MOP 6.00 Closing editor: Joanne Kuai
Mainland’s financial players shake up HK office market Page 9
Year IV
Number 994 Friday March 4, 2016
Publisher: Paulo A. Azevedo
Hong Kong retail sales continue shrinking Page 16
Local SMEs, start-ups awarded MOP68 mln in February Page 4
2015 GDP plummets 20 pct
Macau’s economy contracted 20.3 pct in 2015. A direct consequence of the city’s plunging gaming revenues. GDP for Q4 shrank 14.4 pct. DSEC says the economic contraction was primarily due to the unrelenting decrease in the export of services. Down 26.8 per cent y-o-y. With exports of gaming services tumbling 33.4 pct. And exports of other tourism services dropping 11.6 pct Page 2
Data will be released next week. A private poll will reveal China’s trade is still spluttering. Although the poll suggests the escape of foreign reserves will moderate
Page 10
Human Resources
Job market hardening
Brought to you by
Nearly 9 out of 10 employees expect no year-end bonus for 2015. Underscoring the pessimism of the local workforce, say leading recruitment agencies. Employers will pay up to MOP13,000 starting salary in 2016. And there are fewer job vacancies than in 2015. But job fairs continue to offer hope to fresh grads
HSI - Movers March 3
Name
Page 5
%Day
China Resources Beer H
+3.84
CNOOC Ltd
+2.82
Intelligent MSAR
China Resources Powe
+2.21
Bank of East Asia Ltd/T
+1.73
Hang Lung Properties L
+1.39
Over MOP340 mln disbursed by the Science Fund. With over MOP113 mln allocated to 86 scientific investigation projects. UMAC grabbed the biggest chunk of MOP76 mln. A primary objective of the Fund is to develop the MSAR into an ‘intelligent city’
China Resources Land
-2.40
HSBC Holdings PLC
-2.46
China Mengniu Dairy C
-3.01
Belle International Ho
-3.09
Lenovo Group Ltd
-4.04
Page 2 www.macaubusinessdaily.com
Data cascade
Cultural city Just around the corner. Now in its 27th edition, the Macao Arts Festival will be held from April 30 to May 29. Commemorating, in particular, the works of William Shakespeare and Tang Zianzu. The Festival budget is set at MOP27 mln. Down 7 pct on last year due to promotional cost savings
Page 5
Independence of judiciary guaranteed
All per the Basic Law. The Chief Executive said the gov’t respects the principles of the rule of law. And the independent power of the judiciary. This, in response to media queries about a high profile case. Currently being investigated by the Commission Against Corruption involving the Public Prosecutor’s Office
Page 3
Source: Bloomberg
I SSN 2226-8294
2016-3-4
2016-3-5
2016-3-6
14˚ 20˚
15˚ 21˚
16˚ 21˚
2 | Business Daily
March 4, 2016
Macau KEY POINTS In 2015, GDP amounted to MOP368.7 billion, shrinking 20.3 pct y-o-y Exports of gaming services tumbled 33.4 pt y-o-y Exports of other tourism services dipped 11.6 pct y-o-y Domestic demand expanded at a slower pace, up just 1.9 pct y-o-y
Economy shrinks 20 pct in 2015 amid gaming slump
2.5 and 4.5 percentage points, respectively.
Q4 GDP dipped 14.4 pct
GDP for the fourth quarter declined 14.4 per cent due to the relentless decline in exports of tourism and gaming services Joanne Kuai
joannekuai@macaubusinessdaily.com
F
or the whole year of 2015, Macau’s economy shrank 20.3 per cent year-on-year in real terms, with the city reeling from falling casino revenues and fewer visitors. In 2015, Gross Domestic Product (GDP) amounted to MOP368.7 billion (US$46.04 billion) while per capita GDP was MOP574,790 (about US$71,984) according to data from the Statistics and Census Service (DSEC) released yesterday. The implicit deflator of GDP increased 4.4 per cent year-on-year, while economic growth for 2014 was revised downwards to 0.9 per cent. DSEC says that the economic contraction was
mainly due to the continuous decrease in exports of services, down 26.8 per cent year-onyear, with exports of gaming services tumbling 33.4 per cent and exports of other tourism services dropping 11.6 per cent. The city’s economy shrank 14.4 per cent in the fourth quarter, easing from a fall of 24.2 per cent in the three months through September. There are signs that Macau’s gaming market has reached bottom as a rise in the number of Mainland Chinese tourists during last month’s Lunar New Year holiday helped ease the industry’s 21-month slump. Gross gaming revenue fell 0.1 per cent to MOP19.5 billion
in February, the smallest decrease since the downturn began in June 2014.
