CTM customers can now apply for a special SIM card. Enabling multiple mobile payments via near field communication (NFC) app. In tandem with Macau Pass payment terminals. CTM has also announced the extension of CTM-WiFi hotspots to over 330 buses operated by Transmac
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Furore mounts Over Uber App
Year IV
Number 909 Friday October 30, 2015
Publisher: Paulo A. Azevedo
Closing editor: Joanne Kuai
MOP 6.00
Totally mobile
“Surprised and disappointed”. The official reaction of Uber’s driver-provision service management. Local junket operators This, following the prosecution of two drivers for operating illegal taxi services via mobile app. The travel meet Lionel Leong agency drivers were both fined MOP30,000. Secretary for Security Wong Sio Chak said unsupervised drivers on accounting rules Page 6 would encourage overcharging. While the issue of licensing has figured heavily in discussions. Uber said it would work with legal counsel to ‘address what we believe are misunderstandings’ TSL Jewellery takes Page 4
Page 9
Banking on growth
Premier Li: National growth for next 5 years around 6.5 pct
Mainland state-owned Nam Yue (Group) Co. Ltd. Now the major shareholder of Macau Chinese Bank (MCB). Holding 56 pct stake. Lippo sold 16 pct of MCB shares to Nam Yue for MOP144 mln (US$18.04 mln). To attract additional strategic shareholders, broaden business horizons, and improve growth potential
Page 5
Page 10 Germany and China stock markets create joint venture
Two-child policy
Gaming regulator to retire
China is to allow all couples to have two children. Abandoning its decades-long one-child policy. This, according to a communiqué issued yesterday by the Communist Party of China (CPC). The measure seeks to reverse the consequences of an aging population
The gov’t is seeking a new Gaming Inspection and Co-ordination Bureau (DICJ) boss. Incumbent Manuel Joaquim das Neves retires next month after 30 years of public service. Having headed up the city’s gaming regulator for almost two decades. Candidates will have a tough act to follow, given the wide-ranging requirements looked for
Page 16
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Gaming
www.macaubusinessdaily.com
in 40 pct less as sales plummet in SARs
MGM China stung in Q3
Page 10
HSI - Movers October 29
Name
%Day
CNOOC Ltd
+3.38
PetroChina Co Ltd
+1.98
Lenovo Group Ltd
+1.87
Sands China Ltd
+1.77
Kunlun Energy Co Ltd
+1.41
China Resources Land L
-2.64
China Resources Beer H
-2.67
China Resources Powe
-2.92
China Merchants Holdi
-3.01
China Life Insurance Co
-5.44
Source: Bloomberg
MGM China Holdings’ Q3 profit results are in. Posting a Y-o-Y decline of 38.9 pct. Adjusted EBITDA decreased to HK$1.1 bln for the quarter from HK$1.8 bln a year ago. Total revenue for the period was HK$4.1 bln. Turnover generated by VIP table games crashed 55 pct to HK$79.8 bln in the period
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October 30, 2015
Macau China’s 13th 5-year plan to support Macau development The new Commissioner of the Chinese Ministry of Foreign Affairs in Macau, Ye Dabo, said yesterday that the central government’s upcoming 13th five-year plan, an economic blueprint for the country between 2016 and 2020, would include policy ideas to support the development of Macau. The Chinese official said at his cocktail party for assuming the office yesterday that Macau is at a new historic starting point and is facing very important development opportunities. Ye replaces Hu Zhengyue, who had served as Commissioner in the territory since 2011.
CTM launches new mobile payment application service The city's dominant telco has incorporated the use of Macau Pass into its latest launch of mobile payment application service called ‘M.wallet +’ Stephanie Lai
sw.lai@macaubusinessdaily.com
Free CTM WiFi services on Transmac buses
T
he city's dominant telecommunications operator Companhia de Telecomunicações de Macau (CTM) has just launched the mobile payment application ‘M.wallet +’ incorporating the Macau Pass card, a move that will be followed by the telco's plan to launch an ‘e-commerce platform’ next year. CTM's customers can now apply to change for a special SIM card that enables the operation of the mobile payment application, which will support them making shopping payments at over 3,000 Macau Pass service points by censoring their
smartphones with near field communication (NFC) function on the Macau Pass payment terminals, according to CTM's introduction of the application yesterday. ‘M.wallet +’ application users can also use their value stored in Macau Pass to settle the telco's service bill, or top up the value of its BEST prepaid cards. The launch of the ‘M.wallet +’ application follows the city's sole storedvalue card issuer Macau Pass Ltd's launch of its own mobile payment application in December last year, which allows users with smartphones running on Android systems
and an NFC function to top up their value, read their remaining balance on the card and view transaction records. The application also allows Macau Pass users to pay for their water and power bills. Speaking to media yesterday, CTM's delegates said it would extend collaboration with more business partners next year to further popularise the penetration of ‘M.wallet +’ service. Ebel Cham, vice president of commerce at CTM, told Business Daily that Macau Pass will be one of the partners as a payment gateway for the telco's
Companhia de Telecomunicações de Macau (CTM) also announced yesterday the extension of the CTM-WiFi hotspot to over 330 buses operated by Transmac, a collaborative effort with the city’s marketing and media company MOME. The extension allows passengers riding on Transmac buses to have free access to WiFi for 30 minutes upon successful login to CTM-WiFi SSID: ‘Bus-Free-WiFi’. Speaking to reporters yesterday, CTM’s vice president of commerce Ebel Cham said the company would consider extending the WiFi hotspot service to the other two bus companies and taxis after observing the market response from the Transmac operation.
plan to launch an ‘e-commerce platform’ next year. The platform may not be limited to shopping for goods but also a site that allows online purchase of services, Ms. Cham said briefly. She stressed the company will announce more details of the merchants interested in participating in the e-commerce platform in due course. “Macau Pass will be one of the payment gateways for the platform,” said Ms.
Telecom regulator mulls regular disclosure of operators’ network quality
I
n a reply to a legislator's enquiry, the city's Bureau of Telecommunications Regulation (DSRT) said it is mulling regularly announcing the performance of the telecom networks of the operators here to help facilitate the public’s selection of telecom services.
The news is in response to legislator Chan Meng Kam's enquiry about the high Internet service costs here, as well as his doubts about Internet connection speed. The Bureau said it would gradually liberalise the telecom market by introducing more market competition to foster more ‘reasonable’ charges
for Internet services. Currently, the city has two fixedline telecommunications operators: the dominant telco Companhia de Telecomunicações de Macau (CTM) and MTEL Telecommunication Company Ltd. In the response to Mr. Chan's enquiry, the Bureau also said it plans
Cham, “And we're now also in talks with Alipay to join the platform.” Meanwhile, Macau Pass is in talks for having the company as a payment gateway accepted at on online shopping giant Alibaba Group's popular shopping site Taobao.com. David Lao, deputy general manager of Macau Pass, told Business Daily yesterday that he hoped the intended cooperation with Alibaba can materialise next year.
to employ a third-party institution to assess the overall quality of the city's telecom Internet services. The telecom regulator additionally said it planned to increase to no less than 180 access points the free public wireless Internet service WiFi Go within this year. The Bureau's department head of telecommunications technologies and resources management Francisco Leong San Io mentioned in August last year that the government planned to facilitate 250 access points for the free WiFi service within the coming three years. S.L.
