MOP 6.00 Closing editor: Joanne Kuai
European Union lobby in China analyses weak spots of Mainland economy Page 8
Year IV
Number 986 Tuesday February 23, 2016
Publisher: Paulo A. Azevedo
HSBC hiring practices probed in U.S. Page 16
Macau Security head: “Handing two Hong Kong residents to Mainland legal” Page 4
Gov’t: Gaming revenue forecasts ‘reasonable’
A reasonable forecast. The Secretary for Economy and Finance Leong Vai Tac’s pronouncement on the government’s estimated MOP200 bln casino gaming revenue for 2016. The Secretary said revenue during CNY was similar to that posted in the same period in 2015. The annual forecast implies a 13 pct y-o-y decline in relation to 2015’s take of MOP231 bln. Gaming analysts Bernstein have a more upbeat outlook of MOP233 bln for 2016. While Wells Fargo analysts remain generally conservative Pages 5&6
Industrial production down The Index of Industrial Production (IIP) was 78.5 in Q4. Down 16.5 pct q-o-q. For the whole of 2015, the average IIP increased 14.5 pct y-o-y to 90.1. The production index of Electricity, Gas & Water Supply (83.9) rose 38.4 pct. While that of the Manufacturing Sector (99.0) dipped 4.3 pct
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Crimes reported to police in 2015 fell 2.6 pct y-o-y. Secretary for Security Wong Sio Chak said police conducted a total of 13,653 criminal investigations last year. A total of 5,476 people were referred to the Public Prosecutor’s Office for further investigation in 2015. Gaming-related cases recorded in 2015 increased 38 pct y-o-y
Tasked with restoring confidence. The new head of China’s securities regulator has his hands full. Following policy missteps by his predecessor. Analysts say, however, that Liu Shiyu faces the same old problems. Namely, shattered market confidence and the need for sweeping reforms
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Brought to you by
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HSI - Movers February 22
Balancing act
Name
The AMCM head is satisfied. In 2015, the local banking sector’s assets, savings, and loans amounted to MOP1,341 bln, MOP860 bln and MOP760.7 bln, respectively. Indicating respective growth of 14.2 pct, 8.7 pct and 21.1 pct albeit lower than 2014 levels
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Property www.macaubusinessdaily.com
Crime figures down
Restoring confidence
Wait and see
%Day
Bank of East Asia Ltd/T
+9.19
Hang Seng Bank Ltd
+6.49
China Life Insurance Co
+3.63
Sun Hung Kai Propertie
+3.53
Hang Lung Properties L
+3.09
Want Want China Hold
-0.36
Link REIT
-0.69
China Overseas Land &
-1.27
China Resources Land L
-2.19
HSBC Holdings PLC
-2.19
Source: Bloomberg
Continued freefall in residential property prices. And a familiar refrain from the real estate industry. Calling for the removal of special stamp duty. And relaxing the mortgage lending rules. The gov’t has made no pledge to tweak the rules as Macau’s mortgage delinquency ratio remains low. But pledges to remain watchful
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February 23, 2016
Macau Gov’t Spokesperson’s Office tenure extended to 2018 The government has extended the tenure for the Government Spokesperson’s Office for two years to February 22, 2018, according to the Official Gazette released yesterday. Chief Executive Fernando Chui Sai On said in a dispatch that the extension is due to the Office currently working on several tasks. The Government Spokesperson’s Office was first established in 2010 for the purpose of “better communication with the public”. The initial duration of the Office was set at two years but allowed for extension. The Office is currently led by Victor Chan Chi Ping.
Wong Sio Chak: Local security remains stable despite increased gaming crime Wrapping up the crimes data for the whole year of 2015, the Secretary for Security said the rise in the number of gaming-related crimes does not mean local security has worsened Kam Leong
kamleong@macaubusinessdaily.com
86.4 per cent year-on-year to 410 whilst loan sharking cases jumped 48.1 per cent year-on-year to 354, according to data.
Upward trend
T Taxi violations soar in 2015 In 2015, joint enforcement of the Public Security Police Force (PSP) and the Transport Bureau (DSAT) led to the prosecution of a total of 5,079 cases of taxi violation, which soared 204.9 per cent year-on-year from 1,666. According to the Secretariat for Security, 1,874 cases were related to taxi drivers refusing to take passengers while some 1,233 cases were related to drivers overcharging, which accounted for 37 per cent and 24 per cent of the total, respectively. Meanwhile, PSP prosecuted a total of 357 cases of unlicensed taxi services last year, nine of which were related to taxihailing mobile application Uber. Secretary for Security Wong Sio Chak noted in the press briefing yesterday that the operations of Uber violated local law but its operator had changed its operation model. He claimed that the
local police had not changed their stance and enforcement strength regarding the mobile application.
Overstayers, illegal immigrants down Local police caught a total of 30,506 overstayers and illegal immigrants in the territory last year, down 38.6 per cent compared to 2014. The majority, 88 per cent, were from Mainland China. According to official data, Chinese illegal immigrants amounted to 1,778 for last year. Meanwhile, some 4,005 Chinese visitors travelling to the city on the Individual Visit Scheme and some 21,048 with other Chinese visas were found to have overstayed. On the other hand, foreign overstayers totalled 3,140 in the year while non-Chinese illegal immigrants amounted to 535, of whom 511 were Vietnamese.
he Secretary for Security Wong Sio Chak claimed yesterday that there was no sign of the gaming slump affecting the security of the territory despite gaming related crimes surging 38 per cent year-onyear for the whole year of 2015. “Up until now, the police have not received any intelligence indicating there are unusual movements by triad groups due to the gaming adjustment phase…In fact, the gaming slump has not had any effects on the city’s security,” he said at the Secretariat’s press briefing for the 2015 crimes number yesterday. Last year, the Judiciary Police (PJ) opened files on 1,553 gaming-related crime cases and reports, a jump of 428 cases from 2014’s 1,125. In addition, the Secretariat’s official data showed that some 1,724 crimes were related to local casinos properties, of which 1,317 occurred in these gaming venues. The increase in the gaming related crimes is primarily reflected by the significant growth of illegal detainment and loan sharking. In 2015, the number of illegal detainments surged
“The number of loan sharking [cases] had increased quarter by quarter in 2015, amounting to 68, 85, 87 and 114 cases, respectively… such a trend is worth attention,” the security head said. But he added that the authorities’ increased enforcement was also a factor ‘driving up’ the number of these two kinds of crime. “The growth of these two kinds of cases is partly due to the police taking more initiatives to open files. In addition, most of these crimes happened in casinos, suggesting they did not affect the social security outside the properties,” the Secretary claimed. Meanwhile, security bodies transferred a total of 1,737 suspects involved in gaming related cases to the Public Prosecutor’s Office, up 57.6 per cent year-on-year. Mr. Wong claimed that most of these suspects, as well as victims in these cases, were not local residents. On the other hand, the data shows that the authorities had discovered fake casino chips worth HK$11.3 million last year, a notable jump from 2014’s HK$1.66 million. In total, the Special Administrative Region recorded 13,653 cases of crime for 2015, which is a slight decrease of 2.6 per cent from 2014’s 14,016. Property violations accounted for 55 per cent of the total despite the number dropping some 3.3 per cent year-on-year to 7,584. “Although we haven’t discovered any sign hinting that social security is worsening due to the gaming downturn, the local police will strengthen its enforcement, pay close attention and evaluate the possible negative effects on local security brought about by the adjustment phase in order to prevent any instability,” the Secretary said.
4 | Business Daily
February 23, 2016
Macau Gov’t sets up committee for Sino-Luso platform The government has announced the establishment of a committee for trade and commercial co‑operational service platform between China and Portuguese-speaking countries, effective today. A dispatch by Chief Executive Fernando Chui Sai On said yesterday that the establishment seeks to increase the speed and efficiency of developing the city into such a platform. The committee will comprise 17 members, led by the CE as president and Secretary for Economy and Finance Lionel Leong Vai Tac as vice president. The expenses of the committee will be met by the Macau Trade and Investment Promotion Institute (IPIM).
Banking sector grows at milder rate in 2015 AMCM head said growth in profits, assets, savings and loans was evident in the well‑capitalised banks last year
MOP760.7 billion in 2015, an increase of 21.1 per cent; but a slower increase compared to the 29 per cent of 2014. Profits after tax amounted to MOP11.7 billion by the end of 2015 with a growth rate of 21.1 per cent, which, however, showed a slower increase compared to 26 per cent in 2014.
Annie Lao
Capability
annie.lao@macaubusinessdaily.com
I
n 2015, local banks posted a growth in their assets amounting to MOP1,341 billion (US$168 billion), a 14. 2 per cent increase compared to a year ago, said President of the
Monetary Authority of Macau (AMCM) Anselmo Teng Lin Seng at the Spring luncheon held by the Macau Association of Banks yesterday. However, according to official data, the
growth rate was slower than the 19 per cent increase of 2014. Official data also indicates that savings held by banks last year amounted to
MOP860 billion with an increase of 8.7 per cent in 2015, but a decrease when compared to the 16 per cent growth of 2014. The value of loans issued amounted to
Wong: “Handing two Hong Kong residents to Mainland legal” There is no extrajudicial agreement between Macau and the Mainland yet. But the Secretary for Security said that the handover of two wanted Hong Kong fugitives to the country in 2007 and 2008 did not violate local laws, although the city’s top court perceives it did
S
ecretary for Security Wong Sio Chak said yesterday that local enforcement bodies were merely executing their obligations to the International Criminal Police Organization (Interpol) in turning over two Hong Kong residents to the Mainland authorities in 2007 and 2008, indicating that such actions were in line with the city’s laws. In 2007 and 2008, two Hong Kong permanent residents were turned over by local law enforcement authorities to the Mainland – which was ruled then by the Court of Final Appeal
as ‘illegal and undermined justice in Macau.’ “These two Hong Kong residents were both wanted by Interpol in 2007 and 2008. Meanwhile, Macau’s Criminal Procedure Code does not rule that Hong Kong residents cannot be handed over,” the Secretary said in a press briefing yesterday. Mr. Wong claimed that Judiciary Police (PJ) only took action against the two red-flagged fugitives following requests from Interpol filed by the Mainland authorities. He added that the turning over of the two Hong
Kong citizens to Mainland China was agreed and dispatched by an assistant prosecutor-general. But these two Hong Kong residents later received writs of habeas corpus from the Court of Final Appeal after it had ruled that the local government cannot turn over fugitives as the Criminal Procedure Code regulates no transfer should be allowed without interregional extrajudicial agreements. According to the Secretary, the fugitive caught in 2007 had already been released but the other wanted
Macau’s banks have managed to achieve a well-maintained capital system, with sufficient assets and good liquidly for 2015, the president of AMCM said at the event yesterday. The banks’ nonperforming loan ratio stood at 0.12 per cent at the end of 2015, which was the same as in 2014. The capital adequacy ratios of Macau’s banks also exceeded Basel III standards. The ratio stood at 15.1 per cent in 2015 when compared to the 14.23 per cent of 2014, which is higher than the standard 10.5 per cent to 13 per cent benchmark requirement. Basel III requirements are international and voluntary standards ensuring a bank has the capital adequacy ability to manage banking risk. Developing a ‘unique financial industry’ with special features has been one of the main goals of the MSAR administration, said Mr. Teng. In order to develop its financial platform, Mr. Teng encouraged the banking sector to take advantage of Macau being a tree port, and promote businesses such as financial leasing and wealth management.
