Macau Business Daily October 15, 2015

MOP 6.00

TPI Tumbles

Closing editor: Joanne Kuai

Macau’s Tourist Price Index. The TPI dropped for the first time since 2002 in Q3. Down 2.72 pct y-o-y to 131.46. Mainly driven by the decrease in Accommodation and Clothing & Footwear.

Food, Alcoholic Beverages & Tobacco, Transport & Communication plus Entertainment & Cultural Activities prices increased

Year IV

Number 899 Thursday October 15, 2015

Publisher: Paulo A. Azevedo

Page 4

Judicial Review

Constantly improving. Chief Executive Chui Sai On’s verdict on the MSAR’s judiciary system. But others feel Imperial Pacific: Saipan’s differently. President of Macau Lawyers Association (AAM) Jorge Neto Valente pinpoints infrastructure, ‘temporary casino’ performs better than expected human resources, Portuguese-speaking magistrates, and questionable decisions as issues begging to be Page 6 addressed. President of the Court of Final Appeal Sam Hou Fai says “complicated” cases involving “big China arrests South economic interests” are resulting in challenges the territory has never faced before Page 2

Koreans for luring citizens to casinos

Page 7

Contactless Crime

Oil imports in China on the way to reaching new record

Security loophole on contactless payment cards. Sounding alarms in the HKSAR. Hong Kong Monetary Authority has asked all issuing banks to review security measures. And conduct risk assessments. Upon discovering mobile phone applications could be used to obtain information from these cards in a matter of seconds

Page 2

Narrowing Prices New official data. Revealing Chinese consumer inflation running at a low level. While factory product inflation remains in negative territory. Triggering worries about sluggish market demand and deflationary pressure

Page 8

Page 8

Private poll suggests China’s Q3 growth may be at 6.8 per cent

Page 10

Factory-to-home

HSI - Movers October 14

Name Sino Land Co Ltd

+1.80

New World Developme

+1.62

Hang Lung Properties L

+1.59

Swire Pacific Ltd

+1.01

Wharf Holdings Ltd/Th

+0.99

Lenovo Group Ltd

-2.60

China Resources Land L

-2.81

China Merchants Hold

-2.92

Taxi Tender Tango

Belle International Ho

-3.55

China Mengniu Dairy C

-4.42

At least MOP10 million (US$1.25 million) capital. The open bid to run the on-call taxi service mandates the service provider must run pure on-call services. While taxi operators can introduce additional unspecified charges.

Bidding taxi operators can also develop mobile phone apps to attract custom. Industry insiders, however, remain unenthusiastic, citing lack of human resources and incentives as the biggest obstacle. Interested companies can bid for 100 8-year licences up to December 14

Source: Bloomberg

A site in Areia Preta will become a mixed residential and commercial property project. Comprising two towers of 35 floors with supporting social facilities. One of very few successful land use change applications. Local company Everbuild International Ltd. will undertake the gentrification of the industrial building

Page 5

Transportation

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2 | Business Daily

October 15, 2015

Macau

Judicial year kicks off with controversy The speeches of the opening ceremony of the judicial year portrayed different realities. While the professionals of the sector criticised the system, Fernando Chui Sai On focused on the ‘constant improvement’ João Santos Filipe

jsfilipe@macaubusinessdaily.com

T

he opening ceremony of the new judicial year took place yesterday at the Cultural Centre amid controversy regarding different views about the challenges facing the sector.

“I would like not to have to repeat the problems I have been criticising for the past years. Unfortunately there are more problems than solutions”, the President of the Macau Lawyers Association, Jorge Neto Valente, said.

The lawyer pinpointed problems such as the lack of infrastructure, human resources, Portuguesespeaking magistrates, questionable quality of the decisions of the courts – in which appeals have to be corrected - and an increase in the number of pending cases.

Neto Valente also appealed for the competent authorities to conduct a “radiography” of the way the courts work, by talking with people in the sector in order to identify the problems and find solutions.

However, the President of the Court of Final Appeal, Sam Hou Fai, stressed the challenges arising from the economic development of the

region faced by the judges and the personnel involved in the courts. He considered that “the complicated” cases involving “big economic interests” are resulting in challenges never before faced in the region.

In order to cope with this, the President of the Court of Final Appeal asked for the judges and the personnel working in the courts to manage in a proper way the relationship between their function and their family and interpersonal connections.

“It has a special meaning today [because of the big cases] to reiterate the demands for the judicial system staff to strengthen its capacity to resist corruption and other seductions”, he said.

While Jorge Neto Valente, Sam Hou Fai and the attorney Ip Song Sang stressed the problems of the sector during their speeches, the Chief Executive, Fernando Chui Sai On, preferred to praise the system.

“The judiciary system of the Macau Administrative Region has been constantly improving and the different judicial bodies have been working efficiently”, he said.

Neto Valente: Windsor Arch situation different to Pearl Horizon Jorge Neto Valente, lawyer and Executive Director of Victory Real Estate Development, the company developing Windsor Arch, said yesterday that the situation of the project was different from the Pearl Horizon case.

“Windsor Arch is completed. I’m not sure, at this moment, if the project has been through inspection because there was an inspection scheduled for it”, he explained.

“For many months the constructor was not authorised to install the electric cables and water pipelines because of the Light Rail Transport [LRT] project which is a disgrace”, he said. “The developer should not be blamed for the inefficiencies of the public services”.

The Pearl Horizon and Windsor Arch projects are expected to be completed after the companies’ 25-years land use term on the projects expire in December.

Raimundo do Rosário: AMCM: Local banks suspend Courts and Public Prosecutor’s issue of contactless credit cards office for Zone B

C

R

eclaimed land Zone B has been selected for the construction of the new judiciary buildings that will host the territory’s courts and the Public Prosecutor’s office. The news was announced yesterday on the sidelines of the opening ceremony for the new judicial year by Secretary for Transport and Public Works Raimundo Arrais do Rosário.

“An administrative and judicial hub is planned to be constructed on the reclaimed land in front of MGM, also known as Zone B. The new reclaimed zones went through a public consultation process, which ended in August. Now, the Land, Public Works and Transport Bureau (DSSOPT) have six months to write the report. Maybe during the second quarter of next year,

we will have more news about it”, Mr. Raimundo do Rosário said.

The construction of the judiciary building was urged during the ceremony by the President of the Macau Lawyers Association (AAM), Jorge Neto Valente, which pointed out the lack of proper installations for the judicial system to work.

The Secretary was also asked about the demonstration scheduled for Sunday, demanding the government build more public housing in the territory.

“People are unhappy with it [lack of public housing]. The first thing we need [to solve this problem] is to have land to build more public housing.

However, and as I’ve said before, until this moment we haven’t yet recovered any of the idle plots of land”, he said.

“There are many plots of land belonging to the government in Macau but all of them have been ceded”.

Raimundo Arrais do Rosário also denied that the government is afraid of the demonstration, when asked about it.

“Macau residents have the right to demonstrate and the right to express their opinions”, he stated.

ontactless credit cards were found to have security loopholes by the Hong Kong Monetary Authority (HKMA) on Tuesday, with seven banks ordered to stop issuing them. The Monetary Authority of Macau said three banks in the territory have also issued such types of credit card but the banks have already suspended issuing them.

The Hong Kong authority said on Tuesday that the contactless credit cards issued by seven of eleven banks, which supports Near Field Communication (NFC) and allows cardholders to make transactions by waving or tapping a card reader, have security loopholes enabling the information of users, such as full name and other private information to be stolen.

In an e-mail replying to Business Daily’s enquiry, AMCM said the number of issued credit cards supporting the NFC function are ‘very limited’.

‘Currently, the three banks have suspended issuing such new cards for safety purposes, and are following up on the relevant security issue and are about to send reminders to all affected cardholders. Meanwhile, [the] Authority has been closely monitoring the situation and will take

timely measures if necessary,’ the Authority wrote, without revealing the names of the three banks.

The Hong Kong authority announced yesterday that the seven banks found to have ‘problematic’ cards are the Bank of China (HK), Bank of Communication (Hong Kong Branch), China CITIC Bank International, Dah Sing Bank, DBS Bank (HK), OCBC Wing Hang Bank Limited and Industrial and Commercial Bank of China ( Asia ) Limited.

The world’s two leading credit card companies, VISA and MasterCard, both issues contactless cards like ‘payWave’ and ‘PayPass’, respectively. The cards can only be used to settle payment of less than HK$1,000.

Business Daily has found that Tai Fung Bank and the subsidiary of Hong Kong’s Dah Sing Bank - BCM Bank, have both issued payWave cards with VISA, while OCBC Wing Hang Bank Limited (Macau) has issued PayPass cards with MasterCard, according to their official websites. In addition, Industrial and Commercial Bank of China (Asia) Limited has issued a contactless credit card via UnionPay. K.L.

Business Daily | 3

October 15, 2015

Macau Dore cage theft case involves at least HK$520 mln Following a preliminary investigation, Judiciary Police (PJ) have revealed that the theft of cage capital from local junket operator Dore Entrainment Ltd. involves at least HK$520 million (US$64.7 million).

According to Chinese language newspaper Macao Daily, the estimate was made based on 49 police reports filed in the case. Meanwhile, Secretary for Security Wong Sio Chak said yesterday that the investigation of the case is complicated as it involves a certain number of people and high amounts of money. However, he claimed the investigation is ongoing with targets, indicating the police would announce more information when there is progress.

Taxi owners’ association: On-call service may not attract many bids The lack of drivers remains the biggest concern for bidding taxi operators, the General Association of Taxi Owners maintains

T

he open bid to run the oncall taxi service, for which the deadline is December 14, may not attract much interest from local taxi owners as the lack of human resources remains a “dead knot”, according to Leng Sai Hou, director of the General Association of Taxi Owners.

The government is issuing no more than 100 licences to run the on-call taxi service, with licences valid for eight years per the bidding rules announced yesterday.

