MOP 6.00 Closing editor: Joanne Kuai
President Xi Jinping remarks China’s economy faces downward pressure
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Year IV
Number 923 Thursday November 19, 2015
Publisher: Paulo A. Azevedo
Studio City receives requisite lender consent for loan amendment Page 6
APEC meeting pairs Jack Ma and Obama on business panel
On Track to Meet Fiscal Target
The Chief Executive said the city’s fiscal surplus will likely decrease to some MOP20 bln for the whole of 2015. Even though MOP34.6 billion has been amassed for the first ten months. Nevertheless, the reduced amount would still meet the budgeted MOP18.8 bln for the year. Chui Sai On remains “cautiously optimistic” and sees a silver lining amid the gloom. “The downturn of the economy is certainly an opportunity for us to set up new regional and strategic policies,” he said Pages
VIPs to the rescue
2&3
Emperor Entertainment Hotel Limited. For the six months ended 30 September 2015, revenue declined 17.1 pct to HK$873.4 mln (US$112.7 mln) y-o-y. Gaming revenue declined 17.9 pct to HK$739.9 mln. Its VIP business, however, managed to generate an increase of 17.5 pct to HK$252.2 mln. Encouraging the further development of loyal high rollers
As safe as banks 28 banks in Macau in Q3. With 5,928 full-time employees. An increase of 255 y-o-y. Job vacancies remained as stable as a year ago. In September 2015, average earnings, excluding bonuses and allowance, amounted to MOP24,910, up 8.0 pct y-o-y. Average earnings of bank tellers increased 12.3 pct to MOP14,690
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HSI - Movers November 18
Name
www.macaubusinessdaily.com
Property palpitations The great barometer. China’s real estate sector reported slower recovery in October. With new home prices in a declining number of cities registering m-o-m rises. Of 70 large and medium-sized cities surveyed in October, new home prices climbed m-o-m in 27
%Day
Kunlun Energy Co Ltd
+3.30
Li & Fung Ltd
+3.28
China Overseas Land &
+2.11
China Resources Land L
+1.92
Bank of Communicatio
+0.55
China Unicom Hong Ko
-2.81
PetroChina Co Ltd
-3.22
Sands China Ltd
-3.39
China Resources Powe
-3.50
Galaxy Entertainment
-4.62
Source: Bloomberg
I SSN 2226-8294
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November 19, 2015
Macau
Chui: fiscal surplus down to MOP20 billion by year-end The Chief Executive said the city’s fiscal surplus will decrease to some MOP20 billion for the whole year of 2015 from the current MOP34.6 billion during the first ten months. Nevertheless, he said he is still “cautiously optimistic” about the local economy Kam Leong
kamleong@macaubusinessdaily.com
C
hief Executive Fernando Chui Sai On said yesterday he is still cautiously optimistic about the local economy although he had forecast on Tuesday that the city’s gaming industry would continue its downward revenue spiral. In addition, he revealed that the fiscal surplus may drop to some MOP20 billion (US$2.5 billion), the lowest for this year. On Tuesday, Mr. Chui said in a press conference following the delivery of his
Policy Address that the government expects the city’s accumulative casino revenues for next year to drop to some MOP200 billion, or MOP16.6 billion monthly on average. “Our estimates are indeed conservative compared to other analysts’ expectations. When the global economy and the Asian economy are in downturn in general we have followed our principle of cautiously managing our finances. We hope to
work more to diversify our economy in order to support other industries in the city,” the Chief Executive said yesterday whilst attending a Q&A session on his Policy Address at the Legislative Assembly. Predicting the prospects of the economy for next year, the top officer told legislators that the city’s inflation rate is likely to slow to some 4 per cent, while the unemployment rate will remain below two per cent.
But for this year, he said the fiscal surplus could only reach a maximum of MOP25 billion at the end of the year although the amount has already reached MOP34.6 billion for the first ten months of the year. “Our revenues and fiscal surplus have been fulfilling our targets. But we expect the fiscal payments to settle by the end of the year. If positive, the amount can achieve MOP25 billion,” he claimed. Nevertheless, the fiscal surplus of MOP20 billion to MOP25 billion still meets the government’s budgeted MOP18.8 billion for the year, based on the official data of the Financial Service Bureau (DSF). As compared to 2014’s MOP90.3 billion, it means the year’s surplus will have posted a drop of as much as 77.9 per cent.
Downturn an opportunity
Meanwhile, amid the adjustment phase, the CE stressed at the AL that the government agrees that the downturn is an opportunity for the Special Administrative Region to develop other industries and directions other than solely focusing on gaming.
Business Daily | 3
November 19, 2015
Macau “The downturn of the economy is certainly an opportunity for us to set up new regional and strategic polices. After 10 years of rapid development in which the gaming industry dominated the whole economy it has now brought us some problems to resolve,” the CE claimed. Legislator Cheang Chi Keong queried whether the government has planned any policies to diversify the city’s economy and lead the city out of the adjustment phase. The CE, as claimed in the press conference on Tuesday, said boosting the development of a combination of gaming and non-gaming elements, diversifying different industries and developing regional co-operation are the city’s new ways out. “We realised two years ago that we should prepare for a possible crisis in the local economy as there are always ups and downs. Hence, in addition to the gaming industry, we have also developed regional co-operation,” he said. “In the past, when the economy was good, the number of job positions related to gaming versus non-gaming was 9:1. However, the ratio is now 5.5:5.4, indicating this is a good direction for us to develop the combination of gaming and nongaming elements,” the CE added. “The gaming industry will not be as appealing as before to attract most of the city’s manpower. As such, we will need to offer more training and education to manpower that aims to engage in non-gaming sectors. We will study this issue with the operators of the integrated resorts,” he said. Nevertheless, he also indicated that the gaming industry would
need to develop healthily prior to the development of non-gaming elements. “It is because the total employment reached some 90,000 people among the six major operators. As such, you can see the importance of the industry, in terms of manpower, in terms of GDP,” he perceives.
Sovereign wealth fund
Meanwhile, directly-elected legislator Chan Meng Kam queried whether the government has set a timeframe for establishing a sovereign wealth fund for the city. Without revealing any information related to the timetable of its establishment, the CE only stressed that projects that the fund invest in should guarantee the city’s investment capital and interest. Such an investment fund was announced in Mr. Chui’s first Policy Address for his current term in March of this year. That Address indicated that the creation would be initiated during the course of this year. But the 2016 Policy Address only updated that the government would “continue boosting the study of the [Fund’s] establishment”. “We’ve generated a certain amount of surplus. We hope to invest our surplus in projects that are able to guarantee our investment capital and interest rate. However, the global economy is fluctuating, we need to be cautious when we invest as investment always involves risks,” he told legislators. “As a body managing the public finances, we cannot only chase high returns. We will study the establishment following the [cautious] direction,” the CE claimed.
Gov’t to reveal stance on Pearl Horizon case The government will announce its stance and its legal analysis report on the land-use term dispute of high-end residence Pearl Horizon by December 10, the Chief Executive revealed yesterday. The CE claimed that the government’s working group on the issue had spent a great amount of time trying to resolve the “difficult problem”. In September, the developer of the Polytec Group project said its land use term on the project site expires on December 26 this year although the construction of the project has not yet been completed. The current Land Law does not allow for the extension of the developer’s land-use term, which has caused project homeowners to petition the government.
Motorbike traffic considered for 4th cross-sea bridge The government has considered the traffic of motorbikes for the city’s fourth crosssea passageway, according to the Chief Executive. He told legislators yesterday that the proposal has considered the safety of the motorbike traffic on the passageway. This year’s Policy Address suggests building a bridge rather than an undersea tunnel for the new cross-sea passageway. The bridge is forecast to connect Zone E of the reclamation area in Taipa and Zone A next to the Peninsula. Meanwhile, asked by legislator Ho Ion Sang about the government’s proposal for the 5th cross-sea passageway, the CE replied that his office has not had such a plan yet.
Gov’t studies building smart city from next year The CE said his government would initiate a study on establishing a smart city from next year, which will include proposals to assist local industries to upgrade their models and to boost the development of innovative industries. In addition, the establishment may allow government departments to exchange information internally. Mr. Chui perceives that developing the Special Administrative Region into a smart city is necessary as a World Centre of Tourism and Leisure. He said he would enhance the government’s support of the technology fund and related industries.
