MOP 6.00 Closing editor: Joanne Kuai
Reform of state-owned companies key for China’s future Pages 8&9
Year IV
Number 991 Tuesday March 1, 2016
Publisher: Paulo A. Azevedo
Hutchison’s SARs revenues surge 46 pct in 2015 Page 4
Guangdong industry sees slowdown following CNY Page 10
Package tour visitor numbers plummet in January MSAR welcomed a total of 581,000 package tourists in the first month of the year. Down 31.3 pct y-o-y. Those from the Mainland registered a sharp decrease of 33.2 pct y-o-y. According to official data released by DSEC. Occupancy in local hotels dipped 3.2 percentage points to 76.5 pct from one year ago Page 2
Banking
BOC posts record profits Bank of China Macau is on a roll. Posting a record MOP5.2 bln profit in 2015. Followed by ICBC Macau’s MOP2.01 bln. BOC’s performance outpaced that of the whole of the casino industry with the exception of Sands China
Pages 6&7
Painful overcapacity China will lay off about 1.8 million steel and coal workers. Due to President Xi Jinping’s efforts to cut the country’s industrial overcapacity. About 1.3 million workers in the coal industry and 500,000 in steel will be cut
Page 8
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Home prices plunge in January
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Real-time data A deal is signed. UMAC Factory of Business Administration and Thomson Reuters have announced the Thomson Reuters Trading Room on the campus. The trading room can provide Thomson Reuters Eikon terminal access for up to 80 users. And is equipped with analytics tools, and real-time data
Page 4
Average housing prices continue heading south. Down 14.8 pct y-o-y for January. A residential unit costs an average MOP73,066 per square metre. Total transactions are down on the month but up on the year
Page 3
%Day
New World Developme
+1.56
China Resources Beer H
+1.45
BOC Hong Kong Holdin
+1.00
Link REIT
+0.92
Hang Lung Properties L
+0.89
China Resources Powe
-3.38
PetroChina Co Ltd
-3.48
Tingyi Cayman Islands
-3.68
China Merchants Holdi
-4.01
Belle International Ho
-4.89
Source: Bloomberg
I SSN 2226-8294
Revitalization underway Patane Library. the Maritime Workshops. No. 80 Rua das Estalagens. The three revitalization projects are expected to be completed this year and open to the public
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2 | Business Daily
March 1, 2016
Macau
Package tour visitors drop 31.2 per cent in January In addition, occupancy in local hotels was down by 3.2 percentage points to 76.5 per cent from one year ago Kam Leong
kamleong@macaubusinessdaily.com
Visa-upon-arrival in Oman The government of the Macau Special Administrative Region (SAR) has received confirmation from the Embassy of the Sultanate of Oman in Beijing that Macau SAR passport holders can obtain a visa upon arrival in the Sultanate of Oman for a maximum stay of 30 days. At present, a total of 121 countries and territories have agreed to grant visa-free or visa-upon-arrival access to Macau SAR passport holders, while 12 countries have agreed to grant visa-free access or visa-upon-arrival access to Macau SAR travel permit holders.
WiFi Go speed upgrades to 2Mbps The government is going to improve the free public wireless Internet Service WiFi Go by upgrading the upload speed to 2Mbps from the current 512Kbps, while the download speed remains at 3Mbps, according to a statement issued by the Telecommunications Regulation Bureau (DSRT) yesterday. In addition, the service time of some hotspots will be prolonged to 24 hours a day at government Hospital S. Januário and Island Emergency Station. Macau’s wireless broadband system, built in 2010 with government funds, reached a total of more than 26 million Internet connections as at the end of January with 183 access points, said DSRT.
José Tavares inaugurated as IACM head
T
he Special Administrative Region welcomed a total of 581,000 visitors on package tours during the first month of the year, which is down by 31.2 per cent year-on-year, due to those from the Mainland registered a sharp decrease of 33.2 per cent year-on-year, according to official data released yesterday by the Statistics and Census Service (DSEC). In January, package tour visitors from Mainland China totalled only some 455,000, which significantly declined by some 225,600 compared to 680,200 during the same month of last year. Moreover, there were fewer Hong Kong and Taiwan tourists visiting the city under package tours during the month, which represents a year-on-year drop of 29.7 per cent and 29.1 per cent to 16,000 and 33,000, respectively. Package tour visitors from South Korea also fell by some 18.1 per cent to 32,000 from one year ago, whilst those from Japan soared by 27.1 per cent year-on-year to 14,000 during the month.
Outbound tourists up
On the other hand, a total of 118,000 local residents had travelled outside the territory by using services of travel agencies, which is up by 5.3 per cent year-on-year. Those travelling on package tours had even surged by 27.5 per cent year-on-year to 52,000. According to DSEC, the most popular destination for local
outbound tourists on package tours was Mainland China - which received 78.1 per cent of the total outbound residents in the month. South Korea and Hong Kong were the second and third hottest destination for outbound tourists under package tours.
Average hotel occupancy reaches 76.5 pct
Meanwhile, the official data indicated that there were 106 hotels and guesthouses as at the end of January, offering a total of 32,000 guest rooms, which is up by 16 per cent year-on-year. DSEC said the average occupancy rate for these hotels declined by 3.2 percentage points year-on-year to 76.5 per cent, despite four-star hotels recorded an increase year-on-year of 1.2 percentage points in occupancy to 78.9 per cent. Occupancy in the city’s five-star hotels declined by 3.5 percentage points year-on-year to 77.4 per cent as well, in addition to that in three-star hotels dropping by 5.5 percentage points to 74.3 per cent for the month. Nevertheless, official data showed that a total of 895,000 guests checked into hotels and guesthouses, which is up by 11.9 per cent year-on-year. Hotel guests from Mainland China posted a year-on-year increase of 8.3 per cent to 580,000, while those from South Korea, Japan, Taiwan and Hong Kong all recorded double-digit growth, according to DSEC.
Hotel room rates averagely down by 17.8 pct Apart from the decrease in occupancy, local hotels saw their room rates post a year-on-year fall of 17.8 per cent to MOP1,659 (US$207) per night for January, the latest data released by the Macao Government Tourist Office (MGTO) reveals. The data, provided by Macau Hotel Association that has a total of 40 hotel members, indicated that room rates of local four-star hotel experienced the most significant decline in the month. A night at a four-star hotel cost some MOP801, which dived by 23 per cent year-onyear from MOP1,039.8 one year ago. In addition, room rates at five-star hotels registered a year-on-year decline of 15.8 per cent, amounting to MOP1,708 per night from MOP2,028 per night one year ago, while three-star hotels’ room rates fell by 18.3 per cent year-on-year to MOP923 per night compared to MOP1,129.5 per night during the same period of last year.
The inauguration ceremony of the new President of the Management Committee of the Civic and Municipal Affairs Bureau (IACM) José Maria da Fonseca Tavares was held yesterday at Government Headquarters. The ceremony was officiated by the Secretary for Administration and Justice, Sonia Chan Hoi Fan, and witnessed by other officials such as new Director-general of the Macau Customs Service Alex Vong Iao Lek. José Tavares said he is honoured to take up the new position and that it was sentimental for him to rejoin the first department he first served when entering public office 32 years ago. He vows to improve food safety, beautifying the city and improving municipal service quality. Prior to the new post, he served as the President of the Sports Bureau.
Academic Research Grants invite application Applications for the Academic Research Grants, launched by the Cultural Affairs Bureau (IC, from the Portuguese acronym), are invited from 1 March to 31 May, 2016. Academic Research Grants seek to encourage original academic research on the culture of Macao and on the cultural exchange between Macao, Mainland China and other countries. The grants, in the amount of MOP280,000 and MOP250,000 will be awarded according to the applicant’s academic background and to the content of the project, and are subject to IC’s decision per the proposal of the Selection Panel.
Business Daily | 3
March 1, 2016
Macau
Home prices plunge 15 pct year‑on-year in January There were a total of 402 housing transactions in the month – which is higher than the same period last year but fewer than the month before Kam Leong
kamleong@macaubusinessdaily.com
M
acau’s average housing prices continued south, down 14.8 per cent year-onyear for January, or 6.97 per cent month-on-month, the latest data released yesterday by the Financial Services Bureau (DSF) shows. In the month, a residential unit in the city cost an average MOP73,066 per square metre. The local residential real estate market had a total of 402 transactions, down 19.8 per cent from 501 transactions in December 2015. The number, however, picked up 19.6 per cent compared to 336 transactions one year ago. Home prices on the Peninsula were the cheapest in the month, fetching some MOP68,598 per square metre. The amount decreased
Coloane homes most expensive
Housing prices in Coloane remained the most expensive compared to Macau and Taipa despite the prices plummeting 23.8 per cent year-on-year to MOP92,747 per square metre. The island saw a total of 32 transactions in the month, which is more than a double from last year’s 15 and up 39 from December 2015.
