MOP 6.00 Closing editor: Oscar Guijarro
Chinese foreign exchange reserves decrease in November
Taiwan exports continue falling more than expected
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Year IV
Number 936 Tuesday December 8, 2015
Publisher: Paulo A. Azevedo
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Beijing trains exchange officials in anti-corruption practices
Land Law To Be Tested
And now to the courts. The gov’t and developer of Pearl Horizon have become increasing embroiled in the legal status of the residential complex. Which is to be resolved through litigation initiated by the developer. The fly in the ointment is the expiry of the land grant, and the reasons for non-completion. Meanwhile, buyers who have already made their down payments on off-plan units protested in front of gov’t offices yesterday. The authorities have announced they will cancel the concession based on the terms and conditions of the Land Law Page
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Export morale misery
Exporters’ confidence has taken a knock. A survey found price competition, costlier raw materials and lack of staff to be the primary bugbears. Only 6.2 pct of the 100-plus respondent companies surveyed in Q3 were optimistic about the coming six months
www.macaubusinessdaily.com
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Hotel occupancy rates down Hotels are digesting the arrival of new ‘players’. Average occupancy rates declined 4.6 pct y-o-y to 83.7 pct in October. 5-star hotels posted their first double-digit drop in room rates for the year. Down 12.2 pct y-o-y
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Wheel turning Vietnam is emerging as a casino force. Challenging Macau’s once-dominant hold on VIP gaming. Danang is attracting an increasing number of wealthy Chinese. Lured by sun, sand and discretion. With junkets providing Macau-like services
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Time for change Timing is all. The Mainland’s stock market regulator has announced trading hours for stock-index futures contracts next year will start 10 minutes later. At 9:25 a.m. from January, in line with the cash market. While the afternoon session will close at 3:00 p.m., 15 minutes earlier
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Name
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Bank of East Asia Ltd/T
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Lenovo Group Ltd
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Belle International Ho
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China Shenhua Energy
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China Resources Land L
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PetroChina Co Ltd
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Source: Bloomberg
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2015-12-8
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2 | Business Daily
December 8, 2015
Macau
MSAR to declare Pearl Horizon plot grant invalid The government is ready to launch an open bid for the Pearl Horizon land plot again if it wins the lawsuit filed by the developer, which claims that the government is to blame for the delays in the project Stephanie Lai
sw.lai@macaubusinessdaily.com
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he Macau Government is going to declare the land concession for the Pearl Horizon residential project on the Macau Peninsula invalid on December 25 as the land use stipulation will have been unfulfilled by the deadline. The government proposes an open tender for the plot is possible if it can win the lawsuit initiated by the developer regarding the delays in developing the project. The news was announced by Secretary for Administration and Justice Sonia Chan Hoi Fan in a press briefing yesterday, an event that follows the Hong Kong-listed developer Kowloon Development Company Ltd’s announcement on Friday that the project owner, locally incorporated Polytex Corporation Ltd., would sue the Macau Government for remedies in all respects to continuing and completing the project. “With the construction progress we saw, the land grantee cannot complete the land use before the deadline,” said Ms. Chan, “According to Article number 48, 166 and 215 of the Land Law, as well as the experiences of similar cases the Macau Government has dealt with before, the government has sufficient grounds and legal basis to announce that the plot [for Pearl Horizon] will lose its validity after December 25.” The project plot, originally an industrial site, was approved by the government for rezoning to residential use in 2006. The plot was granted to the developer on temporary concession terms, which expire on December 25 this year; a temporary concession is not renewable, the Land Law states.
When launching the open bid for the land plot, we’ll take into consideration the interests of the buyers who have already purchased the unfinished flats of Pearl Horizon and see if we can create some special, beneficial conditions for them Sonia Chan Hoi Fan, Secretary for Administration and Justice
The delay in the completion of the project was caused by the delay of the Macau Government in granting the requisite approvals and permits for the development of the high-end residential project Pearl Horizon, Kowloon Development stated in its Friday filing. Kowloon Development has a controlling interest in the project, which is located at Lote P in Novos Aterros da Areia Preta on Macau Peninsula. The construction permit for Pearl Horizon was only issued in August, 2014 after the developer said that it
had spent three years completing an environmental assessment report of the project. “If the land grantee loses in the lawsuit, the direction for us is that the land plot [for Pearl Horizon] will be on open bid again,” said Sonia Chan, who only noted that the construction permits have been issued under regular legal procedures when asked about the delays. An exemption of an open bid is not possible under the terms of the Land Law, the Secretary noted. According to Article 55 of the Land Law, an open bid may only be exempted if the concession is made based on “public interest”, including the development of non-profit social services and public facilities. “When launching the open bid for the land plot, we’ll take into consideration the interests of the buyers who have already purchased the unfinished flats of Pearl Horizon and see if we can create some special, beneficial conditions for them,” Ms, Chan responded in the briefing. But when asked if such conditions meant that the buyers could have certain privileged rights in purchasing flats from a residential redevelopment of the plot, the Secretary noted that the government could not picture concrete terms at the moment as it is still pending observing the terms of the lawsuit to be launched by the developer.
Victory not guaranteed
The Secretary refused to comment on the chances of the government winning the lawsuit to be launched by the developer over the delays in completing the Pearl Horizon project. The off-plan sales of Pearl Horizon were first launched in
2011 before construction had even started on the site. The off-plan sales of the project were put on hold when the new laws on property sales activities became effective on June 1, 2013 as the regulations require that unfinished flats can only be sold when the foundations of the building supported by them have been completed, and that the developer has completed the temporary horizontal property registration process of the project. Some 3,020 units of Pearl Horizon were sold off-plan, with most of the buyers individuals, said Ms. Chan. “If the government wins the lawsuit, then the [off-plan sales] contracts signed will be void,” she said. “In this case, the buyers can have their stamp duty returned to them.” The Secretary said that legislator Gabriel Tong Io Cheng is ready to offer free legal counselling to help Pearl Horizon buyers. While the Secretary suggested that the Pearl Horizon buyers could seek legal means to request the return of their deposits and other compensation, a group of these buyers gathered outside Government Headquarters demonstrating their discontent with the government’s announcement. Ms. Chong, one of the protesting buyers, said that she and many of her fellow protesters could not understand why the government had issued a construction permit for the Pearl Horizon project in 2014 with a land use deadline of end-2015. Chong, who bought a 2-bedroom unit from Pearl Horizon for about HK$6 million in 2012 said that some of the buyers were fearful of the uncertainty of the result of the lawsuit between the government and the developer.
Business Daily | 3
December 8, 2015
Macau
Survey: Companies less confident about exports for coming months Mainland China was viewed as a relatively better market for the city’s exports in the third quarter
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ost local exporters express less confidence in the export business for the near future, citing price competition with other regions and the rise in raw material costs as their primary concerns, the Industrial Export Survey for the third quarter conducted by Macao Economic Services (DSE) reveals. Only 6.2 per cent of the 79 respondent companies surveyed in the third quarter reflected that they were optimistic about the export business for the coming six months, a percentage that has shrunk from 29.3 per cent in the same quarter last year, according to the survey. There is also an increase in the proportion of companies that expressed a pessimistic outlook on the export business: around 35 per cent of respondent companies surveyed in the third quarter were pessimistic about the export business for the coming six months, an increased percentage from 21 per cent registered in the same period last year. The survey questioned local export companies engaged in pharmacy, clothing manufacturing, electronics and electrical appliances. Asked about their major concerns
In the third quarter, 18.3 per cent of the surveyed companies cited ‘lack of staff’ as their biggest challenge for their export business
for the export business for the fourth quarter, price competition with other regions and the rise in raw material costs were cited by the surveyed companies, DSE said. In the third quarter, 18.3 per cent of the surveyed companies cited ‘lack of staff’ as their biggest challenge for their
Gov’t grants MOP4.6 mln contract for 2016 bus service assessment
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he government has commissioned the University of Macau’s UMTEC Ltd. to conduct an assessment on the city’s public bus service next year per a contract worth MOP4.6 million (US$575,000) , the Official Gazette has announced. According to the announcement, the government will pay MOP3.68 million of the total next year, while the remaining MOP920,000 will be settled in 2017. The assessment of the public bus service is an evaluation m e c hanis m laun che d b y th e
government in 2012. The scheme is also applied to the government’s new bus concession contracts with two operators; namely, Macau New Era and Transportes Colectivos de Macau SARL (TCM). According to the contracts, the government’s financial aid to the bus operators will be based on their scores in the assessment. The government will increase its financial support by a maximum five per cent if the operators get 80 points or above. On the contrary, aid to the operators will be reduced if they score below 60. K.L.
export business; ‘rising costs of raw materials’ and ‘lack of export orders’ are the other two major challenges, cited by 11.4 per cent of the companies and 10.1 per cent, respectively. According to the third quarter survey, 61.4 per cent of the respondent companies said they lacked staff, a
percentage that is already slightly lower than the 67.6 per cent measured in the second quarter and 63.4 per cent registered in the same quarter last year. Mainland China was viewed as a relatively better market for the city’s exports in the third quarter, while other countries in the Asia Pacific region have been performing poorly in the period, the DSE survey said. S.L.
