MOP 6.00 Closing editor: Joanne Kuai
Greenpeace reports North China farmers growing illegal GMO corn Page 8
Year IV
Number 956 Thursday January 7, 2016
Publisher: Paulo A. Azevedo
Iao Kun chip turnover dives 40 pct in December Page 7
Use of mobile messaging services for trading stocks increasing risks Page 9
New natural gas supply contract changes underway
The newly-inaugurated Co-ordinator of Energy Sector Development Office Hoi Chi Leong said that the government is soon to meet with Sinosky Energy (Holdings) Co Ltd for negotiating its natural gas supply concession, with a focus on its supply of natural gas to the power distributor Companhia de Electricidade de Macau - CEM, S.A (CEM). Also whether the stability of the long-term supply can be ensured. The city’s exclusive natural gas importer and supplier Sinosky has long suffered losses since its inception of service in 2006 Page
2
Patents filed
Poor service
Service sector provided poor help to China’s economy in the most recent Caixin report. The Caixin Media and Markit Economics survey of services purchasing managers fell to a 17-month low of 50.2 in December, barely keeping up expansion grounds
Page 8
A total of 1,051 applications were filed for industrial property registration to the Macao Economic Services (DSE) in December, which is down by 7 per cent compared to the same period of last year. For the whole year of 2015, the bureau received a total of 13,887 applications. Compared to 12,878 applications filed in 2014, the number represents an increase of 7.84 per cent
Brought to you by
Page 5
Not a big concern
A total of MOP1.2 bln (US$153mln) in illegal UnionPay transactions were discovered in Macau in 2015. However, a Union Gaming analyst says their math suggests that even if 20 per cent of premium mass play disappears due to incremental UnionPay restrictions, the impacts are 2 per cent and 3.2 per cent to market-wide gross gaming revenue and EBITDA, respectively
Page 7
Economy
HSI - Movers
Sino-Luso trade
Name
Trade between China and Portuguesespeaking countries fell by 25.84 per cent to US$90.9 billion (MOP727.2 billion) between January and November last year. Brazil remains as the major economic partner of China, followed by Angola and Portugal
www.macaubusinessdaily.com
Page 6
Pushing the boat out The new government is confident that implementation of the free yachting scheme between Macau and Zhongshan will take place in first half of this year after several delays. The Marine and Water Bureau says the SAR is all set. However, for Zhongshan in Guangdong province, it’s still pending for an acceptance check on the joint inspection building for the scheme
Page 4
January 6
%Day
China Shenhua Energy
+4.23
China Resources Powe
+2.29
China Merchants Holdi
+1.32
Power Assets Holdings
+0.50
Link REIT
+0.33
Cheung Kong Property
-2.87
Lenovo Group Ltd
-3.13
Li & Fung Ltd
-3.21
New World Developme
-4.44
Hengan International
-4.96
Source: Bloomberg
I SSN 2226-8294
2016-1-7
2016-1-8
2016-1-9
16˚ 21˚
15˚ 20˚
15˚ 20˚
2 | Business Daily
January 7, 2016
Macau
Govt to negotiate natural gas supply contract with Sinosky soon The new head of the Energy Sector Development Office said the talks between the two parties will focus on the natural gas supply to city’s sole power distributor CEM for generating power Stephanie Lai
sw.lai@macaubusinessdaily.com
T
he government is soon to meet with Sinosky Energy (Holdings) Co Ltd for negotiating its natural gas supply concession, with a focus on its supply of natural gas to the power distributor Companhia de Electricidade de Macau - CEM, S.A (CEM) and whether the stability of the long-term supply can be ensured. The news was told by the Co-ordinator of Energy Sector Development Office Hoi Chi Leong at the sideline of the inauguration of his new post yesterday. “We’ll mainly discuss [Sinosky’s] supply [to CEM] for generating power, the source for importing the natural gas and the importation price,” said Mr Hoi. “We have to see whether they [Sinosky] can ensure the long-term supply of natural gas for generating power here,” Mr Hoi added, “That has to come as a definite promise to us because it matters as part of the city’s plan for generating power.”
Continuing struggle
The city’s exclusive natural gas importer and supplier Sinosky has long suffered losses since its inception of service in 2006. Sinosky, a joint venture between Macau Natural Gas Co Ltd and China Petroleum &
THERE ARE THINGS WE DON’T DO
Chemical Corp. (Sinopec), has seen its losses widen to over MOP29.83 million for the full year of 2014; the company’s accumulated losses since 2006 amounted to MOP177 million, according to the company’s disclosure of the results. Sinosky has been struggling with its operation with a selling price here that is below the importation cost of the natural gas, the company explained in its results. Until now, Sinosky’s selling price of the natural gas is still capped at MOP2.7357 per cubic metre, a compliance to the 15-year concession contract that the company signed with the government in 2006. Business Daily has approached Sinosky on what proposals it is delivering for the upcoming negotiation with the government, but the company declines to comment.
Reliance on import
Talking to media yesterday, the new Energy Sector Development Office head said he cannot promise when the government can close the negotiation with Sinosky. Currently the government also does not have a definite goal on how much more it feels the power generated locally can be enhanced, Mr Hoi added. More than 90 per cent
of the city’s power supply comes from Mainland China via the state-owned China Southern Power Grid. “If we can see a stable supply of natural gas, we can certainly enhance the proportion of locally generated power [by CEM] and reduce our reliance on importing power from mainland,” Mr Hoi remarked, noting that the government will assess the cost-effectiveness of having a higher proportion of power generated from the city.
New in office
Mr Hoi’s new tenure at the Energy Sector Development Office started on January 1 this year. He has replaced Arnaldo Ernesto dos Santos, who has been appointed as the head of the Housing Bureau. Mr Hoi has been in the civil service since 1990, a time when he began as a senior technician working at the Macau Post. He then worked in the Office for the Development of Telecommunications and Information Technology of Macau (the former body of Bureau of Telecommunications Regulation) since 2001, and was eventually promoted as the head of the bureau in January 2015. Now working in a different domain, Mr Hoi pledged at the inauguration ceremony that he would strive to
BUT WE DO•••
familiarise with the workings of the Energy Sector Development Office “within the shortest span of time”. A priority of the tasks that he is taking up in the new office is to ensure a stable power supply in Macau, and to promote energy-saving measures, Mr Hoi said.
Sand supply resumes for Zone A reclamation: Speaking to media at the inauguration ceremony yesterday, Secretary for Transport and Public Works Raimundo Arrais do Rosário confirmed that the sand supply for the reclamation of Zone A has already resumed. The reclamation project, which was initially scheduled to be completed last year, had seen the target completion date extended to 2017, according to Official Gazette. Sand supply has fallen short for the reclamation since February last year, which has caused delay to the project, public works officials have explained before. Zone A, which totals 138 hectares in area, is the largest of the five new urban zones to be reclaimed.
There are men and women who give human kind their perseverance, their genius, their generosity and, in some cases, their own life. Those people and their actions are our inspiration.
• Advertising
• Branding & marketing consulting • Marketing strategy • Creativity • Design
info@goldfishmacau.com +853 2833 1258 www.goldfishmacau.com
4 | Business Daily
January 7, 2016
Macau
Marine Bureau: Macau-Zhongshan free yachting hopefully in H1
T
he Marine and Water Bureau is confident that the “Free Yacht Travel Scheme” between the city and Zhongshan in Guangdong will be implemented within the first
half of this year, following the opening date of the scheme being delayed a few times before. The head of the Shipping and Seafarers Department of the Bureau, Lei Veng Seng,
told reporters on Tuesday that the Special Administrative Region has already prepared all hardware and software needed for the scheme, suggesting the city is ready for the implementation.
But for the Chinese city, according to the official, its authorities are still pending for an acceptance check for the joint inspection building of the yachting travel scheme.
Cultural Affairs Bureau subsidize MOP1.28 million on fashion design
T
he selection of the 2015 Subsidy Programme for Fashion Design on Sample Making held by the Cultural Affairs Bureau was completed and a total of eight entrants were selected as eligible candidates of the Programme. Cultural Affairs Bureau will grant each eligible candidate (individual or team) with a subsidy of up to MOP160,000 for the sample making and production of promotional materials. In order to promote the sustainable development of the fashion design
industry in Macau, the Cultural Affairs Bureau launched the 2015 Subsidy Programme for Fashion Design on Sample Making last year. Among the 22 applicants, the adjudicating panel selected eight finalists after the initial and second reviews, six of whom are individuals and two are teams. The adjudicating panel comprised of relevant professionals from Macau and Hong Kong covering various fields such as fashion design, retail, production and training. The Subsidy Programme for
Fashion Design on Sample Making was first launched in 2013. Some 50 per cent of the applicants for the Programme in 2015 are new applicants. The Cultural Affairs Bureau says it indicates that the programme has continued to attract the participation of new applicants. In addition, over 60 per cent of applicants have registered trademarks for their brands, a growth of 10 per cent compared with 2014, showing that local fashion designers are aware of brand protection and pay close attention to intellectual property rights. One of the adjudicators remarked that the business planning of 2015’s entries is more mature than that of the past and the applicants have gradually found their market positioning. In terms of design, adjudicators said some applicants focus too much on design details whilst neglecting the practicality of the clothes. They suggested applicants consider the product design and consumers’ needs from the perspectives of their own self of use.
