Macau Business Daily December 30, 2015

MOP 6.00 Closing editor: Joanne Kuai Year IV

Number 950 Wednesday December 30, 2015

Publisher: Paulo A. Azevedo

First Crowne Plaza Hotel in Macau opens Page 2

Purchasing Managers’ Index forecast in China grim Page 8

Bond rally in the Mainland to last until half 2016 Page 8

Fight for valuable land resources

Local bus operator Transmac is seeking legal advice over the government’s decision to declare two plots granted to the company invalid. This follows CCAC’s report which pointed out the land concessions have already expired. Secretary for Transport and Public Works Raimundo Arrais do Rosário’s said earlier that he has instructed DSSOPT to start the process of declaring invalidity to the plots granted under temporary concession that are expiring soon or have already expired Page

3

Telecommunications

Long wait It has been 10 years since the government suggested introducing three-network convergence to the SAR. But no plan has been seen so far, said legislator Kwan Tsui Heng. She urged the government to give details for new pay-TV licence bidding

HSI - Movers December 29

Name

%Day

Belle International Ho

+2.95

Kunlun Energy Co Ltd

+2.85

MTR Corp Ltd

+2.14

China Overseas Land &

+2.07

China Merchants Holdi

+2.04

Sun Hung Kai Propertie

-0.48

Bank of Communicatio

-0.54

Lenovo Group Ltd

-0.63

China Petroleum & Che

-0.63

PetroChina Co Ltd

-1.52

Source: Bloomberg

I SSN 2226-8294

Page 2

Smog biz Technology companies are investing in platforms that alert on upcoming pollution peaks. IBM and Microsoft have already signed contracts with Chinese official institutions to help forecast the air condition in events like the Winter Olympic Games

www.macaubusinessdaily.com

Pages 10 & 11

Planning for the future

Hong Kong billionaire Cheng Yu-tung transferred some of his stock holdings to family funds and agreed to sell US$3.2 billion of Chinese property projects as the 90-year tycoon reorganizes his business empire for the next generation

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2015-12-30

2015-12-31

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2 | Business Daily

December 30, 2015

Macau

Kwan Tsui Hang urges government to timetable new pay-TV licences

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egislator Kwan Tsui Hang queried the government’s delay in inviting bids for new pay TV licences, perceiving such delay conflicts with the authorities’ aim to fully open up the city’s telecommunication market.

In a written interpellation, the legislator urges the government to explain whether it is still planning to issue new pay-TV licences. “I have filed enquiry for the same question before, but the authorities only claimed [the delay] is due to the study on three-network convergence, without giving any actual response,” the legislator wrote.

In April 2014, Macau Cable TV’s 15-year exclusive payTV operator’s licence expired.

The operator’s licence was renewed by the government for another five years, yet in a non-exclusive way.

“Until now, there have been no tenders opened for new pay - TV licence yet.

Hence, new operators that are interested in the market cannot enter for competition, while the monopoly in the market still exists with only

one operator,” the legislator slammed.

Meanwhile, she also complained that the government makes use of the study on three-network convergence licences as excuses in delaying in inviting

new bids for new pay-TV licences.

“It has been 10 years since the government suggested introducing three-network integration since 2005.

However, the government has never announced any

framework, direction and timetable on the plan,” the legislative assembly member said, urging the government to release information on its plan.

At the beginning of this month, Secretary for Transport and Public Works, Raimundo Rosario, mentioned the government is preparing the initial works for issuing licences for threenetwork convergence, which covers telecommunications networks, cable TV networks and the Internet.

Meanwhile, a Study on Television Services conducted by the University of Macau last year shows that the local market would be mature for three-network convergence, suggesting the government should issue at least three licences to prevent monopoly in the market.

K.L.

Morning Star acquired by Crowne Plaza Macau Chinese developer Fantasia starts business today

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hinese property developer and investment firm Fantasia Holdings Group Co Ltd announced that they have already acquired the entire equity interest in Morning Star Group Ltd, a travel company which operates tourism and travel agent business in Hong Kong and Macau.

The acquisition was completed on December 24, but the cost involved had not been disclosed in the latest announcement filed by Fantasia Holdings Group to the Hong Kong stock exchange on Monday.

The Chinese property developer said it did not disclose the acquisition cost because the scale of the deal does not constitute a notifiable transaction of the company under the listing rules of the Hong Kong bourse.

Fantasia Holdings Group, engaged in property development in mainland China as well as property management

business, is founded by Zeng Baobao, niece of former Chinese vice president Zeng Qinghong.

“The acquisition of Morning Star Group Ltd will benefit us by allowing the group to enter into the travel industry and developing community tourism business – strengthening the group’s competitive advantages in rendering valuable services onto the community platform,” Fantasia told the Hong Kong stock exchange.

Morning Star Travel, founded in Hong Kong in 1972, was the first travel company of the city listed in the Hong Kong stock exchange. In 2012, the company, along with its travel agency business in Macau, was sold by its parent Morning Star Resources Ltd (which in 2013 changed its name to Ceneric Holdings Ltd) to independent investors at HK$138 million (US$17.8 million).

S.L.

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he 208-room five-star hotel Crowne Plaza Macau is launching a soft opening ceremony today, making it the latest to expand the city’s hotel room inventory, after the opening of Studio City and St Regis Macao, Cotai Central in the current quarter.

Crowne Plaza Macau, is managed

by InterContinental Hotels Group, but owned by local developer San You Development Co Ltd, and will receive its first guest today. The hotel has just received operation licence from the Macau Government Tourist Office (MGTO) last week, Business Daily understood from Crowne Plaza Macau.

Crowne Plaza Macau occupies part of The Residencia project, a luxury housing complex built by San You in the heart of Areia Preta district that is a largely residential area. The hotel is within a short distance from the busiest inland checkpoint the

Border Gate, and is near the future Zhuhai-Macau-Hong Kong Bridge connection.

The 208 rooms of Crowne Plaza Macau is the latest that adds to the city’s room inventory in the fourth quarter, following the opening of the 1,600-room casino-resort Studio City on October 27 and the 400-room St Regis Macao, Cotai Central on December 18.

Until the third quarter this year, Macau had a total of nearly 30,000 guest rooms, according to the latest data available from Statistics and Census Service. This figure was published following the operation of 200-suite Ascott Macau in late September, and the opening of Galaxy Phase 2 and its sister property Broadway Macau in late May (consisting of 1,585 rooms in total).

S.L.

Business Daily | 3

December 30, 2015

Macau

Transmac take legal advice on invalid land grants The local bus operator said they are still seeking legal advice over the govt decision to call two plots granted to the company invalid.

These carry a combined site area of over 7,800 square metres Stephanie Lai

sw.lai@macaubusinessdaily.com

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ocal bus operator Transmac – Transportes Urbanos de Macau told Business Daily that it is seeking legal advice over the government’s decision to declare two plots granted to the company invalid, as a report by the city’s graftbuster Commission Against Corruption (CCAC) has pointed out the land concessions for these two plots have already expired in 2013 and 2014.

In an investigation report released last week, the commission has criticised the government of “inaction” for failing to declare the land concession invalid in time for three out of 16 plots of land that the landholders were allowed to keep even though they have failed to develop the plots as intended.

Two of these three plots, located in Ilha Verde in Macau peninsula and Pac On reclaimed zone in Taipa respectively, were granted

to Transmac for building complexes of bus terminals and parking space.

“We’re now seeking legal advice [to the land

grant issue], and then we’ll look into the legal opinions and see what decision to be made,” said Transmac deputy general manager Kuan Weng Kai. He refused to confirm if his company is going to appeal against the government’s decision to declare the land grants invalid.

Mr Kuan has also declined to explain why the land use for the two granted plots has not been fulfilled in the past two decades.

CCAC has noted in its report that they understood the government was still in the process of declaring the land granted to Transmac invalid.

The temporary land concession for the two plots of Transmac, first granted by the local government in the late 1980s, have already

expired on December 19, 2013 and December 28, 2014 respectively, according to the CCAC’s report. The two plots have a combined site area of over 7,800 square metres.

By the city’s Land Law, a temporary land concession, which carries a validity of 25 years, can only turn effective when the property project of a site is completed and carries the issuance of an occupation permit. For a site with the temporary land concession not having turned effective and expired, the site will have to be taken back by the government.

In a statement released on Monday night, Secretary for Transport and Public Works Raimundo Arrais do Rosário was cited as saying that he attached importance to the report released by the CCAC. “Prior to the release of CCAC’s report, the secretary has already instructed the Land, Public Works and Transport Bureau to start the process of declaring invalidity to the plots granted under temporary concession that are expiring soon or have already expired,” the statement released by Mr Rosário’s office reads.

“As land resources are very important for Macau, the government will abide by the law and defend MSAR’S interest when dealing with these [land concession] cases,” Mr Rosário’s office wrote.

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December 30, 2015

Macau opinion

Loose reflections, continued

José I. Duarte Economist

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ast week, this column focused on the changes in the mainland economy, noting that there seems to be little thoughtful attention to its impacts on the local economy and society. Then, some issues associated with the so much desired, but mostly elusive, diversification of the economy were addressed. It is time to look into a specific aspect that was left out in the previous week – that is, the issue of human resources. This is, in many ways, a wider and more sensitive issue than just the development of ‘talents’, to use the current political jargon.

First of all, let us go back to a subject that is seldom reflected in the public discourse: demography. To be fair, it seems some departments are mindful of the topic. Until they report on their findings or reflections, however, it is difficult to gauge what kind of effect such awareness will have on public policy.

It is certain that at least until the beginning of the coming twenties the number of young residents joining the labour force will be declining. Their numbers may start to climb after that period, assuming most of them will stay in Macau. Some residents will also be leaving the labour force – retiring, opting out of the labour market or migrating. On balance, assuming other relevant factors remain constant, a slow increase in the residents’ labour pool is possible in the next decade.

