Closing editor: Joanne Kuai
MOP 6.00
Macau billionaire to be indicted over UN bribery scheme Page 4 Chinese investors fuel growth in venture capital global investment Page 8 Basel pushes banks to double capital reserves linked to securitization debt Page 16
Year IV
Number 903 Wednesday October 21, 2015
Publisher: Paulo A. Azevedo
Facial recognition system installed at all borders by year-end Page 3
Tables Turned
One week before Studio City’s grand opening. The MSAR Gov’t has authorised 200 gaming tables and 1,233 gaming machines for Melco Crown Entertainment’s new $3.2 b Hollywood-themed resort. With another 50 effective January 1. Galaxy Entertainment Group gets another 100 new mass gaming tables for its Galaxy Macau Phase II and Broadway Resort. Almost immediately following Steve Wynn’s barbed criticism of gov’t red tape. Melco chairman Lawrence Ho said in August he expected 400 tables. Saying he would be “very concerned” if the project didn’t get that amount Page
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IHG’s local revpar retreats Revenue per available room. A Q3 jump worldwide. But not in Greater China. IHG’s ‘revpar’ fell by double digits in Hong Kong and Macau. Where trading conditions remain challenging, according to InterContinental. IHG’s 5-star Crowne Plaza Macau is slated to open in Q4
The sector has dismissed the stock market’s troubled recent history. And now underpins the economy’s growth in Q4. China’s financial services jumped 16.1 pct in the three months through September from a year earlier
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Name
%Day
Hong Kong & China Gas
+1.16
China Overseas Land &
+0.78
Bank of Communicatio
+0.51
New World Developme
+0.36
China Life Insurance Co
+0.33
Cathay Pacific Airways
-1.83
China Merchants Holdi
-2.19
Sands China Ltd
-2.27
China Shenhua Energy
-2.95
China Unicom Hong Ko
-3.02
I SSN 2226-8294
Consolidating commercial opportunities José Manuel Barroso applauds the initiative. China’s New Silk Road will bring opportunities for Macau, he says. The former President of the European Commission was recently in the territory. Speaking of globalisation, and receiving an honorary professorship from Macau Polytechnic Institute
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Telecommunications
‘Digital Macau’ arrives www.macaubusinessdaily.com
October 20
Source: Bloomberg
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Fancy financial footwork
HSI - Movers
CTM has just launched its 4G network in Macau. And vows to continue increasing coverage of WiFi and fibre network. By yearend, CTM WiFi hotspots will increase to 1200. With 100 pct fibre to the home a reality. The telecommunications giant’s network advantage, use of ipv6 technology, IOT, data centre and cloud computing technology give it big local leverage. CTM says it’s committed to realising ‘Digital Macau’ for the whole community
Page 3 Due to the mandatory holiday on Thursday October 21, 2015 – Chong Yeung Festival (Festival of Ancestors) - Business Daily will not be published on Thursday October 22, 2015. We will be back on Friday October 23, 2015 and wish all our readers a very enjoyable holiday.
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2 | Business Daily
October 21, 2015
Macau Central government appoints new Commissioner in MSAR China’s central government has appointed Ye Dabo as Commissioner of the Ministry of Foreign Affairs in the Macau Special Administrative Region (SAR), a press release announced on Tuesday. Majoring in the English language, Ye used to work at the consulate in the United States. Ye served as Chinese Ambassador to Burma from 2009 to 2010. Before coming to Macau, Ye was Deputy Director of the Central Foreign Affairs Office. Ye replaces Hu Zhengyue, who has served as Commissioner in the Macau SAR since 2011.
José Manuel Barroso: New Silk Road creates opportunities for territory The former President of the European Commission, in Macau, has given his approval of the economic policy, praising the strategy of building a World Centre of Tourism and Leisure João Santos Filipe*
jsfilipe@macaubusinessdaily.com
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he New Silk Road will increase the commercial ties between China and other parts of the world, bringing many opportunities to Macau. This is the view of the former President of the European Commission José Manuel Barroso, who yesterday received an honorary professorship from Macau Polytechnic Institute (IPM). “Tourism is a great opportunity for Macau, and globalisation can promote more opportunities in this area and create employment and career opportunities for young local people. The idea of the New Silk Road and of more interaction between China and parts of the world is certainly an opportunity for Macau”, Mr. Barroso said. The former Portuguese Prime Minister commented on the economy of the territory and the investments in tourism as well as the commercial ties with Portuguese-speaking countries. “The strategic choice of making Macau a centre of excellence for tourism and leisure activities, and the opportunity from a cultural point of view of creating a platform with
promoting the unique characteristics of the territory. Macau is on the right path”, he said.
Macau link
countries that speak Portuguese, it’s a good choice. It seems to me that it’s already bearing some concrete fruits”, he said. “Today, Macau is much more developed on the economic side. The
region is very stable and is keeping with pride its Portuguese heritage. I met the Chief Executive [Fernando Chui Sai On] and he told me about the work developed and how the Portuguese heritage is seen as a way of
Besides delivering an introductory lecture on globalisation in the 21st Century, José Manuel Barroso became one of the honorary professors of IPM. “It feels very special because it is in Macau. In the past, mainly when I was in the Portuguese Government, I worked in the handover process. Later, as President of the European Commission, I supported some programmes of translation from Portuguese to Chinese and Chinese to Portuguese. This is the recognition of the work I did in the past and I feel very proud about it”, he said. Before being elected President of the European Commission, José Manuel Durão Barroso was Prime Minister of Portugal, Minister of Foreign Affairs and Secretary of State for Foreign Affairs and Cooperation in 1987. As Portuguese Foreign Minister, he visited Macau three times, in 1993, 1994 and 1995. *with Stephanie Lai
Business Daily | 3
October 21, 2015
Macau Local firms invest US$760 mln in China from Jan-Sep Mainland China attracted some US$760 million (MOP6.08 billion) of foreign direct investment from local enterprises during the first nine months of the year, the Chinese Ministry of Commerce said yesterday. The amount represents a year-on-year jump of 63.6 per cent although it only accounts for less than one per cent of the total US$89.4 billion investment that the country received during the period. Meanwhile, Ministry spokesperson Shen Danyang said yesterday that the country is striving to achieve the basic liberalisation of trade in services with Hong Kong and Macau in Guangdong by the end of the year.
CTM launches 4G+ service The company says the fee will remain stable regardless of the network upgrade. It also aims to increase download speed from the current 112Mbps to 450Mbps
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ocal telecommunications operator Companhia de Telecomunicações de Macau SARL (CTM) launched its 4G+ mobile network that supports both Frequency Division Duplex (FDD) and Time Division Duplex (TDD) mode. CTM says the 4G+ service is aimed at bringing more quality, innovative and diversified 4G service experiences to Macau residents. During the press conference, Mr. Declan Leong, Vice President of Network Services, said that following the completion of the 4G network in August, CTM immediately started fine-tuning network coverage, quality of data and voice transmission, enhancing the network coverage of over 1,000 districts so far.
Currently, CTM 4G+ network has achieved 99.5 per cent outdoor coverage, network enhancement has been done for over 400 indoor locations including commercial buildings, government service centres, dining and shopping premises. For mobile network speed, CTM is studying the use of spectrum stack technology to upgrade 4G upload and download speed. With current spectrum resources, CTM4G+ download speed is 112Mbps, but with stack technology applied to spectrum resources of FDD and TDD this will enable a more stable and faster transmission speed. Mr. Leong indicated that in the coming year CTM will conduct various technology tests
Facial recognition system installed at all borders by year-end
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ll e-Channel kiosks in the city’s border checkpoints will be installed with a facial recognition system within this year in order to intercept criminals entering the territory with fake or others’ identities, according to the Chief of the Office of Secretary for Security, Cheong Ioc Ieng. Since 2011, a facial recognition system has been installed in the traditional passenger clearance channels of local border checkpoints. The system allows Customs officers to compare passengers’ passport pictures with pictures of those having violated laws in Macau or who are banned from entry. ‘The Public Security Police Force (PSP) plans to install facial recognition systems in all e-channel kiosks of local border checkpoints,
so that the system can fully cover all traditional passenger clearance channels and e-channels in the city,” the Secretary’s office chief wrote in reply to legislator Si Ka Lon’s written interpellation. Ms. Cheong also indicated the system was being installed in the city’s busiest checkpoint Border Gate. She said the authorities would strive to complete the installation in other checkpoints by the end of the year. According to the government official, the Customs intercepted some 117 persons trying to enter the city by using fake or others’ identities via the system as at the end of August this year. These people had been restricted from entering the local territory. K.L.
with the objective of increasing download speed to 450Mbps, while actively communicating with the government to explore the use of spectrum resources.
Apple charm
Ms. Ebel Cham, Vice President of Commercial of CTM, mentioned that the 4G project is one of its key development projects in 2015. In preparation for the launching of this service, CTM has invested over MOP600 million (US$75.16 million). Ms. Cham mentioned that after introducing the Apple watch last month, CTM officially launched the iPhone6S a few days ago and has received an overwhelming response. On the first day of launching the
new iphone over 2,000 customers joined the plan. In addition, CTM has increased manpower dedicated to fibre network construction by 2.5 times. From January to September this year, the company has completed 24,538 new fibre service installations. Ms. Cham said that CTM has been striving to promote the development pace of ‘Digital Macau’ and will work closely with Macau Pass to launch M-wallet service. Moreover, phase one of CTM WiFi Bus will be available on over 330 buses, and a free 5G cloud storage service will soon be available, all of which will enable the public to enjoy the fruitful results of IT development.
