MOP 6.00 Closing editor: Joanne Kuai
Marco Müller to direct International Film Festival Macao
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Year IV
Number 982 Wednesday February 17, 2016
Publisher: Paulo A. Azevedo
Japan starts applying negative interest rate Pages 12-13
Shipbuilding industry reinvents itself to survive
Hotel industry girds up for price war Restaurant coupons. Free tickets to entertainment shows. Buy ferry tickets, get complimentary accommodation. And cheaper then usual hotel room rates. The local hospitality industry has entered another price war to offset the low season slump. Given Macau’s weak business tourism sector, an academic urges the city to diversify its offerings further. Meanwhile, Macao Government Tourism Office has revealed the hospitality industry’s CNY strategy. With average 5-star hotel room rates dropping 12.2 pct y-o-y to MOP2,150. Fuelling occupancy rates of 96.2 pct, up 2.9 pct y-o-y
HSI - Movers February 16
Name
%Day
PetroChina Co Ltd
+6.42
China Resources Land L
+5.38
China Overseas Land &
+5.29
China Petroleum & Che
+3.51
Ping An Insurance Gro
+3.38
China Mengniu Dairy C
-1.70
Property
Li & Fung Ltd
-1.75
Residential sales slump
Galaxy Entertainment
-1.99
Kunlun Energy Co Ltd
-2.31
Want Want China Hold
-3.11
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Local real estate agents are expressing concern. With transactions in the residential market for January even slower than December’s 500-plus deals. Centaline (Macau) Property Agency Ltd’s deputy regional sales director, John Ng, counts only 200 transactions. Making it the least active January since 2010
Source: Bloomberg
I SSN 2226-8294
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Coutinho suspects collusion Legislator José Pereira Coutinho has accused the gov’t of benefit transfer. Claiming authorities awarded ExCo member Eddie Wong Yue Kai a multi-million design contract without public tender in 2005. The case relates to the infectious diseases building. The Health Bureau refutes the accusation. On the basis of highest score, cheapest proposal, shortest working period www.macaubusinessdaily.com
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Loans soar China’s new yuan-denominated lending in January jumped to US$385 bln. An increase of 71 pct from a year earlier, official data showed yesterday. January’s new yuan loans were also about four times those posted in December 2015
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Record CNY for airport A bustling Chinese New Year for the local airport. From 8th to 14th February MIA welcomed 160,000 pax and handled 1,200 flight movements. Up 23 pct and 6 pct, respectively. MIA also set new records for daily passenger volume and aircraft movements on 13th February
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February 17, 2016
Macau
Realtors: January housing transactions may hit new low The city’s gaming slump has showed signs of narrowing. But the real estate market has not, local property agents claim, saying total housing transactions for January are very likely to register a new low Kam Leong
kamleong@macaubusinessdaily.com
“Based on the data we have gathered since the beginning of this year, we notice that many landlords, especially those holding a few properties in hand, have tended to drop their sale prices for their units,” she added.
Rental not that affected
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he city’s real estate market is still depressed - with residential transactions probably posting lower numbers for January compared to December 2015, due to the economic downturn coupled with festive factors, local property agents say. “We estimate that total housing transactions since the beginning of the year will drop further from last December. After all, it has been a festive season these two months, with many property agents going on vacation. As such, the number of customers has also decreased,” the managing director of RicaCorp (Macau) Properties Ltd., Jane Liu, told Business Daily in a phone interview.
Meanwhile, Centaline (Macau) Property Agency Ltd’s deputy regional sales director, John Ng, anticipated in the firm’s latest note that the city’s total housing transaction for last month may only total around 200, compared to December’s 501 transactions. “Residents’ sentiments looking for housing units were obviously low in January as it was near the Chinese New Year and was affected by the recent cold weather,” the agent said. If Mr. Ng is correct, it would mean the lowest January housing transaction number since such data was released by the Financial Services Bureau (DSF) in 2010, coming on top of a year-on-year slump of 40
per cent from January 2015’s 336 transactions.
Rebound or not
On the other hand, the Centaline deputy regional sales director said in the note that local housing prices may rebound after the Chinese New Year by slightly three per cent, as market sentiment should start getting active again. But RicaCorp’s managing director does not see the city’s real estate market displaying the conditions to spring back. “Despite the drop in gaming revenues narrowing a bit in January, the junket operations are still under pressure. As such, the overall atmosphere of the property market is still not that good,” Ms. Liu said.
On the contrary, both agents indicated that the local rental market remains active, attributable to support from non-resident personnel working in the Special Administrative Region. “The city’s rental market is primarily supported by foreign tenants, such as engineers from Hong Kong, Singapore and Malaysia as well as foreign chiefs,” Mr. Ng wrote. “Take Taipa as an example; the rental market there is supported by the professional personnel who work for hotels and construction. Although the average rent in Taipa is down by some 30 per cent from its peak, the decrease is due to the increase in supply, such as from One Oasis and Nova Park,” Ms. Liu posited. Nevertheless, she noted that the rental market in the NAPE district on the Peninsula is another story. “The rental market in the district used to be supported by casino people. As such, we see that rents there have plunged by between some 40 and 45 per cent from their highest,” the agent claimed. Forecasting the housing market for the rest of the year, the RicaCorp head predicts that the city’s average housing price would not drop by more than 10 per cent. “This is because current housing prices are already very close to the bottom. When you try to sell your property, you still need to balance your profits and the costs you have. Hence, recently we see that many landlords have preferred leasing out their units rather than putting them on sale,” Ms. Liu explained.
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February 17, 2016
Macau Health Bureau: Infectious diseases building design awarded legally to Eddie Wong
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he Health Bureau said that the award of the design contract for the city’s infectious diseases building to Executive Council (ExCo) member Eddie Wong Yue Kai in 2005 was in line with the law – in response to legislator José Pereira Coutinho’s accusation that the government had transferred benefits to the local architect via the contract. On Sunday, the directly-elected legislator made the accusation during local broadcaster TDM’s outdoor programme Macau Forum, saying that the authorities had granted the design contract to Mr. Wong’s company without inviting any public bids, and urging the city’s graft watchdog Commission Against Corruption to investigate the contract award. According to the Official Gazette, the ExCo member’s Gabinete de Arquitectura Eddie Wong Limitada was granted a MOP54 million (US$6.75 million) design contract for the infectious diseases building, administrative building, hospital dormitory and first-phase expansion of Hospital Conde S. Januário in 2005 by then-Chief Executive Edmund Ho. The local health department said in a press release on Monday evening that the contract award followed written consultations for the projects in 2005, claiming it had filed written enquiries to three local architectural
design companies for price quotations and received three before the tender deadline. ‘The selection committee strictly analysed the quotations provided by the companies based on local contracting standards. It eventually awarded the design contract to the company that scored the highest, with
Foreign exchange reserves climb to MOP156 bln in January
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preliminary estimate of the city’s foreign exchange reserves reached MOP155.6 billion (US$19.39 billion) as at the end of January, according to the latest foreign exchange reserves and nominal effective exchange rate index for the pataca released yesterday by the Monetary Authority of Macao (AMCM). The reserves - compared to MOP150.8 billion for December 2015 - represent an increase of 3.2 per cent. In addition, they jumped by 16.7 per cent from MOP133.3 billion for the same period of last
year, official data shows. As at the end of the month, local foreign exchange reserves represented 13 times the currency in circulation, or 110.1 per cent of Pataca M2 at the end of 2015. On the other hand, the tradeweighted effective exchange rate index for the pataca rose 0.36 points monthto-month, or 4.68 points year-on-year to 107.64 in the month, suggesting that the city’s official currency had appreciated against the currencies of its major trading partners in general. K.L.
the cheapest budget and the shortest required period for the works,’ the Bureau wrote. In 2014, the value of the awarded design contract was lowered to MOP31.8 million after the company altered its original drawings which had violated the height limits for buildings surrounding the cultural
heritage site of the Guia Lighthouse. The ExCo member had previously been awarded several medical infrastructure projects by the authorities, including the MOP235 million architectural contract for the city’s Island Hospital complex granted in 2013. K.L.
4 | Business Daily
February 17, 2016
Macau opinion
Of bridges and people
José I. Duarte Economist
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n a delightful piece of understatement, we have just been notified that seven pillars of the new Hong Kong-ZhuhaiMacau Bridge were ‘flawed’ – and would have to be ‘reconstructed’. As is so often the case in similar situations, the information comes almost casually and devoid of any particulars. What is the nature of the ‘flaws’, their causes and actual risks? Who was responsible for them? Those are topics of minor importance, surely. If they were important, we have to assume, someone would definitely tell us something about them. The fact that nobody did just shows they are not, and sensible people certainly do not waste time on trivial matters. Argument closed. Some time ago, we were also advised that a part of the underwater structure was subsiding due to, it seemed, land movements. We don’t know what other flaws might be implicated or how many pillars, if any, were involved in that event. Hopefully, no new ‘flaws’ will be detected, in pillars or anywhere else. Meanwhile, the construction schedule keeps stretching and the budget keeps inflating. The bridge promises to be, as some have suggested from the beginning, a kind of two-whiteelephants–in–one: one for the construction, another for the operation. Lest we forget, we have still to see a sensible formulation of what real problems this bridge addresses; or a reasoned argument why this particular solution is superior to other conceivable and feasible alternatives; or a plausible forecast of its operations that will not depend heavily upon the ‘pillar’ of public money. It is too late to change the decision but it is never too late to know. Furthermore, for Macau, the extent of costs, beyond underwriting part of the construction bill, and the expected benefits, financial or otherwise, has yet to be clarified. This brings us to one of the major ‘obsessions’ of Macau. The bridge is supposed to ‘help’ us to bring in more visitors. But do we, or should we, want that to happen? We live somehow transfixed with the question of how many more tourists Macau can bear. It is not an irrelevant question, but the issue of the number alone, without a proper frame or context, is close to meaningless and deserves less attention than we grant it. The first question we need to ask ourselves is ‘what type of visitors we want to attract’. Then, we must ponder what kind of services and facilities must be available to cater for those visitors, and how we develop, consolidate and market them. Then, yes, we may ask ourselves how many can we attract in conditions that are both hospitable for the visitors and sustainable for the local community. And that is the essential ‘bridge’ that is still missing.
