MOP 6.00 Closing editor: Joanne Kuai
3rd Annual Business Awards salute professional excellence
Prices of plots on Mainland soar despite overloaded real estate market Page 16
Year IV
Number 929 Friday November 27, 2015
Publisher: Paulo A. Azevedo
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Ministry of Finance completes 12 bln yuan dim sum bonds sale Page 11
Table cap stays
The gaming tables cap policy will remain sacrosanct. As reaffirmed by Secretary for Economy and Finance Lionel Leong Vai Tac yesterday. VIP gaming businessman Zheng Anting suggested gaming companies offering more non-gaming elements deserve a bigger allocation Page
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Delta Bridge opening put back a year Results reflect revenue rollback No surprises. Luk Fook jewellery results were in line with its recent profit warning. A 42.6 pct profit plunge in H1 confirms the weakness of the sector. For revenue of just HK$6.97 bln in the period
www.macaubusinessdaily.com
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Beefing up the labour force Non-resident workers soared 10.7 pct y-o-y as at October. The service sector overtook construction as the largest importer of workers, reflecting the opening of the new casinos. With Mainland Chinese, Filipinos and Vietnamese most in demand
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Unstable supply of materials. Shortage of labour. Restrictions on airport height. Environmental protection constraints. Just some of the reasons the Hong Kong Highways Department cited to explain the delay in completion of the region’s mega project. The bridge linking Macau, Zhuhai and Hong Kong is now not slated to open until late 2017 at the earliest. The Hong Kong authorities said the project ‘is huge and complicated; there are many technical challenges during both the design and construction stages’
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Stepping stone A first for Beijing. Permitted to enter the interbank foreign exchange market. In another step to include the yuan in the IMF currency basket. Seven institutions have been registered, including three central banks
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Brought to you by
HSI - Movers November 26
Name
%Day
Kunlun Energy Co Ltd
+3.27
Tingyi Cayman Islands
+0.88
Sino Land Co Ltd
+0.68
Wharf Holdings Ltd/Th
+0.66
Want Want China Hold
+0.64
Sands China Ltd
-0.93
Swire Pacific Ltd
-1.20
Lenovo Group Ltd
-2.20
China Mengniu Dairy C
-2.30
Cathay Pacific Airways
-2.47
Source: Bloomberg
I SSN 2226-8294
2015-11-27
2015-11-28
2015-11-29
13˚ 21˚
16˚ 22˚
18˚ 24˚
2 | Business Daily
November 27, 2015
Macau Court upholds decision: Ex-IACM chief not guilty The Court of Second Instance has made its final decision and upheld the sentence from the Court of First Instance acquitting former Civic and Municipal Affairs Bureau (IACM) president Raymond Tam Vai Man and three of his staff of misfeasance charges in the city’s infamous burial plot case, according to a statement from the court released yesterday. The case is not subject to further appeal. The burial plot case was brought by Paulina Santos, a lawyer and former government employee. Santos filed a high-profile complaint with the Public Prosecutor’s Office (MP) in 2010, alleging that Tam and his subordinates had intentionally delayed the transfer of documents that prevented prosecutors from investigating a case involving the alleged illegal granting of 10 permanent cemetery plots dating back to 2001.
Hong Kong estate broker Centaline Group management to restructure
Non-resident workers increase 10.7 per cent year-on-year All sectors of activity in Macau increase the number of non-resident workers in the course of a year João Santos Filipe
jsfilipe@macaubusinessdaily.com
Co-founder of Hong Kong real estate broker Centaline Group Shih Wing Ching is going to assume again the post as the group’s chairman starting from December 1, having vacated the position four years ago, Hong Kong’s Chinese language media has reported. Mr. Lai Ming Kai, the incumbent chairman of Centaline Group, will instead chair the group’s division for Mainland China. Responding to Chinese language newspaper am730’s query, Mr. Shih explained that the board change is in response to the group’s operational needs from Mainland China, not the group’s plan to get listed in Hong Kong. The Centaline Group currently has a sales network in Macau.
Depositors sue junket firm Dore Dozens of investors or depositors in junket operator Dore Entertainment Co. Ltd. demonstrated outside the Legislative Assembly yesterday voicing their demand for the return of money stolen by a former Dore employee, and accused the junket firm of dodging responsibility. One of the demonstrating depositors, who requested anonymity, said that some of his fellow depositors in Dore had already filed civil lawsuits against the company as well as Wynn Macau in order to get back the stolen money. Dore, which runs VIP operations in Wynn Macau casino, said in September that a former cage manager had allegedly used her authority to pool deposit capital offering high interest rates without the company’s knowledge.
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he number of non-resident workers in Macau increased 10.7 per cent year-on-year in October to 182,135 from 164,462, according to the Human Resources Office. This is an increase of 17,673 workers. As at the end of October, hotels, restaurants and similar activities were the largest sector importing non-resident workers (TNR), totaling 47,804 workers, while one year ago that number was 41,831 workers. However, one year ago construction was the sector bringing the largest number of immigrants to the territory. In the last month, there were 45,472 TNR in the Construction sector, up from 42,667.
For the same period, the category for domestic workers had a total of 23,259 non-resident workers, which represented an increase of 2,157 in relation to the existing 21,102 in October 2014. In the course of one year all sectors increased their number of non-residents workers. Regarding nationality, most nonresident workers in Macau come from Mainland China, at 117,262, an increase of 10.979 per cent from 106,283. The majority of these workers are involved in construction and hotel activities. Meanwhile, the Philippines community of workers amount to 24,243, while one year ago it was 21,031. The vast majority of workers
from the Philippines are domestic workers. The second sector more prevalent for these workers is hotels, restaurants and similar activities. The third largest source of foreign workers in Macau is the Vietnamese. At the end of October there were 14,618 Vietnamese workers in the territory. This is an increase from 13,226 one year ago. Vietnamese are also mainly engaged in domestic work activities and hotels and restaurants. Regarding Hong Kong workers, they amount to 9,304, a slight increase from 9,196. The vast majority is involved in construction, recreational, cultural, gaming and hotel and restaurant activities.
Individuals engaged in hotels and restaurants increase in Q3
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he new gaming and tourism entities that comm enced operating in the territory inc reased the number of persons engaged by 9.6 per cent to 50,677 in hotels and 12.8 per cent to 32,251 in restaurants, according to the Survey on Manpower Needs and Wages for the third quarter, published yesterday by
the Statistics and Census Service (DSEC). During the same period, average earnings increased 4.5 per cent to MOP16,460 from MOP15,750 in the second quarter of the year in hotel activities. However in terms of restaurants, the salary increased 3.8 per cent to MOP9,200, while in the previous quarter it amounted to
MOP8,860. Regarding the highest salary increase, Financial Intermedi ations Activities posted an 8.1 per cent increase quarter-on-quarter to MOP14,180 from MOP13,120. According to DSEC, the sector struggling most with job vacancies is manufacturing, with a 10 per cent shortage.
Business Daily | 3
November 27, 2015
Macau
Leong: Table cap policy unchanged For the decade onwards from 2013 the Macau Government will stick to its 3 per cent compound annual growth limit for gaming tables when granting them to the gaming concessionaires here, the economy chief has stressed Stephanie Lai
sw.lai@macaubusinessdaily.com
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ecretary for Economy and Finance Lionel Leong Vai Tac reiterated yesterday that the government’s granting of gaming tables has never veered from the casino table cap policy and consideration of the casino resort’s non-gaming elements, noting that this is the government’s aim to direct how the operators develop their gaming business. Mr. Leong was speaking on his first day of attending the debate on the Policy Address for 2016, in which several legislators have asked about the MSAR gaming policy. “For the ten years onwards from 2013, the increase of the gaming tables is limited to 3 per cent [of compound annual expansion]. This never changes,’ said the Secretary. Mr. Leong was responding to legislator and VIP gaming businessman Zheng Anting’s question about the principle of the table cap policy. At the Assembly, Mr Zheng suggested gaming companies that offer more non-gaming elements should deserve a bigger allocation of gaming tables.
