Closing editor: Joanne Kuai
MOP 6.00
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Beijing and Washington to cooperate in fighting theft of trade secrets
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Year IV
Number 927 Wednesday November 25, 2015
Publisher: Paulo A. Azevedo
Business Awards selects 38 finalists Page 6
BoA forecasts divorce of Chinese and American economies
CCAC Accused of ‘White Terror’
Not satisfied with the official explanation. The wife of the Commission Against Corruption staffer who allegedly committed suicide says an internal investigation has got it all wrong. With CCAC personnel living a ‘White Terror’, she claims in a letter to legislators. Pun Fung Cheng says she was told her husband was under investigation for the ‘wrongful transfer of data’. And believed he was being threatened with imprisonment Page
In line with big picture Hong Kong-based company Kingston Financial Group Ltd. The owner of Casa Real Hotel and Grandview Hotel. Gaming revenues for its properties plunged nearly 37 pct y-o-y to HK$239.5 mln (US$29.8 mln) for the six months ended September 30. ‘Sluggish market conditions’ are cited plus the usual suspects
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www.macaubusinessdaily.com
Back to normality A turbulent summer draws to a close for Chinese stocks. One which forced authorities to implement exceptional measures to stop the debacle. China Securities Regulatory Commission has now announced it’s easing control of brokerages’ proprietary accounts
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Dynamic duo
A match made in heaven. Local stored-value card issuer Macau Pass SA and Chinese payment service company Alipay. Acting as the payment gateway for new e-commerce website MacauMarket.com slated to launch next month. Around 30 local companies are to pioneer the sale of goods and services on the e-commerce platform
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Retail
Clinging on The retail sector’s total sales value in the city registered a 1.3 pct increase. Posting MOP14.61 bln for Q3 of the year vis-a-vis the previous three months. Y-o-y, however, value is down 7.7 pct. Luxury product sale values plunged 17.5 pct y-o-y. With motor vehicles and leather goods faring no better
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HSI - Movers November 24
Name
%Day
Lenovo Group Ltd
+3.42
Kunlun Energy Co Ltd
+2.58
Galaxy Entertainment
+1.52
China Merchants Holdi
+1.16
PetroChina Co Ltd
+1.06
Tingyi Cayman Islands
-1.70
New World Developme
-1.87
China Shenhua Energy
-2.17
Link REIT
-2.27
Li & Fung Ltd
-2.44
Source: Bloomberg
I SSN 2226-8294
2015-11-25
2015-11-26
2015-11-27
16˚ 23˚
15˚ 20˚
15˚ 21˚
2 | Business Daily
November 25, 2015
Macau
Suicidal CCAC staffer was under investigation for ‘wrongful transfer of data’ The wife of the former government worker calls for an investigation into the case, saying that CCAC is living a ‘White Terror’ João Santos Filipe and Stephanie Lai
jsfilipe@macaubusinessdaily.com / sw.lai@macaubusinessdaily.com
“According to the hearing reports, the chiefs said to my husband they would not blame him and that there was a lot of appeasement. I suspect these people are hiding facts and giving false statements to keep their jobs”, she wrote. “If this was true, he would have told me and he wouldn’t be facing such pressure and panicking. “I believe that someone in CCAC threatened him with prison or other consequences on the morning of the day he decided to commit suicide”.
‘White Terror’ at CCAC
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ong Lap Meng, the Commission Against Corruption (CCAC) member who purportedly jumped from Dynasty Plaza building to his death on October 15, was under investigation for ‘wrongful transfer of data’, his wife, Pun Fung Cheng, told Business Daily yesterday.
“It is wrongful transfer of data – that the Commission’s data should not be transferred to my own [computer]. It is related to documents of internal training of CCAC staff”, Mr. Iong Lap Meng admitted to his wife on the night of October 9, after confessing that he was under
Sonia Chan sidesteps issue The Secretary for Administration and Justice, Sonia Chan Hoi Fan, opted to ignore a question from legislator Jose Pereira Coutinho on whether there would be an independent investigation into this suicide case. Mr. Coutinho raised the question yesterday about the letter from Pun Fung Chen and
her accusations against the CCAC in the second session of the 2016 Policy Address. The member of the Legislative Assembly then went on to ask her about the corruption situation in Macau. Ms. Chan, however, who was under time constraints, did not mention the issue at all in her answers to the legislators.
a lot of pressure because of a “mistake” committed at work. According to Pun Fung Chen, her husband kept these confidential documents in his personal computer and, as such, the body headed by André Cheong Weng Chon was investigating him. Mr. Iong confessed that he was afraid that the punishment for such a “mistake” would be imprisonment.
CCAC investigation questioned
Yesterday, via a phone interview, Mrs. Pun confirmed to Business Daily that her spouse was under a lot of stress in his workplace just a few days before his death. “On the night of October 9, he suddenly told me he was under a lot of pressure at work. I asked him repeatedly the reasons and he told me he had made a mistake and was under investigation”, she explained.
On October 15, Iong Lap Meng purportedly committed suicide during his working hours at the CCAC building. The case resulted in an internal investigation, which was completed on November 7. However, Mrs. Pun is not happy with the conclusions of the internal investigation and last week sent a letter to the President of the Legislative Assembly (AL), Ho Iat Seng, questioning the proceedings. Pun Fung Chen also called for an extensive investigation into CCAC proceedings regarding her husband’s alleged suicide. Among her complaints about the report, she says the internal enquiry only questioned three persons inside the organisation, two chiefs and Deputy Commissioner Ms. Hoi Lai Fong. She found it suspicious that during the hearings all of the persons listed are said to have told her husband he would not go to jail.
The same letter, which was also sent to the Disciplinary Commission of the CCAC, also mentions the existence of a climate of White Terror inside the official body, purportedly based on the opinions of colleagues of her husband. “After the death of my husband, I talked with many of his colleagues and all of them are very dissatisfied with the management practices from their chiefs and they describe it as if they were working under a White Terror”, she wrote. “There is a lot of pressure to investigate existing cases and to follow all the requirements”, she explained to Business Daily about the meaning of the White Terror expression. Regarding the letter sent to the President of the Legislative Assembly and the accusations of degrading conditions of its workers, CCAC issued a press release confirming it had received the letter and shown their availability to answer the formal questions of Ho Iat Seng.
Sonia Chan: Changes to overtime law for civil servants
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he government is planning to address the law on overtime work next year, according to the Secretary for Administration and Justice, who was replying to questions arising from the 2016 Policy Address at the Legislative Assembly for the second day yesterday. “At this moment, the cap amounts to 300 hours. But in many services the cap is not respected due to the large volume of workload. We need to have a limit to keep the health of our workers safe. We’re going to introduce changes to this next year”, Sonia Chan Hoi Fan said. The question was raised by Legislative Assembly member Zheng Anting, who mentioned cases in which some civil servants are paid for extra working hours while others are not. The Secretary for Administration and Justice also announced that the criteria for allotting public housing to civil servants was going to be reviewed.
Ms. Chan also revealed that the government had recovered 110 public housing units which will be allocated to civil servants. “We are reviewing the criteria that have to be met by the civil servants because at this moment only full-time workers have the right to this public housing”, she said. The Secretary also said she expects that in the future more public housing will be allocated to civil servants using reclaimed and recovered plots of land. Sonia Chan also promised to focus her attention this year on the more important laws that directly affect the lives of the local population. The remaining changes to other laws will be implemented only in 2017. “Our priority is to work on the laws we consider important for the life of the population; the others will be done in 2017. But we have to select well the laws to be changed because we don’t want to overload the Chief Executive”, she said.
Business Daily | 3
November 25, 2015
Macau
Pearl Horizon site could be reclaimed by government Developer Polytec has told the Hong Kong Stock Exchange that it is still awaiting a final decision by the government with regard to the expiring land concession for the high‑end Pearl Horizon residential project Stephanie Lai
sw.lai@macaubusinessdaily.com
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ong Kong-listed developer Kowloon Development Company Ltd has been warned of the risk that the land of its high-end residential project Pearl Horizon could be reclaimed by the Macau Government without compensation if the developer does not get an extension for its land concession, which expires at the end of December.
The project - located on Lote P in Novos Aterros da Areia Preta on the Macau Peninsula - must be completed on or before December 25 this year under the terms of the land concession, the Hong Kong company noted in its announcement filed on Monday night. Kowloon Development Company, a member of the Hong Kong-based developer Polytec Group, owns 73.4 per cent of the listed subsidiary, while
developer Polytec Asset Holdings Ltd. controls the Pearl Horizon project. However, the residential units of Pearl Horizon have yet to be built on the Areia Preta site. The developer was only issued with a construction permit for the project in August, 2014 after spending three years completing an environmental assessment report. In the Monday filing, Kowloon Development blamed the Macau
Macau Pass, Alipay team up as payment gateway Alipay and its local partner Macau Pass are to serve as the payment gateway for new local shopping website MacauMarket.com due to be launched next month
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ocal stored-value card issuer Macau Pass SA and Chinese payment service company Alipay are to act as the payment gateway for new e-commerce website MacauMarket.com, which is due to be launched next month, Business Daily has learned. As required by local financial laws, Alipay can conduct thirdparty payment activities here via a partnership with a local credit institution recognised by the
Monetary Authority of Macau, in this case Macau Pass. Macau Pass is an authorised agent for Alipay for the settlement of transactions consumers make here, according to the card issuer. David Lao, deputy general manager of Macau Pass, told Business Daily that via the partnership with his company, Alipay is accepted as a payment gateway for locallyestablished e-shopping website MacauMarket.com.