Airport passenger numbers up 23 pct at CNY y-o-y The local airport also registered a record-breaking single-day passenger volume of 29,000 and traffic volume of 204 during the weekend Bami Lio
bami.lio@macaubusinessdaily.com
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rom February 8 to 14 – the first to seventh day of the Lunar New Year - Macau International Airport (MIA) received 160,000 passengers and handled 1,200 flight movements, up 23 per cent and 6 per cent, respectively, from the previous Chinese New Year, according to a press release by Macau International Airport Co. Ltd. (CAM). Peak traffic volume occurred on February 13, the sixth day of the Lunar New Year, as 29,000 passengers were received and 204 flight movements were handled, setting the company’s new single-day traffic volume record since inception. CAM attributes the record to an increase in the number
of flights and rise in seat occupancy rate, according to a written email from the company to Business Daily. The previous peak traffic volume occurred in 2008, with more than 23,000 passengers received. MIA also handled 204 flight movements on February 14 2015.
Humble prediction
The company spokesperson also told us that the MIA market this Chinese New Year was mainly made up of route passengers from Southeast and North Asia, followed by those from Taiwan, then from Mainland China. Last year, 40 per cent of the MIA market comprised Southeast
Louis XIII announces two months’ salary bonus for general staff
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esterday, the Louis XIII company announced a Chinese New Year bonus for the general staff amounting to two months’ salary. The bonus will be available for general staff who have been working for the company for the full year of 2015. Employees who started working in 2015 but have not been in the
company for the full year will receive a bonus proportional to the time they have been employed by the company. “This bonus reflects our recognition and appreciation of the diligent, productive work of Louis XIII’s team members, as they continue contributing to what will arguably be the most luxurious hotel ever built”, CEO Walt Power said yesterday in a statement.
and North Asia routes passengers, followed by 33 per cent Mainland China and 27 per cent Taiwan routes passengers in 2015. With a milder rise in Chinese visitors arriving by plane, CAM claimed to have expected a slower year-on-year passenger growth rate for the Chinese New Year in 2016. The company proposed new targets of 57,500 flight movements, 30,659 tonnes of cargo and 5.95 million passengers traffic this year. According to data released by Macao Government Tourism Office (MGTO), some 1.08 million tourists entered Macau from February 7 to 13 with some 63,963 visitors arriving by plane, about 6 per cent of total visitors.
“The sustained success of the company is based on recruiting the highest quality team members, and investing in those individuals through constant world-class training and development”, he added. Louis XIII is building an ultra luxury resort in the area between Cotai and Coloane. When the company first announced the project, scheduled to open in late summer this year, it was supposed to include gaming facilities. However, the later filings of the company do not mention this possibility. “We are proud that Macau will be establishing a new world standard for ultra-luxury hotels through our Macau-born brand, where our expert team will offer our international guests a gateway to a collection of refined and remarkable experiences”, Mr. Power said of the project.
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February 17, 2016
Macau Hengqin International Commodity Trading Centre unveiled Located in Hengqin Zhuhai Free Trade Zone, the Hengqin International Commodities Centre was unveiled on February 15. It seeks to be a platform allowing spot trading of bulk commodities. The Centre claims its target markets are Guangdong, Hong Kong, Macau and international markets, while deals are to be made in renminbi to attract direct use of the currency in those markets. In addition to the new Hengqin International Commodities Centre, four other trading platforms are operating in Hengqin, namely the Guangdong Financial Assets Exchange, Zhuhai Property Rights Exchange Centre, International Intellectual Property Exchange, and Hengqin Rare Precious Metals and Commodity Exchange.
Low season triggers battle of promotions in hotel industry The end of Chinese New Year has triggered a competition between hotel operators to offer guests the best promotions and discount packages to offset the effects of the low season João Santos Filipe
jsfilipe@macaubusinessdaily.com
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ollowing the Chinese New Year (CNY) holidays, the Macau tourism industry returns to reality, with hotel operators engaging in a fiercer competition by offering guests better promotions and discount packages. The goal of these marketing campaigns is to offset the effects of the low season and keep occupancy levels high at a time when there are less visitors coming to the city. The 5-star Grand Hyatt is one of the hotels implementing the discount packages strategy. The resort is currently offering the ‘Grand Offer Package’, which costs HK$1,999 (US$257) and includes MOP800 in restaurant discounts. In addition, the hotel is offering ‘The House of Dancing Water WOW Package’, which starts at HK$2,399 and includes tickets for two for the show. “These promotions are expected to create additional demand and increase occupancy at a time when guests do not usually travel because of the attractiveness of rates or value offer”, the Director of Sales and Marketing of Grand Hyatt Macau, Bonita Hipolito-Busch, told Business Daily. As more new properties and hotel rooms are added to the existing market, competition is increasing. By the end of CNY there were some 33,042 hotel rooms in Macau, according to Macao Government Tourism Office data. In 2016 and 2017 - with the opening of luxury and mega resorts Wynn Palace, Louis XIII, The Parisian, MGM Cotai and Grand Palace Lisboa – the market offer will balloon to around 50,000 rooms.
Sense of value for money
The hotel expansions and the fact that guests are very much attracted by
promotions, which can increase their feeling of value for money, will make this trend become more popular in the territory as part of the marketing strategies. “Yes, this will continue to be a trend especially with more hotels opening in Macau. With more options available to them, people will continue to look for value for money and new experiences when choosing where to stay”, Bonita Hipolito-Busch confirmed. Grand Hyatt is not the only hotel offering discount packages to visitors. The same model is being implemented by Sands China, which has adopted a Spring Sale, with discounts on its rooms. Others, such as Mandarin Oriental and Hotel Lisboa, have adopted different strategies, partnering with the company running ferries to and from Hong Kong and Mainland China, TurboJet. In these cases the most expensive ferry tickets include complimentary accommodation.
Alternatives to gaming tourism
The fact that Macau lacks a strong business tourism industry that can offset the effects of the low season
GIT: LRT designs based on system requirements
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he city's Transportation Infrastructure Office (GIT) said it had not received any reports from residents or units that the infrastructure of the Light Rapid Transit (LRT) may have departed from the standards required by the train system. The Office told local broadcaster TDM
Radio yesterday that the design for all infrastructure works of LRT’s Taipa route is based on the requirements of the train system that the city is to apply. It added that it would ensure the completed project meets the system requirements in order that the project can run smoothly in the future.
for the travel industry lends extra importance to this strategy. “Macau has a strong tourism travel industry but unlike other jurisdictions it doesn’t have a strong business tourism [base] which could offset seasonal peaks. This helps explain why the hotel operators need to have more of these promotions”, the assistant professor of gaming and hospitality management at the University of Macau, Glenn McCartney, told Business Daily. “Another factor is that for some years the city has been too focused on gaming, and as such the other leisure tourism [elements] lagged behind for some time. This makes Macau a challenging city at the moment”, he added. The importance of targeting business tourism as well as leisure guests during low seasons was also stressed by the Grand Hyatt Macau representative. The feeling among hotel staff is that the hotel rate will be positive for the coming weeks and the development in Macau of new attractions drives this feeling. “We are quite positive that leisure guests and MICE guests coming to
Room occupancy rate up but prices dip During the Chinese New Year Golden Week the average room rate of 3 to 5-star hotels in Macau dropped 17.2 per cent to MOP1,672.7, MGTO revealed yesterday. For 5-star hotels, the average room rate went down 12.2 per cent to MOP2,150.5, while for 4-star hotels and 3-start hotels it declined 15.7 per cent to MOP1,455.6 and 25 per cent to MOP1,412.1. Meanwhile, 2-star hotel prices dropped 9.1 per cent to MOP981.6, while guesthouses increased 1.7 per cent to MOP738.2. As for hotel occupancy rate, according to industry figures quoted by MGTO the occupancy of 3-star to 5-star hotels increased 5.9 percentage points year-on-year to 93.4 per cent; 5-star hotels recorded an average occupancy rate of 96.2 per cent, up 2.9 percentage points, while 4-star hotels registered 92.6 per cent, up 8.5 percentage points. Meanwhile, 3-star hotel occupancy posted 91.4 per cent, an increase of 6.2 percentage points. The occupancy of 2-star hotels and guesthouses stood at 78.7 per cent (up 4.8 percentage) points and 75.6 per cent (up 1.6 percentage points). During the Spring Festival Golden Week Macau recorded 1,076,611 visitor arrivals, up 4.7 per cent over the corresponding period last year.
Grand Hyatt Macau will increase after the CNY holidays. The new attractions in Macau also help to increase demand from families and leisure guests”, the Director of Sales and Marketing of Grand Hyatt Macau said.
CNY brings moderated optimism
During 2015 the number of visitors to the territory declined 2.57 per cent year-on-year to 30.71 million visitors from 31.53 million. However, during this year’s CNY the number of visitors rebounded increasing 4.3 per cent to 1.08 million. However, for Glenn McCartney this increase has to be tempered. “Any increase [in the number of visitors] is a positive thing. But Chinese New Year is not the best indicator to tell that number of visitors will increase during the year. The off-peak season is the best time to assess the industry”, he said.
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February 17, 2016
Macau
International Film Festival Macao to feature world-renowned director The new event, to kick off in December, aims to become a major hub in East Asia for red carpet premieres of Asian and international films Annie Lao
annie.lao@macaubusinessdaily.com
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arco Müller is confirmed as Festival Director for the International Film Festival Macao this year. The tentative date for this Festival is from December 8 to 13 2016. The objective of the Festival is to bring more international elements to Macau’s film industry. The Festival will operate on an alleged budget of some US$10 million (MOP800 million), substantial enough for organisers to provide full hospitality to film delegations and to key media from the Asian region. The majority of the finance is to come from the Macau Government, with commercial sponsorship picking up the rest of the tab, according to Variety, a news outlet focusing on the media industry.