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December 8, 2015
Macau Morocco grants visa-free access to SAR residents Holders of a Macau SAR passport will be able to enter the Kingdom of Morocco for a maximum of 90 days visa-free from December 10, the Identification Services Bureau announced yesterday, claiming the two governments had reached agreement on offering mutual visa-free access. The Official Gazette also announced yesterday that the Special Administrative Region is to grant visa-free access and entry permit to nationals of the African Arabic country from Thursday. Currently, a total of 118 governments have granted visa-free access to local passport holders, while 10 other countries allow local citizens to enter their territories with a visa.
5-star hotel room prices down 12 percent in October This is the first double-digit room rate decrease that the sector has posted this year Kam Leong
kamleong@macaubusinessdaily.com
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n October, the city’s 5-star hotels posted their first double-digit drop in room rates for the year, down 12.2 per cent year-on-year, according to the latest data released by the Macau Government Tourist Office (MGTO). The data, based on information provided by the Macau Hotel Association, indicated that a room at a 5-star hotel in the territory cost MOP1,847 (US$230.8) per night on average in October, down some MOP258, compared to MOP2,123 one year ago. Meanwhile, room rates at local 4-star hotels and 3-star hotels continued their double-digit downward trend. During the month, 4-star hotels saw their room prices plunge 17.9 per cent year-on-year to MOP925 from MOP1,127 one year ago. In addition, room rates for 3-star hotels dropped to MOP1,068 per night, down 18.1 per cent year-on-year from MOP1,304. But the lower cost for a hotel room did not stimulate the occupancy rate of the hotel sector. The data showed that the average occupancy
rate of local hotels declined by 4.6 percentage points year-on-year to 83.7 per cent in October, with that of 5-star hotels dropping 6.4 percentage points to 81.9 per cent. Accumulatively, the city’s average hotel room rate registered a yearon-year decline of 7.1 per cent for the first ten months of the year, amounting to MOP1,497 per night, compared to MOP1,611 one year ago. In terms of hotel type, room prices for 3-star hotels posted the most notable decrease to MOP1,042 for the ten months, compared to MOP1,244 one year ago. The segment also reached the highest occupancy rate of 86.3 per cent during the period. Although 5-star hotels registered the lowest year-on-year drop of 4.2 per cent in room prices for the ten months, at MOP1,838 per night, the segment saw only 82.7 per cent of its rooms occupied, down 8.2 percentage points year-on-year from 90.9 per cent one year ago. The room rate of 4-star hotels dropped 13 per cent year-on-year to MOP926 for the ten months, with an occupancy rate of 84.5 per cent.
Corporate MGM Macau announces five MORS Gold Pin winners MGM MACAU employees have been awarded five Gold Pin Awards, the most ever received by MGM. The awards ceremony of the 2015 ‘Macao Occupational Skills Recognition System’ (MORS) Gold Pin Competition Award Presentation Ceremony sponsored by the Institute for Tourism Studies (IFT) is Macau’s most prestigious hospitality competition. The Award presentation took place on December 2 and MGM MACAU is honoured by its five MORS Gold Pin Winners for their hard work, dedication and determination. The Macao Occupational Skills Recognition System was launched in 2001 as a joint effort of the Tourism Industry of Macao and IFT, with the main objective of upgrading human resources in the industry through the introduction of a certification
scheme for a number of hospitality and tourism professions. To reward and demonstrate outstanding MORSrecognised professionals IFT has organised the Gold Pin Competition since 2002. The competition is a platform for contestants to demonstrate their professional skills and pit their talent against the best in the industry. This year, some 290 contestants representing 31 companies and 67 contestants were shortlisted for the finals. The five Gold Winners represent various disciplines; namely, Zhang Shuzhen, Room Attendant; Leong Vai Kwong, Security Officer for Tourism and Gaming; Feng Jiali, Front Desk Agent/Customer Relations Officer; Lin Xiaolu, Chinese Restaurant Service Team; and Kwan Wing Fat, Chinese Cuisine Kitchen Team.
Constructor Tak Wa wins UM renovation project
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ocal construction company Companhia de Engenharia Tak Wa Limitada has been granted a contract to renovate a clean room and a wet lab in the State Key Laboratory of Analog and MixedSignal VLSI (AMSV) at the University of Macau, worth MOP5.48 million (US$685,000), according to the
Official Gazette released yesterday. As the renovation work is a multipleyear project, the government will settle MOP1.09 million this year, while the remaining MOP4.39 million will be paid in the next fiscal year. The payment will be made by the government via the public investment plan (Portuguese acronym ‘PIDDA’).
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December 8, 2015
Macau Le Saunda sales down in Q3
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date stated in the contract following a legal appeal. In July 2013, cleaning company Urbaser SA of Spain asked the Court of Second Instance to overturn the government’s decision to grant the city’s waste management contract to CSR, which led the authorities to delay signing the contract with CSR at that time.
ong Kong-listed footwear retailer Le Saunda Holdings Ltd.’s self-owned retail business recorded a year-on-year drop of 6.1 per cent in total sales for the third quarter of its fiscal year ended November 30, it told Hong Kong Stock Exchange yesterday. The company did not release its financial data for the period in yesterday’s filing. But it claimed that its same store sales had posted a decline of 8 per cent for the three months as compared to the same period of last year. However, the retailer’s e-commerce business registered a total sales growth of 26.7 per cent year-on-year during the previous fiscal quarter. The company had a total of 789 selfowned outlets in Mainland China, Hong Kong and Macau as at the end of last month. In fact, for the first half of its fiscal year, Le Saunda’s retail revenue only increased by 0.7 per cent year-on-year to 755.8 million yuan (MOP943 million/ US$117.9 million), following its sales in Hong Kong and Macau shrinking 26.6 per cent year-on-year to 56.2 million yuan. The company generated an interim net profit of 55.2 million yuan, down 28.8 per cent year-on-year.
K.L.
K.L.
Government increases CSR contract value by 3.2 pct The current contract of the cleaning company with the government started in April 2014
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he government has increased the value of its 10-year waste management contract with Macau Waste Systems Co. Ltd. (CSR) to MOP2.13 billion, up 3.2 per cent from MOP2.07 billion, the Official Gazette announced yesterday. The increase is because the government has considered the delay in the starting date of the contract,
which caused extra expenses for the franchised cleaning company during the contracted period, local broadcaster TDM Radio quoted the Environmental Protection Bureau as saying. The current contract of the cleaning company with the government started in April 2014, which represents a five-month delay from the original
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6 | Business Daily
December 8, 2015
Gaming
Discretion pays for Vietnam casino raking in wealthy mainlanders Chinese are the biggest client base for Vietnam's casinos and Crown, like its peers in Macau, works with junket operators Farah Master
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small beachfront Vietnamese casino is giving Macau's VIP gambling scene a run for its money, drawing in more wealthy Chinese through its columned facade than many Southeast Asian rivals with the allure of sun, sand and discretion. Few outside Danang have heard of the Crown International Games Club, a privately owned casino located along this rapidly developing city's main resort strip and which over the past year has emerged as the most exciting place for wealthy Chinese to drop bets worth at least HK$1 million (US$129,030). The popularity of this low-profile casino among the world's most prolific gamblers coincides with the waning fortunes of bigger, more famous rivals such as the opulent Wynn Macau and Grand Lisboa in Macau as a Chinese government crackdown on corruption and conspicuous spending batters the world's biggest gambling industry. "This is a test case of a casino going under the radar that is doing extremely well," said Ben Lee, managing partner at Asian gaming consultancy IGamiX. "There is no other destination I know where the junket and casino organise 25 charter flights a week from China." Crown's lack of renown can be put down to the Vietnamese government's reluctance to promote Danang as a destination for gambling, an activity which remains restricted to foreigners in this conservative, Communist country which maintains a rigid stance on social order.
Owned by Chinese businessman Hui Kong, Crown is one of seven licensed casinos in Vietnam, already a popular destination for many Chinese tourists. Its main gaming area - plushly decked out in beige and gold - and 13 VIP rooms are about a quarter the size of an average Macau casino, but industry executives estimate monthly VIP turnover has increased over the past year to US$3 billion a month, a figure at least double what larger rivals such as Solaire in the Philippines, NagaCorp in Cambodia and Genting Highlands in Malaysia rake in. Crown executives declined to give any financial details. "Right now many people come here mostly to gamble," said James Yang, marketing director at the luxury Crowne Plaza which flanks the casino. The hotel, managed by the Intercontinental Hotels Group, caters to its mainly Chinese guests by providing a sauna, a karaoke parlour and Mandarin-speaking staff. The resort complex, already Danang's largest, will also double the number of its rooms as part of a US$600 million redevelopment plan that includes opening a JW Marriottbranded hotel, a duty free shopping mall and an expansion of the casino.
