MOP 6.00 Closing editor: Joanne Kuai
CE meets local foreign language media chiefs
Shanghai G20 meeting ready to kick off Page 16
Year IV
Number 988 Thursday February 25, 2016
Publisher: Paulo A. Azevedo
Page 6
Economist ponders China’s reserves resilience Pages 8 & 9
Leisure Tourism Products On Horizon
A sea route connecting the Peninsula with the Islands. For more leisure tourism products. This, in the wake of the central government’s grant of 85 square kilometres of territorial waters to the MSAR last December. Alexis Tam, Secretary for Social Affairs and Culture, acknowledged the importance of the non-gaming ‘gift’. The Macau-Zhongshan free yachting scheme was also discussed by the SAR Gov’t and China National Tourism Administration. Although no updates are currently available Page 3
SJM stocks drop on falling profits
Social conflicts will add uncertainties. This, according to Hong Kong’s Financial Secretary Tsang Chun-wah in the context of the adverse economic environment. The city enjoyed economic growth of 2. 4 pct last year, he said. And anticipates a growth rate in real terms of 1-2 pct in 2016
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HSI - Movers
SJM shares dropped 9.8 pct to HK$5.05 yesterday. Following the company’s announcement of its slumping annual results. 2015 profit plummeted more than 60 pct to HK$2.47 bln. Reduced dividend payout rate, shorter margins and limited capacity to target the mass market are alarming investors
February 24
Name
Page 5
Appeal fails
Retail
www.macaubusinessdaily.com
Social compact
Cold winter for retail Retail sales for 2015 Q4 amounted to MOP15.59 bln. Down 10.5 pct y-o-y but up 6.8 pct vis-a-vis the revised MOP14.59 bln of Q3. The total value of retail sales for the whole of 2015 amounted to MOP60.89 bln, down 10.4 pct y-o-y
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Dismissed from office. Former urban planning chief Teng Si Un has been released from his post due to ‘absolute incapacity for public office’. With his appeal quashed by the local courts. Teng was allegedly implicated in one of the bribery cases involving disgraced former Secretary of public works Ao Man Long
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%Day
MTR Corp Ltd
+1.51
CLP Holdings Ltd
+0.96
Link REIT
+0.70
Power Assets Holdings
+0.68
CITIC Ltd
+0.19
China Mengniu Dairy C
-2.74
Bank of East Asia Ltd/T
-2.79
CNOOC Ltd
-3.04
Li & Fung Ltd
-3.08
Tingyi Cayman Islands
-6.37
Source: Bloomberg
I SSN 2226-8294
2016-2-25
2016-2-26
2016-2-27
11˚ 16˚
11˚ 17˚
12˚ 16˚
2 | Business Daily
February 25, 2016
Macau
City’s retail sales down 10.4 pct for 2015 Watches and jewellery, which accounted for a major segment of the city’s retail sales, continued to suffer a decline last year Stephanie Lai
sw.lai@macaubusinessdaily.com
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he city’s value of retail sales posted a 10.4 per cent drop last year, the first annual decline since 2000 with sales of watches, jewellery, department store goods and leather goods all suffering a hit, the latest data from the Statistics and Census Service (DSEC) retail sales survey shows. Macau’s value of retail sales reached nearly MOP60.9 billion
for the full year of 2015, with its retail sales volume down 7.9 per cent throughout the year, according to DSEC. A double-digit decrease was evident in the retail sales value of watches, clocks and jewellery, department store goods, leather goods and footwear for the year. The segment of watches, clocks and jewellery, accounting for
22.2 per cent of all retail sales value measured by the service, experienced a drop of 25 per cent year-on-year to MOP13.53 billion last year – an annual decline that has lasted since 2014. Department store goods, the segment that accounts for the second biggest retail sales value after watches and jewellery, also saw the retail sales
value decline 13.7 per cent year-onyear to MOP8.93 billion in 2015, official data shows. While a downward trend is seen in most retail items measured by the service for last year cosmetics and sanitary articles and communication equipment registered double-digit increases in retail sales value. The sales value of cosmetics and sanitary products reached MOP2.36 billion last year, while that of communication equipment was MOP1.68 billion. The survey, which cites the business outlook from local retailers, said that nearly half of them anticipate that sales volume will decrease in the first quarter of this year vis-a-vis the final quarter of last year, while nearly 40 per cent expect the sales volume to remain stable. In terms of retail prices, about 61.1 per cent of respondent retailers reported stable prices, 34.3 per cent noted a decrease and 4.6 per cent stated an increase although the survey did not specify the number of retailers questioned. The value of retail sales for the fourth quarter of last year fell 10.5 per cent year-on-year to MOP15.59 billion. The sales volume also dropped 7.7 per cent in the quarter, with significant decreases in the sale of footwear (-24.5%), watches, clocks and jewellery (-16.0%), leather goods (-11.3%) and department store goods (-10.0%).
Bossini interim profit plunges 83.9 pct
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lothing retailer Bossini Int’l Holdings Ltd. has posted a year-on-year decline of 83.9 per cent in net profit for the six months ended December 31 of last year due to its halved profit in the Hong Kong and Macau markets, coupled with losses in other major markets. According to its filing with Hong Kong Stock Exchange yesterday, profit attributable to owners of the company totalled HK$14.1 million (US$1.77 million) for the six months, a plunge of HK$73.4 million from HK$87.5 million of one year ago. Meanwhile, total revenues for the period registered a year-on-year decrease of 13 per cent to HK$1.15 billion. The company’s business in Hong Kong and Macau, where it owns 41 stores, only generated some HK$55.6
million in net profit, a decline of 49.3 per cent year-on-year. In addition, revenues earned from the two Special Administrative Regions
dropped 12 per cent yearon-year to HK$808.7million from HK$921.2 million one year ago, with same-store sales declining 14 per cent
year-on-year. ‘For the first time in many years, the number of annual visitors to Hong Kong was lower than 60 million in
2015… other external factors including the strong United States dollar, interest rate rises and the condition of Mainland China’s economy have led to an inevitable drop in footfall over the period and affected sales,’ the company explained. Meanwhile, the retailers’ business in Mainland China, Taiwan and Singapore all experienced widened net losses for the six months compared to the same period of last year, amounting to HK$14.8 million, HK$15.5 million and HK$4 million, respectively. ‘The period under review witnessed a warmer than usual winter weather in our core markets which weakened local sentiment, intensified competition and triggered steeper discounts. This was reflected in the reduction in same-store sales and gross margin for Hong Kong, Mainland China and Taiwan,’ the retailer wrote. K.L.
Business Daily | 3
February 25, 2016
Macau
Gov’t to launch sea route connecting Peninsula and Islands The route aims to serve the local tourism industry by releasing new sea tourism products following the city’s granted jurisdiction over 85 square kilometre waters Kam Leong
kamleong@macaubusinessdaily.com
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he local tourism department is considering launching a sea route connecting the Peninsula and the Islands for more leisure tourism products, in response to Beijing’s recent demarcation of the city’s coastal waters, the Secretary for Social Affairs and Culture, Alexis Tam Chon Weng, said yesterday. According to the government official, the launch of the new sea route seeks to enrich the city’s current leisure tourism products as well as speeding up the development of Macau as a centre of world tourism and leisure. Mr. Tam made his remarks following the first and closed-door meeting of the Macau-China joint working committee, convened by the Secretary and vice chairman of the China National Tourism Administration (CNTA) Du Jiang in Hengqin yesterday. The purpose of the committee is to boost the city’s appeal as a world centre of tourism and leisure. “The central government granted territorial waters of 85 square kilometres to the Special Administrative Region last December. This demarcation is the best gift from the central government for Macau’s 16th anniversary of its handover. It has brought advantages for the city to develop maritime tourism projects,” the Secretary said. The establishment of the committee follows an agreement signed by CNTA and the Special Administrative Region last year facilitating Macau’s efforts to build a centre of world tourism and leisure.
Mr. Tam reckons that it is now a very good time for the city to achieve the ambitious goal amid the gaming downturn. “In 2015, Macau’s gaming industry entered an adjustment period, with gaming revenues still on a downward track. Nevertheless, total visitor arrivals in Macau still surpassed some 30 million. The SAR Government clearly understands that it is necessary for our tourism industry to provide more non-gaming offerings,” the Secretary said in his speech when wrapping up the meeting.
No updates for free yachting scheme
Yesterday’s closed door meeting also discussed the co-operation between Macau and Guangdong on the Macau-Zhongshan free
yachting scheme. However, the Secretary did not disclose any updates of the scheme, which was first announced by the two parties in 2012 and whose implementation was expected last year. Nevertheless, Mr. Tam foresees that such a scheme would be a new milestone marking the co-operation between the two regions, perceiving the implementation of the scheme would further deepen the development of the two parties’ tourism auxiliary facilities. In addition, he said that the Macao Government Tourism Office (MGTO) would further develop a liaison mechanism with CNTA on tourism management in order to combat illegal activities in the travel market.
It [demarcation of coastal waters of Macau] has brought advantages for the city to develop maritime tourism projects Alexis Tam Chon Weng, Secretary for Social Affairs and Culture
Learn from Singapore
Meanwhile, the Deputy Director-General of the
Liaison Office of the central government in Macau, Yao Jian, reckons that Macau could actually learn from Singapore’s experience of developing a non-gaming industry. The Chinese official suggested after the closeddoor meeting that the local government increase its support of big-scale integrated resorts to assist their development of nongaming business in or out of Macau, so that more business travellers and family tourists can be attracted. Furthermore, he indicated that Macau and Zhuhai should share their hotel and MICE resources so that Macau’s tourism service industry could expand to Hengqin, adding the two cities need to work on improving their infrastructure facilities together, especially for the border checkpoints.
