MOP 6.00 Closing editor: Joanne Kuai
Lippo interim results pressured by subsidiary’s impairment loss
Year IV
Number 921 Tuesday November 17, 2015
Publisher: Paulo A. Azevedo
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Mainland firms leaving int’l markets face investors’ pressure
Pages 8&9
Fiscal surplus shrinks nearly 60 pct
Down but not out. For the first ten months of this year, the city’s fiscal surplus amounted to MOP34.6 bln (US$4.33 bln). Representing a contraction of 59.7 pct from MOP85.9 bln during the same period last year. The plunge is attributed to declining gaming tax income and increased gov’t expenditure. Nevertheless, the city is on target to meet expectations of an MOP18.8 bln surplus for the year Page
Uber throws down the gauntlet Uber has filed a complaint with CCAC. Complaining to the Commission Against Corruption against the ‘unjustified nature of the enforcement against drivers’. This, following local police action regarding the taxi hailing app’s operation in the city. The company has voiced its determination to operate. And is in the throes of recruiting management and marketing personnel for its Macau team
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www.macaubusinessdaily.com
Moderately prosperous President Xi Jinping recently addressed G20 participants. Calling for innovation and the rejection of protectionism as the axis of global development. The Chinese leader posited national plans involve building a “moderately prosperous society”
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Stressful times
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Portuguese Bank Novo Banco SA has a dilemma. Given its 1.4 bln euro (US$1.5 bln) shortfall per the European Central Bank’s stress tests. The parent company of Macau-based Novo Banco Asia is posing a challenge to a country in the midst of political crisis and without a permanent gov’t in place
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Tokyo recommends not rushing into yuan internationalization
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Swings and roundabouts The city’s foreign exchange amounted to MOP144.9 bln (US$18.16 bln) as at the end of October. An increase of 12.5 pct vis-a-vis MOP128.8 bln y-o-y. Meanwhile, the trade-weighted effective exchange rate index for the pataca posted a drop of 0.4 points m-o-m. The pataca has depreciated against the currencies of the city’s major trading partners on a monthly basis. But appreciated on an annual basis
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HSI - Movers November 16
Name
%Day
China Resources Beer H
+0.42
Sino Land Co Ltd
+0.35
Lenovo Group Ltd
+0.24
MTR Corp Ltd
+0.14
Wharf Holdings Ltd/Th
-2.70
Tingyi Cayman Islands
-3.08
Source: Bloomberg
I SSN 2226-8294
2015-11-17
2015-11-18
2015-11-19
24˚ 28˚
23˚ 29˚
24˚ 28˚
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November 17, 2015
Macau QBE Insurance Group changes operating company in city
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deposits, savings deposits, and noninstitutional money market funds. Meanwhile, the trade-weighted effective exchange rate index for the pataca posted a drop of 0.4 points month-on-month. However, on a year-on-year comparison, the index jumped 5.92 points to 105.39 in October, implying the pataca had depreciated against the currencies of the city’s major trading partners on a monthly basis, but appreciated on an annual basis, in general.
he government has approved the Australian-based insurance group QBE Insurance Group to change its operation in the Special Administrative Region under QBE General Insurance (Hong Kong) Ltd. from the previous QBE Insurance (International) Ltd. According to yesterday’s Official Gazette, the government will terminate the insurance operation permit for QBE Insurance (International) Ltd.’s local branch from December 1, allowing the branch to transfer all its assets to the local branch of QBE General Insurance (Hong Kong). The dispatch by Chief Executive Fernando Chui Sai On indicated that all the effective insurance contracts under QBE International would not be affected after the company’s branch in the city terminates its operation. However, these contracts would not be able to be extended, renewed or enhanced in the current insurance amount. Meanwhile, QBE General Insurance (Hong Kong) is permitted to provide insurance products for employee compensation, fire, insurance and marine cargo, in addition to personal insurance products, such as travel accident insurance and sickness insurance. QBE Insurance Group, with headquarters in Sydney, Australia, saw its written premium total US$16.3 billion (MOP130.4 billion) in 2014.
K.L.
K.L.
Foreign exchange reserves total MOP145 bln in October
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he preliminary state of the city’s foreign exchange amounted to MOP144.9 billion (US$18.16 billion) as at the end of last month, according to the foreign exchange services and nominal effective exchange rate index for the pataca released yesterday by the Monetary Authority of Macau (AMCM). The official data indicated that the exchange reserves represent a decrease of 0.3 per cent from the revised value of MOP145.3 billion posted for September. Nevertheless, the number jumped by 12.5 per cent
compared to MOP128.8 billion for October last year. As at the end of the month, the foreign exchange reserves of the Special Administrative Region represented 12 times the currency in circulation, or 105.4 per cent of Pataca M2 at the end of September this year. ‘M2’ refers to that part of the money supply that includes physical coins and currency, as well as readily liquid assets such as on-demand bank deposits and money held in cheque accounts plus all time-related
Lippo interim results pressured by subsidiary’s impairment loss
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ong Kong-listed property developer Lippo Ltd. expects that the impairment loss recorded by its subsidiary would further affect the company’s interim results for the six months ended September 2015, the company told Hong Kong Stock Exchange last week. The company said in the filing that its subsidiary Lippo China Resources Limited, in which it owns 71.24 per cent interest, is likely to record an impairment loss of some HK$60 million (US$7.5 million) on its properties under development during the period. ‘Accordingly, the amount of such impairment loss attributable to the Lippo Group shall be approximately HK$43 million for the period,’ the property developer wrote.
The company, meanwhile, also estimated the subsidiary would post an increase of at least HK$300 million for the loss for the period, compared to a profit of HK$6 million during the same period last year. In fact, the developer had warned last month that its interim profits for the first half of the fiscal year would be negatively affected by unrealised net fair value loss of some HK$186 million. Lippo’s interim results will be announced at the end of the month, according to its previous filing. For its last fiscal year ended March 31, the property developer’s net profit jumped 392.3 per cent year-on-year, totalling HK$522.2 million from HK$112.2 million in 2013. K.L.
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November 17, 2015
Macau
Fiscal surplus shrank nearly 60 pct as at October Compared to the government’s annual target of MOP18.8 bln, the total amount of fiscal surplus generated in the first ten months of the year has already met expectations
MOP6.25 billion compared to MOP4.98 billion one year ago. In general, the total revenues generated by the government dropped 31.2 per cent year-on-year for the ten months, amounting to some MOP90.99 billion. The number is MOP15.7 billion behind the annual target of MOP106.7 billion, according to official data.
Kam Leong
Expenses
kamleong@macaubusinessdaily.com
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he city’s fiscal surplus amounted to MOP34.6 billion (US$4.33 billion) for the first ten months of the year - plunging 59.7 per cent from MOP85.9 billion during the same period of last year - due to a drop in the government’s gaming tax income and increase in its expenses. According to the updates of the central account by the Financial Services Bureau (DSF), the amount of fiscal surplus recorded for the ten months had already surpassed the government’s annual target for this fiscal year of MOP18.8 billion; the execution rate of the surplus was 183.9 per cent as at the end of last month. For the first ten months of the year, the government’s
direct tax received from the local gaming sector plunged 35.3 per cent year-on-year to MOP71.4 billion from MOP110.2 billion one year ago. Forecasting MOP85.9 billion in taxes from the sector, the current number
suggests the government needs to at least generate some MOP7.3 billion more for the remaining two months in order to fulfill its budgeted number. In addition, the government saw its indirect tax income decrease 29.8
per cent to MOP3.43 billion for the first ten months from MOP4.88 billion during the same period of last year. But for other direct taxes received by the government, the total amount registered a year-on-year increase of 25.3 per cent, totalling some
Meanwhile, the government’s total expenses increased 21.5 per cent for the first ten months of the year, reaching MOP56.4 billion compared to MOP46.4 billion one year ago. The 2015 budget had actually granted expenses of some MOP87.9 billion, suggesting the government could still spend some MOP31.5 billion this month and next before expenses exceed budget. According to the account, most of the expenses were for current expenditure, which accounted for about 93.1 per cent of the total, amounting to MOP52.5 billion. The number is a year-on-year increase of 20.6 per cent from MOP43.6 billion for the first ten months of 2014. In addition, the amount of capital expenditure rose 35.5 per cent year-on-year to MOP3.88 billion, following expenses on investment surging 45.4 per cent to MOP3.15 billion of the total.
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November 17, 2015
Macau
Uber files complaint with CCAC Despite the government’s action in tackling the taxi-hailing app and fining Uber drivers, the company is still determined to operate in the SAR Joanne Kuai
joannekuai@macaubusinessdaily.com
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he controversy regarding Uber, the taxi-hailing app’s operation in Macau SAR, has been an ongoing saga since its soft launch on October 22. Local authorities responded on that day that such a service is deemed illegal. In less than one week after its launch, local police fined Uber drivers. While some residents mourn the loss of Uber, the company made a comeback and held a press conference, stating that they would work with their local driver-partners, who were the targets of the law enforcement action, to file a complaint with the relevant authorities. Uber has told Business Daily that the complaint has been filed with the Commission Against Corruption. “The complaint has now been filed with the CCAC along the lines of what we have outlined previously, addressing
The Uber spokesperson added that there are “numerous irregularities in the way the PSP have carried out their enforcement, such as having drivers sign precompleted statements and attempting to confiscate their phones despite the fact that no-one was arrested.”