The bidder must be a company mainly engaged in providing taxi services with capital of no less than MOP10 million (US$1.25 million), and be ready to equip its taxis with a

global positioning system (GPS). The bidding operator should also provide no less than 10 bigger taxis that are accessible for disabled people, according to the bidding rules.

“I don’t think the open bid will attract much interest from our taxi owner members because the lack of drivers is still a dead knot for a sound operation,” said Mr. Leng, whose Association comprises some 500 black taxi owners.

“The human resources issue is still the biggest obstacle, which is also what made Vang Iek Group eventually cease its on-call taxi business,” Leng said. “The opening of the Cotai casino-resorts in the coming years is going to further

strain the pool of drivers, so I think the government really has to address how they can help resolve the human resources problem.”

Local car rental and seller Vang Iek Group ceased its oncall taxi service in November last year following failed talks with the government over the introduction of additional charges for the on-call taxi service.

An executive director of Vang Iek, Gilbert Cheng, explained to media before that his company had suffered a high turnover of drivers. The introduction of additional charges should have been an important way of rewarding and help retain its taxi drivers, Mr. Cheng said.

When asked whether Vang Iek would like to run an on-call taxi service again, the company’s executive director Eugenio Cheng stressed to Business Daily yesterday that it was still assessing the bidding terms and a viable business model.

The Vang Iek executive added that the biggest concern remained the human resources issue.

The bidding rules announce that taxi operators can introduce charges for the on-call service, although the government has set no range.

Bidding taxi operators can also develop mobile phone applications to get taxi service orders, the government said.

S.L.

4 | Business Daily

October 15, 2015

Macau

Tourist Price Index down 2.7 pct in Q3

T

he city’s tourist price index (TPI), which reflects the price change of goods and services purchased by visitors, has dropped for the first time since 2002, down 2.72 per cent year-on-year during the third quarter of the year to 131.46, due to the decrease in hotel room rates, the latest data released by the Statistics and Census Service (DSEC) reveals.

According to DSEC, the price index of local accommodation registered a year-on-year decrease of 10.88 per cent, the most notable drop observed in the TPI for the third quarter.

In addition, prices for Clothing & Footwear were down nearly 7 per cent from the same period last year.

Nevertheless, prices for Food, Alcoholic Beverages & Tobacco registered a year-on-year increase of 5.87 per cent. Costs for Transport & Communications, and Entertainment & Cultural Activities also jumped 3.94 per cent and 3.14 per cent yearon-year during the third quarter, respectively.

Compared to the second quarter of the year, the TPI also fell 2.34 per cent, driven by the drop in prices of Clothing & Footwear and Accommodation of 6.78 per cent and 5.28 per cent quarter-on-quarter, respectively. According to DSEC, the decreases in the two sub-price indexes are ‘due to seasonal sale of ladies’ summer clothing and lower hotel room rate.’

By contrast, the data said the price index of Transport & Communications increased 1.67 per cent quarter-on-quarter, due to higher airfares.

For the first three quarters of this year, the average TPI decreased 0.1 per cent year-on-year, with prices index of accommodation dropping 5.86 per cent year-on-year. However, cost of Restaurant Services and Food, and prices of Alcoholic Beverages & Tobacco, jumped 4.92 per cent and 4.76 per cent year-on-year during the nine months, respectively.

K.L.

External investors injected 27 pct less last year Investment made by local firms outside the territory also plunged by nearly 60 per cent year-on-year

L

ast year, the city attracted some MOP26.3 billion (US$3.29 billion) of direct investment from outsiders, a year-on-year decrease of 27.2

per cent as enterprises reduced their reinvestment of earnings after dividend distributions, according to official data released by the Statistics and Census Service (DSEC).

Official data indicated 2,469 enterprises from outside the SAR invested in the city last year. Total income from this investment reached MOP85 billion, up

7.5 per cent year-on-year.

Meanwhile, at the close of 2014, inward direct investment in Macau totalled MOP218.9 billion, up 15.5 per cent year-on-year.

In terms of sector, 11 outside investors injected funds into the local gaming industry last year amounting to MOP12.4 billion, or 47.1 per cent of the total investment the city received.

Nevertheless, the investment amount represents a year-onyear plunge of 55.3 per cent, according to DSEC. Nevertheless, these gaming enterprises saw the income from their investment hit a record high of MOP57.1 billion for the year, up 2.7 per cent from 2013. In addition, inward direct investment in the gaming industry increased 11.4 per cent year-on-year to MOP128.1 billion as at the close of 2014, of which 52.7 per cent emanated from the Cayman Islands.

Other sectors

Meanwhile, the city’s banks & securities field were invested with some MOP4.9 billion by 31 external investors last year, surging 32.5 per cent from the same period in the year prior. Income from investing in the sector also rose 26.8 per cent year-onyear to MOP9.1 billion. As at the end of last year, the sector had investment stock of MOP37.9 billion, an increase of 18.7 per cent year-on-year, of which more than half of the capital was from Mainland China.

Moreover, 1,101 enterprises outside the

territory invested in the city’s wholesale & retail businesses in 2014. Their invested amount reached a total of MOP3.6 billion, up 165.4 per cent year-on-year. The enterprises saw the income from their investments grow 4.6 per cent year-on-year to MOP8.8 billion. In addition, the sector had MOP22.1 billion of inward investment, with investment from Hong Kong 57.7 per cent.

Analysed by country or territory, the investment that the city received was mainly from the British Virgin Islands, the Cayman Islands and Hong Kong, at MOP8.4 billion, MOP5.7 billion and MOP5.5 billion, respectively.

Outward investment

On the other hand, local firms invested MOP5.4 billion outside the territory last year, plunging nearly 60 per cent year-on-year. The firms generated income of MOP0.7 billion from their investments, which is a yearon-year jump of 174.6 per cent.

In fact, most of the total income, 57.1 per cent of the total, was earned by gaming enterprises, at MOP0.4 billion, soaring 169.4 per cent year-on-year.

As at the close of 2014, stock of outward direct investment of local companies also registered a year-onyear increase of 26.4 per cent to MOP 31.4 billion, of which MOP5.6 billion was invested in Hong Kong, while MOP5.2 billion was invested in Mainland China, primarily in Guangdong and Zhuhai.

K.L.

Business Daily | 5

October 15, 2015

Macau

New property project approved under industrial building revitalisation scheme The mixed residential and commercial property project in the northern Macau district of Areia Preta marks one of the very few approved factory-to-home cases Stephanie Lai

sw.lai@macaubusinessdaily.com

T

he government has approved a mixed residential and commercial property project to be developed within four years, making it one of the very few approved cases under the revitalisation scheme for industrial buildings implemented since 2011.

According to the Official Gazette published yesterday, a site of 2,774 square metres on Rua dos Pescadores in Areia Preta is approved to be developed into a mixed residential and commercial property project. Of the project site, 32,136 square metres are designated for residences, with another 2,983 square metres to be developed into commercial premises.

The site, which is now vacant following the

demolition of an industrial building, is to comprise two towers of 35 floors (four of which are basements) with

supporting social facilities, including a swimming pool, according to the Gazette.

The mixed property project is one of the very few successful land use change cases and was applied for by local company Everbuild International Ltd. under the revitalisation scheme for industrial buildings.

The special scheme, launched in April 2011, requires 70 per cent of the flats in the converted industrial premises to be small (i.e.) not more than 60 square metres (646 square feet). It also says the combined gross floor area of the small flats must represent at least half of the total gross floor area of the conversion project.

The scheme was conceived by the government as a means of boosting the supply of private mid and small-sized flats.

The former director of the Land, Public Works and Transport Bureau, Jaime Roberto Carion, said that the legal requirement of gaining unanimous approval from owners for industrial units conversion is the major reason for the few applications, which stood at only 14 cases as at November last year. By then, only two of the 14 cases had been approved for their draft construction plans.

Everbuild International, which applied for the approval of the project in 2013, must now pay a premium of MOP63.76 million (US$7.99 million) to the government for the new land use. The land lease for the site is valid until November 11, 2022, according to the Official Gazette.

6 | Business Daily

October 15, 2015

Macau opinion

Uses and abuses

José I. Duarte Economist

L

ast week, one of our local Portuguese papers broke some noteworthy news. Apparently, the migration services are dealing with nonresident students in ways that appear illegitimate, to say the least. Surprisingly, no-one involved seemed to ask the obvious questions or challenged the procedures.

And which procedures are we talking about? Non-resident students have a special visa that usually covers the period until the end of the academic year. Of course, in their last year it will happen often that the visa is still valid when they finish their course. That allows them some time to settle their affairs before leaving the territory. They cannot control the date when their last grade will be published, and they cannot know in advance if they need to subject themselves to further examinations.

When the final grade comes it seems only appropriate that they are given a certain time to prepare their return using their visa ‘slack’. That sounds reasonable and fair. Until now!

According to the report, the migration services are giving students one day to leave the territory and will treat them as illegal immigrants from then on. That means they may risk deportation and be forbidden to return to Macau for a certain period of time. It is so obviously unreasonable that should it be legal the only rightful approach would be to change the law. But apparently that is just a very narrow, erroneous – and should I say again, unreasonable – interpretation of the law.

Someone decided it was a good one, and a new procedure was devised. The higher education institutions were asked to provide a list of the non-resident students who finished their course and have apparently obliged without reservation.

That’s perplexing. No-one questioned the usage of those listsl were the legal advisors not asked to analyse the issue?

No-one had doubts or questions? Nobody felt the need to defend the interests and dignity of their students? Possibly they were not aware, a possibility that raises other interesting angles. But let us not diverge from the main theme.

In their defence, the services argue that the ‘one-day’ rule is in the written guidance materials they provide students when they arrive. Well, an illegal or irregular procedure does not become legal or regular because a public service enunciates it. In must be in accordance with laws, serve a clear public good or concern, and protect the legitimate interests and rights of those subjected to them. The interpretations of the services are not above the law. They cannot bend or violate the rules in ways that ultimately usurp the powers of the rightful lawmaking bodies.

