MOP 6.00 Closing editor: Joanne Kuai Year IV
Number 984 Friday February 19, 2016
Publisher: Paulo A. Azevedo
Jet Aviation on schedule to open new airport facilities Page 2
Apple Pay arrives to mature Chinese e-payments market Page 8
Casino operators take revenue hit
MGM Macau hotel occupancy reached 97.5 pct in Q4. But casino operator MGM China posted EBITDA of HK$4.7 bln (US$582.2 mln) for the year. Down 33.8 pct y-o-y. The opening date of its Cotai project has been postponed to 2017 Q1. Meanwhile, Melco Crown reports net revenue for Q4 of US$1.06 bln. Down 6 pct y-o-y. Adjusted property EBITDA was US$278.3 in Q4 for a 15 pct y-o-y decline Page 4
Junket industry hit by another embezzlement
www.macaubusinessdaily.com
Fewer routes and less frequency. Some gaming operators are playing ball on the shuttle bus issue. Traffic affairs advisors urge the authorities to step up the pressure. Getting gaming operators to cut even more. In the name of freeing up public transportation
MOP2.57 mln tourism tax. The courts have declared that Galaxy Entertainment has to pay. Finding all complementary services are subject to tax, with only telecommunication and laundry exempted
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China’s consumer prices. Rising for a third consecutive month in January. Thanks to rising food prices, with producer prices easing, official data showed yesterday. Food prices edged up 4.1 pct y-o-y while non-food inflation climbed 1.2 pct. Due to costlier healthcare, clothing, education and entertainment
HSI - Movers February 18
Name
Page 5
Tax tussle decided
Inflation picking up
Pages 8&9
Another VIP room embezzlement at L’Arc Macau. Judiciary Police received a report that around HK$1 mln was stolen. From a room allegedly controlled by a former 14K triad leader. Ian industry insider says this kind of incident is nothing new. Only receiving attention now because of the gaming slump. When every dollar counts. The case is the second involving L’Arc this year. And comes hard on the heels of several alleged embezzlements in the industry
Shuttle diplomacy
Japan exports shrink to 2009 figures Page 11
%Day
PetroChina Co Ltd
+6.02
Galaxy Entertainment
+6.00
Sands China Ltd
+5.95
CNOOC Ltd
+5.39
Cathay Pacific Airways
+4.31
Cheung Kong Property
+0.37
Kunlun Energy Co Ltd
+0.35
CLP Holdings Ltd
+0.30
Li & Fung Ltd
-0.45
Tingyi Cayman Islands
-0.61
Source: Bloomberg
Retail
CNY sales slacken
I SSN 2226-8294
Retail sales during Chinese New Year in the SARs. Far from satisfactory same-store sales from Jan. 25 to Feb. 14 at 28 pct lower y-o-y, said Chow Tai Fook. Sa Sa reported a 19 pct decline in sales. Meanwhile, transactions by Chinese tourists sank 18 pct in Hong Kong
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2 | Business Daily
February 19, 2016
Macau Border crossings reach 5.13 mln for CNY Some 5.13 million border crossings were recorded for the Chinese New Year Holiday from February 8 to February 17, representing a year-on-year jump of 3.3 per cent, according to the latest data released by the Public Security Police Force (PSP). During the 12-day period, border crossings by non-resident visitors totalled 3.55 million, a year-on-year increase of 3.6 per cent. Meanwhile, the Border Gate was the city’s busiest checkpoint for the holiday, recording 3.56 million crossings during the period, a year-on-year lift of 4.5 per cent.
Authority: 5.54 bln yuan investment in HK-Zhuhai-Macau Bridge this year
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he Hong Kong-Zhuhai-Macau Bridge Authority expects to complete investment of 5.54 billion yuan (MOP6.82 billion/ US$852.5 million) in the super bridge by this year, striving to make the
bridge meet the standards for traffic next summer before it officially opens by next year-end. According to China News Service, the Authority estimates that the deck closures of the whole bridge could
be completed this August and could connect the whole bridge to the undersea tunnel at the beginning of next year. In addition, deck paving for the bridge is expected to be completed by next March.
The completion of the bridge linking the Chinese city and the two Special Administrative Regions was initially slated for the end of this year. However, the Hong Kong Highways Department said last year that completion could only occur in late 2017. It still remains unknown whether the bridge will open for traffic as the latest schedule following Hong Kong news reports indicated earlier this week that seven faulty underground pilings of the super bridge need to be reconstructed. The cross-region project started construction in 2009 with an initial budget of 15.73 billion yuan. The bridge includes a 29.6 kilometre dual 3-lane carriageway and an immersedtube tunnel of about 6.7 kilometres in addition to two artificial islands. K.L.
Jet Aviation on schedule to 3 Macau employs CSG to open new airport facilities enhance 4G LTE Services
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et Aviation is running on schedule to open during the second quarter of the year the jet maintenance, repair and operations (MRO) facilities in Macau International Airport (MIA), according to the publication Aviation Week Network. “We will be extending all approvals that we have from Jet Aviation Hong Kong,” said John Riggir, Vice President and General Manager of Jet Aviation Singapore. “Macau is really part of our Hong Kong footprint and gives us the option to put aircraft into Macau for longer term maintenance projects. Hong Kong can be a challenge for hangar space so we can now take care of that by having Macau supplying extra
maintenance capacity, hangarage and parking”, he added. Last year, after winning the public tender to operate a private aviation MRO business from MIA’s new purpose-built hangar, Jet Aviation reached a 10-year concession agreement with the Macau Airport Authority. The company will lease half of the new 8,000 square-metre hangar in addition to 1,000 square metres of workshop and office space. With this new MRO facility, Jet Aviation, which is based in Switzerland, is expecting to help alleviate congestion at other airports in the region by providing maintenance, aircraft cleaning and parking services for business jets.
Latest integrated revenue and customer management system is utilised
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SG Systems International, Inc. announced yesterday that one of the telecom network operators, Hutchison Telephone Macau, also called 3 Macau, had made an investment in CSG Singleview® to provide a comprehensive integrated revenue and customer management solution system in order to facilitate its advanced 4G LTE services in Macau. CSG Systems International, Inc. is an international provider of business solutions and services, and is currently serving the top 100 telecommunication service providers globally. “Our goal is to offer our customers the most exciting range of new services that 4G LTE brings,” said Wai-ming Ho, CEO at 3 Macau. “To achieve this, we selected CSG for its proven ability to deliver scalable solutions that will help us bring innovative products and services to market quickly.” In June last year, the Macau Government announced that 3 Macau,
Companhia de Telecomunicações de Macau SARL (CTM), China Telecom (Macau) Company Ltd., and Smartone – Mobile Communications (Macau) Ltd. had been approved to provide 4G services under a licence valid for eight years. The government requires the telecom operators to achieve 100 per cent of the city’s network coverage providing 4G services within this year. In addition to the 4G launched in December 2015, 3 Macau says it can now deliver even faster service and bring in more innovative products to the Macau digital market.
Business Daily | 3
February 19, 2016
Macau Gov’t urged to push gaming operators to cut shuttle bus routes Traffic affairs advisors say more roads should be freed up to ease the traffic for better development of public transportation Bami Lio
bami.lio@macaubusinessdaily.com
T
he Traffic Affairs Consultative Committee has urged the government to further push the gaming operators to cut down the number of routes and frequency of scheduled free shuttle bus services in order to free up more roads to develop public transportation. The advisors and authorities discussed the issue yesterday afternoon, committee member Kou Kun Pang told reporters following a closed-door meeting with the Transport Bureau (DSAT). “One of the gaming operators has agreed to cut nearly 20 per cent of its shuttle bus routes, the purpose [of which] is to ease the traffic and free up more road resources. Each operator will have its own proportion and schedule for cutting routes.
We see this as a good start at this early stage of our discussion with gaming operators, but we should keep on evaluating the issue. It’s also important for the government to keep an eye on the cut,’’ Mr. Kou said. However, the convenor said no timetable was available, and no deadline set.
Making progress
Representatives from DSAT also told reporters that nearly 80 shuttle bus routes are being operated now, with around 60 to remain it is proposed, while the ultimate target is to have less than 50 routes in the market. Transport Bureau Director Kevin Lam Hin San said earlier this month that they are already in talks with the gaming operators and have agreed to
cut down 11 routes, such as the ones connecting Cotai to Old Taipa Village, as well as combining the ones to the Airport and Pac On Ferry Terminal. During the meeting, DSAT said they have decided to limit the traffic between Barra and Lam Mau Tong by only allowing buses on the road during peak hours in the morning and night. Mr. Kou said the government will launch a trial run of on Saturdays and Sundays in mid-May. Mr. Kou added that data will be updated and evaluated for further review by then. Mr. Kou also revealed that DSAT said that the 250 taxi licences will go to public tender in March this year. Currently, around 1,300 taxis operate in the market; around 60 have a permanent licence.
Rosário: No change in law loosening property regulations
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he government has no intention of changing any legislation regulating the property market in order to heat it up, but they are still paying close attention to its current development as property prices drop in Macau, said the Secretary for Transport and Public Works, Raimundo Rosário. He was talking to the media yesterday after attending a luncheon held by the Association of Property Agents and Realty Developers of Macau. “We have no intention of changing the law but we are still observing the situation in order to make necessary changes,” the Secretary told reporters. In addition, regarding the lack of efficiency of the administration, the Secretary said that it would take some time for the government to execute but he reckoned some improvements have been made already. He added that he would urge his secretariat to speed up administrative procedures. With regard to the establishment of the Urban Renewal Committee, Mr. Rosário said that the committee is expected to be set up in two to three weeks and that relevant members will be appointed by then.