by the Chinese authorities had been transferred to the Mainland before the top court issued the writ. “These two transfers totally obeyed local laws and procedures. There is no secret hidden. In fact, the cases were reported to the public at that time. I don’t understand why they were repeated again recently. But it’s O.K. as our enforcement is legal and is transparent for the public,” Mr. Wong said. He added that the Public Prosecutor’s Office still disagrees with the top court’s rulings on the two cases. However, in order not to trigger conflicts with the court again, the Secretary said the Office has decided not to hand over any fugitives again. Last July, an alleged corrupt former member of China’s Communist Party, Wu Quanshen, was escorted back from the Special Administrative Region to Mainland China. PJ head Chau Wai Kuong stressed again yesterday that his department had only deported the ex-official rather than handed him over. According to Mr. Chau, the alleged corrupt person’s residency permit in the city was cut following after he was listed among Interpol’s 100 most-wanted fugitives. K.L.
Business Daily | 5
February 23, 2016
Macau
CNY gaming revenue equals that of last year While the city has seen an uptick in its 5-star hotel occupancy and visitor arrivals, gaming revenue during the Chinese New Year vacation has equalled that of last year Stephanie Lai
sw.lai@macaubusinessdaily.com
Visitor arrivals during Golden Week, inclusive of foreign employees and students, also increased 4.7 per cent year-on-year to over 1.07 million. “But apart from casino revenue, I think we should also focus more on the businesses made by the local small and medium enterprises (SMEs) during the Chinese New Year vacation and the spending made by both our visitors and residents,” Mr Leong remarked. “For that we’ve already requested the related departments to study the subject because the SMEs are also key to our economic vitality.”
Bullish on long term
T
he gaming revenue earned by the city’s casinos during the Chinese New Year vacation has basically equalled that of the same period last year, Secretary for Economy and Finance Lionel Leong Vai Tac told local media yesterday. “From the third to the fourteenth day of the Chinese New Year [February 10 to February 21] we observed that it [casino revenue] had equalled the same period last year,” Mr Leong said on the sidelines of a Macau Association of Banks’ event yesterday, noting that conventionally Chinese visitors started taking trips to Macau on the third day of the New Year vacation. “As the gaming revenue earned during Chinese New Year is almost equal to that of last year, we estimate that the gaming revenue of February will maintain at a similar level to December 2015 and January,” the Secretary said. Gross gaming revenue of the city’s casinos in January fell 21.4 per cent year-on-year to
MOP18.67 billion (US$2.33 billion), a 20th month losing streak of gaming earnings here.
Economic vitality
The city has seen an uptick yearon-year in the occupancy rate across 3-star to 5-star hotels during the ‘Golden Week’ of the Chinese New Year holiday lasting from February
7 to 13, the latest available data from Macao Government Tourism Office shows. While the average occupancy of 3-star to 5-star hotels during Golden Week was 93.4 per cent, that of 5-star hotels – many of them located in local casino-resorts – rose by nearly 3 per cent year-on-year to 96.2 per cent, according to official data.
While acknowledging that the city’s economic growth will still be impacted by reduced gaming earnings this year, the Secretary remarked that the government is confident about the gaming companies’ long-term investment interests in Macau. “For different reasons gaming companies have made changes to realising their investment plans,” Mr. Leong remarked when asked to comment on the delay in opening of the Cotai property of MGM China. “But we can see that the [gaming] companies are optimistic in Macau. They have been doing a lot of work on promotions, attracting their target clients and expanding the client base. As they sort out their problems, they will continue to invest in Macau. For this, we are very confident,” he added. MGM China announced last week that the opening of its casino-resort project in Cotai, originally scheduled to be launched in the fourth quarter of this year, has been moved to the first quarter of 2017. The firm said that it is a “strategic decision” that would give it more time to fine-tune their offerings amid current market conditions.
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February 23, 2016
Macau
Wells Fargo: Gaming revenues in February less than MOP18 billion The brokerage firm believes that GGR will decline 8 to 10 per cent during this month. Bernstein has a different view and says GGR may increase 0.2 per cent João Santos Filipe
jsfilipe@macaubusinessdaily.com
and Daniel is cautious. While it stresses that credit growth picked up ‘meaningfully’, it highlights that performing loans increased 51 per cent year-on-year in December and that the Chinese anticorruption campaign remains in full flood.
Optimistic tone
F
ebruary gaming revenues in Macau may come under MOP18 billion (US$2.25 billion) according to the latest estimation of Wells Fargo, which is predicting a decline ranging from between 8 and 10 per cent year-on-year during the second month of the year. ‘We estimate February revenues are pacing around minus 8 per cent to minus 10 per cent year-on-year’, the weekly update report of the brokerage firm published yesterday reads. In February last year, gross gaming stood at MOP19.54 billion, which at the time represented a decline
of 48.6 per cent year-on-year. Now taking into account the predictions of Wells Fargo, the Gross Gaming Revenue (GGR) of this month must stand between MOP17.98 billion and in the worst-case scenario MOP17.59 billion.
Various factors
Among the reasons to justify its prediction, Wells Fargo mentions that visitors to Macau are spending less and less. According to government data, in the first five days of the Chinese New Year the number of visitors increased 4.8 per cent to 730,000. However, in 2015 visitor spending in the territory
decreased for the first time since 2010. The report mentions the better environment in terms of investors, as stabilisation is considered already to be taking place. However, it says that there is the possibility of the new supply to the market being pushed out. This comes after MGM announced that the opening of MGM Cotai casino resort would be delayed to the first quarter of next year. Regarding the Mainland economy, where the largest source of players for Macau hails from, the report written by analysts Cameron McKnight, Robert J. Shore
The view of Wells Fargo is extremely negative in comparison to the view published yesterday by Sanford Bernstein. The latter is expecting gross gaming revenue in February to decline mildly or even increase. Assuming an average daily rate of MOP600 million to MOP620 million for the remainder of this month, February GGR would be MOP19.5 billion to MOP19.7 billion, representing a minor year-on-year decline, or a potentially positive yearon-year growth”, the report written by Vilaty Umansky and Simon Zhan reads. In a chart presented in the report, GGR for February is expected to grow 0.2 per cent. If this proves correct, February would be the first month since June 2014 that gaming revenues had increased in a month in comparison with the previous year. However, this is not expected to be a new trend.
Industrial production index up 14.5 pct in 2015 The production index of electricity, gas and water supply jumped by 38.4 per cent year-on-year, while that of the manufacturing sector was down 4.3 per cent
T
he city’s index of industrial production (IIP) registered a year-on-year increase of 14.5 per cent to 90.1 for the whole year of 2015, attributable to the jump in the supply of electricity, the latest official data released yesterday by the Statistics and Census Service (DSEC) reveals. Last year, the production index of electricity supply surged 50.1 per cent year-on-year to 79.4 from 52.9 in
2014, causing the average production index of electricity, gas and water supply to increase 38.4 per cent yearon-year to 83.9 from 60.6. But the manufacturing industry saw overall production drop for the whole year of 2015, with production index down 4.3 per cent year-onyear to 99. In terms of segment, the city’s manufacture of Chinese bakery products declined 4.3 per cent year-
on-year in the production index to 194.8, while that of the manufacture of tobacco fell some 5.5 per cent year-on-year to 147 for 2015.
Disappearing manufacturing
Nevertheless, the most significant decrease in production was recorded in the most minor manufacturing sector. For 2015, the production index of the manufacture of wearing apparel plunged 52.9 per cent year-on-year to 1.6.
“While it does not necessarily reverse the trend (as we believe March and April may register year-onyear decline again) February GGR is poised to top our earlier estimate (and street consensus), which could provide some upside catalyst to Macau gaming stocks in the near term”, the analysts wrote.
Annual revenue of MOP233 billion
The Bernstein report also addresses the estimation of Lionel Leong regarding the forecast of the government for the annual Gross Gaming Revenue, which was reaffirmed yesterday as MOP200 billion. “Lionel Leong sees the government’s 2016 estimate of GGR forecast of MOP200 billion as being reasonable. The government forecast implies a minus 13 per cent year-on-year decline in relation to 2015’s annual GGR of MOP231 billion. This is in contrast to our current 2016 estimate GGR forecast of MOP233 billion (plus 1 per cent year-on-year). We highlight our understanding that the government forecast is generally used for economic budgeting purposes, which tends to be conservative”, the analysts noted.
