MOP 6.00
All Change!
Closing editor: Joanne Kuai
Public bus operator Transmac will be the last. Following New Era and TCM in converting to a public concession contract. The bus operator hopes to seal the deal by January. And hopes initial gov’t financial aid will take the difference in past service fees into account
Year IV
Number 895 Friday October 9, 2015
Publisher: Paulo A. Azevedo
Page 2
Japan Emerges as Property Pick Japanese real estate is a rising pick for local residents. Because, say realtors, Japan is emerging from 20 C Y Foundation years of economic decline. Local specialist property agencies quote home unit prices starting from as low proposes changing name to Success Dragon as HK$200,000 (US$24,901). The high rental return rate is favourably compared with the MSAR. While the Page 2 local younger generation is identified as the prime buying force Page 5
Long awaited bottoming
Page 4
Tencent and Alibabasupported firms create an Internet giant
Investment bank Credit Suisse is optimistic. Predicting the worst of Macau’s gaming industry woes may have been left behind in Q3. Analysts say the quarter’s gross gaming revenues dropped 4 pct q-on-q. They note a better revenue mix from the higher margin mass market and slot segments. And successful ongoing cost savings measures
Page 8
Beijing is ready for economic challenges announced by IMF
Page 10
Page 2
More international yuan The first phase. China International Payment System (CIPS) was officially launched yesterday in Shanghai. A milestone in the internationalisation of the Chinese currency. The system will enhance efficiency and increase global use of the yuan
Page 8
HSI - Movers
Natural born gamblers
October 8
Name
Chinese tend to gamble more. And like to try their luck in more than one casino. So say the authors of ‘An Analysis of Cultural Differences Effect on Tourist Behaviour in Macau’. The study advocates better promotion of non-gaming elements. Essential in attracting a wider tourism base, the authors say
Page 3
Retail
www.macaubusinessdaily.com
DSE to improve online trademark registration procedures
Bauhaus sales go through the wringer
%Day
Sino Land Co Ltd
+2.28
Sands China Ltd
+1.63
Galaxy Entertainment
+1.42
Power Assets Holding
+1.38
Hong Kong & China Ga
+0.80
China Unicom Hong Ko
-2.94
Tingyi Cayman Islands
-3.24
Belle International Ho
-3.67
China Resources Enter
-5.52
CNOOC Ltd
-5.99
Source: Bloomberg
I SSN 2226-8294
Clothing retailer Bauhaus’ same-store sales growth in Hong Kong and Macau has dropped 7 pct y-o-y. In the six months ended September 30. While growth in Taiwan and Mainland China dropped 18 pct and 2 pct y-o-y
Page 4
2015-10-9
2015-10-10
2015-10-11
24˚ 31˚
24˚ 30˚
23˚ 28˚
2 | Business Daily
October 9, 2015
Macau Tourist numbers exceed one million in Golden Week Nearly 1.07 million tourists visited the Macau Special Administrative Region during the National Day Golden Week, official data released yesterday by the Macau Government Tourist Office (MGTO) reveals. Compared to the same period last year, the number represents an increase of 2.7 per cent. Of total visitors, some 84.7 per cent, or 906,652, were from the Mainland, a year-on-year jump of 7.1 per cent. Meanwhile, on Wednesday alone, the last day of the week-long holiday, a total of 131,395 visitor arrivals were registered at local border checkpoints, of which 106,935 were from the Mainland, up 10 per cent and 13.7 per cent year-on-year, respectively.
Credit Suisse: Gaming industry revenues have bottomed The long awaited bottoming out of the industry may have been achieved at the end of September. With signs now more positive the investment bank expects EBITDA to grow João Santos Filipe
report mentions a limited impact in terms of the withdrawal of ‘deposits’. ‘Depositors’ confidence was hammered leading to small capital flight and thus lower revenue. The market was concerned that junket liquidity would worsen further. However, the gradual pick-up of average daily revenue [ADR] in late September and the strong start to Golden Week (Average Daily Revenue of MOP800-900 million during 1-4 October) should have dismissed the market’s concerns about junket liquidity’, the analysts determined.
Positive signs
jsfilipe@macaubusinessdaily.com
I
t has long been awaited, and now the worst for the gaming industry may have been left behind with the third quarter of this year. Such is the belief of investment bank Credit Suisse in its latest report by analysts Isis Wong and Kenneth Fong. ‘Overall, third quarter GGR dropped 4 per cent quarter-on-quarter (2Q: -12 per cent). However, with a better revenue mix from the higher margin mass market and slot segments, which rose to 52 per cent (2Q: 49 per cent) and ongoing cost savings measure, there should be a sequential improvement in 3Q EBIDTA [Earnings Before Interest, Taxes, Depreciation and Amortization], putting an end to six consecutive quarters’ downtrend’, the report reads. Concerning the effects of the Dore incident, in which an employee from the junket operator allegedly absconded with investor capital, the
The fact that September recorded average daily revenue of around MOP600 million in the first two weeks (excluding the Victory Day holiday), which was similar to August, in spite of ‘weaker seasonality’, is considered another indication that the worst is left behind with the third quarter of the year. For many months serious doubts were raised by analysts about the support for the industry both by local and Central Government. However, the speech of Li Gang, Director of the Central Government Liaison Office in Macau, seems to have brought new hope to the sector. ‘On 2 October 2015, Li Gang, the Director of the Chinese Government’s liaison office in Macau, commented that the Central Government will continue to support Macau’s economy. More supportive policies would be introduced in the near term, with lots of them related to the gaming industry’, the analysts stressed. ‘This is in line with our view of a supportive stance by the governments, which bodes well for sector recovery’, they added.
C Y Foundation Transmac hopes new contract proposes name change compensates for past losses
H
ong Kong-listed C Y Foundation Group Ltd, the parent of Macau-based casino services provider CY Management Ltd., has proposed changing its name to Success Dragon International Holdings
Limited. ‘The Board considers that the proposed Change of Company Name can promote and strengthen the company’s corporate image and enable the Group to better identify and obtain business opportunities for its future development,’ it wrote in a filing to the Hong Kong Stock Exchange. The company will hold a special general meeting on October 30 regarding the issue. C Y Foundation also engages in the manufacture of packaging products for luxury goods.
F
ollowing the switch to a new contract format, city public bus operator Transportes Urbanos de Macau SARL (Transmac) hopes the initial financial aid from the government will take the difference in service fees in the past into account. Deputy General Manager of Transmac, Kwan Wing Kai, said the company would like to see the successful switching of the service provider contract for its transport service to a public concession
contract by January 1 next year. Mr. Kwan revealed that negotiations with the government are underway and that both parties have reached many consensuses. After the conversion of the contract, the bus operator will receive bus fees and financial aid from the government. In addition, bus operator Transportes Colectivos de Macau SARL (TCM) whose new contract with the government came into effect this month - said that the
initial financial aid that the company had received was based on mutual agreement. TCM deputy general manager Leung Mei Leng added that she believes the government would announce the relevant information soon. Meanwhile, Macau Pass SA’s new branch was inaugurated in Rua De Viseu yesterday. Macau Pass says that the increasing population of Taipa and Coloane meant they would like the new office to better serve the residents there.
Business Daily | 3
October 9, 2015
Macau
Chinese tourists keen on visiting more than one casino The government may want to diversify the economy but when it comes to Mainland tourists they visit the territory expecting to gamble and make a buck João Santos Filipe
jsfilipe@macaubusinessdaily.com
T
he Macau Government wants to diversify the local economy away from gaming and attract more non-Mainland Chinese tourists. However, a reduction in the number of Mainland Chinese visitors may not be good news for casino operators. According to a study titled ‘An Analysis of Cultural Differences Effect
on Tourist Behaviour in Macau’, published in the November edition of the International Journal of Marketing Studies, Chinese visitors play more than non-Chinese and like to visit more than one casino. “Compared with Non-Chinese, Chinese tend to gamble more and to gamble for money in Macau”, the
authors wrote. “Compared with other countries, Chinese more frequently gamble [throughout] the world”. The study by Xi Li, Anwei Yi and Jian Ming Luo is the result of 250 questionnaires answered by tourists at the airport and ferry terminal who stayed in Macau for more than 24 hours.
“Chinese like to experience more than one casino; this result is supported by previous studies, that showed that most Chinese would like to visit three or more casinos during their travelling to Macau”, the authors say of their findings. However, when it comes to betting, both Chinese and non-Chinese have moderate time slots, which is said to be related to the time they intend to spend in the territory and to their budget.
