MOP 6.00
Supported by
Closing editor: Joanne Kuai
Macau ‘Australia Day’ Cocktail Fri, 29 January 2016 | 6pm - 8pm | Terrazza, Galaxy Macau More information at www.austcham.com.hk
Taiwan national fund to maintain stock market intervention Page 9
Year IV
Number 964 Tuesday January 19, 2016
Publisher: Paulo A. Azevedo
Real estate prices rise on Mainland Page 8
TurboJET to run Macau-Tuen Mun route from Jan 28 Page 4
Taiwan President-Elect Anti-Gaming Taiwan has elected a new president. Tsai Ing-Wen of the nationalist Democratic Progressive Party (DPP) will also control the legislature. Gaming analysts predict the result is likely to have a negative on Taiwan’s gaming prospects. Tsai is on the record as staunchly anti-gaming. Thus, the island’s recent flirtation with legalisation is likely to be lower on the agenda than before. Benefiting Macau’s gaming industry, say industry observers, as the MSAR is unlikely to face competition from this quarter for at least another five to six years Page
5
Economy
Shoring up the yuan Underwriting the Chinese currency. And plugging the outflow of capital. Setting back the internationalisation of the yuan. PBoC say lenders in offshore yuan-trading centres will now have to lock away a share of deposits in their accounts. Ending the exemption for foreign institutions in a push to curb speculation against the currency
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The ties that bind Trade between the SAR and Mainland China. Posting a notable y-o-y increase of 30.3 pct Jan. to Nov. Due to overwhelmingly strong growth in China’s exports to the city. Trade reached US$4.38 bln (MOP35.04 bln) vis-a-vis US$3.36 bln for the same period in 2014
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Head on the stock block
Xiao Gang, China’s chief securities regulator, offered to resign last week, Reuters reports. It is unclear whether the gov’t has accepted his offer. Chinese stock markets underwent rollercoaster activity on his watch. Culminating in the failure of the ‘circuit breaker’ mechanism just weeks ago
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Source: Bloomberg
Stricter aid criteria
Less gov’t financial aid. For the city’s young entrepreneurs and SMEs, which dropped 12.7 pct y-o-y in 2015. Resulting from fewer applications approved last year. Authorities loaned MOP368 mln via four aid regimes last year, dropping MOP53.9 mln from MOP421.9 mln lent in 2014
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January 19, 2016
Macau
Gov’t lending to SMEs and young start-ups down 13 pct in 2015 Last year, the local government granted some MOP368 million in loans to local SMEs and young start-ups, benefiting a total of 871 firms Kam Leong
kamleong@macaubusinessdaily.com
successful applicants is up to eight years. In terms of sector, nearly half of the granted loans via the scheme went to the retail industry, which received a total of MOP33.1 million. Meanwhile, loans received by F&B establishments and hotels, as well as companies engaged in real estate services, accounted for 15.2 per cent and 10.2 per cent of the total, respectively.
For SMEs
T
he government’s financial aid to the city’s young entrepreneurs and SMEs dropped by some 12.7 per cent year-on-year in 2015, as fewer applications were approved by the authorities last year. Based on the latest data released by the Macao Economic Services (DSE), Business Daily’s calculations show that the government had splashed out a total of
MOP368 million on loans to the city’s SMEs and young entrepreneurs via four of its aid regimes last year, dropping MOP53.9 million from MOP421.9 million in 2014. The four regimes are the SME Aid Scheme, the SME Credit Guarantee Scheme and that for Special Projects, as well as the Young Entrepreneur Aid Scheme. A total of 1,112 applications were filed with the DSE for
these four aid schemes last year, while some 871 were approved, accounting for 78 per cent of the total. Nevertheless, the approval rate fell 6 percentage points year-on-year as the government approved 964 of 1,146 applications in 2014, representing 84 per cent of the total.
Aiding young entrepreneurs
For the Young Entrepreneurs Aid Scheme, the government
received a total of 428 applications in 2015. Approving 287 of the total, it granted some MOP68.44 million via the scheme last year, down from 2014’s MOP69 million for 288 approved applicants. The scheme, implemented in August 2013, offers interest-free loans of up to MOP300,000 for young people to start their own business, while the repayment period for
On the other hand, 552 of 610 SME applicants benefited from the SME Aid Scheme last year. The regime which grants loans of up to MOP600,000 per applicant for different finance purposes - loaned MOP198.2 million last year, down 20.4 per cent year-on-year from MOP248 million for 623 SMEs in 2014. Another aid scheme for SMEs, the SME Credit Guarantee Scheme, granted a total of MOP100.4 million in loans to 61 companies last year, down 4.4 per cent year-on-year compared to MOP105 million granted to 53 local small and middlesized firms. This scheme provides each beneficiary with credit guarantees equal to 70 per cent of the loan approved by participating banks. Meanwhile, a similar scheme for special projects – offering credit guarantees of up to 100 per cent of the amount for SMEs to finance special projects - gave the green light to one project for MOP1 million last year.
PJ: Confirmed ex-Customs chief committed suicide
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he Public Prosecutor’s Office has concluded that the death of the former director-general of the Macau Customs Services, Lai Man Wa, was a suicide, according to a press release by Judiciary Police (PJ) yesterday. The PJ quoted the prosecutor on the case as saying that all evidence pointed to Lai committing suicide. The prosecutor added in its report,
which was filed with the PJ on January 5, that there was no evidence showing that the death of the chief official is related to any criminal activities. The 56-year old was found dead in a public toilet near the residential Ocean Garden complex last October with slashed neck and wrists and a plastic bag enveloping her head, while a bloodied cutter knife and sleeping pills were in her bag. She is alleged by
authorities to have committed suicide on the day her body was discovered. The initial conclusion by the authorities, however, fuelled considerable public doubts. To dissolve such doubts, the PJ said in yesterday’s announcement that it had approached Lai’s family for approval to disclose the reasons for her suicide. ‘The [PJ] received a definite reply
from the family of the deceased on January 15, 2016. [In order] to respect the family and the privacy of the deceased, the Judiciary Police has no right to announce the reasons for the suicide based on the law,’ the PJ wrote in the press release. The announcement also revealed that the case’s prosecutor had decided to close the investigation into the case. K.L.
Business Daily | 3
January 19, 2016
Macau
Macau-China trade volume surges 30.3 pct for Jan-Nov The notable increase in the trade volume was contributed to by the country’s exports to the city Kam Leong
kamleong@macaubusinessdaily.com
T
he volume of trade between the city and Mainland China registered a notable yearon-year increase of 30.3 per cent between January and November last year due to the strong growth in China’s exports to the city. The latest official data released by the Chinese Ministry of Commerce shows that the volume of trade between Macau and the Mainland reached US$4.38 billion (MOP35.04 billion) during the first eleven months of last year, compared to US$3.36 billion for the same period in 2014. The Mainland’s exports to the Special Administrative Region contributed 96 per cent of the total trade value between the parties, amounting to US$4.21 billion.
The number represents a significant increase of 32.8 per cent from US$3.17 billion year-on-year. The city’s exports to China, however, posted a decrease of 10.8 per cent to US$170 million during the
eleven months, compared to US$190 million one year prior. For last November alone, the trade value between the two parties increased 17.1 per cent year-on-year, or 12.9 per cent month-on-month
to US$440 million. US$430 million of the total comprised the Mainland’s exports to Macau, jumping 18.5 per cent year-on-year, or 13.1 per cent month-on-month. In addition, the country saw exports from Macau
decrease 17.2 per cent yearon-year, amounting to only some US$10 million of the total. However, the number, compared to last October, had risen 6.3 per cent.
Local investment in Mainland up
During the month, Mainland authorities approved 136 projects invested in by Macau firms in the country, up 491.3 per cent monthon-month. Nevertheless, the actual capital used for these projects amounted to US$10 million, dropping 91.8 per cent month-on-month. Accumulatively, a total of 465 projects invested in by local companies in the Mainland were given the green light by the Chinese authorities between January and November last year, growing 40.5 per cent yearon-year. The actual capital used for these projects also surged 64.6 per cent yearon-year to US$860 million. During the eleven months, Mainland companies contracted a total of 34 projects in the city, worth a total of US$1.61 billion. Meanwhile, these projects generated a total of US$1.14 billion. As at the end of last November, turnover of the projects granted to Mainland companies reached US$11.72 billion, whilst a total of 120,129 Chinese labourers were working in the city.
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January 19, 2016
Macau Perfect Shape proposes change of name Hong Kong-listed slimming and beauty parlour chain Perfect Shape (PRC) Holdings Ltd., which also operates in Macau, has proposed changing the company’s name to Perfect Shape Beauty Technology Ltd., the firm told the Hong Kong bourse last week. All existing share certificates of the company in issue bearing the existing company’s name will continue to be valid for trading and settlement once the new name is effective. The proposed name change, which has yet to be approved by shareholders, can provide a ‘more appropriate corporate image’ that can benefit its future business, Perfect Shape said.