Slower expansion of domestic demand
Meanwhile, domestic demand expanded at a slower pace, up a modest 1.9 per cent year-on-year, with growth in private consumption expenditure, government final consumption expenditure and gross fixed capital formation easing to 2.4 per cent, 4.2 per cent and 0.9 per cent, respectively. External demand slackened, as exports and imports of goods rose at a slower rate of 10.2 per cent and 0.1 per cent year-onyear, respectively, whilst the
imports of services fell by 3.4 per cent. GDP structure by major components revealed the relative importance of net exports of goods and services to GDP had dropped significantly to 40.7 per cent in 2015 from 53.4 per cent in 2014 on account of the substantial decline in exports of services. By contrast, domestic demand increased year-onyear, bringing its relative importance to GDP up to 59.3 per cent in 2015 from 46.6 per cent in 2014, of which the share of private consumption expenditure (25.7 per cent), government final consumption expenditure (9.5 per cent) and investment (24.2 per cent) rose by 5.8,
DSEC data also indicates that GDP for the fourth quarter of 2015 contracted by 14.4 per cent year-on-year in real terms, a notable deceleration from the 21.0 per cent decline of the previous quarter. Total exports of services shrank 19.1 per cent, as a decrease in visitor arrivals and total visitor spending dragged down exports of other tourism services and gaming services by 6.1 per cent and 25.4 per cent, respectively. Domestic demand weakened, with private consumption expenditure and government final consumption expenditure rising marginally by 1.3 per cent and 1.6 per cent, respectively, with gross fixed capital formation falling 17.4 per cent. Exports and imports of goods decreased 12.7 per cent and 13.8 per cent, respectively, while imports of services dropped by 7.9 per cent. Economic growth for the first three quarters of 2015 was revised upwards to -21.9 per cent, -23.7 per cent and -21.0 per cent, respectively. The implicit deflator of GDP that measures changes in prices increased by 3.0 per cent year-on-year in the fourth quarter.
Science Fund disburses over MOP340 million in 2015 University of Macau and Macau University of Science and Technology most supported by fund
O
ver MOP340 million was awarded in 2015 towards financing “scientific investigation, popularization of science and projects for the establishment of reference laboratories,” stated the Chairman of the Macau Science and Technology Fund [FDCT], Mr. Ma Chi Ngai, at a press conference yesterday. Of this MOP340 million, over MOP113 million was allocated to 86 scientific investigation projects, resulting in “positive results,” said the Chairman. Of the 86 projects approved by the fund last year, 45 were awarded to the University of Macau - granting the institution over MOP76 million. The Macau University of Science and Technology came second, with nearly MOP32 million divided between 18 projects submitted.
Over MOP 76 million awarded to projects submitted by the University of Macau
Major areas of study were focused in the “information technology” area “followed by Biological Science and Traditional Chinese Medicine,” said the Chairman. Other higher education institutions were also awarded funds for scientific investigation projects, in the form of nearly MOP1.8 million to the University of Science and Technology and MOP0.4 million to the Macau Polytechnic Institute – for one project apiece.
“Intelligent City”
Mr. Ma indicated that these funds are aimed at improving the level of scientific investigation, offering international vision and platforms, developing local talent in the area, participating in international competitions, establishing laboratories to study and provide information
regarding the “state” of the MSAR regarding science and technology and work involving developing an “intelligent city”. In order to “investigate the transformation viability of Macau into an intelligent city” the fund welcomed in April two “experts” to share the results of their research. The experts, one from Barcelona and one from the United Kingdom will contribute their research in concepts such as: “wireless city, intelligent transport, intelligent tourism and intelligent government”, complimenting the research the fund’s current projects reference. Of the 33 projects completed by recipients of fund financing, 109 resulted in published articles, 18 in patents, one award and six complete products or samples. K.W.