Better promotion of non-gaming
When it comes to non-gaming elements, the study, which focuses mainly on shows that include elements like girls dancing, points out that better promotion is required to attract non-Chinese visitors. “Due to the long distance of travel, non-Chinese prefer to explore fresh elements in Macau. They are also facing the risk of language and culture conflicts, which make them more careful when consuming. An effective promotion of the shows is needed”, the study argues. “Chinese like the shows more than non-Chinese. This can be explained because violent plays and bloody shows are strictly forbidden in Mainland China”, they explained. When it comes to shopping and the F&B sector, Chinese clients also tend to consume more in terms of luxury items than other visitors, which encourages the authors to suggest the Macau market develop a model based on luxury products. “Regarding the shopping and F&B factor, it is found that Chinese are more likely to choose luxury goods, have meals in luxury restaurants and shop in casino outlets, where the price is higher than non-casino places”, they highlight.
th
Friday Half Page Ad Charity Golf 2015 Business Daily Version 1.indd 1
10/6/2015 7:09:49 PM
4 | Business Daily
October 9, 2015
Macau DSE to improve online trademark registration procedures Macau Economic Services is to optimise trademark registration online services and launch a new function at the beginning of next year. The new function will allow applicants to deliver ‘Application Form of Trademark Registration’ and ‘Power of Attorney’ through emails, instead of at the Bureau in person. DSE said in an introductory session of the new service yesterday that the online application was launched in November last year. Since then, they have received 400 to 500 applications online, accounting for 4 to 5 per cent of the total trademark registration applications. DSE indicated that the number hasn’t achieved expectations, hence the introductory session to promote such services.
Bauhaus sales growth down 8 pct in H1
C
lothing retailer Bauhaus International (Holdings) Ltd. saw its same-store sales growth drop 8 per cent year-on-year for the six months ended September 30, it told Hong Kong Stock Exchange yesterday. However, the company did not disclose how this
increase was translated in terms of financial results for the first half of its fiscal year. According to the retailer, its same-store sales growth in the Hong Kong and Macau market was down 7 per cent year-on-year during the six months, while those in Taiwan and Mainland China dropped
18 per cent and 2 per cent year-on-year, respectively. For its second fiscal quarter, the company registered decreases in samestore sales growth of 6 per cent in general. In terms of segment, the same-store sales growth of the company declined 4 per cent year-
on-year in Hong Kong and Macau, while a year-on-year decrease of 17 per cent and 3 per cent was recorded in its Taiwan and China markets, respectively. During the same period of last year, the retailer’s profit before tax generated in the two Special Administrative
Regions reached HK$56.3 million (US$7.26 million) following same-store sales growth of around 20 per cent in the cities, according to its last interim report. As at the end of last month, the company had 217 stores in Greater China.
THERE ARE THINGS WE DON’T DO BUT WE DO••• • Advertising • Branding & marketing consulting • Marketing strategy • Creativity • Design There are men and women who give human kind their perseverance, their genius, their generosity and, in some cases, their own life. Those people and their actions are our inspiration.
info@goldfishmacau.com +853 2833 1258 www.goldfishmacau.com
K.L.
Business Daily | 5
October 9, 2015
Macau
Local demand for Japanese homes growing Cheap prices and high return rates make Japanese property the new favourite for local residents buying real estate overseas, the city’s realtors told Business Daily Kam Leong
kamleong@macaubusinessdaily.com
W
ith hundreds of thousands of patacas still often not enough for local residents to buy a car park, people here have started to eye property outside the territory. One popular destination is nearby Zhuhai, but Japan is another rising pick for local residents and investors, Business Daily has learned. “In recent years, housing prices have not only surged in Macau but also in Hong Kong and Taiwan. Prices are so high investors may not be able to afford them. But meanwhile the property market in Japan has just started to recover from a very low level after some 20 years of decline. That’s why the Japanese market is appealing,” Eddy Leong, sales and operation director of J Property Macau, told us in a phone interview yesterday. The real estate agency, which has only operated for one year and three months in the territory, only focuses on businesses related to the Japanese property market. According to Mr. Leong, a studio unit in the East Asian country, which is preferred by most of the local buyers, costs some “few hundreds of thousands” on average. He said prices for a home unit start from as low as HK$200,000 (US$24,901) in Fukuoka, which is located in Japan’s third largest island of Kyushu. Meanwhile, home prices in Osaka, the country’s second most economically important city after the
capital Tokyo, go from HK$300,000. “But, of course, prices get higher if the location is near the central or tourism areas. Houses in those areas cost some HK$600,000 to HK$700,000 on average,” the realtor noted.
High return rate
Cheaper prices are not the only reason to attract local residents to step into the Japanese home market, as high rental return rates can be four or five times higher than in the Special Administrative Region. Amigo Lei, a regional director specialising in overseas property with Greatest Properties Ltd., told Business Daily yesterday that the rental return rate of Japanese properties can reach between 8 to 10 per cent, depending upon region. “For tourist cities, such as Tokyo and Osaka, the return rate may not be that high due to housing prices there being more expensive than the average. But for more residential areas, such as Fukuoka, the return rate can reach higher,” he said. According to J Property’s Eddy Leong, the rental return rate in the city is only around two per cent or lower. “But in Fukuoka, the rate is at 8 per cent while that in Osaka can also reach 6 per cent,” he claimed. According to Mr. Lei, his company has inked more than 70 transactions for Japanese homes during the second half of last year, while Mr. Leong
said his company has sold more than 100 units.
bought in the country into hostels for tourists.
The buyers
Western markets
For Mr. Lei, his clients are mostly young people who are primarily purchasing Japanese property for investment. “Compared to the older generation, young people are more aware of the trend, while prices are affordable for them. For older people, they may not have accepted investing in Japan,” the property agent indicated. Yet, Mr. Leong said his company has received clients of different ages, estimating 60 per cent of them buy houses in Japan for investment, with the remainder for self-use. “Most of our clients like travelling to Japan. As such, despite housing prices in Japan being similar to the Mainland, they still think residential units in Japan are more attractive,” Mr. Leong claimed. Operating a real estate agency selling only Japanese properties, the agent believes buying Japanese homes will be an ongoing trend for both Macau and Hong Kong due to visitor numbers in the country rising. “Tourist numbers in Japan are climbing, especially for those from the Mainland. Hence, for sure the demand for accommodation will follow and increase in the country,” Mr. Leong said, claiming many of his clients are planning to turn their properties
In terms of overseas property markets, local residents are also interested in buying houses in the United Kingdom, Canada and Australia. However, investment is not the main purpose, local agents say. “The demand to buy property in the UK, Canada and Australia is always there. We haven’t seen demand change that much in recent years as buyers purchase properties there mainly for their children to study in those countries,” the president of Anzac Group, Nestor Ng, told us yesterday. Greatest Properties’ Amigo Lei also indicated that only some 20 per cent of his company’s clients buy Western properties for investment purposes, while the rest are primarily for their kids. Nevertheless, Mr. Lei noted that Australia has started to see more investors from the Special Administrative Region. “Many have started to invest in the Australian property market as many new projects have been released in these two years, while the average price is only around some HK$3 million,” Mr. Lei said. According to the realtor, the down payment on an Australian unit usually amounts to some 10 to 20 per cent of the total cost. “As such, people like to invest there when they cannot afford to buy houses in Macau,” he stated.
6 | Business Daily
October 9, 2015
Macau
Labour market See you, my friend remains stable despite junket groups layoffs opinion
Pedro Cortés
The human resources demand by the gaming industry has slowed, but no massive layoff is foreseeable as the administration is conducting a mid-term review
Lawyer* cortes@macau.ctm.net
J
osé Braz-Gomes was a real human being. A friend to all. One of those old Macau personalities who will always remain in the collective memory of this city. I had the privilege and the opportunity of him letting me be his friend. Always prepared to help others, he could be sarcastic sometimes, yes, but with a sense of humour that people of our era tend not to have. A couple of minutes with him and you were captivated. Rounds of golf and 19th holes with him would make you think that he enjoyed life, as people should but do so less often. Until recently, we laughed, told stories, and talked. We did what friends do. The knowledge of the experience he had. The simple life. The laugh - oh! the laugh. “And now, nobody says anything?” when he had a great score at one of the MGCC holes, or “too late!”, when he had already won the private competitions we had with each other. We sometimes watched our beloved football club, when we could say in 90 minutes that we were the best or the worst. When we were all certain of the existence of the love for our club, Benfica. Zezinho (Little Joe), as I teased him several times, despite the difference in age, was really a person who could make you believe that despite all the setbacks, all the mistakes and errors, all the bad things that happen to us, there is hope for a better and joyful life. Part of our existence is our friends and when those of his calibre depart we feel even more lonely in the ride that life is. He was part of the Macau community: Chinese, Portuguese and English speakers. Almost everyone liked him for what he really was. When we fight with someone, when we want something bad to happen, when we are trying to take money with us to the coffin, we should consider that this all goes in the blink of an eye. Last Friday, a few buddies that used to see him over the weekend said goodbye, unfortunately forever. He looked in good shape. We exchanged a couple of smiles and chatted about Benfica. I wish I could have talked more and more and more. People should talk, you know, like they do not talk anymore. They chat, they exchange sms, they are in whatsapp, in a virtual world that does not have people talking to each other. Exchanging ideas, laughing at the other and at themselves. José laughed many times. That sixty-something years old kid smile, the feeling of pranking with life. The respect for values that are disappearing. Well, it seems that this is a business newspaper. Who cares! Just enjoy life, my dear readers, as Mr. Braz-Gomes did. With pleasure, with joy. Thank you, José, for passing through my life and do please look after all of us. We will miss you physically, but you will be with us until our last days, with your smile and cigar. *Part-time lecturer at the Chinese University of Hong Kong
T
he Labour Affairs Bureau said in a statement that 61 employees laid off by nine VIP rooms in casinos had sought help between December and midSeptember. But analysts and labour unions have indicated the actual size was bigger as many people working for the junket operators did not have formal contracts and were reluctant to seek help. The Forefront of Macau Gaming estimates at least 3,000 workers has been sacked following the closure of numerous VIP rooms since the end of last year. Leong Sun Iok, vice-president of the Macau Federation of Trade Unions, the city’s largest labour union, which has several affiliate groups of gaming workers, described staff morale in the gaming industry as “somehow worrying”, although the gaming operators have not signalled any move to cut staff like they did when hit by the global financial crisis in 2008-09. The latest unemployment rate in the city remained at a low 1.8 per cent as of July with employees in the gaming and recreational services representing 23.6 per cent of the total employed population, government figures reveal.
