015/16 as compared with an operating profit for the same period of last year”, the filing, signed off by the Chairman of the Group, James Ngai, reads. During the fist half of the previous financial year the company’s net profit amounted to HK$96.9 million. Considering the decline announced in the preliminary assessment of the management of the company,
the profit for the first half of this year should stand at around HK$67.8 million. However, the operating loss in Macau and Hong Kong is not the only reason for declining results. Le Saunda’s board of directors also mention the discounts offered to sell off-season products and the “continuing increase of operating costs”. In addition to the Chinese Special Administrative Regions, the group operates on the Mainland. In relation to the second quarter of financial year 2015/16, the company recorded a total sales decline of 6.4 per cent year-on-year and a same store sales decline of 6.3 per cent compared to the same period of last year. In terms of e-commerce business the trend was more stable as sales declined 0.7 per cent year-on-year during the second quarter. The filing of the group did not disclose how these percentages translate into Hong Kong dollars. During the whole fiscal year of 2014/15, the Group whose ad model is Hong Kong actor Louis Koo - recorded a profit of HK$237.1 million. J.S.F.
4 | Business Daily
September 10, 2015
Macau opinion
Words and facts
Total control of car division boosts net profit of Auto Italia The parent company of Auto Italia Ltd., which imports and sells Ferrari and Maserati cars to Macau, increased its profits to HK$6.5 million during the first six months of the year
José I. Duarte Economist
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here’s a mostly constant and, up to a point, quite annoying characteristic of economic information in Macau. Statements are produced, to the right and the left, without reference to actual data, or facts that, without much effort, could be well established. Often, those producing the statements have a direct and obvious interest in the subject, if not in actually influencing the public perception of the issue at stake. They are seldom asked to present the factual elements that, presumably, underpin their claims Let me give you just such a recent example. A couple of days ago, a representative of a real estate association declared that prices for property had fallen by 30 per cent since the beginning of the year. Further, he added, prices were stabilising, reaching a ‘minimal limit’. That’s like shouting: “Guys! It’s time to buy!” It may well be true – or, maybe not. Certainly, he has access to information, through the association members, that we do not have. But there is also an apparent benefit for their brethren if he succeeds in making people believe those statements are accurate, a true reflection of reality. How can we decide? The first question to ask is evident: where is the evidence? What facts, examples, verifiable figures, underpin such assertions? Nothing! Well, I’m not assuming there is malice in the statement; but there are obvious interests at stake. More than anyone, I venture, real estate agents should volunteer compelling evidence to support the identified trends and figures. Otherwise, they open themselves to the suspicion that their words may not be totally dependable or unbiased. And what do the official statistics tell us? They hardly support that claim. Let us look into the residential segment, which is the one that more directly impacts the life of the average resident. The statistics tell us that the average price per square metre in the second quarter was 0.6 per cent higher than in the last quarter of 2014; and it was about 6.5 per cent higher than in the first quarter of this year. In Taipa, a much-sought after location, the values were unsurprisingly even higher. The corresponding figures were 1.5 per cent and 23.7 per cent, respectively. Therefore, it appears that for those claims to be true, we should have witnessed prices dropping across the board, in just the last couple of summer months (not since the beginning of the year), by something like 30 per cent, give or take a few percentage points. That would amount to a real crash in the real estate sector and would possibly have been in the news and become a favourite theme of conversation in town. That does not seem to have been the case. So, until the original claim is backed by something more solid than just the spoken word, it is possibly wise to hold our judgment.
A
uto Italia Holdings recorded a net profit of HK$6.5 million during the first six months of the year, which was an increase of 261 per cent year-on-year from HK$1.8 million. However, this result was mainly achieved due to the acquisition of the remaining share of the car division, which prior to August 2014 was not totally owned by the group. “The increase was mainly due to an increase in the group’s revenue and profit generated from our financial services division and the 100 per cent after the completion of the acquisition of its remaining interest from a nonwholly owned subsidiary in August, 2014”, the management explained in the interim report, which was published yesterday in a filing with the Hong Kong Stock Exchange.
In Macau, the subsidiary of Auto Italia Holdings named Auto Italia Ltd. is principally engaged in the import, sales, marketing, distribution, and provision of after sales service of Italian luxury car brands Ferrari and Maserati. This subsidiary also operates in the neighbouring Hong Kong Special Administrative Region.
While the net income of the company increased significantly, the revenue for the first six months of the year declined 19.6 per cent year-on-year to HK$468.3 million from HK$582.3 million. This in turn affected the comprehensive income for the period which declined around HK$300,000 (5 per cent) to HK$6.3 million from HK$6.6 million. The company also predicts an optimistic outlook for sales of Maserati due to the Grand Prix. “With the exposure as an official event car sponsor of the 2015 Macau Grand Prix in the second half of the year, plus the anticipated launch of the special edition of various models, Maserati unit sales is on track to achieve another encouraging year.” J.S.F.
Ung Sio Wai appointed Iong’s term as President member of Urban of Environmental Planning Council ProtectionFundextended
U
ng Sio Wai has been appointed a member of the Urban Planning Council, substituting Pun Wing Wah, it was announced yesterday in Macau’s Official Gazette in a dispatch signed by CE Fernando Chui Sai On. Mr. Ung is taking the position as a substitute for the President of the Administration Committee of the Civic and Municipal Affairs Bureau (IACM), Alex Vong Iao Lek. In the same dispatch, Leong Wai Man was appointed a member of the same council. Mr. Leong will be acting as a substitute for the President of the Cultural Affairs Bureau (IC), Ung Vai Meng, who before was being substituted by Cheong Cheok Kio. The Urban Planning Council is an advisory body of the government on issues related to the elaboration, execution, revision and modification of urban projects.
T
he government has renewed the term of the President of the Environmental Protection and Energy Conservation Fund (FPACE), Vai Hoi Ieong, for another two years. The decision was announced yesterday in the Official Gazette but came into effect on 1st September. Besides the Director of the Environmental Protection Bureau (DSPA), the terms of Arnaldo Ernesto dos Santos, representative of the Office for the Development of the Energy Sector (GDSE), Au Wai San, representative of the Financial Services Bureau (DSF), Lei Sio Iong and Lok Lai Fan were also extended. The fund was created in 2011 with the primary goal of improving the quality of the environment in Macau, as well as promoting energy conservation measures.
Civic Education sparks controversy among teachers
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he subject of Civic Education will be mandatory next year in Macau’s primary education, having already been introduced to Preschools. According to the Education and Youth Affairs Bureau (DSEJ) this subject will reinforce the national and
civic consciousness of students. However, the subject is raising many questions by teachers, according to Portuguese news agency Lusa. “What is to love the Motherland? And how do you assess that feeling? Are students allowed to criticise the
actions of Mainland China? What is going to be the impact of this subject upon their grades? And what about the students who are not Chinese?” These are just some of the questions that the Lusa quoted teachers in the territory as raising.
Business Daily | 5
September 10, 2015
Macau
Study suggests changes to tagline of responsible gambling campaign The research of two academics from MUST found that the possible link between casino venues and compulsive gambling affects the perceived quality of life
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he tagline of the responsible gambling campaign in Macau – ‘Don’t gamble when you are drunk’ - could be more effective if it was changed to ‘Don’t gamble when you are drinking’ or ‘Don’t drink when you are gambling’. This was one of the conclusions of the study titled ‘Gambling, Drinking and Quality of Life: Evidence from Macau and Australia’, which was published in the Journal of Gambling Studies. While the results of the study from the academics at the Macau University of Science and Technology (MUST) Yongdong Shi and Xiaohong Pu, and the researcher at Monash University Malaysia Jasmine Loo found evidence to support the campaign and its purpose, they also suggested changes to the tagline that could increase its efficiency. “The threshold or cut-off can be more conservative
by changing the tagline to: ‘Don’t gamble when you are drinking’ or ‘Don’t drink when you are gambling.’ The new threshold is expected to be more effective than the former in preventing problem gambling”, the authors noted. The research analysed the behaviour of consumption of highly addictive products with the participation of 359 young Macau adults and 86 from Australia. The goal of the researchers was to identify important psychological constructs to be taken into consideration when developing marketing strategies to tackle addiction problems.
Gaming more harmful to quality of life
The study also found that in Macau people have more of an urge to gamble than in Australia where alcohol consumption exceeds consumption in the Special Administrative Region.