In a system where the law prevails, the laws exist to protect citizens from abuses of power, not to ritually justify whatever interpretation any service fancies at any moment. And what kind of moral and political signal does that procedure convey to those who have chosen – and paid – to attend our higher education institutions?

Imperial Pacific: Saipan’s ‘temporary casino’ performs better than expected

T

he managing director of Hong Kong-listed Imperial Pacific International Holdings Ltd., Shen Yan, said the company’s ‘temporary casino’ on the island of Saipan had received more customers than anticipated, claiming the first phase of its integrated resort project is estimated to open as soon as the end of 2016.

The company, which is also known as an investor in the profit stream of Macau junket operator Hengsheng Group, had a soft opening of its ‘temporary casino’ on the island in July this year. The MD told Hong Kong reporters at a press briefing on Tuesday that the casino had received some 5,700 to 5,800 customers per day since the soft opening.

Offering only 10 gaming tables for the soft opening, Mr. Yan said the company would provide all 45 gaming

tables in the casino on November 28.

In August last year, Imperial Pacific was granted a 25-year licence to build and operate a casino on Saipan, with an option to extend the licence for a further 15 years.

In March this year, the company entered into a written amendment to its casino licence agreement with the Commonwealth of the Northern Mariana Islands (CNMI), which allows the company to establish and operate a ‘temporary casino’.

For the company’s integrated resort on the island, Mr. Yan revealed that Imperial Pacific would invest some US$600 million (HK$4.82 billion) in the first phase of the project, which would provide 300 gaming tables and 500 slot machines. He estimated the company could reach payback 12 to 18 months after the opening.

In addition, he anticipated the

proportion of mass gaming and VIP gaming in the company’s casino would be 40 per cent and 60 per cent of the total, respectively.

He also revealed that the company had already collected the total guaranteed amount of profit from Hengsheng Group under the profit stream agreement, totalling HK$400 million (US$49.8 million).

In 2013, the two companies reached a profit transfer agreement that the junket operator would transfer a profit stream worth 5 per cent, or a guaranteed minimum annual income of HK$25 million, to Imperial Pacific.

Mr. Yan told reporters that the one-time charge is due to the junket operator failing to reach its minimum target due to the gaming downturn in Macau.

K.L.

CY Foundation releases negative profit warning

T

he CY Foundation Group Limited yesterday released a negative profit warning for the six months ended 30 September in a filing with the Hong Kong Stock Exchange. According to the document, the loss of the group ‘is expected to increase to a greater

extent as compared to that of the corresponding period in 2014’.

Among the reasons for this change the company mentions the deterioration in the performance of its business in Macau – which is said to reflect the sluggish economic growth rate of Mainland China – plus the

Corporate Tak Chun Group rolls out new brand identity Gaming promoter Tak Chun Group has announced the official launch of its new visual brand identity. The company said in a statement that the new logo created by Chiii Design has in fact gone through a complete crafting process and is now simplified and symbolised by the rhombusshaped diamond, complimented with a unique turquoise colour scheme

for better brand recognition. The company added that although this entire re-branding exercise comes at a time when the local gaming market is in slowdown, Tak Chun Group believes it is the right time to give a fresh new public image that serves as a positive energiser and creates a new perspective on the gaming industry.

decline in revenue and margin of the packaging business and additional recognition of share-based payments arising from share options granted to employees.

During the first six months of the previous year, the company recorded a loss of HK$11.92 million.

Business Daily | 7

October 15, 2015

Macau

China arrests South Koreans for luring Chinese to casinos Casino operators around Asia have been aggressively courting Chinese gamblers, with many relying on Macau or mainland junkets to lure wealthy clients

C

hinese police have arrested 13 South Korean casino managers and several Chinese agents suspected of luring people from China to gamble in South Korea, state television reported.

China’s citizens, among the world’s most prolific gamblers, often travel to the Chinese territory of Macau, South Korea, the Philippines or Australia to bet as gambling is illegal in mainland China, except for heavily regulated statesanctioned lotteries.

In a report late on Tuesday, Chinese state television said police launched a probe in June into “criminal gangs” from five South Korean casinos, who “enticed” Chinese with free tours, free hotels and sexual services.

Casinos are not allowed to legally advertise in Mainland China, but operators have skirted around the issue by

promoting the resorts where the casinos are located.

A South Korean tourism ministry official said the 13 Koreans are employees of Grand Korea Leisure Co Ltd (GKL) and Paradise Co Ltd,

and that it was unclear if they had been charged.

A Paradise spokesman said the company’s representatives were not involved in providing the services described in the

media report, but confirmed that 6 of the 13 detained Koreans were its employees.

A GKL spokesman could not be immediately reached for comment.

Chinese President

Melco Crown advances in New York on signs Macau slump may ease Hong Kong-based Melco Crown has rallied this month amid investor optimism that the company will benefit from targeted government stimulus measures

M

elco Crown Entertainment Ltd., Macau’s fourth-largest casino operator, rallied in U.S. trading on signs that a slowdown in the gambling hub may not be as severe as expected.

American depositary receipts of Melco Crown rose 3.4 per cent to US$18.07 in New York on Tuesday, pushing their advance from a September 29 low to 33 per cent.

Macau casino shares rose in Hong Kong trading earlier after analysts said gaming revenue was stronger than expected this month.

While Macau’s gaming revenue has fallen for 16 straight months, better-than-estimated casino receipts after the Golden Week holiday may lead to the smallest decline since January, Credit Suisse Group AG analysts said Monday.

The casino hub, the world’s largest, has suffered the worst downturn in its history as an anti-corruption crackdown in China and slowing economic growth have kept high rollers at bay.

“The Golden Week domestic consumption numbers look very, very strong,” Brendan Ahern, managing director at Krane Fund Advisors LLC in New York, said by phone on Tuesday. “The sentiment going in for the broader casino and gaming was low, so they had a very low hurdle to overcome.”

Macau’s estimated average daily revenue was MOP827 million (US$104 million) during the first 11 days of October, higher than Credit Suisse’s forecast of MOP750 million to MOP800 million, analysts led by Kenneth Fong wrote in a note

Monday. Casino receipts so far this month may lead to a drop of 25 per cent to 28 per cent in October, Fong said.

Macau stimulus

Hong Kong-based Melco Crown has rallied this month amid investor optimism that the company will benefit from targeted government stimulus measures. Macau’s gaming industry revenue is estimated to rebound 8 per cent in 2016, with Melco Crown’s jumping 24 per cent, according to data compiled by Bloomberg Intelligence.

Melco Crown may have clinched the approval of 210 new gaming tables for its Studio City casinoresort, which is scheduled to open on October 27, and another 40 by the end of the year, Fong wrote,

Xi Jinping’s protracted crackdown on corruption and conspicuous spending has kept wealthy Chinese gamblers away from Macau, the world’s biggest gambling hub, where gaming revenues last year fell for the first time since casinos were liberalised in 2001.

At the same time, casino operators around Asia have been aggressively courting Chinese gamblers, with many relying on Macau or mainland junkets to lure wealthy clients.

South Korea has 17 casinos and 14 casino operators, three of which are Paradise or affiliates.

Reuters

citing Asia Gaming Brief. The analyst raised the shares to the equivalent of buy from neutral. The addition would equip its Studio City resort opening in October with the city’s most extensive mass-market attractions.

The company will be the first Macau operator with major operations abroad, opening a Manila resort earlier this year. It has doubled quarterly sales and tripled EBITDA since late 2009, even with the impact of China’s slowing growth and antiextravagance push.

“There are industries that, regardless of what’s going on in the macroeconomic front, will continue to do well, and I think gaming is one of them,” Wayne Lin, a money manager at QS Investors LLC, which invests in Chinese stocks, said by phone on Tuesday. “You could be seeing the emergence of a true Chinese middle class supportive of the gaming industry.”

The BI Macau/China Gaming Market Competitive Peer Group Index jumped 3.5 per cent on Tuesday. A Bloomberg gauge of U.S.- traded Chinese stocks slumped 0.8 per cent for the first retreat in three days after data showed China’s imports contracted more than expected. The Deutsche X-trackers Harvest CSI 300 China A- Shares ETF slipped 0.5 per cent to US$34.69.

Bloomberg

8 | Business Daily

October 15, 2015

Greater China

September inflation cooler than expected Stubbornly weak producer prices are threatening to erode firms’ profits and add to their debt burdens

KEY POINTS Sept CPI +1.6 pct y/y vs +2.0 pct y/y in Aug Sept PPI -5.9 pct y/y unchanged from Aug Deflationary risks weigh on the economy Economists expect more policy easing moves

C

onsumer inflation in China cooled more than expected in September while producer prices extended their slide to a 43rd straight month, adding to concerns about deflationary pressures in the world’s second-largest economy.

The consumer price index (CPI) rose 1.6 percent in September from a year earlier, the National

Bureau of Statistics (NBS) said yesterday, lower than expectations of 1.8 percent and down from August’s 2.0 percent.

In a sign of sluggish demand, the non-food CPI was even milder with an annual growth rate of 1.0 percent in September, the NBS data showed.

The easing CPI was mainly due to a high comparison base last year, Yu Qiumei, a

senior NBS statistician, said in a statement accompanying the data. CPI rose 0.5 percent month-on-month in September 2014, compared to a 0.1 percent growth last month.

Reflecting growing strains on Chinese companies from persistently weak demand and overcapacity, manufacturers continued to cut selling prices to win business.

The producer price index (PPI) fell 5.9 percent from a year ago, in line with the expectations and the same rate of decline as in August, which was the biggest drop since the depths of the global financial crisis in 2009.

“Overall, the still weak PPI highlights the severe overcapacity problem and sluggish domestic investment demand,” said economists at Nomura.

