MOP 6.00 Closing editor: Joanne Kuai
Cutting Costs We live in interesting times. Local gaming labour unions say casino operators are sounding out dealers about internal transfers. Non-gaming positions have their appeal. But dealers are concerned about their hitherto generous pay packets
Year IV
Number 880 Tuesday September 15, 2015
Publisher: Paulo A. Azevedo
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Hotel sector growing
The hotel sector was up 18.1 pct in 2014 vis-a-vis 2013. In terms of Gross Added Value to the economy. AACM launches For a tidy MOP14.55 bln. The sector generated receipts of MOP27.87 bln, an increase of 10.1 pct. online reporting form Page 2 Expenditure totalled MOP23.07 bln, up 7.9 pct. Some 99 licensed hotels and guesthouses operated in Macau in 2014. Employing 39,475 people, down 1.1 pct y-o-y Gov’t extends wastewater Page
3
contract payment for Waterleau, ATAL
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Banking on a breakdown
Officials unveil Chinese state owned firms overhaul
Page 8
Spanish bank La Caixa has shown interest in the acquisition of Portuguese Novo Banco. Should negotiations falter between the Portuguese Gov’t and the original bidders the Spanish may have a chance. If successful, they will merge it with Portuguese bank BPI
Chinese firms keep building up debt despite government reform
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HSI - Movers September 14
Name
Junket Fraud
Tingyi Cayman Islands
+2.65
China Life Insurance C
+1.91
AIA Group Ltd
+1.42
Cheung Kong Property
+1.37
Li & Fung Ltd
+1.21
Want Want China Hol
-1.50
China Resources Powe
-2.45
Galaxy Entertainment
-2.61
Sands China Ltd
-3.00
Economy
Belle International Ho
-6.99
False Alarm?
Source: Bloomberg
Wynn Macau is steering clear. Announcing that junket operator Dore Entertainment’s financial quagmire does not involve the casino operator. A former employee of the junket has allegedly absconded with up to HK$2 billion (US$258 million). The case is in the hands of the police. While creditors want their money back
www.macaubusinessdaily.com
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Stimulating the masses Beijing has seized up to 1 trillion yuan from local governments. All of whom failed to spend their budget allocations. Analysts warn that Chinese stimulus measures are not reaching the real economy
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%Day
The austerity alarm has been sounded. But statistics from the Financial Services Bureau are reassuring. Revealing that the SAR’s central account generated a surplus of MOP28.9 billion in the first eight months of the year. Gov’t revenue reached MOP72.7 bln. Or 68.1 pct of the revenue forecast for 2015
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2 | Business Daily
September 15, 2015
Macau Vitasoy receives MOP14.8 million to provide soymilk to students Vitasoy (Macau) Ltd. will receive a total of MOP14.80 million (US$1.85 million) to provide Macau schools with soymilk during the school years of 2015/2016 and 2016/2017, according to the Official Gazette. The company will receive MOP2.58 million in 2105, MOP7.37 million in 2016 and MOP4.85 million in 2017. Regarding ordinary milk, the government has requested Dah Chong Hong supermarkets to be the provider to schools during these two school years. The Executive will pay to the Hong Kongbased company around MOP21.04 million divided into three payments. The first is to be paid this year and amounts to MOP3.78 million, next year totals MOP10.49 million, and in 2017 the company will receive MOP6.77 million.
Sai Van Bridge maintenance costs MOP13.09 million The government will pay MOP13.09 million (US$1.64 million) to the consortium comprising contractors Construções e Obras Públicas Ka Hou, China Road and Bridge and Sociedade de Engenharia e Electromecânica e Construção Civil Taxon for the management and maintenance of the Sai Van Bridge. These services will be required for the period spanning October 2015 to September 2017, according to the dispatch published yesterday in Macau’s Official Gazette signed by Chief Executive Fernando Chui Sai On. The payment will be in three instalments starting in 2015. The first instalment of MOP1.64 million will be paid this year. Next year, the government will pay an extra MOP6.54 million, and in 2017 another MOP4.91 million.
MUST receives approval to launch Master of Applied Economics The Macau University of Science and Technology (MUST) has received approval from the Secretary for Social Affairs and Culture to launch a Master of Applied Economics. The programme will last a duration of two years, with the course conducted in Chinese and English, according to the dispatch signed by Alexis Tam Chon Weng and published yesterday in the Official Gazette. This Master’s degree will complement the programmes that are already offered by MUST, such as Master of Business Administration, Science in Accounting and Science in Finance, among others that are part of the School of Business. The School of Business is the largest faculty in MUST and in the school year of 2013/2014 had a total of 3,941 students out of 10,452. Of the total students in the department, 867 were Master’s students.
Government surplus MOP28.9 billion for first eight months The Executive may have adopted ‘austerity’ measures, but for the first eight months of the year the territory has already raked in MOP10.1 billion more than the initial projections for the whole year João Santos Filipe
jsfilipe@macaubusinessdaily.com
I
n spite of adopting spending cut measures for the period starting in September, in the first eight months of the year the government central account generated a surplus of MOP28.9 billion, according to data published yesterday by the Financial Services Bureau (DSF). In terms of surplus, during August the amount of money cashed in by the government grew MOP1.7 billion from MOP27.2 billion. This means that the surplus generated until August is already around MOP10.1 billion up on the forecast for the whole year of the government, which was assuming an amount of around MOP18.8 billion. From January to August, the revenue collected by the government amounted to MOP72.7 billion, which represents 68.1 per cent of the total revenue forecast for the whole year. Nevertheless, this amount is down 32.3 per cent year-on-year from MOP107.4 billion. Once again, the central account data reflects the current situation of the gaming industry in Macau, and as such revenues from direct taxes plumetted 34 per cent year-on-year to MOP61.5 billion from MOP93.3 billion.
Not surprisingly, direct taxes from gaming, which are the largest source of government revenue, declined yearon-year 35.5 per cent to MOP58.6 billion from MOP90.9 billion. Other direct taxes increased 21.6 per cent to MOP2.9 billion from MOP2.4 during the first eight months of the past year. Indirect taxes also followed the current trend of the gaming sector plunging 31.5 per cent to MOP2.8 billion from MOP4.1 billion.
Controlled expenditure
The effects of cost saving measures implemented by the government will only be apparent in September. Up to August, however, the government has the expenditure controlled, as expenditure only accounts for 49.9
per cent of the total projected for the whole year, when more than half of the year has passed. From January to August, the government spent MOP43.8 billion, an increase of around MOP8.9 billion (25.5 per cent year-on-year) from MOP34.9 billion. Current expenditure alone increased 24.4 per cent yearon-year to MOP41.1 billion from MOP33.0 billion in the first eight months of 2014. Meanwhile, capital expenditure increased 43.6 per cent year-on-year to MOP2.8 billion from MOP1.9 billion. The majority of this spending comes from the Investment Plan (PIDDA), the expenditure of which increased 67.8 per cent year-onyear to MOP2 billion from MOP1.2 billion. Regardless, the Secretary for Economy and Finance, Lionel Leong Vai Tac, said in announcing the socalled ‘austerity’ measures that the investment plan for the territory will not be watered down. Central Account data also demonstrated that for the period from January to August, the total amount for the expenditure transferred to the Social Security Fund more than doubled by increasing MOP6.5 billion (118 per cent) to MOP12 billion from MOP5.5 billion.
Online confidential aviation reporting form in place
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he Civil Aviation Authority of Macao SAR (AACM) launched the online Macau Confidential Aviation Reporting System (MACCARES) reporting form today. The system seeks to provide the industry and residents with another convenient channel for submitting information regarding safety concerns to the Authority. MACCARES is a voluntary, confidential, and non-punitive incident reporting system established by AACM in 2013. The purpose is to enhance
aviation safety and to prevent the occurrence of aircraft accidents and incidents through collecting information on actual or potential safety deficiencies that may not be captured by the mandatory occurrence reporting system so that AACM can analyse the data and hence recommend improvements to the aviation system. MACCARES enables any person who becomes aware of safety concerns on aviation safety or non-compliance with Macau’s laws and regulations to report such concerns to AACM.
Business Daily | 3
September 15, 2015
Macau
Hotel sector contributed MOP14.55 billion to local economy in 2014 The number represents an 18.1 pct increase year-on-year. Meanwhile, expenditure for the sector increased 7.9 pct to MOP 23.07 billion Joanne Kuai
joannekuai@macaubusinessdaily.com
T Gov’t extends wastewater contract payment for Waterleau, ATAL The Macau Government is to pay MOP3.27 million to the consortium of Waterleau and ATAL, two companies that had had links with Ao Man Long's corruption case Stephanie Lai
sw.lai@macaubusinessdaily.com
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dispatch from the Chief Executive published in the Official Gazette yesterday reveals that the government will pay a consortium of ATAL Engineering Ltd. and Waterleau a total of MOP3.27 million for the operation and maintenance services of the wastewater treatment plant in the Zhuhai-Macau CrossBorder Industrial Park for this year and next. This is yet another payment to be made by the government to the sewage plant and the two companies that had links to the high profile corruption trial of former Secretary for Transport and Public Works Ao Man Long. According to the Chief Executive dispatches, the government paid the consortium MOP5.4 million for the services for last year and 2013, and another MOP8.9 million for the same services between 2012 and 2013. Business Daily has asked the Environmental Protection Bureau (DSPA) to confirm if the Waterleau in the dispatch refers to the Belgian-based Waterleau Global Water Technology NV or its
subsidiary Waterleau Macau Lda, but had not received a reply by the time the story went to press. The Bureau has also not replied to our enquiry into why a public tender was not launched for the wastewater treatment plant operation and maintenance services at the Zhuhai-Macau Cross-Border Industrial Park. The Court of First Instance ruled in March last year that the former Chief Executive of Waterleau Global, Luc Vriens, and the then management member at ATAL Fong Chun Yau were guilty of bribing Mr. Ao to ensure the success of building and operating the wastewater treatment plants in the cross-border zone and Coloane. The Court of First Instance ruled at the time that Fong was to have a suspended sentence of three years for the bribery charges on condition he pay the MSAR MOP200,000 within three months following the ruling. But Fong lodged an appeal against this decision to the city’s Court of Second Instance, which eventually rejected it in a ruling made in July.
