MOP 6.00 Closing editor: Joanne Kuai
Chinese authorities to implement selective reserve ratio cuts Page 9
Year IV
Number 985 Monday February 22, 2016
Publisher: Paulo A. Azevedo
International business drops in local banking sector in Q4 Page 4
Ambrose So testifies in Hotel Lisboa prostitution ring trial Page 8
Telecommunication Operators Blast ‘Unequal Terms’
High CTM tariffs on public assets. Lack of experience of the regulating body. Limited international perspective of the authorities. The telecommunications sector says it is competing on ‘unequal terms’ with the former monopoly. Preventing mobile newcomers from making profits more easily, says an industry source. ‘Naturally, CTM is, as ever, in full compliance with its obligations under the relevant licences, including the Midterm Review of the Concession Agreement’, the company asserted to Business Daily Page 3
Fiscal reserves nosedive The MSAR’s fiscal surplus. Down 67.6 pct y-o-y for 2015. To some MOP29.3 bln. But comfortably exceeds the gov’t target of MOP18.8 bln. Gaming taxes fell in tandem with the city’s gaming revenues by 34.5 pct y-o-y. Total revenues thus decreased 29.7 pct from 2014. Whilst total expenditure increased 22.4 pct
Page 4
Shallow pockets Total visitor expenditure fell 17.5 pct y-o-y for 2015. To MOP51.1 bln. The first annual decline in five years. The drop is credited to Chinese visitors having spent much less. MOP1,965 per head on average, down 16.5 pct y-o-y
www.macaubusinessdaily.com
Page 5
New Customs chief
Fall guy
The head of China’s securities regulator has been removed from his post. Following last year’s US$5 tln stock market bust. Triggering an unprecedented gov’t rescue and a renewed crisis. Plunging Chinese equities reverberated around the world last month
Pages 10 & 11
Brought to you by
Recruited from outside the service. Alex Vong Iao Lek’s appointment as Customs chief was announced by the State Council on Friday. Formally director of the Sports Bureau and President of the Civic and Municipal Affairs Bureau, his lack of security experience has raised eyebrows. Both the CE and Secretary for Security endorse his ability
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Page 2
Source: Bloomberg
The junket model has been a resounding success. But so far for baccarat. Now Grand Prize VIP Club operator Zhang Zheng sees great potential for it in drumming up business for slots. Gaming promoters are the catalyst regarding choice of game, he told Business Daily. And believes VIP slot parlours can be a great success. With plenty of potential hardly tapped. He supports the gov’t initiatives regarding regulation and transparency. But says there should be a trade-off, with incentives offered
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2 | Business Daily
February 22, 2016
Macau
Alex Vong Iao Lek appointed new Customs director The previous IACM president has had no experience in security before. But the Chief Executive and the Secretary for Security believe that he has the ability and skills to lead the department – following the death of its former leader last October Kam Leong
kamleong@macaubusinessdaily.com
A
lex Vong Iao Lek has been appointed the new Director-General of the Macao Customs Service from his position as President of the Civic and Municipal Affairs Bureau (IACM). Mr. Vong’s appointment was announced by the Chinese State Council last Friday following the Chief Executive Fernando Chui Sai On submitting his nomination to Beijing at the end of January. Mr. Chui said in a press briefing last Saturday that Mr. Vong’s nomination was made after careful consideration of the official’s capabilities, such as planning, management and leadership skills. The previous Customs Director-General, Lai Man Wa, was declared to have committed suicide last October. Following her death, the Secretary for Security, Wong Sio Chak, temporarily took up the tasks to head the Customs.
As the new head of the security body, Mr. Vong will manage the city’s newly demarcated 85 square kilometres of maritime waters in addition to helping the Special Administrative Region become a commercial and trade co-operation service platform between China and the Portuguese-speaking countries.
From sports and public administration
In fact, the new Customs leader’s profile indicates that he has never been in the field of security since he joined the government in 1994. Holding a PhD degree in education from Beijing Sport University, Mr. Vong primarily served the city’s Sports Bureau and IACM before. Prior to his previous position as IACM president since 2014, Mr. Vong was the acting head of the Bureau in 2013 and vice president between 2002 and 2003. Meanwhile, from 2003 to 2008, he served the Sports Bureau as acting
director and was promoted to the director’s post in 2008. The Secretary for Security claimed on Saturday that he believes that Mr. Vong’s leadership and management skills can successfully lead the Customs despite his lack of experience in the Customs field. Asked by reporters why the government had not promoted someone within the Customs for the position, the Secretary said that such a decision was well accepted by all staff of the Customs, indicating all public bodies are part of the same team, and all have the same duty to carry out the Government’s policies. Following Mr. Vong’s new appointment, the director of the Sports Bureau, José Maria da Fonseca Tavares, is to take up the position of president of IACM. Meanwhile, the vice-head of the Sports Bureau, Pun Weng Kun, has been promoted to the position of new director of the sports department.
Hotel found selling blue cards to Chinese gamblers
J
udiciary Police (PJ) discovered that a local hotel had allegedly sold non-resident work permits, also known as blue cards, to frequent gamblers from Mainland China while investigating an illegal immigration case. PJ said in a press briefing last Friday that the hotel in question is located in the central area of the Peninsula but did not reveal the name
of the property. According to police officers, an illegal Chinese immigrant surnamed Chen was apprehended at the Outer Ferry Terminal by local police last Thursday night, with a blue card found on him – which says he is a cleaning worker at a local hotel. He admitted, however, that he had never worked in the hotel and had bought the work permit from the hotel
for HK$50,000 (US$6,225) through a friend in 2014 in order to more easily facilitate his visits to the city for gambling. Upon investigation, the PJ said the hotel had allegedly applied for blue cards for frequent Chinese gamblers to make money, adding that it is still chasing agents and hotel staff involved in the case. K.L.
Business Daily | 3
February 22, 2016
Macau
Rentals of circuit service create competition controversy Local mobile operators feel they are competing on unequal terms with CTM because of the price charged to access the circuit service. CTM says it is ‘pleased’ with the ‘full liberalization’ of the sector João Santos Filipe
jsfilipe@macaubusinessdaily.com
T
he prices charged by CTM (Companhia de Telecomunicações de Macau) to the other mobile operators to rent the circuit services in the territory are making other telecommunications companies feel that they are competing on unequal terms with the Macaubased operator. According to the Midterm Review of Concession Agreement of Public Telecommunications signed in 2009 by the government and CTM, the Macau-based company manages and maintains the telecommunication network of the territory. In turn, CTM provides the rented circuit service to the other players in the telecommunication market. This circuit is used to transmit communication information and is essential for the operators to function. By providing this service, CTM charges a tariff, as defined in the Concession Agreement, which is then approved by the government. However, and in spite of the approval of the government of the tariffs, prices to rent the circuit service are considered too expensive in the sector, Business Daily has learned.
Ten times bigger than in Hong Kong
“For the other operators, it is a very challenging environment in the territory. The tariff being charged by CTM, with the approval of the government, is just too expensive. In some cases, renting the circuits in Macau can be ten times more expensive than in Hong Kong”, a source in the industry told Business Daily. “The tariffs defined by CTM for public assets are so high that while they can easily make a profit, the
other operators have been struggling to have positive results”, the same source added. In 2014, CTM posted a profit of MOP1.11 billion. For its part, the Macau-based operator explained to Business Daily that it is committed to the liberalization of the sector. ‘CTM remains fully committed to the MSAR Government’s telecom policy that is beneficial to the sustainable development of Macau. We are pleased to witness the full liberalization of the telecom sector that will bring diversified services at reasonable prices under intensive yet fair competition’, the company said. Our publication also contacted the Bureau of Telecommunications Regulation (DSRT), on the prices of rented circuit service but by the time the story went to press the Bureau had not replied.
Human resources challenge
On the one hand, in the telecommunications sector there is a certain feeling that DSRT is failing to properly inspect the market and guarantee equal competition among the different operators; on the other hand, there is a perceived lack of international perspective in the territory due to the lack of experience of the staff at DSRT, the consequence of a limited pool of human resources in the territory. “We have come to this situation because DSRT lacks people with the proper international experience and qualification in international communications. This makes it very difficult for the Bureau to efficiently inspect the sector”, the industry source explained to Business Daily. Besides CTM, the other companies licensed to operate in the mobile telecommunications sector are
Hutchison Telephone (Macau), via 3 Macau, China Telecom (Macau) and Smartone Mobile Communications. All operators have licences to run both 3G and 4G services.
Controversial inventory list
The Midterm Review of the Concession Agreement of Public Telecommunications also stipulated that until the end of 2011 CTM had to send to the government an inventory with detailed information of the concession assets, defined in the contract as “the whole of the facilities assigned to the provision of the public telecommunications services” including ducts, copper, cables and so on. The details on these assets are essential for the MSAR because by the end of the concession agreement which is scheduled to occur at the end of this year (although it can be renewed automatically until 2021) CTM is supposed to hand these assets back to the government.
The fact that this detailed list has never been made public has raised concerns among some legislators in the Legislative Assembly (AL). On 4th January this year, legislator Chan Meng Kam delivered a written interpellation requesting the government to clarify if the inventory had already been delivered. The AL member also questioned the Director of DSRT as to why the authorities had perceived that only after the end of the contract there are conditions to make public the list of concession assets. “The disclosure of inventory will not damage the right of the company to manage and its responsibility for maintenance of the assets. On the contrary, it contributes to bringing more transparency to the sector and would allow society to be informed regarding the use of concession assets. This will make inspections easier and promote competition in the sector”, Chan Meng Kam wrote at the time. As of today, the legislator has yet to receive an official reply on his questions from the government.
CTM: Obligations fulfilled
The tariff being charged by CTM, with the approval of the government, is just too expensive. Industry source
When asked by Business Daily about the delivery of the detailed inventory back in 2011, CTM said that it had fulfilled its legal obligations. ‘Naturally, CTM is, as ever, in full compliance with its obligations under the relevant licences, including the Midterm Review of the Concession Agreement’, the company asserted to Business Daily. Business Daily also contacted DSRT about the delivery of the detailed inventory but the Bureau headed by Wendy Tam Van Iu had not provided a reply by the time the story went to press.