SARs retail saw sales fall over Lunar New Year
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ong Kong’s top jewellery firm Chow Tai Fook and cosmetics retailer Sa Sa saw sales declines of at least 20 per cent during the key Lunar New Year shopping season, as China’s slowing economy weighed on consumer spending. Chow Tai Fook Jewellery Group Ltd, Hong Kong’s largest jewellery firm by market value, saw its retail sales drop by almost a third in Mainland China and by 23
per cent in Hong Kong and Macau between January 25 and Feb. 14, compared with the previous year’s Lunar New Year period. The buying spree usually happens a week or more before the start of Lunar New Year, which fell on Feburay 8 this year. Same-store sales were down 31 per cent in Mainland China and down 22 per cent in Hong Kong and Macau, Chow Tai Fook said in a
filing to the Hong Kong stock exchange on Wednesday. “The management anticipates the retail business environment will continue to be challenging for the fourth quarter and the sales performance will be worse than that of the third quarter,” the jeweller said. China’s economy, which posted the slowest growth since 2009 in the fourth quarter, and the government’s crackdown on corruption
have stifled spending among Chinese consumers, who typically flock to Hong Kong to shop for everything from handbags to milk powder. On Wednesday, another prominent retailer in Hong Kong also reported dismal sales. Sa Sa International Holdings Ltd, which has a store in almost every corner of Hong Kong, posted a 20 per cent drop in retail sales in Hong Kong and Macau over February 8 to 14, compared
with the previous year’s Lunar New Year period. Sa Sa’s same-store sales fell 19 per cent over the same period, it said in a filing to the Hong Kong stock exchange. The announcements came after Hong Kong’s market closed on Wednesday. Chow Tai Fook’s shares ended 6 per cent lower, while Sa Sa’s stock was down by 0.9 per cent, versus the main Hang Seng index’s 1 per cent fall. Reuters
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February 19, 2016
Macau opinion
International Film Festival of Macau
Pedro Cortés
Lawyer cortes@macau.ctm.net
“S
tart spreading the news”: in this case, the good news. Macau will have an International Film Festival later this year. Macau will also have the Script Road next month, an initiative of my good friend Ricardo Pinto with the engine and vision of Helder Beja. These are the kind of initiatives that the Cultural Bureau should support and that the vital forces should sponsor in order to make ‘diversification’ a reality. Venice, Cannes, Berlin, Oporto – not to mention Hollywood – are all known by their film festivals. I don’t know which mascot (if any) is going to be used by the organisers but I fervently hope it’s not a Panda or otherwise we risk having a movie presented as having been awarded the Golden Panda at the Macau Film Festival. Well, anything to make Macau a destination other than gaming has my applause. We need sophisticated tourists. People who come and see the city beyond the walls of the casino areas. People who have manners and don’t walk in the middle of the street as if they were on the sidewalks of the Champs-Élysées in Paris. People that go and appreciate the cultural events other than the annual parade that takes place in the NAPE area. With big names from the Asian movie industry and the big names of Hollywood, Macau could have more to be seen. I hope this happens for the good of the population. I guess we’re getting tired of the kind of tourist we fortunately receive in Macau every single year. It makes us think that probably it’s good for our health to leave Macau during the festive seasons. The authorities could enhance and educate or try to educate such tourists, giving advice on how to behave and, of course, issuing tickets to those who don’t comply with the public space regulations. I guess they’re busy with other matters but sending information to the Mainland could be worth it. I’m not saying to follow the example of Singapore, which may be beyond comprehension. But at least to express a modicum of decency and politeness in our streets, shops and restaurants. We deserve it. We want it. Macau needs to be a place to remember rather than a place that a tourist visits only once in a lifetime. And our industry needs to keep the tourists more than two nights in Macau, spending more in the restaurants of Old Taipa. Enjoying the other attractions Macau has to offer. As a matter of fact, having Macau known by what it is and not what is sold by the agencies!
MGM China profit down 33.8 pct for 2015
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asino operator MGM China Holdings Ltd. registered a profit (adjusted BEITDA) of HK$4.7 billion (US$585.2 million) for the whole year of 2015, down some 33.8 per cent compared to 2014. In addition, the company announced that its new project on Cotai will be delayed to the end of the first quarter of 2017. The gaming operator announced yesterday that it had generated revenue of HK$17.2 billion for last year, which is down some 33 per cent from a year ago. The company claimed that its market share for the
year ‘remained stable despite the opening of new properties in Macau’. For the fourth quarter of 2015, MGM China’s property EBITDA, meanwhile, registered a quarter-toquarter increase of one per cent to HK$1.1 billion. The company added that it ‘continues to see stabilisation in the mass market’. On the other hand, the operator indicated that its hotel property MGM Macau had reached an average occupancy of 97.5 per cent between October and December last year, with revenue per available room increased by four per cent sequentially to HK$2,367.
In the same announcement, MGM China said the opening of its new MGM COTAI project will be put off to the end of the first quarter of 2017 from this yearend. It claimed that the delay in the opening ‘is based on current market conditions and the timing of other resort openings in the area’. However, the total construction budget for the new project will remain at HK$24 billion. In addition, the gaming operator has proposed a final dividend of HK$9.3 cents per share. K.L.
Melco net revenue down 6 pct in 2015 Q4 The decline was attributed to lower rolling chip revenues and mass market table game revenues in City of Dreams and Altira Macau
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elco Crown Entertainment has reported unaudited financial results for the fourth quarter of 2015, for which period the net revenue posted was US$1.06 billion (HK$8.23 billion), an approximately 6 per cent decrease from US$1.12 billion in the same period of 2014. According to a press release issued by the company yesterday, the decline in net revenue was primarily attributable to lower rolling chip revenues and mass market table game revenues in City of Dreams and Altira Macau, partially offset by the net revenue generated by Studio City and City of Dreams Manila, which started operations in October 2015 and December 2014, respectively. Moreover, adjusted property
EBITDA was US$236.4 million for the fourth quarter of 2015, as compared to adjusted property EBITDA of US$278.6 million in the fourth quarter of 2014. The company said the 15 per cent yearon-year decline in adjusted property EBITDA was attributable to a lower contribution from the group-wide rolling chip segment. Lawrence Ho, Co-Chairman and Chief Executive Officer of Melco Crown Entertainment, commented that the company had delivered a strong set of operating and financial metrics in what is still a challenging environment in Macau, with Macau-wide mass market table game revenues increasing on both a sequential
and year-on-year basis in the fourth quarter of 2015. In addition, without declaring a quarterly dividend for the fourth quarter, the company announced a special dividend of US$350 million. Mr. Ho reckons such measures demonstrate an “impressive cash flow generation from our high quality properties and our strong balance sheet”. “Furthermore, as visibility regarding our operating and regulatory environment continues to improve, we remain committed to maximising cash distributions to shareholders, which includes a review of our current dividend payout ratio of 30 per cent of net income attributable to Melco Crown Entertainment,” added Mr. Ho.
Business Daily | 5
February 19, 2016
Macau
PJ: Another junket embezzlement case reported by L’Arc Macau The embezzlement, involving HK$1 million, reportedly took place inside a VIP room controlled by the city’s infamous former triad leader ‘Broken Tooth Koi’ in L’Arc Macau on the Peninsula
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udiciary Police (PJ) confirmed to Business Daily yesterday that it had received a report about a HK$1million (US$124,509) embezzlement case at a VIP room in L’Arc Macau on Wednesday. Hong Kong Chinese language news outlet Economic Journal reported yesterday that a general manager working in the ‘profit-sharing area’ inside a VIP room controlled by former 14K triad ‘Broken Tooth’ Wan Kuok Koi at L’Arc Macau had allegedly stolen HK$1 million in cash deposits from a client on Wednesday. A PJ spokesperson told Business Daily that the authorities received a report on February 17. However, the officer declined to reveal more details on the case, such as which was the reporting unit. Meanwhile, L’Arc Macau said it had “no comment” on the incident. The former triad leader reportedly controls the Guoying VIP Club (Chinese
transliteration) launched in the hotel property in May last year. According to Economic Journal, the ‘profit-sharing area’ involved in the case is operating under the name Fuyin VIP Club (Chinese transliteration). A profit-sharing area inside a VIP room means the VIP operator allocates some of its gaming tables for co-operation with other junkets in order to attract more clients. The profit and loss generated by the area is shared by the operator and
its co-operating junkets at a set ratio.
Not the first case
This is the second embezzlement case involving VIP rooms in L’Arc Macau this year. In January, the PJ said that a senior staff member working in L’Arc’s own junket operations had allegedly embezzled HK$99.7 million from the company. L’Arc Macau is one of the fifteen satellite casinos operating under a service agreement with Macau-based casino operator
Galaxy Entertainment out MOP2.57 mln in tourism tax battle The courts have decided that all complementary services at StarWorld Hotel are subject to tax, with only telecommunications and laundry exempted
transportation, rental of equipment, mail services and sale of newspapers provided in the company’s StarWorld Hotel. According to the operator’s interpretation of the law, these ‘complementary services’ to the industry were tax-free. However, in June 2014, Galaxy was notified by the Financial Bureau Services (DSF) to pay MOP2.57 million in taxes regarding the operations of the hotel for 2011. The company complained about the decision to DSF but it was told again that it should pay the amount. Finally, on 28 July 2014 Galaxy paid the taxes. The payment was conditional, as the company was ready to take the case to the local courts.
