MOP 6.00 Closing editor: Joanne Kuai Year IV
Number 993 Thursday March 3, 2016
Publisher: Paulo A. Azevedo
CEPA exports to China slump 32 pct in February Page 4
Shenzhen’s ChiNext firms hit 5-year high Page 16
Gov’t to Seize La Scala Land
More than one way of skinning a cat. The gov’t has announced it will recover five plots of land opposite the local airport. Where high-end residence project La Scala was to have been built. The land concession was declared invalid as it involved disgraced former Secretary Ao Man Long’s infamous corruption case. Which in turn involves Hong Kong businessman Joseph Lau’s ongoing judicial appeals. The gov’t says the temporary land concession expired on December 13, 2015. And can thus be claimed as state-owned property Page 3
Dirty laundry
Nine people have been arrested by Macau police. In a money laundering scam involving HK$25 mln. The kingpins are alleged to have shuffled funds between 10 Macau bank accounts opened by relatives
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London Metal Exchange leads HKEx to new record Page 9
Moody’s swing ratings axe Ratings agency Moody’s cut its outlook on China’s sovereign bonds yesterday. From stable to negative. Warning of increasing gov’t debt and further capital outflows. And questioning Beijing’s ability to implement economic reforms
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Brought to you by
HSI - Movers March 2
Gaming
Suspicious funds The Philippines gaming regulator is probing alleged money laundering. With as much as US$100 mln possibly involved. Funds may have entered the financial system via Rizal Commercial Banking Corp. And thereafter converted to pesos and deposited in the account of a Chinese-Filipino businessman who runs a junket operation
www.macaubusinessdaily.com
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AmCham talks up MICE American Chamber of Commerce in South China. AmCham is directing investors towards Hengqin Island. With Macau seen as ‘no longer suitable for labour-intensive industries’ and has an ‘over-reliance on the gaming industry’. It characterises Macau’s recent gravitation towards the MICE sector as ‘cashing in on the lucrative convention trade’
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Name
%Day
China Resources Beer H
+18.15
Sands China Ltd
+7.14
China Resources Land L
+6.62
China Shenhua Energy
+6.55
China Resources Powe
+6.09
MTR Corp Ltd
+1.09
Kunlun Energy Co Ltd
+0.85
Henderson Land Devel
+0.81
CLP Holdings Ltd
+0.58
Link REIT
+0.11
Source: Bloomberg
I SSN 2226-8294
2016-3-23
2016-3-4
2016-3-5
14˚ 20˚
15˚ 21˚
16˚ 21˚
2 | Business Daily
March 3, 2016
Macau
Nine residents arrested in HK$25 mln money laundering scam Judiciary Police say a Macau couple transferred HK$13 million of illegal money from Mainland China to Macau bank accounts through family members Annie Lao
annie.lao@macaubusinessdaily.com
T
en Macau bank accounts holding HK$12.3 million and 140,000 yuan have been frozen in a money laundering case now under investigation. Nine Macau residents - five female and four males, aged from 19 to 53 – have been arrested according to Judiciary Police (PJ). A Macau couple suspected of running a smuggling ring were arrested by Mainland
authorities last year. After Zhuhai police informed their Macau counterparts, nine relatives of the couple, including their daughter, were arrested by the PJ. Mr. Chan Cho Man, spokesman for the Judiciary Police and Head of Economic Crimes Division revealed at a press briefing at Judiciary Police (PJ) headquarters yesterday that the money laundering case involves the largest number of
people busted in recent years. The PJ spokesperson added that other confiscated items include one residential unit worth MOP11 million, one car parking space worth MOP2 million, one car worth MOP280,000, some HK$150,000 in cash and gold jewellery.
Family businesses
The Macau couple arrested by the Mainland authorities
suspected of being the main organisers of this crime are thought to originally be from a smuggling group that facilitates illegal immigration. The PJ was informed last July by its Zhuhai counterparts and launched the investigation on February 7 this year. Police found the couple were using Macau bank accounts to transfer illegal money using 10 bank accounts of their family members in Macau in order to
hide the crime. They were also using the money to purchase properties, car parking spaces and luxury cars. “The couple had continually transferred money into their bank account with amounts ranging from MOP100,000 to around MOP1 million every year up to 2000. In 2000, the amount of money deposited reached about MOP5 million. The sum of money transferred into the Macau bank accounts reached about MOP15 million,” said Kuok Chi Wai, Head of the Money Laundering Crime Evidence Collection and Analysis Section. “They later transferred the money to their brothers’ bank accounts, then to their daughters’ bank accounts in order to conceal the illegal money. However, all the money got transferred back into the couple’s bank accounts in 2014. In June 2015, their daughters transferred the money back into their sisters’ bank accounts in the amount of around MOP13 million,” Mr Kuok explained. “This money laundering case involves the largest number of Macau residents so far,” the spokesman added.
Property market regulations, public transportation cause concern
Six kg of cocaine worth MOP18 mln confiscated
Members of the Social Services Advisory Committee have raised concerns about the overpriced real estate market and suggest optimising planning for better public transportation
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he government should not withdraw any regulations previously put into place to cool the property market, said U Sio Chao, a member of the Social Services Advisory Committee of the Central District in the group’s third gathering this year held yesterday. Mr. U said ever since Macau’s economy had grown due to [the success of] its gaming operations, real estate prices had increased beyond the affordability of local residents. He said that despite the recent drop in real estate prices possibly having a negative effect on society from the short-term perspective, a healthy real estate market benefits the city with continuous development and a stable society. The property market of Macau faced a period of self-adjustment in 2015 following the city’s economic
adjustment, which is good for society in the long term, said U Sio Chao, urging the government not to abandon the previous cooling measures introduced to the property market. U Sio Chao also suggested the government listen to residents’ opinions and launch public housing applications on a regular basis, such as every four months, inviting applications in accordance with available property market data.
Environmentally friendly transportation
Macau may have over emphasised its means of building roads and increasing parking spaces in issues concerning transportation, thus the government can optimise the transportation environment following green society norms and in consideration of the limited space
in Macau, said Mak Heng Ip, another member of the committee. Mak suggested the government have a well prepared blueprint for the future development of the city, especially building a system for replaceable transportation and strictly controlling the number of cars. Means allowing public transportation as a first priority in order to strengthen transport infrastructure facilities was also suggested to improve residents’ green transportation habits. Transportation regulations were one part of the development plans for the whole city, which is very much related to laws concerning land use as well as property. Mr. Mak said the city will only know the transportation system needed in a scientific way once a clear development perspective and city plan is established. B.L.
udiciary Police (PJ) cracked a large-scale drug trafficking case, confiscated 6.01 kilograms of cocaine with a street value of around MOP18 million, and arrested three men from Malaysia, Nigeria and Gambia on Tuesday night. The police said that they were tipped off that someone was using Macau as a transit point for drug trafficking and intercepted the Nigerian male at the Hong KongMacau Ferry Terminal Customs as he attempted to leave Macau. Police brought the suspect back to the hotel he had stayed at in Avenida de Almeida Ribeiro and arrested two other suspects on the premises. “Three men belong to the same drug trafficking group. The Malaysian male received the drugs in the restricted area at Dubai airport, and later hand carried them through Thailand into Macau to meet up with the other two suspects,” PJ spokesman Chan Cho Man said. Police believe the drugs were to be sold in neighboring regions. The case has been handed to the Public Prosecutor’s Office.
Business Daily | 3
March 3, 2016
Macau Surplus in January budget for 2016 Official data shows a surplus in January’s budget for the Central Account of the Government despite the continued fall in overall revenue. According to data published by the Financial Services Bureau (DSF) the budget in January of this year achieved a positive balance of MOP4.8 million (US$0.6 million) with overall expenditure accounting for MOP3.68 million and revenue MOP8.48 million. This represents a 20.3 per cent fall in revenue and a 68.1 per cent rise in spending yearon-year. Direct taxation on gaming, the largest revenue contributor, accounted for MOP6.74 million, a 20.5 per cent drop compared to last January.
Government to reclaim five La Scala plots Land grants of the plots were declared void by the MSAR Government in 2012 as they were linked to the corruption case of ex-chief official Ao Man Long. With local courts still hearing the developer’s appeals against the decision, the government said yesterday that it would take back the plots by other means Kam Leong
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The local airport saw its passenger volume break a new record of 580,000 for last month for a year-on-year jump of 23 per cent, the operator, Macau International Airport Company Ltd. (CAM), announced yesterday. The company claimed that the growth is attributable to the Southeast Asia routes, which posted a year-on-year increase of 28 per cent in the number of passengers. In addition, the Mainland Chinese and Taiwanese market posted a year-on-year growth of 11 per cent and 30 per cent, respectively. In the month, a total of 4,900 flight movements were recorded at the airport, jumping 15 per cent year-on-year.
Raymond Tam inaugurated Director of DSPA
kamleong@macaubusinessdaily.com
he government has announced it will recover five plots of land opposite Macau International Airport as state-owned private property. The plots comprise the site that the high-end residence project La Scala was to be built on. Yesterday’s Official Gazette announced these five idle plots - Lots 1c, 2, 3, 4 and 5 located near Estrada da Ponta da Cabrita in Taipa - would be reclaimed by the government as they were undeveloped before their temporary land concession expired on December 13, 2015. The local land law mandates that such land concessions, with a 25-year term, are only effective once the property project of the site is completed. The five land parcels, occupying 78,789 square metres, were originally granted in 1995 to five companies primarily owned by the then-Portuguese Government, whilst Macau International Airport Company Ltd (CAM) and Sociedade de Turismo e Diversões de Macau, S.A. (STDM) each held five per cent stakes in the companies. In 2006, Moon Ocean Ltd., controlled by Hong Kong billionaire Joseph Lau Luen Hung and his partner Steven Lo Kit Sing, was approved by the SAR Government to acquire the five plots for MOP1.37 billion
Airport passenger volume surged 23 pct last month
(US$162 million). The company was granted another eight land parcels in 2011 – which were combined with the five plots into a single parcel of 82,711 square metres for the La Scala project.