4 | Business Daily
October 21, 2015
Macau S. Culture same-store sales down 8.5 pct in Q3 Hong Kong-listed footwear retailer S. Culture International Holdings Ltd. estimated its same store sales had dropped by 8.5 per cent year-on-year for the third quarter of this year, according to its filing with the Hong Kong Stock Exchange on Monday. It also said its total number of retail outlets had increased by six year-on-year to 128 as at the end of last month. However, the retailer did not disclose its operational results for the period. Owning two stores in the Macau Special Administrative Region, S. Culture experienced a net loss of HK$4.65 million (US$578,721) for the first half of the year, compared to net profit of HK$10.8 million one year ago.
An indictment is the filing of formal charges by a grand jury that hears evidence in a case. It’s a key step to moving the case to trial
“This is not a surprise,” Benjamin Brafman, Ng’s lawyer, said in an e-mail. “They have been threatening an indictment for weeks. Whether by complaint or indictment, Mr. Ng is presumed innocent and we have every reason to believe that he will ultimately be vindicated.”
Vast resources
Ng Lap Seng to be indicted over UN bribery scheme The Macau billionaire is one of six people arrested earlier this month in connection with two bribery schemes at the UN
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Macau billionaire who allegedly bribed United Nations officials to win their endorsement of a conference center will be indicted by Tuesday, a federal prosecutor told a judge who had agreed to release the developer on US$50 million bail. Prosecutors said Ng Lap Seng, 68, chairman of the Sun Kian Ip
Group, paid hundreds of thousands of dollars to former UN General Assembly President John Ashe and Francis Lorenzo, a Dominican Republic ambassador to the UN. Ng is one of six people arrested earlier this month in connection with two bribery schemes at the UN. Ashe and Lorenzo were also charged.
Assistant U.S. Attorney Daniel Richenthal told U.S. Magistrate Judge Kevin Nathaniel Fox in a letter Monday that prosecutors would file an indictment of Ng Tuesday, which would put the case before a federal judge. An indictment is the filing of formal charges by a grand jury that hears evidence in a case. It’s a key step to moving the case to trial.
Fox agreed on Oct. 16 to grant Ng’s release on bail and have him stay at a luxury Manhattan apartment near the UN under the watch of private armed security guards. Richenthal objected, arguing Ng has “vast” resources to help him flee to China, which doesn’t have an extradition treaty with the U.S. Fox agreed to delay Ng’s release until Monday at 2 p.m. in order to give the government a chance to appeal his decision to a federal judge. Richenthal said Ng and his lawyer now have agreed to delay the release until the close of business on Thursday. Once Ng is indicted, he will enter a plea and if it’s not guilty then the case will move toward a trial. Ng was arrested last month, accused in a separate case of bringing US$4.5 million into the U.S. and lying about its purpose to authorities. The case is U.S. v. Ng Lap Seng, et al, 15-MAG-3562, U.S. District Court, Southern District of New York(Manhattan). Bloomberg
CY Foundation buys procurement agreement
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Y Foundation, through the subsidiary Expert Dragon, has reached a procurement agreement with Sports Network Limited (SNL) for the acquisition of the hardware and software to be used in the greyhound racing business in Vietnam by Sports and Entertainment Services. According to the filing sent to the Hong Kong Stock Exchange, the company, which is principally engaged in the provision of services on the management of electronic gaming equipment in Macau, will pay US$6.09 million (HK$47.17 million) for the hardware and software.
The possibility of increasing and diversifying its income stream was the reason for the Board of Directors of CY Foundation to justify the new deal ‘The SNL Betting System Procurement Agreement would enable the Group to procure the hardware and software required for its provision of certain hardware and software for the use by SES for its conducting of greyhound racing business in Vietnam, which would in turn allow the Group to enter into a new business and to broaden its income stream’, the statement reads.
Business Daily | 5
October 21, 2015
Macau Incubation Centre attracts 37 applications for office venues The government’s Incubation Centre for Young Entrepreneurs had received 37 local start-ups applying to use the Centre’s office venues as at October 9, the director of Macau Economic Services Bureau (DSE), Sou Tim Peng, told Chinese-language newspaper Macao Daily. The government official said the Bureau had approved 14 of the applications as the others had had their own office venues prior to the applications. The Incubation Centre, launched on June 18 this year, seeks to provide start-up training, consultancy, office venues and business matching for local young entrepreneurs.
Wells Fargo downwardly revises gaming revenue forecast The American equity research firm expects gaming revenues to decline between 26 and 29 per cent this month, while previously it forecast a drop of between 24 and 28 per cent
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ells Fargo has downwardly revised its prediction for Macau’s October gaming revenue to decline between 26 and 29 per cent, while previously it was anticipating revenue from the sector to decrease between 24 and 28 per cent year-on-year. The revision was announced following a visit to the territory by the American company to check average daily revenue (ADR), said to be MOP486 million (US$60.88 million) last
week. This revenue represents a decline of 47 per cent in relation to the ADR recorded during Golden Week, which stood at MOP827 million and a decline of 45 per cent in relation to the same week in 2014. ‘We note that early October revenues benefited from China’s Golden Week holiday. We remain neutral on Macau gaming as the market adjusts to a ‘new normal’ of: tighter government oversight, a recovery that is
likely to be flatter than prior rebounds, and a weak Chinese economy, all of which are contributing to more muted revenue growth in Macau’, the report signed by analyst Cameron McKnight reads. ’We project decline between 26 and 29 per cent yearon-year from the month of October. This assumes roughly MOP570 million to MOP580 million [ADR] for the rest of the month, and sequential growth of approximately 16 per cent month-on month, slightly lower than normal historical October seasonality of up 20 per cent month-onmonth, on average’, the report notes. ‘Weekly numbers have been volatile since early June and [we] expect this pattern to continue, given instability in the VIP segment’. Last year, gaming revenues during October stood at MOP28.03 billion, which at that time meant a decrease of 23.2 per cent year-on-year from MOP36.48 billion. J.S.F.
6 | Business Daily
October 21, 2015
Macau opinion
Housing troubles
José I. Duarte Economist
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his week, several residents took to the streets to protest on housing issues. Leaving aside the specific claims and demands, this is indeed an important matter for those who live and work in this city. The government somehow acknowledged the protest, stating its own understanding of the issue and assuring all that a new type of public housing is under consideration. This is certainly a major issue for residents. Average prices have risen tenfold in the last 10 years or so. These figures must be dealt with, with care, as the typical housing construction has changed noticeably over the last decade. What we can call the luxury segment had been overrepresented in the market; public housing has developed without obvious relation to the actual needs and income levels of residents - and the general construction, the units thought out and built for residents, has been underrepresented. It is not only a matter of average price, it is also a matter of unbalanced fit to local needs. Either way, for acquisition or renting, current prices place housing beyond the means of many, especially those who need it most: those willing to set up new families or live independently. Earlier measures taken, purportedly, to curtail the activities of the ‘usual culprits’, the socalled and faceless speculators, do not seem to have worked. At best, they did little; at worst, they made home acquisition more difficult for those who were supposedly the beneficiaries of those measures. If anything had some impact, it was the drop in gambling revenues, which was certainly not engineered or could be managed locally. Still, it was necessary for a rout in the market to bring things back to what we could call ‘normal’ terms. In rough terms, if prices went up tenfold, even a 20 per cent drop would make them 8 times bigger than in 2004 - and would likely send the local building operators to the government’s door asking for special protection. In the same period, wages, median or average, did not go up nearly as fast. Any ‘correction’ that would put housing within the grasp of common people would have to be much bigger than that. It is not likely to happen. If anything, this ‘break’ offers an opportunity to think anew the housing issues. But timing is important. While recognising the issues, the government does not seem to feel in a hurry to deal with the matter. It has been ‘paying attention’ for a long while. It is not clear it has made a thorough diagnostics of the situation, or is ready to come forward with well-considered alternatives. It appears somewhat aloof when the timing ‘thing’ is involved. Well, good policies are not only those whose conditions are well assessed and solutions well thought through. Good timing is of the essence. History is full of wonderful policies that failed because they missed their window of opportunity. Policies are also defined by omission. The alternative is that what is – whatever that is – becomes the de facto policy.
Asian stocks drop led by energy shares as October rally halts Casino operator Wynn Macau Ltd. sank in Hong Kong as gaming revenue dropped
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sian stocks fell, paring the benchmark regional equities gauge’s biggest monthly rally in five years, as energy and material shares led losses and casino stocks trading in Hong Kong slumped. BHP Billiton Ltd., the world’s largest mining company, slipped 2.9 per cent in Sydney as commodity companies extended Monday losses. Wynn Macau Ltd. sank 0.5 per cent in Hong Kong as gaming revenue at Macau casinos dropped. Gold futures dropped the most this month, dragging Newcrest Mining Ltd. down 5.1 per cent in Sydney. Tokyo Electric Power Co. tumbled 4.5 per cent in Tokyo as NHK reported that Japan’s Health Ministry said for first time that leukemia in an employee who worked at its Dai- Ichi power plant resulted from the March 2011 nuclear disaster. The MSCI Asia Pacific Index slipped 0.1 per cent to 133.98 as of 4:01 p.m. in Tokyo. The gauge surged 8.3 per cent this month through Monday, on course for its best monthly advance since September 2010, as Chinese shares rallied and traders pushed back expectations on the timing of the Federal Reserve’s first interest-rate increase. The global stock rebound in October has restored more than US$4 trillion in equity value. “The three-week recovery is approaching an exhaustion point,” said Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney, which manages about US$21 billion. “Valuations have
expanded and 2016 earnings have not been upgraded.”
