Macau Business Daily December 31, 2015

MOP 6.00 Closing editor: Joanne Kuai

Chinese authorities halt foreign banks cross-border yuan business

Year IV

Number 951 Thursday December 31, 2015

Publisher: Paulo A. Azevedo

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Beijing’s new rules for trading to punish cancelling orders Page 10

Improving the SAR electoral process

Reports on the SAR’s two latest elections are now released. The reports, together with advice from the Commission against Corruption and the Public Prosecutions Office, are to be the basis for a proposed revision – by the Government – of the Legislative Assembly Election Law. A public consultation – regarding how to enhance the competitiveness of the electoral process for those Legislative Assembly seats assigned to the indirect election system; and how to increase the overall fairness of the electoral process – is to be held in the first quarter of 2016 Page

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Tied hands

www.macaubusinessdaily.com

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Mainland investors are closer to the end of a shares sales ban imposed by authorities after last summer’s rout. Conditions to return to normality are firm, as volatility has fallen by more than half and the Shanghai Composite Index has rebounded 22 percent from its August low

Brought to you by

HSI - Movers December 30

Name

Page 5

Crowne Plaza Macau welcomed its first guest. General Manager Dominique Berhouet admitted great challenge opening an hotel in Macau, from applying human resource quota, to applying all sorts of licences from different bureaus.

But he remains upbeat about business, as the first few weeks rate and bookings are “looking great”

In the mood for shares

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Lowest growth rate in years. Government is tightening authorizing non-resident worker permits. Local hotel industry is feeling the pain. A trade rep says while they understand the govt’s concern in protecting local employment, but without frontline workers which locals seldom choose to be, hotel operations are under great pressure

Optimism prevails

Mainland extends overseas tourist tax refund Page 7

%Day

Li & Fung Ltd

+0.96

Kunlun Energy Co Ltd

+0.87

CLP Holdings Ltd

+0.77

Sino Land Co Ltd

+0.70

Hong Kong & China Gas

+0.66

China Shenhua Energy

-1.94

Ping An Insurance Gro

-1.94

China Resources Land L

-2.00

China Life Insurance Co

-2.73

China Resources Powe

-2.86

Source: Bloomberg

ECONOMY

Gross national income up by 6.7 pct

I SSN 2226-8294

Macau’s gross national income (GNI) for 2014, which equalled MOP368.26 billion, has experienced a slower annual growth by 6.7 per cent in real terms.

This contrasts with the 15 per cent of growth seen in the GNI for 2013. GNI at current prices for 2014 was MOP380.23 billion, which is 14.2 percent lower than the gross domestic product (at MOP443.3 billion)

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December 31, 2015

Macau

City’s imports of consumer goods continued to dwindle as of November

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he city’s merchandise trade for the first eleven months this year was down by 2.6 percent year-on-year to MOP87.59 billion, dragged

down by persistently dwindling imports of gold jewellery, fuels and watches, data released by Statistics and Census Service (DSEC) yesterday shows.

Macau’s total merchandise imports for November has dropped for a fourth consecutive month to MOP6.67 billion, down by 17.4 percent year-on-year,

according to official data. In the month, the fall has been led by double-digit decrease in the imports of food and beverages, mobile phones and gold jewellery.

The merchandise export for November was up by 6 percent year-on-year to MOP868 million, boosted by soaring growth seen in the re-exports of electronic components.

For the first eleven months this year, the total value of merchandise imports fell by 3.9 percent to MOP77.81 billion, as imports of consumer goods including gold jewellery, watches, cars and handbags are all down by a double-digit percentage.

At the same time, the city has also seen a 12.7 percent decline in the imports of fuels and lubricants (MOP6.43 billion) and 8.3 percent fall in the imports of construction materials (MOP2.91 billion) in the period.

Macau’s total value of exports for the first eleven months this year was MOP9.79 billion, up by 9.6 percent year-on-year. The growth was mainly supported by a rapid increase seen in the exports of clocks and watches as well as electronic components.

The merchandise trade deficit for the January to November period was MOP68.02 billion, according to DSEC. S.L.

More land plots may risk being taken back by govt as concessions expired

Bureau heads to be transferred between Housing Bureau, DSRT & GDSE

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acaumayseemoreundeveloped land plots located in Seac Pai Van, Ka-Ho and Ilha Verde which were granted to landholders in the late 1980s, but are under the risk of being taken back by the government as the respective land concessions expired in 2013 and 2014.

Since 2010, the Land, Public Works and Transport Bureau (DSSOPT) have identified a total of 113 land plots with failure of development. In the following year, the bureau has said that the landholders of 65 of these land plots were not the liable party for the delay in land use, noting that some of these plots were still with a land concession contract under amendment.

But according to the bureau’s data published online, 12 of these 65 land plots – located in Seac Pai Van, Ka-Ho of Coloane and Ilha Verde of Macau peninsula – have seen their conditional land concession expired in 2013 and

2014. These 12 plots, carrying a combined size of over 64,000 square metres, were first granted to landholders by the Portuguese administration of Macau in 1988 and 1989.

Of these 12 plots, 10 of them are located in the industrial zone of Seac Pai Van. Business Daily has asked the bureau to confirm if it is in the process of taking back the 12 plots of land, but did not receive a reply by the time the story went to press.

ecretary for Transport and Public Works Raimundo Arrais do Rosário has made several personnel changes for his subordinated departments, namely the Bureau of Telecommunications Regulation (DSRT), the Office for the Development of the Energy Sector (GDSE) and the Housing Bureau, the Official Gazette announced yesterday.

According to the official dispatches, the current director of DSRT, Hoi Chi Leong, will be transferred to be the office chief of GDSE. Meanwhile, the incumbent office chief of GDSE, Arnaldo Ernesto dos Santos, will head the Housing Bureau, replacing the current director of the department Ieong Kam Wa - who will step down to be the Bureau’s vice head.

The announcements show that the three officials will start their new positions in the government

tomorrow, while their terms will all last for one year.

The Secretary did not explain in the announcements the reasons of such personnel changes. However, earlier this year, he had announced his intention to merge DSRT with Macau Post, adding plans for merging more subordinate departments under his secretariat will be unveiled next year.

Mr. Hoi has headed the telecommunications bureau since 2013 as an acting director. He was officially promoted to the Bureau head at the beginning of this year. In addition, Mr. Ieong was promoted to Housing Bureau director in January this year. He was the vice head and the acting head of the Bureau in 2014. Meanwhile, Mr. Santos has been the office chief of GDSE since 2005.

K.L.

Business Daily | 3

December 31, 2015

Macau Subsistence index up 3.3pct in January The Social Welfare issued a press release reminding the resident that the government’s minimum subsistence index will increase by 3.3 per cent effective January 1 2016. The new adjustment states that the index for an individual is MOP4,050 (US$507.35) while a household of eight or more reaches MOP18,870.

Poverty allowances are distributed based on the minimum subsistence index, which serves as an indicator of amount of total income to maintain the minimum standard of living. The last adjustment was made in November last year.

City’s gross national income up by 6.7 pct last year

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acau’s gross national income (GNI) for 2014, which equalled MOP368.26 billion, has experienced a slower annual growth in the year, latest data from Statistics and Census Service (DSEC) shows.

According to DSEC, the city’s GNI in chained dollars (inflation-adjusted) for 2014 was MOP368.26 billion, representing a growth rate by 6.7 percent in real terms - this contrasted with the 15 percent of growth seen in the GNI for 2013.

GNI corresponds to the gross domestic product (GDP) of a territory plus income earned by resident investors from abroad, minus income earned by non-resident

investors from investment in Macau.

“As export prices of goods and services grew more than the import prices of goods and services, the external real purchasing power of Macau rose, which was reinforced by

the decrease in the net outflow of external factor income over 2013, ” the census service explained for the growth seen in GNI registered for 2014.

The net outflow of external factor income reflects the much higher income earned

by non-resident companies and investors from investing in Macau, than the resident companies investing abroad.

In 2014, this net outflow amounted to MOP63.07 billion, which is lower than the MOP64.87 billion registered

in 2013, the official data shows.

The income earned by outside enterprises and investors from investing in the city in 2014, mostly derived from direct investment income, reached MOP98.13 billion, representing a 12 percent year-on-year growth rate, albeit a slower pace when compared with 2013.

The income earned by resident enterprises and investors from investing abroad grew by 53.5 percent to MOP35.06 billion, boosted by rapid increases seen in portfolio investment income and in other investment income.

The per-capita GNI for 2014 was MOP592,741, representing a real growth by 1.8 percent.

Macau’s GNI at current prices for 2014 was MOP380.23 billion, which is 14.2 percent lower than the gross domestic product (at MOP443.3 billion).

S.L.

4 | Business Daily

December 31, 2015

Macau

AL electoral commission suggests loosening campaign period regulations The Commission, summarising what happened in the 2013 Legislative Assembly election, perceives it is hard for candidates to remain silent until the 15th day before the election Kam Leong

kamleong@macaubusinessdaily.com

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he Electoral Affairs Commission for the 2013 Legislative Assembly (AL) election suggests the government should allow candidates to release their political platforms before the legal campaign period - in addition to enhancing supervision on candidates’ election spending.

In a report wrapping up the city’s latest AL election two years ago, the Commission claimed that most of its resources had been used to control and supervise false-start advertisements of candidates.

‘Considering the city’s actual situation and social development, the regulations on prohibiting electionrelated advertising for nearly six months [after the election procedure kicks off] is objectively too long, as the competition between parties is getting intensive following more parties enrolling in the election,’ it wrote in the report that was released yesterday.

Currently, the city’s law on AL election regulates that nominated parties can only start their campaigning 15 days before the election date, while the day before the election is set to be election silence.

Hence, despite the election procedure for the 2013 AL election kicking off on March 11 in that year, admitted groups could only start their 14-day campaign period from August 31.

‘It is objectively difficult to require residents, voters and candidates to stay calm and not to advertise their political platforms or opinions for nearly half of a year…We perceive loosening [regulations] for campaign period of the election is quite viable,’ it reported.