Corporate 2016 Special Olympics Golf Masters The 2016 Special Olympics Golf Masters will again be hosted in Macau from 27th to 30th April. A record participation of 23 different
countries and Special Administrative Regions has been confirmed, according to the organisers - the Charity Association of Macau Business Readers.
The Netherlands, Costa Rica, the United States, Finland and Thailand will be novices in the 5th edition. The biggest delegation will travel from Australia, having missed this event for the last two years due to a clash with local competitions Down Under.
Again the local gaming industry is enthusiastically supporting this event, with Caesars Golf Macau, MGM Macau, Wynn Macau and Melco Crown Entertainment continuing to represent various competitions in level 1, 2 & 5.
4 | Business Daily
February 25, 2016
Macau
Guangdong plans to include new industries in carbon exchange A carbon-trading cooperation in the Pan-Pearl Rive Delta, including Hong Kong and Macau is also on the agenda
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hina’s southern province of Guangdong is planning to expand the number of industries to be included in its carbontrading exchange amid steps to integrate the regional trading program into planned national emissions exchange. China Emissions Exchange, which overseas carbon trading in every part of the province except the
city of Shenzhen, has finished looking at the greenhouse gas emissions of six industries including ceramics, civil aviation and papermaking ahead of possibly including the industries in the program, President Ye Jun said. Next, economic-planning authorities at both the provincial and national levels will determine the number of new industries
and key emitters to be added, he said in a phone interview on Wednesday. The exchange currently covers more than 180 companies in four industries including power, cement, steel and petrochemicals, Ye said. The additions would be a way of preparing ahead of the national carbontrading program which the government said will cover
Standard Chartered profit up 59.9 pct to MOP70.96 mln
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eight sectors. China wants to start the national pollutiontrading system in 2017 to cut global-warming emissions. The national system will be developed using a cap-andtrade rule, under which the biggest corporate polluters buy credits from those that don’t pollute as much. The idea is that the emissions-trading system prompts companies to cut their emissions so they can sell their unused allocations. The exchange is one of seven pilot projects initiated by China. China Beijing Environment Exchange, another pilot, expects to more than double the number of companies included in the city’s market. China Emissions Exchange is also planning to push carbon- trading cooperation in the Pan-Pearl River Delta region, including nine Chinese provinces along with Hong Kong and Macau, said Ye. Bloomberg News
he Macau branch of Standard Chartered recorded a profit of MOP70.96 million (US$8.87 million) last year, according to information published in the territory’s Official Gazette. This result represents an improvement of 59.9 per cent year-on-year for the British bank in Macau. In 2014, the company posted a profit of MOP44.39 million. In addition, according to the information released by the bank yesterday, in 2015 Standard Chartered revenue amounted to MOP74.35 million, while expenses stood at MOP3.39 million. By contrast, in 2014 the revenue of Standard Chartered stood at MOP82.01 million with expenses of MOP37.62 million. Standard Chartered has been operating in the territory since 1983. The bank currently has only a representative office in Macau, which employs five individuals. The bank does not have any branches or ATMs in the MSAR.
Business Daily | 5
February 25, 2016
Macau Gov’t renews Jockey Club representative tenure The government has reappointed Lam Hou In as its representative at horseracing company Macau Jockey Club, it was published yesterday in the territory’s Official Gazette. The renewal term of Lam Hou In will start on 1st March and last for one year. During this period, the Macau Government representative at the horseracing company will be paid MOP9,200 per month. Lam Hou In has been reappointed for this position every year since 2002, when the position was first available.
SJM shares drop 9.8 pct following sluggish Q4 results Investors have adopted a cautious approach to the shares of the company because of the cut in dividends payout rate, shorter margins and limited mass market capacity João Santos Filipe
jsfilipe@macaubusinessdaily.com
A
cut in dividend payout rate, shorter margins and limited capacity to target the mass market are among the concerns of investors driving yesterday’s SJM Holdings’ shares drop of 9.8 per cent on the Hong Kong Stock Exchange. During the first trading day of the stock exchange in Hong Kong after SJM announced on Tuesday a decline in profit of 63.4 per cent to HK$2.47 billion (US$308.6 million), the shares of the company dropped to HK$5.05 per share from HK$5.60. This trend indicates that investors are more cautious after the company announced a cut in the payout ratio per share compared to previous years. While between 2011 and 2014 SJM’s payout stood at around 70 to 76 per cent of earnings, for the fiscal year of 2015 it stood at ‘only’ 57 per cent. ‘The upcoming addition of the leverage to the company’s balance sheet is likely to result in further caution as it relates to the return of capital to shareholders’, the report by the brokerage firm Union Gaming noted after the results were released. Analyst Grant Govertsen noted that the cut in dividend, which make SJM shares less attractive in comparison with the shares of the other operators, was not unexpected. Investment company Bernstein also predicted right after the company announced its results on Tuesday that the cut in the payout rate could easily be translated into negative news for investors. “While the fiscal year 2015 dividend payout ration remains above 50 per cent, the reduction from its historical level (70 per cent) could be perceived negatively by investors”, analyst Vitaly Umansky noted.
Deteriorating margins
Another factor that is likely to raise red flags for investors when it comes to acquiring shares of SJM Holdings is its deteriorating profit margin. This
was one of the factors stressed by Union Gaming, which downgraded its rating of SJM’s shares to hold following the announcement of the company’s results. ‘This is unlikely to reverse itself in a meaningful way over the coming quarters, which we believe will lead to even greater earnings declines relative to current consensus even if the Macau market continues to show stabilisation from a GGR [Gross Gaming Revenue] perspective’, Union Gaming noted. The same view was also shared by Bernstein, which highlighted that the adjusted Earnings Before Interest, Taxes, Depreciation and Amortization [EBITDA] margin for SJM went down from 8.4 per cent in the second quarter of the year to 7.7 per cent in the fourth quarter. This means that while during the second quarter for HK$125,000 in revenue, the company generated
HK$10,500 in profit; in the fourth quarter for the same revenue, the profit stood at only HK$9,625. Still, the perspective for the research firm is that the scenario will not change for better in the coming months. “We expect EBITDA margin to remain under pressure due to sticky labor cost and operational leveraging”, Bernstein told investors.
Cotai problem
If on the one hand margins are deteriorating, on the other the company’s Cotai projec, which can be very important in tackling the mass market, is also making investors frown. The reason is related to the opening date of the luxurious Grand Lisboa Palace. SJM management has set 2017 as the opening date, and according to the company the topping-off of the building’s superstructure is supposed
to happen during the middle of this year. The feeling among investors, however, is that the project will not open before 2018, which will have consequences for the capacity of the company to target the mass market. ‘The company expects Lisboa Palace to open in 2017 (vs. our estimate of early 2018)’, Bernstein said. ‘It lacks a competitive advantage in mass [market] and is late to the game on Cotai. Until Lisboa Palace is up and running in 2018, we believe SJM will lag its competitors,’ they added. ‘Construction on Grand Lisboa Palace in Cotai remains on track to finish in late 2017, although we would not expect the property to open until around the first quarter of 2018’, Union Gaming added. Since the beginning of the year the value of SJM’s shares has dipped 8.7 per cent, starting the year at HK$5.53 per share.
6 | Business Daily
February 25, 2016
Macau
Personal branding important for personal and online interaction Corporate expert says it’s important to identify unique characteristics regardless of whether the person is being contacted in person or in the virtual world Bami Lio
bami.lio@macaubusinessdaily.com
about special tips or suggestions for Macau professionals.
Personal contact
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ersonal branding is about revealing unique strengths and it is important for professionals to bridge the gap between what professionals think they are and the perception of what they are, said Nidhi Kush Shah, founder & director of Alchemy Consulting. At a breakfast meeting hosted yesterday by France Macau Business Association (FMBA) for corporate professionals, guest speaker Shah shared the ways and importance of building personal branding, saying that both face-to-face and online are important.
‘‘One thing I will say to all Macau professionals is that personal branding is so important whether we are working in Macau, Hong Kong or in China or any other part of the world,” she said. “In my experience of travelling in so many countries, I observe that it is important to identify what is unique to me, and then use those strengths and accomplishment to stand out from the rest. And build the connection with my clients and professionals, colleagues and leaders. So if I have to say one thing to Macau professionals, I would like to say it does not matter
where we are, personal branding is really important.” Ms. Shah pointed out that cultural differences may lead to different approaches in communicating but business networking can be achieved even in other channels. “I know a lot of clients from Asian culture find it a little bit difficult to talk about themselves and to talk nicely and be more open. We can brand ourselves even if I don’t want to go out and speak to a lot of people; I can maybe write quietly in my room and I can use social media, online channels to build my brand,” Shah explained when asked
“Face-to-face and online branding are equally important in today’s world; a lot of social media like LinkedIn, Facebook, Twitter, personal websites, all are definitely important because what people do is that immediately like we met today, I think most of the people will go back and Google me about what this person is doing, so I would say both of them are equally important. And vice versa, I’m saying that if online I am very passionate and excited to be here, then I need to show that when we meet one on one,” she added. Nidhi Kush Shah is an experienced and passionate keynote speaker, writer, facilitator and coach specialising in executive personal branding, communication skills and business networking. In the last eight years, she has gained leadership and training experience in Australia, Hong Kong, China, Macau and India. Since its inception in 2012, Alchemy Consulting has gained popularity for providing unique, interactive and effective Learning & Development solutions. Personal branding techniques introduced by Ms. Shah like lowering the voice can be useful, said organiser Rutger Verschuren, chairman of FMBA. He added that the group would like to invite more guest speakers to join the meetings in future.