Jack Chang Chak Io, vice-president of the Macau Association of Economic Sciences, said: “I don’t see the possibilities of a massive layoff as the administration is conducting a midterm review of the gaming industry which is linked to the renewal of the gaming licences and there are new projects to be opened in the coming years. It’s a more likely scenario that there will be an adjustment in the labour force through natural attrition.” Macau’s Chief Executive Fernando Chui Sai On said in August that the mid-term gaming review - completed by year-end – would look into the operations and social responsibilities of the city’s six gaming operators,
whose concessions or sub-concessions will expire by either 2020 or 2022. In a recent meeting with the gaming executives in September, Secretary for Economy and Finance Lionel Leong Vai Tac called for the large companies to “shoulder more social responsibilities,” and work together with their employees to “overcome the hardship,” and “safeguard the employment of local workers.” Amid the economic woes, local small and medium-sized enterprises (SMEs) are breathing a sigh of relief. “Even though there are several new integrated resorts to be opened, fewer workers have been poached from us compared to the past when the new projects opened,” said Daniel Iong Ieng Chun, vice-president of the Macau Small and Medium Enterprises Association. “In other words, our human resources have been relatively more stable.” But many SMEs have no intention of recruiting more personnel at the moment as their business volume has also suffered from the economic downturn. The full story can be read in this month’s issue of Macau Business magazine, available at newsstands or online at www.magzter.com
Population density world No.1 With a high population density and no visionary planning for the demography, the living quality of MSAR is worrisome
I
n the competition for the highest population density in sovereign states and dependent territories, Macau is easily the gold medal winner, with a population of 642,900 in the second quarter of 2015, squashed into a land mass of some 30.3 square kilometres. This gives an average population density of 21,218 per square kilometre, easily outclassing second place, silver medal winner Monaco (18,720 per square kilometre), bronze medal winner Singapore (7,615) and an also-ran Hong Kong (6,580). Macau’s average population density disguises big differences: some 1,800 people per square kilometre on Coloane island; 12,700 people per square kilometre in Taipa; and a
monstrous 54,900 people per square kilometre on the Macau peninsula (figures for 31 December 2014). Think about it: nearly 55,000 people living in one square kilometer. The only other cities in the world to beat Macau for overall population density are Mumbai and Kolkata (29,650 and 23,900 people per square kilometre respectively), but when you compare those figures to the Macau peninsula they are not even in the same league. Looking the graph of projections for Macau’s population in the coming years, with data from the Macau Statistics and Census Survey Department’s projections. The graph shows a low estimate and a high estimate, varying from a low of 680,400 to a high of 839,800
by 2036, excluding the millions of tourists in Macau each month. Working with the projection for 2036, the high variant projection gives: 169,300 people below the age of 20; 161,400 people aged 65 or older, and 80,500 people aged 75 or over. The low variant projection gives: 112,200 people below the age of 20; 153,700 people aged 65 or over and 78,500 people aged 75 or over. In other words, there will not only be a massive population increase but a consistently high ageing population (contrast this with the current 31,500 population aged 75 or over). The full story can be read in this month's issue of Macau Business magazine, available at newsstands or online at www.magzter.com
8 | Business Daily
October 9, 2015
Greater China
Yuan’s international payment system released Developed and administered by the central bank, CIPS enables market participants outside China to clear yuan transactions with their Chinese counterparts directly
“going abroad” strategy of domestic enterprises, said Fan. Developed and administered by the central bank, CIPS enables market participants outside China to clear yuan transactions with their Chinese counterparts directly from 9 a.m. to 8 p.m. Beijing time during any working day under a coding format in line with international practice.
First transaction
T
he first phase of China International Payment System (CIPS) was officially launched yesterday in Shanghai, a milestone in the internationalization of the Chinese currency, the renminbi or yuan. The system, which provides capital settlement and clearing services for cross-
border yuan transactions for financial institutions domestically and abroad, will enhance efficiency and increase global use of the Chinese currency by cutting costs and processing times, said Fan Yifei, vice president of the People’s Bank of China, the central bank. Previously, cross-border
yuan clearing had to be done either through one of the offshore yuan clearing banks in places like Hong Kong, Singapore and London, or else with the help of a corresponding bank on the Chinese mainland. CIPS will have a significant role in shoring up China’s real economy and promoting the
Standard Chartered Bank (China) Limited said yesterday it had completed a yuan clearing transaction for Sweden’s IKEA through the China International Payment System (CIPS), the first such deal to be announced hours after Beijing launched the worldwide system. The bank said it had finished the transaction from China to Luxembourg for the Swedish home furnishing retailer, noting it was the
bank’s first international yuan direct clearing via CIPS. “Direct international RMB payment clearing via Standard Chartered enables a simpler payment route and enhances IKEA’s liquidity management,” said Lena Li, Treasury manager at IKEA China.
Asian clearing
The Industrial and Commercial Bank of China (ICBC) Singapore completed its first clearing of 35 million yuan via the Cross-border Interbank Payment System (CIPS) yesterday as a major step to internationalize its currency. The transaction, which was a trade settlement payment from Singapore’s Raffemet Pte Ltd to Baosteel Resources in Shanghai, marked the first in Asia to be cleared through the newly-launched system. “The launch of CIPS represents a turning point in the internationalisation of the yuan. As the yuan continues to rise as a popular choice among world payment currencies, CIPS will accelerate global use of the currency, with the extended operational hours and greater efficiency,” said Zhang Weiwu, General Manager of ICBC Singapore. As the sole official RMB clearing bank of Singapore, ICBC Singapore has recorded a clearing volume of 47.1 trillion yuan in the first three quarters of 2015, an increase of nearly 97.1 percent from the same period last year. Xinhua And Reuters
Meituan, Dianping merger creates group-buying leader The deal builds a dominant player in China’s crowded online-to-offline services market Lulu Yilun Chen
T
wo Chinese start-ups separately backed by Alibaba Group Holding Ltd. and Tencent Holdings Ltd. will merge to create a dominant player in the nation’s booming market for local services from restaurant deals to movie bookings. Meituan.com and Dianping.com will pool resources and cease a margin-eroding price war. Under their agreement, Wang Xing, chief executive officer of Alibaba-backed Meituan, and his counterpart at Tencentbacked Dianping Zhang Tao will run the new company as co-chairmen and co-CEOs. The deal creates a dominant player in China’s crowded online-to-offline services market, as consumers increasingly use smartphones and tablets to book everything from hotel rooms to car rides to grocery deliveries. The alliance poses a threat to Baidu Inc., the nation’s biggest search company, which is investing US$3.2 billion over three years in its own provider of local services.
China’s three largest Internet companies are vying for a slice of an “O2O” or location-based services market expected to grow to 7.2 trillion yuan (US$1.13 trillion) by 2017, according to Internet researcher IResearch.
Fierce competition
“The external competition is fierce and the business is constantly changing, yet O2O is just getting started,” Meituan’s Wang said in a statement posted on the company’s Weibo microblog. “This tie-up allow us to lift the entire industry to a new level. We’ll have the energy and
the resources to invest in new product innovation, improve the user experience and carve out new businesses.” The merger marks a rare instance of cooperation between Alibaba and Tencent, which still go toe-to-toe in entertainment, e-commerce, even banking. The separate brands and management structure of Meituan and Dianping will be maintained, the companies said. That structure is similar to the creation of Didi Kuaidi this year via a merger of two taxi-hailing apps that China’s two largest Internet firms separately backed.
Alibaba and Tencent have competed for acquisitions and driven the value of Internet deals involving Chinese companies to US$58.4 billion in the year through Wednesday, already almost double the amount for 2014, data compiled by Bloomberg show.