4 | Business Daily
February 22, 2016
Macau
Fiscal surplus plummets 67.6 pct to MOP29.3 bln in 2015 Total revenues for the year dropped 29.7 per cent year-on-year while total expenditure increased by 22.4 per cent year-on-year. The amount of fiscal surplus exceeded the government’s target of MOP18.8 billion Kam Leong
kamleong@macaubusinessdaily.com
MOP156.1 billion of 2014, despite other direct taxes and capital revenues surging 25.7 per cent and 42.9 per cent year-on-year to MOP8.99 billion and MOP 1.09 billion for the year, respectively. In fact, the initial 2015 budget forecast that the city’s fiscal surplus for the year would be some MOP51.9 billion. However, the amount was decreased by two-thirds to MOP18.8 billion last May by the Secretary for Economy and Finance, Lionel Leong Vai Tac, due to the continuous economic downturn.
Higher expenditure
T
he city’s fiscal surplus for the whole year of 2015 plummeted 67.6 per cent year-on-year to MOP29.3 billion, primarily as a result of gaming taxes received from local casinos plunging 34.5 per cent vis-a-vis 2014, the latest updates on the central account by the Financial Services Bureau (DSF) reveals. In 2015, the government’s target
of notching up MOP18.8 billion fiscal surplus was successfully fulfilled. However, the amount, slumping by nearly MOP61 billion from 2014, was the lowest compared to the previous four years – of which related data is available for comparison. As the city’s total gross revenues registered a drop of 34.3 per cent year-on-year to MOP230.8 billion for
last year, the government’s revenues from direct gaming taxes also posted an in-line fall of MOP84.4 billion, which, in fact, is the first annual decline in the past five years. Total revenues generated by the Special Administrative Region for the whole year of 2015 registered an annual decrease of 29.7 per cent to MOP109.8 billion, compared to the
International business drops in local banking sector in Q4 However, the sector saw a 12.8 pct y-o-y increase in international assets as at the end of 2015
T
he share of international assets in total banking assets had fallen to 84.9 per cent from 86.1 per cent as at end-September 2015, while the share of international liabilities in total banking liabilities declined to 80.4 per cent from 82.3 per cent, according to the international business statistics released by the Monetary Authority of
Macao (AMCM) last Friday. At the end of last year, the total international assets of local banks had declined to MOP1,138.7 billion (US$142.2 billion) from MOP1,199.6 billion as at endSeptember 2015, accounting for a decline of MOP60.9 billion or 5.1 per cent. However, when compared with end-December 2014, there was an increase in the
total international assets of MOP128.9 billion, or 12.8 per cent year-on-year. External interbank loans are a major component of the assets, increasing 12 per cent to MOP385.8 billion from a year earlier.
Liabilities
As at end-2015, for total international liabilities, there was a decrease of MOP 67.4
On the other hand, the government’s total expenditure totalled MOP80.5 billion for last year, climbing 22.4 per cent from 2014’s MOP65.8 billion. It is, however, some MOP7.44 billion less than the government’s budgeted MOP87.9 billion. Current expenditure, which includes payrolls to public servants, accounted for 85.6 per cent of the total, amounting to MOP68.9 billion, which represents a year-on-year increase of some 19.4 per cent. Meanwhile, only some MOP8.9 billion was spent on the city’s investment plan (PIDDA) despite the allocated budget for the segment being some MOP14.7 billion. Nevertheless, compared to the MOP7.3 billion for 2014, the expenditure on PIDDA had still increased 23.3 per cent for 2015.
billion or 6 per cent compared to end-September 2015, to MOP1,078.6 billion from MOP1,146 billion. However, compared to the same time in 2014, there was an increase of MOP121 billion or 13 per cent, from MOP957.8 billion. Foreign currency deposits held by local residents and the Macau Government in local banks counted a major part of the liabilities. But it had dropped slightly by 0.9 per cent to MOP442 billion compared to MOP425.8 billion as at end-2014.
Breaking down
In terms of regions, claims on Hong Kong and Mainland China accounted for 38.2 per cent and 23.1 per cent of totally external assets respectively at end-2015. At the same time, claims
on Portugal and the United Kingdom accounted for 3.5 per cent and 2.4 per cent respectively. As for external liabilities, Hong Kong and the Mainland accounted for 45.2 per cent and 21.7 per cent, while France and Portugal took up respective shares of 1.2 per cent and 0.8 per cent. Regarding international banking transactions, foreign currencies are still the major denomination. The Hong Kong dollar and the US dollar in total international assets were the most used currencies with 41.8 per cent and 36.8 per cent, respectively. The rest, in renminbi and foreign currencies, accounted for 14.6 per cent and 6.1 per cent, while total international liabilities were 45.3 per cent, 36.1 per cent, 12.3 per cent and 4.6 per cent, respectively. A.L.
Business Daily | 5
February 22, 2016
Macau Prada appoints Alessandra Cozzani new CFO Italian luxury fashion house Prada SpA appointed Alessandra Cozzani as its new Chief Financial Officer, effective last Friday, following previous CFO and Executive Director Donatello Galli’s resignation for new career opportunities. According to the retailer’s filing with the Hong Kong Stock Exchange, Ms. Cozzani is also an Executive Director of the luxury group. ‘The appointment of Ms. Alessandra Cozzani as Chief Financial Officer of the company is a natural extension of the role she has already been playing in the management of the company and will be beneficial to the group’s long term growth,’ Prada wrote.
Visitor expenditure down 7.1 pct in Q4 Visitors to Macau have been spending less, and for 2015 it dropped 17.5 pct y-o-y, the first annual decline in five years Annie Lao
annie.lao@macaubusinessdaily.com
T
otal visitor spending in the fourth quarter of 2015 amounted to MOP13.1 billion (US$1.64 billion), down 7.1 per cent from the MOP14.1 billion of the same quarter of 2014 although up by 4.7 per cent from MOP 12.47 billion in the third quarter of 2015, data from the Statistics and Census Service (DSEC) released last Friday shows. The whole of 2015 visitor spending was MOP51.1 billion, down 17.2 per cent from the MOP61.75 billion of 2014, posting the first annual decline since 2010. In the fourth quarter of 2015, per capita spending of visitors was MOP1,660, down 5.5 per cent yearon-year although up by 7.8 per cent from the third quarter of MOP1,540. Visitor expenditure by those from Mainland China decreased by 4.9 per cent year-on-year to MOP1,938. Meanwhile, visitor expenditure of those from Singapore, Malaysia and Taiwan decreased. For long-haul visitors, an increase of 1 per cent in expenditure was registered by those from Australia while those from the United Kingdom and the United States spent less.
Annual drop
For the whole year of 2015, visitors from Mainland China spent an average of MOP1,965, down 16.5
per cent year-on-year. Meanwhile, visitor expenditure from Singapore (MOP1,726), Malaysia (MOP1,556) and Japan (MOP1,524) posted a year-on-year decrease. In terms of other visitor expenditure, that of Australia (MOP1,375) and the United Kingdom (MOP1,329) dropped yearon-year, while United States visitors (MOP1,281) spent the same. Overnight visitors and same-day visitors spent an average of MOP2,733 and MOP658, respectively, down 11.3 per cent and 3.2 per cent compared to 2014. Overnight visitor spending by Mainland China (MOP3,360), Singapore (MOP2,728), Malaysia (MOP2,336), Japan (MOP2,294), Thailand (MOP2,108) and Taiwan (MOP2,950) recorded a double-digit decrease, while that of same-day visitor spending by Mainland China (MOP812) and Singapore (MOP510) saw an increase. Visitors spent mainly on shopping (46.0 per cent) with a drop of 3.9 per cent to MOP764, accommodation (25.5 per cent) and food & beverage (20.4 per cent). Visitors’ shopping spending decreased by 20.0 per cent year-on-year to MOP762, while visitors from Mainland China spent an average of MOP1,051 on shopping, down 20.1 per cent. Meanwhile, visitors from other countries spent primarily on accommodation and food & beverage.
Kering sales beat estimates as Gucci brand returns to growth The company says sales were strong in Paris and also in Japan, contrasting with poor market conditions in Hong Kong and Macau
F
rench luxury-goods maker Kering SA reported fourthquarter revenue growth that beat analysts’ estimates as the Gucci brand showed the first signs of a turnaround under Chief Executive Officer Marco Bizzarri and new creative director Alessandro Michele. Sales climbed 8 per cent on a comparable basis, Paris-based Kering said in a statement Friday.
Analysts predicted growth of 4.1 per cent, according to the median of 20 estimates. Gucci revenue advanced 4.8 per cent, compared with the 1.5 per cent growth analysts anticipated -- the brand’s strongest result in three years. The shares rose as much as 3 per cent in early Paris trading. Pressure has been building on Gucci -- which accounts for nearly two-thirds of Kering’s profit -- to
translate the buzz around Michele into sales. While the fourth quarter suggests Michele’s debut collections are living up to their critical acclaim, it will probably take until the second half of 2016 to see if he has delivered as the full complement of his designs won’t be in Gucci’s boutiques until the third quarter.
Turning heads
“Gucci has come in with a significant number of new styles that are starting to turn heads,” said Luca Solca, an analyst at Exane BNP Paribas. Michele’s designs -- which feature vintage styling and the brand’s double-G logo -- accounted for about 30 per cent of Gucci’s sales in the quarter, Kering Chief Financial Officer Jean-Marc Duplaix said on a call with reporters. Security concerns following the November terror attacks in Paris failed to hold back luxury sales in Europe, where high tourist numbers and steadily rising demand from local customers buoyed growth, Kering said. Sales were also strong in Japan, up 14 per cent last year, contrasting with poor market conditions in Hong Kong and Macau. Japan has been
a bright spot for luxury- goods makers including LVMH and Hermes International SCA.