Business Daily | 3
March 4, 2016
Macau DSSOPT: Alto de Coloane residential project not breaking ground soon The Land, Public Works and Transport Bureau (DSSOPT) said in a press release yesterday that the new housing project planned by local businessman Sio Tak Hong in Estrada do Campo in Coloane is not approved for construction yet. Controversy has arisen over the 20 to 30-storey residential project that may affect the natural environment of Alto de Coloane. The government said yesterday that it has not received any official drawings for the project by the developer despite a drafted being recently approved. Meanwhile, Mr. Sio declined to comment on the controversy, claiming he would obey the government’s decision.
CE: Ho’s alleged graft proceedings subject to independent process The Chief Executive said the government would give local judicial bodies free rein in their proceedings on the alleged graft involving the city’s former top prosecutor, as mandated by the Basic Law
C
hief Executive Fernando Chui Sai On says the Macao SAR Government will respect and guarantee the local antigraft agency’s independence in investigating the alleged corruption of former Prosecutor-general Ho Chio Meng. Speaking to reporters while departing for the National People’s Congress in Beijing, the city’s top official said yesterday that he had suggested the Commission Against Corruption (CCAC) investigate the case based on local laws after being notified by the agents last year. According to Mr. Chui,
the alleged graft has been reported to the central government. However, he stressed yesterday that he would not visit any Chinese officials regarding the issue during his official trip in Beijing. “We only reported the case to the central government after the Public Prosecutor’s Office had filed the case with the Court of Final Appeal. The central government did not give any instructions on the case. And the SAR Government treats the case as a regional incident,” the Chief Executive said. The city’s former chief prosecutor was arrested by
local anti-graft agents and detained by order of the top court last weekend for allegedly illicitly granting some 2,000 public contracts of the Office to several local businessmen for advantages between 2004 and 2014. According to CCAC, the suspects in the case had illegally gained at least MOP44 million through the deals.
Unfortunate
Yesterday was the first time that the top official made any remarks on the alleged corruption, telling reporters that he feels “sad” and “unfortunate” about his former co-worker in the
government. But Mr. Chui hopes society will remain objective regarding the case before local courts make any ruling. “We need to respect the principle of the judicial bodies’ independence and their spirit of judicial confidentiality granted by local laws. We should also respect the principle of presumption of innocence. Before local courts rule on the case we should [consider] the whole proceedings objectively,” the CE said, claiming it is too early to make judgement on the alleged graft case. Asked by reporters whether the case would affect the
judicial system of the Special Administrative Region, Mr. Chui did not express any concern, indicating that the city’s judicial system is in line with local laws and has been running independently after 16 years of development since the establishment of the Macao SAR Government. On Tuesday, the top court declined to entertain Ho’s application for a writ of habeas corpus - a legal action by means of which detainees can seek relief from unlawful detention. Before stepping down in December 2014, Mr. Ho had overseen the Prosecutor’s Office for 15 years. K.L.
4 | Business Daily
March 4, 2016
Macau
SMEs, young start-ups Presumption of guilt awarded MOP68 mln in February opinion
Pedro Cortés
Lawyer cortes@macau.ctm.net
In one month, the government approved tens of millions in interest-free loans to the city’s young entrepreneurs and SMEs through several of its financial aid schemes Kam Leong
kamleong@macaubusinessdaily.com
I
t is the duty of a lawyer, among many other things, to not discuss in public matters that are being handled by other lawyers or that are under secrecy of justice or that involve any of his clients. This has been all in the paper for so long that I would expect measures being taken by the competent bodies after what happened this week with the former Public Prosecutor’s case. It is a duty of the relevant investigation body to keep the secrecy of justice in relation to cases that are being investigated. It is a duty of everyone to respect those principles and duties. Unfortunately, no-one respects it and such behaviour is not condemned by anyone. In Macau, as in many other places, people under investigation are always guilty before the trial. In the newspapers, in public opinion, in the forums. Even Legislative Assembly members who are also lawyers consider they can comment upon a case under investigation. Unfortunately, this could happen to any of us one day. This could also happen to those who today violate the rights of the suspects, irrespective of them being a former Public Prosecutor who was a putative candidate for Chief Executive, a driver that had an accident with casualties or someone who allegedly smuggles drugs. We all have the right to have a just trial with a dignified defence and a just college of judges analyzing the facts. The justice of human beings is well drafted in laws and regulations. But when it comes to real life, all gunshots are permissible and, in the end, our rights are expurgated without reason for that. I do not comment on the facts that are allegedly attributed to Mr. Ho Chio Meng not because I am a lawyer but because I am a citizen in a Rule of Law system that states that the referred person shall only be considered guilty after a just trial, preferably with appeals. I want to believe that the future of justice in Macau is not under fire and that all persons will have the same rights in the future. That is why I wholeheartedly respect the judicial institutions and that I do not comment on what happens in courts. Yes, the matter of justice is for the courts to decide and not for public opinion, Legislative Assembly members or other important persons to opine and deliver a verdict prior to any act of justice. I want to believe that only the courts will state in a just manner that the referred defendant was guilty or not in accordance with evidence shown and produced in court. I want to believe that the presumption of innocence exists in Macau and that what is happening is not only the tip of the iceberg. Maybe I am excessively a believer.
