Macau Business Daily January 8, 2016

MOP 6.00 Closing editor: Joanne Kuai

MIA passenger volume reached a new record of 5.8 million in 2015

Efforts to stabilize the yuan impact on FX reserves Page 16

Year IV

Number 957 Friday January 8, 2016

Publisher: Paulo A. Azevedo

Page 6

RMB deposits in Hong Kong under pressure Page 9

Marketing professionals in demand at all levels

Demands for skilled marketing professionals in all levels is expected to be high in 2016 across all industries, said a local recruitment agency. Links Recruitment Consultants (Macau) Ltd. also indicated that the demand for ‘local Macau residents’ is at an all-time high and bureaucratic process for hiring non-locals could be ‘streamlined’. In order to curb labour turnover, it suggests the employers to advocate not only salaries and benefits but also development opportunities such as training programmes for employees to see a career path and a vision of the business Page

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Bearish on CNY sales Jewellery retailers say the fall trend seen in jewellery sales last year will persist all the way through the upcoming Chinese New Year holiday in February, and more shop consolidations or a halt of retail expansion are likely to happen under the bearish outlook on sales

Page 2

www.macaubusinessdaily.com

Silver lining

The reclamation project for Zone A has missed the completion deadline originally set for the end of last year because of a disruption in sand supply, due to the immersed tube tunnel construction of the Hong Kong-Zhuhai-Macau Bridge.

The city's Infrastructure Development Office has pledged that it would strive to push for the completion of the project soon

Page 3

Macau Property Opportunities Fund Ltd (MPO), managed by property investment company Sniper Capital, saw the local government’s policy on the issue of leasehold concessions expiry would not bring downside effects to its invested properties but benefits. They predict home buyers are likely to shift their focus to completed properties in the market, in a time the market is experiencing a decline in housing supply and uncertainty over some projects under construction

Page 4

In less than half an hour Chinese markets have collapsed under 7 per cent, triggering the circuit breaker mechanism for second time this week.

Uncertainty about global economy and a currency decline are reinforcing the selloff

Pages 8&9

Retail

Sands of time

Short circuit

Brought to you by

HSI - Movers January 7

Name

%Day

Cheung Kong Property

+0.32

Li & Fung Ltd

+0.21

Hong Kong & China Gas

-0.27

Sun Hung Kai Propertie

-0.49

Power Assets Holdings

-0.72

China Resources Beer H

-6.36

PetroChina Co Ltd

-6.56

Galaxy Entertainment

-6.65

China Petroleum & Che

-7.17

Sands China Ltd

-7.27

Source: Bloomberg

I SSN 2226-8294

2016-1-8

2016-1-9

2016-1-10

15˚ 22˚

16˚ 22˚

17˚ 21˚

2 | Business Daily

January 8, 2016

Macau

Jewellery retailers bearish on sales for CNY holiday Retailers Chow Sang Sang and Seng Fung both reckon the fall trend in jewellery sales seen in 2015 will last until the upcoming holiday Stephanie Lai

sw.lai@macaubusinessdaily.com

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he fall trend seen in jewellery sales last year will persist all the way through the upcoming Chinese New Year holiday in February, and more shop consolidations or a halt of retail expansion are likely to happen under the bearish outlook on

sales, said jewellery retailers.

Mr Lau Hak Bun, general manager of retail operations (Greater China) at the jewellery retailer Chow Sang Sang Holdings International Ltd, told media yesterday after attending a Hong Kong radio programme of

his bearish forecast for sales for the coming Chinese New Year holiday, with a likely register of “single-digit” drop in sales for Hong Kong and Macau.

The Chinese New Year holiday this year will fall on the second week of February.

Speaking to media, Mr Lau has noted that sales during Christmas have failed to stimulate overall sales for Chow Sang Sang, which has already seen a fall trend since the first half of 2015. Chow Sang Sang saw its same store sales in Hong Kong and Macau decline by 12 percent year-on-year for the first half of last year as the consumption sentiment from mainland Chinese clients weakened and the unit selling price of the company’s jewellery items decreased, Mr Lau said.

The gaining strength of the US dollar and the depreciation of Southeast Asian currencies will also affect visitors’ high-end spendings in Hong Kong this year, the jewellery retailer executive expected.

Lee Koi Ian, general manager at local jewellery retailer Seng Fung Jewellery Co Ltd, shared a similar sales outlook with Mr Lau. “The recent drop in gold prices has not really stimulated much of our

sales,” Mr Lee told Business Daily, “Since last year, the sales of jewellery has weakened a lot as we have seen much less gift hunting [from mainland Chinese shoppers] and spending from gamblers.”

Declining to give a full sales figure for last year, Mr Lee said Seng Fung has suffered a “double-digit” drop in its turnover for the whole year.

“Visitors’ traffic did improve a bit during the Christmas holiday, but still on a year-on-year basis, we saw our sales register a single-digit drop,” Mr Lee said.

For the first three quarters of 2015, notable decline is seen in the sales of watches and jewellery here: the value of the retail sales of watches and jewellery has dropped by 26.1 percent year-on-year to MOP10.15 billion in the period, latest available data from Statistics and Census Service (DSEC) shows.

Cautious outlook

In response to the weaker sales performance, both Chow Sang Sang and Seng Fung said that they are not going to offer steep discounts for the promotion of sales of their products.

“But we’ll be more cautious in our shop expansion plan,” Mr Lee said, “In the coming one or two years, we don’t think we are having more shops in casinos.”

Currently Seng Fung runs eight shops across Macau, mostly on streets.

In Chow Sang Sang’s interim report filed in September last year, the retailer has already mentioned that one street-level shop in Macau was closed at the expiry of its lease. Now Chow Sang Sang runs four shops in Macau, of which three are in casinoresorts.

The Hong Kong-listed jewellery retailer does not rule out more shop consolidation or even closures to happen, Mr Lau noted to media yesterday. Chow Sang Sang has already closed two stores last year, one in Causeway Bay and another in Kwai Fong.

Business Daily | 3

January 8, 2016

Macau HK-Zhuhai-Macau Bridge to blame for Zone A reclamation delay

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Sand supply for the reclamation of Zone A has been disrupted by work on the immersed tube tunnel for the superbridge, government says

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he city's Infrastructure Development Office (GDI) said it would strive to push the completion for the delayed reclamation project for new urban Zone A, which has previously seen sand supply disrupted due to the immersed tube tunnel construction of the Hong Kong-Zhuhai-Macau Bridge.

The reclamation project for Zone A has missed the completion deadline originally set for the end of last year because of a disruption in sand supply, an issue that has to do with the on-going construction of the superbridge project, GDI explained to media in a statement published on Wednesday night.

“All the sand mining works in th e u p s tr ea m a r ea o f th e construction of Hong KongZhuhai-Macau Bridge has been suspended because of the works for the immersed tube tunnel of the bridge,” said GDI, “And that has also affected the source area for the sand supply to Zone A.” The sand supply for Zone A reclamation has been disrupted since February last year, but the supply is now finally resumed, according to the office.

Upon Business Daily's enquiry, GDI did not give a specific estimate for the completion timeframe for the reclamation of Zone A; but the office has pledged that it would strive

Mainland transactions boost Centaline's 2015 revenue

to push for the completion of the project soon.

A dispatch published in the Official Gazette in late December has shown that the reclamation contract has been extended from 2015 to 2017.

The contract cost the government MOP1.88 billion (US$235 million).

Of the five new urban zones to be reclaimed for Macau, totalling 350 hectares, Zone A is the biggest plot with 138 hectares designed to accommodate 28,000 public housing units and 4,000 private flats. The zone, which is across the waters of Areia Preta, will also be joined to the artificial island of Hong KongZhuhai-Macau Bridge.

S.L.

eal estate broker Centaline Group, which operates in Mainland China, Hong Kong and Macau, saw its commission revenue grow by 30 per cent yearon-year to 15.2 billion yuan (HK$18 billion) in 2015, of which 75 per cent or 11.4 billion yuan is derived from the commissions earned in Mainland, the company told in a briefing held in Shenzhen.

The commission revenue earned in Mainland China last year was up by 52 percent.

The group, which is seeking to be listed on the Hong Kong bourse, has registered a property transaction value at a total of 920.5 billion yuan for 2015, which is up by 42 per cent.

Nearly 79 per cent of this value comes from property transactions conducted in Mainland, according to Centaline.

The revenue figures include the transactions completed by estate broker Ricacorp, which is also a member of the Centaline Group.

4 | Business Daily

January 8, 2016

Macau opinion

Hopes for 2016

Pedro Cortés

Lawyer* cortes@macau.ctm.net

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es, we are now officially in the second half of the second decade of the XXI century. In the seventeenth year of the Macau Special Administrative Region and with more than one year of downturn in the gaming industry, what we shall expect of 2016?

In my view it will be the year where the gaming revenues will rebound and we may have not the same levels as before but at least more than the previous years.

The gaming industry is great in adapting to new scenarios. And the new scenario is that mass market will captain the industry.

We can then speak with authority: Macau is now X times Nevada State, as until now we were comparing two different realities.

Aligned with mass market, we hope that the true diversification takes off. The leaders speak, speak, make declarations of love to the diversification, but then the entrepreneurs still suffer with the Human Resources Office cutting quotas or not authorizing qualified resources to come to Macau and help the companies to create wealth.