According to the report, false-start election advertisements were found

right after the election procedure started on March 11, 2013, which included candidates distributing election-related leaflets to residents and students in public places before they announced their intention of enrolling in the election; announcing and introducing election platforms in public places; as well as distributing money-related benefits to residents under the name of associations they belong to.

The Commission suggests parties should be allowed to release their election platforms once their nomination is admitted by the committee. Nevertheless, all other election-related activities, such as holding campaign events and broadcasting platforms on TV, radio and vehicles are only allowed during the 14-day campaign period. It also suggests keeping the day before the election for silence.

Election spending

Meanwhile, the Commission said it also needs to strengthen the supervision on the election spending of nominated parties, as well as the election donations that they receive.

For the 2013 election, each nominated party was allowed to spend maximally MOP5.64 million (US$705,000) for campaigning. But the Commission found that the lowest spending among the parties was some MOP17,400 while the highest spending totalled MOP3.88 million.

Claiming the parties had “huge difference” in the amount that they spent, the Commission said ‘controlling the election accounts [of nominated parties] and improving evaluation on the accounts are necessary in order to make election activities of different parties fair if

regulations on campaign period are to be loosened.”

On the other hand, the AL electoral committee also expressed the difficulty in clarifying sources of election donations due to the current law not capping the amount of donations.

In addition, the Commission suggests the government should set up a permanent electoral commission for the election, so that the body could have more time in promoting the election and make related arrangements.

Changing polling station setting for CE election

Meanwhile, the Electoral Affairs Commission for the 2014 Chief Executive election also released a summary report yesterday, saying the government could consider changing the setting and rules for the election’s polling station.

Last year, the city’s sole polling station for the CE election was set in a form of semi-assembly and semipolling station, which allowed press to take pictures of electoral members casting their ballots inside the vote box.

‘Such setting for the CE election may have possible issues in terms of keeping secrecy and maintaining order in the venue. To prevent such possible issues, [we] suggest the government could set the venue in the form of whole-polling station when the timing is mature,’ the Commission reckons.

According to the committee, once the polling station is set in a form of a whole-polling station, the Commission would be able to set a period of time open for votes from electoral members, so that these

For amending the electoral regulations The suggestions in the two election summary reports, which have already been submitted to the Chief Executive Fernando Chui Sai On, would be considered by the authorities for amending the city’s electoral regulations next year. According to a statement issued by the Public Administration and Civil Service Bureau on Tuesday, the government is currently analysing the two reports and summarising the opinions provided by the Commission Against Corruption and the Public Prosecutions Office. The bill for amending the city’s electoral regulations will be proposed next year and opened for public consultation during the first quarter in 2016.

members would not gather in the station all at the same time.

‘It could prevent members from illegally disclosing their votes or giving up their votes. Furthermore, the media will only be allowed to take pictures within a certain area, which may also help to effectively supervise illegal photoshoots,’ the Commission claimed.

Meanwhile, the Commission also suggests the government should either establish a permanent electoral committee for the CE election or set up the commission one year before the election, in order to allow the body better to manage electoral affairs.

Business Daily | 5

December 31, 2015

Macau

Hoteliers: Govt’s tightening Beijing needs to HR quota causing pressure stop its share sale on the industry opinion

back-seat driving Nisha Gopalan Bloomberg

Local government’s stricter rules in importing non-resident workers is causing problems for hotel industry’s operations, a trade rep says Joanne Kuai

joannekuai@macaubusinessdaily.com

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an authorities in China really take a back seat? In the midst of a bull market (stocks are up more than 20 per cent from their August lows), Beijing appears to be handing control over to companies for all new initial public offerings from March onward.

The shift toward a more U.S.-style disclosure system, where any company can list so long as they provide the requisite information, has been a long time coming. In a more marketoriented system, the regulator concentrates on supervising publicly traded firms rather than acting as a gatekeeper. Such a system would give China’s cash-strapped corporates a funding alternative to shadow banks and online peer-topeer lenders, and help clear a logjam of almost 700 companies waiting to sell shares for the first time.

The question is, can Beijing truly stop its tinkering?

According to KPMG, China has imposed moratoriums on IPOs nine times in the A-share market’s relatively short 25-year history -- four of those in the last decade during periods when things were heading south. The most recent halt, enforced in July after several blockbuster share sales and some stomach- churning stock declines, ended only last month when a government-engineered rally revived the market.

Even when IPOs have been approved, social policy dominates. A few years ago, when China was trying to cool its then-heady real estate sector and rein in burgeoning bad loans, no developer or city commercial bank would have stood a chance getting listing approval. Instead, some went to Hong Kong to raise funds.

The conundrum for the China Securities Regulatory Commission is that letting any (qualified) company sell shares would result in a glut and damp appetite for the state-owned firms that dominate the market. However, rationing admittance to the IPO market means bureaucrats rather than investors are making the decisions, and has resulted in an insatiable demand for new stock.

An even bigger challenge for the CSRC, whose seven-member listing committeecurrently vets IPO applications, is managing investor expectations. In a nation where investment options tend to be limited to volatile wealth management products, equally choppy real estate or low-yielding bank accounts, people have little recourse for their some $22 trillion in savings beyond stocks.

That explains why retail investors own about 80 per cent of publicly traded companies’ tradeable shares unlike the U.S., where institutional investors dominate. Such a prevalence of individuals, who don’t have class action lawsuits to fall back on in cases of corporate malfeasance, also makes for a stock market more akin to a casino than a funding tool.

New listings have always spelled easy money for China’s investing public, with regulators steering share sales toward the low end of valuations to ensure a first-day pop. All of the 211 companies that listed this year before the July freeze rose by their daily limit of 44 per cent, and surged an average 255 per cent in their first month of trade, Bloomberg data show. In the U.S, the 175 IPOs of 2015 rose on average 18 per cent on day one and after a month had barely budged.

Early gains haven’t shown any sign of abating since China began allowing IPOs once more. Of the 28 companies that had been approved to debut before the gates closed, 20 have come to market, and their shares have soared. Stock in moon-cake maker Shenyang Toly Bread, which raised about 619.7 million yuan (US$95.5 million) and started trading Dec. 22, is up 111 per cent on its 13.76 yuan sale price while Chunghsin Technology is at 22.19 yuan versus the 10.52 yuan investors bought for.

If any company could IPO as and when it wished, such surges would be rare. It won’t be easy to take those kind of advances away from an investing public accustomed to them.

And it won’t be easy for the CSRC to accept an issuance flood that diverts billions of dollars away from long-established stocks including not least of all state-backed ones. But for China to have a true capitalist economic system, those are the hard steps it must take. Stop meddling, and markets will mature.

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s at the end of November, there are 182,246 non-resident workers registered in Macau, according to the latest data from the government’s Human Resources Office. Hotels, restaurants and similar activities took the biggest chunk with 48,135 workers.

The number of non-resident workers in November also represents an 8.95 per cent growth rate yearon-year from 167,272. This growth rate is the lowest since 2012, where throughout these years, it’s hardly been under 20 per cent.

The sudden tightening of labour import rules in recent months adopted by government has been interpreted as a measure to protect local labour force in a time when economy is taking a downturn, due to 18-month consecutive gaming revenues slump.

However, shortage of human resources has been a shared pain for big gaming operators to local small and medium-sized enterprises throughout all sectors of Macau, especially in a time when many major casino resort projects are opening or scheduled to open soon, particularly in the city’s emerging Cotai Strip.

Claiming victim

Macau Hoteliers & Innkeepers Association told Business Daily that the government’s cautiousness in authorizing non-resident working permits, also known as blue cards, has been causing great pressure on the hotel industry.

“Those workers that got laid off from the gaming industry during this economic adjustment period would hardly join hotel industry, as those young people are not willing to take up frontline positions such as housekeeping and food & beverages that are most needed in the sector,” Mr. Chan Chi Kit, president of the Association told Business Daily.

“Without these people, hotels are under a lot of operation pressure.

And new properties cannot even open,” added Mr. Chan. “We understand the government’s concern in protecting locals employment, but the policies need to be reviewed as different sectors should be examined differently.”

Looking at non-resident worker numbers, hotels, restaurants and similar activities employed 27,581 foreigners in January 2012, a 32 per cent increase from a year ago; 34,830 workers in January 2013, a 26 per cent year-on-year growth; 39,794 per cent in January 2014, 14 per cent yearly growth; and 43,030 in January 2015, an 8 per cent increase from the same time last year.

Continuing adjustment

In November, average occupancy rate for local three-star to five-star hotels decreased by 7.6 percentage points year-on-year to 85.9 per cent, while rooms were 17.8 per cent cheaper to MOP1,356, according to the latest data released by the Macau Government Tourist Office (MGTO).

During the Handover and Christmas holiday week, visitor arrivals to Macau has increased 10 per cent year-on-year to 1,087,867, the Public Security Police (PSP) revealed earlier this week.

Despite the growth in visitor arrivals, the trade representative says the hotel occupancy rate had suffered from a slight drop comparing to a year ago and would stand at around 85 per cent.

“The increase of hotel rooms has outpaced the growth in visitor numbers,” said Mr. Chan Chi Kit. “I am afraid the trend of lowering occupancy rate and cheaper room rates is here to stay for a while.”

The 208 rooms of Crowne Plaza Macau that opened yesterday is the latest that adds to the city’s room inventory in the fourth quarter, following the opening of the 1,600room 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 (DSEC). 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).

6 | Business Daily

December 31, 2015

Macau

IHG opens first Crowne Plaza in the city While admitting the pre-opening was quite a challenge, the General Manager is optimistic about the business Joanne Kuai

joannekuai@macaubusinessdaily.com

He added that Crowne Plaza Macau “is pleased to be in what we called the 5,000-club”, which is among four to five hotels in the world opened at the same time, that is the 5,000th hotel to open for IHG in the world.

Upbeat outlook

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rowne Plaza Macau, a 5-star hotel brand under the InterContinental Hotels Group (IHG) situated in the city’s northern district, opened for business yesterday after some delays.