Website builder EMall Retail Limited announced in local Chineselanguage newspaper Macao Daily News that around 30 local companies are to be included in the first batch of merchants selling goods or providing services on MacauMarket.com. The partnership with Alipay is part of Macau Pass’s strategy to develop mobile and online payment services alongside its stored-value card issuing business. In December last year, Macau Pass launched a
Government for delay in granting the requisite approvals and permits for developing Pearl Horizon. “We are in a passive position – we will have to take what the government decides over this parcel of land [but] we are now still actively engaged in building the whole project,” the manager of the Hong Kong developer’s local arm, Mr. Chan Sai Tin, told Business Daily when asked if he reckoned the case might possibly go to the courts. Under the new land law effective March 2014 the Macau Government is entitled to reclaim the land of any property development that is not completed or fails to fulfill the conditions stated in the land concession by the stipulated expiry date without compensation to the property owner. Mr. Chan’s company has applied for an extension of the expiry date of five years to December 25, 2020. In the Monday filing, Kowloon Development said that its management would ‘take necessary and appropriate action to protect the interests of Polytec Asset’ in any case involving the Pearl Horizon development. Mr. Chan declined to reveal what his company’s back-up plan was if the government eventually decides not to grant an extension of the land concession. But he said that the developer was waiting for the Macau Government to announce its decision on how to deal with the Pearl Horizon’s expiry of land use on or before December 10. “The Chief Executive has led a cross-department effort to try to help resolve the problems Pearl Horizon is facing,” Mr. Chan told us. “I’m confident that the government can come up with a solution that will eventually help both us and the buyers [who have purchased the uncompleted flats of Pearl Horizon].” Polytec Group said in May that the company had targeted re-launching the presale programme for Pearl Horizon next year. The off-plan sales of the project were previously put on hold when the new laws on property sales activities became effective on June 1, 2013.
new mobile phone application for users with smartphones running on Android systems and a near field communication (NFC) function, enabling them to top up their value, read the balance of the card, and view transaction records. With the launch of MacauMarket. com, Macau Pass is also positioning itself to enable its users to shop on the website using their Macau Pass mobile wallet, Mr. Lao said. This next move is followed by Macau Pass’s announcement over the weekend that over 100 local shops and restaurants installed with Macau Pass terminals can process Alipay Barcode Payment, whereby users can make purchases through barcode or QR code associated with their respective Alipay IDs. This payment service is targeted at the city’s major source of visitors, Mainland Chinese. There are over 450 million Alipay users on the Mainland, Macau Pass said in a statement issued over the weekend. S.L.
4 | Business Daily
November 25, 2015
Macau
Chow Tai Fook net profits plunge 42pct as China slowdown hurts luxury The jeweller attributes the plunge to weakness in the SARs, increased sales of lower-margin gold products and unrealized hedging losses
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how Tai Fook Jewellery Group Ltd., the world’s largest publicly traded jewelry chain, reported first- half profit plunged 42 per cent amid weak demand in Hong Kong and Macau as China’s economic slowdown hurt sales of luxury retailers. Net income fell to HK$1.56 billion (US$201 million) for the six months ended September from HK$2.69 billion a year earlier, the jeweler said in a statement Tuesday. The company warned Nov. 10 its profit will plunge as much as 50 per cent mainly due to weakness in the two cities, increased sales of lower-margin gold products and unrealized hedging losses. Chow Tai Fook and other highend retailers will continue to shut down unprofitable shops in Hong Kong, as the market grapples with
the impact of China’s crackdown on corruption, economic slowdown and stock market volatility, said Michael Cheng, retail and consumer leader for the Asia-Pacific region at PricewaterhouseCoopers LLP. In contrast to the fast-paced expansion plans of retailers during the peak growth period from 2009 to 2012, “they now need to reduce shops to optimize their operations,” Cheng said via telephone before the result announcement. Luk Fook Holdings International Ltd., another Hong Kong-based jewelry chain, also warned this month of a 40 per cent year-on-year slump in profit.
Scaling back
U.K. luxury retailer Burberry Group Plc said earlier this month it’s scaling
back its biggest store in Hong Kong, while Louis Vuitton, part of France’s LVMH Moet Hennessy Louis Vuitton SE, is reviewing eight of its stores in China’s second-tier cities, according to a person familiar with the situation. Chow Tai Fook shares fell 1.2 per cent to HK$5.88 at the close in Hong Kong. The shares have plunged 43 per cent year to date, against the 4.3 per cent decline in the benchmark Hang Seng Index. The company reported sales in the six months ended September fell 4.1 per cent to HK$28.1 billion, while same store sales, referring to outlets open at least a year, slumped 18 per cent in Hong Kong and Macau. Same store sales in mainland China rose 0.1 per cent.
Sasa net profit halved in H1
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ollowing sales decreases in Hong Kong and Macau, cosmetic retailer Sasa International Ltd.’s net profit plummeted 55 per cent year-on-year for the first half of fiscal year ended September 30, according to its filing with the Hong Kong Stock Exchange yesterday. During the six months, the Hong Kong-listed
retailer generated a total of HK$153 million (US$19 million), a sharp decrease of HK$186.8 million compared to the HK$339.8 million it earned for the same period last year. Meanwhile, the company’s total turnover posted a decline of 10.6 per cent yearon-year for the period, down to HK$3.78 billion from HK$4.23 billion one year
ago. In fact, the company saw its sales drop in all of its major markets of Hong Kong, Macau and Mainland China. The retailer’s turnover in the two Special Administrative Regions amounted to HK$3.01 billion for the six months, down 11.1 per cent from HK$3.39 billion for the same period of last year. The
It declared an interim dividend of 8 Hong Kong cents per share and a special dividend of 42 Hong Kong cents per share. Hong Kong, once seen as a shopping paradise for mainland Chinese visitors, has seen retail sales slump as visitor numbers declined. Chow Tai Fook plans to close a few more shops in the city the second half of this year, Chairman Henry Cheng said in a briefing in September. It was seeking a 20 per cent reduction in rent for some of its stores in the city when contracts come up for renewal this year, Managing Director Kent Wong had said in an interview in May. Chow Tai Fook’s retail network expanded to 2,286 points of sales as of end-September, with a net addition of 29 during the period, it said Tuesday.
amount is also contrary to a year-on-year growth of 10.2 per cent that the company posted for last year. ‘This performance was driven by the decrease in average ticket size of Mainland tourists and also the drop in their total number of transactions, which was in line with the overall decrease of 3.4 per cent of Mainland tourist arrivals during the same period,’ the company claimed. According to the company’s filing, its same store sales growth fell 8.5
Bloomberg
per cent year-on-year in the two cities, while that in Mainland China dropped 9.8 per cent year-on-year in local currency. The company’s turnover from the Chinese market declined 8.7 per cent yearon-year to HK$148.9 million in the six months. The segment posted a loss of HK$24.5 million, the retailer indicated. As at the end of September, Sasa had a total of 287 stores in Hong Kong, Macau, Mainland China, Singapore, Malaysia and Taiwan. K.L.
Business Daily | 5
November 25, 2015
Macau
Retail market sees slight improvement from second quarter Both sales value and volume of the sector registered slight increases in the third quarter over the previous one. Compared to the same period of last year, however, the market is still compressing Kam Leong
kamleong@macaubusinessdaily.com
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otal sales value in the city registered a slight increase of 1.3 per cent for the third quarter of the year vis-a-vis the previous three months. However, sales of luxury products and vehicles are still double-digit lower than one year ago. The latest data released by the Statistics and Census Service (DSEC) yesterday reveals that the city’s retail sales value totalled MOP14.61 billion between July and September, marginally higher than MOP14.42 billion in the second quarter of the year. Nevertheless, on a year-on-year comparison, the value represents a drop of 7.7 per cent. The sales value of luxury products, including watches, clocks and jewellery, amounted to MOP3.4 billion for the quarter, plunging 17.5 per cent year-on-year. The sales value of luxury products occupied the largest share of the total, accounting for 23.4 per cent. Compared to the third quarter of 2014, the sales value of motor vehicles posted a sharp decline of 18.2 per cent, totalling MOP761 million, while that of leather goods shrank 21 per cent year-on-year to MOP1.33 billion. The sales value of cosmetics and sanitary articles, however, surged 29.1 per cent year-on-year,
amounting to MOP607 million for the three months. That of adults’ clothing showed a notable increase of 12.1 per cent year-on-year, reaching MOP1.6 billion.
Sales volume
In terms of sales volume, the volume index of retail sales in the local market dropped 5.6 per cent year-on-year to 237.92 for the third quarter. After removing the effect of price changes, the volume of retail sales rose 0.9 per cent quarter-to-quarter.
Sales of watches, clocks and jewellery decreased 10.8 per cent year-onyear, increasing 16.9 per cent quarter-to-quarter. Meanwhile, the sales volume of motor vehicles and leather goods dropped 19.5 per cent and 16.3 per cent year-onyear, respectively. Cumulatively, total retail sales value reached MOP45.3 billion for the first nine months of the year, down 10.4 per cent year-on-year, whilst the sales volume of the sector dropped 7.9 per year-on-year to 246.76.
According to DSEC, 40.4 per cent of the surveyed retailers in the territory have a negative outlook on the retail market for the last quarter of the year, anticipating sales volume will continue to drop from the third quarter. Only some 20.3 per cent expect the volume to go up, while the 39.3 per cent anticipate stable sales. For retail prices, most of retailers, 70.6 per cent of the total, anticipate retail prices will remain flat, while some 7.2 per cent assume there will be an increase.
Bauhaus falls into red in H1
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ong Kong-listed clothing retailer Bauhaus International (Holdings) Ltd. posted a net loss of some HK$26.6 million (US$3.31 million) for the six months ended September 30 from a net profit of HK$20.9 million one year ago, driven by a drop in sales and gross profit. For the six months, the company’s total revenues declined 8 per cent year-on-year to HK$585.4 million, as compared to HK$636.3 million for the
same period last year. In addition, the company’s gross profit decreased by about 11.1 per cent to approximately HK$353.9 million during the period, according to its filing with Hong Kong Stock Exchange on Monday. In terms of region, the retailer generated some HK$427.2 million in its major markets of Hong Kong and Macau during the period, down 7.6 per cent compared to HK$462.3 million one year ago. The company claims the segment’s sales account
for 73 per cent of its total. Profit before tax from the two cities plunged 57.2 per cent to HK$24.1 million for the period. In addition, Bauhaus said it had recorded a negative same-store-sales growth rate of some 7 per cent during the six months in the two Special Administrative Regions. ‘Retail performance in many sectors across the region deteriorated, possibly due to less spending by both inbound tourists and local
Commenting on the performance in the third quarter, 56.7 per cent of the interviewed retailers agreed that their sales volume had decreased quarter-to-quarter. DSEC said the number is down 10.4 percentage points from the second quarter. Meanwhile, some 17.8 per cent of local retailers stated that they saw their sales volume increase during the third quarter compared to the previous one, while the other 25.5 per cent said their sales volume had remained stable.
citizens as a result of the growth slowdown in Mainland China, strong local currency, and volatile finance markets,’ it explained in the filing, Meanwhile, the company’s business in Mainland China registered a slight year-on-year decrease of 1.9 per cent in turnover to HK$132.5 million although same store sales in the market grew some 4 per cent year-on-year. ‘The markets that the Group operates in will remain challenging, owing to such factors as the economic slowdown in Mainland China, appreciation of the US dollar, and lacklustre consumption sentiment,’ the retailer anticipates. K.L.