Marco Müller
Without confirming the budget, the main organiser, the Macau Films & Television Production and Culture Association, told Business Daily that it is in talks with the Cultural Affairs Bureau,
Macao Government Tourism Office and Macau Foundation with regard to possible partnerships. In addition, the President of the Association, Orson Wong, said that this year they
have invited a well-known Film Festival expert to be the director of the event; Marco Müller, born in Rome, has worked as a film scholar since 1980. Müller has previously worked as the Festival Director of several major European international film festivals - in Rotterdam, Locarno, Venice and Rome - as well as serving as Head of Programming at the Silk Road International Film Festival 2015 in China. He is a film critic, university professor and award-winning producer, and has 35 years of organising film festivals in the global film industry.
International market
The aim of this Festival is to make Macau a major movie hub for Mainland
China and the international market, said Orson Wong, Chief Project Officer at the Macau Films & Television Production and Culture Association. While the number of participants is still undefined, Mr. Wong said more information will be released regarding the Festival when they host the official press conference announcing the event in mid-March. Despite similar film festivals taking place in Macau before, the new International Film Festival Macao is said to be unlike any of those as its scale would be unprecedented, according to the organiser. The 10th Asian Film Awards will be held at The Venetian on March 17 this year.
Business Daily | 7
February 17, 2016
Macau
Gaming stocks break through key level as outlook brightens
1.2 percent on average on Tuesday.
Easier Y-o-Y comparatives
Positive signs appear as gaming revenue stabilises and earnings turn out better than expected
If the yuan and Chinese economy stabilize there’s money making opportunity in Macau Rahul Chadha, co-chief investment officer at Mirae Asset Global Investments
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acau gaming stocks are signaling a change in fortunes after a two-year slump. A gauge measuring the performance of casino companies with operations in Macau versus Hong Kong’s benchmark Hang Seng Index broke above its 200-day moving average for the first time in 3 1/2 years. When that last happened, gaming stocks embarked on a 162 per cent rally. Shares of Sands China Ltd., Wynn Macau Ltd., Galaxy
Entertainment Group Ltd., SJM Holdings Ltd. and MGM China Holdings Ltd. have rebounded an average 22 per cent since January 21 as gaming revenue stabilized and earnings turned out better than expected. Casino shares were battered in the past two years, falling as much as 75 per cent, as China’s slowing economy and anti-corruption policies weighed on earnings. A decline in the yuan also eroded mainland visitors’ purchasing power, adding to concern Chinese tourist spending will dry up.
“Overall gaming numbers are bottoming," said Rahul Chadha, co-chief investment officer at Mirae Asset Global Investments, which oversees about $75 billion. “If the yuan and Chinese economy stabilize there’s money making opportunity in Macau. Macau went through a lot of pain over the last 12 to 18 months." When the ratio of Macau gaming stocks and the Hang Seng Index last broke above the 200-day moving average in August 2012, it
climbed steadily to reach a peak in January 2014 as gaming shares more than doubled. Macau casino stocks are down 2.6 percent this year on average, versus a 13 percent drop for the Hang Seng Index. The casino-Hang Seng Index ratio traded above its 200day moving average on Friday and extended gains Monday. Gaming shares slid
China holiday visitors to MSAR keeping tight hold on wallets While more Mainland Chinese tourists visited Macau during the week-long Lunar New Year holiday, it didn’t help much to narrow a protracted slump in casino revenues
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ainland Chinese tourists poured into Macau in greater numbers during the weeklong Lunar New Year holiday, even as many shunned neighboring Hong Kong again this year, but gambling revenues extended an almost two-year slump as high- rollers stayed home. Macau had 793,598 visitor arrivals from Mainland China during the Feb. 7-13 period, up 4.3 per cent over the corresponding week last year in China’s lunar calendar, according to the Macau Government Tourist Office. While that was good news for the world’s largest gaming center, it didn’t help much to narrow a protracted slump in casino revenues. Average daily revenue at tables during the week was HK$790 million, a 20 per cent drop from a year ago, according to Nomura Holdings Inc. gaming analyst Richard Huang. Still, that was slightly better than forecast and led Nomura to predict that revenues for the full month will be 6-10 per cent below year-ago levels.
“The growing number of tourists as well as high hotel occupancy rate don’t directly lead to the improvement of gambling revenue, as the visitation growth is mainly driven by tourists with weaker spending power,” Huang said of the Macau numbers. Casino revenue in Macau has plunged for 20 straight months, following China’s crackdown on corruption and the slowing economy that has kept high-rollers away and also dented mass market arrivals. Gross gaming revenue in Macau fell 34 per cent in 2015, a second straight year of decline. Although revenues are still down, improved projections for the year helped lift gaming stocks.
Hong Kong trouble
Hong Kong fared even worse, with a 12 per cent drop in Mainland Chinese tourists arriving during the week, the second straight year of decline for the period. Chinese visitors are projected to fall 3.2 per cent for the year, according to the
The growing number of tourists as well as high hotel occupancy rate don’t directly lead to the improvement of gambling revenue, as the visitation growth is mainly driven by tourists with weaker spending power Richard Huang, gaming analyst at Nomura Holdings Inc.
While gaming revenue fell 21 per cent in January from a year earlier, it was better than analysts expected. The data are “definitely positive," Nomura Holdings Inc. analyst Richard Huang said in Hong Kong this month, noting it’s too early to draw long-term conclusions. Wynn Resorts Ltd. founder Steve Wynn said in a post-earnings conference call that January was the Macau business’s “best month in a long time.” Wynn Macau shares jumped 10 per cent on Monday, the largest gain since July, as casino stocks rallied along with the broader Hong Kong market. The stock slipped 0.5 per cent Tuesday. “The growth rate isn’t getting any worse,” Ben Surtees, a London-based money manager for Jupiter Asset Management Ltd., said by phone. “Macau’s gaming revenue is stabilizing and during the year they’ll run into easier year-on-year comparatives.” Year-on-year declines in Macau gaming revenue may narrow further this month to 5 per cent, Credit Suisse Group AG said in a note this month. Data from the Macau Government Tourist Office show Chinese visitors to the city during the Lunar New Year holiday increased from a year earlier, though spending was down. “The business model is not broken," said Chadha. “Reversal of the long-term trend is contingent on whether the Chinese economy stabilizes or not." Bloomberg
Hong Kong Tourism Board, with average spending dropping 4 per cent to HK$6,948. Grant Govertsen, a gaming analyst in Union Gaming Group LLC, said the divergence in visitors to Hong Kong and Macau during Chinese New Year marked a departure from previous years when tourist arrival numbers for the two destinations have moved more in tandem. Mainlanders are perhaps actively avoiding Hong Kong for political reasons, he said. Tourist numbers dropped off in the aftermath of the Umbrella Movement in 2014 when protesters blocked city roads for more than two months to demand the right to pick the city’s leader. Tensions flared again this year during the Chinese New Year holiday, when officials tried to clear illegal food stalls in the densely populated Mong Kok district, leading to a riot. A sustained decrease in mainland visitors and the diminished buying power of a weaker yuan led to a second straight annual decline in Hong Kong retail sales in 2015. The overall sales fell 3.7 per cent last year while the hardest-hit jewelry, watches, clocks and valuable gifts sales slumped 16 per cent. Chow Tai Fook Jewellery Group, the world’s largest listed jewelry chain, said last month that sales during Chinese New Year would be challenging. Emperor Watch & Jewellery Ltd blamed a preliminary 2015 loss on strong Hong Kong dollar, high rental pressure in the city and austerity initiatives in Mainland China. Bloomberg
8 | Business Daily
February 17, 2016
Greater China
January new yuan loans climb to record high in seasonal surge Analysts attributed the lending spike to increased injections by the central bank ahead of the Lunar New Year holidays in early February Kevin Yao and Xiaoyi Shao
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hinese banks armed with fresh lending quotas extended a record 2.51 trillion yuan (US$385.40 billion) of new loans in January, far more than markets had expected, suggesting Beijing is keeping monetary policy loose to counter a protracted economic slowdown. Economists polled by Reuters had expected new yuan loans to surge to a near seven-year high of 1.8 trillion yuan in January, tripling from 597.8 billion yuan in December. Analysts attributed the lending spike to increased injections by the central bank ahead of the Lunar New Year holidays in early February, a traditional tendency among Chinese banks to “front load” loans at the start of a year and companies reducing their exposure to foreign-currency loans. “Chinese banks expanded their balance sheet aggressively in the first month of this year, which implies implicit support from the government to counter the economic slowdown,” said Zhou Hao, Commerzbank Asia senior emerging markets economist in Singapore.
Analysts also attributed the surge in new loans to soaring demand for mortgages as property prices recover and government steps to fast-track infrastructure projects to spur activity. While economists have sometimes speculated that big swings in China’s credit data were linked more to speculative activity, the latest data appeared to suggest solid demand in the real economy. Medium-and long-term loans to households were up 45 percent in January from the same period a year ago while such loans to companies jumped 73 percent. Total social financing, another important indicator of China’s credit expansion, rose to 3.42 trillion yuan in January from 1.82 trillion yuan in December. Part of that may reflect massive infusions of cash into the banking system by the People’s Bank of China ahead of the long holiday to avert any risks of a cash crunch. The PBOC injected 1.53 trillion yuan via its standing lending facility (SLF), medium-term lending facility (MLF) and pledged supplementary lending (PSL).
