MOP 6.00
We’re not Macau
Closing editor: Joanne Kuai
Philippine billionaire Enrique Razon Jr. believes his casinos can grow without China. Via increased spending by mass and local gamblers. The president of Bloomberry Resorts Corp. said the company’s earnings will improve. Big plans are in the pipeline for the burgeoning Philippine market, he says
Year IV
Number 892 Tuesday October 6, 2015
Publisher: Paulo A. Azevedo
Page 6
On-call Taxis to Return
The gov’t is to announce a public tender. For no more than 100 ‘special licence’ taxis. The eight-year CEPA exports drop licences may only be bid for by companies. The city’s radio taxi service ceased in November amidst 15.4 pct in September Page 2 acrimony with the gov’t over renewal conditions. An industry representative said better rules are necessary. To ensure special taxis are only employed for on-call services, thus better serving residents Casino shares jump Page
3
following visitors, reported central support
Page 5
Pollutant problem probed
Huarong Asset Management and China Reinsurance return IPOs activity to Hong Kong
Pollutants discharged directly into the sea. Malpractice ongoing for 3 years, say sources. The contractor responsible for the construction of the Hong Kong Link Road of the Hong Kong-Zhuhai-Macau Bridge stands accused. The Highways Department of Hong Kong is on the case
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World Bank forecasts lower growth in South Asia and China
Page 11
HSI - Movers
Page 2
October 5
IMF Pronounces Another IMF report. The International Monetary Fund says China’s economic transition is in line with its forecast scenario. And that ‘vigilance must remain the watchword’
Page 16
Name
Construction Contribution The construction sector contributed MOP18.21b gross value added in 2014. An increase of 75.4 pct y-o-y. Driven mainly by construction of large-scale hotels and entertainment facilities by gaming enterprises in Cotai
Page 4
www.macaubusinessdaily.com
Hong Kong
%Day
Tingyi Cayman Islands
+5.63
Galaxy Entertainment
+5.30
Belle International Ho
+5.01
China Shenhua Energy
+3.93
China Petroleum & Che
+3.91
China Overseas Land &
+0.20
CITIC Ltd
+0.14
China Unicom Hong Ko
-0.30
Want Want China Hon
-0.46
China Resources Enter
-3.29
Source: Bloomberg
Ex-HK CE on bail
I SSN 2226-8294
Ex- Hong Kong Chief Executive Donald Tsang has been charged by ICAC. The Independent Commission Against Corruption has brought two charges of misconduct in public office against him. He has posted HK$100,000 ($12,900) bail with a “clear conscience”. And will next appear in court on November 13
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2 | Business Daily
October 6, 2015
Macau CEPA exports drop 15.4 pct in September
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HZMB pollutants discharged directly into sea China State Construction Engineering has been discharging pollutants directly into the sea, according to Hong Kong newspaper Apple Daily João Santos Filipe
jsfilipe@macaubusinessdaily.com
T
he contractor responsible for the construction of the Hong Kong Link Road (HKLR) of the Hong Kong-Zhuhai-Macau Bridge (HZMB), a company named China State Construction Engineering (Hong Kong), has been discharging pollutants directly into the sea for the last three years, Hong Kong newspaper Apple Daily has reported, quoting the Hong Kong Free Press website. According to Apple Daily, this information was confirmed by the Highways Department (HD) of Hong Kong, which told the newspaper that the company had received a written warning after the illegal act was discovered by inspectors on the site. The HD also said that the contractors were asked to desist the practice and that the incident would be recorded in the report about their works.
While the company has been said by the Hong Kong authorities to have constructed wastewater treatment facilities to avoid the discharging of untreated pollutants directly into the sea before the construction works had begun, Apple Daily quoted unidentified sources saying that the facilities were only built “recently”. The same sources say that since the beginning of the construction that the contractor has been breaching the law.
Troubled bridge
China State Construction Engineering (Hong Kong) started to work on the bridge in May 2012 and is responsible for the design and construction of the section of HKLR between Scenic Hill and the Hong Kong Boundary Crossing Facilities (HKBCF) as well as road links between the HKBCF and
Hong Kong International Airport. The company is being paid HK$8.88 billion (US$1.14 billion) for this project. This is not the first time that the HKBCF has been involved in controversy. Recently, the Highways Department of Hong Kong admitted that the artificial island had moved ‘up to six or seven metres’. The construction of the bridge connecting Hong Kong to Macau was initially expected to be completed by next year but authorities have already admitted that the project is delayed. However, no date for completion of the project has been set yet. State Construction Engineering was also one of the contractors involved in the construction of 11 public estates in Hong Kong where excessive lead content was found in drinking water.
he city saw its exports of goods to Mainland China under The Closer Economic Partnership Arrangement (CEPA) plunge 15.4 per cent month-on-month in September, according to the latest official data released by the Economic Service Bureau (DSE). Last month, the city’s export value of CEPA goods to the Mainland totalled MOP5.76 million (US$719,429) in a notable decrease of some MOP1.05 million from MOP6.86 million in August. The latest monthly value registered is also the second lowest the city has posted for the year, following MOP5.75 million in February. The total export value of CEPA goods from the Special Administrative Region reached MOP70.52 million between January and September this year. Meanwhile, as at the end of last month, the cumulative value totalled MOP636.2 million since the agreement was implemented in January 2014. In terms of trade in services, the economic bureau did not grant any new ‘Macau Service Supplier’ certificate to local firms. As such, the number of certificates that the government issued remained at 491 as at September this year. The certificates are for local companies and enterprises to operate their businesses on the Mainland. The local transport industry, which includes freight forwarding agencies, logistics, storage and warehousing and other transport services, is the sector engaged most in the trade activities between the city and the country under the CEPA agreement. According to official DSE data, the industry has been granted a total of 298 supplier certificates since January 2004, accounting for 61 per cent of the total. K.L.
Perfect shape sales growth plunges in Macau
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ong Kong-listed slimming and beauty parlour chain Perfect Shape (PRC) Holdings Ltd. has seen a notable year-on-year growth in its sales of pre-paid packages of beauty services in Hong Kong for the three months ended September 30, whilst sales in its Macau market posted only a slight increase compared to last year’s notable lift. The firm told Hong Kong Stock Exchange last week that its packages of beauty services pre-sold to its clients in Macau have registered a year-on-year increase of two per cent. Nevertheless, the sales of the company in the Special Administrative Region one year ago soared 293 per cent year-on-year. The company did not detail its revenue data in its filing. But it said its sales of prepaid beauty service packages in Hong Kong
had surged 46 per cent year-on-year in the three months, while those in Mainland China had increased 10 per cent from the same period of last year. ‘The growth in Hong Kong and Mainland China were mainly driven by the increased average spending per customer due to the contribution of high technology beauty service. Looking ahead, the Group is optimistic about the outlook for sales of prepaid packages in the coming quarters,’ the beauty service firm wrote in the filing. For its last fiscal year ended March 31, the company registered a year-on-year growth in net profit of 62.5 per cent, totalling HK$134.9 million (US$17.4 million) from HK$83 million, due to the increase in average spending per customer and its expansion of service centres network. K.L.
Business Daily | 3
October 6, 2015
Macau
Gov’t: Public tender for special taxi licences soon The local taxi industry hopes better regulations can be implemented accordingly, ensuring special taxis only provide on-call services Joanne Kuai
joannekuai@macaubusinessdaily.com
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he government will soon launch a public tender for no more than 100 ‘special licence’ taxis, it was revealed yesterday in the Official Gazette. The dispatch signed by Chief Executive Fernando Chui Sai On on September 30 says that the licences will be valid for eight years, counting from the operation date mandated in the contract to be signed. Following the Official Gazette announcement, the Transport Bureau (DSAT) issued a statement, saying that bidders must be companies (rather than individuals) and that the Bureau has basically completed the preparation to hold the public tender and will announce more details in a short while. Recently, former DSAT Director Wong Won said that “special licence” cabs
would have to provide radio and reservation services and provide special services for the disabled. The city’s radio taxi service ceased in November last year after the city’s then only radio taxi service provider, Vang Iek Radio-taxi Co. Ltd., quit after operating the service for more than two decades because the company and the government had failed to reach a new agreement. Vang Iek ran 100 yellow cabs commonly known as ‘yellow taxis’.
Better rules necessary
President of the General Association of Macau Taxis Owners Raymond Leng Sai Hou told Business Daily that it was a good sign that the public tender for special taxi licences is imminent but that the government must
mandate proper rules in order to ensure that these taxis will only provide on-call services rather than competing with black taxis hailed in the street for service. Mr. Leng said ‘pure oncall services’ is essential to guarantee that the purpose of such special taxis is fulfilled and better serving residents. In addition, the company should have an employment relationship with the taxi
drivers instead of renting the taxis to individuals in order to achieve better management. “We cannot repeat the mistake of ‘yellow taxis’. When you call from Coloane, if they can be hailed in the city centre, they wouldn’t pick you up,” said Mr. Leng. “Stricter regulations have to be implemented. And the (bidding) process must be transparent and monitored by all residents.”
Mr. Leng added that the public service should be conducted by no less than two companies since “competition is always better for the market”. And the government should ensure that at least one investor is local as the government has always pledged to help local small and medium-sized enterprises. Former yellow taxi operator Vang Iek Radiotaxi Co. Ltd, said they haven’t decided whether to join the bidding, according to TDM Chinese radio’s report. They quoted the company’s Executive Director, Eugenio Cheng, as saying the company is aware of the government’s intention of launching the public tender, but it is still in its initial stages and they are not sure if the government has other requirements, with more studies to be conducted.
