MOP 6.00 Closing editor: Joanne Kuai Year IV
Number 912 Wednesday November 4, 2015
Publisher: Paulo A. Azevedo
Galaxy tops gaming market for first time since January Page 7
Chinese banks lobby to reduce provision requirements Page 8
Hong Kong retail sales contract again in September Page 16
Illicit Assets to be Repatriated
Britain has agreed to repatriate a fortune to Macau. About MOP350 million of ill-gotten assets acquired by disgraced former Secretary for Transport and Public Works Ao Man Long. Who was jailed in 2008 for bribery and money laundering. Under the agreement, ‘most of the illicit assets abroad’ will be repatriated to the SAR, the government said. Ao was the most senior official to be tried since Macau returned to Chinese rule in 1999. He is currently serving 29 years in a maximum security prison in Coloane Page 2
Different strokes for different folks There are official numbers. And there are independent numbers. Six Wall Street firms have analysed the Chinese economy. Using different methods . . . and reaching incongruous results
HSI - Movers November 3
Name
%Day
Galaxy Entertainment
+3.80
Sands China Ltd
+3.76
Hengan International
+3.31
Cathay Pacific Airways
+2.78
China Resources Land l
+2.40
Link REIT
-0.32
Ping An Insurance Gro
-0.35
China Mengniu Dairy C
-0.44
Sun Hung Kai Propertie
-0.84
China Resources Powe
-0.95
Source: Bloomberg
Page 10
Timeline of tragedy An alleged suicide has ignited widespread public scepticism. Regarding the tragic death of Customs chief Lai Man Wa. The Secretary for Security has denied the gov’t has withheld information. And says an investigation will follow two lines of enquiry. A timeline of Ms. Lai’s last movements has been revealed. While police reveal the deceased has tested positive for consumption of sleeping and anti-anxiety pills. Ms. Lai was found in a public toilet with multiple injuries and a plastic bag wrapped round her head on Friday
Page 2
I SSN 2226-8294
Test case potential
Uber is insistent. The American app-driven transportation service says its modus operandi is total legitimate. And that its provision of drivers adheres to local laws and regulations. The company is considering legal action against the authorities. To dispute swingeing fines imposed on two of their drivers. Plus impoundment of vehicles and mobiles
Page 3
www.macaubusinessdaily.com
Gaming
Challenging times SJM’s adjusted EBITDA. Decreased 49.5 pct y-o-y in Q3 to HK$884 mln (US$114 mln). Profit attributable to owners decreased 81.4 pct to HK$285 mln. While gaming revenue decreased 37.9 pct to HK$11.24 bln in the period
Page 5
2015-11-4
2015-11-5
2015-11-6
21˚ 27˚
22˚ 26˚
22˚ 25˚
2 | Business Daily
November 4, 2015
Macau Over 100 Wynn Palace construction workers protest Some 130 non-resident construction workers on the Wynn Palace project said yesterday that they were forced to work overtime by Yasha (Macau) Engineering Co Ltd., a sub-contractor on the construction site. The workers gathered in front of the Chinese Liaison Office yesterday morning, complaining in addition that the company had been paying them MOP400 per day instead of the MOP900 per day it had promised. The Labour Affairs Bureau said the case involves about 200 non-local construction labourers, who first raised their demands with the Bureau on October 26. Claiming it had followed up on the issue immediately, the Bureau said the uncooperative attitude of the workers had affected the progress of co-ordination.
Britain to repatriate MOP350 mln‑worth of Ao's ill-gotten assets
T
he British Government is to return to the MSAR some £28.71 million (MOP350 million) of corrupt assets held in the country by former disgraced Public Works Secretary Ao Man Long.
The repatriation of the assets was marked by the signing of an agreement between British Consul General to Hong Kong and Macau Caroline Wilson and the city’s Secretary for Administration
and Justice Sonia Chan Hoi Fan yesterday. The repatriation has been facilitated by the framework of the United Nations Convention Against Corruption. In January 2008, Ao was found guilty of corruption and money laundering and sentenced to forfeit all of his assets, including a London flat plus bank deposits and bonds. In 2012, Macau’s supreme court ruled that Ao was guilty of nine counts of bribery and money laundering, extending his jail sentence by six months to a total of 29 years. Among the charges Ao was found guilty of receiving a bribe of HK$20 million to help companies run by Hong Kong businessmen Joseph Lau Luen Hung and Steven Lo Kit Sing secure five parcels of land opposite Macau
International Airport to develop the upscale residential project La Scala. The Macau Government formally asked the UK to co-operate in May 2010 regarding the retrieval of Ao’s corruption assets, a Court of Second Instance judgment reveals. Ms. Sonia Chan told media yesterday that “almost all” of Ao’s corrupt overseas assets have been recovered. Ao Man Long is the most senior official to be tried since Macau returned to Chinese sovereignty in 1999. His trial was the biggest corruption case in Macau’s history and anti-graft officers said at the time that they had evidence he had acquired a fortune of about US$100 million, more than 57 times his income over seven years as a top policy Secretary. S.L. with Reuters
Government: Nothing hidden regarding Lai’s death The alleged suicide of Customs chief Lai Man Wa last Friday has ignited public misgivings. The Secretary for Security, however, has denied that the government has withheld information from the public. Meanwhile, the government offered a clearer picture of the timeline of the tragedy yesterday
S
ecretary for Security Wong Sio Chak has stressed that the government did not conceal any information regarding the death of the Director-General of Customs Services Lai Man Wa, who allegedly committed suicide last week. Meanwhile, a further official announcement on the case yesterday indicated that the senior official had tested positive to a composition of sleeping and anti-anxiety pills. In a press briefing yesterday, the Secretary said the government would continue its investigation into the case on two paths, those being whether the death is related to crimes, and the reasons why the Customs chief might have committed suicide. The government has announced the arrangements for Lai’s funeral. A memorial ceremony will be held from 4:00pm to 10:00pm today in Kiang Wu Funeral Home. Tomorrow, following burial rituals in the morning, her body will be interred in São Miguel Arcanjo Cemetery. Last Friday, the Customs chief was found dead in a public toilet at the residential Ocean Garden complex. The 56-year old allegedly committed suicide by slashing her neck and wrists,
swallowing sleeping pills and wrapping a plastic bag around her head. A cutter knife with blood and sleeping pills were found in her bag, giving rise to public doubts. The attending doctor of the Forensic Pathology Service of Hospital Conde S. Januário, O Heng Wa, said a quick test of Lai’s urine sample on Friday showed that she was positive for sleeping pills and anti-anxiety pills. However, the doctor claimed that the hospital would need further examinations to determine exactly what medicine was taken and the quantity the Customs chief had consumed. In addition, Secretary Wong said the Customs director’s mobile phone was found at the scene but was shut down due to urine, and that the authorities were still unable to turn it on. The deceased was supposed to have joined Secretary Wong for a meeting in Zhuhai at 4:30 pm last Friday. However, she did not show up and was unreachable. Meanwhile, the Commissioner General of the Unitary Police Service, Ma Io Kun, said yesterday that Lai had called him around 11:30 am on that day regarding matters related to the Zhuhai meeting. K.L.
Timeline* Last Friday 1:24 pm
CCTV cameras of Ocean Garden show Lai arrive at her apartment, transported by her driver.
2:35 pm
She left the building alone.
2:37 pm
She headed to the public toilet where her body was later found. The site was 200 metres from her apartment.
3:16pm - 3:31 pm
Cellular data usage indicated Lai’s mobile phone was still online.
3:30 pm
Police 999 hotline received a report of the case.
3:33 pm
Firemen arrived at the scene. Lai was sent to the Hospital Conde S. Januário.
4:03 pm
Usage of cellular data used on Lai’s phone totally stopped, meaning her mobile phone was turned off at that time.
4:41 pm
Lai was pronounced dead at the hospital.
5:38 pm
Authorities confirmed the identity of Lai. The Unitary Police Service head, Ma Io Kun, informed Chief Executive Fernando Chui Sai On.
7:30 pm
The CE announced Lai’s death to the media.
* Based on information announced by the government yesterday
Business Daily | 3
November 4, 2015
Macau
Uber ready to fight local authorities The American company says it is operating legally in the territory and is preparing to file a formal complaint against the fines imposed upon two of its drivers João Santos Filipe
jsfilipe@macaubusinessdaily.com
M
obile application enterprise Uber is ready to engage in a legal war with local authorities after two drivers offering services through the app were fined MOP30,000 each and had their cars impounded. The two drivers were said by authorities to have provided unlicensed taxi services in the territory. In a press conference held yesterday, the American company stated the drivers are fully legal and that the company will continue to operate. “Our partners are fully compliant with legislation. They have been ever since they started their business. Nothing has changed, so these fines are actually unjustified and impounding their cars is unjustified”, the representative of law firm Asia Pacific Counsel, Hong Ng, which works with Uber, stated yesterday. “Prior to the soft launch in Macau, we undertook an examination of the legal framework and together with local lawyers we determined that our partners would be fully licensed”, Mr. Hon Ng explained. “They are providing the services they have been providing to people visiting the
territory for many years. Business has not changed for them at all. The only difference is that we gave them an extra platform”, he added.
Filing formal complaint
According to the Uber representatives there are reasons to file a formal complaint against the action of local authorities, which is now being considered. “We are looking to work with our partners with the intention of filing a formal complaint to local authorities, which includes but is not limited to the Public Security Forces and possibly the Commission Against Corruption”, he announced. This action was justified by three reasons. The first is that the company believes its partners are working within the legal framework of Macau. Second, they consider the actions of the police regarding these services should have been conducted in co-operation with the Macau Government Tourist Office, if there was a suspicion of breaches of the law and licencing regime. They say this did not happen.
Regarding alleged illegal actions by the authorities, Uber also said that the drivers had their cell phones confiscated, but that this should not have happened if they were not arrested. The company said that the two drivers who were fined were not arrested or charged.
“We support our partners 100 per cent. The same companies that have been serving the people of Macau, tourists for years are the exact same cars that are serving under the Uber platform”, said the company’s North Asia General Manager, Sam Gellman.