KEY POINTS January new loans 2.51 trln yuan vs. forecast 1.8 trln yuan January M2 money supply +14.0 pct y/y, vs. forecast +13.4 pct PBOC made massive injections to avoid Lunar New Year crunch PBOC fears rate cuts could put pressure on yuan-analysts
Some economists believe the PBOC is currently favouring liquidity injections as a policy tool rather than long-expected cuts to its policy interest rate and bank reserve ratio requirements (RRR), which authorities worry could put further depreciation pressure on the yuan currency. According to sources, Zhang Xiaohui, an assistant governor at the PBOC, has said the central bank would not rush to cut the amount of cash banks must hold in reserves, as doing so could send a strong signal on policy easing.
More easing?
But while the central bank may shun further cuts in its main interest rate and RRR in the near term, it may still have to ease policy again, analysts say.
Shipbuilders strive to navigate economic cold As urgency for change mounts, China is trying to find a way out by encouraging shipbuilders to offer high-end products
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hina’s shipbuilding industry is experiencing severe economic stress this winter as new orders are slashed and companies are shut down. The Baltic Dry Index (BDI), a barometer of the shipping industry’s status, has plummeted almost 30 percent, dropping below 320 points in January, according to the latest figures. The BDI measures the shipping fees of dry cargo such as iron ore, cement, grain and coal. Falling BDI means weakening global demand for raw materials, thus less need for shipping services. Sagging demand has already impacted China’s shipbuilding industry, with orders for new ships falling 47.9 percent year on year to about 30 million dead weight tons in 2015, according to the China Association of the National Shipbuilding Industry. A good number of shipbuilding heavyweights in China have filed for bankruptcy, including the private Dongfang Heavy
A lot of shipbuilders may not make it through the winter Industry Co. Ltd. and Mingde Heavy Industry Co. Ltd. in the eastern Jiangsu Province. In November, the Wuzhou Shipbuilding Co. Ltd. headquartered in Zhoushan, Zhejiang Province, filed for bankruptcy, becoming the first state-owned shipbuilder to do so. In Saiqi Township, nine of the 43 large shipbuilding companies have already been wiped from the market, while only a few of the remaining 34 are still in operation. Experts attribute the poor performance to a range of factors, including dwindling global demand, lack of
high-tech ships and China’s excessive shipbuilding capacity. For years, China remained the world’s biggest shipbuilder, but now the market is changing. The government is encouraging shipbuilders to go into the high-end sector, with a national guideline on the country’s manufacturing in May emphasizing better investment in research and development in shipbuilding and marine engineering equipment. A guideline drafted by the China Association of National Shipbuilding Industry was
Lin Ruijin, secretarygeneral, Fu’an Shipbuilding Industry Association
also recently completed. The guideline maps out plans for the industry to increase hightech shipbuilding by 2020. Government support is seeing good results. In December, stateowned Shanghai Waigaoqiao Shipbuilding Co. Ltd. said it will build China’s first cruise ship with technological
support from Italian shipbuilder Fincantieri, with construction starting in 2017 and hopefully completing in 2020. Also in December, Wuchang Shipbuilding Industry Group Co. Ltd. secured a deal to build a deepdiving vessel for Singaporean company Ultra Deep Offshore Ltd., the first order in 2015. Shipbuilders are also using the Internet to try to boost sales. Zhang Qingjie, general manager of Huahai Shipbuilding Co. Ltd., said his company has launched two websites to promote international sales. One of the websites, shipfinder.com, currently receives more than 30,000 hits on a daily basis, with more than ten ships sold through the site so far, mostly to Southeast Asian nations. Zhang said a management team has been set up to further open the market there. Meanwhile, shipbuilders are working together to boost sales in overseas markets. Xinhua
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February 17, 2016
Greater China The PBOC has cut its policy rate six times since November 2014 and reserve requirements several times, but both remain relatively high, giving it plenty of room. “As capital outflows continued, we believe that the PBOC will still need to lower the reserve r e q u i r e m e n t r a t i o ( RRR ) t o permanently inject liquidity into the economy,” wrote ANZ economists in a research note, noting that a further cut in RRR was still possible in the first quarter. Bank lending usually spikes in China in January as banks, which face limits on how much they can lend each year, squeeze as much lending as possible into the first month to protect their market share. The spike in new loans in January also could be due to Chinese companies making early repayments of their foreign-denominated loans and bonds to reduce their currency exposure after the yuan weakened, analysts say. China Eastern Airlines said last month it had recently repaid US$1 billion worth of dollar debt to reduce its exposure to currency volatility. Broad M2 money supply (M2) in January also rose to a 19-month high of 14.0 percent in January from a year ago, beating expectations of 13.4 percent and December’s 13.3 percent. The world’s second-largest economy grew 6.9 percent in 2015, its weakest in a quarter of a century, as activity was weighed down by sluggish demand at home and abroad, massive industrial overcapacity, cooling investment and a weak property market. Even with more rate cuts, economists see growth cooling further to 6.5 percent this year, and some market watchers believe real growth levels may already be much weaker. Reuters
Volkswagen says Mainland sales may rise in line with auto market Paul Carsten
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olkswagen AG expects its China sales may rise in line with the overall auto market this year, as it explores potential cooperation with domestic firm JAC Motors in what could be a third partnership with Chinese automakers. The head of the German firm’s China business, Jochem Heizmann, told reporters in Beijing that he expected China’s total passenger car market will expand in line with, or perhaps even exceed, gross domestic product growth in the world’s secondlargest economy. “If we look to the general growth situation, it’s still tremendous, big growth,” Heizmann said, adding that there is potential for expansion in China’s lower-tier cities despite the country’s economy registering its weakest growth in a quarter century. “These are still cities with millions of inhabitants but in a different development stage,” Heizmann said. The executive said VW will stick to existing investment plans for China, investing more than 4 billion euros (US$4.46 billion) annually for the coming years. VW’s global business has come under increased scrutiny since it admitted last September it misled U.S. regulators about vehicle emissions. Sales in China, a stable source of revenue for VW for years and the
Premier faults regulators’ handling of stocks rout China’s stock market has become a symbol of the government’s struggle to win back investor confidence
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hinese Premier Li Keqiang took the nation’s financial regulators to task for the way they handled a rout in stocks and the yuan, making him the most senior official to date to fault the response to the turmoil. Regulators didn’t respond actively to declines and some even have management problems, Li said in a State Council meeting on Monday, according to a Beijing News report carried on the government’s website. Li didn’t specify the regulators at fault and defended the decision to intervene in equity and foreignexchange markets as necessary to head off systemic risks and “defuse some bombs.” “Looking back, the major responsible departments took inadequate actions and had internal management issues,” Li said. “It was a correct strategy to take marketstabilizing measures against unusual movements in stocks and the currency last year.” The China Securities Regulatory Commission has drawn criticism recently over a series of steps such
Chinese Premier Li Keqiang
as a circuit-breaker system that had to be rescinded just four days after it was introduced in January. The CSRC’s chairman, Xiao Gang, blamed factors including incomplete trading rules and an inappropriate regulatory system, and said officials will learn from their mistakes.
carmaker’s biggest market, fell 3.4 percent in 2015 before rebounding in January. U.S. rival General Motors Co’s vehicle sales in China rose 5.2 percent last year, allowing it to overtake VW to claim the number one spot in the world’s largest car market. While confident in VW’s existing operations in China, including two tie-ups with domestic automakers, Heizmann said VW is now in early talks with JAC Motors about the potential for cooperation between the pair. Asked whether cooperation with JAC Motors could involve electric vehicles, actively being promoted by China’s government as a solution to chronic pollution in the country’s large cities, Heizmann said, “We have started talking about potential for cooperation, but no more detailed plans at present.” JAC Motors, based in Hefei city, in the central province of Anhui, is one of China’s smaller automakers. VW’s existing joint ventures in the country are FAW-Volkswagen, a joint venture with FAW Car Co Ltd, and Shanghai Volkswagen, a joint venture with SAIC Motor Corp Ltd. Overall, Heizmann said, the German automaker plans to increase its Chinese workforce by a third, reaching 120,000 by 2019 from the current staff of 90,000. Reuters
China’s stock market has become one of the most visible symbols of the government’s struggle to win back investor confidence. After cheerleading by state media helped fuel an unprecedented boom in mainland shares last summer, the market crashed as regulators failed to manage a surge in leveraged bets by individual investors. Increased intervention has contradicted government pledges to move to a more market-based economy, while the perception by some foreign investors that policy makers are mishandling the volatility in financial markets is heightening concern that the deepest economic slowdown since 1990 will worsen. Li is signalling “a more unified financial regulatory framework to be dominated by the central bank,” said Dai Ming, a fund manager at Hengsheng Asset Management Co. in Shanghai. “With the emergence of financial derivatives products, the difficulty of regulatory oversight is increasing and it’s necessary to create a co-ordination system within government departments.” The benchmark Shanghai Composite Index has tumbled more than 40 percent since a June high even after state funds spent billions of dollars to prop up equities. The government also tightened capital controls and spent almost US$300 billion of its foreign exchange reserves in the last three months to prop up the exchange rate. The yuan posted its biggest advance in more than a decade on Monday in Shanghai after central bank Governor Zhou Xiaochuan voiced his support for the currency. Bloomberg News
Guidance to support growth of industries China’s central bank issued a slew of measures yesterday to support steady growth of industries as the economic slowdown weighed on a spectrum of sectors. The People’s Bank of China will guide steady growth in credit and money supply and use various tools to maintain adequate liquidity, it said in a document jointly issued with seven other top ministries and regulators. It would also step up disposal of bad assets and slash lending to zombie firms, the central bank said.
Non-financial outbound direct investment up China’s non-financial outbound direct investment (ODI) in January rose 18.2 percent from a year earlier to US$12.02 billion, the Commerce Ministry said yesterday. The ministry expects investment to the United States to grow at a rapid pace in 2016, it said in a statement on its website. Non-financial outbound direct investment (ODI) grew 14.7 percent in 2015 from the previous year, to US$118.02 billion.