4 | Business Daily
October 6, 2015
Macau
Ambrose So believes PRC measures will help gaming sector The CEO of SJM Holdings says the territory needs to work to attract tourists with larger spending capacity João Santos Filipe
jsfilipe@macaubusinessdaily.com
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he CEO of SJM Holdings, Ambrose So Shu Fai, believes the measures promised last week by PRC’s representative in Macau, Li Gang, will help the gaming sector recover. While commenting on measures yet to be announced, Mr. So went as far as to make his own
suggestions on how to attract more tourists. “For example, they can make it easier for Mainland tourists to stay overnight and to increase the number of cities allowed to visit while coming to Macau”, he said, as quoted by Portuguese language
Angela Leong: Canidrome use to be diversified
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ngela Leong On Kei, an executive director of SJM Holdings, said that dog racing is a minor share of Macau’s gaming and entertainment industry, and that shareholders of the operator have been hoping to diversify the purpose of the venue, such as for family gatherings, cultural events or for teenagers, according to a TDM Chinese radio report. The government announced last week that it has decided to ‘temporarily’ extend the concession for Macau’s dog racing track operator, Macau (Yat Yuen) Canidrome Co. Ltd, which was set to expire on December 31 of this year. Sociedade de Turismo e Diversões de Macau SA, a private company founded by SJM Holdings’ chairman Stanley Ho Hung Sun, is understood to be the biggest shareholder in Macau (Yat Yuen) Canidrome. Angela Leong said that they are still waiting for the government’s report. Angela Leong added that SJM Holdings will have a new
set of welfare policies for its employees to be launched soon, including holidays and a supermarket with special discounts for its own employees. She added that SJM had launched a special plan recently for its workers to sign up to. Whoever joins the plan and retires after 2020 will be rewarded.
Stanley Ho’s concern
When asked by reporters what her husband’s point of view of the current gaming industry was - Stanley Ho Hung Sun was the founder of SJM Holdings Ltd. - Angela Leong said that he doesn’t fear ‘the bottom’ and always says there are ups and downs and that during the down times employees’ basic life has to be guaranteed, hence reserves must be accumulated during the good times. She added that Stanley Ho, who is currently resting at his Hong Kong residence, cares a lot about Macau and the companies. When asked about his health condition, Angela Ho answered “pretty good”.
broadcaster Rádio Macau. Ambrose So talked with the press during a company event celebrating the 66th anniversary of the founding of the PRC. “We have to work more on that issue [attract tourists with greater purchasing power]. Macau is a small
city and it is limited by its area, capacity and transport system. We have to take this into account before realising how to attract such clients”, he explained.
To be discussed
Mr. So also commented on the full smoking ban in casinos proposed by the government and that will continue to be discussed this month, once the Legislative Assembly reconvenes. “The existence of smoking lounges in casinos is not opposed to the policy of the government. This has to be understood”, the CEO of SJM said. The Macau gaming industry has been struggling since June 2014, with gross gaming revenue dipping for over one year. Last month alone, gaming revenues declined 33 per cent year-on-year to MOP17.13 billion (US$2.14 billion). According to Business Daily calculations, the company founded by Stanley Ho Hung Sun led the market in terms of revenue share in September with 21.7 per cent, ahead of Sands China, the second best placed operator, which recorded a share of 21.3 per cent.
2014 construction value increases 63.2 pct y-o-y
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nformation from the Statistics and Census Service (DSEC) indicates that principal indicators of the construction sector registered a general increase in 2014 owing to the construction of large-scale hotels and entertainment facilities. In particular, the value of construction increased 63.2 per cent year-on-year to MOP78.15 billion, while intermediate consumption rose 60.2 per cent to MOP61.03 billion, and labour costs grew 42.3 per cent to MOP11.35 billion. Gross surplus, which equals value of construction and other receipts less intermediate consumption and labour costs, amounted to MOP6.86 billion, up substantially by 184.8 per cent. Gross value added, that measures the sector’s contribution to the economy, totalled MOP18.21 billion, up 75.4 per cent. Some 2,633 establishments were operating in the construction sector in 2014, a decrease of 136 year-onyear; the number of persons engaged increased by 11,361 to 45,368. Altogether, 1,192 establishments were engaged in construction
projects with permits, with 1,441 undertaking simple renovation projects. Analysed by type of construction project, the value of private construction projects grew 76.4 per cent year-on-year to MOP66.88 billion, of which the value of construction of hotels and entertainment facilities (MOP53.34 billion) increased 122.3 per cent, while that of private residential buildings (MOP10.66 billion) dropped 9.6 per cent. On the other hand, the value of public construction works increased
11.6 per cent year-on-year to MOP8.12 billion, of which the value of construction of public housing (MOP2.29 billion) and infrastructure (MOP4.07 billion) rose 5.5 per cent and 9.5 per cent, respectively, and that of land formation and reclamation works (MOP1.37 billion) surged 697.7 per cent; meanwhile, the value of construction of the Light Rapid Transit & roads (MOP1.55 billion) and piers (MOP636 million) decreased 17.2 per cent and 52.9 per cent, respectively.
Business Daily | 5
October 6, 2015
Macau
Casino shares jump following visitors, reported central support The gambling downturn has dragged Macau’s economy to its weakest performance since 2011. However, the city’s September gaming revenue came in within analyst forecasts
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acau casino shares jumped in Hong Kong trading after Chinese visitors to the world’s largest gambling hub surged during China’s Golden Week holiday and reports that the nation may move to support the city’s economy. Galaxy Entertainment Group Ltd. rose 5.3 per cent to close at HK$22.85, the highest level since September 21. Sands China Ltd. gained 3.4 per cent, with Wynn Macau Ltd. and MGM China Holdings Ltd. up more than 2 per cent. SJM Holdings Ltd. climbed 1 per cent. The benchmark Hang Seng Index rose 1.6 per cent. The former Portuguese colony has seen casino revenues fall for 16 straight months as China’s antigraft campaign and a slowdown in the country’s economy deterred high rollers, or VIP gamblers, going to the city. The
gambling downturn has dragged Macau’s economy to its weakest performance since 2011. “I believe that the massmarket trend over the holiday was pretty good,” said Grant Govertsen, an analyst at Union Gaming Group, referring to the lower-end players. “The gaming revenue number will show us sequential increase from September. But the VIP I think is still a question mark from holiday weekend.” Monday’s casino stock surge could also be a follow-through rally from a Chinese official’s reported comments on possible support measures for Macau, he said. Shares of Macau’s casino operators spiked on Friday after Li Gang, director of the Chinese government’s local liaison office, said Beijing will introduce more policies this year to support Macau’s economy. The city’s September gaming revenue also came in within analyst forecasts.
Visitors from China, who account for more than twothirds of the city’s total, rose 22 per cent to 276,557 on October 1 and October 2, the first two days of the nation’s weeklong holiday, a traditionally peak season, according to data from the Macau Government Tourist Office. That was compared with a growth rate of 4.3 per cent for the same period in 2014. The total number of travellers to the city in those
two days rose 13.4 per cent to 327,186 from a year earlier, the tourist office said. Visitors from the mainland have dropped 4.1 per cent for the first eight months of the year, according to official data. Macau’s gaming regulator announced late Thursday gross gaming revenue decreased 33 per cent to MOP17.1 billion (US$2.1 billion) last month, narrowing from August’s 35.5 per cent drop. Analysts are expecting a 32 per cent slump in 2015 before rebounding
next year, according to a Bloomberg survey. “It’s a surprise that share prices have gone up so much,” said Chris Kwai from China International Capital Corp. “No matter what the central government brings to Macau, it’s usually more related to improve the tourism there. “We do need some fundamentals. In general we are still waiting for the gross gaming revenue recovery,” he said. Bloomberg
6 | Business Daily
October 6, 2015
Macau
Macau cloud shouldn’t darken Philippine casinos, Razon says The Filipino billionaire believes that the Philippine casino market can grow without China through increased spending by mass and local gamblers Revenue grew 9.5 per cent to 5.99 billion pesos. Growth in casino takings will be subdued unless demand from Chinese gamblers picks up, says Astro del Castillo, managing director at First Grade Finance Inc. “The environment will remain difficult and investors will remain skeptical as it’s hard to imagine where spectacular growth will come from for Philippine casinos without China, since that’s the region’s biggest source of gaming traffic,” Castillo said. Razon said he expects the mass market to keep growing and account for 60 percent of Bloomberry’s gambling revenue in three to five years. Premium customers from Southeast Asia, Taiwan and South Korea also continue to arrive at Solaire, Razon said.
Shares rally
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e’re not Macau. That’s the message from Philippine billionaire Enrique Razon Jr. (pictured) after casino operator Bloomberry Resorts Corp. tumbled 61 per cent this year, making it the nation’s worstperforming major stock. Bloomberry’s losses will narrow because gambling revenue is growing, unlike in Macau, Razon said in an October 2 interview in Manila. He said the company’s earnings will improve and it plans to provision by yearend for all unpaid credit extended to VIP and premium players, he said. Bloomberry provided 1.81 billion pesos (US$39 million) in the first half for 4.69 billion pesos of receivables. “The whole industry has been painted with the same brush, but we’re nowhere near the situation in Macau, where revenue is really falling,” said Razon, 55. Philippine casino operators have plunged in 2015 as an anticipated flood of high-rollers from China failed to materialize amid an anticorruption drive spearheaded by President Xi Jinping and worsening relations between the two nations. State-run Philippine Amusement &
The whole industry has been painted with the same brush, but we’re nowhere near the situation in Macau, where revenue is really falling Enrique Razon Jr., Chairman and the President of Bloomberry Resorts Corp.
