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
Mainland factory gauge maintaining downward trend Page 9
Year IV
Number 971 Thursday January 28, 2016
Publisher: Paulo A. Azevedo
23 pct fewer licensed junkets y-o-y Page 6
Chinese investors turn to HK market in search of bargains Page 10
Tourism Switches Gears for 2016 An encouraging sign. In December last year, the city’s overnight visitors increased 14.2 pct y-o-y to 1.3 million. In line with gov’t aspirations to attract more visitors to Macau for longer stays. Macao Government Tourism Office (MGTO) Director Maria Helena de Senna Fernandes said the city hopes to maintain around 30 mln visitors this year. With more high-end visitors in the Tourism Office’s sights. Particularly overnighters. MGTO would continue to help by incentivising visitors to extend their stay by enriching tourism resources and creating more events, she said. The tourism chief was speaking during an annual review of the local tourism market yesterday Page 5
Awaiting ruling US courts are revisiting a claim for damages by Hong Kong businessman Richard Suen. Who maintains he demonstrably helped Las Vegas Sands Corp. land a Macau gaming concession. LVS maintains he played no role in the acquisition and deserves no compensation. The case has reached the Nevada Supreme Court, which has heard arguments by both parties in a closely contested 12-year odyssey
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www.macaubusinessdaily.com
Penalty warning Wynn Macau is agitated. Sending a stiffly-worded letter to the contractor developing its US$4.1 bln Wynn Palace on Cotai. Advising of penalty payments should construction milestones fail to be met. Leighton Contractors (Asia) Ltd. has been warned it may be liable for US$200,000 per each day of delay. Potentially resulting in liabilities of between US$8 mln to US$10 mln by end-February
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Industrial decline
Profits of industrial companies in China are down. Posting their first annual decline since at least 2000. Due to weakened demand and sales in the economic slowdown. Cumulative profits of China’s industrial enterprises fell 2.3 pct in 2015 following a 3.3 pct gain the prior year. The weakest performance in at least 15 years
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HSI - Movers January 27
Name
Minor returns
The city’s total fiscal reserves amounted to MOP345 bln (US$43.1 bln) in 2015. Whilst return on investment was just 0.7 pct. Foreign reserves jumped 14 pct y-o-y to MOP150.8 bln in 2015. The rate of return on foreign reserves was 0.3 pct, while net profit totalled MOP270 mln
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Society
%Day
Sands China Ltd
+6.51
Henderson Land Devel
+5.53
Galaxy Entertainment
+4.18
Want Want China Hold
+4.10
CNOOC Ltd
+3.85
Hong Kong Exchanges
-0.80
Tencent Holdings Ltd
-0.92
Hang Seng Bank Ltd
-1.06
Cathay Pacific Airways
-1.62
Hengan International
-1.86
Source: Bloomberg
Losing steam
I SSN 2226-8294
Gaming and junket activities lost 2,900 employees to 81,300 in Q4 2015; construction lost 1,800 to 51,100. By contrast, the F&B sector gained 2,500 people to 57,300. Unemployment remained unchanged at 1.9 pct
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2 | Business Daily
January 28, 2016
Macau Macau Liaison Office Vice-Director relocated to PRC’s audit office Zheng Zhentao, a former Vice-Director at the Chinese Liaison Office in Macau, is now a discipline inspection chief at China’s National Audit Office, Chinese language media reported yesterday. Zheng, who had been an official working in Guangdong for a long time, was appointed Vice-Director of Beijing’s representative office here only in February last year. A statement published by China’s State Council yesterday confirmed that Mr. Zheng has already left his post at the Liaison Office.
Fiscal reserves jump to MOP345 billion in 2015 Reserves ballooned by 40.2 pct year-on-year, but the rate of return dropped to 0.7 pct Kam Leong
kamleong@macaubusinessdaily.com
T
he city’s total fiscal reserves amounted to MOP345 billion (US$43.1 billion) for last year, whilst the return on investment (ROI) was just 0.7 per cent, the government told the Legislative Assembly’s followup committee for Public Finance Affairs yesterday. According to sub-committee president Mak Soi Kun, the official data of the Monetary Authority of Macau (AMCM) reveals that the SAR
Government only generated some MOP2.41 billion in revenues from fiscal reserve investment in 2015. This ROI is 1.3 percentage points less than 2014’s 2 per cent, and the lowest compared to the previous three years despite the fiscal reserves representing a year-on-year growth of 40.2 per cent. Meanwhile, annual income from bond investment and return on equity portfolio reached MOP4.57 billion
and MOP120 million, respectively. In addition, deposit interest brought the government some MOP3.03 billion. Nevertheless, the foreign exchange revaluation loss of fiscal reserve expanded to MOP5.31 billion in 2015 from 2014’s MOP3.14 billion due to the loss on revaluation of the renminbi.
Foreign reserves
The government also told legislators that the city’s total foreign reserves
had jumped by 14 per cent yearon-year, amounting to MOP150.8 billion in 2015. The rate of return on foreign reserves was 0.3 per cent, while net profit totalled MOP270 million. Foreign reserve income from bond investment amounted to MOP260 million, while deposit interests generated nearly MOP530 million. However, similar to fiscal reserves the foreign exchange of foreign reserves also registered a loss of MOP410 million due to non-US dollar currency exposure registering a loss due to the notable rise of the US dollar index, although the revaluation gain of the US dollar against the Hong Kong dollar partially offset the aforesaid loss. The sub-committee president told reporters that the SAR Government spent MOP61 million monthly on renting offices, parking spaces and warehouses in 2015, occupying in all some 270,000 square metres. He added that the government might consider building its own office buildings and gradually exit the private rental market.
Chui: Government to review outsourcing Chief Executive Fernando Chui Sai On said yesterday that the government would initiate a study on the necessity for government departments to outsource their works
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n a report issued last week, the city’s Commission of Audit slammed the outsourcing abuse of government departments, indicating departments had a ‘misunderstanding of the laws’ in respect to granting financial aid and outsourcing public works without open tender, negotiating for fair prices, or even not signing contracts. Speaking to reporters yesterday, the top official said his government
cares deeply about the report, revealing he had had an administrative meeting with the five secretaries on the issue. “We will study adopting the opinions suggested in the report. In fact, some departments, such as the Panda Fund, have already adopted the Commission’s opinions. This report is not only an audit report, [it shows that] it is time to study and review the necessity and the needs of outsourcing public services,” the CE said.
He added that the government would also study practical measures that are helpful for government departments. Meanwhile, he perceives the city’s public servants may also need to enhance their own abilities. Asked by reporters whether he agrees that the government is abusing the outsourcing of research and advising services, Mr. Chui claimed that he had received different opinions on the point, explaining that the
government would always want to propose a bill based on public opinion. The CE also revealed that he would nominate a new chief for the Macau Customs Services to the central government this month. After former Customs chief Lai Man Wa committed suicide last October, the Secretary for Security, Wong Sio Chak, took up the position as acting head of the Customs. K.L.
Business Daily | 3
January 28, 2016
Macau Macau Jinyi Technology inks agency deal with SGOC Group Local based company Macau Jinyi Technology has signed an exclusive agency agreement with BOCA International, a company focused on product design, distribution and brand development in the Chinese display and computer field, for the Macau market. The agreement was announced yesterday by the Shenzhen based SGOC Group, the parent company of BOCA International. Under the terms of the agreement, Macau Jinyi is authorised to ‘exclusively develop and market the BOCA branded energy saving and environmental protection products and technologies’ in the territory. Macau Jinyi is an affiliate of local real estate developer Far East International Group and is involved in developing energy saving and environmentally friendly technological solutions.
Unemployment remained at 1.9 pct in fourth quarter Gaming and junket activities employed less people than the previous quarter, while the F&B sector increased its labour force
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n the fourth quarter of 2015 the general unemployment rate remained unchanged to the previous quarter at 1.9 per cent, while the unemployment rate of local residents dropped slightly by 0.1 percentage points to 2.6 per cent, according to data realised by the Statistics and Census Service (DSEC) yesterday. Total employment decreased by 1,800 quarter-to-quarter. Analysed by industry, employment in Gaming & Junket Activities (81,300) and Construction (51,100) decreased by 2,900 and 1,800 respectively, while that in Hotels, Restaurants & Similar Activities
(57,300) increased by 2,500. Median monthly income of the employed was MOP15,000 (US$1,869), remaining unchanged from the previous quarter. The median monthly income of local residents also maintained the same level as the previous quarter at MOP18,000.
Oct to Dec
Information from DSEC also indicated that for October to December 2015 the total labour force was 400,600 while the labour force participation rate stood at 73.2 per cent. The total number of employed decreased by 300 from September to November
2015, to 393,100. Analysed by industry, employment in construction registered a decrease. The number of unemployed was 7,500, up slightly by 100 from the September to November period; fresh labour force entrants searching for their first job accounted for 10.8 per cent of the total unemployed, down 0.9 percentage points.
Yearly roundup
For the whole year of 2015, the general unemployment rate stood at 1.8 per cent, up 0.1 per cent year‑on‑year, according to the latest data provided by the government.
Official data also shows that the median monthly employment earnings of the employed was MOP15,000 (US$1,869), an increase of 12.8 per cent compared to the previous year. In addition, the median monthly income of local residents rose 20 per cent to MOP18,000. With regard to household employment, the average number of employed persons per household was 1.8 in 2015, the same as that in 2014; median monthly employment earnings per household increased by 3.7 per cent year-on-year to MOP28,000.