he MSAR’s hotel sector generated receipts of MOP27.87 billion (US$3.49 billion) last year, according to the results of a hotels and similar establishments survey 2014 released by the Statistics and Census Service (DSEC) yesterday. Official data shows that when analysed by types of receipt, room sales increased 14.3 per cent year-on-year to MOP 13.65 billion, accounting for 49.0 per cent of the total; receipts from Food & Beverages increased by 1.1 per cent to MOP 5.65 billion; receipts from rental of space rose by 18.6 per cent to MOP 5.58 billion, with those for MICE events (MOP 339 million) soaring 111.1 per cent. The survey covered all licensed hotels and guesthouses in Macau which totalled 99 operating in 2014, a decrease of 1 year-on-year, comprising 66 hotels and 33 guesthouses. The total number of persons engaged dropped 1.1 per cent year-on-year to 39,475. Of these, 26,089 around 66.1 per cent - were working in 11 large-scale hotels of 800 or more persons, representing a decrease of 8.1 per cent compared to 2013. Of all establishments, 5-star hotels have the most
balanced income portfolio, with room sales accounting for 46.9 per cent of total receipts, rental of space 22.8 per cent, and F&B 20.6 per cent. The amount of each category stood at MOP10.82 billion, MOP5.25 billion, and MOP4.75 billion, up 14.7 per cent, 18.9 per cent and 0.1 per cent, respectively, when compared to 2013. DSEC said it was worth noticing that online business in hotel sector saw a marked growth, with receipts from online room reservation and ticketing, etc. surging 29.4 per cent to MOP784 million, with the corresponding growth for 3-star and 2-star hotels reaching 35.2 per cent. The data from 2014 also indicates that expenditure of the hotel sector increased by 7.9 per cent year-on-year to MOP 23.07 billion. Operating Expenses (MOP 10.49 billion) and Compensation of Employees (MOP 9.59
billion) rose 3.1 per cent and 17.2 per cent, respectively, year-on-year, while Purchase of Goods & Commission Paid (MOP 2.99 billion) edged down 0.9 per cent. Meanwhile, Nonoperating Expenses such as depreciation of fixed assets and interest paid totalled MOP 7.25 billion, down 7.7 per cent year-on-year. All in all, Gross Value Added, that measures the sectoral contribution to the local economy, rose 18.1 per cent year-on-year to MOP 14.55 billion. Gross Surplus of the sector (receipts plus changes in inventories less expenditure) amounted to MOP 4.96 billion, up 20.0 per cent. On the other hand, owing to an increase in major renovations of establishments in 2014, Gross Fixed Capital Formation grew 22.0 per cent year-on-year to MOP 2.76 billion.
4 | Business Daily
September 15, 2015
Macau
Ka-Ho Tunnel excavation underway The MOP250 million tunnel is expected to become operational in 2017
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he excavation of the north and south ends of the KaHo Tunnel is underway. Construction started in the third quarter of last year. Explosion-proof vents are expected to be built in order to facilitate future blasting work, according to local Chinese language newspaper Macao Daily. In April 2014, the Infrastructure Development Office (GDI) awarded Zhu Kuan Fomento Imobiliario Lda consortium a MOP254.1 million for the construction of the Ka-Ho Tunnel in Coloane. Payment by the Macau Government to the company is to be made in four tranches, the first of which for 2014 was MOP96.6 million, while those for 2015 and 2016 are both of MOP70 million, while that for 2017 is MOP17.6 million. The project is for a 500-metre long tunnel that will link the east of Cotai to the northeast tip of Coloane Island. GID said previously that the twoway tunnel, comprising four lanes, will have its northern entrance start near the Rua da Central Térmica de Coloane in eastern Cotai. The tunnel will be connected to the area near Ka-Ho Port, the northeastern tip of Coloane Island where Macau Oil Terminal and Macau Cement Manufacturing Co. Ltd. are located. Currently, cars have to navigate Estrada do Istmo, and the narrow
Estrada da Barragem de Ká Hó, Estrada do Altinho de Ka Ho to traverse the urban zones of Coloane and Taipa to Ka-Ho. The tunnel is expected to reduce travel time for the said distance by 10 to 15 minutes.
Progress
Macao Daily quoted relevant parties as saying that the mountain the tunnel is situated in mainly comprises granite, and that the excavation will take time. Blasting will be conducted inside the explosion-proof vent, in order to lower the impact of the vibration on the mountain and machinery in the power plant in Colane. Authorities have requested the contractor to install monitoring facilities and collect data from every blast so that the amount of explosives can be more accurately calculated. The contractor is also required to use fences and water splash to reduce dust in a bid to lower the impact on surrounding areas. The Coloane Ka-Ho Tunnel will be divided into three phases. Besides the main tunnel being excavated, the construction of the southern end of a 1.2 kilometre road was completed last year, and includes broadening the two-lane Estr. de Nossa Sra. de Ka Ho into four lanes. The third phase, which is the northern end of the tunnel to link eastern Cotai, will be implemented later. The whole construction is expected to be finished in 2017.
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Business Daily | 5
September 15, 2015
Macau
Wynn Macau denies involvement in Dore Entertainment fiasco Judiciary Police have confirmed that they are investigating the theft, after receiving a report from the junket operator and other relevant parties
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ynn Macau yesterday denied any involvement in the alleged rejected withdrawals of deposits placed with junket company Dore Entertainment. The gaming promoter, which operates in the US-based company owned property, is tainted by a fraud scandal because a former staff member allegedly absconded with up to HK$2 billion (US$258 million) of the company’s money. ‘Dore is an independent, registered and licensed company operating a gaming promoter business at Wynn Macau. Any matters related to Dore’s alleged failure to honour withdrawal of funds requests are related to Dore’s direct financial relationships with the parties requesting such withdrawals and accounts maintained directly between Dore and such parties’, the casino operator explained yesterday in a voluntary announcement to the Hong Kong Stock Exchange. In the same announcement, Wynn Macau clarified that Dore Entertainment does not owe any money to the company and will continue to operate in the casino. In spite of the voluntary announcement, by the time Hong Kong Stock Exchange
trading ended yesterday the stock price of the company controlled by Steve Wynn had dropped 2.58 per cent to HK$10.58.
Police investigation
Judiciary Police (PJ) have confirmed that they are investigating the theft, which may involve some HK$270 million. The police said that they have received a report from the junket operator and another 24 reports from relevant parties, including 19 local, four Mainland Chinese,
and one Hong Kong resident. When asked whether there is a suspect at large, the police said that it was not convenient to release more information at this stage but they don’t exclude the possibility of asking for assistance from Interpol if necessary. Business Daily reported that about 30 protesters assembled outside Wynn Macau on Saturday claiming that their deposit withdrawal from junket promoter Dore had been rejected. The protest follows reports that a former
cage staff member with Dore Entertainment has allegedly absconded with cage capital of as much as HK$2 billion. In a declaration notice published by Dore Entertainment on its website and in the Saturday issue of local Chinese newspaper Macao Daily News, the company said that it has already filed the case with police authorities, saying that the former cage staff member ‘has allegedly used her authority to conduct some unauthorised business’, and
‘damaged the company’s interest and reputation’. Dore Entertainment Co., founded in 2006, was the first junket operator to work with Wynn, according to Macau Gaming Watch website, which cited a filing with the Hong Kong Stock Exchange. The company operates two VIP rooms with at least 25 tables in total at Wynn Macau, according to Anthony Wong, a UBS Securities analyst. The casino had 461 tables at the end of last year, according to a public filing.
Four Mainlanders arrested for loan-sharking
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our men from Mainland China have been arrested for illegal confinement and loansharking. Judiciary Police spokesman said yesterday at a press conference that they had received a tip-off on Saturday morning that a Malaysian man was illegally confined in a foot massage parlour in Zapa on the Macau Peninsula. Police entered and arrested four men that were guarding the victim, finding another man from Hong Kong who was also being illegally confined in the same location. Following preliminary investigations, the police said that the two victims had both met one of the suspects in the morning outside a casino and were persuaded to borrow money and gamble. After losing all the money gambling, the two victims were taken to the massage parlour and locked up.
The police said there was evidence indicating that these four suspects had been active since March this year. They will be charged with illegally taking away people’s freedom and organised crime. The case will be passed to the Public Prosecutor’s Office. In the first half of the year, the number of crimes related to the gaming industry increased 34.5 per cent year-on-year to 679 cases from 505 during the first six months of last year, according to crime reports for the first half of the year. From January to June, illegal confinement cases increased 112.5 per cent year-on-year to 170 cases from 80 cases during the first half of 2014. The number of loansharking cases increased 39.1 per cent year-on-year to 153 cases from 110.
6 | Business Daily
September 15, 2015
Macau
Croupiers approached about internal transfers Macao Gaming Industry Employees Home and Forefront of Macau Gaming say their dealer members have been offered internal transfer opportunities due to the persistent gaming revenue slump Stephanie Lai
sw.lai@macaubusinessdaily.com
much [working in other departments] they will be earning less salary.”