October surge
The October surge pushed valuations on the MSCI Asia Pacific index this month back above their five-year average, Bloomberg data show. The index trades at 13.6 times estimated earnings, the data show. Equity gains came after last quarter’s volatility triggered by China’s surprise decision to devalue the yuan in August. Hong Kong’s Hang Seng Index declined 0.4 per cent and the Hang Seng China Enterprises Index of mainland firms listed in the city retreated 0.4 per cent. Financial markets in Hong Kong will be closed on Wednesday for a public holiday. The Shanghai Composite Index advanced 1.1 per cent as smallcompany shares advanced. Raw-materials shares extended Monday’s losses as data showed China’s economy grew last quarter at the slowest pace since the global financial crisis.
Financial inquiry
Australia’s S&P/ASX 200 Index dropped 0.6 per cent. The nation’s banking regulator will take additional steps by the end of 2016 to ensure Australia’s lenders have strong capital levels, the government said Tuesday in its response to the Financial System Inquiry. Commonwealth Bank of Australia, the nation’s biggest, fell 0.9 per cent and Westpac Banking Corp. retreated 1.6 per cent.
South Korea’s Kospi index advanced 0.4 per cent and New Zealand’s S&P/NZX 50 Index rose 1 per cent. Singapore’s Straits Times Index gained 0.1 per cent and India’s S&P BSE Sensex Index added 0.2 per cent. Japan’s Topix index gained 0.3 per cent. Investors offered to buy shares in Japan Post Holdings Co.’s banking and insurance units for more than their initial public offering prices, a sign of appetite for the nation’s biggest privatization in almost three decades.
Japan post insurance
Buyers were willing to pay 2,350 yen a share for Japan Post Insurance Co. as of 3 p.m. in Tokyo in the so-called gray market, according to Churchill Capital Ltd. That was 6.8 per cent above the IPO price of 2,200 yen. Japan Post Bank Co. was bid at 1,550 yen, compared with its official price of 1,450 yen. Churchill Capital Ltd. said the bank was bid at 1,510 yen, while investors offered to buy the insurer for 2,290 yen. Both brokerages said no trades were made as nobody agreed to sell the shares. E-mini futures on the Standard & Poor’s 500 Index slipped 0.1 per cent. The underlying gauge closed little changed on Monday at the highest level since Aug. 20, rising above a level where past rallies since the summer selloff have lost momentum. International Business Machines Corp. fell in late trading as quarterly revenue missed estimates. Bloomberg
Business Daily | 7
October 21, 2015
Macau
Melco granted 250 mass gaming tables, 100 for Galaxy Secretary for Economy and Finance, Lionel Leong, says non‑gaming elements, focus on mass market and collaboration with SMEs are the main reasons behind the table allocations
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he Secretary for Economy and Finance, Lionel Leong Vai Tac, says the government has granted Melco Crown’s Studio City 250 mass gaming tables plus another 100 new gaming tables to Galaxy for their mass gaming floor. The Secretary said that Studio City has no VIP rooms and no junket business, and that its focus on the mass market would help promote non-gaming elements, hence 250 tables have been granted; 200 can be operational on its opening date next Tuesday. Authorisation for a further 50 will be effective 1 January, 2016. Commenting on the Galaxy Macau Phase II and Broadway of the Galaxy Entertainment Group Ltd., Mr. Leong said that the government is happy to observe that the gaming operator has put a
lot of resources into allowing local Small and Mediumsized Enterprises (SMEs) to enter the property, therefore 100 mass gaming tables are granted, with 50 effective immediately, and another 50 on 1 January, 2016.
Mass market
Lionel Leong added that with the gaming industry entering an adjustment period, the mass market has been performing better, with the gap between the mass market and VIP sector narrowing. The Secretary remarked that non-gaming elements and gaming elements are related, as mass gaming tables can drive the development of food & beverages and hospitality, hence the government encourages gaming operators to put more tables on mass
gaming floors in order to promote the development of non-gaming elements. Studio City International Holdings Limited issued a press release following Lionel Leong’s announcement, adding that the Macau Government has authorised Studio City’s gaming operator, Melco Crown (Macau) Limited, to operate 250 new gaming tables and 1,233 new gaming machines in the Studio City gaming areas, of which 200 gaming tables and 1,233 gaming machines may be in operation upon the opening of Studio City, scheduled for October 27. ‘Following the table allocation confirmation, Studio City intends to proactively engage the lenders under its senior credit facilities to discuss proposed amendments to the terms of
its loan documentation to reflect the number of tables allocated,’ said Studio City.
Table-banging
The Secretary claimed that both gaming operators received the grant some 40 days after submitting their applications. He added that the new table grant is in accordance with the city’s ‘table cap’ policy, which seeks to limit the increase of live dealer table numbers to 3 per cent compound annual expansion until the end of 2022. Gaming table allocation has been a major topic in Macau this week and was the subject of some heated to-and-fro between Wynn Resorts' Steve Wynn and local officials. Business Daily reported this week that the Secretary met with Wynn Macau
executives and issued a written statement saying it was displeased by criticism of how the government allocated quotas, after Wynn Resorts Ltd. chairman and chief executive Steve Wynn expressed frustration about the “ambiguity” that the company faces in terms of table allocation prior to the opening of the US$4.1 billion Wynn Palace on Cotai. However, Lionel Leong said that the government has been spending a “similar amount of time” processing the table applications from gaming operators and the government has enjoyed good communication with the industry. Lionel Leong added he believes that the gaming operators are familiar with the application procedures and time span needed. J.K.
InterContinental revpar jumps worldwide except for Greater China Crowne Plaza Macau, a 5-star hotel brand under the IHG situated in the city’s northern district, expects to open in the fourth quarter of this year
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nterContinental Hotels Group Plc, the world’s largest provider of hotel accommodation, said third- quarter room revenue rose as the owner of the Holiday Inn and Crowne Plaza chains saw increases in all its regions except Greater China. The shares soared. Revenue per available room, a measure of occupancy and rates known
as revpar, increased 4.8 per cent from a year earlier, the Denham, Englandbased company said in a statement on Tuesday. InterContinental’s shares rose as much as 5 per cent, the most since July 30, and were trading at 2,428 pence in London at 9:55 a.m. Revpar at InterContinental’s hotels in Europe advanced 7.8 per cent in
the third quarter, the company said, while there was an increase of 7.1 per cent in Asia, the Middle East and Africa. Revpar fell by double digits in Hong Kong and Macau, where trading conditions remain challenging, according to InterContinental. That caused revpar in Greater China to drop 0.7 per cent.
“Holiday Inn delivered a record level of room openings, and we are expanding our global luxury footprint, particularly in Greater China,” Chief Executive Officer Richard Solomons said in the statement. “We are encouraged by current trading trends and remain confident in the outlook." Bloomberg
8 | Business Daily
October 21, 2015
Greater China Rise in service outsourcing contracts Chinese businesses inked service outsourcing contracts worth US$85.45 billion during the first nine months of the year, official data showed yesterday. The data was up 16.4 percent from the same period last year, the Ministry of Commerce (MOC) disclosed at a press conference. Among the deals were offshore service outsourcing contracts valued at US$56.47 billion, rising 17.2 percent year on year. Cooperation in service outsourcing with countries along the Belt and Road saw quicker growth, with contracts valued at US$11.38 billion for the January-September period, surging 42.1 percent from a year ago.
Financial sector shrugs off stock rout to fuel GDP growth While trading volume for shares in the equity benchmark fell about 25 percent in the third quarter from the second, it was more than double the volume from the same period a year earlier
Top farming produce sees export decline East China’s Shandong Province, the country’s main agricultural region, saw an unusual decline in exports of farm produce in the first three quarters of 2015. Exports were 4.3 percent lower than in the same period of 2014, falling to US$11 billion, revealed customs authorities in the Shandong port city of Qingdao yesterday. The fall was attributed to weak demand in its traditional export markets of Japan, the Republic of Korea and Europe. However, exports to the United States, the ASEAN and Latin American countries grew.
Leung pledges to increase housing supply
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hina’s financial sector shrugged off a slumping stock market to underpin growth in the world’s second- largest economy last quarter. Financial services jumped 16.1 percent in the three months through September from a year earlier, the National Bureau of Statistics said yesterday. The industrial and construction sectors both expanded 5.8 percent, weighing on the 6.9 percent overall gross domestic product growth rate. China’s services sector output rose 8.6 percent in the July to
September period, cushioning the nation’s slowdown and underscoring a transition away from reliance on the old growth drivers of construction and manufacturing. While financial services have emerged as a major prop for the economy this year, declines in the volume of shares traded and a lacklustre property recovery pose challenges for the future expansion pace. “We expect that growth of financial services value-added will slow down significantly starting in the fourth quarter of 2015, and this will have
a material impact on headline GDP growth,” Chen Long, an economist at research firm Gavekal Dragonomics in Beijing, wrote in a note on Monday. Reflecting the two-speed nature of China’s economy, industrial output in September rose 5.7 percent from a year earlier, missing economists’ median estimate of 6 percent. Retail sales increased 10.9 percent, beating a 10.8 percent gain forecast for the month. “The household sector is holding up better than the more cyclical corporate sector, which reinforces the government’s intention to transition towards a more consumption-driven economy,” said Edmund Goh, Kuala Lumpurbased investment manager at Aberdeen Asset Management Plc. After surging in the first half of this year, the benchmark Shanghai Composite Index tumbled 29 percent in the third quarter. The government has cut interest rates five times since November and boosted infrastructure spending in recent months to keep growth from sliding too far below this year’s target for about 7 percent.