Pursuing capital
A larger, more established player can pursue more avenues for capital-raising. Venture financing is becoming more difficult to obtain in a slowing economy and wobbly stock market, and many Web start-ups that had been burning cash
through big incentives to draw customers are facing pressure to cut their losses. Meituan and Dianping are among the larger players in the increasingly crowded onlineto-offline space. A growing number of companies, Alibaba and Tencent among them, are betting rising incomes will drive online and mobile ordering of everyday services despite a decelerating economy. Meituan.com is a groupbuying site similar to Groupon Inc., where people can get discounts on goods and services by making purchases together. It held about 52 percent of the 77 billion yuan (US$12.1 billion) market in the first half of the year, according to a report by researcher Analysys International. Dianping.com, which also runs a consumer review site like Yelp Inc., accounted for about 30 percent. Baidu’s Nuomi is the third-largest player in group buying with 13.6 percent of the market, according to Analysys. Bloomberg News
Business Daily | 9
October 9, 2015
Greater China Didi Kuaidi gets license for Shanghai private car bookings The company said its license will require insurance coverage for as much as 6 million yuan per vehicle annually
R
ide-hailing company Didi Kuaidi said Shanghai has given it license to book privately-registered cars for trips, a move that could pave the way for expansion of the service in the world’s most populous nation. The rival to Uber Technologies Inc. is working with more city governments in China to adopt a model similar to Shanghai’s, according to a company statement. The city is committed to meeting its citizens’ transportation needs, Sun Jianping, the director of Shanghai’s municipal transportation commission, said in the statement. The blessing by Shanghai, a traditional test bed for economic policies including China’s first freetrade zone, could prompt other cities to follow suit in a boon to the car-hailing industry. It also gives Didi Kuaidi a leg up on Uber as both companies await the China central government’s first regulation on mobile apps for ridehailing services. “Didi Kuaidi has the biggest share in the Internet car-booking market in China and it is a natural thing for them to gain the license from a local government,” Zhang Xu, a Beijingbased analyst at Analysys International, said by phone. “There are still uncertainties as to how the industry will be regulated as the nationwide policy is not announced yet.”
Shanghai taxi
Didi Kuaidi, the top car-hailing company in China, said last month it completed a US$3 billion financing round that will boost its cash reserves to more than US$4 billion. The company has been locked in a race with Uber for market share, with both dishing out incentives to attract drivers and riders. Uber is actively preparing its application for a car-booking license as soon as possible, the company said in a statement yesterday. The company plans to invest more than 7 billion yuan (US$1.1 billion) to expand in China, which is projected to outgrow its U.S.
market by the end of this year, Chief Executive Officer Travis Kalanick wrote in a letter to investors in June. Car-booking service providers will be required to pay taxes, Sun said during a speech in Shanghai. Internet-based car- hailing services should offer cars with better quality and services than traditional taxis, and charge premiums, he said. CAR Inc., a Chinese car-rental company, has expressed interest in applying for a license, Sun said. Didi Kuaidi said its license will require insurance coverage for as much as 6 million yuan per vehicle annually. Bloomberg News
Beijing adopts IMF statistical benchmark Chinese President Xi Jinping promised last November at the Brisbane G20 Summit that China would switch to the SDDS
C
hina’s official statistics will conform to the Special Data Dissemination Standards (SDDS), a statistical system created by the International Monetary Fund (IMF) to improve transparency, the central bank has announced. With approval from the State Council, China’s cabinet, People’s Bank of China (PBOC) Governor Zhou Xiaochuan informed IMF Managing Director Christine Lagarde of China’s decision, the central bank announced yesterday morning. Since 2002, China has used the General Data Dissemination System (GDDS), which the IMF set up in December 1997 to provide a framework for countries to adapt and improve their statistical systems. The GDDS applies to all IMF
members, while the SDDS applies to member countries that have or are seeking access to international markets. The SDDS was started by the IMF in 1996 to help it gain access to regular economic and financial statistics and assist participating countries in crafting updated economic policies and gaining access to financial markets. In the past year, China’s central economic agencies, including the National Bureau of Statistics, the PBOC and the Ministry of Finance, have worked to meet the IMF’s SDDS statistics requirements. The adoption of SDDS is a necessary step in reform and opening up, which will further improve China’s statistical transparency, credibility
and comparability among different economies, the PBOC said. On Wednesday in Peruvian capital Lima, PBOC Deputy Governor Yi Gang and David Lipton, first deputy managing director of the IMF, attended a ceremony to celebrate China’s adoption of the SDDS. At the ceremony, Yi said China and the IMF have been working together to improve China’s statistics for many years, and subscribing to the SDDS is another milestone in the collaboration. The IMF welcomed the move, calling it “an important advance.” Lipton said adhering to the SDDS shows “China’s strong commitment to transparency as well as to the adoption of international best practices in statistics.” The United States also welcomed China’s commitment to release economic data in accordance with the SDDS by the end of the year and China’s continued efforts to enhance transparency. China recognizes the importance to successful RMB internationalization of meeting the transparency standards of other major reserve currencies. The consensus between the world’s top two economies was one of important results arising from President Xi’s state visit to the U.S. late last month. Xinhua
Mainland triples proven reserves at top shale gas project China has nearly tripled the size of proven reserves at its Fuling project, by far the country’s largest shale gas find, according to an official from investor Sinopec and an industry report. The Jiaoshiba block of the project, in the municipality of Chongqing in southwest China, has 273.8 billion cubic metres (bcm) of newly proven reserves, said the report. That would take total proven preserve certified by the Ministry of Land and Resources at Fuling to 380.6 bcm, giving it the potential to have an annual production capacity of 10 bcm by the end of 2017, it said.
C.bank lends 52.1 bln yuan via supplementary tool PBOC said yesterday that it made 52.1 billion yuan (US$8.2 billion) in loans to China Development Bank, a major policy bank, in September, via its pledged supplementary lending (PLS) policy tool. The interest rate on the PLS was 2.85 percent, the People’s Bank of China said in a statement on its website. Outstanding pledged supplementary lending stood at 958.9 billion yuan at the end of September, it said. Central bank’s outstanding medium-term lending facility (MLF) stood at 490 billion yuan (US$77.14 billion) at the end of September.
Hushen 300 index futures close higher yesterday China’s Hushen 300 index futures closed higher yesterday, with the contract for October, the most actively traded, up 2.86 percent to close at 3,214.8 points. The November contract went up 3.16 percent to close at 3,140 points and the December contract gained 3.10 percent to 3,083 points. The March 2016 contract rose 3.07 percent to 3,018 points. The stock-index contracts, agreements to buy or sell the Hushen 300 Index at a pre-set value on an agreed date, are designed to allow investors to bet on and profit from either gains or declines in the market.
Talks on ties with Ecuador
Chinese Foreign Minister Wang Yi held talks with visiting Ecuadorian Foreign Minister Ricardo Patino yesterday. Wang praised the establishment of a bilateral strategic partnership in January and said China is ready to work with Ecuador to push forward high-level exchanges, enhance cooperation in energy, infrastructure and other traditional fields, as well as explore new areas of cooperation. Wang also stressed that China will enhance international capacity cooperation and provide necessary financial and technical assistance to upgrade cooperation between China and Latin America.
10 | Business Daily
October 9, 2015
Greater China That could raise the risk of governments seeing their credit grades lowered to noninvestment grade or junk status, as in Brazil a month ago, the IMF said.
Legacies of central planning
The head of the IMF’s Monetary and Capital Markets Department Jose Viñals speaks during a press metting in Lima
No fear of a slowdown The IMF said China will have challenges dealing with the legacies of its old centrally planned system Jeremy Tordjman
T
he IMF cautioned Wednesday that China faces unprecedented challenges modernizing its economy, carrying risks for the whole world, but a Chinese official brushed off the warning, saying: “Don’t worry.” China’s effort to transition to a more market- and consumption-based economic model will be a monumental, risk-fraught task that will “require great care,” the International Monetary Fund said in its new review of global financial risks. And the implications reach far beyond China: The world’s second-largest economy is a lynchpin of global growth and a vital trade partner for fellow
emerging markets, which depend heavily on the Asian giant’s imports of their fuels, metals, minerals and other commodities. “The Chinese authorities face an unprecedented policy challenge in carrying out their objectives to make the transition to a new growth model and a more market-based financial system,” the IMF said. “Achieving this outcome will require careful pacing of reforms and policy consistency.” But a senior Chinese central bank official sought to downplay concerns that China’s slowdown will weigh on the global economy. “I would say don’t worry,” said Yi Gang, deputy governor
of the People’s Bank of China. “China will still have pretty much middle-to-high growth in the near future,” Yi said in the Peruvian capital Lima, where policy makers from around the world were gathering to review the state of the global economy at the annual meetings of the IMF and World Bank. He insisted that Chinese imports of raw materials for its industrial economy will grow steadily in the future. The focus on China came in the IMF’s new Global Financial Stability Report, which stresses the increased dangers across the emerging markets from slow growth and global market turbulence, to very high levels of corporate borrowing.
If not handled well from a policy viewpoint, the cost to the world economy of the emerging market downturn could be a huge three percent of global output, warned IMF Financial Counselor Jose Viñals. In the worst scenario, corporate default rates could rise, particularly in China, “raising financial system strains, with implications for growth,” the report said. A particular risk is that emerging markets’ stateowned enterprises like those in the energy sector, which have raised huge amounts of funding by issuing bonds, could find themselves falling back on governments to service their debt.
Graft watchdog investigates former Sinopec chairman Several sources told respected financial magazine Caixin that Su’s case was related to discoveries made about Sinopec by inspection teams from the government’s audit office John Ruwitch
C
hinese authorities have placed the governor of Fujian province, who is also the former chairman of China Petroleum and Chemical Corporation, under investigation on suspicion of “serious disciplinary violations”, China’s anti-graft watchdog has said. Su Shulin (pictured) had been Fujian governor since 2011 and
also served as deputy Communist Party chief in Fujian, the Central Commission for Discipline Inspection said in a statement late on Wednesday. Su was chairman of China Petroleum and Chemical Corporation, or Sinopec Corp, before his appointment in Fujian, one of China’s wealthiest provinces on the coast across from Taiwan.