Indirect tax
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ith the exception of services related to telecommunications and laundry, hotel operators have to pay tourism tax on all ‘complementary services’, which are the services provided by hotels not related to accommodation or food. This was
the interpretation of the Court of Second Instance, a finding that will cost Galaxy Entertainment MOP2.57 million (US$320,488) in tourism tax. In 2011, Galaxy Entertainment decided not to pay tourism tax on the sales of ferry, air shuttle and flight tickets, paid parking space,
Corporate Lifestyle website to raise funds for non-profit animal charity MASDAW Luxury lifestyle website Ladybird of Leisure will host a charity wine tasting on February 27 in order to raise funds for the Macau Association for Stray Dogs and Animal Welfare (MASDAW), which conducts vital work in Macau including rescuing and desexing animals. The event will take place at Macau Design Centre
from 6:00 pm to 10:00 pm next Saturday. In addition to the wine tasting event, a silent auction will operate this Saturday from 9:00 am to 9:00 pm for donated pieces by local artists, jewellery makers, ceramic artists and photographers. More information can be found at www.ladybirdofleisure.com
SJM Holdings Ltd. Last September, a similar case was reported to police by local VIP gaming operator Dore Entertainment Co. Ltd., claiming a former cage manager had allegedly stolen HK$100 million from the cage and illegally accumulated capital without the company’s knowledge. An industry insider, who prefers to remain anonymous, told Business Daily that embezzlement cases have always been happening in the city’s VIP rooms but have
Following two different complaints sent to the Director of DSF and to the Chief Executive, in early 2015 Galaxy took the case to the Court of Second Instance. This week, the government published the decision made by the court in November 2015, which denied the tax exemption and made Galaxy’s payment permanent.
only become high profile since the gaming downturn. “For the long time I was in the industry, I can say that managers suddenly disappearing with companies’ money were not new things. But the operators just didn’t report it to the police or make it high profile in the past as they cared about their image a lot. However, given the gaming slump, they now make everything high profile when it affects their costs,” the casino insider claimed. Business Daily also reached the president of the Association of Gaming and Entertainment Promoters of Macau, Kwok Chi Chung, for comment on the issue but the junket group head claimed yesterday morning that he hadn’t heard about the incident. Nevertheless, Economic Journal quoted the Association’s vice president Lei Chi Kin as saying that he had heard of the incident, and expressed concern that the latest junketrelated embezzlement would further affect the business and image of the city’s VIP rooms.
According to the Court of Second Instance, the first Article of the law on tourism tax (Law no. 19/96/M) defines that only the complementary services related to telecommunications and laundry are tax-exempt. Another of Galaxy’s arguments was that for some of the services provided there was no income for the company and that the money received was handed to the third parties offering the service. Regarding this point, the local court also clarified that the tax on tourism is an indirect tax and as such it is paid because of the services provided, regardless of the income generated. This means that even if a company is losing money by providing a complementary service, if it is charging for it it will have to pay the tourism tax. Business Daily contacted Galaxy Entertainment to clarify whether the group had appealed the decision. However by the time the story went to press the company had failed to provide a reply. J.S.F.
Business Daily | 7
February 19, 2016
Macau BBIN to launch new online gaming product Asian iGaming software supplier BBIN is to launch a new live online gambling product called Theme Baccarat for its round-the-clock Live Casino in March. The company claims the product will come with a ‘variety of customised backdrop features . . . Theme Baccarat not only preserves the best features of the BBIN Live Casino product and classic baccarat but also uses advanced Green Screen shooting technology from Hollywood filmmaking to switch different styles of background,’ it said in a press release. Currently, the Taiwanese software supplier’s online casino provides realtime Baccarat, Texas Hold’em Poker, Mahjong Tiles, Roulette, Fan Tan, Sic Bo and other games.
Paradise installs 70 Live Multi-Game terminals in Casino Diamond
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a r a d i s e Entertainment installed 70 Live Multi-Game (LMG) terminals on 4th February in Casino Diamond in the Hotel Holiday Inn Macau, the company announced yesterday. “We are pleased to work with Casino Diamond and glad to see our LMG terminals as part of their product offerings. LMG terminals are designed to increase efficiency and productivity, which provide the casino operators an ideal solution amid the current challenging business environment to manage operation cost effectively,” the Chairman and Managing Director of the company Jay Chun said in a statement. According to the company, with the new 70 Live Multi Game terminals in Casino
Diamond, a satellite of SJM Holdings, the total number of LMG terminals installed by the manufacturer in the territory stands at 3,800. “We have deployed close to 3,800 LMGs in Macau up to now, which further demonstrates the growing popularity and acceptance of LMG for both casino operators and players. We believe our cutting-edge gaming machine expertise and operational capabilities will continue to lead the market and deliver solid performance”, Mr. Chun explained. “We continuously innovate and improve on our existing products. We believe th e in d u stry wil l continue to see strong demand for gaming machines and we want to be well positioned to capitalise on such opportunity”.
Macau needs some more glitz to stay in the global game David Fickling
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he VIPs have checked out. It’s past time for Macau’s gambling industry to get used to that fact. The Chinese high-rollers who turned Macau into the world’s biggest casino destination over the past decade have been in retreat for almost two years now, in the face of a government graft crackdown and tighter restrictions on cross-border money flows. The industry is in such dire straits that a 21 per cent annual drop in January gaming revenues was regarded as potentially bullish by many analysts. Even against that backdrop, the VIP segment looks weak: Revenue from high-stakes baccarat accounted for just 53 per cent of the total in the September quarter, the lowest share since 2004. That’s a problem for casino operators that have invested on the prospect of
VIP-style cash flows. It takes five mass-market gamblers to make up the same revenue as one VIP, Bloomberg News’s Daniela Wei reported this month. Sands China was the only one of five casino operators to generate sufficient revenue to cover its operating and capital costs in the half-year ended June, according to data compiled by Bloomberg. Only Melco Crown, Galaxy Entertainment and Wynn Macau are over the humps of their major capex programs. SJM Holdings, the Macau casino stock with the lowest valuation, has about US$2.7 billion of spending locked in for this year and next, according to analyst estimates compiled by Bloomberg: Still, optimists such as Bernstein’s Vitaly Umansky argue that the declines have positioned the industry for more stable growth in massmarket gaming, which is less
volatile and more profitable than the VIP business. New resorts such as Melco Crown’s Hollywood-themed Studio City point the way. The problem with this thesis is that Macau is no longer the only game in town for mainland Chinese leisure travelers. Back in 2013, the territory and nearby Hong Kong attracted about 61 per cent of Chinese outbound tourists. That’s now fallen to about 46 per cent, with more far-flung Asian destinations making up the difference. The number of Mainland Chinese traveling to Macau in the December quarter was just 519,000 up on the figure two years earlier. Some 2.6 million more went to Thailand, South Korea, Japan, Singapore and Malaysia: Macau is solving one part of this problem simply by building more hotel rooms. With just 31,600 at the end
of December, it can sell about 2.9 million room occupancies a quarter so may be butting up against hard capacity limits. About 6,000 more are under construction at the Sands, Wynn and MGM resorts due to open during 2016. The other part of the problem will prove more challenging. As the only place within easy reach of mainland tourists where betting was legal, Macau had one hell of a unique selling point over the past decade. A gateway to the world at a time when China’s economy was booming, it even attracted
31,600 Macau’s end-2015 hotel rooms
a disproportionate share of tourists who traveled more for glitz than gambling chips. Those days are past, and mainlanders’ horizons have broadened. China’s biggest film hit during 2012 was Lost In Thailand, a comedy about a trio of Chinese who end up ... well, you get the idea. If you wanted to catch the latest world tour of Cantopop singer G.E.M., you could have gone to Las Vegas as well as Macau. At Brisbanebased Star Entertainment, normalized gross revenue from international VIPs rose 1.7 per cent in the December half, bucking the declines a nine-hour flight (at least) away in Macau. If the territory’s casinos want to compete in a market where Chinese tourists are taking wing, it’s time for them to forget about competing just with each other. They’re up against the world now. Bloomberg
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February 19, 2016
Greater China
January inflation data shows improvement But lingering worries of deflation have reinforced economists’ views that authorities will have to roll out further stimulus measures Nathaniel Taplin and Xiaoyi Shao
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hina’s consumer inflation quickened to a five-month high in January due to rising food prices but producer prices shrank for a 47th straight month as falling commodity markets and weak demand add to deflationary pressure in the world’s second-largest economy. The consumer price index (CPI) rose 1.8 percent in January from a year earlier, slightly less than market expectations and up from a 1.6 percent increase in December, data from the National Bureau of Statistics (NBS) showed yesterday. But the slight increase was mainly due to a 4.1 percent seasonal rise in food prices before the long Lunar New Year celebrations, and did not imply any visible improvement in economic activity and broader consumer demand, analysts said. Indeed, non-food consumer inflation remained muted, growing 1.2 percent in January on-year, up only slightly from December. The price data also showed further signs of strain on Chinese companies, particularly in the mining and processing sectors, as sluggish demand and fierce competition force them to repeatedly cut their selling prices. The producer price index (PPI) fell
KEY POINTS Jan consumer inflation 1.8 pct y/y, vs 1.9 pct f’cast Jan producer prices fall 5.3 pct y/y, vs -5.4 pct f’cast Deflationary pressure will continue this year
easing,” said Zhao Yang, chief China economist in Nomura. Nomura expects four cuts to banks’ reserve requirement ratio (RRR) this year, each by 50 basis points (bps), together with two more interest rate cuts. Zhao noted that changes in China’s consumer inflation may be less volatile in future after the NBS appeared to have lowered the weighting of food in its consumer price basket, at the
same time as it changed the base year to 2015 from 2010. The NBS said the new comparison bases affected the January CPI and PPI data by 0.08 and 0.002 percentage points, respectively, but exact weightings in the basket are secret. Economists at ANZ also said more support is on the cards. “Overall, China will likely face strong deflationary pressure in the remainder of the year,” they said in a note.
Analysts continue to expect more policy easing to boost economy 5.3 percent in January from a year earlier, slightly less than expectations of a 5.4 percent decline and easing from 5.9 percent fall in December. Lingering worries of deflation have reinforced economists’ views that the government and central bank will have to roll out further stimulus measures this year to spur the economy, which grew last year at its slowest pace in a quarter of a century. “The figures highlight persistent weakness in the economy, leaving room for further monetary policy
Apple launches payments service on Mainland China’s mobile transactions were valued at 9.31 trillion yuan last year Bill Savadove
Ray Zhao, an Internet industry analyst at Guotai Junan Securities, told AFP: “There is still a chance for Apple Pay to grab some market share. Some loyal Apple users may prefer using it instead of other payment tools. “But the space for Apple Pay is still small,” he added.