GDI: Local border for Delta bridge to meet city’s standards
C
Uncompleted unit transactions fall
In terms of unit type, prices for uncompleted residential units were more expensive than completed ones in general. In January, an uncompleted housing unit cost MOP95,342 per square metre, down 23 per cent year-on-year, or 8.4 per cent month-on-month. Although prices were cheaper, the number of transactions on such units did not consequently soar. Official data indicates that the number of transactions on uncompleted flats declined by four per cent year-on-year to 48. In addition, the number represents a plunge of 27.3 per cent month-on-month. Similarly, home prices for completed units dipped 10.8 per cent year-on-year, or 5.38 per cent month-on-month, to MOP69,507 per square metre. Transactions for these units totalled 354 in January, which is a jump of 23.7 per cent year-on-year but down 18.6 per cent month-onmonth.
by 14.7 per cent year-on-year from MOP80,415, or down 8.7 per cent month-on-month from MOP75,152. In fact, nearly 75 per cent of all housing transactions, or 301 transactions, were made on home units on the Peninsula, which jumped by 8.7 per cent year-on-year but dived by 19.7 per cent month-on-month.
hief of the Infrastructure Development Office (GDI), Chau Vai Man, claimed that the infrastructure of the Macau Border for the Hong Kong-ZhuhaiMacau Bridge would be completed based on the city’s construction standards, despite the project now being supervised by the Mainland authorities. Replying to legislator Si Ka Lon’s written enquiry, the GDI official said that the project’s design, supervision and quality controls will all be conducted by local companies, adding the SAR Government would strictly control project investment, construction quality and safety in tandem with the Zhuhai authorities and construction unit. In his interpellation the legislative member queried why the city’s government had requested the Mainland to construct the local
Meanwhile, Taipa registered a year-on-year drop of 16.7 per cent in housing prices in January, amounting to MOP78,575 per square metre. Total housing transactions in Taipa totalled 69 in the period, falling 20.7 per cent month-onmonth. Nevertheless, compared to 44 transactions one year ago, the number represents a leap of 56.8 per cent.
project, expressing his worries that Macau’s authorities could not effectively supervise the project. But Mr. Chau responded that granting the project to the Mainland parties was because the SAR Government wanted to guarantee the project would be finished in line with the completion of the Delta bridge through highly efficient organisation, advanced techniques and sufficient natural resources. Last December, the SAR Government signed a memorandum with the Zhuhai authorities enabling the Mainland Chinese party to build the project for the Special Administrative Region. The new border checkpoint for the city will occupy 76.7 hectares and 34 per cent of the artificial island - which will also accommodate the Zhuhai border for the cross-region bridge. K.L.
4 | Business Daily
March 1, 2016
Macau
UMAC launches Thomson Reuters Trading Room with real-time data The University of Macau commences the opening ceremony of Thomson Reuters Trading Room as a highlight of its 6th FBA Business Week Bami Lio
bami.lio@macaubusinessdaily.com
He sees the trading room helpful in a practical way, ‘‘More likely, when they get to financial situation, they can use the product and are comfortable with the product. We want to equip the students with the best they can have.’’ ‘‘As we look at the evolution of financial market, we are certainly right in the heart of financial market, we work with banks, regulators, government, and central banks and universities, we want to make sure the students get access to the best technology, the best data and best information, so that they are learning, not using a power-point slide. It is not theoretically, it is real. We put theory into practice.’’ After the ceremony, Mirfin also presented a seminar on ‘The Findustrial Revolution’. He is an expertise with broad leadership experience in Europe and Asia and led also PayPal and American Express.
Financial laboratory
James Mirfin (second left), Thomson Reuters Managing Director, Financial & Risk, North Asia
T
he University of Macau’s (UMAC) Faculty of Business Administration (FBA) and Thomson Reuters announced the launch of the Thomson Reuters Trading Room, at a special opening ceremony held yesterday at the university. The trading room is aimed to facilitate the faculty’s various teaching and research activities. The new trading room is equipped with Thomson Reuters Eikon terminal access, the same system and data that
bankers and financial professions are using in reality. 80 users can log with different accounts, allowing them to use the trading room simultaneously. James Mirfin, managing director of Thomson Reuters in North Asia explained to Business Daily that the real time data is the same as what other customers use in the banks and will better prepare the students. “Not many students around the world have the benefits. We want to provide to our customers with the
trading room with the same data access our customers have, because these are the people who may use it in the future. Our aim is to get people familiar with the product,” said Mr. Mirfin.
Theory into practice
Mr. Mirfin also mentioned the long-term parnetship between Thomson Reuters and the University of Macau that ‘‘we have relationship with the university for about five years, starting with a product in the library doing research.’’
The university sees the trading room facility helpful for students’ employment opportunities. ‘‘It is like a laboratory when we study physics and chemistry in science, the trading room is a lab for majors like finance and accounting, and even communications because there is a great data base,’’ said Prof. Jacky So, Dean, Faculty of Business Administration, UM. ‘’One university in Hong Kong also has this kind of facility but not as in advance, so we are already good in competition.’’ Prof. Jacky So also explained that students can download data right after courses and directly from the system for analysis, which should help students understand the topics in depth. In addition to educating students, the trading room is regarded as also a continue aid to even the general public, the faculty may provide courses to share knowledge in this aspect. ‘‘Nowadays, the Hong Kong government and the Beijing government emphasize financial technology to be very important to stimulate economy, our trading room can help our next generations in this main direction.’’ Prof. Jacky So added.
Hutchison’s SARs revenues surge 46 pct in 2015
H
utchison Telecommunications Hong Kong Holdings Ltd saw revenues generated from its mobile business in Hong Kong and Macau soar by 46 per cent year-on-year to HK$18.5 billion (US$2.3 billion) for last year, according to its filing with Hong Kong Stock Exchange yesterday. For the whole year of 2015, the Hong Konglisted telecommunications
operator generated a profit (EBITDA) of HK$1.64 billion from mobile business in the two Special Administrative Regions, which is a jump of 9 per cent compared to the same period of last year. External customers in Hong Kong brought the group revenues of some HK$20.9 billion, which increased by 34 per cent year-on-year from HK$15.6 billion. In addition,
revenues from external customers in Macau soared by 60.5 per cent year-on-year to HK$1.14 billion. According to the filing, the company was serving a total of three million customers in Hong Kong and Macau as last year-end, of which nearly half were post-paid customers. Meanwhile, total net profit of the telecommunication operator totalled HK$915 million for 2015, which is
Corporate Global comedy star at Studio City Having set attendance records around the world and completing one of the biggest comedy tours ever with his Notorious World Tour in 2012, global comedy star Russell Peters, Studio City and Live Nation Lushington presented Russell Peters’ first ever visit to Macau with his new ALMOST FAMOUS WORLD TOUR on February 26 at the acclaimed
Hollywood-inspired, cinematicallythemed entertainment and leisure destination Studio City. The show was the first comedic performance at Studio City Event Centre (SCEC), which has already seen the likes of Queen of Pop Madonna, Asia’s King of Dance Aaron Kwok, a series of top Taiwan artistes, and Cantonese crooner Andy Hui.
a year-on-year increase of 10 per cent from HK$833 million in 2014. Moreover, total revenues earned from the Group surged by 35 per cent year-on-year to HK$22 billion. However, the operator’s fixed-line business in Hong Kong posted a year-onyear decrease of 3 per cent in revenues, amounting to HK$3.97 billion compared to HK$4.1 billion one year ago.
Hutchison explained that the drop was due to a five-percent reduction in revenue in the international and local carrier market, as well as a sevenpercent fall in the residential market. Profit (EBITDA) of the company’s fixed-line service sector thus declined by 3 per cent year-on-year to HK$1.27 billion for 2015, the operator said in the filing. K.L.
Business Daily | 5
March 1, 2016
Macau IPIM received 561 applications for temporary residency in 2015 In 2015, a total of 482 applications for temporary residency for managerial personnel, technical and professional qualification holders were received by the Macao Trade and Investment Promotion Institute (IPIM), which represents an increase of 46 compared with the previous year. IPIM indicated in a statement issued yesterday that it also received 79 applications for major investment and major investment plans, one less compared with the 2014. The two categories represent 85.92 per cent and 14.08 per cent of the total of 561 new applications in 2015. Approved cases for managerial personnel, technical and professional qualification holders amounted to 81, a decrease of 196 compared with last year; approved applications for major investment and major investment plans totalled 7, a decrease of 38 compared with last year. IPIM added that in accordance with the Administrative Regulation No. 7/2007, temporary residency applications for investment in real estate have been suspended since 4 April 2007. Over 4,000 cases were registered before the Administrative Regulation came into effect, all cases under temporary residency applications for investment in real estate were all processed by 17 July 2015.
Cultural heritage revitalization underway Cultural Affairs Bureau President said Chong Sai Pharmacy renovation is expected to cost MOP10 mln, and ready open to the public in the fourth quarter Annie Lao
annie.lao@macaubusinessdaily.com
S
ince the “Cultural Heritage Protection Law” took effect, a public consultation survey on the “Historic Centre of Macau’s Protection and Management Plan” has been launched to enhance the protection of value of heritage, which focuses on immovable and intangible cultural heritage. In addition to the “Classification Procedure of the 1st Group of Immovable Heritage in Macau”, reinforces the cultural heritage inspection, promotion and education for the attraction of the “Historic Centre of Macau” are among Cultural Affairs Bureau’s (IC) main tasks this year. Three revitalization projects include Patane Library, the Maritime Workshops, No. 80 of Rua das Estalagens, which is also known as “Chong Sai Pharmacy” the ChineseWestern Dispensary set up by he Founding Father of the Republic of China, Dr. Sun Yat-sen , are expected to be finished by this year and open for public. “No. 80 of Rua das Estalagens project estimates to costs about MOP10 million and to be completed in the fourth quarter of 2016,” the head of the Cultural Heritage Department, Deland Leong Wai Man told reporters on the sidelines of IC’s media Spring luncheon yesterday. Other 15 restorations projects will take place in near future, including the St. Joseph's Seminary and Church,
Rua da Felicidade and Moosa & CIA Lda. “The cultural and creative industries are an important component of the establishment of a diversified society and economy,” said the President of the Cultural Affairs Bureau, Ung Vai Meng.
New support program
IC will launch the Support Program for the Productions of Original Animation Short Films for the first time this year. Such program is still at a planning stage with more information to be released soon. “It is to diversify the industry of Macau, especially to support the youth, and to provide them opportunities for creative productions, with the main focus on animation,” Mr. Ung said without disclosing relevant budget. “IC had previously launched the Subsidy Program for the Production of Original Song Albums, the Subsidy Program for Fashion Design on Sample Making and the Support Program for the Production of Feature Films, which had a positive outcome,” said Mr. Ung. He added added that IC will continue to be an organizer of Guangdong-Hong Kong-Macau Film Production Investment and Trade Fair and will also join Macau International Trade and Investment Fair (MIF) to set up a Macau Creative Pavilion which assists industries to promote
their own brands and demonstrate the characteristics of cultural and creativity of Macau.