“Australians reported significantly higher alcohol usage and quality of life scores, while Macau participants reported a higher urge to gamble and have stronger gamblingrelated erroneous cognitions. The gamblingrelated environment (in Macau), drinking-related societal structures (in
Australia) and lifestyle might contribute to differences in these scores”, the authors argued. Another conclusion is the impact of gaming on the quality of life, which is more damaging than alcohol usage, given than the individuals using alcohol are not highly dependent upon the substance.
“Significant negative correlations were reported for all gambling-related variables (gambling urge, erroneous cognitions and pathological gambling) and quality of life. Contrary to our initial predictions and past research, however, the negative correlational relationship between alcohol use and quality of life was not significant.” The fact that people can easily access casino venues in Macau and the association between the gaming venues and compulsive addiction was considered a factor affecting the perceived quality of life. “Our findings are consistent with past research and highlight the negative impact of the compulsive consumption of gambling products and its possible link to the increased accessibility to gaming venues on perceived quality of life”, the authors said. J.S.F.
6 | Business Daily
September 10, 2015
Macau
Effectiveness of public consultation in question The consultation exercises appear to please nobody, with some wondering if they polarise the public while some slam the government as insincere
D
espite the good intentions to engage the public in the decision-making process regarding the SAR’s policies on infrastructure, legal framework, and people’s livelihood among many other issues, floods of public consultations have not been effective and satisfactory according to political analysts. “The government basically did not conduct any public consultation after
the handover [in 1999] until the May 1 labour protest in 2006. There have been a surge of consultation exercises to gauge public sentiment since then,” said Eilo Yu Wing Yat, programme co-ordinator of public administration at the University of Macau. The academic said the government was “stuck in a political dilemma”. “The mindset of the government has only two dimensions: accept or do not accept,” he said. “If the public do
not accept a proposal [the government] will propose another and this cycle goes on. It hasn’t really engaged with the public and explained why some opinions are adopted or not.” The authorities have conducted consultations on more than 74 policy initiatives and projects since end2008, government figures show. “The problem now is not whether the government does any consultation but how it does it,” he added.
Sulu Sou Ka Hou, former president of the New Macau Association, described the consultation exercise as “insincere, unprofessional and disrespectful to public opinion”. “The latest government proposal did not adopt the views polled in the first two rounds of public consultation,” lamented Mr. Sou, citing the abrupt increase in population density in reclaimed Zone A and the insignificant presence given to the cultural and leisure facilities in reclaimed Zone B. Authorities also withheld important information until the later stages of the consultation, including traffic and environmental assessment reports on the reclaimed zones, leaving no time for the public to digest the information, he said. The quality issue has also flown under the radar of the government as the city’s top official publicly acknowledged that authorities could do more to enhance their work. In a Legislative Assembly session in August, Macau’s Chief Executive, Fernando Chui Sai On, spoke of five defects in the current consultation exercises; namely, too many consultations; stances taken before engaging with the public; too few residents expressing opinions regarding some initiatives; consultations not going beyond the surface level; and difficulty in forging consensus. However, Mr. Chui did not suggest any solutions, only noting, in a bitter twist of irony, that they would study the matter. The full story can be read in this month's issue of Macau Business magazine, available at newsstands and online at www.magzter.com
Austerity measures: A double-edged sword Some observers say the measures represent an opportunity for the government to optimise its expenditure, while others think it paints a pessimistic picture which only serves to further dampen business sentiment
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he announcement of austerity measures follows the release of official data showing a 35.5 per cent year-on-year drop in gross gaming revenue for August to MOP18.62 billion, representing a losing
streak now extending to 15 consecutive months. Macau Chief Executive Fernando Chui Sai On said earlier that whether a second round of austerity measures is imposed upon the administration will depend on
the city’s financial situation for this month and next, and that the government will pay especially close attention to September’s government revenue. Legislator Au Kam San agrees the administration should be vigilant in its spending. “Being cautious in expenditure is a basic principle that every responsible government should adhere to,” he said. “The government should keep this principle in mind all the time… not only doing so when [gaming] revenue plunges.” When the Legislative Assembly was briefed about the government’s budget in April, Secretary for Economy and Finance Lionel Leong Vai Tac said the administration could present a surplus of
MOP18.81 billion if average gaming revenue stayed at MOP20 billion each month. The balance sheet would only be in the red if monthly gaming revenue plunged below MOP17 billion, the official said at the time. The government’s calculations assume it will splurge all MOP87.92 billion in spending it has budgeted for 2015 but here again the average annual execution rate in expenditure in the 2011-13 period was only 65.9 per cent. Assuming the authorities only spend 65.9 per cent of MOP87.92 billion this year, the administration can rely upon direct tax from gaming alone to achieve a balanced budget if the casinos generate on average about MOP13.8 billion a month, according to
calculations based on official data. While spending cuts seem inevitable, local-based economist José Sales Marques says that the government should not engender panic in the private sector. “It should keep giving hope to the private sector through some instruments like incentives to boost the morale of the SMEs [small-and-medium sized enterprises]…which represent most of the companies here,” he said. “It should make them know that challenges are opportunities.” The full story can be read in this month’s issue of Macau Business magazine, available at newsstands and online at www.magzter.com
Business Daily | 7
September 10, 2015
Gaming Steve Wolstenholme joins Tiger Resort as COO Tiger Resort Leisure and Entertainment, Inc. has announced the appointment of Steve Wolstenholme as Chief Operating Officer. Tiger Resorts, an affiliate of Universal Entertainment Corp., owned by Japanese casino mogul Kazuo Okada, said in May that that it has eventually found a Philippine partner to work with on the US$2 billion integrated resort Manila Bay Resorts. The company said the new COO will be responsible for overseeing the business and leading the group towards the opening of the newest Manila resort and casino complex targeted for December 2016. Prior to joining Tiger Resort, Wolstenholme had previously served as President and Chief Operating Officer of Grand Sierra Resort and Casino in Reno, Nevada.
Caesars fined US$8 million over money laundering controls
T
he U.S. Treasury’s antimoney-laundering watchdog levied an US$8 million civil penalty on a bankrupt unit of Caesars Entertainment Corp. for violations of the Bank Secrecy Act, saying the casino allowed high-rollers to gamble millions of dollars anonymously. The settlement, announced by the Financial Crimes Enforcement Network director Jennifer Shasky Calvery, identified a “blind spot” in the anti-money-laundering program at the company’s Caesars Palace casinos and mandated improvements there. According to the consent order filed by FinCEN, Caesar’s allowed some of its wealthiest
clients to gamble anonymously in private gaming salons in Las Vegas, a service which it marketed in the U.S. and Asia. The casino failed to monitor large transactions such as wire transfers, Calvery said in a statement. That could have exposed the casino to people who wanted to move money into the U.S. financial system without proper vetting. “Caesars knew its customers well enough to entice them to cross the world to gamble to cater to their every need,” Calvery said in the statement. “But when it came to watching out for illicit activity, it allowed a blind spot in its compliance program.” Caesars said it had made
substantial improvements to its anti-money-laundering program. “The entire Caesars organization is committed to full compliance with the requirements applicable to casinos and to taking effective risk-based measures to prevent and detect money laundering,” the company said in a statement. The consent order must be approved by the bankruptcy court, according to FinCEN’s statement. Caesars Entertainment Operating Co., the company’s main operating unit, filed for bankruptcy in January after taking on more debt that in could repay in a US$30.7 billion leveraged buyout. Bloomberg
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8 | Business Daily
September 10, 2015
Greater China
FX transactions reined in to temper capital outflows Capital outflows from China have shown signs of picking up amid a weak currency and sluggish economy
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hina has instructed banks to bolster management of foreign exchange transactions and identify “abnormal” cross-border fund transfers to ease pressure on capital outflows, two sources told Reuters yesterday. The State Administration of Foreign Exchange (SAFE) has released a document, asking banks to pay attention to suspicious FX transactions involving large amounts and frequent payments after August 11, when Beijing unexpectedly devalued the yuan by nearly 2 percent. Banks are required to log transactions where more than five individuals have bought and transferred a total of over US$200,000 or the equivalent to one account or institution outside of China within the past 90 days, said a source whose bank has received the document. “Capital outflow pressure looks heavy now and the SAFE is hoping to use these counter-cyclical measures to stem outflows,” said the source, who declined to be