Actual polices for 5-year plan released Q2 2016 Asked by legislator Kou Hoi In about the government’s economic blueprint for the coming five years, the Chief Executive said the blueprint would be included in the detailed proposal of the government’s five-year plan. He added that more actual measures for the city’s development will be covered in the proposal, which will be released during the second quarter of next year. The committee for the World Centre of Tourism and Leisure announced a general 5-year development plan on Tuesday. According to the CE, the detailed proposal will also include policies to meet the goals set by the central government, such as developing into a World Centre of Tourism and Leisure
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November 19, 2015
Macau opinion
Old wine?
José I. Duarte Economist
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he Chief Executive went to the Legislative Assembly and presented the annual Policy Address. Under the current economic circumstances, there were some expectations about the economic diagnostics and policies that would be put forward. What was said was, however, hardly new. The orientations and proposed measures did not break new ground. Five areas were highlighted as government priorities: gambling, tourism, new industries, resident workers’ protection, and regional cooperation. These topics were expected, and they are almost inevitable. But few details, if any, were put forward. That is somewhat worrying. It suggests some difficulty in moving away from a mostly reactive and unsystematic approach to the issues. Take the case of gambling, for instance. It is the local growth engine, for better or worse. We got intentions that were already stated before: reinforce the monitoring and inspection of the sector and improve the sector’s legislation. What are the imperfections or limitations of the current arrangements; which improvements are sought and why are they necessary or desirable; which actions are being considered and what is the timeframe involved? Those issues are essentially unanswered. Certainly, it is public that the government has ordered a study to review the sector to “assess the [casinos] compliance with the concession contracts”. That contract compliance is evaluated through some kind of academic study is already strange enough. What can be ‘assessed’, given the very generic obligations set out in the contracts, is also not obvious. Anyway, one would expect that to be the realm of lawyers first and foremost. Furthermore, as it is presented, it would appear that only at this point did the administration feel the need to investigate the sector’s influence or impact upon “the economy of the territory, the small and medium companies’ business environment, society’s and population’s lives”. That is puzzling. There is nothing wrong with asking outside and, preferably, independent institutions to come up with analysis and appraisals of any area of government intervention; quite the contrary. But the relevant departments of the administration have done nothing for the last ten years, to go no further? It is hard to believe. What internal analysis, evaluation, and ideas did they come up with in that period and what follow-up did they get? It cannot look like we know nothing about the matter until some ‘external truth’ is revealed. The contents of the Address on the other matters were seemingly generic in their presentation and aims. The over-use of adjectives directly stated or implied in the verbs used, whose actual and practical meaning is never clearly defined, continues unabated, though. Development is meant to be ‘healthy’ and ‘harmonious’; diversification must be ‘adequate’; laws and regulations will be ‘perfected’; actions will be implemented in a ‘stable’ manner, and so forth… Maybe this results from some internal division of labour and the Secretary for the Economy will bring in some new wine to the table.
Emperor Entertainment revenue down 17.1 pct in H1 The gaming sector, which accounts for 84.7 pct of the group’s total revenue, decreased 17.9 pct. Due to achieving VIP growth, the company hopes to find the solution to holding onto that market Joanne Kuai
joannekuai@macaubusinessdaily.com
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or the six months ended 30 September 2015, Emperor Entertainment Hotel Limited’s revenue declined 17.1 per cent to HK$873.4 million (US$112.7 million) compared to the same period of last year ‘amid a challenging macro environment in Macau’ according to a filing with the Hong Kong Stock Exchange yesterday. The unaudited condensed consolidated results of the company also reveal that the Group’s earnings before interest, tax, depreciation and amortisation (EBITDA) and after noncontrolling interests was HK$274.1 million (2014: HK$327.3 million). In the interim result, the company added that the profit for the period attributable to the owners of the company was HK$111.5 million (2014: HK$263.7 million). Basic earnings per share were HK$0.09 (2014: HK$0.20). The Board declared an interim dividend of HK$0.028 (2014: HK$0.05) per share. The company attributes the decline to a net loss on the hotel property valuation due to the downturn of the Macau property market, an exchange loss on offshore traded renminbi deposits held by the group due to abrupt devaluation of the renminbi in August 2015 and a moderate decline of revenue due to the economic downturn.
Gaming sector
During the period, the group’s gaming revenue declined moderately to
HK$739.9 million (2014: HK$901.6 million), accounting for 84.7 per cent of the group’s total revenue. Nevertheless, the group managed to achieve a growth in revenue from the VIP room, leveraging its strong and loyal premium customer base. In the 67-table mass market segment, gross win fell 30 per cent to HK$844.4 million. Revenue fell 29.9 per cent to HK$470.5 million. The segment accounted for 53.9 per cent of the group’s total revenue, compared with 63.7 per cent in the same period last year. On the contrary, the group’s selfmanaged VIP room with 10 tables managed to generate an increase of 17.5 per cent to HK$252.2 million, compared to HK$214.6 million during the same period of last year, with a rolling amount of HK$10.2 billion. This accounts for 28.9 per cent of the group’s total revenue. The gaming sector refers to the mass market hall, VIP room and slot machine hall operations and provision of gaming-related marketing and public relations services in the casino of the Grand Emperor Hotel in Macau. The Group’s casino is operated under the gaming licence held by Sociedade de Jogos de Macau, S.A. In addition, the group’s hotel revenue derives from the hospitality income of Grand Emperor Hotel and the Inn Hotel Macau (formerly known as Best Western Hotel Taipa) which declined 12.2 per cent year-on-year
to HK$133.5 million, accounting for 15.3 per cent of the total revenue.
Problems and solutions
The company pointed out that the Macau gaming market has undergone ‘a massive correction’ since the second half of 2014, amid deepening concerns over China’s economy and ongoing austerity initiatives. Beside the general gaming industry downturn, and dwindling tourist traffic from Mainland China, the company added that ‘the appetite for gambling has further dampened in the wake of the recent stock market turmoil and the surprise devaluation of the renminbi.’ The company believes that the uncertainties in the macro economy, and the regulatory headwinds blowing across the gaming market, will continue to pose challenges to all gaming operators in Macau. As demonstrated by a modest growth in the VIP segment, the company says that it believes its core strength lies in its proven capability to achieve high levels of customer satisfaction by offering unique gaming and hospitality experiences to guests. ‘The group remains committed to reinforcing its competitive edge in providing superior customer services, in order to be well-positioned to capture the full potential once the gaming market rebounds,’ reads the filing.
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November 19, 2015
Macau
Bank sector employment maintains steady growth Overall average earnings increased 8 pct on a yearly basis comparison
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orkers employed by banks established in Macau can sleep soundly as figures show little change. Data issued yesterday by the Statistics and Census Service (DSEC) proves that employment in the sector is experiencing minor increases in their benefits. The 28 banks operating locally employed 5,928 workers at the end of the third quarter of 2015 (JulySeptember), which means an increase of 255 year-onyear and with job vacancies stable, the data revealed. The report showed that in the third quarter of 2015 the banking sector had hired 483 new employees. Thus, the employee recruitment rate for Q3 grew 8.3 per cent but decreased 1.0 per cent on a yearly basis. On the other hand, the employee turnover rate was 5.7 per cent in the last quarter, falling 0.8 per cent year-on-year, indicating that the manpower situation of the
banking sector was relatively stable in this quarter.
employees) in technicians and associate professionals.
Gender gap
Non-resident manager
Female workers enjoyed a relative improvement in nearly every aspect of the sector charts, reducing a remarkable gender gap. Women working for banks earned an average MOP21,800 last quarter; increasing 9.1 per cent from the MOP19,980 a year ago. That figure is still below the average earning (excluding bonuses and allowances) of total fulltime employees, which amounted to MOP24,910; but the increase is slightly higher than the median 8.0 per cent. The number of female workers hired in the last quarter grew over the average (4.5 per cent) to reach 3,511 (5.2 per cent). The highest growth was reached in the directors and managers positions with a 16.4 per cent increase (818 workers), and a 12.0 per cent growth (1,222
The average earning figures of the report also showed that non-resident directors and managers continue to register the highest wages. They earned an average of MOP53,460 last quarter vs. the MOP42,800 of resident directors and managers. However, despite the high salary the average was -8.3 per cent from a year before, when top foreign staff used to earn an average of MOP58,330. There were a total of 1,632 directors and managers.