4 | Business Daily
October 30, 2015
Macau
Uber: “Surprised, disappointed” Agitated ferry waves two drivers prosecuted opinion
After a week of operation in the city, two local drivers using the controversial global ride-sharing application Uber were indicted and each fined MOP30,000 for providing illegal taxi services Kam Leong
kamleong@macaubusinessdaily.com
Pedro Cortés
Lawyer* cortes@macau.ctm.net
I
travel a lot by ferry. Due to professional commitments I cross the Pearl River Delta to Hong Kong and back to Macau at least once a week. Fortunately, I have not been caught up in any of the recent years’ accidents. On these matters, unfortunately, statistics are cruel: we have had more accidents in the last three years than in the previous five decades. It is certainly a consequence of having more ferry carriers crossing the river. But are there any other reasons? When I travel with a third professional party ferrying me, I tend to believe that those at the wheel are capable and bold enough for all situations. Accidents exist, of course, but surely some of them could be prevented if there were a policy for the river that involved the authorities of Macau, Hong Kong and the Mainland. Even with the new bridge to be available in a couple of years, the ferry will always be the privileged means of transportation for those travelling around the Pearl River Delta. They have improved a lot since the liberalisation of gaming. We now have in the majority of cases clean ships and attentive personnel who know what a public service is. The competition, of course, has enhanced the quality of the services. But what we can question is whether the routes are becoming overbooked or whether there are other factors that contributed to the accidents, not only with the Macau route, but also with the Hong Kong islands routes. It is still present in the memory of the tragic accident in 2012 when 39 persons lost their lives when a boat and a commuter ferry collided. I have never heard about meetings between the authorities of each side. Maybe I am distracted by other meetings. But I guess the population shall be informed about such policies. Why not create a three-side authority comprising the two SAR’s and the Mainland? Macau (and Hong Kong) does not have jurisdiction over the strait waters. Such jurisdiction is exercised by the People’s Republic of China authorities. In many other cases in the past, the responsibilities were somehow hidden. I don’t know whether it’s the weather but public opinion in this part of the world tends to forget these accidents promptly, as if nothing had happened. But for the sake of a cosmopolitan axis comprising the cities of the Delta we should know what really happened. And, of course, prevent it from happening again. *Part-time lecturer at the Chinese University of Hong Kong
T
wo drivers of ride-sharing mobile application Uber were prosecuted by local police yesterday for providing unlicensed taxi services in the territory. Meanwhile, an Uber spokesperson told Business Daily that the company is “surprised and disappointed” at the police actions. The Public Security Police Force (PSP) announced it had intercepted two cars operating illegal taxi services for Uber on Wednesday morning, which involves a total of three cases. According to authorities, the two cars belonged to a local travel agency, which is believed to have co-operated with Uber by providing drivers for the application’s on-call service. The two prosecuted drivers are a tour guide and a part-time driver of the travel agency. They are paid MOP600 daily by their company. The police claimed that both of the suspects had admitted providing services for Uber and were fined MOP30,000 each. US-founded Uber, operating worldwide and launched in the city just last Wednesday, does not hire drivers directly but puts passengers in touch with evaluated drivers of private cars willing to transport them.
Uber: Supporting agencies and drivers
The spokesperson of Uber, Harold Li, told Business Daily in a written
statement yesterday that the company would fully back its local travel agency partners and drivers. ‘Given that we're working with the same local travel agencies and drivers that have long been providing transportation to Macau residents and visitors, as well as hotels and casinos, and there are clear legal provisions for them to do so, we're surprised and disappointed at how the police are attempting to prevent drivers from providing such transportation services,’ Mr. Li said, adding the company would work with legal counsel to ‘address what we believe are misunderstandings.’ Meanwhile, the Macau Government Tourist Office (MGTO) said local travel agencies cannot provide their vehicles to third parties for nontourism purposes, claiming any agencies violating the regulation will be fined between MOP5,000 and MOP10,000.
Fare standards
The city’s Secretary for Security Wong Sio Chak also remarked on the issue yesterday, claiming the mobile application, without supervising fare charged, would popularise the issue of taxis overcharging. He claimed that it would be unlikely that the application could operate in the city legally. But the Uber spokesperson said the company’s service charges
are transparent for passengers. “Regarding pricing, Uber fares are transparently presented to riders before each trip begins, eliminating any uncertainty,” he claimed. In fact, Uber does not receive cash payment, meaning passengers can only pay the taxi fee by their credit cards, information regarding which they are required to input when they register on the application. Last Wednesday, PSP and the Transport Bureau (DSAT) jointly announced that the city’s existing laws do not allow ‘part of the design of the mobile phone application and its business model’ to run legally in the territory. In fact, Uber does not only raise legality disputes in the Special Administrative Region. In August, Hong Kong police arrested five Uber drivers there for providing car hire services without required licenses and insurance. In addition, the Hong Kong office of Uber was raided by the authorities. “We've been overwhelmed by the tremendously positive response from the Macau public since our launch and will continue to work hard on meeting your transportation needs,” Mr. Li claimed. As at the time this story went to press, the application did not show any cars available for service in the territory.
Business Daily | 5
October 30, 2015
Macau profit before taxation of MOP48.82 million last year.
Strategic regional co-operation
Nam Yue to secure majority stake in Macau Chinese Bank In July, the Mainland group acquired 40 per cent of the bank and has now reached an agreement to acquire from Lippo Limited another 16 per cent for MOP144 million João Santos Filipe
jsfilipe@macaubusinessdaily.com
M
ainland state-owned Nam Yue (Group) Company Limited has reached an agreement with Hong Kong company Lippo Limited to become the major shareholder of Macau Chinese Bank (MCB), holding 56 per cent of the total shares. According to a filing by Lippo with the Hong Kong Stock Exchange,
its 65.84 per cent subsidiary named HongKong Chinese Limited (HKC) has agreed to sell 16 per cent of MCB shares, or 416,000 shares, to Nam Yue Group for MOP144 million (US$18.04 million). The deal will be done via Winwise Holdings Limited, a wholly-owned subsidiary of HKC. Upon approval by Lippo and HKC shareholders plus the Monetary
Authority of Macau (AMCM), Nam Yue Group will hold 56 per cent of the Macau bank. In July, the Mainland conglomerate bought 40 per cent of the shares (1,040,000) from Lippo for MOP360 million, in what was the first disposal. In spite of the sale, HKC will retain 20 per cent of the Macau Chinese Bank, which generated a net
‘The board of each of Lippo and HKC considers that the Second Disposal, together with the First Disposal, will bring in additional strategic shareholders with strong Macau and Guangdong Provincial connections which will help broaden the business horizon and improve the long term growth potential of MCB’, the company said of the decision for the sale. The deal announced yesterday by Lippo also includes the sale of another 15 per cent of the shares of the bank (390,000) for MOP135 million to Macau businessman Wong Garrick Jorge Kar Ho, who is involved in property development food distribution. Mr. Wong Ho is also a Director of the Industrial Association of Macau. As the deal is completed, Nam Yue Group will assume 56 per cent share of the bank; Lippo has 20 per cent, via HKC, Mr. Wong Ho 15 per cent, and Mr. Yang Jun 9 per cent. As the deal is closed, Lippo will have a 5-year option to sell the remaining 20 per cent of MCB, at its request, for a price that will never be lower than MOP346.15 per share. The new major shareholder of Macau Chinese Bank, known for its involvement in the city's border crossing project in Ilha Verde and the University of Macau's Hengqin campus, is a ‘window company’ of Guangdong Province engaged in cross-border infrastructure investment and development, manufacturing and trading of green food products as well as tourism and hotel management.
6 | Business Daily
October 30, 2015
Macau Local junket operators meet Lionel Leong on accounting rules The Association of Gaming and Entertainment Promoters of Macau met with the Secretary for Economy and Finance Lionel Leong Vai Tak yesterday to discuss accounting practices for local junket promoters’ financial reporting. According to TDM Radio, Association president Kwok Chi Chung claimed local junket companies submit their financial reports to the city’s gaming regulator every year. Meanwhile, its vice head, Suncity Group boss Alvin Chow Cheok Wa, told reporters that the government’s latest internal guidelines issued to junket operators for enhancing transparency of junket’s operational background is similar to the previous ones. The junket company boss also predicted the city’s gaming revenues may rebound next year.
Lionel Leong: On the lookout for DICJ head replacement Gaming analyst says no tougher rules from new gaming regulator are expected as Beijing voices support for Macau and its gaming industry Joanne Kuai*
joanneuai@macaubusinessdaily.com
S
ecretary for Economy and Finance Lionel Leong Vai Tac, said the government is on the lookout for a replacement for Manuel Joaquim das Neves (pictured), director of the Macau Gaming Inspection and Co-ordination Bureau (DICJ), as he will step down on November 25. Mr. Leong says certain qualities will be taken into account when choosing the new DICJ head, such as the candidate’s knowledge of the gaming industry’s regulations and supervision, language skills and grasp of legal concepts, etc. He added that if no suitable candidate can be found the post will temporarily be assumed by the vice director; he believes the transition of the work will be smooth despite the mid-term review of Macau’s gaming industry, and relevant laws and regulations focusing on gaming industry will continue to be improved. Macau’s leading casinos regulator is retiring next month after working as a civil servant for more than 30 years, according to a statement on the city government’s website.