6 | Business Daily
November 25, 2015
Macau
Kingston Financial gaming revenues plummet 37 pct in MSAR
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nvestment holding company Kingston Financial Group Ltd. saw gaming revenues generated by its businesses in Macau plunge nearly 37 per cent year-on-year to HK$239.5 million (US$29.8 million) for the six months ended September 30, it told Hong Kong Stock Exchange on Monday after trading hours. The Hong Kong-based company owns Casa Real Hotel and Grandview Hotel in the city and runs casino operations in the two properties under the gaming licence of Sociedade de Jogos de Macau, S.A. (SJM).
For the six months, the company’s adjusted EBITA of the gaming segment totalled HK$78.2 million, half its HK$161 million of one year ago. The company claimed that such decreases in the results were due to ‘sluggish market conditions’, indicating the performance of its gaming businesses are ‘in line with the development of the gaming industry in Macau.’ For the same period, the city’s total gaming revenues dropped some 35.85 per cent year-on-year in general, according to data released by the Macau Gaming Inspection
and Co-ordination Bureau (DICJ). As at the end of September, the hotel and casino operator had a total of 59 mass gaming tables, two VIP rooms, 239 slot machines and 134 live baccarat machines in its two casino properties. ‘Live baccarat machines brought additional crowds to the properties, achieving synergy with the slot machine business as well,’ it claimed, without revealing data related to the performance of the segment. Meanwhile, Kingston Financial registered a
decrease of 26 per cent in its hotel revenues to some HK$98.5 million compared to HK$133.5 million during the same period of last year. In addition, adjusted EBITA generated from the sector fell 32.7 per cent year-on-year to HK$62.5 million from HK$92.8 million. The company’s two hotels also saw occupancy decrease for the six months. The average occupancy rate of Casa Real dropped to 83 per cent from 90 per cent one year ago, while that of Grandview declined year-on-year to 72 per cent from 85 per cent.
However, the company perceives that ‘In spite of the slowdown of the tourism industry in Macau, the performance of the Group’s hotel business was satisfactory.’ Although the financial company’s businesses in Macau registered decreases, its total net profit surged 59 per cent year-on-year to HK$923.4 million from HK$579 million for the period, driven by its ‘outstanding performance’ in its financial services segment in Hong Kong.
The 38 finalists for Business Awards revealed The event aspires to be the biggest awards programme recognising individuals and institutions’ contribution to Macau by civil society 2015 BUSINESS AWARDS OF MACAU FINALISTS Corporate Social Responsibility Netcraft Information Technology (Macau) Co. Ltd Sociedade de Jogos de Macau, S.A. Shun Tak Holdings (Macau) Ltd Environmental Performance Hotel Beverly Plaza Yatron Energy Group Kwan On Environmental Engineering Co., Ltd. New Talent Leong Soi Chi, Association Member and Volunteer Cradle of Hope Association Keith Cheung, Talent Acquisition & Human Resources Director Sheraton Macao Hotel Stephen Ng, Workshop & Business Development Manager, SuzoHapp Asia Ltd Olinto Oliveira, Director of Business Development & Events MCI Group Macau Ltd Innovation Central Technology Limited Consulate General of Portugal in Macau and Hong Kong Macau Ticketing Network MOME Media and Marketing SuzoHapp Asia Ltd
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ome 38 finalists have been selected from 150 entries to the 2015 Business Awards. The list was revealed yesterday at a press conference; those recognised and the Excellence winners and Gold winners will be announced during the awards ceremony and Gala Dinner on November 26 in the Grand Lisboa Grand Ballroom. Officiating at the third edition this year, Business Awards Chairman Paulo A. Azevedo revealed that the number of entries stood at around 150, similar to last year, but a 30 per cent increase compared to when the awards were first launched. “The Business Awards have become increasingly recognised by society with a widespread popularity and rising number of participants,” said Mr. Azevedo. “Our aim is not to grow too big too fast but have this thing stable in order to continue being the biggest award recognising either individuals, companies or intuitions’ contribution to Macau by civil society.”
New category
Business Awards also announced a new category - Macau Merits - to be added for the 2016 edition of the awards on top of the existing ten. The new category will only have one
contestant and one winner, mainly an exclusive acknowledgement of an individual or a company or an organisation for its long-lasting contribution to the wellbeing of society and Macau’s development, according to the organiser. Paulo A. Azevedo added that to date they have been receiving support from the government as well as the private sector, but he wishes to partner more local private entities to promote or even host the awards. “We are open to all kinds of possibilities. The government gives their recognition through merits and medals. But for a long time, the people and the companies lacked this recognition from its people, its community, its own civil society.” said Mr. Azevedo. “We welcome academic institutions, other non-profit organisations, and other companies to join hands with us. We are open to ideas, or even to taking a different path in the future.” Some 30 members of the Judging Panel, representing all walks of life, selected the 38 candidates for their performance and achievements in ten different categories. The awards ceremony and Gala Dinner will be held on Thursday.
Leadership China Taiping Insurance (Macau) Co., Ltd. Lawrence Ho, Co-chairman and Chief Executive Officer Melco Crown Entertainment Fr. Luis Sequeira, Vice Director Macau Ricci Institute Non-Profit Organisation International Ladies Club of Macau (ILCM) Good Shepherd Sisters Macau Special Olympics Most Valuable Brand Industrial and Commercial Bank of China (Macau) Limited Mandarin Oriental, Macau Melco Crown Entertainment’s The House of Dancing Water Scientific Games Small and Medium Enterprise (SME) Great Time Limited Greatest Properties Limited Netcraft Information Technology (Macau) Co. Ltd PAL Asia Consult Ltd. PAL Small World Experience Entrepreneur Jeremy Artan de Saint Martin, Managing Director iExcel Consulting José Tang, Managing Director Carmen Group of Companies Wong Tin, Managing Director Wong Chi Kei Foods Company Limited Young Entrepreneur Francisco Ho, Executive Director Ho Chun Kei Enterprise Co Ltd Lucas Lei, General Manager and Founder Onemanband Creation Limited Keith Fong, Founder of Blooom Coffee House, Single Origin, and Communal Table Maggie Chiang, Director and Executive Chef, Maquette and Creative Director, La Magie Wendy Chan, Founder and Clinic Director, PhysioOne Centre
K.L.
Business Daily | 7
November 25, 2015
Gaming
Sheldon Adelson, the billionaire chairman and CEO of Las Vegas Sands, has also had meetings with Georgia officials
MGM Resorts, Las Vegas Sands wager on U.S. expansion to lift fortunes The U.S. casino industry, at roughly US$37 billion a year, has struggled to recover from the financial crisis of 2008 Steve Matthews and Christopher Palmeri
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GM Resorts International expects to find out any day whether its investment in 16 lobbyists to push legalized gambling into Georgia might pay off. MGM Resorts, Las Vegas Sands Corp. and other big U.S. casino companies see Atlanta as one of the biggest potential growth markets in an industry suffering from overcapacity. The operators and their lobbyists have spent the fall meeting with state lawmakers to extol the potential economic benefits -- specifically, how an estimated US$288 million in taxes could shore up Georgia’s Hope scholarships, a merit-based education program funded by a statewide lottery. The committee for the Hope program is expected to report its conclusions by December 1 and, if encouraging, the legislature could send the issue to voters for approval next year. MGM Chairman and Chief Executive Officer Jim Murren, who testified last month at a joint Georgia Senate and House hearing on the Hope fund, said the company could consider building a US$1 billionplus casino in the state. Sheldon Adelson, the billionaire chairman and CEO of Las Vegas Sands, has also had meetings with Georgia officials and is interested, according to his spokesman Ron Reese. Opponents in Georgia are working to counter the bright promises, by pointing to the rising unemployment from closed casinos in the faded gambling hub of Atlantic City, New Jersey.
‘Golden egg’
“It didn’t turn out to be the goose that laid the golden egg,” said Cyndy Hartman, who grew up on New Jersey’s coast and testified this
month before Georgia legislators. “There has been a horrible decline.” An analysis on the Georgia potential for MGM Resorts by industry consultants Marquette Advisors concluded casinos could generate US$2.4 billion in annual revenue and more than 30,000 permanent jobs. “Among the largest urban metro markets in the U.S., Atlanta would be a standout,” said Adam Trivison, analyst with Gabelli & Co. in Rye, New York. Gabelli funds are investors in both MGM Resorts and Las Vegas Sands. Other Wall Street analysts agree. “Atlanta has all the makings to support a top regional gaming property -- population, wealth, propensity to gamble,” said Chad Beynon with Macquarie Bank Ltd. in New York. A referendum could go to Georgia voters next November. The legislature could allow individual localities to
decide, similar to the way the state handled the question of liquor sales on Sunday, said state Representative Ron Stephens of Savannah, who has led the push for gambling.
Changing times
“Times are changing,” and the need to raise money for education is paramount, Stephens said. “The only way to fund Hope scholarships is through gambling.” Atlanta Mayor Kasim Reed is not ready to back the effort, noting the city has 5.5 percent unemployment and is succeeding at luring relocations, including the North American headquarters of Mercedes-Benz. A recent visit to a downtown Detroit casino wasn’t encouraging, he said. “I am really uncomfortable with it,” Reed, a Democrat, said in an interview. “What I see in the casinos is people getting off work from Ford and Chrysler with their ID badges on.” Even so, “I’ve got to remain open and continue to listen.”