Growing business
the unjustified nature of the enforcement against drivers, given the legally compliant nature of the service,” said Harold Li, at Communications of Uber North Asia. “The fact that
the PSP is not complying with a ruling by the Administrative Court that it cannot on its free will impose such fines on drivers of travel agency cars nor impound these vehicles.”
Following the police action, a Facebook page titled ‘Support Uber, Macau needs you’ was set up. In less than three weeks, the page now has more than 8,860 ‘likes’. Netizens are sharing news about Uber in Macau and exchanging their opinions on the matter. Also last week, at a plenary session of the Legislative Assembly some legislators indicated that the government should instead of recklessly suppressing such mobile taxi-hailing apps
Portugal’s Novo Banco requires US$1.51 bln capital injection The parent company of Macau-based Novo Banco Asia was found to have a US$1.5 billion shortfall in a stress test
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ovo Banco SA, the Portuguese bank that emerged from the breakup of Banco Espirito Santo SA last year, had a 1.4 billion-euro (US$1.5 billion) shortfall according to the European Central Bank’s stress tests. The ECB found that Novo Banco had a Common Equity Tier 1 ratio of 2.4 per cent under its adverse stress test scenario, which simulates an economic downturn, the Lisbon-based Bank of Portugal said in statement on Saturday. Novo Banco had an adjusted 8.24 per cent ratio in the baseline scenario. The Bank of Portugal ‘interrupted’ the sale of Novo Banco in September because offers weren’t high enough and the possible need to improve capital ratios following the ECB test generated ‘uncertainty,’ the central bank said at the time. The Portuguese central bank said on Saturday that Novo Banco would address the shortfall through a strategic
plan to be presented in a few weeks that will include the sale of assets such as a stake in insurance company GNB Vida. The Bank of Portugal said the preparation to resume Novo Banco’s sale will start immediately. Bank executives including Banco Comercial Portugues SA Chief
Executive Officer Nuno Amado and Banco Santander Totta SA CEO Antonio Vieira Monteiro said earlier this month that the Bank of Portugal’s Resolution Fund, which received a loan from the state for the rescue, shouldn’t be used to recapitalize the bank further.
conduct scientific research in order to better regulate the market while catering to the transportation needs of residents. According to the career listings on Uber’s official website, the company’s Macau operator is hiring for the following positions: General Manager, Marketing Manager, Operations & Logistics Manager, and Marketing/Operations Associates. “We’re excited about our business in Macau and its future, and growing our team here is part of ensuring we can meet the great demand in this city,” said Harold Li. “We’re looking for strong team members to drive operations and marketing in the city and, as we do in all of our 350plus cities globally, we’re very focused on identifying local talent.”
Novo Banco Asia - formerly known as Banco Espirito Santo do Oriente (BESOR) - is the Macau subsidiary of Novo Banco, which was created from the ruins of the collapse of its parent company BES in Portugal last Summer.
Bank rescue
European state aid rules don’t allow further use of the Resolution Fund. ‘Portugal will not provide any additional capital or liquidity support’ to Novo Banco, the European Commission said after Espirito Santo’s collapse in August 2014. The Bank of Portugal is seeking to recoup some of the 4.9 billion euros injected into Novo Banco. Most of the assets and deposits of Banco Espirito Santo, once Portugal’s biggest bank by market value, were transferred to Novo Banco. If the Resolution Fund, which Portuguese financial institutions contribute to, has to sell Novo Banco for less than the value of its rescue then the country’s banks will have to make up the difference. The stress test results come at a time of political wrangling in Portugal. Socialist leader Antonio Costa wants to become prime minister with support of left-wing parties that have been critical of the bank’s rescue. Premier Pedro Passos Coelho was ousted on Tuesday, less than six weeks after the October 4 election which enabled him to form a short-lived minority government.
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November 17, 2015
Macau
Hospitality industry still has room to grow Despite increasingly intense competition and oversupply worries, Macau’s new hotel rooms could eventually help the territory become a world tourism centre, says the hospitality industry with increased conviction
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acau could face its first annual decline in visitor arrivals this year since 2009. Coupled with an imminent inventory of tens of thousands of new rooms, industry insiders and analysts expect fiercer competition in the hotel market. But this could, in fact, also present opportunities for Macau to cement its position on the radar of global travellers –
assuming other facilities fall properly into place. Zeng Zhonglu, professor at the Gaming Teaching and Research Centre of Macau Polytechnic Institute, believes a discount offer is one of the means by which hotel operators are attracting guests in the current weak market environment. “With a slower demand com- pared to the past booming years, the hotels have
to explore different means of maintaining occupancy [rate] at a certain level.” Analysts and economists blame the decline in the number of visitors this year on a mix of factors from a slowing economy and crackdown on corruption in Mainland China – a region accounting for two-thirds of the city’s total visitors - to weaker currencies of nearby nations. In the first eight months of this year, the territory received 20.44 million visitors, down 3.2 per cent from the previous year, the latest government data shows, while the average occupancy rate of 102 hotels and guesthouses here stood at 78.5 per cent in the first seven months, the worst performance since the global financial crisis struck in 2009.
Oversupply worries
While the number of visitors heads south, the supply of
hotel rooms has stoically surged north. After the openings of two projects - Galaxy Macau Phase II and Broadway Macau in May, boosting hotel supply by 1,570 rooms - four new projects are due to open between September and December this year to add another 2,318 rooms. In the next few years, the city’s hotel room supply will increase by over 70 per cent from the current size of 29,900 rooms, as more than 21,100 hotel rooms were being built or planned at the end of the second quarter, government figures reveal. “I’m not too worried about an oversupply at this moment, as there’s still room in the market to absorb new rooms,” said Andy Wu Keng Kuong, president of Macau Travel Industry Council. “In the past few years we of- ten complained about there
not being enough hotel rooms especially during holiday times, as well as the skyrocketing room rates. The new supply presents a solution to the problems.” Mr. Wu believes it is more effective for the hotels to conduct promotional offerings like ‘buy one, get one free’ - allowing guests to stay in hotels for two nights for the price of one - to lengthen the stay of visitors as Macau transforms into a global tourism centre. The Macau Government has said in the past few weeks that they would input resources to enrich the city’s offerings to attract visitors staying here longer and attract more international travellers, who currently represent less than 10 per cent of the total. The full story can be read in this month's issue of Macau Business magazine, available at newsstands or online at www.magzter.com
Corporate
CEM hosts power industry services seminar Companhia de Electricidade de Macau - CEM, S.A. (CEM) hosted the “20th Guangdong, Hong Kong and Macau Power Industry Services Seminar in Macau. Nearly 100 delegates from the power companies and power industry in Guangdong, Hong Kong and Macau attended the Seminar to discuss and exchange experiences in
regard to the conference theme of “Build Green Living Together with New and Smart Energies”. The “Guangdong, Hong Kong and Macau Power Industry Services Seminar” has been hosted by Guangdong Power Grid Co., Ltd. (GPG), CLP Holdings Limited (CLP), and CEM by turns on an annual basis since 1996.
MGM lion dance championship concluded The “MGM Lion Dance Championship – Macau International Invitational 2015” came to a glorious conclusion after two days of fierce competition. Foshan Nanhai Huangfeihong Zhonglian Cable Lion Dragon and Martial Art Association from China took home the title of the fifth MGM International Lion Dance Champion, while the China Guangdong Zhaoqing Electricity
Dragon & Lion Dance Troupe was awarded the Gold Trophy in the Female Lion Dance Performance Competition. The Championship ceremoniously concluded as winners were announced. For the male category, Foshan Nanhai Huangfeihong Zhonglian Cable Lion Dragon and Martial Art Association bested the other 14 troupes by a score of 9.275.
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November 17, 2015
Gaming
FanDuel, DraftKings gamble on judge in fight for N.Y. customers FanDuel Inc. and DraftKings Inc. are betting a judge will see fantasy sports as games of skill, rather than illegal gambling operations that New York’s attorney general is determined to shut down
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he two biggest daily fantasy sports sites, FanDuel Inc. and DraftKings Inc., are taking on Eric Schneiderman in court, accusing him in lawsuits of bullying and abusing his powers in ordering that they stop operations in New York and are seeking a judge’s order to let them keep operating. In the meantime, though, FanDuel says it will stop taking new deposits from players in New York. New York is integral to DraftKings and FanDuel, which are valued at more than US$1 billion each and have drawn investors across the sports, media and venture-capital industries. The state accounts for 5 per cent of FanDuel’s customers and more than 7 per cent for DraftKings, according to the companies’ filings. If both companies were to lose their customers in the state, it would cost them an estimated US$35 million in annual revenue. "Such a shutdown would deprive hundreds of thousands of subscribing New Yorkers of the opportunity to pit their skills against the skills of others in selecting a ‘fantasy’ team of athletes from different sports teams and competing in contests offering prizes to the players whose fantasy teams perform best," FanDuel said in its complaint, which seeks a quick ruling that its contests don’t constitute gambling or bookmaking under New York law.
