MOP 6.00 Closing editor: Joanne Kuai
Chinese companies over-sweeten M&A offers to get U.S. regulator’s nod Page 9
Year IV
Number 992 Wednesday March 2, 2016
Publisher: Paulo A. Azevedo
DSRT: Unwanted telemarketers’ calls already regulated by Personal Data Protection Act Page 7
Mainland factory activity gauges post shrinking trend in February Pages 8&9
Ho Denied Habeas Corpus
The Court of Final Appeal has ruled decisively. Declining to accede to an application for a writ of habeas corpus filed by Ho Choi Meng. Macau’s former top prosecutor has been arrested for a suspected multimillion dollar corruption racket. The court says only magistrates with actual judicial power may enjoy the protection of habeas corpus. Meanwhile, the city’s graft buster CCAC has announced the detention of two local businessmen allegedly involved in the case
HSI - Movers March 1
Name
%Day
Kunlun Energy Co Ltd
+5.40
China Petroleum & Che
+4.85
CNOOC Ltd
+4.15
CITIC Ltd
+3.59
Downturn eases
China Shenhua Energy
+3.48
Hong Kong & China Gas
-0.15
China Life Insurance Co
-0.71
Growth in gambling revenue dropped 0.1 pct to MOP19.5 bln (US$2.4 bln) in February. The 21st consecutive monthly fall. But above analysts’ expectations of a 2-10 pct fall. An increase in Lunar New Year tourists boosted the world’s largest casino hub
Galaxy Entertainment
-0.77
Hengan International
-0.81
China Mengniu Dairy C
-0.89
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Source: Bloomberg
I SSN 2226-8294
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Excluding secrecy MSCI has decided to exclude 18 companies from its indices. Having found a lack of transparency in shareholder structures. Goldin Properties and casino operator Imperial Pacific have been deleted among others
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www.macaubusinessdaily.com
Gaming
DICJ stretches credibility The influence of triads in casinos is still key. This, according to a study by City University of Hong Kong. With particular reference to Macau’s VIP gaming rooms. DICJ claims to know nothing of the existence of any ‘triad selected by the casinos or working with junkets’
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Depreciation gain
Local electricity tariffs may be reduced next month. If the renminbi’s depreciation continues, says CEM. Given 80 pct of the city’s electricity is imported from Mainland China. The city’s sole power distributor will invest some MOP680 mln this year to build more infrastructure projects, namely three high-voltage substations
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March 2, 2016
Macau
CEM: Renminbi depreciation will likely reduce power tariff The company also announced that it would invest some MOP680 million (US$85 million) in its large-scale infrastructure projects in the territory this year Kam Leong
kamleong@macaubusinessdaily.com
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ocal sole power distributor CEM – Companhia de Electricidade de Macau, claimed that there may be room for reduction of the local electricity tariff next month if the renminbi’s depreciation continues. “As more than 80 per cent of the city’s used electricity was imported from the Mainland last year, the depreciation of the renminbi will for sure lower our cost of purchasing electricity from the Mainland,” Bernice Leong, chairman of CEM Executive Committee, told reporters on the sidelines of the company’s media Spring luncheon yesterday. Declining to reveal the range that the company may reduce the local electricity tariff, the CEM chairman only said that service charges could be decreased “a bit” at the beginning of the second quarter. “We’ll need to discuss the impact of the fluctuating exchange rate of the renminbi with China Southern Power Grid. The adjustment to the tariff will really depend upon the exchange rate of the renminbi at that time,” Mr. Leong said. Last October, the local power tariff was set at MOP0.42 per kWh, with
a subsidy of 5 cents per kWh offered to residential customers and small & medium enterprises of CEM that are supplied with low voltage.
Annual growth in revenues
Having invested MOP960 million for the whole of last year, the CEM chairman said that the company’s revenues for 2015 may jump from 5 to 6 per cent year-on-year, adding that audited results could only be completed by the end of this month. In terms of consumption, CEM saw local power consumption post a new record, jumping 6.2 per cent compared to 2014. In addition, the power supplier’s self-generated electricity recorded a jump of 73 per cent year-onyear to 763kWh for 2015 due to the self-generation cost being lower than importation prices from the Mainland amid decreasing fuel prices. Importation from the Mainland thus posted its first negative growth of 1.1 per cent year-on-year.
MOP680 mln investment this year
Meanwhile, the power distributor announced yesterday that it would invest some MOP680 million this year
to revise its five-year grid development master plan. According to Mr. Leong, the plan would include large infrastructure projects that have already been approved by the government – namely, high-voltage substations for the future Island Hospital complex, Hong Kong-Zhuhai-Macau Bridge and Hospital Conde S. Januario, apart from other investments in transmission and distribution grids.
MOP3 billion on Coloane green generator
The CEM chairman also revealed that the electricity company may splash out MOP3 billion to establish a new natural gas-powered generator in Coloane Power Station. “We estimate that the construction of the project may take between three and four years if it is approved by the government. We certainly want the project to be given a green light as soon as possible as using natural gas is much more environmentally friendly than using heavy fuel oil,” he said. According to the company’s senior officer, the implementation of such a green generator could boost CEM’s self-generation capacity to fulfil half
of the local power demands. But he added that the company is still in negotiation with the government on the project.
Morais Power Station clearance
Mr. Leong also disclosed yesterday that CEM would start working on the environmental assessment report this year regarding the clearance of the Macao Power Station in Avenida de Venceslau de Morais in the northern district of the Peninsula. “We are actively negotiating on the clearance plan with the government. At this stage, we will need to conduct an environmental assessment report first. After all, to remove the power station, we need to limit its impact on the nearby social environment,” the chairman said. He added that a timetable for the company to quit the current power station plot would only be available after such a report. Last November, the electricity company filed a proposal with the government to give up the plot its major power station currently occupies. The government has said that the plot would be used for public housing after CEM’s clearance.
Business Daily | 3
March 2, 2016
Macau
Top court denies habeas corpus to Ho Chio Meng Judges rule that the former top prosecutor – who has been remanded in custody for alleged graft – should file an appeal against the detainment rather than apply for the writ Kam Leong
kamleong@macaubusinessdaily.com
Two businessmen linked to graft detained The Commission Against Corruption (CCAC) announced yesterday that two local businessmen linked to the graft case involving former Prosecutor-general Ho Chio Meng had been detained by local authorities on Monday following their violations of the court’s previous orders. CCAC said in a press release yesterday that the two unidentified suspects, as well as the former chief of the Office of the Prosecutor General and a former assessor in the Office, had been restricted for departure and prohibited contact by the Court of Criminal Instruction of the Court of First Instance. ‘However, in a recent investigation the CCAC found that the two local businesspeople already declared as suspects had violated the court’s order,’ the body wrote, claiming the two businessmen colluded with each other in order to provide the same testimony, and disrupt evidence collection and the normal running of proceedings.
than applying for a writ of habeas corpus.
Illogical request
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esterday, the Court of Final Appeal declined to entertain an application for a writ of habeas corpus - a legal action by means of which detainees can seek relief from unlawful imprisonment - filed by the city’s allegedly corrupt former Prosecutor-general Ho Chio Meng. The former top prosecutor was arrested by local antigraft agents and detained by order of the top court last weekend for allegedly colluding with local
businessmen for advantages for a decade. The suspects in the case had illegally gained at least MOP44 million through the deals, the Commission Against Corruption (CCAC) claimed. Mr. Ho’s application for habeas corpus was on the grounds that the former Prosecutior’s Office leader should be exempted from detainment as stated by Article 33 of the Statue for Magistrates, according to his lawyer, Leong Weng Pun. The lawyer claimed
in court yesterday that it would be dangerous for the ex-official to be detained in jail as he had overseen the Prosecutor’s Office for 15 years. Adding Ho needs immediate medication for his health, Mr. Leong requested the top court to release him immediately. Nevertheless, the president of the Court of Final Appeal, Justice Sam Ho Fai, ruled that the alleged corrupt ex-official should have filed an appeal against the court’s decision to take him into custody rather
Corporate Portuguese official meets Macau business sector reps During the visit of the Secretary of State of Industry of the Government of Portugal, Mr. João Vasconcelos, to the Macau SAR, BNU together with the General Consulate of Portugal in Hong Kong and Macau, the Macau European Chamber of Commerce, Portuguese-Chinese Chamber of Commerce & Industry and AICEP organised a luncheon attended by Mr. Vasconcelos, Mr. Vitor Sereno - Consul General of Portugal in Macau, Mr. Pedro Cardoso, CEO of BNU and the Chairman of MECC, Ms. Maria João Bonifácio, Trade & Investment Commissioner, Trade & Investment Agency, AICEP and Mr. Filipe Cunha Santos, President of the Portuguese- Chinese Chamber of Commerce & Industry. The activity was attended, as well,
by about forty business leaders, entrepreneurs and professionals. Mr. João Vasconcelos highlighted in his welcome address that the relationship between Portugal and China, particularly with the Macau SAR, is a strategic priority of Portugal, as mirrored by the growing trend of Portuguese exports to Macau. During his speech, he also mentioned that in view of Macau’s role as a special platform of the interchange of cooperation between European and Asia markets, at the same time Portugal is a bridge between the Portuguese-speaking countries and the European market. Thus, Portuguese companies should develop a deeper knowledge of the opportunities and potential of Macau as an important business partner.
In addition, presiding judge Song Man Lei perceived that Ho’s reasons for habeas corpus were illogical. She explained that only magistrates with actual judicial power may enjoy the protection of the mentioned article. According to the Penal Code, it mandates that any individual may apply for a writ of habeas corpus if they perceive they have been arrested or detained illegally. Mr. Leong told reporters after hearing the court’s ruling that his team would study whether to file an appeal against the decision of custody made by the top court over the weekend. The lawyer declined to reveal the health situation of Mr. Ho.