People’s Bank of China headquarters in Beijing
identified as he was not authorised to speak to the media. Capital outflows from China have shown signs of
picking up amid a weak currency and sluggish economy, stoking worries that the world’s second-largest economy could be at the mercy
of potentially destabilising outflows. The yuan has lost 3 percent against the dollar since August 11. “SAFE’s measures are
targeted at both individuals and companies. The purpose is to prevent arbitrage activities cross borders,” said another source with direct knowledge of the matter. The SAFE asked banks to step up scrutiny of FX transactions that have been split into smaller ones and has instructed them to prevent doing such transactions for clients in future, according to the sources. The regulator also required lenders to strictly examine transactions that involve a single company transferring funds close to US$50,000 frequently to the same account within a short period and to check documentation where necessary. For companies that have borrowed funds from outside of China, they are not allowed to repay these loans in advance unless this has been stated in a contract. China’s foreign exchange reserves, the world’s largest, dropped by a record US$93.9 billion in August to US$3.557 trillion. Net capital outflows from the financial market may be much larger than the FX reserves decline given the massive trade surplus recorded last month, said Shen Jianguang, an economist at Mizuho in Hong Kong. “We expect the pressure for capital outflows to continue until China’s economy is able to gain a more solid footing in Q4 in response to fiscal stimulus,” said Shen. Reuters
Hong Kong shows strain between Fed
But adjusting its peg to t invite speculation and ha financial markets Fion Li and Enda Curran
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IFC 2 tower hosts the Hong Kong Monetary Authority
ong Kong’s 32-year-old currency peg is seen coming under strain, caught in a tug-of-war between tightening U.S. monetary policy and an economic slump in China. The linked exchange rate means Hong Kong has no choice but to follow the Federal Reserve in raising interest rates, which is forecast to happen before the end of this year. At the same time, China’s slowest growth since 1990 will exert downward pressure on the city’s property prices and wages, fuelling public discontent towards the peg, according to BNP Paribas SA. “It’s a double whammy,” Mole Hau, a Hong Kong-based economist at France’s largest bank, said in an interview. “Hong Kong is more integrated with China now and so its economy could be dragged by China’s slowdown. On the other hand, Hong Kong’s monetary policy has to follow that of the U.S. --
Business Daily | 9
September 10, 2015
Greater China Government changing GDP reporting to meet IMF’s standard China has recently introduced a series of other technical policy changes to aid its bid to join the SDR basket of currencies
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hina is tweaking the way it reports quarterly gross domestic product data, paving the way for the nation to adopt an International Monetary Fund standard as it presses ahead with the goal of gaining reserve currency status for the yuan. The new reporting method will create conditions for China to adopt the IMF’s Special Data Dissemination Standard and will better reflect shortterm fluctuations in the economy, the National Bureau of Statistics said in a statement yesterday. The IMF describes the SDDS, established in 1996, as “a global benchmark for disseminating macroeconomic statistics to the public.” Under the change, the NBS will now release its tally of economic output for each quarter, along with a cumulative reading. Formerly, it released quarterly economic growth rates, but didn’t specify the value of GDP for each three-month period on its own. China has recently introduced a series of other technical policy changes to aid its bid to join the SDR basket of currencies, including allowing overseas lenders to buy and sell the yuan onshore for direct investments, publishing a currency reference rate five times a day, and permitting banks
dollar peg n caught d and PBOC
the greenback would arm the credibility of its
China needs to adopt international standards if its currency wants to become an internationally used reserve currency Li Wei, China and Asia economist, Commonwealth Bank of Australia
to set whatever deposit rate they like for terms longer than a year. Those moves came in addition to the shock yuan devaluation on August 11 in a change that gave markets a bigger say in setting the yuan’s value.
Increased transparency
“China needs to adopt international standards if its currency wants to
maintain the stability of the local currency, which is allowed to trade in a range of HK$7.75 and HK$7.85 versus the greenback. One-year implied volatility for Hong Kong’s dollar more than doubled in August and touched 3.2 percent on August 26, the highest since December 2004. The currency reached the strong end of its permitted trading range last week for the first time in four months, prompting the HKMA to offer an unlimited amount of Hong Kong dollars at HK$7.75.
‘Black sky’
that’s quite a dis-coordination for the city.” The chances for an end to Hong Kong’s peg jumped to a decade-high last month in the options market after a surprise devaluation of the yuan triggered depreciation across the region as well as exchange-rate regime changes in Kazakhstan and Sri Lanka. That market instability spurred demand for Hong Kong dollars, forcing the monetary authority to buy US$4.7 billion this month to keep the local currency from strengthening. The flows reflect confidence in the resilience of a currency link that’s survived a change of sovereignty in 1997, a 1998 attack by speculators during Asia’s financial crisis as well as the 2008-2009 global financial crisis and almost three months of pro-democracy protests in late 2014. The Hong Kong Monetary Authority reiterated this month a pledge to
With the challenges of a decelerating Chinese economy and bets that the U.S. will raise rates as soon as September 17, UBS Group AG last week said Hong Kong is in its “blacksky scenario” and advised investors to be cautious on the city’s equities market. Traders see a 28 percent chance that the Federal Reserve will raise borrowing costs next week and 57 percent by December, a move that would translate into higher mortgage costs in Hong Kong. It’s not just falling asset prices that heighten scrutiny of the peg. Surging home prices in 2011 prompted local lawmakers to urge a review and the chief executive of HSBC Holdings Plc, which owns two of the city’s three biggest banks, suggested that any shift could be to a link against a basket of currencies. Former HKMA chief Joseph Yam in 2012 called for a review of the peg, having in 1998 conducted US$15 billion of stock purchases to fend off speculative attacks on Hong Kong’s equity and currency markets. Centaline Property’s Centa-City Monthly Index, a gauge of Hong Kong property prices, has risen 60 percent since the end of 2010. Home prices
become an internationally used reserve currency,” said Li Wei, the China and Asia economist for Commonwealth Bank of Australia in Sydney. Increased transparency and compliance with international standards are the benefits of the new method, he said. China’s statistics bureau had been in cooperation with the IMF, the United Nations and the Organisation for Economic Cooperation and Development to learn the newest international measures for compiling GDP data and after several years preparation felt now is the time to launch reforms, the statement said. “It will internationalize our quarterly compiling measure so as to create circumstance for us to join SDDS,” it said. Quarterly GDP numbers for last year were revised down. China this week also revised lower its GDP growth number for 2014 to 7.3 percent from 7.4 percent. Other on-going measures to improve the quality of economic data include a June vow by the statistics bureau to expand an employment survey that Premier Li Keqiang said he wants to be “authoritative.” Bloomberg News
may start to fall by as much as 10 percent each year starting in 2016, according to Cusson Leung, head of Hong Kong research, conglomerates and property for JPMorgan Chase & Co. “There will be more downward pressure on asset prices, including nominal wages and property values, adding to more popular discontent against the peg,” said BNP’s Hau. “But Hong Kong will keep the peg no matter how painful it could be as there aren’t that many alternatives.” Adjusting the Hong Kong dollar’s peg to the greenback would invite speculation and harm the credibility of its financial markets, said Raymond Yeung, an economist at Australia and New Zealand Banking Group Ltd. It’s too early to consider the yuan as an anchor for the city’s exchange rate because China’s currency isn’t fully convertible, HKMA Chief Executive Norman Chan said in 2013. Hong Kong would need almost 2 trillion yuan (US$314 billion) to back the linked exchange rate, exceeding the amount of Chinese currency available in the offshore market, he said. Hong Kong had $340 billion of foreign reserves as of the end of July, the eighth-largest stockpile in the world. As China opens up its capital markets, conditions for the Hong Kong dollar to be linked to the yuan will become “more ripe” in the years ahead, according to Mitul Kotecha, Singapore- based head of Asia-Pacific foreign-exchange strategy at Barclays Plc. “Clearly, the authorities have been looking at all options,” Kotecha said. “That said, we do need to see some big steps in China towards convertibility for people to see any shifts in Hong Kong.” Bloomberg News
Alibaba trims sales estimates Chinese e-commerce giant Alibaba Group Holding Ltd said it expected its total value of transactions in the second-quarter to be lower than previously thought, a fresh signal that China’s slowdown is taking a bite out of consumer spending. Alibaba is not the first company to flag the negative impact on sales of a weakening Chinese economy, but its sheer size makes it a bellwether. The company dominates e-commerce in China, where online spending is expected to hit US$1 trillion by 2019, according to a report by research firm Forrester earlier this year.