TurboJET to run Macau-Tuen Mun route from January 28 Fares for the new ferry route will remain the same as the operator’s current routes connecting the city to Hong Kong, excluding the Hong Kong International Airport run
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erry service operator TurboJET is to officially kick off its new route between Macau’s Outer Harbour Ferry Terminal and Tuen Mun in Hong Kong on January 28. Meanwhile, fares set for the route will be the same as the operator’s current routes connecting the city to Sheung Wan and Kowloon. According to the operator’s official website, the maiden voyage for the new route will depart from Tuen Mun at 15:10 pm next Thursday, whilst the first trip from the city to the new Hong Kong
destination will depart at 16:10 pm. The ferry company will offer four daily trips from Tuen Mun to Macau and four daily for the other way. Each trip is expected to take around 40 minutes while sailing time will be between 8:10am and
20:10pm every day. Fares for a trip from Tuen Mun to Macau will start from HK$164 (US$20.4) during weekdays, or HK$177 on weekends and holidays. Those for Macau-Tuen Mun trips, meanwhile, are set from HK$153 during weekdays
and HK$166 for weekends and holidays. Currently, TurboJET, run by Shun Tak-China Travel Ship Management Ltd., connects the Special Administrative Region to three destinations in Hong Kong; namely, Sheung Wan, Kowloon and the Hong Kong International Airport. TurboJET is not the first ferry company to operate a Macau-Tuen Mun ferry route. In 2011, Hong Kong ferry operator North West Express Ltd. also launched the route but it ceased service in 2012 due to low patronage.
Last October, the Hong Kong Government signed a seven-year tenancy agreement for the Tuen Mun Ferry Terminal with Shun Tak Group subsidiary Hongkong Macao Hydrofoil Company Ltd. The agreement regulates that Shun Tak operate a minimum of 14 round trips between Tuen Mun Ferry Terminal and Macau every week. Meanwhile, the company is allowed to offer ferry services from Hong Kong to Mainland Chinese cities in the Pearl River Delta. K.L.
Business Daily | 5
January 19, 2016
Macau
DPP’s election victory good news for local gaming industry The new President of the Chinese islands of Taiwan has openly voiced her stance against gaming, with its expansion unlikely to be a priority of the new government João Santos Filipe
jsfilipe@macaubusinessdaily.com
Tsai Ing-wen (C), President-elect of Taiwan
T
he victory of the independenceoriented Democratic Progressive Party (DPP) in both the Presidential and Legislature elections in Taiwan is likely to delay the expansion of gaming in the territory. By extension, Macau’s gaming industry is not likely to face competition from Taiwan for at least the next five or six years, the amount of time the industry would take to get established. ‘President Tsai has personally gone on record as being anti-gaming during the recent election cycle, and instructed DPP legislators in 2009 to vote against the bill to allow gaming referendums’, says a research note by Union Gaming released yesterday. In 2009, Taiwan lifted a 15-year ban on gaming on its outlying islands, namely Kinmen, Matsu and Penghu. After two referendums on gaming activities were held in 2012 on Penghu and Matsu, only the latter approved construction of casinos in the region. The next step in order to expand the gaming industry is the approval of a bill to allow gaming on Matsu Island. However, this bill is not expected to be one of the new government’s priorities. “Before any decision is taken, the new cabinet will have to be formed. Then the new cabinet will have to discuss its priorities, which are expected to be other issues closer
to the DPP party, rather than any gaming legislation”, the Director of the Centre for Public Policy and Law at the National Taiwan University, Yung-mau Chao, explained yesterday to Business Daily. “Gaming will not be among the priorities of the new government. There are other issues considered more urgent, such as reforms of public services and retirement system”, he added. The same negative prospects for the creation of a Taiwanese gaming industry on the outlying islands is also shared by gaming analyst Grant Govertsen of Union Gaming. “We remain somewhat pessimistic about the chances of a gaming bill with the DPP in power”, he said, after stressing the anti-gaming stance of newly elected President Tsai Ing-wen.
Limited impact on Macau
While the development of a gaming industry on the Taiwanese Offshore Islands would create extra competition for the shrinking Macau market, the impact would be limited. “If the gaming resorts are developed on the offshore islands, the impact on the Macau industry will not be significant. In terms of transportation, Macau does not have the barriers that the visitors to these islands would face”, Professor Davis Fong Ka Chio from the University of Macau told
Business Daily. “Macau is a more attractive destination than the islands. These islands still have to develop the required infrastructure to receive visitors, while Gongbei port is just 5 minutes walk away from Macau”. The access point was also stressed by the Union Gaming report as an advantage for the local gaming market compared to Matsu Island. “In our opinion, it is unlikely that Taiwanese customers to Macau will redirect a significant number of visitors to Matsu (or Kinmen or Penghu). This is largely a function of access. Currently, the Matsu islands are served by two small airports (Beigan and Nangan) that offer only a handful of small turboprop flights daily to Taipei”, Union Gaming notes. However, regarding Matsu Island, the equity research firm expects it to divert Fujian’s residents from the former Portuguese enclave because of the geographical proximity of the two regions. “Offering convenience gambling is no small thing and we think the end result of a casino in Matsu would be to significantly grow the gaming revenues being generated by Fujian residents”, they said. Concerning visitation to Macau from the Mainland, according to Union Gaming 44 per cent comes from Guangdong Province and 4.3 per cent from Fujian.
“With a casino in Fujian’s backyard, we would expect Macau to lose some visitation to a Matsu (or Kinmen or Penghu) integrated resort, while the same Matsu integrated resort should grow the total Fujian outbound gross gaming revenue pie. We believe this few hundred basis points of gross gaming revenue risk represents the most significant exposure Macau faces”, the analyst said.
Macau operators to stay away
Another shadow over the Taiwanese gaming market is the possibility of the Central Government prohibiting its citizens to gamble on Taiwan’s offshore islands. “It’s one thing for the People’s Republic of China to authorise its citizens to go on cultural and educational trips to Taiwan. It’s another different issue letting them go to Taiwan to gamble. I don’t think this will happen”, academic Davis Fong told Business Daily. This reason was also highlighted by the research note from Union Gaming, which says that the gaming operators in Macau are likely to stay away from the Taiwan gaming market. The other reasons for the ‘Big Six’ operators in Macau to refuse to enter such a market are the risk of upsetting the Central Government and the decline of the Chinese VIP market, which is not as promising as in the past.
6 | Business Daily
January 19, 2016
Macau
Dampened demand for casino dealers Some dealer training bases in town have halted courses due to slow demand amid gaming industry adjustment period
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he city’s biggest labour group, the Macau Federation of Trade Unions, has halted, for the first time in a decade, a training programme for prospective casino dealers; gaming operators have launched more training initiatives or laid down other career directions for their excess casino staff. This has all happened as the city’s gaming market has been battered by a slowing economy and a relentless anti-corruption campaign consuming Mainland China. Coupled with a cap on
the growth of gaming tables and advances in technology, casino dealers are less highly sought and have to live up to the expectations of acquiring several job skills, say industry observers. Betting on the growing demand of local casino croupiers following the liberalisation of the local gaming market, the Macau Federation of Trade Unions has become one of the main training bases for locals to become dealers since 2006. But the labour group has ceased offering the training course since the end of
last year. “In the past, everyone who finished our courses could basically secure a job as a dealer but this started to change [since 2014] with the declining gaming revenue,” said Leong Sun Iok, vice-president of the group who is in charge of the unions’ training centre. “The demand for dealers has not re-bounded after the opening of two new projects [last year] - only 30 to 40 per cent of our course participants could land a job - so we suspended the course after the opening of Studio City as we’ve accumulated a handful
of participants waiting for a job,” said Mr. Leong, referring to the inauguration of the latest US$3.2 billion project launched by gaming operator Melco Crown Entertainment Ltd. at the end of October. Currently facing an excess supply of dealers, another dealer training base, the School of Continuing Studies at the Macau University of Science and Technology, also halted its training course for potential dealers, with the latest intake completing their course in early December. A staff member at the school declined to provide any reasons, noting only that the course “will be temporarily suspended until further notice.” It is quite evident, however, that the sluggish demand in the labour market was among the reasons the school decided to put the course on hold. Not all training centres here follow in the footsteps of the trade unions, though. The Gaming Teaching and Research Centre at the Macao Polytechnic Institute will continue organising training for dealers with the latest courses starting in February. Zeng Zhonglu, a professor at the Centre, believes demand for personnel will pick up as new projects start up as “there’s still not enough labour in Macau with the latest unemployment rate staying as low as 1.9 per cent.” “It is understandable that there are fluctuations in the labour demand due to the current economic conditions,” he added. The full story can be read in this month’s issue of Macau Business magazine, available at newsstands or online at www.magzter.com
MGM Resorts is first major casino to drop free parking in Vegas The fee, which will take effect in the second quarter, coincides with a US$90 million upgrade of the company’s parking facilities
M
GM Resorts International, citing rising car traffic, will begin charging as much as US$10 for overnight parking at resorts including Bellagio as the largest casino operator on the Las Vegas Strip breaks ranks with competitors. The fee, which will take effect in the second quarter, coincides with a US$90 million upgrade of the company’s parking facilities, including a new 3,000-space garage next to the Excalibur Hotel and mobile technology that lets guests check for
spaces prior to arrival, Las Vegas-based MGM Resorts said in a statement Friday. Members of the company’s M Life customer loyalty program may qualify for free parking. “We recognize this is a significant departure from a long- established paradigm in the Las Vegas market,” Chief Operating Officer Corey Sanders said in the statement. “We believe these enhancements and new technology solutions will become welcome additions to our overall guest experience.”