It will finally be the year that we will see more developments in the light railway. The traffic in Macau is currently in the correct path of chaos. People suffer that on a daily basis. Hopefully, we can see the Sai Van Bridge without the motorcycle way. It is also expected that the sale of cars would fall, as the tax finally increased. In addition, the speculation over car park prices can cool down. I wish that measures to have Macau as an electric car friendly place can be input.

The free trade agreement between Macau and Hong Kong is allegedly ongoing and might be finalized. That will help both Special Administrative Regions’ companies in such a way that their integration will be a fact.

Hengqin Island will continue to be developed and demonstrate that the diversification with sustainable economy is possible.

The unemployment rate will continue to be as low as it is now and full employment a reality.

We also hope that the politicians with one more year of experience, suggest better laws that are in line with the good international standards and do not make Macau go back in time in certain areas.

Fortunately, we have people with good sense in the Legislative Assembly and in the Government to stop some intentions of putting Macau in the Middle Age or Dark Age of legislative evolution.

Measures to make our breathable air proper must be in place or, otherwise, we may have people leaving this amazing city, as they do not want their kids in this insalubrious area. I want to continue seeing Taipa from my place everyday and do not want to have people producing bricks from air inhaled by a vacuum.

As a matter of fact, what we all want is to have people happy and prepared for the challenging future ahead. Let’s work today for a better future tomorrow. Macau and its people deserve it.

MPO Fund sees opportunities from land leasehold concession issues The Sniper Capital managed fund said in a latest report that the government's recent decision on land leasehold concession will drive more home buyers to buy completed properties Kam Leong

kamleong@macaubusinessdaily.com

M

acau Property Opportunities Fund Ltd (MPO), managed by property investment company Sniper Capital, thought the local government's policy on the issue of leasehold concessions’ expiry would not bring negative effects to its invested properties but benefits, despite the fact that the policy may decrease the city's housing supplies.

'It is worth noting that the issues relating to the expiry of land concessions will not affect MPO's properties and they could in fact benefit MPO. As the market experiences a decline in housing supply and uncertainty over some projects under construction, home buyers are likely to shift their focus to completed properties in the market,' the Fund said in its latest investor report.

Recently, the local government stressed that it would retake any land plot with temporary concessions if the plot fails to be developed by its developer before the temporary concession, which carries a 25-year term expires.

Meanwhile, the investment fund said it had observed a decline of some 20 per cent in housing prices for second-hand residential units during the second half of last year.

'We have observed a decline in the average residential prices by 20 per

cent for the secondary market in the second half of 2015 and sellers are more pragmatic these days, aligning their asking prices with transacted prices,' it reported.

In addition, the Fund perceives the decreased number in housing transactions last year is due to 'the lack of new launches, coupled with government policies such as new Presale law, Special Stamp Duty and Double Stamp Duty, as well as the uncertain outlook for the gaming industry.'

'Looking ahead, we anticipate housing prices and rental rates to stabilise in tandem with gaming revenues. This is expected at some stage during 2016. Demand is likely to be supported by the cash-rich domestic market, especially the middle-income group, for mass market projects that are in well-established locations and near amenities,' the Fund forecasts.

The Projects

On the other hand, the Fund mentioned in the report that the occupancy rate at The Waterside had recovered slightly in the final quarter of 2015, reaching 39 per cent, following six quarters of decline.

The Waterside is the Tower Six of high-end residential project - One Central Residences on the Macau Peninsula.

According to the report, average monthly rents at The Waterside had dropped by 16 per cent to HK$22.95 (US$2.9) per square foot in the previous three months compared to third quarter of 2015.

The Fund claimed that the decrease in rents is due to some six new leases being negotiated at lower rental levels.

For another project on the Penha Hill - The Fountainside - the Fund said a total of 27 of 42 units had already been sold. The sold units had brought the Fund a total income of HK$202.6 million. Moreover, the Fund also generated some HK$21.9 million from the sale of parking lots at the project.

MPO bought the project in October 2006 for HK$62 million (US$8 million) and invested another HK$116 in redeveloping it.

'The current market downturn has made it a challenging environment in which to sell units.

While we are in discussions with a number of interested buyers, they are adopting a wait-andsee approach before committing to a new purchase,' it remarked.

Nevertheless, MPO anticipates the demand for parking lots at the project will remain strong 'as there is no cap on the number of motor vehicles allowed in Macau.'

Business Daily | 5

January 8, 2016

Macau

Headhunter: demand for marketing professionals in all levels to be high The demand for ‘local Macau residents’ is at an all-time high and bureaucratic process for hiring non-locals could be ‘streamlined’, says a local recruitment agency Joanne Kuai

joannekuai@macaubusinessdaily.com

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he opening of new casino and hotel properties, as well as new retailers in 2015 and 2016 will continue to drive the demand for front-line sales staff in an already tight labour market, says a report released this week by recruitment agency Links International.

The report titled 2016 Asia Salary Snapshot pointed out that in Macau, experienced store managers and retail area managers are in particular demand, and their salaries continue to increase due to a relatively tight pool of candidates as current unemployment stands at 1.9 per cent.

“The demand for ‘local Macau residents’ is at an all-time high, with more focus being given to local talent than expat talent,” the report reads.

“The demand for skilled marketing professionals in all levels is expected to be high in 2016 across all industries.”

Talent gap

Las Rodrigo, Head of Recruitment at Links Recruitment Consultants (Macau) Ltd., explained to Business Daily via a phone interview that the particular demand for locals is mainly due to the local government’s restrictions in authorizing nonresident worker permits.

This policy has been tightening up in recent months, as the latest data from the government’ Human Resources Office shows that growth rate of non- resident workers hit the lowest point in November last year since 2012.

The cautiousness has been interpreted as a measure to protect our local labour force in a time when the economy is taking a downturn, due to an 18-month consecutive gaming revenue slump.

“It has a huge impact on retail sector primarily through all levels, with frontline positions being the majority,” said Mr. Rodrigo. “We understand the government’s stance,

Source: Links International

but the local talent pool is pretty much exhausted. Macau has a huge need for external talents.”

Mr. Rodrigo also pointed out on average, Macau’s salary level in sales and marketing, retail and FMCG (fast-moving consumer goods) sectors is 10 to 15 per cent higher than the ones in the neighbouring Special Administrative Region (SAR).

Despite skilled professionals from Hong Kong showing great interest in coming over to Macau, a lot experienced hurdles due to the working permit issue. “The procedures could definitely be streamlined,” added Mr. Rodrigo.

Vision

The report, compiling data collected from Macau, Hong Kong, Mainland China and Singapore, also shows an increasing number of ‘jumpy’ CVs – the percentage of candidates that have been in their role for less than three years reached 76 per cent in the 2016 survey, while the number was 62 per cent in 2015.

Las Rodrigo says that in Macau market there continues to be significant turnover of candidates with 42 per cent of Macau respondents having only been in their current role for less than 12 months. Despite salary

being the most important factor in job moves, Macau candidates attach great importance to personal growth.

“What we have been educating our clients (companies) is that they need to be transparent not only about salaries and benefits but also training and development opportunities,” said Mr. Rodrigo in regards of tackling high turnover. “The employees need

to be able to have a vision of the business and know he or she can impress and grow in the short term and for the long run.”

However, Mr. Rodrigo indicated due to the uncertain economy, ‘less itchy feet’ are seen during the new year usually a time when people consider a ‘new start’. “There is now less appetite to change jobs,” said Mr. Rodrigo.

6 | Business Daily

January 8, 2016

Macau DICJ: to improve gaming laws and regulations Paulo Martins Chan, Director of the Gaming Inspection and Coordination Bureau (DICJ), said the priority is to improve the laws and regulations in regard of gaming, as well as optimize deployment of the personnel within the bureau. Secretary for Economy and Finance Lionel Leong Vai Tac and the newly-inaugurated DICJ director met with representatives of the Macau Gaming and Entertainment Promoters Association yesterday. The city’s gaming regulator recognized the junkets’ role in Macau’s gaming industry and pleaded for enhanced communication with the group to improve Macau’s gaming industry’s competitiveness.

Record breaking airport passenger volume in 2015 Macau International Airport passenger volume reached a new record of 5.8 million last year, attributing to Southeast and North Asia routes

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riven by the buoyant tourism market of Southeast and North Asia, Macau International Airport (MIA) achieved recordbreaking passenger volume in 2015. During the year, MIA passenger count surpassed 5.8 million, representing an annual increase of 6.4 per cent, which is a new record for MIA. Meanwhile, the aircraft movement reached over 55,000 and recorded a 6 per cent increase comparing to 2014; the volume of cargo surpassed 30,000 tons, representing a 4.5 per cent increase against last year. At present, there are 30 airlines operating in MIA serving 43 destinations.

In a press released issued by the airport, the company says in 2015, MIA attracted 9 new airlines with 8 new routes

to Macau, namely China Southern Airlines, Hainan Airlines, Capital Airlines, Jeju Air, MEGA Maldives Airlines, Bassaka Air, Asia Atlantic Airlines and Siam

Air Transport Co. Ltd. The new routes include Haikou and Wanzhou of China, Ho Chi Minh City and Haiphong of Vietnam, Phnom Penh of Cambodia,

Maldives, Palau and Pattaya of Thailand.

During the year, China Taiwan and Southeast & North Asia route passengers both recorded an increase -

9.6 per cent and 11.4 per cent respectively; while Mainland China passengers recorded a slight drop of 1.4 per cent as compared to last year.