Gaming Corp. predicts casino revenue in the Southeast Asian country may accelerate in the second half after rising 16 per cent in the first six months of the year. The Philippine casino market can grow without China through increased spending by mass and local gamblers, Razon said. Bloomberry will still pursue premium players through junket operators instead of doing it directly, he said. “The good thing now, in hindsight, is that our relationship with China is really not that good,” he said. “So we never had the business from China, which nowadays is probably a good thing.” As Bloomberry was constructing its Solaire Resort in Manila, tensions between the Philippines and China were building over disputed territories in the South China Sea. The number of Chinese tourists to the country fell by about 33 per cent in the first quarter.
Investors skeptical
The company posted a net loss of 773.5 million pesos (US$16.8 million) in the second quarter amid higher operating costs and expenses at Solaire, which opened March 2013.
Gross gaming revenue in Macau fell by a third in September, its 16th straight month of declines. Philippine takings from casino operations is forecast to grow 13 per cent a year from 2014 to 2017, the highest rate in Asia Pacific, while revenue in Macau is expected to drop by 11 per cent during that period, Macquarie Group Ltd. said in a September 28 report. Philippine Amusement & Gaming Chairman Cristino Naguiat said in July the nation’s casino revenue has a “good chance” of growing 20 per cent to US$3 billion this year. Bloomberry jumped 7.6 per cent at 12:03 p.m. in Manila. Travellers International Hotel Group Inc. gained 4.4 per cent, while Melco Crown Philippines Resorts Corp. surged 11 per cent. Bloomberry is also looking overseas for expansion. The company will probably know by December whether its bid to build a casino resort in South Korea’s Incheon Free Economic Zone is successful, while a casino venture in the North Asian country’s Jeju Island may start making money next year, Razon said. The company also is seeking a gaming permit in Argentina, where it would need to spend about US$500 million to build a “respectable” casino, Razon said. Razon has a net worth of US$3.7 billion, according to the Bloomberg Billionaires Index. He made his fortune through International Container Terminal Services Inc., a Manila-based operator of cargo facilities in about 20 countries. “We can’t stick to a strategy just because we want to,” Razon said. “This is the time to make good moves that will make you a lot of money down the road. We have to adapt to the market, whatever that takes.” Bloomberg
Business Daily | 7
October 6, 2015
Macau
Donald Tsang charged with two counts of misconduct The former Chief Executive of Hong Kong has been charged by the Independent Commission Against Corruption and has had to pay bail of HK$100,000. The initial investigation involves a trip on a luxury yacht to Macau João Santos Filipe*
jsfilipe@macaubusinessdaily.com
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he former Chief Executive of Hong Kong, Donald Tsang Yam Kuen, was yesterday charged with two counts of misconduct in public office by the Independent Commission Against Corruption (ICAC) related to his lease of a luxury flat. The 70-year old politician was the head of the Hong Kong Government from 2005 to 2012. The first charge is related to the lease of a three-storey residential property in East Pacific Garden, in Shenzhen, plus the related payment of RMB800,000 (MOP1 million). The payment was made to a company of the major shareholder of Wave Media Limited (WML) in November 2010. However, Tsang failed to declare or disclose these negotiations to the Executive Council, which met between November 2010 and January 2012, to discuss and approve ‘various licence applications’ to WML. The media company is now named Digital Broadcasting Corporation Hong Kong Limited.
The second charge is also related to the flat and involves the proposal of an architect to be considered for ‘honours and awards’. At that time – between December 2010 and July 2011 – Mr. Tsang failed to inform the Permanent Secretary for the Chief Executive’s Office, the Development Bureau and the
Honours and Non-official Justices of the Peace Selection Committee that the architect was engaged in the interior design work for the flat he was leasing from the major WML shareholder.
Clear conscience
“Over the past three and a half years, I have assisted
Corporate
*with Bloomberg
Hong Kong shares rise 1.6 pct; Glencore surges 18 pct
Charity Golf Tournament tees off Friday The Annual Macau Business Charity Golf tournament has attracted donations for numerous local needy organisations. Last year, Special Olympics Macau received MOP75,000 from JBA Consulting, which has supported the Macau Business Charity Golf tournament since 2012 but last year won for the very first time. Second place went to Macau Business Daily, who donated MOP60,000 to Child
fully with the investigations by the Independent Commission Against Corruption,” Tsang said in a statement, after appearing in court at 2.30 p.m yesterday. “My conscience is clear. I have every confidence that the court will exonerate me after its proceedings.”
Tsang was accompanied by his Macau-born wife Selina Tsang Pou Siu Mei and posted HK$100,000 bail. The next court appearance is set for November 13. The investigation was sparked by complaints about the alleged impropriety of Tsang just months before the end of his term in June 2012. Besides the allegations related to the luxury flat in Shenzhen, Mr. Tsang allegedly accepted advantages from businessmen, including overseas holidays and the use of private jets and luxury yachts. One of the allegations is related to a luxury yacht trip offered by Chongqing property tycoon Zhang Songqiao to Macau. In the territory Mr. Donald Tsang and his wife are said to have spent a weekend on the triple-deck luxury boat with a few tycoons, dining with junket operators and high rollers. At the time of these accusations Tsang said that he paid for the expenses at “market price”.
Development. Caesars Golf Macau took third place and supported the Association for the Intellectually Disabled Macau with MOP40,000, while Scientific Gaming was in fourth place, donating MOP25,000 to the Orphanage Institution. Macau is proud of its participants in the Macau Business Charity Golf tournament and is looking forward to this Friday’s tee off – Yes, it’s true: sharing is caring.
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ong Kong shares rose 1.6 per cent on Monday, with technology and financial stocks leading the way, as expectations of a United States interest rate hike this year diminished on weaker-thanforecast jobs data. Shares of Glencore surged as much as 72 per cent before closing up 18 per cent at HK$12.6. On Friday, sources told Reuters the company is in talks to sell a stake in its agricultural assets, encouraging some investors worried about its debt levels. Macau gambling stocks extended gains from Friday after data showed a smaller drop in casino revenue than
the previous month. Shares of Galaxy Entertainment jumped 5.3 per cent, Wynn Macau gained 2.7 per cent and Sands China rose 3.4 per cent. The benchmark Hang Seng index ended at 21,854.5 points, while the China Enterprises Index of Chinese companies listed in Hong Kong, climbed 2 per cent to 9,883.71 points. Hong Kong's financial stocks rose nearly 2 per cent, technology stocks climbed 2.5 per cent and property shares gained more than 1 per cent China's markets are closed until October 8 for National Day holidays. Reuters
8 | Business Daily
October 6, 2015
Greater China
Big Hong Kong IPOs pitched to investors as confidence improves After falling for five straight months, Hong Kong’s benchmark stock index started October on a positive note Alison Lui and Fiona Lau
KEY POINTS Two IPOs of Chinese firms could fetch up to US$5 bln in total Huarong, China RE had delayed marketing on market turmoil Hong Kong Stock Exchange trading floor
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hina Huarong Asset Management Co Ltd and China Reinsurance (Group) started pitching Hong Kong IPOs worth up to a combined US$5 billion to investors yesterday - a sign of improving confidence in market conditions after recent turbulence. China’s biggest stateowned bad debt asset management firm and its
largest reinsurer had received the nod for their initial public offerings weeks ago but premarketing was delayed due to volatile markets around the world. After falling for five straight months, Hong Kong’s benchmark stock index started October on a positive tone, indicating investors may be ready to dip back into IPOs even though uncertainties
about the health of China’s economy remain. “We’re not out of the woods yet. I wouldn’t view it as a bull signal for the economy or for the stock market, but they must be confident enough to reach this phase, which is positive,” said a Hong Kong-based equity capital markets banker who was not authorized to speak publicly on the matter. “They’ve taken a view that
these deals will get done and will be supported by Chinese pools of capital. There’s no shortage of institutional money in China.” Huarong and China RE did not reply to Reuters requests for comment on the pre-marketing of their IPOs. Huarong is seeking to raise up to US$3 billion in its IPO. The offering will consist of 6.31 billion shares, equivalent to a 16.4 percent stake in the
company, and Huarong is slated to start taking orders from investors on October 15, according to a term sheet of the deal seen by Reuters. The offering will include no more than 607 million shares from China’s Ministry of Finance and no more than 17 million shares from statebacked grain trader COFCO, the terms showed. Huarong plans to use 60 percent of the proceeds to develop its distressed asset business and buy more debt from financial and non-financial companies, while another 30 percent will be set aside to expand its financial services businesses. China RE plans to raise up to US$2 billion. It is set to offer 5.77 billion new shares, equivalent to 14 percent of its enlarged share capital, and to start taking orders from investors on October 12, Thomson Reuters publication IFR reported. Reuters
East industrial centre pushes for robots in
At Foxconn’s plant in Kunshan, more than 2,000 automated mechanical arms have been
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ast China’s industrial bases are turning to robotics to replace human labour as the region strains to upgrade its manufacturing sector. Kunshan City in east China’s Jiangsu Province has decided to become a vanguard in the transformation, focusing on the development of fully automated “smart” factories. “With the disappearing effect of the population bonus on economic growth, it is pragmatic for industrial manufacturers to use more robots in the workplace to substitute human labour,” said Xu Huimin, secretary of Kunshan Municipal Committee of the Communist Party of China on Friday. He said the municipal government plans to help companies upgrade their industries. The municipal government will invest no less than 2 billion yuan (US$315 million) in “incentive funds” annually over the next six years to boost industrial modernization, with production of Kunshan’s intelligent equipment industry expected to reach 80 billion yuan in six years, he said. Kunshan is known as China’s industrial base for electronic engineering and high-precision machinery. Rising costs from labour, energy saving and emission controls have squeezed manufacturing industry profits, leading to economic slowdown in the coastal economic powerhouse, which has prospered through exportoriented industries in past decades.