That rise is likely, nevertheless, to be insufficient to answer the needs of a (hopefully) growing economy. That is, no matter how many and how well local ‘talents’ will be developed from now on, the economic growth will still require, to be sustained, a rising non-resident labour force. Given the current climate on the matter, their smooth integration is not a foregone outcome. And the gambling sector, and satellite operations, will still be the main drivers of employment growth, a fact that fits badly with the diversification imperative.

The temptation here may be that, over time, the stress will be increasingly put on the protection element – popular as it may be - and less on the actual development of skills – challenging as it is. The past suggests we should be careful in such approach. Until recently a major concern expressed by the local society was the high level of secondary school dropouts.

But their behaviour was not irrational: they grasped, correctly, that they would benefit from special protection to do a job that required comparatively few skills. Besides, these could be acquired in a short term. As a result of such protection that job provided a comparatively high pay. Why should they keep studying for longer? To spend resources and time to reach the same end result, meanwhile sacrificing the income (and working experience) they would attain if they took the job earlier? This is but one example of the pitfalls and unintended consequences the real world sets even to the most well-meaning policies.

Billionaire Cheng Yu‑tung transfers shares to family holding

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illionaire Cheng Yu-tung transferred his shares in six Hong Kong-listed companies valued at about HK$3.8 billion (US$490 million) to a family holding company, almost four years after announcing retirement from his main company.

The transfer of his holdings to Chow Tai Fook Capital took place Dec. 21 and included stock in apparel retailer Giordano International Ltd., Hsin Chong Construction Group Ltd., Integrated Waste Solutions Group Holdings Ltd., Mongolia Energy Corp., New Times Energy Corp. and Shengjing Bank Co., according to filings to Hong Kong’s stock exchange late Monday.

Shares of all the companies, except Shengjing Bank, have declined by more than 20 per cent since February 2012, when Cheng stepped down as the chairman of New World Development Co. Cheng’s sprawling conglomerate includes businesses that range from real estate to jewelry and fashion.

“The transfer is a type of personal estate management,” said Andrew Sullivan, managing director for sales trading at Haitong International Securities Group Ltd. Cheng, 90, could move more of his assets to family members in the future, he said.

Chow Tai Fook Capital is a major shareholder of Chow Tai Fook (Holding) Ltd., which controls property developer New World Development Co. and Chow Tai Fook Jewellery Group Ltd. Cheng, whose net worth is estimated at US$10.3 billion, was Hong Kong’s fourthrichest man before the share transfers, according to Bloomberg Billionaire Index.

Family business

The patriarch in early 2012 named his eldest son, Henry Cheng, as chairman of New World Development, which has businesses in property, infrastructure, hotels and retail. The elder Cheng was hospitalized in September 2012 and hasn’t attended public events since.

His son-in-law, Doo Wai-hoi, said last month that the elder Cheng’s health was improving, the Hong Kong Economic Journal reported Tuesday.

Cheng, son of a tailor, was born in the southern Chinese city Shunde and later fled war-torn China for Macau. He got his first job when he was 15 as an apprentice at the Chow Tai Fook gold shop that was founded by his future wife’s family and expanded the jewelry chain in Hong Kong, according to Bloomberg Billionaire Index. Today, Chow Tai Fook Jewellery, which was listed in 2011, is one of the world’s largest listed jewelry chains.

Maria Cheung, a spokeswoman for New World Development, said the company doesn’t comment on transactions related to the Cheng family’s personal investments and personal issues. Joanne Wong, spokeswoman of Chow Tai Fook Jewellery, couldn’t be reached immediately by e-mail and phone.

Bloomberg

Business Daily | 5

December 30, 2015

Macau

Bulls return to Melco Crown as revenue mix offsets Macau slump Melco Crown is seen rebounding as it focuses on mass- market players instead of the high rollers and its diversified revenue with the opening of Studio City in Macau and expansion in the Philippines and other neighboring nations

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fter a nearly two-year slump, some analysts are saying the worst is over for Melco Crown Entertainment Ltd. Macau’s fourth-largest casino operator has been accumulating buy ratings after the total number of them slumped to a fouryear low in September, according to data compiled

by Bloomberg. Since then, banks including Daiwa Securities and HSBC Holdings Plc. upgraded the stock, while Gabelli & Co. initiated coverage, advising clients to buy. That made 13 analysts with bullish calls.

Melco Crown, which has dropped 62 per cent in New York from a peak in March 2014, is seen rebounding as it focuses on mass-market players instead of the high rollers who have been avoiding the gambling enclave amid a government crackdown on corruption and illegal money transfers.

The opening of the US$3.2 billion Studio City casino resort in Macau and expansion in the Philippines and other neighboring nations provide more diversified revenue, according to the analysts who recently turned bullish on the stock.

“Melco is a little different from some of the other Macau operators,” Brian Egger, a Bloomberg Intelligence analyst, said by phone from New York. “It’s certainly more exposed to the segment of the market that is more stable,” and with the opening of new projects, “there’s at least some underpinning of hoping,” said Egger, who doesn’t make recommendations on stocks.

The stock has risen 24 per cent to US$16.87 from a threeyear low on Sept. 29, reducing its decline in 2015 to 33 per cent. Short interest slipped to 10 per cent of outstanding shares on Dec. 24, near the three-year high of 11 per cent it touched a week earlier,

according to data compiled by Bloomberg and Markit.

‘Worst is over’

Macau is going through its worst downturn on record as China’s slowing economy and a crackdown on corruption deterred high-stakes gamblers from visiting the city. Gross gaming revenue fell for the 18th straight month in November.

While Melco’s earnings have slumped, the downturn is showing signs of abating.

Third-quarter profit fell 22 per cent to US$237 million, beating the median forecast of five analysts surveyed by Bloomberg. Mass-market gaming revenue overtook the VIP segment for the first time during the period.

Billionaire chairman Lawrence Ho said at a briefing after the November earnings announcement that the worst is over for Melco Crown. While the VIP segment will be challenging

There’s at least some underpinning of hoping Brian Egger, Bloomberg Intelligence Analyst

in 2016, the mass market has stabilized “and should see some reasonable growth hopefully,” he said.

Non-gambling attractions

Melco Crown opened the Hollywood-themed Studio City on Oct. 27 featuring a Batman ride, a Ferris Wheel

in the shape of a figure-8 and other attractions as part of a strategy to reduce its reliance on gambling. Its City of Dreams Manila, which opened in February and contributed 10 per cent of revenue in the third quarter, will become a “meaningful contributor of value” by 2017, Adam Trivison, an analyst at Gabelli & Co., wrote in a Dec. 9 research report initiating coverage of the company.

HSBC analyst Charlene Liu raised the stock to buy from hold in October, less than one month after Jamie Soo at Daiwa upgraded it to outperform from underperform. In all, 13 analysts now advise clients to buy Melco Crown, compared with 10 who rate it hold and three who say sell. The average 12-month price target is US$20.11, implying a potential 19 per cent return from Monday’s closing price.

Bloomberg

6 | Business Daily

December 30, 2015

Macau

NagaCorp’s acquisition of NagaCity Walk delayed to 2017-end The delay is due to Cambodian authorities’ issue of three orders to halt works on the project to meet with “local cultural and technical requirements” Kam Leong

kamleong@macaubusinessdaily.com

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ambodian gaming operator NagaCorp Ltd said the targeted completion date for its acquisition of a company developing the shopping complex NagaCity Walk in the Southeast Asian country has been put off to the end of 2017, it told Hong Kong Stock Exchange yesterday.

In 2011, the gaming company entered a sale and purchase agreement with its own chief executive and controlling shareholder, Chen Lip Keong, who agreed to sell his entire issued capital shares of a company named TSC Inc. TSC controls City Walk Inc. - the developer of the NagaCity Walk, an integrated complex TSCLK Complex and a landscape park project Tourist Garden.

According to yesterday’s filing, the gaming company and the seller had agreed to extend the completion date of the shares sale deal to December 31 in 2017 rather than the original

proposed date, June 13 in 2016.

NagaCorp said the delay in the completion of acquisition is due to three “stop work orders”

by Cambodian authorities to “to compliance with local cultural and technical requirements.” But it added

that the issue had already been “rectified and works re-commenced subsequently.”

On the other hand, the parties also reached an agreement of not to proceed with the development of the Tourist Garden, as the land

plot proposed for the development had been allotted by the Royal Government of Cambodia to the Ministry of Environment of Cambodia and Electricité du Cambodge in 2013.

In a filing in 2011, NagaCorp claimed that the acquisition, at the consideration of US$368 million, is “to expand its existing business.”

NagaCity Walk and TSCLK Complex are both located next to the company’s casino property, NagaWorld, in Phnom Penh of Cambodia.

The gaming operator also said yesterday that the seller is spending an extra US$29 million (MOP232 million) in the construction works of TSCLK Complex and NagaCity Walk “to meet with changes in compliance with local cultural and technical requirements and the extension of the length of NagaCity Walk.” It indicated that such additional cost will not be passed on to the company.

Business Daily | 7

December 30, 2015

Gaming

Here’s a sure bet: merger mania won’t abate in gaming industry Analysts see consolidation will continue and anticipate a lack of profitability and a need to gain scale

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t’s been the busiest year for gaming- industry consolidation in a decade, and the wave of mergers and acquisitions isn’t over yet.

As governments ratchet up the tax burden at a time when companies are competing harder than ever for new customers, oddsmakers are finding the best way to combat the squeeze on profitability is to join forces. At US$12.9 billion, the volume of deals announced in 2015 was about double that of 2014 and the highest since 2005, according to data compiled

by Bloomberg.

“Consolidation will continue, because a trend is in place where globally governments are increasing taxes on gambling,” said Warwick Bartlett, chief executive officer of researcher Global Betting and Gaming Consultancy. “There’s a lack of profitability and a need to gain scale.”