No slots
Georgia is seen by potential gamblingindustry investors as the next best alternative to Florida Ilir Hysa, economist, Moody’s Analytics
Governor Nathan Deal, a Republican, opposed a gambling proposal that would have collected a 12 percent tax for education, though he told the Atlanta Journal-Constitution that 24 percent or more “will be a totally different proposition.” The U.S. casino industry, at roughly US$37 billion a year, has struggled to recover from the financial crisis of 2008, which prompted many consumers to tighten their discretionary spending. Young people aren’t playing slot machines like their parents did and betting per trip has only recently resumed it rise. Mississippi casino revenue fell 26 percent to US$247 million in 2014
from 2007, before rising to US$250 million in fiscal 2015. Gambling revenue at Harrah’s in New Orleans dropped to US$340 million last year from US$367 million in 2009. Florida, which already has Indian casinos, has rejected expansion. “Georgia is seen by potential gambling-industry investors as the next best alternative to Florida,” said Ilir Hysa, an economist with Moody’s Analytics in West Chester, Pennsylvania. “With baby boomers retiring and moving south, a larger gambling industry in Georgia may also attract Florida seniors to visit.”
More choices
Sluggish national growth hasn’t stopped states from expanding their gambling options as a way of raising tax revenue. New York, Ohio, Massachusetts and Illinois are just some of the states that have either legalized casino gambling or sharply increased the availability of slot machines in recent years. New casinos in Pennsylvania and New York have taken business from Atlantic City, which saw four of its 12 casinos close last year. Hartman, a retired flight attendant who has lived in Georgia for 29 years, said Atlantic City was a “premiere resort, safe and beautiful” in her childhood. “It is run down now. I don’t want to see that happen here.” Hysa, the economist, notes that metro Atlanta not only boasts a growing population, it’s home to the world’s busiest airport and is at least 20 times larger than Atlantic City. “Atlanta will likely be the first to experiment and benefit from casino gambling, but other parts of the state may benefit as well,” Hysa said. Bloomberg News
8 | Business Daily
November 25, 2015
Greater China
Authorities ease control of brokers’ proprietary trading The net long rule was instituted as the government tried to stabilize a stock market that plunged in June after a boom that began in late 2014
This is no doubt positive to brokerages as the move will help them better adjust portfolios and improve returns Chen Xingyu, analyst, Phillip Securities Research
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hina has cancelled a rule requiring brokerages to hold daily net long positions in their proprietary trading accounts as the nation’s stock market stabilizes following its summer slump, according to people with knowledge of the matter. The China Securities Regulatory Commission has issued a notice saying it’s easing control over the brokerages’ proprietary accounts amid a gradual stabilization in equities, according to the people, who asked not to be
identified as the circular hasn’t been made public. The CSRC will allow the market to resume self-regulation and it will resume routine monitoring of securities institutions, the people cited the notice as saying. The net long rule was instituted as the government tried to stabilize a stock market that plunged in June after a boom that began in late 2014. With the Shanghai Composite Index now having gained more than 20 percent from its August low, regulators are withdrawing from an unprecedented government
campaign to prop up shares. The CSRC lifted a five-month freeze on initial public offering last week. The regulator didn’t immediately reply to questions faxed by Bloomberg News on the rule change, which was reported by the Wall Street Journal earlier. Shares of brokerages including Citic Securities Co., the nation’s largest, reversed morning losses in Shanghai. Citic closed 1 percent higher after dropping 2 percent earlier. Everbright Securities Co. gained 3.9 percent.
“This is no doubt positive to brokerages as the move will help them better adjust portfolios and improve returns,” Chen Xingyu, a Shanghai-based analyst at Phillip Securities Research, said by phone. Proprietary trading has increased over the past years to between 40 percent and 50 percent of brokerages’ revenues, he added. Equity and equity derivatives positions within Citic Securities’s proprietary trading accounted for 56 percent of the Beijing-based firm’s net capital as of June 30, down from 91 percent at the beginning of the year, according to its semi-annual report. Among measures to limit the impact of short selling, which regulators blamed for the rout, a group of 21 domestic brokerages pledged in July not to reduce any proprietary investments in the equity market as long as the Shanghai Composite stayed below 4,500. The index closed at 3,616.11 on Tuesday. In August, brokerages including Citic Securities temporarily stopped short selling by clients after the Shanghai and Shenzhen exchanges introduced a measure requiring investors who borrow shares to wait a day to repay the loans. Bloomberg News
Beijing to take tougher stance against trade secret theft Xi and U.S. President Obama agreed in September that neither government would knowingly support cyber theft of corporate secrets to support domestic businesses James Pomfret
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he United States Commerce Secretary said China would offer better legal protection to U.S. firms that suffer theft of trade secrets after annual trade talks that yielded scant progress on other topics like a proposed investment treaty. Few breakthroughs had been expected ahead of the Joint Commission on Commerce and Trade (JCCT) talks in the southern Chinese city of Guangzhou, amid tensions over cyber hacking; a topic that had been addressed by both sides in September during President Xi Jinping’s visit to the U.S. The U.S., led by Commerce Secretary Penny Pritzker and Trade Secretary Michael Froman, however, said after a weekend of talks that China clarified its intent to do more to help firms facing the theft of trade secrets. “We got significant outcomes on trade secrets which is a really big issue,” Pritzker told Reuters in an interview. “This is where China clarified its intent to make
preliminary injunctions and meaningful remedies and other judicial protections more easily accessible to those who are confronting trade secret theft ... It’s a big deal.” The issue has become a growing problem for American companies. Victims have included General Motors, Ford, DuPont, Dow Chemical, Motorola, Boeing
and Cargill as well as lesserknown firms. Xi and U.S. President Obama agreed in September that neither government would knowingly support cyber theft of corporate secrets to support domestic businesses, but U.S. experts argue Chinese hackers continue to target U.S. firms. U.S. trade representative
Penny Pritzker, U.S. Commerce Secretary
Michael Froman also told Reuters that he expected some U.S. genetically modified crop strains, including GMO soybeans, could be approved by China by year end, following protracted reviews. “The approval process has been stuck for a long time, we’re encouraging China to move them out,” Froman told Reuters.
While Beijing has pledged to loosen its manufacturing and service sectors, regulators issued a negative list of prohibited and restricted industries for foreign investors in March. U.S. business lobbies say China’s negative list is too broad and must be cut back. Thorny negotiations over the negative list, part of a proposed new investment pact called the bilateral investment treaty (BIT), have weighed on commercial ties. Froman, however, said there had been no concrete progress on this front during the current talks. “There’s still significant work to be done for the negative list.” The Chinese delegation at the talks was led by vice premier Wang Yang. Wang spoke earlier of differences between the two sides and of the need “to turn the political will and joint expectation into concrete outcomes of co-operation.” Reuters
Business Daily | 9
November 25, 2015
Greater China
S&P warns of possible junk status for Noble Group debt The rating agency said it would make a decision on a possible downgrade from its current rating of BBB- in three months Umesh Desai
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tandard and Poor’s warned yesterday it may cut Noble Group’s credit ratings, which would take the ratings to junk status, saying it was worried about the commodities trader’s weakened liquidity and leverage positions. It became the second rating agency to flag a possible drop to junk grade for Noble’s corporate debt after Moody’s Investors’ did so earlier this month. The company’s bonds are currently trading at levels considered junk, quoted in the market in price terms rather than in spread terms usually used for investment grade debt. Its perpetual bond is trading at around 57 cents on the dollar, down by five points this month, after being issued at par in June last year. Noble, already under pressure in a weak commodities market, came under a spotlight in February when blogger Iceberg Research alleged the company was inflating its assets by billions of dollars by not fairly representing the value of its commodity contracts. The company has rejected the claims. Standard & Poor’s highlighted the decline in Noble’s liquid inventory and
Premier says economy on track to hit GDP growth target credit lines during the third quarter, linking the deterioration to the fall in commodities prices. But it added that management’s commitment to raise at least $500 million in new capital could help restore the company’s liquidity position and financial leverage, and would be key to maintaining its current rating.
The rating agency said it would make a decision on a possible downgrade from its current rating of BBB- in three months. Cuts to junk category are significant because some investors are barred from buying bonds that are not rated investment grade. Reuters
Sichuan insures buildings against earthquakes Quake-prone Sichuan Province in southwest China on Monday started a trial plan to insure buildings against earthquakes and related hazards. The insurance will cover damage caused by earthquakes of 5-magnitude and higher as well as secondary disasters, such as landslides, cave-ins, fires or explosions that occur within 72 hours of an earthquake. The insurance plan is being piloted in Sichuan’s Leshan city, where a rural building can be insured for 20,000 yuan (US$3,130) at the cost of 76 yuan per year and urban buildings for 50,000 yuan at 60 yuan per year.
Budget carrier Spring Airlines plans North Korea route
Taiwan reports lowest unemployment in 15 years
North Korean leader Kim Jong Un has stepped up investment in tourism infrastructure Fang Yan and James Pearson
The flights will depart from Pudong International Airport in Shanghai
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hina’s Spring Airlines Co plans to fly to the North Korean capital Pyongyang next year, making it the third airline to run scheduled flights to the isolated country. The budget carrier hopes to launch four fights a week from its hub, Shanghai’s Pudong airport, in early February 2016, although the proposal is pending approval from both the North Korean authorities and the Civil Aviation Administration of China (CAAC), a Spring Airlines spokesman said.
Chinese Premier Li Keqiang said yesterday China was on track to reach its economic growth target of about 7 percent this year, and the economy was going through adjustments to maintain reasonable medium- to long-term growth. Li made the comments during a summit in the city of Suzhou with leaders of 16 Central and Eastern European countries. China was studying the possibility of establishing of a multilateral financial institution with Central and Eastern European countries, as well as a joint fund denominated in Chinese yuan, Li said in a speech.