Culture forces in Macau
The President of the Cultural Affairs Bureau believes that culture is the major force in transforming Macau into a World Tourism and Leisure Centre. Mr. Ung indicated that cultural events held last year would continue in this year to make Macau as valuable touristic and cultural resources. These events comprise Patane Night Watch House, Macau International Music Festival, Macau Arts Festival, Parade through Macau, Latin City, Lusofonia Festival and Macau City Fringe Festival. Moreover, the bureau head said that the recent integration of Macau’s cultural resources, as well as the centralization of all relevant facilities and services will benefit the government’s work. As this adjusted organizational structure that all matters fall under one management will enhance the co-operation among government debarments and other organizations and eventually improve the cultural activities. “With the development of the city, transparency in information is essential when working with different departments through communication and trust,” said Mr. Ung.
Consumer Council starts annual assessment of ‘Certified Shops’ To ensure honest business practice and quality services of ‘Certified Shops’, Consumer Council carries out continuous inspection on its ‘Adherents’ and ‘Certified Shops’ with diversified criteria. The Council kicks off its 2016 assessment with on-site evaluation in March, almost 1,500 shops will be graded according to over 30 grading principles, and shops being evaluated are called on to cooperate with the Council. Consumer Council said in a statement issued yesterday that the annual assessment on ‘Certified Shops’ is carried out by the Council based on a set of scientific, systematic, and objective assessment mechanism, assessment criteria include on-site evaluation, mystery shoppers, and complaint records from other government departments, etc.. The annual assessment is conducted throughout the year and the final results are announced at the end of the year.
Casino workers labour unions meet with Lionel Leong Several casino workers labour unions under the Macau Federation of Trade Unions met yesterday with the Secretary for Economy and Finance, Lionel Leong Vai Tac, as reported by local public broadcaster TDM Chinese Radio. Secretary General of the Macau Gaming Enterprises Staff Association of Macau Federation of Trade Unions, Choi Kam Fu, told reporters after the closed-door meeting that they’ve urged the government to appeal to the gaming operators to give pay raise and tend to other welfare such as extending insurance scheme to one hour before and after work. Mr. Choi indicated that despite the gaming downturn, the casino workers hope the welfare would not degenerate and the gaming operators would pay attention to the morale. Mr. Choi said that Secretary Lionel Leong has promised them to communicate with gaming operators and reflect relevant issues.
6 | Business Daily
March 1, 2016
Macau
Bank of China posts record profit to dominate sector Besides the MOP5.20 billion profit it generated, BOC is also the major shareholder of the third most profitable bank in Macau, Tai Fung Bank, which generated earnings of MOP1.06 billion João Santos Filipe
jsfilipe@macaubusinessdaily.com
B
ank of China (BOC) was the most profitable institution in the territory among its peers posting a record MOP5.20 billion profit in 2015, according to the
calculations of Business Daily. The performance of the Mainland stateowned bank in the territory is so positive that it even outperformed all casino operators except Sands China.
Ye Yixin brings Midas touch to BOC Macau Last year, Ye Yixin retired from his position as Manager of the Macau Branch of Bank of China. However, during the nine years he spent leading the local unit of the bank the manager enjoyed continuous success, which has translated into the financial results. In 2005, before Mr. Ye arrived in Macau to lead BOC, the profit of the local branch stood at MOP1.33 billion. At the time Zhang Hong-Yi was unit manager. In nine years, the former manager of
During 2015, the Macau banking sector posted profits of MOP11.7 billion, which represented an increase of 21.1 per cent year-on-year from around MOP9.7 billion. While last year the Bank of China’s growth was outperformed by the overall market, the institution still managed to record a 13.5 per cent growth year-on-year from MOP4.58 billion, generating alone some 44.4
per cent of all the profits of the sector, according to our publication calculations. The second best performing bank in the territory was another Mainland bank, the Macau arm of the Industrial and Commercial Bank of China (ICBC Macau). ICBC Macau generated profits of MOP2.01 billion for the full year, which was an increase of 18.2 per cent year-on-year from MOP1.70 billion.
Top 10 Banks in Macau by profit in 2015 BOC made the profit of the bank jump 290.9 per cent to MOP5.20 billion. In his departure speech in September, Mr. Ye praised the teamwork of the company, stressing that the results were a consequence of “the hard work of all members who worked together with one heart and one mind”. Wang Shaojun, the former manager of the Shenzhen Branch of Bank of China, replaced the retiring Mr. Ye in September.
Place
Bank
Profit (MOP Billion)
1
Bank of China
5.20
2
ICBC Macau
2.01
3
Tai Fung Bank
1.06
4
Luso International Banking
0.66
5
Banco Nacional Ultramarino
0.58
6
OCBC Wing Hang Bank
0.38
7
HSBC Bank
0.26
8
Bank of Communications
0.22
9
Banco Comercial Português
0.20
10
BCM
0.20
Source: Business Daily
Business Daily | 7
March 1, 2016
Macau ICBC Macau grabbed 17.2 per cent of the earnings of the banking sector in the territory. In terms of profit, the bestplaced Macau-based bank was Tai Fung Bank, of which the majority shareholder is the Bank of China, with 50.31 per cent equity in the institution. The bank founded by leading local businessman Ho Yin ranked third, generating a profit of MOP1.06 billion. The year of 2015 was very positive for the bank founded by the family of the former Chief Executive of Macau, Edmund Ho, which improved its yearly profit by 37.7 per cent from MOP0.77 billion in 2014. Tai Fung was responsible for 9.1 per cent of the total sector’s profit. In 2015, BOC, ICBC and Tai Fung were the only banks to generate profits in the territory of over MOP1 billion. The three institutions together accounted for 70.7 per cent of the total sector’s profits or MOP8.3 billion.
BNU increases profit by 31.3 per cent
After the billion-profit banks, the best-placed financial institution in the territory was Luso International Bank, which generated a profit of MOP663.8 million. This represents
an increase of 19.9 per cent yearon-year from the MOP553.6 million achieved in 2014. The subsidiary of the Mainland Xiamen International Bank took fourth place in the profit ranking, ahead of Macau-based Banco Nacional Ultramarino (BNU). In 2015, BNU, a subsidiary of the Portuguese state-owned Caixa Geral de Depósitos, recorded a profit of MOP582.2 million, which represented an increase of 31.3 per cent year-onyear from MOP443.3 million. The bank managed by Pedro Cardoso, which is planning in 2017 to open its first branch in Hengqin, grabbed around 4.97 per cent of the sector’s profits. Still regarding the banks incorporated in Macau, according to our calculations, OCBC Wing Hang Bank was the sixth most profitable (MOP337.1 million), Banco Comercial de Macau (BCM) ranked tenth (MOP197.8 million), Novo Banco Ásia achieved 26th place (MOP4.77 million) followed by Macau Chinese Bank (MOP4.48 million). Delta Asia Bank was not included in the ranking because the balance sheet of the bank was not made available in the territory’s Official Gazette.
Bank of China outperforming most gaming operators In 2015, the profit of Bank of China outperformed all gaming operators but Sands China. To this reality is contributed the fact that the banking sector has been growing for the last two years at over 20 per cent, while the gaming industry in Macau has been shrinking. Regarding the gaming industry, Sands China is living a reality similar to the Bank of China and is clearly the strongest player in profit terms. The profit (MOP11.65 billion) of the company run
by Sheldon Adelson in Macau is almost as large as the whole profit of the local banking system (MOP11.70 billion). Notwithstanding comparison with the other players in Macau’s pillar industry, the profit of BOC is almost MOP1 billion greater than the second best performing gaming operator, Galaxy Entertainment. The other one-billion players in the banking sector, ICBC Macau (MOP2.01 billion) and Tai Fung Bank (MOP1.06 billion) outperformed Melco Crown Entertainment (MOP0.85 billion).
Profit of BOC compared with Gaming Operators Place
Operator/Bank
Net Profit in 2015 (MOP Billion)
1
Sands China
11.65
2
Bank of China
5.20
3
Galaxy Entertainment
4.29
4
MGM China
3.21
5
SJM Holdings
2.54
6
Wynn Macau
2.49*
7
Melco Crown
0.85
*Note: The net profit of Wynn Macau has not been announced yet. This amount is a reference calculated by Business Daily based on the interim and quarterly reports of the company for 2015
External trade slumped 16.5 pct y-o-y in Jan Total merchandise imports decreased by 18.5 pct y-o-y to MOP6.96 bln. While merchandise exports amounted to MOP973 mln, up 1.5 pct y-o-y
E
xternal merchandise trade reached MOP7.93 billion (US$990.6 million) in January 2016, down 16.5 per cent vis-a-vis MOP9.49 billion a year earlier, according to data released yesterday by the Statistics and Census Service (DSEC). DSEC data also indicated that total merchandise exported for January 2016 amounted to MOP973 million, up 1.5 per cent year-on-year. Total merchandise imports decreased 18.5 per cent yearon-year to MOP6.96 billion. The merchandise trade deficit amounted to MOP5.98 billion.
Electronic component exports double
The value of re-exports (MOP834 million) grew 8.4 per cent, while the value of domestic exports (MOP139 million) dropped by 26.2 per cent, with that of Tobacco (MOP27 million) falling by 49.9 per cent.
Exports of Non-textiles increased by 2.7 per cent year-on-year to MOP903 million, of which the value of Electronic Components (MOP85 million) soared 223.5 per cent and that of Diamonds & Diamond Jewellery (MOP84 million) rose 19.4 per cent. The value of Machines, Apparatus & Parts (MOP82 million) dropped by 47.5 per cent. Exports of Textiles & Garments totalled MOP70 million, down 11.4 per cent.
Imports of mobile phones halved
Analysed by destination, merchandise exports to Mainland China (MOP136 million) and Hong Kong (MOP634 million) increased by 8.9 per cent and 3.6 per cent year-on-year in January 2016, while exports to the EU (MOP17 million) and the USA (MOP11 million) plummeted 31.1 per cent and 35.7 per cent, respectively.
Source: DSEC
B y p l a ce o f o r i g i n , merchandise imports from Mainland China (MOP2.71 billion) and the EU (MOP1.63 billion) decreased 21.4 per cent and 15.4 per cent, respectively, year-on-year in January 2016.
Imports of Consumer Goods dropped by 8.6 per cent to MOP4.36 billion, with imports of Watches (MOP447 million) and Motor Cars & Motorcycles (MOP113 million) decreasing 31.3 per cent and 46.2 per cent, respectively.