CE: Press plays key role connecting gov’t and public
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hief Executive Chui Sai On said the media plays a significant role in connecting the government and the public by providing information on policies and social issues. He added that the contributions of the media to the development of Macau are widely recognised by the community. Mr. Chui made the comments during a luncheon he hosted for representatives of local news outlets reporting in Portuguese and English. The Chief Executive said the government would introduce additional measures to ensure a good working environment for the media. The government strictly upholds the freedom of the press and freedom of publishing, he added. Mr. Chui said key directions for the city’s sustainability included upholding the rule of law, maintaining social stability, allocating more resources to economic diversification policies, and providing more
development opportunities to local talent, in particular in the training of young people. The government is confident about Macau’s development
outlook, given that the city’s sound fiscal reserve system allows local authorities to cope well with potential challenges emerging from the ongoing
adjustment period in the city’s gaming industry, said the Chief Executive. This strategy so far has proven effective, he said,
enabling the government to continue providing support to the local economy while consistently enhancing people’s livelihood.
Chief Executive Chui Sai On hosts a luncheon for representatives of local news outlets reporting in Portuguese and English
Business Daily | 7
February 25, 2016
Macau Air Macau: Passenger numbers soar 30 pct over CNY Local flag carrier Air Macau said its passenger volume registered a year-on-year jump of 30 per cent for Chinese New Year although it did not disclose the related figures. In a press release, the airline claimed its transit passenger numbers had jumped 20 per cent year-onyear for the holiday break. Japan, South Korea and Taiwan were the hottest destinations for local residents during the period, whilst higher demand for flying to the city was seen in the Japanese and Korean markets, it said. For the holiday, the flag carrier was approved by local authorities to add 68 charter and extra flights.
Former urban planning chief Teng Si Un dismissed from DSSOPT Teng, who had once served as the urban planning chief during the tenure of disgraced Secretary Ao Man Long, has been dismissed from the Land, Public Works and Transport Bureau
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senior technician in the Land, Public Works and Transport Bureau (DSSOPT) Teng Si Un, also a former chief of the Bureau’s urban planning department, was dismissed from his post in late January following his failed appeal against a court decision on his suspension from office. Teng’s dismissal from the Bureau has been in effect since January 22 but the information was only published yesterday in an Official Gazette notice signed by Bureau director Li Canfeng. Teng was released from his post for his ‘absolute incapacity for public office’, the gazetted notice read.
However, when speaking to media yesterday, deputy director of DSSOPT Cheong Ion Man said that Teng’s dismissal from the office was due to his “health issues”. Prior to Teng’s dismissal from the office, he had faced a 6-month suspension as a senior technician at the Bureau in 2012 following a disciplinary procedure conducted against his alleged falsifying of a pension document. According to local Chinese language media reports, Teng had intended at the time to retract his decision of not contributing to the pension fund by falsifying the related document.
Teng sued against the suspension penalty in the local courts but the Court of Final Appeal eventually ruled against him last year.
Link to Ao
Teng, who served as the chief of DSSOPT’s urban planning department from 2004 to 2006, was also involved in the bribery case of disgraced former Secretary of public works Ao Man Long. After freshly assuming office as the urban planning chief in 2004 - a time when Ao was serving as public works Secretary - Teng relaxed the height restriction for two complexes located adjacent to the Friendship
Bridge on the Taipa PO5 lot. Ao was accused of receiving bribes from a co company owned by renowned local contractor Ho Meng Fai, whose developer firm Shun King Property Ltd. was developing the PO5 lot. A phrase referring to Teng’s promotion as a “department chief” and relaxing the height for the Taipa PO5 lot had been written in the “Friendship Notebook” of Ao – a document that allegedly shows payoffs to Ao, local media reported at Ao’s trials. Teng resigned his urban planning chief position in 2006, according to official records. S.L.
8 | Business Daily
February 25, 2016
Greater China
Hong Kong braces for weaker growth as “political volatility” strains economy The retail and tourism sectors, important drivers of the local economy, have been hit hard by a drop in mainland Chinese tourists Clare Baldwin and Donny Kwok
Hong Kong Financial Secretary John C Tsang delivers the annual government budget to the city's Legislative Council yesterday
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olitical tensions in Hong Kong are hurting the economy said the city’s financial secretary in his annual budget speech yesterday, as he rolled out a multi-billion dollar package of sweeteners to bolster growth hit by a slowdown in China. In unusually blunt comments for a budget address, John Tsang said
“political volatility” was threatening to undermine the economy and warned disputes would intensify ahead of legislative elections this year pitting the city’s democratic opposition against pro-Beijing and pro-establishment political parties. He said the conflicts must be resolved. “Politics and economics are closely intertwined.
Political volatility will unavoidably impact our economy,” Tsang said. In the wake of a night-long ‘riot’ earlier this month that saw protesters fight pitched street battles with police, Tsang warned Hong Kong faced “even greater chaos” and risks future generations growing up “in the midst of hatred”. Hong Kong is a special
administrative region of China that returned from British to Chinese rule in 1997 under a “one country, two systems” framework that guarantees broad freedoms and autonomy. Tsang, who said the local economic outlook was “far from promising”, expects GDP growth to slow to 1-2 percent in 2016. Economic growth for 2015 came in at 2.4 percent, in line with the government’s estimate, and compared with a median 2.3 percent forecast by six economists surveyed by Reuters.
Deficits ahead
After a stint of healthy surpluses, including HK$30 billion (US$3.86 billion) for the current financial year, Tsang said he expected the city to run up deficits in its consolidated accounts for two years starting from 2018. Among measures to boost growth were a personal tax cut up to HK$20,000 for
some city residents, some property rate waivers and a public housing supply target of 280,000 units for 10 years up to 2026. Hong Kong home prices remain among the highest in the world. The recent riot, slowness in rolling out major infrastructure projects such as a rail link with China and HSBC Holdings’ recent shunning of the city for its headquarters, are also weighing on Hong Kong and have tarnished its reputation as a law-abiding and efficient global business hub. The Hong Kong government faces a big test and analysts are looking for signs of long-term economic policies and strategic vision, instead of short-term economic sweeteners. The retail and tourism sectors, important drivers of the local economy, have also been hit hard by a drop in mainland Chinese tourists. Reuters
How long before the cracks show in great Most economists agree China has a way to go before running out of road Kevin Yao
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hina still owns the world's largest currency reserves, but it has been burning through them at such a pace that some think Beijing might soon have to allow a sharp fall in the yuan or backpedal on liberalisation and tighten its capital controls. Foreign exchange reserves in China declined US$99.5 billion in January to US$3.23 trillion, following a record fall the previous month, and have shrunk by US$762 billion since mid-2014, more than the gross domestic product of Switzerland. That still leaves a mighty arsenal, and the People's Bank of China (PBOC) says it is more than adequate, though it has not said what the minimum might be and did not return a request for comment. PBOC governor Zhou Xiaochuan told Caixin magazine a week ago that much of the outflow had been Chinese companies repaying dollar debt as the greenback rose, which would bottom out, or outbound investment, which was to be welcomed. Most economists agree China has a way to go before running out of road, but some believe it will have to
hit the brakes in months, not years. The pace of decline has accelerated as the PBOC fought to keep the yuan steady in the face of speculative selling offshore and capital flight at home, a task made harder by China's slowest economic growth in 25 years and the bank's own decision to guide the currency down in August and again in early January. Though it has huge reserves, an economy the size of China's needs them to cover imports and foreign debts, and the less liquid assets in reserves can't readily serve those purposes. Though the composition of China's reserves is a state secret, officials also say the falling dollar value of other currencies it holds accounts for some of the fall. Economists and foreign exchange professionals around the world are nevertheless asking how low can they go before Beijing is forced to choose between fresh capital controls or giving up selling dollars to defend the yuan, also known as the renminbi. French bank Societe Generale says International Monetary Fund guidelines put US$2.8 trillion as the
minimum prudent level for China, which is not far away if reserves keep falling at the current pace. "If that occurs in the next few months," says SocGen, "expect to see a tidal wave of speculative selling, forcing the PBOC to throw in the towel and let the market decide the level of the renminbi exchange rate." A G20 deputy central banker was considerably more sanguine. "Whatever number I would come up with, it would be a lot less than US$2.8 trillion," he said, adding that reserves could fall another trillion by year-end in conjunction with stability in the exchange rate.
No magic number
Analysts at HSBC felt US$2 trillion would be sufficient in theory, but doubted Beijing would risk letting ever-falling reserves spook local investors into shifting more funds offshore. According to Win Thin, global head of emerging market currency strategy at Brown Brothers Harriman, New York, China has 17 months' import cover, and its shortterm foreign debt is only 25 percent of reserves, comfortably better than the three-month and 55 percent
Business Daily | 9
February 25, 2016
Greater China Wanda to announce ‘major deal’ this week The company has said it’s planning five major acquisitions in 2016 -- three of them overseas
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alian Wanda Group Co., the Chinese conglomerate that’s been on an acquisition spree, is planning to announce a “major deal” on Friday, billionaire Chairman Wang Jianlin said. Wang, who spoke at Oxford University on Tuesday, didn’t provide details of the deal beyond saying that it would be outside of the U.K. Wanda is also in talks on a “comprehensive” project involving entertainment in
the U.K. that would result in 10,000 jobs, he said. Wang, who vies with Alibaba Group Holding Ltd.’s Jack Ma as China’s richest man, has had a busy year by agreeing to buy “Godzilla”producer Legendary Entertainment for US$3.5 billion, investing in three hospitals for US$2.3 billion, forming a financial group and signing a US$10 billion development deal in India. In addition, Wanda has said it’s planning
Wanda’s Chairman bought control of AMC Entertainment Holdings Inc. in the U.S. in 2012
currency wall?
levels that might be considered safe for emerging markets (EM). "I would say by any metric that we use for EM, Chinese reserves are more than sufficient," he said. Within China, economists agree there is no imminent crisis facing policymakers.