For the fourth quarter of 2015, the global industrial production index of the Special Administrative Region increased 14.9 per cent year-on-year. However, on a quarter-to-quarter comparison, the index represents a decrease of 16.5 per cent. The quarterly decrease in the global index is due to the production index of electricity, gas and water supply falling 27.2 per cent quarterto-quarter, coupled with the 10.7 per cent quarterly decrease in the of manufacture of food products & beverages. DSEC explained that the two industries’ quarter-to-quarter declines in production index for the three months are because of “the decrease in electricity generation and water treatment” as well as “reduced production”, respectively. K.L.
Business Daily | 7
February 23, 2016
Macau
AMCM head: City's mortgage delinquency ratio still at low level While the gov’t pledges to closely monitor the city's property market, it did not indicate that it would tweak existing mortgage lending rules Stephanie Lai
sw.lai@macaubusinessdaily.com
F
ollowing a year of downturn in the city's residential property prices, the government has made no pledge to tweak the existing mortgage lending rules while Macau's mortgage delinquency ratio remained low, according to the chairman of the Monetary Authority of Macao, Anselmo Teng Lin Seng. The call to remove the special stamp duty law and relax the tightened mortgage lending rules implemented in October 2012 was reiterated
by the president of the Macau General Association of Real Estate, Chong Sio Kin, yesterday, forecasting that the trend for falling home prices that started last year will very likely persist for this year. If the fall persists, it could result in a rising number of negative equity cases – especially for homebuyers who purchased their properties in 2013 and 2014, when the city's home prices rapidly increased, Mr. Chong remarked to media
yesterday at an Association event. “We will continue to closely monitor the property market,” said Mr. Teng yesterday when asked whether the existing mortgage lending rules will be changed. But he did not pledge any policy changes.
Healthy figures
The government introduced tightened mortgage lending rules in October 2012 at a time when the maximum loan-tovalue ratio for property worth MOP6 milllion to MOP8
million was downwardly adjusted from 70 per cent to 60 per cent; for properties worth over MOP8 million, the maximum loan-to-value ratio was further restrained to 50 per cent from the original 70 per cent. The loan-to-value ratio ceiling for the property worth MOP3.3 million to MOP6 million remains at 70 per cent. As for the requirement under the local special stamp duty law, property owners wishing to sell property within
the first year of purchase are required to pay an extra tax of 20 per cent of the transaction price; the levy is reduced to 10 per cent if the property is sold in the second year after purchase. “We will have a comprehensive review of the housing market here,” Mr. Teng told reporters. “The city's property prices have dropped but we have seen that our mortgage delinquency ratio is at 0.05 per cent. And that the other related figures still remain healthy.”
Developer: Gov’t to blame for land development delay The owner of a confirmed land concession says revised plan due to building height limit has been approved but not yet received construction permit
T
he spotlight has been trained on two plots of land located in ZAPE (Zona de Aterros do Porto Exterior) area on the Macau Peninsula, as questions have arisen why such plots have remained idle, while the government has been seen stepping up efforts to reclaim idle land. Local businessman and land developer Liu Chak Wan, who is also a member of the Executive Council of the government, claims to own one of the plots. He clarified that the concession was confirmed rather than temporary. But he said the authorities had failed to issue a construction permit while the plan for the project was previously approved. “We bought plot 134 back in 2004 when the [government’s] plan for the plot [zoned it] as residential and commercial buildings. It was already a confirmed land concession, otherwise we wouldn’t buy it,” Mr. Liu told reporters at a public event yesterday. The two plots at the foot of Guia Hill near Oriental Arch, coded 133 and 134, occupy 3,520 square metres and 7,802 square metres, respectively. The latter one comprises five plots, according to a statement issued by the Land, Public Works and Transport Bureau (DSSOPT) earlier this month. DSSOPT says that after the first leases of the two
plots expired in 1990 and 1998, respectively, the land grants had been revised into a confirmed type of land concession and have been renewed automatically every 10 years until now, without specifying any reason.
Height limit
In 2006, the development plan caused controversy in society as the height limit was around 130 metres and local residents complained that the building once erected could block the view of Guia Hill. The voice of society yielded some results as the high limit was then reduced to 90 metres when the government issued another dispatch in 2008. Mr. Liu indicated that they’ve revised the development plan in accordance with the government’s requirements, and cut the proposed height to around 20 storeys from the more than 30 storeys. The plan was later approved according to Mr. Liu but due to slow administrative procedures they’ve been suffering a loss. “When we bought the plot, the new height limit was not out. But we had paid the land premium already. The estimated loss back than was more than MOP1.6 billion,” said Mr. Liu. “The government promised us back then that all projects that were approved but affected because of height limit due to World Heritage
protection would be compensated, but it’s been more than 10 years and we still don’t know how or when we will be compensated.” Mr. Liu added he doesn’t know when the construction for the project can start. With scarce land resources in the MSAR, land use has
been under a lot of public scrutiny but the government has been criticised for being evasive in sharing relevant information on land grants with the public. Recent land disputes include the courts rejecting developer Polytex Corporation’s request to
Aerial shot from 1980. Source: DSSOPT
extend its land concession and land-use term. When the company had failed to complete the residential Pearl Horizon project before its temporary concession expired on December 25 last year, the SAR Government declared the company’s land grant invalid.
8 | Business Daily
February 23, 2016
Greater China
New stock regulator faces old problems Investors cheered news of his dismissal when the markets re-opened yesterday Bill Savadove
A
new stock market regulator chief could give China’s beleaguered shares a shortterm lift, but analysts say Liu Shiyu faces the same old problems as his ousted predecessor: shattered market confidence and the need for sweeping reforms. Xiao Gang was dismissed as chairman of the China Securities Regulatory Commission (CSRC), state media reported Saturday, after a three-year tenure that saw a debtfuelled stock bubble burst and the botched implementation of a market “circuit breaker” last month. Last year’s market rout sent the Shanghai index down more than 40 percent from its mid-June peak, wiped out trillions of dollars in capitalisation and sparked a costly and widely criticised government bail-out. The newcomer, Liu, most recently led the Agricultural Bank of China -- one of China’s “Big Four” lenders -- and was previously a vice governor of the central bank. His most pressing job is to rebuild faith in stocks, which by Friday had fallen nearly 20 percent this year, after stalling economic growth and depreciation in the yuan currency scared off investors. “The biggest challenge for him now is to restore investors’ confidence,” Phillip Securities analyst Chen Xingyu told AFP. “But the replacement of the
chairman will not essentially change the problems and challenges the market faces now. It is unrealistic to count on a new person to fix all of these things or improve them immediately.” The government intervention in the stock market during last year’s crash, deploying a “national team” to buy on its behalf, raised questions over Communist authorities’ commitment to making China a more marketoriented economy. Analysts say China’s modern stock market, set up only 25 years ago, also faces deep-seated underlying issues: “mom and pop” investors set on speculative gains dominate trading and China’s brokerage industry has
been mired in scandal over illegal dealings.
‘High hopes’
“There are high hopes he (Xiao’s successor Liu) will not only energise China’s stock market, but also boost the confidence of international investors given the impact China’s market now has on overseas markets,” Yingda Securities chief economist Li Daxiao told AFP. But he added: “It’s hard to say whether or not he will be able to accelerate progress on market reforms right now.” Changes to China’s initial public offering (IPO) system are pressing, with regulators currently hand-
picking the companies to list -- and setting their flotation prices -- instead of the market. “Liu needs to implement an IPO registration system, perfect the securities law to crack down on market manipulation and improve company disclosure,” said Hong Hao, chief strategist at securities and asset management firm BOCOM International Holdings in Hong Kong. “None of these tasks are easy,” he told AFP. Calls for Xiao’s head had been growing since last year, although some analysts credit him with improving the regulatory environment during his tenure. Just days ago, Chinese Premier Li Keqiang defended the rescue package but offered veiled criticism of then CSRC chief Xiao, referring to “internal management problems” with the intervention. Investors cheered news of his dismissal when the markets re-opened yesterday, sending China’s benchmark Shanghai Composite Index up more than two percent by the close. Among them was housewife Yin Dongqing, who bought with the herd but plans to clear out soon. “A market rise based on news like this is not going to last long,” she told AFP. “The replacement of the chairman will not make much of a difference.” AFP
Overcapacity problems worsen over 2008-2015 Central government has identified overcapacity and the closure of debt-ridden “zombie” firms as one of its key policy priorities for 2016 David Stanway
I
ndustrial overcapacity in China has got much worse since 2009, with Beijing struggling to implement reforms and overcome the resistance of growthobsessed local governments, a European business lobby said yesterday. China’s central government has identified overcapacity and the closure of debt-ridden “zombie” firms as one of its key policy priorities for 2016, and it has already published action plans aimed at shutting 100 million-150 million tonnes of low-end steel capacity and 500 million tonnes of coal production. The plans were the latest in a long line of measures aimed at tackling debilitating capacity gluts in several major industries, but it remains unclear whether Beijing can force failing enterprises out of the market and resolve problems like debt and unemployment, the
Joerg Wuttke, President of the European Union Chamber of Commerce in China, delivers a briefing on a new report on the increased overcapacity in China's industrial economy
European Union Chamber of Commerce in China said in a report. “China is always enticing industries to grow. The system breeds overcapacity,” said Joerg Wuttke, president of the chamber. With regional governments still chasing growth, there are insufficient incentives to close
down failing firms, which are also treated leniently by local banks and environmental regulators, the report said. Local governments have also obstructed mergers and acquisitions amid fears that vital tax revenues will be transferred to other jurisdictions, and China needs to provide
more revenue streams for regional authorities, the report added. Wuttke told reporters that China had let its overcapacity problem get worse since 2008, approving huge new projects and allowing utilisation rates in sectors like steel, aluminium and chemicals to plummet further. Of the nine
industrial sectors tracked by the chamber, only wind turbine manufacturing saw any improvement in capacity utilisation over the period. “You should actually make your assets sweat and utilise them to 100 percent, but that is not the case here, and the industrial landscape is becoming more and more inefficient,” Wuttke told reporters. “China released the mother of all credit avalanches, hence the double-digit growth and making decision makers more complacent - they thought they could outgrow the previous overcapacity problem,” he said. With demand slowing and prices collapsing, China’s bloated industries are facing mounting debts and heavy losses, and Beijing no longer has the “deep pockets” required to bail out struggling firms with fresh stimulus measures, Wuttke said. Reuters
Business Daily | 9
February 23, 2016
Greater China Hong Kong earnings season has limited downside for stocks
1,000 coal mines to be closed
In last year’s earnings season from January through May 2015, 58 percent of companies on the Hang Seng Composite Index missed average sales estimates
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quity strategists and fund managers see more upside than downside for Hong Kong stocks as 94 companies prepare to report annual results this week. “Expectations are really, really low at the moment,” said Joshua Crabb, head of Asian equities at Old Mutual Global Investors, in a phone interview. “The downside is still relatively limited.” In last year’s earnings season from January through May 2015, 58 percent of companies on the Hang Seng Composite Index missed average sales estimates and 56 percent missed average earnings estimates, according to data compiled by Bloomberg. Among 11 companies that have reported so far in 2016, 55 percent have missed estimates for both earnings and sales. The Hang Seng Composite Index has declined 13 percent this year and 17 percent over the past four months. If last year’s results aren’t as bad as investors expect or if executives are more upbeat about this year’s outlook, stocks may see a short- term boost, said Haitong International Director of Global Investment Strategy Kevin Leung.