“If [the building] passes the acceptance check, [the Chinese authorities] will officially inform us and confirm the procedures for local yachts travelling to the Mainland city. After that, both parties would coordinate the time for implementing the scheme,” Mr. Lei said. In fact, the free yacht travel scheme between the Special Administrative Region and the Chinese city was first scheduled for implementation in the middle of last year. The opening date was later postponed to the end of September, then to the end of last year. For the yachting scheme, the local marine department has planned to provide 50 provisional berths on the waterway in the Concordia Industrial Park in Coloane, in addition to the city’s current 79 berths, of which 57 are at Lam Mau Pier on the Macau Peninsula and 22 at Macau Fisherman’s Wharf. On the other hand, the government would set up a 24-hour border checkpoint at the Coloane Pier for this free yacht travel scheme between the two cities. K.L.
Tourism Fund disburses MOP1.93 million in Q3 last year
T
he city’s Tourism Fund handed out a total of MOP1.93 million (US$241,250) to a number of local associations and groups in the third quarter of last year, according to the Official Gazette released yesterday. The United Association of Food and Beverage Merchants of Macao, which is headed by businessman and legislator Chan Chak Mo, was subsidised a total of MOP499,870 during the three months for their two F&B events, for training purposes. The amount that the association received accounted for one-fourth of the total fund distributed during the quarter. On the other hand, Macao Citizens Federation was subsidised some MOP382,000 for an event at its Fujian Culture Festival in the three months. The other great area of the fund, ranging in amounts of some MOP3,000, was allocated to groups for holding Chinese Opera activities.
Business Daily | 5
January 7, 2016
Macau Seven companies bid for Friendship Bridge surveillance Seven companies have submitted tenders on supply and installation of the surveillance system on Friendship Bridge, according to a press release issued by the Transport Bureau (DSAT) yesterday. DSAT held an open-bidding session and announced that five tenders were accepted, one was rejected, one was accepted with conditions. Prices ranged from MOP3.8 million to MOP12.5 million, and installation periods were from 180 days to 270 days. DSAT says once the system is in place, there will be more than 30 cameras on the bridge for traffic monitoring, as well as detecting speeding in order to enhance safety.
Industrial property rights applications drop 7 pct last month
A
total of 1,051 applications were filed for industrial property registration to the Macao Economic Services (DSE) last month, which is down by 7 per cent compared to the same period of last year, due to the decrease in the applications for trademark registration. According to the latest data released by the DSE, it had received 970 applications for trademark registration in the city in December 2015, a decrease by 11.4 per cent year-on-year from 1,095 applications. However, applications for registering industrial design or model reached 37, which is a sharp increase compared to only eight applications for such kind of registration in December 2014. In addition, application for extending invention patent also grew year-on-year to 39 from 18 one year ago.
Meanwhile, the other five applications in the month were for applying invention patent and utility patent at the local authorities, which
notably declined from last year’s 14 applications. For the whole year of 2015, the economic bureau received a total of
13,887 applications for industrial property rights in the Special Administrative Region. Compared to 12,878 applications filed in 2014, the number represents an increase of 7.84 per cent. Most of the industrial property applications, 13,140 of the total, were filed for registering trademarks, which jumped by nearly 7 per cent year-on-year from 12,287 applications. Furthermore, applications for registering extension of invention patent, industrial design or model as well as name and emblem of establishments increased to 382, 250 and 30 from 310, 132 and 15 yearon-year, respectively. Nevertheless, the number of applications for invention patent and utility patent registrations declined to 65 and 20 from 106 and 28 one year ago, respectively. K.L.
6 | Business Daily
January 7, 2016
Macau 236,000 underage refused entry to casinos In 2015, a total of 236,000 people under the age of 21 were refused entry to Macau casinos, according to the data provided by the Gaming Inspection and Coordination Bureau, as reported by Portuguese News Agency Lusa. A law which came into effect on 1 November 2012 raised the minimum age to legally enter and work in a casino from 18 to 21 years old. In 2014, a total of 330,000 people were refused entry to casinos due to the age limit, the same as in 2013, while in the first two months after the new law was put in force – November and December of 2012, a total of 50,000 under 21 year olds were stopped at the door.
Sino-Luso trade falls 25.8 pct in eleven months Brazil remains as the major economic partner of China, followed by Angola and Portugal
T
rade between China and Portuguesespeaking countries fell by 25.84 per cent to US$90.9 billion (MOP727.2 billion) between January and November last year, according to the latest official figures. The official data of China Customs Service published in the Macau Forum indicated that China had bought US$57.5 billion of goods from Portuguese-speaking countries in the first eleven months of last year, which is down by 29 per cent yearon-year. In addition, it sold
some US$33.39 billion of products to these countries, which decreased by 19.68 per cent year-on-year. Brazil remained as the major economic partner of China. The bilateral trade between the two countries reached US$66.24 billion for the eleven months, which is 17.98 per cent less compared to the same period of 2014. China’s exports to Brazil amounted to US$25.37 billion in the period, representing a decrease of 19.98 per cent year-on-year, while its imports from Brazil totalled US$40.86 billion, reflecting
a decline of 16.69 per cent year-on-year. Angola is China’s second partner in the Portuguesespeaking world. However, trade between the parties declined by 46.24 per cent year-on-year to US$18.27
billion between January and November 2015. Meanwhile, the bilateral trade between China and Portugal, the third biggest Portuguese-speaking partner of China, had also decreased by 7.85 per cent year-on-year
to some US$4 billion during the eleven months. In fact, the Sino-Lusophone trade has been on a downward path since the beginning of last year. Between January and November last year, the monthly value of the SinoLusophone trade had only surpassed US$10 billion once in July. In 2003, China set the Special Administrative Region as a platform to strengthen economic and trade cooperation with Portuguese-speaking countries. In the same year, it created the Forum for Economic and Trade Cooperation between China and Portuguese-speaking Countries (Macau Forum) that holds ministerial-level meetings every three years. The next ministerial-level conference, which will be the fifth since 2003, should take place this year. However, there is no timetable announced for the meeting yet. Lusa
Business Daily | 7
January 7, 2016
Macau
Union Gaming: high-end of UnionPay risk less than 2 pct hit to gaming revenues Analyst argues that premium mass play is the segment at risk in the event of UnionPay crackdowns. This accounts for no more than 10 pct of gross gaming revenue
I
n the event of UnionPay crackdowns, the worst case scenario is probably a less than two per cent hit to the gross gaming revenue (GGR) and less than three per cent hit to EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), said Grant Govertsen, an analyst at Union Gaming Securities Asia Limited. This follows a policy saying the value of illegal transactions made with UnionPay cards and portable payment terminals in Macau was over MOP1.22 billion (US$153 million) last year, as reported by Lusa. The Portuguese News Agency quoted the Judiciary Police (PJ) as saying they began investigating 30 cases in 2015. In 2014, the number of cases was 47 with MOP784 million involved. The Portuguese News Agency says tightening rules with UnionPay debit cards was regarded by analysts surveyed by Lusa as a factor for the first annual y-o-y drop in five years of gaming revenue as observed in June 2014 – and the trend continues - by decreasing the liquidity of most players. However, Grant Govertsen
plays down the concern. The analyst says that Macau GGR is currently split 50/50 between VIP and mass, and 30 per cent of mass are premium-mass, which suggests that only 15 per cent of total Macau GGR is premium mass, who are the primary users of UnionPay to access cash in Macau. “Of the 15 per cent of GGR that is premium mass,
we believe that the high-end of the range is the two thirds of this that originates from UnionPay cash, with existing offshore bank accounts, u n d er g r o u n d b a n k i n g , cash allowed to be freely transported out of China, etc. accounting for the balance; this therefore suggests that no more than 10 per cent of Macau’s GGR originates from UnionPay-derived cash,”
said Mr. Govertsen in a note released yesterday The analyst adds that as the anti-corruption impact has been here for more than two years, and “Chinese behaviour tends to be very lockstep at this point”. “Those persons coming to Macau must feel that they are not at risk of being caught up in the anti-corruption dragnet. Hence the continued
use of UnionPay as a means to get cash in Macau,” said Mr. Govertsen. He believes the highend of the range is likely to see no more than a 20 per cent reduction in UnionPay volume in Macau in the event of tighter measures being implemented, resulting in the risk to GGR and EBITDA at 2 per cent and 3.2 per cent, respectively.