4 | Business Daily
January 28, 2016
Macau L’Occitane same-store sales in HK, Macau down Apr – Dec French retailer of skincare products L’Occitane International S.A saw its same-store sales in Hong Kong and Macau decline by 17.3 per cent in the nine months ended December 31, 2015 in contrast to the overall groupwide samestore sales growth of 1.8 per cent in the period, the company announced in its unaudited trade update for the Hong Kong Stock Exchange. L’Occitane, which operated 38 stores in Hong Kong and Macau in the period, said the total retail sales in the territories in these first three quarters of the current fiscal year had also dropped by 14.5 per cent against the backdrop of fewer Mainland Chinese visitors and the relatively strong Hong Kong dollar.
Cultural Industries Fund granted MOP112 million 70 projects have benefited, with 476 jobs expected to be created
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Leong Heng Teng, President of the Cultural Industries Fund
he Cultural Industries Fund has been established for around two years now. So far, the financial aid granted through this scheme has amounted to MOP112 million (US$13.95 million) and benefited 70 projects according to the head of the Fund, Executive Council spokesman Leong Heng Teng, local broadcaster TDM Radio reports. The projects have a span of from around six months to five years. Relevant investments add up to MOP580 million. The programmes are expected to create 476 jobs. The Cultural Industries Fund, established in April 2014, was injected with MOP200 million by the government to support the development of local cultural and creative industries, particularly
companies which fit the government’s categories of ‘creative design’, ‘cultural exposition and performance’, ‘art collection’ and ‘digital media’. The head of the Fund, Leong Heng Teng, said that since last year, they’ve already optimised the application and evaluation process of granting funds. Measures include a debate in front of a jury. Applicants can also chose to apply for interest-free loans or loans with discounted interest or programme subsidy or a mix.
MOP6 mln in Q4
Around MOP6.07 million were granted to 20 projects in the fourth quarter of last year by the Cultural Industries Fund, according to the Official Gazette issued by the government yesterday.
The biggest chunk was awarded to Consultadoria de Projecto Team Mei Lda. for a Macau fashion brand incubation centre, amounting to MOP917,274; the second biggest amount was given to Companhia do Desenvolvimento Cultural e Criativo 100 Plus Limitada for the second instalment of the subsidies the Fund will grant the project , reaching another MOP902,090; the third biggest share was given to Hou Keang Cultura e Comunicação Limitada , totalling MOP804,300. Other projects that were granted subsidies involved animation, casino background music, board games, and magic house among other projects involving the creative and cultural industry. J.K.
Business Daily | 5
January 28, 2016
Macau
MGTO head: City hopes to receive more overnight visitors this year The tourist office also aspires to maintaining visitor arrivals at around 30 million for this year with a move to tap into emerging visitor markets Stephanie Lai
sw.lai@macaubusinessdaily.com
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ollowing a downturn in the city’s visitor arrivals last year, Macao Government Tourism Office (MGTO) Director Maria Helena de Senna Fernandes said that this year the goal is to attract more overnight visitors, while maintaining overall arrival figures at around 30 million. While the average stay for overnight visitors has increased by 0.2 days to 2.1 days throughout 2015, the number of overnight visitors has decreased by 1.8 per cent year-onyear to 14.3 million – a segment that made up nearly 47 per cent of the city’s total visitor arrivals. For this year, a goal that MGTO hopes to achieve for the city is to attract more high-end visitors, especially guests staying overnight in Macau, Ms. Fernandes said during an annual review of the local tourism market yesterday. “I cannot say that in the future we will see the proportion of overnight visitors outweigh day-trippers every month. But our goal is to attract more overnight guests,” said Ms. Fernandes, adding that the Office would continue to help by adding more incentives for visitors to extend their stay by enriching tourism resources here and creating more events.
Overnight visitors
The more encouraging side of the official data for visitor traffic released last week shows that the number of overnight visitors that came here in December, accounting for half of total visitors, rose 14.2 per cent to over 1.3 million, the highest percentage recorded since January 2013. “My observation is that it [the increase in December overnight guests] resulted from a synergy effect with the events held in the month and the tourism packages that have been put forward by the sector [of hotels and travel agencies] that have attracted many visitors from Hong Kong, Taiwan and Southeast Asia especially,” said Ms. Fernandes. According to MGTO, the city now has 110 hotels in operation supplying
33,047 rooms. This figure follows the addition of 4,155 rooms to Macau’s total inventory last year. Speaking to media yesterday, the MGTO head said that her Office has received applications for operation licenses from three “high-end” hotels and seven budget accommodations although she did not specify which high-end hotels. With fewer overnight visitors registered for last year and more hotel rooms available, the city’s average occupancy rate throughout the period dipped six percentage points yearon-year to 81 per cent. The average room rate for 3 to 5-star hotels for the year was MOP1,491.7 (US$187), down 7.8 per cent.
New sources
For this year, the MGTO head said it would like to see the city welcome
Corporate
MUST students visit Studio City In collaboration with the Macau University of Science and Technology (MUST) Melco Crown Entertainment held the first behindthe-scenes tour for its students, with the aim of providing inspiration for those choosing possible careers with the enterprise. The group of 30 students started their journey at the 5,000-seat Studio City Event Centre. Students learned how an internationalstandard performance is produced. The
group then visited the Batman Dark Flight. They were also briefed on the design, construction and operation of the Golden Reel, Asia’s highest figure-8 Ferris wheel; and the tour concluded at The House of Magic. During the tour, the students met with several local employees of Melco Crown Entertainment, who shared with them their unique experience in working at these world-class entertainment attractions.
around 30 million visitors, with the goal of attracting more international visitors and those travelling here from outside Guangdong Province in Mainland China. Macau’s visitor arrivals for the full year of 2015 dropped 2.6 per cent year-on-year to 30.7 million, the first annual fall registered since 2009 as the numbers of the major source of Mainland Chinese visitors has dwindled by 4 per cent during the period. Speaking of the fall in visitors, Ms. Fernandes referred to causes of unstable external economic factors, including exchange rate fluctuations. A strategy that her Office will pursue this year to attract more visitors is to tap into the emerging markets of the Middle East and India. “India is the market that we will focus on and make continuous
assessment of the market conditions,” Ms. Fernandes said. “Now we are striving to have India’s Outbound Travel Mart held here.” The tourist office will also undertake a deeper analysis of the fall apparent in visitors from Singapore and Malaysia last year – both major visitor sources from Southeast Asia, the director noted. Visitors from both Singapore and Malaysia account for the highest per capita spend when compared to other territories in Southeast Asia: the per capita spending of Malaysian visitors here was MOP1,611 and that of Singaporean visitors was MOP1,632 by the third quarter of last year, a level that is even higher than that of neighbouring Hong Kong (MOP913) and Taiwan (MOP1,402), data from the Statistics and Census Service shows.
6 | Business Daily
January 28, 2016
Macau DICJ licenses 141 junket operators A total of 141 gaming promoters have been licensed by the Gaming Inspection and Co-ordination Bureau (DICJ) this year, the Official Gazette announced yesterday. These 141 licensed gaming promoters include 121 companies and 20 individuals. The number, compared to 183 junket operators as of January last year, dropped by nearly 23 per cent. DICJ director Paulo Chan said earlier this month that some 35 junkets were declined licence renewal by the Bureau due to failing to submit their accounting and financial documents. The local gaming regulator updates the list of the city’s gaming promoters at end-January each year.
Nevada court hears Suen vs. Las Vegas Sands
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he question of whether casino magnate Sheldon Adelson’s company has to pay a US$70 million judgment to Hong Kong businessman Richard Suen for helping secure business in Macau is now before the Nevada Supreme Court. Justices made no immediate ruling Tuesday U.S time after arguments in Las Vegas in a closely contested 12-year old case, according to U.S. media reports. Harvard University law professor Alan Dershowitz argued the case for Sands, which is appealing jury awards granted to Richard Suen after trials in 2008 and 2013. Suen’s attorneys argued the juries got it right, both
times. Suen contends that meetings he arranged with Chinese officials helped Las Vegas Sands Corp. get approval to build lucrative casinos on the Cotai Strip. During Tuesday’s oral argument stage, Las Vegas Sands representatives argued – among other reasons to dismiss the claim – that the case should be overturned by the simple fact that the firm was never granted an official gaming concession by the Macau Government in the first place. Instead, it operates on a sub-concession granted to it by gaming operator Galaxy Entertainment Group Ltd., Las Vegas Review-Journal reported. Adelson’s family recently bought the local newspaper.
MGM China likely to get approval to amend US$3 billion loan The Macau unit of MGM Resorts International has received approval from two-thirds of its lenders to relax its financial conditions
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GM China Holdings Ltd. received consent from banks to amend the terms on its HK$23.4 billion (US$3 billion) loan as the declining fortunes of Macau’s gambling houses are making it difficult for companies to meet their lending requirements, people with knowledge of the matter said. The Macau unit of MGM Resorts International, the largest casino company on the Las Vegas Strip, has received approval from two-thirds of its lenders to relax its financial conditions, including loosening covenants on its leverage ratio, according to people, who are asked not to be identified because they aren’t authorized to speak publicly. The consent came before a January 29 deadline. MGM China was seeking to raise the maximum total leverage it’s allowed to 6 times from the second quarter of 2016 until the same period in 2017, the people said. The original agreement was 4 times after the first anniversary of the opening of its new casino on the developing Cotai gambling district, they said. MGM Cotai is scheduled to open in the fourth quarter of this year. The approval came two months after a Melco Crown Entertainment Ltd. joint venture received consent
from banks to amend the terms on its HK$10.85 billion loan for the Studio City resort that started operations in October last year. The approved covenants include changing the project’s opening date condition from 400 to 250 tables, consequential adjustments to the financial covenants, and rescheduling the commencement of financial covenant testing, according to a filing to the Securities and Exchange Commission in November. Macau saw gaming revenue dropping 34 per cent in 2015 after China’s economic slowdown and anti-corruption campaign deterred high rollers from betting at the city’s casinos. Gambling takings have fallen for 19th straight month and are set to decline further before rebounding in 2017. Bloomberg
Business Daily | 7
January 28, 2016
Macau Melco Crown: No plans for Cypriot casino Local gaming operator Melco Crown Entertainment Ltd. has denied that it is eyeing a gaming concession on the Mediterranean island of Cyprus. “Melco Crown Entertainment has no plan for Cyprus,” a spokesperson for the gaming company told Business Daily in a written statement yesterday. On Tuesday, Cypriot news outlet Cyprus Weekly reported that ‘Macau-based Hard Rock-Melco Crown Entertainment and the Filipino company Bloomberry Resorts are serious contenders for the Cypriot comprehensive casino resort.’ Business Daily tried unsuccessfully to reach Melco Crown for comment on Tuesday.