Cost-saving measures
Both Mr. Lei and president of Macao Gaming Industry Employees Home Mr. Leong Sun Iok remarked to Business Daily that they believed the internal transfer suggested by the casino operators was for cost-saving. “The internal transfer is an act [through which] the gaming operators would like to save some costs with gaming earnings now not good; we’ve seen several VIP gaming room closures so far this year,” Mr. Leong said. “But this does not necessarily mean that the city now has an excess supply of dealers.” As of the second quarter of this year, some 25,072 dealers were working in the city, down 2.5 per cent year-on-year, according to Statistics and Census Service (DSEC) data. As at June, dealers' average earnings stood at MOP18,580 a month, 6 per cent more than a year before; while average monthly earnings for the overall gaming sector is MOP21,480, representing a rise of 6.5 per cent year-on-year.
Predent approach
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ome of the city's gaming operators have sounded out their croupier employees about switching to other departments amid the slowing gaming business, a measure that two gaming labour unions here see as a cost-cutting measure. Casino operator SJM is the name that both Macao Gaming Industry Employees Home and Forefront of Macau Gaming have cited as one
of the casinos that has asked their croupier employees regarding their wish to switch to other non-table game operations at their new Cotai properties. “This internal transfer issue at this stage is only a policy that some casino operators have been consulting their dealers on their inclinations,” said deputy director of Forefront of Macau Gaming Lei Kuok Keong. “The names [of casino operators] that we
Corporate CEM launches ‘E-bill Grand Lucky Draw’ In response to environmental protection and to encourage Macau residents to receive electricity bills via the e-bill service, Companhia de Electricidade de Macau - CEM, S.A. (CEM) has launched the ‘E-bill Grand Lucky Draw’. The company says that the E-bill service not only enables customers to receive electricity bills in a quick and convenient way but reduces paper consumption and deforestation. Through the activity, CEM
hopes to increase public awareness of environmental protection and contribute to building a green Macau. The ‘E-bill Grand Lucky Draw’ promotion period starts from now until 18 March 2016. Customers who successfully register with the CEM E-bill service will automatically be entered into the lucky draw. Results of the lucky draw will be announced on 29 April 2016. Winners will be notified individually.
have heard doing this are SJM, Melco Crown and Galaxy.” “Some of our dealer members have been asked if they would like to work in departments like human resources, F & B or surveillance or security departments in the new Cotai properties, where training for that could be provided,” Mr. Lei added. “But what the dealers are concerned about is that while they believe the allowances and benefits will not differ
In the quarter, job vacancies for the gaming sector totalled 507, down 1,022 year-on-year; the vacancies for dealers, which stood at 107 in the period, represented a sharp fall of 78.7 per cent. “We have noticed that the gaming operators have now become much more prudent in employing dealers, in contrast to the gaming boom period when they even employed some 50 or 60-year olds that were not very well qualified due to the tight supply of labour,” Mr Lei remarked. “For existing employees, the operators have also been much stricter [regarding] observing their work performance.” “The gaming business turned really bad after Chinese New Year but we don't think the casino operators have any intention of firing their dealers because the mid-term review of the gaming concessions is imminent and their new Cotai casinos will be opening soon,” Mr Lei said. “But we'll be watching what the terms are for the internal transfers being adopted for our employee members.”
Casino workers urge better labour law to safeguard employment
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round a dozen members of local gaming labour union Gaming Employees Advance Association petitioned the Labour Affairs Bureau (DSAL) yesterday. They voiced their hopes of a revision of the Labour Affairs Law in order to better safeguard casino workers’ rights, local media TDM Chinese radio reported. Having the freedom to choose voluntarily to prolong the working period and retire at 65 years old, the freedom to choose to only work five days a week, and compensation on overlapping holidays are among the seven requests made by the workers. Director of the Gaming Employees Advance Association, Chan Chi Kin, said that working five days a week would help with the employment situation in the gaming industry without firing workers, as well as
providing casino workers with some free time to rest so that when in need the workers can be mobilised to work overtime. Mr. Chan added that the majority of their members work at Sands China and around 60 per cent of their members are aged over 50 and are the breadwinners of the family who can’t afford to lose their job. That’s why they would like to suggest delaying the retirement age to 65 year from the worker’s own will.
Business Daily | 7
September 15, 2015
Macau
Spanish bank La Caixa circles Portuguese Novo Banco The Spanish company is a major shareholder of the Portuguese BPI, which operates in Macau through its offshore branch, and is considering merging it with the parent company of Novo Banco Ásia João Santos Filipe
jsfilipe@macaubusinessdaily.com
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panish bank La Caixa is interested in the acquisition of Novo Banco, if the ongoing negotiations for the sale of the Portuguese bank fail. The bank that is on sale is the parent company of the Macau-based Novo Banco Ásia. According to Portuguese newspaper Diário Económico, La Caixa is planning to buy the bank in order to merge it with another Portuguese bank named BPI, of which it is already a major stakeholder. BPI is represented in Macau through its offshore branch and a merger may end up affecting the two institution operating in the territory. Notwithstanding, and according to the Portuguese newspaper, this scenario
would only happen once the current stress tests that Novo Banco is going through are finished and the amount of capital injection required for the bank is known.
Waiting list
For the time being, the Portuguese Government has an open tender for the sale of Novo Banco and received three bids from Chinese groups Anbang and Fosun International, and the American Apollo Global Management. After negotiations failed with the best offer, from Chinese Group Anbang, talks started with Fosun Intern ation a l . B u t th e latest news from the Portuguese media is that these negotiations have also collapsed because the
Chinese group is not willing to offer more than 1.5 billion euros (MOP13.49 billion) for the bank, while the Portuguese Government initially wanted to be paid
4.9 billion euros (MOP44.08 billion). By the time this story went to press there was no confirmation of the failed negotiations by the Bank of Portugal.
Should Fosun International decide to give up on the negotiations the Portuguese Government will have to decide between delaying the negotiations to November, when the results of the stress tests are known, or to initiate talks with the American Apollo Global Management. If the first option is chosen, then the door for La Caixa will be opened. Novo Banco was created in August 2014 from the healthy assets of Banco Espírito Santo (BES), which was split into ‘good’ and ‘bad’ banks after being rescued by the resolution fund of the Portuguese Central Bank. The so-called good bank, which includes Novo Banco Ásia, is wholly owned by the resolution fund and is not listed on the stock market.
8 | Business Daily
September 15, 2015
Greater China
Beijing to make state firms stronger Will also introduce pilot schemes at central government-owned conglomerates Xiaoyi Shao and Brenda Goh
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hina will work to reform its huge state-owned enterprises (SOEs), making them more subject to market forces and restructuring those that are performing poorly, while allowing some to close, government officials said yesterday. In a long-awaited reform document published on Sunday, the government said it would introduce “mixed ownership” into its sprawling state sector, heralding its most far-reaching overhaul of the bloated state sector in two decades, a task that has become more pressing as the economy slows. Zhang Xiwu, deputy head of the country’s state assets supervisor, told a news briefing that China would work to reorganise and merge SOEs in order to centralise state-owned capital in key industries, while restricting state investment in industries not in line with national policies. “We will make more efforts in reforming ‘zombie enterprises’, longtime loss-making enterprises and in disposing of those low-efficient and non-performing assets,” said Zhang of the State-owned Assets Supervision and Administration Commission (SASAC). Zhang said that China would use stock exchanges, property exchanges and other capital markets to sell the assets of low performing SOEs “at fair prices”.
State owned companies in oil sector are some of the most prominent
China’s Ministry of Finance and SASAC will also introduce pilot schemes at central government-owned conglomerates, to create state capital investment and operating companies to improve the competitiveness of those firms and create a “barrier” between enterprise and government, said Xu Hongcai, Assistant Minister of Finance.