Recruitment profiles
DSEC revealed that in terms of recruitment prerequisites, 58.3 per cent of the vacancies required working experience, 93.1 per cent required tertiary education, while knowledge of Mandarin and English accounted for 96.4 per cent and 96.8 per cent, respectively.
Regarding vocational training, the sector had 6,065 employee participants attending training courses provided by the employer (including courses organised by the banks or in conjunction with other institutions, and those sponsored
by the banks). About 83.3 per cent of the participants attended courses organised by the banks. The majority of participants (68.8 per cent) attended Business & Administration courses, followed by Law courses (20.0 per cent).
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November 19, 2015
Macau Melco announces Studio City loan amendment update Melco Crown Entertainment Limited announced yesterday that its subsidiary, Studio City Company Limited, as the borrower under the US$1.4 billion Studio City term loan and revolving credit facility, has received the requisite lender consent to amend the loan documentation as proposed by the Studio City borrowing group. The amendments, which are in effect as of yesterday, include changing the Studio City project opening date condition from 400 to 250 tables, consequential adjustments to the financial covenants, and rescheduling the commencement of financial covenant testing. The company said that Studio City, which opened on October 27, 2015, will continue its operations and obtain disbursements from the US$1.4 billion Studio City loan, as scheduled.
Five-Year Development Plan to go through public consultation
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he Government is conducting a three-month public consultation about the Macau SAR’s Five-Year
Development Plan – covering the period 2016 to 2020 – which is designed to transform Macao into an international city.
The consultation aims to collect views from the public on topics including how to create more favourable living and working conditions in
Macau, and regarding transport, travel and entertainment in Macao. The information was disclosed by some members of the Committee for Development of the World Centre for Tourism and Leisure, following the Policy Address for the Fiscal Year 2016 delivered by the Chief Executive, Chui Sai On. Government Spokesperson, Chan Chi Ping; Advisor to the Chief Executive’s Office, Lei Ngan Leng; and Deputy Director of the Policy Research Office, Ung Hoi Ian conducted the briefing. The consultation document, composed by the Committee, mentions seven major planning goals for the coming five years. These
are: to maintain economic vitality; develop the structure of local industry; optimise infrastructure in pursuit of creating an international tourism city; to enhance local people’s quality of life; to improve the quality of education; to raise awareness on environmental protection; and to strengthen the effectiveness of governance and the rule of law. The Committee also plans to promote a more in-depth understanding on how to develop Macau’s strategic position as a world centre for tourism and leisure, (known as the “Centre” policy). The Committee will also outline four development phases for realising the “Centre” policy.
2016 Macau-Guangzhou Fine Products Fair to be held in Guangzhou in Jan IPIM provides Macau enterprises with preferential scheme to participate
T
he 2016 Macau-Guangzhou Fine Products Fair, coorganised by Macau Trade and Investment Promotion Institute (IPIM) and Guangzhou Municipal Commission of Commerce, will be held from 15 to 17 January 2016 at the Poly World Trade Centre in Guangzhou. This event plays a very important role in Guangzhou-Macau trade and economic co-operation. The 2016 Macao-Guangzhou Fine Products Fair will cover a wide range of products and service including MinM, Macau souvenirs, cultural and creative products, consumer goods, clothes, food products, wine, products from Portuguese-speaking countries, commerce of cross-border e-commerce as well as other merchandise. During the fair, fine products from Macau and Guangzhou will be showcased and sold to residents of and visitors to Guangzhou. There will also be diverse activities, including business matching sessions, product procurement and promotional events for Macao and Guangzhou companies during the fair, which will serve as a platform for companies from Macao and Guangzhou to network and cooperate, thereby promoting economic and trade ties between the two places.
In order to encourage companies from Macau to participate in the exhibition, IPIM is providing an incentive programme for companies from Macau. The incentives cover a standard booth, accommodation, transportation, roundtrip freight transportation, storage area and temporary staff. Eligible enterprises only need to pay a participation fee of MOP$2,000.00 for a booth or MOP$1, 800.00 for raw space. The scope of exhibits will include: products manufactured in Macau, Macau brands and overseas products with an agent in Macau (priority will be given to products from Portuguesespeaking countries). All Macau enterprises are welcome to participate in the event and explore new business opportunities. Local companies interested in participating may obtain an application form from IPIM, located on 4th Floor, World Trade Centre Building, 918 Avenida da Amizade, or Alameda Dr. Carlos d’Assumpção, 263, China Civil Plaza Building, 19th floor, Macao during office hours until 25 November. As the number of booths is limited, applications will be processed on a first-come first-served basis with the organisers reserving the right of final decision. Registration and enquiry hotline: 8798 9274 / 8798 9267.
MGTO promotes Macau in Guangdong cities
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acau Government Tourist Office (MGTO) has rolled out the “Experience Macau Carnival” in several cities in Guangdong Province including Zhanjiang, Qingyuan and Heyuan in different periods of recent months. The event aims to promote Macau tourism products as well as events and festivals, so that more residents from various Guangdong cities will opt for a longer visit and profound experience in Macau. The promotional event “Experience Macau Carnival” was organized by MGTO in the three Guangdong cities. Head of Destination Marketing Department of MGTO, Betty Fok attended the launching ceremony held in the first stop, Zhanjiang. A booth was set up after the theme “Touching Moments, Experience Macau” to showcase the World Heritage Site “The Historic Centre of Macao”, the eight walking tour routes themed as “Step Out, Experience Macau’s Communities”, Macau Grand Prix as well as other mega events. Photo zones were also available to
visitors for photo opportunities. Local travel agencies were stationed at the Carnival to sell their tourism products of Macau. MGTO has been carrying out a range of promotion activities to cater for different tourism markets. Besides an endeavour to explore new markets, the Office makes a strong effort in retaining current sources of visitors. Following the road shows in Hong Kong and Zhuhai in September and October respectively, the Experience Macau Carnival was rolled out in Guangdong in late October and November. A variety of tourism elements were on display to attract visitors from various Guangdong cities to visit Macau for an exploration of cultural gems and to feel the vibe in spectacular events. With the Carnival held, the Office sought to boost their length of stay in Macau. In parallel with that, MGTO continues to organize other promotional events in Asia and long-haul markets to broaden the diversity of visitor source markets.
Special
62 MACAU GRAND PRIX ND
It has been one year in the making but the day is finally here. The cars are already out on the streets and on Sunday the city’s new heroes will be crowned João Santos Filipe
jsfilipe@macaubusinessdaily.com
8 | Business Daily
November 19, 2015
Felix Rosenqvist: To win in Macau you need to be a bit crazy The Swede is back in the territory chasing his second win at the Macau Grand Prix. In his sixth visit to the city, he’s driving for Theodore Racing
Business Daily: This is your sixth visit to Macau and last year you won. Do you expect anything other than a victory for this year’s race? Felix Rosenqvist: Our goal is definitely to win the race again but this is the hardest race to win. I’m here with the best team and I won last year… Technically, it should be the best combination of driver and team. However, normally you don’t really know what can happen here. We will try to get through the sessions smoothly and be there at the top in the final. What does it take for a driver to win in Macau? You need to do something special. You need to be quite calm but also quite brave, a bit crazy and for sure you need luck. Who do you expect to be your stronger opponents over the weekend? There are a lot of fast guys. Alexander Sims, Antonio Giovinazzi, Daniel Juncadella, Nick Cassidy… There are a few experienced drivers and this will make things quite tough. The start of the race and then the approach on the first lap to Lisboa Bend… Can this be one of the key moments of the race? I think it can. Even if you start in pole position it’s quite normal that the guys behind you will pass you using the slipstream, then you reach the first corner in third or fourth position. So you want to be trouble-free… Until you’re really racing there, it’s very difficult to define a strategy to approach the Lisboa Bend. That is what makes it so special here. But given that you want to win, how do you think you’re going to approach it? Last year and this year… It’s all about winning for me. If I have the opportunity to overtake, definitely I will go for it. You’re racing for a different team this year. How much does it change things for you in relation to the previous year? First, I need to adapt to the car and see how the team works in comparison with what I used to do in the past. If after that I have a good feeling then everything is possible. The most important is to have a car that gives you confidence because if you don’t feel confident then you will lose a lot of time.
Successful season How do you feel about driving for Theodore Racing, which has such a long tradition in the Macau Grand Prix? The racing weekend has not started yet. But I guess when it does there’ll be a lot of people around. However, I feel this team is more involved in promotional activities.