August’s announcement of Paddy Power Plc’s 2.9 billion- pound (US$4.4 billion) takeover of Betfair Group Plc showed how companies are merging to cope with a clampdown by governments, while seeking to boost their standing in the booming US$40 billion online gaming market. There have been 72 deals across the industry this year, the most since 2006.

In the U.S., Lakes Entertainment combined with Golden Gaming, while the downturn in the Asian gambling hub of Macau has prompted Crown Resorts Ltd. to explore taking some assets private.

More deals will happen in 2016, though maybe not on the scale of this year, according to Paula Murphy, an analyst at Fitch Ratings in London.

Europe, the Middle East and Africa is the region most likely to see deals, she said.

“There are too many players in the EMEA gaming market, particularly

with new online operators,” Murphy said. “Further consolidation should leave the remaining players better placed to cope with increasing regulation and capital expenditure requirements.”

Citigroup Inc. analyst James Wheatcroft also says more deals are likely, as companies try to scale up in order to have the firepower to invest in marketing, new products and technologies. That’s what prompted the merger of U.K. betting- shop leaders Ladbrokes Plc and Coral Group.

Potential deals

According to Bartlett, the consultant, one possible deal would be a takeover of 888 Holdings Plc by William Hill Plc, a transaction that the companies have discussed as recently as this year. Those talks ended in February because of differences over valuation and 888 shares have risen 22 per cent since, even after the company was beaten by GVC Holdings Plc in an auction for Bwin.party Digital Entertainment Plc. The share gain has propelled 888’s market value to about 658 million pounds.

Further consolidation should leave the remaining players better placed to cope with increasing regulation and capital expenditure requirements Paula Murphy, Analyst at Fitch Ratings

Another possibility could see a combination of Unibet Group Plc and Stockholm-based Betsson AB, Bartlett said. The companies rank seventh and 10th, respectively, in his onlinegaming rankings. Unibet, which has a market value of 23.8 billion kronor (US$2.8 billion), is based in Malta and its stock is listed in Stockholm.

Betsson has a 21.1-billion-kronor market value. Unibet declined to comment. Betsson didn’t respond to requests for comment.

Cost savings from combining businesses are a key driver for consolidation as companies struggle to meet an increasing burden of tax and regulation. At the end of last year, the U.K. made all wagers placed by bettors in the country subject to a 15 per cent consumption tax, preventing companies from escaping the duty by locating themselves offshore. Such is the intensity of competition, that companies have funded the additional burden themselves, rather than risk losing customers.

“The very competitive EMEA gaming markets will keep operating margins under pressure over the next three years,” Fitch’s Murphy said.

Bloomberg

Amax completes shares placement and subscription

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aming investor Amax International Holdings Ltd said it had completed shares placement of 24 million existing placing shares, as well as the new subscription of 24 million new shares, according to its filing with Hong Kong Stock Exchange yesterday.

On December 18, the company announced that its chairman and CEO, Ng Man Sun, had agreed to sell a total of 24 million existing placing shares to at least six places at HK$0.64 (US$0.08) per placing share. In addition, Mr. Ng intended to subscribe some other 24 million of new subscription shares of the company at HK$0.64 per share.

After the share placement and subscription, Mr. Ng remained holding some 37.38 million shares of the company, accounting for 12.3 per cent of the total as at yesterday, the filing states.

Meanwhile, the net proceeds from the subscription amount to some HK$15.19 million (US$1.89 million), which “will be used for general working capital and investment of the company.”

The gaming investor also added in the filing that the parties which had received the placing shares have not become substantial shareholders of the company following the placement.

K.L.

8 | Business Daily

December 30, 2015

Greater China

December official PMI likely to show 5th month of contraction China is set to release fourth quarter and full-year GDP data on January 19

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ctivity in China’s manufacturing sector is expected to have contracted for a fifth straight month in December, a Reuters poll showed, likely consigning the world’s second-largest economy to its slowest annual growth in a quarter of a century.

The official manufacturing Purchasing Managers’ Index (PMI) is forecast to inch up to 49.7 from November’s 49.6, according to a median forecast of 27 economists in a Reuters poll.

A reading below 50 points suggests a contraction in activity, while a reading above indicates an expansion on a monthly basis.

The official PMI factory reading will be released on Friday along with the official services PMI. Analysts expect only a marginal improvement in the vast manufacturing sector in December from November, when activity fell to a three-year low.

Chronic overcapacity, sluggish demand at home and abroad and deflationary pressures are expected to continue to weigh on the sector next year.

“There were some bright spots in the economy in December such as a continued recovery in the housing market and an improvement in auto sales,” said Nie Wen, an analyst at Hwabao Trust in Shanghai.

“But performances in these sectors do not necessarily boost the PMI above the 50-point level due to contractions in other industries.”

Vehicle sales in China have rebounded after the government cut taxes on smaller cars from October 1.

In a bid to prevent a sharper economic slowdown, Beijing has rolled out a series of stimulus measures and monetary policy easing over the past year and analysts expect further steps in 2016.

China’s economic growth is expected to cool from 7.3 percent in 2014 to 6.9 percent this year, the central bank said in a recent work

KEY POINTS China official PMI seen at 49.7 in Dec vs 48.6 in Nov Data due on Jan 1 at 0100 GMT paper, its slowest pace in a quarter of a century. Growth could ease further to 6.8 percent next year.

Top leaders last week outlined

Bond investors see record long bull run ending by mid-2016 22 people polled said defaults will increase further in 2016

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hinese investors are predicting a record-long rally in bonds will end before mid-2016 and debt securities will trail behind stocks as the economy stabilizes.

Fifteen of 22 fixed-income traders and analysts surveyed by Bloomberg last week said the rally of eight consecutive quarters will end before June 30 and all but one predicted equities will outperform next year.

The worst for the Chinese economy is behind us, and as November data show signs of improvement, a rebound in growth is probable in 2016 Deng Haiqing, chief economist, JZ Securities Co

An improvement in the economy was singled out as the most likely negative factor to the market.

“We’re bearish on bonds and bullish on equities,” said Deng Haiqing, chief economist at JZ Securities Co. A broad China bond market index compiled by Bank of America Merrill Lynch climbed 8.9 percent this year, after increasing 11 percent in 2014.

That compares with a 9 percent advance in the Shanghai Composite Index of stocks in 2015 -- which included an early rally, a June collapse and a gradual rebound -- after a surge of 53 percent last year.

Credit events

A slowdown in the economy has affected companies’ cash flows, with

Shengda Group Ltd. becoming at least the seventh Chinese firm to renege on local debt obligations this year. All the 22 people polled said defaults will increase further in 2016, and 16 respondents predicted credit premiums will widen. The extra yield of five-year AA rated corporate notes over the sovereign climbed to 173 basis points on Monday, after touching an eightyear low of 169 basis points last month.

China’s gross domestic product is forecast to grow 6.9 percent this year, the slowest pace in a quarter century. Policy makers pledged to continue efforts to shore up expansion in the annual Central Economic Conference this

the main economic targets for 2016, saying the government will push forward “supply-side reform” to help generate new growth engines.

The government also vowed that it will adopt a more flexible fiscal policy, including gradually increasing fiscal deficit ratio and expanding its budget deficit.

President Xi has said China must keep annual average growth at no less than 6.5 percent over the next five years to reach a goal of doubling gross domestic product and per capita income by 2020 from 2010.

Reuters

month. Monetary policy must be more “flexible” and fiscal policy more “forceful” as leaders create “appropriate monetary conditions for structural reforms,” according to statements released at the end of the government’s Central Economic Work Conference by the official Xinhua News Agency.

That followed similar comments in the PBOC’s third-quarter monetary policy report, which said that while policies need to prevent an excessive drop of aggregate demand, they should avoid pumping too much liquidity into the market, which could worsen structural imbalances.

Restructuring push

“As China is facing destocking, capacity cuts and restructuring reforms, monetary policy may not be as loose as this year in 2016,” said Liu Changjiang, a bond analyst at Soochow Securities Co. “Policy makers will become more cautious in loosening, as otherwise it may be difficult to carry out the reforms.”

The PBOC will lower the benchmark one-year lending rate 50 basis points by the end of next year from 4.35 percent currently, according to a separate survey conducted December 17-22. That compares with a cut of 125 basis points in the rate since November 2014. The overnight repurchase rate rose to 1.92 percent on Monday, its highest level since September 30.

The yield on the benchmark 10year sovereign note is likely to be in a range between 2.6 percent and 3.1 percent next year, according to the survey, after touching 2.80 percent Monday, the lowest since January 2009, ChinaBond data show.

Bloomberg News

Business Daily | 9

December 30, 2015

Greater China Deutsche Bank to sell stake in Mainland lender

Central bank official new head of FX regulator

Seeking to bolster its finances, Deutsche Bank has also announced plans to slash 15,000 jobs, shed businesses employing some 20,000 staff and suspend dividends for two years Maria Sheahan and Daria Hsu

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eutsche Bank has agreed to sell its entire 20 percent stake in Beijing-based Hua Xia Bank to Chinese insurer PICC Property and Casualty Co - a deal worth up to US$4 billion that will help lift its capital ratios.

Deutsche Bank, which has embarked on drastic restructuring under new CEO John Cryan, becomes the latest Western financial institution to scale back in China where caps on foreign ownership have made it difficult to attain the strategic growth many firms first envisioned.

Reducing stakes in Chinese lenders has, however, often resulted in multibillion profits for European and U.S. banks. Deutsche too is likely to make a tidy profit, with shares in Hua Xia trading at 11.44 yuan as of Monday’s close, compared with below 4 yuan per share in 2006 when it first invested.

Deutsche will gain between 23.0 billion and 25.7 billion yuan, or 3.2 billion to 3.7 billion euros from the

KEY POINTS CEO says right time to sell as executes on strategy Deutsche Bank is slashing jobs, sacrificing dividends Sale will boost CET1 ratio by 0.3-0.4 percentage points

stake sale at current exchange rates, depending on Hua Xia’s share price ahead of the sale’s completion.