China is North Korea’s biggest trading partner and diplomatic ally. North Korea’s state airline, Air Koryo, runs regular flights between Pyongyang and Beijing and occasionally operates seasonal routes to Shanghai, Kuala Lumpur and Vladivostok. Air China Ltd operates two flights a week to Pyongyang, three in the summer. “Air Koryo had launched some charter flights to North Korea previously, targeting leisure travellers and demand seemed to be pretty strong,” the Spring Airlines spokesman
said yesterday. He declined to be named as per company policy. While North Korea does not publish tourist numbers, travel agencies estimate as many as 6,000 Westerners visit North Korea every year, compared to just 700 a decade ago. The vast majority are from China, which shares borders with North Korea: the latest available Chinese data shows that 237,000 tourists went to North Korea in 2012, nearly double 2010 levels. The spokesman for Shanghaibased Spring Airlines said he could not comment on whether the North Korean government had introduced any restrictions on the nationality or origin of tourists on the flights. North Korean leader Kim Jong Un, who took power in 2011 when his father Kim Jong Il died, has stepped up investment in tourism infrastructure, including the construction of a new airport terminal and a ski resort on the east coast. Last year, North Korea reopened some of its domestic scheduled air routes for the first time in years. Reuters
Taiwan’s unemployment rate stood at 3.9 percent in October, the lowest during this period in 15 years, the island’ s statistics agency said. The unemployment rate was 0.01 percentage points higher than the previous month but 0.05 percentage points lower year on year, the agency said in a press release. The number of total unemployed persons reached 455,000 in October, compared with 11.68 million employed. However, the island’s economic department announced a sluggish industrial production index in October on the same day. The index shrunk by 6.15 percent year on year for the sixth consecutive month.
Apple to launch pay system on Mainland in February Apple Inc plans to launch its mobile payment system Apple Pay in China by early February, the Wall Street Journal reported. The iPhone maker has struck deals recently with China’s big four state-run banks, the newspaper reported late Monday, citing people familiar with the discussions. When launched, Apple Pay will mainly compete with Alipay, the online payment platform run by Alibaba Holding Group Ltd affiliate Ant Financial, and UnionPay Co, a state-controlled consortium that has a monopoly on all yuan payment cards issued and used in the country.
10 | Business Daily
November 25, 2015
Greater China
BoA announces the ‘great divorce’ between the world’s two largest economies The bank has developed a monetary conditions index for China, which tracks the real effective exchange rate and real interest rates, and concludes that the policy has become too tight Luke Kawa
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on’t sleep on the prospect of more currency depreciation from the People’s Bank of China, warns Bank of America Merrill Lynch, calling for a “great divorce” between the U.S. and the world’s second-largest economy in the coming year. David Woo, head of global rates and currencies research, laid out the case for the team’s favourite trade of 2016—buy USDCNH six-month forwards—in his preview for the year ahead: “On the eve of the December FOMC meeting, we think the question is not whether the U.S. economy can live with higher interest rates and a higher U.S. dollar. The question is, given the semi USD/RMB peg and China’s increasing open capital account (which come at the expense of China’s monetary independence), whether China can live with higher U.S. interest rates and a higher U.S. dollar. We are sceptical. This why we think the USD/RMB peg, a marriage of convenience that has been the anchor for the global growth model for the better part of the last 15 years, is headed for a divorce, and we think the RMB devaluation on August 11 was a first small step in this direction.” The strategist doesn’t think the motive for depreciation is to put Chinese exporters in a position to seize a larger share of global demand by improving their competitiveness. Rather, this is all about allowing the People’s Bank of China enough room to enact easier monetary policy in the face of an economy whose growth is moderating.
We think the USD/ RMB peg, a marriage of convenience that has been the anchor for the global growth model for the better part of the last 15 years, is headed for a divorce, and we think the RMB devaluation on August 11 was a first small step in this direction David Woo, Bank of America Merrill Lynch
“We believe the RMB will weaken further because, given the increased openness of China’s capital account, Beijing will not be able to lower interest rates and defend the RMB at the same time,” wrote Woo, reiterating his long-standing call.
Bank of America developed a monetary conditions index for China, which tracks the real effective exchange rate and real interest rates, and concludes that the policy has become too tight: “We forecast USD/CNY to rise to 7.0, which would represent 9 percent depreciation from the current level, compared with 3 percent depreciation implied by the forwards right now,” wrote Woo. “We could see renewed decline of the RMB as early as the first quarter, as the combination of the inclusion of the RMB in the SDR and a December Fed hike (both of which are our central scenario) could turn out to be a perfect storm for the RMB.” The surprise depreciation in August was an attempt to reduce the extent to which the People’s Bank of China was forced to intervene in currency markets to prop up the value of the currency—a process which drained domestic liquidity. However, the market panic that ensued exacerbated the flow of funds out of the country, as investors and companies began to worry about the potential for subsequent devaluations that would erode the value of their yuan-denominated assets and raise the cost of servicing U.S. dollardenominated debt. Woo acknowledges that the consensus view on Wall Street has shifted away from the notion that another large-scale devaluation is imminent and towards the idea that the People’s Bank of China was “one-anddone,” in part because of the magnitude of the reaction to August’s move.
Barclays, for instance, recently pushed back its call for further declines in the yuan. “We acknowledge the strong resolve of the authorities to deter speculation and to maintain currency stability in the near term,” wrote Jose Wynne, head of FX research. Like Woo, however, Barclays’ strategists recommend being long USDCNH forwards to capitalize on any additional weakness in the Chinese currency. The strategist believes once China’s quest to have its currency included in the International Monetary Fund’s special drawing rights basket has concluded—whether it ends in success or failure—the authorities in Beijing will lose their desire to backstop the yuan. This looming Chinese devaluation will be driving price action across rates and foreign exchange markets in 2016, according to Bank of America: As such, Woo is also high on a trade that’s closely linked to Bank of America’s top idea. The second trade on that list is a long position in 30-year Treasury Inflation-Protected Securities, as the strategist believes the Federal Reserve’s terminal rate— the ceiling for how high its policy rate will go—will be dragged down by the decline in China’s currency. “Further monetary easing by Beijing resulting in a shallower Fed cycle would go a long way in convincing investors that the Fed will likely keep real interest rates much lower than in prior cycles,” explained Woo. Bloomberg News
Business Daily | 11
November 25, 2015
Asia
Zombie companies in South Korea spur restructuring push The financial regulator is asking creditor banks to talk with owners of the conglomerates, not just executives in individual businesses, to prevent delays in restructuring Jiyeun Lee
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olicy makers in Seoul are accelerating efforts to restructure debt-laden and unprofitable companies before an anticipated rise in U.S. interest rates and any further slowdown in China reverberates in South Korea. Falling exports and huge losses among some of Korea’s corporate giants have injected urgency into efforts to sell poorly performing assets and raise competitiveness. Overseas shipments have dropped every month this year, with notable weakness in sales to China. Government ministries, financial regulators and state-run banks have established a committee to oversee corporate restructuring while a review of credit ratings continues for large companies that are at risk of collapse. The government this month identified steel, shipping, shipbuilding, construction and petrochemicals as sectors suffering from oversupply and excessive competition. “Back when the economy was roaring, fragile companies were able to survive if they endured just a couple years until the cycle turned for the better,” said Lee Myong Hwal, a research fellow for the Korea Institute of Finance in Seoul. “That no longer works in a low-growth era. With looming risks from China and the U.S., we may see companies that survived on debt having serious problems.”
Debt load
One of the biggest concerns is socalled “marginal” or “zombie” companies, usually defined in Korea as businesses that haven’t been able to make payments on interest from operating profit for three years. A prolonged period of low interest rates has led to an increase in marginal companies and there is an “urgent” need for restructuring, Bank of Korea Governor Lee Ju Yeol said this month. Financial Services Commission Chairman Yim Jong Yong has warned that unless the problems at these companies are addressed, they will become a burden to the economy. The number of marginal companies jumped to 3,295 last year, from 2,698 in 2009, according to the central bank. They account for 15 percent of businesses with more than 10 billion won (US$8.6 million) of assets. Among Korea’s 500 biggest companies by sales, 85 were unable to pay interest with operating profits last year, according to CEOSCORE, a local research company analysing corporate data. The financial regulator is asking creditor banks to talk with owners of the conglomerates, not just executives at individual business, to prevent delays in restructuring, the Seoul Economic Daily reported Tuesday.
Strong points
Overall, the South Korean economy remains relatively strong and growth is expected to improve next year and remain comfortably higher than the U.S., Germany and Japan. If the current recovery momentum continues, gross domestic product is likely to expand by 3 percent in
If the current recovery momentum continues, gross domestic product is likely to expand by 3 percent in 2016, Finance Minister Choi Kyung Hwan said on November 20
Korea’s economy may deteriorate further from here so companies need to prepare pre-emptively before it’s too late Ryu Jae Hun, director, Financial Services Commission
2016, Finance Minister Choi Kyung Hwan said on November 20. Some companies are moving swiftly to address problems and to concentrate on their traditional strengths. Posco in July pledged to “aggressively” leave non-core businesses to focus on its steel operations after its
earnings suffered as oversupply from Chinese competitors pushed down world prices. Moody’s Investors Service said last month the outlook for Posco’s Baa2 debt rating remained stable. The Financial Services Commission has noted that companies in the steel industry are aware of oversupply problems and said the government will keep working with them to streamline investments.
Shipbuilder losses
South Korea is home to the world’s three biggest shipbuilders and quarterly losses at the trio shone the spotlight on companies with problems. Daewoo Shipbuilding & Marine Engineering Co., which plans to sell non-core assets and shed workers, will receive 4.2 trillion won (US$3.6 billion) from its creditor banks. Overseas sales of ships, which accounted for about 7 percent of the nation’s exports in 2015, fell by 5.3 percent in the 10 months through October from a year earlier, data from the trade ministry show.
South Korea will finish its creditrating review of major companies within the year to ensure restructuring takes place, Choi said on November 19.