Not just punts
Several companies are also betting on Vietnam, which analysts say could become a major Southeast
KEY POINTS Privately owned Crown has exclusive licence in Danang VIP turnover exceeds Philippines, Cambodia and Malaysia
Asian casino hub if it allows locals to gamble. Augustine Ha Ton Vinh, a professor who advises the government on the gambling industry, said this restriction is likely to come up for debate next year. Hong Kong-based Chow Tai Fook Enterprises and VinaCapital are building an up to US$4 billion casino resort in central Quang Nam province which is due to open by 2018, while the Ho Tram, a casino backed by U.S. hedge fund Harbinger Capital, is expanding its premises on a beach a two-hour drive from Ho Chi Minh City. So far, Chinese are the biggest client base for Vietnam's casinos and Crown, like its peers in Macau, works with junket operators, typically
companies which loan credit to VIP gamblers and help them bypass China's currency controls. At least 10 of these junkets are now only focusing on Danang, industry executives say, as the slump in Macau's gaming industry pushes their business model to the brink of collapse. "Customers like the environment here much better," said junket operator Hugo Huang as he sipped fresh coconut juice inside a private dining room adjacent to the casino. "We have beautiful beaches, cultural sites and it's very easy for Chinese to feel comfortable." Huang, who also runs VIP rooms in Macau and Cambodia, charters two flights a week from China to Danang. Last month, he flew in 100 VIP gamblers from China for a golf tournament, capping off the trip with a gala dinner and pop music concert. Playing up all the leisure activities Danang has to offer fits in with the government's drive to rebrand the former wartime outpost for U.S. soldiers into a tourist destination for all. "At the moment, we are positioning ourselves as a leisure, beach and meeting and conferencing destination," said Nguyen Xuan Binh, director of Danang's tourism promotion office. Asked about Crown, with its impossible-to-miss glitzy facade and elaborate fountains, Binh said he had never heard of it. Reuters
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December 8, 2015
Greater China
FX reserves down US$87.2 bln in November While the value of China’s gold reserves stood at US$59.52 billion at the end of November
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hina’s foreign exchange reserves, the world’s largest, fell by US$87.2 billion in November to US$3.44 trillion, central bank data showed yesterday, indicating a pick-up in capital outflows that have put pressure on the central bank to support the yuan. The fall in foreign exchange reserves was the biggest since a record monthly drop of US$93.9 billion in August, after a rise of US$11.4 billion in October. “The pick-up in capital outflows appears to have been predominately driven by increased expectations for renminbi (yuan) depreciation” Julian Evans-Pritchard at Capital Economics said in a note. “A rise in offshore interest rates due to the increased likelihood of a December Fed rate hike will also have added to outflow pressures.” China’s surprise devaluation of the yuan on August 11 fuelled a wave of capital outflows on fears the world’s second-largest economy might be slowing
KEY POINTS FX reserves fall to US$3.44 trillion in Nov Drop in Nov reserves sharpest since August Fund outflows put pressure on c.bank to support yuan
more sharply than thought, and on worries of a possible interest rate rise by the U.S. Federal Reserve. Such outflows eased briefly in October, helped by a rebound in the domestic stock market and the official crackdown on illegal foreign exchange transactions. The value of China’s gold reserves stood at
US$59.52 billion at the end of November, down from US$63.26 billion at the end of October, the People’s Bank of China (PBOC) said on its website. China’s International Monetary Fund (IMF) reserve position was at US$4.60 billion, down from US$4.64 billion the previous month. It held US$10.18 billion of
IMF Special Drawing Rights at the end of last month, compared with US$10.36 billion at the end of October. The central bank in July shifted to reporting its foreign exchange reserves on a monthly basis after adopting the IMF’s Special Data Dissemination Standard (SDDS). The bank had previously released the data
Authorities to cut trading hours for stock-index futures in 2016 China will also start a stock-market circuit breaker at the beginning of next year
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hina will cut trading hours for stock-index futures contracts next year as authorities step up measures to limit volatility in the nation’s financial markets after a US$5 trillion rout. Trading in the morning session will start 10 minutes later at 9:25 a.m. from January, in line with the cash market, while the afternoon session will end at 3 p.m., 15 minutes earlier, the China Financial Futures Exchange said in a statement on
Friday. The change will affect futures contracts linked to the CSI 300 Index, CSI Smallcap 500 Index and the Shanghai Stock Exchange 50 A-Share Index. Volumes in CSI 300 and CSI 500 futures hovered near record lows last week after falling 99 percent from their June highs. Ranked by the World Federation of Exchanges as the most active market for index futures as recently as July, liquidity in China has dried up as authorities raised
margin requirements, tightened position limits and started a police probe into bearish wagers. “It will curb volatility,” said Wu Kan, a fund manager at JK Life Insurance Co. in Shanghai. “It can prevent wild movements on the futures from affecting the spot market because of the time advantage.” China will also start a stock-market circuit breaker at the beginning of next year. Under the new mechanism,
on a quarterly basis. On November 30, the IMF admitted China’s yuan into its benchmark currency basket, in a victory for Beijing’s campaign for recognition as a global economic power, and the PBOC’s vice governor Yi Gang said he expected the inclusion would make the yuan more stable. Reuters
a move of 5 percent in the CSI 300 will trigger a 15-minute halt for stocks, options and index futures, while a move of 7 percent will close the market for the rest of the day, the Shanghai bourse said in a statement on its website Friday. Turmoil in China’s stock market sent a gauge of price swings to its highest level since 1997 earlier this year as leveraged investors unwound bullish bets on concern valuations were unjustified amid slowing economic growth. To combat the plunge, the government banned share sales by major investors and allowed more than 1,400 companies to suspend trading. Authorities have targeted futures because selling the contracts is one of the easiest ways for investors to make large wagers against stocks. It’s also a favoured product for short-term speculators as the exchange allows participants to buy and sell the same contract in a single day. Bloomberg News
It will curb volatility… It can prevent wild movements on the futures from affecting the spot market because of the time advantage Wu Kan, fund manager, JK Life Insurance Co. in Shanghai
Business Daily | 9
December 8, 2015
Greater China
Fitch says yuan derivatives heighten risks for Taiwan’s banks
Beijing considers encouraging overseas business
Yuan-linked derivatives known as target redemption forwards incurred unrealized losses of about NT$50 billion after China’s devaluation Justina Lee
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aiwan’s banks face a rising risk of customer defaults as leveraged bets on yuan appreciation turn sour, according to Fitch Ratings. China’s currency has dropped 3.1 percent versus the dollar since a surprise devaluation in August and Fitch estimates that a 10 percent slide could saddle Taiwan’s private-sector banks with losses of NT$79 billion (US$2.4 billion) -- equivalent to 0.4 percent of their assets. That scenario, which the ratings company said is “unlikely,” assumes clients fail to honour 40 percent of their losses on derivatives that were bought to profit from yuan appreciation. “The exposure highlights domestic banks’ weakness in risk governance and opportunism as they seek higher growth and earnings opportunities amid the highly competitive banking
sector in Taiwan,” Taipei-based Fitch analysts led by Sophie Chen wrote in a report dated December 6. Yuan-linked derivatives known as target redemption forwards incurred unrealized losses of about NT$50 billion after China’s devaluation, the financial regulator said in September. Scrutiny of the contracts -- which bet on the currency appreciating and terminate once a cumulative profit has been achieved -- had already been tightened last year as the currency’s first annual decline since 2009 led to losses, prompting the island’s authorities to warn of their risks and penalize some banks. Most of Taiwan’s TRFs were sold when the yuan’s exchange rate was in the 6.35-6.50 range versus the dollar and are set to mature in the first half of 2016, Fitch said.
Stock regulator holds anti‑corruption training Even though domestic stock markets have rebounded by more than 20 pct since the depths of the crash in August, market executives say the regulatory atmosphere has not relaxed
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hina’s stock regulator has held anti-corruption training for dozens of senior exchange officials to ensure they can nip graft in the bud, it said yesterday, amid a crackdown on the securities industry following a mid-year equity market crash. The China Securities Regulatory Commission’s (CSRC) discipline body, in a statement released by the ruling Communist Party’s main antigraft watchdog, said it had recently held closed-door training for top officials at the bodies it regulates. It did not give an exact date or identify the organisations involved, but the CSRC is in charge of regulating the Shanghai and Shenzhen stock markets, as well as futures and commodities exchanges in other parts of the country. Wang Huimin, who runs the CSRC’s discipline body, told those on the training they must ensure they follow party rules on fighting corruption and ensure there are no corrupt practices when it comes to personnel moves or changes. “Prevent corruption at the source,” the statement paraphrased Wang as saying.