Hong Kong Chief Executive Leung Chunying said yesterday that the government will continue to increase the supply of new homes to meet robust housing need. Land supply has increased dramatically over the past three years, leading to a sharp rise in home supply this year, Leung told a media session before the Executive Council meeting. The efforts adopted by the government including stamp taxes have taken effects in recent years, Leung said, pledging to further curb speculation on residential properties and increase home supply.
Mainland investors drive global VC funding to record high
Beijing eyes investment in Laos economic zone
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China is eyeing total investment of more than 200 billion yuan (US$31.45 billion) in 240 projects in a pilot economic zone on the border with Laos, the government of the south-western province of Yunnan said late on Monday. Poor and remote, Laos has traditionally been firmly in the orbit of its larger neighbour to the east, Vietnam. But China has been courting Laos as it sees the country as an important route into Southeast Asia and its ports for landlocked parts of south-western China such as Yunnan.
LeTV plans to buy 70 pct stake in car hire app A unit of China’s LeTV plans to acquire a 70 percent stake in private car hire app Yidao Yongche to become its controlling shareholder, LeTV said in a post on its official microblog yesterday. The deal, whose value was not given, would mark LeTV’s expansion in the vehicle market. LeTV has been working on an electric-vehicle project named super electric eco-system (SEE) since December, according to the post.
Bloomberg News
Global funding in the third quarter rose from the same quarter last year by 82 percent to 37.6 billion, with Asia, particularly China, a key driver lobal investment in venture capital (VC)-backed companies hit a record high in the first nine months of 2015, with surging numbers of Chinese investors a key driver, new analysis has showed. In the first three quarters, there were 5,640 investment deals with a total value of US$98.4 billion in VC-backed companies globally, breaking the record of US$88.7 billion through 7,687 deals in the whole of 2014, according to a quarterly global report on VC trends jointly published by KPMG International and CB Insights. Global funding in the third quarter rose from the same quarter last year by 82 percent to 37.6 billion, with Asia, particularly China, fuelling the growth. During the period, Chinese VCbacked companies raised US$9.6 billion, up 315 percent from a year ago. However, China’s slowing economy has had some impact. “We’ve seen a shift in China in the past quarter.
Downward pressure on the economy has led a lot of companies to shift their focus from purely burning capital to gain market share towards building efficiencies and driving profit,” said Lyndon Fung, a partner at KPMG China in charge of its U.S. Capital Markets Group. The report also highlighted a trend in Asia -- and in China in particular -- towards more conservative investments. Increasing Chinese investment has come on the back of the government’s encouragement of startups. For example, central authorities announced last month that they will work with other investors to set up a 60-billion-yuan (US$9.43 billion) fund to finance small and medium-sized companies in their early stages. “It will be interesting to see how VC investment evolves in China over the next few quarters as a result of the increasing government focus on entrepreneurship and innovation,” said Philip Ng, head of technology at KPMG China. Xinhua
Business Daily | 9
October 21, 2015
Greater China U.S. sheds light on Taiwan’s day-end currency intervention
fallen year-on-year in every month of 2015 apart from September, while economic growth slowed to the least since 2012 in the second quarter. That’s bolstered the case for the central bank to seek a weaker currency to boost exports.
With the local dollar posting Asia’s biggest gain in the first half, the authority stepped up intervention and occasionally asked traders to cancel orders
Change unlikely
Justina Lee
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aiwan’s central bank appears to have sold its local currency in the last hour of trading as much as 75 percent of the time in the first seven months of the year, according to the U.S. Treasury. For the first time since the island’s monetary authority started weakening the local dollar in the run-up to the close more than four years ago, the Treasury highlighted the tactic and its impact in its semi-annual report on exchangerate policies. Total intervention has increased this year, averaging US$1.3 billion a month from US$900 million in 2014, the Treasury estimated. End-of-day intervention has the impact of “signalling to the market the central bank’s targeting of a given closing level for the exchange rate,” it said in the report released overnight. “Market expectations of regular intervention, particularly at certain values or in response to large transactions, can also shape the pattern
of capital flows and obscure the priceclearing mechanism of the exchange rate.” The Taiwan currency’s abrupt declines toward the end of the day are part of the central bank’s arsenal of unofficial tools to keep speculators at bay and support exporters. With the
local dollar posting Asia’s biggest gain in the first half, the authority stepped up intervention and occasionally asked traders to cancel orders. Such actions, none of which are disclosed, help stem appreciation without the expense of buying the greenback. The island’s consumer prices have
"Given the recent weakness in Taiwan’s CPI and GDP, I doubt there will be any change in the approach to Taiwan dollar intervention," said Sean Callow, a currency strategist at Westpac Banking Corp. in Sydney. "Given Taiwan isn’t in the G-20, there’s no obvious regular forum for the U.S. to press the issue." Taiwan’s dollar has declined by an average of 0.46 percent in the last hour of trading this year, compared with 0.2 percent in 2014. It rose 2.5 percent against the greenback in the year through June, the only Asian currency to record a substantial gain. The local dollar has weakened 4.7 percent since then as a slowdown in China, the island’s biggest export market, worsened. As in past reports, the Treasury asked Taiwan’s central bank to limit forays into the market to disorderly situations, and increase the transparency of reserve holdings and intervention. The foreignexchange department at the island’s monetary authority wasn’t immediately available for comment. The central bank’s official policy has always been that it will step into the market when there is excessive volatility and disorderly movements. The Treasury probably pointed to the end-of-day intervention as a "stark example of Taiwan not following its officially published explanation of intervention," Westpac’s Callow said. Bloomberg News
10 | Business Daily
October 21, 2015
Greater China
Sinopec in talks to buy chemical plant shut over safety The purchase could allow Sinopec to increase its purchases of Iranian oil as sanctions are relaxed Chen Aizhu
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hinese state energy giant Sinopec Corp is in advanced talks on taking a controlling stake in petrochemical firm Dragon Aromatics, which operates one of the country’s biggest chemical plants, three sources with knowledge of the matter said. The discussions come after the independent petrochemical firm suffered a second major fire in less than two years at the US$3 billion plant in Fujian and sources said local authorities want Sinopec to participate before allowing the plant to reopen. The tough line shows how Beijing is putting pressure on provinces to ensure better industrial safety standards and protect the environment after a series of accidents has stirred protests from residents opposed to plants in their backyard.
KEY POINTS Sinopec in talks on taking over Dragon Aromatics -sources Firm’s US$3 bln chemical plant has been shut since a fire Authorities want participation of Sinopec before reopening Beijing pushing hard for better industrial safety standards
Dragon Aromatics, owned by Taiwan’s Xianglu Group, was forced to shut the plant with a capacity to produce 1.6 million tonnes a year of paraxylene (PX), a chemical used to make polyester fibre and plastics, after the fire in April. “This is what the local government has insisted: without Sinopec’s participation the plant won’t be allowed to resume operations,” said one of the sources, who declined to be named due to the sensitivity of the discussions. Sinopec could take up to 80 percent of the stake, the source added. Sinopec spokesman Lu Dapeng declined to comment. A senior Dragon Aromatics official said that he was not in a position to comment on the communications at the board level but told Reuters the firm was “trying every means to resume the plant’s production as soon as possible.” The PX plant is located on a peninsular called Gulei, part of Zhangzhou city and a site where state
firms including Sinopec and China National Offshore Oil Corporation (CNOOC) had previously tried to build petrochemical plants. Calls to the press department of the Zhangzhou municipal government were not answered, while an official on the management committee of the Gulei economic zone did not respond to a fax seeking comment.