CCAC announced on Sunday that the ex-top prosecutor was arrested by its agents last Friday as he was leaving the city for Hong Kong at the Outer Ferry Terminal. Mr. Ho, who was once tipped as a possible candidate for a previous Chief Executive election, is accused of awarding some 2,000 public contracts of the Public Prosecutor’s Office to several local businessmen by illicit means from 2004 to 2014. This is the second biggest corruption case related to the city’s high-ranking officials. The former Secretary for Transport and Public Works, Ao Man Long, was sentenced to jail for 28.5 years in 2009 after being convicted of corruption.
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March 2, 2016
Macau
VIP high roller rooms still “dominated by triads” A study by City University of Hong Kong claims that the influence of triads is still key in the operations of VIP high-roller gaming rooms Kelsey Wilhelm
kelsey.wilhelm@macaubusinessdaily.com
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study conducted by Professor Lo Tit Wing and Ms. Sharon Ingrid Kwok of the City University of Hong Kong claims that “despite regulatory measures” VIP gaming rooms for high rollers continue to be “dominated by triads”, although veering away from violent methodology towards corporate strategy, as detailed by Portugueselanguage news agency LUSA. The study - conducted over 30 months from 2012 to 2015 – based its findings on interviews with 17 individuals ranging from VIP room managers, operators and visitors to police and triad members. The study examined only one VIP gaming room, whose host casino is unnamed in the study. “Not all of the operators of VIP rooms are triad members,” the report claims, continuing to state that these operators must have a link to such organisations in order to “keep everything under control in daily operations”. These organizsations are reportedly selected based upon factors including money, reputation and their “capacity to mobilise the work force”, as described in an interview with a member of the Macau gang 14K in an interview conducted in August 2013. Based on the results of the interviews, the authors of the report argue that the presence of these criminal organisations has changed in nature over the years in order to avoid violence and conflict between the groups, claiming that casinos are less likely to associate with organisations with a “problematic
history” the study quotes the same gang member as saying. In a response to queries from the news agency, the Gaming Inspection Co-ordination Bureau (DICJ) claims to not know of the existence of any “triad selected by the casinos or working with junkets.” The DICJ – in its response to the news agency, but promises to adopt the “necessary measures” in the event of any irregularities detected.
operates a VIP room”, and that the former leader of the 14K works at the establishment, following his release in December 2013 after 14 years in prison.
Restrict and regulate
Restrictions set in place by the central government serve to limit the participation of organised crime
Run like a company
“Much like a bank, the company solicits deposits from investors who receive fixed monthly dividends. Then, the company gives credit to the players,” the study says. The authors describe a natural progression in the dependence of the triads on junkets, given the expansion from primarily Hong Kong-based gamblers to those from Mainland China, who currently generate the highest bets. This dependence comes in the form of intermediaries both to procure gamblers from the Mainland and to cover debts, the result of which, the authors conclude, is the “gradual loss of control, resulting in cases of fraud.” To minimise the visibility of organised crime in junket operations, ‘ghost companies’ are used – interviewees claim – to “hide ownership by leaders of the triads and their involvement in junket operations.” A “Chinese manager”, the report states, interviewed in February 2015, even goes so far as to claim that the “blood brother of Broken Tooth
30 month-long study concentrated on 17 interviewees including triad members, police, operators, managers, and visitors to VIP gaming room
in junket operations – focusing on money laundering and capital flight – through limitations on maximum funds that can leave the SAR and the number of days top junket operators can spend out of the country. The effect of these restrictions, claims the report, is the creation of a “market for under-the-table betting” – specifically by the Chinese ‘whales’ (high-rollers) who are unable to take “day trips to Macau”. This has led to new forms of betting from outside the country, such as video streaming of live Baccarat or players who “play from a distance using a telephone” one police official is quoted as saying. “It’s illegal but no-one tries to regulate it,” the interviewee states. In 2014, the government, following allegations of betting via telephone (both locally and internationally), denied the existence of this type of betting in Macau. Casino operators in Macau continually deny any link to criminal organisations.
Legislation in place
In response to queries by LUSA agency, the DICJ responded that according to legislation, ‘any element that requires a licence to promote gaming, independent of its nature [as] an individual or a group, is subject to rigorous verification of suitability and evaluation on behalf of the DICJ.’ The Bureau continued, stating that they would continue to supervise the activity of the junkets ‘in particular, the fulfillment of their legal, statutory and contractual obligations and other responsibilities stipulated in applicable legislation.’
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March 2, 2016
Macau
Casino revenue downturn eases on festive fillip In February, Macau raked in MOP19.5 bln in gross gaming revenue. This is a decrease of 0.1 pct y-o-y, representing twenty one straight months of slump in casino revenue in the city
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acau’s casino market shrank less than analysts’ estimates in February, as an increased number of tourists to the city over the Lunar New Year holiday helped ease a slump that’s lasted for almost two years. Gross gaming revenue was MOP19.5 billion (US$2.4 billion), according to data from Macau’s Gaming Inspection and Coordination Bureau. The 0.1 per cent decrease was the smallest since the downturn began, and compares with the median estimate of a 2 per cent drop from six analysts surveyed by Bloomberg and the 21.4 per cent decline in January. “The fact that the market almost grew in February despite continued VIP woes leads us to believe mass market increased nicely year-on-year in February, which is what investors likely need to see more of,” Union Gaming Group LLC analyst Grant Govertsen wrote in a note. Still, he expects gambling revenue to drop further in March and April, by 13 per cent and 6 per cent respectively, before returning to growth in June. Chinese high-rolling gamblers have
laid low since President Xi Jinping started an anti-corruption campaign in 2013, ending a decade-long Macau boom that propelled the city’s casino revenue to seven times more than the Las Vegas Strip. Since then, operators such as Galaxy Entertainment Group Ltd. have opened resorts aimed more at tourists and mass-market gamblers, in hopes of lifting gaming receipts from their five-year low.
Shares reverse
Macau casino shares reversed earlier losses after the monthly data was released, with Sands China Ltd. up as much as 1.9 per cent and Wynn Macau Ltd. rising as much as 1.6 per cent in Hong Kong trading. The
Source: DICJ
Bloomberg Intelligence Macau casinos index rose as much as 0.4 per cent, after falling by 2.1 per cent in the morning. Revenue from VIPs, as measured by their favorite baccarat card game, have fallen to near the level of other gamblers as Macau’s government tightened scrutiny on junket operators, middle-men who organize trips for high-end Chinese gamblers and lend them money to bet with, in effect skirting China’s currency controls. Sands China President and Chief Operating Officer Wilfred Wong predicted last week Macau’s casino industry would stop its decline as early as February thanks to increased gambling over the weeklong Chinese
holiday that started February 8. The deputy chairman of Galaxy Francis Lui echoed Wong’s optimism, after his company posted fourth-quarter earnings that beat expectations.
Seasonal volatility
Despite the downturn, Macau remains the world’s largest gambling hub, with revenue in 2015 about five times that of the Las Vegas Strip. The Chinese city’s gambling houses have shifted their focus to become more Vegas-like, in an attempt to draw more tourists by providing more non-gaming facilities. Galaxy’s newly-opened Broadway casino-hotel and a Batman ride in Melco Crown Entertainment Ltd.’s Studio City helped the two operators grow their share of the mass market gambling segment in 2015. The US$4.1 billion Wynn Palace will offer air- conditioned cable car rides and Sands China’s the Parisian will feature a half-size Eiffel Tower replica when they open later this year. Macau’s transition from high-end gamblers to mass market tourists will lead to a more seasonal volatility in business however, as fewer VIPs take up the weekday traffic, Bank of America Merrill Lynch’s analyst Billy Ng wrote in a note. Bloomberg
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March 2, 2016
Macau opinion
Dog musings
José I. Duarte Economist
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n these somewhat unsettled times, one looks for signs that people have not lost or are losing their sense of proportion. Browsing the news happens to be not as reassuring as one might wish. Just one example: the law on the protection of animals is again being discussed in the Legislative Assembly. Making it is proving to be a very protracted and difficult delivery. Curiously enough, currently the protection of the said animals from mistreatment by their human fellows seems to have lost topicality. The major subject under discussion now is, so the media report, the protection of humans. Therefore, all dogs in public spaces must be muzzled! We might think that is a subject better dealt with by other legal frames, including but not limited by those concerning the civil responsibility of all citizens, which covers, one presumes, the behaviour of their pets. The legislators seem, implicitly, to disagree. As a consequence, some suggested and we are reassured, the government has already acquiesced to that rule. An earlier proposal applied the rule only to dogs over 23 kilos. Why 23 kilos, no more, no less, no explanation could be found even after some research. But it is (was) such an important threshold that one might expect to find a clarification easily, somewhere. No such chance! Maybe it just happens the original idea was thought of using imperial units, and this is no more than the rough conversion to kilos of a round 50 pounds figure – still unexplained though. Nonetheless, one might ask: was it justified because there is a neat alteration in aggressiveness associated with dogs over that specific weight? Do we expect that weight to correspond to some standard dog size from a reference breed? How will we deal with smaller but obese animals, or bigger but skinny dogs? It was not clear! At any rate, these did not seem to be the driving concerns behind the extension of the muzzle to all kinds and size of dogs. (So far, other categories of pet seem exempt). The big reason, that one, was for once explained – and made all the previous questions irrelevant on the spot. The question was: how could someone complain that a dog had no muzzle unless the animal could be weighed? Which – as I presume was in the mind of the proponents – the dog, the owner, or both, might object. So, hey presto! All dogs must be muzzled. Problem solved. All citizens can now complain by a mere and even distant observation. For my part, I know I will not need to keep my cool any more any time I come across a muzzled Chihuahua or Miniature Pinscher. Nowhere, it appears, has the proportionality, convenience or feasibility of the rule been assessed. And now… What was the law truly about?