Difficulties
Representatives from five government agencies, including the trade and labour ministries as well as the top economic planner, spoke at yesterday’s briefing, and presented their own documents on the reform plan,
leading some analysts to question how effective the liberalisation would be. “Various agencies participated in drafting the document and are simultaneously presenting their own interpretation of what SOE reform means,” said Andrew Batson, China research director at Gavekal Dragonomics. “There’s a tension between the idea they want SOEs to be more independent, vibrant and commercial and the fact they’re imposing all of these new rules and regulations on what they can do,” he said. SASAC’s Zhang vowed to raise the performance of China’s lumbering state
sector by making them “stronger, better and larger” but conceded there would be difficulties pushing through the reforms. Speaking to Reuters on the numbers of SOEs that would be cut, Lian Weiliang, vice chairman of the country’s National Development and Reform Commission, said there was no such plan. China’s state sector is dominated by 111 central government-owned conglomerates, which account for about 60 percent of SOE revenue and are overseen by SASAC. State media reported earlier this year that the number could shrink to 40 through mergers. Reuters
Fosun’s Guo
It’s the first time that Gu to consolidate its busines Bonnie Cao and Ye Xie
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Guo wealth grew through investing in financial assets such as insurance companies to secure long-term funding that can be deployed to expand across a range of businesses
hinese billionaire Guo Guangchang, who calls himself a student of Warren Buffett, says he will slow down a global buying spree over the next two years after his Fosun Group snapped up insurers, banks and fashion companies at home and abroad. Guo will focus on completing recent transactions, allowing him to establish a network of insurance and financial services providers across major global markets, the 48-yearold founder and chairman of Fosun said in an interview. China’s biggest closely held conglomerate, which owns Club Mediterranee SA, has announced 10 takeovers worth a combined US$6.4 billion in the past year through July, according to data compiled by Bloomberg. “We have always been very cautious,” Guo said on Friday in New York. “We’ll still look for new investment opportunities, but our main task now is to focus on what we have already established.” It’s the first time that Guo has signalled a slowdown in acquisitions as the company seeks to consolidate its businesses and work to reduce its debt level. Fosun International Ltd., the Hong Kong-listed unit, raised US$1.5 billion in a rights offer on
Business Daily | 9
September 15, 2015
Greater China Hong Kong steps up effort to stem tourist drain The total number of overnight visitor arrivals to Hong Kong in the first half of 2015 slid 3.8 per cent
T
he decline in tourism related statistics in Hong Kong since this summer has prompted the region’s government and sector to pan out strategies to win visitors back. According to the latest data provided by the government, the business receipts of the tourism, convention and exhibition services of Hong Kong in the second quarter of 2015 saw a year-on-year decrease of 4.2 percent. A notable drop of 10.9 percent in accommodation services industry receipts was recorded. The total number of overnight visitor arrival to Hong Kong in the first half of 2015 slid 3.8 percent, compare to the same period last year, the Hong Kong Tourism Board statistics revealed. Attractions including Hong Kong Disneyland, The Peak, Madame Tussauds museum were not spared amid the predicament, with all of them recorded over 10 percent drop of visitors during June to August comparing to the same period of last year. Vivian Lee Ling-fung, Sales and Marketing Executive Director
of Hong Kong Ocean Park, said since the economy in peripheral regions was not bright, together with the lowered exchange rate of RMB, fewer visitors were coming to Hong Kong, which, in turn, affected to park’s number of visitors. Ocean Park saw a year-on-year 15 percent fall during July to August, with the number of mainland visitors dropping the most. Analysing the reasons of the decrease in visitors, Hong Kong Legislative Council member Yiu Si-wing said, apart from peripheral economic environment and the lack of tourism resources in Hong Kong, the act of anti-parallel traders was also to blame, has created an image that Hong Kong was no longer a hospitable city. Hong Kong Chief Executive Leung Chun-ying said earlier this month that he did not want to see any violence against tourists, and would not condone any actions which hurt Hong Kong’s reputation as a tourist city. He said tourism was important for Hong Kong, especially in creating job opportunities for many at the grassroots level, adding that the
government has spared no effort in promoting Hong Kong tourism overseas and on the mainland. Ocean Park deputy chief executive Matthias Li Sing-chung said they would introduce a string of new rides, which could help strengthen the park’s position as one of the top attractions across the region. Besides, the park would continue to increase its number of attractions and make use of different marketing strategies to cater the need of different consumption groups, Li added. Hong Kong Disneyland is also about to present visitors with brand new attractions, and Managing Director Andrew Kam Min-ho said the park would intensify sales and marketing promotion in 20 countries and cities in Asia to further expand the park’s market and push ahead with Hong Kong tourism development. Yiu suggested that Hong Kong should have its own tourism products as it lacks impressive tourism resources apart from Ocean Park and Disneyland. The government should map out a comprehensive plan in this regard and reinforce promotion. “There will be many large scale attractions in the future, such as Kai Tak Development area in Kowloon City will turn into Kai Tak Fantasy, a recreational place, while outlying island Lantau can become a tourism island upon completion of the Hong Kong-Zhuhai- Macao Bridge,” the legislator said. Differnt places in Hong Kong could be developed into areas with their own characteristics, which would help to add attractiveness to regular visitors, he added. Xinhua
o says time to digest deal spree
uo has signalled a slowdown in acquisitions as the company seeks sses
Net 723.8 bln yuan of FX sold in August China’s central bank and commercial banks sold a net 723.8 billion yuan (us$113.69 billion) of foreign exchange in August, by far the largest outflow on record, according to a Reuters calculation based on central bank data released yesterday. The previous largest outflow, last month in July, totalled 249.1 billion yuan (US$39.13 billion). On August 11, People’s Bank of China surprised global markets by announcing a new fixing mechanism for the yuan against the dollar and abruptly devaluing the currency by nearly 3 percent.
Railway Group plans to absorb subsidiary
China Railway Group said yesterday it would absorb the assets of subsidiary China Railway Erju as part of wider efforts to streamline the government’s sprawling railway sector. Trading in both firms, which are controlled by stateowned holding company China Railway Engineering Corporation, was halted yesterday. Based on their last mainland-listed share prices, China Railway Group was valued at 233.92 billion yuan (US$36.72 billion) while China Railway Erju was valued at 17.46 billion yuan. Railway sector is among those that could be suitable for being reformed to limited non-state investment.
First mainland GM cow gives birth
September 10, a move that Guo said will help lower its leverage and boost investors confidence in the shares. Fosun will also sell off some of its real estate assets and equities around the world as prices have climbed to a “satisfactory level,” while the scale won’t be massive, he said.
Four friends
Guo co-founded Fosun with four friends and about US$6,000 in capital in the 1990s and later built it by borrowing from the investing approach used by Buffett’s Berkshire Hathaway Inc. It invests in financial assets such as insurance companies to secure long-term funding that can be deployed to expand across a range of businesses. The worst of China’s stock market turmoil has passed and the economy is not “as bad as portrayed,” Guo said, referring to lower commodity prices, cheaper borrowing costs and resilient consumption growth. The Shanghai Composite Index has fallen 38 percent from its June 12 high as a boom turned to bust. Guo said mainland health-care and infrastructure companies and Chinese stocks on Hong Kong and U.S. exchanges are attractive. On average, dual-listed companies traded in Hong
TV on September 8 that he’s “bullish on China.”
Billionaire index
We’ll still look for new investment opportunities, but our main task now is to focus on what we have already established Guo Guangchang, Fosun conglomerate owner
Kong are about 26 percent cheaper than their counterparts in Shanghai, data compiled by Bloomberg show. “Be fearful when others are greedy and greedy when others are fearful,” Guo, who often cites Buffett, said. “At least you don’t have to be so fearful at the moment.” Guo said he has only met once with Buffett, who told Bloomberg
Fosun International’s shares have declined 38 percent since a peak in May, cutting their gain this year to 31 percent. The average forecast of eight analysts surveyed by Bloomberg is for a 70 percent advance in the next 12 months. Some of Fosun’s biggest acquisitions include Greek jewellery brand Folli Follie and One Chase Manhattan Plaza in New York. In July, it said it bought the former Milan headquarters of Italy’s UniCredit SpA in a deal valued by the seller at 345 million euros (US$391 million). It recently agreed to buy German private bank Hauck & Aufhaeuser Privatbankiers KGaA and offered to buy out Brussels-based BHF Kleinwort Benson Group SA for as much as 500 million euros. Guo’s wealth has jumped by 31 percent this year to US$5.6 billion, according to the Bloomberg Billionaires Index. His closely held Fosun Holdings Ltd. controls Fosun International and the Hong Kong- and Shanghai-listed drugmaker Shanghai Fosun Pharmaceutical Co. Bloomberg News
A cloned, genetically modified cow has given birth to a healthy calf in China, a crucial step toward producing domestic marbled beef. Ni Hemin, who led the research at Beijing University of Agriculture, said the heifer was healthy half a month after its birth on August 28. The calf’s mother, Niu Niu, is one of two clones born in 2012 with a gene inserted to increase the fat level of their muscle. China lacks breeds that produce marbled meat with fat and muscle intertwined. Ni said the birth of the calf implied major breakthroughs.
Tianjin to rebuild train station destroyed in blasts Workers have begun dismantling a train station for reconstruction in north China’s Tianjin after it was seriously damaged in the fatal warehouse blasts one month ago. The new Donghailu stop of the No. 9 light-rail transit line will be built at the original site, and design work is under way, said a source with the Tianjin Binhai Mass Transit Development Co., Ltd. yesterday. The five-story building, which housed an operation control centre, a training centre and a laboratory, cannot be used any longer due to severe damage, said the source from the company, which operates the light-rail line.
10 | Business Daily
September 15, 2015
Greater China
Companies resist Li reform push Banks are straining under the most nonperforming loans since 2008 Lianting Tu
F
or all Premier Li Keqiang’s (pictured) rhetoric about unrelenting economic reform, companies listed in Shanghai are building up debt at the fastest pace in three years as it gets harder to finance growth from earnings. Total debt at 1,003 Shanghaitraded non-financial firms increased 18 percent in the last 12 months, the fastest pace in three years, to a record 868.3 billion yuan (US$136 billion), the latest Bloomberg-compiled filings show. The debt-to-common equity ratio, adjusted for market value, has risen to 123.1 percent from 121.5 percent a year ago and 88.7 percent back in 2010. China’s growing debt pile is at odds with Premier Li’s vow to rebalance the world’s second-largest economy and reform bloated state-owned enterprises. Banks are straining under the most nonperforming loans since 2008 while attempts to make the equity market an avenue for deleveraging ended in a market collapse and a freeze in initial public offerings in July. “The long-awaited deleveraging of China’s corporate sector hasn’t started yet,” said Xia Le, the chief economist for Asia at Banco Bilbao Vizcaya Argentaria SA in Hong Kong. “Firms are still piling up debt in support of their capital spending.” About 16 percent of companies listed on the Shanghai stock exchange generated losses in the last 12 months, more than double the number a year ago, Bloomberg-compiled data show. Government, corporate and household obligations ballooned to US$28.2 trillion, or 282 percent of China’s gross domestic product as of mid-2014, according to McKinsey & Co., and in April, a state-owned enterprise became the first ever to miss an onshore payment obligation. Unadjusted, the average debtto-common equity ratio looks even worse, at a 205.7 percent, the highest
in at least a decade. Eleven companies have a ratio exceeding 1,000 percent. Onshore bond sales from non-financial companies total 3.1 trillion yuan this year, up from 2.4 trillion yuan the same period of 2014, Bloombergcomplied data show. Weaker demand for Chinese goods could add to the stress facing those companies that rely on selling their wares to the rest of the world. Exports declined for a second consecutive month in August and although the People’s Bank of China devalued the yuan last month, a move some economists said was to tackle weakening exports, any impact is yet to show. “Policy makers intend to reduce leverage in the economy, but they’re also trying to make it a smooth process,” Zhu Qibing, a Beijing-based analyst at China Minzu Securities Co., said.