I really love the circuit and I feel this is one of the races that you cannot say no to if you have the chance to come
Last year, you arrived in Macau following a disappointing season in Europe. This year, you come as the F3 European champion. Do you feel more relaxed about this year’s edition? Sure. I won the championship already and with the victory of last year in Macau, I don’t feel I have anything to prove. I’m just going to try to have fun and do my best. This is a good approach. When you don’t have the pressure it’s probably when you are able to do your best. Do you have your future defined in relation to the next year? My main target is to race in the GP2 Series. But I’m working on some other plans. There’s the chance to race in Super Formula in Japan. I’m also quite interested in racing in America. But so far, I’m working to go to GP2. If you win this year, you may have another invitation to come back next season. Is it something you would consider doing? If I have the chance to come here and drive more times, I will do it for sure. It can be in Formula 3 or GT cars. I really love the circuit and I feel this is one of the races that you cannot say no to if you have the chance to come.
Felix Rosenqvist was born on 7 November 1991 in Värnamo. He is currently the European Formula Three Champion, a title he won with Prema Powerteam, and last year won the Macau Grand Prix, driving for Mücke Motorsport. During this season, he won 13 races out of 33.
In these six visits, have you had the chance to travel around the city? In the first years, I came a couple of days earlier and tried to see it. I also went to Hong Kong. I’ve seen a lot of Macau. But in the last two or three years I’ve been spending more time in the pits. I feel I have seen all the casinos and tourist attractions, which is great because I think I would never have come here if it were not for the driving. In that sense it is very good to have an extra day or two to visit. During your time in Macau, have you tried your luck in the casinos? I tried my luck but I’m not the gambling type. Last year, I spent something like 100 euros (MOP850) but then realised it isn’t the way to become rich (laughs).
Business Daily | 9
November 19, 2015
Macau squad hoping to lift SAR flag aloft Andy Chang, André Couto, Rodolfo Ávila and Henry Ho are the Macau racers competing in the main categories during the weekend
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he 62nd edition of the Grand Prix will accommodate some 49 drivers racing with a Macanese licence. The motorcycle competition is the only one lacking a Macau competitor. In the Formula 3 race, Andy Chang Wing Ching is the local hero. He will be competing for Fortec Motorsport in his second attempt on the Guia circuit. Last year, the driver took the 19th position and this year the goal is to get into the top 10. “This year, I want to get into the top 10. It is my second race on this track and I feel that the experience from last year will be very important. Also, I have a better knowledge of the car this year having spent a year and a half racing in Europe”, he told Business Daily.
Andy Chang comes from a difficult European Formula 3 Championship season, where in five rounds his best classification was 18th position in three races. Chang skipped the first part of the season to focus on his studies. “The championship in Europe is difficult and I only raced during the second part of the season, which doesn’t make it any easier. Then I made some mistakes that ruined my races when I was racing with the front guys”, he said. The Macau driver has the opportunity to demonstrate his talent against another 27 drivers, including teammate Daniel Juncadella, who won the competition in 2011. “I’ll definitely ask advice from him. He won here before and I can learn a lot from him. It will be very important in achieving my goals”, he added.
André Couto racing in FIA GT World Cup
Fifteen years have passed since the year 2000, when André Couto won the Formula 3 race in Macau. Now the 38-year old driver is focusing on the GT category and his goal is to achieve the best possible result. “We want to do everything right during the first days, spend a lot of time on the track adjusting the car and achieve a good qualification position. After this initial plan, we will fight for the best possible result and who knows… maybe winning”, he told us. The local hero will face difficulties, as he will be racing for the first time
with the McLaren 650s. On the other hand, Couto is motivated by the GT300 championship, a competition that is integrated into the Japanese Super GT competition. “Until I really race the car on the track, I don’t have any idea where we stand in terms of performance”, he said. “I’ve only driven the car for two hours in Thailand and it makes it more difficult. It’s always better if you’re using the car you’ve been racing all season long”, he explained. The Macau representative at the FIA GT World Cup will have as teammates official McLaren drivers Álvaro Parente, who is Portuguese, and Frenchman Kevin Estre. “These two teams usually prepare very well for the Macau Grand Prix. They are the only races shipping the cars from Europe, which shows how serious they take this competition”, he said.
Ávila and Ho Wai Kun on Guia Race
Rodolfo Ávila and Henry Ho Wai Kun will be the drivers representing the Chinese Special Administrative Region during the Guia Race, which is also the last round of the TCR International Series. Ávila is going to race for Asia Racing Team with a Seat Leon. His goal is to secure victory in the TCR Asia Series for the team. Before this round, Asia Racing Team was first in the standings (210 points), 58 points ahead of Hong Kong team Prince Racing (152 points).
“I’m going to race in a touring car this year, and this is good because all cars are very similar. Now I have the chance to be fast and compete with the guys in front”, Rodolfo Ávila told Business Daily. “I’m happy to race again in Macau. Now I’m bit older than in the past but ready to race so let’s see how things go”, the 28-year old driver added. For his part, Henry Ho Wai Kun is going to compete in a Honda Civic TCR, integrated into the PAS Macau Racing Team.
Local heroes
Andy Chang Wing Ching Age: 19 Category: Formula 3 Team: Fortec Motorsport Car: Dallara Mercedes
André Couto Age: 38 Category: FIA GT World Cup Team: FFF Racing Team Car: McLaren 650s GT3
Rodolfo Ávila Age: 28 Category: Guia Race 2.0T Team: Asia Racing Team Car: Seat Leon
Henry Ho Wai Kun Age: 33 Category: Guia Race 2.0T Team: PAS Macau Racing Team Car: Honda Civic TCR
10 | Business Daily
November 19, 2015
The day before the races
Yesterday, drivers visited A-Ma temple to celebrate the 10th anniversary of the Historic Centre of Macau as UNESCO World Heritage.
Local students had the opportunity to interact with drivers at the Macau Science Centre. Edoardo Mortara, known as Mr. Macau, posed for a photo to record the moment for the future.
Motorcycle rider Brandon Cretu signs autographs for local students at the Macau Science Centre.
The racing teams were not the only ones busy in the pit lane yesterday. The safety crew also performed an extrication exercise.
Business Daily | 11
November 19, 2015
Greater China
Home prices rise for the first time in 14 months
earlier, quickening from September’s annual 37.6 percent. “Looking ahead, property prices will continue to warm up in first and second-tier cities. Smaller cities will face headwinds due to inventory destocking,” economists at ANZ said.
Average new home prices rose 0.1 percent in October from a year earlier
More support moves?
Xiaoyi Shao and Sue-Lin Wong
H
ome prices in China rose for first time in over a year in October on an annual basis,
signalling a housing market stabilisation that could help re-energise the listless economy.