“When granting the gaming tables, we have the plan to direct how they [casino operators] develop their business,” Mr. Leong said. “As in this year, for the granting of gaming tables we considered the non-gaming elements that the gaming companies have offered; how they helped the small and medium companies here and their development of the mass gaming segment. The allocation of
tables is based on how the operators help make the city achieve the goal of a centre of world tourism [and leisure].” The Secretary also called Mr Zheng’s attention to personal data protection laws regarding local VIP gaming operators’ suggestions of blacklisting gamblers with a history of reneging on gaming debts. “We have to have a more stringent monitoring of the VIP gaming operators here, while keeping them internationally competitive,” Mr. Leong said, “But regarding your suggestion of blacklisting gamblers, I have to remind you that it will involve the personal data protection law. The operators will have to have a very strong communication with the related departments.” The Secretary did not reveal much about the content of the mid-term review of the gaming industry, only noting that the review report can be disclosed to the public at the latest by the beginning of next year. As stated in the Policy Address, the review would look at how the gaming operators have conducted their business, the jobs created, the
promotion of local residents and the development of non-gaming elements. The review would also look at how the gaming companies could better shoulder social responsibilities, Mr. Leong noted.
Government revisits stamp duty Speaking in the Legislative Assembly yesterday, Financial Services Bureau (DSF) director Stephen Iong said the government would propose the exemption of stamp duty on property transfer for owners reconstructing their residential buildings. The intended beneficiaries of the stamp duty exemption are the owners of residences with strata titles recognised by the government as dangerous buildings, or buildings that have to be demolished in the public interest. The government will strive to legislate the proposal next year, Mr. Iong said.
Winners of 3rd Annual Business Awards announced Organizers strive to continue hosting the event representing the biggest awards recognising individuals or organizations’ contribution to Macau from civil society
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en Gold Award plus 28 Excellence Award winners collected their trophies at the 3rd Annual Business Awards of Macau gala ceremony held at the Grand Lisboa last night. Nearly 230 of the leading figures in business gathered, with a great variety of different sectors and industries from Macau also represented. Winners were awarded in ten categories. A jury panel of 30 members from all sectors of society selected the awardees from among more than 150 entries, a 30 per cent increase over the first edition of the Awards. The Gold awardee of the ‘Innovation Award’ was MOME, an integrated marketing and media company based in Macau and launched last year.
“It’s not easy to push forward innovations in Macau. We are thrilled to receive this award,” said director Joe Liu. “We strive to integrate with traditional culture and media platforms using innovative ideas to achieve better marking and communicating effect.”
Another director of MOME, Joseph Chan, also told Business Daily that the company is exploring new platforms such as WeChat to develop channels to better interact with residents and tourists. One of the ‘Most Valuable Brand’ Gold awardees, ICBC
Macau expressed surprise and gratitude for the award and stressed its continuous dedication to Macau society, said Dennis Deng Wanhong, Assistant Chief Executive Officer. “Rooted in Macau, we are dedicated to serving the city,” said Mr. Deng. “70 per cent of the affordable housing loans are being processed by our bank. We have also been making a huge effort to develop an e-commerce platform in line with the Macau Government’s goal in building the city into a World Centre of Tourism and Leisure.” Organizer Paulo A. Azevedo, Business Awards Chairman, said one of the purposes of hosting the event is that he believes great stories should be told,
good achievements shared, acknowledged and celebrated. “We do hope that the Business Awards of Macau continue to grow in celebration of the best ideals, visions, projects and dreams. And that in achieving them, successive participants can go on to make Macau all it can be,” said Mr. Azevedo. The hosts of the Awards added that they believed businesses that participated in the awards have benefited in several ways. “Those that have made the finals and the category winners have had their business profiles raised; strengthening existing commercial relationships and laying the groundwork for new relationships to develop,” said the producer of the event, Margarida Luz, Director of Signature Events.
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November 27, 2015
Macau
Hong Kong-Zhuhai-Macau What can I write? Bridge delayed to late 2017 opinion
Hong Kong official says the “huge and complicated” project has “many challenges”, including lack of skilled workers that have delayed construction by one year João Santos Filipe
jsfilipe@macaubusinessdaily.com
Pedro Cortés
Lawyer cortes@macau.ctm.net
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ompletion of the bridge linking Macau, Zhuhai and Hong Kong has been delayed by one year and is only expected to open in late 2017, the Hong Kong Highways Department revealed yesterday. Initially, the project was expected to be operating by the end of next year. ‘In the face of construction difficulties and challenges such as the unstable supply of materials, shortage of labour, restrictions on airport height, constraints in environmental protection requirements and slower than expected consolidation performance of reclamation works, etc., the Highways Department preliminarily forecasts that the local projects in Hong Kong can only be completed by end-2017’, the Hong Kong official body announced yesterday. The Hong Kong authorities went as far as to stress that the project ‘is huge and complicated, there are many technical challenges during both the design and construction stages’.
The 50-km connections between Macau and Hong Kong, via Zhuhai, started in December 2009. However, in Hong Kong construction was delayed to December 2011 because of a legal challenge regarding the environmental impact of the bridge. The project features three cablestayed bridges, two artificial islands and a 6.7km-long immersed tube tunnel.
In Macau, an artificial island for the connection is being reclaimed near Zone A, and it is believed that after the project is completed the land travel time from Macau to Hong Kong will be cut from more than three hours to around 30 minutes. In spite of the problems, the Hong Kong authorities said in the press release that safety will be the top priority of the project.
Zhuhai-Beijing high-speed rail commences Starting tomorrow, neighbouring Zhuhai City will run cross-province rail routes for the first time, to Beijing and to Guilin in Guangxi
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News on Policy Address is stated above.
uangzhou Railway (Group) Corporation has announced that Zhuhai, Macau’s neighbouring city in Guangdong Province, is going to launch highspeed rail to Beijing and Guilin in Guangxi Zhuang Autonomous Region in southern China starting from November 28. Tickets are already on sale via website, station ticket windows, agencies and telephone booking systems. The train from Zhuhai to Beijing will run every Friday, Saturday, Sunday and Monday, taking around 11 hours. The cost of tickets ranges from 779 renminbi for a seat, to 999 renminbi for an upper bunk and 1,190 for a lower bunk. The train stops at various stations along the way going to or coming from Beijing, including Guangzhou South
Station, Changsha South Station, and Shijiazhuang, among others. The service which connects Zhuhai and Guilin runs daily. The journey takes roughly four hours. Fares are priced at a fixed rate of RMB207.5 for a seat. Residents from Macau and Hong Kong Special Administrative Regions can use their ‘home return permit’ and use UnionPay cards or cash to purchase the tickets. Foreigners can also use their passports as ID documents. At a press conference announcing the news, a Zhuhai official said that the launch of cross-province trains has enhanced Zhuhai’s status as a bridge connecting Mainland China and the SARs, according to local media TDM Chinese Radio’s report. Chen Renfu of the Zhuhai Government said that he believes
such easier transportation options will help Zhuhai attract more talent. “Zhuhai, as the leading force connecting Mainland China to the SARs, can play an even better role once the train [service] has commenced. It’s beneficial to the development of the Hengqin Pilot Free Trade Zone, to economic co-operation between Mainland and Macau, and to the economic diversification of Macau,” said Mr. Chen. When told that flights connecting Zhuhai and Bejing are sometimes offered at even lower price than the railway and with greater frequency, the Guangzhou Railway Corporation representative said railway fares are flexible, and that they will adjust the price in accordance with the load factor in the future. J.K.
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November 27, 2015
Macau Public hospital hours to be extended The government is to introduce night clinics at Hospital Conde S. Januário and will extend the operating hours of the public facility, the Secretary for Social Affairs and Culture, Mr Alexis Tam Chon Weng, has announced. It is one of the government’s strategies to manage the requirements of an ageing population and to satisfy the people’s healthcare needs, he said. The Secretary said the government would need an additional 2,000 medical staff in the next four years to accommodate the development of the public health system, which includes plans for the establishment of the Islands District Medical Complex on Cotai.
IPIM enhances ‘soft power’ of local SMEs Following the Business Gathering at Macau Ideas, the Macau Trade and Investment Promotion Institute (IPIM) organised the procuring networking and exchange meeting again to assist local SMEs to further develop their overseas customer network. The event, held on the first day of the 11th International Hotel Expo, aims to assist local SMEs in promoting Made in Macao products, Macao Brands, Macao Designs and Food Products from Portuguese-speaking Countries with distribution channels in Macao. Through the organisation of an array of activities, it seeks to enhance the exposure and reputation of Macau’s products, as well as developing wider overseas customer networks for local SMEs. The 11th International Hotel Expo was held from 25 to 27 November at the Convention and Exhibition Centre of The Venetian Macao-Resort-Hotel.