Iao Kun chip turnover dives 40 pct in December
J
unket operator Iao Kun Group Holding Company saw its rolling chip turnover plunge by 40 per cent year-on-year in December 2015, according to its filing with Nasdaq Stock Market yesterday. Last month, the junket operator generated a total of US$0.42 billion (MOP3.36 billion) of rolling chip turnover, which is down by US$0.29 billion compared to the same month in 2014. However, on a month-onmonth comparison, the rolling chip turnover that the operator received is up by 27.3 per cent from US$0.33 billion in November of last year. Meanwhile, the company’s win rate for the month was 3.28 per cent, according to its filing. For the whole year of 2015, Iao Kun’s rolling chip turnover totalled US$6.42 billion, which means an average of US$0.54 billion per month. The number, compared to US$16.64 billion for the whole year of 2014,
shrinking by 61 per cent year-onyear. In addition to the junket operator, other players in the local gaming market may have continued experiencing the downturn trend in their revenues last month. According to the latest statistic released by the Gaming Inspection and Coordination Bureau (DICJ), the city’s gross gaming revenues fell by 34.3 per cent year-onyear to MOP231 billion for the whole year of 2015, while that for the last month of the year also registered a year-on-year decline of 21.2 per cent. Currently, Iao Kun’s VIP gaming rooms are located in the StarWorld Hotel, the Galaxy Macau, Sands Cotai Central, City of Dreams and Le Royal Arc Casino in the Special Administrative Region. It has also recently started trial gaming operations in Perth and Melbourne in Australia. K.L.
8 | Business Daily
January 7, 2016
Greater China
Caixin services PMI falls to 17-mon
The reading was the lowest since July 2014 and the second lowest since data collection b
A
ctivity in China’s services sector expanded at its slowest rate in 17 months in December, a private survey showed yesterday, in a further indication that the world’s second-largest economy may be losing steam. Policymakers and economists have hoped Beijing’s push to restructure the economy with a greater emphasis on services and consumption would more than offset the economic drag from persistent factory weakness, but the survey’s findings did not bolster that view. The Caixin/Markit Purchasing Managers’ Index (PMI) fell to 50.2 in December from 51.2 in November. The reading was the lowest since July 2014 and the second lowest since data collection began in late 2005. “In light of the setback to services sector growth, the government needs to gradually relax restrictions in the sector,” said He Fan, chief economist at Caixin Insight Group. A reading above 50 points indicates growth on a monthly basis, while one below that points to a contraction. A sub-index measuring new business fell to 50.6 in December from November’s 51.1, as firms reported relatively subdued demand, though service companies added workers at a slightly faster clip. Their overall costs continued to rise, largely due to higher salaries, but increased competition meant
KEY POINTS Caixin services PMI falls to 50.2 in Dec vs Nov’s 51.2 New business drops to 50.6 vs Nov’s 51.1 Official services PMI quickened to 54.4 in Dec
they had to cut selling prices for the fourth month running. China’s services sector has been one of the few bright spots in the economy over the last year, helping to offset a prolonged slump in manufacturing, and the government has been keen to promote higher consumption to replace flagging old growth drivers such as heavy industry and exports. The results of the private survey contrast with an upbeat official services survey on Friday which showed activity picked up in December to a 16-month high of 54.4. The official survey focuses more on larger firms, while the private survey tends to look at smaller ones which are showing more financial strains from the prolonged economic slowdown.
Indeed, a composite Caixin output index covering both manufacturing and services suggested the downdraft from factory weakness was still somewhat stronger than the contribution from services. The index shrank for the fourth time
Greenpeace say Mainland’s farmers illegally growing GMO corn The organization blamed an “extremely lax and disorganized” seed market management system for the production and sale of illegal seed varieties Dominique Patton
F
armers are illegally growing genetically modified corn in China’s northeast, said environmental non-profit Greenpeace yesterday, in a report that may generate further distrust of the government’s ability to ensure a safe food supply. Beijing has spent billions of dollars to develop GMO crops that it hopes will ensure food supplies for its 1.4 billion people but has not yet approved commercial cultivation amid deep-seated anti-GMO sentiment. The new findings seem to confirm concerns that Beijing will be unable to supervise the planting of GMO crops once commercial cultivation is permitted, leading to widespread contamination of the food chain with GM varieties. In its report, Greenpeace said 93 percent of samples taken last year from corn fields in five counties in Liaoning province, part of China’s breadbasket, tested positive for GMO contamination. Furthermore, almost all of the seed samples taken from grain
The GMO corn strains identified in the survey belong to international companies Monsanto, Syngenta and Du Pont Pioneer said Greenpeace
markets and samples of corn-based foods at supermarkets in the area also tested positive. “It is very likely that much of the illegal GE corn has already entered grain storage warehouses, wholesale and retail markets across the country, ultimately ending up in citizens’ food,” said Greenpeace in a report. While Greenpeace said it was not clear how the GMO corn seeds got into the marketplace, it has long been alleged that GMO plants being tested in field trials have been illegally sold to farmers for commercial use. Such reports have intensified public opposition to the technology, with some anti-GMO campaigners going as far as suing the government over the failure to disclose information about its approvals for imported GMO crops and plans to allow domestic cultivation. Among the six corn seed strains that tested positive in the Liaoning seed market, three have not been certified by China’s agriculture ministry, while three others were certified as conventional seeds and
in five months in December, albeit marginally. China is set to release fourth quarter and full-year GDP data on January 19. China’s economic growth is expected to cool from 7.3 percent
therefore had been contaminated by GMO varieties, said the organisation. The agriculture ministry did not immediately reply to a request for comment on the Greenpeace report. The ministry said last year it was changing regulations to increase supervision of biotech products under development. The GMO corn strains identified in the survey belong to international companies Monsanto, Syngenta and Du Pont Pioneer, said Greenpeace. None of the companies responded to emailed requests for comment. Greenpeace blamed an “extremely lax and disorganised” seed market management system for the production and sale of illegal seed varieties. It said many small seed breeders are not aware of the names of seeds they are breeding on behalf of other companies nor whether the origins of the seeds are legal. Greenpeace recommends that the government investigate all corn breeding companies and destroy illegal GMO seeds. Additionally, there should be annual inspections of crops in north China during the sowing season, and tougher supervision of GMO crop research and cultivation. It says farmers should be compensated for their losses if GMO crops are destroyed. The new findings could make Beijing even more cautious about proceeding with commercialisation of any GMO crops, frustrating international and domestic seed firms. Proponents of biotech crops in China argue that commercialising GMO products will reduce the need for farmers to resort to unapproved varieties to boost their yields. Reuters
Business Daily | 9
January 7, 2016
Greater China Message apps pose growing risk for securities regulator
nth low
began in late 2005
A
in 2014 to 6.9 percent in 2015, the central bank said in a recent work paper, its slowest pace in 25 years. Some China watchers, however, believe real growth is already much weaker than official data suggest. Reuters
growing number of China’s retail investors are opening trading accounts on messaging and social media app WeChat, and some institutional investors are even using it to instruct brokers, making it harder for regulators to monitor trades and spot illegal activity, traders and investors told Reuters. While using mobile messaging and social media apps for trading is not unlawful in China, regulations require reliable monitoring and recording of trades to prevent activities such as insider trading or market manipulation, and to keep on top of threats to market stability such as excessive margin trading. China Securities Regulatory Commission (CSRC) has been clamping down on breaches, including fining four brokerages in September for failing to collect information about the identities of clients who traded stocks through external systems. It also shut down third-party trading software used by brokers that helped traders skirt regulations by dividing one account into many sub-accounts without the need to register a name, according to local media. Even so, using apps to buy and sell stocks over mobile phones is common in a country where retail
Taiwan CPI grows below forecast
investors account for 80 percent of share market volume. Despite closer scrutiny from China’s regulators, brokerages including large listed firms like China Galaxy Securities and smaller entities such as Great Wall Securities, started offering WeChat share trading account services last year in a bid to access the growing pool of retail traders. China Galaxy Securities and Great Wall Securities did not return requests for comment. Overall account openings swelled to around 46 million in the first half of 2015, from around 2 million over the same period in 2014, according to official data. For brokers, the advantages of using WeChat are obvious, since it is the preferred means of communication for many of its 600 million users. But a case in Hong Kong last month highlights regulators’ concerns with the trend. The regulator there suspended a trader for receiving a buy order on WhatsApp, a messaging app owned by Facebook Inc, in breach of the internal communication policies of the firm he then worked for, BTIG, noting that the company had no control over the recording and retention of such messages. Reuters
Huawei smartphone shipments soar Revenue for its consumer business group jumped 70 percent year-on-year to US$20 billion in 2015
H
KEY POINTS First Chinese firm to ship more than 100 mln smartphones Strong sales in China and Western Europe Target higher-margin premium models Huawei shines as clouds gather over Samsung, Apple
serious rival to Samsung and Apple, as smaller Chinese players such as Xiaomi Inc and Lenovo Group Ltd often swapped rank in price wars. “In China it’s true that Huawei grew tremendously over the past
Fin min auctions 1-year bonds China’s Ministry of Finance auctioned 20 billion yuan (US$3 billion) of oneyear bonds in the interbank market yesterday at an average yield of 2.32 percent, traders said, which was lower than expected. Market forecasts had centred around 2.35 percent and ranged from 2.30 to 2.40 percent. The auction yield came in below Tuesday’s benchmark secondary market yield of 2.3680 percent for one-year government debt.