Policy makers intend to reduce leverage in the economy, but they’re also trying to make it a smooth process Zhu Qibing, analyst, China Minzu Securities Co.
“That’s why the government has focused on developing the bond market as a financing venue for Chinese companies.” Borrowing expenses for smaller, private-sector companies are also still elevated, with data from the Wenzhou Private Finance Index putting funding costs for small to medium-sized enterprises at 17.5 percent on a national level versus a one- year benchmark lending rate of 4.6 percent. “The rising debt-to-equity ratio of listed companies shows that the wealth creation in China heavily relies on credit expansion,” said Zhao Yang, the chief China economist at Nomura Holdings Inc. in Hong Kong. Companies already have a lot of debt and taking on any more may prove dangerous, he said. The cost of insuring Chinese government debt against nonpayment using credit-default swaps rose to 122.4 basis points August 24, the most in two years, CMA data show. It’s since fallen to 119.5, up 34 basis points this year. In another indicator of weakness among China’s corporates, the official factory gauge fell to the lowest reading in three years last month, and fixedasset investment in August rose at the slowest pace in 15 years. Premier Li sought to soothe concerns over the slowdown, saying at a World Economic Forum meeting in Dalian on September 9 that China can maintain mid- to high-speed growth even under downward pressure. Officials earlier this month revised 2014 expansion to 7.3 percent from a previously reported 7.4 percent. “The balance sheets of Chinese corporations are overstretched,” Paul Gruenwald, Standard & Poor’s Asia Pacific chief economist in Hong Kong, said. “You can’t pile on more debt and double up. It’s just not the way out any more when the economy is slowing.” Bloomberg News
Interbank market opens lending facilities to qualified members SLF loans had been primarily granted to state policy banks or big nationwide commercial banks
Q
ualified members of China’s interbank market are eligible to apply for central bank lending facilities since yesterday, the market operator, a unit of the People’s Bank of China, announced on its website. Standing lending facilities (SLF) will now be available by application to all qualified members of the interbank market. SLF loans, first used by the People’s Bank of China in 2013, are collateralised credit facilities with a maximum term of three months.
The announcement did not specify detailed standards institutions would need to meet to qualify for access to the loans. SLF loans had been primarily granted to state policy banks or big nationwide commercial banks. Opening the process to smaller banks or brokerages could potentially help smooth equity or money market volatility if capital outflows intensify and continue to affect yuan liquidity. China’s central bank deploys lending instruments such as the standing lending facility and medium-term
lending facility to supplement the standard open market operations it conducts every Tuesday and Thursday. Previously, such facilities were only open to Chinese banks selected on a caseby-case basis by the central bank. China’s interbank lending market, where key short term rates are set and the majority of fixed-income trade takes place, is composed primarily of banks but includes brokerages, insurers, and other financial institutions. In the weeks following the surprise devaluation of the yuan in mid-August, the central bank has made heavy use of its lending facilities to offset capital outflows as well as state bank foreign exchange interventions to support the currency. Money market reaction to the announcement was muted, with the weighted average of the benchmark seven-day repurchase agreement flat at the open. Reuters
Business Daily | 11
September 15, 2015
Asia
Mitsubishi UFJ pivots to Japan The nation’s largest companies plan to increase spending by 9.3 percent in the year ending March Gareth Allan and Shingo Kawamoto
M
itsubishi UFJ Financial Group Inc., the Japanese lender that made about US$13 billion of acquisitions overseas since its founding a decade ago, is making a pivot toward its home market. “A financial institution’s mother market should be its first priority,” Nobuyuki Hirano, president and chief executive officer of Japan’s largest bank, said in an interview. “We’re seeing clear signs that capital investment is gaining traction.”
Hirano’s optimism that Prime Minister Shinzo Abe will be able to re-ignite the economy after a secondquarter slump contrasts with Nobel laureate Paul Krugman, who said that he’s “really worried” about Japan’s prospects. Mitsubishi UFJ has sought to protect itself from a sluggish domestic market with acquisitions from the U.S. to Thailand that have helped more than double its overseas loan balance over the past five years.
We must build robust business foundations Nobuyuki Hirano, president and chief executive officer, Mitsubishi UFJ
“If and when the economy starts to expand in line with what the government had hoped, banks will begin to re-invest more domestically,” said Jonathan Cornish, Hong Kong-based head of North Asia banks for Fitch Ratings Ltd. “But let’s not also forget the fact that profitability here is very much constrained, so I think that they will continue to have an interest overseas.” Hirano, 63, said his bank intends to tap into demand for funds on the back of strong performances by the nation’s companies in recent years. He’s also seeking to boost fee income from retail businesses as individuals increasingly look to invest their savings amid Abe’s attempts to reflate the economy. Japan’s Topix index is up 4.9 percent in 2015. Recurring profit at large Japanese companies other than financial firms increased by 30 percent from a year earlier in the quarter ended June, according to a September research note by Nomura Holdings Inc. Earnings are estimated to climb 15 percent in the 12 months ending March and 8.8 percent next fiscal year, according to the report. Spending is beginning to filter down to small and medium-sized enterprises as well as larger companies, Hirano said. While changes in Japan’s demographics are
Australian Prime Minister faces leadership challenge Abbott survived a threat to his leadership in February
H
igh-profile Australian minister Malcolm Turnbull yesterday challenged Prime Minister Tony Abbott for the leadership of the Liberal Party, saying the premier could not win the next election. With the conservative coalition government under pressure in opinion polls, Turnbull said Abbott’s administration had been unable to provide “the economic leadership our nation needs”. “I met with the prime minister and advised him that I would be challenging him for the leadership of the Liberal Party, and I asked him to arrange or facilitate a meeting of the party room to enable a leadership ballot to be held,” Turnbull said in Canberra. A millionaire former barrister from an upmarket Sydney electorate, Turnbull has long been considered the main challenger to Abbott who
Prime Minister Tony Abbott
a challenge, they also present opportunities for financial business aimed at individuals, he said.
Faces hurdles
Data on business investment in Japan are mixed. The nation’s largest companies plan to increase spending by 9.3 percent in the year ending March, the most optimistic plans since 2007, according to the Bank of Japan’s latest Tankan survey. At the same time, a drop in capital expenditure was one reason why the economy shrank an annualized 1.2 percent in the quarter ended June. The “missing piece” in Mitsubishi UFJ’s overseas business is an assetmanagement platform in the U.S., according to Hirano, who said the bank has prepared a shortlist of companies it may consider acquiring. “Our price range is in the billions rather than hundreds of millions” of dollars, he said, declining to comment specifically on potential targets or progress. Hirano also confirmed that his company is interested in acquisitions such as General Electric Co.’s leasing business in Japan, while declining to elaborate. He said the bank is seeking “business platforms,” which may include personnel or customers, rather than simply buying assets. Bloomberg News
won power from a divided Labour Party in 2013. Earlier yesterday, Abbott had brushed off speculation of a challenge, telling reporters: “I just am not going to get caught up in Canberra gossip, I’m not going to play Canberra games.” He has not yet commented on the move from Turnbull, who resigned as communications minister yesterday. Abbott survived a threat to his leadership in February, but Turnbull said the prime minister had still not been able to unite the electorate behind the government and his policies. “This course of action has been urged on me by many people over a long period of time,” Turnbull said, adding he had not taken the decision lightly. “We need a different style of leadership.” Turnbull said if the Liberal Party was to continue with Abbott as prime minister, the next election -- expected to be held some time in 2016 -- would be lost to opposition Labour leader Bill Shorten. “Now if we continue with Mr Abbott as Prime Minister, it is clear enough what will happen. He will cease to be prime minister and he’ll be succeeded by Mr Shorten,” Turnbull said. AFP
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September 15, 2015
Asia Expansion in NZ services sector accelerates Growth in New Zealand’s services sector reached its highest level in more than a year last month, according to the latest performance of services index (PSI) out yesterday. The BNZ-Business New Zealand PSI for August was 58.2 on a scale on which above 50 indicates expansion and below 50 contraction. It was the highest result since July last year and, with the key sub-indices of activity/sales and new orders consistently over the 60-point mark, it boded well for the months ahead, Business New Zealand chief executive Phil O’Reilly said in a statement.
Tumbling prices in India boost expectations of more rate cuts Calls for a rate cut have grown louder after annual economic growth slowed to 7 percent in the April-June quarter
Australia’s CBA completes US$3.6 billion fund raising Commonwealth Bank of Australia, the country’s No. 2 lender by assets, said yesterday it has raised A$5.1 billion (US$3.6 billion) through a rights issue after completing a retail book build amid volatile market conditions. Last month, CBA announced a fully underwritten 1-for-23 rights issue at an offer price of A$71.50 a share, and raised an initial A$2.1 billion through institutions. Local media last week reported that only about half of the shares from the remaining A$3 billion were taken up by the bank’s retail shareholders, despite the stock being offered at a discounted rate.
South Korea says economy recovering South Korea said the country’s economy has been recovering from the negative effects of the spread of a deadly virus, but it is facing external risks including from planned U.S. Federal Reserve policy changes and a weak Chinese economy. The finance ministry said in a policy statement submitted to the parliament during an annual policy audit that the possibility of China devaluing the yuan further was among the risks facing Asia’s fourth-largest economy.