Lawsuits ongoing
Following the corruption case of the city’s former Secretary for Transport and Public Works, Ao Man Long, the Macau Government respectively announced in 2012 and 2013 the invalidity of Moon Ocean’s acquisition of the five plots and the granted land concession for the eight parcels. Nevertheless, the incumbent Secretary for Transport and Public Works, Raimundo Rosario, noted in yesterday’s announcement that the local courts have not yet ruled decisively on the appeals filed by Moon Ocean against the 2012 and 2013 dispatches, suggesting lawsuits between the company and the local government are still ongoing. In fact, in 2014, the two Hong Kong businessmen were found guilty of corruption and money laundering for paying a bribe of MOP20 million to the ex-Secretary in 2005 in exchange for successfully bidding for the five plots of land. They were sentenced to five years and three months in jail. Following the ruling of the local
courts, Joseph Lau stepped down as chairman of Chinese Estate Holdings Ltd. but bought its then subsidiary Moon Ocean from the parent company in the same year. Meanwhile, neither of the two Hong Kong businessmen is currently behind bars as there is no extradition agreement between the two Special Administrative Regions.
The local land law mandates that such land concessions, with a 25-year term, are only effective once the property project of the site is completed
Raymond Tam Wai Man was officially inaugurated as Director of the Environmental Protection Bureau (DSPA) yesterday. The inaugural ceremony was presided over by the Secretary for Transport and Public Works. According to a statement issued by the office of the Secretary for Transport and Public Works, Tam will be responsible for leading the Bureau for one year. Tam was a former president of the Civic and Municipal Affairs Bureau (IACM) but was suspended from his post on suspicion of involvement in an irregular cemetery grave granting process in 2013. He re-joined the public office after the court ruled that he and three other suspects were not guilty.
AACM website more compatible and secure The Civil Aviation Authority (AACM) has launched a new homepage in order to deliver its promotional strategies with enhanced user experience. The new homepage adopts Secure Sockets Layer (SSL) for encrypted links in sessions about the ‘Macao Confidential Aviation Reporting System’ and the ‘Online Complaint Channel’, which is a more secured technology in online security. The homepage is also compatible with desktop computers, notebook and electronic pad, while three versions of ‘Mobile’, ‘Text’ and ‘PC’ are available for readers to search with different layers.
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March 3, 2016
Macau
2015 slow year for trade between China and Portuguese-speaking countries Data from 2015 shows imports and exports in the red compared to the previous year Kelsey Wilhelm
Kelsey.wilhelm@macaubusinessdaily.com
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rade between China and Portuguesespeaking countries dropped 25.73 per cent between January and December 2015 to US$98.475 billion (MOP788.57 billion). The information from China’s Customs Bureau was published for the Economic and Trade Cooperation between China and Portuguese-speaking Countries, also known as Forum Macau. This decrease was reflected in a cut in both imports and exports. Imports fell 27.92 per cent to US$ 6.23 billion and overall China trade with the eight Portuguesespeaking countries fell 21.62 per cent to US$3.61 billion. Overall trade fell by 25.7 per cent compared to the same period in 2014, resting at US$9.84 billion. Brazil continues as the largest two-way trading partner of China, with imports and exports between the two countries accounting for US$7.18 billion, reflecting a
Imports from Portuguesespeaking countries to China fell 27.9 per cent in 2015 compared to the previous year
contraction of 17.37 per cent overall in trade between the two countries. Exports from China to Brazil fell 21.47 per cent, while imports to China from Brazil contracted only 14.61 per cent. Angola ranked higher
than Portugal in overall trade with China among the other Portuguese-speaking countries but registered a staggering 46.84 per cent decrease in overall trade compared to last year. This was divided between a 48.6
per cent drop in imports and a 37.7 per cent drop in exports, compared to the previous year. Exports to China from Angola stood at US$ 372 million, while imports from China stood at US$ 1.59 billion.
Portugal registered an 8.99 per cent drop in overall trade, the smallest loss of the eight countries, with only Timor Leste and São Tomé and Príncipe registering positive gains in trade, rises of 76.5 per cent and 37.9 per cent, respectively.
Applications for CEPA exports to China slump 32 pct in February industrial property rights down 17 pct in February
T
he Macao Special Administrative Region posted a month-on-month plunge of 31.7 per cent in its exports of zerotariff goods to Mainland China under the Closer Economic Partnership Arrangement (CEPA) in February, the latest official data released by Macau Economic Services (DSE) shows. Last month, total export values of CEPA goods from the city to the Mainland totalled MOP5.76 (US$719,429) million, down some MOP2.72 million from MOP8.48 million in the first month of the year. As at the end of February, Macau had exported some MOP14.2 millionworth of CEPA goods to China this year, whilst its accumulated exports of such goods to the country totalled MOP681.6 million since the agreement between the two parties was implemented in January 2004. The official data also indicated
that the economic department had granted two new certificates of ‘Macau Service Supplier’ to local companies last month, making the total of issued certificates 594 as at the end of last month. With this certificate, local companies can expand their business to the Mainland and enjoy zero-tariff treatment there. The city’s transport industry, which includes freight forwarding agencies, logistics, storage and warehousing, and other services, remains as the sector engaged most in trade activities between the Macao Special Administrative Region and China under the CEPA agreement. According to DSE data, the industry has been granted a total of 298 supplier certificates since January 2004, accounting for 50 per cent of the total, followed by Medical and Dental Services, which have been issued 147 certificates. K.L.
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acao Economic Services (DSE) received a total of 1,011 applications for industrial property registrations in the territory in February, down 17 per cent year-on-year due to the notable decrease in the applications for trademark registrations. According to the latest data released by DSE, 95.7 per cent of the total filed applications were for registering trademarks in the Macao Special Administrative Region last month, amounting to 968. The number, compared to the same month of last year, represents a year-on-year drop of 17.1 per cent. On a month-on-month basis, however, it actually jumped 6 per cent from 912 applications. Meanwhile, applications for registering invention patents declined to two last month, compared to nine
applications one year ago. Applications to extend current patents increased to 33 from 26 year-on-year. In addition, some three applicants applied for registering industrial designs or models in the city in the month, while the number of applicants registering the name and emblem of their establishments amounted to five. Official data indicated that the economic department did not receive any applications for utility registration in the territory in February. Accumulatively, a total of 1,961 applications for industrial property registrations have been submitted to DSE this year, which is a yearon-year drop of 19.3 per cent. Of the total, applications for trademark registrations accounted for 95.8 per cent. K.L.
Business Daily | 5
March 3, 2016
Macau
AmCham: Hengqin is Macau’s next industry base Special Report details over-reliance upon gaming industry and directs American investment towards five main ‘growth areas’ Kelsey Wilhelm
kelsey.wilhelm@macaubusinessdaily.com
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he American Chamber of Commerce in South China is directing investors towards Hengqin Island as Macau is seen as ‘no longer suitable for laborintensive industries’ and has an ‘overreliance on the gaming industry’. In a report titled ‘Special Report on Business in South China’, an annual quantitative study of the regional business environment now in its twelfth year, the group highlights the Chinese Central Government policy to ‘prioritize diversification of the region’s economy’ and directs investors towards ‘growth areas’ of ‘finance, insurance, construction, real estate and manufacturing’. A special segment of the report titled ‘Spotlight on Hengqin’ hails the island as having one of the ‘most preferential policies in South China’, citing a reduced corporate income tax rate of 15 per cent for companies coming under the scope of the industries and business categories within the Preferential Corporate
Income Tax Catalogue released by the Central Government in March 2014, as compared to the standard 25 per cent on the Mainland. The catalogue, released by the Ministry of Finance and the State Administration of Taxation, came into effect in January 2014 and lasts until December 31st 2020 for a seven-year term. The catalogue denotes five sectors as preferential: New and High Technology; Medicine and Health; Science Education/ Research and Development; Cultural
Innovation; and Commercial Services. It encompasses 72 industry sectors, with 200 other industry sectors falling under the separate Investment Industries Catalogue/Permitted Industries Catalogue, as detailed by KPMG’s China Tax Alert.
Shifting
Citing Hengqin as a ‘pilot zone for integration’, the American Chamber of Commerce report hails the ‘RMB 226.3 billion (US$36.4 billion) in total investment’ the area has already
attracted and the fact that it’s only a stone’s throw away from Macau. It further depicts Macau’s more recent gravitation towards the MICE sector as ‘cashing in on the lucrative convention trade’, while being a necessary shift for ‘keeping tourists in town for longer periods of time’ given that the gaming industry ‘still accounts for an estimated 40 per cent of its (Macau’s) GDP’. The report further identifies links between Hong Kong and Macau’s gaming industry as being ‘extensive’, citing ‘STDM’s gaming subsidiary, SJM and Galaxy’ listing on the Hong Kong Stock Exchange in addition to Wynn Macau and Las Vegas Sand’s ‘Macau operations’. Although the limits are undefined, the report says ‘the region’s top trade partners are Mainland China, Hong Kong, Japan, Taiwan, the E.U., and the United States’, with nongaming related exports centered on textiles, electronics and machinery and imports based on consumer goods and semi-manufactured goods.