Revitalisation of streets, misuse of car park spaces raises concern Members of the Social Services Advisory Committee of the Islands urge the government to take appropriate action Annie Lao
annie.lao@macaubusinessdaily.com
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he lack of hygiene in the famous tourist location of Rua do Cunha in Taipa has raised concerns among residents, said a member of the Social Services Advisory Committee of the Islands, Chan Peng Peng, at the committee meeting held yesterday afternoon. Ms. Chan said that recently the condition of the street has been deteriorating and could affect the image of Macau as an international tourism and leisure centre. Local residents complain that rubbish is strewn around the street, there is graffiti on the walls, and some old buildings are without proper maintenance. One building attracting attention is located at 11-13 R. Direita Carlos Eugenio Street as it has been without maintenance and management for such a long time it is a potential hazard to pedestrians should tiles fall from the building’s roof on rainy or windy days, she explained. In the past, the government established the ‘Street Beautification Interdepartmental Working Group’ organised by the Land, Public Works
and Transport Bureau (DSSOPT), the Civic and Municipal Affairs Bureau (IACM ) and Cultural Affairs Bureau (IC) to beautify and revitalise the streets and public facilities in Macau, but the work has not been followed through consistently. The committee member suggested the government make the work permanent in order to focus on beautifying and maintaining the streets in order to increase the positive image of tourism in Macau. She also said that owners need to assume responsibility for repairing dangerous old buildings. “When necessary, laws should be set up to punish [those responsible] which would help raise awareness of the importance of building maintenance. If owners cannot be contacted the government should take the initiative to undertake the repairs then chase them for the relevant renovation fees,” said Ms. Chan.
Management of car parking
Committee member Lo Wa Kit raised the issue of the airport main
road becoming an abandoned car parking space. He said that some cars have been found parked there for almost five years. Due to the lack of mobility of the cars parking there, it is causing hygiene problems. Trees are also growing onto the main road forcing pedestrians to walk onto the road off the pedestrian path, which affects road safety. He urged the government to deal with this problem as soon as possible. The meeting was also joined by representatives from the Transport Bureau (DSAT), Environmental Protection Bureau (DSPA) and Public Security Police Force (PSP) to discuss the issues raised by the community. José Maria Da Fonseca Tavares, the newly inaugurated IACM head and deputy convener of the social committee, told reporters: “The meeting is to increase the level of communication in gathering feedback to be delivered to related government departments to handle; the hearing of those issues is important to us.”
Business Daily | 7
March 2, 2016
Macau
DSRT leave aside unsolicited electronic messages ordinance The telecommunications regulation bureau says ‘Do-not-call Register’ is not applicable in Macau as unwanted telemarketers calls are already regulated by Personal Data Protection Act Bami Lio
bami.lio@macaubusinessdaily.com
not applicable in Macau because senders need to get the prior consent of receivers according to the current legislations. In addition, the current Personal Data Protection Act has already mandated penalties for relevant violations. The ‘Do-Not-Call Register’ is a secure database where individuals and organisations can register, check or remove their telephone, mobile and fax numbers to opt out of receiving most unsolicited telemarketing calls and faxes, as adopted in countries such as the U.S., Canada and Australia.
Under protection
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he government has set aside the legislation on an ‘Unsolicited Electronic Messages Ordinance’, as
it’s already regulated by the Personal Data Protection Act, said Tam Van Iu, Director of the Bureau of Telecommunications
Regulation (DSRT) in a written reply to legislator Kwan Tsui Hang’s enquiry. Tam pointed out that a ‘Do-not-call Register’ is
The DSRT head indicated that senders of electronic messages are currently required to ensure that the message receiver, who is the personal data owner, clearly agreed to get messages. In other cases, the senders are implementing contracts with the receivers as the ones who have signed the documents, otherwise the senders do not have the right to use any personal data under any circumstances.
Tam also said that personal data owners have the right to reject senders by requesting not to get messages from the related units directly. Tam added that the Bureau had discussed with telecommunications operators, government departments and related communities for initial consultation on ‘Unsolicited Electronic Messages Ordinance’. However, the plan was not progressed as it is regulated by current legislation. Nevertheless, the DSRT head said that the government will be monitoring issues on commercial electronic messages, taking international cases as reference to see what kind of practices are more suitable to be implemented in Macau.
Ongoing battle
Legislator Kwan Tsui Hang questioned if the government was consulting communities about a draft on the ‘Unsolicited Electronic Messages Ordinance’, and queried why no progress has been seen. Kwan also urged penalties be put in place so that citizens can be spared commercial electronic messages. Kwan enquired about the possibility of adopting the regulations of Hong Kong requiring the provision of clear and accurate sender information in the message; to honour unsubscribed requests; to build Do-notcall Registers; and not to hide the calling line identification information when sending messages. The legislator added that many citizens also claimed to receive promotional messages even though senders had been informed of unwillingness to receive messages.
Legislator urges transparency in real estate market
Chan Meng Kam calls for regulations on unreasonable pricing
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n order to reduce irrational consumer behaviour caused by insufficient and asymmetric information shared in the market, and provide scientific proof for adjusting the housing market, an index mechanism on the city’s real estate market should be built, said legislator Ho Ion Sang in a written enquiry handed to the government. Ho indicated that the Global Real Estate Transparency Index published by Jones Lang Lasalle stated the transparency of the real estate market in about 100 countries
or regions worldwide. Macau rated 3.65 in 2014, and was positioned 71 of 102 regions, meaning the city has a semi or low transparency. Ho urged the government to build a better database, and enhance the disclosure of information in the market. Ho also stated that the city does not have information about empty properties which is important in reflecting the demand and supply of the real estate market. Ho questioned the empty property rate of the city, and the number according to structure of apartments, as well as area.
he pricing of the city’s commodities are claimed to be unreasonable, legislator Chan Meng Kam said when questioning the progress of government regulations on the issue, according to Chan’s written enquiry. Commodities like fuel in this city are claimed to be unreasonably charged. Mr. Chan indicated that the pricing in the city is suspected of being controlled by various monopolies. He said that despite the result of the ‘Law Review on the Protection of Rights and Interests of Consumers’
released on 9th February, 2015, the legislation seems to have made little progress. In addition, Chan urged the government to consider reducing the ferry ticket price because the charges are based on inflation, cost of fuel and remuneration of staff, etc. of last year, while inflation and the cost of fuel has diminished greatly. Chan also asked the government to fully evaluate the charges for public services to ensure that they can be increased or decreased reasonably.
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March 2, 2016
Greater China
Factory activity shrinks more than expected Two surveys yesterday showed further contractions in domestic and export orders
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ctivity in China’s manufacturing sector shrank more sharply than expected in February, surveys showed yesterday, prompting smaller companies to shed workers at the fastest pace in seven years and suggesting Beijing will have to ramp up stimulus to avoid a deeper economic slowdown. The official Purchasing Managers’ Index (PMI) fell to 49.0 in February from January’s reading of 49.4 and below the 50-point mark that separates growth from contraction. Economists polled by Reuters had expected only a slight dip to 49.3. It was the lowest reading since November 2011. “The PMI came in much weaker than markets expected, hinting that recent easing measures have had limited impact in turning around the weakening manufacturing sector,” wrote senior emerging markets economist Zhou Hao at Commerzbank in Singapore. “We think PBoC will cut policy rates by 25 basis points in the first quarter and lower RRR (banks’ reserve requirement ratio) by another 100-150 basis points this year.” The private Caixin/Markit China Manufacturing Purchasing Managers’ Index (PMI), which focuses more on small to medium- sized, private firms, showed activity contracted for a 12th straight month. It fell to
48.0, below market expectations of 48.3 and January’s reading of 48.4. Both surveys showed conditions in China’s job market were continuing to deteriorate, challenging policymakers who are finalising Beijing’s next fiveyear development plan ahead of the annual parliament meeting starting on March 5. The Caixin report showed companies shed jobs at the fastest pace since January 2009, when China and other trade-reliant economies were reeling from a near-collapse in global trade following the financial crisis. Firms that reported lower headcounts cited company downsizing and cost-cutting, and said more workers who were leaving voluntarily were not being replaced. The employment sub-component of the index fell to 46.0 from January’s 47.0. The official PMI survey, which tends to focus on larger, state firms, has shown persistent declines in employment for the last 3-1/2 years. To be sure, although Markit adjusts figures for seasonal effects, the timing of the long Lunar New Year holiday can make Chinese data in January and February difficult to interpret. Economic activity slows dramatically around the holiday, which falls on a different date in late winter every year.
KEY POINTS Business surveys show further deterioration in China economy Official factory PMI falls to 4-yr low 49.0 (vs f’cast 49.3) Services PMI falls to 52.7, weakest since late 2008 Caixin/Markit PMI falls to 48.0 (vs f’cast 48.3) Caixin employment component falls to lowest level since 2009
Still, the findings in the latest surveys have dashed hopes that a year-long blitz of stimulus measures would start to produce signs of economic stabilisation early in 2016. China’s factory sector has been under pressure from weak demand at home and abroad and massive
overcapacity in key industries such as steel and coal, diluting the impact of six central bank interest rate cuts and a spate of other support measures since November 2014. Industrial profits fell 2.3 percent in 2015 after rising 3.3 percent in 2014.