State planner warns on industrial overcapacity China’s economy still faces relatively large downward pressure, the head of the country’s top economic planner said yesterday. “The largest problem facing the Chinese economy now is industrial overcapacity,” Xu Shaoshi, chairman of the National Development and Reform Commission (NDRC), said at the World Economic Forum (WEF), the Swiss-based corporate think tank which runs the Davos summit of world leaders. In the same panel discussion, Xu said China’s economic fundamentals were healthy. The whole session of the panel dicussion in Dalian was web broadcast.
State councillor to attend China-Arab States Expo State Councillor Guo Shengkun will attend the opening ceremony of the China-Arab States Expo 2015 in Yinchuan, capital city of Ningxia Hui Autonomous Region in northwest China, today. Foreign Ministry spokesperson Hong Lei made the announcement on Wednesday. The Expo will be held in Yinchuan from September 10 to 13, under the theme of “Promoting the Spirit of Silk Road, Enhancing China-Arab States Cooperation.”
Senior financial official backs economy A senior Chinese financial official has backed the country’s economy to recover from its slowdown while visiting Zhejiang, the eastern province known for its pioneering trade success. The economy is transitioning from old to new models of growth with structural adjustment that should be analysed from a long-term perspective, said Liu He, head of the country’s Central Financial Work Leading Group Office, on a tour of Zhejiang on September 6 and 7. According to a report in the Zhejiang Daily yesterday, Liu pointed to China’s swelling middle classes and consumption potential as reasons for optimism.
HK billionaire prepares African rival to Netflix PCCW Ltd., controlled by Hong Kong billionaire Richard Li, is planning a video-on-demand service for South Africa that would compete with Netflix Inc. and Naspers Ltd.’s ShowMax, according to two people familiar with the matter. PCCW’s HKT unit will unveil the entertainment service as early as next week, said one of the people who asked not to be identified as the product isn’t public yet. Telecommunications conglomerate PCCW bought a majority stake in mobile video-on- demand service Vuclip in March and plans to expand the service into new markets, including Africa.
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Greater China
Operation to steady stocks a success, but patient comatose As long as share issues remain suspended, the stock market will not serve as a viable fundraising alternative to bank loans Pete Sweeney and Saikat Chatterjee
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ough medicine for China’s ailing stock markets has brought stability to prices, at least for now, but it has come at a cost; equities and futures are trading so thinly that they are in danger of flat lining. Intraday volumes on key onshore equity markets fell and stock futures turnover all but evaporated this week, after exchanges proposed a “circuit breaker” to limit index swings and China altered dividend taxes to favour long term investors. The moves were welcomed by some, but the sharp drop in volumes also underlined how many investors have lost confidence in Beijing’s ability to manage the turmoil that saw stocks slide over 40 percent since June. Under the country’s old economic model, that may not have mattered so much: bank lending for infrastructure projects and manufacturing was what kept the economic engine running. Now China wants to modernise its economy, favouring nimbler, hightech companies that need equally nimble, modern financial markets to finance them. Comatose stock and futures markets would represent a major blow to its ambitions. Wang Feng, a fund manager and CEO of Alpha Squared Capital, is considering joining the mass exodus from Chinese equities. He told Reuters he was looking into investing in commodities futures as an alternative to stock index futures. Some of his peers in the highfrequency trading community were cancelling plans to come to China altogether. Wang blamed a series of attempts in recent weeks by regulators to curb
excessive speculation for taking the life out of the market. “The joke now is that the market is a vegetative patient.” Others are shifting their strategies to offshore futures contracts tracking China-based ETFs, like the iShares A50 , Wang added. Qiu Zhi, a strategist at Huatai Securities Co, said he was seeing rising inquiries from Chinese investors to open accounts to trade index futures in Hong Kong. “The rules of the game are more consistent in Hong Kong.”
Rewriting the rules
China has busily rewritten the rules in recent weeks, and there has been no let up in policy changes and intervention aimed at shoring up markets and staving off full-blown panic. Adding to authorities’ crackdown on derivatives trade, focused mainly on sellers, the exchanges proposed this week to add a “circuit breaker” to the benchmark CSI300 index that would suspend trade if it moved up or down over 5 percent in a day. While it appears to have convinced some investors to stop selling shares, it may also have convinced people not to buy. Volumes on the Shanghai Composite Index are down more than 40 percent following Monday’s announcement of the circuit breaker plan, and on Tuesday they were at their lowest since February, a month in which trade typically dives due to the Lunar New Year holiday week. Traders suspect much of the remaining business comes from the government’s so-called “national
team” of investors who sweep in to push indexes up near the end of a day, resulting in sudden rises by the close that are hard to explain otherwise. Once-active index futures markets have seen volumes vaporize; trade in the benchmark CSI300 index future contract collapsed this week, with transactions falling from around 600,000 on Friday to less than 23,000 on Tuesday. That compares with a peak of 2.43 million in late August and comes after China raised margin requirements on some stock index futures trading. The risk for China is a stable but illiquid stock market, meaning securities regulators will struggle to re-open the suspended IPO market. As long as share issues remain suspended, the stock market will not serve as a viable fundraising alternative to bank loans for the rapidly expanding companies that Beijing wants to lead its economy in the long term.
Looking for the exit
Retail investors who dominate Chinese stock markets have consistently said they want to exit as soon as they can do so at minimal loss. The sliding volumes highlight their retreat, in a blow to Beijing’s vision of a society that can invest safely and profit from the country’s expanding and increasingly dynamic economy. Institutional investors say they have been put off by heavy-handed pressure from Beijing to buy and hold shares, and in an environment in which fund managers are being questioned by authorities about their strategies, it is increasingly seen as safer not to trade at all.
KEY POINTS Efforts to stabilise markets have stemmed index falls Trading volumes have also dropped sharply Retail, institutional investors increasingly sidelined Market in “vegetative state” fund manager Lack of viable stock market complicates economic transformation “We are staying out of shares at the moment,” said a hedge fund manager focused on China consumer plays based in Hong Kong. Declining investor interest in stocks was predicted by many analysts and economists, who warned that attempts to lure buyers into the market by suppressing sellers would backfire. “Time and again, we have seen countries trying to introduce measures to support their stock markets, but the only thing that has worked in the long term is to let markets clear themselves,” said Dominic Rossi, global chief investment officer of equities at Fidelity Worldwide Management, which manages US$290 billion in assets globally. “China should do the same.” Reuters
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September 10, 2015
Greater China Carbon efficiency index next month China’s equity market in Shanghai will launch a carbon index next month, the first of its kind in China with the aim of identifying the greenest companies on the exchange. The Shanghai Stock Exchange (SSE) and China Securities Index (CSI) will launch the index on October 8, according to a statement from the CSI published on its website yesterday. It will track the carbon efficiency of bluechip companies belonging to Shanghai’s SSE180 index, which are worth 15 trillion yuan (US$2.35 trillion) in total. The sampled companies still include giant energy firms like PetroChina, Baosteel and China Railway Group.
Premier says economic prospects positive The CSRC has been stamping out short positions in mainland markets in recent months
HK securities watchdog probes brokers, hedge funds The investigation began about two weeks ago and is focused on how international brokers and Hong Kong subsidiaries of Chinese brokers used China investment quotas
Bombardier rejects Chinese offer
Michelle Price and Saikat Chatterjee
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he Hong Kong securities watchdog is investigating whether brokers and hedge funds in the financial centre violated their operating licences in creating and trading China investment products, three people with direct knowledge of the matter said. The investigation began about two weeks ago and is focused on how international brokers and Hong Kong subsidiaries of Chinese brokers used more than US$100 billion in China investment quotas to create products allowing hedge funds to trade stocks and bonds in mainland markets. China controls foreign access to its markets through closely monitored programmes, such as by issuing investment quotas. Hong Kong's Securities and Futures Commission (SFC) has not been detailed its concerns with the financial firms it has approached for information. But two sources said it is conducting its investigation to help China's stock market watchdog, the China Securities Regulatory Commission (CSRC). The CSRC has been cracking down on what it has called "malicious" trading activities blamed by Chinese authorities for a 40 percent slump in the mainland's stock markets since June. The SFC declined to comment and the CSRC did not respond to a request for comment. "They are basically clutching at straws," one executive at a foreign institutional broker in Hong Kong said of the SFC investigation. "They have to be seen doing something and it is an extension of the crackdown on hedge funds in the mainland." Brokers are typically licensed to deal in securities, but some China investment product structures may have required them to hold a separate asset management license in order to
The prospects for China’s economy were positive even though the world’s second largest economy continued to experience downward pressure, Chinese Premier Li Keqiang said yesterday. At a meeting of company executives at the World Economic Forum in the north-eastern port city of Dalian, Li said China would maintain basic policy direction but get prepared to make pre-emptive adjustments. “We won’t be swayed by short term economic fluctuations in our big picture direction,” said Li. Li said the creation of over 7 million new urban jobs showed economy was on “reasonable track”.
manage a portfolio of securities for clients on a discretionary basis, one person said. A second source said the SFC was also looking at whether hedge funds had likewise transgressed their licenses or the SFC's general conduct rules. The sources declined to be identified owing to the sensitivity of the matter.