Local delegates at Consumers International World Congress Delegates of the Macau Consumer Council attended the 20th Consumers International World Congress in Brazil and participated in meetings and seminars during the Congress. The 20th Consumers International World Congress took place in Brasilia, Brazil, earlier this month. Participants in the World Congress included President of Brazil Dilma Rousseff and worldwide consumer organizations delegates. Chan Hong Sang, full-time member of the Macau Consumer Council Executive Committee, represented Macao and executed his voting rights. The theme of this World Congress was ‘Unlocking Consumer Power: A new vision for the global marketplace’.
Macau to host international clean energy forum The International Forum for Clean Energy (IFCE) will host its fourth edition in Macau from December 15 to 17, according to a press conference held in Beijing earlier this week. Scientists from the Chinese Academy of Engineering, Chinese Academy of Sciences and related think tanks will discuss China’s energy strategy. They will discuss topics such as the innovation of photo-voltaic technology, the clean technology of coal-fired power generation, and how China’s energy industries will ‘go global’ as the country prepares to roll out its Belt and Road Initiative. The Macau-based IFCE is a non-profit international organisation established in April 2012 which advances clean energy development through policy research.
Luk Fook profit plunges 42.6 pct in H1 Revenue in its key market, Hong Kong, dropped 6.3 per cent, while the performance of Macau ‘was even worse’, says the group Joanne Kuai
joannekuai@macaubusinessdaily.com
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ong Kong-listed jewellery company Luk Fook Holdings (International) Ltd. saw its profit plunge 42.6 per cent to HK$463.4 million (US$59.8 million) for the six months ended September 30, 2015 compared to HK$807.7 million for the same period of last year. The result is in line with its profit warning issued earlier this month, which forecast a 40 per cent yearon-year slump in profits. According to a filing with the Hong Kong Stock Exchange yesterday, the company announced, for the first half of its fiscal year, that revenue had reached HK$6.97 billion, representing a decrease of 7.7 per cent vis-a-vis the same period last year. During the period, the group opened 29 new stores in Mainland
China with the number of shops remaining unchanged in Hong Kong and Macau and overseas and is currently operating more than 1,400 Luk Fook Jewellery shops worldwide.
SAR markets
The Hong Kong market remained the key source of revenue for the group, contributing approximately 60.4 per cent of its total revenue. For the six months ended September 30, the revenues in Hong Kong decreased by 6.3 per cent to HK$4.2 billion. ‘The performance of the Macau market was even worse than that of the Hong Kong market,’ the filing reads. It further cites official Macau Government data of dropping tourist arrivals, as well as retail market data, pointing out a weaker sentiment in the luxury market.
The group’s revenue generated by the Macau market therefore decreased by 16.2 per cent to HK$920 million. (2014: HK$1.1 billion), contributing 13.2 per cent (2014: 14.6 per cent) of the group’s total revenue while gem-set jewellery sales dropped 25.5 per cent. As at 30 September 2015, the group had a total of 10 self-operated shops in Macau. While it ‘remains prudent’ about the business development in the second half of this financial year, as the retail industry in the SARs is suffering, the group says it will continue to optimise the retail network as well as developing e-commerce and further strengthening co-operation with e-commerce platforms.
New products lift VitaSoy sales 10 pct The beverage company is enjoying a good moment in Macau, with sales increasing at a faster pace than in Hong Kong
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he sales of beverage and dessert company VitaSoy increased 10 per cent year-on-year in Macau, according to the interim report of the company. While the specific data for the territory is provided, Macau is integrated into the Hong Kong operations, which recorded an overall growth of 4 per cent. For the period, Hong Kong revenue increased to HK$1.22 billion (US$152.8 million) from HK$1.12 billion, generating an increase in profit to HK$194 million from HK$174 million, an increase year-on-year of 11.5 per cent. This success was explained by the introduction in this market of a new range of products. ’Sales growth outperformed the
beverage industry average through consistent execution discipline in our core business and innovation in products and marketing campaigns. New products including VITA Hong Kong Style range has been well received in the retail market’, the company noted in the report. Besides Macau and Hong Kong, the company is operating in Mainland China, the United States and Singapore, among other places. The largest market in terms of sales is Mainland China, as revenue was HK$1.51 billion vis-a-vis HK$1.14 billion in the first six months of the previous fiscal year. This revenue ended up being transformed into a HK$263 million profit, an increase
of 69.7 per cent year-on-year from HK$155 million. Overall, the company recorded a net profit for the first six months of the fiscal year amounting to HK$270.4 million, an increase of 21 per cent year-on-year from HK$223.5 million. Regarding the second half of fiscal year 2015/2016, the company expects sales growth in Macau and Hong Kong to slow due to ‘business seasonality’. For this part of the year, the company will focus its strategy on a core proposition with its ‘Warm VITASOY Soymilk’ winter programme. and also on driving operational efficiency to continue delivering profitable growth. J.S.F.
Business Daily | 9
November 27, 2015
Gaming
Vegas Casinos can fire Buffett’s utility – for US$127 Million MGM Resorts International, Las Vegas Sands Corp. and Wynn Las Vegas won initial regulatory approval to stop buying power from NV Energy
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hree of Las Vegas’s largest casino operators are a step closer to firing Warren Buffett’s utility as their electricity provider -- if they’re willing to pay the price. MGM Resorts International, Las Vegas Sands Corp. and Wynn Las Vegas won initial regulatory approval to stop buying power from NV Energy, a Nevada utility owned by Buffett’s Berkshire Hathaway Inc. In draft orders published Wednesday, the state’s Public Utilities Commission laid out conditions for the gaming companies to seek cheaper electricity from other sources, including combined impact fees of almost US$127 million. “These fees are necessary because NV Energy’s remaining ratepayers would otherwise be forced to pay increased rates to allow recovery of costs already incurred to provide
reliable electric service to the casinos,” the commission said in a statement. If the casinos decide to pay that price and exit, the loss of the electricity-hungry customers would be a blow to Buffett’s utility empire. The 85-year-old billionaire has been expanding Berkshire’s energy investments over the past decade and a half, steadily acquiring power companies, pipelines and renewable energy projects.
Buffett’s strategy
He has said he likes the industry because it regularly provides a way to invest billions of dollars at reasonable rates of return. At a utility-industry event in Las Vegas last year, he said he plans to keep investing in the business “as far as the eye can see.” Jennifer Schuricht, a spokeswoman for NV Energy, declined to comment on the draft rulings. Wynn spokesman
Michael Weaver said the casino is studying its order. MGM’s Clark Dumont and Las Vegas Sands’s Ron Reese also declined to comment. The size of the impact fees has been a sticking point in the cases. While the casinos said that they’d be willing to pay to leave, they disputed during the regulatory proceedings how sums should be calculated. Las Vegas Sands’s bill would be US$23.9 million; Wynn’s would be US$15.7 million; and MGM’s US$86.9 million, according to the regulator’s statement Wednesday. The commission is scheduled to vote on the draft orders on Dec. 2. The casinos also would have to pay recurring fees and charges after they exit.
Seeking exits
The casinos can ask to leave NV Energy because of a 2001 law that
permits large customers to buy electricity from a third party as long as they pay an exit fee and get approval from the utilities commission. When the measure passed, Nevada got most of its electricity on the open market and was trying to encourage new generation in the state. Since then, NV Energy has built gas and solar plants and now supplies most of its own power. The added cost of those facilities has pushed rates higher. The law was tested earlier when Switch, a company that operates data centers in the state, tried to opt out of the utility so it could buy 100 per cent renewable power. The public utilities commission eventually denied the request. Then, in July, NV Energy announced a plan to let Switch pay a premium to the utility to get what it wanted. Bloomberg
Corporate
Eco-friendly Christmas at Grand Hyatt Macau
New blood in Macau liquor market
‘Tis the season to be jolly and Grand Hyatt Macau is proud to present An Enchanting Eco-friendly Christmas. Championing a healthier planet, Grand Hyatt Macau chose to repurpose objects used around the hotel and creatively transform them into dazzling Christmas trees and other ornaments. Guests arriving at the hotel will be attracted by a collection of unique
Hong Kong MBL Wine Group and Macau Group recently held a press conference in Macau Tower announcing their partnership. An agreement was signed for Macau Group to be the general agency of MBL – Multiple Brand Luxury - in the SAR. MBL Director Angel Lee said that she believes Macau is a market with huge potential, not only because of the strong tourism, but also the significant
Christmas trees rising from the fountain at the entrance, inside the lobby and throughout the hotel. The merry ambience sets the scene for memorable year-end celebrations, including a grand buffet at mezza9 Macau and holiday afternoon tea set in the Lobby Lounge, along with gifts from the Lobby Christmas Boutique and the Grand Countdown Party to usher in 2016.
purchasing power of the locals, witness the rising demand driven by frequently held local community events and banquets. Established in 2009, MBL has been introducing quality wineries from all over the world to the AsiaPacific Region, and expanding its distribution network continuously. Currently, it has over 80 branch cellars, clubs and distribution points in China.