Mainlanders adapt offers to allay U.S. regulatory fears For a third straight year China was the country whose planned U.S. acquisitions and investments were the most scrutinized by regulators
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hinese companies are offering to pay record break-up fees and are willing to settle for minority stakes in U.S. mergers and acquisitions in an attempt to assuage concerns of potential overseas partners about regulatory snags scuttling the deals. The unprecedented concessions come as China pursues record M&As abroad to offset slowing economic growth at home and a weakening currency. They also come as U.S. scrutiny of Chinese-initiated M&A remains high, making its partners uneasy and forcing several deals to be abandoned. The stakes for China are particularly high in the technology sector as Beijing seeks to become a global semiconductor powerhouse, relying mainly on offshore M&As to achieve its goal. The biggest concerns are about the Committee on Foreign Investment in the United States (CFIUS), an interagency panel that scrutinizes deals for national security concerns. CFIUS, which comprises 16 U.S. government departments or agencies, does not publish its decisions or its reasoning for them. Reflecting CFIUS worries, China’s HNA agreed last month to a hefty US$400 million in reverse termination fees for its US$6 billion purchase of
electronics distributor Ingram Micro. This was the first time any material break-up fee was introduced in a U.S. deal covering CFIUS, bankers familiar with the matter said. The usual break-up fee is about 1-1.5 percent of a deal’s value, but HNA agreed to pay 6.6 percent. And China Resources Microelectronics and Hua Capital agreed to pay a total of US$200 million in termination fees, or 8 percent of the deal value, to buy Fairchild Semiconductor International. The previous largest CFIUSrelated termination fee was US$30 million when commodity trader Glencore offered US$6.2 billion to buy Viterra in 2012.
Pulled deals
China’s goal to become a global semiconductor powerhouse has meant prized U.S. tech assets are a focus of its overseas deals. The value of China’s announced outbound M&A into the United States has already hit a record US$23 billion this year, more than double that of the whole of 2015, according to Thomson Reuters data. But in a sober reminder of the U.S. regulatory hurdles, deals worth US$10 billion involving U.S. targets have been pulled just this year alone.
KEY POINTS China firms willing to pay record break-up fees for U.S. deals China’s M&A into U.S. hits record $23 bln in 2016 Smaller deals in less‑sensitive sectors may be way ahead-analysts
That includes China’s Unisplendour Corp’s US$3.78 billion investment in U.S. hard-disk maker Western Digital Corp. And, for a third straight year in 2014, China was the country whose planned U.S. acquisitions and investments were the most scrutinized by U.S. regulators for security implications, according to a report by CFIUS. To mitigate the extra scrutiny, Chinese companies are seeking joint ventures as opposed to an outright purchase, bankers said. “People are definitely talking about doing more non-control deals,” said James Lidbury, a partner with law firm Ropes & Gray. “A minority stake buy is still doable, but a board seat is problematic. It would also help if you are privately owned, but still there will be a lot of questions from CFIUS in the course of the review,” he added. Yet another way to sidestep the added scrutiny is to aim for mid-sized deals and focus on sectors which are less sensitive, M&A bankers said. The recent US$640 million deal by China’s Suzhou Dongshan Precision Manufacturing Co to buy printed circuit board maker Multi-Fineline Electronix is a case in point, they said. Reuters
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March 2, 2016
Greater China The government has made cutting overcapacity in steel and other “old economy” sectors a priority this year, though previous efforts have run into strong resistance locally as big firms are often a key source of tax revenue and employment. Recent tax changes have also raised concerns that China hopes to export more of its excess industrial capacity abroad, further worsening global gluts of chemical and steel products and effectively exporting deflation abroad.
Services softening?
Both surveys yesterday showed further contractions in domestic and export orders, suggesting industrial output will remain sluggish in coming months. In addition, some manufacturers in capital-intensive sectors are struggling with heavy debt loads,
which are becoming increasingly difficult to repay as they have to constantly cut prices to win sales. Last year witnessed a rash of bond defaults by steel, cement and chemical firms. Chinese factory gate prices fell for the 47th straight month in January.
Reserve ratio cut seen boosting demand for corporate bonds Cheaper financing is crucial as more Chinese firms struggle to repay debt amid the weakest economic growth in a quarter century
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hina’s move to cut the amount of cash lenders must hold in reserve will help boost investor demand for the nation’s corporate bonds, brokerages said. The required reserve ratio will drop by 0.5 percentage point effective March 1, the People’s Bank of China said after the country’s markets closed Monday. The yield premium on toprated corporate notes due in five years over government securities has fallen 36 basis points in the past year to 67 basis points, and touched an eightyear low of 54 last month. “The loose monetary environment will help ease credit risks,” said Sun Binbin, a bond analyst at China Merchants Securities Co. in Shanghai. “The credit spread in China’s bond market will stay tight.” Cheaper financing is crucial as more Chinese firms struggle to repay debt amid the weakest economic growth in a quarter century. Baoding Tianwei
Group Co., a maker of electrical transformers that last year became the first state-owned company to renege on onshore debentures, again failed to repay bonds that fell due last week. Policy makers have sought to balance vows to liberalize financial markets
A growth slowdown in China’s services sector last month was also singled out by analysts as a cause for concern. The official non-manufacturing PMI fell from 53.5 in January to 52.7 in February, still in expansion territory but the weakest reading since late 2008. The services sector has been taking up an increasing amount of economic slack as manufacturing cools, but analysts have wondered how long it can remain resilient in the face of the prolonged factory slump and increasing unemployment. With manufacturing in both a cyclical and structural funk, Beijing has been keen to grow the services sector and make consumption a stronger driver of the economy. “Today’s data suggest that policy makers will take further measures in the upcoming National People’s Congress in order to achieve a GDP growth target of 6.5 to 7 percent in 2016,” ANZ economists said in a note. “A proactive fiscal policy will be needed to support investments and we expect the fiscal deficit could be increased to a range of 3-4 percent in 2016, from 2.3 percent in 2015” in order to boost government spending. Reuters
with steps to prevent a sharper jump in debt failures.
Policy support
“There hasn’t been an explosive increase in bond defaults even though the economy is slowing, and that’s all because of the loose monetary policy,” said China Merchants Securities’ Sun. Notes issued by local government financing vehicles and property developers are worth investing in because the government is supporting the sectors to help avert worse cooling of economic expansion, Sun said. Riskier borrowers may still face an increasingly difficult time, according to Ji Weijie, an analyst at China Securities Co. in Beijing. While the reserve ratio cut will help pump liquidity into the financial system, it won’t reduce credit risks “significantly,” said Ji Weijie, an analyst at China Securities Co. in Beijing. “Banks are unwilling to lend to risky companies even with the lower reserve requirement for fear of mounting bad debts.” Bloomberg News
Fed’s Dudley optimistic on mainland’s transition New York Federal Reserve President William Dudley said yesterday he was optimistic that China’s economic transition could be managed, and said policymakers were doing a good job reorienting growth toward consumption. “I think that they are on the right course. Obviously, this is difficult to manage because it’s a big, complex economy so I would not be surprised if there were a few bumps... but I think that I’m quite optimistic that this transition can be managed,” he said. Dudley, a permanent voter on U.S. monetary policy, was speaking at a forum in the Chinese city of Hangzhou.
Punished over poverty relief corruption China had punished a total of 35,240 people for corruption in poverty relief in rural areas from 2013 to November 2015, the Supreme People’s Procuratorate (SPP) said on Monday. This accounted for 22.3 percent of work-related corruption prosecutors dealt with during the period. Poverty relief corruption includes embezzlement by village officials due to lack of transparency or supervision. In 2009, Chengde county in Hebei province received 3 million yuan (US$460,000) to develop a broiler industry. Villagers in Bajiaxiang township were allowed only 10,000 yuan each but they had to sign for 15,000 yuan.
Lew says risk of competitive devaluation reduced U.S. Treasury Secretary Jack Lew said the key takeaway from the conclusion of the G20 meetings in Shanghai was that no country would competitively devalue their currency in a way that would trigger the outbreak of a fresh round of currency wars. “Leaving the Shanghai G20 with the risk of competitive devaluation greatly, greatly reduced because of the commitment is significant,” he told reporters in Hong Kong. The world’s top economies declared on Saturday that they need to look beyond ultra-low interest rates and printing money to shake the global economy out of its torpor.
Hong Kong yuan deposits up Yuan deposits in Hong Kong, the world’s biggest offshore yuan centre, rose 0.1 percent to 852.1 billion yuan (US$130.30 billion) in January from the previous month, according to the Hong Kong Monetary Authority. Cross-border trade settlement stood at 480.1 billion yuan for the month, compared with 667.5 billion yuan in December.
Vehicle reform for central government completed Car reform for the central government has been fully accomplished, the National Development and Reform Commission (NDRC) said yesterday. Car reform in public institutions and state-owned enterprises has also begun, and that of local governments is actively being promoted, according to the NDRC. A total of 3,868 official cars across 140 central government departments were taken out of service by the end of 2015, accounting for 62 percent of all government vehicles. All impounded cars, after their legal documents are verified, will be either auctioned or dismantled depending on their condition.
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Greater China
MSCI deletes closely-held Hong Kong stocks amid investor pressure Rules require holdings of five percent or more of a company’s voting share capital to be disclosed Michelle Price
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oldin Properties and casino operator Imperial Pacific were among 18 companies deleted from MSCI indices yesterday, the index provider said, amid growing investor concerns over shareholder concentration at Hong Konglisted companies. The unusual decision by the New York-headquartered company is a blow to Hong Kong’s status as an international financial centre, shining a spotlight on the lack of transparency around shareholder structures. Many Hong Kong companies are owned by a small group of shareholders who cannot always be identified through public filings, making their stock more vulnerable to manipulation. “MSCI’s decision represents a market-led response to the problem of shareholder concentration in Hong Kong and is one of the rare cases of institutional activism in the financial centre,” said Bryane Michael, senior fellow at the University of Hong Kong specialising in corporate governance.