4 | Business Daily
November 4, 2015
Macau opinion
Budget pains?
New motor vehicle registrations slide 11.2 pct in third quarter As at the end of September, the city had a total number of licensed motor vehicles of 246,452, which is 4.3 per cent increase year-on-year
José I. Duarte Economist
A
s the end of the year approaches, we get closer to our major annual political event. The Chief Executive will present the Policy Address and submit the 2016 budget for approval by the Legislative Assembly. It is time to take stock of the budget execution and what it means or signals about the government’s activity in a period of continuous strain on the gaming revenues front. Gaming revenues are – and will be in the foreseeable future – the ‘cash cows’ of the tax system. Casino revenues are still remarkable by historical standards but their continuous decline changes significantly the expectations under which many investment plans were developed. Let us review some of the main features of the budget execution in the last, say, five years, post-financial crisis. In those five years, taken together, government revenue amounted to more than 630 billion patacas. Taxes from gambling, at more than 520 billion patacas, exceeded 80 per cent of total revenue, and you may wonder, corresponded to some 285 million patacas per day. Expenditure in the same period was chronically executed below the budgeted amounts. Total expenditure reached less than 270 billion patacas, just about 42 per cent of total revenue. That is worth underlining for it is without parallel in our times. Total revenue more than doubled, consistently, year after year, actual expenditure. As a result, in the last five years alone, the government amassed a combined surplus of some 365 billion patacas. How extraordinary that is! It is enough to say that amount would facilitate the running of more than four years of the 2015 expenditure budget! And that would be achieved without collecting a single additional pataca of revenue at all, from anyone. If the average actual expenditure of the previous five years were taken for reference, that surplus would mean almost seven years of free riding on the surplus accumulated just between 2010 and 2014. Given this frame, how bad does the current year look so far? Revenue results up to September, with three-quarters of the year past, do not look too bad. They are certainly below last year’s, but they are in line with the budgeted amount. Up to September, revenue collected represented close to 77 per cent of the budgeted amount. With the usually endof-year good months still to be accounted for, the actual revenue will very likely exceed the budgeted amount. Expenditure is, as has been the case for years, has been under-executed. The rate of overall execution was just 58 per cent as at September. That value was driven down by the very low level of execution in capital expenditure, which stood below 20 per cent for all its main items. Barring some late, lavish splurge, the year’s expenditure will come in distinctly below budget. That is, even in the most dramatic of years, under threat of austerity measures, the actual surplus at the end of the year may well double the amount budgeted (almost 19 billion patacas) and keep adding to the pile. How about that?
T
here are 246,452 licensed motor vehicles in the Macau SAR according to the latest Transport and Communications Statistics released by the Statistics and Census Service (DSEC) yesterday. The number represents a 4.3 per cent increase year-on-year. Of these, motorcycles and light private cars accounted for 52.0 per cent and 41.3 per cent, respectively. Official data also reveals that new registrations for motor vehicles slid 11.2 per cent in the third quarter of the year. In the first three quarters, the new registration of motor vehicles decreased 2.4 per cent year-on-year due to a 12.6 per cent decline in light private cars.
With regard to traffic accident casualties, the number totalled 394 in September, including one fatality. In the first three quarters, the number of traffic accidents (11,747 cases) edged up 0.1 per cent year-on-year, resulting in 4,010 casualties, with 10 fatalities.
Passenger ferry movements between Macau and Hong Kong and between Macau and Mainland China in the first three quarters (109,618 trips) increased 3.8 per cent yearon-year, with the Ferry Terminal at the Outer Harbour sharing 66.4 per cent of the total.
Cross-border traffic
Airborne
DSEC data also indicates that cross-border vehicle traffic totalled 418,089 trips in September 2015, up 4.7 per cent year-on-year. In the first three quarters, cross-border vehicle traffic (3,819,356 trips) increased 4.6 per cent year-onyear, with 77.5 per cent crossing the Border Gate.
According to DSEC, Macau International Airport had 4,131 commercial flight movements in September 2015, up 5.6 per cent yearon-year. In the first three quarters, commercial flight movements (38,702 trips) increased 9.1 per cent yearon-year, with movements to and from Mainland China, Taiwan and Thailand rising 5.8 per cent, 3.7 per cent and 16.6 per cent, respectively. Meanwhile, helicopter flight movements between Macao and Hong Kong and between Macau and Mainland China totalled 1,204 in September, up significantly by 64.0 per cent year-on-year; helicopter flight movements in the first three quarters (10,553 trips) decreased 3.7 per cent year-on-year.
Telecom
The latest statistics also reveal that at the end of September 2015 the number of fixed-line telephone subscribers decreased 4.1 per cent year-on-year to 148,307. The number of mobile telephone subscribers increased 7.6 per cent to 1,816,020, of which stored-value GSM card subscribers shared 62.8 per cent. With regard to Internet services, the number of subscribers totalled 325,920, up 10.2 per cent year-onyear. The cumulative duration of usage in the first three quarters (786 million hours) rose 11.9 per cent year-on-year.
CEPA exports to China down 22 pct in October
T
he value of the city’s exports of goods to Mainland China under the Closer Economic Partnership Arrangement (CEPA) posted a decrease of 21.7 per cent month-on-month in October, the latest official data released by the Economic Service Bureau (DSE) reveals. According to official data, the export value of CEPA goods from the city to the Mainland totalled MOP5.09 million last month, a significant drop of some MOP1.42 million from MOP6.51 million in September. In fact, October’s value is the lowest that
the Special Administrative Region has posted for the year. Meanwhile, the total export value of CEPA goods from the city to the country amounted to MOP76.4 million during the first ten months of the year. In addition, the cumulative value, since the agreement was implemented in January 2014, reached MOP642 million as at end-October. For trade in services, DSE granted 100 new certificates of ‘Macao Service Supplier’ last month, enabling local companies to operate their businesses in China. Cumulatively, the government has granted 591
certificates as at the end of last month. Official data indicates that all of the 100 new certificates given to local firms were engaged in medical and dental services, increasing the total number of certificates that the sector was granted from the government to 147, accounting for 25 per cent of the total. Some other 298 certificates were granted to transport companies, including freight forwarding agencies, logistics enterprises, storage and warehousing and transportation, accounting for 50 per cent of the total. K.L.
Business Daily | 5
November 4, 2015
Macau
SJM gaming profits slide 49.5 pct in Q3 The hotel occupancy rate of Grand Lisboa dropped 5.5 per cent y-o-y to 85 per cent, while average room rate fell 23 per cent to HK$1,743 Joanne Kuai
joannekuai@macaubusinessdaily.com
S
ociedade de Jogos de Macau, S.A. (‘SJM’) group’s adjusted EBITDA decreased 49.5 per cent in the third quarter of 2015 to HK$884 million (US$114 million), compared to the same period of last year, according to selected unaudited third quarter results the company announced yesterday. In the third quarter of this year, the group’s gaming revenue decreased 37.9 per cent to HK$11.24 billion (US$1.45 billion) compared to the same period last year, and for the nine months ended 30 September 2015 decreased 39.6 per cent from the first nine months of 2014 to HK$37.56 billion. Profit attributable to owners of the company in Q3 2015 decreased 81.4 per cent over Q3 2014 to HK$285 million and for the nine months ended 30 September 2015 decreased 61.8 per cent from the first nine months of 2014 to HK$2.76 billion.
Breakdown
According to the announcement, the company says its gaming revenues accounted for 21.3 per cent
of Macau’s casino gaming market during Q3 2015, compared to 22.5 per cent in Q3 2014 and 22.0 per cent for the nine months ended 30 September 2015, and 23.2 per cent for the first nine months of 2014. The VIP gaming revenue of the company was HK$5.44 billion, a decrease of 47.5 per cent from HK$10.38 billion in Q3 2014, while mass market gaming revenue was HK$5.53 billion, a decrease of 24.9 per cent from HK$7.36 billion; slot machine (and Tombola) revenue was HK$272 million, a decrease of 23.8% from HK$357 million. The Group’s total revenue during Q3 2015 of HK$11.38 billion included hotel, catering and related services revenue of HK$138 million. The company added that during Q3 2015 the Group operated an average of 458 VIP gaming tables (Q3 2014: 564), 1,263 mass market gaming tables (Q3 2014: 1,190) and 2,737 slot machines (Q3 2014: 2,806).
Cheaper but fewer guests
According to the company, during the third quarter Grand Lisboa Hotel achieved
KEY POINTS Adjusted EBITDA decreased 49.5 pct to HK$884 mln Gaming revenue decreased 37.9 pct to HK$11.24 bln Profit attributable to owners decreased 81.4 pct to HK$285 mln VIP gaming revenue decreased 47.5 pct to HK$5.44 bln Mass market gaming revenue decreased 24.9 pct to HK$5.53 bln an average occupancy rate of 85.0 per cent and average room rate of HK$1,743 per night, compared with an average occupancy rate of 90.5 per cent and average room rate of HK$2,261 per night during the same period of last year. The capital expenditure of the Group during the third quarter was HK$1,125 million, which was primarily for construction in progress
and furniture, fixtures and equipment. As at 30 September 2015, the Group had total cash, bank balances and pledged bank deposits of HK$17,937 million and debt of HK$760 million. Ambrose So, Chief Executive Officer of SJM Holdings Limited, commented while challenging conditions in Macau’s gaming market continued in the third quarter, with
gaming revenues continuing their decline for the sixth consecutive quarter, SJM is making progress in controlling costs and enhancing customer service. “Our strong balance sheet positions us well for the completion of the Lisboa Palace project, which remains on schedule and on budget, and we remain optimistic about the future,” the statement reads.