10 | Business Daily
November 27, 2015
Greater China
November official PMI seen shrinking for 4th month Some analysts hope China’s economy will bottom out in the fourth quarter
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Official data showed China's October factory output growth hit a 7-month low and investment expansion slipped to its weakest pace since 2000
ctivity in China’s manufacturing sector likely shrank for a fourth straight month in November, a Reuters poll showed, underlining persistent sluggishness in the world’s second-largest economy. The official manufacturing Purchasing Managers’ Index (PMI) likely stayed at 49.8 in November, the same pace as in the previous two months, according to a median forecast of 23 economists in a Reuters poll. A reading below 50 points suggests a contraction in activity while a reading above signifies an expansion on a monthly basis. “Previous stimulus measures have only helped steady the economy for now,” said Nie Wen, analyst at Hwabao Trust in Shanghai. “We don’t see obvious recovery momentum for the economy in short term due to sluggish domestic and external demand.” Factory activity shrank in October for a third month in a row, fuelling fears that the economy may be cooling more rapidly than expected.
Despite a long series of stimulus measures, including slashing interest rates six times since November last year, muted monthly data for October suggested China’s economy lost further momentum. Official data showed China’s October factory output growth hit a 7-month low and investment expansion slipped to its weakest pace since 2000, fuelling bets that Beijing would roll out more support in coming months. Some analysts hope China’s economy will bottom out in the fourth quarter as a burst of stimulus measures rolled out by Beijing gradually take effect, but many of them remain wary about the outlook. China’s Premier Li Keqiang said on Tuesday that 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 mediumto long-term growth. The official PMI factory numbers will be released on Tuesday along with the official services PMI. Reuters
GSK tries to escape the shadow of a scandal The drug-maker has shrunk its business since a scandal, drastically reducing promotional activities and focusing its resources on a smaller number of therapy areas
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laxoSmithKline Plc has cut 40 percent of its sales reps in China and axed some units as it eyes a return to growth in 2016, after sales plunged during a bribery scandal that landed it with a record US$490 million fine in 2014. The British firm is gambling on a new, cleaner image to reboot its performance and reputation with doctors and consumers, China head Herve Gisserot told Reuters during a wide-ranging interview at the group’s Shanghai headquarters. It is the first time Gisserot has spoken at length about the firm’s progress since the high-profile scandal, which saw his predecessor Mark Reilly charged with bribery and eventually deported to Britain. Reilly has since left the company. GSK has previously said it would overhaul its business in China, and more globally, to avoid some of the issues that led to the probe, including stopping all sales-based incentives for drug reps and reducing paid junkets for doctors. The problem is, many of GSK’s rivals are not following
in step, and adapting to a new model means taking a business hit. GSK’s China sales dropped from 759 million pounds (US$1.2 billion) in 2012 to 585 million pounds in 2013 and were flat in 2014. This year has been volatile, after the disposal of peripheral operations and disruption to a factory in Tianjin following deadly explosions in the port city in August. But despite its woes GSK China remains profitable, and Gisserot expects sales to grow again in 2016, before rising in double digits from 2017, helped by the rollout of new products, including HPV vaccine Cervarix.
Shrinking
GSK, in China since 1910, has shrunk its business since the scandal, drastically reducing promotional activities and focusing its resources on a smaller number of therapy areas including hepatitis, respiratory disease and vaccines. The number of front-line sales reps has fallen from 5,000 to around 3,000, and GSK is putting a focus on hiring new graduates who
don’t have the “baggage” of established peers. This smaller team won’t have traditional sales-driven incentives, a fact GSK hopes will reduce the likelihood of bribery, but will undoubtedly hit sales in the short run. China’s drug market is the world’s second largest but growth is slowing. After expanding around 15 percent annually in the first half of the decade, sales are set to grow just 6-9 percent a year over 20162020, according to IMS Health. Gisserot believes even that forecast could be optimistic. GSK sales staff now have to work very differently. Reps have iPads to monitor every interaction with doctors, while fancy meals on expenses have been replaced by a centrally controlled catering system providing “lunch boxes” worth no more than 60 yuan (US$9.40). The move is explicitly designed to take cash out of the system. Bonuses also make up just 25 percent of salaries, down from 40 percent pre-scandal, and won’t be tied to sales.
Price pressure
The wider market has seen huge price pressures
on drugs as Beijing tries to curb over-prescribing by hospitals, which still make money from dishing out drugs, and rein in an overall healthcare bill set to expand to US$1.3 trillion by 2020. Gisserot said this would erode sales of expensive branded generics - long a cash cow for Big Pharma in China - and shift the industry’s reliance towards more innovative drugs, hopefully helped by faster approvals, although this will take time.
Gisserot added GSK, which previously promised to become a “model for reform” in China, was willing to cut prices and promote technology transfer - both demands from a government anxious to secure long-term drug supplies. With more than 30 staff employed solely to check every single expense claim, GSK is now paying a high price to ensure compliance, but Gisserot warned China’s anti-bribery drive could in future snare others. Reuters
Business Daily | 11
November 27, 2015
Greater China Offshore yuan bond sale to institutional investors completed The Ministry of Finance is the biggest and most prolific player in the primary market of dim sum bonds Mainland is New Zealand’s top export destination again
Michelle Chen
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hina completed its sale of 12 billion yuan (US$1.57 billion) in dim sum bonds in Hong Kong to institutional investors and central banks yesterday, the seventh year the Ministry of Finance (MOF) has tapped the market to bolster its development. Four tenors were available, including a 5 billion yuan three-year tranche, a 3 billion yuan five-year tranche and 1 billion yuan each of a 10-year and 20-year tranche. The bonds were priced at 3.29 percent, 3.4 percent, 3.31 percent and 4 percent for the above tenors, respectively. “Pricing for longer tenors was in line with our expectation, but pricing for the three-year tenor was higher than our forecast,” said Frances Cheung, head of Asian ex-Japan rates strategy at Societe Generale. “Foreign investors may have priced in the yuan depreciation factor for the short tenor while longer ones were less affected by the FX factor,” said Cheung. Societe Generale expected the bond to be priced at 2.95-3.15 percent for the three-year tenor, 3.10-3.25 percent for the five-year tenor, 3.20-3.40 percent
for the 10-year tenor, and 3.80-4.00 percent for the 20-year tenor. The Chinese currency has fallen by 3 percent year-to-date against the dollar and foreign exchange analysts polled by Reuters expect further slippage over the next 12 months as China continues to ease monetary policy. The MOF also sold 2 billion yuan of dim sum bonds to central banks and regional monetary authorities, which saw a total subscription amount of 2.098 billion yuan, according to statistics from the Hong Kong Monetary Authority. Another 2 billion yuan worth of offshore yuan bonds will be sold to retail investors in Hong Kong later this week. The MOF is the biggest and most prolific player in the primary market of dim sum bonds and its bond sales are a much-awaited event among investors as it sets benchmarks for other issuers. It planned to sell a total of 28 billion yuan bonds this year, the same as last year’s size. The first batch of the bonds worth 14 billion yuan was sold in May. Bank of Communications Hong Kong branch is the issuing and lodging agent for the bond.
KEY POINTS MOF dim sum bond priced at 3.29 pct for 3-year tenor 5-year at 3.4 pct, 10-year at 3.31 pct, 20-year at 4 pct MOF issue unlikely to revive weak dim sum market The dim sum bond market is facing strong headwinds this year as Chinese issuers have switched back to the onshore market for cheaper funding, while investor demand has been curbed due to the yuan’s depreciation. Analysts said the MOF sale was unlikely to revive weak sentiment in the dim sum bond market as investors worry about depreciation pressure on the yuan currency and eye lower funding costs on the mainland. Reuters
Beijing allows first foreign institutions into interbank FX market
China resumed its place as New Zealand’s top export destination in October, with growing demand for milk powder, meat and kiwifruit, the government statistics agency said yesterday. The resurgence of the China market helped to mitigate New Zealand’s rising trade deficit, which hit 963 million NZ dollars (US$635.39 million) last month, up from 892 million NZ dollars (US$588.54 million) in October last year, according to Statistics New Zealand. Goods exports to China rose by 9.2 percent, or by US$37.58 million, to move China ahead of Australia as the top annual export destination.