“We believe it is prime time to develop a robotics industry cluster in Kunshan by taking advantage of its industrial foundation,” said Gan Zhongxue, a founding director of ABB Corporate Research Robot. ABB is a world leader in power and automation. It relocated its global robotics headquarters to Shanghai in 2005 with an eye on China’s rapidly growing robot market. Gan said China has developed industrial chains for both manufacturing robots and intelligent robots. At Foxconn’s plant in Kunshan, more than 2,000 automated mechanical arms have been installed this year. Each industrial robot can substitute for the labour of three people in the workshop. Yang Ming of Taiwan-based Foxconn Technology Group said the robots in its plant in Kunshan Wusongjiang Industrial Park can
58.9 pct ANNUAL INCREASE IN INDUSTRIAL ROBOTS SALES IN CHINA ROBOT INDUSTRY ALLIANCE
work 24 hours a day and have yielded direct economic returns of up to 300 million yuan. Foxconn, supplier to some of the world’s biggest tech brands, including Apple, is known for its gigantic labour-intensive factories in China, each employing tens of thousands of
workers to assemble high-precision electronic gadgets such as iPhones. The consultative committee advising the Chinese government on the “Made in China 2025” plan to upgrade the country’s manufacturing sector proposed robotics in manufacturing as one of 10 priority
Business Daily | 9
October 6, 2015
Greater China JP Morgan says ‘waves of protectionism’ will cap national steel Net shipments from China may total 86 million tons this year, 87 million in 2016 and 83 million the year after that, according to the bank Jasmine Ng
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teel exports from China will probably peak in 2015 as the doubling of shipments over the past two years spurred a wave of protectionism around the world, according to JPMorgan Chase & Co. Net exports from the top producer will plateau at about 90 million metric tons a year, with gross shipments seen at about 105 million tons, JPMorgan said in a report. China’s shipments of steel ballooned to a record this year as mills confronting shrinking domestic demand and slowing economic growth are seeking increased overseas sales, driving down global prices and spurring trade tensions from the U.S. to India and Africa. Steel demand in China will shrink 4 percent this year and 2 percent in 2016, JPMorgan said. “Booming steel exports have helped steel production hold up relatively
With Chinese exports doubling in the last two years, waves of protectionism measures have been triggered globally Daniel Kang, analyst
Bloomberg News
manufacturing
n installed this year industries on last Tuesday. The plan unveiled in May encourages domestic manufacturers to make technological breakthroughs in emerging industries in order to shift the country from low-end manufacturing to more value-added production.
better than steel demand, but we believe exports have reached a peak,” analysts including Daniel Kang wrote in the report dated October 4. Net shipments from China may total 86 million tons this year, 87 million in 2016 and 83 million the year after that, according to the bank. The 2020 figure was put at 90 million and was unchanged through to 2035, it said. Steel shipments from China have risen to extraordinary levels, according to Credit Suisse Group AG, which compared the volume of exports to total output from Japan, the world’s second-largest producer. In the first eight months of this year, cargoes from China surged 26.5 percent to 71.9 million tons, customs data show. Mills outside China are pushing back. ArcelorMittal South Africa Ltd., a unit of the world’s biggest steelmaker, has asked the government to extend tariffs on imports. The European Union steel industry is seeking data to file a complaint to the European Commission alleging that Chinese exporters are selling hot-rolled coil in the EU belowcost, a practice known as dumping. China may try to rein in steel exports by adjusting taxes to achieve a situation that benefits both the country and its trading partners, Wang Liqun, vice chairman at the China Iron & Steel Association, told reporters in Qingdao last month. Still, shipments will surpass 100 million tons this year as overseas sales remain strong, Wang said. Chinese mills are making more steel than the economy needs as they are benefiting from supplies of cheap iron ore, Lourenco Goncalves, chief executive officer of Cliffs Natural Resources Inc., said in August. Iron ore delivered to Qingdao dropped 5.2 percent to US$53.14 a dry ton on Friday, and is 25 percent lower this year.
Facing headwinds brought on by economic transfer, China’s manufacturing industry has been under pressure to increase automation There are 40 robotics industrial bases like Kunshan in China. Since 2014, robotics firms have opened at a pace of nearly one new firm per day.
Statistics released by the China Robot Industry Alliance (CRIA) show that the sales volume of China’s industrial robots grew 58.9 percent year on year on average from 2009 to 2014, and the domestic sales of robots in 2014 reached 57,000 units, making the country the world’s largest robot producer for two consecutive years since 2013. In addition to the manufacturing sector, China’s mining, petrochemical, coal and fireworks companies have been encouraged to use more robots and automatic equipment for dangerous jobs to reduce safety incidents. In the service sector, the demand for robotics is also robust, with robots used in restaurants, shops, and nursing homes across the country. Home service robots are seen as a future trend for helping take care of the elderly as the senior population grows, with people age 60 or over reaching 212 million, or 15.5 percent of the total. However, China still lags behind in the world’s leading robot production technology. Chinese firms mainly assemble imported key components for robotics, said Xing Fei, deputy director of Nanjing Robotics Research Institute. Xu Jianguo, director of the Shanghai Association of Robotics, said there are bubbles in the robotic sector. Many companies were set up in order to take advantage of favourable government policies such as land use and tax breaks given to boost the technology. Industry insiders proposed the government set up an industry entrance threshold to better regulate the robot industry and establish a financial platform to help turn hightech robotic research and innovation into commercial development. Xinhua
Taiwan’s September exports falling Taiwan’s exports in September likely fell 11.6 percent from the same period a year ago, according to the median forecasts of 13 analysts polled by Reuters. The fall would mark the eighth month in a row that exports have contracted and raise the likelihood that the island’s export-driven economy contracted in the third quarter. Taiwan is one of Asia’s major exporters, especially of technology goods, and its export trend is a key gauge of global demand for technology gadgets worldwide.
Trade in electronic information products slows China’s foreign trade of electronic information products fell 1.1 percent to US$818.3 billion in the first eight months of 2015, according to data from the Ministry of Industry of Information Technology. Exports stood at US$485.7 billion, down 1 percent year on year. Imports were down 1.3 percent at US$332.6 billion. During the first eight months, computer exports fell 12.9 percent to US$124 billion and their imports fell 10.1 percent to US$34.9 billion. Mobile phones exports climbed 15.8 percent to US$69.8 billion. Exports to Japan and the Netherlands fell 13.3 percent and 11.5 percent respectively.
Corruption in prisons next attention A senior discipline inspector Han Henglin has asked officials to fight corruption and other illegal conduct in China’s prison system. Han, chief of discipline inspection in the Ministry of Justice which oversees nationwide prisons, told his subordinates that the prison system faces “a severe and complicated situation” in the fight against corruption, the Communist Party of China Central Commission for Discipline Inspection released yesterday on its website. Abiding by the rules must be incorporated into daily administration, education and promotion of officials in the prison system, Han was quoted as saying.
Shanghai-Hong Kong Stock Link trading at 7-month low
The Shanghai-Hong Kong Stock Connect saw both northbound and southbound trading fall in September to the lowest level since February. Northbound volume dropped 32 percent to 81.9 billion yuan (US$12.9 billion) from 121 billion yuan in August, according to data from the Hong Kong Stock Exchange. Southbound turnover slumped 50 percent to HK$25.3 billion (US$3.3 billion) from HK$51 billion. The cross-border stock link, which started last November, allows mainland investors to buy Hong Kong stocks and permits more foreign access to the world’s second-largest equity market.
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October 6, 2015
Greater China
Real estate sector in China has been a major worry for the authorities in the transforming Chinese economy
Short sellers take on top Hong Kong property stock of 2015 Evergrande’s shares fell 14 percent in September, the worst performer among its peers Lisa Pham
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vergrande Real Estate Group Ltd., the best- performing major property stock traded in Hong Kong this year, is also the most-shorted and lowest-rated among peers. Some reasons: The developer controlled by billionaire Chairman Hui Ka Yan has bought back shares to help boost prices and has been piling on debt, leading analysts and some investors to bet that increases won’t be sustainable. The shares, which defied a slumping market to increase in July and slip only 0.6 percent amid a rout in August, led declines among property developers in September. Chinese developers have been taking on debt to expand as the government turned to areas such as property investment to shore up slowing economic growth. As the share market began its decline in mid-June, developers such as Evergrande and China Vanke Co. moved to give their shares a boost via buybacks. Evergrande’s shares jumped 11 percent in July as the developer embarked on a buyback spree, and was the only stock in the BI China Real Estate Owners and Developers Valuation Peers Index to increase that month. “The cash flow position will become quite tight if the company keeps buying back shares or maintaining its dividend pay-out,” Toni Ho, an analyst at RHB OSK Securities Hong Kong Ltd., said. “Evergrande has
been more aggressive compared to its peers in terms of taking on more debt.” Evergrande’s shares fell as much as 2.7 percent and were 1.3 percent lower at HK$4.73 at the noon break in Hong Kong. The stock was the worst-performing member in the BI China Real Estate Owners and Developers Valuation Peers Index in morning trading. Evergrande’s secretary, Jimmy Fong, didn’t answer two e- mails seeking comment, and three phone calls to his office went unanswered. In August, Fong had said there was nothing new in a report by an independent research firm that highlighted the firm’s indebtedness, adding that though the company’s leverage had gone up, it was due to its expansion. Evergrande’s shares fell 14 percent in September, the worst performer among its peers. Still, the company’s shares are up about 50 percent this year, the top performer and one of four stocks to gain in the 16-member BI China Real Estate Owners & Developers Index, which tracks the nation’s biggest developers with shares traded in Hong Kong. Ho said the stock has been supported by the buybacks and because of the developer’s strong branding on the mainland, where sales were helped by lowering of interest rates and easing of property curbs. In August, the company reported a 33 percent increase in net income
and 23 percent increase in sales for the six months ended June from a year earlier. Evergrande spent HK$5.47 billion (US$706 million) buying back 1.15 billion shares in July. The company, which has amassed one of the highest debt loads among China’s developers, is planning to sell as much as 20 billion yuan (US$3.1 billion) of bonds in the onshore market this month, people familiar with the matter said Wednesday. The developer’s net debt-to-equity leverage rose to a record high of 121.8 percent at the end of June from 102.6 at the end of last year. That compares with the average net leverage of 83.2 percent for Hong Kong-listed developers with a market capitalization of more than US$1 billion, according to data compiled by Bloomberg. If considering its perpetual notes as debt, the company’s net leverage was 291.8 percent at the end of June. Standard & Poor’s, in May, downgraded the developer’s rating because its leverage had increased and was likely to stay high. Short interest surged to about 29 percent of free float after the repurchased shares were cancelled, according to data compiled by Markit Ltd., with the billionaire chairman’s stake in the company rising to 70 percent. Hong Kong-listed companies typically need to have at least 25 percent of their stock available for the public.
