MOP 6.00 Closing editor: Joanne Kuai
Chinese officials warm up Shanghai G20 meeting Page 10
Year IV
Number 989 Friday February 26, 2016
Publisher: Paulo A. Azevedo
Louis XIII Holdings officially re-brands Macau hotel ‘THE 13’ Page 7
China to allocate 100 bln yuan for job losses from capacity cuts Page 9
New water plant gets green light A new water treatment plant in Seac Pai Van. The first phase of construction should commence this year. With production slated for 2019. Phase 1 is budgeted to cost from MOP1 bln to MOP1.5 bln. Macao Water estimates that completion of the first phase will boost the city’s daily water supply to 490,000 cubic metres per day. From the current 390,000 cubic metres. The company also pledge to maintain water fees at the current level this year, as an increase last October has helped alleviate spiralling costs Page 2
Freezing terrorist assets The city’s Legislative Assembly will soon deliberate its first counter-terrorist asset freezing regime. Designed to plug the current legal hole of financial sanctions designated by the UN Security Council. The Financial Intelligence Office said the risk of terrorist financing in the MSAR is very low
Macau torpedoes Crown Resorts results
A good domestic performance. Australian casino company Crown Resorts Ltd. has posted a net profit of AUD205 mln (US$147.1 mln) for the six months ended December 31. A slump in fortunes for joint venture Melco Crown Entertainment Ltd., however, adversely impacted the bottom line. Due to ‘weak market conditions in Macau’
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Eiffel Tower temptation It’s a half-size replica of the real thing. The Eiffel Tower of the US$2.7 bln Parisian Macao might open before September. Wilfred Wong Ying Wai, President and COO of Sands China Ltd., said the early opening of some facilities at the casino property would be part of a promotional push to attract tourists
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HSI - Movers
Visitors staying longer Visitor arrivals totalled 2,445,876 in January 2016. Down 0.8 pct y-o-y and 7.1 pct m-o-m. Overnight visitors rose by 5.3 pct y-o-y to 1,145,902. The average length of stay of visitors was 1.2 days, an increase of 0.3 days y-o-y
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Name
%Day
AIA Group Ltd
+0.89
Link REIT
-0.12
Li & Fung Ltd
-0.23
Sands China Ltd
-0.76
Hengan International
-3.50
China Shenhua Energy
-3.68
Cheung Kong Property
-3.80
Tingyi Cayman Islands
-5.47
Source: Bloomberg
Gaming www.macaubusinessdaily.com
February 25
GEG profits plummets 60 pct in 2015
I SSN 2226-8294
GEG’s 2015 annual profit decreased 60 pct y-o-y to HK$4.2 bln (US$540.6 mln). The results include HKD$1.2 bln of non-recurring charges. And were also negatively impacted by win rates. Annual EBITDA recorded HK$8.7 bln, a decrease of 34 pct from 2014. Galaxy Entertainment Group said lacklustre gaming operations reduced adjusted EBITDA by approximately HK$210 mln
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February 26, 2016
Macau Local vehicles approved to enter Hengqin, and all Zhuhai soon The Director of the Administrative Committee of Hengqin New Area, Niu Jing, said the Chinese Ministry of Public Security (MPS) had approved the policy that vehicles with Macau plates could enter Hengqin and move freely in the district. According to China News Service, the next step for the Chinese authorities is to study the feasibility of allowing Macau vehicles to freely enter the whole of Zhuhai City to drive. Mr. Niu said Guangdong authorities would negotiate to sign agreements on cross-boundary transport with the SAR Government. In addition, Zhuhai-related departments would facilitate measures to increase the efficiency of Customs clearances at the Hengqin Border.
Beijing opens residency application for HK, Macau special talents
Macao Water: Seac Pai Van water plant construction by year-end The new water treatment plant on the Island could be ready for production by 2019, boosting the daily water supply of the territory to 490,000 cubic metres, the company said Kam Leong
Kamleong@macaubusinessdaily.com
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he city’s sole water distributor Macao Water Supply Co. Ltd. expects that the construction of the new water treatment plant in Seac Pai Van will start by the end of this year, adding it has no plans to increase local water fees for this year. “We hope that we can commence construction of the first phase of the project within this year so that it can start production in 2019. We are confident that [this timeline] can be implemented as the government’s responses have been quite positive,” the Executive Director of the company, Nacky Kuan Sio Peng, told reporters on the sidelines of the company’s media Spring lunch yesterday. According to Ms. Kuan, her company is now in discussion with the authorities on the details for the new water treatment plant, the fourth, in Seac Pai Van. The new plant, first proposed by the water distributor in 2014, is divided into two phases with an initial budget of around MOP1 to MOP1.5 billion. “We submitted a report on the feasibility of the new water treatment plant to the government last year, which includes both technical proposals and suggestions,” the Executive Director said. Macao Water estimates that the completion of the first phase of the project will boost the city’s daily water supply to 490,000 cubic metres per
day from the current 390,000 cubic metres, attributable to the completion of the third phase of the Main Storage Reservoir Water Treatment Plant last September.
No plan for fee hike
Meanwhile, Ms. Kuan told reporters that the company had no plans to increase the city’s water fees for the moment, claiming the recent hike had already helped the company deal with soaring operational costs. “As we only increased water fees last October, we temporarily don’t have any intention of adjusting water fees again,” the company’s top officer indicated. Local government granted a 4.28 per cent increase to MOP5.12 (US$0.64) per cubic metre of water supplied to the city’s water users last September, which came into effect from the beginning of the third quarter. However, the approved raise was substantially lower than the 11.88 per cent requested by the water company last March. “Even though our proposed increase was not totally approved, the granted hike has already helped us to relax a bit from our operational pressures and surging costs,” Ms. Kuan explained. Meanwhile, the water company said yesterday that the city’s total water consumption had registered a
year-on-year increase of 1.7 per cent due to more large-scale entertainment properties and infrastructure projects in the territory. Macao Water is 85 per cent owned by joint venture Sino-French Holdings (Hong Kong) Ltd. Sino-French is half-half owned by French utility Suez Environnement and Hong Konglisted NWS Holdings Ltd. The latest NWS interim report released on Monday indicates that the sales volume of Macau Water Plant grew slightly by one per cent year-on-year for the six months ended December 31.
The new plant, first proposed by the water distributor in 2014, is divided into two phases with an initial budget of around MOP1 to MOP1.5 billion
Beijing will allow Hong Kong and Macau residents to apply for permanent residency in the capital city from next month if they are deemed to have special talents, the China News Service reported yesterday. Approved by the Chinese Ministry of Public Security (MPS), those with special talents from the two Special Administrative Regions can directly apply for residency for themselves and their families if they pass the evaluation of Chinese authorities and are recommended by the capital’s Zhongguancun Administrative Committee. Approved persons will also be allowed to hire foreign housing helpers.
AIA increases operating profit in SARs Insurance company AIA Group Limited has posted an operating profit of US$1,049 million (MOP8,394 million) for the Hong Kong market, including Macau, according to the annual results of the company for the year ended November 2015. This represents an increase of 15.9 per cent year-on-year from the operating profit of the previous year regarding the Hong Kong and Macau markets, which totalled US$905 million. During the year, the American insurance group generated US$2,714 million in operating profit, a decline of 21.7 per cent year-on-year from US$3,468 million.
OCBC Wing Hang fraudulent website alert Hong Kong bank OCBC Wing Hang has released an alert concerning a fraudulent internet website at the page: http://winghangbankhk.bwebs.hk/Site/ webpage/wid/101053, which asked for users’ personal bank account data. ‘OCBC Wing Hang declares that we have no connection with this website’, the bank press release read. The group, which operates in Macau through wholly owned-subsidiary OCBC Wing Hang Bank Limited (Macau) advises clients to contact their customer service hotline in Hong Kong if they have used this website. According to the bank, the case has been reported to the Hong Kong Monetary Authority and Hong Kong Police Force.
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February 26, 2016
Macau
Fewer visitors in January but stay longer The first month of the year posted a decline of 0.8 per cent year-on-year in the number of visitors but the average length of stay increased to 1.2 days João Santos Filipe
jsfilipe@macaubusinessdaily.com
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n January, the number of visitors to the territory declined 0.8 per cent year-on-year to 2.45 million visitors from 2.47 million, according to data released yesterday by the Statistics and Census Service (DSEC). The decline in terms of visitor was mainly driven by a cut of 5.6 per cent regarding same-day visitors, which went down to 1.30 million from 1.38 million visitors. The number of overnight visitors, however, increased 5.3 per cent year-on-year
to 1.15 million from 1.09 million. The average length of stay of visitor also increased to 1.2 days from 0.9 days from one year ago. For overnight visitors the average stay stood at 2.2 days. The increase in terms of the length of stay for visitors is good news for the government, which has declared one of its main goals regarding its tourism policy the increase of visitors’ length of stay. In terms of overnight visitors, the importance of
Mainland tourists decreased from 67.5 per cent in January 2014 to 66.1 per cent of the total number, while the prominence of Hong Kong visitors increased from 17.4 per cent to 18.1 per cent. Not surprisingly, the majority of tourists in the territory came from Mainland China, which accounts for 67.81 per cent of the total number of visitors. The number of Mainlanders visiting the MSAR in January stood at 1.66 million visitors but still represented a decline
of 0.7 per cent year-on-year from 1.67 million.
More visitors from Beijing and Shanghai
The provinces of Guangdong, Fujian and Hunan were the best markets for the region, supplying 764,800, 67,200 and 60,600 visitors, respectively. Some 31,300 and 49,300 tourists came from Beijing and Shanghai, respectively. During January, the other markets recording declines in terms of visitor were Hong
Kong, down 5.3 per cent to 0.45 million from 0.47 million, and Australia, which declined 6.6 per cent to 9,400 from 10,100 visitors. Visitors from Taiwan, South Korea and Japan all recorded increases. Japanese tourists to Macau jumped 17.9 per cent year-on-year in January to 25,800 from 21,900, Taiwanese visitors increased 11.6 per cent to 85,900 from 77,000 while the number of Korean tourists went up 0.6 per cent to 69,200 from 68,800 visitors.