Australian antitrust chief questions Murdoch’s actions A proposal by Rupert Murdoch’s cable TV firm Foxtel to buy 15 percent of struggling broadcaster Ten Network Holdings Ltd may hurt competition, an Australian antitrust regulator said, in a sign that it may block the A$77 million share sale. Failure to clinch a deal would require loss-making Ten to recommence its search for a financial lifeline as it trails larger rivals Seven West Media Ltd and Nine Entertainment Co Holdings Ltd in the ratings and as more free-to-air viewers opt for streaming services like Netflix Inc. A key sticking point is the TV rights to big sporting events.
Reserve Bank of India Governor Raghuram Rajanis worries about a resurgence in price pressures
I
ndia’s wholesale prices tumbled for a tenth straight month in August, pressured by falling fuel costs, bolstering prospects of an interest rate cut by the central bank later this month. The wholesale price index (WPI) fell an annual 4.95 percent last month compared with a 4.40 percent yearon-year decline forecast by economists in a Reuters poll and a provisional 4.05 percent slide in July. With price pressures at record lows, expectations are building that the Reserve Bank of India will lower borrowing costs by at least 25 basis points (bps) at its next policy review on September 29, after three cuts earlier this year, to spur economic growth. “This strengthens our view that interest rates will be cut at the RBI’s policy meeting later this month,” wrote Shilan Shah, an analyst with Capital Economics in Singapore. The WPI figures come hours before the release of the data on consumer prices that the central bank tracks to set rates. Retail inflation is forecast to have eased to 3.6 percent in August from a record low of 3.78 percent in July, according to analysts polled by Reuters. Calls for a rate cut have grown louder after annual economic
The wholesale fuel prices tumbled 16.50 percent in August from a year ago, while food prices dropped 1.13 percent year-on-year.
Deflationary pressures?
Yes, there has been moderation in some prices, but that’s not signalling deflation N. Bhanumurthy, senior economist, NIPFP policy think-tank, New Delhi
growth slowed to 7 percent in the April-June quarter from 7.5 percent in the previous quarter. And some economists fear real growth is more sluggish than official figures suggest. Arvind Panagariya, a top policy adviser to the government, last week said the economy needed 50-100 bps of rate cuts.
The rapid deceleration in prices has ignited a debate in New Delhi whether Asia’s third-largest economy is heading towards deflation. Arvind Subramanian, Modi’s chief economic adviser, early this month warned of looming deflation and called for measures to boost consumer demand and step up investment. RBI Governor Raghuram Rajan, however, is worried about a resurgence in price pressures in a country where inflation has been notoriously volatile. While food inflation has broadly remained in check despite below average summer monsoon rains, prices of some staples such as onions are racing up. Wholesale vegetable prices, for instance, gained nearly 17 percent from July. Entrenched expectations of high inflation also are feeding into higher wages. “Yes, there has been moderation in some prices, but that’s not signalling deflation,” said N. Bhanumurthy, senior economist at the NIPFP policy think-tank in New Delhi. “In fact, we are not anywhere near that.” Reuters
editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Michael Armstrong, Stephanie Lai, Óscar Guijarro, Kam Leong, Joanne Kuai GROUP SENIOR ANALYST José I. Duarte Designer Francisco Cordeiro WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia Assistant to the publisher Lu Yang | lu.yang@projectasiacorp.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.
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Business Daily | 13
September 15, 2015
Asia
Japan’s Q3 economy perceived to be growing more slowly Economists expect the core consumer price index (CPI) will rise only 0.1 percent this fiscal year to March 2016 Kaori Kaneko
J
apan’s economy will likely grow much less in the current quarter than projected a month ago and consumer prices remain weak, but many economists expect the Bank of Japan will not announce more stimulus till next year, a Reuters poll showed. Some, however, forecast the BOJ could ease policy next month on concerns China’s economic woes and recent financial market turmoil would be a drag on the Japanese economy. Japan’s economy, the world’s third largest, shrank in the second quarter on weak business investment, which prompted economists to revise down their third-quarter growth forecasts. The central bank expects its 2 percent CPI target will be achieved by September next year but the poll sees consumer prices rising at only half the rate of what the BOJ is aiming for. “We expect the BOJ will likely ease next January,” said Masamichi Adachi, senior economist at JPMorgan Securities Japan. “But looking at recent economic data, it is even more difficult for the BOJ to achieve its price target. Thus, chances have grown for the central bank to adopt further easing this year, especially at the October 30 meeting,” he said. The majority of economists
Bank of Japan’s targets are increasingly harder to reach
surveyed said the BOJ’s next policy move would be to expand stimulus measures. Twelve economists out of 18, with forecasts for when the BOJ might possibly ease, said it would likely be some time next year. Five said the central bank might ease at its Oct. 30 meeting and one said in November. The poll was conducted between September 8 and 11. BOJ policymakers are in no mood to expand monetary stimulus this week, sources familiar with their
KEY POINTS Q3 annualised GDP f’cast +1.3 pct VS +2.2 pct seen in Aug Many expect BOJ to wait for further easing in 2016
Kazakhstan marks 550 years of ‘statehood’ despite economic pain They have seen its revenues diminish significantly as crude oil prices fell below US$50 per barrel Dana Rysmuhamedova
K
azakhstan is rolling out colourful pageantry to celebrate 550 years of statehood, defying an economic downturn that has battered a country viewed as a post-Soviet success story. In scenes recalling its distant nomadic past, men wearing fur hats and cradling eagles were out in the capital Astana this weekend as female dancers decked in light blue frocks and pointed hats danced to traditional music. President Nursultan Nazarbayev, the 75-year-old strongman of this Central Asian country who is known for his grandiose nationbuilding projects, has named 2015 “the 550th anniversary of the Kazakh Khanate”.
The grand celebrations, which run into October, come after Russian President Vladimir Putin angered many Kazakhs by saying the country never enjoyed statehood before its independence from the former Soviet Union. “The Kazakhs never had statehood -- he created it,” Putin said last year, referring to Nazabayev. The anniversary links modern day Kazakhstan to a nomadic warrior state that existed on the territory into the 18th century. Nazarbayev on Saturday hailed the anniversary and the celebrations as “a national achievement”. Yet economic pain -- largely due to the rouble’s plunge in
neighbouring Russia and low oil prices -- has dampened the celebratory mood. “Some people think this search for a national idea to mobilise people around is a waste of precious budget money,” said Dosym Satpayev, director of the Kazakhstan Risks Assessment Group, a think tank. According to the Ministry of Finance, the 550th anniversary of the khanate and other nationwide celebrations this year will cost around US$20 million. “There are more pressing priorities,” Satpayev told AFP.
Life without foie gras
Kazakhstan has seen its revenues diminish significantly
thinking say, even as poor data challenges their presumption that economic recovery will boost inflation to its 2 percent target next year. Kozo Yamamoto, a ruling party lawmaker and close economic aide to Prime Minister Shinzo Abe, told Reuters that the BOJ can hold off on action this week but should expand stimulus as early as its meeting on Oct. 30 to counter weakness in the economy. BOJ Governor Haruhiko Kuroda has kept his upbeat view on the economy and his ambitious price target in place even amid rising scepticism it can be met as growth slows. Economists expect the core consumer price index (CPI), which includes oil products but excludes volatile fresh food prices, will rise only 0.1 percent this fiscal year to March 2016 and 1.0 percent next fiscal year, the poll showed. These compare with 0.3 percent and 1.2 percent projected last month, respectively. But sources told Reuters the BOJ’s CPI index, separate to the one produced by the government, accelerated to 0.9 percent year-onyear in July, faster than a 0.7 percent annual increase in June. The economy will probably grow an annualised 1.3 percent in JulySeptember, the poll of 26 economists showed, sharply down from a 2.2 percent expansion projected in August. Asked how seriously China’s slowdown and market turmoil will affect the Japanese economy, most said they would slightly affect the economy and only two said damage would be serious. “The impact from China’s economic slowdown has spread to other Asian nations. Japan’s export recovery may be delayed,” said Takumi Tsunoda, senior analyst at Shinkin Central Bank. Reuters
as crude oil prices fell below US$50 per barrel. The International Monetary Fund predicts growth will remain sluggish at around two percent in 2015. Deepening economic stagnation -- demonstrated by the government’s recent decision to lift controls on fuel prices -- has been a rare test of legitimacy for Nazarbayev. Last week, Nazarbayev said Kazakhstanis could learn to live “without foie gras” and “huge Land Cruisers” in remarks which unleashed a storm of comment online. Nazarbayev’s spokesman said his remarks had given Kazakhstanis an opportunity “to let off steam”. Last month, the tenge, Kazakhstan’s national currency, plummeted over 25 percent in value after the central bank shifted towards a free exchange rate against the dollar. While Kazakhstan’s leadership continues to blame trends in the global economy and that of Russia, analysts say it could have done more to protect the economy during times of plenty. “President Nazarbayev wasted time when the oil price was high,” said Alex Melikishvili, a senior analyst at IHS research company. Following the sudden downgrading of the national currency “public trust in government has declined”, he says.
Shortly after Nazarbayev won a one-sided presidential election in April, with 97.7 per cent of the vote, the government drew up a 100step blueprint for political and economic reform. The reform envisages overhauling the country’s weak political institutions, as well as the police and judiciary, and shifting the economy away from its dependence on oil. But Melikishvili expressed scepticism over the planned reform, pointing to Nazarbayev’s advanced age and his “prioritising of personal political power”. “The reform’s ambitious nature and limited timeframe raise questions about its feasibility,” he told AFP. Some in Astana, however, were putting pessimism aside for the weekend. “We never used to celebrate this holiday. Now we can, thanks to our president,” said Janybek, a 43-year-old sporting a waistcoat emblazoned with traditional nomadic patterns and carrying a Kazakh stringed instrument called a dombra. “We have our ancestry, our history and our land. What more could you ask for?” he said. The statehood celebrations will peak in October in the southern city of Taraz where the government says the Kazakh Khanate was first declared in 1465. AFP
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September 15, 2015
International Draghi seen expanding QE Mario Draghi’s promise that the European Central Bank is willing to step up its stimulus if needed is resonating with economists, who see the euro-area recovery as too shallow to be sustained. More than two-thirds of respondents in a Bloomberg survey predict the ECB’s president will expand or extend the 1.14 trillion-euro (US$1.3 trillion) quantitative-easing program, and almost all of those say he’ll do so within nine months. While an increasing number of respondents see the economy improving for now, they’re also fretting that the upturn won’t last long.