Investigation
Chinese authorities have gone to extraordinary lengths to prevent a precipitous fall in their financial markets with a frenetic series of policy changes and intervention. Last month, Reuters reported the CSRC had requested information from brokers in both Singapore and Hong Kong to check if they had net short positions on Chinese stocks following the dramatic selloff on the mainland. China is concerned that brokers operating in Hong Kong use their quotas to package products that allow hedge funds to express a negative or 'short' view on the China market, sources said. The CSRC has been stamping out short positions in mainland markets in recent months as part of a broader government effort to prop up stock markets. The SFC has asked foreign brokers for information on hedge fund client trades and contracts relating to these China investment schemes, two of the sources said. A third person with direct knowledge of the matter said the SFC was also investigating how the Hong Kong subsidiaries of mainland brokerages had used their yuan-based investment quotas to create products for hedge funds. The SFC typically fines firms that act beyond their license provisions and has prosecuted individuals for
unlicensed dealings. But two sources said the fallout of a widespread probe by Hong Kong into these products could dent foreign investor confidence in the independence of the territory's regulatory system.
"Running scared"
China closely controls access to its capital markets. Until November last year it only allowed foreign investors in by allocating investment quotas under the so-called Qualified Foreign Institutional Investor (QFII) scheme and its yuan-denominated equivalent, RQFII. The combined QFII quotas outstanding stood at US$77 billion while RQFII stood at 405 billion yuan (US$41 billion) at the end of August. The launch of the Hong Kong Shanghai Stock Connect trading link widened access in November by allowing foreigners to trade Shanghai stocks from Hong Kong. Aggregate China bound use of stock connect stood at 137 billion yuan, having peaked in early July. Brokers, asset managers and trusts in Hong Kong have for years used their QFII and RQFII quotas to structure "China access" products for international investors shut out of the mainland market, particularly hedge funds. The practice, known as "renting" quota, has long-operated in a regulatory grey area. Beijing has never explicitly banned the practice, but has expressed concern in the past that it reduced regulators' visibility and control over the market. The "China access" products are traded over the counter and can take the form of participation notes or equity derivatives, or are structured as a managed portfolio investment. In some cases, hedge funds simply pay a fee to directly trade the broker's quota. Reuters
Canada’s Bombardier has turned down a Chinese offer to buy up to 100 percent of its prized rail unit, documents seen by Reuters show, underscoring its reluctance to cede control of the unit to a state-owned Chinese buyer at this juncture. Beijing Infrastructure Investment Co (BII), a government-owned company that operates 18 metro lines in China’s capital, has offered to acquire between 60 and 100 percent of Bombardier Transport, an August 14 letter reviewed by Reuters outlining BII’s offer showed. Bombardier is attractive to Chinese players like BII.
Finmin targets fiscal policy China will strengthen fiscal policy, boost infrastructure spending and speed up reform of its tax system to support the economy, the Ministry of Finance said, joining other steps by authorities to re-energise sputtering growth. The ministry will accelerate major construction projects, bring in private financing through increased use of the public private partnership (PPP) model, standardize the management of local government debt and reform taxes, it said in a statement late on Tuesday. Chinese policymakers have stepped up efforts to revive an economy growing at its slowest pace in decades.
Auto sales rebounded in August China auto sales rose 0.6 percent last month, snapping a sales slump in the world’s largest auto market as discounts and other incentive offers lured consumers back into showrooms. Retail deliveries of cars, SUVs and multipurpose vehicles increased to 1.44 million units in August, according to the China Passenger Car Association. Sales had declined in each of the two previous months, with purchases falling to a 17-month low in July. Deliveries climbed 11 percent compared with July.
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Asia South Korea’s job growth declines to four‑month low South Korea’s monthly job growth declined to the lowest in four months, indicating the still lacklustre labour market conditions, a government report showed yesterday. The number of those employed totalled 26,141,000 in August, up 256,000 from a year ago, according to Statistics Korea. However, it was the lowest August growth since August 2009 when the global financial crisis was going on and only 3,000 jobs were added. The monthly job growth rebounded from 216,000 in April to 379, 000 in May, boosting hopes for recovery in the labour market.
Bangladesh exports bounce back Bangladesh exported goods worth US$2.76 billion in August, a 28 percent rise from a year earlier, driven by an increase in garment shipments, government data showed on Tuesday. Exports fell 12 percent, to US$2.6 billion, in July from a year ago. For the first two months of the 2015-16 financial year, exports rose 4.7 percent to nearly US$5.4 billion from the previous year, the Export Promotion Bureau said. Readymade garments, comprising knitwear and woven items, fetched US$4.5 billion in July-August, compared with US$4.2 billion in the same period a year ago.
McDonald’s Japan posts first sales rise since 2014 The Japanese unit of McDonald’s Corp said yesterday its same-store sales in August rose for the first time since January 2014 helped by easy comparisons with the year before, when revelations of food-safety violations drove customers away. August sales grew 2.8 percent compared with a year earlier, McDonald’s Holdings Co (Japan) Ltd said in a statement. Sales at the fast-food chain have performed poorly especially since last July, when a major Chinese supplier of chicken was found using expired meat.
Malaysia seen holding policy rate Bank Negara Malaysia (BNM) is expected to hold its benchmark rate at 3.25 percent at a policy review on Friday amid a plunging ringgit and global market uncertainty, a Reuters poll showed. All 13 economists were unanimous that the central bank will not change its overnight policy rate (OPR), due to risks posed to Malaysia’s economic growth by lower commodity prices, capital outflows, the weakened ringgit and a potential rate hike by the U.S Federal Reserve. Malaysia, a major exporter of natural gas, has seen its earnings drop, as gas prices are linked to oil prices.
India’s Government retreats on vital tax measure Ability to generate an investment-led economic recovery has been compromised by the legacy of a debt-fuelled boom that followed the 2008 global financial crisis
I
ndia’s government has given up plans to reconvene a parliament session to secure approval for a common goods and services tax because of lack of political support, the finance minister said yesterday, making it harder to meet an April 2016 deadline to implement the reform. The retreat came just as Prime Minister Narendra Modi’s administration has been assuring an increasingly sceptical business community that Asia’s third-largest economy can withstand global market turbulence and China’s slowdown. Finance Minister Arun Jaitley said a cabinet committee had recommended to President Pranab Mukherjee that he prorogue the monsoon session of parliament that had been kept alive since last month to allow for a consensus on the GST. “There was a meeting of the cabinet committee on political affairs. It was decided to recommend the president to prorogue the monsoon session. We will keep trying, we are in touch with all political parties,” Jaitley said. The main opposition Congress party, which itself had pushed the tax legislation when it was in government, continued to play politics, Jaitley said, throwing into doubt the April deadline.
“Your guess is as good as mine,” he shot back when asked if the government would be able to implement the tax measure. “It is time for political parties to display some element of statesmanship, particularly when India is trying to emerge as an important economic force.” The government needs the support of the opposition to win parliament’s approval as it lacks a majority in the upper house. Business is clamouring for the GST, which would replace an array of state and federal levies and transform India into a more uniform market. Economists estimate that could add up to 2 percentage points to gross domestic product. “It’s massive. GST has to happen,” Juvencio Maeztu, India CEO for Swedish retailer IKEA, which buys wares from India but has yet to open any stores. “We cannot lose more time on this.” Fifteen months into Prime Minister Narendra Modi’s term, officials are pushing hard to kick-start an economy that remains sluggish, despite rosy official growth figures. The government has argued India’s relatively closed economy offers protection against the turmoil sweeping emerging markets, but India has not been immune. Most of the gains in Indian stocks since Modi took office in May
2014 have been wiped out. Jaitley, speaking at an Economist conference earlier in the day, said it was vital to stay on the path of reform and build toward higher growth, which the International Monetary Fund forecasts at 7.5 percent this year.