Intense competition
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pple yesterday launched its mobile payments service Apple Pay in China, pitting the US technology giant against strong domestic players in an already crowded field. The world’s secondlargest economy is a crucial market for the Californiabased firm, and Apple Pay is available in only a handful of other countries including the United States, Britain, Canada and Australia. “Apple Pay launching in China today. Can’t wait for you to try it and see how incredibly easy it is to use!”
Apple chief executive officer Tim Cook said in a posting on his verified China microblog. But unlike most other countries, mobile payment systems are already wellestablished in China and Apple does not have a firstmover advantage. China’s mobile transactions were valued at 9.31 trillion yuan (US$1.4 trillion) last year, up an annual 57 percent, one industry estimate showed, and according to the statebacked China Internet Network Information Centre (CNNIC), the country had 359 million online payment
users in mid-2015, up almost 18 percent in six months. The most dominant mobile and online payment providers are e-commerce giant Alibaba with a nearly three-quarters market share followed by Tencent -- operator of the popular messaging app WeChat -- at 17.4 percent, according to Beijing-based BigData Research. The Apple brand commands a strong following in China, especially among the nouveau riche and emerging middle class, with tales circulating of people selling their kidneys to buy iPhones.
One new Apple Pay user said he looked forward to putting the service to the test -- to buy his midday meal. “The process of adding a (bank) card is a bit slow, maybe because it was just launched,” said university student Li Xiang. “I’m planning to eat at McDonald’s for lunch and try it out.” Analysts said Apple’s iOS system is both a plus and a minus in China. It potentially provides better security for transactions, but in China most people have home-grown phones with the Android system -- which rules them out as Apple Pay users. Tencent and Alibaba unit
Alipay squared off during the recent Lunar New Year, encouraging users to send billions of “red envelopes” -- cash gifts traditionally exchanged over the holiday -- online instead of in person. Just two days ahead of the Apple Pay launch, Tencent said it would start levying fees for withdrawing funds from its WeChat Wallet, according to a statement, apparently a move to discourage users from leaving. Rival Alipay said it will not charge. Apple has found a powerful partner in China, bank card provider UnionPay, which has links to the central bank but has lagged technology companies in developing online payments. “Apple Pay needs to find the right angle to get into the market and it is not as easy as imagined,” independent technology analyst Fu Liang told AFP. “China’s market competition is very intense and there are at least a dozen strong players.” AFP
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February 19, 2016
Greater China “In addition to the risk of deflation, China also continued to face capital outflows in January, as foreign reserves declined further. Therefore, we believe that further monetary policy easing is still needed.”
Under pressure
Chinese producers have seen their selling prices fall for nearly four straight years, reflecting sliding commodity prices, sluggish demand at home and overseas and overcapacity in key sectors including steel and energy. Consumer prices have held up better, reflecting the relative strength of the labour market, but analysts have been watching closely to see whether weakness in the industrial sector and anaemic global trade will start to be felt more strongly in wages and income growth this year. However, People’s Bank of China officials have indicated that they are wary of further broad-based monetary easing such as interest rate cuts, which could help boost activity but spur higher capital outflows and put more pressure on the yuan. Reuters
HNA Group to buy Ingram Micro for US$6 bln Chinese outbound acquisitions topped US$1 trillion for the first time last year
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hinese aviation and shipping conglomerate HNA Group is buying electronics distributor Ingram Micro Inc for about Us$6 billion, the latest in a string of overseas deals by Chinese companies. The offer of US$38.90 per share from HNA unit Tianjin Tianhai Investment Co Ltd represents a 31.2 percent premium to Ingram’s closing price on Wednesday. Shares of Ingram Micro, which distributes products ranging from Apple Inc’s iPhones to Cisco’s network equipment, were trading at US$36.40 in after-hours trading. Chinese companies have been aggressively splurging on foreign acquisitions to sidestep slowing domestic growth. The total value of Chinese outbound acquisitions topped US$1 trillion for the first time last year. But some Chinese deals have hit a roadblock in the United States after the U.S. Committee on Foreign Investment in the United States (CFIUS) raised concerns over national security. Fairchild Semiconductor said on Tuesday it had rejected an offer from China Resources Microelectronics Ltd and Hua Capital Management Co Ltd, citing concerns over the U.S. approval process. Ingram said in a regulatory filing that Tianjin Tianhai will be required
to pay the company a fee of US$400 million if the deal is terminated following a CFIUS investigation. “I don’t expect it would be a security concern as Ingram Micro is a distributor of the equipment, and the vast majority of the products do not go to high-security customers,” Northcoast Research analyst Keith Housum said. The deal will help HNA Group, the owner of China’s Hainan Airlines and the largest stockholder in Tianjin Tianhai, bolster its logistics arm with Ingram’s supply chain network. It will also give the company a stronger foothold in high-growth emerging markets through Ingram’s large international presence. As part of the deal, Ingram Micro will suspend its quarterly dividend payment and its share repurchase program, it said. Morgan Stanley was financial adviser to Ingram Micro, while China International Capital Corp Ltd and Bravia Capital were lead financial advisers for HNA Group. Reuters
Domestic gold investment demand to grow if price rally holds Chinese demand for gold bars and coins rose by a fifth to 201 tonnes last year A. Ananthalakshmi
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old investment demand in China has started 2016 quite strongly, outperforming interest in jewellery, but for the momentum to continue bullion would have to maintain its price rally, a World Gold Council (WGC) official said. With a 14 percent gain, gold is the best performing asset so far this year after falling for three straight years to 2015. The metal hit a one-year high last week as turmoil in global stock markets triggered safe-haven demand. China, the world’s top bullion consumer, has seen strong demand for investment products such as bars around last week’s Lunar New Year holiday, Roland Wang, managing director for WGC in China, told Reuters. The holiday is typically a strong demand period for gold as it is a popular gift, but buying then tends to slow. “We have seen quite solid
(investment) demand for this past one-and-a-half months. We have to see gold maintain the rally for quite a period of time. That will determine further purchases by investors,” Wang said. “(Chinese) buy when they are sure that the gold price will keep going up.” Chinese demand for gold bars and coins rose by a fifth to 201
tonnes last year as a stock market rout and weakness in the currency sent investors seeking safety in the precious metal. But demand is still well below 2013’s record 407 tonnes. Investment demand only accounts for around 20 percent of total Chinese consumption, the bulk of which is in jewellery. Demand for jewellery fell 1 percent in 2015 to 783.5 tonnes. Jewellery demand has taken a hit from a slowing economy, Beijing’s anti-corruption drive and the continued drop in prices. Even during last week’s holiday, investment demand growth performed better, Wang said, adding that retailers are keeping inventories low and jewellery manufacturers are facing tight credit conditions. Reuters reported last year that Chinese banks are growing alarmed by a rising number of defaults among jewellery manufacturers, prompting them to review new gold lending more carefully. Reuters
PBOC asks banks about need for MLF loans, lowers rates The People’s Bank of China has asked selected banks about their demand for extra liquidity through its medium-term lending facility (MLF), sources with direct knowledge of the matter said yesterday. It also lowered offered rates for the loans to 2.85 percent for six-month loans and 3 percent for one-year loans, the sources said. The rates were previously 3 percent for sixmonth loans and 3.25 percent for one-year loans. The central bank could not be reached for an immediate comment. The MLF is a supplementary liquidity management tool that the central bank occasionally uses to boost liquidity in the banking system.
Beijing approves urban railway projects China has approved construction plans for two urban railway projects with a total investment value of 55.0 billion yuan (US$8.44 billion), the country’s top economic planner said in statements on its website yesterday. The projects include a 16.1 billion yuan urban railway in Wuhu, a city in the south-eastern Anhui province. Another project, worth 38.9 billion yuan, is an urban railway in Xi’an, a city in the central Shaanxi province. Beijing has approved billions of dollars in infrastructure projects in recent months to stem a sharp economic slowdown.
Downward pressure not completely eased Downward pressure on China’s economy has not eased completely, the vice head of China’s cabinet think-tank said yesterday. Wang Yiming, vice minister of Development Research Centre of the State Council also said the yuan may be stable in the medium term if China’s economic fundamentals hold steady and may appreciate over time if reforms progress well and market perceptions change. Wang also played down the risk of large-scale capital flight.
COSCO says merger key to riding out downturn The shipping industry is experiencing its worst downturn since the 2008 financial crisis, making mergers key to riding out this tough period, the chairman of China Cosco Shipping Corporation (COSCOCS) said yesterday. Xu Lirong was speaking to reporters on the side-lines of an event to launch COSCOCS, which was formed by a government-driven merger of former domestic rivals China Ocean Shipping (Group) Company and China Shipping Group that has created one of the world’s largest ship-owners. Maritime consultancy Drewry forecasts that the global container shipping industry will make a combined loss of US$5 billion this.
Rewarding academic innovation to drive growth China will give greater financial rewards to innovative academics and small research bodies in a drive to convert interesting scientific ideas into commercial realities and rev up its high-tech industries as wider economic growth stalls. China’s State Council said research bodies and university units who transferred their work to outside firms to develop and market should receive no less than half of the net income earned from the product as a reward. China is trying to boost its high-tech industries, from medicines to computer chips, to offset a slowdown in manufacturing and exports.
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February 19, 2016
Greater China
Silence is the wisest word for central bank
market," he told Caixin. "At the same time, it's not easy to do a good job in communication."