MIA passengers are mainly accounted by Southeast and North Asia route travellers, taking up 40 per cent of the overall market, followed by the Mainland China and China Taiwan route passengers, accounting 33 per cent and 27 per cent respectively.

“Looking into the New Year, with the expansion and upgrading of airport facilities and close co-operation with the tourism industry, MIA will continue to make full use of advantages, adding new routes to expand passenger traffic load, providing more travel options and convenience to Macau citizens and tourists,” the company said.

Drone filming regulation changes underway

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draft on revising regulation of drones for aerial filming and photography is going to be submitted to the Chief Executive within this month, said Simon Chan Weng Hong, President of the Civil Aviation Authority (AACM) Mr. Chan says the authorities have drafted a proposal for a set of regulations and they are currently in talks with security departments. The proposal aims to strike a balance between the public’s safety concern and the needs of drone users.

The president of the AACM added that due to safety concern, some areas may be restricted and open only for professionals; in some cases, drone users need to hand in applications to the authorities beforehand. Nevertheless, if the size of the drone is not too big, and there is no risk where the drone is operated, such usage will be permitted.

Law in place

Currently, Macau laws regulate flying activities such as organized release of latex

balloons, or an unmanned aerial vehicle which is over 7 kilogram. Anyone wishing to carry out such activity must get the written permission from the AACM. However, in regards to the flying of a model aircraft or an unmanned aerial vehicle weighing less than 7 kg, such activity does not fall into the regulation scope and therefore does not require permission.

Despite that, AACM does warn that when flying the model aircraft it cannot

be flown in the air space within 500 metres of the heliport at the Hong Kong and Macao ferry terminals, Macau International Airport and the hangar at Coloane; model aircraft cannot be flown in the air space above the Friendship/Amizade Bridge; model aircraft must be flown at a height not greater than that of the surrounding buildings; the take-off and landing point should be separated from the public; model aircraft cannot be flown when there

is a thunderstorm warning, a heavy rain warning, or tropical cyclone warning hoisted, etc.

Privacy concern

Previously, the SAR government has also warned operators of drones for aerial filming and photography to ensure that they do not violate the Personal Data Protection Law, according to a statement issued by the Personal Data Protection Office (GPDP) in 2014.

According to the statement, drone operators must respect the principles of legality, good faith and proportionality. They also must ensure that the data (photographs, videos and sound) are being collected for legitimate purposes only.

The statement warned that drone operators must not produce images – photographs or video footage – that involve people’s private lives, such photos or video images of the interior of a private home, without their express consent.

Unless legally stated otherwise, drone operators are not allowed to record sound.

8 | Business Daily

January 8, 2016

Greater China

Yuan falls faster, share trading suspe

OCBC noted that against a basket of currencies, the RMB index was still only fractionall Lu Jianxin and John Ruwitch

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hina accelerated the depreciation of the yuan yesterday, sending regional currencies and stock markets tumbling as investors feared the Asian giant could trigger competitive currency devaluations from trading partners.

China’s stock markets were suspended for the rest of the day less than half an hour after opening as a new circuit-breaking mechanism was tripped for the second time this week.

The People’s Bank of China (PBOC) again surprised markets by setting the official midpoint rate on the yuan, also known as the renminbi (RMB), at 6.5646 per dollar, the lowest since March 2011.

That was 0.5 percent weaker than the day before and the biggest daily drop since last August, when an abrupt near 2 percent devaluation of the currency also roiled markets.

Regional currencies promptly went into a tailspin. The Australian dollar, often used by foreign exchange dealers as a liquid proxy for the yuan, fell half a U.S. cent in a blink.

The PBOC’s China Foreign Exchange Trade System (CFETS) repeated yesterday that there was no basis for the yuan’s continuous depreciation and that it was stable against a basket of currencies in 2015.

But the central bank’s fixings have helped drive the yuan down not just

KEY POINTS Chinese central bank sets yuan weaker Domestic stock markets tumble, triggering trading halt Investors fear China is triggering trade war against the dollar this week, but also other major currencies, including a 3.5 percent fall against the yen and 0.8 percent against the euro.

That raised concerns that China might be aiming for a competitive devaluation to help its struggling exporters.

“That’s the fear of the market,” said Sim Moh Siong, FX strategist for Bank of Singapore, adding that it was a zero sum game as other currencies weakened in response, and the end result would be greater volatility.

Others in the market were unsure what policy Beijing was pursuing.

“Frankly speaking, we are still not quite sure where the PBOC boundary is at the current stage.

The fear of the unknown has become

the largest risk for RMB in the near term, despite China’s sizable current account surplus,” said Singaporebased Oversea-Chinese Banking Corporation (OCBC).

Shanghai fund manager dumps all holdings in ‘insane’ market Chinese regulators have imposed a limit on the amount of stock major corporate shareholders can sell

A trading break of 15 minutes or even longer wouldn’t ease their nerves or get them a clear picture of the fundamentals Polar Zhang, analyst, BOC International Holdings Ltd. The bull at the Bund in Shanghai

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Shanghai fund dumped all its holdings as Chinese shares tumbled and triggered a circuit-breaker that halted trading in the world’s second-biggest stock market.

“This is insane,” Chen Gang, chief investment officer at Shanghai Heqi Tongyi Asset Management Co., said in an interview yesterday. “We were forced to liquidate all our holdings this morning,” said Chen, whose firm manages about 300 million yuan (US$45.5 million).

China’s CSI 300 Index plunged 7.2 percent before trading was halted by automatic circuit-breakers for the second time this week, after a weakerthan-estimated yuan fixing fuelled concern that slow economic growth is prompting authorities to guide the currency lower. Many private funds and hedge funds in China have agreements with investors spelling out mandatory liquidation levels if their holdings drop below a certain value.

Chinese regulators have imposed a limit on the amount of stock major

corporate shareholders can sell as authorities move to curb the nation’s stock-market rout. The CSRC capped the size of stakes that major investors are allowed to sell at 1 percent of a company’s shares for three months effective January 9, the regulator said in a statement yesterday. The restriction replaces an existing sixmonth ban on any secondary market

OCBC noted that against a basket of currencies, the RMB index was still only fractionally down for 2016, despite this week’s fixes against the dollar.

stock sales that is due to expire Friday, it said.

‘Couldn’t be worse’

Chen, who commented before the CSRC announced its new caps, said he “won’t consider getting back into the market until that overhang is gone and CSRC improves its circuit-breaker system, for instance by extending the 15-minute break to half an hour.”

The Shanghai Heqi Tongyi manager, whose fund started midyear in 2015, regretted the timing of its launch and said it “couldn’t be worse.” Chen isn’t alone in criticizing the circuit-breaker rule introduced Monday, which many say exacerbates a liquidity squeeze as investors all rush for the exits before trading halts kick in. Under the new rule, a drop of 5 percent suspends trading for 15 minutes, while a decline of 7 percent halts the market for the rest of the day.

“A trading break of 15 minutes or even longer wouldn’t ease their nerves or get them a clear picture of the fundamentals,” said Polar Zhang, a Beijing-based analyst at BOC International Holdings Ltd. “On the contrary, it’s draining liquidity as everybody tries to get out of the door before the door is closed. ” If CSRC doesn’t improve the mechanism, Zhang said he expects to cut trading volume by 20 percent.

About 100 stock-focused Chinese private funds have lost more than 10 percent in the most recent month, according to Howbuy Investment Management Co., which tracks such data. Most of the funds most recently updated numbers in December.

Almost 1,300 Chinese hedge funds liquidated amid China’s US$5 trillion stock selloff during the summer as the value of their equity holdings fell below mandatory levels agreed with investors, according to Howbuy.

Bloomberg News

Business Daily | 9

January 8, 2016

Greater China

ended as prices tumble

Taiwan govt-backed funds supported local shares

ly down for 2016, despite this week’s fixes against the dollar

This week’s slide comes ahead of the expected release later in the day of China’s foreign exchange reserve data for December, which traders fear will show a further sharp decline as investors pull money out of the slowing economy.

China’s reserves, the world’s largest, fell by US$87.2 billion in November to US$3.44 trillion, the lowest level since February 2013 and the third-largest monthly drop on record.

Some fear the yuan’s quickening slide suggests the world’s secondlargest economy is in deepening trouble, though for now economists say there has been no material change in their expectations of a gradual but bumpy slowdown, with no hard landing.

Stock fright

ANZ bank said in a note that the PBOC’s action would nevertheless “create one-way expectation of RMB depreciation, propelling capital flight and leading to significant financial instability”.

A sustained depreciation in the yuan puts pressure on other Asian countries to devalue their currencies to stay competitive with China’s massive export machine.

It also makes commodities denominated in U.S. dollars more expensive for Chinese buyers, which could hurt demand and thus further depress commodity prices in a vicious chain reaction.

Equities markets were also notable and immediate casualties, especially domestic Chinese shares.

Hong Kong yuan deposits under heavy pressure as currency wilts A shrinking pool and tight liquidity have pushed a slew of banks to increase yuan deposit rates to draw in new funds in the past few weeks Michelle Chen

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ong Kong’s yuan deposits face heavy downward pressure this year as China allows the currency to weaken, even as banks raise yuan deposit rates to compete for business.

Yuan accumulation in the offshore market lost momentum in 2015 after its largest yearly loss on record against the dollar, and fresh weakness early in 2016 is likely to reinforce investors’ aversion to the currency.