Exposure to Asia
One disappointment was handbag maker Bottega Veneta, whose sales fell 3.1 per cent in the quarter compared with the 3 per cent growth predicted by analysts. Bottega Veneta “continues to be impacted by its high sales exposure to Asia, and especially Hong Kong/ Macau where the environment remains challenging,” Berenberg analyst Zuzanna Pusz said in a note. The brand has been penalized by high price gaps between Europe and Asia, where products cost more, according to analysts. Watches were held back by sluggish demand and the surging Swiss franc, Kering said, yet that was offset by growth in jewelry, which experienced very high volumes in the fourth quarter. Kering’s full-year sales rose 15 per cent to 11.6 billion euros, exceeding the 11.4 billion-euro median of analysts’ estimates. Recurring operating income was 1.65 billion euros. Bloomberg
6 | Business Daily
February 22, 2016
Macau “The popularity of baccarat among the Chinese is a result of the junket model, and this can be changed” Amid Macau’s gaming revenue slump, a first-of-its kind VIP slots room has opened. Grand Prize VIP Club operator Zhang Zheng told Business Daily that there is opportunity in times of crisis and that he believes in Macau’s long-term future. He says the novelty will be a game changer and that more transparency and regulation need to be implemented to manage the gaming promoter industry, with better recognition and benefits for junkets the trade-off Joanne Kuai
joannekuai@macaubusinessdaily.com Photos by Cheong Kam Ka
What’s so special about a VIP slot parlour? What are the differences between this and the slots seen on the mass gaming floor?
The mass market mainly consist of tourists who come to Macau without a specific purpose of gambling. They may play a few hands on the mass gaming floor when they check in to a hotel where there’s a casino. In the VIP model, there are gaming promoters, gaming agents. It’s like a tour agency charging commissions to guide tour groups. We can guide the clients to the places we want them to see. The gaming promoters will take a share of the profit as their commission. This doesn’t exist in the mass market. On mass market gaming floors, slot machines have a minimum bet of 50 cents Hong Kong dollars, HK$0.1, HK$0.2. Our minimum bet is priced at HK$1 for some machines with the highest HK$10 for other machines.
What’s the idea behind opening a VIP slot parlour when traditionally a VIP room is filled with baccarat tables? The baccarat VIP junket model once achieved an 80 per cent market share in terms of gaming revenues. The VIP junket model for baccarat has proven to be
a great success. It’s presumed that the VIP junket model to be adopted in other types of games can be successful. We highly encourage the gaming promoter model to be adopted in other kinds of gaming activities. In Western gaming markets, gross revenues from slot machines can take up to 50 to 60 per cent of market share. However, the number is as low as five per cent in Macau. There is a huge potential for this game to be developed. Five per cent per year means roughly HK$15 billion in a year. I believe that number can be as high as HK$125 billion per year. Adopting the junket model for other types of games can also develop the possibility of diversifying customer sources. Slot machines are very popular in Western countries. With VIP slot parlours, we may lure customers from those regions as well.
We have our own calculation method to share the profits with gaming promoters. It’s similar to the ones for baccarat and probably higher than for baccarat.
What are the requirements for a client to join a VIP slot club?
Why do you choose slots, in particular, when Chinese gamblers are known to favour baccarat?
It’s similar to other baccarat VIP club membership terms. The minimum charge to enter is HK$100,000. They have to play at least HK$100,000 to join our club to play the slot machines here.
What’s the level of agent commission?
In terms of business model, can revenues generated by a VIP slot club match a VIP baccarat room?
VIP slots has a better revenue than mass slots, just like VIP baccarat has a better performance than mass baccarat. Customers can play millions at slot machines as well. The biggest charm of slot machines for the customer lies in that they can use a little money to win a big prize. For example, on the HK$10 minimum betting machines, you can place the highest of HK$8,800 for one bet, but the biggest reward can be as high as HK$8 million. They can press the button to put down a bet every few seconds on a slot machine, while a run of game of baccarat may take some time.
Slot machines first became very popular in Australia. They had a history there for more than 60 years and a history of around 50 years in some other Western countries. They are very well accepted and recognised in those markets.
The preference for a certain game is dominated by junkets, not necessarily by the customer
The reason why baccarat has such a huge share of the market while slots have a relatively small one here in Macau is because baccarat has a junket model but slot didn’t used to have. It doesn’t mean that players themselves have a preference for baccarat.
You believe that a junket model for slots will work . . . ?
Junkets know that when taking their clients to baccarat VIP clubs they will have a share of the commission so they will convince their clients to play baccarat even when the client prefers slots. Now that we have VIP slot parlours and the junket model,
Business Daily | 7
February 22, 2016
Macau
junkets can share the profit either way. For gamblers that used to play on mass market slots, the junkets can now take them to join the VIPs and share the profit. The preference for a certain game is dominated by junkets, not necessarily by the customer. I’ve known a lot of gamblers that have a passion for slots. They only go to play baccarat when they don’t have the money and they can borrow from the junkets when playing baccarat. All they were thinking about was winning some money at baccarat as soon as possible so that they could have the money to play the slots. The guidance of the junkets in the earlier stage played a decisive part.
Macau has now seen a slowing gaming industry with dozens of VIP rooms closing recently. Why choose now to open a VIP room?
As the Chinese saying goes: ‘every crisis comes with an opportunity’. I have faith in the development of the Macau gaming market. Macau has achieved what it is today, with the gaming industry its cornerstone. And globally, among all the gaming brands, Macau has an established reputation already. No other country or region can replace that. For the time being, Macau’s gaming market is experiencing some setbacks with a 20-month consecutive gaming revenue slump. But look at it from a broader perspective; it’s a result of many other factors. I don’t think it’s because of anti-corruption or the economy slowdown. From my point of view, the nation
thinks about competition from America or Japan and strategic containment of China. It should also take into account who the neighbouring regions are who have been containing Macau and China’s gaming industry so to speak. A lot of countries in the region have been putting a lot of effort into developing their gaming industry, with many beneficial terms, such as low tax. They are targeting Chinese clients as well. And some places have launched, for example, online gaming and tele-gaming. Despite that, gambling in Mainland China is illegal, but with the Internet and means of [manipulating] IP, it’s hard to stop it. All these [factors] have made a great impact on the gaming industry in Macau.
How do you think Macau can overcome these challenges you’ve mentioned?
With regard to actual casinos, those actual environments, other countries in the region don’t stand a chance when competing with Macau. We have all the casinos, provide all sorts of food and beverage, entertainment, and shopping, all these great supporting facilities. The other countries cannot easily match the kind of investment that has been made here in Macau. However, online gaming has posed a huge threat. Both the SAR Government and the Central Government seem to be struggling about whether to grant online gaming licences or not.
Grand Prize VIP Club The VIP slot club called Grand Prize VIP Club and launched earlier this year is located on the third floor of Jimei Casino, a property that operates under the gaming licence of SJM Holdings Ltd. on the Macau Peninsula. According to the operator, it has 111 machines in operation in an area designed to hold 150 machines. All machines are supplied by Aristocrat. Four baccarat tables can also be seen at the entrance.
For 2015, casino gross gaming revenue from the slot machines market stood at MOP11.75 billion or 5 per cent of Macau’s aggregate GGR for the period, which stood at MOP230.84 billion, data from DICJ shows. While the gross gaming revenue of all games of fortune declined 34.3 per cent in 2015 when compared to 2014, slot revenues declined just 18.62 per cent year-on-year.
All they talk about is how to regulate, how to supervise, and how to enhance transparency. But what do we have in return?
Even under the ‘One Country, Two Systems’ policy, this can be very tricky. But there is one possibility, I think, is worth exploring. Macau can grant an online gaming licence to a directly-managed social welfare organisation rather than any of the existing six gaming operators. It will be something like the social welfare lottery in Mainland China. I suggest the SAR Government consider the possibility of the DICJ (Gaming Inspection and Co-ordination Bureau) cooperating with the local social welfare organisations to develop the online gaming sector with a positive tone so that it can offset the negative impact as well as contribute to society. The profit can be designated for social welfare or other charitable organisations. DICJ can even operate with charitable organisations in Mainland China or other countries and regions to open up the gaming market on the Internet and have it legalised and supervised properly. This will eventually benefit society, like supporting the cash hand-out programme conducted by the government or even the establishment of social welfare and people’s livelihood.
The SAR Government has been talking about tightening up regulations for the junket operators. What’s your take on this?
Despite making great contributions to Macau society, the position of gaming promoters is still a bit awkward in Macau society.
They cannot promote themselves straightforwardly; some individual promoters are not properly recognised by the government, and for those coming from Mainland China the visa can be a big problem. It’s really unfair when you think about it. Gaming has been the pillar industry of Macau society. It has contributed a great deal to the economy. The VIP sector, which was brought by gaming promoters, has so far been the biggest contributor. But the government has been trying to diminish its significant achievements by all sorts of means. We see visa restrictions. We see smoking bans being implemented. We have always seen the government trying to control and manage these people that have made great contributions to Macau society, but they’ve never mentioned any sort of reward. All they talk about is how to regulate, how to supervise, and how to enhance transparency. But what do we have in return? There should also be incentives and more beneficiary policies from the government for the junkets who have made special contributions, such as tax deduction, personal and family medical care, and education for their children, so that more junket operators can consider coming to Macau and investing here. So far, junket promoters have different agreements with all other relevant parties, such as gaming operators or casinos. There’s no centralised standard. I suggest that all relevant documents in relation to licensed gaming promoters be standardised, such as contracts, agreements, accounting documents. The format of the documents have to be approved by government authorised organisations or other professional institutions, so that a data base of relevant data can be established, and recognised, supervised and protected by Macau laws.
Coming from Mainland China, how did you get involved in Macau’s gaming industry in the first place?
I first came to Macau in 2004. I was first here as a tourist, then I learned that there was a job position as a gaming promoter, making money out of commissions, so I started getting into this business as a gaming promoter on and off. I’ve worked at Lisboa Casino, and also witnessed the opening of the Landmark Casino and Sands. At the end of 2006, there was an opening in the Suncity group and also later a junket group Heng Seng. I’ve worked in many baccarat VIP parlours as a gaming promoter. After all these years, I think I have a certain understanding of the Macau gaming market.
How has the market been reacting so far to this VIP slot club?
The market reaction has been great. Two or three gaming operators have shown interest in us. They would like to have VIP slot parlours operated by us on their properties. We’re in negotiation already. There are slot machines suppliers that are in talks with us [regarding] investing in our company as well. Conservatively speaking, we are planning on open three more VIP slot parlours in Macau this year.