With various pre-opening experience, Crowne Plaza Macau General Manager Dominique Berhouet admitted the experience of opening an hotel in Macau was quite challenging, saying “it was just the most interesting thing I have ever been associated with.”

“What it is, is just all of the different steps you need to take in Macau. I mean, from the human resources quota

to the licencing process, making sure the fire/life safety is spot on…” Mr. Berhouet told Business Daily. “I’ve never experienced so many bureaus that I’ve had to gain permission from, and the time it took to gain that permission, as I did here.”

Having been in the industry for more than 30 years, Mr. Berhouet has experience across the United States, Europe, Hong Kong and China. Mr. Berhouet joined IHG in 1999, and has opened or rebranded various hotels, primarily with Crowne Plaza Hotels and Resorts during his 16 years with the group.

Featuring 208 hotel rooms, Crowne Plaza Macau occupies part of The Residencia project, a luxury housing complex in the heart of Areia Preta district which is predominantly a residential area.

Targeting business and leisure travellers, the hotel without any gaming elements that usually draw visitors to Macau, is confident in its positioning despite the recent economic downturn in the SAR. The General Manager is upbeat about the business, adding the first week looks ‘very strong’. Without disclosing exact numbers, Dominique Berhouet said “our rate is doing very well and our bookings are doing well.”

Official website of Crowne Plaza Macau shows from superior room to superior suite, prices range from HK$1,461 (MOP1,504/US$188.5) to

HK$2,932, while the average room rate of 5-star hotels in Macau stood at MOP1,675 in November according to the latest data released by the Macau Government Tourists Office (MGTO).

Local market

With a 780 square meter ballroom and several multifunction rooms, the hotel also targets the local market with banquets and MICE (Meetings, Incentives, Conventions and Exhibitions) offerings. Billboards with advertisements of a bride throwing a bouquet can be seen around town.

Mr. Berhouet said in the coming January, they have already had bookings for a banquet hosting more than 700 people and another wedding. “There is huge interest,” he said.

The newly-opened hotel is within a short distance of the busiest inland checkpoint of the Border Gate, and is near the future Zhuhai-MacauHong Kong Bridge connection. While being managed by IHG Group, it is owned by San You Development Co. Ltd., the developer of the Residencia housing complex.

Business Daily | 7

December 31, 2015

Macau

China extends overseas tourist tax refund scheme to six more destinations Visitors from Hong Kong, Macau and Taiwan are also entitled to the 11 pct rebate

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hina decided to include another six destinations in its tax rebate scheme for overseas visitors to boost inbound tourism and consumption.

Foreign tourists visiting Liaoning, Anhui, Fujian and Sichuan provinces, Tianjin Municipality and Xiamen City can enjoy value-added tax refunds on their purchases in specific shops starting from Jan.1, 2016, according to an announcement released by the Ministry of Finance (MOF).

First launched in Hainan Province in 2011, the MOF decided early this year to broaden the program nationwide upon approval to attract tourists and boost domestic consumption.

Beijing and Shanghai were included in the program in July.

Under the plan, foreign tourists as well as visitors from Hong Kong, Macau and Taiwan who have lived on the mainland for no more than 183 days are eligible for an 11 per cent rebate on consumer goods purchased at designated department stores.

The minimum purchase for a value-added tax refund is 500 yuan (US$77.1) in any one store in a day. The refund is valid when the purchase is made within 90 days before departure and the products remain unused upon departure.

Xinhua

Asian stocks pare 2015 retreat following rallies in U.S., Europe The Asian equity gauge is poised for a 4.4 per cent drop for the year, led by Singapore’s Noble Group Ltd. and Macau gaming companies

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sian stocks advanced, paring the regional measure’s annual retreat, as utilities and consumer shares gained following an equities rally in the U.S. and Europe.

The MSCI Asia Pacific Index added 0.1 per cent to 131.89 as of 4:25 p.m. in Hong Kong. About an equal number of stocks slid as gained on light volume across the region.

Australia’s S&P/ASX 200 Index rose for a ninth straight day, the longest winning streak since February.

The Asian equity gauge is poised for a 4.4 per cent drop for the year, led by Singapore’s Noble Group Ltd. and Macau gaming companies. After outperforming global shares in the first six months of the year, Asian equities slid in the second half as China’s surprise yuan devaluation and concern about the Federal Reserve’s interest-rate outlook curbed investor appetite for the region’s stocks. The measure has steadied in December, poised for a 0.1 per cent gain.

Investors responded to global moves and “relief that it looks like we’ll be able to end the year on a positive note,” said Chihiro Ohta, general manager of investment information at SMBC Nikko Securities Inc. in Tokyo. “We’ll keep on being

moved by the oil price. We’ll have to keep being aware of this for the first three months or the first half of next year as well.”

Japan’s Topix index rose 0.3 per cent on the measure’s last trading day of the year. South Korea’s Kospi index and Singapore’s Straits Times Index

each lost 0.3 per cent. Australia’s S&P/ASX 200 Index rallied 1 per cent and New Zealand’s S&P/NZX 50 Index increased 0.4 per cent.

In Hong Kong, the Hang Seng Index dropped 0.5 per cent, while the Hang Seng China Enterprises Index retreated 1.3 per cent as insurers led declines.

Toshiba Corp. jumped 7.7 per cent in Tokyo. The maker of chips and home appliances is considering Fujifilm Holdings Corp. as one of the candidates to buy a stake in its medical equipment unit, Yomiuri newspaper reported, citing an unidentified person. Toshiba climbed on Tuesday as it sought US$2.5 billion in credit line to pay for the cost of restructuring its businesses following an accounting scandal. Australia’s Woodside Petroleum Ltd. advanced 1.4 per cent in Sydney.

Futures on the Standard & Poor’s 500 Index fell 0.2 per cent. The underlying U.S. equity gauge climbed 1.1 per cent on Tuesday as West Texas Intermediate crude jumped 2.9 per cent.

A decline by the MSCI Asia Pacific Index this year would be the measure’s first back-to-back yearly loss since 2002. Shares on the gauge trade at 13.9 times estimated earnings, compared with 17.7 times for the Standard & Poor’s 500 Index and 16.1 for the Stoxx Europe 600 Index, according to data compiled

by Bloomberg.

Noble is down 64 per cent this year. Asia’s largest commodities trader that is battling criticism of its accounting had its credit rating cut to junk by Moody’s Investors Service on concerns about the company’s liquidity amid slumping energy and raw materials prices.

Bloomberg

8 | Business Daily

December 31, 2015

Greater China

Beijing suspends forex business for some foreign banks The onshore yuan traded in Shanghai has lost 1.44 percent of its value since the end of November, and has repeatedly hit 4-1/2 year lows

China has taken a slew of steps to keep the yuan stable since it devalued the currency in August

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hina’s central bank has suspended at least three foreign banks from conducting some foreign exchange business until the end of March, three sources who had seen the suspension notices told Reuters yesterday.

Included among the suspended services are liquidation of spot positions

for clients and some other services related to crossborder, onshore and offshore businesses, the sources said.

The sources, speaking on condition that the banks were not named, said the notices sent to the affected foreign banks by the People’s Bank of China (PBOC) gave no reason for the suspension.

The sources said the banks might have been targeted due to the large scale of their cross-border forex businesses.

“This is part of the PBOC’s expedient means to stabilise the yuan’s exchange rate,” said an executive at a foreign bank contacted separately.

China has taken a slew of steps to keep the yuan stable

since it devalued the currency in August.

The PBOC had no immediate comment.

The latest move comes just three months since the PBOC ordered banks to closely scrutinise clients’ foreign exchange transactions to prevent illicit cross-border currency arbitrage, which

takes advantage of the different exchange rates the yuan fetches in offshore and onshore markets.

The spread has been growing since the August devaluation, which makes it increasingly difficult for the bank to manage its currency and stem an outflow of capital from its slowing economy.

The yuan has come under renewed pressure since late November amid speculation that Beijing would permit more depreciation after the International Monetary Fund announced the currency’s admission into the fund’s basket of reserve currencies.

The onshore yuan traded in Shanghai has lost 1.44 percent of its value since the end of November, and has repeatedly hit 4-1/2 year lows.

The offshore market has traced a similar pattern. The Hong Kong-traded offshore yuan hit an intraday low of 6.5965 yesterday morning, its weakest since late September 2011.

Reuters

Share sale ban closer to an end A degree of normalcy has returned to the world’s second-largest equity market

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hina stock investors are about to find out whether a budding equities recovery can cope with the end of a sales ban that’s kept an estimated US$185 billion of shares off the market.

All seven strategists and fund managers surveyed by Bloomberg say it can, with those respondents expecting regulators to allow major shareholders to sell their investments when a six-month ban imposed at the height of the stock crash expires January 8.

The measure drew criticism at the time from foreign investors including Templeton Emerging Markets Group and UBS Wealth Management, who saw the intervention as a step too far as authorities struggled to stem a US$5 trillion rout. Since the ban started, volatility has fallen by more than half and the Shanghai Composite

Index has rebounded 22 percent from its August low.

The China Securities Regulatory Commission announced July 8 that investors with holdings exceeding 5 percent as well as corporate executives and directors would be prohibited from selling stakes for six months. The rule, which followed the suspension of initial public offerings and curbs on short-selling, was intended to stabilize capital markets amid an “unreasonable plunge” in share prices, according to the securities regulator.

The CSRC did not immediately respond to a faxed request.

At that point, a 32 percent plunge by the Shanghai Composite from the previous month’s peak had wiped out almost US$4 trillion in market value, with the heaviest losses sustained by new investors who opened millions of accounts leading up to the peak.

A gauge of 50-day price swings has fallen to the lowest level in seven months, while the Shanghai Composite is poised for the best performance among major global indexes this quarter. Regulators have removed some support measures, including the halt on IPOs, and signs of state buying has waned. To reduce the need for such extreme intervention again, China’s two exchanges will implement a circuit-breaker system from the start of 2016.