The offshore yuan hit its weakest level on Wednesday since offshore trading began in 2010 as China’s central bank continued to allow the currency to weaken.

Yuan deposits in the world’s biggest offshore hub for the currency stood at 864.2 billion yuan (US$131.35 billion) in November, a bit higher than 854.3 billion yuan a month earlier but still hovering around two-year lows.

A shrinking pool and tight liquidity have pushed a slew of banks to increase yuan deposit rates to draw in new funds in the past few weeks,

Shanghai stocks slid 7 percent to trigger the halt in trading, a repeat performance of Monday’s sudden tumble. Japan’s Nikkei shed 1.8 percent in sympathy.

The halt mechanism, intended to calm market volatility, was having the opposite effect, according to a 22-year-old retail investor in Guangzhou surnamed Hu. He said he bought shares on Wednesday when the market rebounded, but was now trapped by the circuit breaker, which he said was “killing investors” and creating panic.

China’s securities regulator also unveiled new rules yesterday to restrict selling by big shareholders who have been locked into their holdings for six months since Beijing banned them from offloading stocks to arrest a summer market crash.

In rules that take effect on January 9, they can’t sell more than 1 percent of a listed company’s share capital every three months.

The new rules didn’t go down well with investors.

“This is crazy. Chinese regulators set off on this path in July and they cannot get out of it. They have ruined whatever hope investors still had in the market,” said Alberto Forchielli, founder of Mandarin Capital Partners.

Reuters

with some providing an annual return of over 4 percent for deposits of less than one year.

By comparison, the one-year benchmark yuan deposit rate in the mainland has dropped to 1.5 percent after six interest rate cuts since November 2014.

“The trend continues that investors switch yuan deposits to other currencies. Obviously, people lack confidence in the yuan at present and downward pressure on the yuan pool remains heavy,” said Ngan Kim Man, deputy head of treasury at China Everbright Bank’s Hong Kong branch.

The redback lost 4.7 percent last year and is expected to fall further this year as a result of China’s weakening economic fundamentals and rising interest rates in the U.S. Some analysts forecast it will hit 6.8 to the dollar by the end of the year.

Pessimism on the yuan already reached the highest level in more than five years before the latest FX market turmoil, a Reuters poll done in early December among 18 fund managers, currency traders and analysts showed.

Analysts say about 70-80 percent of Hong Kong’s yuan deposits belong to companies and the growth driver for this part used to be the big premiums the offshore yuan had over its onshore counterpart several years ago.

“Now it has been totally reversed and the CNH is having deep discounts against the CNY. I think it is hard to find a new driver for yuan deposits in the short term,” said Nathan Chow, an analyst at DBS Bank in Hong Kong.

The spread between the onshore and offshore yuan spot rates widened to a record of more than 1,600 pips this week. The onshore yuan traded at 6.5936 per dollar and offshore yuan at 6.6900 yesterday.

Reuters

Taiwan’s government-backed funds intervened to support the local stock market, the deputy finance minister said yesterday, after it slid to a more than 4-month low as selling mounted over continuing weakness in China’s share and currency markets. The main TAIEX index closed 1.7 percent lower to 7,852.06 points yesterday, but it had fallen as much as nearly 2.8 percent intra-session to 7,770.16. Volume surged in the final five minutes of trade to end the session turnover at a high not seen since the end of November.

Prepaid card provider banned China’s central bank yesterday said it had revoked the license of a prepaid card provider and vowed to crack down on non-bank financial institutions that violated the law. The People’s Bank of China said on its website it had ordered Shanghai Chang Gou Enterprise Services to withdraw from the market after finding the company had misappropriated clients’ money, concealed capital flows, and refused inspections.

It said police were now dealing with the firms’ bosses and its debts were being handled by Bank of Communications International Trust.

DBS, Standard Chartered said to face yuan curbs

The banks are among those suspended from some foreign-exchange business in China, according to people with knowledge of the matter. Standard Chartered has appealed to China’s central bank to shorten a ban imposed in December and running through March, said one of the people, who asked not to be identified because they’re not authorized to speak publicly. DBS’s ban is shorter than three months, another person said. China may be trying to curb excessive speculation as the yuan weakens, Wai Ho Leong, senior regional economist at Barclays Plc in Singapore, said in an interview.

CTGC to develop hydropower project in Pakistan China Three Gorges Corporation (CTGC), the state-owned hydropower developer, has won the right to develop a hydropower project in Pakistan, CTGC announced yesterday. The Kohala Hydropower Project, the firm’s biggest investment in the Pakistani hydropower market, is expected to have an installed capacity of 1.1 million kilowatts. The project is part of the China-Pakistan Economic Corridor, a 3,000-km network of roads, railways and energy infrastructure to assist development in Pakistan and boost growth for the Chinese border economy. In September, CTGC registered a subsidiary for the project in Pakistan.

10 | Business Daily

January 8, 2016

Greater China

A rebranded Saab at the centre of China’s green car push China, a major oil importer and blighted by air pollution, has offered generous incentives to the public to buy green cars and forced global automakers to share their EV technology

T

he Swedish automaker once known as Saab has emerged as part of China’s push to make electric vehicles a mass-market alternative to petrol cars, after getting a US$12 billion order for EVs. Chinese-owned National Electric Vehicle Sweden (NEVS) - the company that acquired Saab’s assets, though not its name - said it received an order for 250,000 EVs in December from a little known Chinese company. The size of the deal -- and the sketchy information about the companies involved -- prompted some initial scepticism in the industry over its feasibility.

Yet NEVS is one of a group of Chinese-funded start-ups that aim to capitalize on disruption in the auto industry as governments around the world create regulatory incentives for electric or hybrid vehicles. Beijing has created a range of incentives to both attract technology-oriented firms into the EV sector and get the public to buy them.

KEY POINTS Little known Panda New Energy places $12 bln order for EVs China encouraging tech firms to get into auto sector Aim to make EVs mass-market alternative to petrol cars But is Beijing backing the right green-car technology?

NEVS US$12 billion order for EV cars came from a Beijing-based start-up called Panda New Energy Co. Jiang Dalong, a 51-year-old Chinese-born businessman who acquired Saab in 2012, said the deal with Panda New Energy requires little upfront money from the start-up.

Panda said it plans to lease the cars for commercial fleets, such as taxis and courier services.

Jiang owns 43 percent of NEVS, based in Trollhattan, Sweden, through his Beijing-based company, National Modern Energy Holdings.

The city of Tianjin has a 30-percent stake through Tianjin Binhai Hitech Industrial Development Area.

The rest is owned by Beijing State Research Information Technology Co and Teamsun Technology Co, an information-technology company.

The Chinese-born, Swedish businessman sold his bio-power generation business in China to help fund and focus on NEVS. Jiang said he sees a big opportunity for the technology given the enormous policy help Beijing has lined up for it.

“China is going to be the world’s biggest market for electric cars,” Jiang said in an interview in his office in Beijing. “China has no choice.

They have to wean themselves from conventional gasoline combustion cars,” he added, describing the recent sharp uptick in air pollution levels in China’s capital as “terrible” and “crazy”.

“Big existing automakers are too big. They cannot stop producing conventional gasoline combustion cars. But we can ... switch to new energy cars.”

Low entry barrier

Beijing’s new green car policy is based on the idea that a low entry barrier for

electric car technology will allow latecomers to the automotive industry to close a competitive gap with global rivals who have a century’s head-start in traditional combustion engines.

The policy has helped spawn more than a half-dozen Chinese-funded EV start-ups in and outside China, whose financial backers includes Baidu, Alibaba, Xiaomi and Tencent, as well as LeTV, a streaming video and Internet television provider.

Start-up electric car venture Faraday Future, funded by Chinese Internet billionaire and LeTV founder Jia Yueting, on Monday previewed a technology-heavy concept race car.

California-based Faraday hopes to develop it into a range of batterypowered vehicles that can challenge luxury rivals such as Tesla Motors Inc. in the growing market for electric cars.

Jiang said NEVS is exempt from China’s regulations requiring a foreign automaker to have a local partner because it plans to produce only electric cars for sale in China.

Jiang said NEVS is building an EV factory in the northeast coastal metropolis of Tianjin. He said he expected to soon get an auto manufacturing license to start producing EVs for Panda New Energy.

Financing the deal

Panda New Energy, which is funded by a Beijing investment fund called Hasun Asset, won’t have to pony up the whole US$12 billion for the cars, according to Jiang and Panda’s Sun Wei. The two executives said Panda New Energy will pay NEVS for the cars from a four-to-five-year stream of revenue it expects from leasing those 250,000 EVs. All Panda New Energy will have to come up with

is a deposit as little as 10 percent, Jiang said.

Panda New Energy initially expects to receive an all-electric minibus that seats 38 passengers and an electric commercial van. Jiang said production of the minibus and the MPV cars are due to start gradually in 2016 at the Tianjin factory, which he said is already half-completed.

Over the next four to five years, Panda New Energy will buy 50,000 minibuses and 50,000 courier vans, Jiang said. Sun said courier service companies in China, such as one run by 58.com, will use the commercial vans.

The rest of the deal - 150,000 vehicles - are all EVs based on the Saab 9-3, a sedan. Panda New Energy plans to lease them to taxilike chauffeur service companies.

Jiang said NEVS plans to start shipping those EV sedans to Panda New Energy in 2017. The sedans will be assembled at the Tianjin factory.