8 | Business Daily
February 22, 2016
Greater China
Ambrose So testifies in Hotel Lisboa prostitution ring trial
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he Chief Executive Officer of local gaming operator SJM Holdings Ltd., Ambrose So Shu Fai, described the alleged runner of the prostitution ring at
Hotel Lisboa, Alan Ho, as “just and honest” during his testimony at the Court of First Instance on Friday. According to local Chinese language newspaper Macao Daily
News, the SJM officer was one of the six defence witnesses for the former Executive Director of Hotel Lisboa during last week’s hearing. Mr. So testified in court that Mr.
Ho’s personality was like that of foreigners as he is very direct and straightforward. He added that he had never heard the SJM founder, Stanley Ho Hung-sun, complain about Alan Ho, who is the gaming tycoon’s nephew. In addition, he commented that Alan Ho was a very hard working person and was competent in each of the fields he engaged in on behalf of SJM’s hotel operations. Asked by Assistant Public Prosecutor-General Kok Sio Peng whether Ho had intervened in the prostitution issue at Hotel Lisboa and the reason that such business had developed rapidly, Mr. So claimed that he believed Ho would take certain measures to maintain the hotel property’s propriety. But he added that he was not sure whether Ho had implemented any measures. Alan Ho is among the six suspects arrested by Judiciary Police (PJ) in January last year regarding the alleged running of a prostitution ring in Hotel Lisboa. Local police say the ring was the largest to be uncovered since 1999 – with at least 96 sex workers found in the hotel when the suspects were arrested. The hearing continues today.
MGM China perceives local gaming market stabilising
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GM China feels that the gaming market is stabilising in the territory driven by the growth of the mass segment. The revelation was made by the Chief Executive Officer of MGM China, Grant Bowie, during the presentation of the fourth quarter results of MGM Resorts International, the parent company of MGM China. “We are seeing some stabilisation in the market
led by the mass segment. GGR [Gross Gaming Revenue] which has shown improvement for two consecutive quarters”, Bowie explained. The MGM China Board also announced that it will recommend a final dividend of US$46 million subject to shareholders’ approval at the Annual General Meeting.
Postponing Cotai project
The CEO also took the
opportunity to explain the decision to postpone the opening of MGM’s Cotai resort from the fourth quarter of this year to the first quarter of next year. “Our decision is based on current market conditions. This extra time is also important as it will allow us to further fine-tune the offerings in what is a very rapidly evolving marketplace. We want to ensure we are able to capture all efficiencies
Corporate Wynn Resorts on Fortune Magazine’s 2016 World’s Most Admired Companies list Wynn Resorts, parent of Macau casino operator Wynn Macau Ltd., has once again been honoured as the highest ranking casino resort in Fortune Magazine’s 2016 World’s Most Admired Companies list in the hotel, casino and resort category, ranking number three of 13 internationally distinguished hospitality companies. Wynn Resorts ranked first overall in the category of Quality of Products/Services among
all international hotel companies. The company also received high marks for Innovation, People Management, Quality of Management and Long-Term Investment. Fortune works with top industry executives and analysts to rate companies based on nine categories that range from financial soundness to social responsibility. Each year, Fortune Magazine conducts a survey to compile the world’s most admired companies.
that are possible, while at the same time presenting a spectacular product”, Mr. Bowie explained.
Stable budget
In spite of the delay in the opening of the property the CEO of MGM China said that the budget will not increase. The cost of the resort stands at US$3 billion [MOP24 billion]. “There is no change in the current budget of US$3
billion,” he said. “We’re working closely with our contractor, China State (China State Construction Engineering Corporation Limited), and are confident we'll be able to deliver this quality property”. During 2015, MGM recorded total revenue of HK$17.2 billion, which represented a decrease of 33 per cent, from around HK$22.9 billion posted during 2014.
Business Daily | 9
February 22, 2016
Greater China
Beijing cuts home taxes in expansion of efforts to clear glut The government has pledged to reduce home inventory as one of its key tasks in 2016
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hina’s Ministry of Finance said it will cut taxes on home transactions as it steps up support for the property market, after the central government eased mortgage down payment requirements to the lowest level ever earlier this month. China will set the deed tax at 1.5 percent of the home’s value for first residences bigger than 90 square meters and at 1 percent for those smaller than that size, the ministry said in a statement on its website on Friday. Homeowners that live in cities other than the four first-tier ones including Beijing, Shanghai and Shenzhen will also be exempt from paying a business tax on properties sold after two years of purchase. The new rules will be effective as of Feb. 22. In reducing the taxes, China took
another step to prop up home sales as it seeks to dissolve a glut of unsold homes. The government has pledged to reduce home inventory as one of its key tasks in 2016. The area of unsold new homes nationwide increased 12 percent from a year earlier to 441 million square meters as of November 30, according to the latest available data from the statistics bureau. While the authorities’ supportive stance to the property market is known to the market, “the frequency of such measures is prompting optimism that the government will boost stimulus more strongly,” Du Jinsong, a Hong Kong-based analyst at Credit Suisse Group AG, said by phone.
It will be a boost to the stronger markets, but may not have too big an effect on cities where the inventories are huge Liu Yuan, research director, Centaline Group
Stimulus for ‘upgraders’
The tax cuts will mostly benefit buyers of “non-ordinary”
Bloomberg News
Central bank to cancel preferential reserve ratios for some banks The central bank also said it will conduct its macro‑prudential assessment on banks each quarter
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hina's central bank has reversed preferential reserve requirement ratio (RRR) cuts for banks that had failed to support certain sectors of the economy as a condition of the more accommodative monetary policy. The People's Bank of China said in a statement on its website it had examined banks' implementations of targeted RRR cuts announced last year and found a small number of lenders had failed to meet the standards attached to such cuts. Most banks will continue to enjoy preferential RRR cuts and some banks will get such treatment after meeting the official standards, the central bank said without elaborating. The standards related to the banks' support for the farm sector
and small firms, the central bank said. The abolition of preferential RRR for some banks and inclusion of some banks for such treatment will take effect on February 25. "The examination results will help establish a positive incentive mechanism...which has nothing to do with rises in new loans and the macro-prudential assessment," the central bank said. China's banks doled out a record 2.51 trillion yuan of new loans in January, far more than markets had expected and suggesting Beijing is keeping monetary policy loose. The central bank also said it will conduct its macro-prudential assessment (MPA) on banks each quarter, which would cover lending, capital, leverage, liquidity, asset
apartments, which have different definitions across cities but typically refer to apartments larger than 144 square meters with prices above the reach of many buyers, according to Liu Yuan, a Shanghai-based research director for Centaline Group, China’s biggest property agency. Such apartments are currently subject to as much as 3 percent of deed tax, according to Liu. “The government is encouraging people to upgrade their homes,” Liu said by phone. The deed tax will be cut to 2 percent for second homes bigger than 90 square meters and 1 percent for smaller residences, according to the statement. The eased deed tax requirements for second homes will exclude buyers in the four first-tier cities. The intense loosening measures on real estate this month underlines the resolution by Chinese government to stabilize a slowing economy, Ning Jingbian, a Beijing-based analyst at China International Capital Corp., wrote in a note after the statement. After six interest-rate cuts since November 2014, China on Feb. 2 said it will allow banks to cut the minimum required mortgage down payment to 20 percent from 25 percent for first-home purchases in areas without purchase restrictions, while the minimum down payment for second-home purchases was cut to 30 percent from 40 percent. Policies in the four first-tier cities, whose home prices jumped most quickly in China, remained largely unchanged, according to CICC’s Ning. New-home prices in the southern trading hub of Shenzhen jumped 47 percent in December from a year earlier, latest data show.
quality as well as cross-border financing risks. The PBOC introduced the MPA system in December to assess risks
in the financial system in 2016 as the country's banking assets became more diversified. The RRR is the amount of cash as a percentage of deposits that banks must park at the central bank as reserves and is used as a monetary policy lever by the PBOC. The central bank delivered four system-wide cuts in reserve ratios, bringing down the level for major banks to 17.5 percent as part of policy steps to support the slowing economy. On top of that, it has cut reserve ratios for some banks to encourage their lending to the farm sector and small businesses. Reuters
10 | Business Daily
February 22, 2016
Greater China
Government removes stocks regulator head after market woes Securities institution and its head came under fire as stock markets slumped as much as 40 percent in just a few months last summer Adam Jourdan
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hina has removed the head of its securities regulator following a turbulent period in the country’s stock markets, appointing a top state banking executive as his replacement, as leaders move to restore confidence in the economy. The announcement on the official Xinhua news agency on Saturday follows a string of assurances from senior leaders following the Lunar New Year holiday that China will underpin its slowing economy and steady its wobbly currency. Xinhua said Xiao Gang, chairman of the China Securities Regulatory Commission (CSRC) since 2013, had been succeeded by Liu Shiyu, chairman of the Agricultural Bank of China Ltd (AgBank) and a former deputy governor of the central bank. “Xiao’s departure is not a surprise following the recent stock disaster. This is a role vulnerable to public criticism because most Chinese retail investors are destined to lose money in such a market,” said Zhang Kaihua, a fund manager of Nanjing-based hedge fund Huyang Investment. Reuters could not immediately reach the CSRC or Agricultural Bank of China for comment.
Xiao and the CSRC came under fire as China’s Shanghai and Shenzhen stock markets slumped as much as 40 percent in just a few months last summer. In a further blow, a stock index “circuit breaker” introduced in January to limit stock market losses was deactivated after four days of use because it was blamed for exacerbating a sharp selloff. Online media nicknamed Xiao “Mr Circuit Breaker”. Reuters reported in January that Xiao, 57, had offered to resign following the “circuit-breaker” failure. The CSRC said at the time the information did not conform to the facts. The gyrations in China’s stock markets, an unexpected devaluation of the yuan in August and sharp falls in currency reserves rattled global markets, raising concerns about the health of the economy and Beijing’s ability to steer the country through both a protracted slowdown in growth and a shift away from manufacturing towards services. Economic growth slipped last year to 6.9 percent, stellar by Western standards, but the weakest pace for China in more than two decades.