Business disruptions
Schneiderman’s order disrupted the business and the attorney general has pressured payment processors to stop providing the companies service unless they suspend their New York
operations, according to the lawsuits, filed separately in New York state court. The attorney general’s staff “contacted DraftKings’ business partners, threatening to take action against them unless they immediately ceased performing services for DraftKings in New York,” the company said in its petition. Court orders are needed to “bar the attorney general from continuing to abuse his power and to prevent the irreparable harm that will result from it,” DraftKings said. “DraftKings will continue to operate in New York while we pursue all legal options available to prevent the New York Attorney General from denying our customers their right to play the games they love,” the company said in an e-mailed statement. Responding to those allegations, Matt Mittenhal, a spokesman for the attorney general, said in a statement on Friday that "anyone who asks us about the legality of online sports betting will be told exactly what we wrote in our letters." The companies "are operating illegal gambling operations," Mittenhal said. "It should come as no surprise that companies associated with DraftKings or FanDuel are actively reviewing this matter in the context of business decisions." Schneiderman said in an earlier statement Friday that he will "take action to enforce state law," without providing more specifics on the nature or timing of his next steps. Four smaller operators said Nov. 11 they will block New York users from entering their paid contests.
The four are: TopLine Game Labs LLC, which operates fantasy site DailyMVP; Draft Day; DraftOps; and MondoGoal Trading Ltd., an international platform focused on soccer.
New deposits
FanDuel posted a notice on its website Friday notifying users located in New York that they won’t be able to make new deposits. “The situation is developing and we will continue to keep you all updated on any changes, while we pursue our day in court,” the company said. New York’s order is the latest in a growing list of state bans as legislators, regulators and law enforcement continue to scrutinize the industry. Arizona, Iowa, Louisiana, Montana and Washington already forbid DraftKings and FanDuel from operating. Last month, Nevada said the the daily sports pools are gambling and need casino licenses to do business there. Pennsylvania and New Jersey legislators are debating whether to regulate the games, which for now operate unhindered in both states; and Massachusetts Attorney General Maura Healey is investigating the industry with an eye on consumer protections, her spokeswoman Cyndi Roy Gonzalez said in a Nov. 10 statement. In letters to DraftKings and FanDuel, Schneiderman highlighted their omnipresent advertising, which “continues to promote DFS like a lottery, representing the game to New Yorkers as a path to easy riches that anyone can win.”
Those messages, Schneiderman said, are a tacit admission that daily fantasy sports constitute “games of chance,” which are considered gambling, and not “games of skill” as the companies contend. If that determination withstands scrutiny by a judge, it could potentially expose fantasy sports executives to the possibility of criminal action and prompt investors and sports organizations to distance themselves from the business, legal experts said. Boston-based DraftKings and FanDuel, based in New York, have expanded rapidly, raising hundreds of millions of dollars from investors including Time Warner Inc. and KKR & Co. on the premise that their contests are legal.
Fan favorite
FanDuel on Nov. 10 reiterated that assertion and said Schneiderman is “a politician telling hundreds of thousands of New Yorkers they are not allowed to play a game they love.” Daily fantasy sports customers pay entry fees and pick rosters of real-life athletes in the hope of winning millions of dollars in prizes. Schneiderman began a review of the businesses after first looking into allegations that a DraftKings employee used inside information to win $350,000 on FanDuel. A law firm hired by DraftKings concluded the employee did nothing wrong. The case are FanDuel Inc. v. Schneiderman. 161691/2015. New York State Supreme Court (Manhattan) and DraftKings Inc. v. Schneiderman. 102104/2015. New York State Supreme Court (Manhattan). Bloomberg
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November 17, 2015
Greater China
President Xi proposes open economy for boosting global growth He said the G20 members should ensure that regional free trade arrangements serve as a useful complement to multilateral trading regime, rather than creating new obstacles
Chinese President, Xi Jinping, enters a hall during the BRICS leaders’ meeting prior to the G20 summit in Antalya
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s impacts of the international financial crisis are lingering, Chinese President Xi Jinping said Sunday on the Group of 20 (G20) summit that targeted medicine for sluggish growth must be prescribed. In a speech entitled “Innovative Growth That Benefits All,” the Chinese leader pointed out that the G20 should work to maintain a stable economic growth in the short term, while seeking to inject new impetus into the world economy in the long term. Themed with “collective action for inclusive and robust growth,” the on-
going G20 summit, held in the Turkish resort city of Antalya, is expected to underpin global confidence and ensure strong, sustainable and balanced growth for the world economy. President Xi stressed that the G20 members should not only address the immediate challenge by stabilizing growth, but also tackle the root cause by gathering momentum for long-term development.
Effective measures
The dynamism and creativity unleashed through institutional reform and the new industries and products
enabled by the development in science and technology have been essential for the world economy to turn the corner and recover from previous major crises, said Xi. Xi said the G20 members should seize the opportunities, and make innovation-driven development and cultivation of new growth points the new priorities of G20 cooperation. Revitalizing trade and investment and restoring the two engines of the world economy to high-speed operation is another priority for the G20, said Xi. In 2014, foreign direct investment around the world dropped by 8 percent, which deserves close attention. “We should reject protectionism and uphold and strengthen the multilateral trading regime in order to provide sufficient space for the development of different countries,” said Xi. In the wake of the failed World Trade Organization (WTO) Doha trade negotiations that stumbled because complex issues could not be resolved, nations are
now forming regional trade blocks, which are politically charged.
Global driving force
After 30-plus years of fast growth, China also experiences a slowdown, which has stirred speculations that China’s economy will come to a halt and may drag global rehabilitation down. However, Xi said China has the confidence and ability to sustain a medium-high growth rate and continue to create development opportunities for other countries. Xi admitted that China has come to a crucial point when it must adjust the growth pattern and structure of the Chinese economy. “This endeavour won’t be a smooth sailing. It won’t happen overnight,” he said, adding that China’s resolve to push forward structural reform is rock-firm and its policy to open up further is clear. China has adopted a proposal on formulating the 13th Five-Year Plan (20162020) on national economic
and social development, which aims to build a “moderately prosperous society” and double its 2010 GDP and per capita income of both urban and rural residents by 2020, said Xi. In the next five years, China will adhere to a path of innovative, coordinated, green, open and shared development, and will encourage a system that nurtures innovation, said Xi. The country will try to realize the synchronous development of the new type of industrialization, IT application, urbanization and agricultural modernization, he added. China, Xi said, will highlight green and lowcarbon development, improve its environmental quality, become heavily involved in global economy, and carry out the Belt and Road initiative. All these efforts will inject strong impetus into China’s economic growth while unleashing demand for the world economy, said the president. Xinhua
As mainland firms walk out on Wall St, spur
In deals collectively worth US$40 bln, some 33 mainland China companies have unveiled pl Elzio Barreto
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hinese firms listed in New York are finding out the hard way that it’s easier to love global investors than leave them. As dozens plan buyouts and a return home in search of higher valuations, companies that were once Wall Street’s darlings for the first time face the wrath of minority shareholders. Asset managers are publicly demanding better premiums, reflecting historical valuations and not 2015’s slide. In deals collectively worth US$40 billion, some 33 mainland China companies have unveiled plans this year to be taken private and delisted from the Unites States, according to Thomson Reuters data. But a cottage industry of hedge funds and lawyers is coalescing around those determined not to accept low-ball bids for their assets. “We want to put as much pressure as possible,” said portfolio manager Lin Yang at FM Capital, a Britainbased hedge fund backed by the Libyan sovereign wealth fund that owns 1.4 percent of medical firm China Cord Blood Corp. FM Capital is urging a group of mainland China investors to raise a buyout offer, saying the shares are worth 2.5 times the proposed bid. “If no shareholder challenges the offer, it will go through on the cheap,” said Lin. Peaking at a valuation of US$615 million in August this year, China Cord Blood’s market
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November 17, 2015
Greater China Finance ministry to issue bond in Hong Kong China’s Ministry of Finance (MOF) said yesterday it would issue 14 billion yuan (US$2.2 billion) in yuan-denominated treasury bonds in Hong Kong from November 23. The bond issuance will target Hong Kong residents, institutional investors and foreign banks and monetary authorities, the ministry said in a statement on its website. The first batch of 14 billion yuan worth of yuan-denominated bonds for 2015 was auctioned on May 20, the ministry said. The MOF has been auctioning bonds denominated in the offshore yuan in Hong Kong since 2009, supporting the development of the offshore yuan market there.