CTM's mobile retains 43 pct market share for 2015
Raymond Tam to head DSPA
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he city’s dominant telecommunications service provider Companhia de Telecomunicações de Macau, S.A.R.L. (CTM) has maintained its mobile market share at around 43.3 per cent as at December last year, its parent firm Citic Telecom International Holdings Ltd announced in its annual results. The postpaid average revenue per user (ARPU) of CTM mobile services users was up 8.1 per cent year-onyear to HK$234.2 per month
for 2015, according to Citic Telecom’s results filed with the Hong Kong Stock Exchange yesterday. CTM’s growth of mobile data revenue has been partly offset by a 19 per cent drop in its prepaid ARPU (at HK$13.9) under intense price competition in mobile voice revenue. The overall number of mobile service subscribers for CTM, meanwhile, grew 0.9 per cent to 821,000 last year, according to the filing. Speaking at a press briefing for the annual results in Hong Kong yesterday, Citic
Telecom’s CEO Lin Zhen Hui noted that the firm would continue to invest in enlarging the 4G services coverage for CTM. The capital expenses in launching the 4G services last year cost CTM HK$328 million, Mr. Lin noted. CTM, first of the local telco to launch 4G services in October, saw 4G subscribers grow to over 30,000 by yearend, Mr. Lin told media. The ARPU of a 4G service subscriber is around MOP200 to MOP600, while the average monthly data usage per user is around 5GB to 6GB, he said.
aymond Tam Wai Man is to be appointed as the director of the Environmental Protection Bureau (DSPA) for one year, starting March 2 this year, according to a statement issued by the office of the Secretary for Transport and Public Works. The statement says that a relevant dispatch will be published in the government’s Official Gazette soon. It added that the current director of DSPA Vai Hoi Ieong, will join Macauport - Sociedade
de Administração de Portos, S.A. as the vice chairman of the board and executive director of the executive committee. Raymond Tam previously served as the former president of the Civic and Municipal Affairs Bureau (IACM) but was suspended from his post on suspicion of involvement in an irregular cemetery grave granting process in 2013. He re-joined the public office after the court ruled that he and three other suspects were not guilty.
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February 26, 2016
Macau opinion
Are 133 and 134 different numbers?
Pedro Cortés
Lawyer cortes@macau.ctm.net
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here’s a protuberant Macau tycoon who claimed this week that he has lost billions of patacas through a decision of the government back in 2006, due, allegedly, to World Heritage restrictions. For he will receive, if the government accepts his figures, MOP1.6 billion from the Macao Special Administrative Region’s public coffers. The referred entrepreneur is solely defending his rights as he considers it better for his interests. But, shouldn’t he resign from his current position as member of the Executive Council? Is not the case that there might be a clear conflict between his interests and the interests of the Macao Special Administrative Region? Well, all seems to be possible in this lucky and blessed Region. Would he not be in the same position as all other developers and entrepreneurs? We cannot have one scale for the investors with moustache and another scale for those with beard or without direct or indirect links to the summit of power in Macau. The law shall be the same for everyone, irrespective of having meals with the prominent leaders of Macau. This is how I see the Macau legal system. Lots 133 and 134 are no different from any others. Or, otherwise, we will not trust those that govern us and we will question why some decisions are taken. Yes, people are starting to ask why some situations occur. The fact that the economy is passing through a correction period will make people less happy than they were before during the euphoric and crazy first 14 years posthandover. I guess that we all know the law might not be the same for everyone. But, if we want to make decisions that discriminate against one player from another, we need to provide clear grounds for why that should be so. Why will 133 and 134 not be treated in the same manner as all the others in the same factual situation? Why will the Macao Special Administrative Region not indulge all its entities equally? Well, the principle of equality as I understand it from the faculty of law states that equals shall be treated equally and different shall be treated differently. Maybe this is where it resides: the difference of Macau - those that have meetings with the summit are always treated differently by the hidden and not so hidden powers. Even if they are not competent enough for a certain task, the fact that they are a friend of A or B will allow them privileges vis-à-vis the status quo. Well, should Macau not pay what has been “promised” to the entrepreneur and he goes to the Macau courts to be indemnified for his “losses” I am sure that a vacancy at the Executive Council will exist, as he has the duty to resign.
Assembly to legislate counter-terrorist asset freezing regime While the government is rushing to plug the current legal hole to comply with the UN Security Council’s anti-terrorist resolutions, it said the risk of terrorist financing in the MSAR is low Stephanie Lai
sw.lai@macaubusinessdaily.com
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he city's Legislative Assembly will soon deliberate its first counter-terrorist asset freezing regime, a move that will plug the current legal hole of financial sanctions for terrorist activities designated by the United Nations Security Council. The Executive Council and Financial Intelligence Office introduced the measure yesterday. “There is an urgency for the regime to be legislated because it is to exercise our international obligation, and that the Chinese central government has ascertained the UN Security Council's resolutions have to be extended here,” the Director of the Financial Intelligence Office, Deborah Ng Man Seong, told Business Daily following the Executive Council's press briefing of the regime. “Macau lacks a mechanism to exercise the UN Security Council's resolutions against terrorist financing,” Ms Ng told us, “But in the ten years of operation of our office, we've observed that the risk for terrorist financing here is very low – we have nearly zero cases of alleged local financing activities for terrorist groups or individuals.” The regime, which is drafted by the office, proposes that the MSAR Government immediately freeze
assets owned by terrorist groups or individuals in the territory upon the designation of the UN Security Council. The regime also allows the Macau Government to form a list of designated individuals or entities that are believed to finance terrorism. The city's Chief Executive is given power to designate the persons or entities that have been found to finance terrorist acts and freeze their assets held here – the designation is effective for two years, and can be extended by the Chief Executive depending on whether the designated individuals are still found to have committed acts of financing terrorist activities. “We've fixed the validity period for the designation for two years after observing the condition of Macau, and after this two-year period we'll continue to monitor the activities of the designated individuals,” said Ms. Ng. The regime also proposes extending the asset freezing to connected persons of individuals or entities designated by the UN Security Council as terrorists. The acts of asset freezing for designated persons or entities will be publicised as a Chief Executive dispatch in the Official Gazette, according to the regime.
Urban Renewal Committee line‑up soon The roster of the Urban Renewal Committee will be announced soon. Members will not overlap with the city’s other consultative committees, Executive Council spokesperson Leong Heng Teng said in a press briefing yesterday. The Executive Council said it has finished discussion on the formation of the Urban Renewal Committee as an advisory body in setting up legislations for old neighbourhood reform and rules on renovations or reconstruction of buildings in the city. The 29-member advisory body will be headed by Secretary for Transport and Public Works Raimundo Arrais do Rosário, with the rest comprising government delegates and appointed professionals. A.L.
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February 26, 2016
Macau
Galaxy profit falls less than expected helped by new casinos
the tourist-oriented Galaxy Macau Phase 2 and Broadway projects since they opened in May, he said.
Non-gaming offerings
Gaming analyst says new projects helped Galaxy boost its share of mass market table games revenue
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alaxy Entertainment Group Ltd.’s fourthquarter earnings fell 7 per cent from a year earlier, less than the decline analysts expected, as the opening of new Macau resorts last year boosted its non-gambling sales and casino market share. Adjusted earnings before interest, taxes, depreciation and amortization, or adjusted Ebitda, was HK$2.5 billion (US$322 million), compared with the HK$2.36 billion median estimate of five analysts surveyed by Bloomberg. That was also more than the HK$2.1 billion earned in the third quarter. “Profit improvement for Galaxy can be sustained in 2016 because it has among the best non-gaming products in Macau, especially its hotel and retail offerings,” CLSA Ltd. analyst Aaron Fischer said before the results. Galaxy has focused on improving
Macau’s gambling revenue plunged a 20th straight month in January amid China’s economic slowdown and crackdown on corruption, which led high-end VIP gamblers to avoid the world’s largest casino hub. Still, revenue declines in the mass market gambling sector have eased, as operators shifted their focus to draw more tourists. Galaxy shares have risen 6.5 per cent this year through Wednesday, making it the only gainer among Macau casino stocks and the best performer in the Hang Seng Index. New projects helped Galaxy boost its share of mass market table games revenue to 19 per cent in the fourth quarter, up from 16 per cent in the second quarter, Deutsche Bank AG analyst Karen Tang wrote in a note dated Jan. 20. Galaxy is “cautiously optimistic” that the Macau gaming market is stabilizing and “remains confident in the long term potential of China,” it said in a statement Thursday. Its billionaire Chairman Lui Che Woo has said the company will see stable growth as it actively develops the non-gaming business. Bloomberg
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February 26, 2016
Macau
Sands China sees recovery as Parisian opening looms President Wilfred Wong said the Parisian, which is targeted to start operations in September, could see some facilities such as a replica half the size of Eiffel Tower open beforehand, as part of a promotional push to draw tourists
As Macau and Hong Kong work quite closely with each other, some Macau officials already know my name, which makes my work much easier in the city Wilfred Wong, president and chief operating officer of Sands China Ltd.
Wilfred Wong, president and chief operating officer of Sands China Ltd.
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ands China Ltd.’s new chief, hired by billionaire Sheldon Adelson for his experience in government, expects Macau’s casino industry to snap a losing streak as early as this month as the company prepares to open the US$2.7 billion Parisian Macao resort by September. “It’s scary that Macau’s gross gaming revenue has seen declines for 20 months but I have confidence the drop could end in February,” Wilfred Wong, who took over as president and chief operating officer in November and is the first Chinese in those roles
at the company, said in an interview in Macau. The world’s biggest gambling hub saw a “satisfying performance” during the Lunar New Year period earlier this month, as more tourists from mainland China visited Macau, boosting both the mass market and VIP segments, Wong said Wednesday. Gambling revenue in Macau, the only place in China where casinos are legal, have been in a downward spiral since June 2014 when the country’s slowing economy and campaigns against corruption led high-stakes
VIP gamblers to avoid the city. Sands China, one of Macau’s biggest operators with four casinos, has seen revenue slump for six quarters.