Moreover, imports of Mobile Phones (MOP692 million), Fuels & lubricants (MOP434 million) and Construction Materials (MOP209 million) declined by 48.1 per cent, 30.6 per cent and 39.6 per cent, respectively.
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March 1, 2016
Greater China
President Xi tries to fix US$18 trillion worth of underperformance Industrial profits at state-owned enterprises have also fallen for 14 straight months
The last time the government overhauled the state-owned firms some 60,000 companies were closed and 40 million workers lost their jobs
A
bout three years ago, one of China’s richest men couldn’t believe he was offered a large plot of floor space in London along the River Thames for 900 pounds (US$1,260) a square meter, less than half one would pay in Beijing,
as long as he paid the deposit in cash within seven days. He did it in three. Today, in the Nine Elms area where billionaire Wang Jianlin’s Dalian Wanda Group Co. is developing a five-star hotel and a residential
skyscraper, the U.S. embassy is moving in and homebuilders are seeking to sell homes at about 14,350 pounds a square meter. Wang, who shared the anecdote with Oxford University students this month, credited his ability to pull off
that deal to something his business isn’t: a bloated Chinese stateowned enterprise (SOE) needing layers of approvals. The episode helps illustrate why President Xi Jinping is seeking to overhaul the US$18 trillion SOE sector to revive
Mainland expects to lay off 1.8 mln workers in coal, steel sectors The registered urban jobless rate published by the human resources and social security ministry was at 4.05 percent at the end of 2015
The economy faces relatively big downward pressures and some firms face difficulties in production and operation, which would lead to insufficient employment
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hina said yesterday it expects to lay off 1.8 million workers in the coal and steel sectors as part of efforts to reduce industrial overcapacity, but no timeframe was given. China has vowed to deal with excess capacity and eliminate hundreds of so-called “zombie enterprises” - lossmaking firms in struggling sectors that are being kept alive by local governments trying to avoid job losses. Yin Weimin, the minister for human
resources and social security, told a news conference that 1.3 million workers in the coal sector could lose jobs, plus 500,000 from the steel sector. It was the first time a senior government official has given a number for job losses as China deals with industrial overcapacity amid slowing growth. “This involves the resettlement of a total of 1.8 million workers. This task will be very difficult, but we are still very confident,” Yin said. For China’s stability-obsessed
Yin Weimin, China’s minister for human resources and social security
government, keeping a lid on unemployment and any possible unrest that may follow has been a top priority. The central government will allocate 100 billion yuan (US$15.27 billion) over two years to relocate workers laid
off as a result of China’s efforts to curb overcapacity, officials said last week. China’s vice finance minister Zhu Guangyao quoted Premier Li Keqiang as telling U.S. Treasury Secretary Jack Lew yesterday that the fund would mainly focus on the steel and coal sectors. “The economy faces relatively big downward pressures and some firms face difficulties in production and operation, which would lead to insufficient employment,” Yin said, adding that increasing graduates this year would also add pressure in the job market. Despite of economic downturn, there have been no reports of mass layoffs as occurred during the global financial crisis, with the survey-based jobless rate published by the National Bureau of Statistics staying at around 5.01 percent at the end of last year. The registered urban jobless rate published by the human resources and social security ministry was at 4.05 percent at the end of 2015. However, many economists believe the few official employment readings in China underestimate the number of jobless. Reuters
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March 1, 2016
Greater China an economy that’s growing at the slowest pace in a quarter century. “Decision making needs to be swift,” Wang, who vies with Alibaba Group Holding Ltd.’s Jack Ma for the top wealth ranking among China’s tycoons, said at the Oxford event. “At state-owned enterprises, many managers are afraid of taking responsibility, resulting in delays in decisions.” China announced last year it would kick off the process of overhauling state companies by categorizing them into commercial or public-service entities, a move that’s prompted many SOEs to seek discussions with regulators over how they should be classified, according to four people familiar with the matter. These talks are bound to heat up in Beijing this week at the National People’s Congress, the Chinese government’s biggest gathering of the year, according to three of the people. For China’s many SOEs -JPMorgan Chase & Co. has estimated there are more than 150,000 of them -- the stakes are high. Being branded as commercial could lead to higher salaries in some sectors and less government meddling but also deprive a company of cheap financing and state protection in the event business sours, as is increasingly the case in China’s slowing economy. “This categorization will impact SOEs and their business models because commercial companies will face higher pressures to make profits and public ones will need to focus on social benefits,” said Zhou Jingtong, Beijing-based director of macroeconomic research at Bank of China Ltd. “It will also influence investor decisions when they buy SOE bonds and shares because commercial companies will be riskier options.” The likelihood of government
support is already factored in for some SOEs’ debt ratings. For example, Standard & Poor’s rates Aluminium Corp. of China Ltd., China Railway Group Ltd., China General Nuclear Power Corp. and Citic Group Corp. as investmentgrade issuers although each would be rated junk purely based on their financials, according to a S&P report in January. The idea behind the dual categorization, announced in September, is for the government to control public-interest companies and turn the rest into more marketoriented firms by loosening oversight and making them accountable for their performance. Most SOEs will be categorized as commercial, the people familiar said. The government has given some guidelines on how it will decide. For example, to qualify as a noncommercial company, its business would need to serve the public and the government would control the entity’s core operations and prices of “necessary products and services.” While that makes companies such as China General Nuclear, which manages nuclear power stations, obvious candidates for being classified as public interest companies and carmaker Dongfeng Motor Corp. for being categorized as commercial, the choice becomes less clear for companies in industries such as oil and telecommunications. The government will give special exemptions to some SOEs that become categorized as commercial but have businesses of strategic national interests, according to the people. The State-owned Assets Supervision and Administration Commission, which oversees SOEs, didn’t respond to a faxed request to comment. Sinopharm Group Co., China’s biggest drug distributor, is among
CDB Leasing files for up to US$1 bln Hong Kong IPO Penetration of leasing in China reached 5.1 percent at the end of 2015
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hina Development Bank Financial Leasing Co Ltd, the leasing unit of China’s largest policy bank, filed for a Hong Kong initial public offering, joining a slew of financial services firms raising funds in the city to bolster their balance sheets. Thomson Reuters publication IFR previously reported the deal could raise about US$1 billion in the first half of 2016.
Trading hall in Hong Kong Stock Market
News of the IPO comes after the company reported a 4.7 percent drop in revenue to 8 billion yuan (US$1.22 billion) in the nine months through September. It said profits dipped to 840.8 million yuan from 1.18 billion yuan over the same period because of lower domestic interest rates. CDB Leasing said aircraft leasing accounted for 43 percent of revenue, followed by leasing of infrastructure
SOEs making preparations to be categorized as commercial and the company would benefit from further liberalization in the drug market, according to a person familiar with the matter. Asked to comment, Sinopharm said in an e-mail it’s still awaiting final approval from SASAC on its reform proposal to experiment with mixed ownership, which would help the distributor improve as a company. Though individual cases vary, SOEs as a whole are ripe for reform. While they generated profits of 2.3 trillion yuan (US$352 billion) in 2015 -- more than South Africa’s entire economy -- that’s still down 6.7 percent from a year earlier and those returns were only 1.9 percent of the 119.2 trillion yuan in assets they held, according SASAC figures. Industrial profits at SOEs have also fallen for 14 straight months, while the last time earnings declined in the private sector was more than three years ago. SOEs are also less adept than private companies in cutting debt, according to research at the Chinese University of Hong Kong. The last time the government overhauled its SOEs, when thenPremier Zhu Rongji spearheaded the campaign in the 1990s, some 60,000 firms were closed and 40 million workers lost their jobs, according to government data. Still, the purge paved the way for China’s economy pick up and see years of 10-percentplus growth. “I’m more interested in companies that can survive and profit without government support,” said Liang Weihong, a Beijing-based fund manager at Huashang Fund Management Co. Ltd. “SOEs relying on government subsidies will face many more uncertainties compared with commercial ones.” Bloomberg News
such as toll roads, electric and power equipment. Leasing of shipping vessels, construction machinery, commercial property and manufacturing equipment made up the remainder of revenue. The company is betting on continued demand for aircraft and other types infrastructure in China. CDB Leasing owned 179 aircraft as of the end of September and had commitments for 181 more, most of them coming from previous orders for 130 aircraft worth a combined US$12.6 billion with Boeing Co and Airbus Group. The number of leased aircraft in China is forecast to rise 12.5 percent a year from 2014 to 2019, faster than the 9.3 percent a year from 2009 to 2014, according to research firm Frost & Sullivan’s estimates. Leasing overall has soared an average of 32 percent a year from 2009 to 2014 in China, making it the world’s largest leasing market with 2.63 trillion yuan (US$401.70 billion) of assets, Frost & Sullivan said. Penetration of leasing in China reached 5.1 percent at the end of 2015, paling in comparison to more developed markets including the United States with 23.2 percent and the UK with 28.6 percent. CDB Leasing would join companies including BOC Aviation, the aviation arm of Bank of China, brokers Everbright Securities Co Ltd and Orient Securities, and Postal Savings Bank of China, that are also looking to raise funds in Hong Kong to bolster their balance sheets in the face of tougher capital requirements. Reuters
Rural impoverished population down 14.42 mln China was successful in reducing rural poverty last year with the number of rural poor falling by 14.42 million to 55.75 million, official data showed yesterday. Over 17 million urban residents and 49 million rural people received minimum living allowances as of the end of 2015, the National Bureau of Statistics (NBS) said in a statement posted on its website. “Disparities between urban and rural areas continued to narrow last year. Urban incomes were 2.73 times higher than rural incomes, down 2 percentage points from one year earlier,” said Xu Xianchun, deputy director of the NBS.
Premier wants fiscal policies intensified
China’s Premier Li Keqing reiterated that the country will intensify fiscal policies during a meeting with U.S. Treasury Secretary Jack Lew yesterday. The premier also said China will properly handle unemployment issues, according to vice finance minister Zhu Guangyao, who gave a briefing on the meeting in Beijing. Lew reiterated that it was critical that China continue to move toward a more market-determined exchange rate in an orderly manner, and said that the U.S. supported China’s commitments and efforts in this area, according to a transcript of prepared remarks ahead of the meeting with Li, issued by the U.S. Treasury Department.