CPPCC spokesperson: Five-year plan to benefit Hong Kong, Macau
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hina's 13th five-year plan, to be reviewed at the upcoming parliamentary session, will be "good news" for Hong Kong and Macau, a spokesperson for the national political advisory body said on Wednesday. The leadership has placed great importance on and high expectations of the role of Hong Kong and Macau while planning the comprehensive development of China, Wang Guoqing, spokesperson for the annual session of the Chinese People's Political Consultative Conference (CPPCC) National Committee, said in a press conference ahead of the session. Wang assured attendants that the national plan for the years bridging
2016 to 2020 will consider the needs of people in Hong Kong and Macau. The proposal in the 13th fiveyear plan for the national economy and social development put forward last year at a key meeting of the Communist Party of China’s Central Committee made clear that Hong Kong and Macau would play unique roles in economic growth and the opening up of the whole country, he said, adding the central government will support the two SARs as always to sharpen their competitiveness. He said Hong Kong and Macau might integrate their own strategies for development into the national plan. Xinhua
6 | Business Daily
March 3, 2016
Macau
Hard Rock to open two casino-hotels in Asia in 3-5 years The iconic brand is also planning to expand in China in order to tap into the growing leisure industry Joanne Kuai
joannekuai@macaubusinessdaily.com
H
ard Rock International plans to open a casino in Central Vietnam with Banyan Tree and expects to open the project 24 months after its partner receives a licence, according to Daniel Cheng, vice president of Asia business development in a Hong Kong interview. The iconic brand, which has one hotel in the City of Dreams Resort on the Cotai Strip in Macau, is planning to open two casino-hotels in the region within the next three to five years, according to Hong Kong media reports.
Ming Pao reports that Hard Rock is eyeing opportunities in Vietnam, Japan, Cambodia and the Philippines. Daniel Cheng was quoted as saying that the planned casino-hotel in Vietnam will involve an estimated investment of around US$100 million. The property will have around 60 to 80 gaming tables and 500 slot machines. With regard to the Japanese market, Mr. Cheng said that if the country has passed relevant gaming regulations by year-end the investment of a planned property
Corporate GEG team members promote inclusive society Galaxy Entertainment Group cares about the needs of persons with disabilities and believes that given the opportunity they are capable of giving back to the community. Along with the other properties under GEG, StarWorld Hotel has recruited persons with disabilities as part of the StarWorld Hotel team, and together they are creating an inclusive society and celebrating StarWorld Hotel’s tenth anniversary this year. Security Officer Ms. Lily Wong is a person with mild intellectual disability who joined StarWorld Hotel’s Security Department in 2014. She is determined to master her job skills and is thankful for her position at GEG, where she values the work experience. She said she is happy to celebrate
StarWorld Hotel’s tenth anniversary, and wishes GEG every success in the future. With the aim of raising public awareness and embracing persons with disabilities, GEG has been providing job opportunities for the disabled so that they can live up to their full potential in a respectful and inclusive society.
in its urban area will involve an investment of around US$2.5 billion to US$5 billion. The Economic Journal also quoted Mr. Cheng as saying that Hard Rock is pursuing a partnership with Japan enterprises with political networks and capital, as the Japanese Government tends to share the benefits with local entities and foreign businesses are having a hard time joining the market. Speaking of its Macau property, Mr. Cheng said that as Hard Rock focuses more on entertainment and leisure elements, the company is not very concerned about the gaming downturn in the SAR. A Senior Vice President of Development for Asia- Pacific at Hard Rock Cafe International, Inc. since January 5, 2015, Mr. Cheng is responsible for identifying appropriate casino investment and development partners in key countries such as Japan, Korea, Vietnam and the Philippines. With nearly three decades of multiple industry experience, Cheng’s past gaming experience includes development roles with Bally Gaming Systems, the Government of Singapore and, most recently, Resorts World Inc. – the international resort development, Internet gaming and brand licensing business entity of the Genting Group.
Expanding in China
Hard Rock International is also expanding in China with new hotels and restaurants to tap the
fast growing demand for leisure and entertainment in the world’s second largest economy. The Florida-based chain is opening three hotels in China’s coastal cities, including a 200-room oceanfront resort in northeastern Dalian city, slated for completion in 2018. The others are in Shenzhen and Haikou in the south. Three restaurants will also be opened in some of China’s richest cities this year, the closely held company said in a statement on Tuesday. “With the Chinese travel industry quickly changing as leisure demand grows, we feel the music-centric programming at Hard Rock Hotels will resonate well with Chinese travellers who visit Dalian each year,” said Leong Wy Joon, senior vice president of hotel development at Hard Rock International in an interview with Bloomgberg. Chinese’s rising average wages over three decades have spawned a working and middle-class with more discretionary cash to spend on films, travel and other entertainment. Millennials typically born after 1980 – have grown up in a more stable China than their parents and are exposed to Western culture, making them a prime consumer group to drive spending on leisure, Goldman Sachs Group Inc. reports. Hard Rock will also sponsor China’s popular Strawberry Music Festival for the third time this year, according to the statement. With Bloomberg News
Business Daily | 7
March 3, 2016
Gaming
Philippine gaming regulator probes alleged money-laundering Securities and Exchange Commission Chairman warned the country risks returning to the list of nations that aren’t doing enough to fight money laundering Ditas Lopez and Clarissa Batino
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he Philippines is training its sights on the gaming sector in a renewed push to curb the transmission of illicit funds. The Philippine Amusement and Gaming Corporation has started investigating news reports that as much as US$100 million of suspicious funds were remitted to three casinos’ bank accounts, according to a statement yesterday. The government agency expects the casinos, which it didn’t name, to submit their comments on the allegation this week. The gaming regulator’s comments come a day after Securities and Exchange Commission Chairman Teresita Herbosa warned the country risks returning to the list of nations that aren’t doing enough to fight money laundering if laws
aren’t strengthened to include sectors like casinos among institutions required to report suspicious transactions. If that happens, Philippine transactions including overseas remittances that amounted to more than US$25 billion last year would be subject to increased scrutiny. “We already have warnings” from the Financial Action Task Force, Herbosa told reporters on Tuesday. “If the reports coming out were true, it really shows the consequences. I don’t think they have any reason now to oppose the bill that casinos should be covered.”
Art collection
Herbosa is a member of the country’s Anti-Money Laundering Council, which unsuccessfully
lobbied lawmakers to include casinos in a 2012 amendment that added terrorism as a predicate crime for laundering. Casinos must stop cash transactions to prevent laundering or at least impose a cap, Herbosa said. Apart from gaming, the property sector and art collection should also be included on the list of covered institutions on money laundering, Senator Serge Osmena said in a phone interview yesterday. The Philippine law is among the “weakest in the world,” Osmena said. The Philippine Daily Inquirer reported February 29 that authorities are investigating an estimated US$100 million that came in through the banking system, transferred to at least three casinos and moved out to
overseas accounts in a matter of days.
Junket operation
The funds may have entered the Philippine financial system through a branch of Rizal Commercial Banking Corp., converted to pesos and deposited in an account of a Chinese-Filipino businessman who runs a junket operation, according to the Inquirer, which didn’t name the businessman. The newspaper cited an unnamed Rizal Bank official saying the lender immediately alerted the Anti-Money Laundering Council. The funds were used to buy casino chips or pay for losses at venues including Bloomberry Resorts Corp.’s Solaire Resort & Casino and Melco Crown Philippines Resort Corp.’s City of Dreams
Manila, according to the newspaper report. There was no suggestion in the report that the banks or casinos named were in any way complicit with any improper movement of funds. Rizal Bank President Lorenzo Tan didn’t reply to calls and text messages seeking comment. Leo Venezuela, Bloomberry Resorts’ investor relations director, and City of Dreams Manila Vice President Charisse Chuidian also didn’t reply to calls and phone messages. Philippine National Bank and BDO Unibank Inc. were also mentioned in the Inquirer report. Reynaldo Maclang, president of Philippine National Bank, said he cannot comment. Nestor Tan, president of BDO, didn’t reply to calls and mobilephone messages. Bloomberg News
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8 | Business Daily
March 3, 2016
Greater China
Moody’s cuts outlook to ‘negative’ However, it retained China’s Aa3 rating, noting the country’s sizeable reserves gave it time to implement reforms and gradually address economic imbalances
It’s not a worrying sign yet, but rather a negative direction. That’s what Moody’s is flagging Trinh Nguyen, senior economist for emerging Asia, Nataxis
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oody’s downgraded its outlook on Chinese government debt to “negative” from “stable” yesterday, citing uncertainty over authorities’ capacity to implement economic reforms, rising government debt and falling reserves. “Without credible and efficient reforms, China’s GDP growth would slow more markedly as a high debt burden dampens business investment and demographics turn increasingly unfavourable. Government debt would increase more sharply than we currently expect,” Moody’s said in a note yesterday. Moody’s said its rating committee had discussed China’s status at a meeting on February 9, during which the country’s institutional and fiscal strength, as well as its susceptibility to event risks, were reviewed.
The agency said the downgrade was driven by expectations that China’s fiscal strength will continue to decline, and the fall in its foreign exchange reserves which have shrunk by US$762 billion over the last 18 months. It also said that policymakers’ credibility was at risk of being undermined by incomplete implementation or partial reversals of some reforms. “Interventions in the equity and foreign exchange markets over the past year suggest that ensuring financial and economic stability is also an objective, but there is considerably uncertainty about policy priorities,” Moody’s said. Moody’s, however, retained China’s Aa3 rating, noting the country’s sizeable reserves gave it time
to implement reforms and gradually address economic imbalances. But the agency warned that it could further downgrade China’s rating if it saw slowing down of reforms needed to support sustainable growth and to protect the government’s balance sheet. “It’s not a worrying sign yet, but rather a negative direction. That’s what Moody’s is flagging,” said Trinh Nguyen, senior economist for emerging Asia at global asset manager Nataxis. “But they have room to do this. They have one of the lowest government debt as a share of GDP in comparison to other emerging nations. And most importantly, as China has a current account surplus it can fund its own fiscal expansion.”
Initial market reaction to the outlook change was muted, although the cost of insuring Chinese government debt against default rose slightly.