Eiffel Tower
Sands China’s results in 2016 are expected to be relatively flat compared with last year as the casino industry starts to recover, he said, without specifying. Analysts expect the company’s revenue this year to decline 2.5 per cent from 2015, and for net income to drop 8.5 per cent, according to estimates compiled by Bloomberg.
The Parisian, which is targeted to start operations in September, could see some facilities such as a replica half the size of Eiffel Tower open beforehand, as part of a promotional push to draw tourists, according to Wong. The 82-year-old Adelson had said in December he hoped to get government approval for 250 new gambling tables for the Parisian. Sands “won’t complain” if it was allocated that amount, but but hoped to be allowed to set up more tables, taking into account the project’s investment into its non-gaming facilities, said Wong, a 15-year veteran of China’s top lawmaking body the National People’s Congress.
Government background
His job interview with Adelson took place over 30 minutes in Macau, Wong said, during which the pair discussed his background with the Chinese government and previous job as chief executive officer of Hong Kong-based Hsin Chong Construction Group Ltd., which has been involved in the construction of Sands China’s casinos, Wong said. Wong, who also served as a member of the Hong Kong Basic Law Consultative Committee, said he spent his first few months with Sands China calling on all the Macau government departments related to the casino industry. “As Macau and Hong Kong work quite closely with each other, some Macau officials already know my name, which makes my work much easier in the city.” Bloomberg
Profit slumps at Crown Resorts as Chinese VIPs fold Crown Resorts fell the most in more than seven years in Sydney trading after its first-half profit declined more than expected because of a slowdown at its Macau casino venture
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rown Resorts Ltd, Australia’s No. 1 casino company, on Thursday said first-half profit slumped 35 per cent as Chinese highrollers chose cheaper destinations like the Philippines and Vietnam to escape a corruption crackdown at home. The company was a beneficiary of the crackdown last year, as junket operators directed VIP gamblers to Australia to avoid higher official scrutiny of gambling operators in the southern Chinese territory of Macau, Asia’s casino capital. But that traffic has slowed with the rise of cheaper gambling destinations like the Philippines and Vietnam, hurting Crown and its smaller Australian rival Star Entertainment Group Ltd. “The switch has been flicked off,” said James McGlew, executive director of corporate stockbroking at Perth-
based brokerage Argonaut Ltd. Melbourne-based Crown, 53 per cent owned by billionaire James Packer and smaller Star, said “normalised” net profit plunged 35 per cent to A$210.3 million (US$150.7 million) in the six months to end-December.
KEY POINTS Crown Resorts H1 NPAT A$205 mln vs A$263.1 mln Macau profit contribution down 89 pct Shares down 3 pct
The figure, which casino companies use to strip out irregularities in win rates, missed the A$247 million average forecast of analysts polled by Thomson Reuters I/B/E/S. Net profit from its one-third owned Macau business, Melco Crown Entertainment Ltd, dove 89 per cent. Crown shares fell 5 percent, their biggest drop since 2009, while the broader market was flat. Star shares were steady.
Fueled speculation
In its flagship casino in Australia’s second-biggest city Melbourne, Crown said net profit slipped 1.2 per cent to A$255.9 million as an 11 per cent drop in VIP turnover was offset by a spike in “main floor” gambling revenue. Star cited growing competition from cheaper Asian destinations when
it reported last week that VIP turnover in Sydney, Australia’s top tourism destination, rose just 1.2 per cent. Despite being half Crown’s size, Star has been gnawing at its rival’s dominant position in Australia. Last year it outbid Crown for a licence to build a resort in Brisbane city, while Crown is facing lengthy delays in building a resort to rival Star’s in Sydney. Those challenges have fueled Australian media speculation that Packer, who quit the Crown board and announced his engagement to singer Mariah Carey in 2015, is talking with private equity firms about taking the entire A$9.1 billion company private. Packer has denied privatisation plans and on Thursday Crown said it had not received any such approach. Reuters
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February 26, 2016
Gaming Louis XIII proposes name change to ‘THE 13’ Louis XIII Holdings Ltd. has proposed changing its corporate name to ‘The 13 Holdings Limited’, it announced yesterday. In the same press release, the company also said that it has named its hotel ‘THE 13’ – which is expected to open in late Summer this year, at a cost of more than US$7 million (MOP56 million) per room. “As the business and the brand have developed, we felt that the name ‘The 13’ most accurately reflected our Macau hotel’s combination of Baroque inspiration and contemporary accents,” said co-chairman of the company Stephen Hung. “13 is my lucky number and the new name along with the new logo fit perfectly with my vision,” he added.
Jackpot! Remote South Korean casino cleans up as Chinese gamblers fold Kangwon Land is the top performing casino stock in Asia over the past year, having surged 21 per cent. Now valued at US$7.2 billion, it trails only Sands China and Galaxy Entertainment in the region
South Korea has 17 casinos, but only Kangwon Land is allowed to admit locals, enabling steady growth despite its remote location and lack of high-rolling VIP clients, Chinese or otherwise
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sia’s best performing casino won’t be found on Macau’s Cotai Strip, Singapore’s waterfront or even the shores of Manila Bay, but tucked away at the end of a winding mountain road, three hours east of Seoul. While casinos across the region suffer from Beijing’s crackdown on graft and ostentatious spending, Kangwon Land Co Ltd is cashing in on its monopoly on domestic patrons, bypassing the Chinese junket operators and big spending VIPs that its rivals rely on. Kangwon Land is the top performing casino stock in Asia over the past year, having surged 21 per cent. Now valued at US$7.2 billion, it trails only Sands China and Galaxy Entertainment in the region.
KEY POINTS Asia operators look to cultivate non-China business Kangwon Land generates roughly half of S.Korean gaming revenue Firm’s monopoly on local gambling to last until 2025
“Kangwon Land does better and better as small fry keep coming,” said Kim Jung-suk, owner of the Ten Billion Pawn Shop, one of dozens of colourful pawn shops clustered outside the resort’s gates. “There’s no off-season.”
Local business
South Korea has 17 casinos, but only Kangwon Land is allowed to admit locals, enabling steady growth despite its remote location and lack of high-rolling VIP clients, Chinese or otherwise. With 200 tables and 1,360 slots packed tightly into an area slightly smaller than two football fields, the casino and ski resort raked in 1.63 trillion won (US$1.33 billion) in revenue in 2015 - nearly all from gambling. That was up 9 per cent and accounted for about half of South Korea’s gaming revenue. By comparison, revenues at South Korean foreigner-only casino operators Paradise Co Ltd and Grand Korea Leisure (GKL) fell 9 per cent and 6.5 per cent respectively, according to Reuters’ calculation from company filings. Revenues at those two companies were hit by a halt in marketing to Chinese VIPs after mainland authorities detained 13 people working for them in 2015. At Kangwon Land, nearly all visitors are South Korean and 99 per cent are non-VIPs, according to eBEST Investment & Securities. At Paradise’s
three casinos, Chinese VIPs made up 55 per cent of betting last year.
Competition – for some
Competition is poised to intensify for casinos courting Chinese visitors. A consortium of U.S.-based Caesars Entertainment Corp and Lippo Ltd, and a tie-up between Paradise and Japan’s Sega Sammy Holdings Inc, are each building a casino resort in Incheon, west of Seoul. Operators for two more planned integrated resorts will be chosen on February 27. Las Vegas Sands Corp said last year it would consider investing up to 5 trillion won in an integrated resort in the city of Busan - if locals are allowed to enter the casino. But state-run Kangwon Land’s monopoly on local players is due to hold until 2025 under a political concession made to the economically depressed former mining area. Analysts and industry insiders do not expect socially conservative South Korea to change its policy anytime soon.
China squeeze
Elsewhere in Asia, casinos rely on Mainland Chinese for as much 8090 per cent of revenue in Vietnam, to roughly 20 per cent in the Philippines, where operators have also outperformed Asian peers by tapping locals. Cambodia’s Nagacorp Ltd has also seen earnings surge thanks to demand from Vietnam and wealthy southeast Asian customers.
China’s anti-graft campaign began to weigh on the gambling industry in 2014, especially in Macau, where Mainland players accounted for about 70 per cent of revenue. In January, Macau’s gambling revenues fell for a 20th consecutive month to around five-year lows. Shares in Macau operators including Sands China, Galaxy Entertainment, Wynn Macau and MGM China Holdings Ltd , have lost between 28 and 57 per cent in the past year.