“Given the lacklustre growth outlook, we continue to expect moderate fiscal stimulus from the central government and continued monetary easing.”

Nomura expects one more cut to banks’ reserve requirement ratio (RRR) late this year and another four in 2016, each by 50 basis points (bps), together with two more interest rate cuts of 25 bps each next year.

Stubbornly weak producer prices are threatening to erode firms’ profits and add to their debt burdens, conditions which analysts expect to persist for the remainder of the year.

Weichai Power, China’s largest manufacturer of engines for heavy-duty trucks used in mining and construction, warned on Tuesday that its nine-month net profit could fall 75-85 percent due in part to the weakening economy.

Still, with consumer inflation remaining well below Beijing’s 3 percent target for the year, policymakers have ample room to unveil further support for the economy.

Reuters

Crude buyout heading for record China imports nearly 60 percent of the crude it consumes and aims to meet the widespread standard of stockpiling enough to cover 90 days of net imports Florence Tan and Chen Aizhu

A

s China closes in on the United States as the world’s biggest crude oil importer, demand from private refiners and stockpiling of cheap oil is expected to keep imports at record levels after a wobble in the third quarter.

Despite slower growth in recent months - crude imports rose just 1.3 percent in September on a year earlier - buying for OctoberNovember delivery has picked up strongly, traders and analysts say.

The purchases will ease concerns of a sharp slowdown in Chinese buying and support prices in coming months, analysts said.

The increased buying has shown up in tanker movements and freight rates, said Energy Aspects analyst Virendra Chauhan, and analysts are upgrading earlier forecasts for second half growth.

“Despite a slowing Chinese economy, crude imports remain robust on the back of accelerated stockpiling activities into operating and commercial storage,” said Wendy Yong, analyst at oil consultancy FGE. Since July, China has also granted nearly 700,000 bpd of crude import quotas to small refiners, known as

“teapots”, or roughly 10 percent of China’s current total imports, as part of efforts to boost competition and attract private investment, creating a new source of demand.

“The teapots are super-active,” said one oil trader, with many racing to fill their new quotas.

And state-owned refiners are restocking after a third-quarter lull.

Unipec, the trading arm of Asia’s top refiner Sinopec, bought 6 million barrels of North Sea Forties crude and 2.9 million barrels of Russian ESPO for loading this month, and it has also stepped up Angolan crude purchases for November.

To accommodate the oil, new storage tanks on southern Hainan island have either been put to use or are due to be filled with crude from end-2015.

FGE expects China’s crude imports in the second half to rise by 12 percent from the first six months, up from a previous estimate of 10 percent. It forecast China’s crude imports to rise 9 percent for the year.

Such a rise would take Chinese imports to 6.75 million barrels per day, not far off U.S. imports of 7.3 million bpd. China’s imports

outpaced the United States in April were roughly on par in September.

Teapot effect

Teapot refineries are unlikely to utilize the full amount of quotas allotted by the end of the year, but are widely expected to step up purchases in 2016.

KEY POINTS China’s Jan-Sept crude imports up 8.8 pct on year ago Strong finish to year seen as “teapot” refiners fill quotas Strategic stockpiling adds to commercial demand Total 2015 crude imports seen nearing 7 mln bpd

At least three of the seven refiners to receive quotas, including Dongming Petrochemical and Panjin Beifang Asphalt Fuel Co. which have the biggest allocations, have imported crude, traders said.

Hongrun Petrochemical, owned

by Sinochem and also a recent receiver of a quota, has also stepped up imports, they said.

The newly licensed teapots recently bought supplies from the Asia-Pacific region as well as from Brazil and Colombia as they test a variety of grades to find the best fuel yield, traders said.

Other refiners, including Shandong Jinbo Petrochemical and inland plant Yanchang Petroleum, have also applied for import quotas.

Independent refiner Lijin Petrochemical bought a Russian ESPO cargo that arrived at its plant in September, and while it has stopped imports due to a refinery upgrade, orders would resume next year, said a source familiar with the matter.

Analysts said China would also continue to take advantage of low oil prices to build up its strategic petroleum reserves.

Reuters

Business Daily | 9

October 15, 2015

Greater China Beijing to loosen rules on issuance of corporate bonds

HK monetary authority urges suspension of contact-less credit cards

President Xi Jinping is balancing vows to free up the nation’s financial markets with steps to prevent a rash of debt failures as corporate profits slide

C

hina is easing bond market rules as it tries to channel money to cash-strapped companies amid the slowest economic growth in a quarter century, people with knowledge of the matter said.

National Development and Reform Commission, one of the regulators for the nation’s corporate bonds, is taking the step as it moves toward a system to allow more firms to simply register to issue notes instead of getting individual approvals as they must now, the people said, asking not to be identified. Issuers or bonds with AAA credit ratings will be exempted from the regulator’s review process, they said.

Bond defaults have increased, with solar firm Baoding Tianwei Yingli New Energy Resources Co. missing payment on notes Tuesday in the fifth onshore default this year following China National Erzhong Group, according to China International Capital Corp.

Sausage maker Nanjing Yurun Foods Co. said Monday it’s not sure if it can repay a note due next week.

“The new rules will make it easier for corporations to raise money and lower their funding costs, which is positive for the cash-strapped companies” said Liu Dongliang, a

senior analyst at China Merchants Bank Co. in Shenzhen.

Some exemptions

Under the new rules, bonds with guarantee companies that have ratings of AA+ and above, and notes rated AA+ and higher with collateral, may also be exempted from the NDRC’s review process, the people said. All companies whose securities are regulated by the NDRC will be allowed to use note proceeds to finance projects from the start and will be permitted to use as much as 40 percent of proceeds for operations. Previously only higherrated companies could use up to that amount for unspecified purposes.

The NDRC has distributed a document on the rules to all

provincial development and reform commissions, the people said. The 21st Century Business Herald newspaper reported earlier that regulators issued documents to request improvements in corporate bond application, disclosure, use of proceeds and supervision.

The new rules come as China faces another debt scare. State-owned steel trader Sinosteel Co., whose parent warned of financial stress last year, may have to honour 2 billion yuan (US$315 million) of principal next Tuesday when bondholders can exercise an option forcing the notes’ redemption two years before they mature. If that should happen, China Merchants Securities Co. thinks the firm will struggle to repay.

Bloomberg News

China’s middle class has overtaken the United States to become the world’s largest, Credit Suisse said Tuesday in its latest report on global wealth. Asia will be the scene for the greatest expansion of the world’s middle class, it predicted. The Swiss bank said with 109 million adults “this year, the Chinese middle class for the first time outnumbered” that in the United States at 92 million. However the number of middle class worldwide grew last year at a slower pace than the wealthy.

Companies that handle dangerous chemicals will be moved to Tianjin Nangang Industrial Zone following a deadly warehouse explosion in mid-August, local authorities said. The government of Binhai New Area in Tianjin has launched a series of measures to promote the development of the area, including relocating companies that handle dangerous chemicals or goods. Located in the south of Binhai New Area in Tianjin, Nangang Industrial Zone is at least 30 kilometres from the explosion site, and 10 kilometres from the nearest residential area.

Banks took an 82 percent share, followed by funds at 12 percent and private banks at 6 percent

A

Mainland has world’s largest middle class

Tianjin to relocate dangerous chemicals companies

Agricultural Bank sells US$1 bln debut “green bond” in London

gricultural Bank of China, the country’s third-largest listed lender, completed its debut sale of US$1 billion dual currency bonds late on Tuesday in London the first “green bond” from a Chinese bank.

Green bonds are issued to fund environment-friendly projects. This category of fixed-income instrument is growing fast as countries tackle climate change and pollution, a pressing issue in China.

The 600 million yuan (US$94.53 million) two-year yuan-denominated tranche of the bond was priced at 4.15 percent.

The Hong Kong Monetary Authority (HKMA) has called on seven banks to suspend the issuance of contact-less payment credit cards. The call came after it was found that certain mobile phone applications can be used to obtain information from these cards, local media reported yesterday. The HKMA called on the banks, including Bank of China (Hong Kong) and DBS Bank (Hong Kong), to notify their customers of the risks as soon as possible, and said they must conduct risks assessments and review their existing measures to plug any security loopholes.

The order book reached about 4.9 billion yuan from 71 accounts. Asian investors accounted for 94 percent of demand while the rest went to European investors.

Banks took an 82 percent share, followed by funds at 12 percent and private banks at 6 percent.

The dollar segments were a US$400 million three-year tranche priced at 2.125 percent and a US$500 million five-year tranche at 2.75 percent.

The bond will be listed on the London Stock Exchange, with the proceeds to fund eligible green projects, the term sheet showed.

CDB mandates three banks for IPO

The bond will be listed on the London Stock Exchange

Agricultural Bank of China International, Barclays, HSBC and J.P. Morgan are joint global coordinators of the issue.

China Construction Bank sold 1 billion yuan of offshore yuan bonds in London earlier this week, and the People’s Bank of China (PBOC) is expected to issue up to 5 billion yuan of one-year bills in London soon.

Britain and China agreed to a series of initiatives in September ranging from an expanded currency swap agreement to a feasibility study for a scheme to connect the London and Shanghai stock markets.

Chinese President Xi Jinping will visit Britain later this month.

Reuters

State-owned China Development Bank (CDB) has mandated Bank of America Merrill Lynch, Citic CLSA and Deutsche Bank to manage a Hong Kong initial public offering worth about US$1 billion for its leasing unit, IFR reported yesterday. CDB Leasing, the unit of China’s largest policy bank, plans to go public in the first half of 2016, added IFR, a Thomson Reuters publication, citing people familiar with the plans. Bank of America, CDB, Citic CLSA and Deutsche Bank declined to comment on the IPO mandates. CDB Leasing, based in Shenzhen, covers the aviation, transport and infrastructure industries.