Las Vegas casinos have long sought to lure gamblers with perks such as free parking and drinks and discounted food. As casinos have spread across the country, the Nevada operators have adapted by looking to increase sales from non-gambling sources, such as restaurants, nightclubs and shows. Casino revenue on the Las Vegas Strip fell 2.5 per cent to US$5.8 billion in the fiscal year ended June 30, according to the Nevada Gaming Control Board. The city welcomed a record 42 million visitors last year, a 2 per cent increase, according to the convention and visitors authority. Auto traffic was expected to rise 6 per cent during the period. MGM noted in a slide presentation that selfparking fees at hotels in other major cities range from US$49 in Chicago to US$15 in Phoenix. Bloomberg
Business Daily | 7
January 19, 2016
Macau
China to implement RRR for offshore banks’ domestic deposits Effective next Monday, offshore banks will have to follow the reserve requirement ratio (RRR) in what appears to be the central bank’s move to stem speculation in the yuan Stephanie Lai*
sw.lai@macaubusinessdaily.com
C
hina’s central bank said on Monday that it will start implementing a reserve requirement ratio (RRR) on offshore banks’ domestic deposits, in what appears to be its latest attempt to stem speculation in the yuan and manage money flowing in and out of the country. Confusion over China’s foreign exchange policy and its commitment to reforms has sparked mayhem in global financial markets in recent weeks as the People’s Bank of China (PBOC) allowed the yuan to fall sharply and then moved in aggressively to try to steady it. The PBOC on Monday confirmed the move would be effective January 25, saying it would help set up a longterm mechanism to regulate crossborder yuan fund flows and would help offshore financial institutions better manage their yuan liquidity. But it made no mention of increasing restrictions on banks in its statement, adding to uncertainty in markets about China’s policy intentions. The normal RRR rate in China is 17.5 per cent for large banks and 15.5 per cent for smaller banks. Some analysts said the announcement may at this stage be a more symbolic warning to banks, aimed at discouraging them from being too active in cross-border yuan transactions as part of the PBOC’s broader campaign to stabilise the yuan. The offshore yuan, or CNH, fell earlier this month to its lowest level since trading began in 2010 on fears China was planning to sharply devalue it to boost its ailing economy. “The market sees that this is a gesture by PBOC to warn speculators that are betting on a fast depreciation of its currency,” said Zhou Hao, senior emerging market economist for Asia at Commerzbank in Singapore. If it forces offshore banks to hold more yuan in reserve, it would reduce the amount of the currency available in the market, squeezing supply
further and making it more difficult and expensive for speculators, some analysts say. ‘This will have a tightening effect on CNH funding, and follows (the PBOC’s) reported intervention last week and other measures in recent months,’ an HSBC report says. “From a medium-term perspective, this will also allow PBOC to have greater control of CNH money creation.” HSBC estimates that offshore yuan deposits totalled 1.45 trillion yuan (US$220.40 billion) in the four main markets of Hong Kong, Taiwan, Singapore and South Korea as of last November.
Offshore liquidity
As for Macau, the amount of yuan deposits held by the banks here as of last November reached 88.69 billion yuan, according to data from the Monetary Authority of Macau (AMCM).
Upon Business Daily’s enquiry, the Industrial and Commercial Bank of China (Macau) Ltd. said they had yet to observe the impact that the move of PBOC has on their business. The PBOC has been under increasing pressure from policy advisors to let the currency fall quickly and sharply, after spending billions of dollars buying yuan over recent months to defend the exchange rate. China’s foreign exchange regulator has ordered banks in some of the country’s major import and export centres to limit purchase of U.S. dollars this month. China also suspended forex business for some foreign banks, including Deutsche, DBS and Standard Chartered, at the end of last year. According to other sources and HSBC analysts, the deposits that will be affected by the latest announcement include:
1) Offshore participating banks’ CNH deposits placed with onshore correspondent banks; 2) CNH deposits from Bank of China Hong Kong and Macau with PBoC Shenzhen and Zhuhai; 3) Other offshore clearing banks’ CNH deposits placed with onshore parent banks. “We haven’t heard anything from clearing banks or correspondent banks on the reserve requirements. If they ask us to put money as reserve requirements, we can easily get all our yuan deposits to the offshore market,” said a deputy head of treasury at a yuan business participating bank in Hong Kong. The rule applies to yuan deposits from offshore financial institutions that are put in onshore financial institutions, excluding foreign central banks, monetary authorities, international financial organisations and sovereign wealth funds. * with Reuters
8 | Business Daily
January 19, 2016
Greater China
New home prices rise further in December Home prices’ strong gains in big cities were in sharp contrast with performance in small cities
Official data showed property investment grew just 1.3 percent in the first 11 months of 2015 from a year earlier
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hina’s home prices continued to rise in December 2015, adding to signs of improving in the housing market, although the recovery remains uneven across the country. Average new home prices in 70 major cities rose 7.7 percent in December from a year earlier, quickening from November’s 6.5 percent rise, the National Bureau of
Statistics (NBS) said yesterday. Even a mild recovery in the housing market would ease concerns of an acute slowdown in China’s economy, which is expected to show its weakest growth in 25 years in 2015. The NBS data showed on-month price rises were seen in 39 of 70 major cities tracked by the NBS, up from 33 in November.
Big cities led the prices gains again in December, with Shenzhen being the top performer. Home prices there rose 46.8 percent from a year ago, NBS data showed. Home prices’ strong gains in big cities were in sharp contrast with performance in small cities. Average home prices in third-tier cities still fell year-on-year in December, it added.
A Reuters calculation based on NBS data showed China’s new home prices rose 1.6 percent in on-year terms, marking the third month of year-on-year gains in a row. Reuters started its weighted China home price index in January 2011 when the NBS stopped providing nationwide data, only giving home price changes in each of 70 major cities. But it started to provide nationwide data occasionally in recent months. Still, rising home prices have yet to revive a recovery in property investment and construction as a huge overhang of unsold homes discourages developers from launching new projects. Official data showed property investment, a crucial driver of the economy, grew just 1.3 percent in the first 11 months of 2015 from a year earlier, the lowest rate since early 2009. China’s top leaders have made reducing excess stock in the housing market a key task for in 2016, although a plan to encourage migrants to buy unsold homes in lower-tier cities faces challenges. Most of China’s unsold homes are in third- and fourth-tier cities, where cash-strapped local governments rely on land-sales revenues as their main income, and have been hit by migration to larger centres. Some analysts estimate it could take at least two years to clear the glut. While property prices in small cities are still falling, a rebound is under way in the biggest cities, bringing with it the return of land speculation that could stoke another bubble and widening the economic gap between “Tier 1” centres and the others. Reuters
Ban on new coal mines barely scratches the surface of tackling capacity The move to curb new approvals has so far had little impact on prices Kathy Chen and David Stanway
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hina’s decision to stop approving new coal mines for three years has been applauded by green groups, but the move is likely to make barely a dent on the world’s biggest coal industry given its vast existing production capacity. Some estimates suggest China’s surplus capacity could be as high as 2 billion tonnes of coal a year - more than 50 percent of 2015 output - in a country with
nearly 11,000 mines. Beijing wants to cut the share of coal in its energy mix to contain pollution and meet climate change goals, while it is also trying to manage the fortunes of a struggling sector that employs nearly 6 million people. And so far efforts to rein in production appear to have had limited market impact with Chinese coal prices losing a third last year. “The ban on new
approvals will have little impact because capacity is already too much,” Wang Zhixuan, head of the China Electricity Council, said on the sidelines of an coal industry meeting last week. The ban, which was announced in December, was described by environmental group Greenpeace as “a nail in the coffin for king coal”, but still leaves huge mining production capacity. China is estimated to have produced around 3.7 billion tonnes of coal in 2015 and Jiang Zhimin, vice-secretary of the China National Coal Association (CNCA), said there were enough mines in operation to produce as much as 5.7 billion tonnes, meaning that many collieries are working well below capacity.
Closing pits
China shut around 1,000 pits with a total capacity of 70 million tonnes in 2015 and plans to close a similar amount in 2016, the
country’s National Energy Administration (NEA) said. But according to CNCA data last year China has 10,760 mines, and 5,600 of them need to close to meet rules banning those with annual capacity lower than 90,000 tonnes. According to data compiled by Reuters, the NEA approved 15 new large-scale coal mines last year, with total annual production capacity at 58.6 million tonnes, lower than the 69.6 million tonnes approved in 2014. The pace of approvals slowed noticeably in the second half, but no data was available on newly approved projects with annual production capacity lower than 1.2 million tonnes, which are the responsibility of provincial governments. Local governments can, in theory, make their own decisions on smaller mines. Some provinces, including Shanxi, have imposed bans on new projects.