PSP: Authorities not relaxing transit visa rules soon Macau’s Public Security Police deny saying authorities may change existing transit visa rules for Mainland Chinese passport holders by year-end
T
he city's Public Security Police said it does not intend to change or relax the existing transit visa rules for Mainland Chinese passport holders in the short term, in response to recent reports and comments on social media that such transit rules are likely to ease by year-end. “We've recently noticed that there have been many comments in the social media saying the transit visa rules for Mainland Chinese passport holders are likely to be adjusted in December,” a spokesperson from the Public Security Police told Business Daily yesterday. “That is not true.” The city's transit visa restrictions were unwound four months ago after being in place for one year: effective from July 1, Mainland Chinese transiting via Macau were once again permitted to stay for up to seven days (a relaxed rule from five days) provided that they can present documented proof of onward travel to a third destination. This rule applies to the condition whereby Mainland Chinese passport holders do not enter Macau in the previous 30 days, as opposed to the previous restriction when this cooling off period lasted 60 days.
In addition, Mainland Chinese visitors travelling on the transit visa scheme are permitted to stay two days here during the second visit of any given month, a relaxation from the previous allowance of only one day.
Impact on gaming
In a note released on October 31, Union Gaming Securities Asia Ltd. wrote that Macau's transit visa scheme was set to undergo a ‘significant positive shift’ at year-end, citing ‘multiple local sources’. ‘Under the new scheme, persons entering Macau for the (ostensible) purposes of transiting to a 3rd party country would be allowed to stay for up to 14 days (from 7) upon one's first entry into Macau during any given month, and would then be permitted to stay for up to seven days (from two) for a second entry during the same month,’ Union Gaming wrote. If such a relaxed transit visa scheme were to come into practice, the greatest beneficiaries would be junket agents and to a lesser extent premium mass players, Union Gaming analyst Grant Govertsen wrote. The said relaxation of the scheme, however, would unlikely result in any sharp immediate increase in gross gaming revenue, the note said. S.L.
6 | Business Daily
November 4, 2015
Macau
Moody's downgrades Studio City Finance outlook to ‘negative’ from ‘stable’ The credit rating agency said the lower than expected table allocation for Melco Crown's majority owned project will restrain cash flow and delay the process of deleverage Stephanie Lai
sw.lai@macaubusinessdaily.com
C
redit rating agency Moody's Investors Service Inc. has revised the outlook of Studio City Finance Ltd.'s B2 corporate family rating and B3 senior unsecured rating from ‘stable’ to ‘negative’. Studio City Finance, a subsidiary of casino operator Melco Crown Entertainment Ltd., develops and runs the US$3.2 billion gaming resort project in Cotai Studio City, which opened on October 27. “The revision in the outlook reflects Moody's concerns that a lower than expected allocation of only 250 gaming tables to the Studio City project will restrain the company's ability to generate cash flow, which in turn [will] weaken its liquidity and delay its process of deleverage,” Moody's Vice President and Senior Credit Officer Kaven Tsang was quoted as saying in a press statement released on Monday. Ahead of Studio City’s opening last week, the Macau Government announced that they had granted 250 newto-market gaming tables to
improves to around 5.5x to 6.0x in 2017. Although Studio City Finance held US$853 million in cash as of June 30, including restricted cash, Moody's expects the liquidity of the company to become tight over the next 12 months, unless the US$100 million revolving credit facility remains available but is nevertheless uncertain. ‘If liquidity becomes tight, such a situation could necessitate additional funding to meet the payments of principal and interest,’ Moody's stated.
Default concerns the property, of which 200 could be in operation at the opening, while the remaining 50 gaming tables were authorised to be in operation in January 2016. The announced allocation is less than the casino operator's original plan of 400 tables for Studio City. Moody’s expects that the initial cash flow and Studio City Finance’s debt metrics will remain weak in the next 12
months given the ‘challenging operating environment’ in Macau's gaming sector and the material amount of pre-opening expenses to be incurred in the beginning phase of Studio City's operation. The rating agency projects that Studio City Finance's adjusted debt/EBITDA will be around 8x in 2016 – which weakly positions it at the B2 rating level – before it
Corporate MGM China raises MOP183,000 for Orbis While MGM China endeavours to present the foremost and creative artistic works to the region, the property also invests tremendous effort in a wide range of philanthropic initiatives. In connection with the ‘Joana Vasconcelos at MGM MACAU’ exhibition unveiling the Valkyrie Octopus, MGM China launched the ‘Joana
Vasconcelos at MGM MACAU – Orbis Fundraising Programme’, for which the company doubled-up on all proceeds from the sale of the Valkyrie-themed pastries to support Orbis’ sight-saving projects around the globe. A cheque presentation ceremony was held to mark the donation of the raised proceeds of MOP183,000.
In an April filing, Melco Crown – a 60 per cent owner of the Studio City project - noted that a technical default could result on an approximately HK$10.86 billion Studio City project loan if the property did not manage to secure a minimum of 400 gaming tables available for operation by October 2016. Following the table allocation confirmation last month, Melco Crown said it intended 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. In the Monday press statement, Moody's noted some of the mitigating factors regarding Studio City Finance's credit outlook. ‘The secured nature of the facilities and the reduced development risks of the project will help the company [Studio City Finance] negotiate amendments to the terms and conditions of the facilities with lenders,’ Moody's stated. ‘The company has completed the development of the Studio City project on time and within budget.’ Other mitigating factors include the Studio City project’s emphasis on cinematically-themed nongaming activities and mass market gaming, as opposed to the more volatile VIP gaming businesses, and Melco Crown's experience in managing both gaming and non-gaming businesses in Macau.
C Y Foundation buys racing broadcasting system
H
ong Kong-listed C Y Foundation Group Ltd., through subsidiary Expert Dragon, has entered into a Broadcasting System Procurement Agreement with Hyper Marketing for the procurement of the Racing Broadcasting System. The agreement aims for the group to obtain the hardware and software required for use by the Sports and Entertainment Services (SES) for its conducting of the greyhound racing business in Vietnam. According to the filing sent to the Hong Kong Stock Exchange, the company, which is principally engaged in the provision of services for the management of electronic gaming equipment in Macau, will pay US$3.05 million (HK$23.63 million) in consideration for the provision
of the Racing Broadcasting System plus ancillary installation services by Hyper Marketing. Hyper Marketing is a software development company established in Mauritius which is principally engaged in the sourcing and manufacture of computerised equipment and customised computerised equipment including computerised equipment for electronic gaming machines. Previously, the group announced that it had reached an agreement with Sports Network Limited (SNL) for the acquisition of the hardware and software for the greyhound racing business in Vietnam with a payment of US$6.09 million. The group believes the deal ‘would in turn allow the Group to enter into a new business and to broaden its income stream’.
Business Daily | 7
November 4, 2015
Macau
Galaxy tops gaming market for first time since January The group was granted another 50 mass gaming tables last month, with another 50 effective 1 January, 2016
G
alaxy Entertainment Group topped the ranking of the gaming industry by market share in October taking 24.7 per cent, according to calculations by Business Daily. This is the first time the group founded by Lui Che Woo has occupied this position since January. In October, gaming revenues accounted for MOP20.06 billion, down 28.4 per cent from one year ago when the industry generated MOP28.03 billion. The second best-placed gaming operator was Sands China, with a share of 23.1 per cent. The company held the position in the previous month. After leading in terms of industry revenue in September, SJM Holdings
dropped to third position with a share of 20.6 per cent. October was a month to remember for Melco Crown Entertainment because of the opening of Studio City. In terms of share, however, the company dropped to 13.5 per cent from 14.5 per cent in the previous month. At the bottom end of the market share ranking, Wynn Macau took fifth place with 9.3 per cent, while MGM China reached 8.7 per cent for sixth. Regarding November, the forecast of Wells Fargo released yesterday expects gaming revenues to decline by around 30 per cent year-on-year this month. ‘We estimate November Macau gaming revenues to track down approximately 30 per cent year-on-year. This assumes same store average daily revenue of MOP570 million to MOP580 million, which is 5 per cent above the preceding three-week average to account for a full month of Studio City’, the equity research firm report explains. Last year, gaming revenues in November totalled MOP28.03 billion, which at that time was a decrease of 23.3 per cent year-on-year from MOP36.48 billion. J.S.F.
Gaming revenues market share October
November
December
January
February
March
April
May
June
July
August
September October
23.5%
22.6%
23.6%
21.9%
23.1%
23.2%
21.7%
21.9%
21.8%
20.3%
21.8%
21.7%
20.6%
Sands China 23.7%
22.5%
20.7%
20.4%
23.3%
21.4%
24.1%
26.5%
22.6%
23.8%
25.2%
21.3%
23.1%
Galaxy
21.4%
21.5%
20.2%
22.5%
21.5%
20.1%
20.0%
18.5%
22.2%
22.6%
21.2%
21.2%
24.7%
MPEL
14.3%
13.4%
14.9%
14.7%
14.4%
13.9%
12.8%
14.2%
14.4%
14.2%
13.5%
14.5%
13.5%
MGM
8.2%
11%
10.5%
10.1%
9%
10.2%
9.6%
9.1%
10.2%
9.7%
8.9%
11.2%
8.8%
Wynn
8.9%
9%
10.2%
10.4%
8.6%
11.2%
11.8%
9.8%
8.8%
9.4%
9.4%
10.1%
9.3%
Total
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
SJM
Source: Business Daily
8 | Business Daily
November 4, 2015
Greater China
Top lenders lobby to loosen provision requirements As growth declines to its slowest pace in a quarter century, borrowers are finding it harder to repay borrowing, causing commercial bank non-performing loans to increase
C
ICBC said banks were in talks over provision requirements with the banking regulator
hina’s biggest banks are seeking to loosen the regulatory requirement on provisions, as a slowing economy causes a surge in bad loans, transcripts of analyst calls following third-quarter earnings at two of China’s Big Four banks show. China’s lenders are required to have a minimum loan loss provision ratio of 150 percent, a balance sheet calculation measuring the cash set aside for future losses by the total volume of nonperforming loans (NPLs). The requirement is “relatively high compared with international standards”, an executive at Industrial and Commercial Bank of China Ltd, the country’s biggest lender by assets, told analysts Friday on its earnings call, according to a transcript of the call seen by Reuters. ICBC said banks were in talks over provision requirements with the banking regulator, without
giving further details. The bank would implement the decision of the regulator said. China Construction Bank Corp, the country’s secondbiggest lender, also said in its earnings call that the bank was talking with regulators on the “high” provision requirement, according to separate transcripts. As China’s economic growth declines to its slowest pace in a quarter century, borrowers are finding it harder to repay borrowing, causing commercial bank NPLs to increase. Last Friday, ICBC reported a NPL ratio at the end of September of 1.44 percent, up from 1.13 percent at the end of 2014, while its provision ratio declined to 157.63 percent, from 206.9 percent. Bank of China reported a NPL ratio of 1.43 percent, and a provision ratio of 153.72 percent, compared with an NPL ratio of 1.18 percent and a loan loss provision ratio of 187.6 percent at the end of last year. “The whole point for banks to put aside part of their earnings during strong economic years is so they can accumulate impairment allowances for the rainy days,” said a Hong Kongbased analyst. “When the high NPL period really comes, they should have the flexibility to use the impairment allowances to deal with it.” Reuters
Presidents Xi and Hollande reach deal on climate change During their talks, Hollande told Xi he is visiting China hoping to further the all-round strategic partnership with China
P
resident Xi Jinping and his French counterpart Francois Hollande issued a joint statement on climate change in Beijing on Monday, vowing to promote a working program to accelerate pre2020 efforts in mitigation, adaptation and support during the Paris climate summit. They called for a better transparency system to build trust and confidence in the Paris pact, as well as means to review the actions and support of various parties. France will host the climate summit in Paris (COP21) in December, which is largely expected to result in a global and binding agreement on addressing climate change.