Many Hong Kong companies are owned by a small group of shareholders who cannot always be identified through public filings
“Studies find in Hong Kong that companies with concentrated shareholdings exhibit more earnings manipulation, so MSCI’s decision makes good sense for investors.” Hong Kong rules require holdings of five percent or more of a company’s voting share capital to be disclosed, a requirement that MSCI has said may be insufficient to
estimate the free float for some companies. The Hong Kong Securities and Futures Commission (SFC) has issued notices warning investors about companies with a high shareholder concentration since 2009. MSCI has said it will from now on remove companies that appear on the SFC’s warning list. MSCI’s decision was
triggered by feedback from some of its clients - the world’s largest investors that a lack of liquidity in these stocks made it tough for fund managers to replicate MSCI’s Hong Kong and China benchmarks, people with knowledge of these private discussions told Reuters. The issue attracted more attention after a series of wild price swings in Hanergy Thin Film and Goldin Properties last May sparked fears the stocks were being manipulated, these people said. BlackRock, MSCI’s largest client, told Reuters it supported MSCI’s decision but did not elaborate further. Deutsche Bank and HSBC, two of MSCI’s largest Greater China clients, declined to comment. MSCI added Hanergy and Goldin Properties, both of which are majority owned by their founder-chairmen, to its indices in 2012 and 2015 respectively after the companies enjoyed a meteoric rise in their share price. MSCI removed Hanergy in September after the SFC suspended the shares and
launched an investigation. Hanergy said in a filing on Friday it is seeking to address the SFC’s concerns and resume trading. A spokeswoman for Goldin Properties, which also saw its share price rocket before collapsing, declined to comment but last month said the deletion would not impact its business. Imperial did not immediately respond to requests for comment. Asked about the MSCI’s decision, Ashley Alder, chief executive of the SFC, told reporters last week it did not reflect poorly on Hong Kong’s corporate governance regime. Investors said, however, that there was room for improvement when it comes to shareholder disclosure. “Hong Kong is quite advanced on corporate governance issues compared with other Asian markets but I do think we need greater disclosure about who actually owns listed entities,” said Yoo-Kyung Park, director, sustainability and governance Asia at APG Asset Management Asia in Hong Kong. Reuters
Airbus sees no serious impact on domestic plane market Aircraft leasing firms owned by Chinese banks and companies are becoming an important source of planes globally Fang Yan and Matthew Miller
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irbus said it expects China’s aviation market, the world’s second-largest, to come out relatively unscathed from the country’s economic slowdown and provide demand for 5,400 new airplanes over the next 20 years. The European plane maker is also considering boosting its bets on China, and is studying if it should increase the production rate there at its A320 assembly line, Airbus China chief Eric Chen told a media briefing in Beijing. Airbus set up the A320 line in Tianjin in 2008, which is located adjacent to a new A330 completion and delivery centre. Chen said ahead of a ground-breaking ceremony for the centre that Airbus expects the new A330 centre to deliver a jet per month starting in 2017, rising to two per month in the following two years. Despite China’s economic slowdown, aircraft manufacturers like Airbus and Boeing remain buoyant about the long-term demand for air travel in the country.
KEY POINTS Forecasts demand for 5,400 new aircraft in China over 20 years Considering higher output rate at Tianjin A320 plant
The number of Chinese leisure travellers going overseas for the first time topped 100 million in 2014, official data shows. Foreign travel is tipped to grow another 10 percent this year as the United States, France and Australia ease visa policies. State-owned carriers Air
China, China Eastern Airlines, China Southern Airlines and their subsidiaries dominate the Chinese airline market, but they increasingly face stiff competition from HNA Group subsidiary Hainan Airlines and budget airline Spring Airlines . Aircraft leasing firms owned by
Chinese banks and companies are also becoming an important source of planes globally. Collectively, these airlines and leasing firms have placed orders for hundreds of Airbus and Boeing aircraft worth tens of billions of dollars. Reuters
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March 2, 2016
Asia
South Korean exports tumble in February Exports to China shrank 12.9 percent in February from a year earlier Christine Kim and Choonsik Yoo
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outh Korean exports in February tumbled in their 14th consecutive month of declines, with the longest slump in the country’s modern history underscoring how a slowdown in China is putting tradereliant economies on the skids. The bleak overseas sales from the world’s sixth-largest exporter, home to globe-trotting manufacturers of mobile phones to cars to ships, suggest policy makers will have their work cut as they seek to spark growth in the face of faltering demand. Lower oil prices also hurt South Korean exports in February, which dropped 12.2 percent from a year earlier to US$36.42 billion, while imports slumped 14.6 percent to US$29.02 billion, producing a US$7.39 billion trade surplus. February’s exports marked the
longest period of consecutive annual declines on record and brought the country’s monthly exports in U.S. dollar value down by 30 percent from a record high of US$51.6 billion set in early 2014, official data shows. The persistent weakness in exports robs the economy of a key engine of growth and is likely to add pressure on the country’s central bank to cut the policy interest rate further after two reductions last year. “We expect manufacturing to be a drag on Korea’s growth again in 2016,” Tim Condon, economist at ING in Singapore, said in a note to clients. “We also think growth worries will prompt the Bank of Korea to cut (the policy interest rate) by 25 bp to 1.25 percent in the second quarter.” The Bank of Korea next reviews its policy on March 10.
Exports to China, South Korea’s largest market with one-quarter of total shipments, shrank 12.9 percent in February from a year earlier, overshadowing modest gains in sales both to the United States and the European Union. South Korea’s February export decline was less than a revised 18.8 percent drop in January but this was likely due to there being one more working day in February this year than last year. Official data released over the past week showed consumer sentiment slid to an eight-month low and confidence among manufacturing firms at its gloomiest since the 2008/2009 global financial crisis. Ominously, a stuttering global economy holds little hope for the many struggling businesses.
Australia announces media deregulation, paving way for acquisitions The reforms could provide a lifeline to Australia’s struggling newspaper industry Jarni Blakkarly
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egislation to change media ownership laws in Australia will be put before parliament, the government said yesterday, opening the door for a potential raft of mergers and acquisitions from major media companies such as News Corp. The bill will be introduced in parliament today and is expected to be passed in the
next several months with support of independent senators. The so-called ‘two out of three’ rule which prevents any company from owning a free-to-air TV network, newspaper and radio station at the same time will be scrapped. Restrictions on urban TV networks purchasing rural stations will also be
removed. “The media ownership regulations were written before paid television, before the Internet and have been out of date for years ... we are bringing media ownership regulation laws into the 21st century” Prime Minister Turnbull (pictured) told parliament. The reforms could provide a lifeline to Australia’s
KEY POINTS February exports -12.2 pct y/y (Reuters poll -15.5 pct) Exports fall for 14th mth, longest spell on record Turnaround depends on oil prices and China “It’s meaningless to talk about the timing for exports hitting the bottom as oil prices and global demand both show no sign of turning around,” said Park Sang-hyun, chief economist at HI Investment & Securities.
struggling newspaper industry, which is dominated by News Corp’s Australian unit and rival Fairfax Media Ltd, both of whom are expected to consider merging their newspaper and radio stations with a major TV network. News Corp and Fairfax have both seen sharp drops in newspaper circulation numbers in recent years and widespread job losses, as readers increasingly move online for news, disrupting advertising revenue and traditional business models. TV companies Nine Entertainment Corp, Ten Network Holdings and Seven West Media are all tipped to merge with their rural counterparts. Shares in Nine and Ten have risen, 6.3 percent and 4.7 percent respectively since newspapers reported details of the proposed changes at the start of last week, while shares in Seven have jumped by 34.4 percent. Shares in News Corp Australia have remained flat. Shares in Fairfax have
Reuters
dropped 6.9 percent, however analysts ascribed the fall to the company’s weaker than expected results. However, the changes did not go as far as Australianborn media mogul Rupert Murdoch had wanted. News Corp’s local pay-TV provider, Foxtel, had been pushing for changes to laws that require major sporting events to be shown on freeto-air TV. News Corp said yesterday, in an emailed statement to Reuters, that the proposed legislation was a step in the right direction, though last week, News Corp Australia Chief Executive Michael Miller said the company was “disappointed”. “It difficult to accept this as genuine media reform,” Miller told the Australian Broadcasting Corp. Communications Minister Mitch Fifield said the government’s proposals were drawn from the media industry’s broadest consensus. Reuters
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Asia
Australia’s central bank bucks global easing trend Data out yesterday seems to add to the case for an eventual easing Wayne Cole
KEY POINTS RBA keeps rates at 2 pct, sees reasonable economic growth Net exports make no contribution to GDP growth in Q4 GDP expected to rise 0.4 pct q/q, 2.5 pct y/y
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ustralia’s central bank stared down global headwinds and kept interest rates steady for a tenth month yesterday, even as surprisingly soft data suggested the domestic economy hit an air pocket at the end of last year. While central banks from China to Japan are going for even more stimulus, the Reserve Bank of Australia (RBA) held rates at 2 percent at its March meeting.
The prospect of a further easing was left on the table, but a virtually unchanged statement showed little inclination to act. “The Board judged that there were reasonable prospects for continued growth in the economy,” RBA Governor Glenn Stevens said in a brief statement. “Continued low inflation would provide scope for easier policy, should that be appropriate to lend support to demand.”