The crackdown on the securities industry - from hedge funds and institutional fund managers to brokers and banks - began after a summer equity market crash wiped around 40 percent off mainland share prices, which Beijing blamed partly on
Sharp swings in exchange rates can have devastating consequences for holders of TRFs. Hong Kong-listed Citic Pacific Ltd. lost HK$14.6 billion (US$1.9 billion) in 2008 and was forced to seek a bailout from its Chinese parent after using the contracts to bet on gains in Australia’s dollar, which tumbled 20 percent that year as the global financial crisis took hold. Taiwan’s Financial Supervisory Commission is requiring more information disclosure on derivatives, though the risk of TRF losses isn’t significant for banks, Jean Chiu, deputy director- general of the banking bureau, said in September. The notional amount of the island’s yuan TRFs and discrete knock outs, a similar derivative, was NT$135 billion as of mid-August, said Chiu.
China will introduce more favourable policies to help domestic enterprises go global, an official from the Ministry of Commerce (MOC) said. The MOC will partner with other ministries to push policies for outbound investment, cooperation among countries participating in the Belt and Road initiative, encouraging high value-added investments, and improving information services and risk-control measures for overseas businesses, said Zhou Zhencheng, vice director of the Department of Outward Investment and Economic Cooperation under the MOC at a conference on Sunday.
Airport slot-assignment to be reformed
Bloomberg News
“malicious” short-selling and insider trading. Even though domestic stock markets have rebounded by more than 20 percent since the depths of the crash in August, market executives say the regulatory atmosphere has not relaxed. Authorities have revealed little about the specific reasons for the probes, but sources have told Reuters they believed some of the investigations involved suspicions of insider trading relating to trades by China’s “national team” - the big brokerages and fund managers dragooned by the government into buying stocks as part of unprecedented measures to prop up the market. President Xi Jinping launched a sweeping crackdown on pervasive corruption since assuming power three years ago, warning, as others have before, the problem is so bad it could affect the party’s grip on power. Reuters
China is making allocation of new time slots at some key airports a competitive process, a move that could give private airlines a fairer opportunity to get some desired slots compared with state-owned carriers which have been favoured so far. As part of a trial run, time slots for additional domestic flights in 2016 at the Guangzhou Baiyun International Airport will be put up for sale from this week, an official at the Civil Aviation Administration of China (CAAC) told Reuters by phone.
Vanke says Jushenghua has become its biggest shareholder China Vanke Co Ltd said Shenzhen Jushenghua Co, a firm with property and insurance businesses, has become its biggest shareholder, controlling one fifth of the company with a partner firm. Jushenghua and partner Foresea Life Insurance Co Ltd now own 20 percent after Jushenghua bought an additional 4.97 percent as of December 4, China’s biggest property developer by market value said in a filing. Jushenghua owns 20 percent of Foresea. Vanke shares surged 33 percent last week to its highest level in eight years.
HAIG sells planes to Russia
CSRC is in charge of regulating the Shanghai and Shenzhen stock markets
A Chinese aircraft manufacturer, the Harbin Aircraft Industry Group (HAIG), announced yesterday that it has signed a contract to sell 15 Y-12E aircraft to a Russian company. The company, a subsidiary of the Aviation Industry Corporation of China (AVIC), said it signed the contract with Fly AVIA FZE, which provides aviation equipment, repairs and after-sales services for the Russian market. The aircraft will be delivered in 2017 and the contract is worth an estimated total of 550 million yuan (about US$87.3 million), according to the statement.
10 | Business Daily
December 8, 2015
Greater China
Budget airlines spread wings, add routes All of China’s low-cost carriers, except newest entrant 9 Air, are profitable Fang Yan and Siva Govindasamy
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ia Lili, marketing chief at a privately-owned Shanghai software firm switched to flying with Spring Airlines after China’s first low-cost carrier took off in 2010. Her company has since made it mandatory for staff to use budget airlines when available, and has cut its travel costs by a fifth. Xia and her colleagues are among an increasing number of Chinese who are fuelling fast growth in what is often called the “last” big market ripe for low-cost carrier penetration. Since late 2013, the Civil Aviation Administration of China has encouraged budget airlines as Beijing has seen how they have taken off elsewhere. Freeing up new routes for low-cost carriers also helps develop economic growth in western China. Low-cost carriers account for 7 percent of China’s domestic air travel market, and that’s expected to more than double by 2020, according to OAG, an aviation data and analytics company. China, the fastest growing major air travel market, has overall passenger
KEY POINTS Low-cost carriers taking off as routes expand Spring Air dominates popular leisure routes to Japan LCCs help themselves through strict cost cutting
volume of 392 million, rising at more than 10 percent a year, according to official data, and plane maker Airbus predicts it will leapfrog the United States as the world’s largest domestic air traffic market within 10 years. “Low-cost travel has become a life style. Many of my colleagues would start chatting about how to get those 9 yuan (US$1.41) or 99 yuan (US$15.48) special offer tickets,” Xia said. As Europe’s pioneer no-frills airlines such as Ryanair and easyJet mature and move more upmarket, they are attracting business travellers as a way to stand out in the budget crowd.
Cutting costs
China’s four budget airlines offer sharply discounted air fares to fullservice carriers. For example, West Air, a subsidiary of Hainan Airlines’ parent HNA Group, offers a round trip from Chongqing to the popular southern resort of Sanya and a 3-night stay in a five-star hotel for just 999 yuan (US$156), for bookings made well in advance. That compares with 770 yuan for the cheapest one-way ticket offered by full-service carriers, according to Ctrip.com. In Europe, the cheapest budget airline return ticket for a similar flight - from Luton in England to Barcelona - without accommodation, costs 98 pounds (US$148) on cheapflights. co.uk. All of China’s low-cost carriers, except newest entrant 9 Air, are profitable. Much of that is down to severe paring of their costs. At China United, flight attendants
clean up inside the plane between flights. The airline has squeezed more seats into its fleet of Boeing 737 planes, and turned one of the jets into a flying billboard, advertising Huangguoshu waterfall, China’s biggest, said executive vice president Zhang Lanhai. With money from the local government, China United passengers are offered big discounts on hotels and tours in the area. Spring Air, China’s first and largest budget carrier, took out nearly all the light bulbs on the corridor to chairman Wang Zhenghua’s office, and staff must turn off the lights when they leave for the day. Both the chairman and president eat at the staff cafeteria, and flight attendants share hotel rooms on trips. The carrier on Thursday said it signed a US$6.3 billion deal to buy 60 A320neo jets from Airbus to help it meet rising demand, tap new markets and improve fleet fuel efficiency. Spring Air has halved the size of the kitchen on some existing A320s to accommodate extra seats.
Niche routes
Attracted by the sector’s growth potential, some state airlines have converted to low-cost carriers, and others are likely to follow suit. This year alone, China Eastern Airlines converted its China United unit into a budget carrier, and Juneyao Airlines set up a low-cost subsidiary in Guangzhou. West Air converted in 2013, and Lucky Air, another HNA carrier, is also going through that transition. China Southern Airlines is also considering setting up a budget subsidiary, executives told Reuters.
The budget carriers have grown in part by flying routes that aren’t covered by the bigger airlines. China United, for example, flies to nearly a dozen cities in Inner Mongolia, more than any other carrier including Air China, which even has a branch there, said Zhang. Because Inner Mongolia’s transport network is still patchy, the quickest way to travel from one city to another is often to fly around 500 km to Beijing with China United and connect there to a flight to the Inner Mongolian destination. “More and more people are doing this because it’s faster and cheaper,” said China United’s Zhang. Spring Air, which also flies to popular Asian leisure destinations, started flights in late October to Dongyin, an oil-rich city in eastern China whose only connection to Shanghai was previously by a lengthy bus trip and then by high-speed rail. The maiden flight was packed, a company executive said. Frustrated at not having enough slots at Beijing International Airport, Spring Air offered passengers free high-speed rail tickets to Shijiazhuang airport nearly 300 km away, where it has better slots and offers more flights. As more Chinese take to the skies, one challenge for the budget airlines is to manage passenger expectations. Air travel has always been seen as a mode of transport for the privileged in China, and some passengers have been unhappy about meals and legroom or when asked to pay for luggage or in-flight drinks. But 9 Air’s marketing chief Huang Hui says: “Some passengers who initially complained keep coming back.”