High and rising corporate debt
A major rationale for the falling outlook, Moody’s said, was the large stock of contingent sovereign liabilities such as state-owned corporations’ debt, local government debt, and the debt of China’s big “policy” banks the Agricultural Development Bank of China, China Development Bank, and the Export-Import Bank of China. While Moody’s put actual government debt at only 40.6 percent of GDP at the end of 2015, Standard & Poor’s estimated in July that corporate debt had already risen to 160 percent of GDP in 2014, twice that of the United States and up from only 120 percent in 2013. In a separate note yesterday, ratings agency Fitch also highlighted rising risks to Chinese banks from accelerating credit growth. “The 50bp cut to the reserve requirement ratio (RRR) for Chinese banks on Tuesday, together with record loan growth in January, could point to an increasing likelihood that the authorities are shifting policy to enable more credit-fuelled growth,” Fitch analysts wrote. “Rolling over more debt will only delay and not resolve an expected rise in non-performing loans.” Reuters
China Resources Beer gains SABMiller stake at bargain price The firm accounted for 23.3 per cent of the Mainland beer market in 2014 Donny Kwok
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hina Resources Beer will pay US$1.6 billion to buy out SABMiller Plc’s stake in their China Resources Snow Breweries venture, a much lower price than expected and sending shares in the state-backed firm soaring by a quarter in value. The deal which gives China Resources Beer (Holdings) Co Ltd full control of Snow, the world’s No. 1-selling beer by volume, is part of a series of divestments taking place to gain regulatory approval for AnheuserBusch InBev US$100 billion-plus takeover of rival SABMiller. The sale of the 49 percent stake may help the group gain regulatory approval from Beijing. Jeremy Yeo, an analyst at Mizuho Securities Asia said the price tag was significantly below the US$3 billion to US$3.5 billion he had expected. “This news, in itself is positive for CR Beer’s shareholders, from the standpoint of better-than-expected potential near-term EPS accretion,” he wrote in a note to clients. The Snow deal, which would make China Resources the largest brewer in the country with a 30 percent market share, is contingent on the AB InBev-SAB Miller deal
KEY POINTS US$1.6 bln price tag lower than expectations of $3-3.5 bln China Resources Beer shares jump 25 pct to five-year high Sale may help it gain regulatory approval from Beijing
going ahead. It is set to be settled in cash using a combination of funding options including debt and/or equity financing, China Resources Beer said in a statement. Shares in China Resources Beer jumped 25 percent to their highest level in five years, regaining ground
lost so far this year after the stock was dropped from the main constituents in the Hang Seng Index following a regular review by the index compiler. Steven Leung, a sales director at UOB Kay Hian in Hong Kong, said the deal came earlier than the market had expected. “The deal will definitely bring in some positive impact to the company, both in enhancing its market share and prospects in the local beer industry,” Leung said. China Resources accounted for 23.3 percent of the beer market in China in 2014, while Tsingtao Brewery ranked second at 18.4 percent, according to data from Euromonitor. China Resources Beer changed its name from China Resources Enterprise after it announced a plan last April to sell all its nonbeer assets to controlling shareholder China Resources (Holdings) Co for US$3.6 billion. China Resources Snow Breweries had a net asset value of HK$27.2 billion (US$3.5 billion) at the end of last year, the statement said. Its net profit fell 21 percent to HK$1.51 billion in 2014 from a year earlier. Reuters
Business Daily | 9
March 3, 2016
Greater China LME revenue helps HKEx post record profit HKEx reported a net profit for 2015 slightly above analysts' expectations Melanie Burton
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he London Metal Exchange posted a 36 percent jump in revenue for 2015 to HK$1.735 billion (US$223.15 million), as higher trading fees and tariffs helped it offset a drop in volumes, its Hong Kong owner said yesterday. The revenue gains at its London unit was a key contributor to Hong Kong Exchanges and Clearing Ltd’s (HKEx) record net profit last year, showing the payback has begun from its US$2.2 billion buyout of the 139year old metals bourse near the height of the commodities boom in 2012. “Despite the 4 percent drop in the average daily volume of metals contracts traded, trading fees and tariff rose by HK$476 million, or 51 percent, as a result of commercialising the LME’s trading fees, effective from January 1, 2015,” HKEx said in an earnings release. Trading volumes on the LME, the world’s biggest metals exchange by volume, shrank 4.3 percent in 2015, dented by slowing growth in Chinese demand for commodities, data from the bourse showed in January. HKEx reported a net profit for 2015 of HK$7.96 billion (US$1.02 billion), slightly above analysts’ expectations of HK$7.913 billion, according to Thomson Reuters data.
China is confident of achieving medium to high-speed economic growth in 2016 on the back of the sound economic fundamentals and the country’s reform campaign, a spokesperson with the annual session of the national political advisory body said yesterday. “Viewed against the backdrop of the performance of international economies, China’s 6.9-percent growth in 2015 is outstanding; and the Chinese economy is expanding with good quality,” said Wang Guoqing, spokesperson for the fourth session of the 12th National Committee of Chinese People’s Political Consultative Conference.
JD.com reports 58 pct revenue growth
The LME’s operating expenses dropped by US$22 million, or 4 percent, helped by a drop in legal fees in 2015. The LME fought off a string of litigation due to backlogs at warehouses it monitored which drove up legal costs in 2014. The bourse is in its final stages of its warehousing reform. Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 68 per cent to US$1.19 billion. To grow its commodities business, CEO Charles Li said in January that the bourse intended to expand its suite of LME products and develop a spot commodities trading platform in mainland China.
JD.com, China’s second-largest e-commerce company, reported a 58-percent growth in its net revenue in 2015. The company’s total revenue was 181.3 billion yuan (about US$27.8 billion) last year, while net losses ballooned from five billion yuan in 2014 to 9.4 billion yuan (about US$1.4 billion) in 2015, it said in financial results published on Tuesday. The total value of merchandise transactions on JD.com was 462.7 billion yuan, up 78 percent. In 2015, JD had 155 million active users, a yearon-year growth of 71 percent.
KEY POINTS Trading fees, tariffs show 51 pct jump HKEx reports record 2015 profit, but cautions on 2016 outlook It is also continuing to commercialise its metals business. It will, from April 4, introduce new charges for the use of its benchmark data by firms who are not members of the exchange or their clients. Reuters
Overseas investment tops US$1 trillion over a decade The threat of a domestic economic slowdown is encouraging Chinese citizens and companies to funnel more wealth abroad
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hinese investors invested US$1.03 trillion in foreign property, stocks and bonds in the decade to mid2015, British property services firm Knight Frank calculates in its annual Wealth Report released yesterday. Liam Bailey, global head of research at Knight Frank, said Chinese investors had stepped up their interest in British property in the last three years, in a bid to diversify their portfolios. “In terms of foreign nationalities active in London’s residential market right now, Chinese buyers - in terms of numbers of units that they are buying - are the biggest single nationality,” he said. The buying spree continues despite moves by some blue chip lenders including HSBC, Standard Chartered and DBS Group Holdings to restrict or cease offering overseas mortgages and other foreign exchange services to some Chinese nationals. “People think we are seeing a wave of Chinese demand. No, what we have seen so far is the ripple before the wave has even begun to arrive,” Stephen Muller of New York-based Kuafu Properties, said in reaction to the findings.
Spokesperson confident in growth
In terms of foreign nationalities active in London’s residential market right now, Chinese buyers - in terms of numbers of units that they are buying - are the biggest single nationality Liam Bailey, global head of research, Knight Frank
Bailey said he expected more money to flow from China into British and U.S. property in the next decade than the last one, but volumes would depend on policy decisions in Beijing. “The big issue the Chinese government faces is balancing the desire to control investment outflows against asset price bubbles within China,” Bailey said. “But giving Chinese investors the ability to diversify their wealth to other international markets could help take the pressure off domestic markets,” he added. Just four other countries and territories saw outward investment in excess of US$1 trillion over the same period, the report showed. The United Kingdom recorded cross-border asset purchases of US$1.88 trillion. Ireland, flush with cash from its debt-fuelled “Celtic Tiger” economic boom, pumped out US$1.32 trillion, and Hong Kong investors splashed out US$1.7 trillion. U.S. investors, however, sent more wealth overseas than peers in Britain, Ireland, China and Hong Kong put together, clocking up US$7.3 trillion over the same period. Reuters
Reserve ratio cut not impending stimulus China’s move to cut banks’ reserve requirement ratio (RRR) indicates a slight easing bias in China’s “prudent” monetary policy, but that is by no means a signal of any coming large-scale stimulus, the official Xinhua news agency said in a commentary late on Tuesday. The Xinhua commentary follows rising market expectations that China could implement a version of the massive stimulus it adopted during the global financial crisis, launching in late 2008 a 4 trillion yuan (US$610 billion) stimulus package to boost the economy.
Polling date of HK LegCo set for September 4 The polling date of the sixth-term Legislative Council (LegCo) of Hong Kong will be on September 4, 2016, a spokesman for the government said yesterday. The date was specified by the Chief Executive, the spokesman said, the decision has taken into consideration the relevant statutory provisions concerning the determination of a general election date and the nomination period preceding an election, as well as the practice adopted in the past public elections. In light of the polling date, the nomination period for the 2016 LegCo general election is scheduled for July 16 to July 29 this year.
Mainland becomes main market for Brazilian beef China has become the main market for Brazilian beef, an official report said Tuesday. China bought US$906 million worth of beef from June 2015 to January 2016, making up 28 percent of the sector’s revenue, according to data from the Brazilian Ministry of Development published by local daily Folha de Sao Paulo. “They buy all types of cuts and are accounting for solid revenue,” according to Antonio Camardelli, president of the Brazilian Association of Meat Exporters. Analysts believe there is still potential for further demand.