Green vehicle output more than doubles China produced 16,100 new energy vehicles in January, a 144 percent increase from a year earlier, the Ministry of Industry and Information Technology said yesterday. Ninty-seven percent of the green cars produced in January qualified for a government scheme which allows certain new energy vehicles to be exempt from purchase tax, according to the statement published on the ministry website. Automakers in China earmarked in 2015 at least 50 billion yuan (US$7.68 billion) for developing and manufacturing ‘new energy’ vehicles, a Chinese catch-all term for electric and highly electrified cars, data compiled by Reuters shows.
Yabang defaults on short-term bill China’s Yabang Investment Holding Group Co said it failed to meet payment obligations on a 200 million yuan (US$30.8 million) short-term bill which matured Feb. 14, the latest in a series of bond defaults in China. Yabang, a conglomerate with businesses ranging from chemical, medicine, logistics to real estate, said in a statement that due to a cash shortage, it was unable to pay creditors the principal and interest of the one-year bill. Yabang said it is actively raising money to meet its obligations, and is also improving its operations to generate cash flows.
New city to be established in Tibet China’s State Council, or the cabinet, has approved the application of Shannan in Tibet Autonomous Region to become the fifth prefecture-level city in the region, local authorities announced yesterday. As part of the status upgrade, a city committee of the Communist Party of China, government, the people’s congress standing committee, and the city’s political advisory body will be established. Located in southeastern Tibet with an average altitude of 3,700 meters, Shannan is the fifth prefecture-level city in Tibet after the regional capital Lhasa, Qamdo, Xigaze and Nyingchi.
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Greater China A lot of the negativity is already priced in, but it would be a mistake to call it the bottom since markets tend to go further down or further up than anyone expects Mark Mobius, money manager, Franklin Resources
Mobius says irrational stock market is creating bargains He also mentioned that it’s too early to say the broader market will rebound from current position Kyoungwha Kim
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hen Mark Mobius (pictured) looks at the wreckage of Chinese stocks traded in Hong Kong, he sees bargains. The Hang Seng China Enterprises Index plunged 49 percent from its May high through last week, sending valuations to record lows, as concern over China’s economic slowdown and heavy-handed state intervention in mainland financial markets spurred outflows.
"The Chinese market has been reacting irrationally and rather violently, possibly due to heightened speculation derived from the government’s actions to influence the market," said Mobius, the Franklin Resources Inc. money manager who’s been investing in emerging markets for more than four decades. "Fundamentals in China still remain positive.” China’s H shares rebounded along with regional stocks on Monday after
the yuan jumped the most since a dollar peg was scrapped in 2005. Gains were led by China Longyuan Power Group Corp. and Great Wall Motor Co., the two-worst performing stocks on the gauge this year through Friday with losses in excess of 35 percent. Even after the advance, only one of the 40 members is up in 2016. "The market already presents itself with opportunities to pick stocks at a bargain -– companies which have
been unduly punished by panicked sell-offs and volatility," Mobius said, declining to name individual stocks. The People’s Bank of China is stepping up efforts to restore stability to the currency and economy, with Governor Zhou Xiaochuan breaking his long silence to say there’s no basis for continued yuan depreciation. The nation’s balance of payments is good, capital outflows are normal and the exchange rate is basically stable against a basket of currencies, Zhou said in an interview published Saturday in Caixin magazine. While buying opportunities are increasing, it’s too early to say the broader market will rebound from here, Mobius said. China’s exports declined for a seventh straight month in January and imports plunged 19 percent, official data showed Monday. The government is targeting an economic expansion in the range of 6.5 percent to 7 percent for this year, after recording 6.9 percent growth in 2015 that was the slowest in 25 years. "A lot of the negativity is already priced in, but it would be a mistake to call it the bottom since markets tend to go further down or further up than anyone expects," Mobius said. "What we need to do is focus on the individual companies and their ability to weather any economic downturn or even prosper from such downturns." Bloomberg News
First 'Silk Road' train arrives in Tehran from Mainland Chinese President Xi Jinping and Iranian President Hassan Rouhani agreed last month to build economic ties worth up to US$600 billion within the next 10 years
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he first train to connect China and Iran arrived in Tehran on Monday loaded with Chinese goods, reviving the ancient Silk Road, the Iranian railway company said. The train, carrying 32 containers of commercial products from eastern Zhejiang province, took 14 days to make the 9,500-kilometre journey through Kazakstan and Turkmenistan. "The arrival of this train in less than 14 days is unprecedented," said the head of the Iranian railway company, Mohsen Pourseyed Aqayi. "The revival of the Silk Road is crucial for the countries on its route," he said at a ceremony at Tehran's rail station attended by the ambassadors of China and Turkmenistan. The journey was 30 days shorter than the sea voyage from Shanghai to the Iranian port of Bandar Abbas, according to Aqayi. The railway will not stop in Tehran "as we are planning to extend
the railway to Europe in future," generating more income for Iran from passing trains, he added. The train will leave every month and the frequency will be increased if necessary, Aqayi said. The train is run by private companies using existing routes, Iranian railway company spokesman Sadegh Sakari told AFP. According to Iranian media, more than a third of Iran's foreign trade is with China, which is Tehran's top customer for oil exports. Chinese President Xi Jinping and Iranian President Hassan Rouhani agreed last month to build economic ties worth up to US$600 billion within the next 10 years. It came during a visit to Iran by Xi, the first by a Chinese president in 14 years, and just days after sanctions against Tehran were lifted under a historic nuclear deal with world powers.
Xi's signature foreign policy initiative known as "One Belt One Road" is touted as a revival of ancient Silk Road trade routes. The Silk Road is an ancient network of commercial land and
sea routes, named for the lucrative Chinese silk trade, that were central to business across the Asian continent connecting China to the Mediterranean Sea. AFP
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Asia
Bank of Korea sees case for easing March policy meeting is seen as the last opportunity for the current monetary policy committee to move interest rates Christine Kim and Choonsik Yoo
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outh Korea’s central bank governor acknowledged yesterday the softening economy may warrant a policy easing soon but declined to signal any immediate action, citing heightened uncertainty over the global economy and financial markets. The Bank of Korea’s monetary policy committee held its base rate steady at record-low 1.50 percent as widely expected by analysts. A split vote and the governor’s bearish tone lifted bond futures, although gains were limited. Governor Lee Ju-yeol told reporters that even if the BOK opted to ease monetary policy “the resulting effect of lower interest rates is uncertain due to external unrest”. He said South Korea’s economic recovery was faltering mainly because of unfavourable conditions in other countries. Analysts said South Korea’s economy would show further signs of weakening in coming weeks, pressuring the Bank of Korea to cut the policy rate as soon as at its March 10 meeting. “More indicators for the JanuaryFebruary period will make the economic weakness clearer and the Bank of Korea will find it difficult to resist,” said Seo Hyang-mi, a fixed-income analyst at HI Investment & Securities.
Bank of Korea (BOK) Governor Lee Ju-yeol chairs the Monetary Policy Board meeting in Seoul yesterday
Twenty-five out of 27 analysts polled by Reuters ahead of the decision forecast the Bank of Korea would hold interest rates steady yesterday. But a majority of the analysts did expect a rate cut in March to boost economic activity. Board member Ha Sung-keun was the sole dissenter in the seven-member committee yesterday, as he voted for an immediate 25 basis-point cut in
the rate, Governor Lee said, without elaborating on Ha’s views. Lee repeatedly cited heightened uncertainty over not only the financial and commodities markets but over global economic growth generally. Caution demanded the BOK not to make hasty changes in policy, he said. Separately, the Bank of Korea increased its low-interest lending facility for smaller companies by 5
Slumping NZ dairy prices ratchet up risks for Australian banks Non-performing loans at Australian banks stand at an average 1.7 percent of total assets Swati Pandey and Rebecca Howard
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ational Australia Bank yesterday reported the first increase in bad loans in almost six years largely due to its exposure to New Zealand's dairy industry, highlighting the risks to banks owed around US$25 billion by cash-strapped farmers. Australia's biggest lender said it does not expect losses due to these impaired loans, which analysts said have yet to ring any alarm bells, but they add to the pressures for a banking sector that is already battling slowing revenue growth and stricter capital rules. Global dairy prices have slumped 55 percent since early 2014, adding pressure on New Zealand farmers, the majority of whom are already operating below break-even. "We assume that dairy prices will not recover significantly in the next couple of years. Problem loans are thus likely to increase further,"
said Moody's Investors Service senior vice president Sovereign Risk Group Marie Diron, adding that the pressure on asset quality "will be off a very strong base." Dairy products make up around a quarter of New Zealand's total exports and the industry accounts for just under 10 percent of total borrowing in the country. Non-performing loans at Australian banks stand at an average 1.7 percent of total assets, according to estimates by Thomson Reuters Starmine, far better than the global average of 3.5 percent.
Dairy dent
Melbourne-based NAB said impaired assets in New Zealand dairy exposures rose to NZ$420 million during the quarter-ended December while posting an 8 percent increase in quarterly cash profit. These impaired assets led the bank to report its first
increase in bad loans since March 2010. Last week, Commonwealth Bank of Australia's New Zealand arm ASB Bank Ltd said its loan impairment expense climbed 11 percent to NZ$41 million, largely due to its exposure to the dairy sector. Overall, CBA reported the sharpest rise in bad debts in more than six years. "New Zealand's rural sector continues to face headwinds, particularly in relation to volatile international commodity prices," ASB chief executive Barbara Chapman said. These concerns, however, have yet to ring any alarm bells, company executives and analysts say. "If you look at New Zealand this is going to be a risk but it has always been manageable in the past. It's not a major concern," said Bell Potter analyst TS Lim. Reuters
trillion won (US$4.11 billion). That amount, and the 4 trillion won already available in the programme, would be offered to companies through banks. The Bank of Korea’s March policy meeting is seen as the last opportunity for the current monetary policy committee to move interest rates, as four members of the seven-strong committee will be replaced in April. Reuters
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Asia
Bank of Japan launches negative rates Economy Minister said it will take more time to analyse the impact of negative rates but it is already starting to affect mortgages and auto loans Hideyuki Sano and Leika Kihara
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he Bank of Japan’s (BOJ) negative interest rates came into effect yesterday in a radical plan already deemed a failure by financial markets, highlighting Tokyo’s lack of options to spur growth as global markets sputter. The central bank, which announced the shock decision on January 29, will charge banks 0.1 percent for parking additional reserves with the BOJ to encourage banks to lend and prompt businesses and savers to spend and invest. While the announcement briefly drove down the yen and buoyed Japanese share prices, markets quickly went into reverse. “It’s getting clearer that Abenomics is a paper tiger,” said Seiya Nakajima, chief economist at Office Niwa, a consultancy, referring to Prime Minister Shinzo Abe’s policy mix of monetary easing, spending and reform. “The impact of monetary easing is similar to currency intervention. The first time they do it, there’s a huge impact. But as they repeat it, the impact will wane,” said Nakajima. Though senior BOJ officials were at pains to say they had calibrated
only a minor impact on Japanese banks, their stock prices plunged, contributing to a global market selloff, particularly in financial shares.