Safe bet
Even with a trailing 12 month priceto-earnings ratio of 23.17, nearly double that of peers Paradise and Grand Korea Leisure, many analysts consider Kangwon Land a safe bet due to its local monopoly. “It has very steady revenues and profits, but can’t expect much growth without government approval for additional capacity,” said Lee Jinwoo, fund manager at KTB Asset Management, which owns Kangwon Land shares. “As a stock, it’s like a utility.” Twelve minutes after the doors opened at Kangwon Land on a recent morning during a long holiday weekend, 2,739 people, many of them men in their late 40s and 50s, had signed up to enter. “I come here because I enjoy baccarat,” said Kim Sung-hwa, a 53-year-old woman who had arrived on a bus from Seoul. “It’s either here or go abroad.” Reuters
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February 26, 2016
Greater China
Government allocates 100 billion yuan to deal with job losses from capacity cuts Some estimate that a capacity cut of 100 million tonnes of steel a year could lead to around half a million job losses David Stanway
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hina will allocate 100 billion yuan (US$15 billion) over two years to relocate workers laid off as a result of China’s efforts to curb overcapacity in sectors like steel, the Ministry of Industry and Information Technology said yesterday. China has vowed to tackle pricesapping supply gluts in major industrial sectors, and said earlier this month that it would close 100 million-150 million tonnes of steel capacity and 500 million tonnes of coal production in the coming three to five years. The government intends to eliminate hundreds of so-called “zombie enterprises” - loss-making firms in struggling sectors that are being kept alive by local governments trying to avoid job losses and a surge in bad debts. “The central government has decided to establish dedicated industrial enterprise restructuring funds of 100 billion yuan (US$15.31 billion) over two years, which will be used to solve the problem of worker placement,” said vice minister of industry Feng Fei. Feng told reporters the “main principle” of the restructuring policy would be the deployment of market forces, but the central government needed to offer a helping hand to local authorities to deal with layoffs. Feng said China was trying to encourage mergers rather than bankruptcies in a bid to reduce the risk of unemployment, but the central government had to act to remove some of the obstacles that
were impeding the restructuring efforts. “Local governments have to stop extending credit to zombie firms, and banks need to stop offering loans,” he said. “Second, we need to strengthen the enforcement of environmental protection, energy efficiency, quality, safety and technology standards.” He said the restructuring process would also require the disposal of bad assets, but China would use “market methods” to handle the problem. He did not elaborate. China’s steel sector has an annual capacity surplus of around 400
million tonnes, nearly half of the country’s total output in 2015, and the China Iron and Steel Association said it was likely to rise further in 2016. Officials from China’s coal industry association estimate that total annual production capacity now stands at 5.7 billion tonnes, compared to last year’s 3.7 million tonnes. While some estimate that a capacity cut of 100 million tonnes of steel a year could lead to around half a million job losses, Feng said the government was not expecting widespread lay-offs.
The restructuring of China’s lumbering and mostly state-owned industrial sectors has emerged as one of the government’s key priorities this year as it tries to rejuvenate a flagging economy. China is set to announce further state-owned enterprise reform measures, with the government aiming to push through more mergers as well as corporate governance steps, including the use of market-based hiring and compensation practices, designed to make the firms more competitive. Reuters
February official factory PMI shrinking for 7th month Ministry of Industry and Information Technology said industrial output will stabilise and is expected to grow around 6 percent in 2016
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ctivity in China's vast manufacturing sector likely shrank for a seventh straight month in February, a Reuters polled showed, adding to signs that business conditions in the world's second-largest economy are continuing to decelerate. The official manufacturing Purchasing Managers' Index (PMI) is expected to dip to 49.3 in February from 49.4 a month earlier, according to a median forecast of 23 economists in a Reuters poll. January's reading was the weakest since August 2012. The continued weakness comes despite a massive injection of credit from Chinese banks in January, which has been widely attributed to a government push to head off risks of a sharper economic slowdown.
Banks dished out a hefty 2.51 trillion yuan (US$384.23 billion) of new loans last month, although the full effect of the impetus will not be felt overnight. "Funds injected in January should take some time before making a positive impact on the real economy," said Zhang Cheng, an analyst at GF Development Bank in Shanghai. Questions remain, however, over whether many Chinese factory owners are in any mood to take on new debt to expand, with persistently sluggish demand at home and abroad leaving them with significant idle capacity already. Top officials have made reducing overcapacity, particularly in "rust-belt" heavy industries, one of their key policy goals in 2016,
but such a move would risk massive layoffs and saddling banks with loan defaults in the short-term, even if it promises greater long-term dividends. Analysts also cautioned that Chinese economic trends can be distorted in January and February by the long Lunar New Year holidays, when many businesses typically scale back operations or close for lengthy periods of time. That will leave global investors waiting for March data for a clearer picture of the health of the economy. China's industrial output will stabilise and is expected to grow around 6 percent in 2016, the Ministry of Industry and Information Technology said yesterday, slightly lower than the 6.1 percent recorded in 2015. China's top leaders
Funds injected in January should take some time before making a positive impact on the real economy Zhang Cheng, analyst, GF Development Bank
reiterated a pledge on Monday to keep economic growth within a reasonable range this year while maintaining a pro-active fiscal policy and prudent monetary policy. Weighed down by sluggish demand, overcapacity, cooling investment and a sluggish property market, the economy grew 6.9 percent in 2015, its weakest in a quarter of a century, and economists see growth cooling further to 6.5 percent this year. Some market watchers believe real growth levels may already be much weaker. The official manufacturing PMI data will be released on March 1, along with the official services PMI. The Markit/Caixin factory PMI, a private and separate gauge of manufacturing data, will also be released on March 1. Reuters
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February 26, 2016
Greater China
Beijing seeks to reassure trade partners on markets ahead of G20 The Ministry of Industry and Information Technology said during a separate press conference in Beijing yesterday that China’s exports and currency remain under pressure Pete Sweeney
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hina’s leaders voiced support for the embattled domestic currency yesterday, with the country’s vice finance minister saying policymakers are committed to market transparency and aware of the impact their decisions have on other economies. The comments come ahead of a meeting of finance ministers and central bankers from G20 nations in Shanghai on Friday and Saturday, at which current market turmoil and a global economic slowdown are expected to be key topics of discussion. Zhu Guangyao, vice finance minister said that China would seek to keep the exchange rate stable while maintaining its current “managed float” regime. China’s current foreign exchange management theoretically allows market forces input into the way the yuan is priced against other currencies. “We do recognise the risk
the global economy faces,” he said at a conference held by the Institute of International Finance linked to the G20 summit. “We also understand how important it is to correctly communicate with the market,” he added. Zhu’s statements followed similar comments earlier in the day at the same conference by the of the Industrial and Commercial Bank of China (ICBC) Jiang Jianqing, who said there is no market basis for further yuan weakness. This dovetails with previous statements by regulators and central bankers in China. Such calls in the past, however, have had little impact in fending off bearish pressure against the currency, with famous international investors like George Soros publicly arguing that the currency is set to decline further. U.S. Treasury Secretary Jack Lew, in an interview
with the Wall Street Journal published yesterday, said China must make it clear that there is no “major devaluation” in the pipeline. In a speech at the same conference, central bank vice governor Yi Gang said that investors can expect more fluctuations by the yuan against the dollar as the People’s Bank of China moves to put more emphasis on measuring the yuan’s value against a basket of currencies. The Ministry of Industry and Information Technology said during a separate press conference in Beijing yesterday that China’s exports and currency remain under pressure, adding the ministry would invest 100 billion yuan (US$15 billion) over two years to relocate workers during China’s industrial restructuring.
Balancing act
Like other economies, China is struggling to balance short
term stability with structural reforms that might risk generating unemployment and social unrest, and many economists are sceptical that much can come from the G20. A report published by the International Monetary Fund (IMF) on Wednesday called for a coordinated stimulus program to support a slowing global economy. “The G20 must plan now for coordinated demand support using available fiscal space to boost public investment,” IMF staff said in the report. The Shanghai meeting is already being compared with the G20 meeting in April 2009 when officials agreed on coordinated stimulus to prevent a worldwide depression during the global financial crisis. However, few expect this year’s conference to produce similar results. “Calls for co-ordinated policy easing ahead of this weekend’s G20 meeting
Foxconn to acquire Japan’s Sharp Japanese firm’s board votes unanimously to accept offer over rescue by state-backed investment fund Makiko Yamazaki and Taro Fuse
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aiwan’s Foxconn will acquire two-thirds of ailing electronics maker Sharp, marking the largest acquisition of a Japanese tech firm by a foreign company and bolstering its position as Apple Inc’s biggest supplier. Sharp said it would issue around US$4.4 billion worth of new shares to Foxconn, known formally as Hon Hai Precision Industry Co. Foxconn’s total investment is set to be more than 650 billion yen (US$5.8 billion) in the loss-
making liquid crystal display maker, a source familiar with the matter said. Sharp’s stock tumbled 14 percent as the share dilution looked larger than expected, with traders noting that the deal included the issuance of a class of shares that would be convertible next year. The agreement, which signals an opening up of Japan’s insular technology sector to foreign investment, will see Sharp start massproducing organic light-emitting
diode (OLED) screens by 2018, around the time Apple is expected to adopt the next-generation displays for its iPhones. Yesterday’s decision comes after five years of courting by Foxconn founder Terry Gou, who sees ownership of Sharp as a way to better compete with Asian rivals such as Samsung Electronics Co. “Sharp has the technology to build out the components to compete with Samsung as an Apple supplier, which means that with Sharp under its umbrella Foxconn can help Apple wean itself off Samsung,” said Gavin Parry, managing director of Parry International Trading, a brokerage in Hong Kong. “This gives Foxconn better pricing power with Apple,” he added. Sharp’s board voted unanimously to accept the offer over a rescue by a state-backed investment fund, sources said, declining to be identified as they were not authorised to speak on the matter.