Domestic funds reduce equity allocations Chinese fund managers have cut suggested equity exposure for the coming three months to 71.9 percent from 75 percent a month earlier as companies face growing profit pressure from the economy’s protracted slowdown, a Reuters poll showed. Many managers also cited lingering worries about further depreciation in the yuan and the risk of continued sharp declines in China’s foreign exchange reserves as the central bank struggles to stabilise the currency. Recommended bond allocations were also cut, to 10.6 percent from 12.5 percent a month earlier.
National company explores Pakistan power market China’s state-owned Harbin Electric Corporation said it has signed a contract with Pakistan Siddiqsons Energy to build a coal-fired power plant. The new power station, with installed capacity of 350 MW, will be located near the Bin Qasim port in Karachi, Harbin Electric said in a statement. Construction will start in July and be completed in 31 months, the statement said. Harbin Electric has built about 30 percent of Pakistan’s power stations. It is China’s largest exporter of power units.
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March 1, 2016
Greater China
New Year hangover: Strains show in factory heartland The real challenge for China's leaders is whether the economy can create enough new jobs in sectors they are trying to encourage James Pomfret
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illions of migrant workers streaming back to China's industrial heartland after the long lunar New Year break are facing an uncertain future, as smaller factories in particular struggle to cope with anaemic orders and rising inventories. In the Pearl River Delta, the "world's workshop" in southern Guangdong province that accounts for around a quarter of China's exports, workers and business owners say production lines have been slower than usual to restart after the annual two-week holiday. At the Xicheng industrial park in Hengli, several factories lay gutted with broken machines strewn outside, while plots of land earmarked for industrial use were being used by villagers to grow vegetables, a sign of the weak demand for Chinese goods that is forcing business closures and putting pressure on wages. "Finding a factory with a good salary, that's what we want," said Luo Xianrong, an 18-year-old laid off by a factory in January, who was one of scores of migrants knocking on factory gates in the hunt for new work. "We have to be careful. Many factories aren't providing food and accommodation, and they're delaying wage payments," she said, as her four friends nodded in unison. "I don't want to be cheated." While global policymakers gathered in Shanghai for a G20 meeting at the weekend declared that "growth in key emerging markets remains strong", the slowdown in China - the motor of the world economy for the past decade - has unnerved investors and contributed to market turbulence at the start of 2016.
The plight of Luo and her friends underlines the dilemma for China's leaders - they want to shift the economy away from the lowend manufacturing that fuelled its rise, but they also need jobs for the consumers they hope will support its next phase. Labour activists also point to the risk of unrest, as industries consolidate and workers find their benefits squeezed.
Manufacturing contraction
China's manufacturing sector likely contracted for a seventh straight month in February, with the latest numbers due today. The official purchasing managers' index is expected to show the sector shrinking at its fastest pace since August 2012. Exports from Guangdong province - which has a bigger economy than Indonesia - are predicted to grow just 1 percent this year, according to a January government work report. Analysts say many of the smaller factories hit hardest by the slowdown catered more for domestic demand than the export market, another signal that the Chinese consumer is not picking up the slack as is needed to rebalance the economy. That is bad news for policymakers in Beijing, scrambling to stabilise swooning financial markets and with growth slowing to 6.9 percent last year, its weakest in a quarter of a century. Stanley Lau, who runs a watch factory, said uncertainty in Europe, including the refugee crisis and a possible exit of Britain from the European Union, could further sap consumer confidence there, and impact China's factories. "There will be certain numbers of factories that will have some changes, by
narrowing down the scale of the factories or moving to other places," said Lau. "We follow the market trend. If we won't receive sufficient orders by mid-year ... We'll have to reduce our workforce. But for now, we'd like to keep our workforce steady."
"Life and death"
While makeshift recruitment booths and signs advertising jobs remain a fairly common sight in the Pearl River Delta, the labour market is seen getting tighter in the coming months. "The life and death of enterprises ... is to be expected," said Xu Jianhua, the Communist Party Secretary of Dongguan, a major industrial city there, at a recent press conference. He said 39,000 enterprises had shut down in Dongguan last year, including around 500 foreign invested firms, though he stressed the number of new businesses registered in the same period had outnumbered those closing down. "The economic challenges will be more complex" in the year ahead, he added. The outlook appeared better for some larger factories with steady revenue streams, including electronics makers such as Foxlink, a subsidiary of Hon Hai, Apple's main contract manufacturer in China. "We've got these stalls in many factory towns now," said Wang Chunshun, a recruiter for Foxlink who'd pitched several plastic stools and a glossy recruitment poster on the pavement next to a highway and a large industrial estate. "Our company needs new workers, we've still got a lot of orders." Some workers interviewed in Dongguan factory towns suggested the chance of labour disputes or strikes was growing.
KEY POINTS Strains evident in China’s factory towns after annual break Small factories most under pressure, lay-offs seen Bigger factories still recruiting, but wages, benefits tight Feb factory survey out March 1, Europe demand seen weak "I heard from some friends, who didn't get paid by their boss, that the government did nothing to help them," said Zhou Huazhong, a worker at a motor factory in Dongguan, who was smoking a cigarette during a break. "The government is useless." The real challenge for China's leaders is whether the economy can create enough new jobs in sectors they are trying to encourage, such as biotechnology or robotics, to replace those lost lower down the chain. "Basically the employment situation is in a state of flux, factories are closing down," said Geoffrey Crothall of China Labour Bulletin, a labour rights advocacy and monitoring group. "Opportunities are coming up in new manufacturing areas but the question is, are these jobs sustainable? A lot of start-ups are failing and the jobs they're providing aren't often well-paid or offering decent work conditions." Reuters
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Asia
Japan’s factory output rises fastest in a year Analysts say any recovery in the current quarter will be modest because of weak demand both at home and abroad Tetsushi Kajimoto
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apan’s industrial output rose the most in a year in January, tentatively signalling a pick up in factory activity, but the outlook remains far from assured given global market jitters and weakening demand both at home and abroad. The 3.7 percent month-on-month gain compared with economists’ median estimate of a 3.3 percent gain in a Reuters poll, and followed a 1.7 percent drop in December, trade ministry data showed. It was the fastest gain since January 2015, led by production of cars, electronics parts and general-purpose machinery, but manufacturers see poor prospects for industrial output in the coming months. Retail sales fell 0.1 percent in January year-on-year and 1.1 percent month-on-month, following a contraction in fourth quarter gross domestic product, underscoring weakness in private consumption which accounts for about 60 percent of the economy. Policymakers will scrutinise coming data, including January household spending due today, for more clues to health of the economy.
“Expectations for additional monetary and fiscal policy action could rise if weakness in consumer spending and the broader economy persist,” said Yuta Egashira, economist at SMBC Nikko Securities. “The risk of two straight quarters of economic contraction cannot be ruled out,” he said, raising the possibility of Japan suffering a technical recession. Manufacturers surveyed by the ministry expect output to fall 5.2 percent in February and grow 3.1
percent in March. Based on these estimates, output would fall 0.3 percent over January-March from the prior quarter, a trade ministry official said. “Output is probably weaker than the headline figure showed.”
Booming foreign tourism
Yesterday’s indicators followed data out earlier this month showing exports fell the most in January since the 2009 global financial crisis, underscoring
the absence of a growth engine for Japan’s economy, the world’s third largest. A record number of foreign tourists in Japan has been a boost for retailers such as department stores as some of these visitors, Chinese in particular, have gone on a so-called “explosive buying” spree. Nevertheless, retail sales fell in January for a third straight month, suggesting mild winter weather and a cooling consumer mood with the rising costs of food and necessities more than offset gains from booming tourism. Japan’s economy contracted by an annualised 1.4 percent in OctoberDecember, more than expected, as private consumption and exports slumped. Analysts say any recovery in the current quarter will be modest because of weak demand both at home and abroad. The BOJ’s implementation of negative interest rates this month has not helped turn around sentiment, keeping alive speculation that the bank will ease policy again in coming months. Reuters
Australian data allows central bank room to wait and watch Analysts are looking for signs of stronger growth this year as the economy struggles in the face of a sharp downturn in mining investments Ian Chua
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nflation in Australia remained benign in February while demand for business credit grew at a healthy pace last month, a mix of data that offered hope for a pick-up in the economy and room for more cuts in interest rates in 2016 if needed. A private survey yesterday showed consumer prices fell back in February, unwinding most of the rise seen at the start of the year. The benign inflation outlook should reassure the Reserve Bank of Australia (RBA) that it can keep policy loose for longer. The survey from the Melbourne Institute showed consumer prices eased 0.2 percent in February, taking the annual pace down to 2.1 percent. A measure of underlying inflation pressure, the trimmed mean, was even lower at 1.7 percent, well below the RBA’s 2-3 percent target band. The RBA is considered almost certain to leave the cash rate at a record low 2.0
percent today but maintain the option to ease later if necessary. The central bank is likely to be heartened by an encouraging rise of 0.6 percent in business credit last month, following on from a 0.5 percent increase in January. “The sustained, albeit moderate, return to trend business credit growth does lay the foundations for some improvement in non-mining business investment,” said National Australia Bank economist Tapis Strickland. It is another indicator that suggests momentum in the non-mining economy continues into 2016, he said, adding the bank’s view is for the RBA to be on hold. Analysts are looking for signs of stronger growth this year as the economy struggles in the face of a sharp downturn in mining investments. Indeed, quarterly data yesterday suggested
the economy grew at a below-average pace late in 2015. Forth-quarter gross domestic product is due yesterday. Figures from the Bureau of Statistics showed inventories fell 0.4 percent, when a 0.2 percent increase was expected. Wages grew a modest 0.5 percent in the
quarter, while gross company profits fell by a more-thanexpected 2.8 percent. “Today’s company profits and wage and salary data suggest that nominal GDP could have grown by only 0.5 percent in Q4,” analysts at Citi wrote in a note to clients. “Together with the decline in business inventories, this
lowers our real GDP forecast slightly to 0.4 percent, which would yield steady annual growth at 2.5 percent.” The median forecast in a Reuters survey is for the economy to grow at a pedestrian 2.6 percent, down from the long-average of around 3.25 percent. Reuters
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Asia
India unveils budget to help rural poor, rein in deficit The spending package for the 2016/17 fiscal year from April 1 marks a radical shift from Prime Minister Narendra Modi’s initial focus on investing in infrastructure Rajesh Kumar Singh and Manoj Kumar
below the needs identified by finance ministry adviser Arvind Subramanian in his pre-budget report. “We stand solidly behind these banks,” Jaitley said. “Our public sector banks will be strong and well supported.” The news hit banking stocks in trading on the Mumbai stock exchange, although infrastructure firms rallied on Jaitley’s announcement that the government would allocate US$32 billion for infrastructure development in 2016/17. India would build 10,000 km of new national highways and upgrade another 50,000 km.