Li Ning expects to report break-even in 2015 Chinese sportswear maker Li Ning Co Ltd said yesterday it expected to report it broke even in 2015, sending its stock sharply higher as its long-range efforts to reverse out of years of losses begin to pay off. The company’s shares climbed more than 7 percent in early trading to their highest since June 2015 on the prospect of China’s best known homegrown sportswear maker pulling out of three straight years of losses. Li Ning, whose investors include private equity firm TPG Capital Management and Singapore sovereign wealth fund GIC, posted a 781.5 million yuan (US$119 million) net loss in 2014.
Nissan says Mainland 2015 sales up
Yimou Lee and Ritsuko Ando
uawei Technologies Co has become the first Chinese handset vendor to ship more than 100 million smartphones annually, defying a market slowdown to challenge leaders such as Samsung Electronics Co and Apple Inc. The Shenzhen-based company said yesterday its smartphone shipments rose 44 percent annually to 108 million in 2015, thanks to strong sales in China and Western Europe as it seeks to shed its budget supplier image to target highermargin premium models. Hauwei’s upbeat performance comes at a time when industry leaders are facing a tough year ahead. Samsung said it expected a difficult business environment in 2016 due to weak global economy and heightened competition, while a Nikkei report said Apple was expected to cut production of its latest iPhone models by about 30 percent in the January-March quarter due to mounting inventories. Analysts said it was too early to say if Huawei could become a
Consumer price index fell 0.31 percent in 2015 to mark its lowest rate of change since 2009, allowing room for the central bank to continue its loose monetary policy, an analyst said yesterday. For December, the index rose 0.14 percent year on year, the Directorate General of Budget, Accounting and Statistics said. It was below the 0.49 percent expected by analysts and 0.53 percent posted in November. The index declined in each of the year’s first eight months, mostly due to the global oil price slump. However, it has returned to positive territory gradually from September through December.
six months, but it’s a bit of a dog fight within the Android ecosystem,” Kantar Worldpanel ComTech analyst Carolina Milanesi said. “Huawei’s going after Xiaomi and all the other smaller Android players.” Huawei remains a distant third, with a smartphone market share of 7.5 percent in the third quarter after Samsung’s 23.8 percent and Apple’s 13.5 percent, according to research firm IDC. Huawei said revenue for its consumer business group, which sells products such as smartphones and tablets, jumped 70 percent yearon-year to US$20 billion in 2015. Worldwide smartphone shipments are expected to grow 10.4 percent in 2015, down from 27.5 percent in the previous year, according to IDC. Reuters
Nissan Motor Co Ltd and its Chinese joint venture partner sold 1.25 million vehicles in China in 2015, up 6.3 percent from the previous year, the Japanese car maker said yesterday. In December, Nissan sold 159,100 vehicles, up 15 percent from a year earlier. That compares with a 21.9 percent increase in November and a 16.8 percent rise in October. Japanese automakers have outperformed the expected 3 percent growth of the overall Chinese car market, the world’s largest, where consumer appetite for cars waned under the slowest economic expansion in 25 years and a stock market rout.
High-yielding oil at Beibu Bay test well Sinopec Corp said it struck high-yielding oil and gas in a test well offshore Beibu Bay near China’s southwestern coast, marking a rare offshore oil and gas find by the state firm that is largely focused onshore. The Wei-4 well, some 110 kms southwest of the coastal city of Beihai, tested a daily output of 1,264 tonnes of crude oil and 71,800 cubic metres of natural gas at a first layer, after identifying oil-bearing layers nearly a hundred metres thick.
10 | Business Daily
January 7, 2016
Greater China
As authorities revive stock intervention, foreign funds lose patience International investors have sold about US$7.8 billion of Shanghai shares through the city’s exchange link with Hong Kong since China first stepped up its intervention in early July Ye Xie and Bonnie Cao
C
hina’s latest efforts to rescue its stock market are driving away some of the world’s biggest investors. Policy makers revived intervention in the US$6.5 trillion market this week, as state-controlled funds bought equities on Tuesday and the securities regulator signalled a selling ban on major investors will remain beyond its January 8 expiration date, according to people familiar with the matter. The measures to combat a 7 percent selloff at the start of 2016 follow unprecedented intervention to prop up shares during a US$5 trillion rout over the summer. While the maneuvers may stabilize the market temporarily, they’re unnecessary because intervention creates price distortions and fosters moral hazard as traders come to view the government as a backstop for shares, according to UBS Wealth Management, Henderson Global Investors and Wells Fargo Funds Management. With the median stock on Chinese exchanges trading at the highest valuation among major markets, all seven strategists and fund managers surveyed by Bloomberg last month said they expected regulators to let the six-month selling restriction lapse. “I’m disappointed that they continued to use these sorts of quantitative controls,” Jorge Mariscal, the emerging-markets chief investment officer at UBS Wealth Management, which oversees US$1 trillion, said by phone from New York. “These sorts of measures are going to backfire.” The government resumed intervention this week after a US$590 billion rout sparked by weak
manufacturing data and local investor concern that an end to the selling ban would weigh on the market. The China Securities Regulatory Commission asked bourses verbally to tell listed companies that the ban will stay in effect until the introduction of a new rule restricting sales, said people familiar with the policy considerations, who asked not to be identified because the information wasn’t publicly disclosed. Listed companies were encouraged by regulators to issue statements saying they’re willing to halt such sales, they said. Introduced in July during the height of a US$5 trillion rout, the ban on selling has applied to investors with holdings exceeding 5 percent in a single stock, along with corporate executives and directors. The restriction has locked up about 1.1 trillion yuan (US$169 billion) of holdings, according to Goldman Sachs Group Inc.
Foreign outflows
Lifting of the ban will have a limited impact on the market because not all of the major shareholders need to reduce their stakes, Deng Ge, the regulator’s spokesman, said in a statement Tuesday. In recent years, about 60 percent of the share sales from large holders have been done via block trades or transfer agreements that have less impact on the market, he said. The regulator will soon announce an improved mechanism for investors to reduce big holdings, Deng added. Until this week, the government had been removing market- support measures imposed during last year’s equity rout, including resuming initial
public offerings in December. Policy makers have said freer markets are integral to their plans to make the country’s growth more sustainable. They’ve also worked to lure foreign investors to help professionalize a market where individual investors drive more than 80 percent of trading. Those efforts have been thwarted in part by state meddling. International investors have sold about 51 billion yuan (US$7.8 billion) of Shanghai shares through the city’s exchange link with Hong Kong since China first stepped up its intervention in early July, according to data compiled by Bloomberg. Investors withdrew HK$463 million (US$60 million) from the two largest exchange-traded funds that track mainland stocks
It’s quite costly for them to continuously intervene in the markets because it does not do a lot to instil trust that the prices are actually reflecting fundamentals Brian Jacobsen, chief portfolio strategist, Wells Fargo Advantage Funds
in Hong Kong in December, after taking out HK$5.4 billion during the previous month, data compiled by Bloomberg show.
High valuations
“The Chinese government took a real hit to their credibility when implementing bans like that because that’s not really rolling out the welcome mat to foreign investors,” said Brian Jacobsen, chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin. “It’s quite costly for them to continuously intervene in the markets because it does not do a lot to instil trust that the prices are actually reflecting fundamentals.” While the rescue measures put in place over the summer did help to calm the Chinese market -- volatility has fallen by more than half since the ban started and the Shanghai Composite Index has rebounded 12 percent from its August low -- they’ve also left valuations trading at some of the world’s highest levels. Even after the retreat on Monday, the median stock on mainland exchanges trades at about 65 times earnings -- more than three times higher than the median multiple of 18 for NYSE Composite Index companies. The Shanghai Composite, which has a heavy weighting in lowpriced bank and energy shares, is valued at 17 times. “International investors remain a bit sceptical of the A-share market,” said Andrew Gillan, the Singaporebased head of Asian equities excluding Japan at Henderson Global Investors, which oversees about US$124 billion. “It’s not trading on fundamentals.” Bloomberg News
Business Daily | 11
January 7, 2016
Asia
India set to extend central bank term for Rajan's lieutenant Other candidates were considered to replace Urjit Patel, government sources said, but the government did not want to risk disrupting the current direction of the bank Suvashree Choudhury and Manoj Kumar
I
ndia’s government is set to extend the term of the central banker behind monetary policy changes that have helped reduce the country’s chronically high inflation, signalling confidence in Governor Raghuram Rajan’s team at the Reserve Bank of India. Urjit Patel - the architect of a switch to formally target inflation, among other changes - is likely to stay on as a deputy governor when his three-year term ends next week, government and policymaker sources said. An announcement is expected within days. Patel, one of the RBI’s four deputy governors, has run the monetary policy department since 2013. He is viewed by officials within the bank as Rajan’s closest lieutenant. They share an expatriate background - Patel has a doctorate in economics from Yale University - and both worked at the International Monetary Fund, albeit at different times. Patel’s reappointment will raise market hopes that Rajan, will also be offered an extension when his tenure ends in September. Rajan, an academic and former chief economist at the IMF, has been one of the most influential governors
in the RBI’s 81-year old history, building a significant profile abroad as a voice for emerging markets. He was appointed by India’s previous, Congress-led, government, but has established a good working relationship with Prime Minister Narendra Modi’s administration, despite occasional disagreements over policy and the shape of some reforms. The inflation rate, which was in double digits when Rajan took the helm, has been virtually halved, though, like elsewhere, India has
benefited from slumping global oil prices. “The government clearly wants continuity in policy and if Dr. Patel is reappointed, then prima facie, it could indicate the government’s inclination to extend the governor’s term also,” said Abheek Barua, chief economist at HDFC Bank in New Delhi. Quiet, occasionally brusque and wary of media attention, Patel prefers to engage with only a small group he is comfortable with, besides the bank’s governor, officials say.