Foreigners sell

Goldman Sachs Group Co. estimates the ban affected investors with over 1.2 trillion yuan (US$185 billion) of holdings and lifting the restriction may create a “liquidity risk,” according to a December 3 note. Regulators may take steps to limit selling by stockholders and company executives,

which could otherwise amount to a net 350 billion yuan in the first quarter, China International Capital Corp. says.

Since the end of June, the CSRC imposed more than 200 million yuan worth of fines on at least 25 shareholders who “unlawfully cut their stakes,” according to Bloomberg calculations based on the regulator’s announcements.

Technology vulnerable

Foreign investors have been reluctant to dive back in. Global money managers cut their holdings of mainland shares by about 5 percent in the first nine months of 2015, even after authorities made it easier than ever to bring money into the country.

Technology companies are most vulnerable to a sell-off once the ban is removed, says Yin, vice president of Shanghai-based investment firm Baptized Capital.

The ChiNext small-cap index, dominated by technology and consumer companies, trades at 45 times estimated 12-month earnings after jumping 45 percent since August 26. The Shanghai Composite is valued at 18.7 times.

Baptized Capital, Bocom International Holdings Co., Central China Securities, China Galaxy Securities, HFT Investment Management Co., Jinkuang Investment and Shenwan Hongyuan participated in the survey.

Bloomberg News

Business Daily | 9

December 31, 2015

Greater China

Authorities eyes fiscal splurge to cushion reforms

Q3 current account surplus trimmed China yesterday lowered its current account surplus for the third quarter and revised its estimate for the capital and financial account from a deficit to a surplus.

The third-quarter surplus under the current account was cut to US$60.3 billion from a preliminary estimate of 63.4 billion dollars, data from the State Administration of Foreign Exchange (SAFE) showed. China reported a second-quarter surplus of US$73 billion. The country posted a US$11.4-billion surplus in its capital and financial account in the three months ending September, a revision from an initial deficit of US$63.4 billion for the period, the SAFE said.

The government is expected to target economic growth of at least 6.5 percent in 2016 Kevin Yao

C

hina could run its biggest budget deficit in perhaps half a century next year as leaders turn to government spending to arrest the slowdown in the economy, policy advisers say, after disappointing returns from a year of monetary policy easing.

The government is expected to increase its budget deficit to about 3 percent of gross domestic product in 2016 from a target of 2.3 percent this year to help cushion against the possible impact on the economy from structural reforms, the advisers said.

The sources, who prepare advice for senior leaders but are not involved in the final policy decisions, said a bigger deficit was among recommendations made to leaders at a recent meeting that set the economic agenda for next year, as a counter to the expected pain from plans to tackle oversupply and debt.

“Next year’s budget deficit ratio is very likely to rise to 3 percent or slightly higher, and we cannot rule out the possibility of continued rises in the next several years,” said a source at the finance ministry.

Last month, Vice Finance Minister Zhu Guangyao said economists should reconsider what constitutes a danger zone for deficit-to-GDP ratios, comments some analysts took as a hint of more aggressive stimulus to come.

“To halt a further slowdown in economic growth, China should take a more forceful fiscal policy next year and in coming years, using the fiscal policy as the main tool,” said an influential economist at the Chinese Academy of Social Sciences, a top government think-tank.

Growth in the world’s secondlargest economy is set to slow to a quarter-century low of about 7

percent this year and deflationary pressures persist, even after a year of cuts in interest rates and bank reserve requirements, fund injections into the banking system and easier loan requirements.

The government is expected to target economic growth of at least 6.5 percent in 2016 - in line with a new five-year plan to fulfil a previously announced goal of doubling GDP and per capita incomes by 2020 from 2010 levels, policy insiders say.

“During the deflationary period, monetary policy is ineffective as banks are reluctant to lend and companies are reluctant to borrow,” said the CASS economist, adding that the government should run a budget deficit of 3 to 4 percent of GDP in 2016 to finance tax cuts and infrastructure spending.

The Finance Ministry did not return a request for comment.

New mantra for growth

After senior leaders held their Central Economic Work Conference midmonth, they outlined five major tasks for restructuring - capacity elimination, destocking, deleveraging, lowering costs and “making up for shortcomings”.

But such reforms could weaken growth further before the benefits are seen, and that carries risks such as higher unemployment for a leadership bound by goals set by the previous administration.

So while monetary policy will remain supportive, the new policy buzz-phrase in China is “supply-side reform”.

“There is still some room for policy easing. The scope for cutting interest rates is small, with one or two cuts expected next year,” said an economist who advises the government.

KEY POINTS

Ma Jun says RRR decisions must consider capital flow

Advisers urge bigger budget deficit to arrest economic slowdown Advisers expect about 3 pct deficit/GDP ratio in 2016 Could increase further in subsequent years - adviser Patchy data suggest deficit has not hit 3 pct since 1960s There is no complete official data on the deficit/GDP ratio, but Chinese analysts said the level had never hit 3 percent in the post-1978 era, when former leader Deng Xiaoping launched liberalising reforms to China’s command economy.

The last time the level neared 3 percent was in 2009, when a 4 trillion yuan (US$615 billion) stimulus package to counter the global financial crisis pushed it out to 2.8 percent of GDP. At the time, a vice finance minister said China had run deficits of more than 5 percent in the 1960s.

Although this year’s target is 2.3 percent, Finance Minister Lou Jiwei said in March the actual level could be 2.7 percent after including unspent amounts from earlier budgets.

“It could be raised to around 3 percent. We must implement a pro-active policy and expand fiscal spending to support the slowing economy,” said an influential economist who advises the country’s parliament.

Reuters

Finance Minister Lou Jiwei said in March the deficit/GDP ratio could be 2.7 percent after including unspent amounts from earlier budgets

Decisions to adjust China’s reserve requirement ratio and use of quantitative tools must consider the impact on capital flows, the central bank’s chief economist wrote in the bank’s official publication yesterday. Cutting banks’ reserve requirement ratios (RRR), the amount of cash that banks must set aside as reserves, too often and by too much would result in an excessive fall in onshore domestic interest rates and subsequently spur capital outflows, Ma Jun wrote in the Financial News. Keeping short-term interest rates at a reasonable level is a prerequisite for considering the scale and frequency of RRR adjustments, Ma wrote, without specifying a reasonable level.

Former senior Ningxia official subject of graft investigation Former vice chair of the government of northwest China’s Ningxia Hui Autonomous Region, Bai Xueshan, is being investigated by prosecutors for accepting bribes, according to the Supreme People’s Procuratorate (SPP). Following an initial investigation in November launched by the Communist Party of China’s (CPC) Central Commission for Discipline Inspection (CCDI), the CCDI announced earlier this week that Bai had been removed from office and expelled from the Party for “severe disciplinary violations.” Bai has been placed under “coercive measures,” which include summons by force, bail, residential surveillance, detention and arrest, according to an SPP statement released yesterday.

Hong Kong disburses US$6 million in disaster aid The Hong Kong Special Administrative Region government released HK$47.2 million HK dollars (about US$6 million) from the Disaster Relief Fund in 2014-15 to provide emergency relief to victims of major disasters, it said yesterday. The grants have been disbursed by seven relief organizations, including Amity Foundation Hong Kong, CEDAR Fund, Oxfam Hong Kong, Salvation Army, Save the Children Hong Kong, Correctional Services Department Credit Union Education Fund and World Vision Hong Kong, for 15 projects. The funding helped disaster victims in the Chinese mainland, India, Bosnia and Herzegovina, Serbia and Malawi.

10 | Business Daily

December 31, 2015

Greater China

Beijing and Clinton agree: traders should pay for cancelled orders Traders who cancel more than 40 percent of their submitted orders in any given day would be charged a fee of 2 yuan (31 cents) per transaction Eduard Gismatullin and Sam Mamudi

C

hinese securities regulators are preparing some of the world’s strictest regulations on a trading practice at the heart of the global debate over high-speed computerized markets.

The draft rules are designed to prevent traders from flooding exchanges with orders they don’t fill by charging market participants fees for habitual cancellations. The proposal, which could come into force next year, echoes a plan by U.S. presidential hopeful Hillary Clinton to discourage high-speed trading strategies that she says could destabilize markets.

As regulators around the world grapple with the most effective ways to police computer-driven markets, they have focused on how to stop traders from using bogus orders to unfairly move prices in their favour. Critics contend that the tactic makes markets less fair and enables some traders to engage in a manipulative practice known as spoofing. Opponents of the proposed taxes on cancelled orders say they would harm legitimate market makers and raise costs for the average investor.

The China Securities Regulatory Commission (CSRC) says the rules will make exchanges safer. The CSRC stepped up its focus on destabilizing

trading practices after a US$5 trillion stock-market crash over the summer saddled millions of individual investors with losses. While critics

say tighter regulation is designed to deflect blame for the selloff, policy makers also see weeding out manipulation as part of a long-term

Mainland says Taiwan ties could ‘collapse’ if framework tested Taiwan’s ties with China have come under closer scrutiny as the democratically ruled island prepares to elect a successor on January 16 to President Ma Ying-jeou

C

hina said yesterday that ties with Taiwan could “collapse” if the island refuses to recognize the framework that has

underpinned negotiations between the two for more than two decades.

The remarks by Ma Xiaoguang, spokesman

for the mainland’s Taiwan Affairs Office, came in response to comments three days earlier by Tsai Ingwen, the island’s leading

presidential candidate, that there were other options for negotiations with Communist Party leaders. Ma said in Beijing that the so-called 1992 consensus that they both belong to one China was a core concept that couldn’t be questioned.

W i t h o u t t h e understanding, “the institutionalized cross-strait dialogue mechanism will be affected and could even collapse,” Ma said in the agency’s first briefing since the debate at which Tsai made her remarks. “The ship of peaceful development would meet rough seas and could even sink.”

Juan Chao-hsiung, a spokesman for Tsai’s Democratic Progressive Party, said the candidate “has been very clear on her cross-strait policy, which is to maintain the status quo.”