A swift rebound in property prices, however, is unlikely due to high inventories in all but the biggest cities, forcing
developers to slow the pace of or even stop expansion to protect their cash flows. “For next year, most market players are somewhat pessimistic as new construction is still dropping and policy effects are fading away,” said Liu Yuan, head of research at property consultant Centaline in Shanghai. Average new home prices rose 0.1 percent in October from a year earlier, Reuters calculated from National Statistics Bureau(NBS) data out on Wednesday, reversing September’s 0.9 percent drop, marking the first year-on-year gains since August 2014. Even a modest recovery in a sector that accounts for 15 percent of gross domestic product is a welcome boost for an economy heading for its weakest growth in 25 years. The numbers boosted Chinese real estate stocks with the Shanghai stock exchange property sub index surging more than 4 percent. Greenland Holdings and Poly Real Estate gained nearly 10 percent. The NBS data showed larger cities have led the price upturn, with Shenzhen the top performer. Prices in Shenzhen rose 39.9 percent in October from a year
Following a year-long slump, China’s home sales and prices have increased in bigger cities over recent months, helped by a barrage of government measures. Analysts expected to see more measures to revive the key sector in coming months. Chinese President Xi Jinping told the APEC conference in Manila yesterday that the fundamentals of China’s economy remain positive, the economy is proving resilient to the pains of deepening reform, and there is ample room to fend off downward pressure. Data out last week showed growth in property investment cooled to its slowest rate since the global financial crisis, while new construction continued to show year-on-year falls. “There are signs of price gains losing momentum, fuelling hopes that more stimulus, including tax breaks and downpayment cuts, will come in the remainder of this year,” said Guo Yi, market director of Yahao, a real estate consulting agency. Demonstrating that loss of momentum, month-onmonth price gains were recorded in only 27 of the 70 cities tracked by the NBS, down from 39 in September. Compared to a month earlier, home prices in October rose 0.2 percent, dipping from September’s gains of 0.3 percent, according to Reuters calculations based on NBS data. Reuters
Offshore yuan clearing banks halt repo trade Move would mark an intensification of efforts to keep people from selling off the yuan Hongmei Zhao and Pete Sweeney
O
ffshore yuan clearing banks and related offshore participant banks have had their trading in bond repos and account finance suspended by the central bank, people with direct knowledge of the matter told Reuters. That move would limit the transfer of funds outside of the country, restricting capital outflows and contributing to holding the exchange rate stable as China tries to hold the yuan flat in the run-up to the International Monetary Fund’s decision on whether to include the currency in its reserve basket. “We received window guidance from the central bank on Friday,” a person at an offshore yuan clearing bank said. “We have already temporarily suspended trade in yuan account
financing and bond repurchases with onshore banks.” Faxes and calls by Reuters to the People’s Bank of China (PBOC) requesting comment were not immediately answered. A trader at a Chinese commercial bank in Shanghai said the action “may have an impact on forward contracts trading and the spot price of onshore yuan, because the yuan supply in offshore market will decrease.” The move would mark an intensification of efforts to keep people from selling off the yuan, which has come under pressure as China has cut interest rates while the United States is preparing to raise them. The efforts have included heavy intervention in onshore and offshore forex markets to prop up the yuan, traders say.
“I think this action runs contrary to recent forex market reforms, given that the central bank is trying to internationalise the yuan and boost demand for the currency,” said a trader at a foreign commercial bank in Shanghai. “This action may aim at curbing the speculation in the currency, but
KEY POINTS C.bank gave ‘window guidance’ - trader Move would restrict capital outflows
it is a little bit confusing why the central bank would take this move now.” In September, China’s foreign currency regulator started looking into corporate forex purchases. An official said foreign currency demand by some firms and individuals exceeded “the real and rational use” for the currency. Chinese central bankers have struggled to put a floor under the exchange rate since a surprising devaluation of the official guidance rate in August, which made offshore and onshore markets shave nearly 3 percent off the yuan’s value. The October purchases stemmed heavy sales in the previous three months that underlined capital outflows. Reuters
12 | Business Daily
November 19, 2015
Greater China
Xi sees persisting downward pressure on economy
October rail freight down China’s rail freight volume in October fell 16.3 percent from a year earlier to 280 million tonnes, the nation’s top economic planner said yesterday. The volume of goods carried by China’s railways in the first ten months was down 11.9 percent from a year ago to 2.8 billion tonnes, the National Development and Reform Commission (NDRC) said on its website. The amount of cargo moved by railways around China is seen as an indicator of domestic economic activity.
Commercial banks’ net forex sales US$20.1 bln China’s commercial banks sold a net US$20.1 billion of foreign exchange in October settlements, the foreign exchange regulator said yesterday, compared with US$109.2 billion in September. Capital outflows eased in October as the domestic stock market recovered after a crash over the summer although concerns remain over China’s economic slowdown. In January-October, commercial banks had net foreign exchange sales of US$321.6 billion, the regulator said on its website.
Shenzhen grants second investment quota Shenzhen has approved a second batch of 30 companies to buy financial assets and real estate abroad under the Qualified Domestic Investment Enterprise (QDIE) scheme, Chinese business media outlet Caixin reported on its website. The 30 companies have been awarded US$30 million in quota each, meaning they can invest a total of around US$1 billion overseas, Caixin said yesterday. Compared with the established Qualified Domestic Institutional Investor, a similar scheme that allows Chinese institutions to buy overseas stocks and bonds, QDIE gives investors a broader investment scope, including private equity, hedge funds and real estate, the article said.
Anti-dumping investigation into iron alloy China’s Ministry of Commerce (MOC) yesterday began to conduct an anti-dumping investigation over a kind of iron based alloy imported from the U.S. and Japan. The MOC will try to determine whether the imports, iron based amorphous alloy ribbon (strip), which were allegedly at “lower than normal” prices, have damaged or affected domestic producers’ interests, the ministry said in a statement. The investigation started on November 18, the statement said. Iron based amorphous alloy ribbon is widely used in manufacturing power distribution transformer, electric reactor, motors and voltage transformers.
The President said China is working to overcome the challenges of slowing global growth this year by advancing reforms Sharon Chen
C
hinese President Xi Jinping acknowledged downside risks to growth while assuring fellow leaders that Asia’s biggest economy is resilient and will remain on the path of reform. China is working to overcome the challenges of slowing global growth this year by advancing reforms and won’t change its policy on foreign investment, Xi said at the Asia-Pacific Economic Cooperation chief executives summit in Manila yesterday. “In general, China’s positive economic fundamentals and long-term trajectory remain unchanged,” Xi said, taking the stage after U.S. President Barack Obama. “On the other hand, China’s economy is still coping with the complicated internal and external environment, considerable downward pressure and the temporary pain of deep reforms.”
China is on pace for the slowest expansion in 25 years, a worry for Asia’s smaller economies which have become increasingly reliant on it for export demand. Leaders are stepping up fiscal stimulus after six interest rate cuts in the past year failed to spur a revival in growth.
Reasonable growth
Industrial output in China last month matched the weakest gain since the global credit crisis, while fixed-asset investment so far this year has increased at the slowest pace since 2000. Meanwhile, retail sales growth is accelerating, underscoring a shift in the economy toward greater reliance on consumer spending as old growth engines falter. “Some economic indicators have somewhat fluctuated between months and quarters, but the overall economy
has operated within the reasonable range and maintained steady and fairly rapid growth,” Xi said. Xi also touted China’s efforts to take a leadership role in the development and integration of Asia, citing his “One Belt, One Road” initiative to link the country with Europe through central and western Asia as well as the US$100 billion China-led Asian Infrastructure Investment Bank. China is working to complete the Regional Comprehensive Economic Partnership early, he said, and seeks high-standard free-trade agreements with other nations. He urged leaders to work quickly on the Free Trade Area of the Asia-Pacific, an agreement to link the 21 APEC countries Xi put on top of the agenda when members met last year in Beijing. Bloomberg News
Property giant eyes robot rescue from rising wage bills Vanke to open a robot-managed hotel in Shenzhen Clare Jim and Jessica Macy Yu
C
hina Vanke, the biggest property developer by sales in the world’s most populous country, is recruiting robots to sweep floors and guard its properties to address a labour shortage and rising wage bills. As Chinese developers struggle with lacklustre sales and tighter industry margins, China Vanke, like many, is looking to premium concierge services to attract customers, and it said robots would provide some of those services. You can already buy a robot waiter for 40,000 yuan (US$6,300) on Alibaba Group’s Taobao, China’s leading online market place, but Vanke is developing its own, mostly for janitorial, security and transportation services, which are more labour-intensive than the core business of land acquisition, project planning and construction. “We estimate that with today’s growth and the changes to China’s personnel structure, that at least 30
percent of our jobs will be replaced by robots,” China Vanke’s chairman Wang Shi recently told a university forum in Hong Kong. Vanke rolled out a driverless car and a patrol robot earlier this year, and plans to introduce a floorsweeping robot at the end of this month. Wang said in August that eight robot chefs already worked in the restaurants that serve its developments. He added that in 2017, it would open a robot-managed hotel in the southern city of Shenzhen. Vanke expects its total employees to jump 25-fold to 1 million in a decade from the current 40,000, though the company hasn’t said if some of those will run on batteries. China’s urbanisation push and ageing population has made especially younger workers much more footloose and less willing to work in smaller cities, resulting in a spike in wages across the country. Foxconn, the trading name of
Taiwan’s Hon Hai Precision Industry, which employs more than 1 million factory workers in China, is also stepping up the adaptation of robotics to ease a labour crunch. Its chairman Terry Gou once said the company aimed to build a million robots. On a recent visit to Vanke’s research centre in the southern city of Dongguan, Reuters reporters saw a researcher working on a prototype driverless vehicle designed to shuttle up to 10 people across its sprawling residential estates. “Nowadays some housing estates or commercial malls cover a large area and feature long paths,” said Zhang Jinming, a member of staff involved in the automation project. “Our driverless cars can solve the problem of transportation within roughly 1 km, and it won’t involve any labour cost.” Vanke declined to give details on the cost or job savings, or the planned investment in robotics. 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.