Francois Hollande, President of France
Hollande is visiting China ahead of the summit to seek China’s support for a new climate change deal in Paris. The two presidents reaffirmed joint efforts to push forward an ambitious and “legally binding” Paris agreement on the basis of equity and the principle of common but differentiated responsibilities and respective capabilities. “The agreement must send out a clear signal for the world to transition to green, low-carbon, climate-resilient and sustainable development,” said the statement. They stressed that developed countries should continue to offer enhanced financial, technological and capacity-building support to
developing countries in the post-2020 period. Xi and Hollande also pledged stronger cooperation in countering climate change in areas such as lowcarbon transportation, renewable energy, and carbon capture and storage technologies. “China is committed to ensuring the success of the climate conference,” Xi told Hollande in their talks on Monday afternoon. Xi said China supported France as the host of the conference, voicing confidence that it would successfully play its role as a coordinator to facilitate a balanced and comprehensive result. “I’m confident for the progress of the conference. Our statement has injected positive energy to the multilateral process of addressing climate change,” Xi told a press briefing after the talks. China has made multiple climate pledges. These include a decision to launch a national carbon cap-andtrade system in 2017 to help contain emissions, establishing a 20-billionyuan (US$3.1-billion) fund to help other developing countries combat and adapt to climate change, and cutting carbon dioxide emissions per unit of gross domestic product (GDP) by 60 percent to 65 percent from the 2005 level by 2030. The two countries share similar views on many global affairs, and maintain political trust and dialogue, he said.
Xi proposed both countries boost major cooperation projects in nuclear power and aeroplane manufacturing, increase cultural exchanges and jointly promote the building of new international relations. The Chinese president welcomed France to participate in the Belt and Road initiative. The two presidents witnessed the signing of 17 cooperation documents later on Monday, ranging from trade, finance, energy to environmental protection and cultural exchange. Hollande’s visit came days after German Chancellor Angela Merkel’s visit to China and Xi’s Britain trip from Oct. 19-23. “The intensive China-Europe interactions show how important the Chinese market is to Europe in terms of trade and economy,” said Chen Xin, a researcher with the Chinese Academy of Social Sciences. While stepping up trade ties with China, European leaders hope to explore China’s development blueprint amid the country’s economic slowdown, Chen said. China also needs Europe’s support in fields such as the RMB’s inclusion in the International Monetary Fund’s special drawing rights basket, he added. Hollande will also meet with other top Chinese leaders before wrapping up his two-day China trip on Tuesday. Xinhua
Business Daily | 9
November 4, 2015
Greater China HSBC targets bond market with securities joint venture
GDP per capita rises to US$7,800
The bank said the proposed joint venture could engage in the full range of investment banking and securities businesses in China Lawrence White
E
urope’s biggest lender HSBC is setting up a majority-owned securities joint venture in China, taking advantage of Chinese rules that favour Hong Kong-established banks over foreign peers in the world’s second biggest economy. HSBC’s aim is to establish a foothold in issuing bonds in China, which the bank sees as an area of strong future growth. HSBC said on Monday it would own up to 51 percent of the proposed joint venture with China’s unlisted Shenzhen Qianhai Financial Holdings Co Ltd. “It opens up quite a significant opportunity, mostly in the area of bonds,” HSBC Chief Executive Stuart Gulliver told reporters on a conference call. “It allows us to do debt capital markets in China in RMB (renminbi) for corporates.” HSBC has already said it plans to shift assets into China’s Pearl River Delta region in the southern province of Guangdong, a move seen by analysts as potentially risky given the country’s slowing economic growth.
KEY POINTS
Over 40 pct of mainland online sales counterfeit
HSBC would own up to 51 pct of proposed JV HK-friendly rules favour lender over foreign rivals Move carries risks amid China growth slowdown “As China moves forward people will have to save for their own retirement, healthcare, education of their kids, etc. That means long-term liabilities and they’ll need long-term assets,” Gulliver said. He declined to forecast potential profits for the business nor how much the bank has invested, but he said “it is not insignificant.” “It will take us three to four years for it to become profitable and start to make a return, but it’s a significant component of both our global banking and markets proposition in China and
also commercial banking,” Gulliver said. He was speaking after reporting a 32 percent rise in quarterly profits. HSBC should have an edge over foreign rivals due to its ownership of a Hong Kong-based banking subsidiary, The Hongkong and Shanghai Banking Corporation Limited. HSBC said the proposed joint venture could engage in the full range of investment banking and securities businesses in China. The proposed venture is subject to regulatory review. Reuters
Low credit costs boost business sentiment The rebound in business sentiment was mainly due to a relatively quiet policy environment and financial markets in October
C
hinese businesses are showing growing optimism thanks to a favourable policy environment, a leading indicator showed. The MNI China Business Sentiment jumped 8.4 percent month on month in October to 55.6, from 51.3 in September. “This is a very positive signal,” said Li Jin, vice president of China Enterprise Reform and Development Society, a think tank. The data indicated that Chinese companies are optimistic about the overall economy as well as their own business operations in the future, he said. Market News International (MNI), an international market news website, has been releasing its Business Sentiment Indicator for the Chinese economy since 2007. The indicator is based on monthly polls of around 200 large companies listed on the Shanghai and Shenzhen stock exchanges and released before publication of official data such as GDP and inflation to analyse economic trends. The rebound in business sentiment was mainly due to a relatively quiet policy environment and financial markets in October, the MNI report said. Lower credit costs resulting from monetary easing policies are also key to boosting confidence among companies. According to the report, businesses reported the lowest interest rates ever paid since 2012.
Gross domestic production (GDP) per capita has increased to about US$7,800 in the country with more than 1.3 billion people, an official document said yesterday when reviewing China’s achievements during 2011-2015 period. The document was the full text of the Communist Party of China (CPC) Central Committee’s Proposal on Formulating the Thirteenth Five-year Plan (2016-2020) on National Economic and Social Development, which was adopted at the Fifth Session of the 18th CPC Central Committee that ended October 29.
More than 40 percent of goods sold online in China last year were either counterfeits or of bad quality, the official Xinhua news agency said, illustrating the extent of a problem that has bogged down the fast-growing online sector. According to the report, which was delivered to China’s top lawmakers on Monday, just under 59 percent of items sold online last year were “genuine or of good quality”, Xinhua said. China has been trying to shake off a notoriety for pirated and counterfeit goods, long a major headache for global brands targeting the Chinese market.
Winter Olympics high-speed rail approved China has approved plans for a 58.41 billion yuan (US$9.22 billion) high-speed rail project which will be used during the 2022 Winter Olympics in Beijing, a local government said on Monday. The 174 kilometre-long railway, which will connect Beijing with the northern city of Zhangjiakou in Hebei province, will be constructed over a four-and-a-half year period and will be able to ferry 60 million people annually. Beijing beat Kazakhstan’s Almaty in July to host the 2022 Winter Olympics, making it the first city to be awarded both the summer and winter Games.
U.S. sets steep duties on melamine
The indicator is based on monthly polls of around 200 large companies listed on the Shanghai and Shenzhen stock exchanges
China’s central bank has cut benchmark interest rates and the reserve requirement ratio five times this year to shore up the economy. “Financing costs have been lowered significantly compared to the beginning of this year, which relieved many of our concerns when making investment decisions,” said a supervisor for a listed company in southern China who asked not to be named. The Availability of Credit Indicator also expanded, signalling easier access to funds. A weaker yuan also helped business operations, the report showed. The MNI China Business Sentiment Indicator showed volatile movement since July that was influenced by headlines on policy announcements
and recent stock market fluctuations. Still, the upward momentum is in line with business activities surveyed by MNI. “The current balance of evidence suggests that Chinese businesses have weathered the worst of the headwinds,” said Philip Uglow, chief economist of MNI Indicators. In addition to favourable monetary policies, the Chinese government has pushed a set of measures to help the growth of domestic enterprises such as reducing fees and taxes and cutting red tape. Officials have also encouraged entrepreneurship and innovation many times in key government meetings, which also helped boost the business sentiment of Chinese firms. Xinhua
The United States on Monday set steep duties on imports of melamine from China and Trinidad and Tobago after finding the goods were produced using unfair government subsidies and sold too cheaply in U.S. markets. The Department of Commerce set final anti-dumping duties on melamine, a powder used in laminates and other surface coverings, at 363.31 percent for Chinese goods and 172.53 percent for imports from Trinidad and Tobago. Additional anti-subsidy duties of 154.00 percent or higher will also apply to Chinese imports, after a complaint from the Cornerstone Chemical Company.