Deutsche Bank’s Russia faces bribery probe The chairman of Deutsche Bank’s Russia unit will quit Moscow for Germany, the lender has announced, a high-profile departure against the backdrop of an on-going bribery investigation. Joerg Bongartz, Deutsche Bank’s management board chairman and head of global transaction banking in Russia since 2006, will move to Frankfurt to focus on business in central and eastern Europe, the bank said in a statement over the weekend. His departure comes as Deutsche Bank and the U.S. Department of Justice are investigating accusations of bribe-taking by senior staff members and questionable share trades involving the bank’s Moscow office.
Swiss to probe contract signed by FIFA’s Blatter The Swiss Attorney General’s Office will investigate a contract for media rights to the 2010 and 2014 World Cups, two Swiss law enforcement officials said over the weekend. The inquiry follows a television news report asserting that FIFA sold the rights for rates far below market to a Caribbean soccer organization, whose leader then resold them for much more. The interest by Swiss prosecutors expands the scrutiny facing FIFA and its president, Sepp Blatter, along with Jack Warner, former head of the Caribbean soccer federation.
Last chance for Rousseff to save mandate Brazilian President Dilma Rousseff has one last chance to stem a growing political and economic crisis before being forced to step down, one of the country’s leading daily newspapers said. In an unusual front-page editorial, Folha de S.Paulo said Rousseff needs to take “drastic measures” including additional spending cuts and tax increases to make up for a 2016 budget gap that has cost Brazil its investment-grade rating from Standard & Poor’s. Rousseff, a leftist who was re-elected by a thin margin in 2014, is facing impeachment calls as her government struggles with a deep economic recession and a massive corruption scandal.
Pearson to keep Penguin Random House until 2017 Pearson Plc, which agreed to sell the Financial Times in July, intends to hold on to its final media asset, Penguin Random House, until at least 2017, Chief Executive Officer John Fallon said. Pearson has the option to sell its 47 percent stake in the world’s largest book publisher as early as next month under an agreement with Germany’s Bertelsmann SE, which owns the rest. Penguin Random House generated earnings before interest, taxes, depreciation and amortization of 452 million euros (US$511 million) last year.
Rich world struggles to resolve row over coal subsidies Environmental campaigners say such a weak stance would badly damage the credibility of EU claims that it leads the fight against climate change Barbara Lewis
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ich nations are stubbornly divided ahead of talks in Paris to seek a deal to phase out coal subsidies in a foretaste of the difficulty of agreeing on action to curb global warming at a U.N. summit later this year. France, host of the U.N. climate summit, has piled on the political pressure to restrict a type of subsidy that helps nations export technology for power generation from coal, the most polluting of the fossil fuels. Two days after confirmation of EU regulatory approval for U.S. firm General Electric’s takeover of Alstom, France’s big manufacturer of coal plant technology, French Environment Minister Segolene Royal said the government would scrap coal export credits. The Organisation for Economic Cooperation and Development has been trying to broker a phase-out for more than a year and holds new talks on Thursday. It has said it wants an agreement this month, but EU sources say it might have to arrange more talks and time is running out. The problems in solving the coal export financing issue highlight the difficulty of brokering a much wider
deal at U.N. talks in Paris starting on November 30. Even Germany, which led G7 calls for a tough stance on climate change, is heeding industry pressure to maintain support for coal. Within the OECD, it is Japan, the biggest user of export credits that help companies such as Toshiba Corp to sell coal technology abroad, that has led resistance. A Japanese position paper, seen by Reuters, said scrapping OECDsanctioned export credits linked to high standards could mean other countries deploy less efficient technology that would increase emissions.
Turkey considering WTO appeal over U.S. steel pipe duties U.S. producers stand to lose market share to foreign steelmakers if the duties are lowered or removed Maytaal Angel
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urkey is considering lodging an appeal with the World Trade Organization (WTO) against a U.S. move to slap anti-dumping duties on imports of Turkish steel pipes, an industry group told Reuters. “We firmly believe that the Turkish Ministry of Economy will take the ... case to the WTO,” Namik Ekinci, the president of the Turkish Steel Exporters’ Association (CIB), told Reuters. “The ministry must consider several factors before making a final decision, but there is a strong indication and we expect the decision to be taken at the earliest.” Turkey’s Economy Ministry declined to comment. A spokesman for the U.S. Trade Representative said the agency does not comment on potential WTO litigation as a matter of policy.
In a big win for U.S. steel pipe makers, the U.S. International Trade Commission ruled last year that imports of ‘oil country tubular goods’ (OCTG) from South Korea, India, Taiwan, Turkey, Ukraine and Vietnam would be subject to duties of up to 118 percent. But foreign producers appealed, winning a small victory earlier this month when the U.S. Court of International Trade (USCIT) called for a recalculation of the sums used to determine duties on imports from South Korea. U.S. OCTG imports from the Asian nation totalled US$818 million in 2013, more than the combined totals of the other countries. South Korea lodged a WTO appeal against the duties last December. Kimberly Leppold, senior analyst at Metal Bulletin Research, said
It also disputed arguments from the World Bank that coal should only be the fuel of last resort for poor nations with no other source of power. Representing the biggest bloc within the 34-member OECD, EU officials have been seeking to agree a compromise EU position to galvanise the talks. EU sources said compromise discussions are focused on whether coal export credits could continue even for exports to well-off nations provided they are conditional on the use of the most efficient, lower-carbon technology. Reuters
Turkey had a strong case to take to the WTO. The CIB said Turkey’s OCTG exports to the United States in 2014 accounted for just 1.7 percent of total arrivals. It declined to say how much they were worth but an industry source said the dollar value of the trade was ‘significant’. U.S. trade officials are working their way through several disputes involving various steel products, but the OCTG case has been the biggest in terms of trade volumes affected. The CIB said a U.S. finding that Turkey’s largest industrial conglomerate, Erdemir, is a government entity that provides subsidised steel coils to Turkish pipe makers was incorrect. “Erdemir was privatized almost 10 years ago. (It) is publicly traded, most of their shareholders are pension funds from the U.S,” said Ekinci. He added that Canadian authorities had ruled in a similar case that Erdemir is a private company, and therefore not providing government subsidies. Steel pipes are high-margin products used in the energy sector and had been a bright spot in the sluggish steel sector, benefiting in 2013 from a boom in the U.S. shale oil and gas industry, which has since faded as oil prices plummeted. Struggling steel pipe makers including United States Steel Corp, Tenaris SA subsidiary Maverick Tube Corporation, JMC Steel Group Inc’s Energex Tube, Russia’s TMK IPSCO and France’s Vallourec Star filed the case in 2013, saying OCTG imports had been sold cheaply to the United States using government subsidies. Reuters
Business Daily | 15
September 15, 2015
Opinion Business
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Leading reports from Asia’s best business newspapers
If world slides into recession, policy response will fall short
JAKARTA GLOBE Indonesia is offering a higher proportion of profit sharing for eight oil and gas blocks on auction this month, in an effort to attract investors to the project. The government will provide a profit sharing of 30 percent to 35 percent for oil, and 35 percent to 40 percent for gas, said Djoko Siswanto, upstream oil and gas director at Energy and Mineral Resources Ministry. The state usually offers only 15 percent of profit for oil and 30 percent for gas. The ministry aims to complete the tender, which will be conducted online, by December.
James Saft
Reuters columnist
THE TIMES OF INDIA HCL’s billionaire founder and chairman Shiv Nadar and former Tech Mahindra CEO Sanjay Kalra are establishing a US$500-million proprietary fund to acquire US healthcare technology companies and invest in IT products and platforms that can bring greater efficiencies to the US healthcare system. This will probably be the first instance of an Indian fund being set up with the intention to acquire global assets and with the objective of addressing an overseas market problem. Nadar and Kalra’s venture, christened SNSK (Shiv Nadar-Sanjay Kalra) Associates, will focus on IT products and platforms.
THANH NIEN NEWS The US Department of Commerce has cut antidumping tariffs on Vietnamese shrimp by up to 86 percent, giving rise to hope that shrimp exports to that country will increase in the remaining months of this year. The cut follows a periodic review of the tariffs imposed on frozen shrimp from Vietnam, the Vietnam Association of Seafood Exporters and Producers said. Now 32 companies will be subject to a tax rate of only 0.91 percent, down from 6.37 percent earlier. The US is the largest buyer of Vietnamese shrimp, with shipments last year being worth more than US$1 billion.
THE AGE Macquarie Group’s financial services behemoth said profit would jump 40 per cent in the six months ended September 30, stoking more bullishness on the full-year result. Macquarie attributed the strong performance in its first-half ended September 30 to improved conditions across businesses including Macquarie Securities, its equities arm, and Macquarie Asset Management, which benefited from “strong performance fees”, a statement to the Australian stock exchange said. A depreciating Australian dollar also buoyed the result. The statement outlined that Macquarie’s second half would be “broadly in line” with the six months ended September 30.