During his tenure, Patel spearheaded a committee that in January 2014 recommended targeting consumer inflation to control historically volatile prices, shifting the focus away from wholesale prices. The strategy was implemented by Rajan, with the government’s backing, in an overhaul of monetary policy that ranks as one of the most significant since India liberalised its economy in 1991. The same committee also recommended the creation of a panel to set interest rates, currently solely decided by the RBI governor, and spinning off the RBI’s management of government debt to an independent public agency - changes now being discussed by the government and the central bank. Other candidates were considered to replace Patel, government sources said, but the government did not want to risk disrupting the current direction of the bank, while also wanting retain a deputy with the intellectual clout to complement Rajan. “Many people want a person at the RBI who matches Rajan and could question his decisions whenever necessary,” said a senior government official with knowledge of the appointment process.
Australia new vehicle sales break records in 2015 Although sales of light commercial vehicles fell 7.1 percent in December this followed a very strong November
S
Toyota Motor Corp retained first place on the sales ladder in December
ales of new vehicles in Australia rose solidly in December to make 2015 a record-breaking year for the sector, a sign consumers are confident enough to splash out on bigticket items. The Australian Federal Chamber of Automotive Industries' VFACTS report yesterday showed total sales were 99,616 in December, up 2.9 percent on the same month of 2014. Both months had the same number of selling days. That brought vehicle sales
for 2015 to 1.16 million units, 1.7 percent higher than the previous record hit in 2013. Australians spend around A$20 billion on vehicles annually, equal to almost 9 percent of total household consumption. Australians continued their love affair with sports utility vehicles (SUV) where sales in December were 15.5 percent higher than the same month of 2014. SUVs now account for over 35 percent of the market. Those gains have come partly at the expense of passenger vehicles which
Reuters
dipped 1.9 percent in December. Sales of light commercial vehicles fell 7.1 percent but that followed a very strong November. Sales of heavy vehicles rose by 7.6 percent. The strength of commercial vehicle sales could be a harbinger of firmer business investment in the last few months. Toyota Motor Corp retained first place on the sales ladder in December with an increased market share of 21.3 percent. For all of 2015 its share slipped half a percentage point to 17.8 percent . Mazda Motor Corp held second spot in December with 9.7 percent, followed by the local Holden unit of General Motors Co at 9.2 percent. Mitsubishi jumped to fourth place with 7.5 percent, pipping Hyundai Motor Co at 7.2 percent. Ford trailed with 6.3 percent and the brand also suffered the biggest fall in market share for the year as a whole. Reuters
12 | Business Daily
January 7, 2016
Asia
South Korean economy seen to shrug off North’s nuclear test Domestic events have begun to have a greater sway over sentiment in Seoul than provocations from Kim Jong Un’s regime Jiyeun Lee and Cynthia Kim
A
s officials from South Korea’s finance ministry and central bank rushed into a strategy meeting to consider the implications of North Korea’s latest nuclear test, early indications suggest that Asia’s fourth-largest economy is likely to shrug it off. While the currency slid to a threemonth low and stocks dropped as much as 1 percent yesterday in Seoul, the immediate reaction from the Bank of Korea (BOK) was calm and assured. Foreign exchange official Park Jun Seo said the BOK stood ready to perform smoothing operations if trading became volatile and that risks from China’s slowdown and emerging markets remain the real issues, rather than events in North Korea. The South Korean economy, which is more than 40 times larger than that of its northern neighbour, has lived in the shadow of a nuclear threat for more than a decade and continued to thrive.
In fact, domestic events have begun to have a greater sway over sentiment in Seoul than provocations from Kim Jong Un’s regime. A ferry accident off the country’s southern coast and an outbreak of a deadly respiratory disease dealt bigger blows to economic activity in the past two years than missile tests and threats from Kim. “It’s very unlikely to become a major risk to the economy,” said Hong Jun Pyo, an economist for the Hyundai Research Institute in Seoul. “It could affect people’s sentiment, but not enough to hurt the financial market or the economy.”
Limited impact
Market reaction to previous nuclear tests has shown such events typically affect the currency for a few days and the same is expected this time, said the BOK’s Park. Still, a nuclear test adds weight to a host of other factors dragging down consumer sentiment in
an economy that’s seeing a slowdown in its strength in exports. And an interest-rate increase from the U.S. Federal Reserve adds to the risk of investors pulling funds out of emerging markets like South Korea. While capital outflow from the nation’s financial market is an unlikely scenario, gradual interest rate increases could put more pressure on marginal companies and households, Finance Minister nominee Yoo Il Ho said in a report to parliament Tuesday. More modest growth in China, South Korea’s biggest trading partner, also adds to economic concerns as exports slumped for 12 straight months in 2015.
Financial markets
The South Korean government will prepare steps to stabilize financial markets if necessary, Jeong Chan Woo, vice chairman at the Financial Services Commission, said at a
meeting of top government economic officials yesterday. The government will strengthen communication with the markets, he said. Meanwhile, the BOK said in a statement yesterday after a meeting to discuss North Korea’s impact that the central bank expects the event to have “limited negative impact” on South Korean financial markets. South Korean President Park Geun Hye said the nation must “sternly respond” with strong international sanctions against the North, as the test could shake the security landscape of the region. The share of South Koreans who view unification as necessary rose to 55.8 percent in 2014 from 54.8 percent a year earlier, according to a study by the Institute for Peace and Unification Studies at Seoul National University. The ratio declines to 43 percent among those aged 19 to 29. Bloomberg News
Barclays to cut Asia investment banking jobs next week The closure of the Korean and Taiwan businesses reflect Chief Executive Jes Staley’s desire to trim in countries where the bank’s corporate relationships are weaker to focus on core centres Anshuman Daga and Lawrence White
B
arclays will announce investment banking job cuts across Asia next week, including closures in South Korea and Taiwan, sources with direct knowledge of the matter told Reuters. The British bank’s latest cost cuts as part of its global restructuring will include corporate finance and advisory staff in South Korea and Taiwan, as well as equities sales and research staff among a total of at least 50 job losses throughout the region.
In common with other European lenders, Barclays is facing up to a harsh environment for investment banks in Asia after the region’s economies and markets failed to deliver sustained growth after the 2008 financial crisis. Reuters reported on Monday that Barclays will close its Indian equities business as part of the wider pullback in Asia. “We are constantly monitoring our opportunities in different geographies and businesses over the cycle. If
any firm decisions are made, we will provide an update,” a Hong Kong-based Barclays’ spokeswoman said in an email. The latest job losses will include staff from countries in which the bank’s business is not a leading player, the sources said, speaking on condition of anonymity given the sensitivity of the subject. The closure of the Korean and Taiwan businesses reflect Chief Executive Jes Staley’s desire to trim in countries where the bank’s corporate
relationships are weaker to focus on core centres, including Hong Kong, the sources added. One source said that Staley had told staff last month that the pace of restructuring had been too slow and the bank needed further job cuts. The bank has pushed back staff bonus payments to March, two people said. Barclays is not alone in reducing its exposure in the region, with Asiafocused Standard Chartered announcing a year ago that it would close the equities franchise it had launched in November 2008 and rival
Societe Generale saying more recently that it would close its equities research desk in India. Asia is expected to bear the brunt of cuts under Staley’s three-year cost-reduction plan, which involves shedding 19,000 jobs, or about 14 percent of Barclays’ global workforce, as he seeks to improve profitability. Barclays is also weighing up the sale of its Asian private wealth business, for which Singapore’s DBS Group Holdings and Julius Baer are seen as potential bidders, sources told Reuters last month. Reuters
editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Michael Armstrong, Stephanie Lai, Óscar Guijarro, Kam Leong, Joanne Kuai GROUP SENIOR ANALYST José I. Duarte Designer Francisco Cordeiro WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia Assistant to the publisher Lu Yang | lu.yang@projectasiacorp.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.