Upside surprise
“Share prices are suggesting right now that 2015 results will be bad and
2016 will look pretty ugly as well,” Leung said in a phone interview. He sees potential upside for Internet companies, China property stocks and some consumer names. More small- and mid-cap companies are also considering raising dividends to appease shareholders, Leung said. Other sectors that may surprise to the upside this reporting season include technology, telecom and consumer staples such as liquor and baby products, according to BNP Paribas Asia Pacific Equity Strategist Manishi Raychaudhuri. Insurance is the only segment among financials that he sees positively due to growth in new business and a broader range of investments. Banks may underperform amid pressure on asset quality and increasing non-performing loans, Raychaudhuri said. Consumer discretionary companies will continue to be hurt by the decline in Chinese tourists. Leung expects fewer negative surprises as most companies with particularly negative results have already issued profit warnings. Expectations “have come down fairly consistently” over the past year, said Herald van der Linde, Asia equity strategist at HSBC. He calculates that 2016 earnings per-share estimates
Weapons exports surge over past five years The country still accounted for only 5.9 pct of global arms exports from 2011-2015 Megha Rajagopalan
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hina has almost doubled its weapons exports in the past five years, a military think tank said yesterday, as the world’s thirdlargest weapons exporter pours capital into developing an advanced arms manufacturing industry. In 2011 to 2015, China’s arms imports fell 25 percent compared with the previous five year period, signalling a growing confidence in the country’s home-grown weaponry despite key areas of weakness, the Stockholm International Peace Research Institute
(SIPRI) said in a report on global arms transfers. Chinese exports of major arms, which excludes most light weaponry, grew by 88 percent in 2011-2015 compared to the earlier five-year timeframe, SIPRI said. The country still accounted for only 5.9 percent of global arms exports from 2011-2015, well behind the United States and Russia, by far the world’s two largest arms exporters. “The Chinese until ten years ago were only able to offer low tech
China will aim to close more than 1,000 coal mines over the course of this year, with a total production capacity of 60 million tonnes, as part of its plans to tackle a price-sapping supply glut in the sector, the country’s energy regulator said. In a notice posted on its website, the National Energy Administration said the closures would form part of the plan released earlier this month to shut as much as 500 million tonnes of surplus production capacity within the next three to five years.
National banks freeze N.Korean accounts
in Hong Kong have been lowered by 2 percent in the last month alone and by 3 percent over the past three months. Foreign exchange headwinds and lower oil prices are largely priced into stocks already, he said. It’s too early to say whether 2016 estimates need to come down further, said Laura Luo, head of Hong Kong China Equities at Barings Asset Management. “If indeed we see more positive earnings or more positive guidance coming out from companies, then it will give a better sense of confidence of the overall market and the outlook for the economy itself,” Luo said in an interview. Bloomberg News
equipment. That has changed,” said Siemon Wezeman, Senior Researcher with the SIPRI Arms and Military Expenditure Programme. “The equipment that they produce is much more highly advanced than ten years ago, and attracts interest from some of the bigger markets.” China has invested billions developing its home-grown weapons industry to support its growing maritime ambitions in the South China Sea and the Indian Ocean, and also with an eye toward foreign markets for its comparatively low cost technology. Its total military budget in 2015 was 886.9 billion yuan (US$141.45 billion), up 10 percent from a year earlier. The U.S. and Russia saw weapons exports grow by 27 percent and 28 percent respectively, while exports of major arms by France and Germany, the fourth and fifth largest weapons exporters, fell over the same period. Most of China’s arms sales went to countries in Asia and Oceania, the report found, with Pakistan accounting for 35 percent, followed by Bangladesh and Myanmar. Pakistan is a key Chinese ally, and close military ties between the two countries has sometimes stoked tensions with neighbouring India, which is seeking to boost its own home-grown weapons industry. China still needs to import weapons including large transport aircraft, helicopters as well as engines for aircraft, vehicles and ships, according to the report. China, the world’s second largest economy, signed deals in 2015 to buy air defence systems and two dozen combat jets from Russia, its largest arms supplier. Reuters
Chinese banks including a branch of China’s biggest bank Industrial and Commercial Bank of China (ICBC) have frozen accounts belonging to North Koreans, a South Korean newspaper reported yesterday. Citing phone conversations with an unnamed employee of ICBC’s office in the north-eastern Chinese border city of Dandong, the Dong-A Ilbo reported that since late December it had suspended all deposits and transfers of foreign currencies in and out of accounts with North Korean names. Washington and Seoul are seeking support from Beijing, Pyongyang’s main ally, for tougher sanctions against North Korea.
Boao Forum to focus on economy’s new dynamics This year’s Boao Forum for Asia will focus on new ways to fuel world economic development and feature 12 new dialogues with entrepreneurs, organizers announced yesterday. With the theme “Asia’s New Future: New Dynamics, New Vision,” the 2016 annual conference of the forum will be held March 22 to 25 in Boao, a costal town in China’s southernmost province of Hainan. The new dialogues with entrepreneurs will cover 12 fields such as cutting-edge technology, advanced manufacturing, and emerging industries, the secretariat said in a press release.
Xiamen University opens campus in Malaysia China’s Xiamen University held an opening ceremony at its Malaysian campus for the first batch of students on Monday, marking the official opening of the first overseas campus set up by a renowned Chinese university. Some 180 freshmen of Xiamen University Malaysia (XMUM) will start a new chapter of the academic lives by choosing from the seven programs that were offered, i.e. New Energy Science and Engineering, Traditional Chinese Medicine, Chinese Studies, Journalism, Accounting, Finance, and International Business. Zhu Chongshi, president of Xiamen University, said XMUM eyes to be one of the top universities in Malaysia.
ZTE unveils new value-line phones China’s ZTE, the world’s sixth largest smartphone maker, is introducing new value-priced phone models and aims to sell between 60 million and 70 million devices overall this year, an executive said yesterday. ZTE Senior Director of Mobile Devices Waiman Lam said in an interview at the Mobile World Congress that the company is cautiously targeting growth of around 60 million units, which would mark a 7 percent rise in unit sales from 2015. The higher end of its target range, 70 million units, would represent around 20 percent growth over 2015.
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February 23, 2016
Asia
Japan Inc set to lose momentum on wage growth this year Tetsushi Kajimoto and Izumi Nakagawa
KEY POINTS Most firms see annual wage gains of less than 2 pct Cumulative wage gains since sales tax hike set to be weak 30 pct of firms don’t plan to raise base pay, 61 pct undecided
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he vast majority of Japanese firms are planning only modest pay raises this year, a Reuters poll showed, as murky growth prospects and turbulent markets push them to resist Prime Minister Shinzo Abe’s calls for robust hikes. The Reuters Corporate Survey found 84 percent of firms expect increases of less than 2 percent as they conduct annual wage talks - a strong indication of waning momentum after blue-chip companies offered raises above that level for the past two years. The survey, conducted February 1-16, also found that most companies expect cumulative wage increases since a 2014 national sales tax hike to be weak, underscoring little relief for consumers who have seen their purchasing power decline.
Abe has repeatedly urged Japan Inc to lift worker compensation, particularly base pay, as a key part of his strategy to drag the country out of decades of deflation, but the survey results show many companies are hesitant to commit to further rises in fixed costs. “Unless we can become optimistic about our earnings outlook, it will be tough to lift wages,” responded a manager at a manufacturer. The survey, conducted for Reuters by Nikkei Research, polled 513 big and medium-sized firms, with managers responding on condition of anonymity. Around 230-260 firms answered questions on wages. With a global stock market rout and sharp gains in the yen coming on the heels of a quarter of economic
Firms’ wariness a setback for Abenomics contraction, firms have a ready excuse to forgo wage hikes and early signs from labour unions have also shown they are reducing demands. Toyota Motor Corp’s labour union is seeking a 3,000 yen (US$27) increase in monthly base pay, half of what was sought last year. That is despite the automaker expecting record profits in current financial year to March.