10 | Business Daily
March 3, 2016
Greater China
Chongqing blazes economic trail as Bo scandal recedes Unlike much of China, it didn’t shirk the hard decisions, opting early to cut overcapacity in its steel industry and investing heavily to move up the value-chain from lower-end Sue-Lin Wong
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he economic success of the metropolitan area of Chongqing in central China was in the balance following the jailing four years ago of its charismatic Communist Party chief Bo Xilai, a rising star in the political elite. But the city has continued to thrive, a feat that has some lessons for other local governments and reflects a pragmatic streak in China’s leadership in allowing Bo’s Chongqing model, and his economic adviser, Mayor Huang Qifan, to survive his fall. China is trying to transform its giant economy from one led by basic manufacturing to one more reliant on services and consumption, which the government expects to provide more stable growth in the future. A slowdown in growth and slumping stock markets in the past year have raised concerns among investors about Beijing’s ability to maintain stability while driving structural reforms. Chongqing appears to have achieved that balance. Unlike much of China, it didn’t shirk the hard decisions, opting early to cut overcapacity in its steel industry and investing heavily to move up the value-chain from lowerend manufacturing to electronics, biomedical products and high-tech equipment. Under Bo, Chongqing became one of China’s fastest-growing regions, helped by a crackdown on corruption, corporate tax breaks, the pursuit of foreign investment, and rapid urbanisation and industrialisation. And so it remains, chalking up growth of 11 percent in 2015, while the national economy slowed to a 25-year low of 6.9 percent. While Beijing purged many of Bo’s associates, Huang was left in office to oversee that success under new city party boss, Sun Zhengcai, a man tipped for top national leadership.
Even so, the scandal briefly threatened Chongqing’s economic future. Local government official Le Peng said business activity and foreign investment declined, and projects initially approved for Chongqing were moved elsewhere. “The Bo Xilai incident had a very large impact on Chongqing’s economy,” he said, speaking from an office in the city’s Liangjiang New Area. Chongqing was blessed with advantages before Bo and Huang, from its handy location on the Yangtze River and arms-manufacturing history in the 1940s, to central government’s decision to make it the fourth municipality in 1997, alongside Beijing, Shanghai and Tianjin, in a push to develop inland regions. But it didn’t rest on its laurels. “I think we can learn from Chongqing’s experience about the importance of undertaking industrial upgrading and restructuring,” said Yating Xu, an economist at IHS in Beijing.
China Motown
Policies included a corporate income tax at 15 percent to develop priority industries in China’s west compared with 25 percent in more developed parts of China; the first tax-bonded area in inland China, so importers didn’t pay duties until they sold products on; incentives for investing in high-tech and green industries; reforms to encourage rural workers into the city; and policies to make more land cheaply available to industry. The city is now one of the country’s leading centres of automobile manufacturing, drawing global brands such as Hyundai, Iveco, General Motors and Ford. One of China’s biggest carmakers, Chongqing Changan Automobile, which plans to sell 4.5 million vehicles by 2020, is based there.
Chongqing is blessed with advantages like its handy location on the Yangtze River
Huachen Xinyuan’s new auto plant, which primarily supplies China’s domestic market, is based in nearby Fuling district - once a six-hour boat ride from Chongqing centre but now just 40 minutes by high-speed train. That in turn attracted businesses like Haoxiang Machinery. “We moved out here to be closer to Huachen Xinyuan, along with 14 other component suppliers,” said Ye Huagang, its boss, over the buzz of jackhammers at his new factory. Global electronics brands including Hewlett-Packard, Foxconn, Acer and Asus all have operations in Chongqing, lured by tax breaks, cheap labour and land, plus a developed supply chain and logistics. The region makes one in three of the world’s laptops. The vigour of the manufacturing sector has also helped develop related technology clusters and attendant finance and logistics services. “There’s a very close connection between the development of manufacturing and services,” said Tu Xingyong, chief economist at Chongqing’s Economic and IT Commission.
KEY POINTS Chongqing was China’s top growth region in 2015 at 11 pct Credited with early industrial upgrading and restructuring Supervised by Mayor Huang Qifan, who survived Bo’s fall City is major carmaker and produces 1 in 3 global laptops
Chongqing hasn’t just been successful at attracting inward investment. Chongqing firms are also outbound investors, and consular representatives from 10 countries are based there. “We are here mainly to attract Chinese companies who want to invest in Ethiopia and Africa,” said Kebede Abera, Ethiopia’s consular general to Chongqing. In the past four years, around 80 Chinese companies have visited Ethiopia, and some, including Chongqing carmaker Lifan and Chongqing Bureau of Geology and Mining Exploration, have invested there.
Political promise
Fears that Chongqing might suffer for its connection with Bo, who some had considered a potential rival for leadership in Beijing, were soothed when President Xi Jinping made his first trip of 2016 to the city. “This place is full of promise,” he said in a speech looking out over a port connecting railways, waterways and roads along China’s new Silk Road linking Asia and Europe. That is in part a political calculation. “If Chongqing’s economy slowed down, the outside world would think Chongqing can’t do without Bo,” a source with ties to the leadership said. As a further sign of favour, Mayor Huang was among half a dozen regional officials picked to join Xi on his visit to the United States last year. Huang’s next role could well take him to the national stage. Two sources say he is tipped to become secretary-general of the cabinet, which would make him Premier Li Keqiang’s right-hand man. “The power he has here, even if it is local, it’s a very national level experiment,” said Sergio Maffettone, Italy’s consul-general to Chongqing. “Chongqing is like a lab for reforms.” Reuters
Business Daily | 11
March 3, 2016
Asia
South Korean factory output falls at fastest pace in a year It was hit by reduced production of semiconductors and cars in January
S
outh Korea’s industrial output fell at its fastest pace in a year in January as production of key export items such as semiconductors and cars weakened, lending strength to views the central bank may lower rates again soon. The weak production data came ahead of a separate private-sector survey that showed manufacturing activity contracting at its fastest pace in six months as poor exports leave Asia’s fourth-largest economy struggling to mount a solid recovery. Factory output in January fell 1.8 percent from December in seasonallyadjusted terms, far worse than a revised 0.5 percent gain for December and a median 0.6 percent slip tipped in a Reuters survey. It was also the sharpest decline since a 3.5 percent drop in January 2015. “We do not feel South Korean exports will improve within a short period of time,” said Stephen Lee, an economist at Samsung Securities in Seoul, pointing to low oil prices and sluggish demand from China. “There is a high chance that the Bank of Korea will lower rates within the first half of the year to support growth in consumption amid downward economic pressures.” A finance ministry statement following the industrial output data said production and investment were affected by a severe decline in exports in January. Factory output was hit by reduced production of semiconductors and cars in January, which dropped 10.1 percent and 3.6 percent, respectively, in monthly terms. Indices of car and durable goods production hit their lowest levels in 11 months. Semiconductors fall under durable goods in the industrial output index. Meanwhile, the Nikkei/Markit purchasing managers’ index showed South Korea’s manufacturing activity contracted at the fastest pace in six months in February.
KEY POINTS Jan factory output s/adj -1.8 pct (Reuters poll -0.6 pct) Govt official says slump temporary, rebound spotted in Feb Jan weakness attributed to semiconductors, cars Feb PMI at 6-mth low, fuels rate cut views
Market views for another interest rate cut by the Bank of Korea from the current record-low 1.50 percent have grown in the past month as exports show no sign of picking up and a recovery in domestic consumption loses steam. The BOK next reviews policy on March 10. Data out on Tuesday showed South Korean exports in February extending their period of monthly declines to the longest stretch on record as a slowdown in China put trade-reliant economies under pressure. In annual terms, output fell 1.9 percent in January, following a revised 2.2 percent fall in December and compared with a 2.2 percent drop tipped in the Reuters survey. Service-sector output in January slumped by a seasonally adjusted 0.9 percent from the previous month, reversing a revised 0.9 percent gain in December as demand for entertainment, sports and leisure slipped, the data showed. The average factory operation rate was 72.6 percent in January - the lowest since April 2009. Reuters
Hyundai factory
S&P: Large Japanese economic stimulus would raise concerns Speculation has lingered among some market players that Japan could postpone hiking taxes amid worsening demand Shinichi Saoshiro
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apan’s government is unlikely to be able to launch a stimulus package to support its struggling economy without raising concerns about the size of its spending, ratings agency Standard & Poor’s said yesterday. Faced with a flagging economy, Japan is laying the groundwork for new
government spending to pre-empt any weakness in household consumption, which would add to its already heavy debt burden. S&P cut its rating on Japan from AA- to A+ in September, which is four notches below its top rating of AAA, because it doubts the government can reverse the country’s economic deterioration. The
agency also raised its outlook to stable from negative. “The size of any stimulus will have to be carefully calibrated. At this point I don’t think the government can put out a package big enough to support the economy without triggering concerns,” Kim Eng Tan, S&P’s Asia-Pacific senior director of sovereign ratings, said in an interview.
Tan said continued yen strength could remove the external support, such as the receipts inbound tourism bring in, which Japan’s budget balance enjoys. If domestic demand and inflation are unable to make up for the loss of this external support, the fiscal balance could again deteriorate and pose a credit negative factor in the long run, he added. “But even in this scenario, we are unlikely to change our rating in the next year or two,” Tan said. Japan plans to increase its sales tax in April 2017 and that would lift government revenue and lower its outstanding debt burden. Speculation has lingered among some market players, however, that Japan could postpone hiking taxes amid worsening demand. “It really depends on the economic situation at that time. If you introduce a consumption tax hike when the economy is already weak or heading downwards, you
are worsening the economic trend. You may not bring in that much revenue,” Tan said. Japanese government bond yields through the 10year maturities have sunk to record lows below zero percent under the Bank of Japan’s negative interest rate policy, introduced in January, potentially lightening the government’s debt-servicing cost. “In the short term, it can definitely reduce the government’s financing cost, but whether it does so in the long term depends on people’s continued confidence in monetary policy,” Tan said. Although negative yields were unlikely to reverse any time soon, the phenomenon could damage confidence in monetary policy by hurting the financial sector and eventually result in an outflow of capital,” Tan said. “At that point, the policy rates may still be negative, but I don’t think long-term yields will be negative.” Reuters
12 | Business Daily
March 3, 2016
Asia
Australian economy speeds to 3 per cent As consumers outrun commodities gloom Wayne Cole
Turnbull faces a national election later this year and an improving economic background could argue for him to go a few months early, perhaps in July. Gross domestic product (GDP) grew 0.6 percent in the fourth quarter, from the previous quarter when it rose an upwardly revised 1.1 percent. That propelled growth for the year to 3 percent, well above the 2.5 percent that had been expected by both analysts and the Reserve Bank of Australia (RBA). “Given Australia is going through the biggest mining pullback in our lifetimes, this is a pretty good outcome,” said David de Garis, a senior economist at National Australia Bank. “Our baseline is that the RBA is done cutting rates, and these numbers only support that view.” The central bank has held rates steady since May last year and just this week skipped a chance to ease, saying it saw “reasonable prospects” for growth. Investors are still wagering it will have to ease eventually given the headwinds facing the global economy, but likely not as quickly. Interbank futures now imply a 45 percent chance of a cut by May, compared to 60 percent before the data.