Rothschild-backed bank IPO raises US$606 mln Bank of Qingdao Co Ltd, a Chinese city commercial lender backed by Italy’s Intesa Sanpaolo SpA and Rothschild, saw its Hong Kong initial public offering raise US$606 million after pricing it at the bottom of its marketing range, IFR reported yesterday. The IPO was priced at HK$4.75 per share, after being marketed in an indicative range of the HK$4.75 to HK$5.21, Thomson Reuters publication IFR added, citing sources close to the deal. Bank of Qingdao, the largest city commercial lender in China’s northern province of Shandong, sold 900 million new shares, while a group of 18 shareholders of the bank sold 90 million existing shares, according to the IPO prospectus.
Regulator orders The seven institutions that have been registered include three brokerages to halt central banks OTC swap lending The China Securities Regulatory Commission (CSRC) issued window guidance to domestic brokerages requiring them to cease financing clients’ stocks purchases using swaps and other overthe-counter derivatives, two sources with direct knowledge told Reuters. The CSRC did not respond to calls requesting comment. The move comes after CITIC Securities was discovered to have inflated its swap trading by US$166 billion, which it blamed on an IT upgrade.
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he first batch of foreign central banks, sovereign wealth funds and international financial institutions have been registered to enter China’s interbank foreign exchange market, the country’s central bank said on Wednesday. This registration comes ahead of a highly-anticipated announcement by the International Monetary Fund on Monday that China’s yuan may join its foreign exchange basket. That would place the yuan on par with the U.S. dollar, Japanese yen, British pound and euro in the exclusive Special Drawing Rights (SDR) basket. The seven institutions that have been registered include three central banks: Hong Kong Monetary Authority, Reserve Bank of Australia, and National Bank of Hungary, the People’s Bank of China said in a statement on its website. The International Bank for Reconstruction and Development, International Development Association, Trust Funds of World Bank Group, and Government of Singapore Investment Corp, are the other four institutions to be admitted to the domestic market. The PBOC said that the institutions would now be allowed to trade spot products, forwards, swaps, currency
Hong Kong Monetary Authority was obviously included in the list
swaps and options in the country’s domestic foreign exchange market. China issued detailed rules on letting foreigners participate in the interbank foreign exchange market in September, following on from the PBOC’s decision in July to permit long-term foreign investors trade in the interbank market and remove limits on the size of investments. Granting foreign investors greater access to its capital markets is a longrunning theme in China’s quest to reform its economy and turn it into one more reliant on free markets, and less dependent on central planning. Reuters
KEY POINTS Seven institutions register to enter interbank FX market May trade spot products, forwards, swaps, FX swaps and options
Strengthening economic ties with Bosnia Chinese Premier Li Keqiang and Denis Zvizdic, chairman of the Council of Ministers of Bosnia and Herzegovina (BiH), met in Beijing yesterday. Hailing results of their industrial cooperation, Li called on the two sides to work together more in hydropower, wind power, grid transmission systems and railway upgrades. China backs Chinese companies’ investment in BiH fields including cement building materials, mineral exploitation, forestry processing and automobile production, according to the premier. Zvizdic said BiH is happy to cooperate more with China in renewable energy, electric power, highway construction, processing and manufacturing, agricultural products trade and other areas.
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November 27, 2015
Asia
Philippines Q3 economic growth slower than expected Strong domestic demand, underpinned by monthly remittances and benign inflation have kept Philippines relatively resilient to sputtering global demand Karen Lema
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he Philippine economy grew slightly slowerthan-expected in the third quarter but remains on track to be one of Asia’s fastest growing economies this year with domestic consumption and the country’s services sector staying strong. The gross domestic product data released yesterday supports views the central
bank will keep its interest rates policy unchanged for now as growth holds up in the face of slowing global demand. The economy grew 1.1 percent from the second quarter, below the 1.5 percent forecast in a Reuters poll, and slower than the June quarter’s 2.0 percent. From a year earlier, third
quarter growth was 6.0 percent, picking up from an upwardly revised growth of 5.8 percent in the second quarter but weaker than a forecast 6.3 percent. “This growth trajectory we are seeing will likely continue in the fourth quarter as we expect domestic demand to still pick up during the holiday season,” Economic
Planning Secretary Arsenio Balisacan said in a media briefing, adding low inflation and the impact of election spending should support growth. Strong domestic demand, underpinned by monthly remittances worth around US$2 billion from overseas workers, and benign inflation, have kept Southeast Asia’s fifth largest economy relatively resilient to sputtering global demand. That has allowed the Bangko Sentral ng Pilipinas (BSP) to keep its key policy rate steady at a near 1-1/2year low of 4.0 percent, where it has been since September 2014. “They will probably retain a neutral stance in the December meeting, but we might see a less hawkish rhetoric from the BSP from hereon until probably we see
Record slump in Australian business investment a blow to GDP Figures on gross domestic product for the third quarter are due next week and analysts had been looking for a healthy rebound of around 0.8 percent Wayne Cole
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ustralian business investment plunged by the most on record last quarter as firms slashed spending on plant and buildings, a surprisingly sharp blow to economic growth that sent the local dollar reeling. Yesterday’s data showed investment dived 9.2 percent in the third quarter to A$31.4 billion,
more than three times the market forecast and the fourth straight quarter of declines. The dismal report was a blow to hopes that economic growth rebounded strongly in the third quarter and a sign that interest rates may yet have to be cut again, albeit not in the short term. Figures on gross domestic product (GDP)
for the third quarter are due next week and analysts had been looking for a healthy rebound of around 0.8 percent, thanks largely to a pick up in resource exports. “You are likely to see some downwards revisions to GDP,” said Su-Lin Ong, a senior economist at RBC Capital Markets. “Weakness is across the board, in services and capex.
Total planned spending looks largely unchanged since the last time. So these are still pretty soft numbers all around.” Mining investment is in near free fall after a decade of madcap expansion saw it quadruple to reach 8 percent of Australia’s A$1.6 trillion in annual GDP. Spending by miners dived 10.4 percent in the
the fourth quarter (GDP) print,” said Emilio Neri, chief economist at the Bank of the Philippine Islands. Balisacan said risks to growth remain, particularly from a protracted El Niño weather pattern, and political uncertainty ahead of the country’s national election in May as investors hold expansion plans until after a new government is formed. But Balisacan said average growth this year is still likely to come in within the 6 to 6.5 percent government estimate. If such expectations are met, growth would be higher than market forecasts of 5.7 percent and just behind the growth projections of Asian economic powerhouses China and India. “The medium-term outlook is obviously dependent on the choice and performance of the next president. However, it would take a spell of very bad governance to undo the progress made under (President Benigno) Aquino, and we expect the economy to continue growing strongly,” said Daniel Martin, senior Asia economist at Capital Economics. Main growth drivers in the third quarter were services, which climbed an annual 7.3 percent driven by transport, communication and real estate, and a 17.4 percent jump in government spending in the period against a yearago decline of 2.5 percent. Reuters
third quarter, on top of a 11.7 percent drop the previous quarter. The Australian dollar shed a third of a U.S. cent on the weak report to hit US$0.7225. Interbank futures were little moved as the Reserve Bank of Australia (RBA) has recently cast doubt on the need for further easing with rates already at record lows of 2 percent. Just this week RBA Governor Glenn Stevens laid out a laundry list of improving indicators and questioned whether another cut would be the most effective way to aid the economy. The one bright sport in the data was that firms outside of mining did upgrade their spending plans for the financial year to end June 2016. The Australian Bureau of Statistics found total spending was now projected at A$120.4 billion, up from A$115.7 billion three months earlier. Reuters
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Business Daily | 13
November 27, 2015
Asia Japan Inc lobby says capex could surge if government moves on reforms The government cut the corporate tax rate to 32.11 percent in the current fiscal year Tetsushi Kajimoto
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apan’s biggest business lobby forecast yesterday that capital spending could grow 14 percent over the next three years if the government adopts sweeping reforms, including a swift cut in the corporate tax rate. The ambitious projection - for capital spending to hit 81.7 trillion yen (US$666.56 billion) in the fiscal year that starts from April 2018 was presented by Keidanren during a meeting between cabinet ministers and business leaders. Such a level would be the highest since before the global financial crisis. Prime Minister Shinzo Abe is piling pressure on companies to increase investment and raise pay to spur economic growth, as his “Abenomics” recipe of monetary stimulus, public spending and reform continues to struggle for traction. “Whether we can achieve a virtuous growth cycle depends on capital expenditures and wage hikes,” Abe told the joint meeting. “I highly appreciate the stance that was shown by the business circles. I expect them to carry it out steadily.”