The move to curb new approvals has so far had little impact on prices. China’s biggest miner, the Shenhua Group, was forced to slash January contract prices by 13-20 yuan (US$1.97US$3.04) per tonne to secure sales. Meanwhile, spot prices at Qinhuangdao port were 370 yuan per tonne, unchanged since November. Despite a 3.7 percent fall in Chinese production in the first 11 months of 2015, Qinhuangdao prices lost nearly 30 percent last year. The coal association said that more than 80 percent of coal companies made a loss last year and urged the government to introduce a minimum price to support firms. But opponents said this would merely prolong overcapacity and Wang of the China Electricity Council described the plan as “impossible and irrational”. Reuters
Business Daily | 9
January 19, 2016
Greater China Steel firms suffered US$8 billion in losses up to November
Wanda plans five ‘substantial’ acquisitions
China’s total annual crude steel capacity is now 1.2 billion tonnes David Stanway
C
hina’s major steel firms lost 53.1 billion yuan (US$8.07 billion) from January to November last year, as prices fell because of overcapacity and slumping demand, the China Iron and Steel Association (CISA) said yesterday. China’s steel sector, responsible for around half of global output, has been one of the biggest casualties of the country’s economic slowdown, with prices now at multi-decade lows as a result of a massive supply glut. China’s total annual crude steel capacity is now 1.2 billion tonnes, CISA’s chairman Zhang Guangning said in a speech at the association’s annual conference last week that was posted on the group’s website (www. chinaisa.org.cn) yesterday. With about a third of the country’s total capacity now standing idle, Zhang said China has still not established a mechanism that would allow loss-making steel enterprises to exit the market. “Some enterprises want to exit, but an exit route has not been opened up… and some local governments continue to urge steel firms to produce in the interests of local economic development and social stability,” said Zhang, who is also chairman of the state-owned Anshan Iron and Steel Group.
HKMA has no plan to change currency peg
He said CISA member firms saw their total earnings decline 19.3 percent over the 11 months, with more than half making losses, he said. The association consists of around 100 medium- and large-sized steel mills covering nearly 80 percent of national output. Steel consumption in China peaked in 2013, while output in the world’s biggest producer peaked the following year, Zhang said. “The period of high market demand growth has already passed into history, and from now on... overall demand will slowly decline,” he said. Crude steel output in China fell 2.2 percent to 738.4 million tonnes in the
first 11 months of 2015, but apparent steel demand fell 5.5 percent to 645 million tonnes over the 11-month period, Zhang said. Exports have offered a lifeline for Chinese steelmakers, with falling domestic prices allowing them to undercut overseas producers, leading to a surge in trade disputes. Zhang said there were 36 antidumping investigations into Chinese steelmakers last year, double the 2014 number. A composite price index of eight steel products compiled by CISA was at 56.37 in early January, compared to the 1994 baseline of 100. Reuters
Taiwan National Stability Fund to continue buying stocks Some fund managers said the fund is also concerned about market uncertainty regarding Taiwan-China ties after the Democratic Progressive Party takes power Faith Hung
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aiwan’s National Stability Fund will continue to support local stocks, the fund’s chief said yesterday, as the island’s election of an independence-leaning president on the weekend raised concerns about worsening economic ties with the mainland. The fund, with about T$500 billion (US$15 billion) under management, will keep shoring up the market until April due to continued global market turmoil, Wu Tang-chieh, who is in charge of the fund, told reporters. The news sent local stocks to close 0.6 percent higher yesterday, recovering from a loss of almost 2 percent earlier in the session and defying a wider selloff in global markets. “Since the beginning of this year, China’s stocks and currency have plummeted, sparking anxiety and volatility in global markets and dragging down Taiwan stocks,” Wu said at a news briefing. “The National Stability Fund has effectively shored up investor confidence, but the uncertainty above still exists.”
Dalian Wanda Group Co., the property-to-entertainment conglomerate headed by Asia’s richest man, is planning five “substantial” acquisitions this year as the company braces for a drop in sales. Wanda, led by Chinese billionaire Wang Jianlin, is aiming to complete three overseas purchases and two domestic ones, excluding cinema chains, it said in an e-mail yesterday. Separately, Wanda forecast that sales will fall 12 percent in 2016 as slumping revenue from its main real estate business overshadows gains from the burgeoning entertainment operations, the first time it is seeing a drop since at least 2009.
His comments at the news briefing follow similar comments he made in a phone interview with Reuters earlier yesterday, after a meeting of fund officials. The fund’s decision came as a surprise to many in the market who had expected it to announce an end to its interventions. Some fund managers said the fund is also concerned about market uncertainty regarding Taiwan-China ties after the Democratic Progressive Party (DPP) takes power. “The decision of course has something to do with concerns about future cross-strait relations,” said a fund manager at a foreign asset management firm in Taipei. He asked not to be identified due to the sensitive nature of the matter. The fund, which was set up to prevent plunges during times of market turmoil, has been intervening in the stock market since August, buying shares worth T$19 billion (US$575 million), it said in a statement. Reuters
The head of Hong Kong’s central bank said yesterday it has no plans to change the Hong Kong dollar’s peg to the U.S. currency despite recent volatility in the market. Norman Chan, chief executive of the Hong Kong Monetary Authority (HKMA), speaking at the Asia Financial Forum, added that the money market had been operating smoothly so far despite the volatile market. The Hong Kong dollar fell to more than four-year lows earlier in the day as volatility, weak global markets and capital outflows hurt investor sentiment.
Ping An-backed lending platform raises US$1.2 billion Chinese online lending platform Lufax, backed by Ping An Insurance Group Co of China Ltd, has raised US$1.2 billion from a group of investors ahead of a planned dual listing in the second half of the year. The capital raising values Shanghai Lujiazui International Financial Asset Exchange Co Ltd, as the company is formally called, at US$18.5 billion, it said in a statement. Lufax raised US$924 million from new investors in a so-called B round of financing, as well as an additional US$292 million from investors who had bought stakes in the company in an initial funding round.
800 billion yuan for railway network in 2016 China will invest 800 billion yuan (US$121.60 billion) in fixed assets in 2016 as part of on-going efforts to expand its railway network, the official Shanghai Securities News reported yesterday. Stateowned China Railway Corp expects to boost passenger traffic by 10 percent and freight volume by 2 percent in 2016, the paper quoted the firm’s general manager Sheng Guangzu as saying at a conference on Sunday. China Railway invested 823.8 billion yuan in 2015, building 9,531 kilometres of new lines which included 3,306 kilometres of high-speed rail, according to the Shanghai Securities News.
Russia expects AIIB to approve first loan in H1
KEY POINTS Fund to continue supporting local markets until April Fund chief says global market uncertainty still exists Taiwan stocks outperformed regional markets yesterday
Russia expects the China-led Asia Infrastructure Investment Bank (AIIB) to approve its first loans within six months, Deputy Prime Minister Arkady Dvorkovich said yesterday. China officially launched the new bank, which is seen as a rival to the U.S-led World Bank, on Sunday Russia, the third largest shareholder in the AIIB after China and India, would like the new bank to contribute to infrastructure projects in the so called Arctic or Northern Sea Route, the deputy prime minister said. These could be railways to transport cargo to port along the maritime route.
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Greater China
False emissions reporting undermines Mainland's pollution fight Coal emission violations cost power producers 635 million yuan in lost subsidies and fines last year David Stanway and Kathy Chen
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idespread misreporting of harmful gas emissions by Chinese electricity firms is threatening the country's attempts to rein in pollution, with government policies aimed at generating cleaner power struggling to halt the practice. Coal-fired power accounts for three-quarters of China's total generation capacity and is a major source of the toxic smog that shrouded much of the country's north last month, prompting "red alerts" in dozens of cities, including the capital Beijing. But the government has found it hard to impose a tougher antipollution regime on the power sector, with China's energy administration describing it as a "weak link" in efforts to tackle smog caused by gases such as sulphur dioxide. No official data on the extent of the problem has been released since a government audit in 2013 found hundreds of power firms had falsified emissions data, although authorities have continued to name and shame individual operators. "There is no guarantee of avoiding under-reporting (of emissions) at local plants located far away from supervisory bodies. Coal data is very fuzzy," said a manager with a stateowned power company, who did not want to be named because he is not authorized to speak to the media. The manager said firms could easily exaggerate coal efficiency by manipulating their numbers. For example, power companies that also provided heating for local communities
could overstate the amount of coal used for heat generation, which is not subject to direct monitoring, and understate the amount used for power. "Data falsification is a longstanding problem: China will not get its environmental house in order if it does not deal with this first," said Alex Wang, an expert in Chinese environmental law at UCLA.