No tougher rules expected
“In the context of Beijing seemingly pledging its support to Macau and to the gaming industry, we would not expect the transition to a new head of the gaming regulatory body to result in tougher times ahead” for the casino companies, said Grant Govertsen, an analyst at Union Gaming Group. Das Neves had led the regulatory body for 18 years. He told local public broadcaster TDM that he planned to focus on his family after retiring. During his tenure, Macau had seen gaming revenue jump more
Manuel Joaquim das Neves
than sevenfold in a decade until last year when the industry began to slump as Chinese President Xi Jinping’s anti-graft campaign and a slowing economy kept high rollers away. Lionel Leong also denies Das Neves’ retirement has anything to do with the latest Dore case. He expressed appreciation for Das Neves’ contribution during his tenure, extending his best wishes to him to enjoy family life after retiring.
Macau’s transformation
Over the past two years, the Macau Government has imposed restrictions on travel by Chinese nationals, banned smoking in casinos, and tightened regulations on junket operators, middlemen who bring in the highend players. Macau casino shares have suffered, falling 39 per cent in the year to date
compared to the benchmark Hang Seng index’s 3.3 per cent decline. Stocks mostly rose on Thursday, with MGM China Holdings Ltd. up 2.4 per cent by the close of trading in Hong Kong, while Sands China Ltd. gained 1.8 per cent and Galaxy Entertainment Group Ltd. was up 0.6 per cent. Das Neves had witnessed the casino industry’s transformation from a four- decade monopoly held by tycoon Stanley Ho to its liberalization in 2001 when the market opened up to foreign operators including Sheldon Adelson and Steve Wynn. Since then, Macau’s gaming revenue has grown seven times that of the Las Vegas Strip. The industry is once again trying to remake itself, amid China President Xi Jinping’s call last December for Macau to diversify its economy to rid its
For almost two decades, Mr. Manuel das Neves has overseen the industry’s growth to the world’s largest as more Chinese became rich, and witnessed its sharp downturn last year as Beijing’s anti-corruption crackdown curbed highstakes gamblers. Born in Macau, and fluent in Cantonese and Portuguese, Neves holds a degree in public administration and business management. After finishing his studies in Portugal, he returned to Macau where he worked briefly as a teacher. He joined the gaming regulator in 1985. Neves became the Bureau’s head in 1997, two years before Macau’s handover to China and ahead of the liberalisation of the gaming industry.
over-dependence upon gambling. Operators including Sands China, Wynn Macau Ltd. and Galaxy are spending US$28 billion to build new casino-resorts in the next three years to attract more mass market punters, shifting attention from hard-core gamblers. They are adding glitzy malls, restaurants and other non-gaming facilities as the government plans to diversify an economy that relies upon gambling receipts for 80 per cent of its revenue. Melco Crown Entertainment Ltd. this week opened a US$3.2 billion project – Studio City - with a Batman ride and Asia’s highest Ferris wheel. *with Bloomberg
MGM China profit plunges nearly 39 pct in Q3
G
aming operator MGM China Holdings Ltd registered a year-onyear decline in profit of 38.9 per cent for the third quarter of the year, according to its filing with the Hong Kong Stock Exchange yesterday. The company’s adjusted EBITDA had decreased to HK$1.1 billion for the three months from some HK$1.8 billion one year ago. In addition,
the number represents a drop of 3 per cent from the second quarter of the year. Meanwhile, the gaming operator recorded total revenue of HK$4.1 billion for the period, a year-onyear decrease of 33.4 per cent from HK$6.16 billion during the same period of last yea. Compared to the previous quarter, the company also saw its revenue down 5 per cent.
MGM China’s turnover generated from VIP table games crashed 55 per cent to HK$79.8 billion from HK$177.3 billion one year ago, despite the company claiming its revenue from the segment ‘was flat quarter-onquarter’. In addition, main floor gross table games win in the casino property dived 30.4 per cent year-on-year to HK$1.72
billion, while it is a 10 per cent drop on a quarter-on-quarter comparison. MGM China noted its mass gaming floor contributed over 70 per cent of its profit for the quarter. In terms of the hotel segment, the company’s average occupancy rate reached 96.8 per cent for the three months, a year-onyear decrease of 2 percentage
points from the third quarter of 2014. On the other hand, MGM China said its new MGM Cotai project, which will feature about 1,500 hotel rooms and up to 500 gaming tables with over 85 per cent gross floor area of non-gaming elements, remains on target to open its door during the fourth quarter of 2016. K.L.
Business Daily | 7
October 30, 2015
Macau
Packer’s Crown buys stake in Nobu for US$100 Million The remaining 80 pct stake will continue to be held by existing owners and entities associated with Nobu Matsuhisa, Robert De Niro and Meir Teper
C
rown Resorts Ltd., the Australian casino group controlled by billionaire James Packer (pictured), bought a 20 per cent stake in Nobu for US$100 million to extend its relationship with the global restaurant and hotel company. The other 80 per cent will continue to be held by existing owners and entities associated with Nobu Matsuhisa, Robert De Niro and Meir Teper, Crown said in a statement. Packer will be nominated to join the Nobu board as one of four directors. The up-market Japanese eatery has outlets in Crown’s casino complexes in Melbourne and Perth and there is
a Nobu Hotel at the City of Dreams in Manila, owned by Melco Crown Entertainment Ltd., according to the statement. Melco Crown this week opened the Hollywood-themed US$3.2 billion Studio City resort in Macau, which features a Batman ride and a 400-foot Ferris wheel. The opening was attended by De Niro, Leonardo DiCaprio and Martin Scorsese. “We see the Nobu brand as complementary to Crown Resorts’ global luxury entertainment positioning and the Nobu business has an attractive near-term growth profile, with a number of new restaurant and hotel openings planned,” Crown Chairman Rob Rankin said in the statement. Packer, Australia’s third-richest man who stepped down as chairman of Crown in August, is focusing on developing the group’s resorts, which include a planned casino in Las Vegas and a hotel for high-rollers on Sydney Harbour. He also holds an interest in movie-production company Ratpac with filmmaker Brett Ratner. Bloomberg
Imperial Pacific to terminate Profit Transfer Agreement with Hang Seng The company involved in gaming expects the termination of the agreement with the Macau junket to generate HK$221 mln João Santos Filipe
jsfilipe@macaubusinessdaily.com
S
maller profits and the intention to prioritise resources for the new integrated resort on the Island of Saipan has led Imperial Pacific to announce its intention to terminate the profit share agreement with Macau junket Hang Seng. The decision was announced yesterday
in a filing with the Hong Kong Stock Exchange. During the first nine months of the year, gaming revenues in Macau from games of fortune declined 36.2 per cent to MOP275.94 billion (US$34.57 billion) from MOP176.02 billion for the same period of the previous year.
The view of Imperial Pacific is that ‘the downturn of Macau gaming business is expected to continue’, which is expected to continue affecting the profit stream. The profit stream receivable by Imperial Pacific amounted to HK$11.83 million during the first
six months of 2014; this year, revenue amounted to approximately HK$6,000, according to the interim report of the company. While the contract with Hang Seng was signed through the subsidiary Excel Earth the group was receiving 5 per cent of the junket profits in exchange for a consideration of HK$400 million in convertible notes. ‘The termination is in line with the Group’s intention to prioritise resources to develop the integrated resort business on the Island of Saipan’, the Board explained to investors. With this decision, and because of the profit guarantee, Imperial Pacific is expecting to generate HK$221 million, because, among other reasons, of the profit guarantee for the period from 1 January 2015 to 31 December 2029. This amounted to a cash deposit of HK$376 million, which is said to be secured, and, according to the company, is nonrefundable.
Business Daily | 9
October 30, 2015
Greater China
TSL Jewellery takes in 40 pct less as sales plummet in SARs The decrease in net income was due to fewer Mainlanders visiting the two cities, consuming fewer luxury products Kam Leong
kamleong@macaubusinessdaily.com
H
ong Kong-listed Tse Sui Luen Jewellery International Ltd. (TSL) registered a year-onyear decrease of 40 per cent in its net income for the six months ended August 30, resulting from its sales plunge in Hong Kong and Macau due to fewer Mainland Chinese tourists. The jewellery retailer told Hong Kong Stock Exchange yesterday that its profit attributable to owners fell to HK$15.5 million (US$1.93 million) for the first half of its fiscal year from HK$25.8 million one year ago. In addition, total sales turnover declined 3.6 per cent yearon-year to HK$1.75 billion from HK$1.81 billion. ‘This decline in sales in the first half was mainly attributable to a significant year-on-year drop in retail
sales activity in Hong Kong,’ it explained. According to the filing, its revenues generated from Hong Kong and
Macau for the period totalled HK$867.6 million, plunging some 22.8 per cent from HK$1.12 billion one year ago.
