MOP 6.00 Closing editor: Joanne Kuai
Mainland authorities arrest 21 over Ponzi scam Page 9
Year IV
Number 974 Tuesday February 2, 2016
Publisher: Paulo A. Azevedo
Uber and Alipay team up for cross‑border payment solution Page 4
Home sales in Hong Kong sink to 25-year low Page 8
High Hopes for CNY Gaming Boost Down 21.4 pct y-o-y in January. But not all bleak news. Union Gaming says a short-lived spurt of growth may transpire in February. With the Lunar New Year break expected to add impetus. The consensus, however, is that any reprieve will be temporary. With both Union Gaming and Deutsche Bank forecasting a return to negative trends in March and April. Gross Gaming Revenue has fallen for the 20th consecutive month to MOP18.7 billion (US$2.33 billion) Page 6
House loses
Betting on transparency A freshly inaugurated junket-focused gaming association. With introductory mobile app. Seeking to provide more industry transparency to ‘positively promote’ the city’s gaming sector. It claims that 100 junkets are already on board
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No let-up. China’s manufacturing activity contracted for the sixth consecutive month in January. Signalling persistent weakness, official data revealed yesterday. The Purchasing Managers’ Index came in at 49.4, down from December’s 49.7
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February 1
Name
More announcements of invalid land grants. Failing to fulfil land use purposes or whose concession terms have expired. All to be gazetted in the first half of this year, Secretary for Transport and Public Works Raimundo Arrais do Rosário pledged in the Legislative Assembly. To date, the gov’t has reclaimed just two land plots. In Pac On and in NAPE
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Economy www.macaubusinessdaily.com
More closures. Local junket operator Cali Group shut down two of its four VIP rooms in the city over the weekend. And will shift some of its resources to the Philippines. Association of Gaming and Entertainment Promoters president Kwok Chi Chung says the industry is in turmoil. And reckons more closures are on the way
Continued PMI contraction
%Day
China Mengniu Dairy C
+3.91
Lenovo Group Ltd
+3.20
Want Want China Hold
+2.56
China Resources Beer H
+2.43
Li & Fung Ltd
+1.80
PetroChina Co Ltd
-2.95
Hang Lung Properties L
-3.09
CNOOC Ltd
-3.17
Bank of East Asia Ltd/T
-3.97
China Life Insurance Co
-4.15
Source: Bloomberg
Seal of approval
I SSN 2226-8294
Good news from the Heritage Foundation Index of Economic Freedom. Pronouncing the local economy continues to be ‘mostly free’. For the eighth year in a row. The city ranked 9th in terms of economic freedom among 42 economies in Asia Pacific. And ranks 37 in the world
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2 | Business Daily
February 2, 2016
Macau
Trade with China surges 25.1 pct in 2015 Nevertheless, the total trade volume between the two parties fell 8.8 per cent year‑on‑year in last December alone Kam Leong
kamleong@macaubusinessdaily.com
T
rade value between the city and Mainland China jumped 25.1 per cent year-on-year for the whole of 2015, attributable to the country’s surging exports to Macau, the latest data released by the Chinese Ministry of Commerce reveals. Last year, trade volume between the two parties expanded to US$4.78 billion (MOP38.24 billion) compared to US$3.82 billion in 2014, following China’s exports to the Special Administrative Region soaring 27.4 per cent year-on-year to US$4.59 billion, accounting for 96 per cent of the total. However, the city’s exports to the Mainland, amounting to US$190 million, registered a year-on-year decline of 12.7 per cent from US$210 million in 2014.
Drops in December
Meanwhile, for last December alone, the city saw exports from the Mainland drop 7.7 per cent year-on-year, which was the first monthly decline for the whole of 2015. The country’s exports to Macau only amounted to some US$390 million in the month, a month-on-month drop of 6.1 per cent. The decrease in the Mainland’s exports to the city
led the total trade volume between the two regions to post a year-on-year decline of 8.8 per cent for December 2015, or a month-on-month decrease of 4.6 per cent to US$410 million. In addition, Macau’s exports to the Mainland registered a fall of 27 per cent year-on-year to US$20 million during last December. But on a month-on-month
basis, the number represents a growth of 47.6 per cent.
More local investments in Mainland
The Ministry’s official data also indicated that the Mainland authorities approved a total of 566 investment projects by Macau firms in the country, which represents a jump of 48.9 per cent year-on-year. The actual capital used for
these projects totalled US$890 million, which surged 60.8 per cent year-on-year. By contrast, for December 2015 the number of China’s approvals of local investment projects in the Chinese territory plunged 25.7 per cent monthon-month to 101. Nevertheless, the actual capital used for these 101 projects soared 238.5 per cent month-on-month to US$30 million.
On the other hand, Mainland companies were contracted a total of 39 projects in the Special Administrative Region last year, worth US$1.83 billion and generating a total of US$1.48 billion in turnover. As at the end of last year, 121,995 Chinese labourers were working in the Macau territory, the Ministry said.
CEPA exports down 30.34 pct in January
Uruguay grants visa-free access to Macau passport holders
T
U
he city’s exports of zero-tariff goods to Mainland China under the Closer Economic Partnership Arrangement (CEPA) experienced a drastic drop of 30.34 per cent in January 2016 compared to December 2015, the latest official data released by the Macau Economic Services (DSE) reveals. Last month, the export value of CEPA zero-tariff goods to the Mainland amounted to MOP8 million (US$ 1 million), a decrease of some MOP3,652,311 from the month before. Including January, the accumulated exports of goods under the agreement totalled MOP675.7 million since it became effective in January 2004.
In addition, in January, the number of Macau Service Supplier certificates remained at 592 as in December 2015. The certificates allow local companies and enterprises to operate their businesses on the Mainland and enjoy zero tariff treatment. According to official data, half of the issued certificates were granted to local firms engaged in the transport industry, such as those operating freight forwarding agencies, and businesses related to logistics, storage and warehousing. In addition, some 147 of these certificates were given to companies providing medical and dental services, which accounted for 25 per cent of the total. B.L.
ruguayan authorities have informed the Macau SAR Government that with effect from 1st February 2016 Macau SAR passport holders and Macau SAR Travel Permit holders can enter the Oriental Republic of Uruguay as a tourist without obtaining a visa for a maximum stay of 90 days. Both parties perceive that the facilitating measures will continue to strengthen the ease of travel and thus boost tourism and social and cultural contact between the two places. The announcement was made when the Honorary Consul of Uruguay in Hong Kong, Dr. Anabella Levin-Freris, visited the Identification Services Bureau and met with Bureau director Ms. Ao Ieong U last week.
Currently, a total of 119 countries or territories have agreed to grant visa-free or visa-on-arrival access to Macau passport holders, while 11 countries have agreed to grant Macau travel permit holders visa-free access to their region.
Business Daily | 3
February 2, 2016
Macau
Cotai construction projects boost carpenters’ salaries In 2015, the overall average wage index of construction increased 6.6 per cent year-on-year João Santos Filipe
jsfilipe@macaubusinessdaily.com
Regarding unskilled workers, wages declined in the fourth quarter by 1.3 per cent quarter-on-quarter to MOP393 per day, with locals earning an average of MOP416 and nonresidents MOP391. In 2015, the overall wage index of construction workers increased 6.6 per cent year-on-year in real terms.
Expensive materials
T
he increase in demand for workers to develop interior finishing works in Cotai’s large-scale hotels has led to salary hikes for carpenters, bricklayers and plasterers by 13.1 per cent, 10.9 per cent, and 2.4 per cent, respectively, during the fourth quarter of last year. Also during the fourth quarter, the average daily wage of construction workers increased 2.9 per cent quarter-on-quarter to MOP793, as the average for resident workers
stood at MOP1,000 and non-residents at MOP668. The information was released yesterday by the Statistics and Census Service (DSEC) in the report titled ‘Wages of Construction Workers and Prices of Construction Materials’. As for skilled and semi-skilled workers, carpenters (MOP1,053 per day), structural iron erectors (MOP927 per day) and concrete formwork carpenters (MOP903 per day) are the best paid employees.
Regarding construction materials, the price of concrete continues to go up, and in the last quarter it increased 2.6 per cent to MOP803 per cubic metres from MOP784 per cubic metre. Sand prices increased 1.9 per cent quarter-to-quarter to MOP218 per cubic metre from MOP214 per cubic metre. During the fourth quarter, the price of spiral and round reinforcing steel bars decreased 4.6 per cent quarter-on-quarter to MOP4,324 per ton from MOP4,533 per ton. In 2015, the price index of construction materials for residential buildings increased 2.1 per cent yearon-year.
DSRT: Study of city’s telecom service quality completed this year
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he city's Bureau of Telecommunications Regulation (DSRT) said that a third-party study of the city's telecommunications service quality will be completed in 2016, and that the telecom regulator would also duly disclose an inspection guideline of the telecom services here. The official statement, written by former Bureau head Hoi Chi Leong and published only yesterday, was a response to legislator Kwan Tsui Hang's questioning of the timetable for the disclosure of the third-party study. Hoi, however, did not specify when the assessment result will be publicised. In the written response to Ms. Kwan's enquiry, Hoi noted that the Bureau has already requested the telecom operators to regularly disclose their service performances following the implementation of 4G services. Hoi also wrote that the Bureau has continuously conducted spot-checks on the local telecom operators’ networks. S.L.
4 | Business Daily
February 2, 2016
Macau Open bid for 250 8-year taxi licences The SAR Government is going to launch an open tender for 250 taxi licences soon, according to a dispatch signed by Chief Executive Chui Sai On on January 21 this year and published in yesterday’s Official Gazette. The maximum validity period for this tranche of licences will be as long as eight years and are not renewable. As usual, the dispatch stipulates that if vehicles have been used as taxis for less than five years they can be re-registered for private use.
Japan and Vietnam flights on the rise The airborne connections to Japan and Vietnam have each grown in one year by more than 25 per cent. The Mainland is still the main destination and departure point regarding air connections João Santos Filipe
jsfilipe@macaubusinessdaily.com
Passenger ferry movements recorded an increase of 3.2 per cent during 2015 to 145,385 movements from 140,941 movements in 2014.