Purchasing power pain
In Japan, annual wage talks centre on levels for base pay as well as raises linked to a worker’s length of service. Until a few years ago, many big-name companies had simply frozen base pay levels as they are seen as hard to
undo, preferring to reward employees with bonuses. Around 30 percent of companies in the survey said they did not plan to raise base pay this year, compared to just 9 percent that plan to, while the rest remain undecided. Wages in Japan fell 0.9 percent last year in real terms, dropping for a fourth straight year. Much of the decline has been blamed on the April 2014 national sales hike to 8 percent from 5 percent, as well as rises in the cost of food and daily necessities due to a weaker yen under Abenomics. Including plans for this year, most companies expect cumulative wage raises since the tax hike of less than 3 percent. Just over a third of firms expect wages to have climbed between 1 and 2 percent since the hike, another 22 percent expect wages to have climbed less than 1 percent while 12 percent see no wage increases at all. “The latest results suggest cumulative wage hikes still won’t be strong enough to help households regain purchasing power,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute, who reviewed the survey results. “The slump in private consumption can be explained in large part by declining purchasing power. A weak yen and rising food prices in recent years have further aggravated consumer spending.” Reuters
DBS profit up 20 pct, net interest margin at 5-yr high DBS and rival Oversea-Chinese Banking Corp both have significant exposure to Chinese banks and corporates through their Hong Kong units Saeed Azhar
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BS Group Holdings, Singapore’s biggest lender, posted a 20 percent rise in quarterly profit that beat expectations, as a higher net interest margin overcame a jump in bad debt charges and higher expenses. Southeast Asia’s biggest bank by assets saw its net interest margin jump to a five-year high of 1.84 percent, which helped defy market concerns that an economic slowdown in China and its exposure to the oil and gas sector could hurt the bank. “While unsettled financial markets in recent weeks have created shortterm uncertainty, the region’s economic fundamentals are sound and the risks associated with slower growth are manageable,” DBS CEO Piyush Gupta said in a statement. DBS’s net profit came in at S$1 billion (US$711 million) in the three months ended December, versus S$838 million a year earlier and above an average forecast of S$978 million from six analysts polled by Reuters. Its charges for non-performing loans and other assets climbed 17 percent to S$247 million from a year earlier, part of a trend for the city-
state’s lenders that reflects slowdowns in Asian economies and tough times for the oil and gas sector. Net interest income spiked 11 percent to S$1.85 billion, helped by
a 13 basis point rise in its net interest margin after the Singapore Interbank Offered Rate, which is widely used to price mortgages, jumped on a weakening in the Singapore dollar.
KEY POINTS Q4 net profit S$1 bln; consensus S$978 mln Bad debt charges up 17 pct CEO says risks manageable
Moody’s Investors Service said last week that while higher loan loss provisions would negatively impact the profitability of Singaporean banks in 2016, the new provisions were unlikely to eat into their capital buffers. The ratings agency expects new credit growth for Singapore banks will be in the low single-digits in 2016. DBS shares have fallen 18 percent this year, underperforming rivals due to concerns over a slowing China economy and the fallout from weak commodity prices. Reuters
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Asia Thai princess arrives in Cambodia to boost ties Thailand’s Princess Maha Chakri Sirindhorn arrived to Phnom Penh yesterday morning for a 3-day visit to boost relations in education and health between the two neighbouring countries. The princess was greeted by Cambodian Education Minister Hang Chuon Naron and other dignitaries upon her arrival at the Phnom Penh international airport. According to the official schedule, Sirindhorn will meet with Prime Minister Hun Sen at the Peace Palace before attending several ceremonies, including the inauguration of a health centre in north-eastern Rattanakiri province.
BlueScope Steel H1 net profit doubles Finance Minister, Arun Jaitley, holds last year’s budget briefcase
India's US$16 billion wage bonanza may force capex cut
Australia’s biggest steelmaker said firsthalf net profit more than doubled as a result of it taking full ownership of a steel mill in the United States and due to the impact of a declining Australian dollar. Net profit was A$200.1 million (US$142.8 million) for the six months to December 31, up from A$92.7 million in the previous corresponding period, the company said in a statement yesterday. The result included a A$702.9 million upward revaluation of the North Star steel mill after BlueScope bought joint venture partner Cargill Inc’s half share in October.
Finance minister is expected to implement the recommendations of a government commission to raise pay for 10 million Myanmar state‑owned federal government workers and pensioners by 23.5 percent airline extended to Bangkok Manoj Kumar
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US$16 billion pay rise for India’s public servants and costly food and farm programmes could force the country’s finance minister to cut capital spending in its annual budget, officials and economists say. The spending pressure on Finance Minister Arun Jaitley threatens to worsen imbalances in India’s US$2 trillion economy as consumption outpaces investment, undermining Prime Minister Narendra Modi’s promise of better jobs for its 1.3 billion people. A populist budget, ahead of assembly elections in four states this year, could stoke inflation even as structural measures such as Modi’s proposed tax and labour reforms look less likely. It could also eat into capital spending needed for railways, roads, ports and power projects, seen as vital to India’s integration into the global economy. “It is not going to be a revolutionary or inspirational (budget) ... given the spending pressures,” said Shilan Shah at Capital Economics. “It is most likely to lead to a sell-off in the bond market if the salary increase is implemented.” Jaitley presents his third budget on February 29 and is expected to implement the recommendations of a government commission to raise pay for 10 million federal government workers and pensioners by 23.5 percent. While that hike would boost demand, economists question whether a policy dating back to an era of double-digit inflation is justified today, when Reserve Bank of India Governor Raghuram Rajan has driven consumer price growth below 6 percent.
Officials with direct knowledge of budget discussions said Jaitley could raise taxes on services and petroleum products to help cover the extra outlays. He would still have some room to ease tax rules on foreign investment and hit his deficit target of 3.5 percent of gross domestic product in the 2016/17 fiscal year. People familiar with the process say Modi is much more involved in setting the deficit target than previous leaders.
Costly promises
The promised pay hike, an increase in food subsidies and a new crop insurance scheme for farmers would cost at least 1.2 trillion rupees (US$17.5 billion) - equivalent to 0.9 percent of forecast GDP in 2015/16. Government workers get a hefty wage hike every 10 years, a populist wage policy that dates back to independence, in addition to halfyearly and annual increments linked to prices. Unsurprisingly, government jobs are highly sought after in India where most private-sector employment is informal: last year 2.3 million people applied for 368 low-level state jobs
KEY POINTS Pay hike, higher food subsides may widen deficit Little room left for job‑creating investments Jaitley to present annual budget on February 29
in Uttar Pradesh that required only a primary school education. India’s cash-strapped state railways, which employ 1.3 million, are also seeking federal funds to cover higher pay - squeezing its investment budget and creating pressure to hike fares. Most of India’s 29 federal states will raise wages soon. Rajan, who cut policy rates by 125 basis points in 2015, has said the pay commission award, if implemented, could lead to higher inflation for one to two years. Much depends on the timing of the government pay rises, which sources say could take retroactive effect on January 1, 2016. Economists and ratings agencies say the fiscal deficit target may have to be raised to 3.8 percent of GDP to cover the hike.
Losing patience
Analysts say the country’s finances and economic performance, a rare bright spot for emerging markets over the past two years, are now under close investor scrutiny. Foreign investors have been net sellers of Indian stocks and bonds this year, erasing all of the gains in the benchmark BSE Index since Modi’s landslide general election victory in May 2014. Despite the windfall of low oil prices, half of which was clawed back through higher energy taxes, India’s consolidated fiscal deficit exceeds 6 percent of GDP and the national debt, at 68 percent, is high by emerging market standards. And although growth is forecast at 7.6 percent in the current fiscal year, India’s banks are hobbled by growing bad debts and do not have the means to fund new growth projects. Reuters
State-owned Myanmar National Airline (MNA) has extended its wing to Bangkok as its third international air route in addition to Singapore and China’s Hong Kong. With a new Boeing 737-800 aircraft, the MNA’s Yangon-Bangkok flights are scheduled on Monday, Wednesday and Friday. The launch of Yangon-Bangkok flight came after that of Yangon-Singapore and Yangon-Hong Kong in August and December last year respectively. The country’s oldest airline, founded in 1948, carried out reforms last year, expanding regional and foreign destinations. MNA was renamed from state-run Myanmar Airways (MA) in December 2014 after corporatization.
Tasmanian fruit exports to Asia at risk Australia’s Tasmanian fruit exports to Asian markets could be under threat if climate change brings the fruit fly into the island state. Fruit growers and a biosecurity scientist have warned exporters that millions of dollars worth of product could soon be in jeopardy if climate change continues to create fruit fly-friendly conditions in Tasmania. Apple grower Tim Reid said major importers in lucrative markets in China and Japan could turn away Tasmanian produce if the fruit fly makes its way across the Bass Strait.
Tokyo Steel cuts March prices Japan’s top electric arc furnace steelmaker, said it will cut prices for March delivery, by as much as 14 percent for one product, to compete against imports amid a firm yen and on slow domestic demand. The company will cut prices by between 3,000 yen to 7,000 yen (US$27 to US$62) a tonne, it said in a press briefing on Monday. That is between 4 percent and 14 percent, Reuters calculations show. This is Toyko Steel’s first price cut in five months and is the latest in a series of weak signals for Japan’s economy.