T
he government’s lending to local young start-ups and small & medium-sized enterprises (SMEs) reached MOP67.5 million (US$8.44 million) in February, the latest data released yesterday by Macao Economic Services (DSE) reveals. Last month, the economic department approved a total of MOP62.87 million in loans to the city’s SMEs via its two financial aid schemes - namely, the SME Aid Scheme and the SME Credit Guarantee Scheme. The SME Aid Scheme, offering interest-free loans of up to MOP600,000 per applicant for different finance purposes, awarded MOP18.4 million to 43 applicants in the month, which is a drop of some 10 per cent compared to the approved amount of MOP20.4 million in January. The city’s small and medium-sized retailers were the biggest beneficiaries of the loan scheme for this year so
far. The industry was allocated some MOP12.1 million in loans during the first two months of the year, accounting for 31.2 per cent of the total. Meanwhile, the SME Credit Guarantee Scheme lent some MOP24 million in loans to nine successful applicants last month, compared to zero approved applications in January. The local wholesale industry was granted MOP8.71 million in loans in the month, accounting for 36.2 per cent of the total, while the real estate business received loans amounting to MOP6.23 million, or 25.9 per cent of the total. The credit guarantee scheme provides each beneficiary with a credit guarantee equal to 70 per cent of the loan approved by the participating banks, up to MOP 3.5 million.
MOP4.6 mln to young start-ups
DSE data also indicated that some MOP4.6 million in lending was
given to local young people to start their own businesses via the Young Entrepreneur Aid Scheme last month. The scheme received 22 applications in the period whilst the economic department gave the green light to 18, suggesting an approval rate for the month of 81.8 per cent, lower than that of nearly 94 per cent for the first month of the year. The young start-up aid scheme offers interest-free loans of up to MOP300,000 (US$37,500). Entrepreneurs aged between 21 and 44 are eligible for a loan for eight years, with repayments starting after 18 months. For the first two months of this year, some MOP11.4 million in loans has been approved for these young entrepreneurs, bringing the accumulative granted lending via the scheme to MOP167.45 million since it was implemented in 2013. According to official data, these young start-ups primarily engaged in retail and F&B businesses.
Business Daily | 5
March 4, 2016
Macau Bossini to sell local shop in Avenida Henrique Hong Kong-listed clothing retailer Bossini International Holdings Ltd. announced yesterday that it is to sell its local property in Avenida do Infante D. Henrique for HK$350 million (US$43.6 million) to investment holding company Deep Thought Investments Limited. The three-storey property is currently one of the group’s retail stores in the city. The company claimed the disposal ‘gives a good opportunity to realise its investment with considerable gain’. However, Bossini said it would lease back the property for three years after the disposal for continual use as one of its stores in Macau. ‘The disposal will only have minimal impact on the group’s operations,’ the company claimed.
Pessimistic local workforce Local employees don’t have much expectation of receiving a year-end bonus from 2015, and employers are not willing to pay more than MOP13,000 starting salary, survey shows
“Fresh graduates have a starting salary of around MOP10,000 to MOP12,000. Some students say that working in a bank [gives them a] salary of MOP10,000, although MOP400 is retained as funds and expenses. The actual receipt of around MOP9,000 is difficult for university graduates,’’ he said.