Wang Jianlin, Dalian Wanda CEO
Dalian Wanda, R&F Properties seek approval for Shanghai listings
Courier companies Both firms' applications to list are subject to regulatory approval to face punishment for info leaks
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wo of China’s biggest real estate firms are seeking approval to raise about 47 billion yuan (US$7.37 billion) in Shanghai listings, in the first batch of companies to start the listing process after an almost five month hiatus. China said earlier this month it would resume initial public offerings (IPOs), which had been suspended since July as authorities tried to stem a market crash. The reopened window gives property developers, among the most indebted sector in China, another channel to refinance amid slower sales and chase a more favourable valuation as their shares in Hong Kong remain cheap. Guangzhou R&F Properties is
seeking to raise about 35 billion yuan on the Shanghai stock exchange in what could be the biggest listing since 2010, it said in a prospectus posted on the securities regulator’s website on Friday. R&F properties plans to issue no more than 1.07 billion new shares, and will use funds to finance various projects, it said. Dalian Wanda Commercial Properties, China’s largest commercial property developer, is seeking to raise about 12 billion yuan in a Shanghai listing, it said in a separate prospectus posted on Friday. Listing on the A-share market “will help to raise our brand and fan base,” Liu Chaohui, Dalian Wanda Group’s vice president, said at a press conference
in August, adding funds would be used to help the firm refinance and fund its commercial development. “Investors want to see the listing of Wanda and it will also help our H-share performance,” he added. State-owned Beijing Capital Land also said it will submit its A-share listing application as soon as possible, while Country Garden told Reuters it is working on the application for a spinoff of its property management business on the Shanghai bourse. Dalian Wanda plans to issue about 250 million new shares. Both firms’ applications to list are subject to regulatory approval. Dalian Wanda and R&F Properties are in a batch of 84 companies.
rned investors demand payback
lans this year to be taken private and delisted from the United States
Chinese courier companies might face fines of up to 50,000 yuan (around US$7,814) and license revocation for leaking customers’ personal information, according to draft regulations unveiled yesterday. Express companies should regularly destroy waybills and are prohibited from selling, leaking or illegally providing customers’ personal information, the draft rules stipulate. The draft will be posted online to solicit public opinion until December 15, the Legislative Affairs Office of the State Council said. This is good news for express delivery customers who worry that a new real name policy for parcels might be a privacy threat.
Insurance cooperation memorandum with Russia capitalisation has shrunk to just over US$500 million; the bid was made in late April, valuing the target at US$512 million. There’s no deadline for the China Cord Blood buyout offer is and it’s unclear what the outcome will be; the company didn’t respond to email seeking comment. But minority investors have scored notable successes this year: In one case, Chinese investment firm Vast Profit Holdings raised by 34 percent a March buyout offer that initially valued dating service Jianyuan.com at US$178.9 million after pressure from U.S. asset manager Heng Ren Investments and others. The increasingly active culture of complaints may also leave a mark on future buyouts. Late last week e-commerce giant Alibaba Group Holding Ltd raised a bid to take video streaming service Youku Tudou Inc private by almost 3 percent to US$27.60 per share, just three weeks after it was announced. “Listed issuers, before they consider whether to go private or be listed elsewhere, they must remember that at the end of the day, they have sought public funds. That means they must realise that minority shareholders should have a role to play in the business of the company,” said Michael Cheng, a consultant solicitor at law firm Andrew W Y Ng & Co and former
research director at the Asian Corporate Governance Association in Hong Kong.
‘Negative perception’
While Chinese companies may face a reckoning on home soil as the economy that accounts for much of their business slows to its weakest growth in 20 years, the tension over the ‘going private’ deals adds to general international shareholder unease over accounting and corporate governance issues in China. “Investors will shun Chinese IPOs (in the United States) in the future. It just reinforces the negative perception,” said John Romero, a hedge fund manager who has told the board of Renren Inc the buyout offer for the social networking company undervalues it by 60 percent. Renren didn’t respond to email seeking comment on the matter. Law firms such as Levi & Korsinsky LLP have started running their own checks on the fairness of buyout offers for Chinese companies including SORL Auto Parts Inc., China Ming Yang Wind Power Group Ltd and chat app maker Momo Inc. - the latter listed as recently as December 2014. Meanwhile a group of minority investors in E-Commerce China Dangdang Inc is threatening to sue mainland investors proposing a buyout offer valuing the online retailer at US$632 million. The group says an offer made in July was over-
KEY POINTS 33 U.S. delisting buyouts planned in 2015 Proposed deals worth estimated US$40 bln - Reuters Chinese companies face shareholder activism Activist investors win some sweeter offers Some threaten lawsuits if deal terms not improved opportunistic because it came after a 43 percent slide in the stock price over the previous two weeks. Dangdang didn’t respond to email seeking comment on the matter. “At this point, no material damage has been done,” said Kevin Lu, a San Francisco bay area investor in Dangdang who said he speaks on behalf of 120 shareholders including hedge funds and individual investors. “If a deal is finalised at the current proposal, it’s a no-brainer - the buyer group will be sued.” Reuters
China and Russia inked a memorandum to further cooperation on insurance regulations, according to a statement released by the country’s top insurance watchdog yesterday. China Insurance Regulatory Commission and Russia’s central bank will facilitate information exchange and coordination on insurance regulation, the statement said. The cooperation opportunities are abundant for the two countries in areas such as tourism insurance, major project construction financing and risk control, and reinsurance. They will help promote the development of the China-proposed Belt and Road Initiative, the statement pointed out.
Tsinghua Unigroup preparing chip empire China’s Tsinghua Unigroup Ltd plans to invest 300 billion yuan (US$47 billion) over the next five years to build the world’s third-biggest chipmaker, the chairman of the state-backed technology conglomerate said yesterday. Chairman Zhao Weiguo also told Reuters in an interview that Tsinghua Unigroup, controlled by Beijing’s elite Tsinghua University which counts President Xi Jinping among its alumni, was in talks with a U.S.-based company involved in the chip industry. Zhao said a deal could be finalised as early as the end of this month.
10 | Business Daily
November 17, 2015
Greater China
Tokyo urges Beijing to go slow on yuan reform Japanese policymakers are not suggesting there is an immediate risk of a financial crisis, but they say China's heavy intervention in markets to offset the capital outflows shows Beijing is worried Leika Kihara
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apan has expressed concern to China about the pace of capital outflows from the country and has suggested Beijing moves very slowly in reforming its currency system to avoid repeating Japan's past mistakes. After a summer of market turmoil, China now appears to be at a critical juncture as capital outflows reach hundreds of billions of dollars and Beijing draws down heavily on its, albeit large, currency reserves to offset the impact of the money moving offshore. The stocks slump of more than 40 percent in a matter of a few months and the shock devaluation of the yuan acted as a reminder of how quickly Beijing could lose control of its markets if it moves too quickly to open up to market forces, Japanese officials say. "The pace of capital outflows is alarming," said a senior official with knowledge of Japan's currency diplomacy. "If China's financial system is destabilised, the effect on Japan and the rest of Asia would be enormous." Publicly, Japanese officials have urged China to proceed with reform and expressed confidence that Beijing has the tools and expertise to manage. But privately, they have adopted a different tone, cautioning Beijing against moving too quickly to free up the yuan when large capital outflows could make the currency a target for speculators. Japan has conveyed its concerns to Chinese officials at various meetings this year, including at the G20 financial leaders' meeting in Turkey in September. China took a big step towards internationalising its currency on Friday, when IMF staff and the institution's head Christine Lagarde endorsed the inclusion of the yuan in the fund's benchmark foreign exchange basket, known as Special Drawing Rights (SDR). Analysts estimate inclusion could lead to demand for the yuan worth more than US$500 billion. "It should be the other way around," said a Japanese official, who declined to be identified because of the sensitivity of the matter. "Reforms come first, then you debate whether the yuan can join the SDR." China is trying to engineer a shift in the economy away from manufacturing and towards consumption and services while promising to fully liberalise the yuan by 2020 - a goal some Japanese officials feel is to ambitious. Japan's cautious tone is at odds with the more robust calls from Washington - underlined last week with comments from U.S. Treasury Secretary Jack Lew urging Beijing to press ahead with its reform plans. But Japan's views carry weight with Beijing, which has long taken a close interest in how Japan emerged in the past three decades as a global economic power. It views Japan's handling of capital flows and the yen as key factors that
led to its asset bubble blow-up in the early 1990s that led to nearly two decades of deflation Japan is still struggling to eradicate. For decades, China's main concern was the amount of foreign currency coming into the economy as it built a huge export engine. But since China surprised world markets by devaluing its currency around 2 percent in August, net capital outflows have reached $200 billion, while Beijing appeared to have spent $229 billion in foreign exchange intervention to prop up the yuan in the third quarter, a U.S. Treasury Department report showed last month.
"Worst thing is to move too quickly"
If China liberalises its currency too quickly and before it fixes other problems in the economy, such as high debt, Beijing may struggle to contain capital outflows and that may take a toll on its US$3.5 trillion in currency reserves, Japanese officials say.
"Market liberalisation sounds nice. But it could cause various problems," said Eisuke Sakakibara, who as a senior Japanese finance ministry official wrestled to contain volatile yen swings with heavy intervention in the late 1990s. "When an economy moves from fast-growth to stable growth, you're bound to have some market turmoil. The same thing could happen in China, so the worst thing to do is to move too quickly to a free-floating currency regime." China said the devaluation of the yuan reflected market forces, but the move jolted global markets on fears it meant the economy was in worse shape than previously thought. China is Japan's biggest trading partner and its markets have become susceptible to big swings caused by Chinese policy decisions. Any repercussions to Asia also affect many Japanese firms and banks operating in the region. Such impact was highlighted when China's yuan devaluation
sent Japanese and global stock prices tumbling, as investors initially struggled to understand Beijing's motives. "There was lot of second guessing over China's policy intention and that was because the communication was poor," said a China-based Japanese government official.