KEY POINTS China reserves down $762 bln since mid-2014 at $3.23 trln SocGen calculates IMF safe level for China at $2.8 trln Decline in reserves has sped up in last six months If reserves too low, China can’t defend falling yuan Could also impose capital controls to prevent outflow
five major acquisitions in 2016 -three of them overseas. Separately, the group’s Wanda Cinema Line Co. theatre-chain unit was halted from trading in Shenzhen on Wednesday pending the announcement of an acquisition. Wanda is seeking acquisitions to bolster growth as the group braces for falling sales from its main property business. That’s prompted Wang, estimated by the Bloomberg Billionaires Index to have a fortune of US$27.2 billion, to increasingly look toward expanding his entertainment business. In buying Legendary, Wang is poised to become the first Chinese person to control a Hollywood film company. Aside from running China’s biggest movie-theatre chain, he bought control of AMC Entertainment Holdings Inc. in the U.S. in 2012. He’s also building a 50-billion-yuan (US$7.7 billion) complex in eastern China that will include the world’s largest movie studio. Yet Wang, who’s sought to invest in Metro-Goldwyn-Mayer Inc. years ago, still lacks control of a major Hollywood studio, an ambition he’s voiced in the past. One is up for sale. Viacom Inc. Chief Executive Officer Philippe Dauman said Tuesday that it’s exploring the sale of a stake in Paramount Pictures and that it expects to reach an agreement by June. A Wanda representative wasn’t immediately available to comment on the prospects of the Chinese company being a suitor for Paramount, while a Viacom spokesman declined to comment. Wanda also lacks much in terms of film-related operations in Europe, where he’s traveling this week, though the group’s investments in the region include the Club Atletico de Madrid soccer team and Swiss marketing firm Infront Sports & Media AG. Bloomberg News
"We have US$3.3 trillion. What should we worry about?" said one economist at a Beijing-based thinktank. "We have net claims on foreign assets of US$1.5 trillion, and we still have a trade surplus of about US$600 billion." If it falls to US$2 trillion by 2025, he said, "we will still be safe and sound". Another economist at a government think-tank put the bottom line at US$1.62 trillion. "They are a bit worried about the fall in reserves, but it's too early to panic," he said, though he acknowledged an unresolved conflict between overseas investors expecting the yuan to fall and the government's belief that China's fundamentals did not support continued depreciation. Ultimately, the safe level is less about ratios than sentiment, said Thin at Brown Brothers Harriman. "There's no magic number ... I do think that confidence is a big part of this whole thing, and China's policymakers are really trying to restore confidence." Certainly bearish bets against the yuan have fallen since spiking in January, according to a Reuters Asia FX positioning poll, as the dollar has come off its peaks. But Chris Morrison, portfolio manager at Hedge fund Omni, which has been vocally betting against the currency, thinks the tipping point is closer than most. "This game is all to do with expectations and confidence... Once the market sees the bottom of the pit, they lose all credibility. And I think going through US$3 trillion is that point." Reuters
President urges diligent implementation of reforms Chinese officials at all levels need to implement reforms and address lingering problems, China’s president Xi Jinping said Tuesday, according to state news agency Xinhua. Xi made the remarks to high level officials including premier Li Keqiang at a meeting of the Central Leading Group for Overall Reform, the agency reported. The Central Leading Group, meant to help the senior leadership directly spearhead reform efforts, was established in 2013. “Overall, the implementation of the reforms is good,” a statement from the meeting cited by Xinhua said.
Hugo Boss cuts prices to revive weak mainland sales
German fashion house Hugo Boss is bringing prices in Asia down closer to levels in Europe and the Americas after saying its sales in China and the United States so far this year have been weaker than it expected. Hugo Boss, which had already warned last month it was suffering from weak markets in China and the United States, said it now expects 2016 sales to rise at a low single-digit percentage rate on a currency adjusted basis. It expects adjusted operating profit to fall at a low double-digit percentage rate.
Momo jumps as Alibaba’s Tsai joins board Momo Inc. surged after naming Alibaba Holdings Group Holding Ltd.’s vice chairman to its board, stoking speculation that the Chinese maker of a dating app may be able to complete a management-led buyout with help from the country’s biggest online retailer. The American depositary receipts of Momo rose 20 percent to $12 in New York on Tuesday, the most since May 2015 as Momo said that Alibaba co-founder Joseph Tsai has joined its board as a director. The e-commerce company invested in Momo before the company went public in December 2014.
Zurich Insurance explores HK sale Zurich Insurance is exploring a sale of its Hong Kong and Singapore operations as it reviews its non-core businesses outside Europe, sources familiar with the matter said. The Swiss insurer has discussed the plan with several investment banks but has yet to hire advisers, the sources said, cautioning that no deal was certain. The Swiss insurer launched an in-depth review of its business in September after explosions at Tianjin caused losses of around US$275 million. It had also abandoned a 5.6 billion pound bid for Britain’s RSA Insurance after a “deterioration” in its general insurance business.
10 | Business Daily
February 25, 2016
Greater China
CNPC considering oilfield services IPO amid reform drive The company is following similar moves by its fellow state-run energy giants
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hina National Petroleum Corp., the country’s biggest oil and gas producer, plans to spin off its oilfield-services business, according to Chairman Wang Yilin. CNPC is considering an initial public offering of the oilfield services business as part of its efforts to streamline and become more efficient, Wang said in a speech at the IHS CERAWeek conference in Houston on Tuesday that was translated from Chinese. He didn’t provide details on timing or how large of a stake will be spun off. The move comes amid
President Xi Jinping’s overhaul of the country’s stateowned sector as the world’s second-largest economy heads for its slowest growth in a quarter-century. CNPC’s listed unit, PetroChina Co., has sold off pipeline assets in recent months while China Petroleum & Chemical Corp., Asia’s biggest refiner, agreed to sell a stake in its retail business in 2014. “This CNPC drilling business spinoff is part of China’s state-owned enterprise reform blueprint,” Gordon Kwan, head of Asia oil and gas research at Nomura Holdings Inc. in Hong Hong, said by e-mail.
“State-run oil companies have been implementing cost-cutting reforms together with asset restructuring amid depressed energy prices.”
State-run oil companies have been implementing cost-cutting reforms together with asset restructuring amid depressed energy prices
Industry downturn
CNPC is following similar moves by its fellow staterun energy giants. Sinopec Oi l fi el d S er v i ce C o r p . was spun off from China Petroleum & Chemical, known as Sinopec, in 2014, while Cnooc Ltd. took China Oilfield Services Ltd. public in 2002. CNPC’s Beijingbased spokesman Qu Guangxue didn’t answer two calls to his office seeking
Gordon Kwan, head of Asia oil and gas research, Nomura Holdings
further comment. “This reform follows on from Cnooc and Sinopec, who have partially spun off their oil services divisions,” said
This is why Kyle Bass is wrong on Mainland collapse, says CICC This critique comes one week after their CICC colleague Mao Junhua wrote his own research taking issue with Bass’s assessment of nonperforming loans
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hina International Capital Corp. has stepped up its beef with Kyle Bass. The Chinese investment bank’s economists published an 11-page rebuttal of hedge-fund manager Bass’s assessment earlier this month where he stated that the nation’s banking system may see losses of more than four times those suffered by U.S. lenders during the 2008 credit crisis. CICC says Bass is getting it wrong in three main areas: by comparing a “vastly different” Chinese economy to that of Japan’s in 1990; by using the ratio between loans and economic output as a complete measure of leverage in China; and by using a measure of foreign-exchange reserves that underestimates the true figure. There are “several factual errors in Mr. Bass’s research,” Hong Liang, Beijing-based chief economist at CICC, and Eva Yi wrote in a report Tuesday. “Although we do not share Mr. Bass’s assessment of a violent debt-deflation cycle accompanied by severe FX depreciation in China in the near future, we acknowledge that China’s current macro challenges are daunting.” This critique comes one week after their CICC colleague Mao Junhua wrote his own research taking issue with Bass’s assessment of nonperforming loans. The hedgefund manager, who successfully
bet against mortgages during the subprime collapse, said earlier this month that in the event that the Chinese banking system loses 10 percent of its assets because of bad loans, the nation’s banks will see about US$3.5 trillion in their equity vanish, according to a letter to investors obtained by Bloomberg. When asked to respond via e-mail, Bass pointed to a February
17 Goldman Sachs Group Inc. report, in which the firm flagged the potential for a 9 percent bad-loan ratio in China’s banking system, more than the official reported level of 1.7 percent. The ability of industrial companies to cover their interest payments had deteriorated to levels in line with 2003, which is when banks last reported a 9 percent badloan ratio, according to the report.