Thinner, lighter, flexible
Sharp said it aimed to become a global supplier of OLED screens, which are
will almost certainly come to nothing,” wrote Andrew Kenningham, senior global economist at Capital Economics in London. China, however, appears to be positioning itself for aggressive fiscal stimulus, hoping it can migrate its economy away from overdependence on lowend export manufacturing to something more sophisticated without setting off a wave of layoffs, a balancing act PBOC’s Yi Gang referred to as “delicate”. Vice finance minister Zhu also said that China had room to increase its fiscal deficit this year and would take necessary measures to deal with systemic risks while communicating with the market. Such increases would have to be approved by Premier Li Keqiang at the annual meeting of parliament which begins March 5. Reuters
thinner, lighter and more flexible than current displays. South Korea’s Samsung Display and LG Display are also investing heavily in the new technology. The century-old Japanese firm was once a highly profitable manufacturer of premium TVs and a favoured screen supplier to Apple. But it has struggled in recent years as massive investments in advanced LCD plants failed to pay off amid price competition with Asian rivals, and two bank bailouts since 2012 did little to help turn its business around. In agreeing to the deal, Sharp executives have decided to put behind them ill-feelings over the breakdown of a 2012 agreement between the two companies to form capital ties. Both government and Sharp officials initially backed a rescue plan by state-backed Innovation Network Corp of Japan (INCJ), fearing a loss of the company’s technological expertise to a foreign company. The fund had planned to merge Sharp’s screen business with Japan Display, in which the fund owns a majority stake. The plan looked set to be another in a long series of deals between domestic rivals, propped up with the help of banks or state funds. But policymakers warmed to Foxconn’s offer as a step towards bolstering foreign direct investment in Japan. Foxconn’s offer is also seen as beneficial for Sharp’s creditor banks, anxious to limit their losses after helping bail out Sharp twice already. The lenders are Mitsubishi UFJ Financial Group Inc’s core unit Bank of Tokyo-Mitsubishi UFJ, and Mizuho Financial Group Inc’s Mizuho Bank. Reuters
Business Daily | 11
February 26, 2016
Greater China Home prices to rise 4 pct in 2016 Inventories reached 718.53 million square meters by end-December Xiaoyi Shao and Nicholas Heath
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hina’s home prices are likely to rise modestly this year as government support measures gain traction, with more easing steps widely expected in coming months, a Reuters poll showed. A mild recovery in the housing market, which accounts for 15 percent of gross domestic product, may ease fears that the world’s second-largest economy is at risk of a hard landing. But a rebound in property investment and new construction will still be needed before the sector makes a more significant contribution to broader growth again, creating more jobs and boosting demand for materials from cement to steel. China’s average nationwide home prices are expected to rise 4 percent in 2016 from a year ago, according to the median of forecasts from 13 analysts polled. That is twice as much as the gain seen in the last poll conducted in November. “The loosening monetary environment will push up asset prices, though general high inventories (of unsold homes) will limit the room for price rises,” said Frank Chen, head of research at property consultancy firm CBRE China. Housing inventories reached 718.53 million square meters by the end of December, official data showed, which most respondents believed would take over two years to clear.
China’s housing market bottomed out in the second half of 2015 after cooling for more than a year, propped up by a barrage of government support measures, including a series of interest rate cuts and lower downpayment requirements. Top leaders have made reducing the home supply glut one of their top priorities for this year. Last week, China lowered taxes on some property transactions and earlier this month announced further reductions in minimum downpayments required for first- and second-time home buyers. All respondents surveyed expected more such steps this year as the
government tries to stabilise the slowing economy. “Recent measures are just a beginning,” said Xia Dan, an analyst at Bank of Communications. “If property investment remains weak, the government will not stop loosening policy.” Growth in property investment dwindled to 1 percent in 2015, the slowest in nearly seven years, while new construction starts fell 14 percent. But some analysts see the beginnings of a turnaround as government policies revive confidence in the market. Ten of 15 respondents thought property investment would pick up this year, compared with the November poll, when more than half thought growth would continue to slow. However, the recovery could be uneven, with analysts predicting a further divergence between smaller and larger cities. Since much of the property overhang is believed to be in smaller cities with less robust demand, analysts said those areas were most at risk of steep price falls this year. Poll respondents also still see Chinese home prices as slightly expensive. On a scale of 1 to 10, where 1 is extremely cheap and 10 is extremely overvalued, the median reply was 7, higher than 6.5 in the last poll.
China has chosen two state-owned enterprises (SOEs) to pilot SOE reforms, an official said yesterday. More SOEs will be chosen based on the requirements of the reforms, said Zhang Xiwu, deputy head of the State-owned Assets Supervision and Administration Commission of the State Council. The country will boost SOE reform pilots this year following the central government’s plan for testing ten SOE reforms, Zhang said. The reforms will cover payment distribution, investment of state-owned capital, mergers and reorganization. The two companies are China Chengtong Holdings Group Limited and China Reform Holdings Corporation Limited.
Budget deficit could reach 4 pct of GDP China could in theory raise its budget deficit to more than 4 percent of gross domestic product to help support growth, a senior central bank researcher wrote in a commentary posted late on Wednesday. China has been expected to run a larger budget deficit this year as leaders turn to government spending to arrest the slowdown in the economy after disappointing returns from a year of monetary policy easing. “In the near future, it’s possible to raise China’s fiscal deficit rate to 4 percent, or even higher,” Sheng Songcheng, director of the Survey and Statistics Department at PBOC wrote.
Hebei to close more polluting firms
Reuters
Beijing beats New York as world’s billionaire capital
North China’s Hebei Province, neighbouring Beijing, is planning a purge of small polluting firms this year. The provincial environmental inspection bureau said yesterday that it would send inspectors to small firms in 10 polluting industries including paper-making, refining, leather-making, printing, pesticide manufacturing, dyeing and electroplating. Companies found to have substandard environmental facilities will be closed by the end of 2016, according to a statement from the bureau. The province will also subsidize coking, pharmaceutical, metals, leather-making and other plants to install facilities to clean their discharges, the statement said.
Just over 40 percent of the world’s billionaires under 40 reside in China
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eijing has surpassed New York City to become the “billionaire capital of the world” with 100 resident billionaires to the US business and cultural capital’s 95, a survey showed. The number of Beijing billionaires rose by 32 from last year, while New York’s tally rose by just four, according to the Hurun Report, a China-based publisher of luxury magazines and compiler of an annual list of the country’s richest people. Moscow came in third, with 66 billionaires. “Despite its own slowdown and falling stock markets, China minted more new billionaires than any other country in the world last year, mainly on the back of new listings,” said Rupert Hoogewerf, its chairman and chief researcher. Different lists of the world’s wealthiest, including Forbes, Bloomberg and Hurun, produce different results based on varying methodologies. Last year, Greater China surpassed the US to become home to the largest population of billionaires in the world, Hurun said in a previous October report.
Government to boost SOE reform pilots
Beijing to close markets around subsidiary centre Alibaba founder Jack Ma is on the list
Its new figures, released Wednesday, said that the region is now home to 568 billionaires -- 90 more than last year -- with a combined net worth of US$1.4 trillion, a sum comparable to the GDP of Australia. Just over 40 percent of the world’s billionaires under 40 reside in China, the report added. In comparison, 535 billionaires call the US home -- two fewer than last year. China’s richest man, real estate and entertainment magnate Wang
Jianlin, ranked 21st on Hurun’s list of the world’s richest people with a net worth of US$26 billion, behind the likes of Microsoft founder Bill Gates, Facebook CEO Mark Zuckerberg and investor Warren Buffett. Other Chinese billionaires on the list include Jack Ma, founder of Alibaba, and the heads of tech giants Tencent and Baidu, as well as the chief executives of leading beverage producer Wahaha and electronics company Xiaomi. AFP
More than half of the markets in Beijing’s suburban Tongzhou District, the site of the capital’s new subsidiary administrative center, will be shut down within two years, local authorities said yesterday. The Tongzhou government’s closure plan covers markets for construction materials, auto parts, small commodities and clothing among other items. The remaining 46 markets will be “upgraded” -- for example, auction facilities will be added to antiques markets, while home appliance and tea markets will be encouraged to introduce e-commerce service. Those that fail to do so will face closure within two years.
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February 26, 2016
Asia
India gears up for ‘make or break’ budget Spending pledges are likely to focus on infrastructure, recapitalising public sector banks beset by bad loans, and supporting rural areas struggling after two poor monsoons Emily Ford
Indian Prime Minister Narendra Modi (C) arrives with other cabinet ministers at the Indian parliament in New Delhi this week
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ndia’s government is expected to deliver on promises to overhaul the tax regime and ramp up public spending in its budget Monday, as Prime Minister Narendra Modi bids to shore up his sagging reputation as a reformer. The business-friendly premier came to power almost two years ago with promises to overhaul Asia’s third-largest economy and jump-start investment. But with the halfway point of his term approaching, experts say the budget has to tackle the failure to translate those bold pledges into action while stimulating consumption at the same time. “This is a make-or-break budget in some ways,” Rajrishi Singhal, senior geoeconomics fellow at Gateway House think-tank in Mumbai told AFP.
“People were a little bit disappointed with the last budget. Now is the time for him (Modi) to start impressing people.” Finance Minister Arun Jaitley’s second budget last year met with a cool response in many quarters for its lack of “big bang” announcements. And while official forecasts predict the economy will grow an impressive 7.6 percent over the 2015-16 financial year, it still faces heady challenges. India’s main stocks index has lost nearly a fifth of its value since last year, private investment is weak and the rupee is at its lowest level against the dollar since 2013. Despite winning a landslide in the lower house in 2014, poisonous relations between his ruling party and the opposition have stalled the passage of Modi’s flagship Goods and Services
Tax (GST) in the upper house. While Jaitley has previously outlined his intention to reduce corporate tax from 30 to 25 percent before the next election, Monday is expected to be the first time he lays out a detailed roadmap to reach that target. Soumitra Bhattacharya, joint managing director of the technology company Bosch India, said he was expecting an announcement on how to break the impasse over GST -- designed to simplify India’s bewildering multilayered tax regime -- and on the promised cut in corporate tax.
‘Huge stress’
“There is an immediate need to bring GST to reality,” he said. “A clear roadmap for a reduction in the corporate tax rate from 30 percent to 25 percent... will help in boosting business.” The existing complex corporate tax regime is seen as a turn-off to foreign investors, undermining Modi’s efforts to turn the country into a global manufacturing hub under his ‘Make In India’ campaign. The government has been praised for efforts to slash red tape, but pundits say it needs to do more to make India an easy place to do business. Still, while Jaitley is expected to burnish Delhi’s pro-business
credentials, the weakness of the global economy may force him to relax his target for slashing the fiscal deficit in favour of more spending. “It is the effort of the government to present a budget which is growthoriented and which maintains the momentum of growth and tries to develop on it,” said Shaktikanta Das, a budget secretary in the finance ministry. Spending pledges are likely to focus on infrastructure, recapitalising public sector banks beset by bad loans, and supporting rural areas struggling after two poor monsoons. Farmers were key to Modi’s 2014 triumph and he needs to retain support in key state polls in the year ahead. Generous salary hikes for civil servants are also expected after a pay commission recommended increases of 23 percent, as is a new pension scheme for retired soldiers. With these set to cost billions of dollars, the government may delay its target of reducing the fiscal deficit to 3.5 percent of GDP in 2017 as it instead looks to boost consumption. Experts stress the bigger question is whether promises come to fruition. “There’s always announcements made, the question is: can they carry them out?” Richard Rossow, an India expert at the Washington-base AFP
Divergent Japanese central banker warns about negative rates risks Leika Kihara
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ank of Japan (BOJ) board member Takahide Kiuchi said negative interest rates could destabilise Japan’s financial system by squeezing banks’ margins, underscoring worries among some policy makers of the risks of last month’s radical decision. Kiuchi, among four of the nine board members who voted against the BOJ’s surprise move to adopt minus rates to spur stubbornly low inflation and growth, also said economic and price conditions had not deteriorated enough
to justify easing. “The demerits of negative rates is that it could potentially reduce financial system stability by causing further harm to financial institutions’ revenues,” Kiuchi said in a speech to business leaders in Kagoshima, southern Japan, yesterday. Adopting negative rates could backfire and work to tighten monetary conditions if banks decide to pass on the costs by charging borrowers higher rates or transaction fees, he added.