Mixed messages
On key policy decisions, the PBOC does not publish full meeting minutes like the Fed or Bank of Japan to help manage market expectations Kevin Yao and Ryan Woo
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hina's central bank has come under fire since last year's surprise currency devaluation for not explaining its policies to the markets, but its reticence is less a product of poor PR than its limited powers and a speculative onslaught. Unlike the U.S. Federal Reserve or European Central Bank, the People's Bank of China enjoys only limited operational independence, leaving its governor Zhou Xiaochuan to implement policies ultimately decided by the cabinet in Beijing, without the authority to lead debate, risk dissent or shed light on decision-making. In such circumstances, silence is often the safest policy, though Zhou broke that silence in an interview at the weekend and expressed a willingness to improve communication.
KEY POINTS PBOC criticised for failing to communicate Governor acknowledged difficulties in weekend interview PBOC hamstrung by limited operational independence PBOC says speculative attack complicates communication
The PBOC has not been forthcoming, prompting a ticking off last month from International Monetary Fund chief Christine Lagarde (pictured with Governor Zhou) for a "communication issue, which markets do not like"
Zhou has been especially sparing with words in the heat of battle with currency speculators as China's economy plumbs its slowest growth in 25 years, it eats through its reserves at a record pace and capital flows offshore. "For speculators, the relationship is like opponents in a game," Zhou told financial magazine Caixin. "How is it possible for the central bank to tell them all its operational strategies? It's like playing a chess game, you cannot tell the opponent all your tricks." After the PBOC engineered a near 2 percent depreciation in August, it said - and has repeated - that there is no basis for the yuan to keep falling, and that China would keep it stable versus a basket of currencies while allowing greater volatility against the dollar. But it arranged another smaller drop in early January, and the
currency is down about 5 percent over six months. Offshore, the yuan has at times been valued as much as 2 percent lower as speculators made a more pessimistic judgement. In December, the PBOC launched an index on the yuan's exchange rate weighted against a basket of traderelated currencies, and the market has been keen to understand how that regime is managed. The PBOC has not been forthcoming, prompting a ticking off last month from International Monetary Fund chief Christine Lagarde for a "communication issue, which markets do not like". Zhou acknowledged the difficulties when he broke the silence in his weekend interview. "The central bank has a clear and strong desire to improve its communication with the public and
On key policy decisions, the PBOC does not publish full meeting minutes like the Fed or Bank of Japan to help manage market expectations, and it has yet to develop a market-based benchmark interest rate that might also give guidance. "In terms of transparency, there are two areas - one is transparent operations and rules, another is forward-looking guidance. The PBOC cannot meet such requirements," said an economist at a top government think-tank, though he added that no central bank can be absolutely transparent, nor needed to be. The PBOC declined to comment. While global markets saw a big sell-off last week, China's markets were closed for the Lunar New Year celebrations, so Zhou's Caixin interview was full of pre-emptive reassurance about maintaining the reserves and the stability of the yuan, which contributed to the relative calm when markets re-opened on Monday. "Communication between the monetary authority and the market is very important. Governor Zhou gave a long interview recently; I think it's a very good move," said Long Guoqiang, vice head of the Development Research Centre, the cabinet's think-tank. Market analysts nevertheless are not expecting the PBOC to embrace Western-style policy transparency, and certainly not to reveal how much it could allow the yuan to fall or the "safe" floor for the country's foreign exchange reserves. That would indeed make it a hostage to speculators. "The central bank hopes to prevent speculative forces from influencing ordinary investors, but this is very difficult," said the thinktank economist. Under such attack, there is no single right message. "For different market players, the central bank's communication strategy is different," Zhou told Caixin. Reuters
Police raid Madrid office of ICBC Over 100 police were involved in the operation Europol said in a statement
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panish police raided the Madrid offices of China's biggest bank, Industrial and Commercial Bank of China (ICBC), on Wednesday as part of an investigation into alleged money laundering, the Interior Ministry said. The investigation by police, the Spanish tax agency and Europol involves funds handled by a criminal group acting in Spain which the Ministry says passed through the bank and were transferred to China. Over 100 police were involved in the operation, which saw the arrest of five ICBC directors, Europol said in a statement. A Beijing-based spokesman for ICBC said the bank was paying close attention to the investigation. "Our Madrid branch is actively cooperating," he said.
Two Spanish Civil Guard officers stand guard outside a branch of Industrial and Commercial Bank of China in Madrid as the security forces search the offices
"Strictly implementing anti-money laundering regulations, and strictly operating within the law and
regulations have always been our fundamental operation and management principles," the spokesman added.
The Chinese embassy in Spain said it currently had no reason to believe the bank had been breaking the law.
"The Chinese government has always demanded Chinese firms overseas strictly adhere to Chinese law and the law of the country they are in to carry out business legally," the embassy said in a statement on its website. "According to what we understand about events, all Chinese enterprises in Spain are doing so." The embassy added that it had not received official notification about the case from Spanish authorities. Spanish police, investigating tax fraud on certain goods imported from China in an operation, known as "Operation Snake", in May last year, dismantled a group that was found to have laundered at least 40 million euros (US$45 million) through ICBC, the ministry said. Reuters
Business Daily | 11
February 19, 2016
Asia
Japan’s exports fall most since 2009 as global slowdown bites Nippon exports to China fell 17.5 percent from a year earlier Tetsushi Kajimoto
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apan’s annual exports in January fell the most since the global financial crisis as demand weakened in China and other major markets, leaving policy makers battling to revive a fragile economy after a fourth-quarter contraction. Exports fell 12.9 percent year-on-year in January in their fourth straight month of declines, Ministry of Finance data showed yesterday, led by a slump in shipments of steel and oil products as Japan and much of the rest of Asia were put to the sword by feeble external demand.
It was the biggest drop since October 2009 when the global financial crisis knocked demand across the world. The volume of shipments fell 9.1 percent year-on-year in January, down for seven months in a row and the worst slide in three years. The latest data adds to growing concerns that Japanese authorities are increasingly left with few options to revive a stumbling economy even as the Bank of Japan remains proactive in policymaking, shocking markets last month by adopting negative interest
rates to spark momentum. HSBC co-head of Asian economic research Frederic Neumann said global trade suffered a significant deterioration at the start of 2016, blaming China for much of the downturn. “Slowing growth in the mainland (China) economy is clearly taking its toll. Unfortunately, we see few signs that growth is bottoming out,” he said in a note to clients. Indeed, Japan is not alone in suffering a rough start to the year for its exporters, with the chill in China
rippling across trade-reliant regional economies such as South Korea, Taiwan and Singapore. A ministry official said January’s annual sales decline was caused in part by exporters holding off on shipments from late in January ahead of the Chinese New Year holidays, which took place earlier than last year. “The decline also came as a reaction to a big jump seen a year before,” Takeshi Minami, chief economist at Norinchukin Research Institute, said.
Philippines sells bonds at record low rate The last U.S. dollar issue was in January last year when it sold US$2 billion of 25-year bonds at 3.95 percent
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he Philippines’ offer of 25-year U.S. dollar bonds attracted huge demand, as the government sold US$2 billion worth of the paper at a record low rate in a sign of investor’s confidence in the Southeast Asian economy. The 2040 bonds were sold at a coupon of 3.7 percent, the lowest ever issued by the Philippines to date on a global bond, and below it’s initial guidance of 4.0 percent, the Department of Finance said in a statement yesterday. The Philippines, which used to be one of Asia’s most active sovereign bond issuers, raised US$500 million from the 25-year bond sale, with total bids for the new money component reaching US$8 billion. It also switched US$1.5 billion
worth of new 25-yr global bonds with shorter-dated and more expensive debt. Orders for the switch tender totalled US$5.6 billion. “By leveraging on these opportunities to reduce highcoupon debt and to extend the maturity of our debt portfolio, the country achieves valuable savings that we can use to target broadbased and inclusive growth and development,” Finance Secretary Cesar Purisima said. The Philippines will hold a presidential election on May 9. It is being closely watched by investors, who fear the political succession could derail the above 6 percent average economic growth and efforts to crack down on graft made during President Benigno Aquino’s rule.
The Philippines last U.S. dollar issue was in January last year when it sold US$2 billion of 25-year bonds at 3.95 percent.
“Still, exports have been crawling at the bottom, so we cannot expect them to drive growth in the current quarter.” The slowdown in China, Japan’s biggest trading partner, remains a big drag on the Japanese economy and globally, hurting exporters of commodities and a producers of wide swathe of consumer products. In January, Japanese exports to China fell 17.5 percent from a year earlier, down for a sixth straight month due to declines in shipments of liquidcrystal device and organic compounds. The world’s third-largest economy contracted an annualised 1.4 percent in October-December. While analysts expect a return to moderate growth in the current quarter, sluggish exports and weak consumer spending underscore the difficulty policy makers have in putting the economy back on track. Reuters
It has relied more on onshore funding in recent years. It has a history of issuing sovereign bonds early in a year in the hopes of getting more favourable terms. Citigroup, Deutsche Bank, HSBC and Standard Chartered were appointed deal managers for the fund raising and switch tender offer. They were also joint book runners with Credit Suisse, Morgan Stanley, JP Morgan and UBS. Reuters
Investors fear the political succession could derail the above 6 percent average economic growth and efforts to crack down on graft made during President Benigno Aquino's rule
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February 19, 2016
Asia
Unexpected job decline dents optimism in Australian labour market The modest employment declines follow two months of solid gains, when more than 100,000 jobs were created in November and October alone Wayne Cole and Ian Chua
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ustralia’s bumper run of job creation has hit a dry patch, raising questions over the central bank’s confidence in the labour market and whether it might be forced to cut interest rates again. Yesterday’s data from the Australian Bureau of Statistics showed a net 7,900 jobs were lost in January, when analysts had looked for a rise of around 15,000. This came on top of a fall of nearly 1,000 jobs in December. All the decline last month came in full-time employment, which fell 40,600. The jobless rate ticked up to 6 percent, when analysts had expected a steady outcome of 5.8 percent. “The further fall in employment in January is probably just a continuation of the data moving back to reality after the unbelievable strength late last year,” said Paul Dales, Chief Australia & NZ economist at Capital Economics. “Even so, a renewed and sustained labour market weakening would unnerve the Reserve Bank of Australia (RBA).” Yet the modest employment declines came after two months of
solid gains, where more than 100,000 jobs were created in November and October alone. The RBA has cited the past strength of employment as a major reason for not cutting interest rates even as the global outlook was clouded by a slowdown in China and turmoil in financial markets. Indeed, even with the latest dip Australia still created a net 298,000 new jobs in the year to January. Annual employment growth held at
a strong 2.6 percent, beating even that of the United States. “The Reserve Bank won’t be disheartened by the latest job market figures,” said Craig James, chief economist at CommSec. “The RBA looks more closely at longer-run trends. And certainly the Reserve Bank has been surprised at the strength of recent job market indicators.” Policy makers have confessed to being surprised by the strength given
S.Korea ready to intervene if forex moves become disorderly Finance minister singled out the United States and China as the biggest risks to the domestic economy
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outh Korea’s finance minister said yesterday recent movements in the dollar-won exchange rate warrant close observation by the government and officials are ready to step in if price moves become too exaggerated. Finance Minister Yoo Il-ho was speaking to reporters on the side-lines of an economic event in Seoul as the Korean won closed onshore trade at 1,227.4 against the dollar, hovering near 5-1/2 year lows versus the greenback. “The won seems to be moving in one direction
- down. The situation is difficult,” Yoo said. “Our stance is that the exchange rate will basically be left to markets, but if movements become extreme we are ready to step in.” The minister also played down concerns that recent outflows in local stocks and bonds were developing into a permanent trend. “It is difficult to say the outflows we have been seeing in stocks and bonds have become a firm trend. Recent movements in global financial markets have been very skewed,” said Yoo.