Tianjin disaster
Industrial safety has come under heightened scrutiny in China since a devastating explosion in August at a chemical warehouse in Tianjin port that killed 160 people. Sinopec, China’s largest oil refiner and petrochemical producer, wants to build more PX facilities but at least two of its investments have been blocked over the last few years due to opposition from residents worried about pollution. “It would not be a bad deal for Sinopec, as it would save it all the trouble of going through the lengthy
regulatory and environmental approvals,” said a second source with a firm that has a supply agreement with Dragon Aromatics. In Fujian, local officials including a vice mayor have been punished over April’s accident, which was blamed on lax quality control and safety management, according to a report on the state news agency Xinhua in August. Sinopec, regarded as a seasoned petrochemicals operator, may need to retool the plant to improve safety standards, the sources said. To supply the PX plant, Dragon Aromatics also runs a 100,000 barrels per day condensate splitter and a 3.2 million tonnes per year hydrocracker at the site. Dragon Aromatics has been one of the biggest buyers of Iranian condensate, a very light crude oil, and the plant shutdown has forced the Middle Eastern producer to store more of its oil. Reuters
Construction Bank and CME Group to develop yuan use CCB will be able to participate in the London Silver Pricing
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hina Construction Bank (CCB) and CME Group, a U.S.-based derivatives market place, signed a Memorandum of Understanding (MoU) on Monday to support their further cooperation in the fields of RMB settling and benchmark silver pricing. Under the MoU, CME Group is now able to offer offshore Chinese renminbi (CNH) futures contracts with physical delivery in London for the first time, which will be offered via CME Europe, the group’s European exchange. They will be supported by CCB, which is the sole People’s Bank of China designated clearing bank of RMB in London. According to CME Group,
physically deliverable futures contracts for U.S. dollar/ CNH and EUR/CNH have been available on CME Europe since the European exchange launched in April 2014, delivering in Hong Kong, China. Now that CME Clearing Europe, which provides clearing services for CME Europe, intends to work with CCB, CME Europe plans to amend these contracts so that physical delivery will take place in London, bringing cost and time-saving advantages to market users. Meanwhile, CCB will be able to participate in the London Silver Pricing, as well as to facilitate the trading of CME Group products for CCB’s customers in China. Therefore, CCB will become the first Chinese bank to
participate in the fixing of the London Silver Pricing, as well as the seventh bank in the pricing. Wang Hongzhang, CCB’s chairman, said: “CCB wants to support the development of the offshore RMB market in London through our engagement with an innovative financial institution such as CME Group.” William Knottenbelt, senior managing director and head of international, CME Group said: “The ability to transact during London hours is of paramount importance to those institutions who value flexibility in managing their positions in markets where prices can move sharply in short periods of time.” Xinhua
Business Daily | 11
October 21, 2015
Asia
RBA says earlier rate cuts supporting demand Nine of 29 economists surveyed by Bloomberg expect the RBA to lower the cash rate by 25 basis points in November
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nterest-rate cuts earlier this year continue to support demand while a weaker currency is helping the economy rebalance from resources to non-mining activity, Australia’s central bank said. Growth likely strengthened in the third quarter, assisted by a pickup in resources exports and housing investment, the Reserve Bank of Australia said in minutes from its latest board meeting where it kept the benchmark interest rate at a record- low 2 percent for a fifth month. “Reductions in the cash rate earlier in the year continued to provide support to aggregate demand, particularly dwelling investment and household consumption,” the central bank said in minutes of its Oct. 6 meeting released yesterday in Sydney. Australia’s economy grew well below the average rate of the past 30 years in the second quarter and business investment is forecast to fall sharply as the country grapples with slowing demand for its key commodity exports. But the central bank’s minutes signalled there was no immediate need to reduce rates further, noting
that conditions in the labour market had strengthened in recent months. “Information about economic and financial developments, both domestically and abroad, would continue to inform the board’s assessment of the outlook and whether the current stance of policy remained appropriate” to boost growth and keep inflation within the RBA’s target, the central bank said, repeating a phrase it has used a number of times.
Mortgage limit
The most recent board meeting came ahead of a
move by Westpac Banking Corp. last week to raise its home-lending rate by 20 basis points to cover the cost of tighter capital rules. The mortgage rate increase, which some analysts said would be followed by Australia’s other major banks, raised expectations that the RBA may need to cut interest rates further to offset the rise in home rates. Australia’s banking regulator had asked lenders to limit annual growth in mortgages to landlords to calm a rampant housing market and said increased risk weights for mortgages will take effect next year.
In relation to lending for housing, members noted that the data on the split of lending to owner occupiers and investors were of questionable quality at present Reserve Bank of Australia’s minutes
Philippines may import more rice after typhoon damages crops Rice output in the third quarter was likely slightly lower than initially projected due to the dry spell
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he Philippines could be forced to import more rice after Typhoon Koppu hit major grain producing regions over the weekend causing “significant” losses, a senior agriculture official said yesterday. Official preliminary estimates on losses stood at around 412,000 tonnes of paddy rice, accounting for about 5 percent of the government’s forecast fourth quarter harvest of 7.95 million tonnes. A final figure is expected in around a week. “If you ask me if we need to import more, I would say ‘yes’, but up to what
volume and when, I don’t know,” Edilberto de Luna, Department of Agriculture assistant secretary for field operations, told Reuters yesterday. “This is a significant volume because the typhoon hit our major rice-producing provinces.” Powerful typhoon Koppu ploughed into the north-eastern Philippines before dawn on Sunday destroying homes and displacing thousands of people. The Southeast Asian country remains one of the world’s biggest buyers of rice, with imports approved for delivery this year reaching nearly
KEY POINTS Paddy rice damage estimated at 412,000 T Govt official says could need to import more grain Total crop losses valued at US$137 million
While a slowing in house price growth would be welcomed by the RBA, any reduction in housing investment and spending as a result of mortgage rate increases would curb the economy. Nine of 29 economists surveyed by Bloomberg expect the RBA to lower the cash rate by 25 basis points in November. It cut by that amount in February and again in May to 2 percent. Since the October 6 meeting, data showed Australian employers unexpectedly cut jobs in September while the proportion of workers with part-time jobs continued to rise, reaching a record 31 percent.
Spare capacity
The RBA said that spare capacity remained in the economy and domestic cost pressures were “very low”. It also noted that recent data had raised concerns about the outlook for economic growth in China and East Asia. Turning to Australia’s housing market, the central bank said that it was too early to be confident that signs of a slowing in house-price growth would be sustained. In its financial stability review released October 16, the central bank said the housing market could be starting to slow while rapid home construction in some areas is creating an oversupply. The proportion of home auctions in Sydney that successfully found a buyer last week fell to the lowest level in 10 months, according to property researcher CoreLogic Inc. Bloomberg News
1.8 million tonnes, mainly from Vietnam and some from Thailand, two of the world’s top suppliers. Prior to the typhoon, the country’s National Food Authority Council had already been assessing the need to import 1 million tonnes of rice next year on top of 500,000 tonnes approved for the first quarter. Rice output in the third quarter was likely slightly lower than initially projected due to the dry spell, pest attack and typhoons, while stocks had shrunk steadily for four straight months starting May. But de Luna said that rains brought by Koppu had filled up waterstarved dams, which should allow rice farmers to begin planting soon without worrying too much about water access. Total crop losses from the typhoon, including those for rice, corn and other crops, were initially valued at 6.3 billion pesos (US$137 million), he said. Corn losses were “minimal” at about 5,000 tonnes because harvesting was finished before Koppu’s arrival, de Luna added. Reuters
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October 21, 2015
Asia
Jokowi ‘drifts’ in 1st year as Indonesian economy struggles The economy has been hurt by a slump in prices for the commodities that make up more than half of Indonesia’s exports
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ince taking office a year ago, Indonesia’s President Joko Widodo has had mixed results in his agenda to lift the economy, build infrastructure and reduce inequality. The former governor of Jakarta was elected as the first leader outside the machinery of the country’s main political parties, on high expectations he could cut corruption and reform the bureaucracy in the world’s largest archipelago. On his inauguration on October 20, 2014, he was feted like a rock star in the capital’s main thoroughfare with crowds swarming around his open horsedrawn carriage. His popularity among voters and investors has fallen in a year marked by slowing economic growth and a sliding rupiah, policy u-turns and controversy over appointments. Widodo, known as Jokowi, said on his Twitter account yesterday that the past year was about laying foundations and the first step was often the hardest.
Economic growth
Jokowi pledged to lift economic growth to above 7 percent within his term, from an average of 5.7 percent during the decade of his predecessor
Susilo Bambang Yudhoyono. Growth slowed to about 4.7 percent in the April-June quarter, the weakest since 2009, and in a Bloomberg survey is expected to only grow 5.4 percent next year. The economy has been hurt by a slump in prices for the commodities that make up more than half of Indonesia’s exports, such as natural gas, coal and palm oil. While that’s out of Jokowi’s control, the government’s economic forecasts were over-optimistic. Consumer confidence fell to more than a six-year low in September, in a country where domestic consumption makes up over half of the economy, and foreign direct investment has stagnated. A series of recent stimulus measures have amounted to tinkering rather than fresh cash or major structural reforms.
Bureaucratic reform
Improving spending needs a more efficient bureaucracy, in a decentralized system where civil servants are poorly paid and often act only if there’s an economic incentive. Jokowi changed the structure of ministries and pledged to fire officials depending on results. Jokowi reshuffled his economic
team in August, and has also shaken up some state enterprises such as PT Pertamina with new management teams. There’s no sign Jokowi has been able to improve regional administrations, with central government funds stuck at the local level and forest fires still spreading haze pollution across Southeast Asia after a deadline to stop them.
Infrastructure development
Jokowi pledged to build 30 new dams, 15 airports, 24 ports, and 3,258 kilometres of railroads among infrastructure plans. After a slow start, there are signs some projects are starting to get going. The government opened the taps for a Chinese-built dam in August and state companies agreed terms with China for a new railway to Bandung this month. He also pledged to fund infrastructure by gradually reducing fuel subsidies. As oil prices fell last year, he took advantage by scrapping gasoline subsidies, a move seen as a major policy success. However, as oil prices recovered, and workers protested over Asia’s highest inflation rate, Jokowi has effectively reintroduced subsidies by keeping fuel prices low,
shifting the burden for losses onto Pertamina.