KEY POINTS Stocks regulator head Xiao Gang removed from role Replaced by Liu Shiyu, top banker and former central banker Xiao was under fire over handling of market crash
Ahead of two high-profile events for China - a meeting in Shanghai next week of G20 financial leaders and the annual gathering of China’s legislature in March - officials have announced various measures to support the economy, including funds for infrastructure projects and increased financial support to struggling industry. China’s Commerce Minister Gao Hucheng said in an interview with state television on Friday that he was confident that the country’s trade conditions would stabilise and improve in 2016.
Uncertainty ahead
Investors and analysts said the new chief Liu, 54, a trained economist, would bring in new policies and strategies, but it remained to be seen what direction he would take. “Liu has a lot of experience in the financial sector, but there will be some policy uncertainty in the short term as it will take at least six months for the former banker to get used to his new role,” fund manager Zhang said. Andrew Sullivan, managing director, sales trading at Haitong International Securities Group in
Opaque U.S. panel hones in on Mainland deals for third year A group of 46 U.S. lawmakers, most of them Republican, urged to take a hard look at a bid to buy the storied Chicago Stock Exchange Diane Bartz
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hina led the countries whose planned U.S. acquisitions and investments for 2014 were probed for U.S. security implications, making it the most scrutinized country by U.S. regulators, according to a government report released on Friday. The Committee on Foreign Investment in the United States (CFIUS), an interagency panel that reviews deals from a national security perspective, said in its annual report that it investigated 51 of all 147 international deals filed with the agency in 2014. For the third year in a row, CFIUS looked at more deals involving investors from China than from anywhere else. In 2014, CFIUS probed 24 Chinese investments in the United States, compared to
21 involving investors from the United Kingdom and 15 from Canada. So far this year there have been 22 mergers and acquisitions announced in the United States involving Chinese purchasers, totalling US$23 billion, according to Thomson Reuters data. That outpaces Chinese outbound U.S. mergers and acquisitions for all of 2015, which reached US$13 billion. Not only is investment from China increasing, but it is flowing to electronics, which can have implications for U.S. national security, said Christopher Brewster, a CFIUS expert with Stroock & Stroock & Lavan LLP. “When you watch the cases, you know that the China acquisitions are getting aggressive reviews. And anybody who doesn’t
believe that can go talk to Fairchild,” he said. Just this week, Fairchild Semiconductor International Inc rejected an acquisition offer from China Resources Microelectronics Ltd and Hua Capital Management Co Ltd because of CFIUS concerns. The CFIUS report for 2014 shows that 12 notices of unidentified mergers or investments were withdrawn during the review process. Only one was re-filed, indicating the other 11 were abandoned by the companies. It said it had formally rejected one notice, but did not say why or identify the deal. CFIUS rarely kills proposed mergers formally, but instead informally urges companies to scrap merger plans and they comply. Most recently, in January, Philips dropped a plan to sell an 80
percent stake in its Lumileds division to Chinese buyers because of what it described as pressure from CFIUS. The panel is considered opaque since it neither confirms that it is investigating a transaction, nor confirms if it considers certain deals problematic. CFIUS will likely probe ChemChina’s record US$43 billion takeover of Switzerland’s Syngenta, which generates nearly a quarter of its revenue in North America by selling pesticides and seeds. Another transaction it would likely look at are plans by Tianjin Tianhai Investment Co’s to buy Ingram Micro for US$6 billion, which was announced this week. In the months since the time covered by the CFIUS report, Chinese acquisition attempts in the United States
have accelerated, as Chinese investors have sought to park their money outside the country, especially following a summer stock market crash and a devaluation in August. But the drive has faced backlash from U.S. lawmakers in an election year and at a time of increasing tension between the two countries over China’s expanding role in the South China Sea, as well as high-profile hacking attacks against U.S. government agencies which Washington has attributed to China. A group of 46 U.S. lawmakers, most of them Republican, urged CFIUS this week to take a hard look at a bid by China’s Chongqing Casin Enterprise Group to buy the storied Chicago Stock Exchange, one of the oldest U.S. exchanges. Reuters
Business Daily | 11
February 22, 2016
Greater China Zinc refineries slash fees as supply shrinks Chinese zinc refineries have agreed to take sharply lower fees for processing raw material into metal as a long awaited shortage rears its head following the closure of several giant mines, industry sources said this week. Zinc mine supply has been shrinking as several blockbuster mines such as Australia’s Century and Ireland’s Lisheen have dried up with no new major lodes in the pipeline, and as prices near six-year lows force miners to slash output. Spot treatment charges have slumped to US$125-US$130 a tonne last week.
Xiaomi to use chips designed in-house
Liu Shiyu (pictured), former vice governor of People's Bank of China, will replace Xiao Gang
Hong Kong, said that removing Xiao had been largely expected. “But by bringing in the AgBank chairman, they are really not bringing anybody with a fresh market perspective but a political insider,” he said. Liu spent most of his career at the People’s Bank of China (PBOC), rising to deputy governor and holding
that post from 2006 until he left in late 2014 to head up AgBank. Xiao became the CSRC head in March 2013 and was charged with attracting investment into equities and away from speculative bubbles in sectors such as real estate, while defending against endemic insider trading. The Communist Party had
described Xiao as “young, energetic, resolute”. He was also self-effacing, once saying the only thing he’d done right in life was to marry his wife. Xiao was previously chairman of Bank of China Ltd (BoC), China’s fourth-biggest lender, and had worked at China’s central bank for over two decades. Reuters
Authorities to limit land available for homes in oversupplied cities China has announced a string of measures designed to boost the housing market
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hina will reduce or stop issuing land for new residential housing projects in areas where there is a supply glut, the latest in a series of measures aimed at clearing a property overhang weighing on the economy. China’s land ministry will not release vacant land to commercial property developers in cities and other areas where there are large levels of unsold inventory, state television reported yesterday, citing a ministry meeting. The China Central Television (CCTV) broadcast said Land minister Jiang Daming plans to reward cities that effectively reduce their inventories by giving them permission to make new land allocations. China has announced a string of measures designed to boost the housing market, a crucial driver of the economy. Real estate investment affects more than 40 other sectors in China, from cement to furniture. The ministry also said yesterday that it will increase land allocations in cities that have allowed migrant workers to purchase urban homes, CCTV reported, referring to a
China’s most valuable start-up Xiaomi Inc is aiming to use smartphone processor chips designed in-house in some of its lower-priced handsets in the second half of this year, a source with direct knowledge of the matter told Reuters. The move would mark the first time that Xiaomi has used chips designed in-house, something analysts have said could put pressure on industry leaders such as Qualcomm Inc and MediaTek Inc, which supply the company. The in-house smartphone application processor chips are designed for Xiaomi’s mid- to low-priced smartphone model RedMi Note series.
Cadillac sales to grow 25 percent in 2016 Cadillac, General Motors Co’s luxury brand, will increase its sales in China this year by 25 percent to more than 100,000 vehicles, Cadillac President Johan de Nysschen said on Friday in an interview with Reuters. The company sold around 175,000 Cadillacs in the United States in 2015. Cadillac last month began production at a new factory in China of its flagship sedan, the CT6, which is expected to help boost sales. It joins the long wheelbase ATS and XTS sedans already produced in China.
ZTO Express plans U.S. IPO Logistics company ZTO Express is planning a U.S. initial public offering that could be the biggest U.S. listing by a Chinese company since ecommerce giant Alibaba Group Holding Ltd’s US$25 billion IPO, the Wall Street Journal reported. Shanghai-based ZTO Express could raise between US$1 billion and US$2 billion by later this year or early 2017, the Journal reported, citing people familiar with the matter. The company’s potential listing could match the US$2 billion IPO of Alibaba’s rival, JD.com Inc, in May 2014, the WSJ said.
separate measure designed to help tackle oversupply. China had 718 million square metres of unsold commercial and residential housing space at the end of 2015, the National Bureau of Statistics reported on January 19, a 15.6 percent increase from a year earlier. Growth in property investment eased to one percent in 2015, the slowest in nearly seven years, even as national sales improved, the data shows. Reuters
PBOC injects 163 billion yuan via MLF
KEY POINTS Edict affects land for homes by commercial developers Part of measures to revive property industry, economy
China’s central bank said it injected 163 billion yuan (US$25.00 billion) to 20 financial institutions via its medium-term lending facility (MLF) on Friday. It also lowered offered rates for the MLF loans to 2.85 percent for six-month loans and 3 percent for one-year loans, the bank said. Reuters reported on Thursday that the People’s Bank of China has asked selected banks about their demand for extra liquidity through MLF, citing sources.