Frustrated at not having enough slots at Beijing International Airport, Spring Air offered passengers free high-speed rail tickets to Shijiazhuang airport nearly 300 kms away
Reuters
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December 8, 2015
Asia
Australia seeks ‘ideas boom’ with tax breaks, visa boosts The science community welcomed the news, particularly the decision to create an innovation and science committee within cabinet Madeleine Coorey
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ustralia will introduce an entrepreneur visa and offer tax breaks for start-ups, the government said yesterday as it tries to unleash an “ideas boom” to move the economy away from dependence on mining. Launching a signature Aus$1.1 billion (US$806 million) four-year innovation agenda, Prime Minister Malcolm Turnbull said Australia needed a “dynamic, 21st century economy” underpinned by creativity. “This is all about unleashing the ideas boom,” he told reporters in Canberra. Australia has enjoyed more than 20 years of economic growth, but an unprecedented mining investment boom is now fading, commodity prices are dropping and government revenues are falling. Turnbull, a tech-savvy former businessman who became prime minister in September after beating his conservative Liberal Party colleague Tony Abbott in an internal ballot, said innovation was crucial to the next wave of prosperity. Australia lagged in terms of commercialising ideas, consistently ranking last or second last among OECD countries for businessresearch collaboration, he said, meaning a big cultural change was needed to turn things around. “Our appetite for risk is lower than in comparable countries, which means Australian start-ups and early-stage businesses often
Unlike a mining boom, it is a boom that can continue forever. It is limited only by our imagination Malcolm Turnbull, Australia’s Prime Minister
Turnbull said there would be no cap placed on the number of new entrepreneur visas
fail to attract capital to grow,” Turnbull said. To help fix this, new tax breaks for early-stage investors in start-ups will be offered, giving them a 20 percent non-refundable tax offset based on the size of their investment, as well as a capital gains tax exemption. Insolvency laws, which currently focus on penalising and stigmatising business failure, will also be reformed, said Treasurer Scott Morrison. “We understand that sometimes entrepreneurs will fail several times before they succeed -– and will usually learn more from failure than from success,” Morrison said. Turnbull said there would be no cap placed
on the number of new entrepreneur visas designed to attract innovative talent, while changes would also be made to retain high-achieving foreign students. “The more high-quality, effective, productive enterprising entrepreneurs we can attract, the better. Because they drive jobs,” he said. School students will be encouraged to learn coding and computing while the government will also establish a Aus$200 million innovation fund at national science body CSIRO to co-invest in new spin-off firms.
‘Turning point’
The science community welcomed the news,
particularly the decision to create an innovation and science committee within cabinet. “This elevates science and innovation to the very highest levels of government consideration, alongside the National Security Committee,” said Science and Technology Australia chief executive Catriona Jackson. The Australian Academy of Science’s Les Field said the innovation agenda represented a “turning point”. “It means we can grow an economy based on our outstanding science, and which makes the best use of our significant scientific capital,” he said.
Bank of Japan head says no need to adopt negative deposit rates Governor also warned of potential drawbacks from excessive financial regulation such as hampering banks’ profit-making activity Leika Kihara
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ank of Japan Governor Haruhiko Kuroda said yesterday he saw no need to implement negative deposit rates in Japan as borrowing costs were already very low due to the central bank’s aggressive asset purchases. The European Central Bank has adopted negative deposit rates to penalise financial institutions for
parking excess funds at the central bank and encourage them to boost lending instead. Such a step was unnecessary in Japan as the BOJ’s massive asset-buying programme, dubbed “quantitative and qualitative easing” (QQE), was pushing down bond yields across the curve, Kuroda said.
“Our QQE has had an intended impact on the economy and financial markets. Banks have been increasing their loans to the real economy ... Rebalancing has also been taking place,” Kuroda told a seminar in Tokyo. “So we don’t think we should implement negative deposit interest rates,” he said.
Turnbull said there were no guarantees the various policies would work, but committed to changing them if they failed. The millionaire former barrister and investment banker said he wanted to change the paradigm under which “politicians felt they had to guarantee that every policy would work”. “If some of these policies are not as successful as we like, we will change them,” he said. “We will learn from them. Because that is what a 21st century government has got to be. It has got to be as agile as the start-up businesses it seeks to inspire.” AFP
Kuroda also warned of potential drawbacks from excessive financial regulation such as hampering banks’ profit-making activity, as global policymakers push through drastic regulatory reforms. The extent of effects of large-scale regulatory reforms, such as the Volcker rule in the United States, on the flow of funds among financial institutions remains unknown, Kuroda said. “From a long-term perspective, in order for the financial system to ensure stability and in turn contribute to sustainable economic growth, financial institutions need to be sufficiently profitable through active and innovative financial intermediation,” he said. “In this regard, it is important to remove any regulatory excess, inconsistency among regulations, and uncertainty regarding the regulatory environment.” Most economists in a Reuters poll published yesterday expected the Bank of Japan to expand its stimulus programme in the first half of next year, although a small minority of respondents forecast no further central bank easing in 2016. Reuters
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Japanese manufacturers’ mood lifts Compared with September, a service-sector index was down five points, suggesting that the Bank of Japan tankan may show worsening in non-manufacturers’ sentiment Tetsushi Kajimoto and Izumi Nakagawa
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onfidence among Japanese manufacturers bounced in December for the first time in four months and it is seen inching up ahead, a Reuters poll found, suggesting the economy is slowly emerging from a recession. In a sign of still-sluggish domestic demand, however, the service sector’s mood slipped to the lowest level in a year as retailers were hit by weakness in private consumption,
which accounts for about 60 percent of the economy. The monthly Reuters Tankan, which closely tracks the Bank of Japan’s tankan quarterly survey, showed sentiment for both manufacturers and the service sector is seen to be largely unchanged over the next three months. The poll of 514 big and midsized firms between November 20 and December 2 suggested that the
central bank’s key tankan readings due next week may show business mood struggled to improve in the current quarter. A total 259 firms responded in the latest poll. “Manufacturers are wary of the outlook as commodity prices fall, and the service sector reflects weak private consumption,” said Yuichiro Nagai, economist at Barclays Securities. “This survey backs our view that the economy’s rebound will be tepid in the current quarter.” Nagai said the central bank’s upcoming tankan is likely to show the both sectors’ mood worsening in the current quarter. The Reuters Tankan sentiment index for manufacturers rose to 9 in December from 3 in November, the first improvement in four months, led by both materials and processing industries. The index is seen at 10 in March. Compared with three months ago, the manufacturers’ index held steady, suggesting that the BOJ’s upcoming quarterly tankan may show little improvement in the big manufacturers’ sentiment. “Domestic orders are in a moderate recovery trend but sales and profits take time to recover due to the decline in orders from emerging Asian countries,” a manager at a machinery
KEY POINTS Manufacturers’ Dec sentiment index 9 vs 3 in Nov Service-sector index 18 in Dec vs 22 in Nov Business mood seen largely steady ahead Reuters poll suggests tepid readings in BOJ tankan maker said in the survey, which companies answer anonymously. “The drop in transaction volume and sales will persist for the time being given poor business conditions, reflecting China’s slowdown, yen weakness and slumping private consumption, which hurt local regions,” said a transport service firm. The service sector index fell to 18 from 22 in November, the lowest since November 2014, weighed on by retailers. The index is seen unchanged in March. Reuters
CMA CGM offers US$2.4 bln for Singapore NOL The French company said the deal will further reinforce its global position Saeed Azhar and Rujun Shen
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rance’s CMA CGM, the world’s third-largest container shipping firm, made yesterday a S$3.4 billion (US$2.43 billion) offer to buy Singapore’s Neptune Orient Lines to expand its presence on trans-Pacific routes. CMA CGM offered S$1.30 a share in cash, 6 percent above NOL’s last closing price on the stock exchange. Temasek, which owns a nearly 67 percent stake in NOL, accepted the offer and will tender all of its shares, CMA CGM and NOL said in a joint statement. NOL has struggled due to a prolonged downturn in the global shipping market,
posting four consecutive years of losses. Overcapacity, slower economic growth and weak commodity prices could put smaller shipping firms at risk, and consolidation is highly likely among the larger ones, ratings agency Fitch said in a report last week. “With few others having the resources or inclination, we suspect that this is not just the best offer for NOL stock but the only one,” Credit Suisse analysts wrote in a report on Monday. CMA CGM’s offer closes the chapter on a difficult investment for Temasek. The state investor paid S$2.80 a share in 2004 when it increased
its stake in NOL from 29 percent to 68 percent then. CMA CGM will make a mandatory cash offer for the remaining shares from minority shareholders that include BlackRock. NOL’s share price has already risen about 45 percent so far this year, buoyed by the company’s plans to shed assets. Earlier this year, NOL sold its logistics business for US$1.2 billion to Japanese freight carrier Kintetsu World Express Inc . CMA CGM’s acquisition of NOL would be Singapore’s biggest inbound deal since 2013 when companies linked to Thai tycoon
Charoen Sirivadhanabhakdi completed an $11 billion deal to buy conglomerate Fraser and Neave. NOL’s APL unit is the world’s 13th-biggest in terms of capacity, and combining it with CMA would create a fleet of 2.33 million twenty foot equivalent unit (TEU) with an 11.5 percent global capacity share, based on figures from industry analysts Alphaliner. CMA CGM said the deal will further reinforce its global position with combined revenue of US$22 billion and 563 vessels. The deal would not change CMA CGM’s global ranking but would enable the combined
entity to dominate the transPacific lanes with a 12 percent share, ahead of the 9 percent of global leader AP MoellerMaersk’s Maersk Line, Credit Suisse analyst Timothy Ross said last month. But CMA CGM, which has US$5 billion of debts, will be burdened by NOL’s debts of US$2.9 billion. CMA CGM, which itself is taking a bank loan to finance the deal, said on Monday it plans to sell assets over the next 18 to 24 months to cut its debt. CMA CGM was advised by BNP Paribas, HSBC, and JPMorgan. Citigroup advised NOL. Reuters
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December 8, 2015
Asia
In India, corporate transparency comes with puzzling questions
NZ’s central bank to cut rates
Under the new rules, Indian regulators have drafted seven broad categories of price-sensitive company information that would require disclosure to the market Rafael Nam and Himank Sharma
Concerns about New Zealand’s strong currency and tepid inflation are expected to persuade its central bank to lower interest rates at a policy meeting on Thursday, though the case is not clearcut for what would be a fourth reduction since June. Improving economic data and signs that Auckland’s hot property market is spreading to home prices in the rest of the country have convinced some economists that the Reserve Bank of New Zealand (RBNZ) will opt to stand pat. Still, 21 of 24 economists polled by Reuters expect the RBNZ to cut the official cash rate by a quarter point to 2.50 percent this week.