the economy was growing around a sub-par pace of 2.5 percent. Many felt the answer lay in the brisk growth of the service sector, which is more labour-intensive than mining or manufacturing. Hiring in services surged by more than 350,000 in the year to November, with healthcare alone accounting for 151,000. “Since the financial crisis, health has generated nearly one-third of jobs growth and around 40 percent of the increase in total hours worked in Australia,” said Justin Fabo, a senior economist at ANZ. He offered a laundry list of reasons for why that was likely to continue including an ageing population; more frequent use of health services by all age groups; rising incidence of chronic disease; increased spending on disability care and strong demand for child care. For its part, the RBA has stated it will be watching closely to see if employment sustained its outperformance and analysts suspect any turn to weakness could greatly add to the chance of a further cut in rates. Reuters
Foreigners have been unloading South Korean stocks and bonds since late last year, extending a selloff sparked by a rate hike in the United States in December. However, a government official told Reuters there have been continuing bond inflows from foreign central banks. In his speech at a seminar earlier in the day, the minister said South Korea is in a better footing than during the 19971998 Asian financial crisis and the more recent global financial tumult in 2008-2009. He singled out the United States and China as the biggest risks to the domestic economy, but didn’t elaborate on where the hazards lay. Yoo said external uncertainties have been rising in recent months, adding that private consumption has eased slightly and the real estate market appeared to be in a correction after showing robust activity last year. Reuters
editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Michael Armstrong, Stephanie Lai, Óscar Guijarro, Kam Leong, Joanne Kuai, Bami Lio, Annie Lao GROUP SENIOR ANALYST José I. Duarte Designer Francisco Cordeiro WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia Assistant to the publisher Lu Yang | lu.yang@projectasiacorp.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.
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February 19, 2016
Asia Malaysian growth slows less than expected Growth is expected to be 4 percent to 4.5 percent this year
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alaysia’s growth slowed less than expected after overseas shipments and factory output held up, providing some measure of support for an economy facing faltering investment and higher costs. Gross domestic product rose 4.5 percent in the three months through December from a year earlier, after climbing 4.7 percent in the previous quarter, the government said in a statement yesterday. That compares with a 4.1 percent median estimate in a Bloomberg News survey. The
economy grew 5 percent in 2015. The ringgit fell more than any other Asian currency against the dollar last year, making Malaysia’s goods more attractive to overseas buyers. That is countered by a slump in crude that has curbed government revenues and prompted Prime Minister Najib Razak to trim the growth forecast for 2016, while rising costs crimp business investment. “We are far from upbeat about the prospects for Malaysia this year,” said Krystal Tan of Capital Economics
Ltd. “The effects of low commodity prices will continue to feed through into the real economy, curtailing investment in the energy sector, keeping commodity export income weak and hurting fiscal revenue.”
Slower expansion
Growth is now expected by the government to be 4 percent to 4.5 percent this year, compared with an earlier projection of as much as 5 percent. Inflation is projected to rise 2.5 percent to 3.5 percent this year, higher than an October forecast of 2 percent to 3 percent. A key consumer confidence gauge fell to a record low last quarter, and households are turning more negative in their financial outlook for the first half of 2016. The government agreed to delay a plan to double foreign worker levies after companies protested the move, saying it would raise the cost of doing business amid an already difficult operating environment.
‘Sturdy growth’
Exports rose 3.7 percent in the fourth quarter from a year earlier, after gaining 3.2 percent in the previous three months, the statistics department said. Manufacturing expansion quickened to 5 percent, and electrical and electronic products had “sturdy growth,” it said. Private consumption expenditure climbed 4.9 percent last quarter from a year ago, accelerating from 4.1 percent in the previous period. Private investment growth slowed to 5 percent from 5.5 percent in the third quarter. “Private investment is projected to moderate to below its long term trend but will nevertheless be supported by the capital expenditure in the manufacturing and services sectors, as well as the implementation of infrastructure projects,” the central bank said. Bloomberg News
Kuroda defends negative rates He also said the BOJ’s massive asset-buying programme was not aimed at deliberately boosting stock prices Tetsushi Kajimoto and Stanley White
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apan’s central bank governor yesterday said the bank’s adoption of negative interest rates was not directly aimed at weakening the yen, dismissing wider criticism that the policy was a failure amid a surge in the local currency. The Bank of Japan (BOJ) stunned markets by deploying negative interest rates last month to prevent financial market volatility from hurting business confidence and delaying an exit from deflation. The move, however, has failed to override a wave of global riskaversion that has sent global stock markets into a slump and bolstered appetite for the safe-haven yen. BOJ Governor Haruhiko Kuroda (pictured) said policy objectives around price and currency stability were not the same thing in large economies like Japan. He also blamed persistent market volatility on investors’ concerns over China’s slowdown, slumping oil prices and banking-sector woes in Europe. “Global market jitters have not yet subsided,” Kuroda told an upper house financial committee meeting yesterday.
Australia’s central bank plays market turbulence Recent turmoil in global financial markets is likely overdone and has only limited implications for financial stability in Australia, a top central banker said yesterday. Reserve Bank of Australia (RBA) Assistant Governor Malcolm Edey said markets had been through several such episodes of turbulence in recent years but always recovered. He noted there had been little in the way of fresh economic news to justify a major reassessment of the global outlook and recent weakness in oil prices would normally be considered a positive for growth.
Diesel demand in SK puts brakes on exports Rising demand for diesel in South Korea is slowing the pace of exports from one of Asia’s top shippers of the fuel, offering a rare bright spot in a region where surplus supply has driven down refining margins. Growing sales of diesel cars and increased use by the freight sector have stoked appetite for the fuel in the country, while subsidies to encourage diesel taxis may provide a further boost this year. That local demand crimped diesel export growth to 1 percent in 2015 from 7 percent in 2014, and could turn it negative this year.
India suspects Monsanto JV abused dominant position India’s antitrust regulator has ordered an investigation into a Monsanto joint venture, saying it suspected the company had abused its dominant position as a supplier of genetically modified (GM) cotton seeds. The case arose as Indian authorities consider whether to allow commercial growing of the country’s first genetically modified food crop. Local farmers and some of their associations, including one affiliated to Prime Minister Narendra Modi’s ruling party, have complained that Monsanto overprices its products using its position as supplier of GM seeds used in more than 90 percent of the country’s cotton cultivation.
Toyota recalling 2.9 mln vehicles He said in smaller economies like Denmark and Switzerland - where the trade to GDP ratio is comparatively higher - negative rates work more directly in weakening their currencies.
KEY POINTS Price, FX stability not equal in big economies-Kuroda Adds global market jitters have not yet subsided BOJ already holds 54 pct of Japan’s ETF market
This means achieving price stability and currency stability is roughly the same thing, he said. However, central banks in larger economies like Japan, the U.S. and the euro zone do not target exchange rates in guiding monetary policy because the direct impact of policy on currency moves is weaker, he added. “Central banks of big economies don’t target currency rates in guiding policy,” Kuroda said. He also said the BOJ’s massive assetbuying programme was not aimed at deliberately boosting stock prices. A senior BOJ official, however, revealed at the same parliament session that the BOJ’s exchangetraded fund (ETF) holding as of September last year stood at 7.8 trillion yen (US$68.5 billion), roughly 54 percent of Japan’s total ETF market. Kuroda said he expects the positive effects of the BOJ’s negative interest rate policy to gradually spread to the economy and prices. “The policy effect (of negative interest rates) is appearing” in the form of declines in bond yields, he said. Reuters
Toyota Motor Corp said yesterday it is conducting a global recall of 2.87 million vehicles due to the possibility that their seatbelts could be damaged by a metal seat frame part in the event of a crash. In an email, the world’s biggest-selling automaker said that the global recall involved its RAV4 SUV model produced between July 2005 and August 2014 and sold worldwide, and its Vanguard SUV model produced between October 2005 and January 2016 and sold in Japan. The recall includes 1.3 million vehicles in North America announced earlier in the day by Toyota’s U.S. unit.