Neil Beveridge, a Hong Kongbased analyst at Sanford C. Bernstein. “However, with the severe downturn in the industry and low valuations, the timing is not good.” Crude has lost about half its value since the Organization of Petroleum Exporting Countries decided not to cut output in an effort to defend market share amid a global oversupply. Services, drilling and supply companies are bearing the brunt of the crash, having accounted for more than three quarters of the industry’s layoffs, according to consultant Graves & Co. CNPC reported about 110 billion yuan (US$16.8 billion) in revenue in 2014 from its construction engineering, engineering technology and equipment manufacturing divisions, according to data compiled by Bloomberg. That compares with total revenue of about 33 billion at China Oilfield Services and almost 94 billion at Sinopec Oilfield Services. Bloomberg News
Well known for his bet against the U.S. mortgage market in 2007, some of Bass’s calls haven’t been as prescient. He revealed wagering on a collapse in Japan’s government-bond market in 2010, a short position he later acknowledged that other bond investors had nicknamed “the widow maker.” Others have also disagreed with Bass’s views including Larry Hu, an economist at Macquarie Group Ltd. in Hong Kong. He said this month that the hedge-fund manager’s estimate for bank losses could be too large as it implied a true bad-loan ratio for China banks at 28 to 30 percent. Meanwhile, Eclectica Asset Management’s Hugh Hendry has taken issue with Bass’s forecast for a major devaluation in the yuan against the dollar. Policy makers in China wouldn’t risk such a drop because of the impact on consumption, Hendry said at a conference last week. Bloomberg News
Business Daily | 11
February 25, 2016
Asia
Philippine imports shrink the most since 2009 Purchases of raw materials and intermediate goods dropped 53.2 percent Enrico Dela Cruz and Neil Jerome Morales
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hilippine imports dropped nearly 26 percent in December, the sharpest fall since 2009, as semiconductor shipments contracted almost 40 percent to signal tougher days ahead for one of Asia’s fastestgrowing economies. The Philippines imports semiconductors largely for assembly in electronics products for export, and the decline underlines slower demand overseas as the global economy weakens. Last week, Manila cut its 2016 import growth target to 10 percent from 12 percent and for export growth to 5 percent from 6 percent, citing a “very challenging” external environment. Economists say the import data also highlights softening domestic demand, and growing uncertainty on the investment outlook ahead of national elections in May. “Every time there is a presidential election, investment tends to slow significantly,” said Natixis economist Trinh Nguyen, who said the market was looking for imports to have risen 10 percent in December. “I think a lot of private sector investment is holding back waiting for the (election)
results - to have more certainty.” It was the first decline in Philippine imports since last May and the sharpest since August 2009 when imports fell 28.3 percent, according to an official of the Philippine Statistics Authority. It was the steepest drop in imports for the month of December since 2008. Imports of electronics, which accounted for nearly a third of total imports, fell
30.3 percent from a year ago, also showing the first drop in seven months, government data yesterday showed. Danilo Lachica, president of Semiconductor and Electronics Industries in the Philippines (SEIPI), which groups more than 200 semiconductors and electronics manufacturers, did not immediately respond to a request for comment on the data.
Falling global commodity prices were also partly to blame for the drop in total imports, with mineral fuels, lubricants and related materials slipping 14.1 percent. Purchases of raw materials and intermediate goods dropped 53.2 percent, suggesting “a bit of cautiousness overhanging the economy,” said Nguyen. The surprise drop in
imports came a day after the Philippine central bank painted an upbeat outlook for the domestic economy. Bangko Sentral ng Pilipinas Governor Amando Tetangco said on Tuesday that the economy should be resilient this year to both external and domestic risks, noting there was no need for additional economic stimulus at the moment. Reuters
Australian wage growth slowest on record in Q4 Wage growth has been slowing since peaking atop 4 percent in 2008 Wayne Cole
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ustralian wages grew at their slowest pace on record last quarter, promising to keep a lid on inflation over the long run while providing an underpinning to the surprising resilience of the country’s labour market. Figures yesterday showed hourly rates of pay excluding bonuses edged up just 0.5 percent in the fourth quarter, from the previous quarter when they rose 0.6 percent. Annual growth slowed to 2.2 percent, the lowest reading since the Australian Bureau of Statistics started compiling the data in 1997. Real unit labour costs have hardly risen over the past six years, making workers relatively more competitive compared with machines. Almost 300,000 net new positions were created in the year to January, while annual job growth of 2.6 percent surpassed even that of the U.S. economy.
Wage growth has been slowing since peaking atop 4 percent in 2008, a trend Australia shares with a host of developed nations. Not a single industry surveyed
KEY POINTS Wages rise 0.5 pct in Q4, annual pace slows to 2.2 pct Set to keep inflation restrained, support employment Mining slump hits construction spending, home building strong
managed annual growth above 3 percent. Indeed, the best result was finance, which eked out 2.8 percent, while admin and support services drew a Scrooge-like 1.4 percent. “Wage inflation is well contained as pressure comes out of the former hot sectors and industries,” said Justin Smirk, a senior economist at Westpac. “This presents a very benign outlook for inflation and one that is set to remain so.” The subsidence in wages has both reflected and contributed to a moderation in inflation, which ran at a benign 1.7 percent last year. It is also why the Reserve Bank of Australia (RBA) is confident inflation will stay tame for several years more. That in turn offers the scope for a further cut in already record-low interest rates if needed to shepherd the economy through the aftermath of a decade-long resource boom. The baleful impact of the mining
downturn was apparent in figures on construction work which showed a drop of 3.6 percent last quarter, entirely due to a dive in engineering spending. The drag from mining is one reason the overall economy slowed last quarter, after a surprisingly brisk 0.9 percent pick-up in the third quarter. Data on gross domestic product (GDP) for the fourth quarter is due on March 2. Still, low rates have stoked a revival in home building and a much-needed offset to mining. Wednesday’s construction figures showed residential spending climbed more than 11 percent in 2015 to reach a record A$62.3 billion (US$44.83 billion). Home building alone contributed 0.5 percentage points to the 2.5 percent GDP growth seen in the year to last September. Reuters
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February 25, 2016
Asia
Singapore’s stronger GDP masks underlying weakness Annual exports to China, the city’s top overseas market, tumbled 25.2 pct in January Jongwoo Cheon and Masayuki Kitano
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ingapore’s economy grew faster than initially estimated in the fourth quarter, but a deeper contraction in the key manufacturing sector and a downgrade to trade growth for this year will keep pressure on policy makers to step up stimulus. Solid growth in the services industry helped lift gross domestic product (GDP) to an annualised 6.2 percent in October-December period from the previous three months on a seasonally adjusted basis, the Ministry of Trade and Industry (MTI) said yesterday. That topped the government’s advance estimate of 5.7 percent growth issued in January, and compared with third quarter’s 2.3 percent rise. “For now, we are in the no-change camp but softer inflation and growth dynamics obviously do continue to tilt the dial towards potentially policy stimulus - whether it comes from monetary side or fiscal side,” said Selena Ling, head of treasury research and strategy for OCBC Bank. Jacqueline Loh, deputy managing director for the Monetary Authority of Singapore (MAS), told reporters that the current monetary policy stance remains appropriate and will be next reviewed in April.
On Tuesday, Singapore sharply cut its headline inflation forecast for this year but kept the core inflation projection at 0.5 percent to 1.5 percent, which Loh said was “the most relevant indicator for monetary policy.” But given the collapse in exports and as trade flows dwarf the city state’s US$285 billion economy, authorities may have to ease Singapore’s exchange-rate based monetary policy as soon as April, especially as a slowdown in Asia’s locomotive China continues to ripple across global manufacturers from cars and other consumer products to producers of commodities. Singapore’s annual exports to China, its top overseas market, tumbled 25.2 percent in January. In 2015, exports fell 0.1 percent - the
third straight year of annual declines and the first such consecutive drop on record. That explains why the trade agency yesterday downgraded this year’s forecast for total merchandise trade to between -1.0 percent and 1.0 percent, from the previous projection of nil to 2.0 percent growth. Last year, the MAS eased policy twice including an unscheduled move in January.
Manufacturing downturn
Full-year GDP growth in 2015 of 2.0 percent, revised from the initial 2.1 percent estimate, was the worst since 2009 when the economy contracted 0.6 percent due to the global financial crisis. MTI maintained its forecast for this year’s GDP growth at 1.0-3.0 percent.
The service sector helped to prop up the final Q4 GDP number, growing an annualised 7.7 percent from the previous three months. But strain in the city-state’s manufacturing sector pointed to a bumpy outlook for the economy, with factory activity contracting 4.9 percent in the fourth quarter, more than the 3.1 percent fall estimated earlier, as weak global demand took a heavy toll on exporters. The fall in oil prices has also hit manufacturers as demand for drilling rigs has eased. Earlier this month, Singaporean rig builder Sembcorp Marine Ltd reported its first quarterly loss in the fourth quarter. Reuters
S.Korea’s Q4 household credit growth near 9-yr high Christine Kim
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outh Korea’s household credit grew at its fastest pace in nearly nine years in the fourth quarter, central bank data showed on Wednesday, accelerating for the sixth straight quarter thanks to record-low interest rates. To address concerns over burgeoning household debt, the country’s finance ministry issued a statement shortly after the data release saying the surge had helped the ongoing economic recovery at home.