Largest EV market

Government subsidies and other measures helped all-electric car sales soar nearly five-fold in China to 113,810 in the first 10 months of 2015. That puts China on track to soon overtake the United States as the largest market for electric cars.

It is unclear, however, how competitive China’s new EV startups will be. A key question remains over whether the battery-powered EV is the right path for the future.

Japan and its automotive firms, for example, are jostling for supremacy in how future electric cars should generate power. Unlike China, which is pushing for battery-powered cars, Japan is betting on other sources of electricity, including hydrogen fuel cells.

Reuters

Business Daily | 11

January 8, 2016

Asia

Malaysian exports rise in November Imports in November rose 9.1 percent on higher demand for electronic products and consumer goods

M

alaysia’s exports in November rose at only half the pace anticipated, but economists said the country’s trade picture remains satisfactory given the weak state of global demand.

Government data yesterday showed that exports grew 6.3 percent year-on-year, compared to the median forecast in a Reuters poll for a 12.2 percent rise.

Southeast Asia’s third-largest economy has been hit by weak global prices for its commodity exports, and by a slowdown in China, which in November was the biggest buyer of Malaysian’s exports.

From a year earlier, November earnings from liquefied natural gas tumbled while those from electronics and electrical products, the biggest export, increased only marginally.

“The export figures are a little bit disappointing, but considering what we’ve seen in the rest of the region, Malaysia’s (export numbers) are still going up and that’s going to continue going forward,” said Euben Paracuelles, an economist with Nomura in Singapore.

“Outside of commodities, a lot of Malaysia’s manufactured exports are going to the U.S. and this should help to offset the effects from the slowdown in China.”

Malaysia only reports trade figures in ringgit, which slumped more than 18 percent against the U.S. dollar in 2015.

KEY POINTS Nov exports +6.3 pct y/y vs Reuters poll f’cast +12.2 pct Exports a bit disappointing but still rising - economist Nov imports +9.1 pct y/y vs f’cast of +14.1 pct Exports to China +14.2 pct y/y; U.S. +9.2 pct; EU +5.9 pct November’s trade surplus narrowed to 10.23 billion ringgit (US$2.32 billion) from 12.2 billion ringgit the previous month.

Despite weaker commodity prices, Malaysia’s year-to-date trade surplus of 86.3 billion ringgit (US$19.58 billion) is considerably larger than the 73.6 billion ringgit (US$16.70 billion) from the same period last year.

“This should provide some relief to the current account balance,” Rahul Bajoria, economist at Barclays Bank, Singapore, said in a report.

Wider current account surplus?

For the July-September quarter, Malaysia reported its smallest current

account surplus in more than two years.

ANZ said it expected the current account to “remain comfortably in surplus”, increasing from 3.4 percent of gross domestic product to 4.5 percent in 2016.

Imports in November rose 9.1 percent on higher demand for electronic products and consumer goods. The poll had forecast a 14.1 percent rise in imports, which slipped 0.4 percent in October.

Australia home building boom to cool, just at wrong time Home prices have already come off the boil in the biggest cities of Sydney and Melbourne Wayne Cole

A

ustralia’s home building boom is starting to look old in the tooth just when its economic benefits are sorely needed to offset slumping mining investment, a possible harbinger of tougher times in 2016.

Alarm bells rang yesterday when government data showed approvals to build new homes dived 12.7 percent in November, far beyond market forecasts and the biggest drop since

late 2012.

The main culprit was the multi-unit sector where approvals fell a startling 23 percent to the lowest in over a year.

High rise developments have been a star performer in recent years, partly driven by red-hot demand from Asia, but analysts worry demand will not keep up with supply leaving a glut of unsold apartments.

Home prices have already come off the boil in the

biggest cities of Sydney and Melbourne in the face of poor affordability and tighter lending standards by banks.

“High density approvals are inherently volatile, so a bounce back in approvals volumes in December cannot be ruled out,” said Tom Kennedy, an economist at JPMorgan.

“That said, the peak impulse from residential construction to real economic growth has clearly passed and we expect aggregate approval

In October, exports rose 16.7 per cent, its highest growth since April 2014.

For November, exports to the EU rose 5.9 percent from a year earlier, while those to the U.S. increased 9.2 percent on higher shipments of manufactured goods.

In the third quarter, Malaysia grew 4.7 percent from a year earlier, quarter, its slowest economic growth in over two years.

volumes to slide in 2016.”

The Reserve Bank of Australia (RBA) has been counting on the housing industry to help fill in a gap left by mining.

Residential construction accounted for a fifth of the 2.5 percent growth achieved by the economy in the year to September, a result still considered sub-par overall.

Home building activity also spills over into many other sectors from employment, to retail spending and finance.

A downturn would be particularly badly timed as prices for many of Australia’s major commodities have begun the new year under renewed pressure, darkening the outlook for export earnings.

Data from the Australian Bureau of Statistics out yesterday showed the country ran a trade deficit of A$2.9 billion (US$2.04 billion) in November, in large part due to lower prices of key resources such as iron ore.

Australia took in A$74.5 billion from exports of metal ores and minerals in the year

Reuters

The Reserve Bank of Australia (RBA) has been counting on the housing industry to help fill in a gap left by mining

to November. The previous 12 months it made A$90.9 billion.

One bright spot was a 146 percent jump in exports of fresh fruit and vegetables in November to A$356 million, a sector expected to benefit substantially from free trade agreements Australia signed last year with Japan, South Korea and China.

Reuters

12 | Business Daily

January 8, 2016

Asia

Japan’s Nikkei in worst new year start in two decades The up-down ratio, which measures shares that rose over the last 25 days against those that fell, slipped below 70 percent, which often indicates that a bottom is near Tomo Uetake and Hideyuki Sano

J

apanese stocks have posted their worst New Year losing streak since 1995 with the benchmark Nikkei falling below levels many market players expected to be a bottom for the year.

The Nikkei share average slid to a three-month low of 17,767.34 on Thursday, dragged down by a slew of bearish factors - slumping Chinese stocks and a weakening yuan, North Korea’s nuclear test and tensions in the Middle East.

A rush into the safe-haven yen also added to the Nikkei’s woes, pushing the index down 6.7 percent over four days.

Before the new year began, many market players thought the Nikkei was unlikely to fall below 18,000 points with one survey in the Japanese financial paper Nikkei Veritas showing 40 out of 66 respondents not expecting a drop below that level.

In a Reuters poll conducted in December, median forecasts for the

Nikkei was to rise to 20,900 by June and 21,500 by December.

The market’s outlook was bolstered by improved corporate profits, higher dividend pay-outs and the Bank of Japan’s plan to buy 3 trillion yen (US$25.4 billion) worth of shares per year as part of its on-going stimulus measures.

Many investors, however, expect the poor start to 2016 to be temporary.

“At the moment, panic is driving markets. I don’t think the world economy is heading for a recession.

The market will soon stabilise when there is evidence the economy is growing,” said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.

“It is a bit scary to buy here but we could see a sharp rebound as soon as next week. I wouldn’t be surprised to see a 10 percent rise,” said Yasuo Sakuma, portfolio manager at Bayview Asset Management, noting that positive U.S. payroll figures due

KEY POINTS Nikkei falls below expected bottom for 2016 Many still expect rebound on signs of oversold market Short-selling at historical levels

on Friday could be a catalyst.

The level of short selling also suggests the same with more than 40 percent of selling in the last few days being short-selling, and foreign investors have sold more than 2.0 trillion yen (US$16.95 billion) of futures in December.

While that signals bearish sentiment, such a high level of shortselling is often associated with a selling climax and a short-covering rally, market players say.

But not all investors have a sanguine outlook.

“Investors seem to grossly misunderstand the significance of the impact the appreciating U.S. dollar, and with it, weak commodity prices, have on global dollar liquidity,” said Michael Kretschmer, chief investment officer at Pelargos Capital in the Hague.

“The global economy is very weak and all hope hinges on a self-sustained U.S. recovery.”

Reuters

Blackstone, Gaw Capital weigh bids for Ascendas Hospitality Trust It is the only one of six listed hospitality trusts in Singapore that is trading above its book value, Thomson Reuters data shows Aradhana Aravindan and Saeed Azhar

P

rivate equity investors Blackstone Group LP and Gaw Capital Partners are weighing separate bids for Singapore’s Ascendas Hospitality Trust, people familiar with the matter said, eyeing a target with a market value US$600 million.

The potential offers are being considered as bankers say falling market valuations and higher interest rate expectations are set to stoke prospects for mergers and acquisitions of assets owned by the city state’s property trust sector.

Late last year, Saizen Real Estate Investment Trust agreed to sell its Japan portfolio to

an affiliate of U.S. private equity firm Lone Star Funds for US$370 million.

“Conditions, such as lower valuations and weak DPU (distribution per unit) growth outlook, are conducive for sector consolidation,” said Krishna Guha, an analyst with Jefferies.

Ascendas Hospitality Trust is a ‘stapled’ asset comprising Ascendas Hospitality Real Estate Investment Trust and Ascendas Hospitality Business Trust. Stapled assets are created when two or more securities are contractually bound together so they cannot be bought or sold separately.

The trust’s managers said last month they were reviewing options after receiving an unsolicited expression of interest to buy out all its stapled securities.

The people familiar with the prospective Blackstone and Gaw Capital bid interest

declined to be identified because the information was not public.

Ascendas Hospitality and Hong Kong-based Gaw Capital declined to comment.