Wynn Macau contractor may owe US$200 mln for casino delay Previously, the company said the US$4.1 billion Wynn Palace would be postponed by three months, until June 25, 2016, due to construction delays
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ynn Macau Ltd. said its contractor for its second casino in Macau could be liable for as much as US$200 million in damages if the Wynn Palace project experienced further delays. Leighton Contractors (Asia) Ltd., part of Australia’s CIMIC Group Ltd., has been issued with a letter “to reinforce the importance” of meeting the scheduled June opening, Wynn Macau Ltd. said Wednesday in a stock exchange statement. The company said in November the US$4.1 billion casino would be postponed by three months, until
June 25, 2016, due to construction delays. “We are concerned that with your current levels of progress in the execution of the work, you will fail to achieve the third interim milestone,” the Macau casino operator said in the statement signed by billionaire founder Steve Wynn. Wynn Macau intends to deduct payments from Leighton “in respect of any failure by you to meet your completion obligations,” it said. “We are not announcing any delay of Wynn Palace,” said Michael Weaver, spokesman for Wynn Resorts Ltd., parent of the Macau
unit. He declined to comment on the likelihood and potential impact of a delay to the project. Fiona Tyndall, a spokeswoman for Sydney-based CIMIC, previously called Leighton Holdings, declined to comment. CIMIC shares fell as much as 1.5 per cent to A$24.17 in Australia, the biggest intraday drop in more than a week. Wynn Macau jumped as much as 4.7 per cent to HK$7.88 in Hong Kong to the highest level since Jan. 8, amid a broader rally in casino stocks. The Wynn Palace, one of a number of new casino resorts due to open in Macau this year,
is to feature 1,700 hotel rooms, a lake with gondolas and fountains, meeting space and a casino. It is the first for the company in the developing gambling Cotai area of Macau. The new resorts are highly anticipated as more mass-market attractions and a transformation of the Cotai Strip “from the construction zone it’s been for two years,” should help Macau “regain its allure and buzz” among China’s growing consumer class, according to Bloomberg Intelligence in a note last week. Bloomberg
We are concerned that with your current levels of progress in the execution of the work, you will fail to achieve the third interim milestone Wynn Macau
Handbag maker Coach posts first sales growth in 10 quarters Total China sales rose 2 pct in the quarter. While excluding the SARs markets, which continued to be laggards, the sales rose at a double-digit percentage rate
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andbag maker Coach Inc’s revenue rose for the first time in 10 quarters, helped by strong sales of its Stuart Weitzmanbranded shoes and sustained growth in China, where the company managed to shake off the effects of a slowing economy. Shares of the company, which also reported a better-than-expected second-quarter profit, rose as much as 12 per cent to US$33.96 on Tuesday. Coach’s strong showing in China comes at a time when luxury companies such as BMW and LVMH
are struggling to sell their wares to consumers who are tightening their purse strings. Nike Inc and Burberry Group Plc are among the few brands that have managed to report sales growth in China, where the economy last year grew at its slowest pace in 25 years. “In the long term, China remains the single largest opportunity for growth outside of North America,” Chief Executive Victor Luis told Reuters. “Even here in the U.S., we have seen sales to Chinese consumers
continue to increase. All of this points to strong demand from the Mainland Chinese consumer both at home and overseas when they travel.”
China market
Total China sales rose 2 percent in the second quarter ended Dec. 26. Excluding Hong Kong and Macau, which continued to be laggards, China sales rose at a double-digit percentage rate. Coach’s strong performance in China and Europe underlines the premium status of the Coach brand
across regions where it is not yet a mature brand and is not seen as ubiquitous, Conlumino retail analyst Håkon Helgesen wrote in a note. China accounted for nearly 15 per cent of Coach’s total revenue in the fiscal year ended June, 2015. The company, founded in a Manhattan loft in 1941, said sales from international markets rose 4 per cent to US$437 million. Sales at Stuart Weitzman, which Coach bought last year, came in at US$94 million. Net sales rose 4.5 per cent to US$1.273 billion. Sales at established stores in North America fell 4 per cent, including online sales, less than the 4.1 per cent decline analysts had expected, according to Consensus Metrix. Net income fell 7.3 per cent to US$170.1 million, or 61 cents per share. Excluding items, the company earned 68 cents per share. Analysts on average had expected a profit of 66 cents per share and revenue of US$1.276 billion, according to Thomson Reuters I/B/E/S. Reuters
8 | Business Daily
January 28, 2016
Greater China
Industrial profits extend longest losing streak since 2011 Among 41 industrial sectors, 29 had year-on-year profit growth in 2015
KEY POINTS December industrial profits -4.7 pct y/y, 7th monthly fall 2015 profits of industrial firms -2.3 pct y/y High costs, tight liquidity and falling PPI dent profits Could presage more cuts in investment, jobs Profit warnings have flooded out in recent weeks, most notably from firms in the mining and energy sectors
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rofits earned by Chinese industrial firms in December fell 4.7 percent from a year earlier, the seventh straight month of declines, as the slowing economy hits sales and forces many companies to cut prices to win business. The weak performance is bound to spark fresh concerns about investment cuts, job losses and bad loans in the world’s second-largest economy, and could put more pressure on China’s stock markets, which have been pummelled to 14-month lows. Industrial profits - which cover
large enterprises with annual revenue of more than 20 million yuan (US$3.1 million) from their main operations fell 2.3 percent in 2015 from 2014, the National Bureau of Statistics (NBS) said on its website yesterday. That compared with 3.3 percent growth in 2014. December’s profit decline quickened from November’s 1.4 percent drop, marking the longest period of monthly slides since the NBS started collecting the data in 2011. High costs and tight liquidity curbed companies’ production and
operations, along with weak domestic and global demand, the NBS said. “Falling producer prices have further squeezed firms’ earnings,” said He Ping, an NBS official said in a statement. The NBS said industrial firms’ interest payments fell 2.3 percent in 2015 as interest rate cuts helped lower costs, though most economists say borrowing costs remain too high.
Mining and energy hit hardest
With slowing economic momentum squeezing cash flows and margins for
companies across a growing swathe of sectors, profit warnings have flooded out in recent weeks, most notably from firms in the mining and energy sectors. Profits in the mining sector, often a laggard among all groups, tumbled 58.2 percent in 2015, due partly to a supply glut and falling global commodity prices. China Metal Resources Utilization, for example, said on Jan. 22 that 2105 profits are expected to decrease substantially, while China Coal Energy said it was expecting to post a loss. Among 41 industrial sectors, 29 had year-on-year profit growth in 2015, while 12 reported declines, the NBS data showed. State-owned firms fared the worst among all companies. Their profits slumped 21.9 percent in 2015 from a year ago, compared with private firms which saw profits rise 3.7 percent. State-owned firms account for a third of total industrial enterprise profits, according to estimates from ING. China’s economic growth cooled to 6.9 percent in 2015, the slowest pace in a quarter of a century, weighed down by weak demand at home and abroad, industrial overcapacity, slowing investment and a struggling property market. Reuters
PBOC poised to ask banks to suspend offshore yuan loans Central bank also asked some Chinese banks and companies to collect information about short-selling orders in the offshore yuan market
The offshore market is a little bit more pessimistic about possible intervention than onshore Tommy Ong, managing director of treasury & markets, DBS Bank Hong Kong
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hina’s central bank gave guidance two weeks ago to some Chinese banks in Hong Kong to suspend offshore yuan lending to curb short selling and tighten liquidity, said people with knowledge of the matter. The People’s Bank of China told banks including BOC Hong Kong (Holdings) Ltd. and Industrial & Commercial Bank of China (Asia) on January 11 to curb lending unless necessary, said the people, who asked not to be identified as the instructions weren’t public. The central bank hasn’t issued new guidance since
then, they said. PBOC also asked some Chinese banks and companies to collect information about short-selling orders in the offshore yuan market from January 1, after noticing volatility at the end of last year, said two of the people. The Chinese government has been seeking to bolster the yuan as capital outflows rose and bets increased that the yuan will depreciate with weakening economic growth. Yuan speculators entering short positions are expected to “suffer huge losses” as policy makers will take measures
to stabilize the currency, the official Xinhua News Agency said in a commentary on Saturday. Speculative bets against the yuan “is one of the few ways for foreign investors to express their bearishness about China economy,” said Tommy Ong, managing director of treasury & markets at DBS Bank Ltd. in Hong Kong. “The offshore market is a little bit more pessimistic about possible intervention than onshore.”