The IMF said China will have challenges dealing with the legacies of its old centrally planned system as it moves to a more market-driven economy. Chinese banks, for example, have only just begun to deal with growing problems on their loan books due to the difficulties many Chinese companies are having, the Fund said. On Tuesday, the IMF cut its global growth forecasts to 3.1 percent this year and 3.6 percent in 2016, both numbers 0.2 percentage points lower than forecasts just three months ago. The Fund made particular mention of the increasing global challenge from the growth pains in China, whose economy is forecast to expand 6.3 percent next year, its lowest rate in 25 years. Prices of commodities from oil to metals to grains have slumped over the past two years, taking a strong hit on emerging economies and government budgets around the globe. “Commodity prices are highly volatile and unpredictable, posing significant challenges to policymakers in resource-rich economies,” the IMF said. The Fund said that natural resources should be a blessing for a country, but that many have struggled to leverage such resources to improve living standards and deepen economic strength. “Especially in the case of exhaustible mineral and hydrocarbon wealth, many countries have apparently suffered from what is often termed a ‘resource curse,’” when a country with abundant natural wealth lags in development for a range of complex reasons, it said. AFP
The commission did not give details about Su’s suspected ‘disciplinary violations’. The accusation is used regularly as a euphemism for corruption. President Xi Jinping has carried out a sweeping campaign against corruption, waste and extravagance in official ranks since he assumed power three years ago. Su, 53, was also previously the vice president of CNPC, the parent of PetroChina , and was seen as a rising star within the party leadership because of his accomplishments and relatively young age. Several sources told respected financial magazine Caixin that Su’s case was related to discoveries made about Sinopec by inspection teams from the government’s audit office. It was not possible to reach Su for comment and it was not immediately clear if he has any legal representation. Xi has targeted the energy industry in his far-reaching campaign against graft. CNPC was a power base for disgraced former domestic security chief Zhou Yongkang, who was jailed for life for corruption in June. Reuters
Business Daily | 11
October 9, 2015
Asia
Thai consumer confidence sinks as economy struggles to fire Southeast Asia’s second-largest economy has yet to regain traction after more than a year of military rule Kitiphong Thaichareon and Pairat Temphairojana
T
hai consumer confidence fell for the ninth successive month in September to a 16-month low, a university survey showed, as weak exports and low farm prices undermine an economic recovery that’s forced the government to offer fresh stimulus. The consumer confidence index of the University of the Thai Chamber of Commerce dropped to 72.1 in September from 72.3 in August. The reading was the lowest since June 2014, a month after the army seized power after prolonged political unrest that had sapped confidence. But consumers were more optimistic that the economy will pick up pace in the future due to recent economic support measures introduced by the government, the university said in a statement yesterday. The government last month approved economic steps worth 136 billion baht (US$3.81 billion), including soft loans, aimed at lifting low-income earners’ purchasing power. The global economy is still weak and consumers remain cautious, Thanavath Phonvichai, an economics professor at the university, told a news conference. “News of the economic stimulus has given people hope and confidence
KEY POINTS Sept index at 72.1, lowest since June 2014, vs Aug’s 72.3 Sentiment hurt by weak economy, exports and falling farm prices Consumption expected to recover in mid-Q4 on govt stimulus – university
Thai women choose clothes to buy at a clothing shop in Bangkok. The Bank of Thailand has revised down the country’s economic growth forecast in 2015 for the third time this year to 2.7 per cent from 3.0 per cent
but the sentiment is still fragile. We still need to depend on the government to inject money,” he said. The university upgraded growth forecast slightly to 2.7-3 percent, from 2.5-2.9 percent for 2015, mainly to reflect the stimulus measures. The stimulus will help Thailand
grow 3 percent this year, and above 3 percent in 2016, newly appointed Finance Minister Apisak Tantivorawong told Reuters in an interview on Wednesday. Southeast Asia’s second-largest economy has yet to regain traction after more than a year of military
rule as exports are sluggish while high household debt has dampened consumption. Falling commodity prices have also cut farmers’ incomes. The government has also said it would introduce measures to help the property sector, as developers are facing sluggish sales from slow economic growth. The central bank cut its GDP growth forecast to 2.7 percent from 3 percent on September 25 and to 3.7 percent from 4.1 percent for 2016. In 2014, growth was the slowest in three years at 0.9 percent.
Japanese machinery orders fall undermining central bank optimism Some economists still expect the central bank to ease policy at a more crucial meeting on October 30 Stanley White
J
apan’s machinery orders unexpectedly fell in August in a worrying indication that capital expenditure is weaker than many policymakers expected, which could increase the chances of new fiscal and monetary stimulus. Core machinery orders, a leading indicator of capital expenditure, fell 5.7 percent in August versus the median estimate for a 3.2 percent increase, and followed a 3.6 percent decline in the previous month. The decline in machinery orders suggests capital expenditure is not as strong as indicated in last week’s Bank of Japan tankan survey and could undermine Governor Haruhiko Kuroda’s optimism.
The September tankan survey found that big firms plan to raise capital expenditure by 10.9 percent in the fiscal year that started April 1, compared with their previous plan to boost capital spending by 9.3 percent. Kuroda citied these figures as one reason inflation will pick up after the central bank left policy on hold on Wednesday, but the slide in machinery orders undermines this argument. The Cabinet Office lowered its assessment of machinery orders to say they are stalling. Machinery orders fell 3.2 percent in August from July led by down by electronics, steel and car manufacturers, Cabinet Office data showed. Orders from non-
manufacturers’ fell 6.1 percent, due to declines in orders from financial services and shipping. An unexpected decline in August industrial production led some economists to say the economy may have contracted in July-September, which would put it in a technical recession after a contraction in April-June. Machinery orders are very volatile, so it is premature to say whether or not the chance of a recession has increased, but the outlook is still weak due to worries about overseas demand, economists say. Reflecting other domestic demand concerns, sentiment in the services sector worsened for the second straight month in September as retailers
and restaurants turned more pessimistic, a separate Cabinet Office survey showed. The survey’s index, which measures responses from
Reuters
service employees such as taxi drivers, hotel workers and retail staff, fell to 47.5 in September from 49.3 in the previous month. A reading below 50 means pessimists outnumber optimists. Some economists expect the BOJ to ease policy on October 30, when it is expected to cut its long-term economic and price growth forecasts. “Our house view is the BOJ will ease policy in January, but the chances have risen that the BOJ will move later this month. There will also be talk about a new fiscal stimulus package,” said Mizuho Research Institute senior economist Hidenobu Tokuda. Reuters
12 | Business Daily
October 9, 2015
Asia
Cambodia ramps up basic textile wages Major unions had been seeking a minimum wage of US$160 a month, having scaled down an initial demand for US$177 Prak Chan Thul
KEY POINTS Garments, textiles Cambodia’s biggest sector Wage woes comes amid heightened competition Wage set at US$140, short of US$160 revised union demand
C
ambodia agreed yesterday to raise the monthly minimum wage for its crucial textiles sector to US$140 from next year, short of demands by trade unions long at odds with the government over pay. The decision was made in a vote by representatives of the government, factories and unions, with the majority supporting an increase to US$135 a month from US$128. The government then raised that to US$140.
Pay for the 600,000 people who work in mostly Asian-owned factories, churning out clothes and shoes for the likes of Gap, Nike, Adidas, H&M and Inditex has been a thorny issue in impoverished Cambodia. The US$5 billion sector is Cambodia’s most important but strikes in recent years have worried brands enticed by lower costs than powerhouse China. Major unions had been seeking a minimum wage of US$160 a month,
having scaled down an initial demand from US$177, and threatened strikes. It was unclear if they would follow through. “This figure is reasonable and acceptable. Even it’s not acceptable to all, we have no choice,” Labour Minister Ith Sam Heng told reporters. He said Prime Minister Hun Sen took the decision himself to raise the agreed wage by a further US$5. Textiles growth has been one of Hun Sen’s top achievements, but his government has clashed repeatedly with unions and its violent crackdown on strikes has seen union support shift towards his political opponents.
Ath Thon, president of the 78,000-strong Coalition of Cambodian Apparel Workers’ Democratic Union, chided factories and some unions for siding with the government. “We will have meetings with our colleagues about what to do next,” he said. “We didn’t succeed in votes because most people have political leanings toward the government and companies.” The government has a tricky balancing act to keep Cambodia competitive, and stable. Though its wages are low, it faces strong competition from neighbouring Vietnam, which last year shipped US$31 billion in garments and shoes for the same brands that use Cambodian factories. Vietnam’s textiles exports to the United States, Cambodia’s biggest market, will be tariff-free once a Trans-Pacific Partnership (TPP) agreed on Monday comes into effect. “If the industry starts to suffer, then I think a huge part of the responsibility has to be borne by the unions themselves,” said Ken Loo, Secretary General of the Garment Manufacturers Association in Cambodia. Reuters
Indonesia seeks help from several countries to fight fires Tourism operators are fretting and health authorities across the region have warned people to avoid exercise when the smoke is heavy Gayatri Suroyo and Kanupriya Kapoor
I
ndonesia yesterday asked several countries including China, Singapore, Russia, and Japan for help to put out fires that have sent choking smoke drifting across the region for weeks. Indonesia had repeatedly declined offers of outside help to tackle the smoke, which is mostly caused by companies using fire to clear land for palm oil and pulp wood plantations on Sumatra island and its part of Borneo island.