Tougher rules
Beijing has been toughening and extending its environmental protection laws in recent years. Amended legislation which came into force at the start of 2015 gave authorities more power to punish firms and officials responsible for violations, including falsifying data, subjecting them to unlimited fines and threats of closure. Coal emission violations cost power producers 635 million yuan (US$98 million) in lost subsidies and fines last year, while at least 10 thermal power companies have paid 519 million yuan n fines since 2013 for misusing emissions control equipment in order to meet targets and get subsidies. Last November, China's environment ministry named two generators in the north-eastern province of Liaoning for data fraud as part of a move to publicly shame operators. In its latest bid to curb pollution, China's cabinet in December ordered all coal-fired power firms to reduce pollutants like sulphur dioxide by
60 percent by 2020, saying it would close inefficient plants and promote advanced low-emissions technology through subsidies. As an incentive, it offered increased payments to generators that upgrade facilities, with total subsidies estimated to be worth 42 billion yuan (US$6.4 billion) a year. Yet for power plants already under pressure from crippling overcapacity and slowing demand growth, threats of heavy fines or forced closures also offers a powerful incentive to massage emissions numbers.
Halting fraud
The environment ministry acknowledged in December that "a minority of firms were still manipulating emissions control equipment and falsifying data in an attempt to avoid supervision". To help counter fraud, the government has set up continuous emissions monitoring systems that can share real-time pollution readings with authorities, but critics say these can be manipulated and only cover big state-owned firms. "The coal power sector has strengthened standards ahead of others, but to really motivate the change to happen, the law must be enforced and that depends on data quality," said Ma Jun, director at the Institute of Public and Environmental Affairs, a non-government organisation that campaigns for improved pollution monitoring in China. Tougher enforcement was also needed.
The coal power sector has strengthened standards ahead of others, but to really motivate the change to happen, the law must be enforced and that depends on data quality Ma Jun, director, China’s Institute of Public and Environmental Affairs
"The law is not enough," Ma said. "It states that they could even be put in jail, but so far we haven't seen many cases like that." Environmental group Greenpeace said in December that some plants it investigated in eastern China's Jiangsu province even recorded "negative" emissions, according to data submitted to authorities by the companies. All 12 of the plants it investigated exceeded emission limits on sulphur dioxide and nitrogen oxides in 2015, the group said. Reuters
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January 19, 2016
Asia
India's exports fall for 13th month Cheaper Chinese exports have undercut exports of Indian engineering goods Manoj Kumar
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ndia’s merchandise exports fell for the 13th successive month in December, as orders from the United States and Europe shrank and exporters grappled with a competitively weaker Chinese yuan. The deteriorating global economic growth outlook and rising volatility in currency markets have dampened Indian exports, although the blow has been softened by a collapse in the country’s oil import bill. “We are facing terrible times as orders from the U.S. and Europe have dried up,” said S.C. Ralhan, president of the Federation of Indian Export Organisations (FIEO), referring to shipments to India’s two largest markets. “The slowdown in China and depreciation of its currency have further hit exports,” he said, adding that total merchandise exports could fall to about US$250 billion in the fiscal year ending on March 31. Exports in December fell 14.75 percent from a year earlier to US$22.3 billion while imports stood at 33.96 billion, data from the Ministry of Commerce and Industry showed yesterday. India’s merchandise exports declined 3.5 percent in 2014/15 to US$310 billion from the previous year while imports were down 0.5 percent to US$448 billion. Cheaper Chinese exports have undercut exports of Indian engineering goods, which constitute around a quarter of total merchandise exports. Engineering exports could fall to near US$60 billion in the current fiscal year from US$72 billion a year earlier, said T.S. Bhasin, chairman of the Engineering Export Promotion Council. “My own exports are down by more than 30 percent, forcing me to
KEY POINTS December exports fall 14.75 pct, imports down 3.88 pct y/y Industry sees total exports falling to US$250 bln for 2015/16 Job losses of more than 100,000 seen in engineering sector alone
retrench contract workers and sell in the local market at a lower price,” he said, adding more than 100,000 employees in engineering might lose their jobs. Prime Minister Narendra Modi has made his Make in India programme, which seeks to attract foreign investment in export-oriented manufacturing, a centrepiece of an economic recovery plan that needs to create a million jobs a month to succeed. India’s trade deficit with China widened to US$35.6 billion during the April-Nov period from US$32.4 billion a year earlier. During that period, its exports to China fell to US$6.2 billion from US$7.9 billion a year ago, reflecting a severe imbalance
in trade between the world’s two most populous countries. The government offered a fiscal package of about 27 billion rupees (US$400 million) a year, in November to provide subsidised credit to exporters, hoping it could marginally help stabilise exports in coming months. Finance Minister Arun Jaitley, who will present his annual budget for 2016/17 on February 29, is unlikely to provide much relief to exporters, officials said, as he faces a tough challenge to meet his fiscal deficit targets. “We do not have much hope though exporters’ survival is at stake,” Ralhan from the FIEO said. Reuters
Japan’s central bank says small firms cautious over raising wages The Bank of Japan conducted a nationwide survey on companies' plans to raise wages Leika Kihara
Some firms are wary of boosting wages as they see recent profit gains coming largely from temporary factors such as a weak yen
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he Bank of Japan (BOJ) kept its upbeat outlook for most of the country's nine economic regions yesterday, but said small firms remained cautious about raising wages despite a tightening job market. The central bank said some firms in big cities were keen to raise base salaries but it struck a cautious tone about wage-setting behaviours nationwide, which could keep alive market expectations it may ease monetary policy as
early as this month. "Many small- and medium-sized companies in regional areas of Japan remain cautious of raising regular pay for permanent employees," the central bank said in a quarterly report on Japan's regional economies. Some firms are wary of boosting wages as they see recent profit gains coming largely from temporary factors such as a weak yen, while others cite a shrinking domestic market as Japan's
population ages rapidly, the report said. Wage growth is crucial to the BOJ's goal of accelerating inflation to 2 percent, as higher wages give consumers more money to spend, allowing firms to raise prices. In the quarterly report, the BOJ maintained its assessment for seven of Japan's nine regional economies, saying they were recovering moderately. The Tokai central Japan region, home to auto giant
Toyota Motor Corp, raised its assessment to say its economy is "expanding" moderately - the most upbeat view in nearly eight years. The Kinki western Japan region, on the other hand, cut its assessment as output shrank due to slowing emerging market demand for automobiles and cellular phone parts. The BOJ conducted a nationwide survey on companies' plans to raise wages, underscoring concerns over whether firms will do
their part to revive economic growth. The survey was included in the BOJ's quarterly report, which was released after a meeting of the central bank's regional branch managers. BOJ Governor Haruhiko Kuroda maintained his optimism on Japan's economic outlook, telling branch managers that the world's third-largest economy was expected to recover moderately despite pressures from slowing global growth. Reuters
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Asia
Singapore exports slide as downturn in sales to China deepens Concerns about the global economy have heightened in recent weeks as crude prices continued to tumble amid concerns about ebbing demand and a supply glut Jongwoo Cheon and Masayuki Kitano
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ingapore exports fell more than expected in December as a slump in sales to China deepened, adding to worries that global headwinds will keep the tradedependent economy on a wobbly footing this year. The data could revive expectations that the central bank will ease its monetary policy again in April or in an off-cycle move before that, especially as oil prices continue to tumble. Non-oil domestic exports (NODX) slid 7.2 percent in December from a year earlier, trade agency International Enterprise Singapore said in a statement on Monday, missing the median forecast of a 5.1 percent contraction in a Reuters poll. That compared with a 3.4 percent contraction in November. “Today’s NODX print reinforced our view that risks to the growth outlook is clearly skewed to the downside and could possibly elicit a further calibration in policy settings,” said Weiwen Ng, an ANZ economist in Singapore. Last year, Singapore economy
KEY POINTS December NODX -7.2 pct y/y vs -5.1 pct forecast December NODX -3.1 pct m/m sadj vs 0.0 pct forecast Contraction in China NODX doubles; Europe NODX down again
grew 2.1 percent, the weakest performance since 2009 when the trade-dependent economy was hit by the global financial crisis. Concerns about the global economy have heightened in recent weeks as crude prices continued to tumble amid concerns about ebbing demand and a supply glut. A broader rout
in commodities and slowing growth in China have also rocked financial markets worried about the global economy. Sales to China, Singapore’s top overseas market, decreased 18.7 percent in December from a year earlier, compared to a 9.1 percent slide in November. Shipments to the
European Union declined 2.9 percent last month. Most economists say the citystate’s central bank is unlikely to deliver a surprise off-cycle easing similar to the one in January last year, but a few see risks of monetary stimulus if oil prices fall more sharply or China’s economy takes a turn for the worse. Singapore core inflation slowed last year and set a five-year low of 0.1 percent in May, due to the impact of lower oil prices. The Monetary Authority of Singapore expects core inflation, which the central bank uses to set policy, to rebound to between 0.5 to 1.5 percent for the whole of 2016 from a forecast of around 0.5 percent in 2015. Selena Ling, head of treasury and research strategy for OCBC Bank, said the key will be whether the MAS sees the drop in oil prices as a temporary phenomenon or a structural shift. “That will be key, the game changer. I think the slow growth story is pretty much priced in,” she said.