Fighting corruption
Jokowi vowed after wining the July election to cut corruption by 70 percent by building new systems, such as electronic tax collection, and the remainder by adding staff to the anti-graft agency known as the KPK. This issue has perhaps been the biggest disappointment for his supporters. The KPK named Jokowi’s choice for police chief a suspect and the police retaliated by investigating the agency’s commissioners, leading several to step down. Since then, there have been few high profile arrests by the agency. A “dangerous” level of inequality threatens the world’s fourth mostpopulous nation, Jokowi told Bloomberg in February. The economic slowdown isn’t helping. Around 43,000 workers in Indonesia lost their jobs between January and September, the Bisnis Indonesia newspaper reported. The country’s poverty rate was 11.25 percent in March, up from 10.96 percent in September before Jokowi took office. Bloomberg News
Vietnam’s economy set to expand 6.7 pct in 2016 State budget deficit in 2016 is set to stay at 4.95 percent
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The report was presented by Vietnamese Prime Minister Nguyen Tan Dung at the 10th session of the 13th National Assembly ( NA ) w h i c h k i c k s o f f yesterday in Vietnam’s capital Hanoi. According to the report, the country’s average economic growth rate is set to reach 6.5-7 percent a year in 2016-2020 period. The Gross Domestic Product (GDP) per capita is set to stay at US$2,450 by 2016, and US$3,750 by 2020. State budget deficit in 2016 is set to stay at 4.95 percent, reads the report. The country will strive to curb inflation rate at less than five percent in 2016. In order to realize the Among the 14 targets set earlier for 2015, the only one which will likely targets set for 2016 and 2016fail to be realized is on forest coverage rate 2020 period, the country will ietnam’s economy is set to expand by 6.7 percent in 2016, according to a government’s report on socio-economic
situation in 2015, five year period of 2011-2015, directions and missions for 2016 and five-year period of 2016-2020.
focus on developing socialistorientated market economy, stabilizing macro-economy, creating environment and momentum for socioeconomic development; boosting economic restructure along with renewing the growth model and improving productivity and competitiveness. The country will also pay attention to increase the effectiveness of state management and anticorruption work, improve human resource quality and the potential of sciencetechnology, among others. Regarding the participation of Vietnam in the Trans-Pacific Partnership (TPP), the government’s report states that Vietnam has always followed the Politburo’s instruction in
negotiations, especially on ensuring the highest national interest and not to sign the agreement at all costs. The TPP is expected to create more chances and favourable conditions to the development of Vietnam’s socio-economy, especially in exports and foreign investment. Besides, Vietnam will have to face difficulties and challenges while joining in the TPP, reads the report. A full version of the agreement will be submitted by the government to the NA for ratification. Among the 14 targets set earlier for 2015, the only one which will likely fail to be realized is on forest coverage rate, while eight targets are forecast to surpass the set levels, reads the report. Xinhua
editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Michael Armstrong, Stephanie Lai, Óscar Guijarro, Kam Leong, Joanne Kuai GROUP SENIOR ANALYST José I. Duarte Designer Francisco Cordeiro WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia Assistant to the publisher Lu Yang | lu.yang@projectasiacorp.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.
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Business Daily | 13
October 21, 2015
Asia
Japan’s tariffs removal on sensitive products likely to irk farmers The government is planning to justify its moves by showing the potential economic benefits the TPP deal will bring to Japan
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ollowing the broad agreement reached on the Trans-Pacific Partnership (TPP) trade agreement earlier this month, Japan has said out of 586 goods that fall within the nation’s highly protected agricultural sector, 174 will likely see tariffs eliminated under the new deal, with more details on the matter being made known by the government yesterday. The removal of tariffs on about 30 percent of the sensitive agricultural products, which span rice, wheat, beef and pork, dairy products and sugar, flies in the face of government pledges to maintain Japanese “national interests” throughout the TPP negotiations and legislative assurances made to powerful farm lobbies that the industries they represent would be protected. Sources said following the initial announcement by the government regarding the slashing of tariffs on 30 percent of sensitive farm products, local farmers have been incensed as have the lobbies that represent them, as the age-old sectors have relied on high tariffs on foreign imports to ensure their market
domination and the survival of some agricultural industries, like the rice industry, that has largely operated without competition from overseas for decades, if not centuries. But the government is planning to justify its moves by showing the potential economic benefits the TPP deal will bring to Japan and its faltering economy and will likely underscore the fact that it has been successful in keeping tariffs on more than 440 agricultural, forestry and fisheries products, which equates to around 19 percent of this sector.
174
Number of products that will likely see tariffs eliminated
Xinhua
Thailand expects record 30.3 mln visitors in 2015 If the tourist council’s forecast proves right this year’s total number of visitors will be 22.3 percent more than last year
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record 30.3 million tourists are expected to visit Thailand this year, with more than a quarter coming from China, the tourism council said yesterday, as the country rebounds from political unrest in 2014 and a bomb attack in August. Thailand’s vital tourism industry, which accounts for about 10 percent of GDP, has grappled with trying to overcome bad publicity following a 2014 coup and a bomb attack in Bangkok in August that briefly caused
This figure dwarfs the 1.5 percent of the other 11 other TPP-member countries, which is the average achieved by them across the board in this sector, and will be seen as something of a victory for Japan, with Prime Minister Shinzo Abe hailing as “successful” his TPP negotiators’ efforts to remove tariffs in accordance with the tenets of the pact, but protecting a number of tariffs on sectors deemed important, or “sacred” as they have previously been dubbed. Many of the tariffs, however, will in accordance with the broad agreement made, be lifted in stages and eventually removed, meaning the government has time to haggle and try to appease affected sectors, like the agricultural-related industries, in the years ahead. But the farm lobbies will likely point to Diet resolutions made in 2013, that saw the government commit to protecting its sacred sectors and this could prove to be a major sticking point as Abe sets about convincing Japan that the TPP deal, overall, is in Japan’s best interests.
visitor arrivals to fall. But overall, the sector has been doing well in spite of an economy that has been stubbornly underperforming, proving that Thailand’s beaches, bars and Buddhist temples continue to draw visitors. The previous record year was 2013, when 26.5 million visited. The number fell to 24.8 million in 2014, partly because some tourists were put off by political unrest including street protests in Bangkok that year.
Ittirit Kinglek, president of the Tourism Council of Thailand, said the bomb attack at a major tourist spot in the Thai capital did not have much impact on the sector and the country can expect a record number this year driven by Chinese tourists. Fourteen foreigners - seven from mainland China and Hong Kong were among the 20 people killed in the attack at a famous religious shrine in Bangkok’s commercial heart. Two men have been arrested on suspicion of carrying out the attack which authorities believe stemmed from a crackdown on peoplesmuggling. Visitors from China are expected to be a record 8.12 million this year, up 76.31 percent from 2014, Ittirit said. The government has said it expects 7 million visitors from China in 2015, compared with 4.63 million in 2014, which would still be an all-time record. It is aiming for 2.2 trillion baht (US$62.04 billion) in revenue this year from tourism. Reuters
S.Korea’s producer prices fall Prices for goods and services offered by producers and suppliers slipped to the lowest in about five years on the back of cheaper crude oil, central bank data showed yesterday. The producer price index (PPI) stood at 100.47 in September, down 0.3 percent from a month earlier, according to the Bank of Korea (BOK). It kept the downward trend for three months in a row. The September figure was the lowest since July 2010 when it recorded 100.17. The PPI reflects the consumer price inflation 1-2 months in advance.
Cambodian garment call for focus on productivity The Garment Manufacturers Association in Cambodia (GMAC) yesterday called for a focus on productivity after the government decided to raise the monthly minimum wage for garment and footwear workers. The calls were made after the government announced early this month that it will increase the monthly minimum wage for garment and footwear factory workers to 140 U.S. dollars, up 9.4 percent from the current US$128 from January 1, 2016. The clothing and footwear sector, the kingdom’s largest export earner, are comprised of nearly 1,100 factories with some 700,000 workers, according to government figures.
Australia calls for more competition for major banks Australia yesterday accepted most key recommendations of a government-backed inquiry which called for more competition and stronger capital reserves for the nation’s four major banks as well as reforming the US$1.2 trillion superannuation system. The review, chaired by former Commonwealth Bank of Australia head David Murray, last year called on Australia’s major banks to raise additional capital to ensure they become among the world’s safest lenders. Australia’s “Big Four” lenders have raised more than A$20 billion so far but will need to set aside a similar amount over the next two to three years, analysts estimate.
Sumitomo Life plans to buy 300 bln yenworth of foreign bonds Sumitomo Life Insurance Co plans to buy about 300 billion yen (US$2.5 billion) of foreign bonds in the six months to March, seeking higher returns than those on Japanese bonds, its general manager for investment planning said yesterday. Iwao Matsumoto also told a news conference that Japan’s fourth-largest private life insurer, with total assets of about 25 trillion yen, could reduce currency hedging on foreign bonds if the yen rises to near 115 to the dollar.
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October 21, 2015
International Carney to spell out EU referendum stakes Bank of England Governor Mark Carney will spell out how Britain’s membership of the European Union affects the central bank’s ability to manage the economy and protect the country’s banking sector in a key speech today. Carney’s intervention comes shortly after the launch of rival campaigns to influence voters ahead of the EU membership vote which Prime Minister David Cameron has promised to hold before the end of 2017 and is likely to take place next year. Carney is scheduled to deliver the speech at Oxford University at 1700 GMT today.