Offshore yuan prices were little changed yesterday, with the currency down 0.7 percent for the year. It advanced 1.5 percent on January 11 amid speculation of PBOC intervention. The central bank bought offshore yuan that day, the people said. PBOC, BOC Hong Kong and ICBC Asia didn’t immediately respond to queries from Bloomberg. Recent efforts to stabilize the currency, which had fallen as much as 3 percent this year, include imposing reserve requirements on yuan deposits held on the mainland at offshore participant banks. Suspensions on settling offshore clients’ yuan transactions in the onshore market were also imposed last month by the PBOC, people familiar with the matter have said, a clampdown that came as a growing offshore-onshore spread made it profitable to buy the currency in Hong Kong and sell it in Shanghai. DBS Group Holdings Ltd. and Standard Chartered Plc were among banks suspended from some foreignexchange business in China, people with knowledge of the matter said. Policy makers have confronted volatility in the currency market since an August devaluation in the yuan and a move last month to link its value to a basket of other currencies, rather than the dollar. Bloomberg News
Business Daily | 9
January 28, 2016
Greater China January official PMI likely to show 6th month of contraction Aside from seasonal factors, analysts noted that China’s economy would continue to fight headwinds from industrial overcapacity
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ctivity in China’s vast factory sector likely contracted for the sixth consecutive month in January, a Reuters polled showed, underlining a weak start for the year and heightening concerns of a deeper economic slowdown. The official manufacturing Purchasing Managers’ Index (PMI) likely edged down to 49.6 in January from December’s 49.7, according to a median forecast of 20 economists in a Reuters poll. A reading below 50 index points suggests a contraction in activity, while a reading above indicates an expansion on a monthly basis. As the first indication of economic sentiment in 2016, the headline data might be distorted by the week-long Lunar New Year break, which begins on February 7, analysts said. “Manufacturers shut factories weeks before China’s Lunar New Year Holiday, which would drag down factory output,” said Zhang Yiping, an economist of China Merchants Securities in Shenzhen. “We expect China’s economic growth to show a certain degree of slowing down in the first quarter.” Aside from seasonal factors, analysts noted that China’s economy would continue to fight headwinds from industrial overcapacity, high debt and
KEY POINTS China official PMI seen at 49.6 in January vs 49.7 in December Data due on February 1 at 0100 GMT
a cooling property market this year. China’s economic growth cooled to 6.9 percent in 2015, the slowest pace in 25 years, adding pressure to policymakers who are already struggling to restore the confidence of investors after a renewed plunge in stock markets and the yuan currency. China markets began the year with a series of precipitous stock market declines and a sharp depreciation in the yuan. Selling pressure has persisted as economic data confirmed slowing growth and deteriorating business conditions. The official PMI number will be released on February 1, along with the official services PMI. Reuters
Cross-Strait relations will face a serious setback if the 1992 Consensus is not the political foundation, a mainland spokesperson warned yesterday. Ma Xiaoguang, spokesperson with the State Council Taiwan Affairs Office, made the remarks in response to the question whether a new hotline, between mainland and Taiwan chiefs of cross-Strait affairs, will be suspended after the island’s leadership election on January 16. The hotline, which was launched on December 30, aims to facilitate communication on important and urgent cross-Strait problems, allowing the chief officials to speak directly.
More investors hedged currency exposure for Hong Kong equity portfolios, leading to an increase in HKD supply and putting downward pressure on its forward rates
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Chinese visitors to New Zealand will soon be able to shop with their plastic cards at a wider range of outlets after a deal was signed between major financial service providers in the two countries. The ANZ bank said yesterday that ANZ point-of-sale (POS) and bank machine terminals throughout New Zealand would begin accepting UnionPay credit and debit cards. ANZ was also the first bank in New Zealand to accept QuickPass, UnionPay’s “tap and go” application for credit and debit cards, said an ANZ statement.
Mainland highlights 1992 Consensus importance
Hong Kong dollar weakness normal amid interest rate normalisation
he easing of the Hong Kong dollar is a normal phenomenon when interest rate differentials widen between the local currency and the U.S. dollar, while the weak forward rates do not mean the market is betting on a change in the local currency’s peg to the greenback, the city’s central bank said yesterday. The Hong Kong dollar posted its biggest fall in 12 years last week as volatility, capital outflows and spiralling offshore yuan interest rates spilled into Hong Kong’s markets. It regained some ground and traded at 7.7892 per dollar yesterday. “Even if the exchange rate
UnionPay expands presence in New Zealand market
touches the weak-side convertibility undertaking rate and funds flow out of the Hong Kong dollar, this is an inevitable process for the normalisation of the Hong Kong dollar interest rates,” Howard Lee, an executive director at the Hong Kong Monetary Authority said in an article. In the forward market, contracts longer than two years are trading below 7.85, the weaker end of the Hong Kong dollar’s spot rate trading band under a three-decade old currency peg system, prompting speculation that HKMA may take the currency off its peg against the U.S. dollar.
Kaisa says authorities lift Shenzhen ban
More investors hedged currency exposure for Hong Kong equity portfolios, leading to an increase in HKD supply and putting downward pressure on its forward rates, but it did not mean they were speculating that the currency would be taken off its peg any time soon, Lee said. Hong Kong now has a much bigger foreign exchange reserves and lower valuation of equities when compared to 1998, and the banking system is able to meet challenges arising from fund outflows, Lee said. Officials in the city have repeatedly said they had no plans to change the peg system despite volatility in the past few weeks. The central bank’s credibility and confidence in the currency board that backs the peg has survived every speculative attack, including the 1997 Asian crisis, the 2008 global financial crisis and last year’s Chinese stocks crash. Under the currency board system, the HKMA has the equivalent USD as reserves to back every HKD in circulation. That gives the HKMA infinite capacity to intervene to defend its currency, making it all but impossible to break the board. Reuters
Kaisa Group said the local authorities had lifted a sales ban on the bulk of its properties in its hometown Shenzhen, a move that would help the indebted Chinese developer’s restructuring efforts. Kaisa, which became the first Chinese developer to default on offshore bond coupon payments in 2015, said in a statement the project area blocked by Shenzhen authorities from sales dropped by almost two-third since November 10 and the area frozen by courts shortly after its financial difficulties became public has decreased by almost half.
Oil exploration contracts with Ecuador A Chinese-owned consortium has signed two contracts with the Ecuadorian government to explore two oil blocks in the southern province of Pastaza. The contracts with Andes Petroleum marked the start of oil exploration in Ecuador’s south-eastern region and showed foreign investors’ trust in the Ecuadorian government, Ecuadoran Minister of Hydrocarbons Carlos Pareja said on Tuesday. “It sends a message that our country is building up confidence and that companies want to come and invest here despite the low international oil prices,” said Pareja.
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January 28, 2016
Greater China
Mainland investors bargain-hunting for Mainland shares, just not in Mainland A number of measures show Mainland money flowing into Hong Kong stocks, in part an unintended consequence of Beijing’s extraordinary efforts to prop up its imploding domestic market Samuel Shen and Pete Sweeney
Hong Kong Stock Exchange trading floor
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hinese stock investors are finally seeing value in domestic shares, but there’s a twist: instead of wading back onto battered onshore exchanges, they’ve gone shopping for bargains in Hong Kong. By doing so they are exploiting a long-standing market distortion that means the average share price of a dual-listed Chinese company is currently 40 percent lower in Hong Kong than in Shanghai or Shenzhen. The Hang Seng China Enterprises Index now trades at an average priceto-earnings (PE) ratio of slightly more than 6, much cheaper than broader Asian markets, which trade around 13, and the cheapest the HSCE has traded since December 2001. The index of so-called H-shares is also trading below book value, meaning the average company’s shares are pricing the business below its accounting value. “Investing in Hong Kong stocks is the right choice, because the Hang Seng’s current valuation is near historic lows; the kind of opportunity which has generated handsome returns previously,” said Zhu Haifeng, a 31-year-old investor in Hubei province, in central China. Zhu, who left his construction business to become a full-time stock investor, told Reuters he had boosted his Hong Kong equity exposure this year by roughly 70 percent to more than 6 million yuan (US$912,100), while slashing his exposure to onshore stocks. His Hong Kong portfolio, focused on dividend-yielding shares in mainland companies such as China Shenhua Energy and Television Broadcasting Ltd, now accounts for roughly 65 percent of his total equity
exposure, he said. Zhu is not alone. A number of measures show mainland money flowing into Hong Kong stocks, in part an unintended consequence of Beijing’s extraordinary efforts to prop up its imploding domestic market. The E Fund Hang Seng China Enterprises Index ETF for example, an onshore exchange-traded fund managed by a quota system tracking the HSCE, has seen huge inflows from Chinese investors this year. Even as the HSCE has slumped roughly 15 percent year-to-date, the ETFs’ assets under management have jumped 15 percent during the period, to 5.7 billion yuan. And the number of fund units, which eliminates the effect of price fluctuations on fund value, has surged 37 percent this year, to 6.8 billion units, making it the second-largest ETF in Shanghai by that measure. Yang Jun, fund manager at E Fund Management Co Ltd, said that typically ETFs grow in assets when the market is rising, but that has not been the case with HSCE Index ETF so far this year. “Unit prices may be declining, but assets under management are growing rapidly,” he said. In another sign of change, the flow of money into Hong Kong from China via the Hong Kong-Shanghai Stock Connect pilot programme exceeded flows from Hong Kong into Shanghai last week for the first time since April.