“We have asked for help,” President Joko Widodo said in a statement, adding that Indonesia was hoping for at least three aircraft from Singapore and Russia to help douse the fires that often smoulder underground for weeks in peat deposits. “What we need now are planes that can carry 12-15 tonnes of water, not like the 2-3 tonnes we have now,” Widodo said. “We hope this will speed
up the process because fires on peat land is different from regular forest fires.” Indonesia was also in talks with Australia and Malaysia about how they might help, said foreign ministry spokesman Armanatha Nasir. “We have been using all our resources but what we see is our progress is not quick enough,” Nasir told Reuters, adding that Indonesia was exploring what roles the countries could play and
what equipment they could provide. They aimed to finalise details “as soon as possible”, he said. Indonesian officials did not elaborate on why the government had now decided to seek foreign help. It had faced criticism for turning down offers from Singapore. The smoke has pushed up pollution to dangerous levels across parts of Indonesia, Malaysia, Singapore and southern Thailand, disrupted flights and closed schools on bad days. Tourism operators are fretting and health authorities across the region have warned people to avoid exercise when the smoke is heavy.
Indonesia routinely brushes off complaints while vowing to act to stop the burning. But year after year, the problem flares in the dry season. Indonesia’s national disaster management agency said last week it was hoping for rain to help douse the fires by early November, when the northeast monsoon usually starts. Foreign Minister Retno Marsudi is expected to meet her Malaysian counterpart on Friday to discuss the problem. Singapore’s foreign minister, Vivian Balakrishnan, said on his Facebook page the city-state had offered personnel, aircraft, and satellite imaging. 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.
Business Daily is a product of De Ficção – Multimedia Projects Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 editor editor@macaubusinessdaily.com newsroom newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com
Business Daily | 13
October 9, 2015
Asia
Samsung's Lees top Asia's richest families list
Bank of Korea maintaining appropriate monetary policy
The family of Hong Kong tycoon Li Ka-shing was excluded because he has no grandchildren who have taken serious roles in the family business
S
outh Korea’s Lee family, which controls the formidable Samsung conglomerate, topped an inaugural list of Asia’s 50 richest families published yesterday by Forbes Asia magazine. The family had a net worth of US$26.6 billion as of late September, with second- and third-generation members now running more than 50 businesses, the magazine said. The Samsung empire, founded in 1938 by wealthy landowner’s son Lee Byung-Chull, has diversified interests ranging from mobile phones to construction and shipbuilding. Forbes Asia said Samsung, the biggest of the “chaebol” or familyrun conglomerates dominating South Korea’s economy, accounted for 22 per cent of the country’s gross domestic product in 2014. “Nearly half of the richest families in Asia are of Chinese descent, yet none of the inaugural 50 is based in the mainland, where conglomerates are young, run by the first generation,” it said in a report. The second richest is the Hong
Kong Chinese family, also surnamed Lee, which controls Henderson Development and boasts a fortune of US$24.1 billion. The third richest are the Ambanis of India’s Reliance Group with a combined net worth of US$21.5 billion, followed by Thailand’s Chearavanont family with US$19.9 billion, generated from the agriculture-based Charoen Pokphand group. Rounding out the top five is the Kwok family, which controls Hong Kong’s Sun Hung Kai property empire, with a combined net wealth of US$19.5 billion. Only families with business involvement extending to at least three generations were included in the survey, the magazine said. The family of Hong Kong tycoon Li Ka-shing, who has a current net worth of US$25 billion based on a Forbes global list, was excluded because he has no grandchildren who have taken serious roles in the family business, it said. The estimates of family fortunes were based on stock prices and exchange rates at the close of markets on September 25.
Macquarie to buy ANZ’s car finance book Macquarie’s bid beat offers from U.S. private equity giant Carlyle and China’s HNA Group Swati Pandey
T
op Australian investment bank Macquarie Group yesterday said it will buy ANZ Banking Group’s A$7.8 billion ($5.59 billion) vehicle finance portfolio, building on its strategy to cut risk and focus on steadier returns. Macquarie was paying a premium
of A$400 million on the portfolio’s net lending assets, taking the total purchase price to A$8.2 billion. It would need initial capital of about A$800 million, half of which would be raised through an institutional share placement, Macquarie said in a statement.
The top 10 richest families in Asia on the Forbes Asia list with their main businesses: 1) Lee from South Korea (Samsung): US$26.6 billion 2) Lee from Hong Kong (Henderson): US$24.1 billion 3) Ambani from India (Reliance): US$21.5 billion 4) Chearavanont from Thailand (Charoen Pokphand): US$19.9 billion
South Korea’s central bank is maintaining appropriate accommodative monetary policy at the moment, the vice finance minister told reporters yesterday. Vice Finance Minister Joo Hyung-hwan made the comments on the side-lines of an event in Seoul. He was asked whether the economy needed an extra policy boost. “We plan to keep our current expansionary stance for macroeconomic policy,” Joo said. “The Bank of Korea has also been maintaining appropriate accommodative monetary policy.” His remarks come just a week before the Bank of Korea makes its next policy decision on October 15.
Uniqlo-owner Fast Retailing misses profit forecast
5) Kwok from Hong Kong (Sun Hung Kai): US$19.5 billion 6) Kwek/Quek from Singapore, Malaysia (Hong Leong): US$18.9 billion 7) Premji from India (Wipro): US$17 billion 8) Tsai from Taiwan (Cathay Financial): US$15.1 billion 9) Hinduja from India, Britain (Hinduja Group): US$15 billion 10) Mistry from India (Shapoorji Pallonji Group): US$14.9 billion AFP
The acquisition marks another step in Macquarie’s so far successful strategy of reducing its reliance on risky investment banking and focusing on more reliable revenue streams. The bank’s shares, which were placed on a trading halt yesterday pending the announcement, are up 33 percent this year as of Wednesday’s close, compared with a near 4 percent drop on the benchmark index. “It’s a good deal, was well-flagged and well-timed. The valuation is not unreasonable. It is fair value, we think,” said Paul Kasian, head of asset management at EQT Funds Management. For ANZ, the deal will help boost its common equity Tier-1 ratio by 20 basis points and satisfy tough new capital requirements. Concerns about capital ratios have helped drive blue-chip Australian bank stocks down 5-12.5 percent this year, with ANZ the worst performer. Macquarie will issue 5.1 million new shares, about 1.5 percent of its market capitalisation, to institutional investors to raise the A$400 million. It will also launch a share purchase plan for retail investors. It did not disclose the equity component of the deal, which media has widely reported at A$1.5 billion. Macquarie’s total motor vehicle finance portfolio will increase to about A$17 billion from A$9 billion. The Sydney-based bank reiterated that it expects net profit for the year to end-March 2016 to top the A$1.6 billion recorded last year, which was its best annual profit since the 2008 global financial crisis. Macquarie’s bid beat offers from U.S. private equity giant Carlyle and China’s HNA Group. Deutsche Bank is advising ANZ on the sale. Reuters
Japan’s Fast Retailing Co Ltd missed its own forecasts and reported yesterday a 26 percent rise in annual operating profit, saying it had booked impairment losses related to its J-Brand label and some U.S. stores of its Uniqlo brand. Operating profit totalled 164.5 billion yen (US$1.37 billion)in the year ended August 31, lower than its previous forecast for 200 billion yen. Revenue rose 22 percent to 1.68 trillion yen. For the current year, Asia’s biggest apparel retailer said it expects operating profit of 200 billion yen, an increase of 22 percent.
Indonesia to become associate IEA member Indonesia will become an associate member of the International Energy Agency (IEA) at a meeting in Paris in November, alongside China and Mexico, Indonesia’s energy minister said yesterday. The IEA membership follows moves by Indonesia to rejoin OPEC, which is expected to happen in December. “Our engagement with OPEC, IEA and others is important,” Said told reporters, adding that the roles would mean Indonesia would be more involved in international diplomacy and “form a bridge between oil producers and consumers.”
Vietnam, Middle East, African countries to discuss cooperation An international conference themed “Prospects for economic cooperation between Vietnam, the Middle East and African countries” will be held in Vietnam’s capital Hanoi on October 20. The information was announced by Le Hai Binh, spokesperson of Vietnam’s Ministry of Foreign Affairs at a regular press briefing yesterday. “The conference will provide an opportunity for all participant countries to review their recent economic achievements and cooperation, acknowledge the advantages and challenges of Vietnam, the Middle East and African cooperation and discuss measures to breakthrough cooperation in the future,” Binh told reporters.
14 | Business Daily
October 9, 2015
International Most major economies weakening, eurozone stable Growth seems to be easing off in most of the world’s major economies, including the United States and more notably in China, the Paris-based Organisation for Economic Co-operation and Development said yesterday. The OECD said its monthly leading indicator, a synthetic measure that seeks to capture turning points in the economic climate, showed moderating growth generally. However, the euro zone was stable, with growth actually firming up in euro zone countries France and Italy, and also in India.