121.8 pct Evergrande Real Estate Group’s net debt-to-equity leverage rising at the end of 2015 June
The stock may be getting shorted on concerns about liquidity and cash flow, according to Domingo Chen, Hong Kong- based chief operating officer of Quantum China Asset Management. It will take time for Evergrande to alleviate investor concerns about the company’s balance sheet, he added. “We think Evergrande’s share price is not driven by fundamentals,” JPMorgan Chase & Co. analysts led by Ryan Li wrote in a September 2 research report. The low stock liquidity and share buyback program “will make the share price very volatile, but with limited downside in the near term.” Bloomberg News
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October 6, 2015
Asia
World Bank trims East Asia forecasts A report said the downward revisions to regional growth forecasts mainly reflect a moderate slowdown in China's economy Masayuki Kitano
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he World Bank cut its 2015 and 2016 growth forecasts for developing East Asia and Pacific, and said the outlook was clouded by the risk of a sharp slowdown in China and possible spill overs from expected increases in U.S. interest rates. The Washington-based lender now expects the developing East Asia and Pacific (EAP) region, which includes China, to grow 6.5 percent in 2015 and 6.4 percent in 2016, down from 6.8 percent growth in 2014. Its previous forecast in April was 6.7 percent in each of 2015 and 2016. “The baseline scenario for regional growth is subject to a greater-than-usual degree of uncertainty, and risks are weighted to the downside,” the World Bank said in its latest East Asia and Pacific Economic Update report yesterday. “In particular, uncertainty surrounds the trajectory of,
and spill overs from, China’s economic rebalancing and the expected normalization of U.S. policy interest rates.” The World Bank said the downward revisions to regional growth forecasts mainly reflect a moderate slowdown in China’s economy, which it sees growing 6.9 percent in 2015 and 6.7 percent in 2016, down from 7.3 percent in 2014.
The previous forecast was for China to grow 7.1 percent in 2015 and 7.0 percent in 2016. Growth in developing East Asia excluding China is expected to hold steady in 2015 at 4.6 percent before accelerating to 4.9 percent in 2016, the World Bank said. Those were down from previous forecasts of 5.1 percent
growth in 2015 and 5.4 percent in 2016. The bank said the outlook for household incomes and business profits in Indonesia and Malaysia was clouded by weakness in global commodity markets. It said lower real trade-weighted exchange rates can play a key role for such commodity exporters to adjust to weaker terms of trade.
“The depreciations of the Indonesian rupiah and Malaysian ringgit against the U.S. dollar have reduced the drop in exporter revenues, corporate profits, and household incomes in local currency terms -- a valuable shock-absorbing effect,” it said. “More generally, authorities should limit currency market interventions to smoothing volatility, given the importance of maintaining adequate reserve buffers,” the World Bank added. Further declines in Asian currencies against the dollar could cause balance sheet strains in countries with significant dollardenominated debt, it said. “Stress may arise whenever individual firms and sectors suffer from a significant concentration of liabilities,” the World Bank said, adding that such risks are a special concern in Indonesia, Malaysia, Thailand and Vietnam. Reuters
Japan's slow wage growth dents consumption outlook Wages are seen as crucial for generating a virtuous growth cycle Tetsushi Kajimoto
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apanese wage growth slowed in August and summer bonuses fell from last year, a discouraging sign for private consumption that should keep policymakers under pressure to offer more stimulus as fears of a recession grow. Inflation-adjusted real wages rose 0.2 percent year-on-year, slowing from a revised 0.5 percent gain in July, as nominal wages lag price gains of food and daily necessities, undermining the purchasing power of households. Special payments - predominantly summer bonuses - rose 0.6 percent, but those paid during a bonus period between June and August were 3.4 percent lower than last year, labour ministry officials said. The data follows a mixed batch of indicators last week including a surprise drop in factory output and bigger-than-expected household spending growth, highlighting an
uneven economic recovery from a second quarter contraction. Wages are seen as crucial for generating a virtuous growth cycle, especially as policymakers hope companies will spend record profits on investments and salaries, and help boost private consumption that accounts for about 60 percent of the world's third-biggest economy. "The data showed household incomes are improving gradually. Wages are not strong enough to drive consumption though," said Makoto Watanabe, senior economist at BNP Paribas Securities. "Although corporate profits are rising, companies will grow cautious about boosting salaries and winter bonuses as the economy has stalled and uncertainty grows over the outlook." Speculation persists that the Bank of Japan may ease policy further at policy reviews either this week or later
this month, especially as the risk of a recession looms large, which if it does happen would further delay a rebound in the economy. Watanabe said the central bank is likely to stand pat given solid capital spending plans and an improving output gap seen in its tankan survey issued last week. Some analysts say soft wage data was due in part to change in data sampling adopted earlier this year, which increased weighting of sectors such as retailers and wholesalers who pay relatively lower salaries and bonuses. Many companies, particularly small firms, have been hesitant to boost wages to avoid marked increases in fixed labour costs. Total cash earnings rose 0.5 percent year-on-year in August to 272,382 yen (US$2,271.36), up for two straight months, the labour ministry data showed yesterday.
Regular pay, which determines base salaries, rose an annual 0.5 percent, up for a sixth straight month and marking the fastest rise since February 2008. Overtime pay, a barometer of strength in corporate activity, rose an annual 1.5 percent. Reuters
KEY POINTS Aug real wages +0.2 pct yr/ yr, up two straight months Data shows summer bonuses seen below year earlier Wages are not strong enough to drive consumption –Analyst
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October 6, 2015
Asia
Luring Indian savers to fund growth signals RBI rate pause Since taking charge of the RBI in September 2013, Governor has made curbing price increases his top priority and resisted government pressure to cut rates Kartik Goyal
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he Indian central bank governor’s goal of encouraging savings to finance growth in Asia’s third-largest economy leaves him almost no room to lower benchmark borrowing costs for at least six months. Raghuram Rajan cut the Reserve Bank of India’s repurchase rate last week for the fourth time this year, using up the “maximum room” allowed by the outlook for prices and the need for an inflationadjusted return of 1.5 to 2 percent to boost the slowest savings growth in a decade. Though the so-called real rate is usually the gap between the policy rate and consumer-price gains, Rajan’s target is based on a 7 percent treasury bill yield and the RBI’s estimate that inflation will range from 5 to 5.5 percent over the next year. The monetary authority will pause its easing cycle at least through March, according to nine of 11 economists and investors surveyed by Bloomberg after Rajan said he had “front loaded” cuts and wants to ensure they are passed on to borrowers. While Bank of America Merrill Lynch forecasts another reduction in February, DSP BlackRock Investment Managers Pvt.
India’s central bank Governor Raghuram Rajan
Australian inflation picks up in September A survey showed the trimmed mean measure of the CPI edged up 0.2 percent in the month, taking the annual rate to 1.6 percent
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private-sector gauge of Australian inflation released yesterday showed a slight pickup in price pressures in September, but not to the extent that would worry the central bank. The TD Securities-Melbourne Institute’s monthly measure of consumer prices rose 0.3 percent in September from August, when it edged up 0.1 percent. The annual pace ticked up to 1.9
percent, from 1.7 percent, reaching its highest since November 2014. However, it was still below the Reserve Bank of Australia’s (RBA) target band of 2 to 3 percent. The benign inflation environment means the RBA has room to cut interest rates if needed, but all 25 analysts polled by Reuters last week expect the central bank to stand pat at today’s policy meeting. The RBA last cut the cash rate to a record low 2.0 percent in May and has since appeared happy with the current policy setting. “We remain of the view that the RBA is comfortable with a terminal cash rate of 2 percent,” said Annette Beacher, chief Asia-Pacific macro strategist at TD Securities. Yesterday’s survey showed the trimmed mean measure of the CPI
We remain of the view that the RBA is comfortable with a terminal cash rate of 2 percent Annette Beacher, chief Asia-Pacific macro strategist, TD Securities
edged up 0.2 percent in the month, taking the annual rate to 1.6 percent. Inflation excluding fuel, fruit and vegetables came in at 0.5 percent, versus 0.2 percent in the previous month. As a result, the annual pace quickened to 2.3 percent, from 2.0 percent. Non-tradables inflation, covering the prices of goods and services not determined by international competition, sped up to 2.1 percent, from 1.9 percent. Tradables inflation was at 1.7 percent, up from 1.4 percent. For September alone, there were price rises for tobacco, holiday travel and accommodation as well as fruit and vegetables. These rises were offset by falls in petrol prices, newspapers, books and stationery and garments. 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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October 6, 2015
Asia and DBS Bank Ltd. said the RBI’s real-rate goal will prevent it from lowering borrowing costs.