Business Daily is a product of De Ficção – Multimedia Projects Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 editor editor@macaubusinessdaily.com newsroom newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com
Business Daily | 13
January 7, 2016
Asia
Sri Lanka, Pakistan to include services in trade pact Political analysts say any move to liberalise service to Pakistan ahead of India could put a strain on relations between Sri Lanka and its big neighbour
S
ri Lanka and Pakistan have agreed to include services in a bilateral free trade agreement (FTA), Pakistani Prime Minister Nawaz Sharif said. India has been in discussion with Sri Lanka to liberalise the service sector under a trade pact for a Comprehensive Economic Partnership Agreement (CEPA) since early 2000. But Sri Lankan entrepreneurs have strongly opposed the such an agreement with India saying they would be at a disadvantage and could be forced out of businesses. “The two countries have agreed on the inclusion of services and investments chapters in the bilateral FTA,” Sharif, who is visiting Sri Lanka, said after overseeing the signing of eight bilateral agreements. They signed their FTA in 2005. The volume of trade between Sri Lanka and Pakistan has been estimated at about US$325 million a year. Sharif said both South Asian countries had agreed to re-invigorate efforts to reach a target of US$1 billion “at the earliest”.
This would enable our companies to form joint ventures for export to third countries Nawaz Sharif, Pakistan’s Prime Minister
Trade between Sri Lanka and India is an annual US$4.7 billion, but a CEPA could boost that much higher with Indian investment coming into Sri Lanka’s service sector, economists say. Successive Sri Lankan governments have rejected India’s request to sign a CEPA, but Sri Lankan Prime Minister Ranil Wickremesinghe last month promised to sign an economic and
After record year for M&As, privatisation to sustain Vietnam’s deals blitz Deal values in Vietnam last year were boosted by Thai tycoon Santi Bhirombhakdi-linked Singha Asia’s US$1.1 billion stake purchases Mai Nguyen and Saeed Azhar
F
oreign firms are set to capitalise on Vietnam’s privatisation drive and buy into assets such as Vinamilk and Mobifone to gain exposure to its fast-growing economy this year, boosting M&A deals that already hit a record US$4 billion in 2015. The deal-making flurry has been encouraged by a turnaround for Vietnam’s US$186 billion economy last year, which as recently as 2011 was fighting a 20-plus percent inflation rate and a banking sector saddled with bad debt. “With strong momentum in the Vietnamese economy and Vietnamese companies continuing to grow in scale, the opportunity for foreign companies to engage in sizeable transactions and partnerships has become increasingly attractive,” said Rehan Anwer, head of Frontier Markets, at Credit Suisse. Vietnam’s economy grew 6.68 percent in 2015, the fastest pace in
five years. By comparison, growth in the economies of most of its bigger Southeast Asian neighbours isn’t expected to be as robust, hurt by tumbling commodities prices and falling currencies. That dampened their merger and acquisition (M&A) volumes last year. Deal values in Vietnam last year were boosted by Thai tycoon Santi Bhirombhakdi-linked Singha Asia’s US$1.1 billion stake purchases in the consumer goods and beer units of the Masan Group. This year, the sale of an up to 45 percent government stake valued at US$3.1 billion in partly state-owned Vietnam Dairy Products JSC, or Vinamilk, is on the cards. Vinamilk and a finance ministry official were not immediately available to comment. Fraser and Neave, backed by Thai tycoon Charoen Sirivadhanabhakdi, which has an 11 percent stake in Vinamilk, and other strategic investors are
technology cooperation agreement with India and China. Political analysts say any move to liberalise service to Pakistan ahead of India could put a strain on relations between Sri Lanka and its big neighbour, which could have costs for Sri Lanka. “India is more important for Sri Lanka diplomatically and security wise than Pakistan,” said Terrene Purasinghe, senior lecturer in Political Science at the Sri Jayewardenepura University. Subashini Abeyasinghe, senior researcher at Verite Research, said she saw limited business opportunities for Sri Lanka and Pakistan because of political and security problems in Pakistan. “The current political security concerns makes Pakistan less attractive,” Abeyasinghe said. Many Indian and Pakistan companies such as India’s oil giant Indian Oil Corporation and Pakistan’s Thatta Cement Company have invested in Sri Lanka. Reuters
seen as potential bidders, bankers familiar with the situation said. F&N did not respond to requests for comment. Other deals likely to materialise in 2016 include a potential US$900 million sale of mobile network provider Mobifone and a partial privatisation of Binh Son Refining and Petrochemical Company (BSR), said a senior executive of an advisory firm with close links to the government. Mobifone said it does not have any information to share on the sale. A BSR spokesman said no final decision has been taken on the partial privatisation. Deals are also likely in the textiles, footwear, construction and machinery sectors as investors position themselves before Vietnam and 11 other countries implement the Trans Pacific Partnership (TPP) accord, which aims to liberalise commerce in 40 percent of the world’s economy. The government has thrown open several sectors for foreign investors, as a long-waited rule kicked in last year allowing foreigners to own up to 100 percent in Vietnamese listed firms, except for some sectors such as property and transportation. In banks, the government has promised to raise the 30 percent maximum limit. Investors do see risks associated with the market. A key one is a five-yearly congress of the secretive Communist Party which takes place this month, causing uncertainty about the kind of leadership that will emerge from it, though experts say the reform momentum will be unaffected. “Expect hiccups along the way. After all, this is a frontier market,” said Orsen Karnburisudthi, Bangkok-based senior investment manager at Aberdeen Asset. Reuters
South Korea’s FDI pledges hit record South Korea received a record high US$20.9 billion in pledges of foreign direct investment (FDI) during 2015, government data showed yesterday, on surging interest from the United States, China and the Middle East. The total was 10 percent higher than the record set in 2014, when the FDI pledges stood at US$19.0 billion, according to data from the Ministry of Trade, Industry and Energy. Service sector businesses were the top attraction, according to the ministry, with foreigners pledging US$14.7 billion in 2015, up 31.7 percent from a year earlier.
AirAsia sets up funding programme to shore up finances Asia’s largest budget airline, AirAsia, has set up a US$1-billion financing plan through a multicurrency medium-term note programme, months after it faced calls to shore up its financing in tough operating conditions. In a statement to Bursa Malaysia yesterday, AirAsia said the funds would be used for purposes ranging from working capital to debt refinancing and financing the equity portion of its aircraft. The funding move comes after AirAsia said in November that major shareholders were evaluating “all strategic options” following a Reuters report that the airline’s chief executive was seeking investors to take it private.
Thailand sees record high tourist arrivals Thai international tourist arrivals in 2016 are expected to hit a record high of 32 million compared with an estimated 29.88 million last year, the tourism and sports minister said yesterday. “Actually, 32 million is just a calculation. We do not put that as a target because we are now emphasising only on the revenue,” Kobkarn Wattanavrangkul told Reuters.
Samsung to expand mobile payments to new countries South Korean technology giant said yesterday it will launch its mobile payments service in three additional countries, as well as introducing the system on its Gear S2 smartwatches. Samsung, through an official Twitter account, said Samsung Pay is “coming soon” to Australia, Brazil and Singapore. The service launched last year in South Korea and the United States with plans to enter other markets including China, Spain and Britain. Samsung is hoping the payments service will set its phones apart from competing devices, helping the firm protect market share against rivals including Apple and Huawei.
Thai-Lao border checkpoint to be upgraded Thailand is suggested to upgrade a temporary Thai-Lao border checkpoint in Nakorn Panom province through which fruits can be transported on land to southern China. Charnyudh Upapong, head of the provincial chamber of commerce, said yesterday the volume of varied Thai fruits, currently exported to southern China, will likely increase if the temporary border checkpoint is upgraded as a permanent trading spot in near future. Thailand and Laos are part of the newly-established ASEAN Economic Community where regional trade and investment as well as cross-border tourism are planned to expand.
14 | Business Daily
January 7, 2016
International U.K. services cool in December A U.K. services gauge eased in December as risks including a British exit from the European Union weighed on hiring and business expectations fell to a three-year low. The purchasing-managers’ index published by Markit Economics yesterday fell to 55.5 from 55.9 in November. Economists in a Bloomberg survey had forecast a reading of 55.6. Markit said the report together with its latest surveys of manufacturing and construction indicates the economy grew 0.5 percent in the final quarter of the year, down from the 0.6 percent it estimated last month.
U.S. auto sales in 2015 set record Automakers set a new U.S. sales record for 2015 even as December sales fell short of expectations, and most forecasters said sales should rise to another record this year. For full year 2015, U.S. sales hit a record of 17.47 million vehicles, breaking the mark of 17.41 million vehicles in 2000, according to Autodata Corp. Low gasoline prices, easy credit and moderate economic growth boosted the industry. WardsAuto, which provides data used by the U.S. government for economic analysis, said 2015 sales set a record at 17.39 million vehicles sold, breaking the 2000 mark of 17.35 million.
Apple expected to cut production Apple Inc is expected to cut production of its latest iPhone models by about 30 percent in the January-March quarter due to mounting inventories, the Nikkei reported, rattling the nerves of investors in the U.S. giant’s Asian suppliers. As inventories of the iPhone 6s and 6s Plus have piled up since they were launched last September, production will be scaled back to let dealers go through their current stock, the business daily reported. The report prompted a 2.5 percent drop in Apple shares, which have lost about a quarter of their value from record highs in April.