Banking woes loom
Both Prime Minister Shinzo Abe and Finance Minister Taro Aso have called on China to address structural problems in the economy, such as bad loans and excess industrial capacity, and to provide transparency of policymaking. If China fails to tackle these problems, the risk is that it will not be just China that will feel the impact. "The biggest risk for Japan is a hard-landing in China," said Naoyuki Shinohara, a former IMF deputy managing director who retains close contacts with incumbent Japanese policymakers. Reuters
Both Prime Minister Shinzo Abe (R) and Finance Minister Taro Aso (L) have called on China to address structural problems in the economy
Business Daily | 11
November 17, 2015
Asia
Thai Q3 growth tops forecast but recovery still weak Public spending and tourism should continue to support the economy Orathai Sriring and Kitiphong Thaichareon
Public spending and tourism should continue to support the economy
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hailand's economy grew more than expected in the third quarter but the outlook remained fragile with exports still contracting, putting pressure on the military government to boost weak domestic activity. Southeast Asia's secondlargest economy grew 1.0 percent in July-September
from the previous quarter on a seasonally-adjusted basis, higher than the revised 0.3 percent in April-June and the 0.7 percent expected in a Reuters poll. On an annual basis, growth was 2.9 percent, above the poll's 2.6 percent and second quarter's 2.8 percent, the National Economic and Social
Development Board (NESDB) said yesterday. "The numbers look stronger than expected, but this masks some underlying weaknesses, which are potentially important," said Santitarn Sathirathai, Credit Suisse economist in Singapore. "The domestic demand aspect of growth is still
sluggish. What's concerning is the divergence between private and public investments ... I'm not terribly convinced that we can keep this momentum and keep things going upward in the next couple of quarters." Krystal Tan, Asia economist of Capital Economics in Singapore, said the government's "poor track record on meeting capital spending targets suggests any boost to growth will be smaller than the government hopes." Yesterday, the NESDB put 2015 growth at 2.9 percent from 2.7-3.2 percent seen in August. It changed this year's export fall forecast to 5 percent from 3.5 percent. For 2016, it predicts growth of 3.0-4.0 percent, with exports rising 3.0 percent. Last year, the economy grew just 0.9 percent.
Stimulus moves
Government changed its economic team and recently
approved stimulus measures to help rural areas, small firms and the property sector though the effects will likely be felt from the current quarter. Public spending and tourism should continue to support the economy but recovery will likely be slow, with much depending on big infrastructure projects, economists say. Government spending rose 1.0 percent in July-September from a year earlier while public investment increased 15.9 percent, slowing from a 24.7 percent second-quarter increase. Growth in private consumption rose slightly to 1.7 percent on-year from revised 1.6 percent in the second quarter. Exports, worth about twothirds of GDP, shrank 4.7 percent in the third quarter from a year earlier, while foreign tourist numbers jumped 24.3 percent. Reuters
Indonesia has another trade surplus in October For 13 consecutive months starting in October 2014, both exports and imports have contracted from year-earlier levels Nilufar Rizki and Gayatri Suroyo
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ndonesia posted its 11th straight monthly trade surplus in October, which should guarantee its first annual surplus since 2011 but also shows how weak imports remain. Yesterday's trade data is not seen impacting a central bank policy meeting on Tuesday. Twelve of 13 analysts in a Reuters poll expect Bank Indonesia (BI) to again hold the benchmark rate at 7.50 percent, to support the rupiah ahead of a possible December hike in the United States interest rates. BI officials have said it has its eyes on the U.S. rate strategy and China's economic slowdown. Gundy Cahyadi, an economist with DBS in Singapore, said that from the October trade data "the most important thing to note is the sustained weakness in exports". For 13 consecutive months starting in October 2014, both exports and imports have contracted from yearearlier levels. Last month's drop in exports, 20.98 percent, was the biggest since October 2012, while that for imports was 27.81 percent, the second biggest fall since July 2009. Analysts say the continuing import plunge shows how soft consumption and investment remain. Earlier, BI was concerned about Indonesia's current account deficit.
But the deficit shank in the third quarter, due to the trade surplus, to a level the central bank called "healthy".
Sustained recovery needed
Cahyadi said the current account gap remained higher than net foreign direct investment, which means Southeast Asia's largest economy still has some external financing risks on the table when the U.S. raise its interest rate. He said he remains cautious of the outlook for external balances in
2016 "until we see a sustained and significant recovery in exports". Falling commodity prices and weakening demand from foreign buyers have hit Indonesia's exports for years, and last year were the main cause of a US$2.2 billion trade deficit. For January-October this year, the surplus reached US$8.16 billion. Ahead of Monday's trade announcement, ING Financial Markets said it forecast a US$12 billion surplus for full-year 2015.
That translates to a current account deficit of 1.8 percent of gross domestic product (GDP) in 2015, below BI's 2 percent target. To try to boost exports, President Joko Widodo is pursuing trade liberalisation and changing policies many have deemed protectionist. Trade Minister Thomas Lembong, in office since August, has simplified some foreign trade rules while continuing talks for a trade agreement with the European Union. Widodo has said he wants Indonesia to join the Trans Pacific Partnership. Reuters
KEY POINTS Oct imports -27.81 pct y/y, exports -20.98 pct Trade data not expected to impact Tues c.bank decision Imports, exports have fallen 13 straight months y/y Bank Indonesia officials have said it has its eyes on the U.S. rate strategy and China’s economic slowdown
Trade surplus in Oct is 11th in a row
12 | Business Daily
November 17, 2015
Asia
Japan relapses into recession in July-Sept The world’s third-largest economy shrank an annualised 0.8 percent for the period Leika Kihara and Tetsushi Kajimoto
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apan’s economy slid back into recession in July-September as uncertainty over the overseas outlook hurt business investment, keeping policymakers under pressure to deploy new stimulus measures to support a fragile recovery. A rebound in private consumption and exports offered some hope the world’s third-largest economy is emerging from the doldrums, despite slowing Chinese demand and the pain households are feeling from rising imported food prices. Still, many analysts expect the economy to grow only moderately in the current quarter as companies remain hesitant to use their record profits for wage hikes, underscoring the challenges premier Shinzo Abe faces in pulling Japan sustainably out of stagnation with his “Abenomics” stimulus policies. “A big drop in inventory was the largest factor behind a third-quarter contraction. Weak capital spending was a concern, but excluding these factors, the GDP figures were not so bad,” said Takeshi Minami, chief economist at Norinchukin Research Institute. The world’s third-largest economy shrank an annualised 0.8 percent in July-September, more than a
median market forecast for a 0.2 percent contraction, government data showed yesterday. That followed a revised 0.7 percent contraction in April-June, which was the first decline in three quarters. Japan thus slipped back into technical recession, which is defined as two consecutive quarters of contraction, after suffering one last year due to the hit on consumer spending from a sales tax hike in April 2014. The data may affect debate among policymakers on how much fiscal spending should be earmarked in a supplementary budget that is expected to be compiled this fiscal year. The government maintained a cautiously upbeat view, saying that despite some weaknesses, the economy continues to recover moderately on improvements in job and income conditions. “While there are risks such as overseas developments, we expect the economy to head toward a moderate recovery thanks to the effect of various (stimulus) steps taken so far,” Economics Minister Akira Amari said in a statement after the data was released.
KEY POINTS Q3 GDP SHRINKS GROWS ANNUALISED 0.8 PCT VS F’CAST -0.2 PCT PRIVATE CONSUMPTION BOUNCES; CAPEX DROPS AGAIN ECONOMY SHRINKS FOR TWO CONSECUTIVE QUARTERS GOVT SAYS ECONOMIC RECOVERY TO CONTINUE
Capital expenditure fell 1.3 percent, more than a median market forecast of a 0.4 percent decrease to mark a second straight quarter of declines, on sluggish investment by automakers and machinery manufacturers.
But private consumption, which accounts for about 60 percent of gross domestic product (GDP), rose 0.5 percent from the previous quarter, roughly in line with a median market forecast. While domestic demand shaved 0.3 percentage point off GDP, external demand added 0.1 point to growth, the data showed. The weak data would be of little surprise to many Bank of Japan officials, who had largely factored in the recession and expect growth to rebound in coming quarters as consumption and factory output show signs of a pick-up. While the data will be closely scrutinised by the policymakers, the BOJ is widely expected to keep monetary policy steady at its rate review this week, analysts say. “China’s economic slowdown did not have a big impact on Japan’s Q3 GDP, but we could see a negative impact in the following quarters,” said Shuji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities. “The government does not have to respond right away, but economic stimulus could become more likely if things do not get better.” Reuters
Australia “a step closer” to negotiating FTA with EU With the EU currently accounting for 12 percent of Australia’s total trade worth US$80 billion, any implementation of an FTA would be a major benefit to Australian business
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Free Trade Agreement (FTA) between Australia and the European Union (EU) is a step closer to reality after both parties have pledged to begin negotiations. Andrew Robb, the Minister for Trade and Investment, said in a statement yesterday the discussions about an FTA would be “a major step forward in unlocking exciting new trade and investment opportunities in Europe.” “This is a significant step towards expanding our trade, investment and economic links with the EU,” Robb said yesterday. “Having concluded landmark trade deals with S. Korea, Japan and China,
Andrew Robb, Minister for Trade and Investment of Australia
along with negotiations for the 12-country Trans Pacific Partnership Agreement (TPP), the EU is certainly the next frontier when it comes to future agreements.”