Keidanren said it would urge companies which reported stronger profits to offer bigger wages increases at next spring’s labour-management talks than they did this year, with an eye on the government’s aim for nominal 3 percent growth. Sadayuki Sakakibara, chairman of Keidanren, also demanded that the government quickly lower the effective corporate tax rate - among the developed world’s highest - to below 30 percent. “We want the tax rate to fall below 30 percent next fiscal year and want it to be 25 percent as early as possible. If it is realised swiftly, that would accelerate investment,” he told reporters. The government cut the corporate tax rate to 32.11 percent in the current fiscal year from last year’s 34.62 percent, and plans to reduce it to 31.33 percent next fiscal year. Abe said the tax rate would be cut more than planned next fiscal year, paving the way for it drop below 30 percent earlier. He asked businesses to cooperate to help the government secure tax revenue sources needed to implement the corporate tax reform.
KEY POINTS Abe says virtuous growth depends on capex, wage hikes Keidanren wants corp tax rate to be 25 pct to accelerate capex Japan Inc sit on cash pile, reluctant to boost capex The amount of cash Japanese companies have amassed has increased since Abe took office in December 2012. Government data showed corporate internal reserves stood at 350 trillion yen in the fiscal year ended March 2015, versus 300 trillion yen two years earlier. In comparison, capital spending stood at about 70 trillion yen currently, up about 5 trillion yen in the past three years but still far below 76.8 trillion yen seen before the collapse of Lehman Brothers triggered the global crisis. Reuters
S. Korean economy sustaining recovery South Korea’s economy maintained its modest recovery into the middle of this month led by solid growth in private consumption, construction spending and service-sector output, the central bank said yesterday. The Bank of Korea said in a monthly report on regional economic conditions that manufacturing output posted little growth but service-sector output grew slightly. The report covers a roughly 30-day period up to the middle of the month. It said among the key categories of expenditure, private consumption and construction investment enjoyed modest growth whereas capital investment was little changed.
Financial flows a challenge for Indonesia Flighty financial flows are now the most pressing challenge Indonesia faces as it seeks to strengthen its balance of payments, the central bank governor said yesterday. Agus Martowardojo told reporters that financial flows are now a more pressing concern than the current-account deficit, which has narrowed to its lowest level for nearly two years. “We are working to improve the health of the current account, and things have improved, but there is a new challenge, namely financial transactions,” he said. Indonesia saw its balance of payments record a deficit of US$4.6 billion in the third quarter.
Japan’s CO2 emissions fall 3 pct to 3-year low
Singapore’s manufacturing output down Output of the chemicals cluster increased 5.5 percent in October
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ingapore’s manufacturing output declined 5.4 percent in October on a year-on-year basis, with the output of electronics cluster encountering a sharp decline, data released by the Singapore Economic Development Board (EDB) showed yesterday. EDB said excluding biomedical manufacturing, the country’s manufacturing output fell 6.4 percent. While on a seasonally adjusted month-on-month basis, manufacturing output increased 2.5 percent in October compared to the previous month. Excluding biomedical manufacturing, the output grew 1.7 percent.
The electronics cluster’s output fell 14.0 percent in October on a yearon-year basis. Data storage and other electronic modules and components segments recorded output growth of 10.1 percent and 23.9 percent respectively, while the rest of the electronics segments registered output declines. EDB said the precision engineering cluster decreased 6.9 percent in October compared to a year ago. The machinery and systems segment declined 2.7 percent, while precision modules and components segment fell 11.3 percent. Output of the transport engineering cluster declined 4.0 percent year-on-
The electronics cluster's output fell 14.0 percent in October on a year-on-year basis
year in October, weighed down by the marine and offshore engineering and land transport segments. Lower level of rig-building and ship-building activities contributed to the decline in the marine and offshore engineering segment. The aerospace segment increased 6.1 percent on the back of more engine repair jobs. The biomedical manufacturing cluster fell 1.6 percent in October on a year-on-year basis, said EDB. The medical technology segment grew 36.2 percent due to strong export demand for medical devices and supplies. However, this was offset by a 10.8 percent decline in the pharmaceuticals segment. Output of the chemicals cluster increased 5.5 percent in October compared to a year ago, with petroleum and petrochemicals segments increasing 9.7 percent and 4.0 percent respectively. The specialties segment recorded growth of 7.2 percent on the back of expanded production capacities. On the other hand, the other chemicals segment declined 1.6 percent. The general manufacturing cluster’s output increased 0.6 percent year-on-year in October. The miscellaneous industries segment registered an increase of 2.0 percent, while the food, beverages and tobacco segment increased 1.6 percent. In contrast, the printing segment declined 5.4 percent with lower demand for commercial printing. Xinhua
Japan’s greenhouse gas emissions fell 3 percent to a three-year low in the fiscal year ended March due to reduced power demand and growing renewable energy, preliminary government figures showed yesterday. Emissions fell for the first time in five years to 1.365 billion metric tonnes of CO2 equivalent, according to Ministry of Environment data. That was down 2.2 percent from 2005 and up 7.5 percent from 1990. Japan’s emissions had been rising after the 2011 Fukushima disaster that led to the closure of nuclear power plants and an increased reliance on coal.
Australian PM under fire for cost of broadband network The Australian Prime Minister Malcolm Turnbull is under fire after a report found the government’s new national internet service, which he championed, may need to be completely refurbished. In his former post as minister for communications, Turnbull was charged with rolling out the lion’s share of the previous Labour government’s US$580 million National Broadband Network (NBN), billed to bring Australia’s dated communications service into the 21st century. Yesterday, a leaked report surfaced suggesting the NBN’s Hybrid Fibre Coaxial (HFC) may need to be ripped up and replaced.
14 | Business Daily
November 27, 2015
International Britain axes £1 billion carbon capture scheme Britain has quietly cancelled a competition to develop carbon capture and storage technology (CCS), reversing support for a tool intended to help combat global warming ahead of a climate summit in Paris next week. The change was announced to the London Stock Exchange as finance minister George Osborne revealed a much-awaited budget update to parliament that vowed to increase investment in energy research. Proponents of CCS technology reacted with dismay to the announcement that funding was no longer available for the £1.0 billion (US$1.5 billion) scheme.
Bank of Portugal economist Centeno named finance minister
Portugal’s President Anibal Cavaco Silva has accepted the line-up of a new Socialist government in which Bank of Portugal economist Mario Centeno will serve as finance minister. With a PhD from Harvard, Centeno, 48, is an expert on labour market issues. He was the main economic policy advisor to Socialist leader and prime minister-designate Antonio Costa, coordinating the Socialist economic programme before an October 4 election in which centre-right won most votes but lost its parliamentary majority. That ultimately led to Costa’s appointment as prime minister on Tuesday.
Euro area lending accelerates to near 4-year high Euro zone lending expanded at its fastest rate in nearly four years in October while a broader measure of money circulating grew well ahead of expectations, data from the European Central Bank showed yesterday. Growth in lending to non-financial corporations picked up to an annualised 0.6 percent from 0.1 percent in September, the best reading since January, 2012, while lending growth to households rose by 1.2 percent from 1.1 percent, also the highest reading since the start of 2012. Sparse lending to companies has dogged the struggling euro zone economy but the picture improved slightly in recent months.
Argentine ex-central banker appointed finance minister Argentine President-elect Mauricio Macri named former JP Morgan executive and ex-central bank chief Alfonso Prat-Gay his finance minister in a sign that he will move quickly to restore the bank’s autonomy and free up the economy. Macri, who won Argentina’s presidential election on Sunday, named several former businessmen who are deeply critical of outgoing President Cristina Fernandez’s interventionist policies to key Cabinet positions. Former Shell Argentina executive Juan Jose Aranguren will be energy minister and the former Buenos Aires city bank chief Federico Sturzenegger will be central bank head if Alejandro Vanoli steps down.