An external spokeswoman for Blackstone also declined to comment.

Ascendas Hospitality Trust has a portfolio of 11 hotels with more than 4,100 rooms in Australia, China, Japan and Singapore, its website says.

The majority of its properties are in Australia.

It is the only one of six listed hospitality trusts in Singapore that is trading above its book value, Thomson Reuters data shows. The trust is currently trading at 1.1 times its book value, compared with an average of 0.83 for all Singapore’s hospitality trusts.

Ascendas Hospitality’s total returns in 2015 were 17.5 percent, compared with an average negative total return of 1.9 percent for the 35 trusts in the city-state’s REIT sector, data from the Singapore Exchange shows.

While listed companies are attracting buyer interest, Singapore’s hospitality sector is currently facing multiple challenges, including weak visitor numbers amid rising room supply.

Ascendas Hospitality Trust securities, which turned positive briefly after the news, were 0.65 percent lower in afternoon trade, while the overall market was down 2.5 percent.

Reuters

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Business Daily | 13

January 8, 2016

Asia South Korea restricts entry to joint industrial zone in North

Thai consumer sentiment rises

The estate is a precious source of hard currency for the isolated and impoverished North

S

outh Korea said yesterday it was imposing partial restrictions on entry to a joint industrial complex in North Korea, a day after the hermit kingdom shocked the world with its fourth nuclear test.

The Unification Ministry said it will only permit South Korean businessmen and those directly involved in the operation of the Kaesong Industrial Complex to cross the border for the time being for safety concerns.

“The entry restriction is a measure to ensure the safety of the citizens in this state of emergency,” a ministry official told AFP, asking not to be named.

Around 500 South Koreans still crossed the border to Kaesong yesterday, but the official said the number would quickly be reduced.

The move was described as “an initial countermeasure”, with the official suggesting further Kaesongrelated restrictions could be imposed in the future.

“Once we get the full picture of international sanctions on North Korea, the measure will need to be reviewed,” the official said.

The Kaesong industrial estate opened in 2004 and currently hosts more than 120 South Korean companies which employ some 53,000 North Korean workers

AFP

Funds’ appetite for ports, railways to stoke Australia M&A fervour Last year also was a record year for inbound deals for Australia, as North American investors, in particular, raised their exposure Byron Kaye

B

lockbuster buyouts of ports and electricity networks are poised to drive Australia M&As in 2016 from four-year highs of US$146 billion hit last year, as wealthy global investors seek steady yields amid shaky commodity and share markets.

Investment bankers predict that offerings of well-tested government assets and cheap money will lure conservative-minded long-term investors into deals, even as a sputtering Chinese economy hits demand for Australia’s natural resources.

Pension funds such as the Canadian Pension Plan Investment Board and sovereign wealth funds such as China Investment Corp, the Abu Dhabi Investment Authority and the Kuwait Investment Authority have already invested in Australian assets and could be prominent players in the new government sales.

“There’s a massive amount of money looking for yield,” said Geoff Rasmussen, managing director of

With backing from China, Pyongyang’s sole major ally, the 15-member UN Security Council on Wednesday strongly condemned the test and said it would begin work on a new UN draft resolution that would contain “further significant measures”.

The Kaesong industrial estate opened in 2004 and currently hosts more than 120 South Korean companies which employ some 53,000 North Korean workers.

The estate is a precious source of hard currency for the isolated and impoverished North. The South Korean firms get cheap labour as well as preferential loans and tax breaks from the government.

The business park -- virtually the last remaining form of economic cooperation between the Koreas -has become increasingly vulnerable to turbulent swings in inter-Korea politics.

In 2013, during a period of heightened cross-border tensions, Pyongyang effectively shut down the zone for five months by withdrawing its workers.

Azure Capital, which helped telecom iiNet sell for US$1.2 billion in 2015 and earned the 10th highest mergers and acquisitions (M&A) advisory fees for the year, Thomson Reuters data shows.

“Bank deposits and fixed income opportunities are so low-margin that people have turned to infrastructure as an alternative.”

Australia’s biggest deal of 2015 - and its biggest non-IPO privatisation ever - was a US$7.4 billion electricity network sold

by New South Wales state to a consortium two-thirds owned by Middle East sovereign funds and a Canadian pension fund.

But that is likely to be eclipsed early in 2016 by a second electricity network being sold by the same state. This second asset was worth 20 percent more than the first asset, according to a February 2015 sale briefing document seen by Reuters.

The New South Wales government and the pension and sovereign funds

did not immediately respond to emailed requests for comment.

Neighbouring Victoria and Western Australia states are selling some of the country’s busiest ports, while the federal government is expected to raise up to US$4 billion for the securities regulator’s corporate registry business.

Restructuring

Last year also was a record year for inbound deals for Australia, as North American investors, in particular, raised their exposure.

Nick Sims, local head of M&A at Goldman Sachs, which placed third for advisory fees in 2015, said in an email that buyouts originating from North America accounted for 21 percent of inbound activity in 2015 compared to 8 percent the previous year. Australian businesses offered a “pathway to Asia”, Sims said.

Companies which have relied on outsourcing by the mining industry are, meanwhile, expected to explore takeover prospects as a way to cut overheads, plug revenue gaps and improve their survival chances as a two-decade minerals boom grinds to a halt.

Already some companies with mining industry exposure are targets: rail freight giant Asciano is the object of a $6.5 billion takeover battle between Canada’s Brookfield Asset Management and local port operator Qube Holdings .

Former mining services firm Broadspectrum is fending off a cutprice offer from Spain’s Ferrovial as it shifts its focus to government contracts.

“We’ll likely see more activity across the resources space but it will be more restructuring in nature than strategic M&A,” said Aidan Allen, head of investment banking at Citi, which ranked fourth for advisory fees in 2015 and is advising Brookfield’s Asciano offer.

Reuters

Thai consumer confidence rose in December to its highest in eight months, a university survey showed yesterday, boosted by a temporary tax break in December aimed to shore up domestic consumption. The government allows a tax deduction of up to 15,000 baht of taxable goods and services purchased during Dec. 25-31 from their 2015 income tax. The finance minister said late last month that it could lift 2015 GDP growth by 0.1-0.2 percentage point.

Indian government accepts demands on GST bill The Indian government said yesterday it agreed to accept demands set by the opposition Congress party to back a landmark tax reform, raising hopes a political standoff that blocked the measure throughout last year might be resolved. Parliamentary Affairs Minister Venkaiah Naidu also said the government was willing to bring forward the next parliament session to pass the proposed goods and services tax bill (GST) if Congress supports the measure. The proposed tax, India’s biggest revenue shake-up since independence in 1947, would seek to replace a slew of federal and state levies.

Fast Retailing cuts profit view Japan’s Fast Retailing Co cut its full-year outlook and reported a 12 percent fall in December sales from a year earlier at domestic Uniqlo stores as warmer-than-usual temperatures discouraged sales of sweaters and down jackets. The company said it now expects an operating profit of 180 billion yen (US$1.5 billion) for the year through end-August compared with an earlier forecast of 200 billion yen.

Fonterra exports record volumes in December New Zealand dairy giant Fonterra Co-operative Group said yesterday it had exported record monthly volumes in December. The world’s largest dairy exporter said it had shipped more than 300,000 tonnes of dairy products to overseas markets, around 10 percent more than its previous record month in December 2014. But the new benchmark could be hard to beat as reduced milk volumes begin to impact production levels, said Fonterra’s managing director for global ingredients, Kelvin Wickham.

Fonterra is forecasting a year-on-year reduction of milk volumes by at least 6 percent this season.

Hyundai unveils hybrid-dedicated car to take on Toyota’s Prius South Korea’s Hyundai Motor yesterday unveiled its first dedicated gasoline-electric vehicle, becoming one of a handful of automakers to challenge Toyota Motor’s Prius as low oil prices weigh on demand for fuel-efficient vehicles.

Hyundai Motor Senior Vice President Lee Ki-sang said automakers had no choice but to boost green car sales to meet stringent emissions regulations, despite slackening demand as low petrol prices spur the market for gas-guzzling vehicles. “Oil prices could reduce hybrid car sales. But this is the way we have to go,” Lee told reporters.

14 | Business Daily

January 8, 2016

International Canada’s trade deficit narrows Canada’s exports grew for the first time in four months in November, cutting the trade deficit in a sign the country’s weak currency is helping manufacturers even as the price of oil slides. Statistics Canada said on Wednesday the deficit narrowed to C$1.99 billion (US$1.41 billion) from C$2.49 billion in October. Analysts polled

by Reuters had forecast a shortfall of C$2.60 billion. Overall exports grew by 0.4 percent to C$43.25 billion, pushed up by shipments of motor vehicles and parts, metal ores and forestry products.

Energy exports slumped by 6.6 percent to hit their lowest since May 2009.

Osborne warns U.K. economy faces dangerous cocktail of risks Domestic demand is starting to yield to the prospect of years more of austerity and the risk of a British exit from the EU In its quarterly report, the BCC said while its key measures of both services and manufacturing declined in the fourth quarter, the factory indexes fared worse, with many companies citing the strength of the pound as their biggest concern. The cloudy outlook adds to reasons for the Bank of England’s Monetary Policy Committee -- which announces its latest policy decision on January 14 -- to keep interest rates at a record low.