Almost 250,000 vehicles in Macau
T
he number of commercial flights to and from Japan and Vietnam jumped well over 25 per cent during the past year, figures released by the Statistics and Census Service (DSEC) yesterday reveals. Overall, the number of commercial flight movements in 2015 increased 8.3 per cent year-on-year to 52,182 movements from around 48,183 movements in the previous year. Regarding flights to Japan there was an increase of 35.5 per cent
year-on-year to 607 flights from 448 flights. As for departures from Japan to Macau, the increase represented 34.5 per cent year-on-year to 608 from 452. The same trend was apparent with Vietnam. Last year, some 1,622 flights serviced the country located in the South China Sea, an increase of 25.6 per cent year-on-year from 1,291. In the opposite direction, the increase recorded stood at 26.1 per cent, with 1,623 flights landing in
Macau from Vietnam, in comparison with 1,287 flights in 2014. Nevertheless, flights to and from Mainland China dominated the market at 38 per cent, meaning 19,809 movements. This was an increase from the 18,891 movements recorded to and from the Mainland in 2014. Taiwan and Thailand, with a share of 23.9 per cent and 12.8 per cent, respectively, in terms of movements are the second and third most important markets.
In 2015, the number of licensed motor vehicles in Macau grew 3.8 per cent and stood by the end of December 2015 at 249,339 vehicles, an increase of 9,232 from 240,107 as at the end of December 2014. However, the pace of registration of new vehicles slowed 3.5 per cent year-on-year to 19,653 new vehicles during the past year. Of the total number of vehicles, 44.9 per cent, or 112,053, were light automobiles. The number of traffic accidents decreased 1.4 per cent to 15,804 from 16,029, while on the other the number of fatalities increased to 15 from 14. According to DSEC data, Internet usage is on the rise. In 2015, the duration of Internet services accounted for 1,064 million hours, which was an increase of 11.7 per cent year-on-year from 952,549 million hours.
Uber and Alipay team up for cross-border payment solution Mainland Chinese travellers can pay for their Uber rides in Macau through Alipay accounts in advance of the Chinese New Year
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ber China has announced a partnership with Ant Financial Services Group (‘Ant Financial’) whereby a seamless cross-border payment solution is offered to Uber passengers from Mainland China taking trips outside their home region. The partnership will enable passengers from Mainland China to use their Alipay accounts to pay for Uber rides when they’re travelling in other regions. In advance of the Chinese New Year peak travel period, the service will be launched in Macau, Hong Kong and Taiwan, and extended to more regions around the world during the year. ‘Hong Kong, Macau and Taiwan have been selected as the launch cities
for this partnership because of their popularity with Chinese business and leisure travellers, and their importance as key markets for both Alipay and Uber,’ read a statement from Uber China. Uber pasengers have been able to use Alipay to pay for their rides in Mainland China since 2014. However, until now, customers from Mainland China using the Uber app outside their home region needed to connect a dual-currency credit card with their account, and were billed for their rides in U.S. dollars. The partnership with Alipay will enable Uber passengers to pay for their international rides directly in RMB using their connected Alipay accounts, eliminating the need for dual currency credit cards or currency conversion.
Eric Alexander, Head of Business for Uber Asia, said in the statement announcing the partnership, “We’re delighted to partner with Alipay, and to work with them to bring the convenience of their payment platform to our users internationally. As the only truly global ridesharing platform, we are increasingly seeing very strong demand from Mainland Chinese riders using Uber in other markets internationally, and this partnership enables us to provide these travellers with a more convenient, hassle-free payment solution.” Alipay and Uber both entered the Macau market in 2015, and have both recorded strong growth in user numbers since launch.
Uber is the world’s only global ride-sharing app, active in nearly 400 cities across 68 countries and regions on six continents. In China, Uber is currently available in 37 cities, and plans to expand to 55 by the end of February. During China’s week-long ‘National Day’ holiday in 2015, Uber users from Mainland China took Uber rides in 255 cities across 58 countries and regions. Alipay is the world’s largest thirdparty payment platform, with over 400 million active registered users and 200 financial institution partners in China. Alipay recently announced that it will also partner with Uber’s Open API initiative, and will work with Uber on enhancing the user experience for Uber customers.
Business Daily | 5
February 2, 2016
Macau
Government to announce more land grants invalid So far, the government has managed to secure the reclamation of two land plots only, with one in Pac On and another in NAPE Stephanie Lai
sw.lai@macaubusinessdaily.com
M
ore announcements of invalid land grants that failed to fulfil land use purposes or whose concession terms have expired will be gazetted in the first half of this year, Secretary for Transport and Public Works Raimundo Arrais do Rosário pledged in the Legislative Assembly yesterday. The Secretary has made this promise during a plenary session at which several legislators questioned him on the progress of the government's reclamation of land that had failed to be developed and how it intended to use such land following acquisition. “I hope you can give me a few more months' time,” said
Mr Rosário. “And I'm sure the announcement of more invalid [land grant] cases will be made during the first half of this year.” “These invalid land grant cases will not only include the 48 plots [of failure of development where landholders were the liable party],” the Secretary added, noting that some land grant cases that were soon to be announced invalid also involved plots whose 25-year temporary concession terms had expired.
In the process
Since 2010, public works departments have identified a total of 113 cases of land plots failing to be developed, in which the landholder was
the liable party in 48 of such cases. Last year, the government announced the land grants of 22 of these 48 plots invalid and that it was in the process of taking these plots back. In an update addressed to the Assembly yesterday, Mr. Rosário said he has already taken back a plot located in Pac On in Taipa and another plot located in N.A.P.E. on the Macau Peninsula, but he did not specify the size of these plots or exact locations. The Secretary told the Assembly before that every reclamation process of idle land plots involved time-consuming lawsuits, including appeals by the land grantee against the invalidity of the land grant. Speaking to legislators
yesterday, the Secretary stressed that the government will not conduct any land use plan for the land plots that are due to be reclaimed but is still embroiled in lawsuits against the land grantees. But he reiterated that the government will prioritise the consideration of constructing public housing for the land plots that are to be reclaimed.
No “false expectation”
In response to legislators' call for a timeframe for the completion of the 4,000plus public housing units to be constructed, Mr. Rosário said he could not provide an expected date. “We’ve already tried our best to closely follow up on the construction plan for
MSAR ranked ninth freest economy in Asia Pacific Region While trade freedom and investment freedom are considered notable successes, the rating flags major concerns over corruption and labour freedom
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acau’s economic freedom score is 70.1, making its economy the 37th freest among 178 economies in the 2016 Index, dropping from its 34th position recorded last year, according to the
Index of Economic Freedom report released yesterday. Its overall score is 0.2 points lower than last year, reflecting declines in monetary freedom that outweigh small improvements in the management
of government spending and fiscal freedom. Overall, the 2016 score has dropped 1.7 since 2012. In the Asia Pacific region, Macau is ranked 9th of 42 economies, the same as the previous year,
KEY POINTS 2016 Economic Freedom Score: 70.1 (down 0.2 points) Economic Freedom Status: Mostly Free Global Ranking: 37th Regional Ranking: 9th in Asia Pacific Region Notable Successes: Trade Freedom and Investment Freedom Concerns: Corruption and Labour Freedom Overall Score Change Since 2012: –1.7
the public housing, but this is no simple process,” said the Secretary. “...It's hard to control the time for the clearing process for these sites [reserved for building public housing complexes] and so I cannot give you any false expectation of the timeframe.” According to previous announcements, the government has four sites on Macau Peninsula and three other sites in Taipa for the construction of more than 4,000 public housing units. The sites for public housing construction on the Peninsula side are located in Lam Mau Tong, Iao Hon and the CEM plant in Areia Preta. Despite legislators' argument that the city's land resources have already been tight for constructing the existing two types of public housing (social and subsidised housing) Mr. Rosário stressed that the government will decide this year on a new type of public housing for the city's residents. “It's true that we don't have enough land resources for the existing types of public housing,” the Secretary said. “But we have to consider that there are people that are not qualified to apply for either of these types of public housing, so we hope that we can probe how we can help these people.”
following Hong Kong, Singapore, New Zealand, Australia, Chinese Taiwan, Japan, South Korea and Malaysia. The Index of Economic Freedom is an annual index and ranking created by The Heritage Foundation and The Wall Street Journal in 1995 to measure the degree of economic freedom of the world’s nations.
Regulatory efficiency
The Foundation’s 2016 report says that trade freedom and investment freedom are the SAR’s major successes, while raising concerns over corruption and labour freedom. A lack of tourist attractions for non-gamblers and high travel expenses are also perceived as ongoing structural problems. In addition, the report points out that Macau’s overall regulatory environment is less efficient than that of similar economies. ‘Licence requirements vary by type of economic activity. The lack of a dynamic, broad-based labour market is caused partly by the absence of serious reform efforts,’ reads the report. ‘Monetary stability has been relatively well maintained but government subsidies to households increased by nearly 50 per cent in the first half of 2015 despite a severe economic downturn.’ The Foundation says it measures economic freedom based on 10 quantitative and qualitative factors, grouped into four broad categories, or pillars, of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). The neighbouring Hong Kong SAR’s economic freedom score is 88.6, and continues to be the toprated economy in the index, followed by Singapore (87.8), while China scores 52, ranking 144 globally. J.K.