“I didn’t see the need to take additional easing steps (in January) and thought negative rates should be an option the BOJ should save for the future,” Kiuchi said. A former market economist, Kiuchi has been a lone proponent to taper the bank’s massive asset-buying programme. He has long argued that its aggressive bond buying was distorting market functions and making a future exit from the programme difficult. The BOJ adopted negative rates last month to supplement
its large-scale quantitative and qualitative easing programme as it sought to prevent volatile financial markets from hurting corporate sentiment and delaying a sustained end to deflation. The move has pushed bond yields into negative territory, but has drawn criticism from some lawmakers for failing to boost stock prices or arrest an unwelcome rise in the yen. Critics also argue that pushing down already ultra-low borrowing costs would do little to boost capital expenditure.
Kiuchi said the BOJ’s supereasy monetary policy alone is insufficient to accelerate inflation to its 2 percent target and must be accompanied by government and privatesector efforts to boost Japan’s growth potential. The BOJ should not top up asset purchases in response to short-term blips in the economy, he said, advocating instead temporary, emergency cash injection to markets if the economy faces a financial crisis. Reuters
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Business Daily | 13
February 26, 2016
Asia Australian business investment up in Q4 Annual growth stuck below potential at 2.6 per cent Wayne Cole
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ustralian business investment rose the first time in a year last quarter as spending picked up outside the battered mining sector, but downgrades to firms’ future plans meant a meaningful recovery remained elusive. Most disappointing was the Australian Bureau of Statistics’ survey of early investment intentions for the year to June 2017 which showed a steep drop to A$82.6 billion (US$59.1 billion). That was well below analyst expectations of around A$93 billion and almost half of what was spent as recently as 2012/13. “The capex story is not where you
would hope to be,” said Su-Lin Ong, a senior economist at RBC Capital Markets. Resource-rich Australia has been struggling with a global slump in commodity prices which has kept economic growth to below-par levels for going on four years. A decade of madcap expansion saw mining investment quadruple to reach 8 percent of Australia’s A$1.6 trillion in annual GDP. Now, it’s heading rapidly back to around 3 percent. Figures due next week are generally expected to show the economy grew a modest 0.5 percent last quarter, a step down from third quarter’s surprisingly brisk 0.9 percent.
Annual growth is seen stuck below potential at 2.6 percent, even if quicker than much of the rest of the rich world. For that reason investors are wagering that global headwinds will force a further cut in interest rates from a reluctant Reserve Bank of Australia (RBA). Interbank futures are fully priced for a cut in the 2 percent cash rate by August, which would mark more than a year since the last easing. Yet the RBA has consistently argued that rates of 2 percent are already so low that they are no impediment to investment, so cutting further would not help. Instead, they have been hoping other sectors would pick up their spending after some years of under investment. There was some sign of that in the fourth quarter, with investment rising 0.8 percent to an inflation-adjusted A$31.9 billion, when analysts had forecast a 3.0 percent drop. Spending plans for the current year to June were also marked up, but they still implied a drop of around 20 percent when compared to 2014/15. “It’s more of the same story - the non-mining recovery we’re all hoping for still looks fairly soft overall,” said Michael Blythe, chief economist at Commonwealth Bank. Reuters
KEY POINTS CAPEX rises 0.8 pct in Q4, tops forecasts of -3 pct Q4 GDP seen rising around 0.5 pct, 2.6 pct for year
Thai exports fall at fastest pace in years Shipments to the United States dropped 8.5 percent last month and exports to Japan tumbled 10.1 percent
Myanmar marine exports drop Myanmar’s marine exports amounted to US$440 million in 2015-16 fiscal year, down US$40 million compared with the previous fiscal year, according to the Myanmar Fisheries Products Producers and Exporters Association yesterday. Annual export earnings declined from US$550 million in fiscal year 2013-14 to US4480 million in 2014-15 fiscal year, then to US$440 million this fiscal year. The country was unable to fill the order for marine product exports as it has seen a reduction in the amount of fish caught at sea and a low production yield of farmed fish, the association said.
“If we rush for a rate cut, we may waste our bullet. The two rate cuts last year were to help support exports but we haven’t seen them improving,” he said. The BOT has left its benchmark rate unchanged at 1.50 percent since April 2014 following two surprise cuts. The rate reached a record low of 1.25 percent during the global financial crisis. In 2015, shipments fell 5.78 percent, the biggest annual pace of decline in six years. Southeast Asia’s second-largest economy expanded by 2.8 percent last year, up from 0.8 percent in 2014, but its recovery remains fragile. In December, the central bank predicted 2016 economic growth of 3.5 percent, with flat exports. It will offer new projections on March 31. “It’s just one month of bad exports and we are sticking to our target of 5 percent (export growth) this year,” Deputy Commerce Minister Suvit Maesincee told a briefing. In January, exports to China, Thailand’s second biggest market after the United States, dropped 6.1 percent from a year earlier, while those to Europe declined 2.4 percent.
South Korea’s central bank said yesterday it would increase the ceiling on its special lending programmes for smaller firms by 5 trillion won (US$4.05 billion) from next month to support the faltering economic recovery. The Bank of Korea said in a statement issued after a board meeting that the increased ceiling would be allocated to three programs designed to support foreign trading firms, capital investment and business start-ups.
Dick Smith fails to find buyer
Orathai Sriring and Kitiphong Thaichareon
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Japanese financial institutions bought a record volume of foreign securities last week, data from the Ministry of Finance showed yesterday, as the Bank of Japan’s negative interest rates policy crushed domestic bond yields. Capital flows data from the Ministry of Finance showed Japanese investors bought 2.179 trillion yen (US$19.44 billion) of foreign bonds and 449.2 billion yen (US$4.01 billion) of foreign shares. The combined total of 2.424 trillion yen (US$21.62 billion), was the biggest on record, surpassing the 2.187 trillion yen (US$19.51 billion) bought in the second week of August 2010.
S.Korea raises ceiling for low-rate lending
But early spending plans for 2016/17 looking very soft
hailand’s exports contracted more than expected in January, showing the tradedependent economy is still struggling in the face of sluggish global demand and China’s slowdown. Thai exports, equal to more than 60 percent of economic output, tumbled 8.91 percent in January from a year earlier, the Commerce Ministry said yesterday. A Reuters poll projected a drop of 7.1 percent. The decline was the 13th straight month and the biggest for any month since November 2011, when severe flooding closed thousands of factories. “It’s clear that the global economy is worse than expected and this will have an impact on Thailand’s economic recovery,” said Charnon Boonnuch, senior economist at Tisco Securities. Exports may shrink for the fourth year running in 2016 and the Bank of Thailand (BOT) will need to cut interest rates at its March 23 meeting, he added. But Tim Leelahaphan, an economist at Maybank Kim Eng, said domestic demand was improving so Thailand had no rush to act.
Japanese institutions spend big on foreign securities
KEY POINTS Jan exports -8.91 pct y/y vs -7.1 pct in Reuters poll Fall in Jan exports is the biggest y/y since Nov 2011
Bankrupt consumer electronics retailer Dick Smith Holdings Ltd will close down its remaining 363 stores in Australia and New Zealand after failing to find a buyer, receivers and managers of the company said yesterday. “Unfortunately the sale process has not resulted in any acceptable offers for the group as a whole or for Australia or New Zealand as standalone businesses,” receiver James Stewart said in a statement. The retailer went into receivership with debt of A$390 million (US$279.55 million) earlier this year.
Air New Zealand halfyear net profit rises
Jan imports -12.37 pct y/y vs -9.75 pct in poll One economist expects rate cut in March
Shipments to the United States dropped 8.5 percent last month and exports to Japan tumbled 10.1 percent. Imports slipped 12.37 percent in January on the year, led by a 41 percent fall in fuel and a 15 percent drop in raw materials. Many imported items are parts to be assembled into finished goods and shipped out. Reuters
Air New Zealand’s half-year net profit after tax jumped 154 percent to NZ$338 million (US$225 million), the company said yesterday. The performance was driven by the airline adding domestic and international flights amidst record tourism to New Zealand, while low fuel prices had also lowered the company’s costs. CEO Christopher Luxon said in a statement that the company would continue to build its presence in Australia and launch new services such as seasonal flights to Vietnam in June. The airline said it is targeting earnings before tax for the full year to exceed NZ$800 million.
14 | Business Daily
February 26, 2016
International Citi downgrades 2016 global growth forecast Citi economists marked down their forecast on 2016 global economic expansion to 2.5 percent from 2.7 percent due to slowing activity in developed economies in addition to weakening emerging markets. They said there is a risk the world economy may grow below 2 percent due to a probable “mismeasurement” of Chinese growth data and possibly a more severe than expected deterioration among emerging economies. “Global growth prospects are worsening further, with deterioration across advanced economies alongside previous weakness in emerging markets,” Citi economists wrote in a research note.