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Asia
Singapore Q4 GDP downwardly revised Economists say the government is likely to maintain its 2016 growth forecast of 1.0 percent to 3.0 percent
Our house view is still no change. But clearly we recognise that the risk of some further easing has certainly increased Brian Tan, economist, Nomura
While low global demand has hit exports, falling oil prices have also dented industrial production by dampening demand for offshore drilling rigs
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ingapore’s economy is forecast to have grown at a slower pace in the fourth quarter than initially thought, underscoring why some analysts expect more monetary stimulus at the April review given a
weakening outlook amid slackening global demand. The median forecast in a Reuters poll predicted that gross domestic product expanded 4.0 percent on an annualised basis in the October-
December quarter from the previous quarter. The government’s advance estimate of fourth-quarter GDP released on January 4 put economic growth at 5.7 percent as the services sector picked up the slack from weakness in the city-state’s exportoriented manufacturing sector. But the economy remains fragile, with recent data showing that
Korean finance minister says no plans to curb household debt volume Rising household debt in South Korea has been cited as one reason why the Bank of Korea has refrained from further cutting interest rates Christine Kim and Choonsik Yoo
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outh Korea has no plans to directly curb the volume of household debt at the moment as measures that have been taken to improve the quality of debt are more
important, the country’s finance minister said yesterday. “Volume is important, but I would like to inform you we have no plans to directly control or decrease
the volume of household debt,” Finance Minister Yoo Il-ho told a press conference for international media. “Rather, I feel it is more desirable to improve the structure of household
industrial production in December posted its weakest year-on-year reading in eight months. Given the run of weak data and gloomy outlook for the city state’s economy, analysts say the prospect of Singapore’s central bank easing monetary policy at its scheduled policy review in April is rising. “Our house view is still no change. But clearly we recognise that the risk of some further easing has certainly increased,” said Brian Tan, an economist for Nomura. Against a backdrop of low inflation and tepid global growth, the Monetary Authority of Singapore eased its exchange-rated based monetary policy twice last year, most recently in October. Tan said there were also domestic headwinds to growth, such as rising local interest rates, a slowing property market and restrictions on the hiring of foreign workers. While low global demand has hit exports, falling oil prices have also dented industrial production by dampening demand for offshore drilling rigs. Year-on-year growth in the fourth quarter is seen revised to 1.8 percent, the median forecast in the Reuters poll of 14 economists showed, down from the initial estimate of 2.0 percent growth. Economists say the government is likely to maintain its 2016 growth forecast of 1.0 percent to 3.0 percent. Full-year growth will probably slow to 1.8 percent in 2016, Tan said. According to the advance estimate, GDP grew 2.1 percent last year, the weakest performance since 2009, when the global financial crisis shrank economic output by 0.6 percent. The government will report detailed data on October-December GDP on February 24 at 8 a.m. local time (0000 GMT).
debt, which has been ongoing through measures announced last year.” Yoo said it was unlikely South Korea would see housing prices rise or fall sharply like they did in years past. Rising household debt in South Korea has been cited as one reason why the Bank of Korea has refrained from further cutting interest rates from the current record-low of 1.50 percent. Finance ministers and central bank governors from the Group of 20 nations attending the meeting in Shanghai later this week should discuss how to jointly tackle on-going global financial market turmoil, he said, although he did not elaborate on South Korea’s proposals. Yoo agreed there was a need to discuss policy coordination. Asked about recent volatility in financial
Reuters
markets at home, Yoo said other countries aside from South Korean were also experiencing extreme volatility. He said outflows till now had not been large enough to cause alarm. “As of now we do not see outflows big enough to say investors are ‘selling Korea.’ And although we will leave exchange rates to the market, action will be taken if movements are extreme,” he said. South Korean foreign exchange authorities were suspected to have sold around US$2 billion to prop up the won last Friday, shortly after issuing a stern warning against herd behaviour to curb the local currency’s weakness against the dollar. The won has become Asia’s worst-performing currency due to risk-off sentiment that has seen outflows since late last year. Reuters
editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Michael Armstrong, Stephanie Lai, Óscar Guijarro, Kam Leong, Joanne Kuai, Bami Lio, Annie Lao GROUP SENIOR ANALYST José I. Duarte Designer Francisco Cordeiro WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia Assistant to the publisher Lu Yang | lu.yang@projectasiacorp.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.
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February 23, 2016
Asia Australia risks missing climate change commitments The Commonwealth Scientific and Industrial Research Organisation chief executive said the country’s restructure decision would enable new research in how to live with climate change
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ustralia risks not meeting its commitments agreed to under the Paris Climate Change agreement while also being ill-prepared to offset the local impact due to job cuts at the nation’s chief scientific body, a report by the nation’s leading climate advocacy group released yesterday said. The Commonwealth Scientific and Industrial Research Organisation (CSIRO) recently announced it would halve the number of employees in its climate science program, with approximately 100 jobs to go from it’s two main climate monitoring and modelling stations. The losses are in response to significant budget cuts by former Australian Prime Minister and climate change sceptic Tony Abbott, but also current Australian Prime Minister Malcolm Turnbull’s drive for increased scientific innovation.
As a result, the nation’s chief climate advocacy group, Sydneybased Climate Council, looked into the national and international ramifications of the reductions, finding it would cut the nation’s ability to respond to climate change but also have detrimental impacts to its growing export industries, according to its report titled: Flying Blind; Navigating Climate Change without the CSIRO. The report follows a protest letter signed by thousands of international climate scientists that said the job losses proceed, without being filled elsewhere, Australia would not develop its capability to assess the accelerating risks associated with climate change. The report’s author Professor Will Steffen argues critical information about climate change in the Southern Hemisphere would be lost and it will also be detrimental to the billion dollar industries, such
as agriculture that relies on CISRO climate modelling. “Cutting climate science now, as the demand escalates for both adaptation and mitigation strategies, is just like flying into a violent storm and ripping out the radar, navigation and communication instruments,” Steffen said in a statement. Australia’s rural exports are playing an ever more important role as the nation’s economy transitions away from mining-led growth to capitalise on the high quality food needs of the emerging Asian middle class, accounting for 45.2 billion Australian dollars in 2015. CSIRO’s research has been assisting farmers with tools, technologies and forecasts to manage more frequent and severe droughts. Joint studies with the body have led to breakthroughs in agriculture production, such as sunscreen for grapes or genetically modified drought resistant grain. “Climate science also supports bushfire responses by providing the knowledge underpinning high fire danger weather warnings and fire behaviour predictions,” Steffen said. However, what is most embarrassing for the nation, Steffen said if the cuts proceed, Australia will have already reneged on a key promise in the Paris Climate Change agreement. “Australia, along with the rest of the world’s nations, agreed to strengthen climate science as a fundamentally important component of meeting the climate change challenge,” Steffen said. CSIRO chief executive Larry Marshall has previously said the restructure decision would enable new research in how to live with climate change and help meet the government’s innovation strategy. No final decision has been made on which programs would be closed. Xinhua
Bank of Japan governor blames “excessive” risk aversion for market tumult Opposition lawmakers have summoned Governor Kuroda to parliament almost daily to grill him on the central bank’s negative rate policy Leika Kihara
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ank of Japan (BOJ) Governor Haruhiko Kuroda (pictured) yesterday blamed investors’ “excessive” risk aversion for persistent market volatility, and defended the central bank’s decision to adopt a negative interest rate policy in the face of questions about its effectiveness. The BOJ chief also shrugged off criticism that the radical stimulus policy risked destabilising Japan’s banking system by squeezing returns on lending, stressing that bank profits have been on the rise even during years of ultra-easy monetary policy. “Bank revenues have been rising as corporate bankruptcies fell due to a recovering economy. Bank lending has been also on the rise,” Kuroda told a parliament session.
“I’m convinced that such rises in bank lending would have a positive effect on Japan’s economy,” he added. Japanese bank lending rose 2.3 percent in the year to January, marking the 52th straight month of increases. Opposition lawmakers have summoned Kuroda to parliament almost daily to grill him on the BOJ’s negative rate policy, which has pushed bond yields below zero but failed to boost Tokyo stocks or arrest yen rises as policy makers had hoped. Japan’s Nikkei average lost nearly 6 percent from levels before the BOJ’s shock decision on January 29, while the yen gained roughly 5 percent against the dollar. Democratic Party lawmaker Katsumasa Suzuki told Kuroda in
Australian firms shrinking investment plans While Australia’s central bank says the pace of a downward spiral in mining investment should eventually slow, the chart above shows economists predict firms’ spending plans will drop for a fourth year in a row, declining another 10 percent in the next fiscal year that starts July 1. Falling investment drags on growth and is likely to see the economy continue to expand below its 30-year average. Updated data on forecast investment is due February 25.
Indian caste protesters keep up blockade Rural protesters continued to blockade highways and paralyse a north Indian state yesterday despite a deal giving them more government jobs, but there was relief for Delhi’s 20 million residents as the army retook control of their main water source. Rioting and looting across Haryana state by the Jat rural caste has killed at least 15 people and threatens to undermine Prime Minister Narendra Modi’s promise of better days for Indians who elected him in 2014 with the largest majority in three decades.
Australia to start register of foreign water rights The Australian government said yesterday it plans to start a register of foreign ownership of water rights, redoubling its efforts to appease voters concerned about the amount of farming assets being sold offshore. Nine months after the government said it would force foreign owners of farmland to register, Treasurer Scott Morrison said the government plans to introduce laws to create a separate register of foreign ownership of water rights by December 1. By monitoring foreign ownership of water rights, the government may also curtail any price increases.
Samsung, LG unveil new devices
parliament that some retail shops are urging consumers to buy safes to “protect against negative rates,” a sign the BOJ’s policy is raising fears among households and companies that they may be penalised for keeping money at bank deposits. Kuroda defended his stimulus policies as positive for households as mortgage rates are pushed down and economic growth gets a boost from a decline in real borrowing costs. He said external factors, such as uncertainty on the outlook for U.S. monetary policy and investor concerns over Europe’s banking sector, were also responsible for the recent market rout. “I want to carefully watch how recent market volatility would affect Japan’s economy and prices,” he said. The BOJ cut a benchmark interest rate below zero last month, stunning investors with another bold move to stimulate the economy as volatile markets threatened its efforts to sustainably end deflation. The move is a blow to regional banks already hit by low returns on lending and weak corporate borrowing, and may add to pressure for them to consolidate or accept the advances of bigger rivals, analysts say. Reuters
Samsung Electronics Co Ltd and LG Electronics Inc unveiled their latest smartphones at the Mobile World Congress industry show in Barcelona yesterday, seeking to buck the slowdown in industry growth. Phone makers face another tough year in 2016 as subdued global growth and persisting currency weakness in key emerging markets sap consumers’ spending power. A push by Chinese manufacturers to expand overseas amid slowing growth in their domestic market may also undercut margins further. LG also launched a virtual reality headset and accessories including a drone controller to pair with the G5.
Brunei records over 218,000 foreign visitor arrivals Brunei saw 218,213 foreign visitor arrivals in 2015, an increase of 8.6 percent over the previous year, with Chinese arrivals accounting for the most, government statistics show. The data was released yesterday by the tourism development department of Brunei’s Ministry of Primary Resources and Tourism. The 8.6 percent increase was mainly attributed to the source markets including Far East region such as China and Japan, ASEAN countries, Australia as well as long haul markets such as Britain. Travellers from China and Malaysia contributed to the majority of the market.