Puerto Rico shows more evidence of default Infrastructure authority (PRIFA) did not transfer funds to its bond trustee to pay debt due January 1 on certain bonds, according to regulatory filings on Tuesday, further confirmation of a default by the U.S. territory. The island said last week that it would pay the bulk of US$1 billion debt due January 1, but some bond issues would not be met. The debt due was postponed to January 4 due to the holiday. The trustee for PRIFA’s series 2005 B and 2006 bonds said it did not receive sufficient funds from PRIFA for the payment of debt.
JPMorgan names Virtu Financial as its NYSE market maker JPMorgan Chase & Co said it appointed Virtu Financial Inc as its market maker on the floor of the New York Stock Exchange. The bank replaced KCG Holdings Inc partly due to poor performance during the August 24 market mayhem, the Wall Street Journal, which first reported the news, said citing people familiar with the matter. A KCG spokesperson confirmed the news, while Virtu was not immediately available for comment.
Saudi to save US$7 billion from energy reforms The contribution of oil income to revenues dropped to just 73 percent in 2015
S
audi Arabia is expected to save US$7 billion a year after it introduced unprecedented energy price rises in a bid to offset the low cost of oil, a report said yesterday. Jadwa Investment said direct savings from the kingdom’s price hike on diesel are estimated at US$2.75 billion (2.56 billion euros), and gasoline levies are expected to save an additional US$2.5 billion. The rest of the savings will come from price rises on natural gas, fuel oil and propane, it added. The total cost of energy subsidies in the world’s top oil exporter was estimated at US$61 billion last year. Indirect costs include the impact on the environment, road accidents and overconsumption because of cheap prices. Saudi Arabia posted a record budget deficit of US$98 billion in 2015, 15 percent of GDP, and is projecting a shortfall of US$87 billion this year. It posted an US$18 billion deficit in 2014. Last month, the OPEC heavyweight raised the price of gasoline, diesel, crude oil, ethane, natural gas, fuel oil and electricity by up to 80 percent.
The Fitch ratings agency said yesterday that Saudi Arabia’s 2016 budget contained significant reforms and followed key expenditure restraints during the second half of 2015. “The lower-than-expected 2015 deficit mainly reflects measures to contain spending introduced during the year -- including greater scrutiny” of capital spending, Fitch said. The International Monetary Fund and other agencies had forecast the Saudi budget deficit last year to be as much as US$130 billion. Saudi Arabia normally overspends its budget projections. Fitch said last
Saudi Arabia posted a record budget deficit of US$98 billion in 2015
year saw the lowest overspend since 1999 at just 13.4 percent, compared with a 10-year average of 24 percent. “Without the one-off cost of royal decrees after the accession of King Salman and additional military and security spending... spending would have been almost on budget,” the agency said. Revenues in 2015 dropped to US$162 billion, the lowest since the global financial crisis in 2009, due to a massive US$123 billion fall in oil revenues. The contribution of oil income to revenues dropped to just 73 percent in 2015, from an average of 90 percent in the past decade. To finance the budget, the Saudi government withdrew from its huge fiscal reserves and issued bonds on the domestic market. Reserves dropped from US$732 billion at the end of 2014 to US$632 billion in November. The kingdom is estimated to have issued domestic bonds worth around US$30 billion since July, raising public debt to US$38 billion, or 5.8 percent of GDP, Jadwa said. AFP
Wall St. watchdog homes in on highfrequency trades to combat spoofing In the newer, more sophisticated type of spoofing, the traders then use yet another firm to buy or sell the security at issue after they have successfully tricked the market Suzanne Barlyn and Ankit Ajmera
Wall Street’s industry-funded watchdog is ramping up its scrutiny of high-frequency trading firms as efforts to manipulate U.S. markets through the technology grow more sophisticated, the regulator’s chief said on Tuesday. The Financial Industry Regulatory Authority (FINRA) will examine how well high-frequency trading firms are protecting their systems from unscrupulous traders who are trying to manipulate markets, according to a list of its 2016 examination priorities for Wall Street firms, published on Tuesday. High-frequency trading is an automated strategy that can move billions of dollars worth of trades in a fraction of a second. FINRA’s heightened focus on controls in place at high-frequency trading firms coincides with the growing prevalence of a new and more complex form of spoofing, a type of manipulation that involves faking orders for a security to deceive the market by creating the illusion of demand, said Richard Ketchum, FINRA’s chairman and chief executive, in an interview. The regulator is observing more
instances in which traders are using multiple firms to place those orders, Ketchum said. The strategy can make the conduct trickier to track. Spoofing occurs when traders place orders in markets without intending to execute them. The traders immediately cancel the orders, but other market participants mistakenly believe the price of the security has moved. In the newer, more sophisticated type of spoofing, the traders then use yet another firm to buy or sell the security at issue after they have successfully tricked the market, Ketchum said, which allows the traders to attain their target price. The watchdog said it would also examine the “firm culture” at Wall Street brokerages. FINRA is concerned about how brokerages take actions to promote fair and ethical treatment of customers and help mitigate conflicts of interest, the watchdog said in its “2016 examination of U.S. brokerages.” The regulator said it would mainly assess five indicators of a firm’s culture and the role they play in the way brokerages conduct business.
The indicators include the handling of policy or control breaches and of departments or trading desks that might not conform to the corporate culture, and the role of senior executives in a firm’s culture. To that end, the regulator wants to understand how each firm’s culture affects compliance and risk management practices. FINRA also said it would look at the risks shouldered by trading firms who act as middlemen between exchange-traded fund issuers and public financial markets. The regulator said it plans to make sure those short-term institutional investors - known formally as authorized participants - are properly measuring and monitoring the risk that they might not be able to instantly redeem ETFs for the stocks, bonds or other securities held by the fund. Such authorized participants are essential to ETFs because ordinary investors cannot directly redeem ETFs with fund issuers. FINRA routinely examines the industry’s more than 4,100 securities firms to gauge their compliance with securities industry rules. Reuters
Business Daily | 15
January 7, 2016
Opinion Business
wires
Leading reports from Asia’s best business newspapers
Stock-market-by-diktat not working for China
VIETNAM NEWS
James Saft
The whopping rise in trade deficit that Viet Nam ran up with China last year has reiterated its alarming dependence on imports of a wide range of products from there. Updates from the General Statistics Office (GSO) revealed that Viet Nam ran up an estimated trade deficit of US$32.3 billion in 2015, soaring up by as much as 12.5 per cent against the previous year. The massive rise in imports from China were in a wide range of products such as equipment, metals, automobile components and garment raw materials.
Reuters columnist
THE PHNOM PENH POST Starting yesterday, Kingtel, a new internet and telecom service provider, will offer internet services to customers, with the company expected to launch call services within the next few months. The newly established Kingtel Communications Limited is wholly owned by Hong Kong-based KeyBridge International (Hong Kong) Investment, which has put in a capital investment of more than US$140 million, according to Un Chanboran, sales and marketing director at Kingtel. KeyBridge, which in 2014 bought 65 per cent of internet service provider Emaxx and now completely owns the company.
THE KOREA HERALD Korea Credit Information Services, a pan-industry body tasked with data preservation and protection, was launched in Seoul on Tuesday amid mounting calls for data security after a series of large-scale information leaks. The new entity will act as a centralized data centre for personal credit information, taking over data collected and preserved by five different organizations across banking, credit card and insurance. It also seeks to take a consistent and comprehensive approach to data security and usage as big data gains traction as a key tool in developing financial services and products.
THE STAR Petron Corp sees huge potential for the lubricant business in Malaysia. The company is the Philippines’ largest oil refining and marketing company. Head of commercial business Choong Kum Choy said Petron’s lubricant business got off to a great start by churning out a profit in the first year of operation in Malaysia in 2012. “In fact, our lubricant business expanded by eight per cent in the first nine months of last year compared to the same period of 2014,” he told Bernama during his recent visit to the national news agency’s headquarters here.
T
he whole stock-market-bydiktat thing is not working out so well for China, or for the rest of the global economy. China suspended stock trading nationwide on Monday after a 7 percent loss in the benchmark index of Shanghai and Shenzhen shares triggered a newly implemented circuit-breaker. Losses spread globally, sending the Dow Jones industrial average down 1.58 percent. At midday the index was down 2.4 percent, which, if sustained to the close, would have been its worst opening day of January since 1932. The drop wasn’t so much driven by news that China’s economy was faring worse than expected, courtesy of a disappointing survey of manufacturers, but instead fear that investors might actually get to put what they already know about China into practice. China, you see, has spent the past six months furiously suppressing the price-discovery mechanism of its stock market, bullying, intimidating and sometimes arresting those it thinks contributed to embarrassing losses last summer and implementing concrete measures to stifle selling and support prices. One of those measures, a sixmonth moratorium on sales by institutions which hold more than 5 percent of a stock as well as by corporate executives and directors, is due to expire January 8. So it wasn’t news that China is slowing - we already knew its smoke-stack economy has been hard hit - it was the prospect
of this knowledge being made just a bit more manifest through stock prices which caused the falls. The China Securities Regulatory Commission has not said if its July 8 edict will be allowed to expire, but based on its track record, and Monday’s share trading, it will very likely live on in spirit, either as a prohibition, or through other measures with the same aim. China’s attempts to micromanage its share markets are both self-defeating and bad for the rest of the global economy. Self-defeating because they send an unambiguous signal: stay away if you have a choice. Foreign investors are reluctant to buy into something that may later prove difficult to sell, especially if the government is seen as the risk that may pose that difficulty. So while China may have felt compelled to stop the losses last year, its measures to repress price discovery will tend ultimately to drive prices down rather than up. Investors, quite reasonably, want better compensation for the risk that they’ll not be able to get their money back easily or quickly. In order to be able to ultimately row back from its tactics, China depends on the macro environment for Chinese stocks to improve, something which may not happen for the broad market for some time.