Head of AgBank said to assist in probe The president of China’s third-biggest lender by assets, Agricultural Bank of China Ltd (AgBank), has been taken away to assist with an investigation, Bloomberg reported on Monday, citing people familiar with the matter. The probe is the latest revelation in President Xi Jinping’s on-going corruption investigations that have already ensnared top politicians, state enterprise leaders and a cast of senior bankers, including AgBank’s former vice president, who was jailed for life for graft, and a board director at the Bank of Beijing.
10 | Business Daily
November 4, 2015
Greater China
One common problem for economists in constructing these proxy indexes: the dearth of data on the Chinese services sector
Six ways to gauge how fast economy is actually growing Wall Street economists have developed a number of proxies, using an array of indicators, to gauge Chinese growth better Luke Kawa
S
tatistics with Chinese characteristics make it difficult to get a handle on how well the world's second- largest economy is doing. In particular, questions surrounding the way China adjusts its growth figures into real terms often leave investors searching for a better way to judge its economic momentum. Recently, Bloomberg Intelligence Chief Asia Economist Tom Orlik compiled six of these metrics in a report for Bloomberg Briefs. One common problem for economists in constructing these proxy indexes: the dearth of data on the Chinese services sector. Orlik notes that this may serve as a partial explanation for the difference between the proxy gauges and the official data, as the tertiary sector has been gaining ground on the industrial segments of the economy. Here's how Wall Street fine-tunes its grasp of how well China's economy is really doing:
Barclays' GDP Forecast
Barclays uses a blend of highfrequency indicators on activity, such as railway freight, official data, and purchasing managers' indexes, which are survey-based metrics. "The rising role of the services sector is captured by the inclusion of the services PMI and retail sales, but the weight and explaining power of the framework still tilt toward the industrial sector—reflecting data availability," wrote chief China economist Jian Chang. Barclays estimates that the Chinese economy grew 5.5 percent in the first half of the year, 1.5 percentage points below the official statistics.
Bloomberg Intelligence's Monthly GDP Tracker
This GDP tracker makes use of data series released on a monthly basis and weights them in a manner that best reflects the composition of the world's second-largest economy. The two releases with the biggest weights in this index are industrial output and retail sales.
All of the proxies suggest growth in 2015 has been lower than the 6.9 percent reported by the National Bureau of Statistics for the third quarter Tom Orlik, Chief Asia Economist, Bloomberg Intelligence
The gap between this proxy index and the official GDP data has been minute over the past five years, averaging just 0.2 percentage points. In the third quarter, GDP growth was tracking 6.6 percent, 0.3 percentage points lower than the official reading of 6.9 percent. "It doesn't support the case that China's growth rate is significantly overstated," wrote Bloomberg Intelligence economists Tom Orlik and Fielding Chen.
Capital Economics' China Activity Proxy
Capital Economics draws on five indicators to build its proxy for Chinese activity: freight volume, passenger numbers, electricity output, seaport cargo volume, and the area of floor space currently under construction. "The China Activity Proxy suggested that the official figures were broadly accurate until around 2012," wrote chief Asia economist Mark Williams. "Since then, it has added weight to the view that the official GDP data overstate the true rate of economic growth—most recently by a couple of percentage points or more."
According to this metric, Chinese GDP growth came in at 4.4 percent in the third quarter, the slowest pace of expansion implied by all the proxies featured in the brief. Williams observes that this gauge appears to be a leading indicator of sorts—notably, it signalled a brisk moderation in growth at the start of the year that preceded the angst over the state of the world's second-largest economy due to the devaluation of the yuan. The stabilization in this proxy since then, the economist says, suggests these worries about China should dissipate.
Lombard Street Research's Real GDP Estimate
Lombard Street employs a novel approach in putting together its estimate for Chinese growth. The official statistics for real GDP growth have been too smooth over the years, economist Michelle Lam and head of research Diana Choyleva believe, suggesting that the manner in which the data are adjusted might be faulty. As such, the pair uses nominal GDP (not adjusted for price changes) as its starting point, then uses a range of price indexes to deflate the figures into "real" terms. "Our preliminary estimates show growth at an annual rate of just 2.9 percent in the third quarter of 2015, way lower than the official 7.4 percent," they wrote. The services sector, in particular segments linked to the Internet, is outperforming the "old economy" of heavy industry and construction, according to Lombard Street's analysis.
Nomura's Composite Leading Indicator
Nomura's proxy for Chinese growth is comprised of nine indicators: money supply, the OECD leading indicator, the spread between three-year and six-month government debt, turnover in the Shanghai stock market, the difference between producers' output and input prices, and the production of steel, cars, chemical fiber, and metal-cutting machinery.
This gauge of growth dropped off in a big way in the first three quarters of 2015, a sign that the moderation in growth was more substantial than the official figures made it out to be. But Nomura suggests this could be primarily attributable to a boom in China's financial sector that was not completely captured by its proxy. Income earned by margin lenders, fees, and commissions due to the elevated level of activity in the stock market have juiced China's economic performance. "We estimate the financial sector contributed an outsized 1.4 percentage point to reported growth—about 0.7 percentage point more than usual," wrote chief China economist Yang Zhao and economists Changchun Hua and Wendy Chen. "If we exclude the financial sector's additional contribution, growth in the first half was about 6.3 percent yearon-year, more in line with the fall seen in Nomura's composite leading indicator."
Oxford Economics' GDP Proxy
Oxford Economics uses data from all industrial sectors to form a bottom-up estimate of total industrial output, then combines it with official data for the primary and services sector to come up with its gauge for overall growth. "Data on real gross output in industry suggests that the slowdown in industrial output in the first half was more pronounced than the National Bureau of Statistics data show," wrote Louis Kuijs, head of Asia economics. His analysis shows that there may be a tendency for growth in the industrial segments of the economy to be overestimated during downturns, noting that a similar gap between Oxford's estimate and the official figures also materialized near the end of 2008. Kuijs says this metric "qualifies the picture on real GDP growth in 2015, although it does not drastically change it." Bloomberg News
Business Daily | 11
November 4, 2015
Asia
Australian central banks open door to rate cuts
The RBA maintains that the economy is traveling pretty well given the scale of the drop in mining investment, with the unemployment rate stabilizing at a little over 6 percent. The central bank is due to update its forecasts for growth and inflation in its Statement on Monetary Policy released Friday.
While leaving the benchmark unchanged yesterday in an economy it says is showing stronger prospects Michael Heath
R
eserve Bank of Australia Governor Glenn Stevens kept the cash rate at a recordlow 2 percent, as predicted by a majority of economists, saying “the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand.” The explicit bias toward further easing follows a pause in rates by the RBA for the past six months after it reduced borrowing costs
Below-average growth
by 2.75 percentage points since late 2011 to bolster industries outside of mining. While housing construction has surged in the low-rate environment, other firms have proved more reluctant to spend, betting they can meet demand from highly indebted households via existing capacity. “The easing bias is clear,” said Su-Lin Ong, head of Australian economic and fixed-income strategy at Royal Bank of Canada in
Sydney who forecasts a rate cut in the first quarter of 2016. “But the onus is very much on the activity data to deteriorate” for the bias to be acted upon.
Gradual improvement
“The board judged that the prospects for an improvement in economic conditions had firmed a little over recent months and that leaving the cash rate unchanged was appropriate at this meeting,” Stevens said in
a statement. “While GDP growth has been somewhat below longer-term averages for some time, business surveys suggest a gradual improvement in conditions over the past year. This has been accompanied by somewhat stronger growth in employment and a steady rate of unemployment.” Credit data released Friday showed lending to businesses rose 1.2 percent in September from August, the fastest pace since 2008.