Taiwan’s ties with China have come under closer scrutiny as the democratically ruled island prepares to elect a successor on January 16

to President Ma Ying-jeou, whose rapprochement policy culminated in an historic meeting with President Xi Jinping in November. Opinion polls have for months shown Tsai, whose party officially supports independence, holding a wide lead in the race. The Communist Party, which considers Taiwan a province, passed a law in 2005 allowing an attack if the island formalizes the split.

Tsai’s remarks in the debate came after she was pressed by Eric Chu -- the candidate of Ma’s Kuomintang, or Nationalist Party -- to clarify her position on the issue.

‘One option’

“As long as we have sincerity, communication, I believe cross-strait relations can be stable,” Tsai said. “The 1992 consensus is one option, but it’s not the only option. It is inappropriate to continue to frame it as such.”

During his meeting with Ma in Singapore, Xi urged both sides to “maintain the 1992 consensus” so they could share in what he described as China’s revival.

Ma Xiaoguang also said yesterday that top crossstrait officials exchanged New Year’s greetings over a new hotline between their offices.

The telephone link between the Taiwan Affairs Office and the island’s Mainland Affairs Council was set up after last month’s meeting.

Bloomberg News

Business Daily | 11

December 31, 2015

Greater China effort to professionalize the nation’s markets and lure more international investors, according to Oliver Rui, a professor of finance and accounting at China Europe International Business School in Shanghai.

“The new rules are trying to make the market more stable and they seem to be in the right direction,” said Gerry Alfonso, a Shanghai-based sales trader at Shenwan Hongyuan Group Co., China’s fifth-largest brokerage by market value. “The regulator is trying to give investors more confidence and to avoid market manipulation. These are all good developments.”

China’s proposals on algorithmic trading, revealed around the same time in October as Clinton’s, state that “frequently placing and withdrawing orders where the ratio of trades concluded is abnormally low” would be prohibited, according to a translation by law firm Linklaters LLP. Traders who cancel more than 40 percent of their submitted orders in any given day would be charged a fee of 2 yuan (31 cents) per transaction.

Broader package

The plan is part of a broader package of automated trading rules for Chinese markets, first released for public discussion on Oct 9. China ended its consultation on November 8 and the finalized rules are likely to be released early next year, according to John Xu, a Shanghai-based counsel at Linklaters. The measures would then go into effect 30 days later.

Other measures suggested by the CSRC include forcing traders who use automated orders to provide a detailed description of their strategies to regulators and wait for a review before they’re allowed to execute trades. That proposal has raised concern among some international investors who don’t want to disclose

their proprietary trading algorithms, according to Calvin Tai, the head of global clearing at Hong Kong’s stock exchange.

Clinton, the front-runner to win the Democratic nomination for president, called for a fee on cancelled orders in October and explicitly linked the idea to curbing high-frequency traders. Her plan is designed to target “harmful” high-frequency trading that makes markets “less stable and less fair,” Clinton’s campaign said at the time.

For every 27 orders placed on U.S. stock exchanges, about one is filled, according to data from the U.S. Securities and Exchange Commission.

In other words, approximately 96 percent of all orders sent to U.S. equity markets are cancelled.

China wouldn’t be unique in trying to limit cancelled trades. Traders using Frankfurt-based Deutsche Boerse AG’s stock market are restricted from submitting an excessive amount of orders that don’t get executed. Borsa Italiana has a high-usage surcharge to prevent orders from getting too far out of whack with the number of actual trades.

HFT tools

Reining in cancel rates might unfairly punish firms using legitimate computer formulas to constantly update the prices at which they offer to buy or sell securities, according Bill Harts, chief executive officer at Modern Markets Initiative, a U.S.-based trade group for high-frequency firms. Traders who use automated strategies say they often cancel orders because the speed at which markets now move makes many quotes irrelevant almost immediately.

“Cancellation messages are the tools of our trade,” Harts said by e-mail. “Like the shopkeeper who cuts

Approximately 96 percent of all orders sent to U.S. equity markets are cancelled

his price in response to the competitor across the street, they are what enable us to continuously narrow spreads, saving investors’ money. Therefore, a tax on cancellations is a tax on competition, and it would ultimately be paid by investors receiving worse prices.”

Yet cancelled orders are also central to spoofing, a type of bait-and-switch scheme in which perpetrators submit fake bids to entice other traders and then withdraw the orders once prices move in the desired direction. In the most high-profile case to date, the U.S. Justice Department and the Commodity Futures Trading Commission in April accused London trader Navinder Sarao of spoofing that contributed to the May 2010 flash crash, which briefly wiped almost US$1 trillion from the value of U.S. equities.

“For legitimate electronic trading, the algo rules shouldn’t hurt,” said Peter Lewis, the Hong Kong-based founder of Peter Lewis Consulting (China) Ltd., and a former head of trading at HSBC Holdings Plc and Societe Generale SA. “However, they will certainly cut down on abusive market practices such as spoofing.”

Bloomberg News

China has witnessed a boom of rural e-commerce with 780 villages each having online shopping transactions exceeding 10 million yuan (US$1.5 million) in 2015, according to a report released by Alibaba. AliResearch, the research arm of the Alibaba Group, issued the report on Tuesday saying that this was a surge of 268 percent year on year. E-commerce prosperous villages are called “Taobao villages,” as business is mainly conducted via Alibaba’s trading platform Taobao. In addition to the transaction volume, a Taobao village should have more than 100 businesses, or at least 10 percent of households involved in e-commerce, according to AliResearch.

High-speed loop line starts operation Southern China’s Hainan Province began operation of a new stretch of railway track yesterday, completing the world’s first high-speed train line to circle an island. A bullet train set off from Haikou, the capital of the island province, at 9:40 a.m., launching operations of the 345-km western track of the loop line, which links six counties to join the eastern track in Sanya City, a beach resort on the island’s southern coast.

The 308-km eastern part was put into operation at the end of 2010, linking Haikou to Sanya.

Beijing phases out coal-fired heating in core areas Beijing’s central Xicheng and Dongcheng districts have phased out coal-fired heating stoves with 29,900 more households equipped with electric heaters. Since the capital launched its coal-to-electricity transformation project in 2000, a total of 308,000 households in the two districts have switched to electric heaters, said the Beijing Municipal Environmental Protection Bureau on Tuesday. Nine coal sale venues were also closed in the core areas this year. The move will reduce emissions of 3,080 tonnes of smoke, 2,618 tonnes of sulfur dioxide and 616 tonnes of nitrogen oxide each year, said the bureau.

Firm to investors: a thief took my financial statements The firm is now trying to track down copies of the missing documents

A

troubled Chinese company has found a novel excuse for continuing to delay publishing its annual results, telling investors that a thief stole all its financial records for the last four years.

Hong Kong-listed China Animal Healthcare, which makes vaccinations and other drugs for livestock and poultry, said a truck carrying all its original financial documents for the period was stolen while the driver took a lunch break.

The “Lost Documents”, as the company referred to them in a statement to the Hong Kong stock exchange, are at the centre of a forensic accounting investigation after China Animal Healthcare delayed releasing its 2014 annual results in March and auditors refused to sign them off.

Trading in its shares has been suspended for nine months because of the dispute.

“The board...of directors...of the Company wishes to inform the shareholders of the Company... that on 4 December 2015, a truck of the Group... loaded with, among other things, all original financial documents of the Group for the four financial years ended 31 December 2014 and for the current year... were stolen,” the statement said.

Rural e-commerce boom

Asia’s largest underground station opens in Shenzhen Asia’s largest underground railway station opened yesterday in Shenzhen, launching high-speed rail service between Guangzhou and Hong Kong. The new line slashes travel time between Guangzhou and Hong Kong to half an hour. The Futian High-speed Railway Station in downtown Shenzhen, Guangdong Province, covers a total area of 147,000 square meters, or about the size of 21 football fields. Its three underground floors have seating for 3,000 passengers, according to Guangzhou Railway Corporation, which operates the station.

“According to the local public security bureau, thefts such as the incident are common occurrence” in the Qingyuan area where the alleged crime took place, it added.

The driver was said to have been transporting documents stored at a facility in Hebei province to the company’s headquarters in Beijing, but the truck was stolen when he stopped for lunch at a restaurant.

The firm is now trying to track down copies of the missing documents,

it said, adding the suspension of its shares would continue “until further notice”.

The truck was later found by local police but the thief had apparently made off with the documents, although they would have little value except to the company.

“Although the possibility of finding the Lost Documents is not high, the group has nonetheless deployed all possible resources in search of the Lost Documents,” it said.

AFP

Beijing adopts QR code to manage facilities More than 1,100 items of street furniture along the Chang’an Avenue have been labelled with QR codes as an experiment in urban management. By scanning the code, people can find information about the appropriate property management department and responsible personnel and report directly on the facility’s sate of repair, cleanliness, among others, to officials at the city administration commission.

12 | Business Daily

December 31, 2015

Asia

South Korea factory output falls the most in 10 mths November’s fall was the worst since January, led by semiconductors and communications equipment

KEY POINTS Nov s/adj industrial output -2.1 pct m/m (Poll -0.5 pct) Services post longest rising streak since 2011 Fin min Choi says fighting low growth a key in 2016

Christine Kim and Choonsik Yoo

Won ends down 6.2 pct in 2015 vs dlr

S

outh Korea’s industrial output posted its worst decline in 10 months in November as slumping global demand hurt exports while services managed to provide some relief as consumption recovered, data showed yesterday.

Factory output in November fell a seasonally-adjusted 2.1 percent from a month earlier, according to Statistics Korea. A Reuters survey had projected a 0.5 decline, and October’s drop was revised to 1.3 percent.

November’s fall was the worst since January, led by semiconductors and communications equipment, while the finance ministry attributed the gloomy data to weak exports amid persistently bad external conditions.

Concerns over weak growth spilling into next year were reiterated by the finance minister, who will step down in the new year to run for parliament.