KEY POINTS Australian Treasurer Scott Morrison speaks during a press conference at Parliament House in Canberra yesterday. Morrison commented on the December quarter national accounts.
A
ustralia’s economy outpaced all forecasts to grow at the fastest pace in almost two years last quarter, a hopeful sign the worst of the global commodity rout may be over for the resourcerich nation.
Yesterday’s upbeat report sent the local dollar leaping half a U.S. cent as investors reined back expectations of further cuts in interest rates, while providing a political boost to the coalition government of Malcolm Turnbull.
Q4 GDP TOPS FORECASTS RISES 0.6 PCT Q/Q, 3.0 PCT Y/Y CONSUMER SPENDING, HOME BUILDING OFFSET MINING DRAG MARKETS LENGTHENS ODDS ON RATE CUTS, LIFTS LOCAL DOLLAR
Vietnam coffee exports heading for six-year low Total production in Vietnam in 2015-16 will not be more than last season’s 1.5 million tons because of impact of El Niño Diep Ngoc Pham
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offee exports from Vietnam, the biggest producer of robusta beans, may fall to the lowest in six years as farmers hold out for higher prices amid a forecast global supply shortage, according to the nation’s largest shipper. Shipments are forecast at 1.1 million to 1.2 million metric tons this year, Do Ha
Nam, the chief executive officer of Intimex Group, said in an interview last week. That would be the lowest level since 2010, according to customs data. Robusta futures, which slumped 20 percent in 2015, may rebound this year because of concerns over global supply, said Nam, who is also the vice
chairman of Vietnam Coffee and Cocoa Association. Rabobank International and Olam International Ltd. are also anticipating gains in the coffee markets. “Prices are still on a down trend so farmers are not intending to sell, especially as prices are approaching their cost of production,” Nam said. “A crisis of global
The RBA would prefer that any further stimulus come through a lower Australian dollar, but is being thwarted by the drastic easing of central banks elsewhere. The Bank of Japan only recently joined the club of negative interest rates and the European Central Bank is widely expected to cut further below zero next week. The slowdown in China also remains a major uncertainty since the Asian giant takes almost a third of Australia’s exports.
On the mend
Yet the RBA estimates the worst of the drag from mining will be over this year, while record low rates, rising house prices and a boom in home building continue to juice domestic demand. Household consumption is clearly on the mend adding just over half of the economic growth seen over 2015, while home construction added another half a percentage point. Overall, the Australian Bureau of Statistics reported the value of goods and services produced was worth A$1.63 trillion (US$1.18 trillion) in current dollars, or around A$68,400 for each of its 24 million residents. Annual growth of 3 percent handily topped the 2.1 percent boasted by Germany in 2015, as well as the 1.9 percent enjoyed by the United States and UK, and Canada’s 1.2 percent. Importantly, the acceleration in growth made the strength of employment in recent months seems less of an outlier. “There was a fair deal of debate about how accurate the job numbers were -- but it looks like they were telling the right story after all,” said Michael Blythe, chief economist at Commonwealth Bank of Australia. “If that’s the case, that’s a pretty powerful signal for the RBA to stay on hold.”
shortage could happen in April and May as there will be little supply from Indonesia and Vietnam.” Robusta, used by companies including Nestle SA, gained 3.4 percent to US$1,413 a ton on ICE Futures Europe on Monday, trimming their decline for the year to 7.7 percent.
Vietnam differentials
Should prices remain at those levels, the premium for farmers in Vietnam will climb to US$50 a ton or more, Nam said. The current domestic premium of about US$30 hasn’t attracted farmers to sell stockpiled beans, he said in the interview from Ho Chi Minh City on February 26. Total production in Vietnam in 2015-16 will not be more than last season’s 1.5 million tons because of impact from El Niño, Nam said. Production in the 201617 harvest will continue to be limited as low prices have reduced replanting. Growers
Reuters
are replacing old coffee trees with pepper or fruit crops. The total planted are is forecast to drop to 600,000 hectares this year from 650,000 hectares last year. Green bean exports will also drop due to more investment in instant coffee production, Nam added. Intimex’s coffee exports in 2016 are forecast to rise to 400,000 tons from 350,000 tons last year as the company markets higher-quality products, he said. Coffee prices are set to increase as certified stockpiles are drawing down at an alarming rate, Olam CEO Sunny Verghese said Monday. Robusta futures may gain as much as US$200 a ton in coming months as exports from Brazil and Indonesia are set to fall after dry weather curbed yields and farmers in Vietnam may decide to continue withholding beans, Carlos Mera Arzeno, an analyst at Rabobank, said earlier this month. Reuters
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Business Daily | 13
March 3, 2016
Asia
US$15 billion lost in Modi’s 1,500-page India budget Finance Minister Arun Jaitley said the government workers’ wage hike would make it an “extremely challenging” year for expenditure Vrishti Beniwal and Unni Krishnan
South Korea’s current account jumps South Korea’s current account surplus in January surged to a one-year high of US$11.27 billion in seasonally adjusted terms from a revised US$8.59 billion surplus in December, central bank data showed yesterday. This was the biggest monthly surplus since an US$11.67 billion surplus set in January 2015. Exports in January dropped by a seasonally adjusted 8.9 percent onmonth to US$40.31 billion while imports slumped by a sharper 13.2 percent to US$29.21 billion, producing a goods surplus of US$11.10 billion, the Bank of Korea data showed.
New Zealand’s QV house price index rises New Zealand house prices continued to rise in February, government property appraiser Quotable Value (QV) said yesterday, driving its residential property price index up an annual 11.6 percent. The index is now 34.3 percent above the market’s previous peak in late 2007, QV said. House prices in the Auckland region were 17.8 percent higher on the year and are now 69.4 percent higher than at the 2007 peak, although Auckland house prices decreased by 0.7 percent over the past three months, QV said.
Indian jewellers begin 3-day strike over excise levy Indians walk past a screen showing a live broadcast of the Budget speech of Finance Minister Arun Jaitley, at the Bombay Stock Exchange (BSE), in Mumbai
O
ne of the biggest mysteries in India’s budget is how much Prime Minister Narendra Modi allocated for a once-in-a-decade pay hike for government employees. Economists covering India have spent the last few days scouring through some 1,500 pages of budget documents to discover funds for a roughly 1 trillion rupee (US$15 billion) wage increase proposed by a government-appointed committee. What they’ve found varies from 150 billion to more than 700 billion. The size of the salary bill is crucial for two reasons: It would determine the credibility of Modi’s plans to narrow Asia’s widest budget deficit, and indicate whether a consumption boom can kick-start slumping investment. Both are key to future rate cuts and the sustainability of India’s world-beating growth rate exceeding 7 percent. “The budget is mysteriously silent” on the proposed pay rise, Nikhil Gupta, an economist at Mumbai-
Page 199 shows total wages rising by 650 billion from the last fiscal year, close to certain estimate
based brokerage Nirmal Bang, said in a report. He added that it appears to have been implemented “only partially, at best.” The government hasn’t been very helpful in clarifying. Early in his budget speech on Monday, Finance Minister Arun Jaitley said the wage hike would make it an “extremely challenging” year for expenditure. In a press briefing later, he said he accounted for a “significant” amount of the increase without giving a specific number. His deputy, Jayant Sinha, said a committee of senior officials would figure out how to implement the proposal to boost pay for as many as 4.7 million workers and 5.2 million pensioners. He also declined to bite on a number.
Enough room
“We have enough room in the budget to be able to put in place what these recommendations will entail,” he said. Finance Secretary Ratan Watal later clarified to CNBC-TV18 that the budget had allocated about 650 billion to 680 billion rupees for increases in wages for government employees. Yet it’s hard to find that number. It’s nowhere to be found in any specific line items, and salary hikes are only cited in certain explanatory notes. Page 199 might hold the answer, according to Sujan Hajra, a Mumbaibased economist at Anand Rathi Financial Services Ltd. It shows total wages rising by 650 billion from the last fiscal year, close to Watal’s estimate. Still, it’s unclear if that includes mandatory increases tied to inflation.
Consumption hit
Even if one assumes the numbers match official estimates, risks remain.
That amount suggests the government “will either accept a lower increase relative to the recommendations or will stagger the pay hikes over two years, suggesting less consumption stimulus than originally envisaged,” analysts including Sonal Varma at Nomura Holdings Inc. wrote in a report. Lower consumption, in turn, would affect the government’s revenue projections -- which economists such as Dhananjay Sinha at Emkay Global Financial Services Ltd. already see as too optimistic. The income tax increases underpin the boost in India’s tax projections, Revenue Secretary Hasmukh Adhia said in an interview on Tuesday. Those funds, along with a greater corporate tax intake, will help India hit its budget deficit target, he said. “We are very confident,” he said. Even so, concerns exist elsewhere on the revenue side. India consistently undershoots its asset sales target, leading to pressure to boost taxes. While oil’s slide helped them painlessly raise excise taxes to bridge the gap this year, that won’t be easy to replicate. India is on pace to miss its asset sale target for a sixth straight year, raising only about a quarter of 695 billion rupees through February as lower commodity prices and volatile markets affected valuations. Adhia said he doesn’t know how much the government allocated for salary increases, saying it’s the responsibility of others in the Finance Ministry. And what if they come asking him for more revenue? “I have given them my maximum stretch of limit,” Adhia said. “Pay hike -- how much to give, when to give -- is not my baby.” Bloomberg News
Indian jewellers yesterday began a three-day strike in protest against the re-imposition of one percent excise levy by the government. “We have collectively decided to go on a three-day strike. Over 300 associations across India will participate in the stir,” Chairman of All India Gems and Jewellery Trade Federation Sreedhar GV said. Indian Finance Minister Arun Jaitley had re-imposed the excise levy from April 1 this year, and had announced the same in the budget for the financial year 2016-2017.