6 | Business Daily
February 2, 2016
Macau
Gaming revenue dips 21.4 per cent but positive growth beckons January brought the 20th consecutive month of gaming revenue decline but Union Gaming believes that a short-lived growth may occur in February João Santos Filipe
jsfilipe@macaubusinessdaily.com
C
asino revenue declined 21.4 per cent year-onyear during January to MOP18.67 billion (US$2.33 billion) from MOP23.75 billion, according to data published yesterday by the Gaming Inspection and Co-ordination Bureau (DICJ). The agony of Macau’s main industry has now been lingering for 20 months in a row but it may change this month. The decline in gross gaming revenue (GGR) for the first month of the year was
in line with the expectations of industry analysts but there are different perspectives regarding February’s revenues. For analyst Grant Govertsen of brokerage firm Union Gaming there are signs that the market may have been growing for the last days of January. “Like last month, we believe the final tally beat consensus expectations by up to a couple of hundred basis points, which suggests the month ended on a positive
note. Heading into the back half of January, GGR trends have been showing their normal seasonal slowdown in advance of Chinese New Year. We would highlight that January 2015 represents the most difficult year-on-year comparison to be faced this year”, Govertsen wrote.
Growth of 2 per cent
For this month, the analyst believes there is the chance for casino revenues to increase around 2 per cent year-onyear. If this happens it would
be the first time since June 2014 that gaming revenues had grown in year-on-year terms. “We think that February’s results could look something like October’s MOP20 billion, which would result in a 2 per cent year-on-year growth. We don’t think this is a stretch as GGR has exceeded MOP18 billion in each of the last two months despite not having a traditional holiday benefit”, he wrote. Union Gaming justifies the optimism for February
by “the typical holiday GGR boost associated with Chinese New Year”, the fact that “most of the preChinese New Year seasonal slowdown would have already been felt in January”, and because “February 2016 gets the benefit of one extra day thanks to leap year”, it explained. The low base of comparison with February 2015, when gaming revenues declined 40 per cent year-on-year to MOP19.54 billion are also mentioned by the Deutsche Bank analyst Karen Tang. However, she does not believe that the overall market will actually grow. In her view, the exception is the mass segment. “For February, we expect the super low base will narrow February 2016 GGR decline to only minus 5 per cent year-on-year since February 2015’s GGR fell a sharp 40 per cent year-on-year given a late Chinese New Year (19 February last year). For a single month, February mass GGR growth might even turn positive”, she said. If on one hand the view for February has caused different opinions, both brokerage firms agree that any positive effect for February will be short-lived and that negative trends will return in March and April.
IPIM unveils new version website
I
n order to further implement the policy objectives of the Macau SAR Government and uphold the ‘people-based’ principle, as well as constantly optimising public services and closely following the development pace of new electronic media platforms, the Macau Trade and Investment Promotion Institute (IPIM) launched a new version of its official website yesterday. The new version is compatible with the browsing functions of smartphones, in a bid to further enhance IPIM’s role as an information platform, to more effectively assist local and overseas enterprises
to timely and accurately grasp economic and trade information, as well as helping them become more aware of the trends of the ever-changing markets and seize business opportunities. IPIM said in a statement announcing the launch of the new website that in recent years the Institute has spared no effort in disseminating trade and economic information through diverse and easily accessible channels, such as the Internet, the Macau Trade and Invest Kiosk and WeChat so that the general public and SMEs at home and abroad can learn more about IPIM’s functions and services,
the development trends of the convention and exhibition industry, Macau's role as a business and trade co-operation service platform
between China and Portuguesespeaking countries, as well as the progress of the development of the ‘Three Centres’.
Business Daily | 7
February 2, 2016
Macau
Cali Group closes two VIP rooms in the city More closures may be on the way, the Association of Gaming and Entertainment Promoters of Macau predicts, claiming the industry is experiencing “the aftershocks following an earthquake” Kam Leong
kamleong@macaubusinessdaily.com
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ocal junket operator Cali Group shut down two of its four VIP rooms in the city over the past weekend in order to shift part of its resources to the Philippines. According to gaming labour union Forefront of Macau Gaming (FMG), the junket company’s VIP rooms in Grand Lisboa on the Peninsula and in City of Dreams on the Cotai Strip officially closed on Sunday. The closures mean the company has only two VIP rooms operating in the territory, located in Galaxy Macau and MGM Macau, according to its official website. In addition to the closures, the gaming union claimed in a written announcement that some employees of the operator have been assigned to work in the Philippines as the Group had excess human resources due to the local gaming slump. Business Daily reached the Cali Group yesterday but a spokesperson of the company declined to comment on the issue. Nevertheless, the president of the Association of Gaming and Entertainment Promoters
He added that big-scale VIP rooms may not have the full advantages of sustaining their businesses amid the downturn. “It is not necessary that smaller rooms are always the ones shutting down their businesses. It depends on how these companies manage their finances. After all, their operations get worse due to they having given out too many loans before. Amid the downturn, it is difficult for them to chase up the debts, so their capital flow is affected,” he explained.
Blacklist
of Macau, Mr. Kwok Chi Chung, yesterday confirmed the company’s closure of two VIP rooms to reporters. “As I know, the Cali Group has indeed closed two of its VIP rooms in the city. However, they will still continue their operations in Macau. On the other hand, they have allocated part of their resources to overseas… which is the Philippines,” the Association head said.
Mr. Kwok’s Association includes the city’s major junket operators, such as Suncity Group, Tak Chun, Jimei, Meg-Star International, and Macau Golden Group, in addition to the Cali Group.
Closure Trend
Meanwhile, commenting on the closure trend of the city’s VIP rooms, Mr. Kuok believes that more VIP operators will shut down their businesses.
“The current situation is like the aftershocks following an earthquake. After some time, some VIP rooms may have seen the number of customers that they receive is not enough to support their operations. As such, they may prefer shifting some of their resources and focuses from Macau to other places in order to decrease their operational costs here,” Mr. Kwok said.
New junket information group seeks greater transparency Macau Gaming Information Association (MGIA), led by Charlie Choi Kei Ian and Antonio Hoo, hopes to provide more junket-related information to the city to “positively promote” the local gaming industry
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ew junket-focused gaming association Macau Gaming Information Association (MGIA) hopes to positively promote the city’s gaming industry by launching a mobile application that provides daily junket-related news and information, its director Antonio Hoo told Business Daily yesterday. The new gaming association held its inauguration ceremony yesterday afternoon, as well as launching its
new mobile application named MGIA. According to Mr. Hoo, the Association’s member companies include around 100 of the city’s 141 gaming promoters. Charlie Choi Kei Ian, the operator and founder of former website ‘Wonderful World’, which reported on local casino debtors, is the president of the new association. But Mr. Hoo stressed that the new Association and its application are not related to the gaming-debtor website.
“Our aim is to provide a platform for the industry to exchange information and positively promote the gaming industry. Our member companies can share any information related to gaming, including news and their companies’ promotions through our application,” Mr. Hoo said.
Support regulation
In addition, the Association director told us that the group is mulling
Meanwhile, Mr. Kwok revealed that the government has given the nod for the Association to study the establishment of a credit database for the gaming industry, known as the blacklist of debtors. “The government has agreed with the direction, giving the priority that the database or blacklist should not violate the city’s laws. It said it would accept such a plan if our operation obeys the laws,” he said. The Association director claimed that the establishment is still under study, whilst no timetable or details have been confirmed.
attracting more foreign marketing companies to the city so that local junket operators can promote themselves outside of the Special Administrative Region. “Amidst the gaming downturn, by making the city’s gaming-related information more transparent we hope to boost the performance of the gaming industry,” he said. Mr. Hoo also indicated that his Association fully supports the government’s intention to improve the regulation of junket operations and enhance its supervision of promoters’ financial accounts. “These are the reasons why we have decided to launch this application as we hope the city’s gaming-related information can be more transparent, so that people can avoid falling into gaming fraud cases,” Mr. Hoo explained, adding the Association believes that the city’s new gaming regulator head, Paulo Chan, would effectively improve Macau’s current gaming regulations. K.L.
8 | Business Daily
February 2, 2016
Greater China
Factory activity falls at fastest pace since 2012 Both official and private factory surveys show domestic and export demand remain weak, while companies continue to shed staff Nathaniel Taplin
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hina’s manufacturing activity contracted at its fastest pace in almost three-and-a-half years in January, an official survey showed, suggesting the world’s second largest economy is off to a weak start in 2016 and adding to the case for near-term stimulus. The official Purchasing Managers’ Index (PMI) stood at 49.4 in January, compared with the previous month’s reading of 49.7 and below the 50-point mark that separates growth from contraction on a monthly basis. It is the weakest index reading since August 2012 and below the median 49.6 forecast from a Reuters poll of economists. The PMI marks the sixth consecutive month of factory activity contraction, highlighting a manufacturing complex under severe pressure from falling prices and overcapacity in key sectors including steel and energy. “The electricity production remained sluggish and the crude steel output continued the weak trend in January, reflecting an on-going deleveraging process in the industrial sectors,” said Zhou Hao, an economist at Commerzbank.
“In the meantime, China has started an aggressive capacity reduction in many sectors, which could add downward pressure on the bulk commodity prices over time.” The Markit/Caixin factory PMI also showed activity deteriorating, although at a slower pace than in December. The index was 48.4, higher than economists’ median forecast of 48.0, and above the December figure of 48.2. The Markit report focuses more on small- and medium-sized firms as opposed to larger state-owned firms in the official survey. Both the official and private factory surveys showed domestic and export demand remained weak and companies continued to shed staff. China’s plan to cut its steel production capacity by 100-150 million tonnes will lead to the loss of up to 400,000 jobs, the official Xinhua news agency reported last week. “To maintain growth above 6.5 percent this year the economy will need more policy support,” said Ding Shuang, head of Greater China
KEY POINTS Official manufacturing PMI lowest since August 2012 PMI shows six straight months of factory activity contraction Non-manufacturing PMI falls from prev month to 53.5
Economic Research at Standard Chartered bank in Hong Kong. “The fiscal deficit is almost certain to exceed three percent now, and there could be additional support from the policy banks. There is less room now for expansionary monetary policy although we expect the central bank to remain accommodative.”