KKR bets on Indian life insurance KKR & Co LP bought a 10 percent stake in India’s Max Financial Services for about US$140 million, the latest foreign investor to bet on the country’s booming life insurance market. The investment was made from KKR’s Asian Fund II, the company said in a statement that did not disclose the value of the deal. The stake, purchased from a group of investors including Max Group founder Analjit Singh, would be valued at nearly US$140 million, given the company’s market capitalisation of US$1.35 billion.
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February 19, 2016
International Bullard suggests Fed’s direction One of the U.S. Federal Reserve’s most prominent advocates of higher interest rates declared it “unwise” to move any further in light of weak inflation and global volatility, suggesting the Fed is stepping further away from plans to continue to hike rates. St. Louis Fed President James Bullard argued steadily last year for the U.S. central bank to tighten policy and sounded alarms over the risk that continued low rates would create dangerous asset bubbles. He said the steady drop in U.S. inflation expectations is now his chief worry.
Swiss watch exports drop Exports slid for the seventh consecutive month as plummeting stocks and slowing economies damped demand for luxury timepieces in their main markets. The two biggest destinations for Swiss watch exports -- Hong Kong and the U.S. -- were almost exclusively responsible for the global downturn, the Federation of the Swiss Watch Industry said in a statement yesterday. Shipments dropped 8 percent to 1.52 billion francs (US$1.53 billion) in January, according to data from Switzerland’s customs office. That compares with a 3.7 percent gain in the same month in 2015.
Obama to make historic trip to Cuba President Barack Obama will visit Cuba in the coming weeks, a senior administration official said on Wednesday, making a historic trip in the final year of his presidency that will mark a turning point in U.S. relations with a long-time Cold War foe. The White House plans to announce the visit yesterday. The Cuba stop will be part of a broader trip to Latin America. The visit to Havana by Obama would cap what administration officials see as one of his legacy foreign policy achievements: normalizing relations with Cuba and taking steps toward expanded commercial relations.
UAE says oil price will force it to freeze output Oil prices are not suitable and will force producers to freeze their output, the United Arab Emirates’ energy minister Suhail bin Mohammed al-Mazrouei said yesterday, adding investments in high-cost production would also be restrained. “Current prices are not suitable ... and will force producers to hold production levels and limit investments in the higher cost oil (production),” state news agency WAM quoted him as saying.
Nestle sales growth misses expectations Food group Nestle missed forecasts with a 4.2 percent rise in annual underlying sales and predicted a similar outcome this year, saying it was getting harder to raise prices in a tough economic backdrop. Like rivals, Nestle has had to deal with slower growth and more demanding consumers in emerging markets, notably China, while sales in India have been dented by a recall of its popular Maggi noodles. The group behind Nescafe instant coffee and Kitkat chocolate bars has been slow to adjust to changing consumer demands in China.
Venezuela raises fuel price, devalues bolivar amid crisis The reforms risk fuelling triple-digit inflation at a time when millions are struggling to make ends meet
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enezuelan President Nicolas Maduro devalued the currency and raised heavily subsidized fuel prices in an effort to stem a widening economic crisis, though critics of the socialist leader quickly dismissed the moves as insufficient. The measures are meant to help shore up the OPEC nation’s finances as plummeting oil prices and a collapsing state-led economic model have left the country with a severe recession, triple-digit inflation and chronic product shortages. The reforms risk fuelling tripledigit inflation at a time when millions are struggling to make ends meet, and comes two months after the ruling Socialist Party suffered a blistering defeat in parliamentary elections due to anger over the crisis. The package will likely be seen by Wall St. investors, who are increasingly concerned about a potential default, as mildly positive but still vastly insufficient to help Venezuela make some US$10 billion in debt payments amid a major cash crunch. Maduro devalued the strongest official exchange rate by 37 percent to 10 bolivars per dollar from 6.3, and streamlined the previous three-tiered system into a dual exchange rate mechanism. Greenbacks on the black market currently fetch 1,046 bolivars, according to website DolarToday. The weaker of the two rates will be a free float based on an existing system that currently sells dollars at around 200 bolivars, Maduro said, while the stronger rate will over time
This is a necessary measure, a necessary action to balance things, I take responsibility for it Nicolas Maduro, President of Venezuela Venezuelan President Nicolas Maduro
be shifted based on criteria he did not specify.
Implementation crucial
Critics immediately noted that the government has repeatedly announced “free-floating” systems that withered away precisely because authorities never allowed them to be determined by demand. A truly free float would raise prices of staple goods such as rice and corn flour that are currently subject to price controls. That would cut into the subsidized food programs created during the oil boom years by late socialist leader Hugo Chavez. Maduro also runs risks if he does not significantly overhaul the system. Currency and price controls have spurred snarling food lines reminiscent of Soviet bloc countries, spawned a lucrative smuggling trade and left furious shoppers scrapping for prized items such as chicken or laundry soap.
S&P cuts Saudi Arabia, Brazil, Oman, Kazakhstan, Bahrain The moves were a near repeat of similar co-ordinated cuts made this time last year Marc Jones
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ating agency Standard & Poor’s downgraded Saudi Arabia, Brazil, Kazakhstan, Bahrain and Oman’s credit ratings, in its second mass cut of large oil producers in almost exactly a year. S&P cited the pressures being created by the drop in oil prices for the moves which included doublenotch downgrades of Saudi Arabia to A- stable from A+ negative and stripping Bahrain of its investment grade status. “The decline in oil prices will have a marked and lasting impact on Saudi Arabia’s fiscal and economic
indicators given its high dependence on oil,” the ratings agency said in a statement. The plunge in oil prices since mid2014 had already brought a blizzard of downgrades for oil producers, including Saudi Arabia, Russia, Brazil and Venezuela, where the oil rout has raised fears of a sovereign default. The moves were a near repeat of similar co-ordinated cuts made this time last year. The firm’s head of sovereign ratings in EMEA, Moritz Kraemer, told Reuters last month that another such move was being considered.
The first fuel price hike in nearly 20 years will boost the cost of gasoline by at least 1,329 percent. But fuel is still so heavily subsidized that filling a small car will still not cost more than half the price of a soft drink, or around 20 cents based on the black market exchange rate. However, the money it brings in over a year could be close to 5 percent of this year’s budget or 0.5 percent of GDP, according to Reuters’ calculations. A fuel price hike in 1989 contributed to three days of looting and subsequent military repression known as the “Caracazo” in which at least several hundred people were killed. The memory of that has made the gasoline subsidy a third rail that politicians are wary of touching. Reuters
One country that was spared this time was Russia. S&P said Moscow’s fiscal buffers gave it more leeway, though it could still cut its BB+ rating again if those were eroded faster than expected or if international sanctions were “significantly” tightened again. Brazil was kept on a negative outlook, meaning a roughly 1-in-3 chance of another cut as its rating dropped one notch to BB from BB+. However, it was Brazil’s political difficulties as much as the economic pressures from falling oil prices that were cited for the move. For the Middle East there is far more intense pressure from low oil because many currencies, including the Saudi riyal, are pegged to the dollar, limiting scope for currency weakness that could stimulate the economy. Authorities are also having to dig into reserves to keep spending at levels that support their highly dependent economies. Like Saudi Arabia, Bahrain saw its rating cut two notches. Significantly, though, it also lost investment grade as it went to BB from BBB-. Oman was lowered two steps as well to BBB- stable from BBB+ negative while Kazakhstan was cut one notch to BBB- from BBB but left on a negative outlook due to concerns about inflation, exchange rate pressures and banking sector stability. Reuters
Business Daily | 15
February 19, 2016
Opinion Business
wires
Zika and Reproductive Rights
Leading reports from Asia’s best business newspapers
Françoise Girard
President of the International Women’s Health Coalition
THE JAKARTA POST The (Indonesian) Energy and Mineral Resources Ministry is planning to develop smallscale refineries to process crude oil from marginal wells into fuel products for domestic consumption. The ministry’s director for oil and gas, Agus Cahyono Adi, said the plan foresaw the construction of eight mini refineries. “The mini refineries will be located near marginal fields, so that transportation costs will be lower and the product can be sold directly to consumers in the areas. They will only be able to produce diesel fuel,” Agus said.
THA AGE A horror start to 2016 in global share markets has pushed the average superannuation account balance down roughly 3 per cent for the year already. The average growth fund lost 2.3 per cent in January and by mid-February was down as much as 4.5 per cent, according to the latest analysis released by superannuation industry research house Chant West. Growth funds are defined by Chant West as those with between 61 per cent to 80 per cent of capital invested in “growth” assets, such as shares and listed property trusts.
THE TIMES OF INDIA The Central Bureau of Investigation (CBI) on Wednesday claimed to have identified 2,200 corrupt senior government officials in 2015 and initiated enquiries against them. The agency said there was a 94% jump in crackdown against corruption in the country from 2014. CBI director Anil Sinha said the agency had identified 2,200 corrupt senior officials and begun investigations against them. The CBI registered 101 graft related FIRs in 2015 after receiving complaints about officials demanding bribe to grant favours. The corresponding figure was 52 in 2014.
THE STAR Tan Sri Dr Zeti Akhtar Aziz said she will not stay on for another term as Bank Negara Malaysia (BNM) governor. The process of finding a successor is being undertaken by the Governance Committee of the BNM Board which comprises independent directors from the private sector. “I am not at liberty to discuss the matter. An announcement on my successor will be made soon. It will eventually happen,” Zeti told reporters after launching the Investment Account Platform (IAP) on Wednesday. She said while the search for her successor was in place, there was no request for her to stay on.