Australia’s Prime Minister Malcolm Turnbull also hailed the positive news in a joint statement released on Sunday night with President of the European Council, Donald Tusk, and President of the European Commission, Jean-Claude Juncker. The trio agreed to begin work aimed at launching negotiations, adding that an FTA “will support sustainable growth and investment, open up new commercial opportunities and promote innovation and employment in Australia and the EU.” Australia and the EU will now commence their own “consultative processes” and begin bilateral discussion on
the next steps to launch the negotiations. With the EU currently accounting for 12 percent of Australia’s total trade worth US$80 billion, any implementation of an FTA would be a major benefit to Australian business.
Growing bond
In a separate development at the G20 summit, Indian Prime Minister Narendra Modi is reportedly seeking a “strategic partnership” with Australia in a potential deal that would expand two-way trade worth US$15 billion. An Australian newspaper reported yesterday that Modi had told PM Turnbull of the new “confidence and
enthusiasm” between the two countries during a formal meeting between the two leaders at the G20 summit in Antalya, Turkey. While Modi did not specifically mention the trade deal -- known as the Comprehensive Economic Cooperation Agreement -- in his opening remarks to the meeting, he hinted at the growing bond between the two countries in his talks with Turnbull. “Today I feel that India and Australia are very close friends and we are forging ahead as strategic partners,” Modi said. “I also see that in our bilateral relationship there is this new confidence and enthusiasm.” Xinhua
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Business Daily | 13
November 17, 2015
Asia
Asian business leaders’ optimism slides to record low Despite their pessimism, 53 percent of the executives surveyed said they planned to increase investment in the next 12 month Ditas Lopez
Executive Director of Asia Pacific Economic Cooperation (APEC) 2015 Alan Bollard looks on as he speaks during a press conference in Manila
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ptimism among Asian business leaders fell to a record low even as forecasts signal that economic growth will accelerate in the region. Only 28 percent of regional business leaders were “very confident” their companies will see revenue growth in next 12 months, down from 46 percent a year ago, according to an annual survey by PwC of executives attending the Asian Pacific Economic Cooperation (APEC).
Concerns about China’s slowdown and the market turmoil stemming from the plunge in Chinese stocks this summer took their toll on confidence, the survey said. The world’s second-biggest economy is set to expand at the slowest pace in a quarter-century this year. Fears of a hard-landing for the Chinese economy helped fan the stock market selloff that roiled world financial markets
and wiped about US$4 trillion from the value of the country’s stock markets. Even so, there are signs that the slowdown in Asia has bottomed out and growth will pick up in 2016. The economic expansion in the AsiaPacific region will likely accelerate to 3.4 percent in 2016 from 3.1 percent this year, Denis Hew, APEC’s policy support director, said at a briefing in Manila. Growth was 3.4 percent last year. Despite their pessimism, 53 percent of the executives surveyed said they planned to increase investment in the next 12 month, with 68 percent of the funds directed at the APEC region. “On a positive note, in so far as their investment is concerned, investment is now more dispersed probably because also of the slowdown in China,” said Alexander Cabrera, chairman of PwC Philippines. “China, the U.S. and Indonesia remain the main sources of growth not far behind Vietnam and Philippines and Thailand.” Bloomberg News
New Zealand to charge GST on overseas online purchases
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that should, under New Zealand’s tax rules, be subject to GST. The New Zealand government claimed that the increased volume of offshore online buying meant the government was losing about 40 million NZ dollars (US$26 million) in GST a year. McClay said the government was also concerned at the no-tax threshold on low-values goods bought from overseas. The growing volume of imported
Land asset prices in South Korea jumped more than 3,000 times in the past 50 years, central bank data showed yesterday. The country’s nominal land prices totalled 5,848 trillion won (US$5 trillion) in 2013, up about 3,030 times compared with 1.93 trillion won in 1964, according to a Bank of Korea report. Land prices per square meter increased from 19.6 won to 58,325 won in the same period. The ratio of total land prices to gross domestic product averaged 392 percent during the 50-year period. It peaked at 547 percent in 1970 and 597 percent in 1991 when the real estate market boomed.
India, Bangladesh sign trade agreement India and Bangladesh have inked a pact on enhancing bilateral trade, according to a official statement. Both countries signed the standard operating procedure for operationalizing the already-inked Agreement on Coastal Shipping in the Indian capital Sunday, the statement said. The agreement was signed by top-level officials of the two countries in presence of Indian Road, Highways and Shipping Minister Nitin Gadkari. Gadkari has said that once the procedure is operational, the coastal shipping agreement will enable a huge saving in logistic costs of transport between the two countries, the statement said.
Singapore private home sales fall Sales of private homes by developers in Singapore fell 30 percent in October from a year earlier, government data showed yesterday. Data compiled by the Urban Redevelopment Authority showed developers sold 546 units last month, compared with 785 units in October 2014. The figure compares with 341 units sold in September of this year.
The government claimed that the increased volume of offshore online buying meant the government was losing US$26 million in GST a year ew Zealand Revenue Minister Todd McClay said yesterday that overseas purchases such as music and e-books will be charged Goods and Services Tax (GST) from October next year. McClay said the proposed measures in a tax bill introduced yesterday will apply GST to cross-border “remote” services and intangibles supplied by offshore suppliers to New Zealandresident consumers, by requiring the offshore supplier to register and return GST on these supplies. It includes products such as e-books, music, videos, and software purchased from offshore websites. “To reduce compliance costs, offshore suppliers will not be required to return GST on supplies to New Zealand-registered businesses, nor will they be required to provide tax invoices,” McClay said. Non-resident suppliers will be required to register and return GST when their supplies of remote services to New Zealand residents exceed NZ$60,000 (US$39,165) in a 12-month period. McClay said the move which the government had earlier announced is the first step in the efforts to deal with increasing volumes of online services and purchases from overseas suppliers
S.Korea’s land prices jump 3,000 times in 50 years
New vehicle sales fall in Australia
goods meant the amount of foregone GST was continuing to increase and raise concerns for domestic suppliers, he said. The minister said customs had been asked to consult on the logistical issues of collecting GST on cheaper goods, and will release a consultation paper in April next year to get feedback on the implications of streamlining GST collection on low-value imported goods. Xinhua
Australian new vehicle sales fell back in October after a strong result in September, but still showed a healthy gain on the same month last year. Yesterday’s data from the Australian Bureau of Statistics showed 96,925 new vehicles were sold in October, seasonally adjusted. That was down 3.6 percent from September when sales had jumped 5.9 percent to top 100,000 for the first time. Sales last month were 4.2 percent higher than in October last year.
Cambodian opposition leader loses immunity The Cambodia’s National Assembly announced yesterday that opposition leader Sam Rainsy has entirely lost his parliamentary immunity after the Appeal Court issued a final verdict against him over a defamation charge. Rainsy has completely lost his right, “privilege and membership as a lawmaker in the fifth legislature,” according to a statement signed by National Assembly President Heng Samrin. Chheang Vun, ruling Cambodian People’s Party lawmaker and parliament spokesman, said Sam Rainsy would be arrested if he returned to Cambodia because the 2013 Appeal Court verdict had deprived him of his immunity as a lawmaker.
14 | Business Daily
November 17, 2015
International
Russia’s Siluanov says Moscow made offer to Ukraine over debt Euro-area prices increased in October Euro-area consumer prices unexpectedly increased in October, revised higher from an initial reading of stagnation, the European Union’s statistics office in Luxembourg said yesterday. The region’s inflation rate rose to 0.1 percent from minus 0.1 percent in September, Eurostat said. Economists had predicted no change in prices, according to a Bloomberg survey. The core inflation rate -- which excludes volatile elements such as food and energy -- increased to 1.1 percent, Eurostat said. The European Central Bank is grappling with weak prices pressures in the 19-nation bloc.
Oil-rich Saudi to privatise airports to diversify economy Saudi Arabia’s civil aviation authority has announced a plan to privatise its airports by 2020, as the kingdom looks to diversify its economy to boost nonoil income. The initiative was set to be launched in the first quarter of 2016 with the privatisation of the capital’s main international airport, said the state-owned General Authority for Civil Aviation. In the second and third quarters of next year, the kingdom plans to privatise the aviation services sector and the information technology system, respectively, it said in a statement issued at the weekend.