Recent statements from central bank officials suggest they are reluctant to implement further broadbased easing measures like cutting bank reserve ratios while pressure on the yuan from capital outflows remain strong. Meanwhile, the official nonmanufacturing Purchasing Managers’ Index (PMI) fell to 53.5 from December’s 54.4, showing a slight slowdown in services activity growth. With manufacturing decelerating quickly, services have been a crucial source of growth and jobs for China over the past year, and analysts have been watching closely to see if the sector can maintain momentum in 2016. Analysts note headline PMI data in January might be distorted as activity tends to slow in the weeks leading into the Lunar New Year break, which begins this year on February 8. 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. Reuters
Hong Kong January home sales hit 25-year low Housing prices are down 9.5 percent from September Frederik Balfour
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ong Kong home sales slumped to the lowest in at least a quarter-century last month, Centaline Property Agency Ltd. estimated, adding to evidence that prices have further to fall. Centaline estimated January sales of new and secondary homes would reach 3,000 units, the lowest monthly figure since it started tracking data in January 1991. The previous low was 3,786 units
in November 2008, according to a Jan. 31 release. “The Hong Kong residential market is all about sentiment,” Joanne Lee, senior manager of the Hong Kong research and advisory team at Colliers International Group Inc., said. “Falling stock-market prices, the economy weakening, China’s economy weakening and increases in the interest rate will all have an impact.”
Hong Kong’s property market has been showing signs of weakening since reaching a peak in September, amid a rising supply of homes and slowing growth in China. Housing prices are down 9.5 percent from September, according to the Centaline Property Centa-City Leading Index and may fall another 20 percent in 2016, according to some estimates.
Tepid demand
The tepid demand was pronounced in January as buyers traditionally delay making purchases in the lead-up to the Chinese Lunar New Year holiday
The Hong Kong residential market is all about sentiment Joanne Lee, senior manager, Colliers International Group
which begins on February 8. In turn, many developers have delayed the launch of new projects until then. Sales in December were 5,294 units. The drop was particularly sharp in the primary market, with an estimated 420 new units sold last month, down 80 percent from December’s 2,127 units, Centaline said. In order to encourage buyers, developers have been offering discounts and stamp duty rebates as well as second mortgages allowing borrowers to finance up to 90 percent of a home’s value. Henderson Land Development Co.’s Harbour Park mass-market development in the Sham Shui Po district of Kowloon sold 15 units during January with discounts and rebates of up to 11 percent, out of a 60 units released so far, according to the company website. Prices before discounts ranged from HK$3.47 million (about US$446,000) for a 202 square-foot flat to HK$4.86 million for 276 square feet. “If developers want to sell, especially for projects in the New Territories, they have to provide incentives to potential buyers,” said Thomas Lam, senior director of valuation and consultancy at Knight Frank LLP. “If they want to launch a new project they will have to offer more incentives than 12 months ago.” Bloomberg News
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February 2, 2016
Greater China Authorities arrest 21 over US$7.6 billion Ponzi scam
Court fines food supplier OSI 2.4 mln yuan
The platform, launched in July 2014, had amassed more than 50 billion yuan by December
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hinese authorities have arrested 21 people on suspicion of defrauding around 900,000 people of more than 50 billion yuan (US$7.6 billion), state media reported, after an online peer-to-peer lender turned out to be a giant Ponzi scheme. Ezubao offered investors annual returns of between nine percent and 14.6 percent on various projects, the official Xinhua news agency reported -- far more than currently offered by Chinese banks’ wealth management products. The platform, launched in July 2014, had amassed more than 50 billion yuan by December, said the report late Sunday, citing police as estimating 900,000 investors had fallen victim to the scam. Ezubao was China’s fourth largest Internet P2P lender, Chinese business magazine publisher Caixin Group said in a previous report. The company fabricated most of the projects on its website and paid old debts with money from new investors, Xinhua said. “Ezubao is a typical Ponzi scam,” it quoted Zhang Min, president of its owner Yucheng Group and one of those arrested, as saying in custody. Yucheng’s chairman Ding Ning said the company spent more than
800 million yuan buying corporate information to invent the fraudulent projects, the report said. He also splashed out investors’ money on a lavish lifestyle, including giving Zhang a 130-million-yuan
Police said that of the 207 companies to whom Ezubao claimed to have lent money, only one actually borrowed from it
villa in Singapore and 500 million yuan in cash. State media regularly carry purported confessions by detainees, a practice strongly condemned by overseas advocacy groups as violating the right to a fair trial. Illegal fund-raising is widespread in China and often involves a large number of investors who have few investment options because of low bank interest rates, an extremely speculative stock market and uncertainties in the property sector. It is a concern of the government as it puts social stability at stake. In October a payment crisis at state-managed Fanya Metals Exchange sparked protests in Beijing and Shanghai, with police detaining hundreds in the capital. Police said that of the 207 companies to whom Ezubao claimed to have lent money, only one actually borrowed from it. “As far as I know, 95 percent of the projects on Ezubao were fake,” it quoted Yong Lei, a risk controller at a Yucheng subsidiary, as saying. Police raided the company, based in the eastern province of Anhui, after discovering that its executives were transferring funds and planning to flee, Xinhua added. AFP
Shanghai exchange warns securities firms on corporate bond, ABS risks
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However, with corporate defaults on the rise and high-rated debt prices at or near multi-year highs, some analysts have warned that credit quality in some portions of the bond market may be deteriorating. Moreover, corporate bond financing has taken over from China’s murky “shadow banking” sector - the locus for a large portion of China’s existing bad debt problem - as the largest source of non-bank financing in the economy. Net corporate bond financing in 2015 was up more than 20 percent in 2015 to 2.94 trillion yuan (US$446.89 billion) and accounted for 32 percent of total net credit last year, according to central bank figures, a new high. “For the whole year of 2015, the biggest increment in aggregate financing came from the corporate financing via bond and stock markets,” Zhou Hao, senior emerging markets economist a Commerzbank in Singapore, said in a research note last month. “It appears to us that commercial banks have few incentives to provide loans directly to corporates especially due to credit concerns over SMEs, but turn to capital markets to finance the corporates indirectly.”
Renault CEO to put Mainland at centre of strategy Renault plans to put China at the centre of its strategic plan for 2017-2022, Chief Executive Carlos Ghosn said yesterday at the inauguration of the firm’s first assembly plant in Wuhan. “Renault does not depend on China, China is only an opportunity for us,” Ghosn told reporters. “It will be at the centre of the next strategic plan.” Ghosn said the company needs to propose a more affordable electric vehicle for both the Chinese and global markets.
Airline passengers start transiting Taiwan Chinese passengers will be able to transit Taiwan and fly to a third destination starting yesterday, signalling a step toward greater transportation links between the two political rivals. The plan had been discussed for years and China announced early last month that it would start the transit programme with three trial cities, Nanchang, Kunming and Chongqing. Two Chinese passengers transited Taiwan yesterday on a flight from Nanchang, before flying on to Bangkok, according to an official with the island’s quasi-governmental Straits Exchange Foundation (SEF), which is in charge of the programme.
Policy bank lends more to agriculture in 2015
Corporate bond issuance on the exchange has skyrocketed over the past year as firms have taken advantage of easier issuance regulations he Shanghai Stock Exchange has warned several securities firms to strengthen risk control in their corporate bond and assetbacked securities (ABS) businesses, two sources with direct knowledge of the matter said yesterday. Two sources told Reuters that they saw a document from the exchange requesting stronger risk management. The exchange also asked securities firms to boost issuance by high quality firms and assess underwriting risks from coal, steel, real estate and other sectors with overcapacity, sources said. An exchange official declined to comment. “The move is apparently in line with the central government’s efforts to adjust the economic structure,” said a senior trader at a Chinese commercial bank in Shanghai. “Industries such as steel and cement appear no longer able to make major contributions to the economy, (so) their fund raising will yield few benefits.” Corporate bond issuance on the exchange has skyrocketed over the past year as firms have taken advantage of easier issuance regulations and falling yields to issue cheaper debt.
A Chinese court has fined two Chinese units of U.S. food supplier OSI Group 2.4 million yuan (US$364,875) and sentenced one executive to prison for producing and selling inferior products, a Shanghai court said on its official Weibo microblog yesterday. The verdict from the Shanghai Jiading People’s Court marks the end of a long-running investigation into the U.S. food supplier after a food safety scandal in July 2014 that dragged in fast-food giants McDonald’s Corp and Yum Brands Inc.
Recent Reuters analyses of exchange data found that large proportions of new issuers in recent months were in struggling sectors including real estate, steel, energy and infrastructure. In addition, issuance of so-called private placement debt - marketed directly to institutional investors and then later listed on the exchange - has risen especially fast. Low-rated (below AA) Chinese corporate debt has sold off sharply in recent months following a series of high profile defaults by steel, cement and other heavy industrial firms. But capital fleeing China’s volatile equity market has helped push the yield premium of high-rated corporate debt over Chinese treasuries to multiyear lows, leading some analysts to conclude that the market is vulnerable to repricing. Reuters
The Agricultural Development Bank of China, a major policy bank, provided more financial supports to China’s agriculture in 2015. The bank poured 780.34 billion yuan (nearly US$120 billion) into the sector last year, more than double that of 2014, Xie Xuezhi, the bank’s board chairman said Sunday. The surging lending marked increasing efforts from the government to modernize agriculture and boost rural development. In a tone-setting official document released Wednesday, policymakers vowed to make more efforts to improve the sector partly by promoting reforms to step up modernization.
Shanghai reports 2.1 percent drop in foreign trade Shanghai reported 2.8 trillion yuan (US$427.5 billion) of foreign trade last year, down 2.1 percent from 2014, according to municipal customs Sunday. The figure breaks down into 1.6 trillion yuan of imports and 1.2 trillion yuan of exports, Shanghai Customs said in a press release. It said the city’s imports went up a slight 0.5 percent year-on-year and accounted for 15.2 percent of China’s total imports. Forty percent of Shanghai’s imports were high technology products, valued at 527 billion yuan, up 4.6 percent year-on-year, the document said.