“As we execute on Deutsche Bank’s strategic agenda, now is the right time for us to sell this investment,” Cryan said in a statement on Monday.

While it is pulling out of Hua Xia, Deutsche continues to run a

securities joint venture and an asset management business in China.

The sale will help boost the German bank’s common equity tier 1 capital ratio as of September 30 by about 0.3 to 0.4 percentage points from 11.5 percent.

Chinese insurers like PICC P&C have been particularly acquisitive this year, spending a record US$12.2 billion on property, banking and insurance businesses at home and abroad.

Hua Xia, a relatively small bank in China with around 80 branches and a market capitalisation of US$20 billion, offers PICC P&C a new channel to distribute its insurance products, said Leon Qi, an analyst at Daiwa Capital Markets.

PICC P&C, which is partly owned

by American International Group, said it expected relatively steady investment returns from its stake in Hua Xia, in addition to the benefits of strategic cooperation.

Reuters

Rating company Dagong looking to hire, expand in Europe Firm’s chairman has been a vocal opponent of methodologies adopted by the world’s biggest grading companies

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hina’s Dagong Global Credit Rating Co. is looking to hire in Europe as it expands operations and tries to increase market share, according to the firm’s chairman.

The assessor, one of China’s top three credit-rating companies, will move its European headquarters to Frankfurt from Milan very soon, and add staff to its office of fewer than 20 employees, Guan Jianzhong said in an interview on Monday. The subsidiary, which has been making losses since it set up operations in 2012, will promote the company’s methods and try to raise its “very small” slice of the market, Guan said.

He described as groundless a report that the firm’s European unit is being probed by the European Securities and Markets Authority, adding that he isn’t aware of any checks by regulators in the past 18 months. His comments came after Reuters reported last week that ESMA is investigating the subsidiary on concerns that it may not be “fully compliant with” local rules that prevent conflicts of interest. In an e-mailed statement on Monday, ESMA said that it doesn’t comment on supervised entities or on on-going supervisory activities.

“Dagong has made significant investments in Europe and will

The deputy governor of China’s central bank has been appointed head of the country’s foreign exchange regulator, leading business publication Caixin reported yesterday. Pan Gongsheng will retain his post as deputy governor while assuming the position as head of the State Administration of Foreign Exchange (SAFE), Caixin reported, citing unnamed sources. The outgoing head of SAFE, Yi Gang, will remain a deputy governor of the central bank as well as vice minister of the Office of the Central Leading Group on Financial and Economic Affairs, according to the publication.

Anti-graft watchdog to launch WeChat tip channel China’s disciplinary watchdog will launch its official WeChat account on January 1 as part of efforts to reach a broader audience amid an anti-corruption drive.

In addition to providing users with firsthand, authoritative information, the WeChat account will have a one-click channel for users to report disciplinary violations by officials, the Communist Party of China’s (CPC) Central Commission for Discipline Inspection (CCDI) said in a statement yesterday. The CCDI currently has a website and a mobile application, which occasionally publish information on fallen officials.

2016 energy consumption targets set China expects to consume 550 million tonnes (11 million barrels per day) of crude oil in 2016, 205 billion cubic metres of natural gas and 5.7 trillion kilowatt-hours of electricity, according to a report by the official Xinhua news agency. Non-fossil fuels will also make up 13.2 percent of primary energy needs, while coal will fall to below 62.6 percent, Xinhua also said in the report citing the head of the National Energy Administration, Nur Bekri.

Desertification in Mainland reversed China has experienced less serious desertification over the past decade with data revealing that desertified areas have been shrinking, the forestry authority said yesterday. By the end of 2014, there was 2.61 million square kilometres of desertified area in China, about 27 percent of the whole territory, down 12,120 square kilometres from a previous survey in 2009, according to research by the State Forestry Administration. China has been monitoring desertification and sandification every five years since 1995. It was in 2004 that desertified areas started to reduce.

continue to do so in the coming years,” Guan said, without giving details.

“We would like to promote our own credit-rating methodologies, which are superior to those adopted by our global competitors.”

Vocal opponent

Guan has been a vocal opponent of methodologies adopted by the world’s biggest grading companies, including Standard & Poor’s and Moody’s Investors Service. He published a booklet in June, saying that foreign rating companies look at irrelevant

factors to decide a bond’s risk and pay too much attention to historical default rates.

Dagong caused a flutter in 2013 when it cut the U.S.’ rating to Afrom A after President Barack Obama signalled legislation raising the federal debt limit. That was below the rating of Botswana, which was graded A. Dagong lowered Japan’s local-currency sovereign ratings to A- from A on December 17, and its foreign-currency grading to A from A+, each with a stable outlook.

Bloomberg News

Beijing approves China Merchants’ acquisition of Sinotrans & CSC China’s cabinet has approved China Merchants Group’s acquisition of Sinotrans & CSC Holdings Co, the state asset regulator said yesterday. No further details were provided in the announcement, published on the regulator’s website.

10 | Business Daily

December 30, 2015

Greater China

Tech giants spot opportunity in forecasting smog Microsoft and IBM secured their first government clients last year after developing their respective pollution forecasting technologies Adam Rose

A

ir pollution in China could be big business.

Two of the world’s largest technology firms, IBM and Microsoft, are vying to tap the nascent, fastgrowing market for forecasting air quality in the world’s top carbon emitters.

Bouts of acrid smog enveloping Beijing prompted authorities in the Chinese capital to declare two unprecedented “red alerts” this month - a warning to the city’s 22 million inhabitants that heavy pollution is expected for more than three days.

Such alerts rely on advances in pollution forecasting, increasingly important for Communist Party leaders as they seek improvements in monitoring and managing the country’s notorious smog in response to growing public awareness.

Official interest has also been boosted by China’s preparations to host the Winter Olympics - Beijing’s smog is worse in the colder months - in 2022.

“There is increasing attention to the air quality forecast service,” said Yu Zheng, a researcher at Microsoft.

“More and more people care about

this information technology.”

A rudimentary forecast was pioneered

by Dustin Grzesik, a U.S. geochemist and former Beijing resident who created

Banshirne.com, a free website and smartphone app, in 2013 to predict clean air days using publicly available weather data on wind patterns.

Vanke finds investor in fight with ‘hostile takeover’ Shenzhen Jushenghua Co. and fellow Baoneng unit Foresea Life Insurance Co. boosted their combined Vanke stake to 24.3 percent as of December 24

C

hina Vanke Co. said it has found a potential investor and is in talks with others as the managers of China’s biggest listed homebuilder wage a struggle for control against its largest shareholder.

The company signed

a letter of intent to buy unspecified assets from a potential investor by issuing new shares and using cash, according to a statement to Hong Kong’s stock exchange yesterday. The price will be decided after due diligence and the transaction may not

be completed, the Shenzhenbased company said. Vanke didn’t say how many shares it will issue or to whom, and didn’t say what assets it plans to buy.

President Yu Liang said earlier this month that Vanke faces a “hostile takeover”

“If you can predict the weather, it only takes a few more variables to predict air quality,” said Robert Rohde of Berkeley Earth, a U.S.-

from Baoneng Group, which became its biggest shareholder after increasing holdings.

Vanke’s announcement on December 18 that trading was being suspended pending the release of information about a share sale and asset restructuring had prompted speculation it was seeking to dilute Baoneng’s ownership.

“The main purpose should still be to dilute Baoneng,” Alan Jin, a Hong Kongbased real estate analyst at Mizuho Securities Asia Ltd., said by phone. Buying assets may make the share sale “more acceptable to smaller investors” as the assets may

The shares will continue to be suspended as the restructuring is “relatively complicated” and the company is also in talks with other parties

be able to generate revenue and reduce the dilution effect, he added. “Vanke isn’t short of money.”

Shareholder support

The management wants “all shareholders’ support” in its asset restructuring to keep the company’s culture, brand name and credibility, which are Vanke’s “most valuable wealth,” according to a December 26 statement.

If the ownership structure can become more stable as a result, it will benefit Vanke’s credit ratings and long-term growth, the homebuilder said.

Shenzhen Jushenghua Co. and fellow Baoneng unit Foresea Life Insurance Co. boosted their combined Vanke stake to 24.3 percent as of December 24, according to a December 27 filing. Anbang Insurance Group Co. raised its holding to 7.01 percent, a move later welcomed by Vanke.

The letter of intent will terminate if the two sides fail to reach a written agreement on the transaction before June 30, according to yesterday’s statement.

The acquisition will be made with either Vanke’s shares traded in Hong Kong or Shenzhen and in cash, Vanke said in the statement.

The shares will continue to be suspended as the restructuring is “relatively complicated” and the company is also in talks with other parties, Vanke said without giving details.

Bloomberg News

Business Daily | 11

December 30, 2015

Greater China based non-profit that maps China’s real-time air pollution. “Most of the time pollutant emissions don’t vary very rapidly.”

Now, advances in “cognitive computing” - machines programmed to improve modelling on their own allow more sophisticated forecasting software to provide predictions for the air quality index up to 10 days in advance using data on weather, traffic and land use, as well as realtime pollution levels from government monitoring stations and even social media posts.

Forecasts can help governments plan when to close schools and airports, restrict vehicles or postpone sporting events, and also decide which polluting factories to shut down temporarily.

Business of smog

Both Microsoft and IBM secured their first government clients last year after developing their respective pollution forecasting technologies at their China-based research labs.

Chinese authorities only began releasing real-time levels of PM2.5 - airborne particulate matter under 2.5 microns in diameter that can penetrate deep into the lungs - in 2012, after denouncing the U.S. embassy for publishing its own realtime monitoring data on Twitter.