“We must not let the flame of economic recovery go out because we are facing the problem that it will be inevitable for the economy to run into low growth,” said Finance Minister Choi Kyung-hwan told journalists in Sejong City, south of Seoul.

President Park Geun-hye urged government officials this week to come up with strong measures to keep consumption

Choi said low global oil prices had “not been all good” for the local economy as it hobbled growth in emerging market economies and oilproducing countries, both customers for South Korean exports.

Unused capacity

Reflecting soft activity, factories on average used only 72.7 percent of

their operating capacity in November, the lowest since April 2009.

On an annual basis, industrial output fell 0.3 percent in November, compared with a 1.7 percent increase tipped in the Reuters survey. October output was revised to a 1.7 percent annual gain.

December export data will be released on January 1. A fall for a 12th

Philippines to join AIIB The opening ceremony and inaugural meeting of the Board of Governors and the Board of Directors in Beijing will take place on the third week of January 2016

P

Philippine President Benigno S. Aquino III

hilippine President Benigno S. Aquino III has approved the country’s participation in the China-initiated Asian Infrastructure Investment Bank (AIIB), senior government officials said yesterday.

Presidential Communications Operations Office Secretary Herminio Coloma Jr. said Aquino gave his goahead signal following the recommendation of Finance Secretary Cesar Purisima.

In a separate statement, Purisima said the Philippines will be signing the Articles of Agreement (AOA) of the AIIB before year-end.

consecutive month in annual terms is expected, according to a Reuters poll, despite the local currency having weakened 6.2 percent versus the dollar in 2015.

“Manufacturing in the fourth quarter will likely turn out to be worse than the third, as there is no hope in sight for exports - there is much riding on domestic demand at the moment,” said Huh Jae-hwan, economist at KDB Daewoo Securities.

Yesterday’s data on services provided some hope for growth.

Service-sector output rose for a fifth straight month by a seasonally adjusted 0.1 percent from October, whose gain was revised to 0.4 percent from a preliminary 0.2 percent. It’s the longest rising streak for services since early 2011.

President Park Geun-hye urged government officials this week to come up with strong measures to keep consumption from lagging as exports are expected to remain weak.

The government believes that the AIIB will augment and complement existing multilateral institutions in accelerating economic growth, he said.

“Our shared pursuit of growth and development has only become more challenging as the global environment becomes increasingly complex. We thus welcome platforms where countries can work towards shared development goals in the spirit of partnership,” Purisima said.

In a globalized world, connectivity is the name of the game. The AIIB is a “promising institution” addressing investment needs, and will help close financing gaps in many countries, he said.

The Asian Development Bank has estimated Philippine infrastructure financing needs from 2010 through 2020 to be at 127.

US$12 billion, requiring an annual investment of US$11.56 billion.

The total capital stock of the AIIB is US$100 billion,

Reuters

20 percent of which is paidin. The indicative paid-in capital of the Philippines is US$196 million (payable in five years or US$39 million per annum).

“The Philippines has taken the matter of our membership in AIIB very seriously,” Purisima said, adding, “We are confident that the Bank’s organization design and oversight mechanisms are committed to transparency, independence, openness, and accountability.”

“We are likewise optimistic that AIIB’s decision-making processes are geared towards making it a lean, clean, green institution run like a true multilateral.”

“Further, as the AIIB has no restriction on the procurement of goods and services from any country, we may foresee market expansion for infrastructurerelated industries, widening job and business growth opportunities,” Purisima added.

Xinhua

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 31, 2015

Asia Failing Indonesian officials quit in boost for Jokowi governance

Thai consumption, investment up

Chris Brummitt

T

wo of Indonesia’s top civil servants have resigned over their performance, suggesting President Joko Widodo’s push for greater government accountability in Southeast Asia’s largest economy is making headway.

Land transportation chief Djoko Sasono quit Saturday, citing a failure to anticipate monster traffic jams that ensnared millions as they left the capital Jakarta ahead of the Christmas holiday and prompted an onslaught of negative media coverage. His departure came weeks after the head of the tax office stepped down for falling short of promised revenue targets.

Widodo, who’s better known as Jokowi, took office in October last year pledging to make public officials more accountable and shake up the civil service. His first year was characterized by policy U-turns, ministerial bickering and a dispute with police over how to fight graft.

He fired five ministers in August in an effort to improve governance.

While this month’s resignations are promising, it’s too soon to say if they herald a new era of accountability, said Djayadi Hanan, a politics professor at Paramadina University in Jakarta.

“The resignations come from ministries which are undergoing

internal reform,” Hanan said. “When you look at it that way, we can have a hope that we are seeing the start of a new culture in Indonesian public officials.”

Speaker quits

The leader of the lower house of parliament was another high-profile casualty of the push for better governance. Setya Novanto stepped down as speaker on December 16 amid an attorney general’s investigation and a legislative ethics probe into allegations he sought shares in Freeport-McMoRan Inc.’s local unit in return for a license extension.

Novanto, who has denied wrongdoing, kept his seat in parliament.

The transport and tax ministries have both touted their commitment to efficiency, merit-based promotions and other bureaucratic overhauls.

Indonesia was ranked 107th of 175 states and territories in Transparency International’s 2014 Corruption Perceptions Index.

Sasono announced his resignation in a hastily arranged evening briefing Saturday, after some drivers took 16 hours to make the 160 kilometre trip from Jakarta to the West Java city of Bandung. Sigit Priadi Pramudito, who became tax chief nine months ago, left after it became clear this year’s

revenue would fall about 15 percent shy of budgeted forecasts.

‘Taking responsibility’

“They were like knights, taking responsibility,” Vice President Jusuf Kalla said. “We have to respect this.

It is a good example, though of course it depends on the individual cases.”

Jokowi, who rose from humble origins compared with many Indonesian political elites, earned a reputation as a straight- talking, can-do leader during stints as mayor of the small town of Solo and later as governor of Jakarta. He says he subjects ministers to regular performance evaluations and has called for a “revolution” in the way bureaucrats approach their jobs.

While he hasn’t commented publicly on the bureaucrats’ resignations, he told a nationwide meeting of village chiefs in central Java on Sunday that he would fire unproductive officials, such as those who held up infrastructure projects.

“I just call the ministers immediately and give them a month and a half,” he said in remarks reported by Koran Tempo newspaper. “I check if there is still a problem. Then, I note it in their performance review. If it is red, it’s easy. I reshuffle them.”

Bloomberg News

Moody’s downgrades Noble to junk as commodity rout deepens Shares in Noble have shed around two-thirds of their value since mid-February when blogger Iceberg Research alleged the company was inflating its assets

M

a Moody’s vice president and senior credit officer, said in the statement.

The ratings reflect low levels of profitability and consistent negative free cash flow from core operating activities, which exclude proceeds from asset sales.

“The downgrade also reflects the uncertainty as to whether or not these factors can be improved sustainably and materially, given our expectations of a prolonged commodity down-cycle, and the consequent negative sentiment impacting Noble and commodity traders in general,” Morrison said.

A week ago Noble sold its remaining stake in its agricultural trading business for US$750 million in cash as it seeks to cut debt, shore up its balance sheet and hold onto its investment grade credit rating.

On Tuesday, Noble said it still believed the agricultural sale would put its financial metrics in excess of those required of an investment grade credit. Debt stood at US$4.2 billion at end-September.

“It is unfortunate that this transaction has seemingly, in our view, been

Singapore to launch more public housing in 2016 Singapore will launch more public housing units in 2016, compared with this year to meet higher demand, National Development Minister Lawrence Wong said in a blog post yesterday. Singapore’s public housing authority will launch 18,000 new build-to-order (BTO) flats in 2016, compared with this year’s 15,000, he said in the blog. Separately, local media quoted him as saying resale prices in the public housing market, which had been falling, have stabilised over the last few months. He said it was too early to talk about unwinding property price cooling measures, the newspaper reported.

Hyundai, Kia ordered to cut stakes in steel affiliate Hyundai Motor and Kia Motors have been ordered to sell a combined 6.6 percent stake worth 461 billion won (US$394 million) in steelmaking affiliate Hyundai Steel by Thursday to meet conglomerate ownership rules.

South Korea seeks to address complex cross-shareholdings involving affiliates of big industrial groups, which have long been criticized for their poor corporate governance. Samsung Group, the country’s top conglomerate, said on Sunday that its battery-making arm Samsung SDI will sell US$622 million worth of shares in sister firm Samsung C&T Corp to comply with the regulations.

Indonesia’s inflation seen at 0.5 pct

Josephine Mason

oody’s Investors Service downgraded its credit rating on Noble Group Ltd on Tuesday to junk status with a negative outlook due to concerns over the Singapore-listed commodity trader’s liquidity, profitability and cash flow.

In a blow to the company’s efforts to retain its investment grade rating and slash debt by selling assets, Moody’s cut Noble’s senior unsecured bond ratings to Ba1, which represents junk status, from Baa3 and assigned a Ba1 corporate family rating to Noble.

The company was put on review for possible downgrade in mid-November, Moody’s said in a statement.

The worsening year-long rout in commodities, which has punished prices of raw materials that Noble handles from oil to copper, has overshadowed cost-cutting plans and will likely hurt access to funding and challenge its profitability, it said.

“The downgrade of Noble’s ratings reflects Moody’s concerns over the company’s liquidity,” Joe Morrison,

Thailand posted a current account surplus of US$3.0 billion in November, down from a US$5.18 billion surplus the previous month, the central bank said yesterday. The Bank of Thailand said its index for private consumption in November rose 0.7 percent from October, while its index for investment increased 0.8 percent.

Indonesia’s month-on-month inflation in December is seen at around 0.5 percent, chief economics minister Darmin Nasution told reporters yesterday. The central bank has previously said the annual inflation rate may cool to 2.97 percent in December from 4.89 percent in November, due to changes in base prices. Indonesia’s statistics bureau will release December inflation numbers on January 4.

outweighed by Moody’s negative view of the commodity producer segment,” Noble said.