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Business Daily | 13
November 19, 2015
Asia
Australian wage slowdown a stimulant for employment Wage gains have been slowing since 2008 when they peaked atop 4 percent Wayne Cole
A
ustralian wage growth stayed stuck at the slowest pace in at least 16 years last quarter, a mixed blessing that has eaten into household incomes but also fed surprisingly strong demand for labour. Yesterday’s data showed hourly rates of pay excluding bonuses edged up 0.6 percent in the third quarter, from the previous quarter when they rose by the same amount. Annual growth held at a scroogelike 2.3 percent, matching the lowest reading since the Australian Bureau of Statistics started compiling the data in 1998. Wage gains have been slowing since 2008 when they peaked atop 4 percent and not a single industry surveyed posted annual growth over 3 percent. The glory days of mining were truly over as wages there rose just 2.1 percent for the year, while the education sector enjoyed the best outcome at 3 percent. This long moderation in wages has restrained domestically-generated inflation, with consumer prices up a tame 1.5 percent in the year to September. That in turn led the Reserve Bank of Australia (RBA) to say there was still room for a further cut in the 2.0 percent cash rate, though it sounded upbeat enough on the economy to suggest an actual move was unlikely in the near future.
Modi says gov’t all out to weed out corruption Indian Prime Minister Narendra Modi yesterday reiterated that his government is all out to weed out corruption, stressing steps have already been taken to curb graft. “Corruption is a principle challenge. India is in a crucial phase of nation building. There is a need to fight relentlessly against corruption,” Modi said in the national capital. Modi also said that comprehensive and deterrent law has been enacted that provides for stringent penalties. “The government is unsparing when it comes to punishing the corrupt,” he said.
S.Korea pushes for MSCI advanced status
Much of that optimism is due to the surprising strength of employment - itself a function of the subdued wages story. Real unit labour costs have hardly risen over the past six years, making workers relatively more competitive compared with capital and encouraging employers to hire more. Figures out last week showed a hefty 315,000 net new jobs were created in the year to October. Annual jobs growth of 2.7 percent even beat the 2 percent boasted by the United States.
That means more people earning a living and able to spend. The jobless rate also dipped unexpectedly to 5.9 percent, the lowest in six months, when the RBA had thought it would stay at 6 percent or higher for a whole year before declining. “The figures already suggest that the RBA’s unemployment forecast may be turning out to be too conservative,” said Ivan Colhoun, chief markets economist at NAB. “This (jobless decline) appears to be occurring much earlier than anticipated.” Reuters
Indonesia douses talk of curbs to capital, exchange rate Vice President Jusuf Kalla suggested that Southeast Asia’s largest economy may impose some control over capital flows
South Korean officials will hold talks later this month with MSCI to press for the inclusion of their country’s stock markets in the equity index compiler’s advanced market index, breaking a link to other more volatile emerging markets. The discussions will be attended by a team of officials from the Ministry of Strategy and Finance, the Financial Services Commision and the Korea Exchange. Government sources have said 24-hour trading of the won currency was on the list of requirements that MSCI want to see before promoting South Korea to the advanced markets index.
Thai rate cut likely to have small impact Thailand’s central bank held its benchmark interest rate on November 4 as policy easing at that time likely would produce only a limited impact on economic recovery and could pose financial risks, minutes from that meeting showed yesterday. The central bank’s monetary policy committee (MPC) voted 7-0 to leave the one-day repurchase rate steady at 1.50 percent for a fourth straight meeting. The record low is 1.25 percent, during the global financial crisis. Members also thought policy space should be preserved, while some continued to see the need to monitor risks to economic and financial stability.
Suu Kyi says Beijing bonds deserve close attention
Hidayat Setiaji
I
ndonesia reaffirmed its commitment to allowing the free movement of capital and a floating exchange rate, putting to bed concerns the government would impose capital controls to manage rupiah and dollar liquidity. Edi Prio Pambudi, Assistant Deputy Minister at the economics ministry, told Reuters on Wednesday the government was focused on getting exporters to bring home their offshore earnings. “We have no plan in the short run to change the law. Our current focus is to attract exporters to bring offshore earnings back home,” he said. Indonesia adopted free capital flows and a floating exchange rate policy after the Asian financial crisis of the late 1990s
The comment comes a day after remarks from Indonesia’s Vice President Jusuf Kalla suggested that Southeast Asia’s largest economy may impose some control over capital flows. Indonesia’s rupiah currency has come under severe pressure this year, hurt by a balance of payment deficit, weak prices for the country’s commodities, and capital flows driven by expectations of the U.S. Federal Reserve raising rates by year-end. The rupiah has lost 9 percent so far this year and is the second worstperforming currency in emerging Asia. On Tuesday, Kalla told an economic seminar the country’s foreign exchange system must be changed.
“We were proud that we could ship minerals. But the goods are gone, and the money is only coming in small amounts, which are saved in Singapore and in Hong Kong,” Kalla said. “This is a fatal policy,” and needs to be changed, he said. In 2011, Indonesia’s central bank issued a regulation requiring exporters to repatriate their earnings through local banks, hoping that some of the dollars would stay onshore and help protect the economy from possible capital outflows in the event global risk sentiment worsened. This year, Bank Indonesia again introduced rules to manage dollar liquidity onshore, including banning the use of dollars for domestic transactions and revising some auction mechanisms. Reuters
Myanmar’s Aung San Suu Kyi has pledged to pay “special attention” to ties with China when her party takes office after its election triumph, and said foreign investments would need public support to help improve relations. In an interview with China’s state-run Xinhua news agency, the National League for Democracy (NLD) leader said Myanmar had no enemies, but relations with neighbours were more sensitive than others and needed to be carefully handled. China was Myanmar’s lifeline for two decades when sanctions prevented most Western businesses and financial institutions from engaging with the country.
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November 19, 2015
International White House threatens veto of ruling Fed’s decisions The White House issued a veto threat for a Republican-backed bill to make the Federal Reserve set interest rate policy using a mathematical rule, a proposal Fed Chair Janet Yellen said would “severely damage” the U.S. economy. The Obama administration opposes the proposal because it would hinder the Fed’s ability to help the economy, the White House said in a statement. The proposal, which could pass the Republican-controlled house, is not expected to become law but has nonetheless prompted a host of Fed policymakers to air their concerns.
U.S. inflation turning corner; factory output rises Inflation should get a boost next year as the weak readings from late 2014 and this year drop out of the calculation
Barclays could face another fine in FX probe The bank will pay at least another US$100 million in a settlement with the New York financial regulator to resolve allegations that it rigged foreign exchange markets, a person familiar with the matter said. The British bank could settle with the New York Department of Financial Services by next month, the person said. Barclays agreed to pay US$120 million earlier this month to settle private U.S. litigation accusing it of conspiring with rivals to rig the benchmark interest rate known as Libor. They agreed in May to pay US$650 million on charges related to U.S. dollars and euro trading in the forex spot market.
Pemex seeking partners for refinery upgrades Mexico’s state-owned oil company Pemex is seeking private partners for three major refinery upgrades that will allow it to convert more heavy crude into higher-value fuels like gasoline, a company executive said. Pemex estimates required investment for the construction and installation of coking units at its Salina Cruz, Tula and Salamanca refineries at US$12.3 billion. “We think these projects can be completed by means of partnerships with third parties,” said Juan Marcelo Parizot, Pemex’s head of marketing for its newly-created Industrial Transformation division.
OECD agrees deal to restrict financing for coal technology Members of the Organisation of Economic Cooperation and Development (OECD) struck a deal on Tuesday to restrict subsidies used to export technology for coal-fired power plants, ending months of wrangling. Representatives of the world’s richest countries agreed a deal to end export credits for inefficient coal plant technology to take effect from January 1, 2017, with a review in 2019 that could allow the deal to be strengthened.
Criminal cases against RBS, JPMorgan executives U.S. Federal prosecutors are pursuing criminal cases against executives from the Royal Bank of Scotland Group and JPMorgan Chase & Co for allegedly selling flawed mortgage securities, the Wall Street Journal reported on Tuesday, citing unnamed sources. People familiar with the probes said officials were trying to determine whether the bankers ignored warnings from associates that they were packing too many weak mortgages into investment offerings and whether they can prove that constituted fraud, the newspaper said.