Tax disputes
Touching on a sensitive subject for investors, Jaitley said the government was also seeking to resolve pending tax disputes and hoped to resolve “legacy” issues in short order. The finance ministry decided last week against pursuing demands for foreign portfolio investors to pay Minimum Alternate Tax. But India is still locked in back-tax disputes with UK telecoms group Vodafone and Cairn Energy. Without referring to these directly, Jaitley said the government hoped to resolve pending disputes “in not much time”. Asked whether bad loans were the main worry for the economy, Jaitley said: “The banking system is a matter of concern - it is not the main worry, there are no grounds for panic.” He said he would be open to looking at consolidation between fragile banks and their stronger competitors. Reuters
Singaporeans debate safety net as economy changes
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s Singaporeans head into their first election since the passing of Lee Kuan Yew, one hot issue is something the city-state’s founding father disdained - whether a wider welfare safety net should be put in place. Lee, who died in March, built Singapore as a model of self-reliance, where workers saved for health costs and their retirement, and family was the main support network with minimal state welfare. But as Singapore’s population ages and the economy moves beyond the “tiger” phase of rapid growth powered by manufacturing, the question of what sort of safety net should be there for those left behind in the transition is being debated. “Trying to give your kids a good education is not cheap nowadays and things are also expensive in Singapore,” said C.H. Chua, a taxi driver in his 50s. “So I don’t dare to think about my retirement because I don’t have enough
money to really think about it,” he said. The People’s Action Party (PAP) has ruled Singapore since its independence in 1965, and is set to win Friday’s election to extend its half-century in power, helped by respect for Lee and the euphoria of the country’s 50th anniversary last month. But it got a clear message at the 2011 poll from a record low vote, reflecting rising resentment towards imported workers, expensive housing as well as yawning wealth gaps, and has since shifted policy slightly to the left. Finance Minister Tharman Shanmugaratnam said at a PAP rally on Saturday the government took issues such as low-income workers and the need to care for the elderly “very seriously”. There’s “more to be done,” he said. The government sees Singapore’s future in moving up the value chain in manufacturing and services, but the transition can be difficult for older, unskilled workers.
Existing measures include assistance for low-income earners and the disadvantaged, and subsidised housing. But increased spending needs to be funded, and that could challenge Singapore’s status as a low-tax base for business. The government says it has taken steps to raise the revenues it needs for the next five years. Analysts think that eventually, it may have to increase the value added tax rate. The proportion of the resident population aged 65 or over rose to 11.2 percent in 2014 from 7.8 percent in 2004. Singapore plans to spend S$32 billion (US$22.63 billion) on social development this year - 8 percent of its gross domestic product, up from 6.2 percent in 2011. Some voters worry that enhanced welfare would undermine Singapore’s work ethic, one of Lee’s cornerstones. Reuters
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September 10, 2015
Asia
Reserve Bank of Australia says economy flexible Deputy Governor Lowe said an important element in this flexibility is the exchange rate Ian Chua
KEY POINTS RBA Lowe says economy flexible A$ has adjusted considerably Need to get used to ‘less extraordinary’ growth in China
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ustralia’s falling exchange rate, flexible labour force and record low interest rates are all helping to support the economy, a top Australian central banker said yesterday, but the country will have to get used to less growth from China. In comments that appeared in line with the central bank’s wait-and-see stance on monetary policy, Reserve Bank of Australia (RBA) Deputy Governor Philip Lowe also downplayed recent data that highlighted sharply slower growth. Figures last week showed the economy grew just 0.2 percent in the second quarter, taking the annual
growth rate down to 2.0 percent, well below the long-term average of 3.03.25 percent. “The data for the June quarter suggest that the economy is continuing to grow at a similar rate to that of the past few years,” Lowe told a lunch in Melbourne. “Most other recent indicators are also consistent with a moderate expansion in the Australian economy. The missing ingredient continues to be a lift in non-mining business investment, where we are still waiting for convincing signs of a pick-up.” Lowe said annual growth could
be closer to 3 percent if that were to occur. He also pointed to the country’s “considerable ability to adjust”, noting it had gone through a oncein-a-lifetime mining investment boom without overheating. “We are now adjusting to the downside, while still managing to grow at a moderate rate. This is a significant achievement and is a testimony to the underlying flexibility of our economy.” Lowe said an important element in this flexibility is the exchange rate, which has fallen to its lowest in over six years against the U.S. dollar and on a trade-weighted basis.
“The exchange rate has now adjusted considerably... the depreciation is helping in the downswing,” he said. On China, Lowe said the Chinese authorities’ handling of the stock market crash has led some to ponder the general direction of Chinese policy, including the likely pace of economic reform, an issue that bears close watching. “We became used to extraordinarily strong growth in China and now we are having to get used to something a little less extraordinary.” Yet, Lowe pointed out the benefits of having deeper ties with an economy that is set to become the world’s biggest at some stage. “As a nation, we need to keep an eye on these opportunities, while, at the same time, understanding and managing the associated risks as best we can.”
Analysts forecast Bank of Korea will keep rates unchanged The Bank of Korea has cut rates four times since last year
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he Bank of Korea (BOK) is expected to hold rates steady on Friday, a Reuters survey found, as the BOK monitors the effects of its two rate cuts this year and waits to see if the U.S. Federal Reserve raises rates next week. Thirty of 31 analysts polled by Reuters forecast the Bank of Korea would keep the base rate unchanged at 1.50 percent for a third straight month.
The 30 analysts agreed that the BOK would hold rates ahead of the Fed’s policy meeting from September 16 to September 17. When queried over the central bank’s next policy move, nine of the 13 who gave a clear direction forecast it would cut rates, most likely in the fourth quarter of this year. The remaining four predicted a hike sometime next year.
With the exception of one, all those who did not offer a rate direction said rates would be kept on hold at least through the end of 2015. “Rate cut views have been growing but it’s questionable as to whether current weak economic momentum and concerns over long-term low growth can be addressed with monetary policy,” said Park Hyuk-soo, a fixedincome analyst at Daishin
Economic Research Institute. “Cutting rates now would just be wasting the little policy space we have left.” The Bank of Korea has cut rates four times since last year, with the last move taking place in June to aid the economy after an outbreak of Middle East Respiratory Syndrome depleted domestic consumption. A plunge in exports, slow recovery in domestic demand,
Reuters
and jitters from neighbouring China’s economic troubles has bolstered public opinion that the BOK should do more to boost economic activity at home. Inflation remains below 1 percent, giving the bank ample room to cut if needed. The BOK would, however, think twice before cutting rates again soon as household debt is growing at a rapid pace, some respondents noted. South Korea’s household credit in the second quarter marked its fastest annual growth in nearly four years. As South Koreans took advantage of record-low interest rates and borrowed more money, house prices in annual terms rose in August at the fastest pace since April 2012. Reuter4s
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International Russia spends 900 billion roubles from Reserve Fund Russia used in the first eight months of the year 900 billion roubles (US$13.30 billion) from its Reserve Fund, one of its sovereign wealth funds, to finance federal budget expenditures, Finance Minister Anton Siluanov said yesterday. Siluanov, speaking at a government meeting, said also that the Finance Ministry estimated the budget deficit this year at just below 3 percent of gross domestic product.
JP Morgan to remove Nigeria from government bond index JP Morgan will remove Nigeria from its Government Bond Index (GBI-EM) by the end of October, the bank said on Tuesday, after warning the government of Africa’s biggest economy that currency controls were making transactions too complicated. The removal will force funds to sell Nigerian bonds, triggering potentially significant capital outflows and raising borrowing costs for the government. Struggling with a plunge in vital oil revenue, Nigeria had imposed currency restrictions to defend the naira after the burning of dollar reserves failed to halt a slide.
ABB cuts revenue forecast Switzerland’s ABB cut its revenue growth target yesterday and said it was accelerating a US$1 billion cost-savings programme as the company grapples with low oil prices and a slowdown in China. ABB, which makes everything from factory robots to power transformers, said it was now targeting average annual growth in revenue of 3 percent to 6 percent until 2020, trimming a prior goal of 4 percent to 7 percent. It will also speed up a restructuring programme which aims to save US$1 billion annually by the end of 2017. The steps are expected to cost US$1.2 billion.
BP wins one U.S. court ruling, loses another A U.S. appeals court said BP Plc, which in July reached a US$18.7 billion settlement of federal, state and local claims over the 2010 Gulf of Mexico oil spill, must face one of two proposed class-action lawsuits claiming that the oil company defrauded shareholders over the disaster. The 5th U.S. Circuit Court of Appeals in New Orleans said investors who bought BP’s American depositary shares in a 33-day period soon after the spill may pursue group claims that BP initially “lowballed” the oil flow rate, and that the share price tumbled as the crisis’ magnitude became known.