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Greater China
PBOC effort to squeeze bets against yuan undermined by stimulus Yuan borrowing costs in Hong Kong had surged to records across all tenors earlier in January as China’s central bank bought the currency after it weakened to a five-year low Saijel Kishan
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he cost of betting against the yuan in Hong Kong fell back to where it was at the start of the year, highlighting the shortcomings of China’s attempt to starve the offshore market of funds while flooding domestic banks with cash to support the economy. The Hong Kong InterBank Offered Rate for three-month yuan loans fell to 4.87 percent last week, 59 basis points lower than the December 31 fixing and down from a record 10.42 percent on January 12. The comparable rate in Shanghai is 3.10 percent and Chris Morrison at US$965 million hedge fund Omni Partners says funds will flow offshore, providing a pool of yuan to be borrowed and sold, unless China imposes draconian capital controls. "The only way to truly deter speculators would be to let onshore interest rates rise sharply, but they cannot do this as it would further depress the Chinese economy," said Morrison, who heads strategy at the London-based firm’s macro fund and has predicted the yuan could fall about 15 percent this year. "It will be too difficult for them to drive a permanent and high wedge between offshore and onshore interest rates." Yuan borrowing costs in Hong Kong, the biggest centre for offshore financing in the currency, had surged to records across all tenors earlier in January as China’s central bank bought the currency after it weakened to a five-year low. That drained supplies in the market and made it more expensive to borrow for short trades, selling borrowed assets in the currency with the aim of profiting by buying them back at lower prices later.
Yuan Hibor is the benchmark used to price loans in the currency outside of China and was introduced by Hong Kong’s Treasury Markets Association in 2013. The overnight rate surged to all-time high of 66.8 percent on January 12 and was at 1.1 percent yesterday. The three-month rate rose 1.43 percentage points yesterday to 6.3 percent on increased demand before the Lunar New Year holidays next week.
While some short sellers may have been scared away temporarily, I believe there are still plenty of short sellers out there willing to short both onshore and offshore yuan Kevin Smith, founder of Crescat Capital
China’s action may have served as a warning shot to short-sellers that could deter future bets. Officials are using military analogies to describe the People’s Bank of China’s bruising attack on speculators who were betting against the currency. The People’s Daily wrote in a commentary in its overseas edition that billionaire investor George Soros’s "war" against China won’t succeed. “The risk-reward of shorting the yuan offshore, even if funding costs have come off, is low given the greater potential for a short squeeze to happen again,” said Sim Moh Siong, foreign-exchange strategist at Bank of Singapore Ltd. “Most players are cautious.” The PBOC has been buying yuan in Hong Kong since devaluing the currency in August and more so since the offshore exchange rate sank to a record 2.9 percent discount to the onshore level on January 7. The gap raised questions about the yuan’s value before it joins the International Monetary Fund’s reserve-currency basket in October.
‘Not consistent’
“This is the problem the Chinese have with their foreign-exchange policy, it is not consistent with domestic macroeconomic policy objectives,” Morrison said. “And that is why the market will continue to take the other side of the bet. Foreignexchange and macro policy must sing from the same hymn sheet for it to be credible.” The yuan has fallen about 5.6 percent in Shanghai since its August devaluation, even as China’s central
bank burnt through US$321 billion of its foreign-exchange reserves to ease the currency’s slide. Six interest rate cuts since November 2014 of a combined 1.65 percentage points have cut yields in China, with the 10year sovereign rate dropping to 2.84 percent on Friday, 91 basis points higher than similar U.S. Treasury yields. The gap was as low as 50 basis points at the end of last month. Many Chinese savers are moving their money out of the nation in fear of further currency weakness after the economy grew 6.9 percent last year, the least since 1990. Outflows from China increased to $158.7 billion in December, the most since September and were $1 trillion last year, according to estimates from Bloomberg Intelligence. That’s more than seven times the amount of cash that left in 2014.
Chinese defence
Chinese officials have sought to allay fears of a weakening currency, saying they intend to keep the exchange rate stable and that wagers against the yuan will fail. State-media warned speculators, including billionaire investor George Soros who said he was shorting Asian currencies, not to short-sell the yuan. “While some short sellers may have been scared away temporarily, I believe there are still plenty of short sellers out there willing to short both onshore and offshore yuan,” said Kevin Smith, founder of Crescat Capital, a US$72 million hedge fund in Denver, Colorado, that’s been betting against the yuan since 2014. Bloomberg News
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February 2, 2016
Asia
South Korea’s exports tumble most since mid-2009 Although few expect the Bank of Korea to cut the base rate from its record-low 1.50 percent at the February 16 meeting, the pressure is growing for more stimulus Christine Kim
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outh Korean exports in January suffered their biggest slump in more than six years as sales to the key China market collapsed, pointing to another wrenching year for Asia's export-reliant economies and more stimulus from regional policymakers. South Korea is the world's sixth-largest exporter and
the first major exporting economy in the world to report trade figures every month, providing anxious financial markets a quick health check on global trade and the economy. The numbers showed global demand remained depressed, with Korean exports in January down a worse-than-expected 18.5
percent from a year earlier, according to trade ministry data yesterday. It was the biggest annual contraction since August 2009 and the 13th straight month of declines. Shipments to China, South Korea's largest market, tumbled 21.5 percent on-year in January in their biggest drop since May
2009, and the trade ministry said export conditions are worsening. "Shipments being this weak means a recovery in consumption is urgently needed. If you look at the economy as a whole, this might boost the need for policy easing," said Lee Sangjae, chief economist at Eugene Investment & Securities.
Although few expect the Bank of Korea to cut the base rate from its record-low 1.50 percent at the February 16 meeting, the pressure is growing for more stimulus. The Bank of Japan last week stunned markets by adopting negative interest rates as it looked for ways to stimulate growth. Other trade-reliant Asian economies have also seen a gloomy start to the year, with factory surveys in China showing a further contraction in export orders in January and Taiwan's export orders in December shrinking at the fastest pace since early 2013. Following the data release, Finance Minister Yoo Ilho said the government will announce measures soon to boost exports and consumption. He did not give a timeframe. Slowing economic growth in China and weaker emerging market currencies are undercutting sales of electronics ranging from televisions to personal computers, spelling trouble for companies such as Samsung Electronics, SK Hynix and LG Display. The trade ministry said export products like smartphones, cars, semiconductors and flatscreen displays had all notched falls in January, a discouraging sign for bellwether companies traditionally propping up the economy. The data also showed imports slid 20.1 percent on-year, compared to a 19.2 percent fall in December. The resulting US$5.3 billion trade surplus was the smallest surplus since November 2014. In a glimmer of hope, a survey of South Korea's manufacturing activity showed a rise in January export orders although factories were still struggling with a fall new business. Reuters
Australian inflation gauge up on seasonal factors The annual pace quickened a touch to 2.3 percent, from 2.0 percent
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private-sector gauge of Australian inflation ticked higher in January due to seasonal increases for services such as education and health care, while measures of core prices remained well restrained. The benign underlying trend should reassure the Reserve Bank of Australia (RBA) that it can keep policy loose when it holds the first board meeting of the year today. The central bank is widely expected to hold rates at 2 percent and signal there was scope to ease further should that be necessary. Yesterday’s survey from TD Securities and the Melbourne Institute showed consumer prices rose 0.4 percent in January, from December when they edged up 0.2 percent. The annual pace quickened a touch to 2.3 percent, from 2.0 percent, but was still in the lower half of the RBA’s target band of 2 to 3 percent. A measure of underlying inflation pressure, the trimmed mean, stood
at 2 percent and matched the official reading for the fourth quarter released last week. “Our Gauge reflects the usual seasonal jump in health and education expenses, offset a little by another decent step down in fuel prices,” said Annette Beacher, chief Asia-Pacific macro strategist at TD Securities. Health costs climbed 3.4 percent in the month while education rose 2.3 percent, as fees and charges for both increase almost automatically at the start of every year. Going the other way there was a seasonal fall in holiday travel and accommodation costs, while petrol dropped sharply for a second straight month. “We also draw attention to the monthly and annual jump in tradable inflation, further confirmation that the weaker exchange rate is feeding through into higher imported costs,” added Beacher. Costs for tradable goods and services rose 0.6 percent in January
to be up 3.0 percent on the year, a lagged reaction to the local dollar’s decline over the first half of 2015. Yet there has also been a notable deceleration in non-tradable prices, those not determined by international competition such as services that make up well over half of the CPI
basket. Inflation here edged up 0.2 percent in the month, while the annual pace slowed to just 1.8 percent. Inflation excluding fuel, fruit and vegetables rose 0.6 percent in January, while the annual pace stayed at 2.2 percent. Reuters
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February 2, 2016
Asia
Japan’s megabanks’ profits down as monetary measures threaten bottom line A three-tiered system applies negative interest rates to new reserves parked at the central bank
It could take significantly negative rates to convince businesses and households to move out of cash into other assets Tobias Harris, vice president, Teneo Intelligence
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apan’s biggest banks tumbled in Tokyo share trading yesterday as a drop in their latest earnings was compounded by fears that the Bank of Japan’s (BOJ) new stimulus measures would hit their bottom line. Shares in the trio -- Mitsubishi UFJ, Sumitomo Mitsui Financial Group and Mizuho Financial Group -- suffered a sell-off after the central bank on Friday unveiled plans to effectively charge lenders on some deposits. The negative interest rate policy is
intended to increase lending to people and businesses in order to kick-start the world’s number three economy and fend off deflation. The idea is to give commercial banks an incentive not to park their cash at the central bank. But the move threatens to weigh on bank profits, analysts said, as they battle to drive up lending at home. Some analysts saw the BOJ bid as a desperate move after three years of Prime Minister Shinzo Abe’s big-
spending and monetary easing policy known as “Abenomics”. This had limited impact on the moribund economy. “While banks potentially benefit along with the rest of the economy from Friday’s valiant attempt by the BOJ to rescue Abenomics, in the short and medium term the sector seems likely to face substantial downward earnings pressure,” David Threadgold, analyst at Keefe, Bruyette & Woods, said in a commentary.