“Recent household borrowing contributed to the real economy as loans were taken out by households with actual demand for housing, boosting real estate transactions in addition to consumer spending,” the statement said. “When considering its overall soundness or growth, household debt is stable in terms of financial systemic risk.” The statement was issued shortly after the Bank of Korea’s preliminary data
showed household credit during the fourth quarter of last year, including loans and other credit owed by South Korean households, was up 11.2 percent on-year to a total of 1.207 quadrillion won. The growth in credit quickened from an increase of 10.4 percent in the previous quarter and was the swiftest since an 11.3 percent jump in the first quarter of 2007. “This year, debt volume growth is expected to slow while improvement in debt quality will likely speed up,”
the ministry added. The market’s consensus view is for another rate cut as soon as March, although fast growth in household debt has been cited as one reason why the Bank of Korea has refrained from cutting interest rates from the current recordlow of 1.50 percent. Policymakers have said they do not see household debt developing into a financial risk anytime soon. Finance Minister Yoo Il-ho said in a press conference on Monday the government is focused on improving the structure of debt and has no plans to rein in volume. Household borrowing has
been steadily rising in recent years as the BOK lowered its policy rate four times between August 2014 and June last year. Yesterday’s data showed household loans in the December quarter rose 11.4 percent from a year ago to 1.142 quadrillion won, compared with the third quarter’s 10.4 percent gain. The outstanding amount of purchases on credit, also part of the household credit balance, rose 8.1 percent in the December quarter in annual terms, slowing from a 10.5 percent rise in the third quarter. Reuters
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Business Daily | 13
February 25, 2016
Asia Sharp starts two‑day board meeting on Foxconn’s offer At least four of Sharp’s 13 board members favour the Foxconn offer Makiko Yamazaki
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he board of Japan’s Sharp Corp began a two-day meeting yesterday to decide if it should accept a US$5.9 billion takeover bid from Taiwan’s Foxconn over an offer from a state-backed fund, a source with direct knowledge of the matter said. A deal with Foxconn, formally known as Hon Hai Precision Industry Co, would pave the way for the largest acquisition by a foreign company in Japan’s insular technology sector. Foxconn is widely seen as the frontrunner in the race to rescue the loss-making electronics maker, with sources saying its offer is more than double the 300 billion yen (US$2.7 billion) investment proposed by the state-backed Innovation Network Corp of Japan (INCJ). After Sharp said this month it would devote more resources to studying a deal with Foxconn, the Taiwanese firm’s CEO Terry Gou flew into Osaka to talk with Sharp executives and later announced that the two firms had agreed on most points of a deal. At least four of Sharp’s 13 board members favour the Foxconn offer, two
of whom represent Sharp’s two main lenders, according to sources familiar with recent discussions. The lenders are wary of the INCJ plan, which calls for them to cancel the preferred shares they own, they said. But it was unclear how the other board members including Chief Executive Kozo Takahashi would vote, they said. Sources have declined to be identified as they were not authorised to speak on the matter. A Sharp spokesman said the company did not disclose its board meeting schedules and declined to comment further. The company has said it would decide by the end of the month whether to accept Foxconn’s offer. The INCJ at one time had been considered the more favoured suitor as it was seen as a more reliable investor with the backing of government. The fund has said it wants to merge Sharp’s display business with Japan Display Inc, in which it is the top shareholder.
Some sources have cited lingering doubts within Sharp over Foxconn’s commitment, after a breakdown in a 2012 agreement between the two companies to form capital ties. In a gesture to reassure Sharp executives, Foxconn has offered to pay 100 billion yen as a cancellation fee if it does not go through with the deal, one source said. Board members will also discuss INCJ’s offer before moving to a vote today, the sources said. A takeover by Foxconn, which assembles various electronics products such as smartphones and televisions for the likes of Apple Inc and Sony Corp, would vastly expand sales channels for Sharp’s liquid crystal display (LCD) panels. Teruo Asamoto, professor at Kyushu Sangyo University, said Foxconn’s ample resources would also enable much-needed investment in next-generation display technology, including for organic light-emitting diode (OLED) screens which Apple is believed to be adopting in its iPhone around 2018. The two companies “would make a good match as Sharp can take advantage of Hon Hai’s expertise in production efficiency to commercialize their gadgets,” he said. Reuters
KEY POINTS
Fortescue attacks costs, eyes opportunities Australia’s Fortescue Metals Group reported a four percent fall in half-year profit as steep cost cuts largely offset a slump in iron ore prices, and flagged it will be on the lookout for acquisitions at a later date. Fortescue, Australia’s third-biggest producer behind Rio Tinto and BHP Billiton said yesterday its debt repayment schedule will allow it to look for distressed assets in about 18 months. “As we generate cash flow from the business we will repay debt. That will put us in a position with a very strong balance sheet to take advantage of further opportunities in iron ore and across the broader sector,” Chief Executive Nev Power said.
GIC to invest in retail arm of CT Corp Singapore sovereign wealth fund GIC agreed to invest a total of 5.2 trillion rupiah (US$387 million) in PT Trans Retail, the retail arm of Indonesian conglomerate CT Corp, the two firms said in a statement yesterday. Trans Retail operates hypermarkets, supermarkets, and cash and carry stores under the Carrefour and TRANSmart brands.
Deal would be biggest foreign purchase of Japanese tech firm
S.Korea fines Japan’s Denso, Mitsubishi Elec
At least 4 of 13 board members in favour of Foxconn -sources
Malaysia’s January inflation rate rises
South Korea’s anti-trust regulator fined Japan’s Denso and Mitsubishi Electric a combined 1.14 billion won (US$924,229.40) on Wednesday on charges of colluding to fix the prices of engine starter motors supplied to General Motors. This is the seventh price-fixing case involving global auto component makers probed by South Korea and comes amid a worldwide crackdown on car part cartels. In 2008, Denso and Mitsubishi Electric colluded on bid prices for the engine starter motors used in GM’s Spark, Cruze and Orlando vehicles made in South Korea, the Fair Trade Commission said in a statement.
Poor global oil prices have hurt Malaysia, which exports liquefied natural gas
Asciano, suitor report weaker sales
Lingering doubts
Foxconn offers to pay fee if deal doesn’t go through - source
Australian freight giant Asciano and the smaller rival trying to buy it for A$9 billion (US$6.5 billion) both posted lower first half sales on Wednesday, strengthening the case for consolidation in a sector hammered by a commodities rout. A day after revealing that its two long-standing suitors were now weighing a joint tilt, Asciano reported a 4.3 percent drop in revenue for the period, while net profit rose 5.3 percent due to cost cutting. Suitor and cargo handler Qube Holdings Ltd also said sales fell 3.7 percent for the six months to December 31 while profit eased just 1.7 percent, also as a result of reduced overheads.
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nflation rate in January surged to the fastest level in nearly two years, but this is not expected to lead to any hike of the country’s benchmark interest rate. The consumer price index in January rose 3.5 percent from a year earlier, the largest annual increase since March 2014. In December, the annual rate was 2.7 percent. A Reuters poll had forecast a January level of 3.7 percent. Fuel prices fell in January but a low base from a year earlier plus increased food and cigarette prices contributed to a higher inflation rate last month, economists said. In November, the government raised excise taxes on tobacco products by 40 percent. Inflation climbed following the introduction of a 6 percent goods and services tax in April 2015, but had been below 3 percent since September. The weakening of the ringgit in 2105, the worst performing currency in the region last year, has also boosted prices of imports. The central bank has an inflation target this year of 2.5-3.5 percent. It said in January it expected inflation to peak in the first quarter before moderating, as low energy and commodity prices persist.
The rise of headline inflation to above 3 percent isn't seen as worrying Bank Negara Malaysia, whose long-time governor Zeti Akhtar Aziz will complete her term in late April
Malaysia’s central bank has kept its overnight policy rate at 3.25 percent since July 2014. The rise of headline inflation to above 3 percent isn’t seen as worrying Bank Negara Malaysia, whose longtime governor Zeti Akhtar Aziz will complete her term in late April. “We don’t foresee any changes to overnight policy rates since growth expectations have already been tuned down, and inflation is not really a concern,” said Jeff Ng, an economist at Standard Chartered in Singapore. Weiwen Ng of ANZ said that for Malaysia, inflation pressures “are of secondary concern notwithstanding
the uptick today. The balance of risks in 2016 are skewed towards growth disappointment and fiscal slippage.” Poor global oil prices have hurt Malaysia, which exports liquefied natural gas. In January, the government revised its annual budget, with a total of 9 billion ringgit (US$2.13 billion) in planned spending cuts. It also trimmed the 2016 economic growth target to 4.0-4.5 percent, from 4.0-5.0 percent earlier. The central bank’s next policy meeting is on March 9. Reuters
Sime Darby Q2 profit down 22 pct on low commodity prices Malaysia’s Sime Darby, the world’s largest palm oil planter by land size, reported a 22 percent drop in second-quarter net profit as weak commodity prices and consumer demand hit its plantations and industrial businesses. Net profit declined to 273.3 million ringgit (US$64.55 million) from 437.4 million ringgit in the second quarter a year ago, while revenue rose to 11.83 billion ringgit versus 10.74 billion ringgit. “The numbers reflect the challenging business environment that the group operates in,” Chief Executive Mohd Bakke Salleh said in a statement.
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February 25, 2016
International Airbus Group profits meet expectations
Airbus Group reversed part of its plans to cut production of a key aircraft model due to a rebound in demand, a move likely to generate extra cash as it posted 2015 profits in line with expectations yesterday. The European plane maker said it would make seven of its A330 wide-body jets a month from 2017, having recently cut output from 10 a month to nine, and then six, as it prepares to make a transition to the new A350 jetliner. The move came weeks after Iran agreed to buy 45 A330 jets.
JPMorgan signals rough Q1 JPMorgan Chase & Co signalled a rough first quarter on Tuesday with double-digit declines in investment banking revenues and a US$500 million increase in provisions for expected losses on energy loans. Plummeting oil prices, volatile markets, stubbornly low interest rates, pressure from regulators and a slowdown in China have combined to hurt banks worldwide over the past few months. Against such a backdrop, companies are either shying away from or unable to issue debt and equity and investors are reluctant to take on more risk, said Daniel Pinto, JPMorgan’s head of investment banking.
Cargill to invest US$100 mln in Ukraine grain terminal U.S. agriculture giant Cargill will invest US$100 million in building a new grain terminal at Ukraine’s Black Sea port of Yuzhny, Ukrainian Prime Minister Arseny Yatseniuk said yesterday. The terminal, near Ukraine’s biggest port city of Odessa, will have an annual loading capacity of 5 million tonnes of grain and other commodities, Andriy Pivovarsky, Ukrainian infrastructure minister, said after a signing ceremony. The ministry last year said Cargill, one of the world’s largest privately-held corporations, would be able to open the terminal by 2017.
UN promises to facilitate Burundi crisis resolution The United Nations will do everything possible to facilitate peaceful resolution of the Burundi crisis, UN Secretary General Ban Ki-moon said Tuesday at the end of his official visit to Bujumbura. The political crisis began in April 2015 after incumbent President Pierre Nkurunziza announced plans to contest for a third term, a move that was contested by both opposition and civil society groups. Ban, who spoke after holding talks with Nkurunziza, said the discussions were sincere and productive, especially with regards to the crisis the country is facing now.