Expanded role
The government has also expanded the role of Uamco Ltd., a buyer of bad debt, so that it can create a fund and purchase ailing companies. Uamco will find its first target this month. The government emphasizes that companies and creditor banks should enter into “voluntary restructuring,” while the it offers broad guidelines to facilitate the process. “Korea’s economy may deteriorate further from here so companies need to prepare pre-emptively before it’s too late,” said Ryu Jae Hun, a director for the Financial Services Commission. “Creditor banks tend to want to keep companies alive so that losses don’t mount on the banks’ books. This is why the government is pushing them to act, voluntarily.” Bloomberg News
12 | Business Daily
November 25, 2015
Asia
Indian oil imports from AsiaPac spike in October Malaysian oil supplies to India last month were the highest in six months Nidhi Verma and Jacob Gronholt-Pedersen
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ndia's crude oil imports from the Asia-Pacific region spiked last month as its refiners looked beyond their traditional suppliers for cheaper purchases amid a global supply glut.
Crude imports from points east of India, mainly Malaysia and Australia, surged to 187,000 barrels per day (bpd) in October, the highest since April 2014, according to ship tracking data obtained
from sources and compiled by Thomson Reuters Oil Research & Forecasts. That was more than double the volume imported from Asia-Pacific in September and up some 70 percent from a year ago, the data showed. The surge in shipments were a boost to Malaysia, Southeast Asia's second-biggest oil producer, and Australia, where some refineries have been shut. Malaysia in particular has been looking for stable outlets to bolster oil revenues and cushion the impact of falling global crude prices, reducing spot prices to attract buyers and offering grades to refiners further away such as in India. "Malaysia has reduced the premium (to the Brent benchmark) it charges, so these grades have become attractive. Also, freight cost from Malaysia is less compared to Nigeria, that makes the Malaysian grade cheaper," said a senior
executive at Bharat Petroleum Corp. Malaysian oil supplies to India last month were the highest in six months, the data showed. Refiners in India normally buy Malaysian oil through term deals but BPCL recently procured barrels through spot tenders. Shell supplied Malaysian Kikeh and Miri grades to BPCL in October under a deal obtained through a spot tender. Last month, the Indian refiner for the first time also imported the Russian Sokol grade from Far East Russia, a high-quality crude that usually goes to refiners in nearby South Korea and Japan. Other spot values for Asia-Pacific crude loading in September fell to multiyear lows, as refinery margins weakened amid slowing regional demand and a buildup of product stocks, further boosting the shipments from East Asia.
Thai exports data confirm trade engine sputtering Shipments to Europe dropped 12.3 percent and those to the United States dipped 1.4 percent Pairat Temphairojana and Orathai Sriring
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hailand’s exports fell for a 10th straight month in October and were worse than expected, while imports slumped again, showing the trade-dependent economy is still struggling to get back on track after more than a year under military rule. Although a coup in May 2014 ended months of political unrest, Southeast Asia’s second-largest economy has yet to get back on a firm growth track, with pivotal exports and domestic consumption persistently sluggish. Exports in October fell 8.11 percent from a year earlier, the Commerce
Ministry said yesterday, worse than the 6.95 percent drop predicted by economists in a Reuters poll and a 5.51 percent decline in September. “The global economy has not recovered yet, commodity prices are falling and exchange rates are volatile,” Commerce Minister Apiradi Tantraporn told a news conference. In January-October, exports slipped 5.3 percent from a year earlier and are expected to contract this year for the third year running. Exports account for about two-thirds of the economy. In October, exports to China fell
3.6 percent while those to Japan dropped 13.9 percent. Shipments to Europe dropped 12.3 percent and those to the United States dipped 1.4 percent. Imports slumped 18.2 percent in October year-on-year after September’s 26.2 percent tumble, and compared with the poll’s projected 16.03 percent decline. October imports of capital goods rose 2.5 percent but raw materials tumbled 21.3 percent and consumer goods slipped 9.1 percent, pointing to continued weakness in domestic demand.
And at a time of slowing demand growth in China, India looks like the "brightest spot" for Asian barrels, said Ehasan Ul-Haq, senior analyst at London-based consultancy KBC Energy Economics. Still, India by far meets the bulk of its oil demand through supplies from Middle East, West Africa and Latin America, with Saudi Arabia regaining its top supplier status in October and Iraq falling back to the second slot. Crude futures have already lost around 60 percent of their value since mid-2014 due to a global oil glut that has sparked price competition among producers from West Africa to East Asia in a fight for global market share. Overall in October India imported nearly 9 percent more crude than a year ago at 3.94 million bpd, according to the shipping data. Reuters
The decline also signals more pain ahead for many exporters as most imported materials are assembled into completed goods and shipped out again. However, imports of auto parts increased 28.7 percent from a year earlier. Thailand is a major regional hub for global auto companies, and exports of cars and parts rose 0.2 percent. An 8 percent slide in the baht currency so far this year has done little to reverse the deterioration in exports. The state planning agency expects Thai exports will contract 5 percent this year, the biggest fall since 2009, before rising 3 percent in 2016. As exports remain weak, the military government is focusing on driving investment in a bid to lift the economy, which grew just 0.9 percent last year, the weakest since flood-hit 2011. The planning agency expects economic growth of 2.9 percent this year and 3.0-4.0 percent next year. After two surprise interest rate cuts in March and April, the Bank of Thailand has left its policy rate steady at 1.50 percent, near the record low of 1.25 percent. It next reviews policy on December 16, and most economists expect no change for now. 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 25, 2015
Asia
Despite euphoria, Asian community could face serious obstacles
Terror weighing on Australian consumer confidence
According to a recent survey, the economic community has been achieved by 92 percent but for the political and security community, it is only 12 percent Tao Jun, Ky Nam
D
espite the optimism and euphoria expressed by leaders of the Association of Southeast Asian Nations (ASEAN) during the recent ASEAN summit in Kuala Lumpur, the establishment of the ASEAN Economic Community (AEC) by year-end would be facing several obstacles, according to a respected Vietnamese expert. “As assessed by the ASEAN Secretariat, the preparation of policies fully fulfilling the commitment to the integration of the governments is considered sufficient. However, enterprises of the less developed countries are not really well prepared for the integration,” Tran Dinh Lam, Director of the Centre for Vietnamese and Southeast Asian Studies in Vietnam’s Ho Chi Minh City, told Xinhua in recent interview.
Due to different origin, historical context and development level of each country when they joined the ASEAN, the establishment of the AEC may face a number of obstacles Tran Dinh Lam, Director, Centre for Vietnamese and Southeast Asian Studies
Lam said that a research conducted by the Institute of Southeast Asian Studies in Singapore on the awareness of the Vietnamese enterprises about the AEC, 63 percent of them think that the AEC will have minor effects on their business. A survey made by Vietnam’s Hanoi Young Entrepreneurs Association also showed that 80 percent of enterprises surveyed said that they are “very indifferent to and not interested in” the AEC integration, and only 20 percent, mostly large-scale enterprises, expressed interest. “Due to different origin, historical context and development level of each country when they joined the ASEAN, the establishment of the AEC may face a number of obstacles,” Lam said. Lam cited differences in religion, culture, geography, levels of economic development of the member countries, the imbalance within each country, and the lack of consistency in the evaluation of the South China Sea disputes as among the barriers to the creation of a region-wide economic integration. According to a recent survey by ASEAN, the economic community has been achieved by 92 percent, for the socio-cultural community, it is 82 percent but for the political and security community, it is only 12 percent. “This indicates that the biggest obstacle for the development of the AEC are political and security issues,” Lam said. To overcome this obstacle requires the solidarity of the ASEAN community in finding lasting solutions to political and security issues, especially on current maritime row in the South China Sea, Lam said. According to Lam, the establishment of the AEC will bring enormous economic benefits
to 10 ASEAN member countries, but the least developed countries in the community will face more challenges because their weak internal resources will make it difficult for them to compete with more developed members which have more experience in controlling quality of goods and services, in attracting investments and in organizing efficient business practices. In addition, the poorly-trained workers in the least-developed ASEAN countries would result in low productivity, Lam said, adding that the small and medium enterprises (SMEs) of these countries do not care much about the AEC. Because this new game requires strict compliance by all ASEAN members without regard to the levels development of each member, there is the tendency for the weaker countries to be at the mercy of the stronger members, the Vietnamese expert said. Lam recommended that the administrative apparatus governing ASEAN countries should be specialized and managed by well-trained and competitively-selected technocrats. According to the Vietnamese scholar, China’s Belt and Road Initiative can make contributions to the ASEAN’s common prosperity. “This extremely ambitious initiative of China to connect Asia, Europe and Africa will create an economic zone stretching over one third of the earth’s perimeter with 4.4 billion people,” Lam said. Lam stressed that the establishment the ASEAN Community in general and the AEC in particular will be significant milestones in the regional grouping with a combined population of 625 million and GDP of about US$2.7 trillion. Xinhua
Terrorism fears and concerns of personal finances seem to be weighing on Australia’s consumer confidence, which fell for the second successive week. The latest ANZ-Roy Morgan weekly consumer confidence index is down 1.2 percent for the week to November 22, extending the 0.6 percent dip of the previous week. The Paris terror attacks, community fears of terrorism and the outlook of future finances are likely to be weighing on the index, ANZ economists noted. However Australian consumer confidence remains elevated and above the long term average.
Vietnam’s HCM City sees higher CPI Vietnam’s Ho Chi Minh City is estimated to post a 0.25-percent increase in its consumer price index (CPI) in the first 11 months of this year against the same period last month, the municipal authorities said on its website yesterday. In November alone, the city’s CPI rose 0.1 percent against October, but dropped 0.45 percent against November 2014. Among 11 groups of goods and services used to calculate CPI, seven have so far this month seen price hikes against last month. The prices of household appliances increased most.
South Korea household credit up South Korean household credit grew by 3.0 percent during the July-September period, the same as in the previous quarter, when the growth rate hit the highest rate in four and a half years, central bank data showed yesterday. Household credit - borrowings from financial firms and purchases on credit - rose to an outstanding 1,166.04 trillion won (US$1.01 trillion) at the end of September from 1,131.54 trillion won at the end of June, the Bank of Korea data showed. It was the fastest rate of growth seen since a 3.3 percent gain set in the fourth quarter of 2010.
India’s Lanco aims to raise up to US$1 bln Lanco Infratech Ltd is looking to raise as much as US$1 billion over the next 18 months through a stake sale and a listing of its power assets as it seeks to pare back a heavy debt load, its chief financial officer said. The news comes as the independent power producer swung back to profit in the June-September quarter, sending its shares surging by a fifth in afternoon trade. Lanco has some Us$5.3 billion in debt and has been losing money in recent years.