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International Schengen collapse could cost 1.4 trln euros A collapse of Europe’s Schengen passport-free travel zone could cost the European Union up to 1.4 trillion euros over the next decade, a study by Germany’s Bertelsmann Foundation showed yesterday. The study estimated that under a worst case scenario, in which the reintroduction of controls at EU borders pushed import prices up three percent, the costs to the bloc’s largest economy Germany could be as much as 235 billion euros between 2016 and 2025, and those to France up to 244 billion.
Investment banks’ trading revenue declined in 2015 Poor trading results and low client activity in the second half of 2015 contributed to an overall 3 percent decline compared to a year ago Anjuli Davies
Mexico’s FDI jumped by a quarter in 2015 Foreign direct investment (FDI) in Mexico rose by a fourth last year to reach US$28.382 billion, the country’s economy ministry said in a statement yesterday. Mexico’s FDI in 2014 totalled about US$22.57 billion. The ministry said the stronger 2015 FDI was due to U.S. telecoms company AT&T Inc paying more than US$2 billion to acquire Mexican wireless operators Iusacell and Unefon, as well as the purchase of Vitro’s glass container business by U.S.-based Owens-Illinois Inc for about US$2.15 billion. The United States accounted for about 53 percent of total FDI last year, followed by Spain, Japan and the Germany.
Lagarde sees oil low for longer than expected Crude prices will probably stay low for longer than expected, International Monetary Fund Managing Director Christine Lagarde said, urging Gulf Arab oil-producing countries to cut spending and boost revenue through new taxes. A value-added tax that’s the same across the six-nation Gulf Cooperation Council should be adopted, Lagarde said in a speech in Abu Dhabi. The measure along with corporate income and property taxes would help raise government income, she said. Global oil prices have dropped 44 percent in the past year.
EFG to buy Brazilian group BTG’s Swiss bank EFG International has agreed to buy Brazilian financial company Grupo BTG Pactual SA’s Swiss private bank BSI for 1.33 billion Swiss francs (US$1.34 billion) in cash and shares, a deal it hopes will propel it into the top five in Switzerland’s crowded wealth management market. The sale comes just five months after BTG completed the acquisition of BSI but was borne out of a need to raise cash after the arrest of the Brazilian bank’s billionaire founder André Esteves last November. EFG expects the combination to make it the fifth-biggest private bank in Switzerland.
Marketers use of mobile phone data erodes trust Most consumers feel they lack control over personal information on their phones are suspicious of attempts to use it for marketing appeals and many think the problem is getting worse, a survey in major countries of the world has found. The findings from a poll in January of 8,000 mobile phone users published yesterday spell trouble for advertisers hoping to tailor marketing and services based on location, personal context and interaction history for customers on the go. The survey found 75 per cent of consumers did not trust even well-known marketing brands to take care of their data.
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evenue at the world’s 12 largest investment banks from trading fixed income, currencies and commodities, known as FICC, fell 9 percent in 2015 compared with a year before, a survey showed yesterday, dragged down by regulatory changes and retrenchment. Eight years after the global financial crash, banks are still struggling to adjust to reforms compelling them to hold more capital and liquidity, while litigation costs and market volatility have forced them to restructure, shed staff and exit some business lines. Such trends have reduced the FICC activities which had been their most profitable business. FICC trading revenue at 12 of the world’s biggest banks was $69.9 billion last year, down from US$109.1 billion five years before, according to the survey by industry analytics firm Coalition, based on its analysis of their
public disclosures and independent research. Coalition tracks Bank of America Merrill Lynch, Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, Societe Generale and UBS. Poor trading results and low client activity in the second half of 2015 contributed to an overall 3 percent decline compared to a year ago in investment banking revenue across the world’s major banks, to US$160.2 billion, the data showed.
Slow business
In commodities, revenues dropped by 18 percent, mainly due to slow business in metals and investor products, and also reflecting a return to more normal turnover in the power and gas markets after last year’s surge.
Revenue earned by leading banks from commodity trading, selling derivatives to investors and other activities in the sector fell to $4.6 billion from US$5.6 billion in 2014, it said. “A normalisation of the U.S. power and gas markets and weakness in metals and investor products drove the overall decline,” Coalition said. “In contrast, oil revenues improved as corporate client activity increased.” In 2014, a cold winter in North America had created volatility and boosted activity in power and gas, while trading surged in the oil sector last year due to a sharp fall and then partial recovery in prices. Banks’ equity businesses, including cash equities, equity derivatives, prime services (serving hedge funds) and futures and options, were bright spots. Revenue rose 10 percent to $49.8 billion year-on-year. Elsewhere, investment banking divisions (IBD), which advise on mergers and acquisitions (M&A) and equity and debt underwriting, saw a 5 percent fall in revenue to US$40.5 billion, as a surge in M&A activity was offset by declines in equity and debt capital markets activity. Headcount at the top banks fell 2 percent from a year before. Cuts were felt in FICC, where there was a 4 percent decline in staffing levels. Return on equity (RoE) declined slightly to 9.2 percent from 9.3 percent, due to both increased capital requirements and weak performance, Coalition said. Reuters
Europe’s weak economy feels the strains of the global slowdown Markit said euro-region economic growth this quarter may fall short of the 0.3 percent seen at the end of 2015 Jill Ward
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he euro area is showing signs of strain from the global slowdown. Weaker growth and deeper price cuts by companies, as captured in a monthly report by Markit Economics published yesterday, will raise concerns about the health of the economy. They may also increase pressure on European Central Bank policy makers to add to stimulus at their next meeting in March. Markit said that its composite Purchasing Managers Index for the euro zone fell to 52.7, the lowest in more than a year, from 53.6. In Germany, manufacturing took a
hit from falling overseas demand, while the composite gauge for France signalled “sluggish” economic growth. “Not only did the survey indicate the weakest pace of economic growth for just over a year, but deflationary forces intensified,” said Chris Williamson, chief economist at Markit in London. The data “greatly increase the odds of more aggressive stimulus from the ECB.” The Organization for Economic Cooperation and Development cut its forecasts for the euro region last week, and ECB officials are reviewing whether their current stimulus program is enough to counter global
pressure. They’ve expressed concern that a renewed slump in oil prices is adding to risks that low inflation becomes entrenched. Markit said euro-region economic growth this quarter may fall short of the 0.3 percent seen at the end of 2015. Its German factory index fell to 50.2 this month, barely above the key 50 level that divides expansion from contraction. “The German economy appears to be in the midst of a slowdown,” said Oliver Kolodseike, an economist at Markit. Manufacturing is “near stagnation,” he said. Bloomberg News
Business Daily | 15
February 23, 2016
Opinion Business
wires
The case for surge funding
Leading reports from Asia’s best business newspapers
George Soros
Chairman of Soros Fund Management and Chairman of the Open Society Foundations
THE JAPAN NEWS The Bank of Japan’s negative interest rate decision has started affecting the life insurance market, with sales of some products such as whole-life insurance policies being suspended following the announcement. Life insurance companies invest a large portion of premiums collected from policy holders into Japanese government bonds. However, as long-term interest rates are at their lowest ever, it has become difficult for life insurance companies to gain sufficient investment returns. On Tuesday, Daiichi Frontier Life Insurance Co., suspended sales of some of its yen-dominated, single-premium whole-life insurance policies.
THANH NIEN NEWS The Vietnam Textile and Apparel Association and non-member Hanoi Industrial Textile JSC have filed a complaint claiming that shipping lines from China, South Korea and Taiwan were ripping them off with an unfair surcharge. Fully known as container imbalance charge, the CIC is meant to offset shipping lines’ costs of transferring empty containers from one place to another. It is only applicable during certain seasons when there is a large gap between import and export activities. But foreign shipping companies have asked Vietnamese traders to pay the surcharge all year round.
NEW ZEALAND HERALD Auckland International Airport chief executive Adrian Littlewood said New Zealand still has plenty of capacity to grow tourism from its record levels achieved last year. Visitor arrivals to New Zealand rose 10 percent to a record 3.13 million last year, and tourism has become the country’s number one export earner, overtaking dairy which is in the doldrums. The sector has an aspirational goal of hitting NZ$41 billion in total revenue by 2025, up from the NZ$29.8 billion achieved in 2015.
THE STAR The Malaysian Employers Federation hopes the Government’s decision to suspend the recruitment of foreign workers will not involve or burden local employers who had already received approval to do so. Executive director Datuk Shamsuddin Bardan said there was a possibility of some employers having already made payments or had specific commitments and the Government’s decision may delay their work. The suspension decision was made after the Bangladesh government signed a memorandum of understanding on Thursday with Malaysia on sending workers to the country.