Canada’s Liberals to cap budget deficit at C$30 bln Canada’s ruling Liberals will cap the coming year’s budget deficit at C$30 billion (US$21.81 billion)- three times larger than originally pledged - as they try to stick to long-term budget plans, according to senior government sources. Four insiders, who spoke on condition of anonymity because of the sensitivity of the topic, said a 2016-17 deficit of C$30 billion, or about 1.5 percent of GDP, is the most Prime Minister Justin Trudeau’s team will tolerate given its longer-term goal of lowering the country’s debt-to-gross domestic product ratio, now about 31 percent.
LSE and Deutsche Boerse in merger talks to create European heavyweight Deutsche Boerse had a market value of US$16.4 billion as of Monday’s close, while the LSE’s was US$11.6 billion, according to Reuters data
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eutsche Boerse and the London Stock Exchange are making a third attempt at a merger that would create a European trading powerhouse that could better compete against U.S. rivals encroaching on their turf. The deal would combine the LSE’s share-trading operation with the derivatives trading of Deutsche Boerse’s Eurex in a group worth almost US$30 billion. It would propel the companies to a similar scale as U.S. exchange ICE, which has taken a huge slice of the European derivatives markets. Nearly 16 years after their first attempt to merge, the London and Frankfurt exchanges confirmed they
KEY POINTS LSE confirms pair holding detailed talks on merger Deutsche Boerse would hold 54.4 pct stake in new company Merger would create the largest European exchange A combined company could better compete with U.S. rivals
were holding detailed discussions on an all-share merger that would give Deutsche Boerse shareholders a 54.4 percent stake and LSE shareholders 45.6 percent of a new company. Two sources familiar with the matter told Reuters earlier the two were exploring a possible merger. One said the talks, using code names Delta for Deutsche Boerse and Luna for the LSE, were at an early stage. Under British takeover rules, Deutsche Boerse must either make an offer or announce it will not do so by March 22, unless it obtains an extension from the UK mergers regulator.
in 2000 and 2004-5, neither the LSE nor Deutsche Boerse has been able to pull off a deal that transforms them into the dominant European bourse. ICE, which owns the New York Stock Exchange, has meanwhile bought London derivatives trading platform LIFFE - presenting the two European firms with strong transatlantic competition. U.S derivatives giant CME has also made inroads into the European market, while Chi-X - now owned by American BATS - has entered the fray to become Europe’s biggest cross-border stock trading venue.
Previous attempts
Jonathan W Goslin, analyst at Numis Securities, said a deal should bring significant cost and revenue savings but said there were several hurdles to get past before it could go ahead. Competition concerns and the exchanges’ differing views on how to structure their businesses are possible obstacles, as well as national pride. One person familiar with the matter said such a merger would function even in the event of Britain deciding to leave the EU in a June 23 referendum, a so-called Brexit. EU rules form the basis for crossborder trading in the 28-country bloc with London the largest financial centre.
A merger would create a group that spans derivatives, shares and indices - offering pan-European trading, clearing and settlement under one roof. LSE owns LCH.Clearnet, one of the region’s biggest clearing houses for euro-denominated securities, while Deutsche Boerse owns Clearstream, one of Europe’s biggest settlement houses. Deutsche Boerse, headed by CEO Carsten Kengeter, also owns Stoxx indices, the most traded stocks futures in Europe, while the LSE owns the UK’s FTSE and U.S. Russell suite of indices. Since their failed merger attempts
Global political risks push investors to bulk up cash defences Current key risks include the UK leaving the euro zone, South China Sea tensions, Middle East conflicts, falling oil prices, the European refugee crisis and a highly uncertain U.S. Presidential race
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ith the threat of a UK exit from the European Union no longer just a distant prospect, already battered investors are shoring up defensive positions against a host of intensifying geopolitical risks, including a “Brexit”. Investors typically dismiss political gyrations as sideshows that might cause temporary market turmoil but with little long-term impact. However, with markets volatile and assets from developed market equities to emerging market bonds a sea of red, the unusually high number of geopolitical risks stalking investors this year could expose already bruised portfolios to further losses. “When you look into 2016, the one thing very clear is there are more fat
tail risks out there than we’ve seen for a long time,” said Paul O’Connor, co-head of multi-asset at Henderson Global Investors in London. Across most Henderson funds, cash levels as a percentage of total assets are in the mid-teens, he said. A fat tail risk refers to the higher-than-normal likelihood of an otherwise unusual event that would lead to extreme movements in returns, technically more than three standard deviations from the mean. Crucially, tail risks are growing at a time when global growth concerns and recent market dislocation have made investors crowd into a small number of trades, notably long U.S. dollar, short oil and emerging market positions.
Brexit worry?
Reuters
That means tail risk events could spark a dramatic unwinding of these positions as large numbers of investors seek to sell at the same time. Henderson is not alone in increasing cash. A Bank of America Merrill Lynch survey of 198 fund managers with combined assets of nearly US$600 billion released last week found average cash balances are up to 5.6 percent - the highest level since November 2001 with a U.S recession displacing a slowdown in China as the biggest tail risk for global investors. The prospect that one of these tail risks could further damage the fragile global economy is what makes them so worrying.
Crude reality
For Neil Dwayne, global strategist at Allianz Global Investors, which manages 427 billion euros in assets globally, a sharp spike in oil prices caused by an outbreak of conflict in the Middle East could tip the world into recession. Equally, it would spark a rush to the exits by hedge funds who have crowded into trades betting oil prices would remain low for the foreseeable future, causing a massive wave of selling. For example, net short positions in crude oil - a proxy for hedge fund positioning - remain near record highs, according to Thomson Reuters data, indicating how vulnerable the market is to the prospect of a reversal. Reuters
Business Daily | 15
February 25, 2016
Opinion
The Brexit of UK banking wires Business
Leading reports from Asia’s best business newspapers
Howard Davies
Chairman of the Royal Bank of Scotland
THANH NIEN NEWS State-owned Vietnam Oil and Gas Group, or PetroVietnam, has again lobbied for tax breaks for the country’s sole oil refinery Dung Quat, saying its products cannot compete with cheap imports, local media reported on Monday. In a letter sent to the government, PetroVietnam asked for lower tariffs on crude oil that the refinery’s operator, Binh Son Refining and Petrochemical Company, has to import for production. Lower input costs will allow the refinery to compete against ASEAN and South Korean producers, the letter said. Crude imports are taxed at 20 percent.
PHILSTAR Foreign investment commitments approved by the country’s seven investment promotion agencies went up by 31.2 percent in 2015 to P245.2 billion, the Philippine Statistics Authority (PSA) said. This compares to total approved foreign investment pledges of P187 billion in 2014, the PSA said in a report. In the fourth quarter of 2015, total approved foreign investments rose 45.6 percent year-on-year to P138.6 billion from P95.2 billion in the same period in 2014. Most of the foreign investment pledges approved in the fourth quarter came from Japan, the Netherlands and United States.
THE PHNOM PENH POST Indonesian garment manufacturer Sri Rejeki Isman, better known as Sritex, has signed a memorandum of understanding with the Interior Ministry to establish a joint venture that will manufacture uniforms for the Kingdom’s police and military personnel. The US$50 million venture, to be called Sritex Cambodia, will see the Indonesian firm set up a factory later this year, according to the Jakarta Globe. Publicly-listed Sritex manufactures military and corporate uniforms and announced last year that they will sell 100,000 uniforms in Cambodia, as part of a global expansion plan, which also includes Australia, Kosovo and several African countries.
THE ASAHI SHIMBUN Liquid-crystal display manufacturer Japan Digital Inc. said it will begin mass-production of organic light-emitting diode (OLED) displays that are curved, flexible and thinner than conventional LCDs. The company has its sights set on selling its OLED panels to Apple Inc., one of its major customers, for use in Apple’s iPhone. It said mass-production is expected to start in 2018. Japan Digital is currently developing prototype OLED panels at its plant in Ishikawa Prefecture. Apple and other makers are expected to use OLEDs for their small display devices.
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hen I became the head of banking supervision in the United Kingdom in the mid1990s, my friends did not see it as a glamorous or exciting career move. Banking regulation was an obscure task, like cleaning sewers: essential, perhaps, but hardly front-page news. Expressions of curiosity about how I spent my working hours were typically a sign of friendly politeness rather than genuine interest. Twenty years later, the structure of banking regulation in Europe has risen to the top of the political agenda in London. It is one of the key points in Prime Minister David Cameron’s renegotiation of the UK’s terms of membership of the European Union. One of Cameron’s four major demands of the EU is a national derogation from elements of the uniform rulebook which the European Central Bank is seeking to introduce in the eurozone’s banking union to ensure a consistent approach across countries. The French and others fear that this derogation could permit the UK, in search of competitive advantage, to loosen financial regulation in London, even though recent evidence suggests that bank capital requirements, and other controls on banks’ activities, are in fact now tighter in London than elsewhere in Europe. For example, there is no European equivalent of the British requirement to “ring-fence” retail and commercial banking, and the French and German governments’ opposition suggests that there is unlikely to be one. Of course, the reason why banking supervision – and financial regulation more generally – has higher political salience now is obvious: The financial crisis of 2008 showed that bank failures could have catastrophic consequences for the economy as a whole.