In addition, the company claimed sales in the two Special Administrative Regions had dropped 19 per cent, while same store sales
growth was minus 20 per cent for the six months, without disclosing exact figures. ‘The number of tourists visiting Hong Kong and Macau from Mainland China dropped significantly in the first half with the result that overall tourist and customers’ spending in these markets decreased accordingly,’ the company remarked, adding that customers ‘steering away from luxury jewellery and higher-priced items towards mass market commodities’ was another factor diving down sales. However, the retailer saw its revenue earned from the Mainland Chinese market soar 28.1 per cent for the same period, amounting to HK$860.2 million. In addition, its retail business and same store sales growth in the country registered a year-on-year increase of 5 per cent and 2.3 per cent, respectively. TSL said the growth in the Mainland market was attributable to its shift of focus to the country’s premium mass market following the slowdown in the high-end luxury segment, as well as its development and expansion into the self-consumption market. For the six months, the company declared it would distribute an interim dividend of 1.5 HK cents per share, a lift of 0.3 HK cents compared to the same period of last year.
10 | Business Daily
October 30, 2015
Greater China
Li floats new five-year growth minimum of around 6.5% Premier said that the country will lift most of the people currently among the 70 million living in poverty out of that condition by 2020
The 6.5 percent target is still a little challenging. A target of 5-6 percent seems a more feasible one Le Xia, economist, Banco Bilbao Vizcaya Argentaria
P
remier Li Keqiang (pictured) highlighted a minimum growth estimate for China in the coming five years that could indicate the leadership’s readiness to accept the weakest period of expansion since the economy was opened up three decades ago. The nation needs annual growth of at least 6.53 percent in the next five
years to meet the government’s goal of establishing a “moderately prosperous society,” Li said in an October 23 speech to Communist Party members, according to people familiar with the matter who asked not to be named as the remarks weren’t public. Communist Party leaders today conclude a four-day gathering to discuss their 2016-20 five-year plan
for the nation, the first since President Xi Jinping and Premier Li took office. “It seems that Premier Li is sending a signal through his speech that China’s government is likely to lower their growth target to 6.5 percent in the 13th five-year plan,” said Le Xia, a Hong Kong-based economist at Banco Bilbao Vizcaya Argentaria SA.
Private economists have predicted a lowering in the fiveyear growth target to 6.5 percent, down from 7 percent in the current plan -- a reflection of the Communist leadership’s continuing attempts to move away from debt-fuelled expansion. China’s central bank shouldn’t adopt quantitative easing to flood the economy with too much money, Li said, according to the people. The comment underscores how the People’s Bank of China has
Shanghai and Frankfurt tighten links with joint venture China didn’t allow its currency outside its own borders before 2004, but now it’s rapidly integrating with global financial markets and may announce a 2020 deadline to fully dismantle currency controls John Detrixhe
A
s German Chancellor Angela Merkel seeks deeper economic ties with China, Deutsche Boerse AG announced a new venture intended to strengthen financial links between the two countries.
Germany’s biggest exchange and China Foreign Exchange Trade System agreed on a joint venture that will host interbank products and renminbi-denominated currency and interest-rate
trading, according to a statement yesterday. CFET, run by the People’s Bank of China, provides trading and information for interbank bonds and foreign-exchange. A week after Chinese
The new Deutsche Boerse partnership announced yesterday, in which both sides will have a 50 per cent stake, will also be based in Germany. Frankfurt Stock Exchange (Pictured)
President Xi Jinping stayed at Buckingham Palace, Germany is getting its latest turn at building its relationship with the world’s second-biggest economy. And just as London Stock Exchange Group played a role in the U.K.’s courtship of China and the ensuing volley of announcements, Deutsche Boerse Chief Executive Officer Carsten Kengeter is part of Merkel’s entourage of business leaders in Beijing. “Our joint venture will contribute to the continued growth of our markets and economies,” Kengeter said in a statement. “Further, it will also strengthen the relevance of Europe as an RMB offshore hub and be mutually beneficial for our organizations, and importantly, for our customers.” The German exchange said in May that it’s starting a joint venture with two Chinese exchanges to offer
renminbi-denominated instruments. The Frankfurtbased operation will be called China Europe International Exchange, or CEINEX, and is set to begin trading November 18. Shanghai Stock Exchange and China Financial Futures Exchange are the other two partners in the project, which initially will offer trading in exchange-traded funds and bonds. It’s the first authorized platform that’s dedicated to renminbi trading outside mainland China. Other exchanges also have renminbi-based products. China Construction Bank Corp. listed an ETF on the London Stock Exchange in March. Last week, Chicagobased CME Group said it’s offering an offshorerenminbi futures contract that’s deliverable in London. Euronext NV listed a money market ETF in Paris during the summer. Bloomberg News
Business Daily | 11
October 30, 2015
Greater China opposed U.S. and Japan-style direct purchases of assets in its campaign to ease liquidity and shore up the weakest expansion in a quarter century. The State Council didn’t immediately respond to a faxed request for comment on Li’s remarks. Li, speaking to the Communist Party Central Committee’s Party School, underscored China’s avowal to avoid cheapening the yuan as a tool to stoke exports. Recent depreciation in the currency has been a “market action,” he said, according to the account. The program to bolster international use of the yuan will continue to advance, he said. The premier said that fiscal and financial risks are increasing, and that the stock-market rout suffered earlier this year was caused by leverage, such as a surge in margin financing. Growth cannot return to the days in excess of 10 percent, though it can stay in a reasonable range, Li said. Officials have worked hard to achieve the current target of 7 percent, the premier said. Some private estimates of the economy indicate that the expansion may be weaker than officially reported, as gains among new services and consumerled businesses aren’t yet sufficient to offset a contraction among old-line industries. “In the next five years if China can grow between 6 percent and 6.5 percent that will be a very good number,” said Liu Li- Gang, the chief Greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. China’s goal of a “moderately prosperous society” refers to policy makers’ plan to double per-capita income by 2020 from 2010 levels. Bloomberg News
Baosteel has no further plans to cut output
Beijing to channel fuel aid to Nepal
It announced late on Wednesday that it had suffered net losses of 920.5 million yuan
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aoshan Iron and Steel Corp, China’s largest listed steel producer, has no further plans to cut production following the closure of its 550,000-tonne per annum Baotong plant, a company official said yesterday. “Apart from Luojing previously and Baotong now, the company currently has no plans to further cut production,” said Zhu Kebing, the company’s chief financial officer, at an online investor briefing to discuss its third-quarter results. Baosteel announced late on Wednesday that it suffered net losses of 920.5 million yuan (US$145 million) in the third quarter of this year, its first quarterly loss in nearly three years, with domestic steel prices at decades-long lows. The firm said in its earnings report that the Baotong plant had “entered the production suspension phase” and that Baosteel was “preparing to make provisions for asset impairment” in the fourth quarter. China Iron and Steel Association vice-chairman Zhu Jimin told a briefing on Wednesday that output cuts were the only way the sector could reverse its current decline. Baosteel’s general manager, Dai Zhihao, said he expected Chinese steel capacity, currently saddled with
KEY POINTS Says Baotong plant has entered “production suspension phase” But does not plan new production cuts elsewhere Local steel prices at lowest in decades a surplus of more than 300 million tonnes, to shrink steadily in the next few years, but progress was unlikely to be quick. “Although new production capacity construction has been restricted well, the elimination of existing capacity has been held back for a variety of reasons and it is hard to be optimistic,” he said. Dai said China’s steel sector was still in a trough and would only gradually emerge in one or two years after a period of restructuring, but the era of big profits was already over. “Operating at breakeven will be the industry norm in the future for a relatively long period,” he said.
IMF director says wider yuan use may increase spillovers A one percent growth shock from China could take more than 0.3 percentage point from overall Asian growth according to IMF
556 fugitives captured in “Fox Hunt 2015” A total of 556 suspects have been captured overseas since “Fox hunt 2015” began in April, an official from the Ministry of Public Security (MPS) said yesterday. Yang Shaowen, deputy director of the international cooperation department of the MPS, revealed the number during an on-going foreign law enforcement officers’ event held in east China’s Jiangsu Province. Yang said suspects were found in 59 countries and regions, and China has so far sent 62 police officers to 36 embassies and consulates in 30 countries.