The International Finance Facility for Immunization has raised billions of dollars over the past several years to ensure that vaccination campaigns are successful as soon as possible
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mportant progress was made at the donors’ conference for Syrian refugees convened in London on February 4. But much more remains to be done. The international community is still vastly underestimating what is needed to support refugees, both inside and outside the borders of the European Union. To deal with the refugee crisis, while putting the EU’s largely unused AAA borrowing capacity to better use, requires a paradigm shift. Rather than scraping together insufficient funds year after year, it is time to engage in “surge funding.” Spending a large amount of money up front would be far more effective than spending the same amount over several years. Frontloading the spending would allow us to address the most dangerous consequences of the crisis – including anti-immigrant sentiment in receiving countries and despondency and marginalization among refugees – more effectively. Making large initial investments would help tip the economic, political, and social dynamics away from xenophobia and disaffection, and toward constructive outcomes that benefit refugees and the recipient countries alike. Surge funding has been used often to finance immunization campaigns. The International Finance Facility for Immunization (IFFIm), which borrows against future government contributions to immunization programs, has raised billions of dollars over the past several years to ensure that vaccination campaigns are successful as soon as possible. In the long run, this is more effective than spending the same amount of money in yearly instalments. IFFIm provides a convincing
precedent for the current crisis. A sudden large influx of refugees can cause panic that affects the general population, the authorities, and, most destructively, the refugees themselves. The panic breeds a false sense that refugees are a burden and a danger, resulting in expensive and counter-productive measures, like erecting fences and walls and concentrating refugees into camps, which in turn breeds frustration and desperation among the refugees. If the global community could fund large-scale, concentrated programs to address the problem, the general public and the refugees would be reassured. A surge in spending is needed both in Europe and in frontline states like Jordan, Lebanon and Turkey. The necessary investments include an overhaul of the EU’s asylum policy and improvement of its border controls. In frontline states, money is needed to provide refugees with formal employment opportunities, health care, and education. If life for refugees is made tolerable in frontline countries, and they believe that an orderly process is in place for gaining entry to Europe, they are more likely to wait their turn, rather than rushing to Europe and overwhelming the system. Similarly, if the refugee crisis can be brought under control, the panic will subside and the European public will be less prone to support anti-migrant policies. Jordan could provide a test case. A country of 9.5 million people, it is providing refuge to 2.9 million non-citizens, including 1.265 million Syrians, and facing the influx of additional Syrians
When should the EU’s AAA credit be mobilized if not at a moment when the EU is in mortal danger?
uprooted by Russian bombing. A combination of massive upfront direct financial assistance, enhanced trade preferences, and temporary debt relief is needed. A successful program for Jordan could demonstrate the international community’s ability to bring the refugee crisis under control, opening the way to similar programs for other frontline states, adjusted on a case-by-case basis, depending on local conditions. The approach suggested here would cost more than EU member states can afford out of current budgets. A minimum of €40 billion (US$45 billion) needs to be spent annually in the next 3-5 years; but even larger amounts would be justified to
bring the migration crisis under control. In fact, so far, lack of adequate financing is the main obstacle to implementation of successful programs in any of the frontline countries, particularly in Turkey. While Germany has an unallocated budget surplus of €6 billion (US$6.8 billion), other EU countries are running deficits. German Finance Minister Wolfgang Schäuble has proposed a pan-European fuel tax, but that would demand either unanimous agreement or a coalition of the willing. This enhances the merits of having recourse to the EU’s largely unused AAA credit. The migration crisis poses an existential threat to the EU. Indeed, with the north pitted against the south, and the east confronting the west, the EU is coming apart at the seams. When should the EU’s AAA credit be mobilized if not at a moment when the EU is in mortal danger? It is not as if there is no precedent for this approach; throughout history, governments have issued bonds in response to national emergencies. Tapping the AAA credit of the EU, rather than taxing consumption, has the additional advantage of providing muchneeded economic stimulus for Europe. The amounts involved are large enough to be of macroeconomic significance, especially as they would be spent almost immediately and produce a multiplier effect. A growing economy would make it much easier to absorb immigrants, whether refugees or economic migrants. In short, surge funding is a winwin initiative, and it must be undertaken urgently. Project Syndicate
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February 23, 2016
Closing Vietnam’s capital city sees CPI increase
Nanchang launches virtual reality industrial base
Hanoi city is to see a month-on-month inflation growth of 0.47 percent in February 2016, according to the city’s statistics office. On a yearover-year basis, in February, the city’s Consumer Price Index (CPI) is likely to increase by 1.73 percent, the statistics office said on its website. Among the 11 commodities in the CPI basket, nine groups saw price hike, including food and foodstuff as well as culture, entertainment and tourism among others. Meanwhile, price of two groups went down, namely housingconstruction materials and transportation. Industrial production index of the capital city in February is estimated to decrease by 27.2 percent.
East China’s Nanchang City yesterday unveiled a virtual reality (VR) industrial base to harness business opportunities from the promising technology. Song You, an official with Honggutan New District in Nanchang, said the base is expected to expand to one with 1,000 VR companies and an output value of 100 billion yuan (US$15.3 billion) in three to five years. Authorities will launch a 1-billion-yuan angel fund and a 10-billion-yuan industrial investment fund to support VR firms in the base, Song said. Wang Guoping, a professor of the School of Electronics Engineering and Computer Science of Peking University, said the base needs policy support in terms of capital, technology and talent.
HSBC confirms China “princeling” probe as profit falls short Last year, Asia represented 83.5 percent of global pretax profit for HSBC Lisa Jucca
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SBC is under investigation by U.S. regulators in relation to hiring practices of people tied to government officials in Asia, the bank said yesterday, as it warned of an uncertain environment particularly in top market China. Europe’s biggest lender said profit before tax was US$18.87 billion for 2015, little changed on the year before and well below an average analysts’ estimate of US$21.8 billion, according to Thomson Reuters data, dragged down by an unexpected US$858 million loss in the fourth quarter. The bank also confirmed being among a number of financial institutions under investigation by the U.S. Securities and Exchange Commission (SEC) over recruitment practices in Asia. In a footnote to its earnings statement it said it couldn’t predict how or when the matter would be resolved
but said the impact “could be significant”. The SEC had opened a probe into JPMorgan in 2013 regarding the hiring of “princelings”, the term used in Asia to refer to the children or younger relatives of China’s political leaders or of powerful executives at state-owned enterprises. HSBC said it would stick to delivering on a June strategic plan centred around expanding in China, in particular the denselypopulated Pearl River Delta region. But Chairman Douglas Flint added the economic slowdown there was making the environment more challenging. “China’s slower economic growth will undoubtedly contribute to a bumpier financial environment, but it is still expected to be the largest contributor to global growth as its economy transitions to higher addedvalue manufacturing and
services and becomes more consumer driven,” Flint said.
Muted outlook
The bank said its poor fourthquarter results reflected value adjustments on derivatives, legal costs and the disposal of its Brazilian business. The figures were also hit by restructuring costs the bank is undertaking to achieve cost savings of between US$4.5 billion and US$5 billion. HSBC said it would retain Turkish operations that had been up for sale, after offers it received were deemed not to be in the best interest of shareholders. It will instead restructure the unit. “It remains a very good bank with a conservative risk appetite and will continue to outperform peers in a bear market, but as we’ve seen today, the earnings outlook for the bank remains muted,” analysts at Bernstein Research wrote in a note. Last year, Asia represented
HSBC Hong Kong headquarters
83.5 percent of global pretax profit for HSBC, a larger portion than a year earlier and a sign the bank’s growth is tied to the region’s. HSBC, which just over a week ago decided not to move its headquarters to Hong Kong, said it would raise its total annual dividend to US$0.51 per share from US$0.50, a relief to investors
China’s natural gas imports post record surge
Experts suggest Nepal will adopt “Green Economy”
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who had worried the lender’s more constrained capital position would cause it to abandon its goal of dividend growth. The bank also warned that while it is keeping its headquarters in London, the possibility of Britain leaving the European Union could cause major disruptions to its business in the region. “A disorderly exit could force changes to HSBC’s operating model, affect our ability to access the European Central Bank and high-value euro payments, and affect our transaction volumes due to possible disruption to global trade flows,” it cautioned in its annual report. The bank, which is reining in costs as a result of its higher regulatory burden, said in its annual report Chief Executive Stuart Gulliver’s total pay had fallen to 7.34 million pounds from 7.62 million a year earlier. Reuters
Tsinghua’s Taiwan deals to face unprecedented scrutiny
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nternational experts have suggested Nepal to promote and implement “Green economy” in the country to graduate from a Least Developed Countries (LDC) to a Developing Country. Experts made such remarks in a two-day international seminar on Make Nepal Green that kicked off in Kathmandu yesterday. Experts from China, Japan, India and Nepal believed that the implementation of Green Economy will provide a momentous opportunity for Nepal, which faced the devastating earthquake in 2015 with an economic loss of around US$7 billion. “This seminar can bring out successful and practical solutions from the laureates of Alternative Nobel Prize for Green Economy based on the principles of sustainable development,” Monika Griefahn, a German politician and chairperson of Right Livelihood Award Foundation addressed the seminar. Nepal has a target to graduate to the status of a developing country by 2022. Since the majority of the production resources are already available in Nepal, entrepreneurs in the seminar claimed that the implementation of Green Economy will undertake low costing. Among the different elements of the entire Green Economy, organic agriculture and renewable energy is regarded as fully suitable.
hina’s natural gas imports surged to a record last month on shortages in Beijing and higher demand on colder-than-normal temperatures. Shipments of natural gas by pipelines in January surged 28 percent from a year earlier to 2.76 million metric tons, the most in records going back to 2010, according to data released yesterday by the General Administration of Customs in Beijing. The country’s LNG imports last month jumped 16 percent to 2.46 million tons, the second-highest on record. Northern China was hit by the lowest temperatures in 64 years this winter, leading to an increase in natural gas consumption, according to China National Petroleum Corp., the nation’s largest petroleum producer. Pipeline imports last month were mostly from Turkmenistan, which increased 17.5 percent from a year earlier to 2.4 million tons. China imported LNG mostly from Australia and Qatar in January, which have longterm supply contracts with the nation. Beijing suspended natural gas supplies to some industrial users and limited heating in public buildings as CNPC faced a supply shortfall last month.
hina’s Tsinghua Unigroup’s US$2.6 billion offer for stakes in three Taiwanese chip firms will undergo unprecedented scrutiny by a new government less friendly toward its giant neighbour, complicating the chance of success. The Chinese state-backed conglomerate aims to buy into the island’s technology sector as a step toward building China’s own semiconductor industry. But the timing of its offers, during a Taiwan election in which deepening cross-straits economic ties was a hot topic, left the firm a target of political attack. Tsinghua is aware it may not receive approval for all three deals due to the change in government, but overseas acquisitions will continue to focus on Taiwan and the United States, a person familiar with Tsinghua’s thinking told Reuters, declining to be identified due to the sensitivity of the matter. Tsinghua made offers in quick succession late last year for a quarter each of chip testing and packaging companies Powertech Technology Inc, ChipMOS Technologies Inc and Siliconware Precision Industries. The company plans to inject a total of US$2.6 billion into the three in exchange for stakes plus one board seat at each with no management control.
Xinhua
Bloomberg News
Reuters