He added that the banking unit of Japan Post was most at risk owing to the size of its domestic business. After markets closed yesterday, Mitsubishi UFJ said its net profit for the nine months through December fell eight percent to 852.3 billion yen (US$7.03 billion), as it saw lower gains on its vast debt holdings. The bank’s shares tumbled 5.46 percent, while Sumitomo Mitsui dived 7.61 percent and Mizuho Financial Group dropped 5.87 percent. Last week Sumitomo Mitsui said net profit dropped more than eight percent, but it added that it would still hit a 760 billion net profit for the fiscal year to March. Mizuho’s profit edged down from a year earlier. “The new (BOJ) policy is unlikely to dispel growing concerns about the efficacy of Abenomics,” said Tobias Harris, a vice president at US-based political risk firm Teneo Intelligence. “It could take significantly negative rates to convince businesses and households to move out of cash into other assets.” The three-tiered system applies negative interest rates to new reserves parked at the central bank. “The BOJ may be testing to see what effects a negative rate has on the behaviour of lenders, depositors and borrowers before committing fully to a negative interest rate policy,” Harris said. Takashi Miura, an analyst at Credit Suisse in Tokyo, said the bank share sell-off may be overdone. “Bank shares are being sold today on concerns of lower margins on loans and securities, as they were on Friday,” Miura told Bloomberg News. “But in reality the megabanks have a high proportion of overseas lending, which will benefit from the weakening yen...I think the market may have gone too far.”
Thai consumer prices fall for 13th straight month The core inflation rate, which strips out raw food and energy prices, was at 0.59 percent in January
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hailand’s annual headline consumer prices dropped for a 13th consecutive month in January due mainly to lower oil prices, giving the central bank leeway to keep interest rates low to help the flagging economy. The index, published by the Commerce Ministry yesterday, fell 0.53 percent in January from a year earlier, compared with a Reuters poll forecast for a 0.49 percent dip. The core inflation rate, which strips out raw food and energy prices, was at 0.59
AFP
percent in January, in line with the 0.60 percent seen in the poll. Consumer prices have also been held down by government price controls and sluggish spending since an army coup in May 2014 ended months of political unrest. The Bank of Thailand is forecasting headline inflation at 0.8 percent this year, below the 1.0-4.0 percent target range, and core inflation at 0.9 percent. Central bank Governor Veerathai Santiprabhob told Reuters on January 19 that there was no need to cut interest rates as fiscal spending was supporting the economy. After surprise cuts in March and April last year, the BOT’s monetary policy committee has kept the benchmark interest rate unchanged at 1.50 percent. It next reviews policy on February 3, and most economists expect no change for now. Reuters
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Business Daily | 13
February 2, 2016
Asia Zeti Akhtar Aziz prepares to step down as head of Bank Negara Malaysia in April
Cambodia earns US$7.1 bln from garments & footwear
Malaysian central bank chief’s imminent exit highlights succession risks The central bank governor is formally appointed by the King of Malaysia Joseph Sipalan and Vidya Ranganathan
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or 16 years, Malaysia’s internationally-lauded central bank governor bolstered the economic credibility of a country otherwise facing a slew of emerging market challenges, ranging from currency crises to a commodities markets crash. As Zeti Akhtar Aziz prepares to step down as head of Bank Negara Malaysia in April, questions about succession are framed by uncertainties clouding the Southeast Asian economy, notably a collapse in commodity prices and a political scandal that has drawn international scrutiny, according to market participants. They say their angst centres on three key risks: the future of the central bank’s current independence, policy continuity and the competence of Zeti’s replacement. If the central bank cuts rates too early or too fast, it could spur capital outflows from Malaysian debt. On the other hand, a rate rise to defend the currency could hurt the economy. “People are hoping that the successor will be as credible as Zeti has been,” said Brian Tan, an economist with Nomura. “But we don’t know who is on the list and some people worry the replacement will be politically motivated.” Neither the central bank nor the government responded to Reuters’ requests for comment on potential successors or concerns around succession. So far this year, Malaysia’s currency and bond markets have enjoyed a degree of calm after being battered in 2015. Similarly, forward markets in the ringgit, Asia’s worst performing currency last year, don’t appear to be pricing in rough weather post April. Some of the issues hounding Malaysia in 2015 have faded, notably the political scandal around allegations of graft at the debt-laden state fund 1Malaysia Development Berhad (1MDB) and a revelation that about Us$681 million was deposited into Najib’s personal bank account.
While an on-going Swiss probe into 1MDB’s activities shows wider concerns around the fund are yet to be resolved, some say more immediate domestic political risks for the economy have retreated after Malaysia’s attorney-general last week cleared Najib of corruption. Foreign capital has also returned to the ringgit bond markets while Malaysian exports have remained robust. Another comforting factor is that BNM’s independence is sanctified by the law, which institutionalises the bank’s autonomy for the formulation of monetary policy. “The independence issue would not be an institutional one because some of the institutional anchoring has been done. It will be more to do with coziness between the government and the central banker,” said Vishnu Varathan, an economist with Mizuho Bank. He noted a lack of clarity around succession could impact sentiment in broader markets as Zeti’s term draws to a close.
Big shoes to fill
There’s been no official word on who could replace Zeti. Among names of contenders floating around in local media are those of deputy central bank governor Muhammad Ibrahim, the minister in the Prime Minister’s Department in charge of Economic Planning Abdul Wahid Omar, the Malaysian ambassador to the U.S. Awang Adek Hussin and the Secretary General of Treasury at the ministry of finance Mohd Irwan Serigar Abdullah. None of them commented on the matter when approached by Reuters. Zeti said in November she expects the new BNM leadership after her would be “excellent” because of the various processes existing to evaluate successors. She added there were internal candidates for the job but did not name specific individuals. When approached by Reuters last week, Zeti declined to comment on potential successors, but said she had no immediate plans to take up any new role.
“I will not take on any new assignments. I will focus on writing,” she told Reuters on Friday. The central bank governor is formally appointed by the King of Malaysia, who has a symbolic role in the constitutional monarchy. The tenure of the governor is for five years. The appointment is made on the advice of the federal cabinet, ostensibly the Prime Minister. A source close to the government said the economy is Najib’s biggest concern and that would guide the search for the next governor. The source said a significant number of strong candidates have already been lined up, both within the central bank and outside. Still, investors are worried about whether Zeti’s competence can be matched. “It’s very hard to distinguish Zeti from the BNM. We’re sort of delving into uncharted territory here in terms of her successor,” said Frederic Neumann, co-head of Asian economics research at HSBC in Hong Kong. “But the BNM seems to be fairly cautious. Malaysia has fared quite well by keeping interest rates stable over time and rarely moving, and I suspect the successor will want to maintain that winning formula.” The daughter of celebrated Malaysian academic Ungku Aziz Ungku Abdul Hamid, Zeti was handed the reins of the central bank at the peak of the Asian financial crisis in 1998. She was appointed governor in May 2000, becoming Malaysia’s first woman central bank governor. She steered the economy through the years when the ringgit was pegged, even dealing with former Prime Minister Mahathir Mohamed who dismissed the idea of an independent central bank, and through the global financial crisis in 2007. Under Najib, she was able to push for more autonomy for the central bank, winning Bank Negara plaudits from the international financial community for being one of Asia’s most independent central banks. Reuters
Cambodia exported garment and footwear products in equivalent to US$7.1 billion in 2015, up 14.5 percent from a year earlier, the Industry Ministry reported yesterday. The figure for 2014 stood at US$6.2 billion, according to the ministry’s annual meeting that opened yesterday. Main markets for the products are European countries, the United States, and Canada. Permanent Deputy Prime Minister Keat Chhon said the growth clearly showed the strength and competitiveness in the country’s garment and footwear industry. The garment and footwear sector, the country’s largest foreign currency earner, has 1,007 factories employing 754,188 workers.
Hyundai Merchant Marine to seek new buyer South Korea’s Hyundai Merchant Marine Co Ltd (HMM) plans to seek another buyer for its majority stake in stock brokerage Hyundai Securities Co Ltd , an HMM spokesman said yesterday. HMM’s talks to sell its entire 22.4 percent stake in the brokerage to Japan’s Orix Corp for about 647 billion won (US$535.83 million) fell apart late last year, the spokesman said. The plan needs to be approved by HMM’s creditor banks, the spokesman added.
Australian city home prices rebound Australian home prices rebounded in January with Melbourne boasting especially strong growth, a counter to speculation the market was at risk of crashing after a rapid run up last year. Yesterday’s figures from property consultant CoreLogic RP Data showed its index of home prices in the combined capital cities rose 0.9 percent in January, compared to December when prices were flat. Prices in Sydney increased by 0.5 percent after a soft end to last year, while Melbourne saw a jump of 2.5 percent. Melbourne also overtook Sydney with annual growth of 11.0 percent.
Thailand to sell rice from stockpiles Thailand will sell 500,000 to 600,000 tonnes of rice from government stockpiles for human consumption and industrial use, the commerce ministry said yesterday. Thailand, the world’s second-biggest rice exporter after India, has stocks of about 13 million tonnes following the rice-buying scheme under the previous government of Yingluck Shinawatra that cost the state billions of dollars and ended in 2014. Bidding for the rice, the military government’s first sale this year from its huge stockpiles, will take place later this month, said commerce ministry permanent secretary Chutima Bunyapraphasara.
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February 2, 2016
International Euro-Area factories cut prices Factories in the euro area slashed prices of goods by the most in a year in January, highlighting the deflationary risks that’s keeping alarm bells ringing at the European Central Bank. In its monthly manufacturing report, Markit Economics said price pressures “remained on the downside” and output charges fell for a fifth month. In addition, all countries in its survey reported declines, the first time that’s happened in 11 months. President Mario Draghi said the European Central Bank’s stimulus policies will be reviewed in March as the region’s inflation rate may drop below zero again because of oil’s slump.
Dubai airport 2015 traffic up 10.7 pct Dubai International Airport remained the world’s busiest for international passengers in 2015 as traffic grew 10.7 percent, boosted by the addition of new airlines and routes, the airport’s operator said yesterday. Annual traffic rose to 78 million passengers from 70.5 million in 2014. In the month of December alone, traffic climbed 8.5 percent to 7.05 million people. The addition of 12 new passenger destinations from Dubai International lifted traffic through the airport as local carriers Emirates and flydubai expanded. Air Canada, Germany’s Eurowings and China Southern also began operating in Dubai.