ADB supports Bangladesh’s education reform
ASEAN countries leaders (L-R) Philippines President Benigno Aquino III, Singapore Prime Minister Lee Hsien Loong, Thailand Prime Minister Prayut Chan-o-cha, Vietnam Prime Minister Nguyen Tan Dung, Malaysia Prime Minister Najib Razak, Laos Prime Minister Thongsing Thammavong, Brunei Sultan Hassanal Bolkiah, Cambodia Prime Minister Hun Sen, Indonesia President Joko Widodo, Myanmar President Thein Sein during the Signing Ceremony as part of the 27th ASEAN Summit in Kuala Lumpur
The Asian Development Bank (ADB) and the Bangladeshi government have signed a loan agreement for US$185 million dollars for improving the secondary education system and building a foundation for developing a skilled labour force. The assistance is the second tranche of the US$500 million Secondary Education Sector Investment Program (SESIP) approved by the ADB in 2013. The SESIP, scheduled to be completed in 2023, is supporting the government of Bangladesh’s 10-year secondary education reform plan.
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November 25, 2015
International Fed’s Yellen argues for interest rate caution Federal Reserve Chair Janet Yellen argued for a cautious approach to the pace of interest rises in an unusual exchange with U.S. consumer advocate Ralph Nader. In a letter to Nader, the Fed chair repeated recent statements that the central bank should only gradually raise interest rates. “An overly aggressive increase in rates ... would at undercut the economic expansion, necessitating a lasting return to low interest rates,” Yellen said in the letter. Nader published an open letter to Yellen that asked her to consider the “humble savers” who were “frustrated by the Fed’s low rates”.
Canada to tell world it’s serious about climate change, says PM Although the Conservatives had pledged to cut greenhouse gas emissions to 30 percent below 2005 levels by 2030, government figures show rising emissions mean the goal is out of reach David Ljunggren
Italy approves privatisation of 40 pct of rail operator The Italian government has approved the privatisation of up to 40 percent of the national rail operator, the Ferrovie dello Stato said on its website yesterday. A government statement published on the Ferrovie dello Stato’s website said the Council of Ministers had approved on Monday the company’s privatisation, but did not give a date for the operation. The government has previously indicated it plans to proceed with the sale of the stake in the railway in 2016, while the finance ministry recently said it could take place in the second half of next year.
Colombia to reform state-owned businesses Colombia will create a holding company of state-owned businesses in a bid to increase transparency and as a step toward membership in the Organization for Economic Cooperation and Development (OECD), President Juan Manuel Santos said yesterday. As the first phase of the plan, cabinet ministers will cease to serve on the boards of state-owned oil company Ecopetrol and electricity companies Isagen and ISA, three of 111 businesses which belong to the state. “Eventually all state companies will enter the holding, which will separate from the finance ministry and be autonomous,” Santos said in a speech.
U.S. politicians slam tax-avoiding Pfizer-Allergan deal Politicians condemned Pfizer Inc’s deal with Allergan Plc as a tax dodge on Monday, bringing another round of hand-wringing in Washington over the corporate tax code, though legislative action before 2017 is unlikely. Democrats heaped the most criticism on the New York-based drug maker, with Hillary Clinton accusing Pfizer of using legal loopholes to avoid its “fair share” of taxes in a deal that she said “will leave U.S. taxpayers holding the bag.” The front-runner for the Democratic presidential nomination in the November 2016 election said she will propose steps to prevent more inversions, but she did not provide details.
Canadian Prime Minister Justin Trudeau
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anada will tell a green summit next week that it is finally ready to tackle climate change, Prime Minister Justin Trudeau said after a meeting with the country’s provinces to work out a national strategy. Trudeau’s Liberals won an election last month promising radical change on the environment from the previous Conservative administration, which was widely criticized for not doing enough to combat global warming during its near decade in power. Trudeau, who will attend a United Nations environmental summit in Paris next week, says Canada must curb its emissions of greenhouse gases. “In Paris a united Canada will demonstrate that we are serious about
climate change,” Trudeau told a latenight news conference after meeting with premiers of the 10 provinces and three territories. Alberta, home to most of Canada’s oil sands, said on Sunday in a groundbreaking move that it would implement an economy-wide tax on carbon emissions in 2017. Trudeau and the provinces hope their united approach and Alberta’s move will help dispel some of the international suspicion about Canada and climate change. At previous U.N. summits the Conservative government sometimes found itself openly at odds with activist groups and even some provinces. Those days were over, said Trudeau.
German growth buoyed by domestic demand Private consumption rose 0.6 percent in the third quarter Michael Nienaber
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rise in German private consumption and higher state spending on refugees more than compensated for weakness in foreign trade, helping Europe’s biggest economy to grow at a modest, albeit slower pace in the third quarter, data showed yesterday. Record-high employment, rising wages and nearly stable prices are boosting household spending in Germany while cheaper gasoline is freeing up some cash for other purchases. At the same time, record numbers of people, fleeing war in the Middle East, are arriving in Germany. The federal government and states are spending billions of euros (dollars) on housing the new arrivals, integrating them and
finding them jobs. The Federal Statistics Office confirmed a flash estimate showing seasonally adjusted gross domestic product (GDP) grew by 0.3 percent on the quarter between July and September, after expanding 0.4 percent between April and June. Private consumption rose 0.6 percent in the third quarter, while state spending jumped 1.3 percent - the biggest rise since early 2009. Overall, domestic demand added 0.7 percentage points to GDP. “Of course, the refugee costs are playing a role here. These are the first effects on state spending,” an official at the Statistics Office said. Higher state spending on refugees will help boost growth in the coming
“We need to show a renewed image of Canada to the world,” said Quebec premier Philippe Couillard. Some premiers are nervous about the idea. Brad Wall of Saskatchewan says Canada must find a balance between the environment and protecting employment. Low crude prices have triggered major job losses among energy industry workers. “As we prepare for Paris and to present a constructive and national front to the world, we just need to be mindful of that fact,” he told the closing news conference. Although the Conservatives had pledged to cut greenhouse gas emissions to 30 percent below 2005 levels by 2030, government figures show rising emissions mean the goal is out of reach. Trudeau will not be going to Paris with a new target, but has committed to coming up with a goal with the provinces within 90 days of returning from the talks. Two government scientists told the strategy meeting that Canada’s rate of warming was about twice the global rate. This means hotter summers with more forest fires, melting permafrost and a smaller Arctic ice cover that will force polar bears onto land as they search for food, they said. Reuters
quarters also, DekaBank economist Andreas Scheuerle said, noting that weak investment by German companies remained a problem for the economy. Exports climbed at a slower pace than imports in the third quarter as demand from China and emerging markets weakened. Net foreign trade subtracted 0.4 percentage points from GDP - the weakest contribution for two years. “Exports are particularly weak,” Scheuerle said. “Without help from the weaker euro and growth in industrialised countries, they would have been worse.” The German economy has recently been sending out mixed signals. While exports and imports bounced back in September, industrial output posted its steepest drop in more than a year that month, according to data released this month. In addition, factory orders fell for three consecutive months between July and September, reinforcing concerns that a slowdown in emerging markets will leave its mark. The closely watched ZEW survey showed last week, however, that morale among German analysts and investors improved more than expected in November despite the attacks in Paris. In addition, a survey among purchasing managers pointed to accelerating growth in the private sector in November. Reuters
Business Daily | 15
November 25, 2015
Opinion Business
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Stein’s law says oil prices will rise John Kemp
Leading reports from Asia’s best business newspapers
Reuters Columnist
THE NEW ZEALAND HERALD Economists are predicting the Official Cash Rate to drop to 2 per cent next year after a cut next month and two further reductions next year. The current Official Cash Rate (OCR) is 2.75 per cent, and economists from ASB Bank and Westpac are predicting it will fall to 2 per cent next year. Westpac has been predicting the fall since October, but this week ASB economist Nick Tuffley said the bank has changed its position. The Reserve Bank will announce whether the OCR will drop when it delivers its quarterly Monetary Policy Statement on December 10.
THE ASAHI SHIMBUN Japanese and American companies are becoming foes and friends in the fierce competition to tap into the growing number of overseas tourists to Japan. They are both using a variety of IT services to win over customers, although the Japanese companies seem focused more on breaking language barriers while the U.S. companies are targeting reservations for restaurants and other locations. The stakes are high. The number of foreign travellers visiting Japan this year exceeded 14.48 million by September, already surpassing the annual record set last year.
THE TIMES OF INDIA Finance minister Arun Jaitley asked state-owned banks to clean up their balance sheets at the earliest, stressing that they have all the powers to deal with wilful defaulters. The minister also reviewed interest rate in the light of key policy rate reduction by RBI in September. Besides, the institutional measures being taken to assist banks in reducing NPAs were also discussed in the second quarterly performance review in six months. The gross NonPerforming Assets of public sector banks rose to 6.03% at the end of June, as against 5.2% in March this year.
THE PHNOM PENH POST Cambodia’s central bank has selected Bank of New York Mellon to act as the global custodian of its foreign reserves, it said in a press release. “After a rigorous selection process, the National Bank of Cambodia believes that BNY Mellon’s custodian service meets all our stringent criteria and is deemed to be the safest custodian available for our foreign reserve’s assets,” it said. The tie-up with US-bank culminated after a months-long diligence processes conducted by both sides. BNY Mellon, for its part, also conducted an assessment of the central bank in light of its compliance with US laws on anti-money laundering.
“I
f something cannot go on forever, it will stop,” according to Herbert Stein, former chief economist to U.S. President Richard Nixon (“What I think: essays on economics, politics and life” 1998). Stein’s law is one of the most simple but important statements in economic theory, yet it is remarkable how often it is forgotten. Stein’s law explains why oil prices crashed from the middle of 2014 after spending more than three years over US$100 per barrel (http://tmsnrt.rs/1SVIZk9). Most commentators now accept a price of US$100 was unsustainable (though at the time there were plenty who predicted prices would remain at that level forever). High prices were encouraging too much new production, especially from U.S. shale, while causing consumption to fall in the advanced economies and slow in emerging markets. The emerging supply-demand imbalance could only be resolved by a sharp price fall which was triggered in July 2014 after Islamic State fighters failed to seize Kurdistan’s oilfields and Libya resumed oil exports. In retrospect, all this is obvious, but the clues were there at the time for anyone who tracked data on stagnant consumption and accelerating U.S. oil production.