The increase in manufacturing output was another indication that economic growth would accelerate in the fourth quarter
U
.S. consumer prices increased in October after two straight months of declines as the cost of healthcare and other services rose, evidence of firming inflation that further supports views that the Federal Reserve will raise interest rates next month. The economic outlook also got a boost from other data on Tuesday showing a fairly solid increase in manufacturing output in October after dropping for two consecutive months. The Labour Department said its Consumer Price Index increased 0.2 percent last month, reversing September’s 0.2 percent drop. In the 12 months through October, the CPI advanced 0.2 percent after being unchanged in September. Signs of stabilization in prices after a recent downward spiral are likely to be welcomed by Fed officials and give them some confidence that inflation will gradually move toward the central bank’s 2.0 percent target.
Inflation has persistently run below target. In the wake of a robust October employment report, the U.S. central bank is expected to raise its benchmark overnight interest rate from near zero at its December 1516 meeting. There is hope tightening labour market conditions, characterized by a jobless rate now in a range that some Fed officials view as consistent with full employment, will put upward pressure on wages and drive inflation toward its target. A report from the Fed showed manufacturing production increased 0.4 percent as the output of both long-lasting and nondurable goods rose. Manufacturing, which accounts for 12 percent of the U.S. economy, declined in both August and September. The sector has been hobbled by a strong dollar, spending cuts by energy firms and efforts by businesses to reduce an inventory bloat.
Canada reviewing TPP agriculture compensation The U.S. Congress is fiercely resisting approval of the pact David Ljunggren
C
anada’s new Liberal government is reviewing a C$4.3 billion (US$3.2 billion) package designed to compensate farmers for losses they might incur under a new Pacific trade deal, Trade Minister Chrystia Freeland told reporters yesterday. Freeland’s remarks add to the uncertainty over whether the Liberals will ratify Canada’s participation in the 12-nation Trans-Pacific Partnership (TPP) agreement,
which was negotiated by the previous Conservative government. The Liberals, who won a federal election last month, say they are examining the 6,000-page document and want to consult Canadians before making a decision. Any move to change the 15-year compensation package would most likely anger Canada’s powerful dairy and poultry sectors, which say they need protection from international producers.
However, further declines in mining output and a weather-related drop in utilities production weighed on overall industrial production last month. Still, the increase in manufacturing output was another indication that economic growth would accelerate in the fourth quarter after braking to a 1.5 percent annual rate in the July-September quarter. In October, the so-called core CPI, which strips out food and energy costs, gained 0.2 percent after a similar rise the prior month. Rents and medical costs accounted for much of the increase in the core CPI last month. The rental index increased 0.3 percent after rising 0.4 percent in September. Medical care costs rose 0.7 percent, the largest increase since April. In the 12 months through October, the core CPI increased 1.9 percent after rising by the same margin in September. The Fed tracks the personal consumption expenditures price index, excluding food and energy, which is running below the core CPI. The dollar’s 18 percent rise against the currencies of the United States’ main trading partners since June 2014, has made imports such as apparel and automobiles less expensive. Energy prices, including gasoline and electricity, rose last month. While food prices rose marginally, four of the six major grocery store food group indexes increased, with cereals and bakery products posting the largest increase since August 2011. Hospital costs increased 2.0 percent in October and airline fares rose 1.5 percent, ending a string of three consecutive declines. There were also increases in recreation costs, but apparel prices recorded their biggest decline since December. Prices for used cars and trucks fell for a sixth straight month. Reuters
“We are reviewing now what the compensation plans will be ... we appreciate the important of compensation to sectors affected by the TPP,” Freeland told reporters on the side-lines of an Asia-Pacific summit. “It would be very inappropriate for us right now to commit to specific packages given that we’re actually reviewing the agreement overall,” she added. News of the C$4.3 billion compensation package helped mute protests to the TPP agreement from the farm sector. Some of the money is also slated to help farmers who might suffer from a free trade deal signed with the European Union. Freeland said other TPP nations had shown “great understanding” for the new Canadian government’s insistence that it needed to re-examine the deal. The TPP would be a signature landmark for U.S. President Barack Obama, who earlier in the day said the pact was a good deal economically. The U.S. Congress must approve the pact before it can take effect, but lawmakers in the United States are lukewarm toward the deal. Reuters
Business Daily | 15
November 19, 2015
Opinion
Japan economy doing OK, at least wires in working population terms Business
Leading reports from Asia’s best business newspapers
James Saft
Reuters columnist
VIETNAM NEWS Logistics trading is not provided adequate conditions for development in Viet Nam though it is considered a cash cow sector, Nguyen Cam Tu, deputy minister of Industry and Trade, said. Tu told a conference, held to provide market information and favourable commercial mechanism to facilitate import-export and transport businesses in Ha Noi, that Viet Nam should create favourable conditions for trade activities as well as building an effective logistics sector for better exports. In addition, the country should have high value products in the world market while increasing integration in the seaport sector.
THE KOREA HERALD Global rating agency Moody’s Investors Service said yesterday it has kept the sovereign credit rating on South Korea at “Aa3,” as the country’s strong fiscal fundamentals are forecast to offset unfavourable external conditions. “Korea’s fiscal fundamentals remain very strong, supporting its Aa3 government bond rating,” Moody’s Vice President Steffen Dyck said in a media briefing in Seoul. The global credit appraiser has kept its current rating for Korea at its fourth-highest level since August 2012. The agency, however, warned that slowing export momentum and consumer confidence could hinder economic growth further.
THE TIMES OF INDIA Direct investments by Indian firms abroad fell 21 per cent to US$2.28 billion in October 2015 compared to the same month last year, according to RBI (Reserve Bank of India) data. Indian companies had put in US$2.88 billion in the form of outward foreign direct investment in October 2014. While in the preceding month of September 2015, the investment stood at US$1.24 billion, as per the data. The investments were a mix of issuance of guarantees (US$1.72 billion), loans (US$210.94 million) and equity (US$341.82 million).
THE AGE Strong returns in October have placed Australian superannuation funds back on track for a fourth consecutive year of positive returns in 2015, but the super-charged returns of recent years are a thing of the past. Balanced funds, the growth option in which most workers have their compulsory retirement savings, returned on average 3.2 per cent in October, bringing average returns for first 10 months of the calendar year to 6.1 per cent, according to Chant West research released yesterday. The bounce in October followed a volatile September quarter.
Abenomics, an all-out program of fiscal and monetary stimulus designed to end decades of deflation, has clearly not succeeded as planned, with this marking the second recession during Prime Minister Shinzo Abe’s three years in office
T
he good news about Japan is that its economy is doing OK, in absolute terms, given the number of working-age people who live there. The bad news is the number of people, of working or any age, is dropping. The even worse news, longer term, is that debts don’t fall with population, they only get harder to pay back across a smaller base. Japan fell into its fourth recession in five years, data showed on Monday, with the economy shrinking at a 0.8 percent annual clip in the quarter to September. That performance looks less bad, at least to the woman in the Tokyo subway, if compared to the fact that overall population is declining at a rate of about 0.3 percent a year, and working-age population is falling at well over a percent annually. Growth has been stop and start, but population dwindles inexorably. Investors, especially those with exposure to Japan’s massive government debt, don’t really care if Japan is doing well with what it’s got. While the Bank of Japan (BOJ) is buying up bonds faster than the government is issuing them, the longer out you look, the less sustainable the numbers appear. Japanese government debt now stands at 245 percent of annual output, almost two and a half times the 102 percent in the U.S. Abenomics, an all-out program of fiscal and monetary stimulus designed to end decades of deflation, has clearly not succeeded as planned, with this marking the second recession
during Prime Minister Shinzo Abe’s three years in office. To be sure, Abenomics has not been lucky in its timing, coming along just as China entered a long and painful growth slowdown tied to its own demographic woes and its need to transition towards internally generated, consumption-driven growth. That’s made for an extremely hard operating environment for Asian exporters like Japan and thus perhaps it is not surprising that falling business investment was the main cause of the most recent slowdown. Expectations that the Federal Reserve will soon raise U.S. interest rates has driven the value of the yen down, now at 123 to the dollar, giving the Bank of Japan less room to manoeuvre. Should the BOJ increase its asset buying, the yen could fall further, perhaps not enough to help exporters, who’ve not thrived anyway despite steep falls, but hurting in the process consumers who buy imported food and other goods.