Big banks accused of interest rate-swap fixing in U.S. class action suit The suit was brought by The Public School Teachers’ Pension and Retirement Fund of Chicago Mike Kentz
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class action lawsuit accuses 10 of Wall Street’s biggest banks and two trading platforms of conspiring to limit competition in the US$320 trillion market for interest rate swaps. The class action lawsuit, filed in U.S. District Court in Manhattan, accuses Goldman Sachs Group, Bank of America Merrill Lynch, JPMorgan Chase, Citigroup, Credit Suisse Group, Barclays Plc, BNP Paribas SA, UBS, Deutsche Bank AG, and the Royal Bank of Scotland of colluding to prevent the trading of interest rate swaps on electronic exchanges, like the ones on which stocks are traded. As a result, the lawsuit alleges, banks have successfully prevented new competition from non-banks in the lucrative market for dealing interest rate swaps, the world’s most commonly traded derivative. The banks “have been able to extract billions of dollars in monopoly rents, year after year, from the class members in this case,” the lawsuit alleged. Goldman Sachs, Citigroup, Bank of America, BNP Paribas, Credit Suisse and Royal Bank of Scotland declined to comment. JP Morgan, Barclays, Deutsche Bank and UBS were not immediately available to comment. The suit was brought by The Public School Teachers’ Pension and Retirement Fund of Chicago, which purchased interest rate swaps from multiple banks to help the fund hedge against interest rate risk on debt. The
plaintiffs are represented by the law firm of Quinn, Emanuel, Urquhart, & Sullivan LLP, which has taken the lead in a string of antitrust suits against banks. As a result of the banks’ collusion, the suit alleges, the Chicago teachers’ pension and retirement fund overpaid for those swaps. The suit alleged that since at least 2007 the banks “have jointly threatened, boycotted, coerced, and otherwise eliminated any entity or practice that had the potential to bring exchange trading to buy-side investors.” “Defendants did this for one simple reason: to preserve an extraordinary profit centre,” the lawsuit said. The banks masked their collusion by using code-names for joint projects such as “Lily”, “Fusion,” and “Valkyrie,” according to the suit. The suit also accused broking platforms ICAP and Tradeweb, which control key cogs in the infrastructure of the swaps market, of facilitating the antitrust violations by acting as a forum for collusion and making
business decisions on the banks’ behalf. Nine of the ten defendant banks own equity stakes in Tradeweb and hold positions on the company’s board and governance committees. Tradeweb is majority owned by Thomson Reuters. Thomson Reuters is not named as a defendant in the suit. Tradeweb, ICAP and Thomson Reuters declined to comment. Bankers used those positions to control the direction of the Tradeweb and collectively blocked the development of more investor friendly swaps exchanges by firms such as the CME Group, TrueEX, Javelin Capital Markets, and TeraExchange, according to the suit. “During the time period relevant here, Tradeweb board and governance committees were organized specifically for the purpose of protecting the ‘dealer community’ from the growth of exchange trading,” reads the suit. Similar allegations of bank collusion in the market for another type of derivative known as credit default swaps, have been the subject of investigations by the United States Department of Justice and the European Commission, as well as a separate class action lawsuit brought by investors. In September, twelve banks and two industry groups settled that lawsuit by agreeing to pay US$1.87 billion, making it one of the largest antitrust class action lawsuits in U.S. history. Reuters
Russia tightens control over Turkish food imports: minister Russia also said it could redirect its Turkish exports including wheat and oil to countries in the Middle East and Africa
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ussia said yesterday that it would reinforce control over Turkish food imports citing frequent violations of safety standards, as tensions surged with Ankara over the downing of a Russian warplane on the Syrian border. Some 15 percent of Turkish agricultural produce does not meet Russian standards with levels of pesticides, nitrates and nitrites considerably above safe limits, Agriculture Minister Alexander Tkachev said. “Taking into account repeated violations by Turkish producers of Russian norms, the Russian government has tasked (the food safety agency) Rosselkhoznadzor with reinforcing control over supplies of agricultural produce and food from Turkey,” Tkachev said.
Russia will “organise additional checks at the border and at food production sites in Turkey,” he said. Russia has found “traces of banned and harmful substances” in Turkish food products of animal origin some 40 times this year, Tkachev added. Over the past 10 months Turkey imported agricultural produce and food worth just over US$1 billion (one billion euros) to Russia, down 21.2 percent compared to the same period last year. Turkish vegetables account for some 20 percent of vegetables imports to Russia, said Tkachev, adding that Moscow could opt to buy produce from other countries, such as tomatoes from Iran, Israel, Morocco, Azerbaijan and Uzbekistan. Turkey also accounts for a quarter of Russian citrus fruit imports, he
said, adding that the country could switch to other producers including South Africa, China, Argentina and Georgia. Russia also said it could redirect its Turkish exports including wheat and oil to countries in the Middle East and Africa. Over the past 10 months, Russian exports to Turkey amounted to US$1.3 billion. Russia is pulling out all the stops in response to NATO member Turkey shooting down its military plane. On Wednesday, lawmakers from the Kremlin-friendly A Just Russia party introduced a bill calling for a maximum punishment of five years in jail for those who deny that the mass killing of Armenians by Ottoman Turkey in 1915 was genocide. AFP
Business Daily | 15
November 27, 2015
Opinion Business
wires
A Banker’s revolution
Leading reports from Asia’s best business newspapers
Alfred Hannig
Executive Director at the Alliance for Financial Inclusion
THE KOREA HERALD South Korea kicked off a four-day exhibition yesterday to promote the country’s creative economy policies, inviting local firms to share their achievements in the technology realm. The creative economy refers to President Park Geun-hye’s flagship policy that aims to merge different industrial sectors, mostly with information and communications technologies, to generate new business opportunities and foster the growth of start-ups. The Ministry of Science, ICT and Future Planning said around 70,000 start-ups were set up in the country through September this year, while the amount of investment on venture firms advanced 30 percent on-year.
BANGKOK POST Information technology (IT) spending in Thailand will grow at a slower rate than GDP this year for the first time in five years, says IDC. Unfavourable economic conditions, a high level of household debt and weak consumer spending are the main factors in the sharp drop in IT spending. “The IT industry is on pace to total 373 billion baht in 2015, a 2% increase from last year,” said Jarit Sidhu, senior analyst at IDC Thailand. The local IT sector saw its glory days in 2012 with 15.8% growth, dropping to 7.8% in 2013 and 3% in 2014.
THE STAR Bank Negara Malaysia (BNM) yesterday introduced three new mobile applications to help consumers in making informed financial decisions. The mobile apps are MyBNM, BNM MyLINK and MyTabung. MyBNM allows consumers to keep abreast with the latest financial news including announcements, speeches, interviews, releases, fraud alerts, and foreign exchange rates, among others. Consumers will also receive updates on the monetary and financial policies of BNM via the app. MyLINK provides a direct interface between consumers and financial service providers. The app offers a directory of conventional and Islamic banking, insurance and takaful companies.
THE PHNOM PENH POST Hong Kong-based developer Eastland Development (HK) Ltd has expressed interest in listing on Cambodia’s stock exchange within a year. Sam Yang, the company’s chief executive, said during a recent company promotional event that Eastland is working with a local underwriter to prepare to float shares on the Cambodian Stock Exchange (CSX). “The application will be ready early next year and the company will have an initial public offering in September next year,” he said, adding that Eastland intends to be the first foreign-registered company to list on the CSX.