AVIC set to be spun off, shares surge Aviation Industry Corporation of China (AVIC) is preparing to spin off three aircraft engine subsidiaries, a newspaper reported yesterday, part of a broad government effort to improve the competitiveness of its state-owned conglomerates. A new firm, controlled by the central government, will become the parent of the three companies, the official Shanghai Securities News said without identifying the source of the information. Sichuan Chengfa Aero-Science and Technology Co, AVIC Aero-Engine Controls Co and AVIC Aviation Engine Corp announced in separate stock exchange filings late on Tuesday that AVIC may not be its controlling shareholder.

10 | Business Daily

October 15, 2015

Greater China

Factory output likely grew 6.0 percent in September from a year earlier

Q3 growth seen dipping to 6.8 percent That would be the weakest pace of expansion since the first quarter of 2009 Kevin Yao

C

hina’s economic growth is expected to fall below 7 percent for the first time since the global financial crisis in the third quarter, putting pressure on policymakers to roll out more support measures as fears of a sharper slowdown spook investors.

Chinese leaders have been trying to reassure global markets that Beijing is able to manage the world’s second-largest economy after a shock devaluation of the yuan and a summer stock market plunge fanned fears of a hard landing.

But even the government concedes the economy is entering a slower growth phase after decades of breakneck expansion.

Growth in third-quarter gross domestic product (GDP) likely slowed to 6.8 percent from the same period last year, down from 7 percent in the second quarter, according to a Reuters poll of 50 economists.

That would be the weakest pace of expansion since the first quarter of 2009, when it tumbled to 6.2 percent, but far from an alarming loss of momentum.

The highest forecast in the poll was 7.2 percent and the lowest was 6.4 percent, though some investors fear current growth levels could already be much weaker than the official data will suggest.

“We expect the government to maintain loose monetary policy and step up fiscal spending in response to the economic slowdown,” economists at China International Capital Corp (CICC), a domestic investment bank, said in a note.

“We believe that loosening measures may help cushion the slowing momentum in economic growth but it’s difficult to reverse the long-term downward trend.”

Instead of calming financial markets, a surprisingly resilient reading could reinforce scepticism about the reliability of Chinese official data. However, some economists believe government statistics may actually be underestimating consumption and strong service sector growth.

Despite weak exports and imports, industrial overcapacity and a property downturn, annual economic growth in the first two quarters was 7.0 percent, in line with Beijing’s full-year target, with the government rejecting suggestions that the figures were being inflated to meet official forecasts.

Sheng Laiyun, spokesman for the National Bureau of Statistics, said last month that third-quarter economic growth will be largely stable as the impact from the stock market slump on the broader economy has been limited.

The bureau has changed the way quarterly gross domestic product data is calculated, a move it calls a step to adopt international standards and improve the accuracy of Chinese numbers.

Policy support

China’s policymakers think they can stem a rapid rundown of the country’s foreign exchange reserves and ease pressure on the currency by pumppriming the economy to meet this year’s growth target, sources involved in policy discussions say.

The CICC expects the central bank to deliver another 25-basis point (bps) cut in interest rates and two cuts in bank reserve ratios totalling 100 bps by year-end.

The central bank has already cut interest rates five times since November, and reduced the amount of cash that banks must hold as reserves to spur activity, though some analysts say such moves have not been as effective as in the past when the economy was more tightly controlled and debt levels were much lower.

KEY POINTS Q3 growth seen slowing to 6.8 pct y/y from Q2’s 7.0 pct More policy steps may be needed to hit 2015 growth target Scepticism grows about reliability of Chinese data Q3 GDP data due on Monday, at 0200 GMT Sept activity data to be released alongside GDP

Other support measures have included more government spending on infrastructure and easing down payment requirements and other curbs on the cooling property sector, which have succeeded in reviving weak home sales and prices but have not yet reversed a sharp decline in new construction which is weighing on demand for materials from cement to steel.

Monthly data

A raft of monthly indicators will be released with the GDP data, and analysts will be looking for signs as to whether momentum is still fading or if the economy may be slowly stabilising.

Factory output likely grew 6.0 percent in September from a year earlier, slowing from August’s 6.1 percent rise, as firms struggle to cope with persistent deflationary pressures due to overcapacity and softening demand.

Annual growth of fixed-asset investment, a crucial driver of China’s economy, likely eased to 10.8 percent in the first nine months of 2015 - the weakest expansion in nearly 15 years - from 10.9 percent in January.

Annual retail sales growth was seen at 10.8 percent in September, unchanged from August.

China’s exports fell less than expected in September, with monthly figures showing recovery, but a sharper fall in imports left economists divided over whether the country’s ailing trade sector is showing signs of turning around.

Reuters

Business Daily | 11

October 15, 2015

Asia

Singapore slightly eases policy as economy barely dodges recession Yesterday’s move follows January’s reduction in the width of the policy band for the Singapore dollar in an unscheduled meeting Jongwoo Cheon and Aradhana Aravindan

S

ingapore’s central bank eased monetary policy for the second time this year and warned of downside risks to growth after its economy narrowly avoided a recession in the third quarter.

Yesterday’s move sees the city-state joining a wave of global easings as policy makers rush to counter slackening world demand that has led to a precipitous drop in exports and floored many economies.

“MAS will continue with the policy of a modest and gradual appreciation of the S$NEER policy band. However, the rate of appreciation will be reduced slightly,” the Monetary Authority of Singapore (MAS) said in its semi-annual policy statement.

The MAS manages monetary policy by letting the Singapore dollar rise or fall against the currencies of its main trading partners within an undisclosed trading band based on its nominal effective exchange rate (NEER).

“I think the (policy) adjustment itself is a big

statement in the sense of recognising the downside risks to growth,” said Sim Moh Siong, FX strategist for Bank of Singapore.

Acknowledging the growing stresses on tradedependent economies as China’s giant economy cools, MAS said growth prospect for Asia-ex Japan have dimmed and warned of downside risks to Singapore.

“The subdued global growth will exert a drag on the external-oriented sectors in Singapore in the quarters ahead,” the central bank said.

Data earlier in the day showed the city state’s export-reliant economy grew a scant 0.1 percent in the June-September quarter from the previous three months on an annualised and seasonally adjusted basis, barely avoiding a recession after it contracted 2.5 percent in the second quarter.

A Reuters poll had tipped a 0.1 percent contraction.

China chill

The Singapore dollar jumped to 1.3904 per U.S. dollar, its

Monetary Authority of Singapore headquarters

strongest since September 18, possibly reflecting the better-than-expected GDP outcome and unwinding of bearish bets by a section of traders who had expected a bigger easing step.

A majority of 25 analysts polled by Reuters had expected MAS to loosen policy this week after it held steady in April.

Yesterday’s move follows January’s reduction in the slope of the policy band for the Singapore dollar in an unscheduled meeting, and comes as nations from India

to Taiwan to Norway have eased policy to stoke rapidly receding momentum.

A slowdown in China has rattled financial markets and chilled output across global businesses. Last month, the U.S Federal Reserve cited China worries when it held off on raising rates for the first time since 2006.

Singapore exports have continued to fall, while inflation in August slowed at its fastest pace since 2009.

The MAS expects core inflation at 0.5 percent this

year, and sees it averaging 0.5-1.5 percent in 2016 with economic growth at around 2-2.5 percent this year and roughly at similar levels next year.

Analysts warn that Singapore’s economy is not out of the woods yet.

“Risks surrounding the U.S. rate hike amid a sluggish recovery, a cloudy eurozone outlook and the deceleration in China will continue to weigh down on growth outlook in the near term,” DBS analysts said in a note.

Reuters

Thai domestic auto sales fall as economy sputters On an annual basis, domestic sales have dropped every month since May 2013 Kitiphong Thaichareon and Pairat Temphairojana

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omestic auto sales in Thailand will fall this year, the Federation of Thai Industries said yesterday, as the weak economy prompts consumers to cut back on spending.

Thailand is a regional vehicle production and export base for the world’s top carmakers, but the military government that seized power in a May 2014 coup has struggled to get Southeast Asia’s second-largest economy back on track.

Both export and domestic demand remain weak, weighing on manufacturers.

“Thailand has yet to make an economic recovery, while farm prices remain low, private investment is

slowing and banks are tightening their lending,” Surapong Paisitpattanapong, spokesman for the federation’s Auto Industry Club, told a briefing.

KEY POINTS 2015 auto sales expected at 750,000 to 800,000 cars Jan-Sept car exports rise 7.92 pct y/y to more than 905,360 Industrial sentiment index at its highest level this year

Thai auto sales are expected to reach 750,000 to 800,000 cars this year, he said, down from 881,832 in 2014.

The federation had already cut its car sales target in July to 850,000 cars from 950,000 cars seen earlier for this year, but maintains its car export estimate for 2015 at 1.2 million cars.

In the first nine months of this year, Thais bought 553,826 cars, down 14.6 percent from a year earlier.

Car exports in the same period were 905,366, or 7.92 percent higher than last year.

However, some rays of hope have emerged.

The federation said a gauge it uses for industrial sentiment reached its highest so far this year in September, after hitting a more than six-year low last month.

“This is due to an increase in mostly foreign orders,” Supant Mongkolsuthree, chairman of the Federation of Thai Industries, said in a statement.

The weak baht currency also helped export performance in September, he added.

The central bank last month cut its 2015 economic growth forecast to 2.7 percent from 3 percent, and to 3.7 percent from 4.1 percent for 2016.

In 2014, growth was the slowest in three years at just 0.9 percent.

Reuters

12 | Business Daily

October 15, 2015

Asia

Odds narrow on Australian rate cut after mortgage surprise The RBA holds its next policy meeting on November 3 and is generally expected to hold rates at record lows of 2.0 per cent Wayne Cole

O

dds on a cut in Australian interest rates narrowed yesterday when the country’s second-largest lender sprang a surprise rise in mortgage rates, threatening to dampen home prices and consumer sentiment in an already fragile economy.