12 | Business Daily
February 22, 2016
Asia
Sharp to vote on rival takeover bids on Thursday A deal with Foxconn would give Sharp much-needed resources to develop advanced organic light-emitting diode panels
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harp Corp plans to choose between rival rescue offers as soon as Thursday, as a favoured bid from Taiwan’s Foxconn continues to be challenged by a Japanese state-backed investment fund, people with direct knowledge of the matter said. The board of the ailing electronics maker met on Saturday to discuss the two takeover proposals, according to the sources, who requested anonymity
because they were not authorized to speak to the media. The company’s 13-member board holds a regularly scheduled meeting on Wednesday, and aims to vote on the competing offers at an extraordinary meeting the next day, the sources said. Sharp declined to comment while INCJ officials could not immediately be reached. Foxconn said it had no comment, citing previous remarks
KEY POINTS Foxconn, INCJ offers both on table - sources Sharp’s board to vote on offers after Wednesday meeting
Japan’s business mood subdued amid fears of global slowdown A poll suggests the economy remains underpowered after declines in exports and consumer spending Tetsushi Kajimoto and Izumi Nakagawa
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onfidence at Japanese manufacturers remained largely subdued in February and the mood was seen deteriorating over the coming three months, a Reuters poll showed, highlighting concerns about slowing global growth and turbulent markets. In a sign of the stiff headwinds dragging on growth in the world’s third-
largest economy, service-sector sentiment also soured though it was expected to stabilise somewhat in the near term, the Reuters Tankan showed. The monthly poll, which strongly correlates with the Bank of Japan’s (BOJ) quarterly tankan survey, suggested the economy remains underpowered after declines in exports and consumer spending led to a contraction
in output in the fourth quarter. The Reuters Tankan sentiment index for manufacturers inched up to 7 in February from 6 in January, helped by gains in food processing and precision machinery industries, while cars, steel and oil refineries sagged. It is seen falling to 4 in May. “The results showed gradual worsening of corporate sentiment as declines in demand
by its chairman, Terry Gou, that it was in a silent period during its negotiations with Sharp. Sharp said earlier this month that it was devoting more resources to studying a deal with Foxconn, an Apple Inc supplier known formally as Hon Hai Precision Industry Co . The Taiwanese firm, the world’s largest electronics assembler, has offered to invest 659 billion yen ($5.9 billion) in Sharp, far more than the 300 billion yen investment proposed by statebacked Innovation Network Corp of Japan (INCJ). Gou was in Japan late in the week following a visit to Taiwan by Sharp executives. Their report formed part of Saturday’s board discussions, one source said. Foxconn said this month it had agreed with Sharp on most points of a deal, but the sources said the situation remained fluid with both bids still on the table. The Taiwanese firm has offered to pay 100 billion yen as a cancellation fee if it does not go through with the deal, one source said. Another source said Sharp’s main lenders oppose the INCJ proposal, which calls for them to cancel the preferred shares they own. An INCJ official who declined to be named because the discussions remained confidential told Reuters on Sunday the fund believes it could reach an agreement with the lenders if its offer is accepted. A deal with Foxconn would give Sharp much-needed resources to develop advanced organic lightemitting diode panels, which Apple is said to be adopting in its iPhone within a couple of years. INCJ, on the other hand, plans to combine Sharp’s loss-making display business with rival Japan Display Inc.
have become more evident after markets turned into a risk-off mode,” said Mari Iwashita, chief market economist at SMBC Friend Securities. “There’s no driver of growth. If domestic demand remains lacklustre on top of weak exports, that could mount pressure on not just the BOJ but the government to respond by taking fresh stimulus steps,” she said. The poll of 513 big and mid-sized Japanese companies between February 1-16, of which 265 responded, was taken at a time when heightened global risk aversion shook up the yen. The safe-haven Japanese currency rose sharply, hurting exporters’ morale as the dollar fell to a 15-month low below 111 yen last week.
Headwinds
Japan’s economy contracted by an annualised 1.4 percent in October-December as private consumption and exports slumped. While analysts expect a moderate recovery, stagnant
Reuters
wages, depressed consumer prices and faltering global growth have raised fresh doubts about Prime Minister Shinzo Abe’s cocktail of stimulus policies aimed at quashing years of deflation. Even the central bank’s shock adoption of negative interest rates late last month has hardly helped turn around business sentiment, as it failed to boost Tokyo stock prices or weaken the yen. “Demand from China has slowed a lot and there are signs of demand for some semiconductor-related parts declining,” a manager at a rubber maker said in the survey. An electric machinery producer said: “Our business results stand at the previous year’s levels but have somewhat fallen short of our estimate. Yen rises could aggravate the situation.” The service sector index fell to 21 from 27 in January, weighed by retailers and wholesalers. The index is seen unchanged in the next three months. Reuters
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Business Daily | 13
February 22, 2016
Asia South Korea in suspected US$2 bln intervention The won has become Asia’s worst performing currency due to risk-off sentiment Christine Kim and Yena Park
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outh Korean foreign exchange authorities were suspected to have sold around US$2 billion to prop up the won, shortly after issuing a stern warning against herd behaviour to curb the local currency’s weakness against the dollar. The won hit a 5-1/2-year low, leading weekly losses among regional currencies on Friday, as foreign lenders such as custodian banks dumped it amid bond outflows. The Bank of Korea and finance ministry warned they would take all measures necessary against excessive movements in dollar-won trading, which helped the currency curb early losses, but still, the won slipped lower for a fourth straight session. For the last week, the won lost
KEY POINTS Won was trading as low as 1 pct against dollar early on Friday Intervention estimated around $2 billion - dealers Won erased some losses, but closed down for 4th day
1.9 percent, its sharpest weekly percentage loss since early January. “Market participants have grown more aggressive about buying dollars recently as the authorities’ response to a weakening won had been soft until now,” said a bank dealer in Seoul to Reuters who declined to be identified. “What happens next is really up to the authorities’ attitude.” Another dealer said the won would keep weakening unless the authorities continued intervening. “If the authorities want to see bets on a weaker won taper off, they will have to keep selling dollars for a while,” the dealer said. As the won dropped as much as 1 percent in early trade, the authorities issued a warning against excessive movements. “The Bank of Korea and the government feel that recent movements in the dollar-won exchange rate have been excessive and are concerned that herd behaviour in the market has been intensifying,” the central bank and finance ministry said in the statement sent to Reuters. “Our foreign exchange officials’ stance that they will take measures against excessive movements has not changed and we will do all that is needed if necessary.” Several dealers told Reuters shortly after the warning that they suspected foreign exchange authorities of selling dollars aggressively to support the won, spending an estimated US$2 billion. The won has become Asia’s worst performing due to risk-off sentiment that has seen outflows from Asia’s fourth-largest economy since late last year. South Korea’s central bank governor acknowledged this week that the softening economy may warrant policy easing soon, which has also aggravated selling in the won. Reuters
Sri Lanka raises rates unexpectedly The central bank in a statement said its Monetary Board had observed “certain risks to macroeconomic stability continue”
South Korean exports tumble again South Korean exports shrank by one-sixth for the first 20 days of this month from a year earlier despite longer working days, data showed yesterday, adding to concerns that the global economy was losing momentum. South Korean exports during the February 1-20 period totalled US$22.16 billion, down 17.3 percent from the comparable period of 2015, while imports fell 17.4 percent to US$20.19 billion, according to the data from the Korea Customs Service. Exports and imports during the first 20 days of this month would be about 20 percent each less than a year earlier, Thomson Reuters calculations show.
World Bank approves funding for Philippines The World Bank on Saturday approved US$450 million of funding for the Philippines’ flagship anti-poverty program, which will provide basic healthcare and education to millions of families until 2019. The financing, under the bank’s Social Welfare Development and Reform Project II, will cover about 7 per cent of the total cost of implementing what is known as the conditional cash transfer (CCT) program. Manila has allocated about 62.7 billion peso (US$1.32 billion) from its 2016 budget for the scheme, which is expanding this year to cover 4.6 million households.
Car production suspended in north India amid protests Maruti Suzuki India Ltd, India’s biggest carmaker by sales, said it had suspended operations at its northern auto plants after protests disrupted the supply of some components. In a statement posted on its website, Maruti Suzuki said it had stopped manufacturing at the Manesar and Gurgaon plants on Saturday. The factories produce a combined 5,000 vehicles daily. The automaker said it was trying to find other parts suppliers not affected by the protests, adding it would resume normal operations when the supply is restored. It did not specify a date.
Shihar Aneez and Ranga Sirilal
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ri Lanka’s central bank unexpectedly raised its key policy interest rates by 50 basis points on Friday from a record low, to prevent demand-driven inflationary pressure. Rates were raised for the first time almost in four years with the bank increasing the standing deposit facility rate (SDFR) to 6.50 percent and the standing lending facility rate (SLFR) to 8 percent. A Reuters poll had predicted rates to be kept steady. Commercial banks’ statutory reserve ratio was left unchanged at 7.50 percent. The rate hike comes as Sri Lankan is in initial talks with the IMF about a loan amid concerns over pressures on its balance of payments, outflows from government bonds, a ballooning fiscal deficit and heavy downward pressure on the rupee. The central bank in a statement said its Monetary Board had observed “certain risks to macroeconomic stability continue”, in spite of the recent policy measures and some upward adjustments observed in market interest rates.
Radioactive leakage at Japanese nuclear plant “The Monetary Board was of the view...continued upward trend in underlying inflation requires preemptive policy measures in order to contain further build-up of demand driven inflationary pressures,” it said.
Higher foreign debt repayments and the central bank’s heavy intervention to prop up a falling rupee have depleted Sri Lanka’s reserves by around a third to US$6.3 billion as of January 31, from a peak in October 2014. Reuters
Credit growth slows
Private sector credit growth by commercial banks grew at 25.1 percent in December, slowing for the first time since August 2014. It slowed from 27 percent in November. Currency dealers said the policy move will ease the pressure on the rupee, which fell 9 percent last year, while stockbrokers said there will be selling pressure in stocks with investors shifting to fixed assets. Rupee is under pressure due to strong imports and foreign selling of government securities. “This will give a policy direction that the interest rates are on the way up. So that’s the signal to the market. This will ease the policy uncertainty little bit,” said Shiran Fernando, an analyst at Colombo-based Frontier Research.
KEY POINTS Central bank raises rates for the first time in almost 4 yrs Rate hike comes as Sri Lanka in initial IMF loan talks Private sector credit growth slows in December Analysts see ease in rupee, selling pressure on stocks
Japan’s nuclear power-reliant utility Kansai Electric Power said on Saturday it had found a pool of contaminated water at a nuclear reactor slated to restart in late February after years of being shut down. In a statement posted on its website, Kansai Electric said it has found 34 litres of radioactive water at the No. 4 unit at its Takahama nuclear plant in Fukui prefecture, 500 km west of Tokyo. The water has been cleared and there has been no impact on the environment, the company said, adding that it is investigating the reasons for the leakage.
PTT returns to net profit in Q4 PTT Pcl, Thailand’s largest energy firm, said on Friday it returned to a small net profit in the fourth quarter, though it missed analysts’ expectations mainly due to a huge impairment loss from its coal business. Net profit was 188 million baht (US$5.26 million) for the October-December quarter, versus a loss of 25.8 billion baht a year earlier. PTT booked an impairment loss of 20.3 billion baht for its coal assets after price declines as global oil prices hit an 11-year low in late 2015, it said in a statement.