Shares in Noble have shed around two-thirds of their value since midFebruary when blogger Iceberg Research alleged the company was inflating its assets by billions of dollars by not fairly representing the value of its commodity contracts.

Noble rejected the claims and board-appointed consultant PricewaterhouseCoopers found no wrongdoing in a report published in August.

It has investment grade ratings with the other two major agencies, Standard & Poor’s and Fitch.

Reuters

LG, Samsung to supply screens for iPhones South Korea’s LG Display Co Ltd and the panel-making unit of Samsung Electronics Co Ltd will supply organic light emitting diode (OLED) screens for Apple Inc’s iPhones, the Electronic Times reported yesterday citing unnamed sources. The report comes after years of speculation that Apple will start using the next-generation technology in its phones. OLED screens are thinner and offer better picture quality than the mainstay liquid crystal display screens.

Japan’s Nikkei newspaper reported last month that Apple plans to start using OLED screens for iPhones starting in 2018.

14 | Business Daily

December 31, 2015

International Private sector loans growing in eurozone: European Central Bank The volume of loans to the private sector in the euro area expanded in November, with a bigger bounce recorded than the previous month, European Central Bank data showed yesterday. The statistics are a key indicator of economic health for the ECB, as borrowing is a main financing source for corporate investment which in turn should boost the eurozone’s currently weak economy.

In November, approved loans rose 1.3 percent from a year ago, compared to a growth of 1.0 percent in October, an ECB statement said.

Julius Baer earmarks extra provisions for tax case

Swiss private bank Julius Baer said it has set aside nearly US$200 million in additional provisions to settle a U.S. criminal investigation that it helped wealthy American clients dodge taxes.

Baer said it had reached an agreement in principle with the U.S. Attorney’s Office for the Southern District of New York regarding the financial component of the case, drawing a line under one of the biggest uncertainties facing Switzerland’s third-largest listed bank. The new provision brings the total amount earmarked to cover potential penalties in the case to US$547.25 million which the bank said will be charged to its 2015 full-year results.

Facebook must face shareholder class actions over IPO A federal judge has certified two shareholder class actions accusing Facebook Inc of hiding concerns about its growth forecasts prior to the social media company’s May 2012 initial public offering.

U.S. District Judge Robert Sweet in Manhattan said retail and institutional investors who claimed to lose money from buying Facebook shares at inflated prices in connection with the US$16 billion IPO may pursue their respective claims as groups. The decision is dated December 11 but had been kept under seal, which Sweet lifted in an order made public on Tuesday.

Ex-Panamanian president involved in bribery scheme A U.S. federal judge identified the former president of Panama, Ricardo Martinelli, as one of several alleged co-conspirators in a bribery scheme that helped SAP to sell millions of dollars in software to Panama, according to a document reviewed

by Reuters. The reference to Martinelli as a co-conspirator, which has not been previously reported, comes as the former president faces unrelated allegations of corruption and misconduct in Panama - accusations he has said are politically motivated. Martinelli’s name came to light in the U.S. bribery case against Vicente Garcia, a former executive at SAP, the German software company.

Global growth will be disappointing in 2016 says IMF’s Lagarde She warned that rising U.S. interest rates and a stronger dollar could lead to firms defaulting on their payments and that this could then “infect” banks and states

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lobal economic growth will be “disappointing” next year, the head of the International Monetary Fund said in a guest article for German newspaper Handelsblatt published yesterday.

IMF Managing Director Christine Lagarde said the prospect of rising interest rates in the United States and an economic slowdown in China were contributing to uncertainty and a higher risk of economic vulnerability worldwide.

In addition, growth in global trade has slowed considerably and a decline in raw material prices is posing problems for economies based on these, while the financial sector in many countries still has weaknesses and financial risks are rising in emerging markets, Lagarde added.

“All of that means global growth will be disappointing and uneven in 2016,” Lagarde said, adding that low productivity, ageing populations and the effects of the global financial crisis were putting the brakes on growth.

She said the start of normalisation of U.S. monetary policy and China’s shift towards consumption-led growth were “necessary and healthy” changes but needed to be carried out as efficiently and smoothly as possible.

The U.S. Federal Reserve hiked interest rates for the first time in nearly a decade earlier this month and made

IMF Managing Director Christine Lagarde

clear that was a tentative beginning to a “gradual” tightening cycle.

There are “potential spillover effects”, with the prospect of increasing interest rates there already having contributed to higher financing costs for some borrowers, including in emerging and developing markets, Lagarde said.

She added that while countries other than highly developed economies were generally better prepared for higher interest rates than they had been in the past, she was concerned

about their ability to absorb shocks.

“Most highly developed economies except the USA and possibly Britain will continue to need loose monetary policy but all countries in this category should comprehensively factor spillover effects into their decisionmaking,” Lagarde said.

She warned that rising U.S. interest rates and a stronger dollar could lead to firms defaulting on their payments and that this could then “infect” banks and states.

Reuters

Cuba sees growth halving to 2 pct on lower export revenues Prices for key exports such as sugar, nickel and refined oil products have all fallen significantly this year Marc Frank

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uba is forecasting that economic growth will halve in 2016 to 2 percent from this year, and Cuban President Raul Castro on Tuesday blamed the decline on falling export revenues.

Echoing an earlier statement by Economy Minister Marino Murillo, Castro confirmed the forecast for a slowdown in 2016 as he closed the year-end-session of the National Assembly, from which foreign journalists were barred. His comments were reported by official media.

Castro attributed the decline to “financial limitations associated with the fall in earnings from traditional exports,” the Cuban News Agency (ACN )reported.

Prices for key exports such as sugar, nickel and refined oil products have all fallen significantly this year.

Castro said lower oil prices had reduced the cost of a number of imports such as food but also hurt

“mutually advantageous cooperation relations with various (oil-producing) countries, in particular the Bolivarian Republic of Venezuela.”

The collapse of oil prices punishes Cuba under the terms of its oil deal with Venezuela. Cuba receives more than 100,000 barrels of oil per day as part of an exchange that sends Cuban professionals to Venezuela.

Some 30,000 doctors and nurses, plus another 10,000 professionals, are posted in Venezuela.

Cuba also receives cash for the workers. Economists and oil market experts believe the amount is tied to oil prices, meaning Venezuela would pay less to Cuba when prices are down.

Cuba refines and resells some of the oil in a joint venture with its socialist ally. Prices for refined products are down in tandem with crude.

The fall in oil prices has been a major driver of financial markets

this year. Oil prices rose about $1 a barrel on Tuesday, but slowing global demand and abundant supplies from OPEC members kept energy markets bearish. Venezuela is a member of the Organization of Petroleum Exporting Countries.

Traders and analysts said the global oil glut would persist into 2016.

“Cuba’s trade with Venezuela represents 15 percent of the gross domestic product, half of what the Soviets’ trade represented,” said Cuban economist Pavel Vidal, a professor at Colombia’s Pontificia Universidad Javeriana Cali.

Cuba continued to receive oil this year, but most likely not all the cash it may have been owed, Vidal said.

Diplomats and foreign businessmen based in Cuba said state companies were cutting imports and seeking longer payment terms from suppliers.

Reuters

Business Daily | 15

December 31, 2015

Opinion Business

wires

Leading reports from Asia’s best business newspapers

How much development data is enough?

Keith D. Shepherd

Heads Decision Analysis and Information Systems in the Research Program on Water, Land, and Ecosystems at the Consultative Group for International Agricultural Research

THE KOREA HERALD Three out of 10 large businesses in South Korea are voicing worries over the possibility of worsening relations with labour unions next year due in part to the on-going controversy over the government-led labour reform drive, a poll showed Tuesday. In a survey conducted by the Korea Employers Federation of its 304 member companies, 67.1 percent of respondents expected labour-management relations to destabilize further next year. Of those polled, 46.2 percent cited the on-going controversy over the government’s labour reform drive, which has been pending in the National Assembly.

TAIPEI TIMES HTC Corp said it is to sell a plot of land and a building in Taoyuan to Inventec Corp for NT$6.06 billion (US$183.46 million) as part of its efforts to lower operational costs and boost efficiency. The local smartphone maker said the production facilities and its employees would be transferred to HTC’s three other properties in Taoyuan to centralize its production facilities. “The sale of the land and building will not affect HTC’s production capacity or shipping schedules,” an HTC investor relations officer said by telephone.

THE PHNOM PENH POST Cambodian rice millers and exporters are increasingly eyeing the export of organic rice to the European Union and the United States, after shipments of this niche product increased this year.

Hean Vanhan, deputy general director of the general department of agriculture, said that organic rice exports were considerably small compared to export of other varieties of rice, with the Kingdom exporting only 2,800 tonnes for the first 11 months of the year. Exports for the more popular varieties of rice was close to 457,000 tonnes this year.

THE STAR With over RM83bil worth of infrastructure jobs to be awarded next year, it is going to be a busy year for the construction sector in 2016.

“The 11th Malaysia Plan unveiled in May 2015 has reaffirmed the strong pipeline of construction jobs till 2020.

The record awards of project delivery partners (PDPs) for four major infrastructure projects with total value of RM80bil have further reiterated the potential works,” said Maybank IB Research in a recent strategy report. This flow of contracts if they are rolled out according to plan, is a new record.

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apid advances in technology have dramatically lowered the cost of gathering data.

Sensors in space, the sky, the lab, and the field, along with newfound opportunities for crowdsourcing and widespread adoption of the Internet and mobile telephones, are making large amounts of information available to those for whom it was previously out of reach. A small-scale farmer in rural Africa, for example, can now access weather forecasts and market prices at the tap of a screen.

This data revolution offers enormous potential for improving decision-making at every level – from the local farmer to world-spanning development organizations. But gathering data is not enough.

The information must also be managed and evaluated – and doing this properly can be far more complicated and expensive than the effort to collect it. If the decisions to be improved are not first properly identified and analysed, there is a high risk that much of the collection effort could be wasted or misdirected.