Westpac Banking Corp lifted its variable mortgage rates for occupiers and investors by 20 basis points, saying the move was necessary to cover rising regulatory costs.

Should the other major banks follow suit, as many expect, that might be considered an unwarranted tightening in monetary conditions by the Reserve Bank of Australia (RBA).

“The economy can’t handle rate hikes now so Westpac’s move makes it more certain RBA will cut again,” concluded Shane Oliver, chief economist at

The economy can’t handle rate hikes now so Westpac’s move makes it more certain RBA will cut again Shane Oliver, chief economist, AMP Capital

AMP Capital. “Watch its November meeting for a quarter point cut.”

The RBA holds its next policy meeting on November 3 and had been generally expected to hold rates at record lows of 2.0 percent, where they have been since the last easing in May. Top mortgage lender Commonwealth Bank of Australia yesterday said it was yet to make a decision on its rates while a spokesman at Australia and New Zealand Banking Group declined to comment.

National Australia Bank CEO Andrew Thorburn didn’t rule out following Westpac’s lead. “It’s something you react to...and review on an on-going basis,” he said at a business lunch in Sydney.

Investors still seem less than convinced a cut will come so quickly with interbank futures implying a 27 percent chance of a move

in November, up from 20 percent on Tuesday.

However, the probability of an easing by February shifted up markedly, all the way to 98 percent from 68 percent previously.

“On net this adds to our case for further RBA easing,” said Michael Turner, a strategist at RBC Capital Markets, who tips a move in either February or March.

Rising mortgage rates would threaten to slow home price growth and thus temper household wealth.

“This in turn increases risks that household spending starts to better reflect household cash flows, which involve tepid wages growth and now higher servicing costs,” said Turner.

The RBA has long wanted to cool portions of the market in Sydney and Melbourne where prices have surged as much as 50 percent in three years. It urged regulators to take aim at

Lotte chairman ousted by brother from key affiliate in group The decision comes amid a power struggle that began in July at South Korea’s biggest retail giant Rose Kim

L

otte Group Chairman Shin Dong Bin lost his directorship at one of the conglomerate’s key companies in the latest move spearheaded by his disgruntled older brother amid a power struggle over control of the group.

Kwang Yoon Sa, the biggest holder of unlisted Lotte Holdings Co., which is key to controlling Lotte Group, held a meeting of shareholders yesterday to remove Shin from the board,

according to an e-mailed statement from a company controlled by the elder brother. Shin Dong Joo, the elder brother, was also appointed as chief executive officer of Japan- based Kwang Yoon Sa, according to the statement.

“As the biggest shareholder of Kwang Yoon Sa and Lotte Holdings, I plan to correct and reform the many problems at Lotte Group,” Shin said in a statement that was read

out to reporters outside the shareholder meeting in Tokyo.

In response, Lotte Group said in a statement that the changes won’t disrupt management at the retail conglomerate because Kwang Yoon Sa is not a holding company, but rather a family owned company that holds a fraction of Lotte Holdings.

The decision comes amid a power struggle that began in July at South

Korea’s biggest retail giant. The Lotte case has gained national attention in a country where disputes between family members at corporate dynasties -known locally as the chaebol - - are rarely displayed in public.

In July, Shin Dong Joo, acting through his father, tried to have his younger brother fired from Korea’s largest retail giant only to see the plan backfire as the patriarch became side-lined

investment loans and to raise the capital buffer banks needed to cover this group.

Westpac’s hike in borrowing costs would thus have not been unexpected by policymakers, who as recently as this week were showing little urgency to lean further on rate levers.

The deputy governor of the RBA, Philip Lowe, on Tuesday went to great pains to highlight the limitations of monetary policy preferring instead to rely on stimulus from a lower currency.

Furthermore, mortgage rates are only rising modestly from what were the lowest levels in at least half a century. Other rates, such as on business loans, are not affected. Westpac estimated its move would cost A$10 a week for the average borrower.

Another wrinkle particular to Australia is that many borrowers had not taken past rate cuts in full, choosing instead to pay their loans off quicker. Westpac estimates 70 percent of its customers are ahead on their loans.

“When official rates dropped by 50 basis points earlier this year the vast majority of borrowers did not change their repayment schedules,” says Michael Workman, a senior economist at CBA. “For them a rise of 20 basis points will likely not even register as a higher repayment.”

Reuters

to an honorary position.

The elder brother owns 50 percent and his sibling 39 percent of Kwang Yoon Sa, the largest shareholder of Lotte Holdings, which is key to controlling conglomerate Lotte Group because of its various stakes in group affiliates.

Last week, the group’s 93-year-old founder Shin Kyuk Ho and his older son renewed their challenge for power, by suing Lotte’s chairman and other board members of Lotte Holdings to nullify the patriarch’s July 28 ouster on grounds that he was illegitimately deposed.

Though Lotte Holdings is based in Tokyo and has operations in Japan, the group generates the bulk of its business in Korea, where it has 80 affiliates in areas ranging from department stores to amusements parks and hotels with estimated 112 trillion won (US$97 billion) of assets. Lawsuits were filed both in Korea and Japan.

Bloomberg News

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Business Daily | 13

October 15, 2015

Asia Japanese government cuts economic assessment as output sags There is lingering market speculation the BOJ will expand its quantitative easing programme at the October 30 meeting Stanley White

J

apan’s government lowered its assessment of the economy yesterday as output sags, in a worrying sign that recovery is stalling as overseas demand weakens.

The government also downgraded its view of industrial production as factory activity contracts and inventories rise.

The gloomy overall assessment raises the stakes for the Bank of Japan’s (BOJ) monetary policy meeting at the end of the month and places Prime Minister Shinzo Abe’s economic policies under even greater scrutiny.

Last month, the government said the economy was recovering but in some parts the recovery has dwindled.

The last time the Cabinet Office downgraded its assessment was in October last year.

An unexpected fall in August industrial production prompted some economists to suggest Japan’s economy could contract in July-September, which would put it in a technical recession after the previous quarter’s contraction.

In addition to the decline in output,

The economy is in a gradual recovery trend, but there are some pockets of weakness…

Recently, industrial output has weakened Japan’s Cabinet Office, monthly economic report

a rise in inventories also led the government to lower its assessment.

The Cabinet Office said exports are weakening, the same as its assessment from last month.

Consumer spending is holding steady, unchanged from last month.

Capital expenditure is showing signs of recovery, the Cabinet Office said. But some economists say the trend for capital expenditure is unclear because the data has been mixed.

There is lingering market speculation the BOJ will expand its quantitative easing programme at the October 30 meeting in which it is seen likely to downgrade its gross domestic product and consumer price growth forecasts.

Prime Minister Abe is trying to breathe new life into his economic agenda with a series of announcements on improving the welfare system and adapting to Japan’s rapidly ageing population, but some economists worry Abe’s new economic policies are too vague and may not be able to deliver the dramatic acceleration he seeks.

Reuters

Mini-marts boom as Vietnam’s shoppers shift spending patterns The mini-mart boom sharply contrasts with that of supermarkets

V

ietnam is seeing a mini-boom in mini-marts, with local and foreign players beefing up their presence as shoppers eye easy buys while a robust economy increases spending power.

Convenience store numbers have jumped more than 260 percent since 2012, with at least 533 up and running by the end of last month, according to data from the companies.

Market watchers say Vietnamese consumers are increasingly willing to pay a little more for the convenience of mini-marts, which open for longer hours and are found in more and more locations. “There is a lot of room for growth. In other countries, convenience stores are about 20 percent of market. Here it is less than 10 percent,” said CBRE Vietnam Executive Director Richard Leech.

Vietnamese conglomerate Vingroup, which has opened 93 Vinmart stores since the end of last year, recently said it would double its 2016 target to 2,000 outlets. In July, 7-Eleven, which has 8,469 outlets in Thailand and 1,407 in the Philippines, signed a master franchise agreement with Seven System Vietnam to develop and operate 7-Eleven stores. Japan’s FamilyMart said it aims to increase its Vietnam stores to more than 100 in 2016, citing customer growth of 120 percent annually.

The mini-mart boom sharply

contrasts with that of Vietnam’s supermarkets, which expanded around 3 percent to 313 stores in 2014 from 304 in 2012, according to market research firm Nielsen. Its poll showed a fifth of Vietnamese now used convenience stores often, although fresh markets remained the preferred channel with 62 percent of shoppers using them.

Broader expansion of the middle class and retail, however, means minimarts face plenty of competition.

“Convenience stores must compete fiercely with other retail channels which are also growing dramatically, especially online shopping,” said Dinh Thi My Loan, head of the Association of Vietnam Retailers.

Reuters

Japan, Iran agree on investment pact Japan and Iran have reached agreement on an investment accord, which may give a boost to Japanese investments into the Islamic Republic once sanctions are lifted as early as next year, the countries’ foreign ministers said in a statement. Japan is keen to boost ties with Iran and invest in resource projects there, as well as increase crude imports from the Middle Eastern country. Japan’s crude imports from Iran plunged more than 40 percent from 2011 levels before tough Western sanctions were introduced in 2012 over Tehran’s disputed nuclear programme.

Won still strong vs euro, yen The won has fallen against the dollar in recent months but not as much as other major currencies have, a South Korean foreign exchange official said, indicating he sees the country’s currency as over-valued. The official also told Reuters this week that the baseline scenario Korean foreign exchange authorities have is for the Federal Reserve to begin raising United States interest rates before the end of this year. The remarks were made on the condition the official remain anonymous.

During the third quarter, the won fell 5.9 percent against the dollar.

Kyushu to restart second nuke reactor in Japan Japanese utility Kyushu Electric Power Co said it will restart the No.2 reactor at its Sendai nuclear plant today, the second unit to resume operations after dozens of reactors were shut following the 2011 Fukushima disaster. Japan has been inching back towards nuclear energy, turning on its first reactor, the 890-MW Sendai No.1 unit, in mid-August after a near two-year blackout. Prime Minister Shinzo Abe and many senior figures in industry are backing nuclear power to cut fuel bills, despite widespread public opposition to atomic power.