Cambodia launches online business registration The Cambodian Ministry of Commerce yesterday launched online business registration, reducing the time to register a company from seven days to one hour, Minister of Commerce Sun Chanthol said. “With the online business registration, applicants can register their companies from anywhere in the country and in the world without coming to the ministry of commerce,” he said at the launching ceremony. The applicants could pay the application fee by electronic payment and print their own certificate of incorporation, he said. They can register their companies at www.businessregistration. moc.gov. kh and pay the fee of 1,720,000 riel (about US$430) via e-payment service.
I
ndian regulators have launched an unprecedented drive to boost corporate transparency, bombarding firms with disclosure demands, but clumsy execution has created suspicions of a box-ticking exercise that may not entirely achieve its aim. Poor disclosure among India-listed firms is a turnoff for foreign investors, a weakness Asia’s third-largest economy can ill afford as competition for overseas capital heats up among emerging markets in expectation of higher U.S. interest rates. A Reuters review shows Mumbai’s National Stock Exchange, India’s biggest bourse, issued 934 requests for clarification to its top 500 listed companies since revamped disclosure rules took effect in September 30 last year. That is almost double the 492 requests the top 500 received over the course of the entire preceding decade. Requests in the past 14 months have ranged from queries on market rumours to news reports, but repetitive and sometimes misdirected questions mean that firms, analysts and some investors are questioning the impact of the campaign. “There’s just no fantastic value added in this entire process,” said the chief financial officer of one of India’s 20 largest listed companies. “We are going through the motions of the efforts because we can’t be seen as being indifferent to the queries raised.” To be sure, many inquiries are pertinent and investors say there has been a gradual improvement in corporate governance in recent years, but executives say the disclosure drive is littered with redundant, timewasting requests. For example, BSE Ltd, India’s second-biggest exchange, queried HCL Technologies on an acquisition
that the firm had disclosed the previous day. In other cases, analysts said, exchanges confused the impacted units or even the companies at stake: sending a clarification for information to Electrosteel Steels instead of Electrosteel Castings, or to Vedanta-owned Cairn India instead of the separate, UK-listed firm Cairn Energy.
Anxious executives
India’s two biggest stock exchanges enforce disclosure rules at the behest of the regulator, the Securities and Exchange Board of India (SEBI). The National Stock Exchange’s chief regulatory officer, V. R. Narashimhan, said exchanges were fulfilling their regulatory obligations and were conscious of not overstepping the mark. “Such disclosures are steps towards achieving better governance. Corporate India will learn,” chief regulatory officer V. R. Narashimhan said. Asked about criticisms of the disclosure campaign, the BSE said in an emailed statement that it was responding to SEBI’s directive to seek clarifications from companies. “The duty of seeking clarifications from companies regarding unpublished price-sensitive information has been cast upon the exchanges by SEBI,” BSE said. Since his appointment five years ago, SEBI chairman U.K. Sinha has made corporate transparency a priority, attempting to shake off India’s decades-old reputation for murky governance.
Investors acknowledge SEBI’s efforts
“As more companies’ standards improve, the scope of investment, especially for some of these foreign
Samsung’s Lee to backstop engineering affiliate’s rights issue As more companies’ standards improve, the scope of investment, especially for some of these foreign investors, can increase Mahesh Patil, co‑chief investment officer, Birla Sun Life Asset Management
investors, can increase,” said Mahesh Patil, co-chief investment officer at Birla Sun Life Asset Management which manages around US$20 billion, including foreigner funds. Under the new rules, Indian regulators have drafted seven broad categories of price-sensitive company information that would require disclosure to the market, including details on changes to ownership and the outcome of board meetings, which must now be released swiftly after the event. In the stricter regulatory environment, executives also worry that unfounded penalties could get more of their firms tangled up in India’s lengthy and complex appeals process. Reuters reviewed 83 appeals this year against SEBI penalties in which there has been a clear verdict. Of these, SEBI won 36 cases and lost 23, with split verdicts delivered in the rest. Reuters
The heir apparent of Samsung Group will buy up to 300 billion won worth of shares to be sold by affiliate Samsung Engineering Co Ltd should existing shareholders not fully take up the firm’s 1.2 trillion won rights issue, Samsung Group said yesterday. In a statement, the family-run conglomerate said Jay Y. Lee, son of group patriarch Lee Kun-hee and vice chairman of flagship Samsung Electronics Co Ltd, will acquire the shares on the same terms as all other shareholders. Samsung Engineering yesterday confirmed plans for the rights issue, which was first announced in October.
DPRK-invested museum opens in Cambodia After five years of building, the US$24-million Angkor Panorama Museum, invested by the Democratic People’s Republic of Korea (DPRK), opened in northwest Cambodia’s Siem Reap city, a local English newspaper reported yesterday. Cambodian Deputy Prime Minister and Cabinet Minister Sok An presided over the inauguration ceremony, the Khmer Times reported. Sok An said the 6,000 square-meter building reinforced both cultural and economic ties between the two countries. The project was signed in 2011, under which DPRK’s Mansudea Overseas Project Group will run the museum with the Cambodian government.
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International Electrolux’s U.S. plans in tatters Shares in Sweden’s Electrolux slumped more than 10 percent on Monday after a US$3.3 billion deal to buy General Electric’s appliance business fell through. Announcing the deal in autumn last year, Electrolux said its biggest ever acquisition would double its sales in the United States and step up the challenge to arch rival Whirlpool in the world’s largest appliance market. But the U.S. Department of Justice (DOJ) said the deal would reduce competition and drive up prices, and asked a federal court in July to stop it from going ahead.
RBS to sell Irish loans at 78% discount Royal Bank of Scotland Group Plc’s Irish units agreed to sell 1.63 billion pounds (US$2.5 billion) of real estate loans to Lone Star Funds and homebuilder Cairn Homes Plc. At completion, Ulster Bank Ireland Ltd. and Ulster Bank Ltd. will receive about 360 million pounds in cash at current exchange rates, a gain of about 245 million pounds compared with the book value, RBS said in a statement yesterday. The loans had a loss of about 28 million pounds in 2014.
Venezuela opposition defeats Maduro Venezuela’s opposition trounced the ruling Socialists on Sunday to win the legislature for the first time in 16 years and gain a long-sought platform to challenge President Nicolas Maduro’s rule of the OPEC nation. The opposition Democratic Unity coalition won 99 seats to the Socialists’ 46 in the 167-national National Assembly, the election board said, with some districts still to be counted. Fireworks were set off in celebration in pro-opposition districts of Caracas when the results were announced, while government supporters dismantled planned victory parties.