IBM’s first client was the city of Beijing’s environmental protection bureau, which bases its colourcoded pollution alerts on the technology.

The company launched a “Joint Environmental Innovation Centre” - staffed by government and IBM scientists - with the bureau earlier in December, allowing officials to better model pollution reduction scenarios during the worst episodes.

Still the municipal government only makes public a 24-hour forecast on its website, meaning residents aren’t able to see for themselves when a “red alert” may be due.

The environmental bureau’s monitoring centre did not respond to a request for comment.

IBM has also signed a deal with Zhangjiakou, which will jointly host the 2022 Winter Olympics alongside Beijing, to do forward planning and scenario modelling ahead of the games.

For its part, Microsoft has signed up China’s environment ministry, and the environmental protection bureaus in Fujian province and Chengdu, the capital of the southwestern province of Sichuan.

Outside China, IBM has also signed deals for air quality modelling with Delhi, one of the world’s most polluted cities, and Johannesburg.

KEY POINTS Microsoft, IBM, vie for pollution forecasting business in China Technological advances allow predictions up to 10 days ahead Tech giants won first smog forecasting contracts in 2014 IBM has also signed deals with Delhi, Johannesburg But local start-up gives giants run for money

“We should be able to use the same base system and do air quality forecasting in different parts of the world,” said Brad Gammons, the business leader behind the IBM initiative, which the company calls ‘Green Horizons’.

“With the machine-based learning we can do it very quickly.”

The two tech rivals aren’t just competing over government clients.

Business clients - in particular renewable power generation companies - are another target, along with consumers.

Already more than 30 solar farms in China are using IBM’s forecasting technology, which can also help predict the availability of sunlight.

Microsoft has created a website called Urban Air and a smartphone app with a 48-hour forecast for cities across China, while the China Open tennis tournament put two-day IBM pollution forecasts for parks across Beijing on its public WeChat social messaging account.

But there are still kinks to work out.

The latest version of Microsoft’s iPhone app lacked the forecasting function advertised, which the company blamed on a soon-to-befixed bug, while during a recent “red alert,” when the air was considered hazardous and schools were shut, the China Open IBM-based forecast recommended “light exercise”.

And while other tech giants, such as China’s Alibaba, currently remain on the side-lines, Air Visual, a crowdsourced start-up pollution monitoring platform based in Beijing, is already giving IBM and Microsoft a run for their money, using “deep machine learning” to provide its own free three-day forecasts for cities across the globe through its website and smartphone app.

Reuters

Hanergy stake sale implies US$20 billion in value wiped out Chairman Li Hejun agreed to sell 2.5 billion shares to unidentified buyers at an average of 0.18 yuan

H

anergy Thin Film Power Group Ltd., the solar equipment maker that earlier this year briefly became the world’s most valuable clean energy company, is now worth almost US$20 billion less than when trading was suspended in Hong Kong more than seven months ago.

Hanergy is currently worth about HK$9 billion (US$1.16 billion), compared with a market value of HK$163 billion when the shares were halted on May 20 after falling almost 50 percent. At one point this year, Hanergy’s market value was bigger than those of Sony Corp. and Twitter Inc. The solar company’s valuation is based on two regulatory filings that showed Hanergy’s chairman, Li Hejun, agreed to sell 2.5 billion shares to unidentified buyers at an average of 0.18 yuan, or 21.5 Hong Kong cents. That’s almost 95 percent below the last traded level in Hong Kong, though it’s unclear why the transactions were in yuan when the stock is listed in Hong Kong dollars.

“That’s the current fair value unless he’s acting under duress,” said David Webb, a shareholder activist in Hong Kong and founder of Webb-site.com. “Don’t forget it was a bubble stock.”

Shandong Shanshui Cement Group Ltd, which defaulted on a bond payment in November, said yesterday it was at risk of defaulting on another bond maturing soon. The cement firm is a mainland subsidiary of Hong Kong-listed China Shanshui Cement Group Ltd. In a statement posted on the website of one of China’s main bond clearinghouses, the firm said it might be unable to pay interest and principal on a 1.8 billion yuan (US$277.64 million) medium-term note maturing on January 21, 2016.

Beijing helps low-income groups China has provided more than 140 billion yuan (US$21.6 billion) to low-income residents over the past 11 months, according to the Ministry of Civil Affairs (MCA) on Monday. China has some 66.5 million people, five percent of its total population, receiving subsistence allowances. The cash subsidy standard for each urban resident is 439 yuan per month, and 255 yuan for rural residents, the MCA said. The MCA also announced 45.5 million people with financial difficulties were offered medical services from January to September, with 15.3 billion yuan spent on the scheme.

Consumer confidence in Taiwan lowers Taiwan consumers have continued to show lower expectations about future income and investment as well as general economic situation for the eighth-consecutive month in December, said a survey publicized Monday. The consumer confidence index, based on a monthly survey by the “National Central University,” dropped by 2.59 to 81.61 points in December from last month, said a report from the university’s Research Centre for Taiwan Economic Development. The index has continued to fall since May due to febrile growth in the local economy.

Hainan to raise duty-free ceiling

Hanergy’s shares tumbled by almost half on May 20, wiping out US$19 billion of its market value and prompting a trading halt. The stock was suspended at HK$3.91 amid a Hong Kong regulatory probe.

Stake Sale

“Li’s sale of his 6 percent stake at a 95 percent discount to the last traded price would normally mean that the company has lost 95 percent of its value,” Alex Gardner, an analyst at Bloomberg Intelligence, said by e-mail. “As a consequence, other shareholders have lost 95 percent of their money on this valuation.”

Calls to the public relations department of Beijing-based parent Hanergy Holding Group went unanswered.

A resumption in trading of Hanergy Thin Film “seems infinitely far away,” resulting in uncertainties over the assets, said Ronald Wan, chief executive of investment bank Partners Capital International Ltd. in Hong Kong.

Buyers could be risk takers who want to take their chances, or friends of management willing to help, he said.

If it’s one buyer with a 5 percent stake, the company would need to disclose the identity, according to

Shandong Shanshui says may default on another bond

Hong Kong Securities and Futures Commission requirements.

Contract cancelled

Hanergy’s May collapse brought an end to a six fold surge in the space of a year for the manufacturer.

The company has faced a series of challenges since the share plunge and the regulatory investigation.

In November, Ikea Group said it wouldn’t renew a contract to fit homes with solar panels.

A unit of the listed company also faces a lawsuit over HK$1.73 million (US$223,000) in unpaid office rent and management fees. Hanergy Thin Film Power Asia Pacific Ltd., which is responsible for the company’s business in the region, is the target of a writ filed December 3 at the High Court of Hong Kong.

Bloomberg News

Southernmost province Hainan will raise the upper limit of offshore shopping eligible for duty exemption, its party chief said Monday, the latest move to boost spending on the resort island. Hainan allows non-locals to make duty-free purchases twice a year before taking flights to leave the island, each capped at 8,000 yuan (US$1,235). That amount is expected to double, said Luo Baoming, secretary of the Hainan Provincial Committee of the Communist Party of China.

The island province will also promote online duty-free shopping while allowing those who leave the island by train to enjoy duty exemption, Luo said.

Smelters to cut copper sales in 2016 Nine large copper smelters in China have agreed to cut sales of spot metal by as much as 200,000 tonnes in the first quarter of 2016 to counter low prices, an executive at one of the smelters said late Monday. The amount is equal to about 10 percent of China’s first-quarter refined copper production in 2015. The plan to limit spot sales adds to an earlier decision by smelters to cut production next year by at least 350,000 tonnes in an effort to support prices that are troughing around six-year lows.

12 | Business Daily

December 30, 2015

Asia

Thai output edges up but factory sector remains weak Industrial goods made up 79 percent of last month’s total exports Orathai Sriring and Kitiphong Thaichareon

T

hailand’s industrial output rose slightly in November, a surprise given that the country’s pivotal exports, many of which are manufactured goods, continued to fall last month.

The Industry Ministry said yesterday its manufacturing production index (MPI) in November increased 0.1 percent from a year earlier. A Reuters poll projected a 2.0 percent contraction.

The ministry said the output index fell 2 percent in November from a month earlier, and it sharply revised the annual fall in October, to only 0.83 percent instead of the 4.17 percent decline reported a month earlier.

For all of 2015, the ministry maintained its forecast that output would fall or rise 0.5 percent, and have a 2-3 percent increase next year.

“This year is probably the worst ... Looking forward, the (output index) should return to positive, helped by mega projects next year plus government economic measures,” ministry official Verasak Supprasert told a news conference.

Dhammatouch Thongaram, economist for TMB Analytics, said the November increase stemmed from

KEY POINTS Nov output +0.1 pct y/y vs -2.0 pct in Reuters poll Auto output rises, but electronics down 2015 ‘probably the worst’ ministry official “ramped-up” auto production before new domestic taxes are imposed in 2016, and jewellery production for year-end gifts.

Trade-reliant Thailand recently changed the way it calculates output, which has been sluggish for over two years.

A weakened pillar

The index’s November rise in annual terms will not be seen as indicating better times, because exports - a pillar of the Thai economy - remain poor.

Industrial goods made up 79 percent of last month’s total exports,

which fell 7.4 percent from a year earlier and will contract for the third straight year in 2015.

Domestic demand, too, remains sluggish as low commodity prices hurt farmers, so the economy continues to struggle 19 months after the army seized power to end political turmoil.

In one of the few bright spots for the economy, auto production rose 3.5 percent from a year earlier, thanks to the improving domestic demand.

The sector accounts for about 10 percent of gross domestic product and employs about one-tenth of the manufacturing workforce. Thailand

Yen guru Gyohten says it’s Abe’s turn to stimulate He said that any discussion about clearly changing policy will be a topic after 2017

T

oyoo Gyohten, a former currency-policy chief at Japan’s Ministry of Finance, says 2016 will be the year for Prime Minister Shinzo Abe to take up the mantle of stimulus from the Bank of Japan (BOJ), which has done all it can to revive the economy.