Cyprus not to request more financial aid Cyprus will not need to request any additional financial aid from its international lenders when its bailout program runs out in March 2016, Finance Minister Harris Georgiades said on Monday. Cyprus was pulled back from the brink of bankruptcy in a 10-billion-euro deal (US$11 billion) with the Eurogroup and the International Monetary Fund in March 2013. The island has up to now drawn about 6.0 billion euros of this but will turn to the international markets to finance its government’s operations. But it may use the remaining 4.0 billion euros as cheap loan money to repay more expensive loans.
Ivory Coast’s Ouattara to push for new constitution if re-elected Ivory Coast President Alassane Ouattara said on Monday he would push for constitutional reform if he wins re-election this week to scrap a nationality clause that helped drag his West African nation into a decade-long crisis. Ivory Coast, the world’s largest cocoa producer, has long been a magnet for immigrants from neighbouring countries. Ivorian nationality became a burning political issue at the heart of a 2002-2003 civil war that divided the country in two for eight years. Ouattara told Reuters he was determined to remove the nationalist bias from the constitution.
U.S. Treasury Secretary meets with Puerto Rico interest groups U.S. Treasury Secretary Jack Lew met with Puerto Rican and Hispanic interest groups to talk about the U.S. territory’s fiscal problems and address the administration’s efforts to help speed its economic recovery, the Treasury said in a statement, confirming an earlier Reuters report. The U.S. Treasury has repeatedly said it is not bailing out indebted Puerto Rico but said last week it has been trying to find ways to help the Commonwealth return to a sustainable economic path. Puerto Rico, in recession for nearly a decade, is trying to restructure its debt.
Morgan Stanley’s trading rout sets grim tone for Q4 Morgan Stanley on Monday warned that there was little hope for a quick turnaround in its key trading business given the persistence of global growth concerns that helped pummel the bank’s third quarter earnings. Chief Executive James Gorman was put on the defensive after a 42 percent slide in bond trading, one of its worst performances since the financial crisis, and a drop in its private-equity business sent net income skidding. “We’re by no means complacent about this,” Gorman told analysts after the forecast-lagging results.
ECB survey shows bank sector on mend The eurozone central bank has previously complained that its ultra‑easy monetary policy had not been feeding through into the real economy
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urope’s battered financial sector is showing further signs of mending and banks are increasingly competing for custom by lowering credit standards, a key European Central Bank survey showed yesterday. The ECB said its quarterly bank lending survey showed banks are easing credit standards for loans to enterprises, an encouraging sign, since the chronic weakness of credit activity in the euro area has previously been blamed for the absence of any noticeable recovery in the 19 countries that share the single currency. “In the October 2015 bank lending survey (BLS), euro area banks reported a net easing of credit standards on loans to enterprises in
the third quarter of 2015, which was stronger than banks’ expectations in the previous survey round,” the ECB report said, attributing the development to “competitive pressures”. At the same time, banks reported a net tightening of credit standards on loans to households for house purchases, saying that tighter national regulation offsets the easing effect of competition. Demand for loans is also increasing, the ECB found. “Net demand for loans to enterprises increased, due mainly to the general level of interest rates, as well as to increased needs for fixed investments. Net demand for housing loans continued to increase due to the
Canada’s Trudeau topples PM Harper in shock election win Trudeau has promised to raise taxes on high-income Canadians and reduce them for the middle class
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anada’s Liberal leader Justin Trudeau rode a late surge to a stunning majority election victory on Monday, toppling Prime Minister Stephen Harper’s Conservatives with a promise of change and returning a touch of glamor, youth and charisma to Ottawa. Harper conceded defeat and the Conservative party announced his resignation, ending a nine-year run in power and the 56-year-old’s brand of fiscal and cultural conservatism that voters appeared to sour on. The Liberals seized a Parliamentary majority, a turn in political fortunes that smashed the record for the number of seats gained from one election to the next. The centre-left Liberals had been a
distant third place party before this election. “My friends, we beat fear with hope. We beat cynicism with hard work. We beat negative, divisive politics with a positive vision that brings Canadians together,” Trudeau, 43, told a crowd of cheering supporters in Montreal. “This is what positive politics can do.” The photogenic son of former Prime Minister Pierre Trudeau pledged to run a C$10 billion annual budget deficit for three years to invest in infrastructure and help stimulate Canada’s anaemic economic growth. This rattled financial markets ahead of the vote and the Canadian dollar weakened on news of his victory. Trudeau thanked his two closest
low level of interest rates and housing market prospects,” the ECB said. The eurozone central bank has previously complained that its ultra-easy monetary policy had not been feeding through into the real economy, because banks are not passing the money on in loans, particularly to the small and mid-sized enterprises (SMEs) which are the region’s economic backbone. In an attempt to address this, the bank cut its interest rates to new all-time lows and also embarked on a series of programmes to pump liquidity into the economy. For example, it is making cheap funding available to banks via its targeted long-term refinancing operation programme on the condition that the banks will lend the cash on to businesses. Most recently, the ECB embarked on a controversial programme of sovereign bond purchases, known as quantitative easing or QE. The ECB said the additional liquidity made available to banks via its asset purchase programme was being used to grant loans. Looking ahead to the fourth quarter, “banks expect a further net easing in credit standards on loans to enterprises,” the ECB said. On the demand side, “banks expect a further considerable increase in demand from enterprises in the fourth quarter of 2015,” the ECB said. AFP
friends and advisers for shaping his campaign to show “that you can appeal to the better angels of our nature. And you can win doing it.” Trudeau has said he will repair Canada’s cool relations with the Obama administration, withdraw Canada from the combat mission against Islamic State militants in favor of humanitarian aid and training, and tackle climate change. Trudeau vaulted from third place to lead the polls in the final days of the campaign, and will now return to the Prime Minister’s residence in Ottawa where he grew up as a child. “When the time for change strikes, it’s lethal,” former Conservative Prime Minister Brian Mulroney said in a television interview. “I ran and was successful because I wasn’t Pierre Trudeau. Justin is successful because he isn’t Stephen Harper.” Liberal supporters at the party’s campaign headquarters broke into cheers and whistles when television projected that Trudeau would be the next prime minister. The Conservatives become the official opposition in Parliament, with the left-leaning New Democratic Party in third. The NDP’s fall was highlighted in Quebec, where it had had the majority of its seats, while the separatist Bloc Quebecois won 10 seats, up from just two previously. BQ leader Gilles Duceppe, however, failed to win a seat. Reuters
Business Daily | 15
October 21, 2015
Opinion Business
wires
The path to carbon pricing
Leading reports from Asia’s best business newspapers
JAKARTA GLOBE The government has released a new regulation, which will provide a stronger legal ground for state-owned infrastructure guarantee fund Penjaminan Infrastruktur Indonesia (PII) to provide insurance for projects it guarantees. The regulation, signed by Finance Minister Bambang Brodjonegoro on October 6, but only made available online on Monday, will allow multilateral and overseas lenders to get assurance that the government-backed PII will cover any possible defaults over infrastructure projects being worked by state firms. Fully owned SOEs can secure the guarantee facility without president’s approval, but those not fully owned need to secure president’s approval before getting the facility.
NEW ZEALAND HERALD Goldman Sachs is looking to shift its New Zealand-based securities business across the Tasman. Goldman bosses Andrew Barclay and Simon Rothery informed staff this morning of a proposal to make changes to the firm’s securities trading, settlements and clearing functions in New Zealand. “In early 2016 we are proposing to relocate our New Zealand-based market trading activities and implement an integrated coverage model from Sydney,” Barclay and Rothery said. Goldman’s local investment banking unit is expected to remain as a standalone business in New Zealand.
THE TIMES OF INDIA Amid weaker outlook across emerging market economies, India’s recovery has strengthened under a new reform agenda, but it is not yet a “major driver” of global growth, a US treasury department report has said. Buoyed by savings of US$44 billion from drop in prices of oil imports, India’s total foreign exchange reserve has reached an all-time monthly average high of US$328 billion - thus making it the eight country from the top in terms of foreign reserve - the US department of treasury said in its semiannual “Report to Congress on International Economic and Exchange Rate Policies.”
THANH NIEN NEWS Vietnam Dairy Products JSC is willing to raise foreign ownership in the country’s biggest company by market value to the maximum level the government would allow. “We want to open the room by the limit allowed by the government because the investment of overseas investors will not just bring capital but also advanced corporate management experiences,” said Bui Thi Huong, an executive director at the dairy producer. The company is awaiting government guidance, she said. Vietnamese regulators see foreign investment as one of the keys to growing the country’s stock market which is about one-eighth that of Singapore.