Policy distortions
The long-running price difference between Hong Kong and mainland exchanges reflects vastly different regulatory regimes - China’s closed capital account means its markets
are driven by sentiment among the domestic retail investors who dominate there, while open Hong Kong is more driven by international money managers and follows moves in global capital markets. Fund managers had expected the gap to narrow or vanish with the launch of the Stock Connect in 2014, but it has persisted and even widened since then, with prices further distorted by a mainland rally that took off in late 2014 and burst in mid-2015. The discount has been aggravated by Beijing’s attempts to halt the massive onshore stock crash in August, in which a “national team” of investors poured money into sliding onshore markets to prop up key indexes. Analysts say that put an artificial floor under the market when many
KEY POINTS Hong Kong-listed China shares have long traded at discount Hong Kong “H-share” index at P/E of 6, cheapest since 2001 ETFs, Stock Connect show China money flowing to Hong Kong Support measures put artificial floor under mainland stocks
company share prices were still extremely expensive compared with international peers. For example, even after falling nearly 50 percent from its summer peak, the average company listed on the ChiNext growth board in Shenzhen is still pricing at more than 60 times earnings, compared with around 20 for the Nasdaq 100. Some analysts argue that investor concern over tumbling onshore markets and China’s slowing economy have also hurt shares in Chinese companies listed in offshore markets beyond Hong Kong. The MSCI China Index, for example, which focuses on offshore listed Chinese firms, now enjoys a PE of around 10, much cheaper than the Wall Street benchmark S&P 500 index, which stands at 18. Andy Rothman, investment strategist at Matthews Asia, argued that the time was ripe for a stockpicking approach towards China. The Matthews Asia China portfolio, which is focused on quick-growth consumer plays, was still priced at a reasonable 13 times earnings, he added. “While the overall market both in (domestic) A-shares, and to a lesser extent in Hong Kong can be expensive, there are plenty of individual stocks which are reasonably priced,” he said. Not everyone is convinced these low prices represent bargains, however, given the worldwide equities sell-off. “It’s true that valuation of Hong Kong shares is low, but they’re exposed to global capital markets, where the general mood is ‘risk-off’,” said Yang Hai, analyst at Kaiyuan Securities. Reuters
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January 28, 2016
Asia
Australian inflation restrained, no trigger on rates Employment has been one of the bright spots of an economy struggling with the end of a decade-long boom in mining investment Wayne Cole
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ustralian price pressures remained restrained last quarter as underlying inflation slowed to the very bottom of policy makers’ target range, offering the scope but not necessarily the trigger for a cut in interest rates. Key measures of underlying inflation rose by 0.55 percent on average in the fourth quarter, while the annual pace dipped a tick to 2.0 percent. That was the slowest pace in almost four years and at the floor of the Reserve Bank of Australia’s (RBA) long-run band of 2 percent to 3 percent. “Structurally, it looks like pretty low inflation is going to be in place through this year,” said Michael Workman, a senior economist at Commonwealth Bank. “The market will probably keep a rate cut priced in, but it looks unlikely as long as we get pretty good jobs market outcomes, and that appears to be on the cards.” Employment has been one of the bright spots of an economy struggling with the
end of a decade-long boom in mining investment. The RBA has also been reluctant to lower rates yet further and risk inflating a bubble in home prices. Yet turmoil in global financial markets and worries about a hard landing in China, Australia’s single biggest trade partner, have led investors to wager on at least one more rate cut. Interbank futures imply
very little chance of an easing at the RBA’s next policy meeting on February 2, but a 25-basis point move to 1.75 percent is almost fully priced in by August. The Australian dollar actually blipped higher on the inflation numbers as many speculators had been betting they would surprise on the downside. Yesterday’s data from the Australian Bureau of Statistics
South Korean consumer sentiment fades The trade ministry data also showed department sales for 2015 had fallen 1.2 percent in the worst decline on record Christine Kim
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onsumer sentiment in South Korea reached its lowest level in six months in January while department store sales marked their worst fall on record last year, raising doubts about the strength of the consumer sector as other parts of the economy slow. The Bank of Korea (BOK) said its composite consumer sentiment index (CCSI) slipped for a second month to 100 in January from the December index reading, which was revised
down to 102 from 103. An index reading above 100 indicates consumers expecting economic conditions to improve in the coming month outnumber those expecting a worsening. All the sentiment sub-indices fell, with South Koreans’ outlook on future economic conditions notching the biggest decline. “Consumer confidence has showed signs of softening since end-2015. A pullback in retail sales in likely
showed its headline consumer price index (CPI) rose 0.4 percent in the fourth quarter, a shade above market forecasts. The annual pace of CPI inflation edged up to 1.7 percent, from 1.5 percent. Adding most to the CPI in the quarter were price increases for tobacco and holidays, while petrol, telecoms and fruit all showed sizable drops. The disinflationary pulse from falling oil is far from over.
to ensue in the first half of 2016 as the cut of consumption tax is set to expire,” said analysts at DBS Bank in a note yesterday. The note added fiscal policy would be the priority option if additional stimulus is needed to boost the economy. Finance Minister Yoo Il-ho has said there are no plans for a supplementary budget after taking office earlier this month, but stated yesterday that the government is open to taking shortterm policy measures to shore up economic activity if needed. Revised government figures released after the sentiment survey showed sales at South Korea’s top department and discount stores marked their biggest on-year declines in four months in December. The trade ministry data also showed department sales for 2015 had fallen 1.2 percent in the worst decline on record. Meanwhile, a Reuters survey showed yesterday January inflation will ease to 0.9 percent from 1.3 percent in December on commodity prices and slowed-down consumption. The survey results and data cast a shadow over the on-going recovery in South Korea after fourth-quarter GDP
Just last week national petrol prices dived over 5 percent in the biggest drop since late 2008. The weakness is not just in energy costs. Intense foreign competition is squeezing margins in the retail sector and offsetting the impact of a lower local dollar, while slack in the labour market has wages growing at the slowest pace in over two decades. Reuters
KEY POINTS Consumer sentiment in Jan at 6-mth low Jan inflation to ease vs Dec Dept store sales post worst fall on record in 2015
growth data published on Tuesday showed the economy was driven mostly by private consumption, which has contributed to about a third of GDP growth since 2011. With global demand cooling and exports slumping, consumption activity has become increasingly important as a driver of GDP growth. The BOK has become less dovish in recent weeks, tempering market expectations of further rate cuts from the current base rate at 1.50 percent, while its governor has emphasised the importance of structural reform in boosting growth. Reuters
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Asia
Bank of Japan seen to favour standing pat Decision may swing in favour of easing if the central bank sees the fallout from the market rout as hard to ignore Leika Kihara
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ank of Japan (BOJ) policymakers would prefer to hold back additional monetary easing at their meeting on Friday, people familiar with the central bank’s thinking say, though global market volatility could yet force their hand. Even as slumping oil prices and soft consumption drag inflation further away from their target, many BOJ officials hope to stand pat as they believe the underlying inflation trend continues to improve, with companies gradually raising prices and the economy recovering moderately. Policymakers are wary of using their diminishing options to counter what they see as factors beyond the BOJ’s control, such as volatile financial markets and China’s economic slowdown. But the debate may swing in favour of easing if the BOJ sees the fallout from the market rout as hard to ignore, or if the U.S. Federal Reserve’s message on the future pace of rate hikes triggers a fresh round of market volatility, the sources said.
Bank of Japan headquarters
“I can see the BOJ come up with a good justification both to ease or to not ease,” one said. “Risks to the outlook are on the rise. Whether they have heightened enough to warrant immediate action is an open question,” another said, on condition of anonymity. Given Governor Haruhiko Kuroda’s upbeat tone on prospects for achieving his 2 percent inflation target, many analysts expect the BOJ
to maintain its pledge to expand base money at an annual pace of 80 trillion yen (US$677 billion). Kuroda may try to keep alive expectations of future action by signalling that more stimulus could still be forthcoming, analysts say. Some market participants, however, speculate the BOJ may ease as plunging oil prices force it to push back the timing for hitting its price target.
The BOJ is hardly complacent on the outlook. Inflation has ground to a halt and many firms remain wary of raising wages. Slumping Tokyo stocks may discourage firms from boosting capital expenditure, threatening the positive momentum the BOJ is trying to create with its money-printing drive. Kuroda has warned that with inflation expectations “somewhat weak,” he was carefully watching markets. Pressure for easing may increase if the Fed, which meets a day before the BOJ, offers a dovish tone on the policy outlook and triggers a yen spike against the dollar, some analysts say. But opponents in the BOJ of immediate easing say it would take a severe market upheaval to pull the trigger, given a lack of hard data proving that the stock market rout has hit growth. At least four of the nine board members are wary of topping up an already massive asset-buying programme that has had little success in boosting inflation expectations. The BOJ may prefer to save its ammunition until April as political pressure for monetary stimulus may heighten ahead of nationwide elections in July, some analysts say. Much will depend on whether Kuroda, a former top Japanese currency diplomat, thinks he can get the maximum market impact by expanding stimulus now, they say. “The BOJ could ease this week but it won’t have much effect in reversing the market tide,” said Hideo Kumano, chief economist at Dai-ichi Life Research Institute. “The BOJ may have slipped into an endless battle with markets, and I doubt it will ever claim victory.” Reuters
South Korean exports slump likely to continue in January Inflation in January is expected to ease to 0.9 percent versus 1.3 percent in December
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outh Korea’s exports are expected to extend their slump in January as the global economy shows little sign of improving sharply, while inflation is seen likely to have cooled this month as global oil prices fall further. A Reuters poll yesterday showed the decline in shipments was expected to continue for a 13th straight month, with the 14 analysts polled picking a median fall of 10.8 percent on-year in January. This would be slightly less severe than the 14.1 percent drop in December
but still bad for the on-going recovery if global demand remains soft while global commodity prices keep declining, analysts said. “A double-digit percentage fall looks inevitable as there is one less working day in January from last year while falling oil prices will also drag down trade costs,” said Stephen Lee, senior economist at Samsung Securities in Seoul. The same poll forecast imports would drop by 15.1 percent on-year in January. Inflation in January is expected to ease to 0.9 percent versus 1.3 percent
in December as the effect from a cigarette price hike last year is set to dissipate while a recent cut on city gas prices will also reduce price pressures. “This year inflation will be stabilised at a low level from falling global commodity prices and sluggish domestic demand and likely to come to 1.4 percent at yearend, per the central bank’s forecast,” said Lee Sang-jae, chief economist at Eugene Investment & Securities. The Bank of Korea forecast inflation would stand at 1.4 percent this year and 2.0 percent in 2017.