Aussie financial services delegation to visit mainland The fight is on for the Chinese investment dollar as the leader of Australia’s largest economy prepares a financial services delegation in the wake of Britain’s push for increased China-UK engagement. New South Wales (NSW) Premier Mike Baird, who’s state shares a sister-state relationship with Guangdong, will lead his second business delegation to China in the beginning of November to explore emerging opportunities under the China-Australia FTA, particularly in the financial services sector. Australia looks set to pass the enacting legislation for the China-Australia FTA by year’s end.
Xi to visit Vietnam, Singapore next week
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f China’s yuan joins the International Monetary Fund’s benchmark currency basket, changes in its economy will likely be felt more deeply in Asian financial markets, a senior IMF official said. Changyong Rhee, director of the IMF’s Asia and Pacific Department, said estimated spillovers from China to other regional economies were already larger than expected and this could be exacerbated if the yuan, also known as the renminbi, joins the Special Drawing Rights (SDR) basket. The IMF’s executive board is due to decide in November on Beijing’s bid for the yuan to have equal billing with the dollar, euro, yen and pound sterling, and Rhee stressed he did not want to pre-judge that decision. If the currency is added, renminbidenominated swap agreements that China has agreed with a host of trading partners could be regarded as official reserves, and general usage of the currency within the region would likely increase, he said. “It’s hard to know how fast it’s going to happen but renminbi inclusion in the SDR basket can have an impact on Asian financial ... dynamics,” Rhee said at an event at the Carnegie Endowment for International Peace. Rhee said the Fund did not see a
China will provide Nepal with “a certain amount” of emergency fuel aid as an energy crisis deepens in the Himalayan nation, China’s Foreign Ministry said yesterday, Nepal signed a deal with China on Wednesday to import petroleum products, Nepal’s embassy in Beijing said, after it was forced to ration fuel after protests against a new constitution strangled supplies from India into the landlocked country. Nepal has accused India of imposing a blockade to punish Nepal for rushing through the constitution despite opposition from some minority groups. India denies the accusation, saying its truck drivers fear for their safety.
Chinese President Xi Jinping will pay a state visit to Vietnam from November 5 to 6 at the invitation of General Secretary of the Communist Party of Vietnam (CPV) Nguyen Phu Trong and Vietnamese President Truong Tan Sang, Foreign Ministry spokesperson Lu Kang announced yesterday. Xi will pay a state visit to Singapore from November 6 to 7 at the invitation of his Singaporean counterpart Tony Tan Keng Yam, Lu said.
Silk Road Forum 2015 held in Madrid
hard landing for China’s economy and was more concerned about the potential impact of slower growth on other countries in the region, partly due to closer trade ties. A one percent growth shock from China could take more than 0.3 percentage point from overall Asian growth, IMF staff calculations showed.
In the short term, China’s growth rate of 6.9 percent between July and September meant the country could beat the IMF’s forecast of 6.8 percent expansion in 2015, he said. “Actually at this moment the ... overall 2015 growth rate may be close to 7 (percent) and above our 6.8 percent,” he said. Reuters
The Silk Road Forum 2015, was opened in Madrid on Wednesday with the participation of around 300 guests from over 30 nations and international institutions. The Forum is co-organized by the Development Research Centre of the State Council of China, the Centre for International Relations and Sustainable Development and the Chinese Embassy in Spain. The objective of the forum is to unite the Think Tanks of countries involved in the Silk Road and promote communication at an international level, with the aim of uniting institutions, promoting the flow of commerce and communication to build a high-end platform.
12 | Business Daily
October 30, 2015
Asia
Japan seen holding rate as output rebound offers some relief Factory production rose 1.0 percent in September after two straight months of falls
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he Bank of Japan (BOJ) is expected to hold monetary policy steady today even while diluting its rosy inflation forecasts, sources say, clinging to the hope a tightening job market will underpin consumption and help the economy emerge from a soft patch. Some BOJ policymakers have worried that sluggish demand in emerging Asian markets could hurt output and corporate sentiment enough to delay planned capital investment and wage hikes. But yesterday’s data showing a healthy rebound in output has eased pressure on the central bank to use its diminishing policy ammunition now, analysts say. The BOJ is likely to stand pat with financial markets stable and no clear evidence yet that overseas headwinds are damaging corporate sentiment, say sources familiar with its thinking. “Corporate activity remains firm for now and a positive economic cycle is intact. The key is how overseas headwinds could affect all this,” said one of the sources. At Friday’s rate review, the BOJ is expected to maintain its pledge to increase base money, or cash and deposits at the central bank, at an annual pace of 80 trillion yen
Some bet that despite his optimistic tone on the economy, BOJ Governor Haruhiko Kuroda may surprise markets by easing, as he did in October last year
(US$663 billion) through aggressive asset purchases.
Glimmer of hope
Japan’s economy contracted in April-June and may shrink again in July-September on weak exports. Many analysts say any rebound in the current quarter will be too weak for the BOJ to achieve its 2 percent inflation target next year. With the economy skirting recession, the BOJ is expected in a twice-yearly report due on Friday to cut its economic and price growth
forecasts for the fiscal year that began in April. But sources say the BOJ will only slightly tweak its forecast that inflation will hit 1.9 percent next fiscal year, giving it grounds to argue that Japan can hit the 2 percent inflation target without expanding stimulus. A recent Reuters poll found economists are split on whether the BOJ will pull the policy-easing trigger. Some bet that despite his optimistic tone on the economy, BOJ Governor Haruhiko Kuroda may
surprise markets by easing, as he did in October last year. BOJ officials have said economic conditions are much better than last October, when consumption took a direct hit from a sales tax hike, and companies were in no mood to raise wages. When excluding the downward pressure from lower oil prices, consumer inflation is accelerating as more companies say they feel comfortable about raising prices. Markets have shifted their bets more toward no action after a string of positive economic data this week. Factory production rose 1.0 percent in September after two straight months of falls, data showed yesterday, as robust U.S. and domestic demand for cars and cosmetics made up for weak machinery demand in China. Output is seen rising roughly 4 percent in October-December after two straight quarters of declines, underscoring the BOJ’s view the economy will stay on the moderate recovery track. “The output data was not that bad, so it doesn’t give the BOJ justification to ease,” said Taro Saito, senior economist at NLI Research Institute. “I doubt it will use its precious remaining options now.”
Modi urges ‘comprehensive’ climate deal Modi also invited African nations to join an alliance of solar-rich countries that he plans to launch in Paris on November 30 Emily Ford
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ndia’s Prime Minister Narendra Modi called yesterday for a “comprehensive and concrete” agreement on climate change in December, as he addressed African leaders at a major summit in New Delhi. Modi said no one had contributed less to global warming than India and Africa, warning that “the excess of (the) few cannot become the burden of many”. He was speaking as world leaders prepare to meet in Paris in December to try to reach an agreement on tackling climate change, with the goal of capping warming
at two degrees Celsius (3.6 degrees Fahrenheit) over preIndustrial Revolution levels. “We are each making enormous efforts with our modest resources to combat climate change,” the Indian premier told delegates from all 54 African Union nations gathered in New Delhi. “So, when the world meets in Paris in December, we look to see a comprehensive and concrete outcome that is based on the well established principles in the UN Convention on Climate Change.” India has pledged to generate 40 percent of its electricity from renewable
sources within 15 years in an action plan submitted to the UN. But India, which relies heavily on polluting coal, has rejected calls to curb its use, saying developed countries were mostly to blame for climate change. Developing countries insist rich nations should lead the way in slashing climate-altering greenhouse gas emissions, arguing they started polluting earlier, and should bear a heavier duty for fixing the problem. But industrialised nations balk at being saddled with a higher burden of responsibility.