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February 22, 2016
International IMF re-elects Lagarde The International Monetary Fund on Friday said its board re-elected Managing Director Christine Lagarde to a second five-year term, starting on July 5. Lagarde, the only candidate nominated for the post, was elected “by consensus,” the IMF said in a statement. Lagarde, who took over the post in 2011, has overseen an easing of Europe’s sovereign debt crisis and has implemented changes to give greater influence in the Fund to emerging markets including China and Brazil.
Cameron calls June 23 Brexit referendum after clinching deal The Prime Minister was given a fillip on Saturday when Business Secretary and Home Secretary threw their support behind the campaign to remain on February 17 found he’s second to only Cameron when it comes to influencing whether voters choose to stay or go. Unlike the “bitterly divided” Tories, the opposition Labour Party is largely united on the issue of Europe, its foreign affairs spokesman, Hilary Benn, said Saturday in a BBC radio interview. Labour Party leader Jeremy Corbyn, who’s held ambiguous views on the issue in the past, also threw his weight behind the campaign to stay.
Citigroup to exit retail banking in Brazil, Argentina Citigroup Inc said it plans to exit its retail banking and credit card operations in Brazil, Argentina and Colombia as part of its efforts to cut costs and boost profitability. Shares of the bank, which has operated in Argentina and Brazil for more than a century, were down 1.3 percent at US$38.40 in early trading on Friday. The U.S. bank, built with a series of acquisitions dating back to the 1980s, has been trying to slim down since the financial crisis to be as profitable as its rivals.
Russia’s central bank chief supports roubles loans The bulk of banking loans in Russia should be in roubles to minimise risks related to currency fluctuations, Elvira Nabiullina, Russian central bank governor, told Reuters in an interview. As weak oil and sanctions have knocked the rouble, the central bank has taken drastic measures, including hiking the benchmark interest rate in December 2014 to 17 percent. The rate is now 11 percent. The central bank has also started tightening regulation to contain risks related to foreign currency exposure in the Russian banking system, already asking banks to set aside more capital against retail forex loans.
U.S. becomes Germany’s top trading partner The United States became the top destination for German exports last year, overtaking France for the first time since 1961 thanks to an upturn in the U.S. economy and a weaker euro, data from Germany’s Statistics Office showed on Saturday. Exports to the United States rose by 19 percent to 114 billion euros (US$127 billion) in 2015, compared with an increase in French purchases of 2.5 percent to 103 billion euros. It was the first time in more than half a century that France was not Germany’s biggest trading partner.
Brazil relaxes 2016 fiscal goal Brazil’s government said on Friday it will cut its key fiscal target to a deficit from a surplus this year if tax revenue continues to fall, in a move that increased market doubts about leftist President Dilma Rousseff’s commitment to austerity. Rousseff’s government, under pressure from investors and the business community to cut spending amid a deep recession, will be able to run a deficit of 1 percent of gross domestic product before interest debt payments under the new target. The government had targeted a primary surplus of 0.5 percent of GDP.
Emergency brake British Prime Minister David Cameron (C) sits with other EU heads of state and government in a round table meeting at an EU summit in Brussels on Friday
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rime Minister David Cameron said he’ll hold a long-pledged referendum on the U.K.’s membership of the European Union on June 23, signalling the start of a fourmonth campaign that immediately exposed rifts in his Conservative Party. “Leaving Europe would threaten our economic and our national security,” Cameron said outside his official Downing Street residence in London Saturday. Cameron’s announcement follows intense negotiations in Brussels over the past two days to finalize a deal with EU leaders resetting Britain’s relationship with the 28-nation bloc. Now, attention turns to the stance of ministers who have been given a free hand by Cameron to campaign
against the government’s position. They were asked not to announce their intentions until after the cabinet meeting. Divisions among the Tories were immediately in evidence when several ministers were pictured at a rally by Vote Leave, one of several groups campaigning for an exit from the EU. Chancellor of the Exchequer George Osborne, who’s helped spearhead the U.K.-EU discussions, told the BBC the U.K. will be “safer” staying in the European Union. “The alternative is a huge leap in the dark, with the risks that that entails for our country, for its economy and for our security,” he said. The views of London Mayor Boris Johnson will be the most closely watched, after an Ipsos Mori poll
The U.K. won a seven-year “emergency-brake” period in which it can impose welfare curbs on other EU citizens arriving to work in Britain, as well as provisions for its financial services industry and agreement that the EU goal of “ever closer union” doesn’t apply to Britain. Cameron “only ever asked for minor changes,” Vote Leave Chief Executive Officer Matthew Elliott said in a statement. “He will now declare victory but it is an entirely hollow one.” Grassroots Out’s rally late Friday included speeches by Conservative lawmakers David Davis, Tom Pursglove and Peter Bone, Labour’s Kate Hoey, and U.K. Independence Party leader Nigel Farage, whose pressure before last year’s general election fed into Cameron’s decision to call a referendum. Bloomberg News
Faster U.S. CPI inflation still not moving key dial for Fed Investors expect fewer if any hikes this year Jason Lange
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rise in the barometer of consumer prices most familiar to Americans has failed to show up in an inflation measure closely watched by the Federal Reserve, making it unlikely the central bank will raise interest rates next month. The Labour Department said on Friday its Consumer Price Index (CPI) rose 2.2 percent in January from a year earlier when factoring out food and energy. This “core” reading has been accelerating since the end of 2014 but the Fed puts more emphasis on a separate core inflation reading produced by the Commerce Department that policymakers feel is more accurate. The Commerce Department’s Personal Consumption Expenditures (PCE) index shows inflation didn’t budge last year and December’s 1.4 percent reading, the latest available, was well below the Fed’s 2 percent
target. This has kept the Fed’s ratesetting committee, known as the FOMC, on edge. Friday’s data “should provide some relief, though it is unlikely to change the current policy bias to stay on the side-line at the March FOMC meeting,” said Millan Mulraine, an economist at TD Securities in New York. Fed policymakers put special emphasis on core inflation because stripping out volatile food and energy prices arguably gives a better view of where inflation is heading. Even so, officials are unsure how much a strong dollar is depressing core prices by lowering the cost of imports and policymakers are increasingly divided about the inflation outlook. Cleveland Fed President Loretta Mester, who has backed rate hikes for longer than most Fed policymakers, said on Friday that inflation appears on track to rise to 2 percent. But
another long-time hawk on rate policy, St. Louis Fed President James Bullard, said two days earlier it was unwise to lift borrowing costs further. Investors expect fewer if any hikes this year and the minutes of the Fed’s January 26-27 meeting said officials discussed changing their outlook for the path of policy. Economists generally see the PCE index as more accurate than the CPI index because it more quickly accounts for shifts in consumer spending toward different products and services. The PCE index also weights spending categories differently, giving slightly less importance to housing costs like rising rents which have pushed the CPI index higher. Economists expect the PCE index to eventually follow the CPI higher if the global slowdown doesn’t deal a heavier blow to the U.S. economy. Reuters
Business Daily | 15
February 22, 2016
Opinion Business
wires
No Brexit
Leading reports from Asia’s best business newspapers
Anatole Kaletsky
Chief Economist and Co-Chairman of Gavekal Dragonomics and the author of Capitalism 4.0, The Birth of a New Economy
THE KOREA HERALD Samsung Electronics Co. said Saturday it plans to release its mobile payment system Samsung Pay in major markets, including China, next month, speeding up its efforts to expand the presence of the platform amid the rise of rivalry services. Samsung Pay, first released in South Korea and the United States last year, boasts around 5 million users. The South Korean tech giant said the service will kick off in China next month, adding that it is also preparing to launch in Australia, Brazil, Spain and a handful of other countries.
TAIPEI TIMES During a debate convened by groups that aim to make the Chinese Nationalist Party (KMT) more appealing to young people, three of the party’s chairperson hopefuls fielded questions on key areas, such as what to do with the party’s controversial assets and what its core values are. The debate was organized by the Grassroots Alliance, Open KMT and the Chong Shing Elites of the Kuomintang and was attended by KMT chairperson hopefuls, Acting Chairperson Huang Min-hui, Taipei City Councilor Lee Hsin and Legislator Apollo Chen. Dozens of young attendees showed up for the event, which was streamed online.
PHILSTAR The amount of rediscount loans extended to local banks to finance the needs of businesses and households fell 82 percent in January amid strong liquidity in the financial system. Data showed availments under the central bank’s peso rediscount facility amounted to P11 million last month or P50 million lower compared to P61 million in the same month a year ago. Out of the total amount, bulk or 62.3 percent went to capital expenditures under other credits while 37.7 percent went to agricultural credits, the Bangko Sentral ng Pilipinas said.
BANGKOK POST Airports of Thailand Plc (AoT) says it has moved to deal with the problems related to soft surfaces at Suvarnabhumi airport that pose safety concerns for aircraft. Sirote Duangratana, general manager of Suvarnabhumi airport, insisted that AoT had not overlooked the issues raised by the International Air Transport Association (IATA). The airport has had both immediate and long-term action plans in place for quite some time to resolve the “soft spots” on the tarmac, taxiways and apron areas where aeroplanes became stuck, he told the Bangkok Post on Friday.
British Prime Minister David Cameron leaves at the end of an extraordinary two days EU summit at EU headquarters in Brussels on Friday
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mong the multiple existential challenges facing the European Union this year – refugees, populist politics, German-inspired austerity, government bankruptcy in Greece and perhaps Portugal – one crisis is well on its way to resolution. Britain will not vote to leave the EU. This confident prediction may seem to be contradicted by polls showing roughly 50% support for “Brexit” in the June referendum. And British public opinion may move even further in the “Out” direction for a while longer, as eurosceptics ridicule the “new deal” for Britain agreed at the EU summit on February 19. Nonetheless, it is probably time for the world to stop worrying. The politics and economics of the question virtually guarantee that British voters will back EU membership, even though this may not become apparent in public opinion polls until a few weeks, or even days, before the vote. To understand the dynamics that strongly favour an “In” vote, start with the politics. Until this month’s deal, Britain’s leaders were not seriously making the case against Brexit. After all, Prime Minister David Cameron and his government had to pretend that they would contemplate a breakup if the EU rejected their demands. Under these circumstances, it was impossible for either Labour politicians or business leaders to advocate an EU deal that Cameron himself was not yet ready to promote. The Out lobby therefore enjoyed a virtual monopoly of public attention. This situation may briefly persist, even though the EU deal has now been agreed, because Cameron has no wish to antagonize his party’s implacable Eurosceptics until it is absolutely necessary; but as the referendum approaches, this political imbalance will abruptly reverse.