Brazilian students hold card reading 'Ten minutes saves life', as they attend a conference by Brazilian Navy over the measures to fight the mosquito Aedes aegypti, that transmit the Zika virus
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osquitoes know no boundaries, and neither does fear. As public-health experts grapple with the Zika virus, panic continues to spread around the world. Yet the crisis has brought to light two important truths. The first revelation is how badly degraded public health systems have become, across Latin America and beyond. This did not happen by chance. In large part, it is the result of pressure on developing countries by concessionary lenders, such as the International Monetary Fund, to cut social sector expenses, including health spending, beginning in 1980. In Brazil and elsewhere, state authorities could have deployed well-known and cost-effective measures to control mosquitoborne diseases, but they did not. Their most affected citizens, who tend to be poor, have been forced to live with the consequences. Second, the Zika epidemic has revealed, with particular poignancy, another dire threat to public health: the denial of women’s reproductive rights. Governments are shirking their responsibility in this regard too, often in a grotesque manner. The reported spike in cases of microcephaly – a birth defect – among infants in Zika-affected areas led the governments of Brazil, Colombia, Ecuador, and El Salvador to warn their female citizens “not to become pregnant.”
This message, which places the blame and burden of the Zika epidemic on women, is as unjust as it is unreasonable. It is also toothless, as many women in the region do not have access to contraception or safe abortions. The Zika crisis has highlighted an obvious reality: Not providing women with reproductive health information and services places their lives – and those of their children – at grave risk. Latin America’s abortion laws are among the world’s most restrictive. El Salvador, for example, bans abortion in all circumstances and has incarcerated women who have gone to emergency rooms after miscarriages, charging them with seeking illegal abortions. Contraception can also be expensive or difficult to access across the region, despite high rates of teenage rape and pregnancy. The result, especially with the addition of the Zika virus, is a recipe for tragedy. Brazil, the Latin American country hit hardest by the virus so far, is emblematic of the problem: Abortion is allowed only in cases of rape, danger to the woman’s life, or in the case of fetal anencephaly (the absence of a major portion of the brain). In response to the Zika crisis, Brazil should immediately allow abortion in cases of suspected microcephaly as well. The loosening of restrictions, however, should not stop
The Zika crisis may mark a turning point in the fight for women’s health and equality
there. Over the last few years, conservatives in the Brazilian Congress have been trying to place limits on abortion in cases of rape. These efforts – which demonstrate complete disregard for the rights and dignity of women – must end. Instead, women’s right to seek an abortion should be expanded – and quickly. Governments must also ensure that services are accessible and affordable. Wealthy Brazilian women can afford to pay private health providers for safe abortions. Poor women are forced to resort to poorly trained and equipped providers who operate in unsanitary conditions, sometimes as part of criminal networks. In September 2014, two women died in Rio de Janeiro following clandestine
abortions. In the region overall, 95% of abortions are unsafe. In Latin America and the Caribbean, 62% of women aged 15-49 want to avoid a pregnancy. But nearly a quarter of these women are not using an effective method of birth control. Expense is only one barrier for poor women and girls; another is the lack of information. Men and women need comprehensive sexuality education, so they are informed about their reproductive health and family planning options and know where they can get modern contraceptives. Recent evidence suggesting that Zika might be transmitted sexually adds extra urgency to making male and female condoms and other contraceptives widely available. The movement for reproductive rights has a long history in Brazil and in other parts of Latin America. Over the last several months – even before Zika – feminists had been taking to the streets in outrage at the lack of access to safe and legal abortions. The Zika crisis may mark a turning point in the fight for women’s health and equality. It is certainly a wake-up call for governments everywhere to rebuild and strengthen public health systems, and to guarantee all women and girls access to contraceptives and safe abortions. Women and girls around the world know the alternative – and it is terrifying. Project Syndicate
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February 19, 2016
Closing Uber says it’s losing US$1 bln a year to compete on Mainland
Vice finance minister sees raising budget deficit ratio a necessity
The chief executive of Uber Technologies Inc said the company is burning through more than a billion dollars a year in China, where it is locked in a fierce battle with larger local rival Didi Kuaidi to lure consumers with cut-price deals. Uber’s China unit boosted its valuation last month to more than US$8 billion after it raised over US$1 billion in its latest funding round, although the U.S. ride-hailing app is not yet profitable in the mainland due to intense competition. “We’re profitable in the USA, but we’re losing over $1 billion a year in China,” Uber’s CEO Travis Kalanick told Canadian technology platform Betakit. Uber officials in China confirmed the comments in an email to Reuters yesterday.
Raising the budget deficit ratio and cutting taxes are necessary to combat downward economic pressure, according to China’s vice finance minister. The government must expand its spending and lower investment and operation costs for businesses to boost growth, vice finance minister Liu Kun was quoted as saying in “China Economic and Financial News” yesterday. China will gradually raise its fiscal deficit ratio, increase government debt issues and set a limit on new local government debt, according to Liu. China raised its fiscal-deficit-to-GDP ratio to 2.3 percent for 2015, compared with 2014’s target of 2.1 percent, with the number expected to rise to 3 percent or more in 2016.
Bank Indonesia lowers key rate again in bid to boost growth The central bank also lowered its overnight deposit rate by 25 basis points to 5 percent Nilufar Rizki and Gayatri Suroyo
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ndonesia’s central bank, trying to help speed up sluggish economic growth, yesterday cut its benchmark interest rate for the second time this year and lowered the banking sector’s reserve requirements in another easing move. Thirteen of 19 economists surveyed by Reuters had predicted Bank Indonesia (BI) would cut its key rate by 25 basis points to 7.00 percent, following a trim in January of the same size. BI kept rates unchanged for nearly all of 2015 as it sought to battle high inflation and support the country’s fragile rupiah. The central bank also lowered its overnight deposit rate, known as the Fasbi, by 25 basis points to 5 percent, and slashed commercial banks’ rupiah reserve requirements by a hefty 100 basis points in a move expected to boost
liquidity by 34 trillion rupiah (US$2.52 billion). “Policy rate cut makes sense when inflation impetus is mild, while the reserve requirement cut is also done with liquidity in mind,” said
OECD urges world leaders to tackle flagging growth
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economist Wellian Wiranto at OCBC in Singapore. “Overall, given the space provided by the dovish Fed, it’s a good move by BI that should go down well in market.”
Indonesia is not the only Asian economy that easing policy to try to boost growth. Japan has introduced negative interest rates, Taiwan and Bangladesh have cut rates
and others are expected to this year amid global growth worries.
Stability to be maintained
Southeast Asia’s largest economy grew 4.8 percent last year, the fifth year of slowing growth and the weakest in six years. But growth accelerated in the final quarter in what many see as a sign of upward momentum. Perry Warjiyo, a BI deputy governor, said combining the rate cuts and the lower reserve requirement would “make the effect stronger and faster” as was part of a policy of supporting growth while maintaining stability. The rupiah weakened more than 10 percent against the dollar in 2015, making it emerging Asia’s second worst-performing currency. This year, it has risen nearly 2.5 percent against the dollar while Indonesia’s stock market has outperformed regional peers. In a Reuters poll published yesterday, currency traders and analysts turned bullish on the rupiah for the first time since November 2014. Economists note the annual inflation rate has been near the midpoint of BI’s 3-5 percent target range, giving it room to cut. In January, inflation was 4.14 percent, significantly lower than the average during 2015 but higher than December’s 3.35 percent. Reuters
PBOC’s forex sales show outflows persist
Volvo cars 2015 profit triples as SUV exceeds targets
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he OECD poured cold water on any lingering hopes of a pick-up in global economic growth this year yesterday, slashing its forecasts for the United States, Europe and Brazil and urging world leaders to act collectively to strengthen demand. The Paris-based Organisation for Economic Co-operation and Development, a think tank funded by wealthy countries, cut its 2016 global growth forecast to 3.0 percent in its interim economic outlook, from the 3.3 percent it forecast in November. That would mean global growth this year would be no higher than in 2015, itself the slowest pace in the past five years. Trade, investment and wage growth remained too weak, the OECD said, urging world leaders to deploy all policy levers to stimulate growth urgently. The United States and Germany suffered the biggest downgrades among major developed economies, with the OECD slashing its 2016 forecast by half a percentage point for both countries to 2.0 percent and 1.3 percent respectively. The OECD left its forecasts for Chinese growth unchanged for the next two years.
hina’s central bank sold a net 644.5 billion yuan (US$98.9 billion) worth of foreign exchange in January, easing back from a record amount the previous month, but signalling persistent capital outflows as economic growth slows. The People’s Bank of China (PBOC) has been supporting the yuan, burning through its massive foreign exchange reserves at a record pace to counter a tide of capital outflows. January’s net forex sales, from Reuters calculations based on central bank data published yesterday, compare with a record high of 708.2 billion yuan in December. Outflows have increased since China’s surprise devaluation of the yuan last August, and have been fanned by concerns about its economic slowdown and expectations of U.S. interest rate rises. China’s foreign exchange reserves fell US$99.5 billion in January to US$3.23 trillion, the lowest level since May 2012. That followed a record US$512.66 billion drop in 2015. Earlier, central bank data showed combined foreign exchange sales by the PBOC and commercial banks amounted to 629 billion yuan in December on a net basis.
Reuters
Reuters
olvo Car Group’s earnings tripled last year after higher-than-expected sales of the revamped XC90 sport utility vehicle helped push deliveries above 500,000 vehicles for the first time. Operating profit rose to 6.62 billion kronor (US$778 million) from 2.13 billion kronor in 2014, the Gothenburg, Sweden-based company said yesterday in a statement. Revenue rose 19 percent to 164 billion kronor after deliveries reached an all-time high for a second consecutive year. The carmaker said it expects a third year of record vehicle sales for 2016. The boost comes as Volvo modernizes its production lines as part of an US$11 billion spending plan. Last year’s XC90 was the first car wholly developed and produced during the ownership of billionaire Li Shu Fu’s Zhejiang Geely Holding Group Co. Volvo is rolling outa follow-up this year with the S90 luxury sedan, with the aim of winning customers away from BMW, Mercedes-Benz and Audi. The goal is to push sales to 800,000 cars, which would still pale in comparison to the BMW brand’s sales of 1.9 million autos last year. Bloomberg News