New Argentina government to dismantle currency controls The government of Argentina’s president-elect Mauricio Macri said Sunday that it will seek to dismantle a series of capital controls propping up the peso as soon as possible, aiming for December 14 if the central bank is under new management. Macri has previously demurred on giving details on his strategy to lift outgoing president Cristina Fernandez’ so-called “clamp-down” on dollar purchases that has created a multi-tiered exchange rate, saying he must first take a close look at the true state of national accounts.
Puerto Rico hijacks money for bond payments Puerto Rico may have dodged a bullet when it avoided default last week, but its decision to commandeer revenue that was supposed to meet future debt payments will invite creditor pushback and possibly lawsuits. Creditors have long criticized Puerto Rico’s spending habits, and may have the ammunition to bring those complaints to court now that the Caribbean island plans to divert funds to cover constitutionally-guaranteed debt and essential government services.
‘Clock ticking to catastrophe’, Ban urges strong climate deal Almost every nation will make brief speeches this week outlining national policies and hopes Valerie Volcovici and Bruce Wallace
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arning that the “clock is ticking toward climate catastrophe”, U.N. Secretary-General Ban Ki-moon urged governments yesterday to agree a strong deal to limit global warming and transform the economy to greener energy. “Outside these negotiating halls, there is a rising global tide of support for a strong, universal agreement,” Ban told environment and foreign ministers at the start of an intense home stretch of the talks, due to end on Friday. He urged delegates from almost 200 nations not to duck the hard choices they face as four years of often glacial-paced negotiations peak. The talks are aimed at producing the strongest agreement yet to bind both rich and poor to curb greenhouse gas emissions. “The world is expecting more from you than half-measures and incremental approaches,” Ban told the negotiators, calling for “a transformative agreement.” Ban said a final deal should include a review of national pledges at five year intervals starting before 2020. Some developing nations are reluctant to commit to such an early timetable.
KEY POINTS Paris talks on global climate deal resume after one-day break Biggest issues unresolved; a “week of compromise” ahead U.S.’s Kerry and other ministers to debate finance, measurement
He also said the private sector needed a clear signal that a shift to low emissions was “inevitable” and told rich nations to lead in cutting emissions. Ban said emerging nations also needed access to US$100 billion a year promised by 2020 to help them tackle climate change. U.S. Secretary of State John Kerry, dispatched to secure a deal meant to cement President Barack Obama’s legacy as a guardian of the environment, will work alongside ministers from almost 200 nations this week to try to secure a deal. Negotiators approved a pareddown draft text on Saturday, and handed over the toughest questions to their bosses, who will spend the week hammering out thorny issues including a system for funding developing nations and the mechanisms for monitoring national pledges to reduce emissions. Almost every nation will make brief speeches this week outlining national policies and hopes. They are due to reach a final accord on Friday, but the talks are widely expected to run into overtime, as previous summits have.
Crossroads
While officials have been pleased with progress halfway through the twoweek summit, Indian Environment Minister Prakash Javadekar cautioned that “substance-wise, we are not midway but ... at a crossroads”.
French Socialists retreat further to ward off far-right Marine Le Pen, who herself topped the poll as lead candidate in the Nord‑Pas de Calais-Picardie region where the migrant crisis is symbolised by the migrant camps outside Calais, refrained from claiming victory
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rance’s Socialist Party yesterday said it would pull its candidates out of a third regional poll, that of eastern France, adding to its efforts to create an electoral “barricade” against the far right, the party’s chief said yesterday. The far-right National Front (FN)
of Marine Le Pen made sweeping gains across France in a first round of voting on Sunday, largely at the expense of the ruling Socialists of President Francois Hollande. The Socialists said on Sunday that they would withdraw from December 13 second-round runoffs in the north
He reiterated New Delhi’s demand that richer nations must shoulder the biggest curbs to “pay back their debt for the overdraft that they have drawn on the carbon space”, highlighting one of the most difficult obstacles to a deal. To speed things along, the host, French Foreign Minister Laurent Fabius, has formed working committees headed by ministers to tackle the biggest themes, which include “differentiation” (the distinction between rich and poor nations, critical for questions of financing) and “ambition” (how to improve on national efforts in future). Some form of agreement seems all but certain, with major powers eager to avoid the failure of the last summit in Copenhagen, six years ago. Still, all sides say the deal will not be enough to prevent global temperatures rising past a dangerous threshold of 2 degrees Celsius over pre-industrial times. Just how strong the accord will be remains to be seen. Some nations want a commitment to phase out fossil fuels by the middle of the century; others see that as unrealistic. Some of the most vulnerable countries, such as lowlying islands, want firm language on how rich nations who have emitted the most will pay for the future damage caused by rising seas. Reuters
and southeast of France, where they ended the first round in third place, in hope of keeping the FN from winning. The party also came in third in the eastern Alsace-Champagne Ardenne-Lorraine region, and party secretary general Jean-Christophe Cambadelis said on Monday that it would also withdraw from the runoff there, leaving it, like the other two, to Nicolas Sarkozy’s conservative The Republicans in a duel with the National Front. “There is too big of a risk of victory for the National Front for us to keep our candidates in this region,” said lawmaker Bruno Le Roux, who is the Socialists’ leader in the lower house of parliament. Boosted by voters’ fears over the Islamic State attacks that killed 130 people in Paris on November 13 and by record unemployment and worries about immigration, Marine Le Pen’s party secured 27.96 percent of the vote nationally, the interior ministry said, with over 98 percent of votes counted.
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December 8, 2015
Opinion Business
wires
Silicon Valley everywhere
Leading reports from Asia’s best business newspapers
Carlo Ratti
Chairs the World Economic Forum’s Global Agenda Council on Future Cities and teaches at the Massachusetts Institute of Technology
THE KOREA HERALD South Korea’s automobile exports fell in November from a year earlier on weaker demand from emerging markets, the government said yesterday. Outbound shipments of vehicles came to 263,687 units last month, down 3.5 percent from a year earlier, according to the Ministry of Trade, Industry and Energy. From the previous month, however, exports were up 5.6 percent. “Exports to the United States and the European Union did well, but demand in Russia, Latin America and other emerging economies caused overall numbers to fall,” the ministry said.
BANGKOK POST Thailand’s draft data protection bill is expected to go through the National Legislative Assembly (NLA) debate within the next four months. This follows its complete revision by the Information and Communication Technology Ministry. “After the NLA passes the draft bill, it should become effective by the end of 2016,” said Surangkana Wayuparb, executive director of the Electronic Transactions Development Agency. Thailand spent almost two decades working to implement a data privacy law because of setbacks from political instability.
THANH NIEN NEWS Executives from Indonesia’s top 200 businesses will attend a trade promotion event in Hanoi next week to explore investment opportunities in Vietnam, Indonesian ambassador Mayerfas has said. Most of the businesses attending the 2015 Indonesia Trade Fairs and Business Forum on December 10-12 have never invested in this country, he said at a press conference. Since Indonesian businesses do not prefer to operate on their own overseas, they would look for local partners in Vietnam too, he said. They would also look to collaborate with Vietnamese companies for projects in Indonesia, he said.
THE STRAITS TIMES Sembcorp Industries has announced a memorandum of understanding (MOU) with the Myanmar government to invest in and develop the country’s largest gas-fired power plant to help address a power shortage. The company said it wholly-owned subsidiary, Sembcorp Utilities, yesterday (Dec 7) signed the MOU with Myanmar’s Department of Electric Power Planning (DEPP), under the Ministry of Electric Power of Myanmar (MOEP), over the project. The US$300 million (S$420 million) 225-megawatt power plant will be built in central Myanmar near Mandalay, Sembcorp Industries said in a statement to the Singapore Exchange yesterday.