The central bank’s inflation target for 20162018 is 2 percent. It has said inflation will move upward this year, but the pace will be very slow and the target is unlikely to be achieved in 2016. Separately, the poll forecast December industrial output to have inched up 0.3 percent in monthly terms as the
slump in global demand likely capped improvement in services and retail sales. Factory output fell 2.1 percent in November, which had been the worst decline in 10 months. The output data will be released on January 29, while trade and inflation data are due on February 1 and 2, respectively. Reuters
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January 28, 2016
Asia Bangkok, Singapore, Tokyo rank top Asia-Pacific destinations
Philippine c.bank independent from Fed
Asia Pacific’s tourism industry is also the largest in the world by total contribution to GDP, having overtaken Europe in 2014
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angkok, Singapore and Tokyo have been ranked as the top three most popular destinations in the Asia-Pacific region for international tourists, according to the results of the inaugural MasterCard Asia Pacific Destinations Index released yesterday. The MasterCard Asia Pacific Destinations Index polls 167 destinations, including island resorts as well as towns and cities across the region, by total number of international overnight arrivals, crossborder spending, and the total number of nights spent at each destination. These 167 destinations represent 90.1 percent of all international overnight arrivals within the region. According to the index, Thailand’s capital city Bangkok topped the survey, with international overnight visitors breaking the 20 million mark for the first time last year. Thailand also dominated the top 10 destinations, taking three of the top 10 rankings, with Phuket securing fifth place and the coastal city of Pattaya coming in at eighth place. Following Bangkok is Singapore and Tokyo, which both welcomed 11.8 million international overnight visitors last year. Other top 10 cities include Seoul, Hong Kong, Kuala Lumpur, Bali and Osaka.
Chinese tourists have become the tower of strength in the growth of international tourists for the Asia Pacific region, which contributed to about one-third of the total growth in number of tourists from 2009 to 2015, at least five times higher than that from the second country, South Korea, according to Matthew Driver, Group Executive, Global Products & Solutions, Asia Pacific of MasterCard. Of the top 20 destinations by total expenditure per day, Shanghai welcomed the biggest spenders with US$269 spent daily, followed by Beijing, Seoul, Singapore and Hong Kong.
However, in terms of total expenditure by international tourists, Bangkok again seized number one at US$15.2 billion on the top 20 destinations. Tourists growth has been strong in the Asia Pacific region, with half of the top 10 destinations saw 10 percent growth or more in international overnight visitor numbers between 2014 and 2015, according to the index. Tourism contributed US$2.27 trillion to Asia Pacific economies and 153.7 million jobs in 2015, according to “Travel and Tourism Economic Impact 2014 -- Asia Pacific” by World Tourism and Travel Council. “The tourism industry in Asia Pacific is continuing to show robust growth with an increasing number of destinations receiving well over 5 million visitors a year, driven by increased consumer wealth, particularly from China. Providing in-depth analysis of overnight arrivals in 167 Asia Pacific destinations, the APDI can help businesses and governments better understand the underlying components of in-bound tourism demand, so they can plan investment to ensure the sustainable development of the tourism industry,” said Driver. Xinhua
Toyota considers Daihatsu buyout, denies Suzuki tie-up talks Full control of Daihatsu could help Toyota leverage the lowercost brand better and cut procurement costs for Daihatsu Naomi Tajitsu
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oyota Motor Corp said it was considering buying out the rest of mini-vehicle maker Daihatsu Motor Co, a US$3.2 billion deal at current market prices, but denied a report that it was in partnership talks with Daihatsu rival Suzuki Motor Corp. Shares in Daihatsu soared 20 percent in late yesterday trade after being overwhelmed by buy orders throughout the day. Shares in Suzuki jumped 11 percent despite denials from both Toyota and Suzuki. Toyota rose 3.6 percent. Full control of Daihatsu could help Toyota leverage the lower-cost brand better and cut procurement costs for Daihatsu, while capital ties with Suzuki would help the world’s largest automaker make inroads into India where Suzuki commands around half the passenger car market. “We are constantly considering a number of possibilities relating to Daihatsu, such as partnerships or business restructuring, including making the company a fully
owned subsidiary,” Toyota said in a statement, but added that no decisions had been made. Toyota owns 51.2 percent of Daihatsu, which like Suzuki, specialises in 660cc mini-vehicles, a segment particular to Japan, as well as compact cars. The Nikkei business daily said that Toyota and Suzuki were discussing ties from a variety of angles, including the possibility of cross-shareholdings as they look to take capitalise on demand for compact cars in India and other emerging economies. Some analysts noted that greater control of Daihatsu could be at odds with potential cooperation with Suzuki given that the two minivehicle makers are fierce competitors for the same customers. “I can easily see the Daihatsu brand used in the same way that VW uses Skoda or Renault uses Dacia or Nissan uses Datsun as a low-cost, sub-premium brand to the core brand,” CLSA senior research analyst Christopher Richter said.
“That could be a very effective weapon against Suzuki in places like India ... if I were Suzuki that would sound like a risk to doing business with Toyota.” Still, others noted that a potential Toyota-Suzuki partnership could benefit both automakers. Suzuki, through its control of Maruti Suzuki India Ltd , has a vast distribution network in India that Toyota could greatly benefit from. “Suzuki would meanwhile be getting a stable shareholder in Toyota as well as access to Toyota’s HEV/ FCV and other next-generation environmental technologies geared toward future vehicle electrification,” JPMorgan analysts said in a note. Suzuki is expected, however, to tread carefully with any new tieups. It formed a capital alliance with Volkswagen AG in early 2010 but relations soon soured, leading to a years-long dispute in an arbitration court that ended last year with the unwinding of their crossshareholdings. Reuters
The Philippine central bank’s policy decisions do not have to move in sync or in the same magnitude as the U.S. Federal Reserve’s actions, its governor said yesterday, as he reiterated the Southeast Asian economy does not need additional stimulus. Bangko Sentral ng Pilipinas Governor Amando Tetangco also said policymakers were closely watching developments in China and underlined the need for the world’s second-largest economy to communicate its policies with greater clarity to help guide the market. The resilient economy has managed to largely shrug off a growing global chill.
Vietnam’s FDI inflows rise Foreign direct investment (FDI) inflows into Vietnam climbed 23.1 percent in the first three weeks of January, extending the trend seen in 2015, when the country drew a record US$14.5 billion from overseas firms. As of January 20, FDI inflows totalled US$800 million, while additional pledges rose 19.2 percent to US$323.4 million, the Planning and Investment Ministry said yesterday. New pledges during the period surged 157.9 percent from the same time in 2015 to US$1.01 billion, mostly going into manufacturing and processing industries, the ministry’s Foreign Investment Agency said in a report.
S.Korea to explore MSCI qualifying South Korean authorities will discuss measures to improve the won currency’s convertibility as part of an effort to get the Korea Exchange included in MSCI’s developed market index, the financial regulator said yesterday. The Finance Ministry, regulators, and the stock exchange are working with MSCI to get the Korea Exchange reclassified and into MSCI’s World Index of 23 developed markets as soon as possible, the regulator said in a statement. Financial Services Commission Chairman Yim Jong-yong previously told reporters that South Korea and MSCI had not agreed on some issues.
LG Chem: SK naphtha cracker restarting ‘soon’ South Korea’s LG Chem Ltd said yesterday it would restart its naphtha cracker in Daesan on the country’s west coast “soon”, following an unexpected shutdown the day before due to “process troubles”. A company spokesman did not give further details on the expected restart date for the 1.04 million-tonnes-per-year (TPY) cracker, although traders not related to the firm said it would probably come back online this week. They added that the shutdown would likely crimp demand for naphtha by the equivalent of a medium-range vessel in a market already marked by heavy prompt supplies.
Future Fund delivers lowest return since 2011 Australia’s sovereign wealth manager, the Future Fund, yesterday said it returned 8.4 percent in the year ending December 31, its lowest annual return since 2011 as it boosts cash holdings amid greater global markets volatility. Global markets have been unusually volatile since last August, largely led by fears of slowing growth in China and uncertainty over the timing of U.S. interest rate hikes. Future Fund Managing Director David Neal said the fund has “gradually reduced the level of risk” in the portfolio through 2015.
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International Austrians delighted about increase of start-ups in 2015 The Austrian Economic Chambers (WKO) said on Tuesday that the increase of new start-up companies in 2015 was delightful for the country mired in a “collective state of depression”. The number of new start-up companies in 2015 increased 4.8 percent to 29,561 while most people expected a decrease rather than an increase, Austria Press Agency quoted WKO President Christoph Leitl as saying. Besides, company insolvencies were down 5 percent to 5,150 in 2015 over the previous year. The WKO said the longevity of Austrian start-ups is also at a record European level with 8 out of 10 surviving the three-year mark, and 7 of 10 the five-year mark.