Rio Tinto to pay millions to mining magnate Rinehart Rio Tinto will have to pay more than A$200 million (US$144 million) in royalties and court fees after losing an Australian legal battle with iron ore magnate Gina Rinehart. The High Court yesterday ruled in favour of Rinehart and heirs to her father’s business partner in their pursuit of royalties from two Rio mines in the Pilbara, Western Australia. Rio said it had no comment on the judgment.

The royalties were part of a deal made when Rinehart’s father and his partner sold the Channar and Eastern Range mines to Rio Tinto in 1970.

Toyota to sell 30,000 fuel-cell cars annually in 2020 Toyota Motor Corp said yesterday it aimed to sell more than 30,000 fuel cell vehicles around or after 2020, and that it would use renewable energy and hydrogen-based production methods at its factories to completely eliminate CO2 emissions by 2050. Unveiling new environmental targets, Toyota also said it planned to sell 1.5 million hybrid vehicles annually by 2020 as the maker of the Prius, the world’s top-selling hybrid car, pushes to further popularise its line-up of fuel-efficient vehicles.

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October 15, 2015

International Ireland to introduce new OECD-compliant tax scheme Ireland announced a low 6.25 percent corporate tax scheme for intellectual property research as it aims to continue to attract investment after closing the “Double Irish” tax loophole. The “Knowledge Development Box” will offer a tax incentive on earnings originating from research and development projects carried out in Ireland at half the rate of the headline 12.5 percent corporate tax rate -- already one of Europe’s lowest. “The income that qualifies for the Knowledge Development Box will be subject to a new rate of corporation tax of 6.25 percent,” Finance Minister Michael Noonan told parliament.

Turkey’s August current account narrows Exports fell 5.8 percent in August to US$11.8 billion Constantine Courcoulas and Isobel Finkel

Turkey’s dependency on foreign capital has started to fall, although the current account deficit is still huge

Eight non-OPEC nations invited to Vienna meeting Venezuelan Oil Minister Eulogio del Pino said that eight non-OPEC countries have been invited to an October 21 oil meeting: Azerbaijan, Brazil, Colombia, Kazakhstan, Norway, Mexico, Oman and Russia. The technical meeting of oil experts from the Organization of Petroleum Exporting Countries and nonOPEC countries will be held in Vienna, he told Reuters. “The confirmations are coming in gradually and I’m personally calling ministers to ensure that the delegation is of the adequate level of authority,” del Pino said. Venezuela will unveil a bold new oil strategy this month.

U.K. unemployment unexpectedly drops U.K. unemployment fell to its lowest rate since mid-2008 in a sign that the labour market is withstanding strains from the global economy. The jobless rate declined to 5.4 percent between June and August from 5.5 percent in the previous three months, the Office for National Statistics said yesterday in London. Economists in a Bloomberg News survey forecast no change. Pay growth excluding bonuses slowed to 2.8 percent from 2.9 percent. With no inflation, Britons are enjoying the strongest growth in real incomes since before the financial crisis.

UBS settles U.S. SEC case over structured notes

Ozgur Altug, chief economist, BGC Partners

Turkish Central Bank Governor Erdem Basci

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urkey narrowed its monthly current-account balance to the smallest deficit since a surplus was last registered in 2009, amid plunging commodity prices and a weaker currency that slowed imports.

Data released yesterday showed the deficit in the nation’s broadest measure of trade in goods and services narrowed to US$163 million, missing the balanced trade sheet that was the median estimate in a Bloomberg survey of nine economists. The shortfall was US$3.2 billion in July and US$2.2 billion in August last year.

“This plays to those arguing a ‘rebalancing’ theme, as domestic demand perhaps begins to slow, lower energy prices finally begin to feed through, and perhaps the impact of the very cheap lira,” Timothy Ash, a credit strategist at Nomura International Plc in London, said in an e-mailed note. “This number comes at a useful time for Turkey, obviously with lots of focus on perceived heightened political and security risks.”

Turkey’s annual current-account deficit is set to shrink to 5 percent of gross domestic product this year, compared with 5.8 percent in 2014, according to the median estimate of economists surveyed by Bloomberg.

Tougher regulation on banks slowed credit growth, reducing demand for imported goods bought with loans, while oil’s fall to below UD$50 a barrel lowered the energy bill for a country that imports more than 90 percent of its crude.

Exports fell 5.8 percent in August to US$11.8 billion, while imports tumbled 17.7 percent to US$15.5 billion, according to the data.

The gap will continue to narrow through the rest of the year, Central Bank Governor Erdem Basci said in a presentation posted on the bank’s website Saturday.

“Turkey’s dependency on foreign capital has started to fall, although the current account deficit is still huge,” Ozgur Altug, the chief economist at Istanbul-based brokerage BGC Partners said by e-mail on Tuesday, before the release.

JP Morgan earnings lifted by tax benefits Earnings for JP Morgan translated into US$1.32 per share, five cents below analysts’ expectations

UBS AG will pay US$19.5 million to settle civil charges alleging it made false statements to U.S. retail investors in its offering documents for complex structured notes tied to a proprietary foreign currency index, U.S. regulators said. The case by the Securities and Exchange Commission marks the first ever to focus on misstatements involving structured notes, a complex product that consists of debt securities and derivatives pegged to the performance of other instruments. Investors in structured notes get their return based on the performance of the derivative over the life of the note.

U

S banking giant JPMorgan Chase reported a jump in third-quarter earnings, as a large tax gain offset weaker performance in bond trading and some other businesses.

Earnings for the quarter came in at US$6.8 billion, up 22.3 percent from the year-ago period. Revenues were down 6.4 percent at US$23.54 billion.

JPMorgan, the biggest US bank by assets, said earnings in the corporate and investment bank segment fell 12.9 percent. This closely watched

business saw lower revenues in fixedincome trading, partly offset by higher revenues for equity market trading.

Chief financial officer Marianne Lake said there was “reasonably broad-based market turbulence” in the third quarter due to worries about the slowing Chinese economy and uncertainty about when the US Federal Reserve will raise interest rates.

The volatility also resulted in lower earnings in asset management. Client assets under management fell one percent to US$2.3 trillion, the result of

Authorities have targeted lowering the current-account deficit because it leaves Turkey’s economy highly dependent on foreign capital flows at a time when investor sentiment toward emerging markets has soured amid weakening global growth. Investors are also unsettled by Turkey’s prolonged political deadlock and escalating violence between the authorities and autonomy-seeking Kurds.

The impact of war in neighbouring Syria is also spilling into Turkey. A twin suicide-bombing ahead of a peace rally in Ankara on October 10 left at least 97 people dead, with the Islamic State group named by the government as the primary suspect.

The lira has depreciated more than 20 percent against the dollar this year, the most of any major currency except the Brazilian real. The economy is set for its lowest growth in three years.

The shift in the current-account balance is “mostly healthy,” Altug said. But it’s also a sign that the economy is “slowing down and slowing down fast,” he said.

Bloomberg News

“clients moving money out of marketsensitive categories,” Lake said.

On the positive side, JPMorgan scored a four percent gain in consumer and community banking, thanks in part to stronger mortgage banking earnings and increased auto and credit card loans.

Total loans rose 8.9 percent to US$809.5 billion.

Results were boosted by US$2.2 billion in tax benefits, including a gain of US$1.9 billion from resolving tax audits.

Lake said the tax benefit was related to the financial crisis, but declined to elaborate. She said the large boost would not likely be repeated in future quarters.

JPMorgan cut non-interest expenses. Headcount is down about 6,700 from last year at 235,680.

“We had decent results this quarter,” said chief executive Jamie Dimon in a statement. “We saw the impact of a challenging global environment and continued low rates reflected in the wholesale businesses’ results, while the consumer businesses benefited from favorable trends and credit quality.”

AFP

Business Daily | 15

October 15, 2015

Opinion Business

wires

Leading reports from Asia’s best business newspapers

Earnings to sing the economy’s blues James Saft

Reuters columnist

THE KOREA HERALD South Korea’s jobless rate fell in September as more people were hired in the manufacturing, business support services and hospitality sectors, a government report showed Wednesday.

According to the report by Statistics Korea, the jobless rate stood at 3.2 percent last month, down from 3.4 percent in August. The number remained unchanged from a year earlier. The seasonally adjusted jobless rate for September was 3.5 percent, also down from the 3.6 percent tallied for the previous month.

The number of newly created jobs rose to 347,000 last month from 256,000 new positions in August.

TAIPEI TIMES The Ministry of Economic Affairs yesterday said it is assessing the feasibility of allowing Chinese investments in Taiwan’s IC (integrated circuits) design companies.

“We are considering it, but we have not yet carried out a formal evaluation,” the ministry’s Industrial Development Bureau Deputy Director-General Leu Janghwa told a press conference.

The press conference came after local media reported that the ministry is likely to ease restrictions on Chinese investment after MediaTek Inc. reportedly urged the government to allow Chinese investments in Taiwan’s IC design sector.

THE STAR The ringgit (Malaysia’s currency) is expected to weaken to around 4.45 to 4.50 against the US dollar towards the end of the year, as the same concerns that had caused the ringgit to depreciate in recent months intensify again, according to Rabobank Group. The Netherlands-based financial institution pointed out that the continued uncertainty over the timing of the interest rate hike by the US Federal Reserve and the possibility of China devaluing its currency in the medium-term would remain the two most important global factors imposing downward pressure on the ringgit.

BANGKOK POST The Tourism Authority of Thailand (TAT) has set an ambitious goal of boosting domestic tourism and generating 1 trillion baht in tourism revenue annually three years from now. “If we can encourage Thais to travel more in Thailand, domestic tourism will grow and we can reduce the risks from the foreign tourist market,” governor Yuthasak Supasorn said. The TAT has revised down this year’s revenue target for domestic tourism to 750 billion baht from 800 billion due to the local economic slowdown.