New working environments are inclined to substitute offices and desks by cosy cafés and smartphones
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uring the last decades of the twentieth century, Silicon Valley was the unparalleled epicentre of hightech innovation. Other regions tried to imitate its success, but none succeeded. France’s Sophia Antipolis, a top-down attempt by the government to create an innovation hub near Cannes, never evolved beyond its origins as a relatively tranquil technology park – notwithstanding its mythological name, California-like weather, and the surrounding area’s unbeatable gastronomy. In the twenty-first century, however, Silicon Valley’s competition has gotten fiercer – as reflected by the increasing number of locations affixing the chemical element to their names: Silicon Alley (New York), Silicon Wadi (Tel Aviv), Silicon Sentier (Paris), etc. In London, for example, the emergence of Silicon Roundabout in the late 2000s caught the British government almost by surprise. Now rebranded Tech City, the innovation hub in the old Shoreditch neighbourhood has evolved into one of London’s key economic engines and talent magnets. Similar scripts are playing out around the world. In Berlin, a new start-up is said to be founded every 20 minutes. Paris is busy building what will be Europe’s largest incubator at Halle Freyssinet. And in Tel Aviv, the phrase “Start-up Nation” has gone from a political slogan to economic reality. For the first time, “unicorns” (start-ups that reach a valuation of more than US$1 billion) are no longer the exclusive preserve of the United States – a reality that would have been unthinkable only a few years ago. A bright generation of
global youth – from Mumbai to Prague to Kenya to Singapore – is betting on innovation, and American venture capital funds, sustained by access to cheap financing, are sating their investment appetites overseas. There are several factors behind this phenomenon. In a globalized world, capital flows have accelerated and extended their reach. Innovators around the world are able to muster support from traditional venture capitalists or from crowd-funding platforms such as Kickstarter. Ideas move even faster – propelled, sustained, and strengthened by the Internet. And the ability to turn them into reality is keeping pace, as global supply chains and new technologies like 3D printing reduce implementation times. Meanwhile, the Great Recession that followed the 2008 global financial crisis has disrupted traditional industries, while creating a large surplus of creative talent and affordable workspaces. As a highly mobile, well educated, risk-taking workforce converges on urban hubs, the excitement of city life, coupled with the availability of co-working spaces and a variety of supporting mechanisms, helps to sustain innovative momentum. Former New York City Mayor Michael Bloomberg provided what is perhaps the pithiest summary of the attraction of urban life. Speaking at Stanford University’s 2013 commencement, he quipped, “I believe that more and more Stanford graduates will find themselves moving to Silicon Alley, not only because we’re the hottest new tech scene in the country, but also because there’s more to do on a Friday night than go to the Pizza Hut in Sunnyvale. And
For the first time, “unicorns” are no longer the exclusive preserve of the United States – a reality that would have been unthinkable only a few years ago
you may even be able to find a date with a girl whose name is not Siri” (the digital personal assistant installed on Apple’s handheld devices). Bloomberg is generally credited as one of the major forces behind Silicon Alley. During his tenure in office, he funded early-stage technology companies, hired the city’s first chief digital officer, and launched a new university to develop high-tech talent. Similar policies are now being implemented in many urban areas, in order to attract a critical mass of creative, technologically savvy people. Cities, as a recent World Economic Forum report highlights, are rapidly becoming not just drivers of innovation, but also testing grounds for new technologies, such as reprogrammable space, self-driving mobility, urban farming, and intelligent street lighting. Meanwhile, vehicle-hailing apps like Uber and apartment-sharing platforms like Airbnb are demonstrating how cities have become some of the most fertile environments for technological development. That is yet another reason why many new start-ups are putting down roots in urban centres. Most likely, this proliferation of innovation is just the beginning. As the Internet continues its penetration of all aspects of our lives, we are entering what the computer scientist Mark Weiser has called the era of “ubiquitous computing” – a time when technology is so prevalent that it “recedes into the background of our lives.” Before long, the digital world and the physical world will be indistinguishable. The era of “Silicon Everywhere” is upon us – and it is taking shape in the world’s cities. Project Syndicate
16 | Business Daily
December 8, 2015
Closing China releases blueprint on fight against poverty
IMF says Sri Lanka’s 2016 revenue, capex goals ambitious
The Communist Party of China (CPC) Central Committee and the State Council released a document of instructions on poverty alleviation yesterday. The document followed a high-profile conference on the issue in Beijing late in November, during which the leadership pledged resolute measures to help lift 70 million poor rural people out of poverty by 2020. This job has bearing on the building of a moderately prosperous society in all aspects, according to the document. Poverty alleviation will also help expand domestic demand and boost economic growth, said the document.
Sri Lanka’s 2016 budget raises questions about its ambitious revenue and capital expenditure targets as the government is falling far short of steps needed to improve the tax system, a top International Monetary Fund official said yesterday. Todd Schneider, the mission head for Sri Lanka’s post IMF lending programme, said the country’s tax-to-GDP ratio is one of the lowest in the world, and tax efficiency is low compared with its peers. “The fundamental solution to this problem involves restructuring the tax framework and tax administration,” Schneider said.
Taiwan’s November exports tumble At the end of November, the government forecast fourth quarter annual economic growth of just 0.49 percent J.R. Wu and Jeanny Kao
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aiwan’s exports slumped far more than expected in November, denting hopes the trade-reliant economy can grow in the last quarter of this year after sinking into recession in July-September. The 16.9 percent onyear contraction in exports in November was worse than a Reuters poll projection of a 10.2 percent fall. The export drop was the biggest annual fall for any month since August 2009. The November fall - the 10th straight one - is likely to boost the case for the island’s central bank to cut interest rates again on Dec. 17, when it meets within hours of a Federal Reserve session that is expected to raise U.S. rates. Taiwan is one of Asia’s major exporters, especially of technology goods, and its export trend is a key gauge of global demand for technology gadgets. The fresh export data “doesn’t bode well for GDP in the fourth quarter,” said Raymond Yeung, senior
economist with ANZ in Hong Kong, adding that he doesn’t see any improvement in December shipments or short-term growth prospects. At the end of November, the government forecast fourth quarter annual economic growth of just 0.49 percent. In the third quarter, the economy contracted 1.2 percent from April-June at a seasonally-adjusted annualised rate (SAAR), and by an annual 0.63 percent. For the first 11 months, exports were 10.3 percent below the same period of 2014, when shipments were lifted by the latest iPhone’s launch.
All markets ‘not good’
The government forecasts exports this year will shrink 10.16 percent. It has halved its 2016 export growth forecast to 1.97 percent from earlier estimates. “November exports to all markets were not good,” Finance Ministry official Yeh Maan-Tzwu told reporters. Exports to the U.S.
fell 10.9 from a year ago, deteriorating from October’s 9.1 percent slide. Shipments to China contracted 19.6 percent, compared to the previous 11.1 percent decline. Imports fell 13.7 percent in November, less than the
forecast 19.6 percent fall and October’s 20 percent drop. Without exports to drive growth, Taiwan’s central bank in September cut its the policy rate for the first time since 2009, to 1.75 percent from 1.875 percent.
“The room for one more rate cut remains,” DBS economists said in a note on Monday before the trade data, adding there will be pressure for another 12.5 basis point reduction next week.
Singapore, Chinese universities to step up collaboration
TSMC plans new China plant worth US$3 bln
Turkish economy risks losing US$9 billion over Russia crisis
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hree Memorandum of Understandings (MOUs) were signed yesterday between top Singapore and Chinese universities to mark the 25th anniversary of diplomatic relations between the two countries. The signing of MOUs between National University of Singapore (NUS) and Tsinghua University, Nanyang Technological University (NTU) and Peking University, as well as Singapore University of Technology and Design (SUTD) and Zhejiang University was witnessed by Singapore’s Acting Minister for Education (Higher Education and Skills) Ong Ye Kung and China’s Ambassador to Singapore Chen Xiaodong. Singapore’s Acting Minister for Education Ong Ye Kung said the strengthening of partnerships between universities from China and Singapore is a key outcome from Chinese President Xi Jinping’s visit to Singapore last month. “This latest collaboration builds upon years of partnership between our universities,” said Ong. NUS and Tsinghua University will be focusing on joint research and development in areas such as data science and data analytics. Xinhua
aiwan Semiconductor Manufacturing Co Ltd said it plans to set up its first advanced manufacturing plant in China with a US$3 billion investment, highlighting the growing importance of the Chinese market for semiconductor giants. The move by TSMC to build a wholly-owned plant that will make 12-inch wafers - which denotes the size of the silicon that chips are cut from - was expected after Taiwan authorities in September relaxed rules that had mandated such investments in China be done under joint venture terms. It underscores how TSMC, the world’s largest contract chipmaker, aims to go it alone to protect its technological lead, even as rivals, namely from China, are busy snapping up smaller players. TSMC had urged authorities to allow such facilities, which would use more advanced technology processes than 8-inch wafer plants, to be wholly owned out of concern for intellectual property protection. TSMC already has a whollyowned 8-inch chipmaking plant near Shanghai. TSMC said yesterday its latest investment will allow it to expand its business opportunities in China. Reuters
ensions with Russia could cost Turkey’s economy nine billion dollars in the worst case scenario of “zero relations”, Turkish Deputy Prime Minister said yesterday. Moscow has imposed a series of economic sanctions against Ankara after Turkish fighter jets shot down a Russian jet on the Syrian border on November 24, sparking the biggest crisis between the two countries since the Cold War. “In the worst-case scenario, which is zero relations with Russia, we are talking about a loss of nine billion dollars (8.3 billion euros),” Mehmet Simsek, the deputy prime minister in charge of the economy, told private NTV television. The current tension is likely shave 0.3 to 0.4 percent off Turkey’s GDP, Simsek added. Russia’s sanctions include a ban on the import of some Turkish foods and a halt on sales of holiday packages, a major blow to Turkish tourism. Simsek said that the number of Russian tourists visiting Turkey and construction contracts with Russian companies had also significantly reduced. AFP