Ratings agencies could still be better supervised says EU auditor They came under the gun during the 2007-09 financial crisis when they gave high ratings to securitised debt linked to poorly performing home loans in the United States Huw Jones
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atings agencies in the European Union, which came under fire during the financial crisis for the verdicts they gave on sub-prime debt, still need to be better supervised, the bloc’s auditor said yesterday. The European Court of Auditors said that the European Securities and Markets Authority’s supervision of the agencies since 2011 was well established, but not fully effective. “Credit ratings are important for investors and participants in the equity and bond markets, in some cases even replacing investors’ due diligence,” said Baudilio Tome Muguruza, the Court member who wrote the 70-page report.
“But there is still room for improvement in the supervision of credit ratings agencies in the EU,” Muguruza added. Cumbersome registration rules and central bank hurdles are making it harder for smaller credit ratings agencies to compete with the “Big Three” in the EU, the report concluded. Ratings agencies came under the gun during the 2007-09 financial crisis when they gave high ratings to securitised debt linked to poorly performing home loans in the United States. This debt became impossible to trade, contributing to a global markets meltdown and prompting
Pakistan inflation rate rises Pakistan’s annual consumer inflation rate rose to 3.32 percent in January from 3.19 percent in December, the Bureau of Statistics said yesterday. “The year-on-year inflation increased mainly due to an increase in food prices,” said Asif Bajwa, the bureau’s chief statistician. On a month-on-month basis, prices rose by 0.21 percent in January from December. The average annual inflation rate for July-January 2015/2016 over July-January 2014-15 was 2.26 percent. On Saturday, Pakistan’s central bank announced that it was leaving the benchmark interest rate unchanged at 6 percent.
Barclays, Credit Suisse strike record deals over dark pools Barclays and Credit Suisse have settled federal and state charges that they misled investors in their dark pools, with Barclays admitting it broke the law and agreeing to pay US$70 million, federal and New York state officials said on Sunday. The settlements between the banks and the U.S. Securities and Exchange Commission and the New York state attorney general mark the two largest fines ever paid in connection with cases involving dark pools. The amount to be paid, in fines and disgorgement, is a combined total of US$154.3 million.
BT posts best growth for seven years Britain’s BT Group posted the best revenue growth for seven years in its latest quarter, driven by a strong performance in consumer broadband and putting it in a strong position to incorporate the mobile market leader EE. Chief Executive Gavin Patterson said it was an exciting time for the former British incumbent, which in recent years has added superfast fibre broadband and television services to a line-up capped by a return to the mobile market. “BT Consumer had a stand out quarter, increasing its overall line base for the first time in well over a decade,” he said yesterday.
the EU to pass three sets of laws to regulate ratings agencies and boost competition in a sector dominated by Moody’s, Fitch and Standard & Poor’s. The report said the “Eurosystem” -- the combination of European Central Bank and central banks in euro zone countries -- only accept ratings issued by four of the 23 agencies authorised by ESMA. This creates a two-tier market structure and puts small agencies in an unfavourable situation, the Court said. Although ESMA has laid down good foundations for its supervision approach, its rules and guidelines are not complete. Documentation and internal monitoring tools are “rather rudimentary”, and it was not always possible to trace the on-going supervisory work performed, or the analysis and conclusions derived from it, the report said. ESMA said it accepted some of the criticisms and recommendations, but that it had no authority over how the Eurosystem operates. It said it continuously seeks to enhance its practices, such as by looking at those of other supervisors. The ECB said its Eurosystem Credit Assessment Framework (ECAF) is open to additional rating agencies if they request acceptance and comply with minimum requirements.
One of the “Big Three”. Fitch Ratings and Standard & Poor’s are the other two
Reuters
Leveraged loans roar to life The lending surge contrasts with a slump in sales of European junk bonds and U.S. leveraged loans Selcuk Gokoluk
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ore leveraged loans were arranged in January than in any of the previous 17 months as private equity firms went bargain hunting amid a stock-market slump. Twenty deals totalling 6.6 billion euros (US$7.2 billion) were launched in Europe last month, the most since July 2014, based on details from people familiar with the various plans. That compares with 4.9 billion euros in January 2015. All but one of last month’s loans financed acquisitions as a 6 percent decline in European equity markets pared competition from the initial public offering market. The lending surge contrasts with a slump in sales of European junk bonds and U.S. leveraged loans as the slowing Chinese economy and falling commodity prices sap demand for risky assets. “The fact that we had a January when some of the heat came out of
the equity market set the picture for private equity,” said Fiona Hagdrup, who helps manage 9 billion euros of speculative-grade bank debt at M&G Investments, the fund- management arm of U.K. insurer Prudential Plc. Among the biggest deals in Europe’s leveraged-loan market, U.K. gasstation operator Euro Garages obtained 620 million pounds (US$887 million) of term loans denominated in sterling and euros, according to a person familiar with the matter, who isn’t authorized to reveal the information and asked not to be identified. The syndication was oversubscribed, the person said. The funds, part of a wider financing package, will be used for TDR Capital’s acquisition of a minority stake in the company.
Supply decline
KKR & Co. raised the equivalent of 500 million pounds for its purchase
of LGC, a U.K. medical measurement and testing company, from private equity firm Bridgepoint. Issuance in high-yield bonds dropped about 80 percent in January, with Telecom Italia SpA executing the only major sale. Leveraged loans totalling 45 billion euros were sold last year, from 57 billion euros in 2014, according to data compiled by Bloomberg. The decline in leveraged-loan supply, coupled with investors seeking higher yields, fuelled returns of 5.5 percent last year on the S&P European Leveraged Loan Index, the seventh- straight year of gains. That tracked rising demand for new debt from originators of collateralized loan obligations, which package loans into tradable securities. Bloomberg News
Business Daily | 15
February 2, 2016
Opinion Business
wires
China’s bumpy new normal
Leading reports from Asia’s best business newspapers
BANGKOK POST Thailand’s six main airports saw robust growth in passenger traffic of 21.3% in 2015, setting a new record of just under 110 million. Such impressive growth largely reflected the marked upturn in Thailand’s tourism industry. Aircraft movements -- takeoffs and landings -- surged in tandem by 16.6% from the previous year to 727,750, according to figures from the Airports of Thailand Plc (AoT). The growth momentum is expected to continue through 2016 with AoT, the state operator of the six airports, conservatively projecting an 11% increase in combined passenger throughput.
VIETNAM NEWS Vietnamese textile and garment companies face a huge challenge with the market set to be flooded with imports following the country’s accession to the ASEAN Economic Community (AEC) and Trans-Pacific Partnership (TPP) treaty. “I realise that customers will support domestic goods, but the most important factor to retain Vietnamese clients is to assure quality,” Nguyen Thi Dien, chairwoman and executive director of the An Phuoc Shoes Sewing and Embroidering Company, has been quoted as saying on the government website.
THE PHNOM PENH POST Cambodian entrepreneurs and business leaders on Saturday stressed the challenges for firms in the hospitality and retail sectors that adopt an aggressive pricing policy, suggesting a more value-added approach instead. At the 2nd Global Alumni Convention – a forum that brings together Cambodian graduates who studied overseas, government officials and senior business leaders – participants said undercutting competitors on price affects the industry as a whole in terms of future investment and quality standards. Pascal Ly, CEO of the Credit Bureau Cambodia, said that for SMEs to compete on price was a “very risky strategy”.
THE AGE Private equity giant Blackstone says the current oil price is not sustainable and it expects prices to return to a more comfortable level of US$75 a barrel in the next few years, as more US producers start to shutter supply. “It’s hard to call the exact turn but ... these prices are not sustainable,” said Blackstone president Hamilton James in an earnings call. “When we look at energy investing, we look at surviving a long time where prices are today and then still getting very, very nice returns if we get back to prices US$60 or above.”
Joseph E. Stiglitz
Nobel laureate in economics, is University Professor at Columbia University and Chief Economist at the Roosevelt Institute
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hina’s shift from exportdriven growth to a model based on domestic services and household consumption has been much bumpier than some anticipated, with stock-market gyrations and exchange-rate volatility inciting fears about the country’s economic stability. Yet by historical standards, China’s economy is still performing well – at near 7% annual GDP growth, some might say very well – but success on the scale that China has seen over the past three decades breeds high expectations. There is a basic lesson: “Markets with Chinese characteristics” are as volatile and hard to control as markets with American characteristics. Markets invariably take on a life of their own; they cannot be easily ordered around. To the extent that markets can be controlled, it is through setting the rules of the game in a transparent way. All markets need rules and regulations. Good rules can help stabilize markets. Badly designed rules, no matter how well intentioned, can have the opposite effect. For example, since the 1987 stock-market crash in the United States, the importance of having circuit breakers has been recognized; but if improperly designed, such reforms can increase volatility. If there are two levels of circuit breaker – a short-term and a long-term suspension of trading – and they are set too close to each other, once the first is triggered, market participants, realizing the second is likely to kick in as well, could stampede out of the market. Moreover, what happens in markets may be only loosely coupled with the real economy. The recent Great Recession illustrates this. While the US stock market has had a robust recovery, the real economy has remained in the doldrums. Still, stock-market and exchange-rate volatility can have real effects. Uncertainty may lead to lower consumption and investment (which is why governments should aim for rules that buttress stability). What matters more, though, are the rules governing the real economy. In China today, as in the US 35 years ago, there is a debate about whether supply-side or demand-side measures are most likely to restore growth. The US experience and many other cases provide some answers. For starters, supply-side measures can best be undertaken when there is full employment. In the absence of sufficient demand, improving supply-side efficiency simply leads to more underutilization of resources. Moving labour from low-productivity uses to zero-productivity unemployment does not increase output. Today, deficient global aggregate demand requires governments to undertake measures that boost spending.