U.S. private payrolls data point to economy’s resilience U.S. private companies added workers at a brisk clip in December, pointing to underlying strength in the economy despite signs that growth slowed sharply in the fourth quarter. While other data on Wednesday showed a slight moderation in services sector activity last month, details of the survey were fairly upbeat and suggested a pickup in the coming months. The economy is battling the impact of a buoyant dollar, inventory glut and relentless spending cuts by energy firms, which have been hurt by lower oil prices. These headwinds have hobbled manufacturing and strained exports.

German industry orders rise more than expected Healthy domestic demand fuelled a bigger-than-expected rise in German industrial orders in November, data showed yesterday, providing further evidence that Europe’s biggest economy gained momentum at the end of last year. Contracts for ‘Made in Germany’ goods were up 1.5 percent on the month, the economy ministry said.

The second consecutive monthly rise compared with a Reuters consensus forecast for a rise of 0.1 percent. “After declining industrial orders in the third quarter, the impression of a subdued upturn in the manufacturing industry is becoming clearer,” the ministry said.

Argentina moves to increase financing options The country has swapped US$16 billion in non-negotiable notes held by the central bank for U.S. dollar-denominated bonds, as the country moves to bolster currency reserves and strengthen its hand against creditors suing over defaulted debt. Long-awaited negotiations with a group of New York hedge funds that sued in the U.S. courts for full repayment of defaulted sovereign bonds are set to start in the days ahead. The central bank also is talking with investment banks about a financing deal of up to US$7 billion.

Monsanto increases job cuts Monsanto Co said a souring farm economy and currency woes will push its 2016 earnings to the lower end of expectations, while a cost-cutting drive will lead the world’s largest seed company to slash more jobs.

Low commodity prices also should lead to more consolidation in the agricultural sector, Chief Executive Hugh Grant said, about a month after rivals Dow Chemical Co and DuPont said they would merge.

Growth slowing

Chancellor of the Exchequer George Osborne

C

hancellor of the Exchequer George Osborne will say a “dangerous cocktail” of global threats faces the British economy this year as he warns that complacency is starting to take hold.

Osborne’s alert was underscored by a gloomy report on the economy published by the British Chambers of Commerce showing both manufacturing and services weakened at the end of 2015. In his speech yesterday, Osborne is set to identify the slowing economies of China, Brazil and Russia, the slide in commodity prices and escalating political tensions in the Middle East as potential hazards for the U.K. “Anyone who thinks it’s mission accomplished with the British economy is making a grave mistake,” the chancellor will tell business

leaders in Cardiff, according to extracts released by the Treasury.

“2016 is the year we can get down to work and make the lasting changes Britain so badly needs, or it’ll be the year we look back at as the beginning of the decline. This year, quite simply, the economy is mission-critical.”

Brexit impact

There are also signs the U.K. is losing momentum. In particular, domestic demand -- the engine of growth since the financial crisis -- is starting to yield to the prospect of years more of austerity and the risk of a British exit from the European Union in a referendum that could be held this year. Confidence among U.K. services firms slid to a three-year low last month.

World Bank cuts global economic growth outlook The U.S. economy should grow by 2.7 percent, down from an earlier estimate of 2.8 percent

T

he World Bank on Wednesday cut its global economic growth forecast for 2016, saying the weak performance of major emerging market economies will tamp activity overall, as will anaemic showings from developed countries such as the United States.

Global growth should accelerate to 2.9 percent this year from 2.4 percent in 2015, the bank said, but that still represents a downgrade from its June forecast for 3.3 percent growth.

The bank raised particular concern about the flagging performance of top emerging economies.

“Given the size and global economic integration of the largest emerging markets - Brazil, the Russian Federation, India, China,

and South Africa, or the so-called BRICS - the simultaneous slowdown underway in all but one of them could have significant spillovers to the rest of the world,” the report said.

The bank forecast the Russian and Brazilian economies would continue to contract in 2016 rather than return to growth as it had estimated in its previous outlook in June.

Real gross domestic product in Russia could shrink at a 0.7 percent annual pace this year, it said. In June it had forecast 0.7 percent GDP growth for 2016. The bank estimates the Russian economy shrank by 3.8 percent in 2015.

In Brazil, GDP is forecast to decline by 2.5 percent in 2016 compared with an earlier estimate for growth of 1.1

Cooling growth momentum, c o m b i n e d w i t h s l o we r - t h a n expected wage inflation, means there’s a dwindling prospect of the Bank of England soon following Janet Yellen’s Federal Reserve with tightening, even after eleven quarters of uninterrupted U.K. expansion.

Still, Britain should be prepared for rising borrowing costs, which will be a sign of strength when they come, Osborne said in an interview on BBC Radio 4’s “Today” program yesterday.

“We’ve got to be ready, but ultimately if and when interest rates go up that will be a sign of a stronger economy that is normalizing after the extraordinary crisis of seven or eight years ago,” he told the BBC. Amid criticism of his budgetcutting plans from the opposition Labour Party, the chancellor plans to use his speech to defend his goal of turning a 90 billion-pound (US$132 billion) deficit in the latest fiscal year into a surplus by the end of the decade.

Bloomberg News

percent, the World Bank said. The Brazilian economy likely contracted at a 3.7 percent rate in 2015.

China GDP growth was estimated to slow to 6.7 percent in 2016 from an estimated 6.9 percent in 2015. In June the bank had estimated 2016 growth of 7.0 percent.

The South African economy should grow at a modestly faster rate in 2016 than last year - 1.4 percent compared with 1.3 percent - but substantially slower than the 2.1 percent growth forecast in June.

Of that group, India was the only one expected to see notable improvement in economic performance from 2015 - advancing at a 7.8 percent rate in 2016 versus 7.3 percent in 2015. But even there, the bank nipped its 2016 estimate by 0.1 percentage point from its earlier forecast.

The bank also trimmed its outlook for the United States and other developed economies.

The U.S. economy should grow by 2.7 percent, down from an earlier estimate of 2.8 percent but up from 2015’s 2.5 percent.

Estimates for growth in the euro zone were trimmed by the same amount, to 1.7 percent from 1.8 percent previously, although that would mark a modest acceleration from 2015’s estimated 1.5 percent rate.

Reuters

Business Daily | 15

January 8, 2016

Opinion Business

wires

The hidden goods of 2015

Leading reports from Asia’s best business newspapers

TAIPEI TIMES Democratic Progressive Party (DPP) presidential candidate Tsai Ing-wen yesterday urged the Mainland Affairs Council (MAC) to provide a detailed explanation of China’s limited transit flight proposal. “Issues regarding cross-strait exchanges should be subjected to fullscale negotiations. I would take them in my stride if they have been through a democratic procedure and handled with equality and dignity,” Tsai said on the side-lines of a Taipei campaign event for DPP legislative candidate Rosalia Wu. If other matters were involved in the negotiations on the transit plan, the council should provide the public with a detailed account of the negotiations, she said.

BANGKOK POST Thailand’s economic growth is expected to decline moderately this year due to high household debt and restrained exports, says the World Bank. “Growth in Thailand is expected to slow to 2% in 2016 from 2.5% in 2015 as high household debt holds back consumption and export growth is subdued,” the global development lender said in a statement. “Policy uncertainty is likely to weigh on private investment.” It is estimated that Thailand’s average GDP growth until 2018 will come in at 2.4%, according to the bank’s “Global Economic Prospects” report.

THE JAKARTA POST The government decided on Tuesday to immediately establish a new national committee to develop the sharia financial industry, which still holds a small market share.

The committee is to be led

by President Joko “Jokowi” Widodo and will comprise a number of relevant ministers. The Indonesian Ulema Council (MUI) will act as its advisory board. Among the committee’s tasks is to harmonize laws, National Development Planning Minister Sofyan Djalil said.

The decision was made following a limited Cabinet meeting where Jokowi heard input from ministers, Bank Indonesia Governor Agus Martowardojo and Financial Services Authority chairman Muliaman D. Hadad.

THE JAPAN NEWS Toyota Motor Corp.’s research and development company, Toyota Research Institute (TRI), said it hired a team of scientists and engineers to help drive research into artificial intelligence and robots. The world’s top-selling automaker announced plans in November to set up TRI with a focus on developing artificial intelligence technologies such as self-driving cars. TRI also named John Roos, former U.S. Ambassador to Japan, as chairman of an advisory board that will guide its work.

Peter Singer

Professor of Bioethics at Princeton University and Laureate Professor at the University of Melbourne

I

f we were to judge the state of the world by the news headlines, 2015 was the year of Islamist terror, especially in Paris. It began with the massacre at Charlie Hebdo and included the much deadlier November 13 shootings in the city, in addition to attacks in Beirut, Ankara, and on a centre for disabled people in San Bernadino, California.

But even if we focused on terrorism, that would be a misleading view of the year’s events. In 2015, terrorism killed more people in Syria, Iraq, Nigeria, and Kenya than in France or the United States.

And if the crash in October of a Russian civilian airliner in Egypt’s Sinai Desert was, as the Islamic State (ISIS) and Russians experts assert, the result of an ISIS plot, then that incident alone killed more people than both terrorist attacks in Paris.

In any case, concentrating on what the news media find most important to cover can give us a distorted sense of the world. The death of each of the innocent victims of last year’s terrorist attacks is a terrible tragedy for that person and his or her family and friends; but that is also true of deaths that occur in traffic accidents, which receive much less media attention.

Terrorism is shocking, violent, and makes for “good television.”