Singapore fresh graduates get higher starting salary The mean gross monthly salary among Singapore fresh graduates employed in full-time positions has increased, with a growing number of fresh graduates find a full-time job within six months in 2015, according to results from the latest Joint Graduate Employment Survey released yesterday. The results were based on the latest Joint Graduate Employment Survey 2015. According to the survey, fresh graduates from the above three universities had a gross monthly pay of S$3,468 in 2015, up from S$3,333 in the year earlier. In the meantime, the median gross monthly salary among full-time fresh graduates also increased by S$100 to S$3,300 last year.
Australian new home sales rise Sales of new homes in Australia rose for a second straight month in January in a positive omen for employment and consumption, an industry survey showed yesterday. The Housing Industry Association (HIA) said its survey of large-volume builders showed sales of new homes rose a seasonally adjusted 3.1 percent in January, from December when they had jumped 6.0 percent. Sales of detached homes increased by 5.8 percent, while multi-unit sales fell by the same amount.
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International German cartel office probes Facebook for market abuse
U.S. data bolster growth prospects Though automobile sales slowed a bit in February, they remained at levels consistent with strong consumer spending
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Germany’s cartel office has opened an investigation into Facebook for suspected abuse of market power through breaches of data protection law, it said yesterday. The watchdog said Facebook’s terms of service regarding its use of user data may abuse its possibly dominant position in the social network market. “For advertising-financed internet services such as Facebook, user data are hugely important. For this reason it is essential to also examine under the aspect of abuse of market power whether the consumers are sufficiently informed about the type and extent of data collected,” Federal Cartel Office President said.
Kenya’s KCB Group to raise capital this year Kenya’s KCB, the country’s biggest bank by assets, announced a scrip dividend yesterday and said it would issue debt to raise capital this year after volatility in lending rates crimped profit growth in 2015. The bank, which has operations in Kenya, Uganda, Tanzania, Rwanda and South Sudan, said its pre-tax profit rose by 12 percent to 26.5 billion shillings (US$261 million) in 2015, slower than the 18 percent increase in the previous year. It maintained its annual dividend at 2 shillings per share.
anufacturing appeared to stabilize in February, with production accelerating and new orders holding steady at higher levels, in another dose of good news for the economy after growth slowed in the fourth quarter. The economic outlook was further bolstered by another report on Tuesday showing construction spending scaling a more than eightyear high in January. The reports added to upbeat data on consumer spending, the labour market, industrial production and durable goods orders in suggesting that economic growth picked up at the start of the first quarter, which should further ease fears of a recession. The Institute for Supply Management (ISM) said its index of national factory activity increased 1.3 percentage points to a reading of 49.5 last month, the highest reading since September. A reading below 50 indicates a contraction in manufacturing, which accounts for 12 percent of the U.S. economy. While it was the fifth straight month the ISM index was below 50, it was also the second consecutive month that it has risen. A strong dollar, weak global demand and spending cuts by
energy firms following a plunge in crude oil prices have undercut manufacturing. On-going efforts by businesses to sell unwanted inventory have also been a drag on factory activity. The ISM survey was the latest indication that the worst of the manufacturing downturn was probably over. Reports last month showed solid increases in industrial production and new orders for longlasting U.S.-manufactured goods. A second manufacturing survey on Tuesday from data firm Markit also corroborated the improvement in factory activity in February. The signs of stabilization in U.S. manufacturing are in contrast to factories in Asia where output shrank in February. In Europe, manufacturing activity is waning.
Inventory correction easing
The ISM survey showed new orders held steady at a five-month high, though export orders fell. Factories reported a significant decrease in the number of customers saying inventories were too high last month. Customers’ inventories had been considered too high for six consecutive months. This is welcome news after the
fourth-quarter gross domestic product report last week showed businesses had made less progress than previously thought in reducing the overhang of unsold merchandise. Manufacturing could get support from the still-strong demand for autos. Data said auto sales dipped last month to a 17.54 million-unit pace from a 17.58 million-unit rate in January. Ford Motor Co said sales rose 20 percent in February on the strength of SUV and crossover vehicles. General Motors Co sales, however, fell 1.5 percent. In a separate report, the Commerce Department said construction spending increased 1.5 percent to US$1.14 trillion, the highest level since October 2007, as both private and public outlays rose. That followed an upwardly revised 0.6 percent increase in December, previously reported as a 0.1 percent gain. The strong construction spending report prompted economists at Barclays to raise their first-quarter gross domestic product growth estimate by three-tenths of a percentage point to a 2.4 percent annual rate. The economy grew at a 1.0 percent rate in the fourth quarter. Reuters
Puerto Rico working on creditor counterproposal Puerto Rico has received counteroffers to a proposal it made to creditors earlier in the year, and is working on a counterproposal, the U.S. territory said in a presentation posted on the website of its Government Development Bank on Tuesday. In a plan made public in February, Puerto Rico asked its creditors to take a huge “haircut” that would slash its total outstanding debt by about US$23 billion in an opening salvo to resolve a crippling debt crisis. Creditors of Puerto Rico’s sales tax authority, COFINA, made a counteroffer in February.
SEC to pay highfrequency trading critic award The founder of Nanex, LLC, a real-time financial markets data company, said on Tuesday he will receive a US$750,000 whistleblower award for a tip that triggered a US$5 million U.S. Securities and Exchange Commission fine against the New York Stock Exchange in 2012. Eric Hunsader, an outspoken critic of high-frequency traders, said he qualified for the award after tipping off the SEC that NYSE gave certain customers a head start on trading information. An SEC spokeswoman declined to comment. The NYSE trading information was described as “real time,” even though some people received it before others, Hunsader said.
Swiss economy returns to growth The central bank expects the economy to accelerate to about 1.5 percent in 2016 from 0.9 percent last year
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he Swiss economy returned to growth at the end of last year as it fought off the impact of a currency shock that had threatened to push the country into a recession. Gross domestic product rose 0.4 percent in the fourth quarter -- the most in a year -- after shrinking 0.1 percent in the previous three months, the State Secretariat for Economic Affairs in Bern said yesterday. Despite the better-than-forecast performance in the fourth quarter, the economy still suffered its worst year since 2009. That can be traced in part to last January, when the Swiss National Bank abolished its currency cap, sending the franc surging and hitting exports to the euro area.
Adding to the headwinds has been a slowdown in China and other emerging markets, on which some Swiss exporters had pinned their hopes in a bid to offset weak demand in Europe. Exports of pricey Swiss watches, popular in China and Hong Kong, experienced their first annual drop since 2009 last year. The machine, electrical and metals sector reported a 14 percent slump in new orders, terming 2015 an “annus horribilis.” Private consumption grew 0.1 percent in the fourth quarter compared with the third, the SECO data showed. Government expenditure increased by 0.6% and exports rose by 2.9 percent. Third-
quarter GDP had initially been reported as stagnating. With the franc cap gone, the SNB has relied on negative interest rates and a pledge to intervene to keep the currency in check. The franc has weakened to an average of almost 1.10 per euro so far this year -- versus 1.079 in the second half of 2015. The issue for the SNB is the European Central Bank, which is forecast to increase stimulus again this month. That could weaken the single currency versus the franc and push Swiss central bank President Thomas Jordan to loosen policy in response. Bloomberg News
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Opinion Business
wires
Whose QE was it, anyway?
Leading reports from Asia’s best business newspapers
Carmen Reinhart
Professor of the International Financial System at Harvard University’s Kennedy School of Government
THE AGE The Reserve Bank of Australia is investing in South Korea’s currency, allocating 5 per cent of its reserves to the won. “This investment will further diversify the Bank’s foreign currency reserves,” the RBA said in a statement. Its foreign currency portfolio now holds seven currencies, with 5 per cent also allocated to the Japanese yen, Canadian dollar, Chinese renminbi and the British pound sterling. The rest of its portfolio is made up of 55 per cent US dollars and 20 per cent euro.
THE TIMES OF INDIA In a move that will reduce Rs 35,000 crore worth of capital requirement burden for public sector banks, the RBI (Reserve Bank of India) has revised norms allowing lenders to assign higher values to hidden assets in their balance sheet. The hidden assets include undervalued real estate, taxes paid but not reckoned and foreign currency reserves. State Bank of India, if it chooses to revalue its assets, will be the biggest beneficiary along with other public sector banks that have large holdings of real estate.
THE KOREA HERALD Foreign investors are estimated to have earned 5.7 trillion won (US$4.63 billion) in dividend payments from their shareholdings in South Korea last year, data showed Tuesday. According to data compiled by industry tracker FnGuide, 710 companies from the country‘s main bourse and tech-heavy KOSDAQ closing their books in December handed out 36.4 percent of combined dividends to overseas investors. Foreigners accounted for almost 40 percent of the dividends handed out by 361 listed firms listed on the main KOSPI market, up 5.7 percentage points compared to a year earlier.
THE JAPAN NEWS Major companies began their recruitment drive for university students due to graduate in spring 2017 with the annual ban on job briefings lifted Tuesday. As the start date for corporate selection activities including interviews was moved forward by two months, students will have less time than usual this year to gather information on companies before the interviews start. A joint explanatory event was held by about 460 companies by Recruit Career Co. at Makuhari Messe in Mihama Ward, Chiba, on Tuesday. Many students were lined up to enter the venue at 11 a.m. when the session began.