Bad timing
The problem was partly bad timing, as global markets were already in a tailspin over concerns about China’s slowdown, U.S. rate hikes and tumbling oil prices. But the reaction leaves BOJ Governor Haruhiko Kuroda’s assertion that his policy is having its intended effects looking increasingly threadbare. “It seems as though the BOJ’s action triggered the market moves,” said Yoshinori Shigemi, global market strategist at JPMorgan Asset Management. “But a better explanation would be that concerns elsewhere overwhelmed the BOJ action.” In the 11 days since the BOJ board’s announcement, the benchmark Nikkei index has fallen 8.5 percent, despite a sharp rebound on Monday, while the yen has climbed 6.5 percent against the dollar. Japanese bank shares have slumped by as much as 30 percent as they are
unlikely to pass on negative rates to savers, who already get negligible interest on their deposits but would baulk at paying to save. Negative rates could push down bank operating profits by 8-15 percent, Standard and Poor’s said. The 10-year Japanese government bond yield initially fell below zero on the easing - a first among Group of Seven economies. But it has recovered from minus 0.035 percent last week to 0.090 percent above zero, with Japanese markets becoming more unstable as investors are at a loss on how to reckon fair value. Prices on 10-year JGB futures imply volatility above 5 percent, a 2.5-year high and more than triple the level at the start of the year. This high volatility could persist, and the BOJ has only itself to blame, some market players say. The overnight call rate, the benchmark for interbank lending, fell to 0 to 0.001 percent yesterday, traders said, down from its weighted average of 0.074 percent on Monday. Although the rate is likely to fall to negative levels eventually, it is unlikely to fall below zero for now, partly because many banks have not
Indonesian Government to form holding company for state banks The plans come as President Joko Widodo’s administration steps up efforts to better manage state firms Cindy Silviana
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he Indonesian government plans to form a holding company that will own shares in all of the country’s statecontrolled banks by 2018 in a bid to make lenders more efficient and boost equity, an official at the state-owned enterprises ministry said at a briefing yesterday. Deputy minister Gatot Trihargo said the government
wants to set up an investment firm to work as the holding company for some of Indonesia’s biggest banks. Among those involved will be Bank Mandiri, Bank Rakyat Indonesia, Bank Negara Indonesia and Bank Tabungan Negara. “With a holding company, we can strengthen recurring income,” Trihargo told reporters yesterday. The ministry will either choose
an existing state investment firm as the holding company, such as Danareksa, Bahana Securities or Perusahaan Pengelola Aset, or create a new firm altogether, he added. The plans come as President Joko Widodo’s administration steps up efforts to better manage state firms, drawing up plans to create a holding company for each sector where it has more than one firm, such
KEY POINTS BOJ to implement Jan. 29 decision on negative rates Japan stocks are since down 8.5 pct, yen up 6.5 pct vs dlr Interbank rate falls to, but not below, zero BOJ running out of options, say analysts and economists
as pharmaceuticals, mining and insurance. Jakarta has also said it will privatise four fully owned state firms, including heavily indebted carrier Merpati Nusantara Airlines, through strategic sales. Banks in Indonesia, Southeast Asia’s largest economy, manage capital risks well, according to the country’s central bank, with an average capital adequacy ratio at 21.1 percent as of November 2015, but are small compared to peers in neighbouring countries. The country’s banking regulator and the central bank have both been pushing for banks to merge to shore up equity. The regulators want to halve the number of banks operating across the archipelago from around 120. But Trihargo said the government will drop a plan to merge all state sharia banks, and opt to look for investors from the Middle East to partner with those banks. Reuters
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February 17, 2016
Asia New Zealand inflation down The New Zealand dollar took a spill yesterday after inflation expectations in the country slumped to their lowest on record, piling pressure on policy makers for further cuts in interest rates. A Reserve Bank of New Zealand quarterly survey on the economic outlook showed respondents expected inflation to slow to just 1.09 percent on a one-year horizon. That was down from 1.51 percent three months ago and the lowest result since the survey began in 1987. The outlook for inflation on a two-year horizon also slowed sharply to 1.63 percent, the lowest since 1994.
Avation places US$130 mln aircraft order
Japanese Economy Minister Nobuteru Ishihara
yet fixed their trading system to cope with negative interest rates. “At the moment, no one seems willing to lend at negative rates... The BOJ decided to introduce negative rates so suddenly without giving banks time to prepare for them,” said Keita Higano, market economist at Totan Research.
In defence
Economy Minister Nobuteru Ishihara said it will take more time to analyse the impact of negative rates but it is already starting to affect mortgages and auto loans. BOJ Governor Kuroda told parliament it wasn’t the BOJ’s policy
but “excessive risk aversion” that was behind the global market turbulence. And BOJ Deputy Governor Hiroshi Nakaso told a New York audience on Friday that the new, three-tiered rate scheme “is carefully designed to mitigate aggressive impact on banks’ profitability while ensuring the effect of negative rates on prices in financial markets”. But a former BOJ official who retains close contact with central bankers said this “is essentially saying that the effect of its policy itself is limited”, adding: “If the move was aimed at weakening the yen, it failed completely.”
Some BOJ officials privately worry whether the central bank can keep gobbling up JGBs at the current pace of $700 billion a year, as negative rates would discourage financial institutions from piling up the cash they would earn by selling JGBs to the BOJ. Japan’s three ‘megabanks’ have scrambled to buy JGBs and corporate bonds, seeking whatever meagre interest they can earn without taking on much risk. While Kuroda notes the BOJ can cut rates deeper below zero, market participants say there’s little hope that more of the same would have a beneficial effect. Reuters
Philippines cuts 2016 growth goal The government cut its estimate for exports growth this year to 5 percent from 6 percent Siegfrid Alegado and Andreo Calonzo
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he Philippine government lowered economic growth targets for this year, joining Asian nations in bracing for mounting global risks that’s damping demand for the region’s exports. The economy will probably expand 6.8 percent to 7.8 percent this year, compared with a previous goal of as much as 8 percent, the inter-agency Development Budget Coordination Committee said late Monday. Growth is seen at 6.6 percent to 7.6 percent in 2017, committee members said in a briefing in Manila. Asian stocks fluctuated yesterday, underscoring greater volatility in financial and commodity markets that’s hurting growth prospects in Asia. In the Philippines, outgoing President Benigno Aquino is boosting spending to a record to help shield the domestic economy, building on momentum after growth quickened to a one-year high last quarter. “The Philippines isn’t immune to these headwinds,” Euben Paracuelles, an economist at Nomura Holdings Inc. in Singapore, said by phone. “But even with the revisions, the government is still targeting faster
growth this year from last year which signals that domestic demand remains robust, offsetting the weakness from the exports sector.” The government cut its estimate for exports growth this year to 5 percent from 6 percent, while also lowering the forecast for imports growth to 10 percent from 12 percent. Inflation will probably average near the low-end
of the 2 percent to 4 percent target this year, before accelerating to the midpoint of the range in 2017, it said. Revised economic targets were based on a lower exchange- rate assumption of 45 to 48 pesos per dollar from 43 to 46 previously, and an estimate for Dubai crude oil of as low as US$45 a barrel. Bloomberg News
Regional turboprop plane maker ATR, a joint venture between Airbus Group and Italy’s Finmeccanica, signed a deal to supply five ATR 72-600 aircraft to Singapore-based lessor Avation PLC. The acquisition of the planes by Avation is valued at about US$130 million, company officials said yesterday, the first day of the Singapore Airshow. Planemakers normally give discounts from list prices. With the latest deal, Avation has increased its tally of firm orders of ATR-72s to 35 since its first purchase in 2011.
Singapore’s UOB profit up United Overseas Bank, the smallest of Singapore’s three listed banks, posted a 0.3 percent rise in fourth-quarter net profit, beating expectations, but recorded higher provisions for bad loans amid an economic slowdown. The bank said risks are largely manageable and the underlying economic fundamentals are strong enough to withstand shocks as the region enters a period of slower growth. UOB’s net profit came in at S$788 million (US$563 million) in the three months ended December, versus S$786 million a year earlier and above an average forecast of S$768 million from six analysts polled by Reuters.
Japan keeps ban on GPIF stocks investment Japan’s ruling Liberal Democratic Party has decided not to let the country’s trillion-dollar public pension fund directly invest in stocks due to concern on the fund’s influence on corporate management, sources in the party and government said yesterday. The government has been debating whether to deregulate rules governing the Government Pension Investment Fund (GPIF) and allow direct investment in stocks. As of September 2015, the GPIF had 135 trillion yen (US$1.18 trillion) in assets under management. In 2014, the GPIF made a historical shift by abandoning its traditional stance of having domestic government bonds comprise the bulk of its portfolio.