New Romanian PM unveils technocrat government Romania’s prime minister-designate Dacian Ciolos named a technocrat government on Sunday, tapping European Union experts as well as private sector leaders to steer the country until elections next year. Ciolos was tasked on Tuesday by President Klaus Iohannis with forming a new government after ex-premier Victor Ponta stepped down following mass anti-government protests sparked by a nightclub fire that killed 55 people in Bucharest. Amid a popular rejection of a political class seen as corrupt and blamed for the tragedy, Iohannis supported having a technocrat government run the country until legislative elections set for the end of 2016.
Julius Baer to raise stake in Kairos Julius Baer Group Ltd., Switzerland’s third- largest wealth manager, agreed to increase its stake in Milan- based Kairos Investment Management SpA to 80 percent to boost assets it oversees in Italy. The private-banking group is raising its stake from 19.9 percent, the companies said in separate statements yesterday, without disclosing the price. The transaction is expected to close in 2016 and the companies have agreed to pursue a listing of Kairos on the Italian stock exchange.“The partnership between Julius Baer and Kairos has proven to be a powerful force in the Italian wealth-management sector,” Julius Baer CEO said.
They lent Ukraine US$3 billion by buying its Eurobonds in December 2013
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ussia wants to reach a compromise over Ukraine’s debt to Russia and has made an “interesting” offer to settle the issue, Russian Finance Minister Anton Siluanov said yesterday. The 11th-hour offer represents an apparent U-turn by Russia, which has been insisting for months that it expects Ukraine to repay the debt in full when it falls due next month and would treat any failure to do so as a default. Siluanov did not provide any details about what the Russian offer involves, other than to say that Russia continues to regard restructuring on the same terms as commercial creditors as unacceptable. Siluanov revealed the offer after a meeting with the head of the International Monetary Fund, Christine Lagarde, who is also attending the Group of 20 summit in Turkey. “Russia made an offer about the procedure for payment by Ukraine. This proposal will be interesting and placed at the basis of regulating (the debt),” Siluanov said on the sidelines of the summit. “We consider restructuring on the terms of commercial creditors unacceptable.” Russia lent Ukraine US$3 billion by buying its Eurobonds in December 2013, three months before the overthrow of former Ukrainian president Viktor Yanukovich. The two neighbours have been at loggerheads over the issue since then, in the context of the wider deterioration in relations caused by Russia’s annexation of Crimea and support for separatists in Ukraine’s east.
Russian Finance Minister Anton Siluanov
The political upheaval and war in Ukraine have caused a severe deterioration in government finances as a result of which Ukraine needed a new bail-out from the IMF, which insisted on a restructuring of government debts. Ukraine reached a deal with commercial bondholders in August, under which they agreed to a debt swap which includes a 20 percent write-down on the principal and coupon cuts. Russia has repeatedly insisted that the Ukrainian bonds it holds are not subject to the restructuring agreement because they represent a loan from a sovereign creditor. It has threatened to take Ukraine to court if it fails to redeem the bonds in full when they mature on December 20. Ukraine insists that it cannot offer Russia better terms than its other creditors -- a position that Ukrainian Finance Minister Natalia Yaresko reiterated last week. “It’s not a matter of compromise ... The legal structure of the restructuring for all the Eurobonds has a most-
Climate spending surges in year before Paris deal The CPI said that about US$25 billion was spent on adaptation measures to make countries more resilient to the effects of climate change Alex Morales
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lobal spending on projects to cut greenhouse gases and reduce vulnerability to climate change surged 18 percent last year as governments and investors stepped up green investments, the Climate Policy Initiative (CPI) said. Total expenditure rose to US$391 billion in 2014 from US$331 billion a year earlier, with almost three quarters of the cash raised and spent in the
same country, the CPI said yesterday in a report. About US$292 billion of the cash went on solar parks, wind farms and other renewable energy projects, whose falling costs mean “investments are achieving more impact than ever before,” the San Francisco-based analysis group said. The expenditure is still short of what the International Energy Agency says is needed for the world to restrict
favoured creditor clause that says that we cannot provide better terms for any holdouts,” Yaresko said in an interview with Reuters. “Therefore that is the structure within which we will have to work.” Yaresko also said she was willing to meet her Russian counterpart and that she would “continue in good faith to try and reach some type of agreement”. Russia’s offer follows signs the IMF is preparing to change its rules over debts to sovereign creditors, in effect refusing to support Russia in its claims against Ukraine, even though the Fund’ rules say it cannot lend to countries which are in arrears to other governments. Russia has criticised the proposed rule changes. “We are concerned that the changes in the policy of the Fund are forced in the context of a very politicised issue of restructuring of the Ukrainian debt,” Siluanov said on October 30. Reuters
warming since pre-industrial times to the international target of 2 degrees Celsius (3.6 degrees Fahrenheit). The IEA said last month that expenditure of US$16.5 trillion from 2015 through 2030 would keep the planet on a path where the temperature goal can still be achieved. That works out to just over US$1 trillion a year. “Overwhelmingly, it is national selfinterest that is driving climate action,” Barbara Buchner, a director at the CPI and lead author of the study, said in a statement. “While global investment in a cleaner more resilient economy is growing, so too is the investment gap between what is required for reducing emissions to within agreed limits and what is being delivered.” The CPI said that about US$25 billion was spent on adaptation measures to make countries more resilient to the effects of climate change, such as rising sea levels and more prolonged droughts. Of total spending, US$148 billion was public money and about $101 billion of cash flowed from one country to another, according to the report. The CPI didn’t say how much of that was from developed to developing nations. Bloomberg News
Business Daily | 15
November 17, 2015
Opinion Business
wires
Is traditional banking unbreakable?
Leading reports from Asia’s best business newspapers
Dambisa Moyo
Eeconomist and author, sits on the board of directors of a global financial services company and a leading technology company
THE TIMES OF INDIA The government is looking to set up a special fund to tackle the issue of stressed assets. This is expected to be part of the National Investment and Infrastructure Fund, which would be like India’s sovereign wealth fund. Although banks are seeing a slowdown in growth of fresh non-performing assets, they are grappling with a huge pile of bad debt due to problems in certain companies and some sectors such as metals, and inability of several infrastructure projects to take off. Minister of state for finance said the proposed special situations fund will deal only with projects that are viable.
THE STAR Maybank IB Research says that a key point on the Trans Pacific Partnership Agreement (TPP) focuses on the liberalisation in government procurement, giving established construction players an advantage in bidding for future tenders locally and internationally. In a note today, the research house maintained its ‘overweight’ call on the construction sector as the TPP seeks to create fair, transparent and non-discriminatory rules for government procurement among the participating countries. Selected construction projects will also be exempt from TPP terms, particularly Public Private Partnership projects which include build-operate-transfer and public work concessions.
JAKARTA GLOBE State energy company Pertamina has promised to submit findings indicating widespread corruption in its controversial trading unit Petral to Indonesia’s anti-graft commission. Pertamina corporate secretary Wisnuntoro Sardjono said that the Corruption Eradication Commission (KPK) had requested the company hand in the results from an independent audit that blamed price fixing and bid rigging by Petral officials for Pertamina paying more than necessary for oil. “The KPK has requested [the audit results] and we shall provide them with it. But of course we are waiting for an official letter [from the KPK],” he said.
THANH NIEN NEWS Vietcombank, Vietnam’s biggest lender by market value, has reported a sharp increase in loans that are overdue for around a year or longer, even as total bad debt shrank in the first three quarters, according to local media. The bank released a statement saying that nonperforming loans fell 4 percent to VND7.1 trillion (US$320.5 million), equal to 2 percent of total loans in the first nine months. But among them, credit in the extremely risky Category 5 surged 38 percent to more than VND4.9 trillion (US$223 million).