Campus and online recruitment
T
he sentiments of the local workforce towards the global economic climate are pessimistic, say local human resources (HR) agencies MSS Recruitment and hellojobs.com. A month-long online survey reveals that of 1,378 respondents, 87 per cent admit they don’t expect a bonus. It’s heartening to see that the local workforce has realistic expectations towards their year-end bonus, said Jiji Tu, Managing Director of MSS in a press briefing yesterday. The HR expert also pointed out that it reflects that 87 per cent of employees feel that their employers have suffered a business decline hence their pessimistic expectation of a year-end bonus. Only 5 per cent of
people expected to receive at least one month’s salary as bonus.
Lower expectations
In addition, in another survey conducted on the employers’ side, 58 per cent of HR managers from around 30 small and mediumsized enterprises (SMEs) revealed that in 2016 they expect to pay a starting salary to fresh graduates of MOP10,001 to MOP11,000 (US$1,250 to US$1,375) said Jiji Tu. The company conducted the survey with respondents from some 30 SMEs in different industries such as retail, engineering and wholesale; 17 per cent of respondents expected the starting salary to be MOP12,001 to MOP13,000, while another 17
per cent expected the amount to be MOP10,000 or below. No respondents said that they could pay a starting salary of more than MOP13,000. In addition, the respondents indicated that there will be fewer job vacancies in 2016 compared to 2015. MSS attributes this to less growth, minimal hiring due to internal transfer or current employees taking on more responsibilities. Nelson Kot Man Kam, Chairman of the University of Macau Alumni Association (AAAUM) stated in the briefing that “Of course, we would like to see our graduates have a good perspective in their career path but according to what we’ve heard from students market conditions are not as satisfying as in recent years.”
Hello-jobs. com and MSS Recruitment are going to hold ‘Macau Campus Joint Recruitment Event 2016’ offering jobs for fresh graduates this year from 63 companies with more than 400 job vacancies. Fresh graduates can have their resume in English reviewed and advised upon in the companies’ booth at the Macau Universities Career and Internship Fair. A 24-hour online recruitment fair for seven days will also be held for fresh graduates, whether Macau residents or overseas students. Companies offering jobs in the campus recruitment programme include Bally, Mandarin Oriental Macau, Louis XIII, Banco Nacional Ultramarino, Taboo, CTM, and V.W.M. Motors Limited. B.L.
Macau Arts Festival budgets MOP27 mln This year’s budget represents a reduction of 7 pct from last year, with savings derived from fewer printed promotional materials and greater emphasis on online marketing
W W W. T H E S C R I P T R O A D . O R G
A
5-19
三 月 • MARÇO
MARCH 2016
t MOP27 million (US$3.37 million), the budget for this year’s Macau Arts Festival will be the same as in 2014, which represents a 7 per cent decrease compared to the previous year’s budget, the organizer of the event, Cultural Affairs Bureau President Ung Vai Meng, said at a press conference announcing the event yesterday. “The part that an be saved comes from less expenditure on printing promotional materials. Instead, we are utilising more online media to advertise the Festival. The decrease in budget will not affect the quality of the Festival,” the Head of the Department for the Development of the Performing Arts, Leong Chi Kin, explained. “The Festival has been advertised overseas. We’re also using online platforms to promote. Meanwhile, we’ve been negotiating new partnerships such as having discounted tickets with return ferry tickets between Macau and some neighbouring regions,” he added.
Local arts
The 27th Macau Arts Festival (MAF) - organised by the Cultural Affairs Bureau - will be held from April 30 to May 29, presenting shows,
artistic exhibitions and an outreach programme including over 100 activities. This year marks the 400th anniversary of the death of the Western world’s literary giant William Shakespeare and of the renowned Ming Dynasty playwright Tang Xianzu. The Festival will open with Shakespeare’s romantic comedy ‘A Midsummer Night’s Dream’ performed by the Shakespeare Theatre Company from the USA. “Some of the programmes are unique to this year only and some of them will continue in the following years. In addition, the artistic content is larger with less entertainment elements in comparison to last year,” Leung Hio Ming, Vice President of the Cultural Affairs Bureau, said. “Local performances are required to comprise over 50 per cent of the whole programme, which aims to promote the culture of Macau. Therefore, it aims to set up a platform for local artists to have the opportunity to shine in order to encourage local artists to perform overseas by building up Macau as a cultural city.” Ung Vai Meng added. A.L.