In a Reuters poll of 40 analysts, all but one had expected no change in the cash rate this week which limited the reaction in markets to a slight rise in the local dollar. Stevens again noted that the central bank was watching if the labour market could sustain its strength or whether wild swings in global markets would have a lasting impact, but left the questions open. Since last easing in May, the central
To let: Singapore office vacancies to increase as economy falters Broader cost-cutting at banks is likely to have an impact on vacancies Aradhana Aravindan
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acancies at Singapore’s gleaming office towers are nearing their highest level in almost a decade, with construction of the city-state’s tallest building - GuocoLand Ltd’s 64-floor block in the financial district - wrapping up just as the economy slows. Singapore’s exportoriented economy has been hit by the slowdown in China
and beyond, which has also put pressure on key sectors such as marine oil and gas, commodity trading and banks. Last year, the economy grew at just 2 percent, its slowest pace since 2009. A January review by real estate services firm JLL of major foreign international banks in the financial district showed half had either reduced the size of their office
space over the past year and a half, or had to contend with extra space. Analysts predict vacancy rates will continue to rise this year, with JLL estimating prime office rents to fall between 10 percent and 20 percent after dropping 15 percent last year in a city that is ranked the eleventh most expensive in the world to rent top quality offices.
bank has shown a clear preference for further stimulus to come through a low currency. Central banks world wide are keen to keep their currencies competitive as they take ever more aggressive steps to revive growth. That is one reason investors are still wagering on at least one more rate cut, with interbank futures fully priced for 1.75 percent by August. “We suspect the RBA will become disheartened by further shifts towards lower and negative cash rates globally, giving rise to increased risk that the AUD trades above levels which it sees as fair,” said Andrew Ticehurst, an economist at Nomura. “We continue to look for a 25 basis points cut in May.” Australian data out yesterday seemed to add to the case for an eventual easing. Net exports added nothing to gross domestic product (GDP) last quarter when analysts had looked for a contribution of around 0.3 percentage points. That left analysts forecasting a rise of around 0.4 percent in GDP last quarter, less than half the gain made in the third quarter. Annual growth is seen stuck at 2.5 percent, better than most of the rich world but substandard for Australia.
Nicholas Mak, executive director at SLP International Property Consultants, said many of the buildings that are now ready for occupancy were planned about five years ago, towards the end of the global financial crisis. “Many people thought that this is the new boom, let’s try to capitalise on it. Nobody expected the party to end by end of 2015,” he said, adding that office vacancy rates could hit 13.5 percent, a level not seen since 2005. Broader cost-cutting at banks due to the slowdown in the global economy is likely to have an impact on vacancies as financial institutions are key tenants for prime commercial space in Singapore. Barclays will cut about 1,000 jobs in investment banking worldwide and close its cash equities business in Asia, an internal memo seen by Reuters showed. Societe Generale gave up two floors in an office
Reuters
tower after selling its private banking activities in Asia to DBS Group Holdings in end2014. It added three-quarters of a floor to existing space in another building. Mak said vacancy rates could improve by the end of next year if the economy picks up and as demand catches up with the supply, easing the glut. In the meantime, office landlord are limiting the number of leases that will expire over the next couple of years as well as diversifying their tenants to cope with the glut. “This will be a short-term blip,” Lynette Leong, chief executive of CapitaLand Commercial Trust, said in January. Banking, insurance and financial services represented 33 percent of CapitaLand Commercial Trust’s tenant mix at end-2015, compared with 38 percent five years ago, its results show. Reuters
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March 2, 2016
Asia
Japan setting up panel to debate new spending
Indonesia’s inflation rate accelerates
A 2 percentage-point sales tax hike will cost consumers around 5 trillion yen Stanley White
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apanese Prime Minister Shinzo Abe will convene an advisory panel to consider an extra budget for the coming fiscal year, sources told Reuters, days after the Group of 20 nations urged more fiscal spending to support the ailing global economy. Abe announced the plan yesterday, saying the panel would help him prepare for hosting a Group of Seven summit in May where the fragile state of global growth is sure to top the agenda. “We need to do more to ensure stable growth for the world economy,” Abe told reporters. “I want to hear the frank views of experts and well-known economists from both inside and outside Japan. We need to debate how G7 countries can cooperate.” Financial market turmoil and economic contraction at the end of last year have increased pessimism about Japan’s domestic demand, but rising tax revenue and falling bond yields suggest it now has more leeway to spend. Finance Minister Taro Aso told reporters on February 23 that he would not rule out compiling a stimulus package for fiscal 2016/17, which starts from April. “If there are changes in the economy, then it’s natural to respond with an extra budget,” said an official involved in fiscal policy, who told Reuters the government was seriously leaning toward more spending. “Cash hand-outs for pensioners have only just started, but this could be an option,” the official said, referring to a policy that will start next month. Timing was not yet clear on an extra package, he said, though ruling party heavyweight Toshihiro Nikai has said he suspected it was being prepared ahead of elections expected in July. Abe advisor Masahiko Shibayama has also said the next package could include spending on childcare and
elderly care to reduce the burden on the working population. Economists are building extra spending into their forecasts. “We are already factoring in an extra budget for money to be spent in fiscal 2017,” said Masamichi Adachi, senior economist at JP Morgan Securities. “Nominal growth is good, and tax revenue is nominal, so the government should have enough money to spend.”
Sales tax conundrum
A spending boost could also offset the coming blow from a rise in sales tax to 10 percent from 8 percent in April 2017. The government tried the same thing when it raised the tax to 8 percent from 5 percent in 2014, but its 5.5 trillion yen (US$49 billion) stimulus package was not enough to stop a recession. This time the size of the tax increase is smaller, and the government has already agreed to exempt food and other everyday goods, but politicians are worried. Yoshihide Suga, the government’s top spokesman, said on Friday taxes should not be raised if it caused revenue to fall, suggesting a delay is possible. A 2 percentage-point sales tax hike will cost consumers around 5 trillion yen, so the government needs to spend 5 to 10 trillion yen to keep consumption on track, economists say. “The size of fiscal stimulus should be at least equally as large as last time, possibly larger, given the global situation,” said Hiroshi Shiraishi, senior economist at BNP Paribas Securities. Tax revenue is closely correlated with nominal gross domestic product growth, and on that measure Japan is set for a windfall, economists say. Last calendar year, nominal GDP expanded at the fastest pace since 1994, when comparable data
first became available. The finance ministry expects fiscal 2015/16 tax revenue to reach a 24-year high of around 56 trillion yen, more than their original estimate of 54.5 trillion yen. Even if nominal growth slows, fiscal 2016/17 tax revenue could still top the government’s estimate of 57.6 trillion yen, economists say. And the government could bring forward bond issuance, they say, as it can borrow at no cost, given the Bank of Japan’s (BOJ) negative interest rate policy. Critics say Japan already has the world’s worst debt burden at twice the size of its economy and runs large budget deficits, so risks triggering a downgrade by credit rating agencies. Fiscal doves argue that weakness in the world economy justifies it, and in any case bond markets are immune to ratings agencies while the BOJ is pumping out money through its quantitative easing programme. At a weekend summit the G20 sided with the doves by calling for more fiscal spending and less reliance on monetary policy to help the fragile global economy, which some investors say has reached its limit after years of quantitative easing and negative real interest rates. BOJ Governor Haruhiko Kuroda has supported that position, saying each country has agreed to use all available policy tools. Abe’s new advisory panel will meet about five times before Japan hosts a Group of Seven summit in late May, and Japan hopes its debate on an extra budget will encourage other countries to shift away from fiscal austerity, sources said. “This may not influence Europe, but China, South Korea and other Asian countries could follow Japan’s spending approach,” said Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities. Reuters
Indonesia’s annual inflation rate in February slightly rose to 4.42 percent from a year earlier compared with January as food prices pick up. The national statistic bureau announced on Tuesday in Jakarta that February’s annual rate was higher than the 4.14 percent recorded last month. The consumer price index fell 0.09 percent on monthly basis, slowing from 0.51 percent in January, as food prices and electricity tariff dipped, Suryamin, head of the bureau said. However, the pace of price declines was deeper last year, the annual rate still increased.
Dairy prices drag down New Zealand terms of trade
Falling dairy prices in the quarter to the end of December 2015 dragged down New Zealand’s terms of trade for the second quarter in a row, the government statistics agency said yesterday. The merchandise terms of trade fell 2 percent year on year in the December quarter, following a 3.8-percent fall in the September 2015 quarter, according to Statistics New Zealand. The fall in the terms of trade -- meaning a drop in the imports-purchasing power of New Zealand exports -- was due to goods export prices falling more than import prices, said the agency.
Japan’s GPIF earns US$42 bln in Oct-Dec Japan’s giant public pension fund said yesterday it earned 4.7 trillion yen (US$41.8 billion) in the October-December period as both domestic and foreign equities rose, pushing its asset value to 139.8 trillion yen. The Government Pension Investment Fund (GPIF) earned 2.9 trillion yen on domestic equities and 1.5 trillion yen on foreign equities during the quarter, the fund said. As of end-December, the GPIF had 37.76 percent of its assets in Japanese government bonds, 23.35 percent in Japanese equities, 13.50 percent in foreign bonds, 22.82 percent in foreign equities and 2.57 percent in short-term assets.
Australian deputy PM urges local investment in agriculture
Japanese Prime Minister Shinzo Abe (C) chats with legislators during Monday’s parliamentary session
Australia’s deputy prime minister yesterday urged the country’s A$1.8 trillion (US$1.3 trillion) pension fund industry to boost its investment in agriculture as the sector gears up to meet strong demand from Asia. While foreign interest in Australian agriculture has soared, Barnaby Joyce, who is also the agriculture minister, said it was baffling that local pension funds had just 0.3 percent of their total investment portfolio in the growing sector. Australia’s second-biggest export earner behind iron ore, shipments of agricultural produce are forecast to hit a record A$45 billion next year, but the industry is facing a shortage of investment.
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International African private equity fundraising to fall African private equity funds are likely to raise less cash for investments this year after a bumper year in 2015, the African Private Equity and Venture Capital Association (AVCA) said. Private equity funds investing on the continent closed funding rounds worth US$4.3 billion last year, up from US$1.9 billion the previous year, AVCA said in its Annual African Private Equity Data Tracker seen by Reuters yesterday. “2015 was a bumper year for fundraising, with a handful of large funds achieving final closes during the year,” the association said.