While a weaker Aussie helps local producers, some companies are still having to retrench to keep themselves viable. BlueScope Steel Ltd., Australia’s largest steelmaker, struck a deal last month to cut 500 jobs and freeze wages for its remaining workers in order to save its plant located south of Sydney. The economy has also grown at below its average for six of the past seven years. “Inflation is low and should remain so, with the economy likely to have a degree of spare capacity for some time yet,” Stevens said. Bloomberg News
Inflation is forecast to be consistent with the target over the next one to two years, but a little lower than earlier expected Glenn Stevens, Governor, Reserve Bank of Australia
Reserve Bank of Australia Governor Glenn Stevens
S.Korea to keep monetary stance but wary of household debt The BOK has lowered interest rates four times between August 2014 and June, taking the base rate to a record low 1.50 percent
S
outh Korea's central bank promised to keep its monetary policy easy in a report released yesterday, but stopped short of signalling additional interest rate cuts as it keeps wary of household debt levels and external risks. "We plan to keep our monetary policy accommodative as the on-going recovery is steady and as inflation is expected to remain low," the Bank of Korea's twice-yearly report on monetary policy said. At the same time, the central bank stressed it would act with other authorities to rein in household debt should that pose risks to financial stability, while closely monitoring external risks such as changes in the U.S. Federal Reserve's policy and economic sluggishness in China. The central bank said the cuts in
March and June had "effectively" influenced real borrowing rates by bringing them down. "Our market interest rates may
Bank of Korea headquarters
rise after the Fed hikes interest rates, regardless of our monetary policy. However, they will probably rise at a limited pace as we plan to keep rates
accommodative enough to support economic growth," said Yoon Myunshik, a deputy governor at the Bank of Korea, at a briefing on yesterday's report. The report added that South Korea does not face a high chance of capital flight en masse even if interest rates are hiked in the U.S. Although South Korea saw outflows during the third quarter due to jitters sparked by China, stocks and bonds saw modest inflows in October, Yoon said. The BOK stated that its response mechanisms against sudden outflows have strengthened "considerably" compared to the past. South Korea's country's economic fundamentals are more stable than those of other emerging economies, it added, citing its massive foreign exchange reserves. "However, this does not mean that we are complacent," Yoon said. "Rather, we are continuing efforts to keep our economy strong as weakness in other emerging economies after the Fed rate hike may become contagious." The BOK also said offshore interest in assets denominated in the Korean won has increased but added it will keep monitoring international financial markets in case of sudden changes. Reuters
12 | Business Daily
November 4, 2015
Asia
South Korea’s October inflation hits 11-month high Over the previous month, inflation showed no change in October
S
outh Korea’s annual inflation in October accelerated to its highest in 11 months to reflect an on-going recovery in consumption, government data showed yesterday, easing the pressure for an immediate rate cut by the central bank. The consumer price index rose 0.9 percent in October from a year earlier, Statistics Korea data showed, up from a 0.6 percent increase in September. It was the fastest rise since a 1.0 percent gain in November last year. The result beat a median 0.8 percent rise tipped in a Reuters survey. “This shows inflation is now just starting to leave the bottom although it doesn’t indicate price pressures are back where they were before,” said David Kim, an economist at Daishin Securities in Seoul. Kim said the central bank was unlikely to cut interest rates soon in light of recent data. Core inflation, which strips out volatile food and fuel prices, also accelerated in October, rising 2.3 percent annually from a 2.1 percent rise in September to stand at its highest since February this year. Policy makers have been touting a firm rebound in private consumption thanks to government stimulus. Yesterday’s data showed services
KEY POINTS CPI, core inflation both pick up in October Services prop up inflation last month Rate cut views grow weaker rose 2.1 percent in October on-year, the highest since a 2.3 percent rise in February 2012. Recent indicators like factory output for September, which stood at a three-month high, have pushed some economists to upwardly revise their views on future central bank moves. Tim Condon at ING said in a note on Friday that the bar for further easing at the Bank of Korea is high, suggesting interest rates will be on hold at the current 1.50 percent for the rest of the year. Barclays said on Monday it has delayed its rate cut timing forecast from the fourth quarter of this year to the first quarter of 2016 while Nomura sees risks to its baseline call for a cut later this month. Reuters
Condo boom in Cambodia’s capital driven by expat demand Prak Chan Thul and Aradhana Aravindan
H
igh-rise apartments are springing up across Cambodia’s capital, part of a property boom led by expat demand, while developers are also betting the country’s growing middle class will shed a traditional distaste for “living on top of each other”. As once red-hot property markets like Singapore lose steam, frontier markets such as Cambodia are gaining more attention from investors, and that is helping make the construction and real estate industries the Southeast Asian nation’s most dynamic engine of growth. Developers such as Singapore’s Oxley Holdings and Teho International are embarking on high-rise upmarket condominiums complete with swimming
pools, gymnasiums and river views. Japan’s Creed Group as well as Taiwanese and South Korean firms have jumped into the market, while local developers are also building, albeit mostly low-rise apartments. A lack of condominiums in prime Phnom Penh areas for expats has led to high rental yields for investors. But some experts worry supply could outstrip demand in a few years unless the country’s middle class moves away from a traditional preference for houses with land. With an economy of only US$16.7 billion, Cambodia could be very slow in shifting to high-rise living as its urban middle class, while growing, remains small. “Unless there is a strong take-up by local families, there
could well be an oversupply,” said Marc Townsend, managing director for real estate services firm CBRE in Cambodia and Vietnam. Property consultants note that most buyers of condominiums, even locals, are purchasing them for investment purposes - keen to rent them out and believing their value will appreciate over the next few years. They also estimate that foreigners account for 60 to 70 percent of condominium sales in Cambodia, spurred on in part by the relaxing of restrictions on foreign home ownership in 2010, though some limitations remain in place. “While most buyers are foreigners, the trend will change towards Cambodians. But it may take 10 to 20
years,” said Kim Heang, chief executive of Khmer Real Estate. For the time being, the influx of foreigners over the past few years as multinational companies open offices is feeding demand. That helped the construction and real estate industries contribute more to GDP than the garment and footwear sector last year, according to the World Bank. Prime residential land prices in the capital jumped 14.1 percent in the first half of this year, the biggest rise among 13 Asian cities in a Knight Frank research report. CBRE estimates there are 48 condominium projects, both finished and under construction, in Phnom Penh, where total condominium stock is set to jump to 19,745 units by the end of 2018, a
13-fold increase over levels seen last year. Some of the most highprofile projects are being built by Oxley and Cambodian developer Worldbridge Land. These include The Peak, a 55-storey mixeduse development with two residential towers and a Shangri-la hotel, which is due for completion in 2020. It follows the 45-storey The Bridge, whose residential units are almost fully sold - with Cambodians, Singaporeans and Taiwanese the top buyers. Due to current limited stock, gross rental yields for Phnom Penh’s condominiums located in prime areas are among the highest in the region - 10 percent versus 4-6 percent in Bangkok and Singapore’s 2-3 percent, CBRE data shows. Reuters
editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Michael Armstrong, Stephanie Lai, Óscar Guijarro, Kam Leong, Joanne Kuai GROUP SENIOR ANALYST José I. Duarte Designer Francisco Cordeiro WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia Assistant to the publisher Lu Yang | lu.yang@projectasiacorp.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.
Business Daily is a product of De Ficção – Multimedia Projects Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 editor editor@macaubusinessdaily.com newsroom newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com
Business Daily | 13
November 4, 2015
Asia
Thai central bank seen holding policy rate steady after stimulus
Droughts, floods, landslides cost Laos dearly
Southeast Asia’s second-largest economy remains stuck in low gear since the army seized power in May 2014 Orathai Sriring
T
hailand’s central bank is widely expected to leave its policy interest rate steady on Wednesday for a fourth straight meeting even though the economy is making little headway after more than a year of military rule. All but one of 23 economists polled predicted the one-day repurchase rate would be left steady at 1.50 percent when the monetary policy committee meets on November 4. The committee was seen likely to wait for the effects of recent stimulus measures and a weak baht to filter through while the trade-dependent economy confronts global market uncertainties. One economist predicted a 25-basispoint cut this week, citing a weak outlook. That would match the record low of 1.25 percent during the global financial crisis. Kobsidthi Silpachai, head of capital markets research at Kasikornbank, said the MPC should wait to see “if
the recent new medicine is working”. Tim Leelahaphan of Maybank Kim Eng said: “The window for Thai rate cuts has already closed, given the expected Fed rate hike, while Thai rate hikes may require demand-side factors to continue gaining momentum.” The meeting will be led for the first time by new Bank of Thailand Governor Veerathai Santiprabhob, who said last month monetary policy in the short term would remain accommodative to support growth but noted financial stability risks from keeping interest rates very low for a long time. At the September 16 meeting, the MPC voted 7-0 to keep the rate unchanged, saying monetary conditions, including the exchange rate, remained supportive to the economic recovery. The rate has been left steady since two surprise cuts this year. Policymakers are hoping stimulus will boost the economy, while a weak baht will lift exports. The baht has fallen about 7.5 percent against the dollar this year.
Still, some economists predict further easing, with inflation also benign. Nomura expects a 25 basis-point cut on Wednesday, but with the risk this could be delayed. “We still believe that there is scope for the BOT to be disappointed on the growth outlook this year and next.” HSBC predicts a rate cut next month, the final meeting of the year. “We still expect more than a 50/50 chance of a 25-basis-point-rate cut in December to provide a bigger push to the recovery, especially as downside risks to growth persist.” Southeast Asia’s second-largest economy remains stuck in low gear since the army seized power in May 2014 to end months of political unrest, with exports and consumption still weak. The central bank in September cut its 2015 economic growth forecast to 2.7 percent from 3.0 percent. Growth last year was 0.9 percent. Reuters
Panel to recommend Japanese Gov’t aims for 2 pct potential growth rate The council will make the recommendations at a meeting with Abe and members of his cabinet today
J
apan’s top economic advisory panel will propose that government encourages companies to increase investment and retain more employees beyond their retirement age in a bid to raise the potential growth rate to 2 percent, sources with direct knowledge of the matter said on Monday. Currently, Japan’s potential growth rate is around zero due to decades of economic stagnation and a declining population, making achieving 2 percent a tough task. Members of the Council on Economic and Fiscal Policy (CEFP) reckon that Japan needs a potential growth rate of around 2 percent to meet Prime Minister Shinzo Abe’s target of raising nominal GDP to 600 trillion yen (US$4.98 trillion), the sources said. The council will make the recommendations at a meeting with Abe and members of his cabinet today, they added. Some economists say Abe’s GDP target is unrealistic given that nominal GDP was only 491 trillion yen at the end of last fiscal year. The CEFP will argue that Japan should keep people in the work force longer by increasing the number of companies that will hire workers above the official retirement age of 65, the sources said.
In addition, the government should take steps to get companies to increase domestic investment to raise the potential growth rate, the sources said. The CEFP calculates that private consumption will rise by around 60 trillion yen if wages grow around the same pace as nominal GDP, the sources said. The government could also count
Natural disasters are costing Laos between 2.6 and 3.7 percent of GDP per year as the country embraces more severe weather ahead with warming climate, the environment minister warned yesterday. Vulnerability of the Southeast Asian nation’s majority rural and remote populations in the face of losses from natural catastrophe were a key issue being addressed in the next five-year development plan, Minister of Natural Resources and Environment and Vice Chairman of the National Disaster Prevention and Control Committee Sommad Pholsena said.
Thai cabinet approves US$365 mln for rubber farmers
Thailand’s cabinet yesterday approved measures worth 13 billion baht (US $365 million) to help rubber farmers and support falling prices, a government source familiar with the matter told Reuters. The government said it would pay a direct subsidy of 1,500 baht (US$42.22) per rai (0.17 hectares) for up to 15 rai per household, the source said. Approval comes after the cabinet last week approved measures worth about US$1 billion to help rice farmers, including grants and an interest rate reduction for farmers from state banks.
More than 10,000 observers to monitor Myanmar’s election
on an additional 7-10 trillion yen boost to consumption if it raises the number of tourists to anywhere from 30 to 40 million by fiscal 2020, the CEFP will propose. Low crude oil prices could add around 50 trillion yen to the economy given that Japan relies on imports for its crude oil and natural gas needs, the proposal will say Reuters
A total of 10,500 local and international observers have been in place to monitor Myanmar’s November 8 general election which has entered into a five-day countdown. According to the Union Election Commission (UEC), the 10,500 observers include 1,118 representing diplomats, international election observation bodies and 9,406 from local observation organizations. In addition, 290 media personnel from 45 foreign media organizations will cover the election, the commission said in a statement published yesterday.