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his U.S. earnings season the data from the frontline is about to confirm the broader economic narrative: things aren’t so great.

How that plays out in financial markets and whether we begin to see meaningful contagion is perhaps the more interesting question.

U.S. companies have begun their quarterly ritual of reporting earnings, and though we are early in the process, already the themes may be emerging: lower revenues, profit margins under pressure and a fondness among companies to blame the strong dollar or weakness abroad in places like China.

Less than 10 percent of U.S. companies have yet reported, but according to data from earnings tracker FactSet the majority of companies citing a negative factor on calls discussing earnings with investors cited the stronger dollar, with a substantial minority blaming weakness in Europe or China.

“As global growth decelerates, corporate earnings growth should decelerate,” Stephen Jen of hedge fund firm SLJ Macro Partners wrote in a note to clients.

“We will likely see unimpressive micro data (corporate earnings) to confirm the troubled macro narrative of the world. The ‘badnews-is-good-news’ dynamics will not likely last much longer.”

That idea, that poor news could be good for markets for risky securities like equities, is based on the idea that weakness makes it more likely that the Federal Reserve waits longer to hike interest rates, or makes

Given ructions in China and dislocations in financial markets over the summer in some ways it is remarkable we’ve had so little contagion, economically or in securities

other attempts to ameliorate the economy.

Aluminium company Alcoa hit all of the expected blue notes with its earnings release last week, reporting a double-digit decline in sales, combined with issues caused by dollar strength and a huge increase in production by competing Chinese firms.

Firms in general look vulnerable to regression back towards more historically typical levels both of profits and margins.

With S&P 500 profits at record highs, a failure to expand topline sales or any type of wage pressure are almost sure to compress profit margins.

As well, while years of corporate

share buybacks flatter earnings per share figures, they often have served to mask weakening in firms’ underlying franchise, or a reluctance to invest in new markets or products.

Some areas, such as energy firms, are almost sure to show contraction in sales and margins but others too, notably banking, are also in the firing line. A rocky August in global financial markets is likely to have hit revenues from capital markets activities, with many bond and share issues delayed. At the same time, the Fed’s decision not to raise rates means that banks still face only scant compensation from the extra they can charge borrowers above what it costs them to raise money, called net interest margin.

Lack of contagion Given ructions in China and dislocations in financial markets over the summer in some ways it is remarkable we’ve had so little contagion, economically or in securities.

Emerging markets, particularly Brazil, have been hit very hard, as shown by the fact that MSCI’s index of emerging market currencies is down more than 8 percent in a year. Riskier parts of the bond market have also suffered. The extra interest a high-yield, or junk, borrower must pay to raise funds is 1.65 percentage points higher today than a year ago. While high-yield borrowers are often energy firms, which are rightly causing lenders default worries, better positioned borrowers with good credit ratings are now having to pay extra too.

Financial markets, even with a sell-off in equities, have remained, by and large, reasonably calm, with a signal lack of the sort of panicked contagion often seen in the early stages of downturns.

Market strategist Ed Yardeni, of Yardeni Research, argues that most of the speculative excesses in the latest round have been provided by capital markets, or privately, rather than through commercial banks.

“So the losses aren’t impairing the banking system this time,” Yardeni wrote in a note to clients.

“Rather, they are simply reducing the returns on portfolios that own the bad debts. Most of them are large institutional portfolios, so the negative wealth effect isn’t depressing consumer spending or having any other significant contagion effect on real economic activity.”

Still, by definition a slow economy causing an earnings turndown should in theory have its own economic consequences. Those may not be a loss of faith in the financial system, or even a large retreat from risk taking.

Instead, equity investors may have to re-do their calculations.

If the outlook, as it seems to be, is for continued low interest rates and low economic growth, then we may have reached the end of the line for margin growth or for the magic of buying back shares to stoke interest in stocks.

Perhaps a routine earning season is more of a turning point.

Reuters

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October 15, 2015

Closing Canton Fair suggests tough trade prospects for China

Vietnam to lower visa fee to lure foreign arrivals

The upcoming Canton Fair will see fewer international buyers, suggesting tough trade prospects, an official said yesterday. “Fewer buyers have confirmed their attendance and fewer new guests have applied to attend the fair,” said Xu Bing, spokesman of the 118th China Import and Export Fair, a biannual trade fair and a barometer of the foreign trade. The 11th session opens today. Xu said rail ticket bookings from Hong Kong also declined compared with previous sessions and even fewer people have consulted via the fair hotlines. The Canton Fair is held biannually in Guangzhou City every spring and autumn.

Vietnam will cut visa fee for foreign passport holders and overseas Vietnamese since November in an attempt to boost tourism, the National Administration of Tourism said yesterday. The administration quoted a statement issued by the Ministry of Finance as saying that since November 23, visa fee for single entry to Vietnam will be reduced from the current US$45 to US$25. Visa fee for multiple entries with validity of less than three months will decrease from US$95 to US$50. Meanwhile, the cost of multiple-entry visa with validity between three and six months, as well as six months to one year will remain unchanged at US$95 and US$135.

China to extend onshore FX trading to overlap with London It is unclear how much real impact the extended hours would have on investor sentiment in the near term

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hina’s foreign exchange market will “soon” extend the trading hours for the yuan to 23:30 local time (1530 GMT) to overlap with European trading hours, three sources with direct knowledge of the matter said yesterday.

The change is seen helping Beijing advance its project to encourage more

international use of the yuan and support China’s case for the International Monetary Fund (IMF) to include the yuan in its currency basket.

“The move will be a big boost to the yuan’s inclusion in the IMF’s SDR basket,” said Joey Chew, Asian FX Strategist at HSBC in Hong Kong, referring to special drawing rights.

“The IMF has mentioned that it had concerns on yuan liquidity during London trading hours because it calculates the FX value of SDR basket currencies at 12pm London time when there is no trading in China’s onshore market at present.”

The China Foreign Exchange Trade System, managed by the central bank,

currently closes at 16:30 local time (0830 GMT).

That has kept the onshore market out of sync with London, a major centre of offshore yuan trade, and has also given offshore markets a window to trade on policy changes announced after domestic markets are closed.

“The change will make the yuan move more in line

U.S. authorities examine Goldman India’s pharmacies shut down to protest online sales Sachs role in 1MDB transactions

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with international markets, in particular European markets, and will make it more convenient to absorb international reactions to China’s policy changes, which are typically announced after the Chinese markets close,” said a senior trader at a Chinese commercial bank in Shanghai.

The People’s Bank of China did not immediately respond to requests seeking comment. The sources declined to be named due to the confidentiality of the matter.

However, it is unclear how much real impact the extended hours would have on investor sentiment in the near term.

Offshore markets in Hong Kong - the largest centre of CNH trade - have struggled in the aftermath of a surprise devaluation of the yuan in August. That left investors worried that economic growth was slowing down faster than previously thought and that other devaluations may follow.

At the same time, most foreign investors are unable to access the onshore forex market, limiting hedging and arbitrage opportunities.

“Most foreign market players in New York and London still don’t have direct access to the market,” said Chew of HSBC. “It is more a forwardlooking measure that facilitates future trading when China further opens up capital account.”

Reuters

Swatch links with China bank giants for mobile-payment watch

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.S. authorities are looking at Goldman Sachs Group Inc’s role as an advisor to Malaysian state development fund 1MDB as part of a broad probe into allegations of corruption and money laundering, the Wall Street Journal reported yesterday.

Inquiries by the Federal Bureau of Investigation and the U.S. Department of Justice are at the information-gathering stage and there is no suggestion of wrongdoing by Goldman Sachs, the paper reported, citing people familiar with the matter.

Investigators “have yet to determine if the matter will become a focus of any investigations into the 1MDB scandal,” the newspaper quoted a spokeswoman for the FBI as saying.

A Goldman Sachs spokesman in Hong Kong declined to comment. The FBI and the Justice Department were not available for comment outside U.S. business hours.

In July, Malaysian anti-corruption officials investigating the allegations visited the local office of Goldman Sachs seeking documents relating to 1MDB, sources have told Reuters.

round 800,000 Indian pharmacies downed their shutters yesterday to demand a crackdown on online drug sales, which they say is unregulated and eroding their business.

The one-day strike is aimed at curbing India’s burgeoning online drug retail industry, which the All India Organisation of Chemists and Druggists (AIOCD) says is putting customers at risk by failing to follow existing rules.

“It is going to be a 100 percent strike.

Approximately 800,000 chemists will be on strike,” AIOCD president J.S. Shinde told AFP. “Our own investigation has shown that antipregnancy pills, sleeping pills and steroids are being sold freely online.”

A slew of companies opened shop online in India last year to tap a market worth more than an estimated US$10 billion.

Registered e-pharmacies like 1mg and Zigy say they have teams of pharmacists who vet prescriptions submitted online to counter potential abuse. But India has no specific rules covering e-retailers, and bricks-and-mortar sellers say drugs are being sold online without proper verification.

Reuters

AFP

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watch Group AG is linking up with China Unionpay Co., a payments giant, and Bank of Communications Co., one of China’s big-five banks, to sell a watch that can be used to make payments.

Retailing for 580 yuan (US$91), the device called Swatch Bellamy will be sold in China from January next year and later rolled out in Switzerland and the U.S., Chief Executive Officer Nick Hayek said at a briefing in Shanghai yesterday.

The watch will be sold at Bocom and Swatch outlets and can be used for payments at Unionpay point-of-sale machines across the nation, according to a statement from Swatch. A nearfield communication chip beneath the dial lets the device function in a way similar to a bank card.

Talking about why the watch was being sold in China first, Hayek said that while Swatch always considered its home territory of Switzerland first, “my God, it takes months and months and years” to do something new with Swiss banks. The product adds to the competition faced by Apple Inc.’s smartwatch.

Bloomberg News