Christine Lagarde
Managing Director of the International Monetary Fund
Jim Yong Kim President of the World Bank Group
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n just six weeks, world leaders will meet in Paris to negotiate a new global climate-change agreement. To date, 150 countries have submitted plans detailing how they will move their economies along a more resilient lowcarbon trajectory. These plans represent the first generation of investments to be made in order to build a competitive future without the dangerous levels of carbon-dioxide emissions that are now driving global warming. The transition to a cleaner future will require both government action and the right incentives for the private sector. At the centre should be a strong public policy that puts a price on carbon pollution. Placing a higher price on carbon-based fuels, electricity, and industrial activities will create incentives for the use of cleaner fuels, save energy, and promote a shift to greener investments. Measures such as carbon taxes and fees, emissions-trading programs and other pricing mechanisms, and removal of inefficient subsidies can give businesses and households the certainty and predictability they need to make long-term investments in climate-smart development. At the International Monetary Fund, the focus is on reforming its member countries’ fiscal systems in order to raise more revenue from taxes on carbon-intensive fuels and less revenue from other taxes that are detrimental to economic performance, such as taxes on labour and capital. Pricing carbon can be about smarter, more efficient tax systems, rather than higher taxes. Carbon taxes should be applied comprehensively to emissions from fossil fuels. The price must be high enough to achieve ambitious environmental goals, in alignment with national circumstances, and it must be stable, in order to encourage businesses and households to invest in clean technologies. Administering carbon taxes is straightforward and can build on existing road fuel taxes, which are well established in most countries. Carbon pricing will be in many countries’ best interests, owing to the many domestic environmental benefits. For example, burning cleaner fuels helps to reduce outdoor air pollution, which, according to the World Health Organization, currently causes about 3.7 million premature deaths a year.
It is vitally important to address the impact of energy-price reforms on vulnerable groups in every society. So these reforms will need to be accompanied by adjustments to fiscal systems and safety nets, among other things, to ensure that the poor are not harmed. The World Bank Group is supporting countries and businesses as they develop climate-friendly public policies, invest in carbon markets, and explore financial innovations to ease into low-carbon transitions. The Group is leveraging its experience and global reach for learning and knowledge exchange through programs like the Partnership for Market Readiness. From that experience, we have developed, alongside the OECD, initial principles to help guide and inspire future carbon-pricing schemes. By drawing on these principles, countries, regions, states, and businesses can move faster to tackle the climate challenge confronting us all. The principles are based on fairness; alignment of policies and objectives; stability and predictability; transparency; efficiency and cost-effectiveness; and reliability and environmental integrity. To help achieve our climate objectives, we need to promote dialogue about the necessary policy measures before and beyond the climate-change conference in Paris. That is
Carbon pricing policies are already being implemented by some 40 national governments, including that of China, the world’s largest emitter
why we are announcing a “Carbon Pricing Panel,” which will bring together heads of state, city and state leaders, and representatives of top companies to urge countries and businesses around the world to put a price on carbon. These leaders have taken steps to price carbon pollution and catalyse greener investment in their own countries and regions. They include German Chancellor Angela Merkel,
Chilean President Michelle Bachelet, French President François Hollande, Ethiopian Prime Minister Hailemariam Desalegn, Philippines President Benigno Aquino III, Mexican President Enrique Peña Nieto, Governor Jerry Brown of California, and Mayor Eduardo Paes of Rio de Janeiro. Carbon pricing policies are already being implemented by some 40 national governments, including that of China, the world’s largest emitter, and 23 cities, states, and regions that are putting a price on carbon. Many other governments also are reforming energy prices, and more than 400 companies report using a voluntary, internal carbon price. That makes sense. Top companies must effectively manage exposure to climate risk in order to generate higher profits and ensure more stable earnings. All of these actions are welcome; but we view them as being only initial steps. Together with the leaders of the Carbon Pricing Panel, we call on governments to seize the moment – for the sake of the planet and future generations – to put a price on carbon pollution that reflects the environmental damage it causes. We stand ready to support governments that act. The longer we wait, the costlier and more difficult it will be for us – and our children and grandchildren – to protect the planet. Project Syndicate
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October 21, 2015
Closing China’s urbanization model to change in future
ASEAN ministers to gather in Vietnam on environmental issues
National urbanization has been successful so far, but its model will change along with social and economic transformations in the future, Under-Secretary General of the United Nations Joan Clos said while in Beijing. The country’s focus during the next phase of urbanization will need to move from land to people’s well-being, Clos, also executive director of the UN Human Settlements Programme, known as UN Habitat, said in a recent interview with Xinhua. “As China’s economy changes from rapid industrialization to a more knowledge-based one, Chinese citizens will ask for more quality in life in the future, not just quantity,” he said.
Ministers of the Association of the Southeast Asian Nations (ASEAN) nations will gather in Vietnam to discuss environmental issues in the region. The 13th ASEAN Ministerial Meeting on Environment (AMME 13) is scheduled to be held in Vietnam’s capital during October 26-31, according to Vietnam’s state-run news agency VNA yesterday. During the meeting, participants will review the implementation of cooperation agreements on environmental issues and discuss new cooperation programs for post-2015 period. They will also discuss and are expected to adopt an ASEAN (headquarters pictured) declaration on climate change.
Banks need to double capital to cover securitised debt The amount of capital held against trading books had already risen sharply under interim rules known as Basel 2.5 Huw Jones
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anks will have to double the amount of capital they hold to cover possible default on their pooled-debt under planned new global rules, they said yesterday, potentially
hampering the EU’s drive to boost market-based financing for the economy. Overall, capital held against trading books will on average have to quadruple, some 28 banks including Citi,
Aging society to lead to labour shortfall
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Deutsche Bank, Goldman, HSBC and JP Morgan said in a submission to regulators. The banks’ study challenges statements from global regulators now finalising the rules that most
lenders would be largely unaffected by a reform which is key to making the financial system more resilient to market routs. The Basel Committee of banking supervisors from nearly 30 countries is due to finalise its “fundamental review of the trading book” (FRTB) in December. Banks have submitted data to Basel to quantify the impact of the rules that are likely to come into effect in 2019. Industry bodies, including the International Swaps and Derivatives Association (ISDA) ran the numbers themselves and say the rules would quadruple how much capital banks must hold against trading books when calculated under the regulators’ own “standardised” method. The amount held against pooled or securitised debt, a security based on a pool of loans such as mortgages,
would double -- on top of increases that have already been introduced -- to well above possible losses under the FRTB, ISDA said. The European Union has proposed to cut capital charges on “high quality” securitised debt in a bid to revive a market that was tarnished because of its central role in sowing the seeds of the 2007-09 financial crisis. Banks provide most funding for companies in the EU and the bloc wants to boost the ability of markets such as securitised debt to raise money. “We’re concerned about the impact this will have on market liquidity and various bank business lines,” Mark Gheerbrant, head of risk and capital at ISDA, said in a statement. “And the businesses that will be hardest hit will likely be those most important for the real economy, such as credit to small- and mediumsized entities, securitisation and small cap equities.” Many banks have pulled out of trading in some assets such as commodities as a lower level of business and the cost of tougher regulation make it uneconomic. Big banks use their own models for calculating capital requirements, which typically mean less capital is needed. But regulators will require them to use the stricter standard approach as well to set a “floor” on capital, irrespective of what the models come up with. Reuters
China ‘to take one-third stake’ in UK nuclear plant
Google makes first investment in mainland since 2010
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hina may face a labour shortfall as early as 2021 due to a rapidly aging population as the results of the one-child policy, started in the 1970s, begin to bite, an expert said yesterday. China’s labour population will show a downward trend as workers born during the baby boom in the 1960-70s begin to retire in 2021, Yao Meixiong, deputy head of the Centre for Population Census of Fujian Provincial Bureau of Statistics, was quoted as saying by Yicai.com. By the end of 2014, China had 212 million people aged above 60, accounting for 15.5 percent of the total, according to the Ministry of Civil Affairs. “Young labour resources between the age of 20 to 34 will plunge year by year from 2021. The drop could amount to 11 million each year from 2022 to 2025. By 2030, the youth labour force at this rate will drop to 221 million, 32 percent or 104 million fewer than 2010,” said Yao. He said the population under 14 years old only accounted for 16.5 percent of the country’s total, compared with the world’s average of 27 percent.
hina has agreed to take a one-third stake in French power giant EDF’s £25 billion next-generation nuclear project at Hinkley Point in Britain, French business daily Les Echos said yesterday. The deal comes as Chinese President Xi Jinping embarks on a four-day state visit to Britain to build closer business ties. China is taking a 33.5-percent share in the construction of two reactors at Hinkley Point, southwestern England, in a deal signed by EDF with China General Nuclear Power Corporation and China National Nuclear Corporation, Les Echos said. The agreement also foresees the possibility of building a Chinese “Hualong” nuclear reactor at Bradwell, southeastern England, which is also owned by EDF’s British offshoot EDF Energy, the paper said. EDF declined to comment on the report. London is looking to Xi’s visit as an opportunity to seal the deal for Hinkley Point, two years after it first gave the green light for the project. A report in the Financial Times said the deal was signed hours before Xi’s arrival in Britain and would be announced today.
Xinhua
AFP
oogle Inc. is making its first direct investment in a Chinese firm, an artificialintelligence start-up, since mostly quitting the country in 2010 over censorship concerns. Google is leading a round of funding for Mobvoi Inc., a company operating a Chinese-language voice-activated search engine. Google used Mobvoi instead of its own blocked service in the Moto 360 smartwatch released in China in June. The deal underscores how Google may be edging back into the world’s largest mobile market with its first strategic investment in years. In 2014, a growth equity arm of the corporation called Google Capital invested in InnoLight Technology Corp., a Suzhou-based company that makes high-speed data transmission hardware. “Mobvoi is very excited to welcome Google as an investor as both companies share a long-term view on technologies,” Li Zhifei, the company founder and a former Google employee, said in a statement without specifying the amount that the Mountain View, California-company is investing. Mobvoi, known in Chinese as Chumenwenwen, has raised US$75 million from backers including Sequoia Capital and ZhenFund. Bloomberg News