S.K. Eximbank issues global bonds after rating upgrade
Some economists say Abe’s GDP target is unrealistic given that nominal GDP was only 491 trillion yen at the end of last fiscal year
South Korea’s state-run Export Import Bank of Korea (Eximbank) issued US$1.75 billion of global bonds denominated in the dollar overnight Monday after an upgrade in the sovereign rating. One billion dollars of 10-year global bonds and 0.75 billion dollars of bonds that mature in five and a half years were sold overnight, according to the state lender to exporters. The issuance sent the lender’s total selling of global bonds in 2015 to 5 billion dollars as it floated global bonds worth 2.25 billion dollars in January and 1 billion dollars in June respectively.
14 | Business Daily
November 4, 2015
International
Standard Chartered axes 15,000 jobs The bank also announced US$5.1 billion capital raise Aaron Tam
Obama signs two-year budget bill U.S. President Barack Obama on Monday signed into law a two-year budget bill that averts a default on the government’s debt and a potential government shutdown. “By locking in two years of funding, it should finally free us from the cycle of shutdown threats and last-minute fixes and allows us to, therefore, plan for the future,” Obama said in the Oval Office as he signed the bill. It comes just one day before the November 3 deadline after which the Treasury Department would exhaust its borrowing capacity and could no longer fund the government’s payment obligations.
Global factory growth picked up in October Global manufacturing growth accelerated to a seven-month high in October but remained muted despite factories cutting their prices at the steepest rate since May 2013, a business survey showed on Monday. JPMorgan’s Global Manufacturing Purchasing Managers’ Index (PMI), produced with Markit, came in at 51.4 last month after holding steady at August’s more than two-year low of 50.7 in September. October was the 35th month the index has been above the 50 level that separates growth from contraction and the slight pick up did push factories to increase headcount after trimming employment levels in September.
Polish election winner questions helicopter deal Poland’s election-winning party’s foreign policy point man yesterday questioned the country’s initial deal to buy French Airbus Group’s army helicopters, saying the contract would only leave “leftovers” for Polish producers. Poland’s outgoing government signed a provisional deal with Airbus in April for 50 EC-725 Caracal multi-purpose machines, turning down offers from U.S. Sikorsky and AgustaWestland. The US$3 billion contract has not yet been signed. The Eurosceptic Law and Justice (PiS) party, which won outright majority in parliament last month, has repeatedly said it would rather see the contract awarded to those who manufacture locally.
Amnesty accuses Shell of failing to clear Nigeria oil spills Shell has failed to fulfil its legal obligations to clear up oil spills that it has caused in Nigeria’s oil-rich Niger Delta region, Amnesty International said yesterday. Oil pollution caused by corroded pipelines and crude theft has longed plagued the south-western Delta, an impoverished region despite being home to much of Nigeria’s oil and gas wealth. Amnesty said the findings of a 38 page report were based on research conducted in the Boobanabe, Bomu Manifold, Barabeedom swamp and Okuluebu areas of Niger Delta’s Ogoniland region, between July and September this year.
A
sia-focused British bank Standard Chartered said yesterday it would axe 15,000 jobs and raise US$5.1 billion in capital after posting a “disappointing” thirdquarter loss as it struggles to return to growth. The job losses are part of a major restructuring that will cost around US$3 billion, the bank said. A Standard Chartered spokeswoman said she could not give any further details of the job cuts. More than half of the restructuring costs would come from potential losses on liquidating assets and businesses, the bank said in a statement. The remaining charges would be from “potential redundancy costs” of a planned headcount reduction of 15,000, as well as goodwill writedowns, it added. The bank reported an unexpected pre-tax quarterly loss of US$139 million compared with a US$1.53 billion profit a year earlier, in a performance described as “disappointing” by group chief executive Bill Winters. Revenue was down 18.4 percent to US$3.68 billion and impairment losses increased from US$536 million to US$1.23 billion for the quarter.
Shares in the bank plunged as much as 6.2 percent on the Hong Kong stock exchange in the wake of the results -- its stock value has fallen 32 percent in the past year. “I know a lot of people losing their jobs is not good, (but) from a business point of view, that’s what they have to do,” Hong Kong-based financial analyst Jackson Wong told AFP. Wong said loan losses were the main reason the bank swung to a pre-tax loss, adding that it needed to “control costs and try to remodel (its) business”.
Rights issue
Standard Chartered announced a plan to raise US$5.1 billion in capital through a rights issue, and a strategic review that raised its cost-cutting target to US$2.9 billion between 2015 and 2018. It added it was refocusing on “affluent retail clients” rather than corporate and institutional banking businesses and would exit or restructure US$100 billion of assets. “The business environment in our markets remains challenging and our recent performance is disappointing,” Winters said in a statement filed to the Hong Kong bourse.
Cuba hold business council meeting with U.S. in Havana According to Cuba’s National Information Agency (AIN), both parties agreed that the U.S.-led trade embargo remains the main obstacle to bilateral trade ties
T
he U.S.-Cuba Business Council held a meeting Monday as the 2015 Havana International Trade Fair (Fihav) began on Monday in Cuba’s capital, to forge links between the business sectors of both countries and identify investment opportunities. The meeting of the council, created on September 25 under the auspices of the Chambers of Commerce of
both countries, drew more than 50 businessmen from major U.S. companies such as Morgan Stanley, Home Depot, Caterpillar, Boeing, American Airlines, Heinz Kraft, Fox News, The Wall Street Journal and Sprint, among others. The U.S delegation was headed by Myron Brilliant, senior vice president of the American Chamber of Commerce, while Cuba’s Minister
The plans we have outlined today significantly reallocate resources to change fundamentally the mix of the group towards more profitable and less capital-intensive business Bill Winters, chief executive, Standard Chartered group
Winters, former co-head of JP Morgan, took the reins from Peter Sands in June after shareholder calls for a boardroom cull following profit warnings. The bank said in January it would axe 2,000 jobs around the world in 2015 in an attempt to make savings of US$400 million in a structural overhaul. It had already shed 2,000 jobs in the three months before January. Standard Chartered saw its profits plunge in the first half of this year, with net profit slumping 36.7 percent in the six months to June compared to the period in 2014. Bosses at the bank gave up their bonuses after profits fell by more than a third in 2014, sliding 37 percent to US$2.51 billion. AFP
of Foreign Trade and Investment Rodrigo Malmierca led the Cuban delegation, accompanied by officials and businessmen from the fields of tourism, health, industry, telecommunications, banking, transportation, and energy and mines. According to Cuba’s National Information Agency (AIN), both parties agreed that the U.S.-led trade embargo remains the main obstacle to bilateral trade ties. “The sizable U.S. delegation demonstrates the willingness of the U.S. business community to do business with Cuba and shows the failure of the economic blockade imposed by Washington,” Malmierca told reporters. He also reaffirmed Cuba’s willingness to maintain strong economic ties with its traditional partners, including China, Venezuela, Spain and Russia. Cuba and the United States in July restored diplomatic ties, which were severed by Washington on January 3, 1961. Twenty-nine U.S. companies are participating in the 33rd Fihav event, which runs through November 7 Xinhua
Business Daily | 15
November 4, 2015
Opinion Business
wires
The Fed’s communication breakdown
Leading reports from Asia’s best business newspapers
Kenneth Rogoff
Former chief economist of the IMF, is Professor of Economics and Public Policy at Harvard University
TAIPEI TIMES Members of the Financial Technology Consulting Committee clashed over an initiative aimed at accelerating development to ensure that the nation is prepared for changes as the global market increases the digitization of financial services. The Financial Supervisory Commission in September formed a new office, along with a consulting committee made up of 15 to 20 experts drawn from the financial and technology sectors, to oversee the integration of resources for boosting development of financial technology (fintech), a crucial emerging industry that would enable the nation to maintain its competitiveness amid the “Bank 3.0” shift.
THE TIMES OF INDIA The infrastructure sector output growth rose to a fourmonth high in September but two key sectors - steel and cement - contracted, posing some concerns over the overall strength of the key segment. Data released by the commerce and industry ministry on Monday showed the core sector spanning coal, crude oil, natural gas, refinery products, fertilizers, steel, cement and electricity rose 3.2% in September compared to 2.6% in the same period last year and previous month’s 2.6%. The core sector accounts for 38% of the index of industrial production.
THE KOREA HERALD Hundreds of global retail companies gathered in Seoul yesterday to purchase quality consumer goods and seek new business opportunities in South Korea, the trade ministry said. The Korea Consumer Goods Showcase 2015 kicked off for a twoday run, bringing together Amazon.com, JD.com Inc., Rakuten, Lowe’s Companies, Yves Rocher and many other retailers and shopping mall operators, according to the Ministry of Trade, Industry and Energy. Some 500 South Korean manufacturers of home appliances, beauty and health care products, fashion, food and home decorations are showcasing goods and products to catch the eye of global buyers.
PHILSTAR Ready or not, the Philippine business community has no choice but to face tougher competition from its regional counterparts. As the deadline for the Asean Economic Community (AEC) nears, business tycoon Manuel V. Pangilinan said the Philippines remains unready for the economic unification of the regional market. “No, we’re not ready... People keep talking about integration but what does it really mean? I’m not saying it will not happen in one day, but not in our lifetime. Let us be realistic that it won’t happen because politics will intrude,” Pangilinan said.