Brunei needs more waste recycling centres
Outgoing President Benigno Aquino is boosting spending to a record level to help shield the domestic economy
More recycling centres are needed to reduce the amount of waste that goes to landfills, said the acting director of the Department of Environment, Parks and Recreation. There are only 10 recycling companies that are registered with the department, local media Tuesday quoted Hj Shaharuddin Khairul as saying. More recycling centres can reduce the waste and stretch the life span of landfills in Brunei, the director said. It was previously reported that there were six landfills in 2014. Sg Paku landfill collects an average of 450 tonnes of rubbish per day.
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February 17, 2016
International European car sales up in January European car sales rose 6.3 percent to 1,093,565 vehicles in January, industry data showed yesterday, even as Europe’s largest carmaker Volkswagen saw registrations of VW-branded cars fall 4 percent in the wake of a diesel emissions scandal. VW’s rivals Ford and General Motors’s Opel/Vauxhall posted rises in sales of 11.4 percent and 12.4 percent respectively, according to car registration data for European Union (EU) and European Free Trade Association (EFTA) countries. The Volkswagen Group as a whole saw sales rise 1 percent in January, buoyed by a 14 percent jump in registrations for its premium Audi division.
Venezuela names new economy VP Venezuelan President Nicolas Maduro on Monday unexpectedly named a moderate business leader as the country’s economy vice president, replacing a hard-line socialist who lasted only a month amid the OPEC nation’s deepening economic crisis. Miguel Perez, former head of an industry association, becomes economy czar as Venezuela suffers a severe recession, scarcity of food and medicine, a currency crash on the black market and inflation forecast to hit 720 percent this year by the International Monetary Fund. Seen as more inclined towards reform than his outgoing predecessor Luis Salas, Perez has sought dialogue with Venezuela’s private sector.
Saudis, Russia agree oil output freeze Within the Organization of the Petroleum Exporting Countries is a growing consensus that a decision must be reached on how to prop up prices Rania El Gamal
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op global oil exporters including Russia and Saudi Arabia agreed yesterday to freeze output to tackle a global glut but said the deal was contingent on other producers, with Iran absent from the meeting and planning to ramp up shipments. The Saudi, Russian, Qatari and Venezuelan oil ministers visited Doha for a previously undisclosed meeting - their highest-level discussion in months on joint action to help prices
recover from their lowest in more than a decade. The Saudi minister, Ali al-Naimi, said freezing production at January levels was an adequate measure and new steps to stabilise the market could be considered in the next few months. He said he hoped other producers would adopt the proposal, while Venezuela’s Oil Minister Eulogio Del Pino said more talks would take place with Iran and Iraq on Wednesday. Oil prices rose to US$35.55 per
Benin’s economy to grow at 5.8 pct Benin’s economy is forecasted to grow at 5.8 percent in 2016, up from 5.2 percent in 2015, latest data by the country’s finance ministry showed. The government plans to execute its economic policy that is based on development of the private sector through reinforcement of energy, transport and ICT sectors; improvement of productivity of the agricultural sector as well as improvement of access to education and health services. The government is equally counting on the dynamism of the informal sector and the possibility of mobilizing more resources by reinforcing capacities of financial networks.
Petrobras to exit Brazil electricity sector Brazil’s national oil giant Petrobras is leaving the electricity sector and putting up all related assets for sale under a double-hit crisis of debt and corruption, sources said. The assets include 21 thermal power plants, pipelines and regasification terminals, and after giving up these Petrobras will give priority to oil production instead of being an integrated energy company. The state of Rio de Janeiro owns 47 percent of Petrobras’ thermal plants among Brazil’s nine states.
barrel but later pared gains to trade below US$34 as expectations for an immediate deal faded. Iran has pledged to raise supply steeply in the month to come as it looks to regain market share lost after years of international sanctions, which were lifted in January. The Doha meeting came after more than 18 months of declining oil prices, knocking crude below US$30 a barrel for the first time in over a decade. The slump has been longer and deeper than anyone predicted, and the mood may be shifting among producers that have been determined to defend market share rather than prices. Within the Organization of the Petroleum Exporting Countries is a growing consensus that a decision must be reached on how to prop up prices, Nigerian Oil Minister Emmanuel Ibe Kachikwu told Reuters late last week. Much has changed since OPEC’s fractious meeting in early December, the last big gathering of key oil ministers, when members “were hardly talking to one another. Everyone was protecting their own positional logic,” Kachikwu said. While Venezuela has been the hardest-hit major producer, oil below US$30 is a fraction of what Russia needs to balance its budget as it heads towards parliamentary elections this year. Saudi finances are also suffering badly, running a US$98 billion budget deficit last year, which it seeks to trim this year. Reuters
EU commissioner says firms should pay taxes where they earn profits Moscovici announced last month a raft of measures to combat tax avoidance
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he EU’s top economic affairs official said Monday that companies should pay taxes where they earn profits, days after a report of another firm using aggressive strategies to lower their bill. When asked about a report that the world’s top furniture company Ikea may have underpaid taxes by one billion euros using aggressive tax strategies, Pierre Moscovici said “a company should pay taxes where they generate profits”. The EU’s economy commissioner told journalists during a visit to the southern French city of Toulouse that “we’ve had enough of multinational firms benefitting from this or that favourable rule ... to avoid paying
tax where they did business to pay little in taxes in countries where the rates are low.” He declined to name any company. But the Green/EFA group in the European Parliament said at the weekend it had commissioned research that shows Ikea “structured itself to dodge 1 billion euros in taxes over the last six years using onshore European tax havens”. Responding to the report the European Commission said on Saturday it would examine the claims, while Ikea defended its management of its tax affairs. Moscovici announced last month a raft of measures to combat tax
avoidance, in addition to EU investigations under way into the tax deals of major groups such as Apple, Starbucks and McDonald’s. The measures from the European Commission call for big companies to be obliged to report profit country by country -- a break with the previous practice that allowed multinationals to secretly shift revenue across borders to save on tax. Another requirement will compel nations to agree on minimum standards for drawing up tax rules, so that multinationals stop the practice of shopping around for loopholes to avoid paying tax altogether. The initiative comes amid growing public outrage about tax avoidance by multinational corporations. Last month Google agreed to pay £130 million (US$185.4 million, 172 million euros) in back taxes to Britain after a scathing government inquiry into the search giant’s tax arrangements. Finance minister George Osborne hailed the agreement as a victory but the sum provoked a barrage of criticism for being too low. Moscovici noted that small and medium-sized businesses “pay on average 30 percent more in corporate taxes than multinationals. That can’t, shouldn’t continue.” AFP
Business Daily | 15
February 17, 2016
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What’s holding back the world economy?
THE TIMES OF INDIA Wholesale prices fell for 15 consecutive months in January on the back of sliding global crude oil prices. But prices of some food items such as pulses stayed firm, pointing to the need for authorities to keep a close watch. The WPI data comes days after retail inflation in January rose to a 17-month high of 5.7%, up from 5.6% in December on the back of rising food prices. The retail inflation data has a higher weightage of food and services, while the WPI accounts for a greater presence of commodities.
NEW ZEALAND HERALD Bank economists say pressure is growing on the Reserve Bank (of New Zealand) to cut interest rates in March after the central bank’s Survey of Expectations showed a sharp drop in anticipated inflation. Expectations for the inflation rate in two years time fell from 1.83 per cent to 1.63 per cent, the lowest since 1994. The expectation for inflation in one year fell to 1.09 per cent from 1.5 per cent. Economists at Westpac and ASB have both interpreted the result as a sign the bank have to move sooner on rate cuts.
Joseph E. Stiglitz
Nobel laureate in economics, is University Professor at Columbia University and Chief Economist at the Roosevelt Institute
BANGKOK POST The Stock Exchange of Thailand (SET) is pursuing Bank of Thailand permission for US-dollar-denominated trade settlements of foreign companies to be listed on the local bourse alongside commodities to offer convenience for investors. Easing the rules to allow stocks and commodities to be traded in dollars would sharpen the Thai stock market’s competitiveness, but the decision rests with the central bank, SET president Kesara Manchusree said. Trading in the Thai stock market is limited to baht, while other bourses offer dollar-denominated settlement. This divergence is a stumbling block as the local market vies with others to attract fund inflows.
PHILSTAR Domestic industries are stepping up efforts to stop the scourge of smuggling and other forms of illicit trade in the country. The Fight Illicit Trade Movement (Fight It), comprising major players in various industries, has teamed up with the National Bureau of Investigation to curb unfair trade, protect consumers and legitimate players in the domestic market and safeguard government revenues. Fight It brings together major players from industries with some of the most commonly smuggled goods or products such as rice, sugar, corn, palm oil, tobacco, steel cement, ceramic tiles, among others.