Budget for the poor
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ndia unveiled a budget for the poor yesterday, announcing new rural aid schemes and skimping on a bank bailout, in a strategy shift that seeks to boost Prime Minister Narendra Modi’s ruling party in coming state elections. Finance Minister Arun Jaitley’s spending plan sought to cast Modi as a leader who cares after the premier came under sustained opposition fire for being too close to business and spending too much time hobnobbing with foreign leaders. Presenting his third budget, Jaitley said the government wanted to spread the benefits of growth more widely among India’s 1.3 billion people, but gave an assurance that it could do so without increasing borrowing. “We have a shared responsibility to spend prudently and wisely for the people, especially for the poor and downtrodden,” the 63-year-old finance minister, who wore a powderblue jacket, told lawmakers. India holds several state elections this year, including in the farming state of West Bengal, with the country’s most populous state, Uttar Pradesh, going to the polls in 2017. A strong showing will be vital to
The spending package for the 2016/17 fiscal year from April 1 mapped out by Jaitley marked a shift from an earlier focus on investing in infrastructure that had tried to kick-start private-sector investment, which still remains weak. Jaitley described his three priorities as: strengthening India’s firewalls by ensuring macroeconomic stability and prudent fiscal management; driving growth through domestic demand; and reforms to boost economic opportunity.
Holding the line
Indian Finance Minister Arun Jaitley holds his briefcase with Union Budget documents as he leaves for the Parliament House to present the 2016-17 General Budget in New Delhi yesterday
Modi’s chances of a second term, with doubts still hanging over the impact of economic reforms undertaken since his government swept to power almost two years ago.
Importantly, Jaitley said he would stick to the government’s existing fiscal deficit target for the coming year, at 3.5 percent of gross domestic product, down from 3.9 percent in the fiscal year just ending. That news lifted government bonds and the rupee as market fears that Jaitley would backslide on the deficit were not borne out. Reflecting tough fiscal constraints, the government will set aside 250 billion rupees (US$3.6 billion) to recapitalise state banks. That is less than expected by markets and
Modi’s landslide election victory in 2014 raised hopes he would draw a line under India’s socialist past, cut welfare and reduce the government’s role in business. In its first two years in power, his government splurged on roads and railways at the expense of welfare programmes in the hope of creating economic stimulus. Modi’s gamble was that infrastructure investment would yield dividends for the poor and the rural communities. Four in 10 Indians rely directly on farming for their livelihoods, the government estimates. Rising rural distress after backto-back droughts and a recent heavy election defeat in a largely agricultural state have upset that calculus. It has also left Modi’s nationalist ruling party open to attacks by the opposition, who use a Hindi phrase to deride Modi for leading a “suit and boot” government that only works in the interest of the rich. Jaitley’s reeled off a list of US$16 billion in measures targeted at the countryside, including spending on a job creation scheme, farmers’ welfare and building of rural roads. Reuters
Thai factory output falls as external demand worsens Decline in output was led by lower production of autos, electronics, steel and apparel
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hailand’s industrial output fell more than expected in January and at the sharpest pace in more than a year, showing the trade-reliant economy continues to struggle amid weak global and domestic demand. Stubbornly weak exports and domestic spending have been a big drag on Southeast Asia’s secondlargest economy. The ruling junta has struggled to revive demand since seizing power in May 2014. The Industry Ministry said yesterday its manufacturing production index (MPI) in January contracted 3.3 percent from a year earlier
after December’s revised 1.4 percent gain. A Reuters poll predicted a 0.2 percent drop. Falling commodity prices and drought have also hit the farm sector. While government spending and tourism are picking up, some big public infrastructure projects have yet to get started. “The weak external environment is expected to remain as one of Thailand’s key drags to economic growth,” said Barnabas Gan, an economist at OCBC in Singapore. “The weak manufacturing print serves to reinforce this expectation, given that industrials react to the lower export prints.”
However, a recent pickup in consumption means Gan expects the Bank of Thailand to keep its interest rates unchanged at its next policy meeting in March. January’s decline in output
was led by lower production of autos, electronics, steel and apparel. Car production slipped 11.7 percent in January from a year earlier but car exports rose 1.4 percent.
The auto sector accounts for about 10 percent of gross domestic product. Thailand is a regional manufacturing and export hub for global automakers and major makers of hard drives. Factory output has been weak for more than two years. Industrial goods account for nearly 80 percent of total exports, which tumbled 8.9 percent in January from a year earlier, the fastest pace of decline in more than four years. Capacity utilisation in January rose slightly to 63.93 percent from 62.89 percent in December. Reuters
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March 1, 2016
Asia Little respite for plunging South Korean exports in February Industrial output in January is expected to have fallen by a median 0.6 percent from a month earlier
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he slump in South Korean exports is expected to show no sign of abating in February, despite an extra working day versus last year, a Reuters poll found yesterday. The median forecast from a survey of 15 analysts showed exports were seen likely to fall 15.5 percent in February from a year earlier. This would be slightly less severe than the 18.8 percent drop seen in January while extending the falling trend that started last year against a backdrop of weak global growth.
Imports were projected to fall 15.4 percent in February in annual terms, versus a 20.0 percent slide in January, the poll found. “Weak external demand is likely to have kept exports soft, despite the boost from one extra working day,” said Wai Ho Leong, economist at Barclays.
February this year has 20 working days, compared to 19 days in 2015. Industrial output in January is expected to have fallen by a median 0.6 percent from a month earlier, the same poll showed, compared to a 1.3 percent rise in December as weak exports hobbled manufacturing. Meanwhile, inflation likely picked up slightly in February to an annual 1.0 percent as harsh weather drove up fresh produce prices, the survey found. The spike in consumer spending that goes with the Lunar New Year holiday, which fell in early February this year, would have also contributed some price pressure, analysts said. The consumer price index rose 0.8 percent in January. Inflation on the whole was likely to be subdued for a while as global oil prices remained weak, respondents said. The trade data will be published on March 1, while industrial output and inflation data are due on March 2 and 3, respectively. Reuters
KEY POINTS Jan industrial output seen -0.6 pct s/adj m/m
Japanese fund managers trimmed overall stock allocations while increasing exposure to bonds in their model portfolios for February as risk aversion gripped global markets, a Reuters survey found yesterday. A survey of six Japan-based fund managers, conducted between February 15 and 19, showed respondents on average wanted to allocate 39 percent of their portfolios to equities in February, down from 42.3 percent in January. The S&P 500 fell to a two-year low and Japan’s Nikkei plumbed a 16-month trough earlier in February as concerns about the health of the global economy prompted a pullback from risk assets.
Singapore reports more visitors in 2015 Singapore welcomed 0.9 percent more international visitors in 2015, but tourism receipts fell for the first time since 2009 as an uncertain global economic outlook and weak currencies in some of the top markets kept a lid on spending. Preliminary estimates show 15.2 million people visited the city-state last year, the Singapore Tourism Board (STB) said in a statement. Tourism receipts fell 6.8 percent to S$22 billion (US$15.6 billion), hurt by fewer visitors for business travel and meetings, incentives, conventions and exhibition (BTMICE).
S. Korean department store sales rebound in January
Feb exports seen -15.5 pct y/y, imports -15.4 pct y/y Feb CPI seen +1.0 pct y/y vs +0.8 in Jan
Sales at South Korea’s department and discount stores rebounded in January thanks to spending spurred by the Lunar New Year holidays, government data showed yesterday. Combined sales at department stores run by Hyundai Department Store, Lotte Shopping and Shinsegae Co rose 9.0 percent on-year, finalised data from the Ministry of Trade, Industry and Energy showed. That marked a sharp bounce from a 5.7 percent decline in December and wasn’t far off the preliminary 9.6 percent gain estimated by the finance ministry earlier this month.
Indonesian government to back revisions to anti-graft law Parliament and police are widely perceived to be among the most corrupt institutions in Indonesia
Minimum wage rise in New Zeland The New Zealand government yesterday raised the minimum wage by NZ$50 cents (US$33 cents) to NZ$15.25 (US$10.03) an hour, an amount critics described as inadequate. The starting-out and training hourly minimum wages rates would also rise from April 1, remaining at 80 percent of the adult minimum wage, Workplace Relations and Safety Minister Michael Woodhouse said in a statement. The rise would directly benefit approximately 152,700 workers and will increase wages throughout the economy by NZ$75 million (US$49.35 million) per year.