World Bank lowers projection for 2016 oil prices The World Bank cut its 2016 forecast for crude oil prices to US$37 per barrel and foresaw other commodity prices to shed further this year due to weak demands from emerging economies. In its latest Commodity Markets Outlook report, the bank said the lower forecast reflects sooner-than-anticipated resumption of exports by Iran, greater resilience in U.S. production and weak growth prospects in major emerging market economies. In its last October’s projections, the World Bank said the oil prices would stay around US$51 a barrel in 2016.
Bearish views abound at elite hedge fund conference Hedge funds are starting the year off negative. Professional money managers gathered at an elite Morgan Stanley investment conference in Palm Beach, Florida this week expressed a range of pessimistic market views, including so-called bearish takes on the energy sector, China, and stocks such as Valeant Pharmaceuticals and SolarCity. Paul Tudor Jones, the billionaire head of hedge fund firm Tudor Investment Corp, said during a panel discussion that he is negative on commodities, including crude oil, according to people who heard the remarks.
Apple sees first sales dip in a decade Apple Inc forecast its first revenue drop in 13 years and reported the slowest-ever increase in iPhone shipments as the critical Chinese market showed signs of weakening, suggesting the technology company’s period of exponential growth may be ending. The slowdown comes as Wall Street analysts worry the company does not have another blockbuster product to replace the iPhone. Apple does not report Watch sales, but it does not appear to have the makings of being a hit on the same level as the iPhone a year after launch.
U.S. consumer, housing data underscore economy’s resilience A survey also showed some firms complained the buoyant dollar remained a headwind to growth at the start of 2016
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.S. consumer confidence improved in January despite a stock market rout and house prices accelerated in November, suggesting underlying strength in the economy despite a sharp growth slowdown in recent months. There are, however, signs the malaise from manufacturing and export-oriented industries is starting to filter into the services sector, with data on Tuesday showing activity in that vast sector hit a one-year low in January. The Conference Board said its consumer confidence index rose to 98.1 this month from 96.3 in December as households shrugged off January’s stock market sell-off and focused instead on a strengthening labour market. Consumers remained optimistic about the labour market this month. The share of households anticipating more jobs in the months ahead increased 13.2 percent from 12.4 percent in December, while the proportion of those anticipating fewer jobs fell slightly. Though the share of consumers expecting an increase in incomes rose to 18.1 percent from 16.3 percent last month, there was a slight increase in those expecting an income reduction. Other details of the report showed the proportion of consumers claiming jobs are ‘plentiful’ fell to 22.8 percent from 24.2 percent in December. However, fewer households believed jobs were ‘hard to get,’ a sign the labour market continued to tighten. Labour market strength, marked by a 5 percent unemployment rate, prompted the Fed to raise interest rates in December for the first time in nearly a decade. While stock market volatility has diminished the chances of another rate hike in March, economists expect the Fed will increase borrowing costs in June.
A separate report showed the S&P/ Case Shiller composite home price index of 20 metropolitan areas rose 5.8 percent in the year to November, adding to a 5.5 percent increase in October. House prices rose 0.9 percent in November from October on a seasonally adjusted basis. Home prices in Dallas, Denver and Portland, Oregon are now at record levels, the report showed. Still, home prices nationally remain 4.8 percent below their record level from July 2006, before the housing market crash, although they have climbed 29.2 percent from their postrecession bottom in January 2012.
Soft patch
The economy has hit a soft patch as dollar strength, spending cuts in the energy sector and faltering global demand undercut manufacturing, mining and export-oriented sectors. Efforts by businesses to reduce an
RBS sets aside another £2.0 bln for scandals The group is meanwhile pumping another £4.2 billion into its pension scheme
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ritain’s Royal Bank of Scotland has set aside another £2.0 billion (US$2.8 billion) to cover mortgage-backed securities litigation in the United States and compensation for credit insurance mis-selling in Britain, it said yesterday. Fourth-quarter earnings will be reduced by the equivalent of US$2.8 billion, the state-rescued lender warned in a statement detailing a raft of vast financial provisions. RBS is putting aside £1.5 billion to cover expected legal action on US residential mortgage-backed securities, and an extra £500 million to cover
possible compensation for mis-selling payment protection insurance (PPI). The Edinburgh-based company also took an impairment charge of nearly £500 million on the value of its troubled private banking business. The group is meanwhile pumping another £4.2 billion into its pension scheme. “I am determined to put the issues of the past behind us and make sure RBS is a stronger, safer bank,” said RBS chief executive Ross McEwan in the statement. “We’ve always been open about the scale of past issues facing RBS and
excessive inventory build has also put pressure on economic activity. The drag from these sectors appears to be spilling over to the services industries. In a third report, financial data firm Markit said its flash U.S. services PMI business activity index slipped to 53.7 this month in January, the weakest reading since December 2014, from 54.3 in December. While service sector firms continued to report improving domestic economic conditions and rising client demand this month, some suggested that spending cutbacks across the energy sector had a negative impact on their business activity. In a fourth report, the Philadelphia Fed said its non-manufacturing business conditions index fell three points to 21.4 in January. Firms reported a decline in new orders received, shrinking order books and sales. Reuters
although there is clearly much more to do, this announcement is a further step towards addressing legacy issues and building a great bank for our customers and delivering long term value for our shareholders.” The additional hit for US mortgage legal action -- which is expected to be settled soon -- takes the total charge to £3.8 billion. However, RBS stressed this total only related to civil claims, adding that it had not made any provisions linked to the on-going US Department of Justice and various US Attorneys General investigations into the matter. “The costs of resolving these investigations could individually or in aggregate prove to be substantial,” it warned. The bank added that its total bill for payment protection insurance (PPI) mis-selling compensation in Britain now stands at £4.3 billion. RBS, which is almost 73-percent owned by the British government after a vast bailout during the global financial crisis, publishes annual results on February 26. AFP
Business Daily | 15
January 28, 2016
Opinion Business
wires
False alarm on China
Leading reports from Asia’s best business newspapers
TAIPEI TIMES The Zhuhai Association of Taiwan Businesses has launched a fundraising campaign to help Taiwanese director Paul Lin who is in critical condition in a hospital in Zhuhai, China, after allegedly being attacked by a homeless person he tried to help. Lin’s family members on Monday were notified by the hospital that he was in a coma. The Straits Exchange Foundation yesterday said Lin’s friends and relatives had asked the foundation for help, and that the Zhuhai-based association was trying to raise money to pay Lin’s hospital fees of about 16,000 yuan (US$2,430) per day.
THE JAKARTA POST Indonesia will speed up negotiations on the Indonesia-European Union (EU) Comprehensive Economic Partnership Agreement (CEPA), aiming to have an agreement with the EU come into effect within two years. The two parties had discussed the implementation of the CEPA in a meeting with EU trade ministers during the World Economic Forum (WEF) in Davos last week, Trade Minister Thomas Lembong said. “It has been decided in a Cabinet meeting that we will have a trade agreement with the EU. We must start it immediately because the President gave us two years to complete the agreement,” Thomas said.
THE KOREA HERALD The average price of land in South Korea rose 2.4 percent on-year in 2015, fuelled by low interest rates and easing regulations on property development, the government said yesterday. The increase is the highest since 2008, when land prices dipped 0.32 percent compared to the year before as Asia’s fourth-largest economy struggled with the fallouts of the global financial crisis, the Ministry of Land, Infrastructure and Transport said. The country’s land prices have been rising on a monthly basis since November 2010.
TIMES OF INDIA The government is set to expand the coverage of its Jan Aushadhi scheme. It will offer 439 life-saving medicines, including cancer and cardiovascular drugs, as well as 250 medical devices like stents and implants at 4050% discounted prices. The department of pharmaceuticals plans to open 300 Jan Aushadhi stores across the country by March and another 3,000 by 2017. Presently, only 45 medicines are available in 121 such stores. The roadmap has been drawn under the supervision of Prime Minister’s Office (PMO).