While the Bank of Japan is buying up bonds faster than the government is issuing them, the longer out you look, the less sustainable the numbers appear
Where to invest? This helps explain the otherwise puzzling reaction of the Bank of Japan, which meets this week to set interest rates. The BOJ may well wish, while remaining committed to the thrust of Abenomics, to wait until the global situation is more stable before it takes any further steps. Big holders of Japanese government bonds like the Government Pension Investment Corp and the newly privatized Japan Post Bank have been on a campaign to shift into other
assets they hope will enjoy higher returns. Many of those bonds have been bought by the Bank of Japan, which as such is facilitating the retirement savings of Japan’s aging population, but not necessarily in a way that stimulates growth at home. “The data suggest that Japan’s excess liquidity is flowing abroad, not into investments at home. We figure that is why the yen has been so weak.
We will look for further yen depreciation,” Carl Weinberg at High Frequency Economics wrote in a note to clients. That’s certainly been true in the corporate sector. Faced with fatter profits from a weak yen, exporters have proved happy to bank the higher margins, tending to make what investments they do make into diversifying their manufacturing base offshore, rather than increasing it at home. That has really limited the multiplying effect that its architects hoped Abenomics would have, as wages, and with them prices, haven’t gotten as much of a boost as hoped. Looking further out, it is hard to blame either corporate Japan or the country’s retirement funds for their tactics. Both see better longer-term prospects abroad and both, having responsibility to their shareholders and investors, are taking steps to increase their exposure to markets outside of Japan. That’s the unavoidable logic that results from a shrinking population. When you husband your resources with that future drop in population in mind you take steps that can exacerbate the problems of poor demographics. On some measures Japan’s economy is doing just fine by its people. Per capita output should continue to grow, especially in working-age population terms. There will be plenty to go round domestically, but the need for inflation to lighten the debt burden becomes ever more pressing and the tools still don’t seem to work. Reuters
16 | Business Daily
November 19, 2015
Closing Mainland’s financial industry receives less FDI
Service outsourcing continues to grow
China’s financial institutions received 15.05 billion yuan (US$2.36 billion) in net foreign direct investment (FDI) in the third quarter this year, the country’s foreign exchange regulator said yesterday. The figure is lower than the 25.33 billion yuan in net FDI received in the second quarter, according to the State Administration of Foreign Exchange (SAFE). Net overseas direct investment from China’s financial institutions, including banks, insurers and securities firms, totalled 7.3 billion yuan in the third quarter, lower than the 14.13 billion yuan in the second quarter.
China’s service outsourcing industry continues to grow, with a faster increase in the value of contracts signed in the first 10 months of the year, official data showed yesterday. Chinese companies inked service outsourcing contracts worth US$96.75 billion during the January-October period, up 18.2 percent year on year, accelerating from a 16.4-percent increase in the first nine months, the Ministry of Commerce (MOC) said. Among the deals were offshore service outsourcing contracts valued at US$63.48 billion, rising 18.8 percent from a year earlier.
Obama interviews Jack Ma U.S. president also praised the relatively unknown Filipina entrepreneur Megha Rajagopalan
Government is simple - just reduce the tax, or no tax, for these guys Jack Ma, Alibaba’s CEO
US President Barack Obama (L) gestures as he sits next to Executive chairman of Alibaba Group, Jack Ma (R) during a dialogue of the Asia-Pacific Economic Cooperation (APEC) CEO Summit in Manila yesterday
U
.S. President Barack Obama took time off at an AsiaPacific summit yesterday for an unusual task - putting questions to Chinese internet billionaire Jack Ma and a young Filipina entrepreneur on government-business ties in a panel discussion. Obama joked comfortably with the eccentric founder and executive chairman of Alibaba Group Holding Ltd., which is looking to make
inroads into foreign markets, including the United States. During the discussion on the side-lines of the Asia Pacific Economic Cooperation (APEC) summit in Manila, the U.S. president probed Ma on how he thought government and established businesses could help young entrepreneurs. “Government is simple just reduce the tax, or no tax, for these guys,” Ma responded, to a wave of laughter and
applause from the audience of business executives. “You got a lot of cheers from your fellow CEOs,” Obama quipped in response. Ma’s remarks come as Alibaba works to invest heavily in ventures abroad. Executives have said its push beyond the China market is a top priority, as the company works to maintain its rapid growth even as the prospect of e-commerce saturation at home looms large.
From Berkshire to Zurich, here’s what insurers lost on Tianjin
Three China central bank officials warned on graft
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nsurer Talanx AG’s US$122 million loss from port explosions at Tianjin, one of China’s worst industrial disasters, takes the net hit incurred by insurers across Europe, the U.S., Bermuda and Asia to at least US$2 billion, according to filings by 27 companies. That’s at the lower end of an initial estimate by reinsurance broker Guy Carpenter of US$1.6 billion to US$3.3 billion after 173 people died following the August 12 explosions. It’s the fourth most costly man-made disaster ever for the industry based on current estimates and adjusted for inflation, according to Swiss Re AG’s Economic Research and Consulting unit. The highest costs from Tianjin were suffered by European firms, led by Zurich Insurance Group AG, whose US$275 million loss was partly responsible for the Swiss firm abandoning its proposed takeover of Britain’s RSA Insurance Group Plc. China Reinsurance Group Corp. said its costs would not exceed US$174 million, while Warren Buffett’s Berkshire Hathaway Inc. disclosed the highest loss from a U.S. insurer at US$130 million. Bloomberg News
Alibaba has said some of its larger overseas markets include Brazil and Russia. Obama also praised the relatively unknown Filipina entrepreneur, Aisa Mijeno, a professor of engineering who invented a lamp powered by salt water. He suggested that Ma should invest in the company of his fellow panellist after she said she was looking for funding to mass-produce the lamps.
“I’m just saying,” Obama said, throwing Ma a suggestive look. “Serving as a matchmaker here, a little bit.” Ma smiled in response. He said Alibaba had been putting 0.3 percent of the company’s total revenue for the past six years towards encouraging young people to find solutions to climate change and other environmental issues. Ma added that he thought it was a “fantastic idea” to invest in clean technology, referring to a recent conversation in which Microsoft Corp. co-founder Bill Gates broached the idea. Agreement on climate change is one of the bright spots in Washington’s troubled relationship with Beijing, which has been shaken recently by a row over China’s increasingly assertive posture in the South China Sea. Leaders of the two countries agreed in September to a common vision for a global climate change agreement, including steps to deliver on earlier pledges to slash greenhouse gas emissions. Reuters
Australian minister pushes ‘urgent’ trade talks in Indonesia
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hree Chinese central bank officials were given administrative warnings after investigators found their division had padded salaries and misused official vehicles, the Communist Party’s corruption watchdog said yesterday. The three all work for the People’s Bank of China’s credit reference centre, and included its Communist Party boss Wang Xiaoming, director Cao Ningrong, and party chief of its discipline department, Gao Jun, the watchdog said in a brief statement. “All levels of the People’s Bank of China must take this as a warning,” the watchdog added. Calls to the central bank seeking comment went unanswered. Chinese President Xi Jinping has launched a sweeping crackdown on deep-rooted graft since taking over the party’s leadership in late 2012 and the presidency in 2013. Dozens of senior officials have been investigated or jailed. Graft investigators have fanned out across the country looking for abuses, including in government departments and ministries in Beijing.
ustralia’s trade minister said yesterday it was a “matter of urgency” to revive talks on a trade agreement with Indonesia, during a trip to Jakarta with hundreds of business leaders as ties thaw between the neighbours. “It’s a very important visit from our point of view,” Andrew Robb told reporters in the Indonesian capital, after arriving at the head of 350 businessmen and -women, the biggest delegation Australia has ever sent to Indonesia. “We haven’t had the engagement that we could and should as such close neighbours,” he said, adding that both countries “have been looking past one another” for commercial opportunities in the past 15 to 20 years despite being so close. He said that talks on a trade pact, which stalled after initial discussions several years ago, would be revived as soon as early next year. The pact is aimed at strengthening trade, investment and economic cooperation between the neighbours, according to Australia’s department of trade.
Reuters
AFP