6 | Business Daily
March 4, 2016
Macau Imperial Pacific report VIP rolling chips of US$1.95 bln in Saipan Hong Kong-listed casino operator Imperial Pacific International Holdings Ltd. generated US$1.95 billion (MOP15.6 billion) of VIP table games rolling from its ‘temporary casino’ on the island of Saipan for February, according to a filing with the Hong Kong Stock Exchange. The ‘temporary casino’ of the operator, soft-opened in July last year, was officially launched on November 27. Nevertheless, its VIP gaming operation started to run from November 1 last year. The casino property has some 45 gaming tables and 106 electronic gaming machines.
Lionel Leong: “Too early to tell” on gaming Meanwhile, SJM CEO Ambrose So indicated the March figure would be key, despite the gaming operator noting improvement in the mass market and several VIP rooms in February development of the Meetings, Incentives, Conventions and Exhibitions (MICE) industry.
SJM sees mass market improvement
“I
t is still too early to tell if [Macau’s] gross gaming revenue will stop dropping. It takes more time to observe the situation,” Secretary for Economy and Finance Lionel Leong Vai Tac said on Wednesday in Beijing, where he was attending China’s National People’s Congress
(NPC) as a member of the Macau delegation. Macau’s gross gaming revenues dropped 0.1 per cent year-on-year. It’s also been an improvement for three consecutive months already. However, the Secretary pointed out that this year’s Chinese New Year holidays, a traditional hot
season for Mainland tourists travelling to the SAR, fell entirely in February, while last year some of the holidays fell at the end of February and some fell in early March. “Any conclusion that gaming revenues will stop dropping or rebound is still too early. We need to constantly monitor the
MGM said close to US$1.13 bln sale of Las Vegas mall to Simon
M
GM Resorts International has reached an agreement to sell its Shops at Crystals mall in Las Vegas to a Simon Property Group Inc. partnership for US$1.13 billion, according to a person with knowledge of the transaction. The deal may be completed soon, said the person, who asked not to be identified because the terms have not been made public. Representatives for Simon Property and MGM Resorts declined to comment on the deal. The property is part of MGM’s CityCenter, a US$9 billion casino, hotel and retail complex on the Las Vegas Strip that is co-owned by the Dubai investment firm Infinity World Development Corp. The Las Vegas-
based casino operator has been trying to reduce its debt load, in part due to pressure from Jonathan Litt’s activist firm Land & Buildings Investment Management LLC. MGM Resorts put the mall up for sale three years ago, but halted the process after failing to get the offers it wanted. Since then, tourism to Las Vegas has grown. Real estate values in the city have also risen and the mall has added tenants, according to John Knott, who heads the casino practice at brokerage CBRE Group Inc. in Las Vegas. The Shops at Crystal deal was reported earlier Wednesday by newsletter Real Estate Alert. Bloomberg
situation, especially the neighbouring regions, customer sources and capital flow,” said Mr. Leong. As an NPC Macau delegation member, Mr. Leong also said he would focus on how to utilise national policies to improve the economic diversification of Macau, as well as the
Gaming operator Sociedade de Jogos de Macau (SJM) has seen a slight improvement in the business performance of the mass market at its properties and some VIP rooms, said Ambrose So Shu Fai, Chief Executive Officer (CEO) of SJM. However, the CEO said such signs cannot reflect the general trend yet. “Macau’s February gross gaming revenue has dropped 0.1 per cent year-on-year. And I hope for the whole year, the gaming revenues will stay stable or increase slightly,” Mr. So told reporters on Wednesday on the sidelines of attending the political gathering as a member of Macau’s delegation to the Chinese People’s Political Consultative Committee (CPPCC) in Beijing, as reported by Macau media. When asked whether February’s positive gaming revenues performance was only seasonal, he said that March will be the key month by which to gauge the future trend and whether or not to increase the number of VIP rooms.