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etween 1913 (when the United States Federal Reserve was founded) and the latter part of the 1980s, it would be fair to say that the Fed was the only game in town when it came to purchases of US Treasury securities by central banks. During that era, the Fed owned anywhere between 12 percent and 30 percent of US marketable Treasury securities outstanding (see figure), with the post-World War II peak coming as the Fed tried to prop up the sagging US economy following the first spike in oil prices in 1973. We no longer live in that UScentric world, where the Fed was the only game in town and changes in its monetary policy powerfully influenced liquidity conditions at home and to a large extent globally. Years before the global financial crisis – and before the term “QE” (quantitative easing) became an established fixture of the financial lexicon – foreign central banks’ ownership of US Treasuries began to catch up with, and then overtake, the Fed’s share. The purchase of US Treasuries by foreign central banks really took off in 2003, years before the first round of quantitative easing, or “QE1,” was launched in late 2008. The charge of the foreign central banks – let’s call it “QE0” – was led by the People’s Bank of China. By 2006 (the peak of the US housing bubble), foreign official institutions held about one-third of the stock of US Treasuries outstanding, approximately twice the amount held by the
Fed. On the eve of the Fed’s QE1, that share stood at around 40 percent. Spanning a decade (2003-2013), QE0 was the most sustained and uninterrupted surge in central banks’ purchases of Treasuries on record. It is difficult to determine the extent to which the Fed’s QE1 during the crisis owed its success in bringing interest rates down to the fact that it was being reinforced by what foreign central banks worldwide – notably in Asia – were doing simultaneously. It is instructive, however, that the Fed’s next two policy instalments, QE2 and QE3, were not matched by large foreign purchases and appeared to have only modest effects in financial markets. After the turmoil of the 2008 crisis subsided, a variety of indices of financial conditions displayed comparatively low levels of volatility (by historic standards) through the spring of 2013. But that spring bloom of stability soon faded. A combination of falling oil and primary commodity prices, an over-ripe business cycle, and the Fed’s announcement of its intent to start “tapering” its asset purchases brought the decade-long boom in many emerging markets to an end. Since then, growth in these economies has slowed markedly, their stock markets have slumped, capital outflows have escalated, and many of their currencies have crashed. In tandem with this grim turn of events, numerous emergingmarket central banks reversed course and began selling US
Treasuries. We would not know about these sales, however, from the Fed’s quarterly report of the Financial Accounts of the US: Around the time official sales commenced, the Fed stopped reporting US Treasuries held by foreign official institutions (a series of data that had been available since 1945). The report now
We no longer live in that US-centric world, where the Fed was the only game in town and changes in its monetary policy powerfully influenced liquidity conditions at home and to a large extent globally
shows only the aggregate figure, which combines central bank holdings with those of the private sector. Fortunately, the US Treasury still publishes the information. As of the end of 2015, the share of Treasuries held by foreign central banks is more than 1.5 times what the Fed holds. But this figure is significantly down from its peak and, with capital outflows from China and elsewhere showing little signs of abating, is now trending lower. The fitful and disorderly unwinding of QE0 is most likely overwhelming the effects of reassurances by Fed officials that they will maintain a large balance sheet. Indeed, tighter liquidity conditions and increased volatility in financial markets are the byproduct of the reversal in the long cycle of foreign purchases. The unwinding of QE0 does not necessarily imply a decline in the rest of the world’s appetite for US Treasuries. In times of financial turbulence, US Treasuries have historically been a safe haven for private flight capital. But the change in ownership taking place now does carry implications for financial stability. The change from the steady (and often predictable) purchases of the foreign central banks of the 2003-2013 era to the less predictable hands of private investors, who are more sensitive to changes in rates of return, is likely to be the signature of this stage of the global cycle. Project Syndicate
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Closing ICBC to take part in managing Russian Eurobond
Singapore central bank seen on hold in April
Industrial and Commercial Bank of China (ICBC) wants to take part in organising a Russian sovereign Eurobond issue this year and has responded to an invitation from the Russian Finance Ministry, a deputy chairman of the bank told Russia’s RBC newspaper. Russia invited 25 foreign and three domestic banks to bid to organise up to US$3 billion in Eurobonds this year, in what would be its first foray into foreign debt markets since 2013. But U.S. officials reportedly warned some U.S. banks that bidding for the deal would undermine sanctions imposed on Moscow for its role in the Ukraine conflict. ICBC was one of four Chinese banks invited to organise the Eurobond.
The risk of monetary easing has risen as global headwinds buffet Singapore’s trade-reliant economy, but the central bank may stay on hold at its next meeting in April barring a sharper slowdown in China and steeper jobs losses, a Reuters poll showed. Analysts have renewed focus on the possibility of further easing by the Monetary Authority of Singapore (MAS) since the 2016 official forecast for headline inflation was cut and amid weakness in exports, oil prices and swings in financial markets. Eight of 16 analysts in a Reuters poll said the chances of MAS easing at its semi-annual review next month have increased, with four saying the central bank was likely to ease.
ChiNext profit growth hits five-year high A total of 322 companies reported increased profits while 173 firms saw declines
The Internet industry reported profit growth of 146 percent year on year in 2015
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he average net profit of firms listed on the ChiNext Index, China’s NASDAQ-style board for start-ups, grew at its highest speed in five years in 2015. Almost all ChiNext-listed companies unveiled their performance sheets by the end of February, reported the official Securities Times yesterday. The 500-some ChiNextlisted companies raked in an average net profit of
125 million yuan (US$19.1 million) last year, up 27.8 percent year on year. Their revenue on average also rose at a 5-year high of 29.4 percent year on year. A total of 322 companies reported increased profits, accounting for 65 percent of the total, while 173 firms saw declines. The percentages of companies with gains versus those with losses were similar to the numbers reported in 2014. Among the gainers in
Airbus starts work on new mainland facility
2015, nine witnessed a dramatic surge in net profits of more than 500 percent. They include East Money, Nationz Technologies and EDAN Instruments. A total of 71 companies reported their profits more than doubled last year, including Baofeng Technology Co., Anhui Shengyun Machinery Co. and Jinlong Machinery & Electronics Co., Ltd. Firms in emerging industries, such as the
Internet, environmental protection, electronic machinery, software and information technology, took the lead in profit gains. The Internet industry reported profit growth of 146 percent year on year in 2015. While emerging industries reported gains, ChiNext-listed companies in traditional sectors turned to asset swaps and other means to improve their weak performance. The data show the growth engine has steadily moved from traditional sectors to emerging industries as China pushes to restructure its economy. The profits of major
Jack Ma to be in talks for Caixin stake
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industrial firms in 2015 fell year on year for the first time in over a decade, the National Bureau of Statistics (NBS) data showed. Although the overall situation is grim, the hightech industry, equipment manufacturing companies and consumer goods producers posted profit gains of 8.9 percent, 4 percent and 7 percent, respectively. China’s policy makers are striving to steer the economy away from an export-driven, credit-fuelled growth model to one based on innovation, stronger consumer spending and the service sector. Consumption accounted for 66.4 percent of GDP in 2015, up 15.4 percentage points from 2014, while the service sector contributed 50.5 percent to the economy in 2015, up from 48.1 percent in 2014, according to official data. China is implementing supply-side structural reforms, featuring better provision of high-quality goods and services, to shore up growth as demandside management, such as investment stimulus, has become less effective. Xinhua
New Zealand economy forecast to grow by 3 pct
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urope’s largest aircraft manufacturer Airbus started construction yesterday on a new facility to deliver wide-body planes in China, as it faces off against bitter US rival Boeing for market share in the world’s second-largest economy. At a ceremony in the northern port of Tianjin Airbus CEO Fabrice Bregier and Chinese officials officially broke ground for the completion and delivery centre that will produce two A330 planes per month. The centre is an expansion of the firm’s existing final assembly plant for A320 single-aisle aircraft in the city. It comes with China’s economic growth at its weakest in a quarter of a century and concerns over its outlook sending shivers through global stock exchanges. But Bregier said that “this is not true for our market”, adding that increased middle-class incomes and easing visa rules were driving a boom in Chinese air travel. The country is forecast to have 1.7 billion air passengers by 2034, and is poised in the next two decades to become the largest civil aviation market in the world.
libaba Group Holding Ltd.’s financial affiliate is in talks to invest in Chinese business magazine publisher Caixin Media Co. as billionaire founder Jack Ma expands his media interests, according to two people familiar with the matter. Caixin, founded by Hu Shuli, has been discussing a stake sale with Ma’s Zhejiang Ant Small & Micro Financial Services Group Co., the people said, asking not to be identified because the matter is private. No deal has been signed, the people said, declining to comment on the price or size of the stake. Alibaba agreed in December to buy Hong Kong’s South China Morning Post newspaper as Ma, who controls Ant Financial, expands his media empire. An investment in Caixin, which has a news website, mobile applications and conference business, would mark another connection between Ma and the publisher’s Chairman Li Ruigang. In November Alibaba teamed with Li, Tencent Holdings Ltd., and Oriza Holdings to create CMC Holdings. Li is a former chairman of Shanghai Media Group, which formed a joint venture with Alibaba last year to create a financial data and information service.
trong population growth, construction and tourism will be the key drivers behind solid economic growth in New Zealand for the next few years, according to a forecast from an independent economic think-tank yesterday. Economic activity picked up over the second half of 2015, reflecting growth in the non-dairy sectors and annual GDP growth was expected to recover to around 3 percent this year and average 2.5 percent for the following years, according to the Quarterly Predictions report from the New Zealand Institute of Economic Research (NZIER). However, the current volatility in global financial markets was a reminder of how quickly sentiment could change, said a statement from the NZIER. Despite the pick-up in economic activity, inflation in New Zealand remained very weak, largely due to lower petrol prices. However, lower petrol prices had also reduced costs for households and businesses and encouraged spending, and while wage growth was subdued, it was still outpacing consumer price inflation, resulting in real wage growth for many households.
AFP
Bloomberg News
Xinhua