Brazilian Senate passes bill to relax Petrobras dominance Brazil’s Senate on Wednesday passed a bill that reduces Petrobras control over some of the country’s most promising offshore oil resources, in an attempt to kick start the country’s oil industry hammered by low oil prices and a corruption scandal at the state-run oil company. The Senate passed the bill, 40-26, ending a requirement that Petroleo Brasileiro SA, as the company is formally known, operate all new developments in an offshore region known as the Subsalt Poligon and provide at least 30 percent of investment.
Venezuela, Gold Reserve to settle arbitration dispute Venezuela and Canadian mining company Gold Reserve signed a memorandum of understanding to settle a protracted arbitration dispute over a gold concession through creation of a joint venture in the South American country. The deal would see Venezuela and Gold Reserve, which were embroiled in a dispute over the termination of the company’s Las Brisas gold concession in 2009, jointly exploit the Brisas and Las Cristinas mines, President Nicolas Maduro said. The deal’s fine print was not immediately clear, although Venezuela said the deal would result in a US$2 billion dollar loan for the crisis-hit country.
Bayer’s profit misses estimates Bayer AG, the German drug maker that appointed a new chief executive officer yesterday, reported fourth-quarter profit that missed analysts’ estimates as earnings in the company’s agricultural division declined. Earnings before interest, taxes, depreciation and amortization, and excluding some costs, climbed 4 percent to 1.9 billion euros (US$2.1 billion), the Leverkusen, Germany-based company said in a statement yesterday.
Regulator says BT should be overhauled BT will have to open up more of its network to rivals and meet tougher targets on fixing faults, British regulators said yesterday, but stopped short of recommending that Britain’s biggest telecoms group be split up. Ofcom said BT should reduce its grip on the network that provides broadband to millions of homes, both through BT’s own services and those of rivals. Competitors including TalkTalk, Vodafone and Sky, which rely on BT’s Openreach network to deliver broadband, wanted the regulator to recommend that Openreach should be spun off.
Bank of Russia says intervening to calm ruble spawns risks Russia was the first of the top oil-producing states in the former Soviet Union to cut its currency loose in late 2014 Anna Andrianova
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he Bank of Russia is avoiding the trap of intervening to shield the ruble from volatility in oil, which would only raise the risk of a bigger adjustment in the exchange rate, according to Ksenia Yudaeva, a first deputy governor. “Attempts to do that will have a negative impact on GDP dynamics and the dollarization of savings, making necessary more rare but significantly stronger corrections in the exchange rate,” Yudaeva said in an interview in Moscow. “The central bank can’t -- and shouldn’t -- completely smooth over the volatility caused by swings in oil prices.” Russia was the first of the top oil-producing states in the former Soviet Union to cut its currency loose in late 2014 amid a selloff in crude. By contrast, Kazakhstan and Azerbaijan opted to wait out the turmoil as their economies came under pressure, draining reserves before adopting free floats that sent the tenge and the manat to the world’s two worst performances against the dollar last year. The Russian central bank hasn’t sold foreign currency since late 2014,
pledging to avoid interventions unless the ruble’s swings threaten financial stability. Dmitriy Tulin, who replaced Yudaeva a year ago as a first deputy governor in charge of monetary policy, this month held out the possibility of fighting currency volatility that results from “some technical factors related to market imperfections.” Only 14 percent of Russians identified currency depreciation as their biggest concern, down from 15 percent a year earlier, according to a Levada Centre poll published this month. That’s less than half the share of those who said inflation was the biggest threat.
Record correlation
The ruble is down 3.5 percent against the dollar this year after a 20 percent loss in 2015. Without central bank interventions to ease its movements, the correlation between the currency of the world’s biggest energy exporter and a barrel of crude reached a record in October. Three-month implied volatility, a measure of exchange-rate swings used to price options, is the secondhighest globally after Argentina’s peso, suggesting investors anticipate
The Russian central bank hasn’t sold foreign currency since late 2014, pledging to avoid interventions unless the ruble’s swings threaten financial stability
ruble price fluctuations will persist, data compiled by Bloomberg show. The CBOE Crude Oil Volatility Index, which measures expectations of price swings, rose for a third session to the highest level in almost a week. “Volatility is rather high, and in our case it’s linked with oil prices,” Yudaeva said. “We see a gradual tendency of ruble swings fading out.” Fluctuations in oil are now giving way to stabilization in prices around US$30 a barrel, she said. Only “structural changes” in the Russian economy will break the link between the exchange rate and crude, according to Yudaeva. “Monetary policy alone isn’t enough,” she said. Bloomberg News
Bank of Russia’s intervention to calm ruble spawns risks The country is the latest Gulf government to seek funds from the international bond market to help mitigate the impact of lower oil prices on state finances Archana Narayanan
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he government of Oman is in talks with banks about a sovereign dollar bond issue, sources aware of the matter said yesterday, as the Gulf nation looks to tap international bond markets to shore up state finances pressured by low energy prices. An offering would be the first time the sultanate has issued international debt in almost 20 years, and is expected to kick-start a regular programme of issuance to cover budget deficits for the country. With smaller oil and gas reserves than its wealthy Gulf neighbours and a higher cost of production, Oman is particularly vulnerable to the oil price plunge. It lacks the big fiscal reserves of its wealthy neighbours. The Finance Ministry did not respond to a request for comment. However, Oman’s central bank executive president, Hamood Sangour al-Zadjali, said this month the government might issue bonds by
the middle of this year as part of a plan to borrow up to US$10 billion from abroad. He did not comment though on the size of any bond offer or give further details of the foreign borrowing plan. The sultanate, which was lowered two notches to BBB- from BBB+ by Standard & Poor’s last week, has already obtained a US$1 billion sovereign loan from international banks this year. Now it has sent invites to a small group of banks, most of whom participated in the loan, to pitch for roles in arranging the bond, said multiple sources speaking on condition of anonymity as the information is private. The government may issue the dollar-denominated bond as soon as the second quarter, two of the sources added. Its loan had 11 banks participating include Citigroup, Gulf International Bank and Natixis, who arranged the transaction.
The other banks were National Bank of Abu Dhabi, Societe Generale, Sumitomo Mitsui Financial Group, Bank of Tokyo-Mitsubishi UFJ, JP Morgan, Credit Agricole, Standard Chartered and Europe Arab Bank. Bahrain’s government raised US$600 million through a bond sale this week and Sharjah raised a US$500 million sukuk in January. Oil’s plunge since 2014 has hit Oman’s finances hard. It swung to a deficit of 3.26 billion rials in the first 10 months of the year from a surplus of 189.6 million rials a year earlier. To bridge the deficit, Oman has begun spending cuts, tax rises and fuel subsidy reforms. The country has an extended domestic borrowing programme, including regular treasury bill auctions. The borrowing is adding pressure to the liquidity in the local banking system and forcing the government to raise money abroad. Reuters
Business Daily | 15
February 26, 2016
Opinion
Who’s right on US financial reform? wires Business
Leading reports from Asia’s best business newspapers
Jeffrey Frankel
Professor of Capital Formation and Growth at Harvard University
JAKARTA GLOBE Indonesia and its Southeast Asian peers need to revamp their information technology infrastructure, update regulations and encourage an entrepreneurship ecosystem to generate an additional US$1 trillion in its gross domestic product in the next decade, according to a report published by a consulting firm. The report, titled “Asean Digital Revolution,” suggested that members of the Association of Southeast Asian Nations can benefit from the use of digital technology in businesses and day-to-day human life by aligning strategies across the nations to create a single, borderless digital market and harmonized digital regulations.
THE KOREA HERALD Korea’s short-term foreign debt slipped in 2015 from the previous year as banks cut back on overseas borrowing, the central bank said yesterday. External debt with a maturity of one year or shorter totalled US$108.7 billion as of the end of 2015, down US$7.7 billion from a year earlier, according to the Bank of Korea. Total external debt consequently stood at US$396.6 billion as of the end of last year, also dropping US$27.8 billion from the previous year. However, the value of all assets held abroad stood at US$719.7 billion, up US$36.2 billion from 2014.
PHILSTAR Tax professionals are crafting a bill that would lower income taxes on micro and small enterprises. The bill aims to lower income levies on covered firms to “about five percent” or a “fixed amount” to be paid every year. Currently, micro and small businesses are charged based on income brackets under the National Internal Revenue Code. They however enjoy some perks from the government. For instance, the three-year Investment Priorities Plan gives tax and non-tax incentives to micro, small and medium enterprises. According to the Department of Trade and Industry, more than 97 percent of local business corporations are MSMEs.
THE STRAITS TIMES The market may not be showing much confidence in banking stocks currently, but DBS Group chief executive Piyush Gupta and other senior management evidently do not share in the pessimism. In the past two days, they have bought over 500,000 DBS shares amounting to more than US$7 million. For Mr Gupta, a Singapore Exchange filing showed that he bought 200,000 DBS shares on Monday at US$13.88 apiece, or close to US$2.8 million in total. The filing also showed that on top of the purchase, Mr Gupta had received 148,068 shares as part of a share award scheme.