If it occurs in cities like our own, or in cities we might visit, it attracts even greater interest because of the “It could have been me!” factor. From a global perspective, however, the two most important things that

happened in 2015 were both highly encouraging, though only one, the international climate agreement reached in Paris in December, received significant media coverage.

Decades will pass before we know if the Paris agreement succeeds in meeting its stated aim of limiting global warming to “well below” 2°C above pre-industrial levels. But this is more ambitious language than most observers had expected, and it was accepted by all 194 participating countries.

Experts tell us that adding up the reductions in greenhouse-gas emissions that these countries have pledged yields a total drop that is still well short of the agreement’s stated goal. But a sliver of hope is offered by the commitment to review these targets at five-year intervals and consider what adjustments are needed to meet the goal.

We will see whether it works (or those of us young enough to live to 2050 will). But after the disappointment of the Copenhagen climate-change summit in 2009, the spirit of agreement that animated the Paris meeting should lift our spirits. If it does prove to be a turning point for efforts to prevent catastrophic climate change, its importance will dwarf anything else that happened in 2015.

In contrast to the outcome of the Paris meeting, the second most important thing that happened in 2015 was unequivocally positive: The proportion of the world’s population living in extreme poverty has fallen below 10% for the first time.

The rapid decline in extreme poverty may not attract viewers and readers, but its impact on human welfare surely outstrips that of terrorism

That, at least, is the view of the World Bank, which has been monitoring global poverty since 1990.

As extreme poverty has fallen, developing countries’ “working middle class,” defined as people living on more than US$4 per day, has grown, from only 18% of their workforce in 1991 to onehalf today. In the same period, the proportion of undernourished people in developing regions has also fallen sharply, from 23.3% to 12.9%.

The rapid decline in extreme poverty may not attract viewers and readers, but its impact on human welfare surely outstrips that of terrorism. In 1990, 1.95 billion people, or nearly 37% of the world’s population, lived in extreme poverty; today there are 702 million. If the proportion of people living in extreme poverty had remained unchanged, there would be 2.7 billion of them. In other words, the decline in poverty has improved the lives of almost two billion people.

Extreme poverty kills, through inadequate food and diseases like malaria, measles, and diarrhoea. So it is not surprising that a drop in child mortality has accompanied the decline in extreme poverty. In 1990, 35,000 children per day died before reaching their fifth birthday. Today that figure is down to 16,000.

Yes, 16,000 child deaths a day is far too many, and the fact that 2015 was the hottest year on record shows that the struggle against climate change has only just begun.

But we can build on the gains made last year. We need to be active citizens, pushing our leaders not just to meet, but to surpass, the emission targets they have pledged to achieve.

If we live in an affluent society, we should also demand that our country play its role in reducing extreme poverty. And, whatever our government does, we can find out which charities fighting poverty are the most effective –and contribute to them.

Project Syndicate

16 | Business Daily

January 8, 2016

Closing Mainland 2014 growth verified as 7.3 pct

Philippines posts US$127 mln budget surplus

The statistics authority yesterday verified the country’s 2014 growth rate as 7.3 percent, unchanged from the preliminary verification figure. The revised gross domestic product (GDP) for 2014 came in at 63.59 trillion yuan (US$9.6 trillion), down 22.9 billion yuan from the preliminary verification figure, the National Bureau of Statistics said in a statement.

Primary industries accounted for 9.2 percent of the GDP structure, the secondary sector accounted for 42.7 percent, and the tertiary sector accounted for 48.1 percent, all unchanged from the earlier statistics.

The Philippine government posted a budget surplus of 6 billion pesos (US$127 million) in November, bringing the year-to-date balance to a deficit of 46.5 billion pesos (US$988 million), the Department of Finance (DOF) said yesterday. Finance Secretary Cesar Purisima said the government collected 177.5 billion pesos (US$3.8 billion) revenue in November, 12 percent or 19.2 billion pesos (US$407 million) higher than a year ago level, while disbursements for the month reached 171.4 billion pesos (US$3.6 billion), expanding 13 percent year-on-year.

Foreign reserves drop by record in push to aid yuan The yuan sank to a five-year low yesterday, as the PBOC signals it is more tolerant of depreciation as growth slows

C

hina’s foreignexchange reserves slid more than forecast in December, capping their first-ever annual decline, as authorities sought to prop up a weakening yuan.

The currency hoard shrank by a record US$108 billion to US$3.33 trillion in December, the People’s Bank of China said yesterday. The median forecast of economists surveyed by Bloomberg was for a drop to US$3.42 trillion.

The reserves fell by more than half a trillion dollars in 2015.

Policy makers fighting to stem declines in the currency amid slower growth and plunging stocks have been burning through the stockpile to reduce yuan volatility.

“It’s inevitable: The PBOC is intervening, there are a lot of capital outflows, and the yuan is facing larger depreciation pressure,” said Chen Xingdong, chief China economist at BNP Paribas SA in Beijing. “The PBOC now wants to maintain stability.”

The weakening of the fixing contributed to a selloff

in stocks that led exchanges to close early on Monday and Thursday after the retreat triggered new circuit-breaker mechanisms.

The government will “allow for more depreciation, use reserves and tighter controls on cross-border capital flows,” said Wang Tao, chief China economist at UBS Group AG in Hong Kong. The yuan will continue to decline against the

dollar this year and foreign reserves will drop to US$3 trillion, she said.

Weakening trend

“The fact that the central bank cut the fixing so much this week signalled that the authorities are worried that the economy is challenged by increasing downward pressures,” said Nathan Chow, a Hong Kong-based

economist at DBS Group Holdings Ltd. The drop in the stockpile would have been even greater had it not been for strength in other currencies that China holds in reserve. The stronger euro and yen in December helped lift the valuation of the reserves, which are reported in U.S. dollars.

The world’s second-largest economy expanded 6.9

percent last year, the slowest pace since 1990, according to the median forecast of economists surveyed by Bloomberg. The government will release fourth-quarter gross domestic product data on January 19.

“When there are capital outflows, it’s difficult for the central bank to stem the loss in foreign-exchange reserves,” said Zhao Yang, the Hong Kong-based chief China economist at Nomura Holdings Inc. “The PBOC didn’t want the yuan depreciation to be too fast; that’s why the reserves drop was quite big. Use of forwards can help stabilize the exchange rate, but the effect is quite limited. Largescale intervention in the spot market is needed to support the currency.”

Bloomberg News

Asian Financial Forum 2016 to focus on China opportunities

George Soros sees crisis in global Singapore’s BOC Aviation orders markets that echoes 2008 30 Airbus jets worth US$3bn

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G

he Asian Financial Forum 2016 scheduled for January 18-19 in Hong Kong will focus on topics including China opportunities, the Association of Southeast Asian Nations (ASEAN) development prospects as well as the “Belt and Road” initiative, organizers said yesterday.

According to Helen Wong, chief executive for Greater China region of HSBC, the two-day forum will feature in-depth discussions and exchanges on topical issues shaping global business and finance.

Wong, who is also chairperson of the forum’s organizing committee, said that apart from the China opportunities and ASEAN prospects, topics regarding financial technologies as well as opportunities created by the “Belt and Road” initiative will also be touched during the forum.

With the theme of “Asia: Shaping the New Paradigm for Growth,” this year’s forum will attract participants including former U.S. Federal Reserve chairman Ben Bernanke, Russia’s Deputy Prime Minister Arkady Dvorkovich among others.

Co-hosted by the Hong Kong Special Administrative Region government and the Hong Kong Trade Development Council, the forthcoming forum will be the ninth edition of its kind.

Xinhua

S

lobal markets are facing a crisis and investors need to be very cautious, billionaire George Soros told an economic forum in Sri Lanka yesterday.

China is struggling to find a new growth model and its currency devaluation is transferring problems to the rest of the world, Soros said in Colombo.

A return to positive interest rates is a challenge for the developing world, he said, adding that the current environment has similarities to 2008.

Global currency, stock and commodity markets are under fire in the first week of the new year, with a sinking yuan adding to concern about the strength of China’s economy as it shifts away from investment and manufacturing toward consumption and services.

Almost US$2.5 trillion was wiped from the value of global equities this year through Wednesday.

“China has a major adjustment problem,” Soros said. “I would say it amounts to a crisis.

When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008.”

Soros, whose hedge-fund firm gained about 20 percent a year on average from 1969 to 2011, has a net worth of about US$27.3 billion, according to the Bloomberg Billionaires Index.

ingapore-based aircraft leasing firm BOC Aviation said yesterday it has ordered 30 Airbus A320s worth more than US$3 billion at list prices to meet growing demand.

The order, made at the end of December, comprises 18 A320s equipped with new engines and 12 A320s using the current engines, the company said in a statement.

At 2015 catalogue prices, each re-engineered A320 costs US$106.2 million and a standard A320 is worth US$97 million, according to the Airbus website. This would constitute a total catalogue cost of US$3.07 billion.

“This order underscores our continued confidence in the reliability and operational efficiency of the A320 family aircraft, and reflects its popularity among our customers for short- and medium-haul routes,” said BOC Aviation chief executive Robert Martin.

“With this order, BOC Aviation becomes one of Airbus’ top 10 customers,” added John Leahy, Airbus chief operating officer for customers.

BOC Aviation, owned by Bank of China, is based in Singapore with offices in Dublin, London, Seattle and Tianjin. It is a key customer for both Airbus, based in France, and US rival Boeing.

Bloomberg News

AFP