A Fed board meeting
N
othing describes the United States Federal Reserve’s current communication policy better than the old saying that a camel is a horse designed by committee. Various members of the Fed’s policy-setting Federal Open Markets Committee (FOMC) have called the decision to keep the base rate unchanged “data-dependent.” That sounds helpful until you realize that each of them seems to have a different interpretation of “data-dependent,” to the point that its meaning seems to be “gut personal instinct.” In other words, the Fed’s communication strategy is a mess, and cleaning it up is far more important than the exact timing of the FOMC’s decision to exit near-zero interest rates. After all, even after the Fed does finally make the “gigantic” leap from an effective federal funds rate of 0.13% (where it is now) to 0.25% (where is likely headed soon), the market will still want to know what the strategy is after that. And I fear that we will continue to have no idea. To be fair, deciding what to do is a very tough call, and economists are deeply divided on the matter. The International Monetary Fund has weighed in forcefully, calling on the Fed to wait longer before raising rates. And yet central bankers in the very emerging markets that the IMF is supposedly protecting have been sending an equally forceful message: Get on with it; the uncertainty is killing us. Personally, I would probably err on the side of waiting longer and accept the very high risk that, when inflation does rise, it will do so briskly, requiring a steeper path of interest-rate hikes later. But if the Fed goes that route, it needs to say clearly
The real risk is that, if the Fed starts hiking, it will be blamed for absolutely every bad thing that happens in the economy for the next six months to a year
that it is deliberately risking an inflation overshoot. The case for waiting is that we really have no idea of what the equilibrium real (inflation-adjusted) policy interest rate is right now, and as such, need a clear signal on price growth before moving. But only a foaming polemicist would deny that there is also a case for hiking rates sooner, as long as the Fed doesn’t throw random noise into the market by continuing to send spectacularly mixed signals
about its beliefs and objectives. After all, the US economy is at or near full employment, and domestic demand is growing solidly. While the Fed tries to look past transitory fluctuations in commodity prices, it will be hard to ignore rising consumer inflation as the huge drop of the past year – particularly in energy prices – stabilizes or even reverses. Indeed, any standard decision rule used by central banks by now dictates that a hike is long overdue. But let’s not make the basic mistake of equating “higher interest rate” with “high interest.” To say that 0.25%, or even 1%, is high in this environment is pure hyperbole. And while one shouldn’t overstate the risks of sustained ultra-low rates to financial stability, it is also wrong to dismiss them entirely. With the decision about raising rates such a close call, one would think that the Fed would be inclined to do it this year, given that the chair and vice chair have pretty much told the market for months that this will happen. The real reason for not hiking by the end of the year is public relations. Let’s suppose the Fed raises interest rates to 0.25 basis points at its December meeting, trying its best to send a soothing message to markets. The most likely outcome is that all will be fine, and the Fed doesn’t really care if a modest equityprice correction ensues. No, the real risk is that, if the Fed starts hiking, it will be blamed for absolutely every bad thing that happens in the economy for the next six months to a year, which will happen to coincide with the heart of a US presidential election campaign. One small hike and the Fed
owns every bad outcome, no matter what the real cause. The Fed of course understands that pretty much everyone dislikes interest-rate hikes and almost always likes rate cuts. Any central banker will tell you that he or she gets 99 requests for interest-rate cuts for every request for a hike, almost regardless of the situation. The best defense against these pressures is to operate according to utterly unambiguous criteria. Instead, however good its intentions, the net effect of too much Fed speak has been vagueness and uncertainty. So what should the Fed do? My choice would be to have it explain the case for waiting more forthrightly: “Getting off the zero bound is hard, we want to see inflation over 3% to be absolutely sure, and then we will move with reasonable speed to normalize.” But I also could live with, “We are worried that if we wait too long, we will have to tighten too hard and too fast.” Throwing out the rulebook made sense in the aftermath of the 2008 financial crisis. It doesn’t anymore. And today’s lack of clarity has become a major contributor to market volatility – the last place the Fed should want to be. It’s wrong to vilify the Fed for hiking, and it’s wrong to vilify it for not hiking; if it is such a close call, it probably doesn’t matter so much. But, at this critical point, it is fair to ask the Fed for a much clearer message about what its strategy is, and what this implies for the future. If Fed Chair Janet Yellen has to assert her will over the FOMC for a while, so be it. Somebody on the committee has to lead the camel to water. Project Syndicate
16 | Business Daily
November 4, 2015
Closing China pledges wider opening-up in 2016-2020
Thai shrimp production curtailed to maintain price
Beijing will continue to open up economy to attract foreign investment and encourage Chinese firms to invest overseas, according to a proposal unveiled yesterday. The Communist Party of China Central Committee’s “Proposal on Formulating the Thirteenth Five-year Plan (2016-2020) on National Economic and Social Development,” was adopted at the Fifth Session of the 18th CPC Central Committee, which ended October 29. Coastal areas will be given support to participate in global economic cooperation, advanced manufacturing bases and economic zones will be established, and border and cross-border economic cooperation zones will continue to be improved, said the proposal.
Thai shrimp farmers yesterday offered to reduce production to keep the domestic price of their shrimps from falling further. The Association of Thai Shrimp Farmers called on the government to see to it that the market price of the shrimps will go up now that the volume of production is being reduced, said Banchong Nisapavanit, a leader of the shrimp farmers’ group. The shrimp farmers have continued to cut their combined production volume from 250,000 tons to 210,000 tons throughout this year, he said. The average cost of raising the Vannamei shrimps in Thailand currently amounts to 114 baht (US$3.16) per kg while the market price is roughly about the same.
HK retail sales fall for 7th straight month Total tourist arrivals slipped 4 percent in September from a year ago
H
ong Kong retail sales fell for a seventh straight month in September as a drop in Chinese tourists and weak consumer sentiment amid a volatile stock market hurt retailers.
Retail sales dropped 6.4 percent from a year earlier, the biggest percentage decline since January this year, to HK$35.2 billion (US$4.54 billion). That followed a revised 5.3 percent fall in August. In volume terms,
September sales slipped 3.1 percent. “The subdued performance of retail sales reflected the weakening of inbound tourism and, to some extent, the spill over of heightened stock market
volatility during the summer on consumer sentiment,” the government said in a statement. It added that retail sales slackened further with most types of retail outlets showing year-on-year declines in sales. “Looking ahead, retail business will likely be still constrained by the weak performance of inbound tourism in the near term,” the government said. “Much will also depend on how the dimmer global economic outlook will affect the economy and local consumer sentiment going forward.” The strong Hong Kong dollar - which is pegged to the U.S. dollar - has made the
city an expensive destination. China’s wealthiest tourists are also now heading to more exotic destinations. Total tourist arrivals slipped 4 percent in September from a year ago. Mainland visitors, which accounted for 77 percent of the visitors to Hong Kong, fell 4.7 percent in the month, according to Hong Kong Tourism Board data. Hong Kong’s comparatively high rents and wages have hurt companies as fewer mainland Chinese tourists have come to the city to buy handbags, watches and designer clothing. September sales of jewellery, watches, clocks and valuable gifts were down 22.9 percent on a value basis in the biggest percentage drop since June 2014. It compared with a 8.8 percent decline in August. Clothing and footwear were down 11.6 percent on the same basis while department stores slid 5.1 percent. In October, cosmetic chain operator Sa Sa International had warned of a more than 50 percent drop in 6-month profit ended in September due to a worsening operating environment while same store sales fell 10 percent in the July-September quarter. Chow Tai Fook Jewellery Group Ltd also said its same store sales in Hong Kong fell 13 percent for the three months ended September 30. Reuters
PBOC’s Ma Jun says some President Xi says 6.5 pct annual market participants too bearish growth enough to meet goals
S
ome market participants have become too negative on China, where a recovery in property sales and monetary and fiscal easing should start to support growth, Ma Jun, chief economist of the People’s Bank of China’s research department, said yesterday. His comments come as the world’s second-biggest economy is on track for its slowest pace of growth in 25 years and after a US$5 trillion stock market rout rattled investor confidence. He cited a recovery in property sales, macro policies that have been trying to stabilize the economy, and a pick up in global growth, as among positives for China. “Some of the market participants are too bearish on the Chinese economic outlook,” Ma said in an interview in Shanghai. “I think partly because they didn’t recognize the few positive factors which will contribute to the stability of the growth outlook.” Policy makers have sought to cushion the economy with six interest-rate cuts in the past year, increased infrastructure investment, and a range of other policy relaxations. While consumption has remained robust and services spending is surging, that hasn’t been enough to prevent a slowdown as weakness in residential construction and manufacturing weigh on the economy. Bloomberg News
G
Shell says can make BG deal work despite weak oil price
R
rowth of only 6.5 percent a year in 20162020 will be enough for China to meet its wealth goals, President Xi Jinping said yesterday according to the official news agency Xinhua. The report came as the ruling Communist party issued guidelines for the next five-year plan for the world’s second-largest economy, whose slowing growth has alarmed investors worldwide. The first documents released by the leadership conclave did not include a numerical growth target. But Xinhua cited Xi as saying that annual growth should be no less than 6.5 percent in the next five years to achieve the Communist Party’s aim of doubling GDP per capita from 2010 by the end of the decade. The doubling target is part of achieving what China’s ruling party calls a “moderately prosperous society” in time for the 100th anniversary of its foundation. The comments are the clearest indication yet that Beijing will reduce its target growth rate from the current “around seven percent”, after expansion slowed last quarter to its lowest in six years.
oyal Dutch Shell sought to ease investor concerns over its planned US$70 billion takeover of BG Group, announcing plans for further benefits and cost cuts aimed at making the deal work with oil prices in the mid-US$60s a barrel. The Anglo-Dutch group, which hopes to complete the deal early next year, said it now expected synergies to increase by US$1 billion to US$3.5 billion for the combination which will make Shell a leader in liquefied natural gas (LNG) and offshore oil production in Brazil. Shell, which last week reported a huge thirdquarter loss due to US$8 billion of write-offs in Alaska and Canada, said it would reduce its costs by US$11 billion in 2015 as it tackles a prolonged period of lower oil prices, currently trading below US$50 per barrel. “Shell is becoming a company that is more focused on its core strengths, a company that is more resilient and competitive at all points in the oil price cycle and that has a more predictable project development pipeline. We’ll grow to simplify,” Chief Executive Officer Ben van Beurden said in a statement ahead of a company strategy day in London.
AFP
Reuters