‘Status Quo’
“Rajan’s new method of arriving at real rates suggests room for further easing is rather limited,” said Dhawal Dalal, the Mumbai-based head of fixed income at DSP BlackRock, the local venture of the world’s largest money manager that oversees 372 billion rupees (US$5.7 billion) locally. “RBI is in status quo up to March 2016.” The central bank surprised markets by cutting the benchmark rate by 50 basis points last week to 6.75 percent. Most of the 52 economists surveyed by Bloomberg had predicted a quarterpoint move, and only one made the right call. Rajan had said earlier this year that while borrowing costs need to be lowered to support growth, “we have to keep in mind that the savers should not be forgotten.” India’s gross domestic savings rose 30.6 percent in the year ended March 2014, the least since 2004, according to the latest available official data, as one of fastest inflation rates in Asia eroded returns and investors turned to gold as a store of value. Since taking charge of the RBI in September 2013, Rajan has made curbing price increases his top priority and resisted government pressure to cut rates. Earlier this year he got Prime Minister Narendra Modi’s administration to agree on an inflation-targeting mechanism, one of the biggest reforms in the central bank’s 80-year history. “It’s critical to preserve real rates to boost savings to finance growth on a sustainable basis,” said Radhika Rao, an economist at DBS Bank in Singapore. Rajan is “signaling to savers that their interest will be protected” when he responds to the
need to spur the economy, she said. The need to shield Indian markets from potential volatility when the Federal Reserve raises U.S. interest rates later this year will also keep the RBI from easing further, according to Rao. Future rate cuts will depend on the government’s ability to carry out economic reforms and remove supply bottlenecks that feed inflationary expectations, said Dalal from DSP BlackRock.
Modi’s Reforms
Modi’s government has backed down from a plan to make it easier for companies to acquire land and has failed to convince opposition lawmakers to back a goods-andservices tax that would create a unified market in the world’s second most populous nation. Even so, Ashutosh Datar, the only economist to correctly predict the RBI’s latest rate move, forecasts a 50 basis-point cut by the end of March or April as inflation stays below the central bank’s 5.8 percent target for January. Bank of America Merrill Lynch sees a 25 basis point reduction in February, according to a September 29 report. “Slowing inflation and weak growth will force the RBI’s hand,” said Datar, who works for IIFL Institutional Equities Ltd. in Mumbai. Consumer prices rose 3.66 percent in August from a year earlier, the smallest increase in nine months, latest official data show, and India’s economic growth slipped to 7 percent in the April-June quarter from 7.5 percent in the preceding three months. India’s sovereign bonds rallied after the RBI cut rates and allowed foreigners greater access to local debt. The 10-year yield fell 15 basis points last week to 7.56 percent on Thursday, the biggest drop since the five days ended June 19, according to data compiled by Bloomberg. It
Philippine pension buys stocks as foreigners sell most on record Earnings by listed companies are projected to expand 16 percent over the next 12 months, according to analyst estimates compiled by Bloomberg Ian Sayson, Cecilia Yap and Clarissa Batino
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or the largest Philippine pension fund, record foreign outflows are making the nation’s equities a more attractive investment. As the Philippine Stock Exchange Index surged to a record in April, the Government Service Insurance System was selling, according to its President Robert Vergara. Since then, the benchmark gauge has fallen every month, its longest losing streak in 13 years, and the fund has been purchasing shares -- spending a third of its annual equities budget in a 5 billion peso (US$107 million) buying spree in August alone, he said. “This year we were really behind our investment program, we were actually taking profit as the market was going up,” Vergara said in an interview in
Manila. Now, the fund is “predominantly buying” and there’s “a possibility that we will bottom out, maybe in the next couple of weeks,” he said. Foreign money managers sold a record US$1.28 billion of the nation’s shares in the three months through September, fuelling the stock index’s biggest quarterly loss in seven years, as a slowdown in China’s economy roiled global markets and traders boosted expectations the U.S. will raise interest rates. While the Philippine Stock Exchange Index remains the region’s priciest, valuations have fallen to near the cheapest levels in 20 months.
Outlook positive
The outlook for the Philippines remains positive even as Asian
If you look at the RBI’s new way of arriving at the real rate, there doesn’t seem to be much room for further easing… The governor also said he’s front loaded the cuts Anubhuti Sahay, head of South Asia economic research
extended its decline on Monday, dropping five basis points from Oct. 1 to 7.51 percent. Local markets were shut Friday for a holiday. The risk to inflation from the weakest monsoon rains in six years and the government’s plan to boost salaries for its employees next year will also deter Rajan from lowering borrowing costs, according to Standard Chartered Plc. “If you look at the RBI’s new way of arriving at the real rate, there doesn’t seem to be much room for further easing,” said Anubhuti Sahay, head of South Asia economic research at the U.K. bank in Mumbai. “The governor also said he’s front loaded the cuts.” Bloomberg News
growth slows, Vergara says. The nation is more insulated from weaker world growth than other emerging markets because of its reliance on domestic spending and steady dollar inflows from remittances, according to the International Monetary Fund. Gross domestic product growth will probably accelerate to 6.3 percent in 2016, from 6 percent this year, the Asian Development Bank forecast last month. The bond market is also pushing back expectations for the first Federal Reserve interest-rate increase in almost a decade until March at the earliest. Traders pared bets on a 2015 hike and subsequent increases after the U.S. reported surprisingly weak labour data for September. Vergara said the GSIS will consider spending more than the 15 billion pesos it set aside for stock investments this year if share prices continue to decline. The Philippine stock index has tumbled 16 percent from an April 10 record high and trades at 16.8 times projected 12-month earnings, down from 20.8 at its peak on May 2013. That’s still 37 percent higher than the MSCI Asia Pacific Index, according to data compiled by Bloomberg. While the Philippine outlook is “good” compared with its neighbours, that’s already priced into shares, says Dennis Lim, Singapore-based co-chief executive at Templeton Asset Management Ltd., which has an underweight rating on the nation’s equities. “Valuations are reflecting all the positives.” Bloomberg News
S.Korean central bank chief says growth to be near 2.8 pct South Korea’s central bank chief said yesterday economic growth this year will be near the 2.8 percent level the bank had forecast in July. The central bank will revise its forecasts later this month. “Domestic consumption is considered to be in recovery and although I cannot pinpoint what our forecast revision will be, it will unlikely diverge largely from (our previous forecast),” Bank of Korea Governor Lee Ju-yeol (pictured) told lawmakers in parliament. During the same session, Finance Minister Choi Kyung-hwan also said there are some downside risks to the government’s current GDP forecast for this year.
Vietnam’s economy to expand by 6.2 pct Vietnam’s economy is forecast to expand by 6.2 percent in 2015, according to an East Asia and Pacific Economic Update released by the World Bank (WB) yesterday. “Growth is expected to be over 6 percent in 2015, underpinned by further recovery in domestic demand, in turn reflecting more robust private consumption and investment growth,” the WB said in its semi-annual publication. Despite the expansionary monetary policy stance, inflation would remain low due to subdued global conditions and low global energy and food prices. The WB estimates that Vietnam’s inflation would stay at 1.5 percent in 2015.
Australian job ads increase Australian job advertisements in newspapers and on the Internet posted a second month of healthy gains in September, an encouraging outcome suggesting employment growth may be picking up momentum. A monthly survey by Australia and New Zealand Banking Group showed total job advertisements rose 3.9 percent to 153,778 per week on average in September, adding to the 1.3 percent gain in August. Ads were 12.8 percent higher on September last year, speeding up from the 8.8 percent pace seen in August and nearing the 14.1 percent rate set in May.
Cambodia’s growth projected to 6.9 pct Economic growth is expected to slightly ease to 6.9 percent this year, 0.2 percentage point lower than the 7.1-percent growth last year, according to a new World Bank report released yesterday. The country’s economic growth depends mainly on agriculture, tourism, garment exports and construction. The slightly lower growth for 2015 was due to “sluggish agricultural growth, uncertainty in the tourism sector and moderate garment exports”, the report said. Growth in agricultural sector remains sluggish due to slow crop yield improvements and depressed agricultural commodity prices, it said.
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International No progress in governance across Africa Progress in governance across Africa has stalled since 2011, with deteriorating safety and lack of economic opportunity overshadowing any gains made on the human rights front especially in resource-rich nations, a survey said yesterday. The Ibrahim Index of African Governance rates 54 African nations against criteria such as security, human rights, economic stability, just laws, free elections, corruption, infrastructure, poverty, health and education. Mauritius held onto its top spot, followed by Cape Verde, Botswana, South Africa and Namibia, but overall the index has improved just 0.2 basis points over four years and half.
Rolls-Royce to cut more staff at its marine unit Britain’s Rolls-Royce said it would cut an additional 400 staff from its marine business by the end of next year, its latest move to make the unit more efficient and cope with a fall in orders sparked by lower oil prices. The marine unit, which depends on oil and gas-related customers for about 60 percent of its business, has seen some of its orders cancelled in the past 16 months as the price of Brent crude collapsed to six-year lows. Rolls-Royce had already announced in May that it would cut 600 jobs in its marine business.