U.S. small business borrowing at lowest level since 2014 U.S. small business borrowing fell 13 percent in January to the lowest level in more than a year, data released on Tuesday showed, a fresh sign that economic growth could weaken in the coming months. The Thomson Reuters/ PayNet Small Business Lending Index registered 118.2 in January, the lowest level since November 2014. The PayNet index typically corresponds to U.S. gross domestic product growth one or two quarters ahead. “This is a dramatic form, an extreme form of hunkering down,” said Bill Phelan, president of PayNet.
Iran must privatise car industry, president says Iran’s car industry must be privatised to meet the government’s goal of turning it into a global competitor, the president said yesterday, sending a strong signal of his intention to open up the country’s economy to world markets. Hassan Rouhani said Iranian carmakers, which form the second biggest sub-sector of the economy behind oil, should cooperate closely with foreign companies to improve the quality of their products.
Argentina reaches deal with “vulture” funds Argentine Finance Minister Alfonso PratGay confirmed that Buenos Aires had reached an agreement with so-called vulture fund creditors holding overdue debt bonds, which is a great step toward restoring the South American country’s financial position. The agreement concludes drawn legal wrangling in a U.S. court and will allow the government to “regain (access to) credit and trust, both abroad and at home,” said PratGay. Daniel Pollack, the court-appointed mediator in the case, said on Monday that the agreement in principle would see Buenos Aires “settle all claims” with the payment to those vulture fund creditors holding long-defaulted bonds.
Insurers find Google a potential rival More than 40 percent of insurers see Google as a potential threat because of its strong brand and ability to use customer data, a report released yesterday said. And young, mobile phone-friendly consumers may bypass traditional insurers for “new, more nimble” competitors, consultancy Capgemini’s annual world insurance report said. Google beat other household names Amazon and Wal Mart as the biggest new entrant threat, based on interviews with more than 150 insurance executives. Insurers are looking to use technology to gain more information about their customers and potentially offer them lower-cost insurance.
ICE confirms it may bid for LSE Group Deutsche Boerse and LSE last week announced plans to combine and create a global player worth at least US$28 billion
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ntercontinental Exchange Inc. said it is considering making an offer for London Stock Exchange Group Plc, a week after Deutsche Boerse AG said it was in merger talks with the U.K. company. ICE said in a statement that it hasn’t taken a final decision on whether to make an offer, nor has it approached LSE’s board about doing a deal. “There can be no certainty that any offer will be made, nor as to the terms on which any offer will be made,” ICE said in the statement. ICE, which is based in Atlanta and owns the New York Stock Exchange, is working with advisers including Morgan Stanley to prepare a possible higher offer for LSE, according to people familiar with the matter, who asked not to be identified because talks are private. While the U.S. firm is aware it may face political and corporate pushback if it tries to break up the European marriage, ICE has concluded that LSE shareholders can be persuaded by a higher offer, the people said. At the least, a counterbid could force Deutsche Boerse to increase its offer, one of the people said. CME Group Inc. is also working with advisers to assess whether it could challenge the deal, separate people familiar with the matter said. While a counterbid for LSE is the most likely option that CME is studying, discussions are at an early stage and the Chicago-based exchange may choose not to proceed, they said.
Takeover deadline
ICE is unlikely to make a move before the March 22 U.K. takeover deadline for Deutsche Boerse to make a formal
offer for LSE, one of the people said. Representatives LSE, Morgan Stanley and CME declined to comment. A representative for Deutsche Boerse didn’t immediately respond to requests for comment. The exchange business is rife with acquisitions. ICE, led by Chief Executive Officer Jeff Sprecher, became a global powerhouse in part through its dealmaking, such as the 2013 purchase of NYSE Euronext, which gave it a derivatives business called Liffe. And in October, Sprecher expanded its data-services business with the US$5.2 billion acquisition of Interactive Data Holdings Corp. ICE also is no stranger to unsolicited offers for competitors. In 2007, the Chicago Mercantile Exchange prevailed in its quest to buy the Chicago Board of Trade (CBOT) over an unsolicited US$11.8 billion offer from ICE. Kelly Loeffler, an Intercontinental executive and Sprecher’s wife, paid a bellboy at the Boca Raton Resort
& Club to slip the CBOT proposal under the doors of Charles Carey and Bernard Dan, the chairman and CEO of CBOT, at 6:45 a.m. that morning, a person with direct knowledge of the matter said in 2012. The ICE counteroffer forced the Chicago Merc to improve its bid three times. Deutsche Boerse and LSE last week announced plans to combine and create a global player worth at least 20 billion pounds (US$28 billion), which could better compete with ICE as well as CME Group Inc., the world’s largest derivatives market. A German-British merger could also give customers a one-stop shop for primary markets in London, Frankfurt and Milan, as well as access to a pan-European stock venue called Turquoise. The transaction would also gather the Euro Stoxx 50 Index, the most valuable equity benchmark in Europe, and FTSE Russell’s portfolio of indexes under the same roof. Bloomberg News
EU, Canada make breakthrough on trade deal The new deal includes important modifications to the contested investor protection system
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he European Union and Canada announced a major breakthrough towards completing a delayed free trade deal on Monday with hopes that the accord could be in effect next year. Canadian and European leaders formally concluded the deal in 2014, but implementation has been delayed due to last-minute objections in Europe over provisions to create an investment protection system that would help protect companies from government intervention. This system is key to a similar but far more ambitious agreement currently under negotiation between the EU and US and has drawn fierce criticism, especially in powerful Germany where hundreds of thousands of people rallied in October to oppose both accords. Opponents say the measure favours big business, which could
fight local rulings -- such as health and safety regulations -- that violate the trade deal and threaten their investments. “Canada and the European Commission are very pleased to announce that the legal review of the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) ... has been completed,” EU Trade Commissioner Cecilia Malmstroem and Canada’s Trade Minister Chrystia Freeland said in a statement. “We are confident that CETA will be signed in 2016 and enter into force in 2017,” they said. The new deal includes important modifications to the contested investor protection system, including leaving more power to governments to regulate freely and the creation of a full-fledged court that would handle complaints.
“This is really a gold plated trade deal,” Canada’s Freeland said at a briefing in Ottawa, calling it a “landmark trade agreement”. Canada signing off on the changes is a significant victory for the European Commission, which is facing huge pressure to have the US agree to the same offer. “This is virtually 100 percent what we have proposed to the United States,” a senior EU official told AFP. The measures are also being inserted into a draft EU-Vietnam deal reached last year, with the longterm ambition of having the new court system become universal and not just limited to EU deals. The EU is second only to the United States among Canada’s trading partners, while Canada ranks as the 12th most important trading partner for the EU. AFP
Business Daily | 15
March 2, 2016
Opinion Business
wires
China’s volatile growth
Leading reports from Asia’s best business newspapers
TAIPEI TIMES Sate-run banks have taken the lead in launching reverse mortgages for older homeowners, while their privately run peers have remained on the side-lines because of related credit risks and a lack of government assurances. Reverse mortgages allow older homeowners to borrow money against the value of their home to fund their retirement. Since launching reverse mortgages toward the end of last year, state-run Land Bank of Taiwan has completed 22 transactions totalling NT$165 million (US$4.93 million), while Taiwan Cooperative Bank has carried out 36 transactions totalling NT$320 million.
THE STRAITS TIMES Singapore’s top companies have led from the front in helping to remedy one of the blights on the local corporate scene - the under-representation of women on company boards. A new report has found that across the 30 listed companies comprising the blue chip Straits Times Index, 10.2 per cent of board seats were held by women last year, up from 7.6 per cent in 2014. It was an even brighter picture for new appointments, with women accounting for 27 per cent, significantly higher than the overall 14 per cent, said the Diversity Action Committee.
As private consumption has expanded, services have proliferated, generating employment for many
Michael Spence
a Nobel laureate in economics, is Professor of Economics at New York University’s Stern School of Business and Senior Fellow at the Hoover Institution
BANGKOK POST Global rubber prices are expected to recover this year after Vietnam last week agreed to join forces with three other Asean rubber producers to cut exports. Bundit Kerdvongbundit, vice-president of Von Bundit Co, said the International Rubber Consortium last Friday agreed on plans for Thailand, Indonesia and Malaysia to cut their rubber exports by 15% each over the next six months to reduce supplies and boost prices. The three countries also agreed to increase domestic consumption of rubber including for road and railway construction.
INQUIRER Local oil firms (in Philippines) implemented mixed fuel price adjustments this week amid increased market volatility as members of the Organization of Petroleum Exporting Countries (OPEC) remain divided on how to respond to the continued drop in oil prices. In separate announcements, major oil firms Petron and Shell raised the price of gasoline by 20 centavos per litre, but lowered the prices of kerosene by 15 centavos per litre and diesel by 10 centavos per litre effective 6 a.m. yesterday. Seaoil, one of the larger minor oil companies, likewise announced similar price adjustments effective also today.
Fred Hu
Chairman and Founder of Primavera Capital Group, a China-based global investment firm
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ncertainty about China’s economic prospects is roiling global markets – not least because so many questions are so difficult to answer. In fact, China’s trajectory has become almost impossible to anticipate, owing to the confusing – if not conflicting – signals being sent by policymakers. In the real economy, the export-driven tradable sector is contracting, owing to weak foreign demand. Faced with slow growth in Europe and Japan, moderate growth in the United States, and serious challenges in developing countries (with the exception of India), the Chinese trade engine has lost much of its steam. At the same time, however, rising domestic demand has kept China’s growth rate relatively high – a feat that has been achieved without a substantial increase in household indebtedness. As private consumption has expanded, services have proliferated, generating employment for many. This is clear evidence of a healthy economic rebalancing.