Ryanair hikes annual profit forecast Irish no-frills airline Ryanair yesterday ramped up its full-year net profit forecast by a quarter on keen demand for summer holidays at higher prices. Earnings after taxation will climb to between 1.175 billion euros and 1.225 billion euros (US$1.8 billion and US$1.88 billion) in the current financial year to March 2016, Ryanair predicted in a trading statement. That was revised up from the previous forecast of between 940 million euros and 970 million euros, which was given in May. The carrier added that the upgrade was “due to stronger than expected peak summer traffic”.
U.K. factory output, export slump give reasons for caution Manufacturing dropped 0.8 percent, against a forecast for a 0.2 percent increase Andrew Atkinson and Jillian Ward
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.K. industrial production unexpectedly declined and goods exports plunged the most in nine years, indicating a loss of economic momentum that may keep the Bank of England on a cautious policy footing. Total production fell 0.4 percent in July, the Office for National Statistics said in London yesterday, missing economists’ forecasts for a 0.1 percent increase. Sales of British goods abroad fell 9.2 percent, contributing to the biggest drop in factory output since January. The figures come as BOE Governor Mark Carney leads a meeting of the Monetary Policy Committee before it announces its latest interest-rate decision today. After disappointing factory and services surveys last week, the latest data may push the MPC into adopting a dovish tone on when to start raising borrowing costs from a record low. “The economy is losing momentum. I don’t think it’s collapsing -- but there are clear signs of stress,” said Ross Walker, an economist at Royal Bank of Scotland Group Plc in London. “You see it in today’s numbers, in the external facing parts of the economy that are coming under pressure.” Manufacturing dropped 0.8 percent, against a forecast for a 0.2 percent increase. Oil and gas production fell 0.4 percent. Factory output dropped 0.5 percent from a year earlier, while overall production increased 0.8 percent. The drop in output from June was due to summer shutdowns at
The goods trade deficit widened to US$17.1 billion in July, more than economists forecast and the most in a year
auto factories beginning earlier than usual, along with a drop in weapons manufacturing.
U.S., China
The trade report from the ONS also proved disappointing. The goods trade deficit widened to 11.1 billion pounds (US$17.1 billion) in July, more than economists forecast and the most in a year, led by a drop in exports of chemicals and manufactured goods. Imports increased 0.8 percent. The deficit with countries outside the EU widened to 3.5 billion pounds, as exports plunged 12.6 percent on the back of falling shipments to the U.S., Switzerland and China. A survey by Markit Economics last week showed manufacturing growth cooled in August as export orders fell. Producers blamed the decline in foreign demand on a strong pound, weakness in the euro area and the
The figures come as BOE Governor Mark Carney (pictured) leads a meeting of the Monetary Policy Committee before it announces its latest interest-rate decision today
slowdown in China. The ONS said yesterday that the total trade deficit widened to 3.4 billion pounds. The surplus in services increased to 7.7 billion pounds. In the second quarter, the total deficit narrowed more than previously estimated to 3.4 billion pounds. That raises the possibility that net trade contributed more to economic growth in the period than the 1 percentage point reported last month. The ONS cautioned the overall picture could change as it goes through its annual Blue Book revisions. Bloomberg News
Turkish finance minister says political uncertainty biggest risk to economy He said the economy is likely to grow by 3 percent in 2015 Ebru Tuncay
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olitical instability poses the biggest risk to Turkey’s economy, Finance Minister Mehmet Simsek said yesterday, citing potential damage to public finances and further pressure on budget and current account deficits. Simsek’s comments are a rare admission by the governing AK Party, which unexpectedly lost its parliamentary majority in June elections, that politics could further hamper Turkey’s once-stunning growth. The lira currency has hit a series of record lows this year as the election result and an upsurge in violence between Kurdish militants and security forces since July have unsettled investors.
“The most important risk to the Turkish economy is long-term political uncertainty,” Simsek said at a conference in Istanbul. “It would be a recipe for budget and current account deficits.” He said the economy is likely to grow by 3 percent in 2015 but warned that prolonged political uncertainty could weaken strong public finances, which currently act as a buffer against economic shocks. Simsek also said achieving a 5 percent inflation target could only happen with a strong government, not through central bank intervention alone. Turks will vote again on November 1 although polls suggest the AK Party will again struggle to win enough votes to form a single-party government and
may be forced back to the negotiating table to try to strike a coalition deal. Turkey’s new deputy prime minister in charge of the economy, Cevdet Yilmaz, said on Tuesday that the political uncertainty which has hammered the lira would ease after the November poll. The central bank, whose independence has been brought into question by President Tayyip Erdogan’s repeated assertions that it should lower interest rates, has been contending with stubborn inflation coupled with flagging growth. In August inflation exceeded expectations and climbed back above 7 percent, with further increases expected as the weaker lira feeds through to prices. Reuters
Business Daily | 15
September 10, 2015
Opinion Business
wires
Leading reports from Asia’s best business newspapers
As Chinese capital flees, the impact could be major
PHILSTAR The Philippines is in the final stages of discussions on an investment product that would allow the government to eliminate obligations when a natural disaster hits the country, Finance Secretary Cesar Purisima said. The socalled catastrophe bond may have its maiden issue this year, amounting to “between US$100 million and US$300 million,” Purisima told The STAR in a roundtable discussion yesterday. “The idea is that if a certain type of catastrophe hits, the bond will be extinguish of the debt, and thus, will open up the financial capability of the government,” he explained.
James Saft
Reuters columnist
NEW ZEALAND HERALD Work on a NZ$200 million luxury hotel on Auckland’s waterfront will start next year after the project was granted resource consent this week. Auckland Council’s Panuku Development Auckland branch made the announcement this morning. The building will be one of the largest Chinese investments in New Zealand infrastructure. The hotel - to be referred to as the Park Hyatt Auckland - will be managed by the world-renowned Hyatt Group and will be built with the help of the Fu Wah International Group, which announced its plans for the hotel in November.
TAIPEI TIMES The Financial Supervisory Commission (FSC) denied media reports that its ban on short-selling stocks below their closing prices from the previous session was the culprit behind a surge in investors failing to settle their day-trading transactions. The commission said that two incidences of settlement failures involving day-trading of Largan Precision shares were detected. The commission’s short-selling ban was put into effect on August 24. It is easy for investors to borrow shares from the Taiwan Stock Exchange, but the commission has not seen a rise in stock loan applications, Wang said.
THE PHNOM PENH POST The government is seeking to strengthen its ability to counter money laundering and terrorism funding through a new working group that combines representatives across several ministries and the private sector. According to a statement released yesterday from the National Coordination Committee on Anti-MoneyLaundering and Combating the Financing of Terrorism, the new working group will be set up in response to an upcoming audit from international watchdog Asia/Pacific Group on Money Laundering, scheduled for next year. The working group will gather information and legal documentation in order to cooperate with auditors, the statement said.
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ow sellers of everything from Maui real estate to fine art reinvest the proceeds will be key in determining the global impact of Chinese capital flight. That is, of course, if China carries on allowing capital to flee, far from a certainty. China logged its biggest-ever fall in foreign exchange reserves in August, down US$93.9 billion last month to US$3.557 trillion as it battled a slide in the yuan prompted by capital flight, People’s Bank of China data showed on Monday. How, for how long and under what rules of engagement China fights this battle will matter a great deal for it and the global economy. Where the money leaving China goes, what it buys and what those who sell to Chinese capital owners do with the cash will also have a big impact; potentially changing the global price of money and with it the price of financial assets. Money leaving China does so for a complex set of reasons. Some individuals fear further devaluation of the yuan and falls in Chinese asset prices and go abroad seeking better investments. Some, especially those with fears over corruption prosecution and the rule of law, seek safety, often by buying property in places like London, New York, Hawaii or Canada, or even art. Property can act as an escape hatch as well as a store of value, while art is easy to store and easy to own anonymously. To understand the impact these
The open question is how China might try to stem (cash out)flows, though many of those efforts may only make money more eager to leave
flows might have on markets it is important to remember how and why China built up the largest foreign exchange reserves in history, and what it bought on the way up. The foreign exchange pile was largely built up in an effort to hold down the value of the yuan and support exports. To do so China needed to hold on to many of the dollars it earned in exchange for exports. The PBOC did this not like a pension fund, seeking to maximize risk-adjusted return,
but simply with the economic and exchange rate management as a goal. The result was that China became the biggest creditor to the United States, owning at least US$1.5 trillion of U.S. debt. So when money flows out of China, as it is now, the PBOC must either allow the yuan to fall in value or stabilize it by selling reserves, mostly Treasuries, and handing over the cash to owners who are expatriating it. The vast majority of this is done against regulations, but happens none the less.