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ndonesia’s government will back controversial revisions to the law governing its top anti-graft agency, a senior cabinet minister said in a statement yesterday. Lawmakers in parliament have been in discussions to review the authority of the popular Corruption Eradication Commission (KPK), proposing revisions that critics say will leave the agency unable to effectively fight endemic graft in Southeast Asia’s biggest economy. “The government will agree to the revisions as long as they can be shown to strengthen the KPK, and not weaken it,” said chief security affairs minister Luhut Pandjaitan. Criticism from anti-corruption activists and the KPK itself last week prompted President Joko Widodo to ask parliament to suspend its discussions. Among parliament’s proposals, which the government backs, are the limiting of the KPK’s powers to wiretap suspects without a warrant and setting up a watchdog for the KPK. “All this time, the wiretapping has been done without any coordination or clear accountability even within the KPK,” Pandjaitan said, adding the
Japan fund managers trim allocations
Myanmar to build international fuel jetty new law should call for the agency to set up a standard operating procedure to approve wiretaps. The government agrees with the KPK’s need to hire independent investigators, Pandjaitan said, while parliament has sought to limit its pool to just the police and attorney general’s office. The new chief of the KPK, Agus Rahardjo, has threatened to resign if the revisions proposed by parliament are enacted, saying they will make
it impossible for the agency to make arrests. The KPK suffered huge setbacks last year when a bitter rivalry with police prompted the arrests of three key KPK personnel and several cases ground to a halt. Parliament and police are widely perceived to be among the most corrupt institutions in Indonesia, and MPs and police officials are often the targets of KPK investigations. Reuters
Myanmar will build an international standard fuel handling jetty in the second largest city of Mandalay to serve northern part of the country, official media reported yesterday. The fuel handling jetty, to be built by the Myanmar Energy Sector Development Public Company, lies at the junction of the Ayeyawaddy River and the Dokehtawaddy River in Amarapura township of Mandalay. The project is to be implemented on a 16.6-hectare plot and covers 32 fuel tanks and four jetties. It will have the capacity to fill 136 fuel tankers.
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March 1, 2016
International Nigeria sacks thousands of ghost workers Nigeria’s finance ministry said Sunday that it had saved millions of dollars for the cash-strapped government by removing more than 20,000 “ghost workers” from the state payroll. The eliminated ghost workers represented just a “percentage” of “non-existent” staff who had been receiving monthly wages, highlighting the brazen corruption in Africa’s biggest economy. “The salary bill for February 2016 has reduced by 2.293 billion naira (US$11.53 million),” finance ministry advisor Festus Akanbi said in a statement. Akanbi said that stricter payroll regulation would boost the budget.
Amazon enters Britain’s fresh food market Online retailer Amazon is set to enter the British fresh food market after striking a supply deal with supermarket Morrisons, potentially ramping up competition in the already cut-throat sector. Morrisons, Britain’s fourth biggest supermarket, said yesterday the deal would allow Amazon Prime Now and Amazon Pantry customers access to Morrisons ambient, fresh and frozen products in the coming months. The British supermarket sector has been convulsed by fierce competition in recent years and analysts have warned that a step up from Amazon could hurt the traditional players even more.
Barclays Africa plays down impact of changes
Barclays Africa Group Ltd said yesterday that any announcement by its London-listed parent company Barclays Plc would not impact the shareholding and ownership of operations in individual African countries. Barclays Plc said on Sunday its board was evaluating strategic options in relation to its shareholding in its African business. The bank will update the market on its plans for Barclays Africa today, it said. Barclays Africa said it was well capitalised, that it had an independent board and that it would continue to operate as normal.
CIB signing deal to sell investment bank Egypt’s largest listed company, Commercial International Bank (CIB), said on Sunday it had signed a deal to sell its investment banking arm CI Capital to an Orascom Telecom unit for 924 million Egyptian pounds (US$118 million). Orascom Telecom (OTMT), which has holdings in media, technology and cable businesses as well as energy, transport and logistics, is expanding into financial services and had nominated its subsidiary Beltone Financial, to buy the entire share capital of CI Capital. CIB accepted a bid from billionaire Naguib Sawiris’s OTMT to buy CI Capital earlier this month.
Kenya tax agency sees revenue rising VAT income more than doubled in the six months ended December Adelaide Changole
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enya’s government is settling debts with service providers including companies helping double the paved- road network, which is good news for the tax agency in East Africa’s largest economy as it seeks to recover from a record shortfall. “There have been concerns about government paying bills on time and therefore companies themselves meeting obligations, including tax obligations,” John Njiraini, commissioner general of the Kenya Revenue Authority, said in a February 25 interview in the capital, Nairobi. The agency missed its fiscal firsthalf collection target of about 618.6 billion shillings (US$6.1 billion) by 59 billion shillings, as the economy slowed, the local currency weakened and high interest rates constrained businesses, reducing tax payments. That’s the biggest miss of the firsthalf goal, according to Bloomberg calculations. Companies wound back expansion plans and cut staff to limit losses, weakening tax revenue from individual salary earners. Some government employees went without pay for as long as three months in the second half of 2015 as the state scrambled for funds to pay for imports and the cost of infrastructure investment such as a 405,000-hectare irrigation project and the road expansion plans. The state paid interest rates as high as 22.5 percent on treasury bills as it raised money to meet its commitments. The agency expects income tax collection to recover in the second half as the economy benefits from a more stable shilling and the state meets its obligations to creditors, Njiraini said. The disbursements by the government are allowing suppliers to pay off their debts, reducing bad-
debt levels and increasing liquidity in the system, he said.
‘Positive effect’
“Government put a lot of effort in the second quarter to normalize its expenditure program and this has a knock-on positive effect, resulting in more collections of withholding tax and a rebound in pay-as-you-earn in January and February,” Njiraini said. Income and corporate taxes account for half the agency’s revenue. Increased value-added tax collections are also bolstering the agency’s coffers, Njiraini said. VAT income more than doubled in the six months ended December, while excise tax collections rose 16 percent. “VAT had a 6 billion shilling surplus by the end of January and we are working towards having a surplus of 12 billion shillings by the end of June,” he said. A new excise law enacted in December should improve the authority’s ability to collect taxes on goods, he said. The authority is also scaling up the use of technology
to track production of excisable goods at factories, extending this from cigarettes, alcoholic spirits and beer to soft drinks, water and juices. The government has set KRA a revenue collection target of 1.5 trillion shillings, or 75 percent of the 2016-17 budget. This is a 14 percent increase from the 1.3 trillion shillings it’s expecting in the current fiscal year. KRA plans to enlist the country’s banking network and Safaricom, the nation’s biggest mobile-money company, to rope in more tax payers. The telecommunications provider had 91,246 mobile-money agents across the nation by September 2015, which would effectively extend the taxman’s reach past the 35 outlets the agency has in the country. “The conventional platform where people have to walk into a bank to pay taxes is not helping,” Njiraini said. “People are saying, ‘we want to pay money, but why do we have to come looking for you in your ivory tower?”’ Bloomberg News
Lowest Turkish exports since 2011 hidden by shrinking trade gap The declining cost of energy imports led the improvement in the foreign trade balance Onur Ant
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urkey’s exports fell to a fiveyear low as shipments to neighbouring countries that are beset by fighting and economic crisis plunged. Exports dropped to US$9.6 billion in January, with sales to Russia and Iraq plummeting, Turkey’s state statistics institute in Ankara said on its website yesterday. Turkey’s trade gap shrank to US$3.76 billion from US$4.34 billion during the same period, due to the lower cost of importing energy. The improvement in Turkey’s foreign trade imbalance is hiding the troubles its manufacturers are facing. Russia, which used to be Turkey’s
seventh-largest export partner in 2014, wasn’t even among the top 20 last month, as exports fell to around US$107 million, nearly a third of what it was a year earlier. Shipments to Iraq, where parts of the country is under Islamic State’s control, fell 44 percent from a year ago. “Geopolitical problems in neighbouring countries are the main reason behind the fall in Turkey’s exports,” financial entity Oyak Menkul Degerler’s Istanbul-based chief economist Mehmet Besimoglu said by phone. “Although the ongoing improvement in the trade deficit is good for Turkey, yesterday’s trade
figures warrant a cautious optimism about the future of Turkey’s foreign trade imbalances.” The declining cost of energy imports led the improvement in the foreign trade balance. Imports of mineral fuels, including purchases of crude oil, stood at US$2.3 billion last month, down 37 percent from a year earlier, according to preliminary trade data published by ministry of trade and customs earlier this month. After depreciating 20 percent in 2015, the currency has lost another 1.45 percent so far this year, according to data compiled by Bloomberg. Bloomberg News
Business Daily | 15
March 1, 2016
Opinion
Less than zero in Japan wires Business
Leading reports from Asia’s best business newspapers
Koichi Hamada
Special Economic Adviser to Japanese Prime Minister Shinzo Abe
TAIPEI TIMES Major real-estate brokers reported a sharp year-onyear decline in the number of property transactions this month, with Tainan seeing a more than 30 percent fall following the February 6 earthquake. The data came as little surprise because the Lunar New Year holiday shortened the number of working days, brokers said. Taiwan Realty Co said transactions this month softened 20 percent year-on-year in seven cities and municipalities, with Tainan seeing the steepest fall of 35.1 percent, followed by Kaohsiung with 27.3 percent.
JAKARTA GLOBE Indonesia will soon have a strategic plan or framework that would guide and shape the nation’s digital game industry in a bid to help local developers gain a controlling share of the market, a senior government official said. The team is collecting information on difficulties facing the local game industry. This is done in order to come up with an action plan that can help the country achieve its goal to have local players in Indonesia’s game industry control at least 50 percent of the market by 2020.
THE PHNOM PENH POST Cambodia’s security regulator has slashed transaction fees on securities by half in its latest bid to stimulate interest in the Kingdom’s lacklustre stock exchange. Sok Dara, deputy director of the Securities and Exchange Commission of Cambodia (SECC), said a decision was made last week to reduce the trading fee, clearance and settlement fee, and depository fee on securities by 50 per cent, effective immediately. “The securities trading fee has been reduced to 0.075 per cent; while the settlement and clearance fee has been dropped to 0.05 per cent, and the same rate applies for the depository fee,” he said.
VIETNAM NEWS Deputy Prime Minister and Foreign Minister Pham Binh Minh re-affirmed Viet Nam’s full support for ASEAN’s co-operation priorities in 2016 initiated by Laos as this year’s ASEAN Chair. The official made the remarks at the ASEAN Foreign Ministers’ Retreat which took place in Vientiane, Laos, on Saturday. Viet Nam would closely co-ordinate with Laos and other ASEAN member countries to help Laos successfully fulfil its ASEAN Chairmanship, he said. Minh outlined the need for the ten-member group to prioritise maintaining peace and stability in the region amidst complicated regional security.