Delayed for nearly a year due to the Ebola crisis, the approximately 1,000-delegate summit represents the highest number of foreign dignitaries to descend on India since 1983 and is thought to be the biggest ever overseas gathering of African leaders. Modi met yesterday leaders of countries including Angola, Ethiopia and Egypt after holding talks on Wednesday with leaders including Zimbabwe’s Robert Mugabe and Muhammadu Buhari of Nigeria, the oil-rich nation key to India’s energy interests on the continent. New Delhi has worked hard to showcase its commitment
Reuters
to the continent’s economic rise and historic friendship with African nations as it vies for a greater share of its natural resources. Despite more than doubling since 2007 to US$72 billion in the fiscal year 2014-15, India’s twoway trade with Africa is still comparatively small to China. But it is gaining ground, dominated by the energy sector and led by private entrepreneurs. Modi said Africa and India were “two bright spots of hope and opportunities in the global economy,” as he pledged US$10 billion in concessional credit over the next five years to African nations. “India is now a major source of business investments in Africa,” he said. Africa primarily exports raw materials to India, including precious metals, gemstones and oil, which are then processed into goods such as cut diamonds or refined petroleum products.
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Business Daily | 13
October 30, 2015
Asia S. Korea’s household debts grow at fast pace on low rates
Blackmores to sell baby formula in China
Corporate loans by banks stood at 750.9 trillion won at the end of last month
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ousehold debts in South Korea kept a fast-growing trend last month on low interest rates, financial watchdog data showed yesterday. Outstanding debts owed by households to local banks came in at 615.1 trillion won (US$539 billion) as of end-September, up 6.2 trillion won from a month earlier, according to the Financial Supervisory Service. The September growth was down from a 7.7 trillion-won increase in August, but it increased at a fast pace on the back of low borrowing costs that led to demand for home transactions.
Mortgage loans extended by banks increased 5.9 trillion won from a month earlier to 457.3 trillion won as of the end of September, after growing 6 trillion won in August. Household debts began to rise at a rapid clip from the second half of last year as the Bank of Korea cut its policy rate by a quarter percentage point in August and October last year each. The bank lowered it by the same amount in March and June this year to an all-time low of 1.5 percent. Corporate loans by banks stood at 750.9 trillion won at the end of last month, up 7 trillion won from the previous month.
Household debts began to rise at a rapid clip from the second half of last year as the Bank of Korea cut its policy rate by a quarter percentage point
Mortgage loans extended by banks increased 5.9 trillion won from a month earlier to 457.3 trillion won as of the end of September
The delinquency ratio of bank loans was 0.66 percent as of endSeptember, down 0.1 percentage point from a month earlier and 0.2 percentage points from a year ago. The bad debt ratio for homebacked loans came in at 0.4 percent at the end of September, down 0.06 percentage points from the previous month and 0.19 percentage points from the same month of last year. Xinhua
Thailand sees policy rate rise, higher GDP next year The ministry reiterated its 2015 economic growth forecast of 2.8 percent Kitiphong Thaichareon
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hailand’s benchmark interest rate is expected to rise next year following an anticipated hike by the U.S. Federal Reserve and recovery in the domestic economy, a senior ministry official said. The policy rate is likely to rise to 1.75 percent late next year from the current 1.50 percent, Kulaya Tantitemit, chief economist at the ministry’s Fiscal Policy Office, told reporters. The central bank’s monetary policy committee (MPC) reviews policy next
on November 4 and most economists expect no change after two surprise cuts in March and April to help activity. The military took power in May 2014 but has struggled to revive Southeast Asia’s second-largest economy, with exports and domestic demand still weak. Growth last year was 0.9 percent. The ministry reiterated its 2015 economic growth forecast of 2.8 percent, cut last week from 3.0 percent. “Falling exports are the main reason for the downgrade for this year,”
Kulaya said, adding exports might contract 5.4 percent this year, rather than fall 4 percent as seen previously. That would mark the third straight year of declining exports. Deputy Prime Minister Somkid Jatusripitak said on Wednesday that despite the weakness: “Thai exports have still performed better than in many other countries ... so we don’t have to panic.” The ministry’s revised growth forecast for 2015 is still higher than the central bank’s 2.7 percent, which some economists believe is still too optimistic. For next year, the ministry predicted growth of 3.8 percent, the top end of a 3.4-3.8 percent range revealed last week, driven by higher public investment spending, Kulaya said. Spending on infrastructure projects is expected at around 82.2 billion baht (US$2.32 billion) in the current fiscal year that began on October 1, up from 35 billion baht in the previous year, she said, adding that should help spur private investment. Reuters
KEY POINTS Sees policy rate rise to 1.75 pct late next year from 1.50 pct Sees 2016 GDP growth of 3.8 pct Cuts 2015 GDP growth forecast to 2.8 pct from 3.0 pct Sees 2015 exports down 5.4 pct vs 4 pct fall previously
Australian vitamin maker Blackmores Ltd said it would join dairy producer Bega Cheese Ltd to produce and sell baby formula to China, sending shares in both firms to record highs. Blackmores, which reported an almost tripling in third quarter profit on strong vitamin sales to China, said it would start the formula sales within months, expanding into a market forecast to be worth US$30 billion by 2017 amid ongoing concerns about the safety of locally made products. Blackmores will compete against global dairy firms such as Danone SA, Mead Johnson Nutrition Co and New Zealand’s Fonterra.
Sri Lanka joins Open Government Partnership Sri Lanka has endorsed the Open Government Declaration committing to foster a culture of open government, the country’s foreign ministry said yesterday. In a statement, the ministry said Sri Lanka has become the newest participating country of the Open Government Partnership (OGP). The OGP is a multilateral initiative by the United States launched in 2011 to provide an international platform for domestic reformers committed to making their governments more open, accountable and responsive to citizens.
Only three Indonesian tin firms meet export rules Only three Indonesian tin companies have so far met new export rules to be introduced at the start of November, an industry group said yesterday, likely again curtailing shipments by the world’s top tin exporter. Indonesia halted tin exports in August due to rules aimed at cracking down on environmental damage and smuggling, as well as enforcing royalty and tax payments, but smelters ramped up exports in September ahead of the latest changes. Benchmark tin prices have so far failed to react to the stop-start exports, and are down 21 percent this year.
LG Elec profit skids South Korea’s LG Electronics Inc reported a 37 percent slide in quarterly profit as its mobile device business lost money, but still beat market expectations on strong home appliances earnings and sales of high-end televisions. The world’s No.2 television maker behind Samsung Electronics Co Ltd said third-quarter operating profit was 294 billion won (US$257 million), down from 465 billion won a year earlier. That beat a 266 billion won forecast from Thomson Reuters SmartEstimate, derived from a poll of 29 analysts.
IndiGo’s IPO three times oversubscribed InterGlobe Aviation, owner of Indian budget airline IndiGo, received orders for more than three times the number of available shares for its 30.2 billion rupees (US$463.7 million) initial public offering, according to exchange data. InterGlobe had received orders for 101.8 million shares or 3.38 times the number of shares on offer as 0812 GMT yesterday, according to data from National Stock Exchange and BSE Ltd. Foreign institutional investors were the most active bidders, having placed orders worth 10.9 times the number of shares slotted for all institutional investors.
14 | Business Daily
October 30, 2015
International Deutsche Bank cutting 15,000 jobs Deutsche Bank is slashing 15,000 jobs and shedding assets in which some 20,000 staff are employed, as new Chief Executive John Cryan starts to implement a deep overhaul aiming to improve returns at Germany’s biggest bank. Cryan said the bank will sacrifice its 2015 and 2016 dividends as it seeks to bolster its finances and retain money to pay for sins of the past. “I do not think that 2016 and 2017 will be strong years,” he told reporters yesterday. Cryan is under pressure to overhaul Germany’s biggest bank, with costly litigation from past scandals.
Bradesco raises loan-loss provisions as defaults climb Banco Bradesco SA increased loanloss provisions in the third quarter in line with forecasts, showing how the Brazilian bank is bracing for consumer and corporate loan defaults as a result of the country’s deepest recession in a quarter century. Chief Executive Officer Luiz Carlos Trabuco took advantage of a large gain from deferred tax assets booked last quarter, and funnelled most of those proceeds into so-called excess loan-loss reserves. At the same time, rising consumer defaults led Bradesco to boost recurring provisions by 8.5 percent, the fastest pace in five quarters.