While the yen will hold losses from a four-year decline, it is unlikely to weaken beyond 130 per dollar as the Federal Reserve raises interest rates only gradually and the BOJ keeps policy on hold, said Gyohten, who was involved in negotiations leading up to the 1985 Plaza Accord to weaken the U.S. currency.

Central bank bond buying has come at a price, pushing yields on shorter-term notes below zero percent and causing some primary dealers to complain of low market liquidity.

“The Bank of Japan’s monetary policy isn’t the biggest item on the economic agenda next year,” Gyohten, 84, said in an interview in Tokyo on December 22.

The mix of fiscal stimulus and monetary easing known as Abenomics has spurred corporate profits, increased tax revenue and fuelled an 80 percent gain in the benchmark Topix since Abe’s election in December 2012.

The government this month

announced a supplementary budget for the fiscal year ending in March, after the BOJ delayed its time frame for meeting a 2 percent inflation target. Abe also urged companies to deploy record cash for investment and wage increases.

Elusive target

Benchmark 10-year sovereign debt is set to complete a sixyear gain, the longest in data back to 1986. While the BOJ maintained its plan to increase the monetary base at an annual pace of 80 trillion yen (US$665 billion) at a December 18 policy meeting, it also lengthened the

Jan-Nov output +0.23 pct y/y is a regional production and export hub for global automakers.

The Bank of Thailand on Friday nudged up its 2015 economic growth forecast to 2.8 percent from 2.7 percent, but downgraded its 2016 growth forecast to 3.5 percent from 3.7 percent to reflect zero export growth rather than a 1.2 percent rise seen previously.

The economy grew just 0.9 percent in 2014.

average maturities of Japanese government bonds it buys to seven to 12 years from seven to 10 years.

The central bank is unlikely to achieve its 2 percent inflation target next year and any discussion about clearly changing policy, including quantitative easing or zero rates, will be a topic after 2017, said Gyohten, who used to serve as vice finance minister and is now president of the Tokyo-based Institute for International Monetary Affairs.

Policy divergence

As the BOJ keeps its current policy, a gradual increase in U.S. interest rates next year will support the dollar against the yen, according to Gyohten.

Masafumi Yamamoto, the chief currency strategist at Mizuho Securities Co. in Tokyo, forecasts the yen’s losses will be capped at about 127 even as policy diverges.

“The probability is low for additional BOJ easing,” he said. “Right now, the government and the BOJ have put emphasis on the bad

Reuters

influence of the weak yen on income redistribution. Their stance is that there’s no need for further stimulus.”

An increase in a government action could relieve pressure on the BOJ, which became the biggest holder of JGBs through its monthly bond purchases of as much as 12 trillion yen. The strain on the market may worsen as an increase in tax revenue allows Abe’s government to fund next business year’s budget without increasing new bond issuance, which is forecast to fall to the lowest since fiscal 2009.

“The core of Abenomics in strengthening the overall economy is making a progress and won’t be derailed,” Gyohten said. “The issue for Japan is whether it can really show the path toward recovery and turn the corner next year on investment and consumption -- Abenomics’ ultimate economic policy goal -- or become a very disappointing case, even if such a probability isn’t big.

The year 2016 will be crucial.”

Bloomberg News

editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Michael Armstrong, Stephanie Lai, Óscar Guijarro, Kam Leong, Joanne Kuai GROUP SENIOR ANALYST José I. Duarte Designer Francisco Cordeiro WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia Assistant to the publisher Lu Yang | lu.yang@projectasiacorp.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.

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Business Daily | 13

December 30, 2015

International Australia’s Prime Minister loses ministers 3 months after taking over Turnbull has been riding high in opinion polls since replacing Tony Abbott in mid-September Michael Heath

A

ustralian Prime Minister Malcolm Turnbull lost two ministers from his threemonth-old administration yesterday as Jamie Briggs, responsible for development of cities, quit and Special Minister of State Mal Brough temporarily stood aside.

Turnbull said yesterday that Briggs’s conduct “fell short” of standards expected of ministers. Briggs said he resigned after an unspecified incident involving a female public servant in a bar in Hong Kong but didn’t provide further details. Minister for the Environment Greg Hunt will assume Briggs’s responsibilities until a replacement is named.

The prime minister said he had agreed with Brough that the special minister of state should stand aside “pending the completion of inquiries by the police” into events involving access to the diary of the former speaker of Parliament. Finance Minister Mathias Cormann will take over Brough’s duties, Turnbull said.

Brough was under fire in recent weeks as the opposition Labour party accused him of saying one

Australian Prime Minister Malcolm Turnbull

thing to the media and another to the parliament over his dealings with the then- speaker of the previous government. Turnbull is trying to

Bridgestone considering Icahn bid for Pep Boys Both Bridgestone and Icahn are seeking to expand their presence in the tire and automotive-repair sector Nick Turner and Yuki Hagiwara

B

ridgestone Corp. will decide by the end of the year whether it will top Carl Icahn’s bid for Pep Boys after the billionaire investor raised his offer for the car-parts chain to more than US$1 billion.

The Japanese tire maker will decide its next move within three business days, spokesman Fusamaro Iijima said yesterday in an e-mail. Hours earlier, Icahn Enterprises escalated a bidding war with an US$18.50-ashare cash proposal, and said it would be willing to boost the proposal even further if Pep Boys doesn’t increase the termination fee in its deal with Bridgestone.

The takeover battle for Pep Boys underscores the confidence Icahn and Bridgestone have in the U.S. autoparts retailing industry, which has benefited from an aging vehicle fleet on American roads. The automotive retailer agreed to a sweetened, US$17-a-share takeover offer from Bridgestone last week, following an earlier bid from Icahn.

Both Bridgestone and Icahn are

seeking to expand their presence in the tire and automotive-repair sector by adding Pep Boys’ 800 locations across more than 30 states. Bridgestone operates more than 2,200 tire and automotive centres in the country.

Icahn, meanwhile, plans to combine Pep Boys with the Auto Plus chain,

refocus his administration on driving Australia’s economic growth and employment as he prepares for an election in late 2016.

“It does take a little bit of shine off Turnbull,” said Zareh Ghazarian, a politics lecturer at Monash University in Melbourne.

Turnbull has been riding high in opinion polls since replacing Tony Abbott in mid-September, returning the government to an election-winning lead and trouncing opposition leader Bill Shorten in the polls. Brough played a role in helping Turnbull gain support to win the leadership, according to numerous media reports including by the Australian Financial Review.

“In offering to stand aside Mr Brough has done the right thing, recognizing the importance of the Government maintaining an unwavering focus on jobs, economic growth and national security,” Turnbull said.

The decisions open the door for the prime minister to reshuffle his ministry in the weeks ahead.

Bloomberg News

which he acquired earlier this year.

Icahn’s increased offer sent Pep Boys’ stock up as much as 7.1 percent to US$18.65 in late trading. Shares of the company, whose full name is Pep Boys -- Manny, Moe & Jack, had already gained 77 percent this year, largely driven by the bidding war.

Pep Boys trades at 64 times forward 12-month earnings, versus the 18 times average for U.S. auto retailers, according to data compiled

by Bloomberg.

The company, based in Philadelphia, said in a statement that Icahn’s proposal was superior and gave Bridgestone until 5 p.m.

New York time on December 31 to make another offer or terminate their agreement.

Icahn had previously said he was willing to pay at least US$18.10 a share and was puzzled by Pep Boys’ board opting for the Bridgestone offer.

“We cannot understand the actions of the directors in that they know we were willing to offer a lot more than US$17,” he said last week.

Bloomberg News

Myanmar suffers trade deficit in 1st 8 months Myanmar has suffered over US$3.713 billion trade deficit in the first eight months of 2015-16 fiscal year, according to official statistics issued yesterday.

With its total foreign trade amounting to over US$18.1 billion during the period, its export stood at 7.2 billion, while its import reached 10.9 billion.

The statistics issued by Central Statistics Organization show that in the first seven months of 2015-16 fiscal year, total foreign trade amounted to over US$15.6 billion, of which its export stood at US$6.4 billion, while its import topped 9.2 billion.

South Korea dept store sales rise

Sales at department stores in South Korea rose for the third straight month in November, though the pace of growth slowed from October. Combined sales at department stores run by Hyundai Department Store, Lotte Shopping and Shinsegae Co rose 1.0 percent from a year earlier, finalised data from the Ministry of Trade, Industry and Energy showed yesterday. That was far weaker than a 11.4 percent jump seen in October but strong sales then were mainly due to a major holiday in South Korea.

Cambodia requests Thailand labour visas Cambodia’s Ministry of Foreign Affairs has requested Thailand to issue labour visas to 68,174 Cambodian workers in 2015, the ministry’s spokesman Chum Sounry said in a statement on Monday.

Besides, the ministry has actively assisted Cambodian migrant labourers in Thailand and provided them legal aid when they have been involved in legal cases, he said. According to the 2003 memorandum of understanding, Cambodian workers entering Thailand require approval from the labour ministries and the foreign ministries of both countries. Some 250,000 Cambodian migrant workers, mostly undocumented, were repatriated to Cambodia in June last year.

Vietnam’s anti-corruption body urges intensified efforts Anti-corruption efforts must be intensified in a more result-oriented manner after the upcoming 12th National Congress of the Communist Party of Vietnam (CPV) in early 2016, CPV Central Committee General Secretary and Chairman of the Central Steering Committee for Anti-Corruption (CSCAC) Nguyen Phu Trong said. The CSCAC held its ninth meeting in Vietnam’s capital Hanoi on Monday, highlighting the need for stronger and more fruitful anti- corruption activities, reported local Vietnam News online newspaper yesterday. From December 1, 2014 to November 30, 2015, investigation agencies brought criminal proceedings in 216 corruption cases involving 460 people.