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e may well not get a global recession in the coming year or two but if we do, bank on one thing: an inadequate policy response. Citibank Chief Economist Willem Buiter attracted attention this week with a call for a 55 percent chance of a global recession sometime in the next two years, most likely starting in the latter half of 2016. Buiter’s working definition of global recession is important to note: unemployment above that which keeps inflation in balance, a gap between output and potential output, or actual real GDP below potential real GDP. All of that equates, more or less, to global growth below 2 percent. Global recessions are not that unusual: there have been four since the 1970s, with the usual run of traffic being a slowdown in the developed world spreading to emerging markets. More particularly, the U.S. tends to be the prime mover. That’s not what’s likely in the immediate future. Instead Buiter is forecasting an emerging markets slowdown which hits developed market activity: via trade flows, via commodity prices, via financial market effects and via a hit to confidence. As for China, it is the classic mix: excess capacity meets excess leverage. We’ve seen it so far in the property and stock market in China, but the
In China and across the emerging markets the policy response options in a widespread global downturn are not appetizing
harder to trace impact of local government debt and industrial production and investment are worrying too. If we put aside for a moment the likelihood of a global recession, the interesting question becomes: will policymakers react quickly enough and do they have the needed ammunition? The answers, respectively, are no and no. Chinese Premier Li Keqiang, speaking Thursday at the World Economic Forum in Dalian, seemed to rule out quantitative easing, highlighting its negative unintended effects and calling
for structural reform instead. Those may be the words of a man trying to inspire confidence in global markets, and at home, but the message may also bespeak a reluctance in China to get in front of the slowdown. Remember that China’s swift and, by and large, effective response to the great financial crisis was an easier political move to make. They were in essence cleaning up after mistakes made by others. Aggressive policy steps in China now, or if the slowdown gets worse, imply self-criticism, a tougher ask.
Pass the ammunition In China and across the emerging markets the policy response options in a widespread global downturn are not appetizing. As exports decline, interest rates will be cut, likely as parts of an attempt to achieve some advantage from currency devaluation. That, however, is one of those games which gets worse the more players join in. Debt levels too are either high in many emerging markets or likely to go higher in a downturn as private or quasi-state investment debt gets socialized. Buiter is particularly downbeat about the potential for aggressive and effective policy out of China. Given high debt levels it will be difficult to fund safely and may simply lead to another round of keeping failing enterprises, state-owned, banks and others, alive but failing to cut capacity to scale.
In developed markets there is similarly little likelihood of a strong policy response, especially on the fiscal side. Imagine, if you will, the quality of the debate in the U.S. about fiscal stimulus during a global recession in an election year. “With the possible exception of the UK, the combined monetaryfiscal stimulus necessary to minimize the depressing effect of an emerging market recession on economic activity in the developed markets is unlikely to be forthcoming in most advanced economies,” Buiter writes. “This means that the monetary authorities once again will have to do the heavy lifting.” So, perhaps the Fed had better raise interest rates next Thursday, if only to give them something to cut if the downturn comes in what they expect to be the middle of rate normalization. A global recession then implies more quantitative easing out of the major central banks: not just the Fed, but in Japan, Britain and the euro zone. Remember too that QE works well when markets are frozen, and so far we’re not talking about a recession coming from markets, as in 2008, but from the real economy. That may imply less satisfactory results this time round, or if not maybe even bigger balance sheet expansions. There is never a good time for a global recession, but 2016 looks particularly bad. Reuters
16 | Business Daily
September 15, 2015
Closing HKMA sells HK$6.59 bln to keep HK dollar in trading band
Toshiba reports US$102 million quarterly net loss
The Hong Kong Monetary Authority (HKMA, pictured) stepped into the currency market and sold HK$6.59 billion (US$850.33 million) in Hong Kong dollars on Monday as the local currency hit the strong end of its trading range. According to the HKMA, the latest intervention will lift the aggregate balance - the sum of balances on clearing accounts maintained by banks with the authority to HK$333.533 billion on September 16. The Hong Kong dollar is pegged at 7.8 to the U.S. dollar, but can trade between 7.75 and 7.85. Under the currency peg, the HKMA is obliged to intervene when the Hong Kong dollar hits 7.75 or 7.85.
Toshiba yesterday reported a first-quarter loss of US$102 million after sales fell to a two-andhalf-year low, in a fresh blow to the Japanese conglomerate after a huge accounting scandal. A 140-year-old firm, which sells everything from vacuum cleaners to nuclear reactors, posted a net loss of 12.27 billion yen in the three months to June. Sales fell 4.5 percent from a year earlier to 1.35 trillion yen, the lowest since the quarter ended December 2012, due to a poor performance in television and personal computer businesses. Toshiba said in a stock exchange filing its electric and nuclear generation businesses also saw a weak three months.
Unspent local government budgets drag down Chinese stimuli effect Lacklustre spending growth could be especially punishing for China Benjamin Kang Lim
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ngry Chinese authorities have seized up to 1 trillion yuan (US$157 billion) from local governments who failed to spend their budget allocations, sources said, as Beijing seek ways to stimulate economic growth which is at its slowest for 25 years. The huge underspend, linked to officials’ reluctance to spend on big-ticket projects while authorities crack down on corruption, supports the argument of some economists that Chinese state investment has grown too slowly this year. “In the past, local governments had asked for the money. Money was given, but no one acted,” said one of two sources, both of whom are close to the government. They declined to be named as they are not authorised to speak to the media. “Investments were not realised, and the money will be reallocated,” added the source, an economist. He
HSBC Bank estimated in May that China had 3.8 trillion yuan of unused fiscal funds carried over from previous years did not elaborate on how the funds would be spent. The repossessed money will pay for other investments, said the sources, as economic growth looks increasingly likely to fall below 7 percent. Lacklustre spending growth could be especially punishing for China, as investment is seen by some Chinese government economists as the best way to shore up activity in the short-term. One trillion yuan of
unspent funds is equivalent to about 6 percent of China’s projected total government spending for 2015. The Finance Ministry was not immediately available for comment when contacted by Reuters.
Corruption connection
As part of sweeping reforms proposed by the Chinese government at the end of 2013, China is pursuing its boldest ever anti-graft campaign that has felled a
powerful ex-domestic security chief among others. While the campaign has been a hit with the public, it has also had the unintended consequence of scuppering investment as fearful officials eager to stay out of trouble resort to early retirement or dither over approving major projects.
That has annoyed Beijing, which has repeatedly threatened to punish procrastinating governments by recalling their unspent budgets. HSBC Bank estimated in May that China had 3.8 trillion yuan of unused fiscal funds carried over from previous years. “Due to the crackdown (on corruption), most local officials have accomplished nothing,” said the second source, who has ties to the leadership. Official data showed investment accounted for slightly more than a third of China’s economic growth in the first six months of this year. Data over the weekend pointed to stubborn weakness in China’s economy. Growth in investment and factory output both missed forecasts in August, suggesting that China needs to roll out more policy support to lift the world’s second-largest economy. Reuters
Alibaba’s financial arm said to invest in Cathay Financial unit
Euro zone industrial production Malaysia’s Najib delivers US$4.6 bln boost for stock market up by 0.6 pct in July
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libaba Group Holding Ltd.’s finance arm plans to invest about 1.2 billion yuan (US$188 million) for control of a China insurance unit of Cathay Financial Holding Co., according to a person familiar with the matter. Zhejiang Ant Small & Micro Financial Services Group Co. is buying a 60 percent stake in Cathay Insurance Co. in order to gain a license to develop insurance products, the person said, asking not to be named because the matter is private. The investment would allow Ant Financial to enter the business faster than by applying for its own license. Ant Financial has ambitions to become a dominant online financial services provider, sometimes taking on powerful mainland China state banks on their own turf. More than 200 million users of Ant Financial’s Alipay payment system already manage their wealth via financial products like Yu’E Bao, a money-market fund that pooled in 613.4 billion yuan by June 30. The company introduced a new application called Ant Fortune in August that lets users buy about 900 fund products from more than 80 Chinese financial institutions. Bloomberg News
he Malaysian government will inject 20 billion ringgit (US$4.6 billion) into a state investment firm to shore up the stock market, Prime Minister Najib Razak said yesterday, in a bid to boost confidence in a country reeling from a political scandal. The embattled prime minister announced some new measures yesterday at a news conference, and offered reassurances meant to improve sentiment. He said the equity investment firm, ValueCap, would be given funds to invest in undervalued Malaysian companies. “As such, the government will reactivate ValueCap with funds of 20 billion ringgit,” he told reporters at the Prime Minister’s office. The prospect of government support for the share market helped lift Malaysia’s benchmark stock index 1.7 percent to 1,630 points in afternoon trade, but it was still 8.7 percent weaker compared with the start of the year. Najib also announced that the factory sector would be exempted from import duties until the economy recovers from a slowdown, but did not specify which specific sectors would benefit. Reuters
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easonally-adjusted industrial production rose by 0.6 percent in the euro zone and by 0.3 percent in the European Union (EU) in July compared with the previous month, reverting to a positive upward trend after June’s falling, official data showed yesterday. The 0.3-percent increase in the euro zone was due to production of energy rising by 3.0 percent, capital goods by 1.4 percent and durable consumer goods by 1.3 percent, while production of both intermediate goods and non-durable consumer goods fell by 0.6 percent, EU statistical office Eurostat said. Among member states, the highest increase emerged in Ireland with up by 7.2 percent, followed by Greece with a rising by 4.3 percent. However, Denmark saw the largest decrease with down by 4.6 percent. The industrial production in the bloc’s powerhouse Germany saw growth by 0.5 percent month on month, the figure should be regarded as a relief after the plummeting in June with down by 0.6 percent. In June, the seasonally-adjusted industrial production fell by 0.4 percent in the euro zone and by 0.2 percent in the EU, prompting concern in the market. Xinhua