This conclusion is itself based on empirical analysis. The evidence is weak, for example, that monitoring initiatives in agriculture or environmental management have had a positive impact. Quantitative analysis of decisions across many domains, including environmental policy, business investments, and cyber security, has shown that people tend to overestimate the amount of data needed to make a good decision or misunderstand what type of data are needed.

Furthermore, grave errors can occur when large data sets are mined using machine algorithms without having first properly examined the decision that needs to be made. There are many examples of cases in

which data mining has led to the wrong conclusion – including in medical diagnoses or legal cases – because experts in the field were not consulted and critical information was left out of the analysis.

Decision science, which combines understanding of behaviour with universal principles of coherent decisionmaking, limits these risks by pairing empirical data with expert knowledge. If the data revolution is to be harnessed in the service of sustainable development, the best practices of this field must be incorporated into the effort.

The first step is to identify and frame frequently recurring decisions. In the field of development, these include large-scale decisions such as spending priorities – and thus budget allocations – by governments and international organizations. But it also includes choices made on a much smaller scale: farmers pondering which crops to plant, how much fertilizer to apply, and when and where to sell their produce.

The second step is to build a quantitative model of the uncertainties in such decisions, including the various triggers, consequences, controls, and mitigants, as well as the different costs, benefits, and risks involved. Incorporating – rather than ignoring – difficultto-measure, highly uncertain factors leads to the best decisions.

When put in the service of sustainable development, such a model will often involve projecting the impact of interventions on livelihoods and the environment over several decades. This process is most successful when stakeholders as well as experts are recruited to identify the relevant variables and their relationships. These

There are many examples of cases in which data mining has led to the wrong conclusion – including in medical diagnoses or legal cases – because experts in the field were not consulted and critical information was left out of the analysis

participants must be trained to provide quantitative estimates of their uncertainty for the different variables. For example, experts might estimate with 90% confidence, based on available data and their own experience, that farmers’ average maize yields in a given region are 0.5-2 tons per hectare.

The third step is to compute the value of obtaining additional information – something that is possible only if the uncertainties in all of the variables have been quantified. The value of information is the amount a rational decision-maker would be willing to pay for it.

So we need to know where additional data will have value for improving a decision and how much we should spend to get it. In some cases, no further information may be needed to make a sound decision; in others, acquiring further data could be worth millions of dollars.

This process is repeated until there is no further value in acquiring data and a sound decision – a logical conclusion, based on the information, values, and preferences of the decision-makers or decisionmaking body – is reached. It provides decision-makers and stakeholders insights into how to improve policies to maximize positive outcomes and reduce risks, such as the possibility of low rates of adoption or limited institutional capacity for effective implementation.

It is not enough simply to assume that the data revolution will benefit sustainable development. Ensuring that it does will require recognizing the importance of rigorous analysis in every data-collection effort and the formation of a new generation of decision scientists to work alongside policymakers.

Project Syndicate

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December 31, 2015

Closing Indonesia expects 12 mln foreign tourist arrivals in 2016

China’s railway construction robust despite less investment

A senior official said yesterday that the Indonesian government expected the country would receive 12 million foreign holiday makers in 2016. Tourism revenue on this basis would reach 172 trillion rupiah (some US$12.469 billion), said Tourism Minister Arief Yahya. For this year, Minister Arief projected that the number of foreign holiday makers coming into the country would grow by 5.81 percent to 10.017 million. “The figure exceeds the target of this year’s foreign tourist arrivals. Our work performance in developing tourism has been on track so the target is achieved,” the minister said. Indonesia set the target of foreign tourist arrivals at 10 million for 2015. Pictured Indonesian touristic spot Borobudur.

Investment in China’s railways in 2015 is still growing despite an economic slowdown. China spent 820 billion yuan (US$126 billion) on rail projects in 2015 and put more than 9,000 kilometres of new track into operation, meeting its annual targets of 800 billion yuan investment and 8,000 kilometres of new lines, according to China Railway Corporation. China now has 19,000 kilometres of high-speed rail. The fast growth of railway construction projects came at a time when the country is enduring continuous deceleration in the growth of fixed-asset investment. In the first 11 months of 2015, fixed-asset investment grew 10.2 percent year on year, slowing from 13.9 percent of growth seen at the beginning of this year.

Tokyo shares among top gainers in 2015 The positive finish marked the fourth year of gains for the Japanese market, although the Nikkei is sitting below its June highs Daniel Leussink

T

okyo’s shares ended the year on a high note, climbing more than nine percent in 2015 to rank among the world’s topperforming major markets.

The benchmark Nikkei 225 rose 9.07 percent while the Topix index of all firstsection shares tacked on 9.93 percent since January -ahead of most major markets in the US and Asia-Pacific.

It was near the 21,000 level before China’s shock currency devaluation this summer hammered equity markets as it aggravated worries about the powerhouse economy -- a major driver of global growth and a key market for Japanese firms.

Yesterday, Japan’s last trading session of the year, the Nikkei ticked up 0.27 percent, or 51.48 points, to close at 19,033.71.

The Topix rose 0.25 percent, or 3.91 points, to 1,547.30.

Analysts were generally upbeat on the prospects for Japanese equities in 2016, saying shares are still relatively cheap.

Also positive, the yen would remain weak on expectations

of more monetary easing by the Bank of Japan, as it looks to counter sluggish growth in the world’s number three economy, they said.

A weak yen boosts the profitability of major exporters and lifts investor demand for their shares.

The past year saw Japan unveil a long-awaited corporate governance code in a bid to improve firms’ transparency, and attract more overseas investors.

The national pension fund -- the world’s biggest -- also helped boost the market in 2015 as it ploughed more of its bond-heavy portfolio into domestic and international stocks.

China question

The cloudy picture for China’s economy will be crucial to for Japanese shares in 2016, analysts said.

“It isn’t that China’s economy is in such a bad state, but that it’s difficult to know what really is going on,” said Chihiro Ohta, general manager of investment information at SMBC Nikko Securities.

The BOJ’s 80 trillion yen (US$665 billion) stimulus scheme -- a cornerstone of Prime Minister Shinzo Abe’s attempt to spur growth, dubbed Abenomics -- sent the yen into free fall.

Yesterday the dollar fetched 120.41 yen, making the yen worth about 40 percent less than when Abe came to power three years ago.

Among the big gainers in 2015 was Japan Post, which raised US$11.5 billion in a hotly anticipated initial public offering aimed at privatising the huge company.

The triple-listing -- which

included the firm’s banking and insurance units -- saw the holding company’s stock soar about 33 percent from its IPO price.

But the insurance division led the pack with nearly a 42 percent gain since the listing.

Nintendo climbed almost 33 percent this year as it presses on with a plan to revive its fortunes with a push into the lucrative smartphone gaming market.

Sony tacked on about 21 percent in 2015 on high hopes for the struggling firm’s turnaround plan.

Meanwhile, Toshiba’s stock plunged by nearly half

since it was hammered earlier this year by an embarrassing profit-padding scandal.

Auto parts supplier Takata, embroiled in a global exploding airbag crisis, saw its shares lose 56 percent over the year.

Despite the Nikkei’s strong performance in recent years, the index remains a shadow of its former self. It peaked at almost 39,000 in the last days of 1989.

Japan’s asset bubble then popped, dealing a huge blow to the powerhouse economy and sending the Nikkei plunging over the next two decades.

AFP

McDonald’s supplier China trial concludes in Shanghai

China Telecom chairman steps down amid investigation

Taiwan demands Japan’s apology to WWII “comfort women”

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Shanghai court concluded a trial of OSI Group LLC, the U.S. meat supplier that sells to McDonald’s Corp. but got ditched

by Yum! Brands Inc. in China for allegedly selling out-of-date products, according to a court official.

No schedule for a verdict on the two China units of the Aurora, Illinois-based has been announced and the information will be published on the court’s website, according to an official from Shanghai Jiading district court surnamed Yang, who wouldn’t give her full name.

Shanghai and Hebei Husi Foods Ltd., along with 10 employees, had been charged by prosecutors in September, according to a statement posted on a Shanghai government website.

The trial comes more than a year after a Chinese TV channel report that alleged Husi workers were repackaging and selling expired chicken and beef.

The ensuing fall-out prompted China and Japanbased fast-food chains from Yum-owned KFC to McDonald’s to halt supplies from OSI and pull products from menus, hurting earnings.

Bloomberg News

tate-run China Telecom Corp Ltd said yesterday that Chairman and Chief Eexecutive Chang Xiaobing has resigned with immediate effect, just days after authorities said he was being investigated for alleged disciplinary violation.

Chang is “suspected of serious violation of discipline”, the ruling Communist Party’s anticorruption watchdog said on Sunday, the latest senior executive to be caught in an anti-graft dragnet.

Chang was chairman of China Unicom before becoming China Telecom chairman. China Unicom and China Telecom are two of the country’s top three telecom service providers.

In a filing to the Hong Kong bourse after the market close yesterday, China Telecom said President and Chief Operating Officer Yang Jie will exercise the powers of the chairman and chief executive officer with immediate effect until a new appointment is made.

Chinese President Xi Jinping’s corruption investigations have already included leading politicians, bosses of state enterprises and senior bankers.

Reuters

aiwan urged Japan to apologize and compensate Taiwanese women who were forced into sex slavery during World War II following Monday’s deal between Japan and the Republic of Korea (ROK) on the issue.

Taiwan leader Ma Ying-jeou told media that Taiwan authorities have always demanded an apology from the Japanese government to “comfort women” in Taiwan and for compensation.

Justice should be served and the dignity of these women should be respected, Ma said.

The ROK and Japan on Monday reached an agreement on Japan’s wartime sex slavery of Korean women during WWII as Japanese Prime Minister Shinzo Abe made an official apology for the atrocities. Japan also promised to offer 1 billion yen (US$8.3 million) from its government coffers to help the ROK establish a foundation supporting the former sex slaves.

David Lin, the island’s chief official in charge of external affairs, said in another press conference that Taiwan will continue to negotiate with Japan to protect rights and interests of the female victims.

Xinhua