Central Group says ‘keen to bid’ for retailer Casino’s stores in Vietnam and Thailand Central has been actively looking to buy assets overseas as it wants to expand into Southeast Asia and Europe Manunphattr Dhanananphorn
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hailand’s biggest retailer, Central Group, said it may bid for French supermarket firm Casino Group’s Thai and Vietnam stores, seeking control of a business it already partly owns as a platform for growth in fast-growing Southeast Asia. “We are interested in both (Casino-controlled) Big C in Thailand and Vietnam,” Prin Chirathivat, deputy chief
executive officer told Reuters in a phone call. “If the prices are not too expensive, we will be keen to bid,” Prin said. Casino owns 58.6 percent of the Thai asset, Big C Supercenter Pcl, which has a market value of US$5.5 billion, and is the country’s second-biggest hypermarket business. The Vietnam asset is worth at least US$750 million, according to people familiar with the matter.
Central owns 25 percent of Big C through its founding Chirathivat family, according to company sources. A takeover bid would make for Thailand’s secondbiggest inbound acquisition after 2013’s US$6.6 billion purchase by CP All Pcl of cash-and-carry wholesaler Siam Makro Pcl. Casino said last week some buyers had expressed interest in its Thai business during the
sale process for its Vietnam unit. The French firm’s move to consider selling the Thai unit comes after a report by short-seller Muddy Waters in December that said Casino was “dangerously leveraged”, prompting the worst slide in its stock in seven years. Bankers pointed to Central’s existing interest in Big C as a potentially serious impediment for other bidders - despite the asset’s
Reuters
appeal as growing Southeast Asian economies bring rising consumer spending. Big C was founded by Central, but it brought in Casino as a partner in 1999 when Thailand was mired in economic difficulties. “The sell-side is trying to drum up competition to Central for Thailand, but (it’s) not sure people want to go hostile against them,” a banker familiar with the transaction said. “This is all happening so quickly.” Other potential bidders for the Big C Vietnam asset include Berli Jucker Pcl, the flagship company in the consumer business of TCC Group, controlled by Thai tycoon Charoen Sirivadhanabhakdi. Central has been actively looking to buy assets overseas as it wants to expand into Southeast Asia and Europe. The Chirathivat family is the third-richest in Thailand, according to Forbes Magazine. Reuters
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January 19, 2016
Asia India’s Wipro meets forecasts Wipro Ltd, India’s third-largest software services exporter, posted a 2 percent rise in quarterly net profit yesterday, in line with street estimates, as it added 39 new customers during the quarter. The operating margins for its IT services business, however, fell to 20.2 percent in the quarter ended December, from 21.8 percent a year earlier, due to heavy flooding in Chennai city, where it employs about 13 percent of its staff. Wipro forecast its IT services revenue to be in the band of US$1.88 billion to US$1.91 billion for the March quarter.
Australian inflation gauge stays benign in December
S.Korea halts U.S poultry imports
The annual pace quickened a touch to 2.0 percent but was still at the very bottom of the Reserve Bank of Australia’s target
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private-sector gauge of Australian inflation remained subdued in December and pointed to only a slight pickup in price pressures that should still leave room for further cuts in interest rates if needed. Yesterday’s survey from TD Securities and the Melbourne Institute showed consumer prices rose 0.2 percent in December, from November when they edged up 0.1 percent. The annual pace quickened a touch to 2.0 percent, from 1.8 percent but was still at the very bottom of the Reserve Bank of Australia’s (RBA) target band of 2 to 3 percent. A measure of underlying inflation pressures, the trimmed mean, lifted to 1.7 percent, from 1.6 percent.
Annette Beacher, chief Asia-Pacific macro strategist at TD Securities, said the survey suggested official measures of underlying inflation likely increased by 0.5 percent in the fourth quarter, for an annual rate of 2.0 percent - figures that were entirely consistent with the RBA’s own projections. The official inflation report is due on Jan 27. “We remain of the view that the RBA is likely to leave the cash rate at 2 percent this year, although the rocky start to the year has increased the odds that a rate cut could be delivered should that prove to be beneficial,” she said. The central bank holds its first policy review of 2016 on February 2.
The TD-MI survey showed price rises for fruit and vegetables, holiday travel and accommodation, and meat and seafood. These were offset by falls in fuel, non-alcoholic beverages and rent. Inflation excluding fuel, fruit and vegetables came in at 0.3 percent in December, while the annual pace quickened a tick to 2.2 percent. Non-tradables inflation, covering the prices of goods and services not determined by international competition, slowed to 2.1 percent, from 2.3 percent. Tradable inflation sped up to 1.9 percent, from 1.1 percent, reflecting the impact of a weaker Australian dollar. Reuters
Tepid inflation may fuel more NZ rate cuts The RBNZ has been concerned about rising house price inflation
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ew Zealand is expected to report muted fourth quarter consumer price inflation figures on Wednesday, adding to the view that the central bank might cut interest rates again - although it will still be keeping a close eye on the housing market. A Reuters poll found analysts’ median expectation was for Wednesday’s data to show annual consumer price inflation at 0.4 percent in the fourth quarter, while it was tipped to fall 0.2 percent quarteron-quarter. Weak data could mean inflation undershooting the central bank’s forecasts for the first quarter of this year, pointing to a “slower rebound” back into the central bank’s 1 percent to 3 percent target range, said BNZ Head of Research Stephen Toplis. “A further delayed return of headline CPI inflation to within target band (let alone the 2 percent midpoint of it) may add to the perception that the bank needs to cut its official cash rate even further,” he said. He added, however, recent data pointing to “serious momentum” in housing markets across the country “will remain a prickly area for the RBNZ”. The Reserve Bank of New Zealand (RBNZ) cut interest rates by a quarter
percentage point to 2.5 percent in December but virtually shut the door on further easing, saying it expected to achieve its 1 percent to 3 percent inflation target without more monetary stimulus. The RBNZ has long been concerned about rising house price inflation in the largest city of Auckland and news that prices outside the city may also be rising quickly would be worrying. ASB Bank Chief Economist Nick Tuffley, however, said persistently
weak inflation pressures would still prompt two further 25 basis point cuts in the official cash rate from mid-2016. He tips annual inflation to be 0.3 percent in the fourth quarter, noting weak fuel prices means CPI will not move back over 1 percent until the second half of the year. “Consequently, inflation is likely to remain below the RBNZ’s target band for around 2 years,” he said. Reuters
South Korea has halted imports of U.S poultry and poultry meat just two months after shipments were resumed, following a fresh discovery of bird flu in the United States, the agriculture ministry said on Saturday. The ban will not apply to imports of poultry meat that has been treated with heat, the ministry said in a statement. A new strain of avian influenza, H7N8, has been detected in a turkey farm in Indiana state, the U.S. Centers for Disease Control and Prevention said on Friday.
Australia new vehicle sales fall Australian new vehicle sales fell in December, but still showed a healthy gain on the same month last year. Yesterday’s data from the Australian Bureau of Statistics showed 97,338 new vehicles were sold in December, seasonally adjusted. That was down 0.5 percent from November, when sales had risen 1.3 percent. December sales were 2.2 percent higher than a year ago.
Japan’s diplomat urges China to undertake reforms Japanese top financial diplomat Masatsugu Asakawa yesterday urged China to carry out capital account reforms as the recent turbulence in its currency and stock markets raises renewed concerns about its economy. Asakawa, vice finance minister for international affairs, told a seminar that he saw China’s structural reforms heading in the right direction.
Wesfarmers takes DIY prowess to Britain Australia’s biggest retail group Wesfarmers Ltd unveiled yesterday a A$1.2 billion (US$829.9 million) expansion into Britain’s hardware sector, betting on an extension of the DIY craze that turned its Bunnings stores into the market leader at home. Wesfarmers, which also owns the Coles supermarket chain, said in a stock exchange filing that it plans to buy the Homebase unit of Britain’s Home Retail Group Plc for A$705 million and then spend another A$500 million refurbishing its 265 stores. No further details were disclosed. Last week, Home Retail Group said it was in advanced talks to sell Homebase as part of a “transformation” plan.
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International US to pay Iran US$1.7 bln in debt and interest The United States is to repay Iran a US$400 million debt and US$1.3 billion in interest dating to the Islamic revolution, Secretary of State John Kerry said Sunday. The repayment, which settles a suit brought under an international legal tribunal, is separate from the tens of billions of dollars in frozen foreign accounts that Iran can now access after the end of nuclear sanctions. But the timing of the announcement, one day after the implementation of the Iran nuclear accord, will be seen as pointing to a broader clearing of the decks between the old foes.
Banks to pitch for Saudi grains privatization Deutsche Bank AG, HSBC Holdings Plc and Credit Suisse Group AG are among banks seeking to advise on one of the first privatizations under Saudi Arabia’s new economic reform plan, according to four people with knowledge of the matter. The lenders, and rivals including JPMorgan Chase & Co., Saudi Fransi Capital and Samba Financial Group, attended a meeting at the end of last year where interested banks were briefed on plans for the partial privatization of Saudi Arabia’s Grain Silos and Flour Mills Organization, the people said, asking not to be identified as the talks are private.
Renault sees 2016 sales growth accelerating Renault SA forecast deliveries will grow at a faster pace in 2016 than last year as the carmaker expects more buyers to be lured by new models such as the Kadjar sport utility vehicle. Deliveries rose 3.3 percent to 2.8 million vehicles in 2015, bolstered by 10 percent growth in Europe, the French carmaker said Monday in a statement. Renault forecast industry-wide demand for new vehicles will grow 1 percent to 2 percent this year. Renault has come under scrutiny after it revealed last Thursday that its offices in France were searched by government fraud investigators.