Different preferences While the amount of dollars doesn’t change, the preferences of these dollar’s new owners is likely to be hugely different. Some Chinese will park some of their money in Treasuries, but many will instead buy real estate, art or other assets. “If China is forced to significantly run down FX reserves to defend its economy from disorderly capital outflows (which we believe would be dominated by domestics looking abroad as opposed to foreigners repatriating) and undesired currency depreciation, then this could have a notable impact on the U.S. term premia,” economists at Societe Generale led by Michala Marcussen wrote in a note to clients. “However, that would depend also on which assets capital outflows seek out; if the Chinese private sector buys U.S. Treasuries as the official sector sells then it is merely a swap of Chinese external
assets from the public sector to the private sector. In the real world, such perfect matching is unlikely.” This is where the preferences of the sellers of Picassos and luxury apartments come in. They too are unlikely to want to turn their new cash piles into exclusively liquid Treasuries. The upshot is a drop in overall supply of Treasuries offered, combined with a drop in demand, forcing interest rates up or increasing longer-term rates particularly. Remember too that the 10-year Treasury price is sometimes called the most important price in the world for a reason. Treasuries have a special power of influencing the value of other assets in financial markets. The higher the price of Treasuries, the cheaper other, riskier assets look in comparison. Reverse the first part of that and you reverse the second. The trend of capital flows does not appear over. “The evidence indicates not that the market is settling back down but rather that the market is betting more and more against the RMB stabilizing. Capital appears to be flowing out at a faster rate,” writes Christopher Balding, an associate professor at Peking University HSBC Business School. The open question is how China might try to stem flows, though many of those efforts may only make money more eager to leave. From Maui to Wall Street, the impact will be large. Reuters
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September 10, 2015
Closing Indonesian President unveils economic stimulus moves
Philippines’ Supreme Court orders payment to airport contractor
Indonesian President Joko Widodo (pictured) unveiled a series of policies yesterday as part of a stimulus package intended to support the rupiah, prop up growth and restore investor confidence in Southeast Asia’s largest economy. The package included extending a scheme to provide rice for the poor and adjustments to 89 regulations seen as overlapping with other rules, Widodo said. He said the government would complete its deregulation steps by October. But analysts are worried that the stimulus package could only offer short-term economic fixes and ignore thornier, entrenched problems such as the country’s poor infrastructure.
The Philippines’ Supreme Court has ordered the government to pay US$510.3 million to the local contractor of a controversial airport project after a more than decade-long legal row that raised doubts about the nation’s investment climate. The Ninoy Aquino International Airport (pictured) Terminal 3 has been embroiled in legal disputes between the government and its contractor, Philippine International Airport Terminals (PIATCO), over what the government should pay the contractor. The compensation was composed of a principal amount of US$326.93 million plus interest accrued from September 2006 to December 2014.
First global forex code takes shape Six codes of conduct currently in force will be scrapped in favour of the first global code Patrick Graham and Huw Jones
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he first comprehensive global code of conduct to regulate the scandalhit foreign exchange market will come into force in May 2017, central bank officials said yesterday. Three years of revelations over the conduct of major banks in the world’s single biggest financial market have seen dozens of traders suspended or fired and lenders fined billions of dollars for manipulating currency market benchmarks. Work on the new code by a committee from the Bank for International Settlements (BIS), a forum for central banks based in Switzerland, is the latest effort to head off further abuses and restore faith that the US$5 trillion a day market is run fairly. It will deal with issues including how to deal with automatic stop loss orders, and the difference between when banks are making markets themselves and when they are acting as agents for clients, Reserve Bank of Australia assistant governor Guy Debelle told a briefing at the Bank of England.
KEY POINTS Drawn up by Bank for International Settlements committee Follows three years of scandals in foreign exchange market Up to governments how the code will be enforced Bank for International Settlements headquarters
Six codes of conduct currently in force will be scrapped in favour of the first global code whose scope will go beyond traders to include asset managers and trading platforms, a reflection of how the market is rapidly evolving. This would go beyond the global preamble central bankers drew up last year to attach to existing codes. “We are not trying to reinvent the wheel in this code, but build on what’s there,” Debelle said.
“There clearly needs to be a significant rebuilding of confidence in the way this market functions,” added Debelle, who heads the BIS’s markets committee. Local “annexes” are envisioned to reflect specific national markets in some cases. “The idea is this code will continue to evolve,” Debelle said. The allegations and fines so far have focused on traders at banks who sell their services to hedge funds and other
Singapore remains Asia’s top meeting and convention city
Shanghai to shut polluting factories for Disney park
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ingapore has retained its spot as Asia’s top meeting and convention city under the Union of International Associations (UIA) and International Congress and Convention Association’s (ICCA) 2014 global rankings, Singapore Tourism Board said yesterday. This is the eighth year for Singapore to remain on top of UIA, and 13th consecutive year at the top of Asia Pacific cities in ICCA’s rankings, it added. “The accolade is not only a validation of the strength of Singapore’s MICE industry, but also a reminder that Singapore needs to continuously up its game in light of the increased competition. While we are humbled that Singapore remains the Asian destination of choice for event owners, we will continue to enhance our vibrant MICE ecosystem further for a more remarkable experience for business visitors,” said Neeta Lachmandas, Assistant Chief Executive (Business Development), Singapore Tourism Board. Under the halo, Singapore will also welcome some major events in the coming years, including Conference and the International Union for Physical and Engineering Sciences in Medicine World Congress for Medical Physics and Biomedical Engineering in 2021. Xinhua
market participants. Many in the market say this unfairly focused regulatory attention purely on the sell-side rather than customers as well. New York Federal Reserve official Simon Potter stressed the code aimed to provide guidance to all parts of the market, including central banks, that are key players. The officials said the code would need to keep pace with a market whose structure has shifted towards high-speed, computer driven trading from
the traditional transactions between banks over the telephone. “This is an entirely different market than it was five or six years ago, when (bank) dealers were the only ones making prices,” said David Pluth, chief executive of CLS, which processes almost all spot forex trades. Debelle said the biggest challenge was to devise ways of making banks and other participants stick to the new code. Critics have said the measures taken by regulators to date fail to go far enough in changing the structure of the forex market and the culture on trading floors that led to the scandals. The code won’t have the status of formal, binding regulation and it will be up to governments how it could be enforced. Britain has already made rigging of currency and other market benchmarks a criminal offence, and the European Union is also bringing in tougher punishments for market manipulation. Reuters
BOJ’s new measure of core CPI accelerates in July
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hina’s commercial hub Shanghai plans to shut 153 polluting and inefficient companies near Disney’s planned theme park to help improve the surrounding environment, according to a local government statement. The government will close the industrial firms -- described as “high polluting, high consumption and low efficiency” -- by the end of 2016 to “welcome” the opening of the Disney park, due early in the year, Shanghai’s economic agency said on its website. The 153 companies are mainly in the machinery, chemical and textile industries, it said, and are in the Zhoupu area, near the Disney park. Disney has pushed back the opening of the US$5.5 billion park, which broke ground in April 2011 and was due this year, to 2016. In July, Disney unveiled details of the planned park, promising Chinese features and new attractions not found in its five other resorts. The government plans to redevelop the companies’ current sites as part of a “beautiful countryside” initiative to promote agriculturerelated tourism, the statement said.
measure of core consumer prices that the Bank of Japan (BOJ) began publishing earlier this year accelerated in July, sources said, in a possible sign the central bank is making progress in encouraging inflation. The BOJ’s core consumer price index, which excludes fresh food and energy and is different from government data, rose 0.9 percent year-onyear in July, sources with direct knowledge of the matter told Reuters. That is faster than a 0.7 percent annual increase in June. The central bank is scheduled to officially release its data for July on September 16. The BOJ began publishing its own calculations from May. The BOJ is pursuing quantitative easing to lift inflation to 2 percent around the first half of fiscal 2016 and eliminate the risk of a return to deflation. The government’s measure of core consumer prices, which excludes fresh food but includes energy and some other food prices, turned flat in July from a year ago, raising doubts whether the BOJ can meet its inflation target.
AFP
Reuters