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inancial regulators are generally known for taking aapproach to change. But in the developing world, that reputation is being turned upside down. In some of the world’s poorest countries, central bankers have proved willing to make bold decisions – embracing innovative approaches in their quest to broaden participation in the formal financial system, increase financial stability, and put their countries on the path to inclusive, sustainable economic growth. Increasing financial inclusion requires fundamentally rethinking how a country’s financial system is structured and operates. It also frequently necessitates the use of instruments outside of the central bankers’ traditional toolkit. In Kenya, for instance, officials altered the regulatory framework to allow for the growth of mobile money. In Malaysia, the central bank took a lead role in raising the public’s level of financial literacy. And in the Philippines, the Bangko Sentral ng Pilipinas helped double the number of access points where consumers could obtain financial services, supporting the opening of 517 micro-banking offices, many of them in municipalities with no traditional bank branches. Likewise, in 2011, the Bank of Tanzania made a specific commitment to increase financial inclusion under the Alliance for Financial Inclusion’s Maya Declaration, a commitment by policymakers in the developing world to unlock the social and economic potential of the poor. The result was dramatic and vastly exceeded expectations. Tanzania reached its goal of providing 50% of
its adult citizens with access to banking a year ahead of schedule, making the country a global leader in digital financial services. As in neighbouring Kenya, the game changer was the widespread adoption of mobile money. “It may sound maverick,” said Benno Ndulu, the bank’s governor. “But we must let innovation run ahead of regulation.” While East Africa is blazing the trail when it comes to electronic money, other parts of the world are adopting different innovative approaches. Last year in Colombia, Congress passed a law creating a new type of financial institution called a Specialized Electronic Deposit and Payment Institution. While not technically banks, these institutions are able to accept customer deposits and payments electronically through mobile phones or at licensed locations like a post office. The effort is part of a larger national strategy, launched in 2014, to provide 76% of adults with financial access and 56% with active savings accounts by the end of 2016. And in the Pacific region, Fiji, Papua New Guinea, Samoa, Solomon Islands, Timor-Leste, Tonga, and Vanuatu have banded together to create the Pacific Islands Regional Initiative (PIRI), which will enable every Pacific Island state, even those without a central bank, to share knowledge on improving access, quality, and usage of financial services in geographically challenging environments. Each of these efforts started as a country-led initiative, born of particular challenges and designed to meet the specific needs of the local population. But the accumulation of expe-
As central banks change how they operate, retail banks are responding with new ways of doing business
rience is proving invaluable. As lessons are shared and successes provide inspiration for others, the impact is becoming exponential, with even the smallest countries demonstrating that they have a significant contribution to make. Meanwhile, as central banks change how they operate, retail banks are responding with new ways of doing business. Kenya’s Equity Bank has grown enormously by explicitly targeting the financially excluded; in just six years, it has expanded from a half-million customers to almost six million. Telecommunication companies are also pioneering new services. Tigo, for example, now serves more than 56 million customers in 14 countries in Latin America and Africa with products such as cross-border mobile payments and cashless services for sales agents. As with any period of great change, it is not easy to see what lies ahead. As Stephen Kehoe, Head of Global Financial Inclusion at Visa, recently noted, “The last seven years provide absolutely no indication of what the next seven years will be.” What is clear, however, is that there still remains much to be done – and that the opportunities are nearly limitless. Bringing the world’s two billion unbanked people out of the shadows and into the mainstream financial system will require new partnerships among regulators, the private sector, non-profits, regional bodies, and international organizations. That may seem like a tall order, but filling it would help build a brighter future for everyone. Project Syndicate
16 | Business Daily
November 27, 2015
Closing Authorities plan to cut domestic corn prices
European and Chinese central banks finish swap test
Beijing plans to cut local corn prices for a second year as it pushes to reignite stalled demand from its crisis-hit grain processors and whittle down the world’s biggest corn stockpile, industry sources said. In its latest move to boost a sector that has struggled with the world’s most expensive domestic corn, the government is preparing to slash state support prices by another 10 percent to 1,800 yuan (US$282) per tonne for 2016/17, according to three sources. That would follow previously announced cuts for the crop year that began in October.
China’s central bank and the European Central Bank (ECB) completed two tests on bilateral currency swaps this year, getting ready for a swap based on agreed procedures. The tests were conducted in April and November 2015 by providing symbolic amounts of euro and renminbi liquidity, the People’s Bank of China (PBOC) said in a statement. In October 2013, the PBOC and the ECB signed a bilateral local currency swap arrangement for the purpose of supporting economic and trade activities and ensuring the stability of financial markets.
‘Land kings’ shine spotlight on Mainland’s dual-track property market Despite unsold homes hitting a record 686.3 mln square metres at the end of October
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he return of “land kings” -- as plots sold at record prices are dubbed in China -- has highlighted duality in the property market. With the overall industry still under destocking pressure, land prices are soaring again in big cities after being subdued during the downturn, while inventories are still mounting in smaller cities. On Wednesday, a parcel of land for residential development in Shanghai was sold at auction for 61,000 yuan (US$9,547) per square meter of housing, a record high in the metropolis. On Tuesday, two Beijing land lots were auctioned for
prices that approached or even exceeded the average housing prices in their neighbourhoods. There have also been “land kings” in Guangzhou, Nanjing, Hangzhou and other top-tier or second-tier cities in the past few weeks. Against an overall industry backdrop of high inventories and falling investment, China’s real estate market has clearly become divergent. The market entered a downturn in 2014 due to weak demand and a supply glut, prompting authorities to take easing measures, including interest rate cuts, reducing down payments and scrapping home-purchase restrictions.
percent from a year earlier, official figures show. In first-tier cities, for every new home sold in October, there were nine unsold homes, and the ratio went up to 12.2 and 18.9 for second- and third-tier cities respectively, according to E-house China R&D Institute. To avert risks in those cities, developers tend to move their investment to bigger cities, resulting in the market divergence, Zhang explained. In the first half of the year, more than 90 percent of funds spent by 20 major property developers on land purchase went to first- and second-tier cities, according to data from Centaline Property Agency. An underlying factor behind the market movement has been the flow of migrant labourers to big cities, said Chen Jie, an economist at Shanghai University of Finance and Economics. Despite the land fervour in metropolises, some have warned of industrial risks due to high inventories. Market competition in big cities like Beijing will become “brutal,” according to a research note from Anbound Consulting.
As a result of support policies, property sales in toptier cities and some secondtier ones have recovered, but the cooling continued in others, especially thirdtier cities where a previous market boom led to serious oversupply. Sales of land for residential use in 40 major cities in China rose to 37.8 billion yuan last week, up 157 percent from the previous week, according to data from China Index Academy, a property research organization. Meanwhile, there remains great pressure to destock. China’s unsold homes hit a record 686.3 million square meters at the end of October, up 17.8
Credit Suisse gets brokerage Gold imports in China approval to operate in mainland drop first time in 4 months
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To address the problem, authorities should adopt differentiated policies, said Meng Xiangyuan, a property researcher at Nanjing Forestry University. He suggested “stabilizing developers’ expectations” for land supply in top-tier cities to rein in the purchase rush, and curbing land supply in lower-tier cities to help digest house inventories. Analysts have also called for faster reforms to the household registration system to accelerate urbanization and spur house purchases. The future of China’s property market has broader implications for the economy. Sagging property investment has dragged down China’s GDP growth in the third quarter to a six-year low of 6.9 percent. The knock-on effect of a property construction downshift will continue to spread through the rest of the Chinese economy for the next two years, dampening demand for commodities and machinery, Wang said in a research note earlier this month. Xinhua
Pakistan tightens its anti-money laundering law
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redit Suisse Group AG said yesterday its investment banking joint venture in China has won approval to provide securities brokerage services, in a further sign of China’s gradual warming to foreign players in its securities industry. The joint venture, Credit Suisse Founder Securities Ltd, is the first Sino-foreign firm to get approval to buy and sell shares on behalf of clients since China rewrote the rules for foreign participation in its securities industry in 2007. It comes at a time when trading in China’s volatile stock markets is providing strong returns to local brokers. The venture will be limited to providing brokerage in the country’s Shenzhen Qianhai development zone in the southern province of Guangdong, where HSBC earlier this month announced it would launch its own investment banking partnership. Foreign securities joint ventures in China mostly operate under restricted licences that limited them to underwriting equity offerings, rather than the potentially more lucrative business of buying and selling shares on behalf of clients.
hina’s net imports of gold from Hong Kong dropped for the first time in four months in a holiday-shortened October and as demand lapsed in a lean season before the New Year. Net purchases fell to 87.8 metric tons from 96.6 metric tons in September and compares with 69 tons a year earlier, according to data from the Hong Kong Census and Statistics Department compiled by Bloomberg. Exports to Hong Kong increased to 19.7 tons from 13.7 tons. Mainland China doesn’t publish the data. Lower imports from the world’s largest user may hurt bullion prices which have fallen 9.6 percent this year amid signs the U.S. economy may be resilient enough to weather the first interest rate increase since 2006. Financial markets in China closed for the National Day holiday between October 1-7. “Monthly imports sometime fluctuate in line with seasonal demand,” Long Ling, analyst at Industrial Futures Co., said by phone from Shanghai before the data was released. “Consumption may pick up again approaching New Year or the Chinese New Year.”
akistan’s parliament has approved amendments to an anti-money laundering law to make it more effective in targeting the financing of extremists and bring it into line with global standards, officials said yesterday. The National Assembly, the lower chamber of the federal parliament, unanimously approved the amendments on Wednesday, two weeks after the Senate passed it, parliamentary officials said. The amendments will boost the law to “deal effectively with terrorism financing”, a senior finance ministry official told AFP, adding that they “reflect the government’s firm resolve to strengthen its anti-money laundering regime”. The law now complies with international standards outlined by the global Financial Action Task Force (FATF), the official added. In June Pakistan’s central bank issued regulations for banks and financial institutions to fight money launding and financing for extremists, and the finance ministry official said the latest amendments also bring the law further in line with those guidelines.
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