Here today, yuan tomorrow? As Monday’s trading demonstrates, all of this isn’t simply a problem for China. The stock market of the world’s
In order to be able to ultimately row back from its tactics, China depends on the macro environment for Chinese stocks to improve, something which may not happen for the broad market for some time
second-largest economy, even if tightly controlled, is going to have a substantial impact on the rest of the world. Even if the information content of Chinese stock prices is diluted by official control, volatility, which is one likely output of price suppression, will have an impact elsewhere. None of this is to say that the rest of the world should have no worries about China other than how it manages its capital markets. Growth is clearly
slowing, and while long term the change will be a very good thing, an on-going transition to a consumer-oriented economy is going to pose problems for a world dependent on Chinese demand for raw materials. China’s yuan hit its lowest levels against the dollar on currency markets since May of 2011, carrying on a slide in both mainland and offshore markets. China has good reason to want a weaker yuan, whose value it tightly controls. A less valuable currency will be good for exports, though it may increase the pent-up desire of Chinese holders of yuan to move money offshore. At the same time, a cheaper yuan makes it that much tougher for other economies, not only in terms of competing with China but also in that it sends a further and powerful deflationary force into a global economy still suffering from too little inflation. China is suffering a substantial outward flow of capital as its people try to move money offshore, both because they may fear further yuan depreciation but also as anticorruption crackdowns make the idea of having assets beyond the reach of authorities attractive. China’s central bank and its commercial banks sold a net US$337 billion of foreign exchange between January and November, indicating large amounts of capital moving out. China is unlikely to suddenly see the virtues of price discovery, which means the rest of the world will have to live with the resulting risks. Reuters
16 | Business Daily
January 7, 2016
Closing Yangtze river sees increased cargo
China state planner approves high-speed rail projects
About 2.18 billion tons of cargo was shipped through the main reaches of the Yangtze River in 2015, about 120 million tons more than the figure from last year, local authorities said yesterday. Tang Guanjun, director of the Yangtze River Administration of Navigational Affairs, under the Ministry of Transport, said the growth is a result of continued effort to improve navigation, shipment structure and upgrade ports along the water. There are about 12 ports with the ability to handle more than 100 million tons of cargo along the Yangtze.
Top economic planner has yesterday approved two high-speed railway projects with a total value of 34.6 billion yuan (US$5.28 billion), a move to hasten infrastructure projects to boost economic growth. One project is a 197-km rail link between northeastern Liaoning province and northern Inner Mongolia, and the other involves an investment of 17.02 billion yuan (US$2.6 billion) in a separate rail link between different cities in the two regions, the National Development and Reform Commission (NDRC) said on its website.
Yuan sinks to five-year low as PBOC surprises with weaker fixing The offshore yuan dropped beyond 6.70 per dollar for the first time since September 2010
T
he yuan sank to a fiveyear low after China’s central bank set the currency’s reference rate at an unexpectedly weak level, a sign that policy makers are becoming more tolerant of depreciation as intervention costs rise and economic growth slows. The People’s Bank of China cut its daily fixing to the lowest level since April 2011, weaker than Tuesday’s onshore closing level. The currency tumbled 1.1 percent in Hong Kong’s freely traded market -- the most since the day after a surprise devaluation in August -- and lost 0.6 percent in Shanghai as both exchange rates slumped to their weakest levels since at least March 2011. The gap between the two widened to a record. While China’s defence of the yuan stabilized the yuan for almost four months following the August 11 devaluation, the intervention led to the first-ever annual decline in the nation’s foreign-exchange reserves. Official support for the currency has been more sporadic since the start of
December as the weakest economic expansion in a quarter century and rising U.S. interest rates fuelled capital outflows. The central bank intervened in the currency market on Tuesday to prevent excessive volatility, said a person with direct knowledge of the matter. A few major Chinese banks sold U.S. currency when the onshore yuan dropped to around 6.5460 per dollar yesterday, but the offerings weren’t stable or constant, according to traders who asked not to be named. The offshore yuan dropped beyond 6.70 per dollar for the
Hong Kong company closures hit record
first time since September 2010, about two months after trading was first permitted in Hong Kong. The Hong Kong rate’s discount to the domestic level widened to a record 2.5 percent, after spreads of up to 1.8 percent triggered suspected PBOC intervention in the offshore market last week. The central bank’s August devaluation, which sparked a rout in emerging-market currencies and stocks, was accompanied by a revamp of its methodology for setting the yuan’s daily fixing to give market forces greater sway. While allowing depreciation may help the Chinese
This isn’t good for the rest of the world… Until China stops weakening the yuan, global markets will struggle to stabilize Koichi Kurose, chief market strategist, Resona Bank
economy, it risks spooking global markets, according to Japan’s Resona Bank Ltd.
Global impact
Yuan swings tend to impact currencies and export prospects across Asia, with China being the biggest trading partner of economies including South Korea and
China may allow car dealers to sell multiple brands
A
Taiwan. The BloombergJPMorgan Asia Dollar Index -- which tracks the region’s 10 most-used currencies excluding the yen -- reversed a daily gain immediately after the PBOC announced the cut to its yuan fixing and fell as much as 0.4 percent. The yuan has “limited” room for further depreciation as slumping energy prices will help boost the currentaccount surplus in China, the world’s second-largest importer of oil, and offset capital outflows, according to Goldman Sachs Group Inc. Low crude prices may prop up the excess to about US$360 billion this year, a level last seen before the global financial crisis, analysts led by Robin Brooks wrote in a report on Tuesday. A relatively strong export market compared to other developing nations also suggests the exchange rate is fairly valued, they said. Authorities said in August they would use factors including the last closing level and movements in major currencies when setting the reference rate. Bloomberg News
Beijing to step up free trade talks in 2016
A
C
record number of Hong Kong firms shut up shop last year as China, the mainstay of the city’s economy, trundled to its slowest economic growth in a quarter of a century and spending by mainland visitors dried up. Some 122,479 companies were dissolved, according to data from the city’s Companies Registry compiled by financial research platform Webb-site.com. New firms incorporated in Hong Kong also slid 17 percent, leaving the net number of new firms at a low since 2003’s SARS outbreak slammed the city’s economy. The numbers show just how tightly Hong Kong’s business prospects remain tied to mainland China, despite its aspirations as a global financial centre. Bleak as last year was, the problem for the city’s entrepreneurs is that China’s growth may keep slowing. Hong Kong’s experience with SARS showed the city’s resilience - while thousands more firms were closed in 2003 than were started, the city was back in business with a net 21,605 new firms just a year later. But China’s health problems may leave a deeper scar.
uthorities are considering broadly easing producer-imposed restrictions on auto dealers, potentially allowing a single dealership to sell rival brands, a move that could boost car retailers’ competitiveness as the country’s economy slows. Auto manufacturers could no longer forbid their dealers from selling cars from rival brands, according to the draft rules the Ministry of Commerce posted on its website yesterday for public comment. Under the proposed rules, dealers would have to tell their customers if they haven’t obtained permission from manufacturers to sell a certain brand of cars. The new rules would offer dealers increased protections and flexibility to operate at a time when China’s slowing economy has forced many dealers to discount heavily, even to the point of selling new cars at a loss, to stay competitive. “The dealers are the first to cry,” a manager for one of Volkswagen AG’s China ventures told Reuters last year when sales were declining. China’s auto market is expected to have grown 3 percent in 2015.
hina will pursue more free trade agreements (FTAs) this year, an official said yesterday. Speaking at a regular press conference, Ministry of Commerce Spokesperson Shen Danyang said China aims to conclude Regional Comprehensive Economic Partnership (RCEP) talks this year. The RCEP talks involved 10 ASEAN member states and six dialogue partners - China, Japan, the Republic of Korea, Australia, New Zealand and India. Negotiators have reached a consensus on key points in goods and service trade and investment. “China will improve communication and cooperation with other parties to conclude the talks, which are important to market access, industrial cooperation and economic outlook,” Shen said. Shen said China also expects the ChinaSingapore FTA upgrade to complete this year, and is eyeing breakthroughs in negotiations with Japan and the Republic of Korea, as well as talks with Sri Lanka, Maldives and Pakistan. China has signed and implemented 14 FTAs covering 22 countries and regions.
Reuters
Reuters
Xinhua