Nordex to buy Acciona’s wind power business German wind turbine maker Nordex is buying Spanish firm Acciona’s wind power business for 785 million euros (US$882 million) in cash and shares to create a global player in the wind energy market, it said late on Sunday. “In combining their activities Nordex and Acciona Windpower will create a truly global company and in doing so reduce exposure to demand swings in individual markets,” Nordex said in a statement. Nordex said the two businesses were complementary, with Nordex strong in Europe and specialised in complex projects, while Acciona Windpower was focused on the Americas and emerging markets.
Global regulators finalise new capital rule for big insurers They include AIG and MetLife from the US, Britain’s Aviva, Ping An Insurance of China, Italy’s Generali, and Axa of France Huw Jones
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he world’s nine biggest insurance companies will have to hold more capital under new rules just finalised by global regulators that aim to prevent taxpayer bailouts of the industry in a crisis. Regulators decided to look at the multi-trillion dollar insurance industry following the massive public rescue of insurer AIG in the United States during the 2007-2009 financial crisis. At the request of the Group of 20 economies (G20), the International Association of Insurance Supervisors (IAIS) has completed a two-part capital requirement for the nine companies, whose collapse could wreak havoc in global markets. They include AIG and MetLife from the United States, Britain’s Aviva, Ping An Insurance of China, Italy’s Generali, and Axa of France. The insurers will not have to make public their extra capital buffer until 2019 but, as with new banking capital rules, investors are likely to want to know if a company is strong enough to comply early without having to raise fresh capital. The IAIS said the first capital cushion, known as the basic capital
requirement, will effectively be what each of the nine insurers are already required to hold under national law. A consultation had initially proposed that the basic capital requirement, to be phased in over three years from 2016, should be at least 75 percent of the national requirement. The second capital buffer, known as higher loss absorbency, will be on average 10 percent of the basic requirement, depending on the riskiness of a company’s operations, the IAIS said in a statement. This has been scaled back from an original proposal for a higher loss absorbency buffer that was on average 12-13 percent of the basic one. All nine must meet their combined capital requirements from 2019 under the finalised rules which G20 leaders are due to formally endorse next month at a summit in Turkey. The G20’s regulatory task force, the Financial Stability Board, is due next month to update its list of insurance companies deemed to be systemically important, but it is not expected to include any big reinsurers, an omission that has raised eyebrows of some regulators.
UK plans US$3 billion Lloyds share sale People applying for investments of less than 1,000 pounds will be prioritised, the U.K. finance ministry said Matt Scuffham
American Apparel files for bankruptcy
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American Apparel Inc filed for chapter 11 bankruptcy protection yesterday, joining a rising number of U.S. apparel retailers reeling under tough competition and lower spending by teen shoppers. The teen apparel retailer said it had reached a restructuring support agreement with most of its secured lenders and would continue to operate its business throughout the process with its stores and U.S. manufacturing operations continuing uninterrupted. The retailer expects to cut its debt to US$135 million from US$300 million, as the deal will eliminate more than US$200 million of bonds in exchange for equity in the reorganized company.
ritain’s finance ministry said it will sell at least 2 billion pounds (US$3 billion) worth of shares in Lloyds Banking Group to private retail investors in spring 2016 to return the bank to full private ownership. The sale is set to be the biggest privatisation in Britain since the 1980s, when Margaret Thatcher’s government sold 3.9 billion pounds worth of shares in British Telecom and 5.6 billion pounds worth of British Gas shares. As well as raising money to pay down Britain’s debt, those sales aimed to encourage ordinary Britons to invest in the stock market, an aspiration shared by the current Conservative government, which gathered for its annual party conference in Manchester on Sunday. “This final sale will be the biggest privatisation in over 20 years and I don’t want all those shares to go to City institutions. I want them to go to members of the public,” finance
minister George Osborne told Sky News yesterday. Market sources say the shares are expected to be attractive to retail investors because of the high dividend yield they are expected to offer in the coming years. The bank was one of the biggest dividend payers in the FTSE-100 before its 20.5 billion pound taxpayer-funded bailout during the 2007/09 financial crisis, which left the government holding a 43 percent stake. Lloyds, which already has more retail investors than any other stock in Britain’s FTSE-100 index, paid its first dividend since its bailout earlier this year and is expected to ramp up pay-outs over the next 2 to 3 years. “The buoyant interest in this share sale will only now accelerate with the terms finally on the table,” said Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, which has 727,000 private clients. Shares in Lloyds were up 1.5 percent at 0730 GMT.
All nine insurance firms must meet their combined capital requirements from 2019 under the finalised rules which G20 leaders are due to formally endorse next month at a summit in Turkey
Some U.S. insurance supervisors have questioned the need for global capital rules at all. Met Life has taken the U.S. government to court to challenge a U.S. regulatory panel’s decision to deem the firm “systemically” risky and therefore subject to tighter scrutiny. Reuters
The Lloyds shares will be offered to retail investors at a discount of 5 percent to the market price, with a bonus share for every 10 shares for those who hold their investment for more than a year. The value of the bonus share incentive will be capped at 200 pounds per investor, the Treasury said. People applying for investments of less than 1,000 pounds will be prioritised, the finance ministry added. Britain’s government has recouped almost three-quarters of the taxpayer cash used in the rescue of the bank through sales of shares to institutional investors since September 2013. It now owns just under 12 percent of the lender. Before this year’s national election, Osborne said he would look to sell part of the government’s stake to private investors if the Conservative Party won a majority. Osborne is pressing ahead with the sale, seen as a symbol of Britain’s recovery from the financial crisis, despite mild opposition from some of Lloyds institutional shareholders, who have suggested the government could avoid unnecessary costs to the taxpayer if it continued to sell down its stake on the market. The announcement comes after Britain’s financial regulator said on Friday that it intended to set a 2018 deadline for people to claim compensation for mis-sold loan insurance. That decision was seen as positive for Lloyds, which has already set aside 13.4 billion pounds to compensate customers, more than any other bank. Goldman Sachs is advising the government on the retail sale. Reuters
Business Daily | 15
October 6, 2015
Opinion Business
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Leading reports from Asia’s best business newspapers
The Middle East meltdown and global risk Nouriel Roubini
Chairman of Roubini Global Economics and Professor of Economics at the Stern School of Business, NYU
THE PHNOM PENH POST Cambodian exports saw a nearly 20 per cent increase for the first half of the year, as garment shipments to the European Union led the way in making up for a decrease in exports to the United States, according to a new Ministry of Commerce report. The report shows that outbound shipments from Cambodia brought in US$3.9 billion for the first six months, as compared to the US$3.28 billion reported for the same period in 2014. The rise was buoyed by a 32 per cent increase in garments to the European Union, not including textiles and footwear.
THE JAKARTA POST The contribution of stateowned enterprises in the form of dividends to the state budget will increase Rp 3 trillion (US$203.87 million), from Rp 31 trillion in the 2015 state budget to Rp 34 trillion next year. The increase was agreed to during a hearing between StateOwned Enterprises (SOE) Minister Rini Soemarno and House of Representatives Commission VI overseeing state companies’ affairs. Previously, the minister set the dividend contribution at Rp 31 trillion consisting of Rp 6.9 trillion from state lenders and Rp 24.22 trillion from non-banking state companies.
VIETNAM NEWS Consumer credit is expected to grow strongly in Viet Nam thanks to the many advantages the country possesses, economists have said. Senior financial expert Can Van Luc told that Viet Nam’s consumer financial services industry has great potential. Consumer lending accounts for just 6 per cent of total outstanding loans in Viet Nam compared to 15-20 per cent in many countries and as high as 35-40 per cent in the US, he added. The most common forms of consumer credit include credit cards, auto finance, personal loans, consumer lines of credit, retail loans, and mortgages.
THE NEW ZEALAND HERALD The Government has laid out its plans for investment in science over the next 10 years, including changes to the main funding mechanism. Science and Innovation Minister Steven Joyce this morning launched the National Statement of Science Investment in Wellington. “The [statement] provides a timely stocktake on the overall shape of our science system that will help determine where the next investments should be made,” he said. As a result of feedback, the Government would redesign the contestable fund for science investment which is managed by the Ministry of Business, Innovation and Employment.