German exports plunge German exports plunged in August by their largest amount since the height of the global financial crisis and imports also fell sharply in the latest sign that Europe’s largest economy is feeling the pain from a slowdown in emerging markets. Data from the Federal Statistics Office showed seasonally-adjusted exports sliding by 5.2 percent to 97.7 billion euros month-on-month, the steepest drop since January 2009. Imports tumbled by 3.1 percent to 78.2 billion euros, the biggest one-month decline since November 2012. Germany’s trade surplus narrowed to 19.6 billion euros.
Brazil’s president loses legal battle Brazil’s besieged President Dilma Rousseff lost a major battle on Wednesday when the federal audit court rejected her government’s accounts from last year, paving the way for her opponents to try to impeach her. In a unanimous vote, the Federal Accounts Court, known as the TCU, ruled that Rousseff’s government manipulated its accounts in 2014 to disguise a widening fiscal deficit as she campaigned for re-election. The ruling, the TCU’s first against a Brazilian president in nearly 80 years, is not legally binding but it will be used by opposition lawmakers to argue for impeachment proceedings.
Deutsche Bank to post loss in Q3 Deutsche Bank warned yesterday that it would post a net loss of 6.2 billion euros (US$7.0 billion) in the third quarter and that dividends for the year may be scrapped. The bank said it would book a charge of 5.8 billion euros in impairments, “largely driven by the impact of expected highly regulatory capital requirements... as well as current expectations regarding the disposal of Postbank.” The group was also setting aside 1.2 billion euros to meet litigation costs. The bank further took a hit of 600 million euros in the value of its almost 20 percent stake in Hua Xia Bank.
Dell in talks to buy data storage company EMC Dell Inc, the world’s third largest personal computer maker, is in talks to buy data storage company EMC Corp, a person familiar with the matter said, in what could be one of the biggest technology deals ever. A deal could be an option for EMC, under pressure from activist investor Elliott Management Corp to spin off majority-owned VMware Inc. The terms being discussed were not known, but if the deal goes through it would top Avago Technologies’ US$37 billion offer for Broadcom. EMC has a market value of about US$50 billion.
Emerging market companies overborrowed US$3 trillion It recommended the Federal Reserve hold off on raising rates until it sees additional signs that inflation is quickening Mitra Taj
E
merging market companies have an estimated $3 trillion in overextended loans that threaten to trigger a sharp credit crunch and capital outflows in economies that have already been hit hard by low commodity prices, the International Monetary Fund said on Wednesday. The IMF warned that a messy withdrawal of stimulus measures in advanced economies could start a “vicious cycle of fire sales, redemptions, and more volatility.” The U.S. Federal Reserve has said it is on track to raise rates for the first time in almost a decade by the end of this year. Overborrowing in emerging market economies likely adds up to an average of 15 percent of their gross domestic product, and 25 percent of China’s GDP, the IMF said. Emerging markets where companies tapped easy credit to soften the impacts of the global financial crisis are now on the verge of a credit downturn, the IMF said. Many of the borrowers are state-owned enterprises and the lenders are often local banks. “Corporate and bank balance sheets are currently stretched,” it said in its Global Financial Stability Report. “Immediate prudential attention is needed.” China’s exposure to credit risks as it transitions to a more market-based economy is especially worrisome, the Fund said.
IMF Managing Director Christine Lagarde (L) and World Bank President Jim Yong Kim (R)
China’s August stock market crash and sudden devaluation in August rattled global markets. “Direct financial spillovers include a possibly adverse impact on the asset quality of at least US$800 billion of cross-border bank exposures,” the Fund said. The IMF said China should improve access to it equity market to provide companies an alternative to bank financing.
Shocks in U.S.
The IMF calculates that there is around US$1.5 trillion in embedded leverage in U.S. bond funds through derivatives, which could unwind dramatically if the Fed’s normalization process provokes liquidity shocks. Bankers, investors, as well as regulators from the Fed have expressed concerns about bouts of bond market
volatility, particularly after a “flash crash” on October 15, 2014. Many market participants have blamed the volatility on crisis-inspired rules requiring more capital, less proprietary trading and stress tests that have reduced liquidity in markets. The IMF’s warning comes after years of near-zero interest rates and massive stimulus programs in the United States and Europe that have failed to return growth to pre-crisis levels. It recommended the Federal Reserve hold off on raising rates until it sees additional signs that inflation is quickening. Subsequent hikes should be gradual and well communicated. The Federal Reserve has faced criticism for not providing more clarity on when it will raise interest rates, a hotly anticipated move that has caused volatility in emerging markets. Reuters
Africa’s mobile telecoms growth to slow sharply in five years Mobile phones have been one of the factors behind Africa’s recent growth spurt Tiisetso Motsoeneng
G
rowth in Africa’s mobile phone users is set to slow sharply in the next five years, a study showed yesterday, heralding an end to the boom in an industry that has spurred the continent’s growth. A report by global industry body GSMA expects subscriber growth to slow to 6 percent between 2015-2020 compared with 13 percent growth in the first half of the decade, citing lack of commercial logic in setting up network coverage in some rural areas, where more than half of the population lives. “I am bit surprised by this development because I expected strong growth to continue because the penetration rate in Africa is still well below 100 percent,” Mortimer Hope, GSMA’s Africa director, told Reuters. “One reason for the slowing growth is that some areas especially
in remote, rural communities are not economically viable for mobile phone companies to deploy their network because of the low spending power of people living there.” By 2020, a little over 500 million people, or just under half the continent’s population, will have subscribed to a mobile service compared with the global average of almost 60 percent, GSMA said in the report. Mobile phones have been one of the factors behind Africa’s recent growth spurt, by freeing people from the shackles of the continent’s awful landline infrastructure and allowing them to communicate and transact at low cost. The simple SMS - and more recently mobile social media - have also become powerful political tools, used by grassroots political movements to mobilise support.
While relatively low penetration rates suggested significant growth potential in most markets, the negative impact of increasing competition on profit margins is raising the prospect of more consolidation in the region, Hope said. “Smaller players don’t have the economies of scale to drive their prices down and compete for long periods, so you’ll probably see some consolidation in the market,” he said. There has already been deal activity in the sector in recent years with South Africa’s Vodacom buying fixed-line operator Neotel, which struggled to mount serious competition against larger rival Telkom. United Arab Emirates’ Etisalat sold its struggling Tanzanian mobile phone business, Zantel, to Sweden’s Millicom in June. Reuters
Business Daily | 15
October 9, 2015
Opinion Business
wires
Leading reports from Asia’s best business newspapers
Volkswagen and the future of honesty Peter Singer
Professor of Bioethics at Princeton University and Laureate Professor at the University of Melbourne
THE KOREA HERALD Shin Dong-joo, the elder brother of Lotte Group chairman Shin Dong-bin, said yesterday he will sue his younger brother and the group’s parent firm, rekindling a bitter family feud to gain control over South Korea’s No. 5 conglomerate. Lotte has been mired in the family squabble involving founder Shin Kyuk-ho and his two sons -- Dong-joo and Dong-bin, who were sparring to bolster their grip on the group whose business spans from luxury hotels to amusement parks, mostly located in South Korea and Japan.
TIMES OF INDIA For the fifth consecutive quarter, India Inc is expected to report single-digit growth in revenues when results are announced later in the month for the just concluded September quarter (Q2FY16). This is mainly because of fragile consumption demand, especially in the rural areas, weakness in investment-linked sectors, and the meltdown in global commodity prices, a Crisil Research report said. Together, these negative factors are also expected to more than offset the gains from the export-oriented sectors. However, revenue growth is expected to improve in the second half of fiscal 2016.
JAKARTA GLOBE Small and medium-sized firms (SMEs) account for at least 50 percent of Indonesia’s economy, but they have been sideswiped by the rupiah’s slide to 17-year lows against the dollar, faltering consumption and a jump in minimum wages. The struggle of SMEs - traditional pillars of the economy that rescued Indonesia from the depths of the 1998 financial crisis - is bad news for President Joko Widodo, himself a former furniture businessman who is now battling the weakest growth in six years. The growing ranks of jobless may widen the rich-poor divide and push up crime in Indonesia.
PHILSTAR Pilipinas Shell Petroleum has committed to pursue major projects in the country ranging from new facilities to its muchdelayed IPO, its top official said. The local subsidiary of energy giant Royal Dutch Shell has lined up several projects and still continues to look for opportunities in the country, said Shell country chairman and president Edgar Chua. The company has already completed the P1-billion second phase and third phase of the Malampaya deep water gas-to-power project. This expansion will maintain the level of gas production to fulfil commitments under existing gas sales agreements until 2024.
I
f you used the term “business ethics” in the 1970s, when the field was just starting to develop, a common response was: “Isn’t that an oxymoron?” That quip would often be followed by a recitation of Milton Friedman’s famous dictum that corporate executives’ only social responsibility is to make as much money for shareholders as is legally possible. Over the next 40 years, however, businesspeople stopped quoting Friedman and began to talk of their responsibilities to their companies’ stakeholders, a group that includes not only shareholders, but also customers, employees, and members of the communities in which they operate. In 2009, an oath circulated among the first class of Harvard Business School to graduate after the global financial crisis. Those who took it – admittedly, a minority – swore to pursue their work “in an ethical manner” and to run their enterprises “in good faith, guarding against decisions and behaviour that advance my own narrow ambitions but harm the enterprise and the societies it serves.” Since then, the idea has spread, with students from 250 business schools taking a similar oath. This year, all Dutch bankers, 90,000 of them, are swearing that they will act with integrity, put the interests of customers ahead of others (including shareholders), and behave openly, transparently, and in accordance with their responsibilities to society. Australia has a voluntary Banking and Finance Oath, which obliges those taking it (more than 300 people have so far) to, among other things, speak out against wrongdoing and encourage others to do the same.