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t is a rare industry nowadays that is not at risk of being upended by digital technology. Amazon, having swept away bookshops, is now laying siege to the rest of the retail sector. In transportation, Uber is outrunning traditional taxi companies, while Airbnb is undermining the foundations of the hotel industry. Meanwhile, smartphones are transforming how we communicate and revolutionizing the way we discover and patronize businesses. So it is no surprise that banking and financial-services companies are not safe from the immense transformations wrought by technological innovation. Indeed, for the last decade, digital start-ups have been penetrating areas traditionally dominated by the financial industry. But there is reason to believe that finance will prove resilient. Today, money can be sent to the other side of a country – or the world – simply by tapping an app, without ever interacting with a traditional financial-services company. Migrants’ remittances alone, which the World Bank estimates will total US$586 billion this year, represent a tremendous growth opportunity for companies competing with banks to move money. Meanwhile, would-be disrupters are offering opportunities to save and invest – the very heart of traditional banking institutions’ operations. Start-ups such as Acorns – an app that automatically allocates a proportion of everyday purchases to a pre-selected investment portfolio – are making rapid
inroads into a very competitive marketplace. Acorns, launched in 2014, already manages more than 650,000 investment accounts. The company – and others like it – are not just moving into the market; the simplified investment and savings processes they offer are expanding and transforming it. According to research by the digital ad agency Fractl, approximately 85% of millennials are saving a portion of their paycheck – a larger percentage than their predecessors. Lending, too, is being transformed by technology. Crowdsourced funding and peer-topeer lending schemes give borrowers the opportunity to circumvent many of the hurdles of traditional banking – including, in some cases, collateral requirements and credit ratings. According to the research firm Massolution, the crowdfunding market has grown exponentially, from US$880 million in 2010 to US$16.2 billion in 2014. Global crowdfunding volumes are expected to double this year, surpassing US$34 billion. In 2016, crowdfunding is expected to provide more funding than traditional venture capital. Even financial services traditionally characterized by face-to-face dealings with clients, such as investment banking advisory services, have been affected. When Google conducted its initial public offering in 2004, it chose to bypass the investment banking industry, which traditionally underwrites the process of taking a company public. Instead, the company opted for an electronic auction in which
As the digital revolution evolves, much of the financial terrain in which technology companies are making the deepest inroads will come into much sharper regulatory focus
anyone could participate. Other companies – like the financial research firm Morningstar – have followed suit. While these attempts to revolutionize the equity capital markets have yet to gain widespread traction, their very existence is evidence of the opportunities for disruption in this sector. But it would be premature to conclude that traditional banking has yielded to new financial platforms. Many of the
new entrants have benefited from advantages that would be difficult to maintain were they to scale up in size and importance. Traditional banking is subject to intense oversight, and regulations have only become more onerous in recent years, as regulatory authorities reacted to the 2008 global financial crisis by tightening rules on leveraging ratios and know-your-customer requirements. Many upstarts in the sector have carved out a competitive advantage by avoiding thresholds beyond which they would face substantial regulatory scrutiny and requirements. This places a significant constraint on the size and type of financial transactions these new companies can offer. By steering clear of services that might draw the scrutiny of financial authorities, digital start-ups face a natural limit to the size of their market. Indeed, this arrangement – albeit informal – can be viewed as the way regulators manage the systemic risk posed by new entrants. As the digital revolution evolves, much of the financial terrain in which technology companies are making the deepest inroads will come into much sharper regulatory focus. This will favour the established players. As a result, the digital revolution’s assault on the traditional banking industry is by no means overwhelming. In finance, at least, technology firms should not be viewed simply as a threat, but as a source of productivity-boosting innovation. Project Syndicate
16 | Business Daily
November 17, 2015
Closing UN chief Ban Ki-Moon to visit North Korea this week
China, Turkey expand currency swap scale
United Nations Secretary-General Ban KiMoon will visit Pyongyang this week and may meet with North Korean leader Kim Jong Un, Yonhap News reported, citing a UN official it did not identify. Ban’s earlier plan to visit North Korea was cancelled at the last minute in May, prompting him to express regret. The former South Korean foreign minister has said in the past he is willing to go to North Korea to help ease tensions on the peninsula. Ban’s spokesman Stephane Dujarric declined to comment on the Yonhap report. North Korea and South Korea struck an agreement in August to ratchet down tensions.
China and Turkey will renew a currency swap deal and expand its scale, according to a statement released by the Chinese central bank yesterday. The scale of the three-year agreement will expand to 12 billion yuan (US$1.88 billion) and will be extendable by mutual consent, the People’s Bank of China said in a statement. The move is aimed at enhancing financial cooperation and promoting bilateral trade and investment, as well as ensuring regional financial stability, the statement said. The two countries signed a 10-billion-yuan currency swap agreement in 2012. China has signed currency swap agreements with 32 countries and regions.
Paris attacks’ impact deemed short-lived Most stock markets fell across Asia. Airlines, travel-related firms among the most hurt
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irline and travel-related stocks tumbled in Asia yesterday following the deadly terror attacks in Paris, but analysts and industry players said they expect the impact to be short-lived. Travellers from the region cancelled trips as France grappled with the aftermath of the carnage that left at least 129 people dead and more than 350 wounded. The horrific events come just a little over two weeks after a Russian passenger plane came down in Egypt’s Sinai peninsula, killing all 224 people on board, which Islamic State militants have claimed responsibility for. “Whenever there’s terrorism, businesses are affected. Worst hit are commerce and tourism, and as a consequence, airlines,” said Shukor Yusof, an analyst with aviation research firm Endau Analytics. Most stock markets fell across Asia, with airlines and travel-related firms among the most hurt. In Shanghai, Air China, China Eastern Airlines and China Southern Airlines each lost more than two percent, while tourism firms also
retreated -- China CYTS Tours Holding lost 1.28 percent and China International Travel Service fell 1.05 percent. Hong Kong flag carrier Cathay Pacific was down 2.7 percent. “The airlines and tourism companies are affected by the Paris attack,” Haitong Securities analyst Zhang Qi told AFP. “But it’s more of a psychological impact on the stock market,” he said. But Hong Kong-based financial analyst Kevin Tam
said “the actual impact won’t be that much because of the geographical concentration. There will be more material impact on European and American travel-related companies”. Singapore Airlines was down 0.92 percent in late afternoon trade in the citystate and South Korean flag carrier Korean Air closed 3.33 lower while rival Asiana Airlines finished down 3.32 percent in Seoul. Top South Korean tour
operator Hana Tour closed 8.94 percent lower following a barrage of trip cancellations after the South Korean government advised nationals to “refrain from” travelling to Paris and its surrounding areas. Sydney-listed flag carrier Qantas was down 1.7 percent and Virgin Australia tumbled 6.5 percent percent as Air New Zealand was 2.8 percent lower in Wellington. Japan Airlines closed down 2.95 percent and rival All
Nippon Airways declined 3.46 percent. HIS, a major travel agency, finished 5.02 percent due to trip cancellations. “France is a main route. Japanese airlines get the most profit from international routes,” said Hajime Tozaki, a commerce professor at Waseda University. Indonesia’s Garuda was down 1.32 percent in afternoon trade but Fazal Bahardeen, chief executive of Singaporebased Muslim travel specialist Crescentrating, said the attacks are unlikely to deter tourism. “More and more travellers are becoming determined not to let the terrorist fear mongering dictate their travel plans,” he told AFP. Andrew Herdman, director general of the Association of Asia Pacific Airlines, urged travellers to react prudently to terror attacks. “Past experience tells us that we must be careful not to let our emotions overwhelm good judgment, and care is needed to ensure that we do not over-react in ways which may only amplify the damage inflicted upon society,” he told AFP. AFP
Lending by China’s biggest banks falls
MasterCard sees double-digit growth in mainland
China January-October outbound direct investment surges
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he loans outstanding of China’s four biggest banks declined for the first time since at least 2009, adding to warning signs for a tepid economy. Total loans by the four lenders, including Industrial & Commercial Bank of China Ltd., amounted to 35.7 trillion yuan (US$5.6 trillion) at the end of October, down 65.6 billion yuan from a month earlier. That’s according to data released Sunday by the People’s Bank of China. “Credit growth is slowing because they are cautious about the economic outlook and asset quality,” said Chen Shujin, an analyst at DBS Vickers Hong Kong Ltd. The banks may also have slowed lending because they’re close to meeting full-year loan targets, the analyst said. Chinese banks’ troubled loans increased to almost 4 trillion yuan by the end of September, according to data released on Thursday night by the China Banking Regulatory Commission. Their profit growth slumped to 2 percent in the first nine months from 13 percent a year earlier. Nonperforming loans stood at 1.59 percent of outstanding credit, or 1.2 trillion yuan, according to the CBRC data. Bloomberg News
lobal payment operator MasterCard sees double-digit annual growth in credit card transaction volumes in China, lifted by the booming e-commerce industry in the world’s second-largest economy, a senior executive told Reuters yesterday. China’s plan to open up its domestic transactions market to foreign companies such as MasterCard would be a “game-changer”, Ling Hai, co-president for Asia Pacific, said in an interview on the side-lines of the Asia-Pacific Economic Cooperation summit. MasterCard’s current business in China is mostly handling cross-border transactions when international travellers come to China or when Chinese cardholders go overseas. The domestic market has long been dominated by state-backed China UnionPay. “That’s going to change with China opening up. We will be able to process domestic transactions just like a domestic national player,” Ling Hai said, adding that the timeline for this move remains unclear. “If you truly gain full access and get it right, China is a game-changer,” he said. “China is the future in terms of consumer market. It will contribute a great deal in terms of spending and volume.” Reuters
he Chinese mainland made around 589.2 billion yuan (about US$95.21 billion) in non-financial investment in overseas markets in the first ten months of 2015, up 16.3 percent year on year, the latest data showed yesterday. Outbound direct investment in the period covered 5,553 overseas-based companies in 152 countries and regions, the Ministry of Commerce (MOC) said. The number of foreign-contracted projects worth more than US$100 million increased to 307, up by 39 from last year, with the total contract amount reaching US$108.3 billion in the Jan.-Oct. period, said Jiang Wenbin, deputy head of the MOC Department of Outward Investment and Economic Cooperation. The projects covered a wide range of fields including transportation, housing construction, electric power engineering, telecommunication and petrochemical industries, Jiang said. During the period, Chinese investors spent around US$9.94 billion in developing manufacturing industries in overseas markets, up 82.8 percent year on year, the data showed. The manufacturing investment mainly went to automobiles, medicine, computers, communication devices, rubber and plastic products, Jiang said. Xinhua