Refugees and migrants arrive at Galatsi Olympic Hall in Galatsi near Athens. Civil wars that turn millions of people into refugees will destabilize Europe economically and socially
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mong today’s geopolitical risks, none is greater than the long arc of instability stretching from the Maghreb to the AfghanistanPakistan border. With the Arab Spring an increasingly distant memory, the instability along this arc is deepening. Indeed, of the three initial Arab Spring countries, Libya has become a failed state, Egypt has returned to authoritarian rule, and Tunisia is being economically and politically destabilized by terrorist attacks. The violence and instability of North Africa is now spreading into Sub-Saharan Africa, with the Sahel – one of the world’s poorest and most environmentally damaged regions – now gripped by jihadism, which is also seeping into the Horn of Africa to its east. And, as in Libya, civil wars are raging in Iraq, Syria, Yemen, and Somalia, all of which increasingly look like failed states. The region’s turmoil (which the United States and its allies, in their pursuit of regime change in Iraq, Libya, Syria, Egypt and elsewhere, helped to fuel) is also undermining previously secure states. The influx of refugees from Syria and Iraq is destabilizing Jordan, Lebanon, and now even Turkey, which is becoming increasingly authoritarian under President Recep Tayyip Erdoğan. Meanwhile, with the conflict between Israel and the Palestinians unresolved, Hamas in Gaza and Hezbollah in Lebanon represent a chronic threat of violent clashes with Israel. In this fluid regional environment, a great proxy struggle for regional dominance between Sunni Saudi Arabia
and Shia Iran is playing out violently in Iraq, Syria, Yemen, Bahrain, and Lebanon. And while the recent nuclear deal with Iran may reduce the proliferation risk, the lifting of economic sanctions on Iran will provide its leaders with more financial resources to support their Shia proxies. Further east, Afghanistan (where the resurgent Taliban could return to power) and Pakistan (where domestic Islamists pose a continued security threat) risk becoming semi-failed states. And yet, remarkably, even as most of the region began to burn, oil prices collapsed. In the past, geopolitical instability in the region triggered three global recessions. The 1973 Yom Kippur War between Israel and the Arab states caused an oil embargo that tripled prices and led to the stagflation (high unemployment plus inflation) of 1974-1975. The Iranian revolution of 1979 led to another embargo and price shock that triggered the global stagflation of 1980-1982. And the Iraq invasion of Kuwait in 1990 led to another spike in oil prices that triggered the US and global recession of 1990-1991. This time around, instability in the Middle East is far more severe and widespread. But there appears to be no “fear premium” on oil prices; on the contrary, oil prices have declined sharply since 2014. Why? Perhaps the most important reason is that, unlike in the past, the turmoil in the Middle East has not caused a supply shock. Even in the parts of Iraq now controlled by the Islamic State, oil production continues, with output smuggled and sold in foreign markets. And the prospect that sanctions on Iran’s oil exports will be phased
With the US on the way to achieving energy independence, there is a risk that America and its Western allies will consider the Middle East less strategically important
out implies significant inflows of foreign direct investment aimed at increasing production and export capacity. Indeed, there is a global glut of oil. In North America, the shale-energy revolution in the US, Canada’s oil sands, and the prospect of more onshore and offshore oil production in Mexico (now that its energy sector is open to private and foreign investment) have made the continent less dependent on Middle East supplies. Moreover, South America holds vast hydrocarbon reserves,
from Colombia all the way to Argentina, as does East Africa, from Kenya all the way to Mozambique. With the US on the way to achieving energy independence, there is a risk that America and its Western allies will consider the Middle East less strategically important. That belief is wishful thinking: a burning Middle East can destabilize the world in many ways. First, some of these conflicts may yet lead to an actual supply disruption, as in 1973, 1979, and 1990. Second, civil wars that turn millions of people into refugees will destabilize Europe economically and socially, which is bound to hit the global economy hard. And the economies and societies of frontline states like Lebanon, Jordan, and Turkey, already under severe stress from absorbing millions of such refugees, face even greater risks. Third, prolonged misery and hopelessness for millions of Arab young people will create a new generation of desperate jihadists who blame the West for their despair. Some will undoubtedly find their way to Europe and the US and stage terrorist attacks. So, if the West ignores the Middle East or addresses the region’s problems only through military means (the US has spent US$2 trillion in its Afghan and Iraqi wars, only to create more instability), rather than relying on diplomacy and financial resources to support growth and job creation, the region’s instability will only worsen. Such a choice would haunt the US and Europe – and thus the global economy – for decades to come. Project Syndicate
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Closing Macau HKEx scraps dual-class listings proposal after regulator rebuff Thai industry-wide auto sales may slide as much as 15 pct Hong Kong’s stock-exchange operator scrapped a move to introduce weighted voting rights after opposition from the city’s financial regulator. The listing committee of Hong Kong Exchanges & Clearing Ltd. won’t proceed to a formal consultation on allowing dual-class listings, nor finalize its draft proposal, after considering the views of the Securities and Futures Commission, HKEx said in a statement on its website. The watchdog said in June that it didn’t support the plan because there was no assurance such companies would treat shareholders fairly.
Thailand’s industry-wide auto sales could fall as much 15 percent in 2015 and mark a third consecutive year of sales declines, according to Toyota Motor Corp’s Thai unit. Toyota had initially forecast auto sales would rise 4.3 percent this year to around 920,000 vehicles but lowered that estimate to 800,000 in July before cutting it again yesterday to between 750,000 and 760,000 vehicles. “The domestic economy has been (a problem) for us for a while. However, the global economy has been worse than expected and has had an impact on this market,” president of the Toyota Thai unit said.
China’s slowdown in line with IMF forecast IMF estimates that a one percentage point slowdown in Chinese growth translates into a 0.3 percent decline for other Asian countries
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nternational Monetary Fund (IMF) released yesterday a document analysing Chinese economic transition. Changyong Rhee, Director for IMF’s Asia and Pacific Department, and document’s author said “the current pace of China’s slowdown remains in line with the IMF’s forecast (and that of the authorities themselves), although downside risks have increased.” He also said that it is “important to understand that the transition is essential if China is to create a more inclusive economy that gives greater play to market forces and achieves safer and more sustainable growth, involving a delicate balancing act for the Chinese government— implementing reforms while maintaining demand and financial stability.” In order to reach a successful transition, Rhee highlighted that Government will need to persist in “hardened budget constraints
for both state-owned and private firms, and continued strengthening of the financial supervision framework.” Among other recommendations, IMF’s paper says that China has enough room to activate further policy stimulus “to prevent growth from falling excessively. The focus of such measures should target both demand and rebalancing (for example, by providing support for consumption, especially by the more vulnerable members of Chinese society),” the document says.
state-owned enterprises, the real estate and construction sectors, and weaker corporates.” The director says that such leverage was clearly seen in the stock market rise and the following correction, which implied
significant global spill overs. “The good news is that it is expected to have only a limited direct impact on the economy, given the low degree of share ownership by Chinese households and the low share of equity in corporate financing,” he said. “The recent change in the exchange rate regime also had large ripple effects, particularly in Asia due to the uncertainty created by the move… This does not alter the IMF’s assessment that the exchange rate is broadly in line with medium-term fundamentals.”
Spill overs
Rhee states that the IMF has estimated that “a one percentage point slowdown in Chinese growth translates
into a 0.3 percent decline for other Asian countries.” He adds that “such spill overs obviously are of concern, and recent experience suggests that spill overs to China’s neighbours in Asia might have become even larger lately, coming not only through trade but also global financial market linkages.” Falling commodity prices and the prospect of an increase in U.S. interest rates are other factors that have affected global economies. “If managed well… China’s transition could provide the basis for renewed economic strength in a region that has led the world in growth for several years,” he concludes. O.G.
Dangerous leverage
On the other hand, Rhee says “it would be preferable to avoid the renewed use of debt-financed investment so as to prevent a resurgence of corporate leveraging. Since the Global Financial Crisis, growth in China has relied heavily on investment and credit, with the biggest build-up of leverage going to
Eurozone business activity slows in September
IMF confirmed its assessment that the RMB exchange rate is broadly in line with medium-term fundamentals
India agrees to fast-track German business deals
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Alain Ducasse agrees to sell a 10% stake to Elior
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urozone economic activity slowed more than first thought in September, a key business survey showed yesterday, adding to concerns over the outlook. Data monitoring company Markit said its revised September Purchasing Managers Index fell to 53.6 points, compared with a first reading of 53.9 points. The PMI, a closely watched indicator, stood at 54.3 points in August, well above the 50-point boom-or-bust line as holding near the best performance in four years. Analysts had welcomed the original September figures as showing the 19-nation eurozone economy continued on track for a modest recovery. But they also expressed concern at the slowdown, warning that the European Central Bank might have to boost its already massive, one trillion euros stimulus programme, if the slide continued. The data emerged as eurozone finance ministers were set to meet yesterday for the first time since Greek voters re-elected leftist premier Alexis Tsipras. Markit chief economist Chris Williamson said the latest figures suggested the eurozone economy would grow 0.4 percent in the third quarter.
ndia and Germany signed a deal yesterday to fast-track business approvals, an arrangement to make it easier for German companies to operate in Asia’s third largest economy that was announced as Chancellor Angela Merkel visited New Delhi. The fast-track approvals process will ensure that German firms will have a single point of contact in the Indian administration, helping them to navigate a web of red tape that often thwarts business initiative. The agreement is the first of its kind and comes as Prime Minister Narendra Modi seeks to attract foreign investment in support of his “Make in India” drive to boost industrial investment and create skilled jobs. Indian Commerce Secretary Amitabh Kant said that under the fast-track arrangement India “would monitor on a monthly basis all issue for German companies.’ “The prospects are huge because India is just beginning its long spurt for growth,” Kant told a business round table. Merkel was expected to urge Modi to return to the negotiating table to discuss a proposed free-trade agreement with the European Union that has been on ice since India walked out of talks this year.
lain Ducasse, who operates Michelin-starred restaurants around the world, is teaming up with a catering company that provides meals to British sailors and French schoolchildren as the chef prepares to open new venues in Versailles and Paris. Ducasse will sell a stake of about 10 percent in his company, Alain Ducasse Entreprise, to Groupe Elior SCA, and the two will work in partnership on culinary consulting, bidding on concessions and creating catering concepts, Elior and Ducasse said in a statement yesterday. Terms of the deal weren’t disclosed in the statement, and representatives for the companies declined to comment. The partnership will help the French-born chef carry out planned openings, including in Versailles, home of the former royal palace, and in the historic Les Halles neighborhood in central Paris, according to the statement. For Elior, which sold shares in an initial public offering last year, the venture will help boost its high-end offering. Elior had sales of 5.3 billion euros (US$6 billion) last year. The company operates 47 restaurants and points of sale at Madrid’s Barajas airport and expanded into the U.S. in 2013 by purchasing a caterer serving schools, health facilities and prisons.
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