In August, one executive, Véronique Laury, said that her professional ambition is to have “a positive impact in the wider world.” You might think she heads a charity, rather than Kingfisher, a home-improvement retailer with some 1,200 stores across Europe and Asia. In September, McDonald’s, the largest purchaser of eggs in the United States, showed that it, too, can contribute to ethical progress, by announcing that its US and Canadian operations would phase out the use of eggs from caged hens. According to Paul Shapiro, the US Humane Society’s vice president for farm animal protection, the move signals the beginning of the end for the cruel battery cages that have, until now, dominated America’s egg industry. Then came the revelations that Volkswagen installed software on 11 million diesel cars that reduced emissions of nitrogen oxides only when the cars were undergoing emissions tests, enabling them to pass, even though in normal use their emissions levels greatly exceeded permitted levels. In the wake of the ensuing scandal, the New York Times invited experts to comment on whether “the pervasiveness of cheating” has made moral behaviour passé. The newspaper published their responses under the heading: “Is Honesty for Suckers?” Cynics would say that nothing has changed in the last 40 years, and nothing will change, because in business, all talk of ethics is intended only to camouflage the ultimate aim: profit maximization. Yet Volkswagen’s cheating is odd, because, even – or especially – by the standard of profit maximization, it was an extraordinarily reckless gamble.
Honesty maximizes value over the long term, even if by “value” we mean only the monetary return to shareholders
Anyone at Volkswagen who knew what the software was doing should have been able to predict the company was likely to lose. Indeed, all that was required to lose the bet was an attempt to confirm that the emissions results obtained when the vehicles were undergoing federal emissions tests were similar to those resulting from normal driving. In 2014, the International Council on Clean Transportation commissioned West Virginia University’s Center for Alternative Fuels, Engines, and Emissions to do just that. The software ruse quickly unravelled.
Volkswagen’s stock has lost more than one-third of its value since the scandal broke. The company will have to recall 11 million cars, and the fines it will have to pay in the US alone could go as high as US$18 billion. Most costly of all, perhaps, will be the damage to the company’s reputation. The market is giving its own answer to the question “Is honesty for suckers?” Its response is: “No, honesty is for those who want to maximize value over the long term.” Of course, some corporations will get away with cheating. But the risk is always there that they will be caught. And often – especially for corporations whose brands’ reputation is a major asset – the risk just isn’t worth taking. Honesty maximizes value over the long term, even if by “value” we mean only the monetary return to shareholders. It is even more obviously true if value includes the sense of satisfaction that all those involved take from their work. Several studies have shown that members of the generation that has come of age in the new millennium are more interested in having an impact on the world than in earning money for its own sake. This is the generation that has spawned “effective altruism,” which encourages giving money away, as long as it is done efficiently. So we have grounds to hope that as the millennials begin to outnumber those still running Volkswagen and other major corporations, ethics will become more firmly established as an essential component of maximizing the kinds of value that really matter. At least among major corporations, scandals like the one at Volkswagen would then become increasingly rare. Project Syndicate
16 | Business Daily
October 9, 2015
Closing China wants more disclosure on spare parts from automakers
Sri Lanka hints at restarting China-funded mega port city
China will require automakers to publish technical information on vehicle repair and spare parts from next year, a government statement said yesterday, a move aimed at curbing anti-trust behaviour by car dealers in the world’s largest auto market. The information, which would include repair manuals and spare part catalogues, would make it easier for consumers and independent repair shops to fix cars, analysts said, putting pressure on official car dealerships to cut prices on repairs and parts at a time when sales of new cars have come to a standstill. Such information would make it easier to identify suppliers and source parts directly.
New cabinet has agreed to appoint a fresh committee to review the agreement on a mega China-funded port city project so that the construction of the project could be restarted. The US$1.4 billion Colombo port city project funded by the China Communications Construction Company Limited (CCCC) was suspended by the Maithripala Sirisena (pictured) government in March. However, Cabinet spokesperson Rajitha Senaratne told journalists in a weekly media briefing that following a recommendation by Ports and Shipping Minister, the cabinet had agreed to appoint a fresh committee to address these issues so that the project could continue.
Leading Chinese auditor warns on construction projects delays Beijing plans to channel funds mainly into infrastructure projects to meet this year’s 7 percent economic growth target
M
ajor Chinese construction projects worth about 286.9 billion yuan (US$45.17 billion) are facing delays due to reasons such as slow fund distribution by local governments, the country’s top auditor said yesterday. Its comments are likely to fan concerns over the effectiveness of China’s
renewed effort to pump cash into infrastructure to shore up its slowing economy, as it suggests that such investment is taking longer to ripple through. The projects range from railways to housing. Reuters reported in September that angry Chinese authorities have seized up to 1 trillion yuan from local
governments who failed to spend their budget allocations amid an on-going corruption campaign. Of 815 projects inspected across 29 provinces in August, 193 - worth 286.9 billion yuan - were found to be experiencing significant implementation lags due to a lack of funds or poor initial planning, the National
Audit Office said in a report published on its website. Of 333 railway projects currently under construction, 99 were found to have a completion rate of investment
Of 815 projects inspected across 29 provinces in August, 193 were found to be experiencing significant implementation lags due to a lack of funds or poor initial planning
- a measure of investment efficiency - of below 50 percent, while 20 had a completion rate of less than 10 percent. For instance, two railways running from Dali city in the south-western Yunnan city to the cities of Ruili and Baoshan had their completion date pushed out to 2019 from May 2014 due to slow disbursement of construction funds, the report said. Similar delays were found in the construction of agricultural waterconservation projects and expressways, while major telecom operators were found to be behind schedule on data center completions, it said. While the provinces are supposed to invest 12.43 billion yuan into major agricultural water-saving projects this year, only 708 million yuan had so far been invested at the end of July, it added. Beijing plans to channel funds mainly into infrastructure projects to meet this year’s 7 percent economic growth target, sources involved in policy discussions told Reuters last month. Some economists believe current growth levels are already much weaker than official data suggest. China’s top planning agency, the National Development and Reform Commission (NDRC), has approved about 800 billion yuan (US$126 billion) of railway, port and highway projects so far this year. Reuters
Italy pushing hard for European jobless insurance plan
I
National sovereign rating can withstand slower growth
ADB offers US$5 billion loan to Indonesia
C
T
taly is pushing for a European Union unemployment insurance scheme that will spread the cost of protecting Europe’s unemployed from economic crisis and deepening ties between the 19 European states that use the euro currency. Experts say its chances for becoming reality depend on whether the initiative is seen as an administrative or political challenge. Italian Minister of Finance Carlo Padoan has cast the plan as “major progress toward solidarity and risk taking” in Europe. The plan would create a fund run under the auspices of the European Commission, and countries with sudden rises in joblessness could draw on the cash in the fund to replace a chunk of a workers lost wages for a span of months while the worker looks for a new job. It is significant that a country would gain access to the fund based on the unemployment trend in a specific company. As such, a country with a low jobless rate would have access to aid if that rate ticks higher, but a country with a large percentage of its work force among the unemployed would not have access if that percentage remained unchanged. Italy sees the measure as important tool to deepen integration between the countries in the Eurozone.
hina’s sovereign rating can withstand slower growth and greater volatility, Moody’s senior research analyst Rahul Ghosh said at a briefing in London yesterday. Moody’s rates China Aa3 with a stable outlook, and is forecasting GDP growth at 6.8 percent in 2015 and 6.3 percent in 2016, in line with International Monetary Fund forecasts. Ghosh said that Chinese corporate credits in the Moody’s ratings universe, which covers about 200 companies and banks, were likely to be able to absorb a further 5-10 percent depreciation of the yuan “pretty well”. A total of 22 companies have a high reliance on foreign currency debt, in sectors such as metals, mining and steel and oil and gas. However, oil and gas producers have a natural currency hedge as their revenues are denominated in dollars, Ghosh said. In areas such as real estate, however, there was likely to be more of a currency mis-match issue as they receive most of their revenues in yuan. “In a further 10 percent devaluation scenario, there would be some impact on the credit metrics for property companies,” Ghosh said.
Xinhua
Reuters
he Asian Development Bank (ADB) plans to give US$5 billion dollars loan to Indonesia to support the development of electricity sector in the country, top official of the lender said yesterday. The loan is aimed at helping Indonesia to expand its power transmission and power plants of renewable energy, Country Director ADB, Steven R. Tabor said. “This is aimed at helping Indonesia to boost transmission system and distribution, and support clean energy development,” he said at Mandarin Oriental Hotel in Jakarta. Steven said that the loan is classified as longterm debt with very good grace period. Indonesia is scrambling to build more electricity projects to meet rising energy demand and boost electrification in the vast archipelago country. The government aims to set up 35,000 MW power plant project within five years to support the government target of more than 7 percent GDP growth in 2019. Foreign investors’ participation is badly required in the mega projects. Xinhua