One reason is Cameron’s decision to release his ministers from party discipline during the referendum campaign. Initially viewed as a sign of weakness, Cameron’s move has turned out to be a masterstroke. Having been offered the freedom to “vote your conscience” on the EU deal, every significant Conservative politician has come round to support Cameron. These newfound EU loyalists include two of the most potentially influential eurosceptics, London Mayor Boris Johnson and Home Secretary Theresa May. As a result, the Out campaign has been left effectively leaderless and has already split into two rival factions – one driven mainly by anti-immigrant and protectionist sentiment, the other determined to concentrate on neoliberal economics and free trade. As the political tide turns, it can be confidently predicted that the British media and business opinion will follow, mainly because of direct financial interests. For example, Rupert Murdoch, whose outlets dominate the media landscape, needs membership in the EU single market to consolidate his satellite TV businesses in Britain, Germany, and Italy. Another powerful motivator for Murdoch, as well as for other media proprietors and business leaders, is to be on the winning side and to maintain good relations with Cameron, unless they see overwhelming evidence that he will lose. That brings us to the main reason for ignoring current opinion polls: Only when Britain starts seriously debating the costs and benefits of leaving the EU – and this may not happen until a few weeks before the referendum – will voters realize that Brexit would mean huge economic costs for Britain and no political benefits whatsoever. The economic challenges of Brexit would be overwhelming.
The French, German, and Irish governments would be particularly delighted to see UK-based banks and hedge funds shackled by EU regulations
The Out campaign’s main economic argument – that Britain’s huge trade deficit is a secret weapon, because the EU would have more to lose than Britain from a breakdown in trade relations – is flatly wrong. Britain would need to negotiate access to the European single market for its service industries, whereas EU manufacturers would automatically enjoy virtually unlimited rights to sell whatever they wanted in Britain under global World Trade Organization rules. Margaret Thatcher was the first to realize that Britain’s specialization in services – not only finance, but also law, accountancy, media, architecture, pharmaceutical
research and so on – makes membership in the EU single market critical. It makes little economic difference to Germany, France, or Italy whether Britain is an EU member or simply in the WTO. Britain would therefore need an EU association agreement, similar to those negotiated with Switzerland or Norway, the only two significant European economies outside the EU. From the EU’s perspective, the terms of any British deal would have to be at least as stringent as those in the existing association agreements. To grant easier terms would immediately force matching concessions to Switzerland and Norway. Worse still, any special favors for Britain would set a precedent and tempt other lukewarm EU members to make exit threats and demand renegotiation. Among the conditions accepted by Norway and Switzerland that the EU would surely regard as non-negotiable are four that completely negate the political objectives of Brexit. Norway and Switzerland must abide by all EU single market standards and regulations, without any say in their formulation. They agree to translate all relevant EU laws into their domestic legislation without consulting domestic voters. They contribute substantially to the EU budget. And they must accept unlimited EU immigration, resulting in a higher share of EU immigrants in the Swiss and Norwegian populations than in the UK. If Britain rejected these encroachments on national sovereignty, its service industries would be locked out of the single market. The French, German, and Irish governments would be particularly delighted to see UKbased banks and hedge funds shackled by EU regulations, and UK-based businesses involved in asset management, insurance, accountancy, law, and media forced to transfer their jobs, head offices, and tax payments to Paris, Frankfurt, or Dublin. When confronted with this exodus of high-value service jobs and businesses, Britain would surely balk and accept the intrusive regulations entailed by Swiss and Norwegian-style EU association agreements. Ultimately, Brexit would not only force a disruptive renegotiation of economic relations; it would also lead to a loss of political sovereignty for Britain. Or maybe just for England, given that Scotland would probably leave the UK and rejoin the EU, taking many of London’s service jobs to Edinburgh in the process. Once Britain’s political, business, and media leaders start drawing attention to these hard facts of life after Brexit, we can be confident that voters will decide to stay in the EU. Project Syndicate
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Closing Beijing eyes public-private partnerships for priority projects
Australia issues terror warning for Kuala Lumpur
The Beijing government is going to encourage the private sector to get involved in publicprivate partnerships to fund key projects in transportation, the environment and industry, the city’s bureau of finance said yesterday. The construction of a railway and three inter-city roads, a forest for water conservation, and a steel plant in neighbouring Hebei Province are among the major projects. The government is prioritizing schemes to reduce air pollution and traffic jams, and also needs investment to build the planned new municipal administrative centre in suburban Tongzhou District, an official with the bureau said.
Terrorists may be planning attacks in and around Kuala Lumpur, Malaysia, the Australian government said in a post on its website yesterday. The government said attacks may target Western interests or locations frequented by Westerners. The U.K. also warned citizens in the past week against travel to coastal islands in the east Malaysia state of Sabah, near the Philippines, citing high threats to foreigners of kidnapping and criminality. Australia advises its citizens to exercise normal safety precautions across Malaysia. It urged them to avoid all travel to the coastal resorts of eastern Sabah. New Zealand classifies travel to the area as “high risk.”
China diesel exports slide as price floor boosts domestic profit The nation’s net oil product exports fell 76 percent in January from the previous month to 350,000 metric tons
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hina’s diesel exports fell from a threemonth high while imports surged as the government’s decision to halt fuel price cuts amid crude’s crash made domestic sales more attractive. The world’s largest energy consumer shipped overseas 730,000 metric tons of diesel in January, the lowest in five months, data from the General Administration of Customs showed yesterday. While that’s more than tenfold the same period a year ago, exports slid 26 percent from about 980,000 tons during the previous month. Imports more than tripled from December to 150,000 tons, the highest in 10 months. China has been flooding regional markets with diesel as stockpiles of the fuel swell amid slowing industrial activity and shifting demand growth toward gasoline. The government’s decision not to cut retail prices when oil falls
below US$40 a barrel has made domestic sales more profitable compared with exports, according to ICIS China, a Shanghai-based commodity consultant. Brent crude, the global benchmark, closed down 3.7 percent at US$33.01 a barrel on Friday.
“Refiners definitely prefer to sell in local markets where margins are better, and a few traders have actually started to import,” Lin Jiaxin, an analyst with ICIS China, said before the data were released. “Diesel exports will remain subdued until March, when
some teapot refineries may export some cargoes.”
Export slump
China more than doubled its first batch of fuel-export quotas for this year to 20.93 million tons, ICIS China said on January 6. Five companies,
Ex-BOJ official sees side-effects Mainland film industry eyes more from negative rate policy success after holiday record
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he Bank of Japan’s new negative interest rate policy may bring “side-effects” if the central bank further pushes rates into the red, a former BOJ chief economist said yesterday. Hideo Hayakawa, who was an executive director at the BOJ before he retired in 2013, said on a NHK television discussion show that people won’t see negative rates at the current minus 0.1 percent level. Even so, he said there were cases in Europe where negative rates have led to individuals being charged on their deposits. The Japanese central bank on Tuesday started charging 0.1 percent on a portion of the excess funds that financial institutions have in its accounts. When it introduced the policy at its January meeting, the BOJ said it would cut the rate further “if judged as necessary,” prompting fears that individuals may face charges on money kept in bank deposit accounts. “In European countries where negative rates are close to minus 1 percent, smaller financial institutions are charging a small handling fee for small-size deposit accounts,” said Hayakawa, who is now a senior executive fellow at the Fujitsu Research Institute. Japan has joined central banks in the euro area, Switzerland, Denmark and Sweden in introducing a negative rate policy.
ecord box office sales in the first week of the Year of the Monkey suggested another explosive year for the Chinese film market, the world’s second largest. Chinese cinemas took 3 billion yuan (US$461 million) in ticket sales during the six days of the Lunar New Year holiday. Box office from February 8 to 13 was up 67 percent on the same period last year, according to the State Administration of Press, Publication, Radio, Film and Television (SAPPRFT). On Valentine’s Day, which fell on the seventh day of the Lunar New Year, ticket sales totalled 580 million yuan, surging by more than 150 percent year on year. Valentine’s Day coming immediately after the Lunar New Year holiday grouped together two of the biggest occasions for cinema-going in one week. With average daily box office exceeding 500 million yuan and around 100 million people going to cinemas every day, the week saw several records smashed, including single-day ticket sales and the number of films raking in more than 100 million yuan in daily box office.
Bloomberg News
Xinhua
including four independent refiners, known as teapots, obtained a combined 430,000 tons of fuel- export licenses for the first time, it said. The nation’s net oil product exports -- a measure that strips out imports -fell 76 percent in January from the previous month to 350,000 metric tons, the lowest since June, according to calculations based on preliminary customs data released earlier this month. The decline in net exports was also partly due to cold weather that boosted domestic demand, analysts at Citigroup Inc. including Ivan Szpakowski said in a report February 15 Also in January, gasoline exports rose 92 percent from last year to 590,000 tons. Although kerosene shipments were 1.4 percent higher from the same period a year ago, they fell from December to 940,000 tons, the lowest since July. Bloomberg News
10 dead in caste riots in India
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en people have died in caste protests which triggered widespread arson and looting in a north Indian state, police said yesterday, as New Delhi faced a water crisis after mobs shut down a key supply. Thousands of troops with shoot-on-sight orders were deployed on Saturday in Haryana state, a day after week-long protests turned violent with rioters setting fire to homes and railway stations and blocking highways. Ten people have been killed and about 150 injured in the state since Friday when officers fired on rioters, Haryana police chief Yash Pal Singal told a press conference, updating earlier estimates of five dead. The Jat caste is leading the protests, demanding quotas for government jobs and university places, saying they are struggling to find employment and education opportunities despite India’s strong economic growth. India reserves places for lower castes in measures intended to bring victims of the country’s worst discrimination into the mainstream. But the policy causes resentment among Jats, a rural caste which owns farms, and among other communities, who say it freezes them out. AFP