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ight years after triggering a crisis that nearly brought down the global financial system, the United States remains plagued by confusion about what reforms are needed to prevent it from happening again. As Americans prepare to choose their next president, a better understanding of the policy changes that would minimize the risk of future crises – and which politicians are most likely to implement them – is urgently needed. What Americans are sure about is that they are angry with the financial sector. This is reflected in the success of recent Hollywood movies such as The Big Short (which has been rightly praised for making complex instruments like derivatives broadly understandable). And it is reflected in the current presidential campaign – most notably, in remarkable support for Senator Bernie Sanders’s leftist bid for the Democratic nomination. At the centre of Sanders’s campaign is a proposal to break up the big Wall Street banks into little pieces, thereby ensuring that no bank is so big that its failure would endanger the rest of the financial system. The appeal of that goal is understandable. But achieving it would require a massive sledgehammer. Though the American banking system historically featured thousands of small banks, the “too big to fail” phenomenon is not exactly new. The first bank that was declared “too big to fail” was Continental Illinois, which received a bailout in 1984 from President Ronald Reagan. With banks now bigger than ever – America’s four largest each held more than US$1 trillion in assets in 2011 – breaking them down to the point that no segment is systemically important would be a long and complex process, to say the least. Merely turning
the deregulatory clock back 30 years would not do the trick. But even if Sanders did somehow manage to break up the banks sufficiently, it would not solve the problem. After all, the US experienced a run on depositary institutions in the 1930s, when its financial system still comprised thousands of small banks. Yet Canada, with a financial system dominated by just five large banks, sailed through the global financial crisis of 2008-2009 more easily than almost any other country. Yet Sanders has indicated that he would even prohibit anyone with past experience on Wall Street from serving in his administration. Such blanket statements and superficial judgments do not belong in the selection of individuals for important positions. Consider Gary Gensler, a former co-head of finance at Goldman Sachs, whose appointment as Chair of the Commodity Futures Trading Commission Sanders tried (and failed) to block in 2009. In that position, to the consternation of many former Wall Street colleagues, Gensler spent five years working vigorously to implement financial-reform legislation, including pursuing the aggressive regulation of derivatives. Gensler also supported the prosecution of five financial institutions that had colluded to manipulate the London Interbank Offered Rate (Libor, the benchmark rate that some major banks charge one another for short-term loans). Attacking banks is emotionally satisfying. But it won’t prevent financial crises. In fact, the financial industry’s biggest problems lie elsewhere: hedge funds, investment banks, and other non-bank financial institutions that face less regulatory oversight and restrictions (such as on capital standards and leverage) than commercial banks. Recall that
What Americans are sure about is that they are angry with the financial sector
Lehman Brothers was not a commercial bank, and AIG was an insurance company. Former Secretary of State Hillary Clinton – Sanders’s opponent for the Democratic nomination – recognizes the need to place a high priority on regulating nonbanks, and she has proposed specific measures to do so. For example, she is calling for a small tax targeting certain kinds of high-frequency trading prone to abuse. Clinton also aims to close the “carried interest” loophole that currently allows hedge-fund managers to pay lower tax rates on their incomes than almost everyone else, and she proposes imposing a “risk fee” on big financial institutions that would rise as they grow. Clinton’s proposed risk fee resembles one advanced by President Barack Obama’s administration in 2010 in order to discourage risky activity by the largest banks, while helping to recoup some revenue from bailouts. But that plan was thwarted by three Republican senators who would support critical financialreform legislation – the DoddFrank Wall Street Reform and Consumer Protection Act – only if the fee was dropped.
Even without the risk fee for large banks, the Dodd-Frank legislation was a step in the right direction. Among other things, it increased transparency for derivatives, raised capital requirements for financial institutions, imposed additional regulations on “systemically important” institutions, and, per the suggestion of Senator Elizabeth Warren, established the Consumer Financial Protection Bureau (CFPB). But Dodd-Frank was far from complete. Making matters worse, many in Congress have spent the last six years chipping away at it, such as by exempting auto dealers from the CFPB and restricting the budgets of the regulatory agencies. Those who worked to undermine the financial regulatory-reform legislation – mostly Republicans – appear to have paid no political price for it. Meanwhile, those who, like Gensler, worked tirelessly to implement the reforms are judged according to superficial criteria by the very politicians who should support them. There is a place in political campaigns for bumper-sticker slogans. And there is definitely a place for ambitious goals. But the danger is that those who are attracted to inspirational rallying cries and sweeping proposals will lack the patience required to identify which side to support in the numerous complex battles over financial regulation that take place every year. To get the details of financial regulation right, the US needs leaders with the wisdom, experience, and perseverance to identify the right measures, push for their enactment, and then implement them effectively. If such people are not the ones who receive political support, we should not be surprised if the financial sector again escapes effective regulation and crises recur. Project Syndicate
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February 26, 2016
Closing Beijing gives quotas for bad loan securitization
Domestic major banks scrap charges on mobile transfers
China has granted six large domestic banks quotas to issue asset-backed securities (ABS) with non-performing loans as underlying assets, two sources with direct knowledge told Reuters. The six banks are Industrial and Commercial Bank of China Ltd, China Construction Bank Corp, Agricultural Bank of China Ltd, Bank of China Ltd, Bank of Communications Co and China Merchants Bank Co, the sources said. The lenders were granted a total bad loan securitization quota of 50 billion yuan (US$7.65 billion), said one of the sources. Among the six, Bank of China has moved the fastest for its first sales of ABS based on NPLs.
Five biggest commercial banks in China announced yesterday that they will no longer charge fees on domestic yuan transfers through cell phone, including inter-bank transactions. Effective since yesterday, fees will also be scrapped on domestic yuan transfers through the Internet as long as the transaction is under 5,000 yuan (US$765), according to a joint statement by Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, and Bank of Communications. The move comes as traditional banks are facing growing competition from Internet companies in the crowded mobile payment market.
China asks for urban ban on high‑sulphur diesel in clean fuel push Mainlanders are the world’s largest fuel users after the United States
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hina has asked local governments in 11 provinces to ban in urban areas the selling of high-sulphur diesel that is used for industrial and farming purposes rather than in automobiles, Beijing said in a policy document released yesterday. The request comes after China rolled out “national five” standards for gasoline and diesel on January 1 in the 11 provinces in the more economically developed eastern part of the country. The standards are equivalent to Euro V specifications that allow a maximum sulphur content of 10 parts per million (ppm). Due to lax supervision, however, “general diesel” or diesel with a high-sulphur content is still being sold at urban petrol stations in the provinces that come under the new policy, said the National Development & Reform Commission (NDRC) yesterday in the document posted on its website www. ndrc.gov.cn. Only kiosks in rural areas
or along the rivers should be allowed to sell high-sulphur diesel, the NDRC said. The tighter fuel standards are an attempt to tackle air pollution. Emissions from automobiles, especially from diesel-burning trucks, are one of the main contributors to the choking smog that plagues many Chinese cities. “Along with China’s accelerating fuel upgrades, the problem of having the lower-grade fuel quit the market has become increasingly prominent,” the agency said. “Especially as general diesel is being sold to automobiles illegally, marketing of (higher quality) automotive diesel has been adversely affected.” The agency requires all service stations to mark clearly the names and quality of their fuels to help motorists select the grades they want and to allow authorities to supervise fuel quality, the NDRC said. By January 2017, “national five” will cover the whole country, it said, in line
Growth in eurozone private sector picks up slightly
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with an announcement last April that moved the roll-out up by one year. Refiners have started boosting output of cleaner fuels, and also raised imports of diesel to 145,000 tonnes in January as recorded by customs data, despite an overall domestic surplus that has turned China into a leading exporter of the fuel.
Traders said the rare imports, which were about 20 percent of the diesel China exported last month, were driven in part by the need to meet the cleaner fuel standards. China, the world’s l a r g es t f u e l u s e r a f t e r the United States, has more than 90,000 petrol stations. Nearly 60 percent
of them are owned or run by dominant state refiners Sinopec Corp and PetroChina, the rest by smaller state oil companies like Sinochem Corp and independents. The big state refiners say they have spent billions of dollars upgrading facilities to make the cleaner fuels. Reuters
Mainland’s equities plunge most in a month
Japan’s fair trade watchdog plans guidelines for bailouts
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rowth of loans to the private sector in the euro area picked up fractionally in January, European Central Bank data showed yesterday. For the ECB, the statistics are a key indicator of economic health of the single currency area, as borrowing is a main financing source for corporate investment which in turn should boost the eurozone’s currently weak economy. In January, approved loans rose 0.8 percent from a year ago, fractionally faster than growth of 0.7 percent in December, an ECB statement said. When certain strictly financial transactions are stripped out from the loans data, the trend remained the same -- with credit accorded to households and companies up 0.6 percent in January, compared with 0.4 percent in December. The ECB has launched a raft of policy measures to get credit flowing, most significantly a massive programme to buy more than one trillion euros (US$1.1 trillion) worth of public sector bonds to pump liquidity into the system. The ECB already extended that programme by a further six months in a bid to drive eurozone inflation higher.
hina’s stocks tumbled the most in a month as surging money-market rates signalled tighter liquidity and the offshore yuan declined for a fifth day. The Shanghai Composite Index sank 6.4 percent at the close, with about 70 stocks falling for each that rose. Industrial and technology companies led losses. The overnight money rate, a gauge of liquidity in the financial system, climbed the most since February 6. The plunge in equities underscores the challenge for China’s policy makers as they seek to project an image of stability in the nation’s financial markets as the economy slows. Finance chiefs and central bankers from the Group of 20 will meet in Shanghai on Friday, while the annual meeting of the legislature begins in Beijing next week. The return of volatility is also a test for China’s new top securities regulator, who took over on the weekend after his predecessor was removed amid criticism of mismanagement. “The market is in a quite fragile state when everyone scrambles for an exit,” said Central China Securities Co.’s Shanghai-based strategist Zhang Gang, who accurately predicted last year’s June selloff. “None of the news in the market is sufficient enough to trigger such a slump.”
AFP
Bloomberg News
apan’s fair trade watchdog is working on guidelines to prevent damage to competition when state-backed funds invest in troubled firms, its chairman said, adding that competition was harmed when Japan Airlines Co was bailed out six years ago. Japan has several state-backed funds that have been instrumental in propping up struggling companies with Japan Airlines gaining one of the biggest bailouts, receiving nearly 1 trillion yen (US$8.9 billion) in state-backed support. In recent years, the Innovation Network Corporation of Japan fund has been active, rescuing chipmaker Renesas Electronics in 2013 and helping create Japan Display Inc in 2011 from three conglomerates’ screen units. Japan Fair Trade Commission Chairman Kazuyuki Sugimoto said that while the planned guidelines would not be legally enforceable, they could play a part in preventing further unfairness. “Our organisation believes that the government bailout of JAL harmed fair competition,” he said in an interview. “We can not rule out the possibility that a similar bailout will happen in the future.” After the government bailout, Japan Airlines has since rebounded, booking record profits. Reuters