14 | Business Daily

December 30, 2015

International Ruble sinks to new 2015 low over oil price plunge Russia’s battered ruble yesterday continued its slide on the back of low oil prices, reaching a new 2015 low against the dollar and dropping to below 80 against the euro.

The Russian currency stood on Tuesday at 72.85 against the dollar, down from 72.46 yesterday. The ruble meanwhile stood at 80.02 against the euro, dropping below 80 for the first time since late August. The slide in oil prices and Western sanctions over Moscow’s role in the Ukraine crisis have pummelled the oil-dependent Russian economy in recent months.

U.S. holiday retail sales grow Strong online sales and demand for furniture and women’s apparel helped U.S. retail sales grow by a “solid” 7.9 percent this holiday season, according to MasterCard Advisors SpendingPulse. U.S. retail sales, excluding automobiles and gas, had grown 5.5 percent in the period between Black Friday and Christmas Eve last year. Online sales grew 20 percent in the holiday season this year, MasterCard Advisors, which tracks customer spending, said in a report on Monday.

Argentina looks for 2nd law firm to resolve debt lawsuit New government is shopping around for a second law firm to help resolve the country’s longstanding battle with creditors suing it over its unpaid debt, a source said. The centre-right government of Mauricio Macri searches a new firm based in New York City to work together with Cleary Gottlieb Steen & Hamilton LLP, said the source, who spoke on the condition of anonymity. Argentina and the so-called “holdout” bondholders plan to meet in the second week of January to start talks toward settling the legal dispute that stems from the country’s US$100 billion default in 2002.

Saudi plans spending cuts, reforms to shrink budget deficit Government announced plans to shrink a record state budget deficit with spending cuts, reforms to energy subsidies and a drive to raise revenues from taxes and privatisation

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he 2016 budget, released by the Finance Ministry on Monday, marked the biggest shake-up to economic policy in the world’s top crude exporter for over a decade, and includes politically sensitive reforms from which authorities previously shied away.

The plan suggests the kingdom is not counting on a major recovery of oil prices any time soon but is instead preparing for a multi-year period of cheap oil. The International Monetary Fund warned in October that Riyadh would run out of money within five years if it did not tighten its belt.

“Our economy has the potential to meet challenges,” King Salman said in a speech, adding the 2016 budget launched a phase in which his kingdom would diversify its revenues.

The government ran a deficit of 367 billion riyals (US$97.9 billion) or 15 percent of gross domestic product in 2015, officials said. The 2016 budget plan aims to cut that to 326 billion riyals, reducing pressure on Riyadh to pay its bills by liquidating assets held abroad and issuing bonds.

Next year’s budget projects

spending of 840 billion riyals, down from 975 billion riyals actually spent this year. The ministry said it would review government projects to make them more efficient and ensure they were necessary and affordable.

Revenues next year are forecast at 514 billion riyals, down from 608 billion riyals in 2015, when oil revenues accounted for 73 percent of the total. The Brent oil price averaged about US$54 a barrel this year but is now around US$37.

The success or failure of the budget plan will be key to maintaining the confidence of financial markets in Riyadh.

As the deficit has swelled, the riyal has dropped in the forwards market to its lowest since 1999 because of fears Riyadh may eventually have to abandon its peg to the U.S. dollar.

Subsidies

In its budget statement, the ministry said it would adjust subsidies for water, electricity and petroleum products over five years. That is a politically sensitive step since the kingdom has traditionally kept domestic prices at

JPMorgan to raise deposit rates for some big clients JPMorgan Chase & Co will begin raising deposit rates for some of its biggest clients in January, the Wall Street Journal reported, citing a person familiar with the matter. The bank’s deposit-rate increase will affect most institutional clients and the size of the increases will vary, the Journal reported, citing the person. Earlier this month, major U.S. banks raised their prime rates, a benchmark for a wide range of consumer and commercial loans, for the first time since 2006, following a rate hike from the Federal Reserve.

some of the lowest levels in the world as a social welfare measure.

Changes will aim to make energy use more efficient and conserve natural resources, while minimising the negative effects on lower- and middle-income Saudis, the ministry said.

Minutes later, state news agency SPA said the government had raised domestic fuel, water and electricity prices. The price of 95 octane gasoline climbed to 0.90 riyal (US$0.24) per litre from 0.60 riyal - though it remained very low by global standards.

The ministry also outlined other reforms including “privatising a range of sectors and economic activities,” although it did not give details.

The government plans to introduce a value-added tax in coordination with other countries in the region and raise taxes on soft drinks and tobacco, the ministry said, without giving a timeline. The United Arab Emirates has said it expects a regional VAT to take about three years to introduce.

But gross domestic product growth, which was 3.3 percent this year, is expected to suffer as state spending cuts hurt the construction industry and higher fuel and electricity prices dampen consumer spending.

The Finance Ministry did not disclose the average oil price assumed in its 2016 budget calculations but economists estimated it was about US$40 a barrel. The figure is an accounting device and does not necessarily mean Riyadh expects oil at that level.

Figures given by Economy and Planning Minister Adel Fakieh indicated the cost of Saudi Arabia’s military intervention in Yemen, which it launched in March and consists mostly of air strikes, was not a major factor in the budget. He said Saudi Arabia had increased its military and security spending in 2015 by about 20 billion riyals because of the conflict.

Reuters

Volkswagen’s Audi tempers spending plans for 2016

The move comes after VW cut 1 billion euros Brazil Christmas retail from its 2016 investment plan in November sales fall Sales fell 15 percent from a year earlier, the São Paulo Commerce Federation, or FecomercioSP, said on Monday, a result that adds to a growing body of evidence that the country’s worst recession in decades is getting deeper. “The result confirms what we expected,” FecomercioSP said in a report citing recent negative results in annual and monthly retail sales from Brazil’s IBGE government statistics agency. During the week of December 18 to 24, Brazilian retailers saw turnover fall to 50.6 billion reais from 59.2 billion reais during the same pre-Christmas week last year, a loss of 8.69 billion reais (US$2.2 billion) in revenue for retailers.

V

olkswagen’s flagship Audi division reined in its spending plans for 2016 and delayed the construction of a new wind tunnel on Monday, after the German carmaking group was hit by a scandal over rigged emissions tests.

Audi, which made a higher operating profit than the VW group in the first nine months of 2015, said it would invest more than 3 billion euros (US$3.3 billion) on plants and equipment in 2016.

A company source said the plan foresaw spending of 3.3 billion euros

for next year. Under its previous budget drawn up a year ago, Audi announced investments of 17 billion euros over 2015-19, or an annual average of 3.4 billion euros.

“With the current investment program, we obviously want to enhance the brand’s strong position, but at the same time, we aim to achieve additional financial scope by means of further process and cost optimisation,” Audi finance chief Axel Strotbek said in a statement.

The move comes after VW, Europe’s biggest automotive group, cut 1 billion

euros from its 2016 investment plan in November, as its emissions cheating scandal expanded to include tens of thousands more U.S. vehicles.

Audi vowed not to save at the expense of future growth but rather to examine every investment decision individually.

“The Board of Management has therefore decided to postpone the construction of a new wind tunnel for one year,” it said.

The company did not comment on investment plans beyond 2016.

Reuters

Business Daily | 15

December 30, 2015

Opinion Business

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Leading reports from Asia’s best business newspapers

The education antidote to radicalization Gordon Brown

THE TIMES OF INDIA

Former Prime Minister and Chancellor of the Exchequer of the United Kingdom, is United Nations Special Envoy for Global Education

The government is ready to launch the National Infrastructure Investment Fund (NIFF) — with an initial corpus of at least Rs 40,000 crore — with two large overseas funds expected to sign up commitments of at least US$1billion (around Rs 6,700 crore) each next month, a top government official said. “In 2016, you will see NIIF as a very active investor in the infrastructure sector and it will invest for the long term. The fund will invest in greenfield, brownfield as well as stalled projects. We have identified a shelf of infrastructure projects, especially in the transportation sector,” economic affairs secretary Shaktikanta Das said.

THE KOREA HERALD South Korea will increase the number of products on its flexible tariff list next year to boost exports and spur growth in Asia’s fourth-largest economy, the government said yesterday. The number of products eligible for preferential tariff rates will rise to 51 in 2016, up from 41 this year, according to the Ministry of Strategy and Finance. Flexible tariffs, which cover both tariff quotas and adjustment duties, are used by the government to temporarily raise or lower basic tariff rates on particular products to stabilize prices, protect local producers and ensure a steady supply.

TAIPEI TIMES MediaTek said it expects its mobile chip shipments to grow by a low double-digit-percentage at best next year, backed by rising demand for 4G chips in emerging markets such as India. However, MediaTek, which mainly supplies chips to Chinese phone brands, including Huawei, said that intensifying competition from Qualcomm and Spreadtrum would undermine its profitability next year and drive its profit growth to the slowest in three years. “As [price] competition will continue to be stiff in 2016, gross margins will be under even more pressure compared with this year,” MediaTek vice chairman said.

THE STRAITS TIMES Singapore Airlines (SIA) disclosed yesterday that it owns, controls or has agreed to acquire about 74.5 per cent of the budget carrier’s shares - short of the 90 per cent required for the move to succeed. In a filing to the Singapore Exchange before trading opened, SIA said it owns or controls about 1.86 billion Tigerair shares as of 5pm on Monday, after it gained acceptances for about 469 million shares, accounting for 18.76 per cent of Tigerair stock. Tigerair shareholders now have another 11 days to decide whether to accept SIA’s offer of S$0.41 a share.

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o visitor to the Middle East can avoid noticing the yawning gap between the educational, entrepreneurial, and occupational aspirations of the region’s young people and the harsh reality that deprives so many of them of a positive future. Indeed, in the Middle East, half of those aged 1825 are either unemployed or underemployed.