Richest 1% own more than the rest of the World As a priority, Oxfam is calling for an end to the era of tax havens which has seen the increasing use of offshore centres to avoid paying taxes
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he richest one percent of the world’s population now own more than the rest of the world combined, aid group Oxfam said yesterday. “Runaway inequality has created a world where 62 people own as much wealth as the poorest half of the world’s population -- a figure that has fallen from 388 just five years ago,” the anti-poverty agency said in its reported published ahead of the annual gathering of the world’s financial and political elites in Davos. The report, entitled “An Economy for the 1%”, states that women are disproportionately affected by the global inequality. “One of the other key trends behind rising inequality set out in Oxfam International’s report is the falling share of national income going to workers in almost all developed and most developing countries... The majority of low paid workers around the world are women.” Although world leaders have increasingly talked about the need to tackle inequality “the gap between
The world has become a much more unequal place and the trend is accelerating Winnie Byanima, Executive Director, Oxfam International
Airbus, Uber team up for on-demand helicopter rides European aircraft maker Airbus has said it is teaming up with global ridesharing service Uber to test plans for offering an on-demand helicopter service. Airbus’ new Silicon Valley-based innovation centre “is collaborating with terrestrial mobility provider Uber on a market pilot to provide an on-demand transportation service”, it said in a statement Sunday. It would offer on-demand rides on Airbus’ H125 and H130 helicopters, it said, without giving an indication of their likely price. Its goal would be “proving out a new business model for helicopter operators to access a broader customer base”, it added.
Lead developer quits bitcoin Bitcoin slid by 10 percent on Friday after one of its lead developers, Mike Hearn, said in a blog post that he was ending his involvement with the cryptocurrency and selling all of his remaining holdings because it had “failed”. Hearn, one of five senior developers who has spent more than five years working on the web-based currency, said he would no longer be taking part in development. “Despite knowing that bitcoin could fail all along, the now inescapable conclusion that it has failed still saddens me greatly,” Hearn said in his post on blog-publishing platform Medium.
Oxfam Executive Director challenged those attending the World Economic Forum “to play their part in ending the era of tax havens”. Pictured Klaus Schwab, founder and president of the World Economic Forum, at a press conference last week
the richest and the rest has widened dramatically in the past 12 months,” Oxfam said. Oxfam’s prediction, made ahead of last year’s Davos meeting, that the richest one percent would soon own more than the rest of us, “actually came true in 2015,” it added. While the number of people living in extreme poverty halved between 1990 and 2010, the average annual income of the poorest 10 percent has risen by less than US$3-a-year in the past quarter of a century, a increase in individuals’ income of less than one cent a year, the report said.
‘Few dozen super-rich people’
Oxfam International Executive Director Winnie Byanima, who will also attend World Economic Forum at Davos having co-chaired last year’s event, said: “It is simply unacceptable that the poorest half of the world’s population owns no more than a few dozen super-rich people who could fit onto one bus.” World leaders’ concerns about the escalating inequality crisis have “so far not translated into concrete
Robots, new working ways to cost 5 mln jobs by 2020 Women will be the biggest losers as their jobs are often concentrated in low-growth or declining areas
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isruptive labour market changes, including the rise of robots and artificial intelligence, will result in a net loss of 5.1 million jobs over the next five years in 15 leading countries, according to an analysis published in Davos yesterday. The projection by the World Economic Forum (WEF), which is holding its annual meeting in the Swiss ski resort this week, assumes a total loss of 7.1 million jobs, offset by a gain of 2 million new positions. The 15 economies covered by the survey account for approximately 65 percent of the world’s total workforce.
The assessment highlights the challenges posed by modern technologies that are automating and making redundant multiple human tasks, from manufacturing to healthcare. With the International Labour Organization, part of the United Nations, already forecasting an increase in global unemployment of 11 million by 2020, the size of the additional job losses is sobering. Two-thirds of the projected losses are expected to fall in the office and administrative sectors as smart machines take over more routine tasks, according to latest findings,
action -- the world has become a much more unequal place and the trend is accelerating,” she warned. As much as 30 percent of all African financial wealth is estimated to be held offshore, it added, costing an estimated US$14 billion in lost tax revenues every year. Getting hold of the proper level of taxes will be “vital” if world leaders are to meet their goal, set last September, of eliminating extreme poverty by 2030. Byanima challenged those attending the Davos meeting “to play their part in ending the era of tax havens, which is fuelling economic inequality and preventing hundreds of millions of people lifting themselves out of poverty”. Of the 62 people said to hold as much wealth as the poorest 50 percent, Oxfam said that 53 are men and just nine are female, highlighting that women are ill-represented even at the highest levels. Oxfam said it had calculated the wealth of the richest 62 people using Forbes’ billionaires list. AFP
which are based on a global survey of personnel and strategy executives. The WEF has made “the fourth industrial revolution” - a topic covering robotics, nanotechnology, 3D printing and biotechnology - the official theme of this year’s Davos meeting, which runs from Jan. 20 to 23. The “Future of Jobs” report concluded that jobs would be displaced in every industry, although the impact would vary considerably, with the biggest negative losses likely to be in healthcare, reflecting the rise of telemedicine, followed by energy and financial services. At the same time, however, there will be a growing demand for certain skilled workers, including data analysts and specialist sales representatives. Women will be the biggest losers as their jobs are often concentrated in low-growth or declining areas such as sales, office and administrative roles, the report said. While men will see approximately one job gained for every three lost over the next five years, women face more than five jobs lost for every one gained. Reuters
Business Daily | 15
January 19, 2016
Opinion Business
wires
Leading reports from Asia’s best business newspapers
The right incentives for a low-carbon future Thomas Fricke
THE TIMES OF INDIA
Chief Economist of the European Climate Foundation
Sharp contraction in factory output is just an “aberration” and underlying industrial growth is still positive, Nomura has said in a research note, adding that the country is expected to clock a GDP growth of 7.8 per cent in 2016. According to the global financial services firm, the contraction in industrial production was significantly below expectations and the December industrial production growth should rebound. The report noted the gradual rise in growth numbers would be largely led by low commodity prices, improving discretionary demand, gradual transmission of past rate cuts and higher public investment in infrastructure.
THANH NIEN NEWS The Ministry of Industry and Trade has revised the rules for adjusting power tariffs amid strident public criticism of state monopoly Electricity of Vietnam. If the changes are approved, EVN can now increase the prices every three months by 3-5 percent at a time compared to the earlier 7-10 percent every six months. But many economists and consumers are doubtful they will address the main complaint: that consumers have to pay more and more for electricity without having a say and or knowing why exactly EVN is hiking tariffs.
THE PHNOM PENH POST US Secretary of State John Kerry will visit Cambodia on January 25 and 26, seeking to “strengthen” the countries’ “growing bilateral economic relationship”, the US State Department announced. Kerry will meet with Prime Minister Hun Sen and Foreign Minister Hor Namhong to discuss economic cooperation and an upcoming summit in California in February, which all 10 ASEAN heads of state will attend. The Kingdom hopes to use the opportunity to further “open” US markets to Cambodian exports, said Ministry of Foreign Affairs spokesman Chum Sounry.
NEW ZEALAND HERALD The New Zealand dollar may fall this week on concern about the impact on the local economy of slower Chinese growth, weak dairy prices and low inflation. The kiwi may trade between US$63 cents and US$66.50 cents this week, according to a BusinessDesk survey of eight currency analysts. Five expect the local currency to decline while three pick it will end the week higher. It recently traded at US$64.36 cents. Investor concern so far this year has been focused on the likelihood that weaker growth from China will weigh on the rest of the world.