Such spending can be put to many good uses. China’s critical needs today include reducing inequality, stemming environmental degradation, creating liveable cities, and investments in public health, education, infrastructure, and technology. The authorities also need to strengthen regulatory capacity to ensure the safety of food, buildings, medicines and much else. Social returns from such investments far exceed the costs of capital. China’s mistake in the past has been to rely too heavily on debt financing. But China also has ample room to increase its tax base in ways that would increase overall efficiency and/or equity. Environmental taxes could lead to better air and water quality, even as they raise substantial revenues; congestion taxes would improve quality of life in cities; property and capitalgains taxes would encourage higher investment in productive
China also has ample room to increase its tax base in ways that would increase overall efficiency and/or equity
activities, promoting growth. In short, if designed correctly, balanced-budget measures – increasing taxes in tandem with expenditures –could provide a large stimulus to the economy. Nor should China fall into the trap of emphasizing backwardlooking supply-side measures. In the US, resources were wasted when shoddy homes were built in the middle of the Nevada desert. But the first priority is not to knock down those homes (in an effort to consolidate the housing market); it is to ensure that resources are allocated efficiently in the future. Indeed, the basic principle taught in the first weeks of any elementary economics course is to let bygones be bygones – don’t cry over spilt milk. Low-cost steel (provided at prices below the long-term average cost of production but at or above the marginal cost) may be a distinct advantage for other industries. It would have been a mistake, for example, to destroy America’s excess capacity in fibre optics, from which US firms gained enormously in the 1990s. The “option” value associated with potential future uses should always be contrasted with the minimal cost of maintenance. The challenge facing China as it confronts the problem of excess capacity is that those who would otherwise lose their jobs will require some form of support; firms will argue for a robust bailout to minimize their losses. But if the government accompanied effective demand-side measures with active labour-market policies, at least the employment problem could be effectively addressed, and optimal – or at least reasonable – policies for economic restructuring could be designed.
There is also a macro-deflationary problem. Excess capacity fuels downward pressure on prices, with negative externalities on indebted firms, which experience an increase in their real (inflationadjusted) leverage. But a far better approach than supplyside consolidation is aggressive demand-side expansion, which would counter deflationary pressures. The economic principles and political factors are thus well known. But too often the debate about China’s economy has been dominated by naive proposals for supply-side reform – accompanied by criticism of the demand-side measures adopted after the 2008 global financial crisis. Those measures were far from perfect; they had to be formulated on the fly, in the context of an unexpected emergency. But they were far better than nothing. That is because using resources in suboptimal ways is always better than not using them at all; in the absence of the post2008 stimulus, China would have suffered substantial unemployment. If the authorities embrace better-designed demand-side reforms, they will have greater scope for more comprehensive supplyside reforms. Moreover, the magnitude of some of the necessary supply-side reforms will be markedly diminished, precisely because the demandside measures will reduce excess supply. This is not just an academic debate between Western Keynesian and supply-side economists, now being played out on the other side of the world. The policy approach China adopts will strongly influence economic performance and prospects worldwide. Project Syndicate
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February 2, 2016
Closing Taiwan exports seen falling for 12th month
Thai Prime Minister assures general election in 2017
Taiwan’s exports probably fell for a 12th month in a row in January, a Reuters poll of analysts showed, with an expected 13.6 percent decline from a year ago highlighting the lacklustre state of global demand entering the new year. Exports fell 13.9 percent in December. The median forecast of 14 analysts polled by Reuters also predicted imports would fall 13.7 percent year-on-year in January. A trade surplus of US$4.33 billion was forecast for the month, slightly up from December’s surplus of US$4.17 billion. The poll also predicted a 0.72 percent rise in consumer price inflation in January from a year ago.
Thailand’s Prime Minister Prayuth Chan-ocha (pictured) said yesterday that a general election will take place in 2017, amid criticism that a draft constitution unveiled last week would delay the poll. A draft constitution released on Friday has been pilloried by all major political parties, raising fears it will be rejected in a July referendum, delaying a return to democracy. “The year 2017, 2017, 2017,” a visibly irritated Prayuth told reporters in response to a question about when an election will be held. Last week, Prayuth said Thailand will hold an election in 2017 even if the draft constitution does not pass the referendum.
Beijing to allow banks to directly invest in high-growth tech firms The move is intended to channel more financial support to China’s high-flying tech sector Shu Zhang and Matthew Miller
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hina is planning a pilot programme to allow selected commercial banks to set up equity investment arms to take direct stakes in technology firms, people familiar with the matter said, a move aimed at giving lenders a chance to buy into a high-growth industry while stoking competition with private equity players. Under China’s commercial banking law, banks are forbidden from directly investing in equities of nonbank institutions, unless otherwise stated by the government. The pilot programme, dubbed an “investment and loan linkage mechanism”, is set to start sometime this year via special approval by the State Council, China’s cabinet, a government official with direct knowledge of
tech sector, a traditional hunting ground of private equity, venture capital and foreign investment banks. “If these rule changes bring more capital to the market, its going to create more competition and put more pressure on returns for all investors,” said Bain & Co partner Vinit Bhatia. While China’s broader growth prospects have cooled, its tech sector remains in demand. Investments in telecommunications, media and technology totalled US$14.1 billion in China in the first half of 2015, surpassing the US$13.3 billion invested during the whole of 2014, according to Bain & Co. With an eye on the Silicon Valley model, Chinese commercial bankers told Reuters that while sometimes risky, tech start-ups can make for lucrative business if lenders are allowed to not only lend, but also take ownership in those firms.
Indirect investments
the plans said. The official was not authorised to talk to the media and requested anonymity. Details of which banks will qualify to take part in the pilot scheme, and under what conditions, have yet to be hammered out, the official and three senior bankers said, but China’s banking regulator has identified the effort as a
Australia, Pacific islands on high alert for Zika virus
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major task for 2016. The bankers declined to be identified because they were not authorised to talk to the media. The China Banking Regulatory Commission (CBRC) did not respond to a faxed request for comment. The move is intended to channel more financial support to China’s high-flying
With more resources to set up offshore vehicles, some of the country’s bigger lenders have already made indirect investments in rising tech firms. Last week, China Merchants Bank Co agreed to invest US$200 million in fast-growing ride-hailing firm Didi Kuaidi, which competes with ambitious U.S. start-up Uber. In order to make the investment, part of a US$3
billion fund-raising round that brought in money from investors including Singapore state fund Temasek, China Merchants Bank used an offshore investment affiliate, a person familiar with the matter told Reuters. China Merchants Bank declined to comment. Elsewhere, Hankou Bank, a small city bank based in central China, has teamed up with Legend Capital and Hony Capital, both owned by Legend Holdings, the biggest investor in PC and smartphone maker Lenovo Group Ltd. The bank provides loans, while its partners buy stakes in tech firms. Legend Holdings has a 15.3 percent stake in the bank. But the model isn’t ideal, Hankou Bank Chairman Chen Xinmin told Reuters in December. Although each of the parties shoulders high risks, equity investors benefit as valuations increase, while the bank makes money only from loan interest. “Traditional banks mainly have debt relations with clients, but to develop tech finance, we need to build shareholding relations with them,” Chen said. Some banks already are testing the boundaries of current law restricting equity investment in tech companies, using debt-to-equity terms in loan agreements and by appointing friendly private equity houses and venture capital firms as proxy shareholders, bankers said.
China’s new home prices up in January
Mainland’s economy worries Europe
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ustralia and Pacific island countries are on high alert for the mosquito-borne Zika virus that has been linked to severe birth defects. “There is great deal that remains unknown about the Zika virus, but the reports and suspected links to birth defects and neurological problems mean that this threat must be taken very seriously,” Papua New Guinea’s Prime Minister Peter O’Neill said in a statement. Australian authorities have implemented measures to help stop the spread of the virus through the Torres Strait with monitoring in the nation’s remote north already underway. “We’ll monitor closely through the Torres Strait. We already do that with a number of infectious diseases,” Queensland state health minister Cameron Dick told reporters yesterday. Dick said the Zika virus does not pose a significant health risk to Queensland “at this time ... but we’re going to continue to monitor that.” Zika carrying mosquitos are endemic to tropical and sub-tropical environments. There are currently no reported cases of Zika in Australia.
hina’s new home prices increased in January for the sixth straight month, a survey showed yesterday, positive news for the key sector following a series of stimulus measures aimed at boosting lending. The gains come as authorities have sought to stabilise China’s property market -- a main driver of the world’s second-largest economy -- and rolled out new measures intended to encourage migrant workers to buy homes in the cities where they work. The average price of a new home in China’s 100 major cities rose 0.42 percent month-on-month in January to 11,026 yuan (US$1,675) per square metre, the China Index Academy (CIA) said in a report, a slight easing from December’s 0.74 percent rise. On a year-on-year basis, prices rose 4.37 percent. The property market fuelled much of China’s spectacular growth in recent decades but hit the doldrums in the past two years, with new buyers priced out despite government borrowing restrictions reining in soaring costs. The National Bureau of Statistics said in January that total property market turnover jumped 16.6 percent in 2015 as volumes rose, but added that growth in new construction slowed, limiting the positive effect on the overall economy.
Xinhua
AFP
Reuters
he global economy remains on a moderate recovery track but China’s slowdown is of particular concern as it raises the risk of crisis returning to developed nations, European Central Bank policymaker Ewald Nowotny said yesterday. China’s growth, though seemingly still rapid, is “meagre” compared to its social and demographic challenges, and its transformation will hurt its trading partners in the short term, said Nowotny, who is also the head of the Austrian central bank. “The most urgent issue here is the financial volatility and economic weakness in various emerging market economies,” Nowotny told a conference in Budapest. “Recent developments in China - since last year, world’s largest economy in terms of GDP based on purchasing power parity - are of particular concern.” The euro zone has struggled with weak growth and ultra-low inflation for years and its problems have been exacerbated by Chinese growth slowing to its lowest level in 25 years. The ECB eased policy with a rate cut and an expansion of its asset purchase programme in December and signalled last month it may have to ease policy further in March. Reuters