Hamid Rashid Chief of Global Economic Monitoring at the United Nations Department of Economic and Social Affairs
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even years after the global financial crisis erupted in 2008, the world economy continued to stumble in 2015. According to the United Nations’ report World Economic Situation and Prospects 2016, the average growth rate in developed economies has declined by more than 54% since the crisis. An estimated 44 million people are unemployed in developed countries, about 12 million more than in 2007, while inflation has reached its lowest level since the crisis. More worryingly, advanced countries’ growth rates have also become more volatile. This is surprising, because, as developed economies with fully open capital accounts, they should have benefited from the free flow of capital and international risk sharing – and thus experienced little macroeconomic volatility. Furthermore, social transfers, including unemployment benefits, should have allowed households to stabilize their consumption. But the dominant policies during the post-crisis period – fiscal retrenchment and quantitative easing (QE) by major central banks – have offered little support to stimulate household consumption, investment, and
growth. On the contrary, they have tended to make matters worse. In the US, quantitative easing did not boost consumption and investment partly because most of the additional liquidity returned to central banks’ coffers in the form of excess reserves. The Financial Services Regulatory Relief Act of 2006, which authorized the Federal Reserve to pay interest on required and excess reserves, thus undermined the key objective of QE. Indeed, with the US financial sector on the brink of collapse, the Emergency Economic Stabilization Act of 2008 moved up the effective date for offering interest on reserves by three years, to October 1, 2008. As a result, excess reserves held at the Fed soared, from an average of US$200 billion during 2000-2008 to US$1.6 trillion during 2009-2015. Financial institutions chose to keep their money with the Fed instead of lending to the real economy, earning nearly US$30 billion – completely risk-free – during the last five years. This amounts to a generous – and largely hidden – subsidy from the Fed to the financial sector. And, as a consequence of the Fed’s interest-rate hike last month, the subsidy will increase by US$13 billion this year. Perverse incentives are only one reason that many of the hopedfor benefits of low interest rates did not materialize. Given that QE managed to sustain nearzero interest rates for almost seven years, it should have encouraged governments in developed countries to borrow and invest in infrastructure, education, and social sectors. Increasing social transfers during the post-crisis period would have boosted aggregate demand and smoothed out consumption patterns. Moreover, the UN report clearly shows that, throughout the developed world, private investment did not grow as
one might have expected, given ultra-low interest rates. In 17 of the 20 largest developed economies, investment growth remained lower during the post-2008 period than in the years prior to the crisis; five experienced a decline in investment during 2010-2015. Globally, debt securities issued by non-financial corporations – which are supposed to undertake fixed investments – increased significantly during the same period. Consistent with other evidence, this implies that many non-financial corporations borrowed, taking advantage of the low interest rates. But, rather than investing, they used the borrowed money to buy back their own equities or purchase other financial assets. QE thus stimulated sharp increases in leverage, market capitalization, and financial-sector profitability. But, again, none of this was of much help to the real economy. Clearly, keeping interest rates at the near zero level does not necessarily lead to higher levels of credit or investment. When banks are given the freedom to choose, they choose riskless profit or even financial speculation over lending that would support the broader objective of economic growth.
Perverse incentives are only one reason that many of the hoped-for benefits of low interest rates did not materialize
By contrast, when the World Bank or the International Monetary Fund lends cheap money to developing countries, it imposes conditions on what they can do with it. To have the desired effect, QE should have been accompanied not only by official efforts to restore impaired lending channels (especially those directed at small- and mediumsize enterprises), but also by specific lending targets for banks. Instead of effectively encouraging banks not to lend, the Fed should have been penalizing banks for holding excess reserves. While ultra-low interest rates yielded few benefits for developed countries, they imposed significant costs on developing and emerging-market economies. An unintended, but not unexpected, consequence of monetary easing has been sharp increases in cross-border capital flows. Total capital inflows to developing countries increased from about US$20 billion in 2008 to over US$600 billion in 2010. At the time, many emerging markets had a hard time managing the sudden surge of capital flows. Very little of it went to fixed investment. In fact, investment growth in developing countries slowed significantly during the post crisis period. This year, developing countries, taken together, are expected to record their first net capital outflow – totalling US$615 billion – since 2006. Neither monetary policy nor the financial sector is doing what it’s supposed to do. It appears that the flood of liquidity has disproportionately gone toward creating financial wealth and inflating asset bubbles, rather than strengthening the real economy. Despite sharp declines in equity prices worldwide, market capitalization as a share of world GDP remains high. The risk of another financial crisis cannot be ignored. There are other policies that hold out the promise of restoring sustainable and inclusive growth. These begin with rewriting the rules of the market economy to ensure greater equality, more longterm thinking, and reining in the financial market with effective regulation and appropriate incentive structures. But large increases in public investment in infrastructure, education, and technology will also be needed. These will have to be financed, at least in part, by the imposition of environmental taxes, including carbon taxes, and taxes on the monopoly and other rents that have become pervasive in the market economy – and contribute enormously to inequality and slow growth. The views expressed here do not reflect the views of the United Nations or its member states. Project Syndicate
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February 17, 2016
Closing MIT establishes supply chain education centre in Ningbo
Malaysia’s growth to slow on weak exports
The Massachusetts Institute of Technology (Dome building pictured) will establish a supply chain education centre in China’s coastal city Ningbo, which houses the world’s largest port by cargo tonnage, according to the city’s education bureau yesterday. The Ningbo Supply Chain Innovation Institute China, the sixth such research centre run by MIT’s Centre for Transportation and Logistics and the first of its kind in China, has started recruiting teaching staff and will recruit postgraduate students starting 2017, according to the bureau. The centre will offer training for senior executives in addition to opening master and doctoral programs.
Weak mining exports, slowing agriculture output and the on-going slump in commodity prices will likely drag Malaysia’s fourth-quarter economic growth to its slowest in nearly three years. Malaysia’s fortunes have turned along with the collapse in global crude prices last year and the continuing slowdown in China, its biggest trading partner. Annual growth was forecast at 4.3 percent for the October-December quarter, according to the median estimate in a Reuters poll, its slowest since the first quarter of 2013 when it grew at the same pace. The economy expanded 4.7 percent in the third quarter. Exports in December grew only 1.4 percent from a year earlier.
Taiwan exports fall for 12th month Slackening global demand and cooling growth in Asia’s locomotive China continues to drag down the important tech sector Emily Chan and Jeanny Kao
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aiwan’s exports in January slid for the 12th month running, hit by a slump in shipments to China and raising the risk of further downgrades to the island’s economic growth outlook this year. The government will issue latest growth forecasts for 2016 today that could suggest a bumpy ride ahead for the trade-reliant economy, which barely emerged from recession in the fourth quarter as its tech exports faltered. Growth in 2015 was the weakest since the global financial crisis. Slackening global demand and cooling growth in Asia’s locomotive China continues to suck the oxygen out of Taiwan’s important tech sector, with little signs yet of a rebound. January exports fell 13.0 percent from a year earlier to US$22.2 billion, its lowest value in almost a year. The decline was better than December’s 13.9 percent drop and a Reuters poll
KEY POINTS January exports -13 pct y/y vs -13.6 pct in poll January exports to U.S. -5.8 pct y/y; China -19.3 pct January exports to Europe +3.4 pct y/y; Japan -1.8 pct forecast for a 13.6 percent fall in January. “Exports will remain in the red for the first half of this year,” said Andrew Tsai, economist with KGI Securities Investment Advisory, who expects Taiwan’s central bank to cut policy rates at its quarterly meeting in March and June. The contraction in Taiwan’s exports comes as China’s own exports shrank much faster than expected in January and could be a prelude of worse to come. “February exports are likely to continue to
U.K. inflation rate rises to highest in a year
contract,” said Yeh Maantzwu, the statistics director for the finance ministry, which released the data on Tuesday. But economists said January-February figures tend to be distorted by the effects of the Lunar New Year holiday. The festival began on Feb. 8 this year, prompting some companies to rush goods out ahead of the weeklong holiday.
China demand slumps
Tsai of KGI said China’s efforts to produce more of its
own components will affect Taiwan’s shipments. “Our exports to China were poor, partly because they are looking for import substitution, but also due to the overall economic slowdown,” he said. In January, Taiwan’s exports to China sank the most by 19.3 percent from a year earlier, worsening from December’s 16.4 percent drop. Meanwhile, export performance to other key markets improved. Shipments bound for
China securities regulator strengthening skills
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the United States fell 5.8 percent on year last month and those headed to Japan slid 1.8 percent, both narrowing losses posted in December. The island’s exports to Europe swung to 3.4 percent growth from a fall in December. The central bank cut its policy discount rate at each of its two previous quarterly policy meetings and, having twice guided market rates lower in the first quarter so far, expectations are up for another cut in March when it next meets. Reuters
Beijing draws criteria to evaluate poverty-relief work
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.K. inflation climbed to its highest in a year in January, driven by motor fuels, food and clothing. Consumer prices rose an annual 0.3 percent following a 0.2 percent gain in December, in line with the median forecast of economists in a Bloomberg survey. Core inflation, which excludes volatile food and energy prices, slowed to 1.2 percent from 1.4 percent, the figures from the Office for National Statistics in London show. Inflation remains well below the Bank of England’s 2 percent target. With oil prices remaining near a 12-year low and pay pressures weakening, officials say that the economy doesn’t yet warrant a rate increase from a record-low 0.5 percent. Central to the outlook for rates is pay growth, which has come off the boil in recent months despite unemployment reaching a decade low. The statistics office will report data on jobs and wages on Wednesday. The main driver behind the pickup in inflation last month was motor fuel, which fell less than a year earlier. These pressures were partially offset by air fares, which fell 36 percent, more than they did a year ago, following an upward surge in December.
hina’s securities regulator is strengthening its ability to discover evidence of market manipulation and other irregularities, according to an article on the website of the stateowned paper Legal Daily. Citing information obtained from the China Securities Regulatory Commission (CSRC), the article said that the regulator was drafting steps to strengthen its ability to discover and prove the existence of market irregularities. The moves include pushing for joint information “channels” with the Shanghai and Shenzhen exchanges, and the China Financial Futures Exchange. The number of new cases under investigation had climbed rapidly from 2012 to 2015, but the number of inspectors had not kept pace, according to the article, which was published late on Monday. Following the equity market crash last summer, policymakers led a broad crackdown on alleged financial market manipulation which has ensnared top executives at a number of Chinese financial institutions. In January, the director of the CSRC pledged to strengthen market oversight, following a new bout of volatility.
hinese authorities have published a set of criteria for assessing local poverty-relief work in its latest effort to deliver on the government’s target of lifting all people out of poverty by 2020. The evaluation criteria, released by the general offices of the Central Committee of the Communist Party of China and the State Council, will mainly check on local authorities’ efforts to identify, help and reduce the impoverished population, as well as whether poverty relief funds are used effectively. The method will apply to 22 provinces and regions in central and west China, where the impoverished people are most concentrated. The evaluation, organized by the State Council Leading Group Office of Poverty Alleviation and Development, will be conducted annually for the 2016-2020 period. Authorities that fail to deliver satisfying poverty reduction results will be held responsible, and the results will serve as major reference to assess the performance of government officials, according to the method. There are still 70 million people living below the poverty line of 2,300 yuan in annual income by 2010 price standards last year.
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