Stephen S. Roach
Faculty member at Yale University and former Chairman of Morgan Stanley Asia
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he prospect of an economic meltdown in China has been sending tremors through global financial markets at the start of 2016. Yet such fears are overblown. While turmoil in Chinese equity and currency markets should not be taken lightly, the country continues to make encouraging headway on structural adjustments in its real economy. This mismatch between progress in economic rebalancing and setbacks in financial reforms must ultimately be resolved as China now enters a critical phase in its transition to a new growth model. But it does not spell imminent crisis. Consistent with China’s long experience in central planning, it continues to excel at industrial reengineering. Trends in 2015 were a case in point: The 8.3% expansion in the services sector outstripped that of the oncedominant manufacturing and construction sectors, which together grew by just 6% last year. The so-called tertiary sector rose to 50.5% of Chinese GDP in 2015, well in excess of the 47% share targeted in 2011, when the 12th Five-Year Plan, was adopted, and fully ten percentage points larger than the 40.5% share of secondarysector activities (manufacturing and construction). This significant shift in China’s economic structure is vitally important to the country’s consumer-led rebalancing strategy. Services development underpins urban employment opportunities, a key building block of personal income generation. With Chinese services requiring about 30% more jobs per unit of output than manufacturing and construction, combined, the tertiary sector’s relative strength has played an important role in limiting unemployment and preventing social instability – long China’s greatest fear. On the contrary, even in the face of decelerating GDP growth, urban job creation hit 11 million in 2015, above the government’s target of ten million and a slight increase from 10.7 million in 2014. The bad news is that China’s impressive headway on restructuring its real economy has been accompanied by significant setbacks for its financial agenda – namely, the bursting of an equity bubble, a poorly handled shift in currency policy, and an exodus of financial capital. These are hardly inconsequential developments – especially for a country that must eventually align its financial infrastructure with a market-based consumer society. In the end, China will never succeed if it does not bring its financial reforms into closer sync with its rebalancing strategy for the real economy. Capital-market reforms – especially the development of more robust equity and bond markets to augment a long dominant bank-centric system of credit intermediation – are critical to this objective. Yet in the
The bad news is that China’s impressive headway on restructuring its real economy has been accompanied by significant setbacks for its financial agenda
aftermath of the stock-market bubble, the equity-funding alternative is all but dead for the foreseeable future. For that reason alone, China’s recent financial-sector setbacks are especially disappointing. But setbacks and crises are not the same thing. The good news is that China’s massive reservoir of foreign-exchange reserves provides it with an important buffer against a classic currency and liquidity crisis. To be sure, China’s reserves have fallen enormously – by US$700 billion – in the last 19 months. Given China’s recent build-up
of dollar-denominated liabilities, which the Bank for International Settlements currently places at around US$1 trillion (for shortand long-term debt, combined), external vulnerability can hardly be ignored. But, at US$3.3 trillion in December 2015, China’s reserves are still enough to cover more than four times its short-term external debt – well in excess of the widely accepted rule of thumb that a country should still be able to fund all of its short-term foreign liabilities in the event that it is unable to borrow in international markets. Of course, this cushion would effectively vanish in six years if foreign reserves were to continue falling at the same US$500 billion annual rate recorded in 2015. This was precisely the greatest fear during the Asian financial crisis of the late 1990s, when China was widely expected to follow other so-called East Asian miracle economies that had run out of reserves in the midst of a contagious attack on their currencies. But if it didn’t happen then, it certainly won’t happen now: China’s foreign-exchange reserves today are 23 times higher than the US$140 billion held in 1997-98. Moreover, China continues to run a large currentaccount surplus, in contrast to the outsize external deficits that proved so problematic for other Asian economies in the late 1990s. Still, fear persists that if capital
flight were to intensify, China would ultimately be powerless to stop it. Nothing could be further from the truth. China’s institutional memory runs deep when it comes to crises and their consequences. That is especially the case concerning the experience of the late 1990s, when Chinese leaders saw first hand how a run on reserves and a related currency collapse can wreak havoc on seemingly invincible economies. In fact, it was that realization, coupled with a steadfast fixation on stability, that prompted China to focus urgently on amassing the largest reservoir of foreignexchange reserves in modern history. While the authorities have no desire to close the capital account after having taken several important steps to open it in recent years, they would most certainly rethink this position if capital flight were to become a more serious threat. Yes, China has stumbled in the recent implementation of many of its financial reforms. The equity-market fiasco is especially glaring in this regard, as was the failure to clarify official intentions regarding the August 2015 shift in exchange-rate policy. These missteps should not be taken lightly – especially in light of China’s high-profile commitment to market-based reforms. But they are a far cry from the crisis that many believe is now at hand. Project Syndicate
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January 28, 2016
Closing Beijing calls for new approach to agricultural modernization
Mainlanders touring Taiwan in record numbers
China will apply new development concepts in its efforts to make agricultural modernization more efficient, inclusive and environment-friendly, according to a policy document released yesterday. The document, publicized by the Central Committee of the Communist Party of China and the State Council, vowed “marked progress” in agricultural modernization by 2020 to ensure the building of a moderately prosperous society. Output capacity should be improved to ensure grain security and supply, while the urban-rural income gap must be narrowed, according to the document.
The number of mainland tourists visiting Taiwan is estimated to hit 3.4 million, a record high, in 2015, the State Council’s Taiwan Affairs Office said yesterday. Spokesperson Ma Xiaoguang told a press conference that the mainland remains the biggest contributor of tourists to Taiwan. About 9.86 million people made cross-Strait trips in total, an expansion of 4.7 percent from the year before. Taiwan residents made 5.5 million visits to the mainland while mainland residents made about 4.36 million visits to the island, an increase of 2.47 percent and 7.73 percent respectively from the previous year, he said.
Foxconn details offer for troubled Sharp, Gou steps in The firm, formally known as Hon Hai Precision Industry, had already offered over 600 billion yen for Sharp but had stopped short of detailing a restructuring plan Taro Fuse
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aiwan’s Foxconn has detailed its offer for troubled electronics maker Sharp Corp, a person with direct knowledge of the talks said, potentially complicating a rescue bid led by a Japanese state-backed fund. Innovation Network Corporation of Japan (INCJ), still seen as a front runner, will go head-to-head with Foxconn in the bidding for Sharp, and its third bailout in under four years. Foxconn, formally known as Hon Hai Precision Industry, had already offered over 600 billion yen for Sharp but had stopped short of detailing a restructuring plan, people with knowledge of the matter had said last week, dampening enthusiasm for its proposal among Sharp advisers. The company has now provided details to Sharp and its lenders, including a promise not to cut jobs,
and Foxconn founder and chairman Terry Gou has also met government officials on Tuesday to discuss the offer, the person said, declining to be named as the information remains confidential. “Hon Hai’s offer is detailed. It’s considerably realistic and can’t be ignored,” the source said.
Another industry source familiar with the talks said Foxconn was “very, very intent and serious” about its offer. Sharp declined to comment. Executive at Foxconn were not immediately available to comment. INCJ is willing to invest around 300 billion yen in the bailout, while banks
are expected to offer up to 350 billion yen in financing, including 150 billion yen in a debt-for-equity swap, a source said late last week. Sharp’s lenders, however, have been hoping a higher offer from Foxconn could prompt INCJ to raise its bid and help the banks recoup losses.
Sharp’s main creditors are Mitsubishi UFJ Financial Group Inc’s core unit Bank of Tokyo-Mitsubishi UFJ, and Mizuho Financial Group Inc’s Mizuho Bank. INCJ was still considered the favoured buyer, another source said on Tuesday, partly because of the certainty that the state’s involvement brought to the deal. Policymakers are also keen to keep jobs and technology in Japan. INCJ is reportedly planning to later merge Sharp’s LCD business with rival Japan Display, in which it is the top shareholder. Previous tie-up talks between Foxconn and Sharp fell through in 2012 after the Japanese company balked at demands that it said would have given the Taiwanese firm too much control. The companies jointly operate a plant in Osaka, western Japan, that makes large LCD panels.
Authorities planning to build floating nuclear power plant
China, U.S. agree on need for new Government services to go U.N. measure on North Korea mobile in mainland cities
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hina is planning to build a floating nuclear power station as it seeks to double its atomic capacity by 2020, a senior official said yesterday. Authorities are making plans for a “marine floating power station”, which will go through “strict and scientific demonstration”, said Xu Dazhe, chairman of China Atomic Energy Authority. “China is devoted to building itself into a maritime power and so we will definitely make full use of ocean resources,” he told a press conference. The use of nuclear power at sea is not unknown -- aircraft carriers and missile submarines are often nuclear-powered -- but doing so for civilian purposes appears to be unprecedented, although a Russian project is reportedly already under construction. Beijing included the development of two marine nuclear power plants, to be built by China General Nuclear Power Corporation (CGN) and China National Nuclear Corporation (CNNC) respectively, in its 13th five-year plan for 2016-2020, the two companies announced earlier this month. The CNNC plant is expected to start operation in 2019 and CGN’s the following year, according to their statements. AFP
Reuters
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.S. Secretary of State John Kerry and Chinese Foreign Minister Wang Yi agreed yesterday on the need for a significant new U.N. Security resolution targeting North Korea after its January 6 nuclear test, though there were few signs of concrete progress. Kerry, on a two-day visit to Beijing, had been expected to press China, North Korea’s lone major backer, for more curbs on Pyongyang after it said it had successfully conducted a test of a miniaturised hydrogen nuclear device, though the United States has voiced scepticism as to whether it was that powerful. China has insisted it is already making great efforts to achieve denuclearisation on the Korean peninsula and Wang rejected any “groundless speculation” on its North Korea stance, following remarks from U.S. officials that China could do more. “We agreed that the U.N. Security Council needs to take further action and pass a new resolution,” Wang told reporters at a joint briefing with Kerry. Kerry said the two sides had agreed to an “accelerated effort” at the U.N. to reach a “strong resolution that introduces significant new measures” to curtail North Korea’s ability to advance its nuclear and ballistic missile programs.
ore than 70 percent of Chinese cities will make public services such as paying electric bills or taxes available on popular smartphone apps, tech consultancy Gartner predicted. The growing penetration of internet into almost every aspect of life in China has prompted many local governments to offer public services not just online, but also accessible through smartphones. Over 90 percent of China’s 688 million web users use smartphones to access the Internet, making mobile devices a crucial platform for businesses and government to engage with users. China’s internet conglomerates Tencent and Alibaba have began offering public service access points on their mobile applications for an increasing number of Chinese cities over the past year. With 70 cities offering public services on Tencent’s instant messaging app WeChat and about 86 cities doing the same on Alibaba’s mobile wallet Alipay, the city service penetration rate has already hit 30 percent, Gartner said. The campaign to sign up local governments for such services first began in China’s top tier cities and provincial capitals, where citizens have been complaining for years about long lines in administrative centres, poor services and bureaucratic inertia.
Reuters
Xinhua