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he climate agreement that world leaders reached in Paris last month has been widely celebrated for establishing the ambitious target of limiting the increase in global temperature to well below 2º Celsius above pre-industrial levels. But the agreement is just one step, albeit an important one. Policymakers now must figure out how to achieve this goal – no easy feat, especially given that, contrary to the conventional wisdom, steadily rising costs for conventional energy cannot be counted on to propel the necessary shift toward a low-carbon future. At first glance, the logic of negative economic incentives seems sound. If, say, driving a gas-guzzling car becomes more expensive, people will presumably be less likely to do it. But the impact of changing fuel prices is partial and delayed. While drivers may purchase a more fuel-efficient car in the long run, they are more likely, in the shorter run, to reduce other kinds of consumption to offset the rise in cost. When it comes to resolving a problem as urgent as climate change, Keynes’s famous dictum – “In the long run, we are all dead” – clearly applies. Moreover, even if consumers did respond efficiently, fossilfuel prices are dictated largely by heavily financialized markets, which tend to be extremely volatile. The sharp decline in oil prices over the last 18 months is a case in point. Not only have oil prices themselves failed to spur a reduction in consumption; they have undermined incentives to develop alternative energy sources. Investing in, say, solar power may have seemed worthwhile when oil cost US$100 per barrel, but it looked
a lot less appealing when the price dropped below US$50. Conceivably, policymakers could raise taxes to offset such declines. But such hikes sometimes (like now) would have to be huge, and adopting erratic policies that mirror the volatility of the market is never a good idea. Carbon pricing could experience a similar fate. In the European Union, carbon prices have been low for several years, and for now market participants seem to be following the herd in believing that they will remain so. But there is no guarantee that free emissions trading will not function like other financial markets, producing sharp fluctuations in CO2 prices. Should expectations suddenly change, the herd might turn and run in the opposite direction, causing CO2 prices to soar. Yet another problem with the price-based approach to mitigating climate change is that it fails to account for markets’ potential to create perverse incentives. When the cost of conventional energy rises, new suppliers see an opportunity; thus, before June 2014, when oil prices were high, investors poured resources into developing shale oil and gas in the United States. The additional supply, however, ultimately causes prices to fall, reducing the incentive to invest in alternative energy sources or energy efficiency. This is a normal market reaction, but it does not advance the fight against climate change, which would require steadily rising costs. The final reason why negative incentives alone are inadequate to mitigate climate change may be the most irrational: after some years of rising taxes, the public is staunchly opposed to
When policymakers get to work designing strategies for executing the Paris agreement, they should not rely heavily on rising energy costs to advance their objectives
any policy that may increase energy prices, regardless of whether current prices are high or low. People are so convinced that energy costs are “exploding,” despite the recent oil-price collapse, that any new project implying even slightly higher prices – even if overall energy prices are still lower than they were five years ago – is now exceedingly difficult to initiate. The implication is clear: When policymakers get to work designing strategies for executing the Paris agreement, they should not rely heavily on rising energy costs to advance their objectives. A strategy that assumes that the market will punish those who do not invest in a low-carbon future is not realistic. A better approach is possible: Directly reward those who do invest in a low-carbon future, whether by enhancing energy efficiency or developing clean energy sources. For example, governments could implement accelerated depreciation schemes for investment in low-carbon businesses; offer subsidies for investment in energy-efficient buildings; and create policies that favour industrial innovation aimed at reducing emissions and boosting competitiveness. All of this would make fossil fuels less attractive to both investors and consumers. While an approach based on such positive incentives would be costlier than tax hikes in the short run, the long-term benefits can hardly be overstated. At a time of strong resistance to higher energy costs, this may well be among the most effective – not to mention politically savvy – mechanisms for advancing the goals set out in Paris. Project Syndicate
16 | Business Daily
January 19, 2016
Closing Monkey-baby drive may boost births in China
Moody’s see mainland’s fuel-price floor credit positive
Those born in the year of the monkey are said to be crafty, clever and charming. That’s spurred some couples in China to delay parenthood until the less-auspicious sheep year ends -- a balm for companies offering fertility products and obstetric services. The change in the Chinese zodiac from sheep to monkey, which happens this year on February 8, has helped boost maternity bookings by as much as 30 percent at Harmonicare Medical Holdings Ltd.’s 72-bed hospital in Beijing, the company said. German drugmaker Merck KGaA said sales of fertility-related medications increased in China late last year as couples sought to build the ranks of little monkeys.
China’s new policy to allow the economic planner to stop reducing refined oil prices when crude prices go below 40 dollars per barrel is credit positive for the country’s national oil companies, a Moody’s report said yesterday. China National Petroleum Corporation (CNPC), China Petrochemical Corporation (Sinopec), and China National Offshore Oil Corporation (CNOOC) will benefit because higher profits for refining will likely moderate the negative effect of lower crude prices on the companies’ upstream exploration and production segment, the report noted. The rating agency expects Sinopec to benefit the most from the pricing change.
China’s chief stock regulator has offered to resign It’s unclear whether Xiao’s resignation offer has been accepted by the central government Benjamin Kang Lim and Kevin Yao
C
hina’s embattled top securities regulator, Xiao Gang (pictured), has offered to resign, sources said, after perceived mismanagement wiped more than US$5 trillion off the capitalization of the Shanghai and Shenzhen stock markets since they peaked last June. The 57-year-old chairman of the China Securities Regulatory Commission (CSRC) tendered his resignation last week after his brainchild, a “circuit breaker” mechanism to limit stock market losses, was blamed for exacerbating a sharp sell-off, a source with ties to the leadership and a financial industry source told Reuters. The “circuit breaker” was deactivated on January 7, just three days after its introduction. “The (Communist Party) central (leadership) is extremely unhappy with Xiao Gang. It is certain he
government. The CSRC did not immediately respond to requests for comment. On Saturday, Xiao gave a speech at an annual meeting in which he said the stock market rout has highlighted the problems facing CSRC’s regulatory mechanisms. “The abnormal stock market volatility has revealed an immature market, inexperienced investors, an imperfect trading system and inappropriate supervision mechanisms,” he said. Xiao’s term does not formally expire until end2018.
Short-listed will change jobs,” the source close to the leadership said, adding it was unclear where he would go next. “Xiao Gang handed in his resignation last week,” said the financial industry source.
Both sources requested anonymity because they were not authorized to speak to the media. It’s unclear whether Xiao’s resignation offer has been accepted by the central
Asian markets extend losses as oil sinks below US$28
HSBC CEO sees 6.7 per cent growth for China
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il prices plunged below US$28 a barrel yesterday, hitting energy firms and extending losses across Asian stock markets after the lifting of sanctions against Iran allowed the key producer to resume crude exports. While the decision to free Tehran of the strict embargoes had been well telegraphed, the news hammered Middle East equities Sunday, which were already under pressure as the price of oil sits at 12-year lows. Yesterday a barrel of Brent oil fell 4.4 percent to US$27.67 at one point before bouncing back above US$28. The last time Brent closed below US$28 was in November 2003 and Nomura Holdings is tipping further falls towards US$25. Singapore’s DBS Bank said in a research note that adjusted for inflation oil was now cheaper than at any time since 1998. The news was met with horror in Gulf trading. Most Asian equities followed suit, with Tokyo closing down 1.1 percent near one-year lows, Hong Kong ending 1.5 percent lower, Sydney shedding 0.7 percent by the end and Wellington 1.1 percent lower. There were also sharp losses in Manila and Jakarta. AFP
The party’s Organisation Department, or personnel ministry, has short-listed three candidates to succeed Xiao, the sources said. Xiang Junbo, who turns 59 this month and is chairman of the China Insurance Regulatory Commission
(CIRC), is the leading candidate, they said. The CIRC declined immediate comment. Another candidate is Huang Qifan, 63, mayor of the south-western metropolis of Chongqing, who is also tipped to become secretarygeneral of the State Council, or cabinet, and may concurrently serve as CSRC chairman, the sources said. If confirmed as cabinet secretary-general - Premier Li Keqiang’s right-hand man - Huang would help tackle a stalling economy and market turbulence as well as oversee the entire spectrum of portfolios: from industry to agriculture, energy, the environment, state planning and technology, according to a Reuters report last week. “The Organisation Department has sounded out all three candidates and completed background checks,” said the source with leadership ties. The identity of the third candidate is not known. Xiao, Xiang and Huang could not be reached for comment. The government campaign to restore confidence in the country’s volatile stock markets has been dented by entrenched market pessimism, with the benchmark Shanghai Composite Index, the most closely watched by Chinese investors, falling through the lows seen during the depths of last year’s crash. Reuters
Beijing calls for comprehensive approach to Korean nuclear issue
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SBC Chief Executive Stuart Gulliver forecast yesterday China’s economy to grow at 6.7 percent this year, in line with official estimates but higher than many economists who say the data is over-optimistic. “We do think the data are accurate, we think any errors in the data are compensated for by the fact a lot of the service economy is not included [in the numbers],” Gulliver told the annual Asia Financial Forum in Hong Kong. HSBC, Europe’s biggest bank, last June said it would expand in China’s southern Pearl River Delta region as part of a strategic ‘pivot’ towards Asia. Gulliver said he did not foresee a so-called ‘hard landing’ for China, the bearish scenario foretold by many economists in which the country’s slowing growth results in widespread corporate defaults and economic collapse. Jean Lemierre, Chairman of French lender BNP Paribas, echoed Gulliver’s positive outlook on the Chinese economy. Earlier, Gulliver had said the price of oil would likely settle at between US$25 and US$40 in one year’s time.
hina has always advocated a comprehensive approach to seeking both temporary and permanent solutions to the Korean Peninsula nuclear issue, said a Foreign Ministry spokesman yesterday. Spokesman Hong Lei made the remarks when asked to comment on a statement issued by the Democratic People’s Republic of Korea (DPRK) on Saturday. In the statement, the DPRK said its hydrogen bomb test was a “self-defence measure” and the United States should recognize it as a nuclear weapons state. It also said all proposals offered to the U.S. are still valid, including a nuclear testing moratorium in exchange for a halt to joint military drills by Seoul and Washington and the conclusion of a peace treaty to replace the armistice agreement signed in 1953. The DPRK is “channelling all its efforts into the building of an economic power and feels no need to provoke anyone,” it added. China hopes that all parties concerned can keep calm and hopes that they will address the issue through dialogue and consultation, accommodate each other’s concerns and jointly seek lasting peace and stability for the region, said Hong.
Reuters
Xinhua