Russian oil production poised for record The nation’s government has proposed increasing the tax burden on energy companies after the collapse in the price of crude, which together with natural gas provides almost half of state revenue Stephen Bierman and Julian Lee
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ussian oil output is poised to break a post-Soviet record for the fourth time this year as the nation’s producers once again prove themselves resilient to a slump in crude prices. Production of crude and a light oil called condensate is on track to reach 10.77 million barrels a day
in October, topping the previous month’s revised figure and setting a record for the second month running, according to Bloomberg estimates based on Energy Ministry data. Russian production has withstood a collapse in oil prices amid a global supply glut, while output in the U.S. has fallen about 5 percent from its
EU to increase number of trade court judges The European Parliament approved a reform of the EU’s court for competition cases on Wednesday that will increase the number of judges and shorten the time it takes to deliver judgments. The EU General Court, one of the three bodies that make up the Court of Justice of the European Union, deals mostly with competition, state aid and trademark cases brought by companies. EU lawmakers voted in favour of raising the number of judges by 21 to 56 by 2019 to try to cut the backlog of cases that has more than doubled in the last five years.
Goldman to pay fine for not supervising banker Goldman Sachs Group Inc will pay a US$50 million fine for a banker who took confidential documents from the Federal Reserve Bank of New York and shared them with a client, the New York Department of Financial Services said on Wednesday. As part of the settlement, Goldman took the rare step of admitting guilt in the case, conceding it had failed to properly supervise the now former banker, Rohit Bansal. U.S. federal prosecutors are preparing to unveil criminal charges against Bansal and former Federal Reserve employee Jason Gross, a person familiar with the matter said on Monday.
June peak. Oil-extraction and export tax rates shrink in Russia at lower prices, giving companies a buffer against the slump, while the weaker ruble has reduced costs. “Russian oil companies are insulated from oil price corrections,” said Artem Konchin, an oil and gas analyst at Otkritie Capital in Moscow. The production figure for October is derived from output data from the Energy Ministry’s CDU-TEK unit for the first 28 days of the month. The remaining days were estimated using an average of the previous seven days. Output from January to October averaged about 10.7 million barrels a day, a 1.3 percent increase over the same period in 2014, the data show. That’s in line with the Russian Energy Ministry’s full-year forecast for production of 533 million tons, or 10.7 million barrels a day. The nation’s government has proposed increasing the tax burden on energy companies after the collapse in the price of crude, which together with natural gas provides almost half of state revenue. Oil output will suffer without a predictable tax system, Rosneft OJSC Chief Executive Officer Igor Sechin said October 13. Bloomberg News
US House passes two-year budget deal that averts default The bill now goes to the Senate where it is expected to pass
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he US House of Representatives on Wednesday passed a bipartisan, two-year budget deal that boosts federal spending by US$80 billion, reduces a government shutdown threat and raises the debt ceiling through the end of Barack Obama’s presidency. Nearly 80 Republicans joined a united front of Democrats in favour of the legislation, which passed 266 to 167. The deal is the result of weeks of secret negotiations between the White House and outgoing House Speaker John Boehner, who has stated his desire to clear the decks of any fiscal crises before his successor takes the gavel. Congress must raise the federal borrowing limit by November 3, or risk Washington ending up in default. The bill now goes to the Senate where it is expected to pass, effectively bringing to a close a
series of fiscal fights as the two parties gear up for the 2016 presidential race. Republican and Democratic lawmakers fought several battles over borrowings between 2011 and 2014 that roiled financial markets, caused an unprecedented downgrade of the country’s triple-A debt rating by Standard & Poor’s, and forced a partial government shutdown for 16 days in 2013. “This agreement is by no means perfect, but on balance it’s a good agreement for our troops, for taxpayers, and for the American people,” Boehner said in a statement. The legislation raises federal spending caps by some US$80 billion until September 30, 2017, with funding split between domestic programs and the military. Another roughly US$31 billion in “contingency operations” funding would go to the Pentagon, offset by
tweaks to entitlement programs including Social Security.
‘Utter surrender’
Several conservative Republicans opposed the deal over the way it was negotiated in secret, but also because it failed to reduce the US$18 trillion deficit. “Instead of passing this bill, which pushes us in the wrong direction by increasing spending and raising the debt limit, we should have answered the call of the American people to reduce the national debt and balance our budget,” House Republican Gary Palmer said. In a sign of how Washington’s federal spending habits and its huge deficit will continue to flare up as issues in the presidential race, several of the Republican White House hopefuls including Senator Marco Rubio and Senator Ted Cruz expressed their opposition. Cruz blasted it as “complete and utter surrender,” while Senator Rand Paul insisted to The Hill that he would try to do “everything I can to stop it.” The deal is one of Boehner’s final accomplishments. Republicans on Wednesday elected Paul Ryan as their candidate to be the next speaker of the House. Ryan said in a statement ahead of the speaker vote that while he disapproved of the closed-door dealings that yielded the agreement, he would ultimately support it. “As with any budget agreement, this one has some good, some bad, and some ugly,” he said. “What has been produced will go a long way toward relieving AFP
Business Daily | 15
October 30, 2015
Opinion
Holiday pudding - rate hike wires with a side of dissent Business
Leading reports from Asia’s best business newspapers
James Saft
Reuters columnist
THE STRAITS TIMES Singapore has emerged as the most business-friendly economy in the world for the 10th year in a row. According to a World Bank league table, Singapore’s regulatory environment is highly beneficial for entrepreneurs. The annual “Doing Business” report released on Tuesday measures the ease of doing business in 189 economies based on 10 areas of business regulation, including starting a firm, getting credit and electricity, and trading across borders. By those measures, Singapore led the pack with a score of 87.34. New Zealand was close behind on 86.79.
THE NEW ZEALAND HERALD The Reserve Bank opted to leave its official cash rate unchanged at 2.75 per cent, which was in line with market expectations, but said further reduction in the rate “seemed likely”. The bank’s statement left out its by now standard comment about the exchange rate being too high. Instead, the bank directly linked the exchange rate to interest rates, saying a higher New Zealand dollar would require a lower interest rate path than would otherwise be the case. The Reserve Bank said concerns remained about the prospects for slower growth in China and East Asia especially.
THE PHNOM PENH POST Private-sector enterprises urged Cambodia’s Customs Department yesterday to introduce an online application and payment system for shipments, rather than the manual method used currently that eats into time and resources. At a luncheon jointly organised by CAMFEBA and the American Chamber of Commerce, a Tax Department official said a strategy was in place to improve customs clearance operations and establish a single-window system, though the department was waiting for funding to implement it. “We are developing the program and hope to have it in the future,” said Sang Sinavith, at the General Department of Taxation.
THE AGE Yesterday’s surprisingly soft inflation for the third quarter has economists around Australia revisiting their forecasts for next Tuesday’s interest rate decision by the Reserve Bank of Australia. Those who predicted a cut, to 1.75 per cent, early next year said governor Glenn Stevens might now bring it forward to the November 3 meeting; those discounting any chance of a reduction agreed a case could now be made for further easing. Finally, those who had stuck to their guns on a November cut said “told you so”.
Fed Chair Janet Yellen appears to be sailing into the possibility that she and colleagues will raise rates over the objections of one or more FOMC voters
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ow that China appears not to matter much any more, the Federal Reserve finds itself in the awkward position of getting ready to deliver an initial interest rate hike in December with a side order of dissent. The Fed on Wednesday kept interest rates steady but prepared the way for finally taking rates higher in its last 2015 meeting. “In determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress - both realized and expected - toward its objectives of maximum employment and 2 percent inflation,” the Federal Open Market Committee said in its statement accompanying the decision. Specifically mentioning its next meeting was taken as a clear sign that, data developments aside, a hike is a very live possibility. Traders buying fed fund futures, which facilitate bets on interest rate changes, now put a 42.6 percent probability on a December hike, up from about 33 percent on Tuesday and just 8 percent a month ago. Much seems to have changed in a month, both outside the Fed, where China is rated less of a threat, and inside, where a bust-up over hiking is threatened. Gone is September’s caution that global developments (i.e. China) may “restrain” activity and put “downward pressure” on inflation. Instead, just a flat statement that the Fed is
are expected to be less than inspiring and recent durable goods numbers point to some potential for softening.