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n a bold attempt to reflate the Japanese economy, the Bank of Japan (BOJ) has now pushed interest rates on deposits into negative territory. Though this policy is not new – it is already being pursued by the European Central Bank, the Bank of Sweden, the Swiss National Bank, and others – it is uncharted ground for the BOJ. And, unfortunately, markets have not responded as expected. In theory, negative rates, by forcing commercial banks essentially to pay the central bank to be able to park their money, should spur increased lending to companies, which would then spend more, including on hiring more employees. This should spur a stock-market rebound, boost household consumption, weaken the yen’s exchange rate, and halt deflation. But theory does not always translate into practice; while the BOJ’s introduction of negative rates almost immediately pushed the interest-rate structure lower, as expected, the policy’s effects on the yen and the stock market have been an unpleasant surprise. One reason for this is widespread pessimism about Japan’s economy, reinforced by volatility in China, monetary tightening in the United States, and the collapse in world oil prices. But, as BOJ Governor Haruhiko Kuroda recently reported to the House of Councillors, Japan’s economic fundamentals are generally sound, and pessimistic predictions are greatly exaggerated.
In fact, Prime Minister Shinzo Abe’s economy strategy – socalled “Abenomics” – has enabled Japan to stay on a reasonably positive path in highly uncertain times, with the economy showing signs of steady recovery from its decades of stagnation. Since Abe took office in 2012, 1.5 million jobs have been created, and the unemployment rate has fallen from 4.6% to 3.3%. Moreover, tourism has surged, and both company and government revenues have been rising rapidly. Even Japan’s external challenges may not be such bad news. For starters, Japan, like emerging economies with flexible exchange-rate regimes, may actually benefit from America’s monetary tightening, as an appreciating dollar makes Japanese exports more competitive. Similarly, because Japan can meet at most 6% of its own energy needs, cheap oil is a true blessing – one that may well endure for some time to come. As for the economic situation in China, there is certainly reason for concern. The problem is that, while the “hardware” of the Chinese economy has advanced substantially since Deng Xiaoping initiated his “reform and opening up” policy almost four decades ago, the “software” of economic policymaking is constrained by excessive state management. As a result, the country is struggling to shift to a more sustainable growth model, underpinned by a thriving services sector and strong domestic consumption.
The Japanese stock market regarded negative rates as a harbinger of greater financial risk, and speculators have remained bullish on the yen
Until China reckons with the ruling Communist Party’s stranglehold on key levers of the economy, it will be a source of market uncertainty that reverberates throughout the global economy. But even here Japan’s situation is not as dire as many seem to think, owing to its limited exposure to China; for example, exports to China amount to only 3% of Japan’s GDP. Given this, there is no reason why the Tokyo stock market should gyrate whenever the Shanghai market shakes. The conventional hedge-fund
strategy should be going short on Shanghai stocks and long on Tokyo stocks. And yet, even though Japan’s economic situation is far from dire, introducing negative interest rates has not been treated as what it is: a manoeuvre to loosen monetary policy. Instead, the Japanese stock market regarded negative rates as a harbinger of greater financial risk, and speculators have remained bullish on the yen. The statistician and economist Yoichi Takahashi tells me that the yen’s 8% appreciation over just ten days in February is abnormal, and probably fuelled by speculative attacks. In his opinion, some interventions in the exchange market by the Ministry of Finance may need to be pursued to contain the extraordinary fluctuations. From 2003 to 2004, the Japanese treasury purchased a large amount of dollars, thereby easing monetary conditions at a time when the BOJ was reluctant to pursue open market operations. In recent years, however, the yen’s exchange rate has been determined through monetary policy, not manipulated by intervention. In general, I welcome this new approach, and thus do not recommend major interventions to change the direction of the yen exchange rate. I do, however, believe that sporadic interventions may be needed to punish speculators who are taking advantage of temporary market psychology to keep the yen far above its market value. Project Syndicate
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March 1, 2016
Closing More Chinese buying movie tickets online
Beijing cuts reserve requirement ratio again
More movie tickets were sold online than offline in 2015, a joint survey by Penguin Intelligence, Tencent’s big data platform, and group buying service Meituan and Dazhongdianping showed. Mobile apps have become the top choice for China’s movie-goers when purchasing tickets, the report said. Purchases made online surpassed those made offline last year, it added. In Guangdong and Jiangsu provinces, online ticket sales accounted for more than 70 percent of tickets sold in the last three months, according to statistics published by the State Administration of Press, Publication, Radio, Film and Television.
China’s central bank reduced the amount of cash that banks must hold as reserves for the fifth time since February 2015, as it seeks to revive a slowing economy. The People’s Bank of China said on its website that it would cut the reserve requirement ratio by 50 basis points for all banks, taking the ratio to 17 percent for the country’s biggest lenders. The cut is effective March 1. China last cut RRR on October 23, when it also reduced interest rates by 25 basis points to rein in social financial costs. Under the banner of “prudent” monetary policy, the central bank has pursued its most aggressive policy easing since the 2008/09 global financial crisis.
China investor seeking another slice of K-Pop with music agency deal K-pop is big in China, part of the broader “Korean wave” of cultural exports popular in Asia and globally Joyce Lee
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alent agency Cube Entertainment Inc is poised to become the latest K-pop producer to link up with a Chinese partner, banking on the popularity of everything South Korean from make-up to music in the world’s second largest economy. IHQ Inc, which controls Cube, said on Monday its parent C&M was in talks with Chinese investors over a possible investment, without providing further details. Cube represents popular K-pop groups Beast and 4minute. Online media firm Money Today said the investment could be worth up to 100 billion won (US$80.7 million), citing an unnamed source. News of a potential deal sent shares in Cube surging by the 30 percent ceiling yesterday. K-pop is big in China, part of the broader “Korean wave” of cultural exports popular
K-Pop popularity reaches beyond Korean borders
in Asia and globally, and partnerships between Chinese digital music service providers and K-pop producers have accelerated since China stepped up music copyright protection in July 2015. “As with copyrights, there are signs that China’s music market is changing, and we expect K-pop agencies to eventually be able to get a share of the concert profits
Petronas posts US$704 mln Q4 net loss
instead of the current fixed sum,” said Kyobo Securities analyst Chung Yu-Seok. Earlier this month, a Singapore-based unit of Alibaba Group Holding Ltd agreed to acquire a 4 percent stake in South Korea’s largest entertainment management agency S.M. Entertainment for 35.5 billion won, as part of a strategic partnership, S.M. said in a filing.
Another K-pop agency, FNC Entertainment, attracted investment of 33.7 billion won from Shanghai-based Suning Universal Media in November, according to an FNC filing. Some K-pop agencies are known to boost physical album sales by releasing different versions of the same song. S.M., for example, released 18 versions of group
PBOC fixes yuan at four-week low despite pledge
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EXO’s hit album late last year, in both Korean and Chinese, so fans can collect them all. Agencies such as S.M. and YG Entertainment Inc are also expected to leverage their digital music exposure in China by increasing the number of concerts they stage there, analysts said. In China, digital music made up about 72 percent of the music industry 2014 revenue of US$790 million, according to PwC data, larger than 46 percent globally, according to the International Federation of the Phonographic Industry (IFPI). IFPI said informal estimates suggest Chineselanguage music accounts for around 80 percent of China’s music market, with K-pop and Japanese J-pop combining for another 10 percent, and other international music accounting for the remainder. Reuters
South Korea’s loan delinquency ratio rises
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alaysia’s Petroliam Nasional Bhd, or Petronas, reported a fourth-quarter net loss yesterday and announced spending cuts for the next few years, as the state oil company braces for a prolonged period of low oil prices. Petronas reported a net loss of 2.96 billion ringgit (US$704.3 million) for the October-December period, compared with a loss of 7.3 billion ringgit a year ago. The company attributed the net loss to impairment of assets caused by low oil prices. Revenue for the quarter was 60.1 billion ringgit, down nearly a quarter from 79.4 billion ringgit for the corresponding period a year ago. The 70 percent slump in crude oil prices since mid-2014 has been squeezing the finances of unlisted Petronas, which accounts for about a third of the Malaysian government’s oil and gas revenue. “2016 and 2017 will continue to be challenging for Petronas,” Petronas President and Group CEO Wan Zulkiflee Wan Ariffin said at a press conference to announce the results. Petronas also confirmed plans to cut spending by 50 billion ringgit over the next four years, as earlier announced in an internal memo to its staff.
hina’s central bank yesterday fixed its central rate for the yuan currency at a four-week low, data showed, despite comments by chief Zhou Xiaochuan that there was no basis for further depreciation. The People’s Bank of China (PBOC) set the yuan at 6.5452 to US$1.0, down 0.17 percent from Friday, according to the China Foreign Exchange Trade System. The fix was the weakest since February 3, previous figures showed. The weaker currency hurt sentiment on the stock market, with the benchmark Shanghai Composite Index dropping as much as 4.44 percent yesterday morning. PBOC governor Zhou Xiaochuan on Friday told a seminar on the sidelines of the G20 finance ministers’ meeting in Shanghai that the yuan -- also known as the renminbi (RMB) --- would be stable. “There is no basis for persistent renminbi depreciation from the perspective of fundamentals,” he said. Authorities only allow the yuan to rise or fall two percent on either side of the daily fix, to prevent volatility and maintain control over the currency.
ank loans delinquency ratio in South Korea rose in January due to an increase in arrears by big corporations, financial watchdog data showed yesterday. The delinquency rate of loans extended by commercial banks stood at 0.67 percent as of endJanuary, up 0.09 percentage points from a month earlier, according to the Financial Supervisory Service. Fresh arrears reached 1.8 trillion won (US$1.5 billion) in January, far surpassing resolved loans worth 0.6 trillion won. The delinquency ratio had kept a downward trend since the third quarter of 2012 thanks to record-low interest rate by the central bank. The Bank of Korea cut the benchmark interest rate by a quarter percentage point in March and June last year to an all-time low of 1.5 percent, after lowering it by the same margin in August and October 2014. The January rebound in delinquency rate came on the back of an increase in arrears among large companies. The default rate in corporate loans advanced 0.14 percentage points from a month earlier to 0.92 percent as of end-January.
Reuters
AFP
Xinhua