Aggravating this situation is the global refugee crisis, which has displaced some 30 million children, six million from Syria alone, very few of whom are likely to return home during their school-age years. It should come as no surprise that the group known in the region as Daesh (the Islamic State) believes that it can find fertile ground for recruitment in this vast population of dispossessed and disaffected young people.

Daesh propagandists are misusing social media in the way that their extremist predecessors and contemporaries have sometimes misused mosques – as a forum for radicalization.

The group consistently posts content that challenges the possibility of coexistence between Islam and the West and calls young people to jihad.

The grotesquely violent videos that Daesh produces have shock appeal. But what really attracts disaffected young people is the invitation to be part of something that seems larger than themselves and the societies in which they live. Shiraz Maher of the International Centre for the Study of Radicalization (ICSR) at

Few would disagree that we find ourselves in a generational battle for hearts and minds that cannot be won by military means alone

King’s College London identifies a common thread of sentiment among recruits: “righteous indignation, defiance, a sense of persecution, and a refusal to conform.” As a recent Quilliam Foundation report concludes, Daesh plays on the youthful desire to be part of something worthwhile; it is the organization’s utopian appeal that is most alluring to new recruits.

Given this, few would disagree that we find ourselves in a

generational battle for hearts and minds that cannot be won by military means alone. Hard power can eliminate Daesh’s hardcore leaders. But we will need more than that to convince nearly 200 million young Muslims that extremism is, quite literally, a dead end.

There are many examples of under-the-radar operations working to counter extremism across the Indian subcontinent and the Middle East: children’s magazines in Pakistan, videos aimed at teenagers in North Africa, radio stations in the Middle East, and books and publications opposing Al Qaeda.

They can help to expose the truth about life in Daesh – that it is brutal, corrupt, and prone to internal purges – in several ways, including by drawing attention to defections. As a 2014 report states, “[the very existence of defectors] shatters the image of unity and determination that [the group] seeks to convey.”

But we must be more ambitious if we are to win the war of ideas, sustaining the cultural space that Daesh calls the “the grey zone,” which it longs to destroy.

It is a space in which Muslims and non-Muslims can coexist, discover their shared values, and cooperate. Peter Neumann, the director of the ICSR, has proposed a YouTube contest for videos that explain the failings of Daesh. “You would receive 5,000 videos in no time,” he says. “Four thousand are junk, but 1,000 of them are effective – 1,000 videos against [Daesh] propaganda.”

The best long-term tool for countering extremism, however, is education. In Jaffa, Israel, a school run by the Church of Scotland teaches the virtues of tolerance to Muslim, Jewish, and Christian children. Throughout Lebanon, a common school curriculum championing religious diversity – including the “refusal of any radicalism and religious or sectarian seclusion” – is being taught to Sunni, Shia, and Christian children starting at the age of nine. The country has also introduced double shifts in its school system to accommodate some 200,000 Syrian refugee children.

If troubled Lebanon, wracked by sectarian violence and religious divides, can champion coexistence and provide Syrian refugees with a chance to study, there is no reason other countries in the region should not follow its example.

The choice could not be clearer.

We can stand by and watch a new generation of web-savvy Muslim youth be deluged with false claims that Islam cannot coexist with Western values.

Or we can recognize that the young people of the Middle East and the rest of the Muslim world share the aspirations of young people in every other part of the world.

All the evidence indicates that the region’s young people want education, employment, and the chance to make the most of their talents. Our resolution for 2016 should be to make that happen.

Project Syndicate

16 | Business Daily

December 30, 2015

Closing Mainland continues suspension of fuel price adjustment

Philippine bourse slips in final trading day this year

China’s top economic planner said yesterday that it will continue suspending price adjustment of domestic refined oil products before a new pricing mechanism is introduced. A special meeting was hosted by the National Development and Reform Commission (NDRD) the same day to invite opinions of relevant departments and work units on a new pricing mechanism.

The NDRC also plans a series of symposiums to solicit opinions from experts, industrial associations, petroleum enterprises and drivers. Under a mechanism that became effective in March 2013, prices of refined oil products are adjusted when international crude prices translate into a change of more than 50 yuan per tonne.

The traditional Santa Claus rally failed to lift the Philippine stock market, which ended its last trading session in the negative. The bellwether Philippine Stock Exchange index lost 0.45 percent or 31.53 points to 6,952.08, while the broader all-share index retreated by 5.69 points or 0.14 percent to 3,990.47. Trading volume further thinned with only a total of 1.20 billion shares worth 6.46 billion pesos (US$136.96 million) were exchanged hands. Of the six counters, only the mining and oil sector bucked the trend. “The year’s final day of trading remained tight with a downward bias as the prevailing sentiment among global equities remain bearish,” online brokerage 2TradeAsia.com said.

Beijing reshuffles online lending A public opinion period gives P2P platforms a grace period of 18 months to rectify their business after the regulation takes effect

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draft regulation, released on Monday and open for public opinion until January 27, will tighten supervision on China’s booming peer-to-peer (P2P) lending industry, according to analysts and insiders.

The draft imposes 12 restrictions on P2P platforms, prohibiting them from accepting public deposits, pooling investors’ money to fund their own projects, or providing any kind of guarantee for lenders.

P2P lending, which is done without a traditional financial intermediary such as a bank, has seen rapid development since China’s first P2P platform, ppdai. com, was launched in Shanghai in 2007. With investors attracted by the higher returns offered by the service compared with bank deposits, and small businesses finding it easier to secure loans.

The lack of supervision, however, has made the industry risky for investors as some P2P platforms have been implicated in shady fund raising.

Some operators have been accused of false advertising or illegally absorbing public deposits, while those that have gone bust have left investors out of pocket.

At the end of November, there were 2,612 P2P lending platforms in normal operation and 1,157 others with problems, according to

PBOC plans new financial risk assessment framework

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statistics released by the wdzj. com, a website focusing on P2P lending research.

“Many P2P platforms do illegal fund raising under the guise of ‘financing innovation,’ which has had a bad impact on the industry,” said Shi Pengfeng, CEO of the website.

Under the draft rule, P2P

platforms should deposit investors’ money with banking institutions and they are now banned from selling financial products or equity-based crowdfunding.

The rule will return P2P lending entities to their core business and really support the real economy, said Shi.

P2P lending platforms, the draft states, must disclose basic information about borrowers and financing projects to lenders, and their website must include information on the number and volume of transactions and bad lending rate.

Following the implementation of the new rules, some small P2P platforms with poor risk control abilities will exit, said Zhang Jun, CEO of ppdai. com.

According to Zhang, the draft rule adopts a negative list supervision model, which bars certain people and institutions from engaging in P2P lending, while allows room for the industry to grow.

P2P lending platforms should not promise to secure the principal and interest for lenders. This will make investors more rational, he said.

The rule also demands that the names of P2P companies contain words relating to the product that they are engaged in, to highlight the nature of their business.

Xinhua

FX supervision system in China Foreign direct investment not related to price fluctuations to Vietnam increases

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hina’s central bank said it will start gauging risk next year using what it calls a Macro Prudential Assessment system built on examining banks’ capital adequacy ratios.

The People’s Bank of China will closely watch financial institutions’ interest-rate pricing using the system, which should help cut financing costs, according to a statement Tuesday from the central bank. The assessment framework will include investments in bonds and equity, a change from focusing on loans only in the past, according to the statement.

The assessment “will change its focus from loans, which are narrowly defined, to a focus on credit in a broader sense,” the PBOC said in the statement. It will include bond investments, equity investments and buybacks of the financial assets sold, PBOC said. Buybacks of financial assets sold usually refers to banks’ off-balancesheet assets.

While the central bank has the overall responsibility for managing loan growth, liquidity levels, and systemic risk, taking variables more associated with shadow banking into account for the purpose of calculating bank capital ratios is more in line with the responsibility of the China Banking Regulatory Commission.

hina’s foreign exchange regulator said yesterday that a new business supervision system to be launched next month won’t change the way Chinese individuals use currencies and has nothing to do with capital market fluctuations.

The State Administration of Foreign Exchange (SAFE) published the statement after Shanghai’s dollar-denominated B shares tumbled nearly 8 percent on Monday in their worst day in four months.

Some traders attributed the slump to SAFE’s individual foreign exchange supervision system, to be launched on January 1, 2016.

SAFE said on its official microblog yesterday that the new system is aimed at “expediting individual foreign exchange businesses via bank outlets and electronic banking, and improving business efficiency.”

The system won’t change policies regarding foreign currency use and “has nothing to do with domestic capital markets fluctuations.”

China-focused investment bank NSBO interpreted the system “as the latest move to combat persistent capital outflows.” Some analysts said the B share slump was mainly triggered by profit-taking, as the Shanghai B-share index had risen for 13 sessions in a row, and surged nearly 50 percent over the past three months.

egistration of Foreign Direct Investment (FDI) to Vietnam in 2015 is estimated to increase by 12. 5 percent compared to the previous year, according to Vietnam’s General Statistics Office yesterday.

Specifically, FDI registration to Vietnam during the year reached some US$22.76 billion. As many as 2,013 new projects worth US$15.58 billion were granted licenses as of December 15, up 26.8 percent in number of projects, but down 0.4 percent in investment value year-on-year.

Meanwhile, some 7.18 billion dollars were registered to add to 814 existing projects, Vietnam’s state-run news agency VNA quoted the statistics office as saying.

During the reviewed period, FDI disbursement reached an estimated US$14.5 billion, up 17.4 percent year-on-year.

The manufacturing and processing sector remained the most attractive with US$15.23 billion, accounting for about 67 percent of the nation’s total FDI. The sector of electricity and energy ranked second with over US$2.8 billion (over 12.3 percent of the total FDI).

Meanwhile, real estate sector came third with 2.39 billion dollars, accounting for 10.5 percent of the country’s total FDI attraction.

Bloomberg News

Reuters

Xinhua