A hike with dissents sends a difficultto-read message to financial markets, which already may be feeling confused about the central inputs to policy
“monitoring” developments overseas. Well, the Fed are probably always “monitoring” global conditions. This neatly illustrates just how poorly thought through was September’s decision to hang the decision not to hike on the peg of Chinese ructions. Given that the economic data coming out of China remains both mixed and totally unreliable, not to mention that market prices are a sham, observers are left with very little of substance on which to judge future levels of concern. Equities initially sold off on the news, but rallied later in the day. To be sure, U.S. data between now and the December meeting could go either way. GDP figures reported tomorrow
When discussion becomes dissent All else being equal, however, Fed Chair Janet Yellen appears to be sailing into the possibility that she and colleagues will raise rates over the objections of one or more FOMC voters. While today’s dissenter, Jeffrey Lacker of the Richmond Fed, who wanted an increase, will presumably be pleased with a hike, Federal Reserve Board members Lael Brainard and Daniel Tarullo have both laid out arguments for staying on hold within the last month. Both argued that the Phillips curve, the supposed relationship between unemployment and inflation, no longer works well in current conditions. That idea is still central to how Yellen and Vice Chair Stanley Fischer view the world. Much of the impetus for raising rates now comes from the expectation that improvements in labour conditions will have a corresponding effect of pushing wages, and with them prices, upward. Brainard disagrees: “A variety of econometric estimates would suggest that the classic Phillips curve influence of resource utilization on inflation is, at best, very weak at the moment. The fact that wages have not accelerated is significant, but more so as an indicator that labour market slack is still present and that
workers’ bargaining power likely remains weak,” she said in an October 12 speech. That’s a bit of a Copernican statement from someone at the heart of the Fed and it remains to be seen if Yellen as pope can take it on board or will press ahead as if it is not true. “This is the most exciting speech I have read in forever,” economist and Fed watcher Tim Duy of the University of Oregon wrote just after Brainard’s speech. “Not necessarily for the content. But for the politics.” Those politics don’t seem to have gotten any easier to parse. The data don’t seem to have moved decidedly in one direction or the other, nor are they likely to in the next six weeks. That may well argue for Yellen and Fischer temporizing at the December meeting, pushing the decision further out without fully engaging with the central argument Tarullo and Brainard make. That possibility, of waiting until March or so, may explain the comeback equities made later in the day. Either way, the decision is problematic. A hike with dissents sends a difficult-to-read message to financial markets, which already may be feeling confused about the central inputs to policy. A delay, without fuller explanation, as opposed to a desire for more data, will do the same. The pressure is on for Yellen to deliver some response to dissent when next she speaks in back-to-back appearances in the first week of December. Reuters
16 | Business Daily
October 30, 2015
Closing Beijing warns of severe winter smog, worsened by El Niño China could face another bout of severe air pollution this winter with unfavourable weather expected to aggravate the problem, the environment ministry said yesterday. Smog has emerged as a major problem for the government, which has relied on coal and highly polluting heavy industries to fuel its economic growth, especially in northern regions. The Ministry of Environmental Protection said the El Niño phenomenon meant that wind and rain were likely to be unusually low, and so emissions produced by coal-fired urban heating systems would not be easily dispersed.
Bank of China’s profit slips for first time since crisis Bank of China Ltd.’s profit fell in the third quarter for the first time since the global financial crisis as the Chinese economy faltered and the lender set aside record provisions for bad loans. Net income slipped 1.5 percent from a year earlier to 40.8 billion yuan ($6.4 billion), the company told Hong Kong’s stock exchange yesterday. That was less than the 42 billion yuan average estimate of three analysts. The lender was the second of China’s big-four banks to report as weakness in the economy caps demand for credit and leads to more soured loans.
Beijing drops one-child cap after three decades The Central Committee’s communiqué marks the first step in the official roll-out of the 2016-20 blueprint
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hina’s ruling Communist Party will abandon the onechild policy introduced in the late-1970s to defuse a demographic time bomb that threatens to choke growth in the world’s second biggest economy.
The party’s decisionmaking Central Committee approved plans to allow all couples in China to have two children, the official Xinhua News Agency said yesterday at the end of a four- day party gathering in Beijing. The move, which had been
China signs deal for 100 Airbus A320s
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expected, comes after a previous effort to relax the policy fell well short of the goal of boosting births by 2 million a year. “It shows the party wants to take action as soon as possible, and shows there is no time to delay for China
to modify its population policy,” said Wang Yukai, a governance professor at the Beijing-based Chinese Academy of Governance. “They couldn’t wait for the legislation to pass next year. The leaders want the new policy now.” The polices are part of President Xi Jinping’s blueprint to manage the economy’s shift to slower, more balanced growth. The five-year plan represents Xi’s best chance to implement social and economic reforms outlined since he took power in 2012. China is attempting to avoid the “middleincome trap” and complete its transition from a investment-and-exportdependent developing nation to a “moderately prosperous society” with an economy powered by services, consumer spending and innovation. The “one-child” policy, which limited most couples to one or two children
depending on ethnic background and where they live, was a cornerstone of late leader Deng Xiaoping’s efforts to overhaul the economy. When the policy was adopted 36 years ago, the thinking was that the birth rate of almost 3 children per woman was a drag on growth. The cap has since been relaxed and calls to lift it completely have gained traction as the fertility rate plunged and eroded the labor pool. The country’s working-age population shrank for the first time in at least two decades last year as growth slowed, echoing Japan’s downturn in the late 1990s. Shares of Danone, one of the world’s biggest producers of baby formula, rose as much as 3 percent to the highest since April on the news. China consumes about US$19 billion of baby food annually, making it the biggest market for such products after sales more than doubled in five years, according to Euromonitor. The Central Committee’s communiqué marks the first step in the official roll-out of the 2016-20 blueprint. More details are expected in coming days with the release of the draft plan, which won’t be completed until the national legislature approves it next year. Bloomberg News
PetroChina net profit down 68.1 pct to September
CPC meeting confirms expulsion of 10 former officials
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hina signed a contract to buy 100 A320 aircraft from European manufacturer Airbus on yesterday, a spokesman for the firm told AFP, worth US$9.7 billion at list prices. The deal was signed as German Chancellor Angela Merkel met Chinese Premier Li Keqiang at the Great Hall of the People in Beijing. The European Union is China’s biggest trading partner and Merkel’s trip comes as European leaders jockey for trade and investment deals with the world’s second largest economy. Airbus -- which has an assembly facility in the northern Chinese port of Tianjin -- is engaged in a fierce struggle with Boeing of the US for dominance in the crucial Chinese market. Yesterday’s agreement also included the confirmation of 30 options for twin-aisle A330s, which were among a 75-plane deal announced in June ahead of a visit by Li to Airbus headquarters in the French city of Toulouse, the company spokesman told AFP. During Chinese President Xi Jinping’s visit to the US last month, Seattle-based Boeing announced a record purchase of 300 aircraft worth around US$38 billion.
etroChina, China’s biggest oil and gas producer, reported a 68.1 percent drop in net earnings for the first nine months of the year, as oil prices fell. The company’s average realised oil price declined by 48.8 percent to US$51.16 a barrel. Nine-month net profit was 30.6 billion yuan (US$4.81 billion), down from 96.0 billion in the same year-earlier period, the state-controlled company said yesterday in a filing with the Shanghai stock market. Net profit for July-September declined 81.4 percent to 5.2 billion yuan (US$818.23 million) from 27.9 billion yuan a year earlier. Operating profit at the exploration and production segment fell 68.1 percent in the first nine months to 46.5 billion yuan, while crude output rose 3.3 percent on year to 722.9 million barrels. The refining and chemicals business posted an operating profit of 3.0 billion yuan, compared with a loss in the same period last year of 8.8 billion yuan. The marketing division posted an operating loss of 978 million yuan on low prices for refined fuels, compared to a profit of 10.6 billion yuan during the same period last year.
AFP
Reuters
he fifth plenary session of the 18th Communist Party of China (CPC) Central Committee yesterday endorsed prior decisions to revoke the membership of 10 former officials, including Ling Jihua. A former vice chairman of the Chinese People’s Political Consultative Conference (CPPCC) National Committee and head of the United Front Work Department of the CPC Central Committee, Ling was found to have seriously violated the political discipline and rules of the CPC, taken advantage of his posts to seek profits for others and accepted huge bribes. Others on the expulsion list are Zhou Benshun, Yang Dongliang, Zhu Mingguo, Wang Min, Chen Chuanping, Qiu He, Yang Weize, Pan Yiyang and Yu Yuanhui. Their violations include abuse of power, bribery, embezzling public funds, leaking state secrets, among others, according to previous statements from the top anti-graft body. Previous decisions to strip them of their membership were made by the Political Bureau of the CPC Central Committee. According to the CPC constitution, a decision to expel a member or alternate member of the Central Committee must be approved by a two thirds majority vote at a plenary meeting of the Party committee to which he or she belongs. Xinhua