That crisis followed a period during which the financial sector grew dramatically, especially in Europe. The bank-market ratio – the size of the banking sector relative to the size of equity and bond markets – roughly doubled in the UK and Germany in little more than a decade, while the ratio remained stable in the US, and at a much lower level. The difference is particularly marked in the eurozone, where two-thirds of non-financial firms’ external financing comes from bank loans. The comparable figure is nearer 20% in the US, where, as in the UK, equity and debt capital markets play a much more important role in financing business investment. The short-term consequence was that the credit crunch that began in 2008 had a more serious and longer-term impact on Europe’s heavily bank-based economies, as banks curtailed lending to preserve and rebuild their capital ratios. That process is still under way in parts of continental Europe, though business lending by banks has recovered in the UK. But a new study by Sam Langfield of the ECB and Marco Pagano of the University of Naples suggests that the longer-term implications are even more damaging than was previously suspected. Langfield and Pagano point out that in the eight years since the crisis, the European Union’s GDP has grown by only 2%, compared to more than 9% in the US, and attribute this differential to transatlantic differences in financial structure. Analysing data for a large number of countries, they find that “an increase in the size of a country’s banking sector relative to stock and private bond market capitalization is associated with lower GDP growth in the subsequent fiveyear period.” And the magnitude of the impact they assess is considerable. Europe’s bank-
Langfield and Pagano point out that in the eight years since the crisis, the European Union’s GDP has grown by only 2%, compared to more than 9% in the US, and attribute this differential to transatlantic differences in financial structure
market ratio was 3.2 in 1990; by 2011, it had risen to 3.8. An increase on that scale is associated in their model with a 0.3-percentage-point reduction in annual growth, and twice that in a housingmarket crisis, given the high proportion of mortgage lending on EU banks’ balance sheets. Many EU countries, notably Ireland and Spain, did experience
a collapse in house prices after 2008. So the relative size of EU banks might account for roughly half of the growth gap vis-à-vis the US. That explains why the ECB, and some EU governments, are keen on the Capital Markets Union project, which aims to find ways to stimulate the growth of non-bank financing channels across the continent. Progress would reduce dangerous overreliance on banks. The UK, as ever, is to be found somewhere in the middle of the Atlantic. Cumulative economic growth from 2008 to 2015 was 6%. A little closer to the US than to the rest of Europe, though still a relatively weak rebound from a deep recession. The UK’s stock market is larger relative to its economy than most others in Europe. Its banking system is large and concentrated, though new entrants and new financing channels are changing that. Peer-to-peer lending has expanded faster than elsewhere in Europe. UK banks are also, on average, more oriented toward non-European markets, which makes the banking sector seem larger. And a third of the UK banking sector’s assets are in fact held by non-EU banks. Only Luxembourg comes close, at just below 20%, while in France, Germany, and Italy, the overseas share of their domestic markets is negligible. These differences may partly explain the UK’s reluctance to participate in the European banking union, while some other non-eurozone countries are keen to join it, fearing that, otherwise, they might be effectively excluded from ECB policymaking. In London, even pro-Europeans prefer to address Britain’s remaining financial-sector challenges on a national basis; the differences in structure make that an understandable choice. Project Syndicate
16 | Business Daily
February 25, 2016
Closing Taiwan export orders slump most in 3 years
Sri Lanka vows safe haven for tourists
Taiwan’s export orders in January shrank the most in three years, as evidence mounts that Asia may be facing an export collapse in the first quarter. The 12.4 percent year-on-year slump in orders reported yesterday was the steepest since February 2013 and much worse than the 9.8 percent fall seen by economists in a Reuters poll. Orders from all of Taiwan’s major markets - China, the United States, Europe and Japan -fell at double-digit rates or close to it, suggesting a further contraction in exports and the island’s industrial output in the next few months.
Government yesterday said it will take immediate measures to provide a safe environment for tourists to the island nation. Tourism Minister John Amaratunga said the government was concerned at the increasing number of complaints of exploitation and harassment of foreign tourists and warned to take stern action against those involved. Amaratunga called on the police department to revamp the Tourist Police. Sri Lanka’s tourism industry, which was once heavily scarred by a 30-year civil conflict, has now emerged. In January, arrivals rose 24.3 percent year-on-year to 194,280, boosted mainly by a massive influx of Chinese tourists.
Grand bargain to rescue global economy seen unlikely at G20 meet Many G20 members are urging stimulus and better policy coordination John Ruwitch and Pete Sweeney
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nvestors hoping for a grand plan from the world’s top financial officials to stabilise shaky markets are set for disappointment, insiders say, when finance ministers and central bankers gather this week in Shanghai to discuss the troubled global economy. Stubbornly week demand, falling equity markets and currency volatility pose a challenge to the Group of 20 (G20) major economies that some are comparing to its April 2009 meeting, at the height of the global financial crisis, when ministers agreed on coordinated stimulus to avert a worldwide depression. Many G20 members are urging stimulus and better policy coordination, but with no convergence about what to do a deal along the lines of the 1985 Plaza Accord, which reversed a destabilising surge in the dollar, appears unlikely. “Financial markets need something refreshing, but we
are not expecting a ‘Plaza’like policy accord,” said a Japanese official. “There’s no magic bullet.” With divergent monetary policies exacerbating currency market volatility, China, the G20 chair in 2016, has said strengthening policy coordination and reducing “negative spillovers” from domestic policy measures was a “pressing task”. Others, including the United States and Japan, are planning to urge G20 states to do more to counter market turmoil and use fiscal policy to support the global economy. “The global picture is less rosy than it was a year ago,” said an Italian official, who declined to be identified, adding the February 2627 meeting was “unlikely to produce any short-term crisis responses”.
Pointless movie sequel
In 1985, the Plaza Accord was struck among just five
Hong Kong Uber drivers plead not guilty in licence row
industrialised countries. Today, the divergent interests between the major developed and big emerging economies that make up the G20 makes agreement on strong, coordinated action much harder, analysts say. “There is a risk that a G20 outcome that has no specificity will get the same reviews as a pointless movie sequel, but cause more financial stress and further asset market selling,” Citi said in a research note this week. “However we think they can give enough indications that policy is not dead to give modest support to asset markets.” China will likely attempt to set minds at ease about its ability to manage its slowest growth in a quarter century and plans to reform its economy - and by extension China’s ability to offset weak consumer demand in developed economies. “We’re concerned that if you have sustained financial
turmoil, increasing risk aversion, further falls in risk assets, further turbulence, particularly in China, that could be enough to tip the global economy over the edge into recession territory,” said Charles Collyns, chief economist at the Institute of International Finance. One concern for China has been has been the rate of capital outflows, which has prompted some economists to suggest Beijing should temporarily back-pedal on liberalising reforms and tighten capital controls. China’s yuan currency has been losing value against the dollar since 2014, weakened by factors including a renewed enthusiasm for dollar assets, falling interest rates and concerns about capital flight. A surprise currency devaluation in August 2015 accelerated the decline. To slow the slide, the People’s Bank of China has intervened heavily to support
the exchange rate, moved to stem speculative capital outflows and said it was not planning further currency devaluation. Another worry among international investors is whether the Chinese government is up to the task of managing an increasingly complex economy. Botched attempts to arrest falling stock markets last year dented confidence and caused overseas markets to shudder. China is not seen as the only country with communications problems, however. In the developed world, the apparent lack of monetary policy coordination between the United States, Japan and Europe will also factor, insiders said, with International Monetary Fund Managing Director Christine Lagarde urging G20 policymakers to think about the “spillovers” from their policies. Reuters
Moody’s says negative rates Vietnam’s CPI likely to unlikely to boost lending in Japan increase 0.42 pct in February
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ive Hong Kong Uber drivers arrested in a dramatic police swoop pleaded not guilty yesterday to driving without proper licences. The case comes as the burgeoning company encounters regulatory roadblocks around the world, and hit the headlines once more after an Uber driver in the United States allegedly went on a killing spree. The August sting operation in Hong Kong came after furious cabbies in the southern Chinese city smashed up their own taxis with hammers and drove slowly towards the government headquarters, calling on authorities to act over unlicensed drivers. All five drivers pleaded not guilty to “driving a motor vehicle for the carriage of passenger for hire or reward” without a proper licence, and driving without third-party insurance. Defence lawyer Phillip Ross told the magistrates’ court he intends to seek a “stay of proceedings” for the drivers. The case was adjourned to March 23 for a pre-trial review. Two other drivers arrested in the August swoop pleaded guilty to the same charges last month and were fined HK$7,000 (US$900), with their driving licences revoked for 12 months.
urope’s experience with negative interest rates suggests the Bank of Japan’s (BOJ) adoption of the same policy is unlikely to spur lending to businesses and households, Moody’s Investors Service said yesterday. The BOJ’s negative interest rate is unlikely to make it cheaper for the government to borrow because funding costs are already very low and only a fraction of outstanding debt will be refinanced at lower rates, Moody’s said in a report. The policy could lessen domestic investors’ appetite for government debt that underpins Japan’s A1 rating with a stable outlook, Moody’s said. “As far as negative interest rates are concerned, the evidence from Europe points to a limited passthrough to Japanese households and corporates,” said Michael Taylor, managing director and chief credit officer for Asia at Moody’s. The BOJ stunned investors last month by adopting a negative 0.1 percent interests rate, which means it charges commercial banks that amount on a small portion of reserves they keep at the central bank.
ietnam’s Consumer Price Index (CPI) is estimated to increase by 0.42 percent in February compared to the previous month, according to the General Statistics Office (GSO) yesterday. Meanwhile, the country’s February CPI is likely to go up by 1. 27 percent over the same period in 2015, the statistics office said. Among 11 groups of commodities in the CPI calculation basket, eight witnessed rising prices, while the other three experienced price cut during the month. The group of food and foodstuff is likely to post the highest price hike of 1.98 percent, while medicine and healthcare is estimated to see the smallest increase of 0.06 percent compared to the previous month. Groups of housing and construction materials, transportation as well as postal services and telecommunications are likely to see price cut of 0.41 percent, 3.96 percent and 0.16 percent, respectively, over the previous month. Though not included in the CPI calculation, in February, price of gold increased by 3.02 percent, while that of U.S. dollar dropped by 0.64 percent over January, said GSO.
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Reuters
Xinhua