The situation in the corporate sector is mixed. On one hand, highly innovative and dynamic private firms are driving growth. Indeed, as a forthcoming book by George S. Yip and Bruce McKern documents, these innovations are occurring in a wide range of areas, from biotechnology to renewable energy. The most visible progress has come in the information technology sector, thanks to firms like Alibaba, Tencent, Baidu, Lenovo, Huawei, and Xiaomi. On the other hand, the corporate sector remains subject to serious vulnerabilities. The rapid expansion of credit in 2009 led to huge over-investment and excess capacity in commodity sectors, basic industries like steel, and especially real estate. The now-struggling pillars of China’s old economic-growth model bear considerable responsibility for the current growth slowdown. Despite these challenges, the reality is that China’s transition to a more innovative, consumerdriven economy is well underway. This suggests that the economy is experiencing a bumpy deceleration, not a meltdown, and that moderate growth can reasonably be expected in the medium term – that is, unless the financial system’s problems intensify. As it stands, non-performing loans are on the rise, owing largely to the weaknesses in heavy industry and real estate. While official sources report that NPLs account for 1.67% of loans held by commercial banks, the Chinese investment bank CICC estimates the figure to be closer to 8%. If so, the banking sector – and the wider economy – could suffer considerably. Whether it does depends on the decisiveness of the policy response. As in the late 1990s,
after the Asian financial crisis, China may need to rely on the large state balance sheet for loan consolidation, debt writeoffs, and bank recapitalization. But the concerns do not end there. Net private capital outflows remain substantial, and show no signs of slowing. As a result, the reserves held by the People’s Bank of China (PBOC) have declined by roughly US$500 billion over the last year, with particularly large declines of some US$100 billion in each of the last two months. These outflows, together with volatility in the stock and currency markets, have left investors and policymakers increasingly worried. Unfortunately, a clear explanation for this behaviour has yet to emerge. Some
The absence of credit discipline is particularly problematic when combined with highly accommodative monetary policy
blame it on the combination of progress toward opening the capital market and an overvalued exchange rate, anticipating that net inflows will resume once the currency resets closer to market level. Others suspect the influence of inside information: The capital exodus is a signal that economic conditions and growth prospects are much worse than official figures imply. Still others cite the impact of President Xi Jinping’s intensive anti-corruption campaign and, more generally, declining official tolerance for heterodox views. Those who feel directly threatened by the anti-graft campaign might be inclined to take their money out of China. But many others may be doing so for fear that, far from giving the markets a more “decisive role” in the economy, the government may be moving to assert greater control. Capital tends to flow to places where rules are clear and stable. Given China’s systemic importance in the global economy, uncertainty about its plans and prospects is bound to send tremors through global capital markets. That is why it is so important that the Chinese government increase the transparency of its decision-making, including by communicating its policy decisions more effectively. Consider the soothing impact of PBOC Governor Zhou Xiaochuan’s recent statement (following a long and baffling official silence on exchangerate policy) that the central bank would keep the renminbi “basically stable” against a basket of currencies and the dollar. But the principal unaddressed problem affecting China’s financial system is the pervasiveness of state control and ownership, and the implicit guarantees that pervade asset markets. This leads to misallocation of capital (with small and medium-size private enterprises struggling the most) and the mispricing of risk, while contributing to a lax credit culture. The absence of credit discipline is particularly problematic when combined with highly accommodative monetary policy, because it can artificially keep zombie companies afloat. To resolve this problem, China’s leaders must segregate the state balance sheet from the credit allocation system; but there is no clear roadmap for doing so. Moreover, they should build on efforts taken to open up the capital account, thereby improving the efficiency of capital allocation over time, though this process is undoubtedly complicated by the capriciousness of crossborder capital flows. China’s current bout of economic volatility is likely to persist, though increased transparency could do much to blunt it. Add to that the smart use of state resources, together with sure-footed reforms, and China should be able to achieve moderate yet sustainable longterm growth. Project Syndicate
16 | Business Daily
March 2, 2016
Closing Euro-area unemployment drops to 4-year low
Petronas to cut under 1,000 positions
Euro-area unemployment decreased to lowest in more than four years in January, giving European Central Bank policy makers some positive news a week before their monetary policy meeting. The region’s jobless rate declined to 10.3 percent, the European Union’s statistics office Eurostat in Luxembourg said yesterday. That’s the lowest since August 2011 and beats the median economist forecast of the rate holding at 10.4 percent. National figures published by Eurostat yesterday pointed to the divide in the euro region. While German’s unemployment rate stood at 4.3 percent, joblessness in Spain still is at 20.5 percent.
Malaysia’s firm announced yesterday that the state-owned oil and gas company will see redundancies of under 1,000 positions and leadership changes after a strategic review of its business model. The company said in a statement it was making an effort to re-deploy employees affected by the redundancies. “Petronas will further embark on a separation exercise for these employees as needed, which is expected to be completed over the next six months,” it said. The announcement was made after President and Group Chief Executive Wan Zulkiflee Wan Ariffin addressed employees in a town hall meeting in Kuala Lumpur.
Indonesia wants more citizens to pay tax Southeast Asia’s largest economy had a big shortfall in 2015 tax revenue Gayatri Suroyo and Hidayat Setiaji
KEY POINTS Tax revenue needs to reach 13-14 pct of GDP - finance minister New tax chief says far more citizens should be paying tax Finmin: 2016 fiscal deficit won’t be wider than 2.53 pct
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ndonesia must collect more tax in order to have “expansive” state funding to help lift the country’s growth rate, the finance minister said yesterday. Bambang Brodjonegoro made the comment after inaugurating a new head of the country’s tax office. “Without collection, there will not be an expansive state spending that we hope can drive economic growth,” he said. Slow government spending
was a key reason the economy weakened sharply in early 2015. Higher spending helped lift the pace late in the year, but the 2015 growth rate was 4.8 percent, the slowest since 2009. The target for 2016 growth is 5.3 percent. Southeast Asia’s largest economy had a big shortfall in 2015 tax revenue as exports fell and collection of other taxes did not meet ambitious goals. The new director-general of
tax, Ken Dwijugiasteadi, said he will make it easier for citizens lacking tax identification papers to get them. There are 27 million registered taxpayers, he said, when there should be more than 120 million in the population of around 250 million. The tax office will use “geo-tagging” from Internetbased maps to crosscheck data on individuals’ assets, Dwijugiasteadi said.
The finance minister said Indonesia must get tax revenue up to 13-14 percent of gross domestic product from 11 percent in the next three years.
Budget revisions
Brodjonegoro, who thinks a collection shortfall is this year’s biggest fiscal risk, said the government will later propose a revision to the 2016 state budget with a cut in spending, lower tax target and a wider deficit.
“We’re going to maintain the fiscal deficit in a range that makes sense. At least it shouldn’t be higher than last year’s level,” he said. For 2015, Indonesia’s budget deficit was 2.53 percent of GDP, instead of the initially set 1.9 percent. This year, the government has been counting on a tax amnesty programme, which offers low rates for individuals declaring untaxed assets, to expand collection and keep down the fiscal deficit. But the amnesty has been delayed because parliament refused to begin debating until returning from a recess in April. Brodjonegoro said he is optimistic tax receipts will still be boosted even if the amnesty only comes into effect very late this year. Also yesterday, an official from the national planning ministry said Indonesia is considering strengthening the tax office by making it a separate institution from the finance ministry, reporting directly to the president, in 2018. Reuters
Barclays in new bank shake-up Sources say China to lay off 5-6 million workers as losses double
South African GDP growth slows in fourth quarter
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S
arclays yesterday announced a further shakeup of the bank’s operations after losses more than doubled last year, as it seeks to restore its battered reputation under new leadership. The British lender, struggling to recover from several scandals, said it would split the bank into two units, focusing on its operations in Britain and the United States. And after announcing in January plans to exit Russia, Barclays on Tuesday said it would reduce its majority stake in the group’s African unit. “At the heart of Barclays strategy is to build on our strength as a transatlantic consumer, corporate and investment bank anchored in the two financial centres of the world, London and New York,” Barclays said in a statement. It plans to split the company in two to form Barclays UK as well as Barclays Corporate and International. “We are today announcing our intention to sell down our 62.3-percent interest in our African business, BAGL, over the coming two to three years,” it said. It comes as Barclays revealed annual losses after tax of £394 million (US$549 million, 505 million euros) for the bank as a whole. AFP
C
hina aims to lay off 5-6 million state workers over the next two to three years as part of efforts to curb industrial overcapacity and pollution, two reliable sources said, Beijing’s boldest retrenchment programme in almost two decades. China’s leadership will spend nearly 150 billion yuan (US$23 billion) to cover layoffs in just the coal and steel sectors in the next 2-3 years. The overall figure is likely to rise as closures spread to other industries and even more funding will be required to handle the debt left behind by “zombie” state firms. The government plans to lay off five million workers in industries suffering from a supply glut, one source with ties to the leadership said. A second source with leadership ties put the number of layoffs at six million. Both sources requested anonymity because they were not authorized to speak to media about the politically sensitive subject for fear of sparking social unrest. The ministry of industry did not immediately respond when asked for comment on the reports. Reuters
outh Africa’s economy, the continent’s second-largest, grew at a slower pace than economists forecast in the fourth quarter, expanding an annualized 0.6 percent from the previous three months. Gross domestic product growth compared with 0.7 percent in the third quarter, the statistics office said in a report released yesterday in the capital, Pretoria. The median estimate of 18 analysts surveyed by Bloomberg was 0.9 percent. The economy grew 1.3 percent for the whole of last year. The economy’s rebound from a recession in 2009 has struggled to gain traction as commodity prices slumped and growth in South Africa’s biggest export market, China, slowed. South Africa’s outlook has deteriorated since last year as the worst drought in more than a century cut farming output, prompting Finance Minister Pravin Gordhan to reduce his GDP growth forecast for 2016 by almost half to 0.9 percent. “The weaker performance stems mainly from suppressed activity on the production side of the economy,” Kamilla Kaplan, an economist at Investec Ltd. in Johannesburg, said. “A further slowdown in economic activity is expected in 2016.” Bloomberg News