Unsustainable prices Stein’s law cannot predict when an unsustainable trend will reverse, only that it must do so eventually, and that the worse the disequilibrium becomes the bigger the correction is likely to be. If Stein’s law was relevant when oil prices were unsustainably high in 2012-2014 it is also relevant in 2015 now oil prices are unsustainably low.
There are plenty of signs that oil prices have now fallen to a level that cannot continue over the medium and long term. U.S. oil production is forecast to decline more than 1 million barrels per day by September 2016, according to the U.S. Energy Information Administration (“Short-Term Energy Outlook” Nov 2015). U.S. shale oil and gas producers reported losses totalling US$24 billion in the third quarter of 2015, up from US$15 billion in the second quarter, despite continued efforts to cut costs and improve efficiency (http:// tmsnrt.rs/1SVJhrd). Total non-OPEC oil production is expected to decline by 600,000 barrels per day next year, according to the International Energy Agency (“Oil Market Report” Nov 2015). By contrast, global oil demand has increased by 1.8 million barrels per day in 2015 and is predicted to rise by another 1.2 million barrels per day in 2016. Shale and non-shale oil producers have been able to cut costs and improve efficiency in response to the price plunge but producers may be running up against the limits of what they can do in the short term. The major international oil companies are presently failing to cover the cost of capital investment, debt payments and dividends to shareholders from current cash flow. “Forty-dollar to fifty dollar oil prices don’t work in this business,” the chief executive of ConocoPhillips told the Wall Street Journal (“Low oil prices catch up with the U.S. oil patch” November 20). “We’re really reaching the limit of what people can do,” the chief executive of data vendor DrillingInfo said in the same article. “Right now, you are down to the best areas, the best rigs, the best people. Any
The question is when rather than if the market must eventually move higher
cuts from now on are bone rather than fat.” Massive losses being reported by U.S. shale firms tell their own story: prices have fallen faster than shale firms can cut costs and the entire sector is running out of time and money.
Disequilibrium dynamics There is no doubt the current low level of prices, with Brent below US$45 and WTI flirting with US$40, are not sustainable. The question is when rather than if the market must eventually move higher. The problem is that disequilibria can persist, and even get worse, for a considerable period of time before the inevitable correction occurs. The oil market’s underlying supply-demand imbalance got progressively worse between 2012 and 2014, but a series of supply disruptions (Libya, Iran, Iraq, and Syria) masked the unsustainable trajectory until July 2014. The same could now happen in reverse, with a series of supply increases (post-sanctions Iran, non-OPEC fields planned before 2014) masking the unsustainable slowdown in supply and acceleration in demand. Most commentators think the
market will be under-supplied by 2018 without more investment in production, but there is less agreement on whether the imbalance will start to become apparent in 2016 or 2017. For their part, many hedge fund managers are convinced things must get worse for oil producers before they get better to force a more speedy adjustment. Hedge funds have amassed a near-record short position in futures and options contracts on U.S. crude oil, betting that prices will fall further. On November 17, hedge funds and other money managers held short positions equivalent to 154 million barrels of oil, up from 90 million in the middle of October, according to the U.S. Commodity Futures Trading Commission. This is the third time hedge funds have established a large short position in 2015, with previous peaks at 163 million barrels in early August and 178 million in March (http://tmsnrt. rs/1NmVszh). Both big short positions coincided with sharp drops in prices, which were then abruptly reversed as the hedge funds tried to reduce their positions and lock in prices, sparking rallies. In this case, many hedge funds and commodity dealing banks say prices must fall further to maximise the pain for U.S. shale producers to enforce a change of course. But the gamble is a risky one because prices already appear stretched and the funds are betting that they can get in and out of the positions before the adjustment becomes apparent to the rest of the market. In effect, the hedge funds are betting that they can ride the growing disequilibrium in the market before Stein’s law kicks in and forces a correction. Reuters
16 | Business Daily
November 25, 2015
Closing London Exchange executive sees no barriers in Shanghai link
EVA Airways and Boeing sign Taiwan’s biggest ever plane deal
The time difference between London and Shanghai should not be a barrier to linking the city’s stock markets, a senior executive at the London Stock Exchange Group said yesterday. Nikhil Rathi was responding to doubts raised by investors, brokers and other exchange executives over a proposed London-Shanghai trading link that would potentially mimic the Hong Kong-Shanghai Stock Connect scheme launched last year. Stock Connect allows international investors to trade Shanghai stocks via the Hong Kong stock exchange, and for Chinese investors to trade Hong Kong stocks from Shanghai.
Taiwan’s EVA Airways signed a deal yesterday worth more than US$6 billion for 26 Boeing jetliners, making it the island’s biggest ever single commercial plane purchase. The Taiwanese carrier will buy 18 787-10 Dreamliners -- Boeing’s most recent model in its family of long-haul jets -- and two 777-300ER (extended-range) aircraft. The agreement also gives EVA Airways the option to buy six more 787s. The order is the largest ever single commercial airplane purchase in Taiwan aviation history, Boeing said in a statement yesterday.
Reserve Bank of Australia Governor Glenn Stevens
Australia’s RBA optimistic, but not too precise, on economy Stevens reckoned global interest rates would remain very low for much of the decade ahead Australia’s top central banker yesterday laid out a generally upbeat outlook for the economy over the next couple of years, but at the same time castigated markets for overreacting to minute changes in forecasts which were by their very nature imprecise. Rather, Reserve Bank of Australia (RBA) Governor Glenn Stevens urged a greater focus on larger global forces
including demographics and technological change. “One can’t help but observe that, in common discussion about the economic outlook, we too often ignore the influence of demography,” Stevens told a dinner of business economists. Instead, there was far too much focus on every change in the RBA’s economic forecasts no matter how small.
Key Nicaragua canal work due late in 2016
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“This fervent desire for precision is not supported by any demonstrated accuracy of economic forecasts,” said Stevens. “Its cousin, a hankering for policy fine-tuning, is barely, if at all, better supported by the historical outcomes of economic policymaking,” he added. The central bank has recently resisted pressure to cut interest rates again from already record lows of 2
percent and expressed doubt that easier policy would do much good. Stevens did reiterate that there would be scope to move again if needed given inflation was surprisingly restrained. Yet he also said the fundamentals were already in place for a pick up in economic growth over the next couple of years. “A number of data points over recent months suggest
that prospects for firmer conditions in the non-mining economy are improving,” he said. Surveys of business activity were above long-run averages and firms seemed to have stepped up their hiring. Employment, hours worked, and vacancies were all rising and unemployment had been stable for months. On the longer term outlook globally, Stevens noted China’s demographics were not favourable with the total working-age population set to shrink over the years ahead. In contrast, India’s working age population would exceed China’s within a decade and make the country a much more prominent actor in the global economy. Stevens reckoned global interest rates would remain very low for much of the decade ahead, even if the Federal Reserve soon raised U.S. rates as was likely. A world of low rates would make it harder to ensure adequate retirement incomes, perhaps leading people to take more risks in their portfolios. “Part and parcel of the same adjustment may be higher real wages for the smaller proportion of the population that is working,” said Stevens. “These changes, driven by demographics, may require some adjustment to our collective thinking about what is ‘normal’.” Reuters
Anti-graft investigators probe two brokerages in Shanghai
HK to leverage emerging Innovation & Technology trends
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ajor construction on Nicaragua’s US$50 billion canal will start late in 2016 -a year behind the schedule first set by Hong Kong Nicaragua Development, the Chinese builders announced. The company had originally set early 2016 as a target and announced the new dates in a newsletter it published this month. On November 5, President Daniel Ortega’s government approved the environmental impact study done by Environmental Resources Management (ERM) for HKND. The study, which was under review for five months, found that the project will have serious consequences for the environment but could be positive for the largely impoverished Central American nation, if it is managed well. HKND received a 50-year concession from Ortega in 2013 to build and run the 280-kilometer (175-mile) canal. The 50-year concession can be renewed once. The canal had been scheduled for completion in 2019, but HKND did not immediately offer a new completion date estimate. The canal is expected to displace some 30,000 people, mainly poor farmers and indigenous people.
nti-corruption investigators opened probes into two of China’s largest brokerages and censured four executives at a leading insurer yesterday, the latest moves in a campaign against graft in the financial sector following a market slump. After a bloodbath in the share market in midJune, Beijing began cracking down on alleged illegal activity, such as insider trading and ‘malicious’ short-selling, which were blamed partly for volatility. Investigators in Shanghai have started probing Guotai Junan Securities and Haitong Securities, two of the largest state-owned brokerages, the official Xinhua news agency reported, citing a government paper. Guotai Junan International, the Hong Kong subsidiary of Guotai Junan, said on Monday its chairman had been missing since Wednesday. This is the third probe in Shanghai this year, Xinhua said, and will involve sweeping investigations that involve 12 other state-owned companies and six universities. President Xi Jinping opened a campaign three years ago to root out corruption in all walks of life in China.
AFP
Reuters
ecretary for Innovation & Technology Nicholas Yang said yesterday that the newlyestablished Innovation & Technology Bureau will pave the way for Hong Kong’s transformation to a knowledge-based economy. Speaking at the opening of the Hong Kong International Computer Conference 2015, Yang said the bureau, established on November 20, will provide stronger and more focused policy coordination together with the understanding and support of Hong Kong people to capture the opportunities from the digital economy, leveraging on the rapidly evolving innovation and technology environment. The digital economy permeates the world in the form of e-commerce, e-learning, smart devices, social media platforms and so on, Yang said, adding today’s Internet-driven global economy is powered by innovation and technology. Innovation and technology can bring economic growth and employment opportunities, and can also improve people’s quality of living and help on social development, he said. He said that Hong Kong certainly stands out in today’s global digital economy. Xinhua