8 | Business Daily
March 4, 2016
Greater China
Government eyes 13 pct money supply growth to buffer economy Sources also say inflation forecast for this year set to be around 3 per cent, more than double the actual rate in 2015 Kevin Yao
C
hina plans to target broad-based money supply growth of around 13 percent this year, sources said, a signal that further monetary policy easing is likely during a painful economic restructuring that could see millions of workers losing jobs. Top leaders have already pledged “supply-side structural reforms” to tackle excess factory capacity and “zombie firms”, and are also expected to lean more on fiscal stimulus as they seek to avert a hard landing for the world’s second-largest economy. “A 13 percent rise in M2 is sufficient for keeping liquidity flush in the near term, but we may see faster rises later this year as the central bank is likely to loosen policy further,” said one of the sources. The target, which is set to be announced by Premier Li Keqiang at the annual parliament session that opens on Saturday, was endorsed by top party leaders at a closed-door Central Economic Work Conference in December, said a number of people with knowledge of the outcome of the meeting. China’s top economic planner has said the government would target economic growth of 6.5-7 percent
KEY POINTS M2 money growth target set at 13 pct for 2016 - sources 2016 inflation target to be around 3 pct - sources
this year, confirming a Reuters report, and the sources said the money supply and inflation forecasts are in line with that target. The State Council Information Office did not respond to faxed requests for comment. The money-supply targets are subject to last-minute revisions before being submitted to the largely rubber-stamp parliament for approval.
Renewed easing cycle
Flush credit conditions will be vital for the government to cut taxes and keep up infrastructure spending to compensate for the effects of tackling overcapacity, including unemployment.
Targets to be announced at annual parliament from March 5 Further monetary easing seen likely to cushion reform pain There are plans to lay off 5-6 million workers from “zombie enterprises” over the next two to three years as part of efforts to cut industrial overcapacity and pollution, two sources with ties to the country’s leadership said this week. “The target for M2 is likely to be 13 percent this year. They need to keep appropriate liquidity conditions, credit and money supply growth to meet the need for supply-side
reforms,” said another source, a policy adviser. Advisers expect the central bank to deliver more cuts in bank reserve requirements in the coming months, though there is less room to cut interest rates. The central bank is also expected to pump out more cash via policy tools such as the standing lending facility (SLF) and the medium-term lending facility (MLF), they said. M2 money supply expanded an annual 13.3 percent in 2015, beating the government’s money supply target of around 12 percent, due to a raft of easing measures. The government is expected to target consumer inflation of around 3 percent this year as it tries to combat deflationary risks and anticipates a possible rebound in global commodity prices, said the sources. It aimed at the same target last year, but the consumer price index (CPI) stalled at just 1.4 percent. “The target on the CPI will still be 3 percent, partly because the government hopes prices could rise,” said another source. “Many firms are losing money as producer prices drop.” Reuters
Commodities trade thrives as uncertainty spurs wagers Hong Kong Exchanges and Clearing Ltd. has plans to bridge the gap between Chinese and world pricing with a three-year plan for commodities
E
conomic uncertainty is a boon for China’s commodities trade, lifting volumes and expanding the nation’s sway over global markets for raw materials even as its own demand slows, according to two veteran metals brokers who share more than 50 years experience in the industry. “Volatility is going to remain in the market this year and that is going to increase turnover,” said John Browning, managing partner at BANDS Financial Ltd., the brokerage he founded with Chinese business partner Tiger Shi last year. China, the top buyer of everything from copper to rubber, is the epicentre of a collapse in metals to multi-year lows as it struggles with the slowest growth in a generation. Prices have rebounded in recent weeks as investors bet on output cuts and policymakers move to stabilize the economy. Trading volumes on the Shanghai Futures Exchange in January and February were at a record in the first two months of the year. Chinese exchanges have opened a flurry of contracts in recent years. Iron ore on the Dalian Commodities Exchange, established in 2013, saw volumes surge 169 percent to a record in 2015 amid a plunge in prices. The SHFE’s nickel contract, launched March 2015, is already trading around three-quarters of the tonnage
seen on the London Metal Exchange, the world’s benchmark, based on data for January and February.
Copper drops
Copper in Shanghai dropped from 46,260 yuan a metric ton in May to 33,510 yuan in November and was last at 36,900 yuan. Price moves on China’s exchanges are increasingly setting the tone for global markets, helped in part by aggressive trading from Chinese hedge funds, said Shi, who began his career in 1996 at the State Reserve Bureau, China’s strategic stockpiling agency. Browning, a U.K. national, started out at metals warehousing firm Henry Bath & Son Ltd. in the 1970s.
serve western investors seeking access to Chinese markets as the country pursues financial reforms. While China’s futures markets remain ringfenced by rules that restrict access in both directions, its leaders have pledged to gradually open up the country’s exchanges and securities to outside participants, and introduce more market-based pricing. It’s a track that bigger outfits are following. Hong Kong Exchanges and Clearing Ltd. has plans to bridge the gap between Chinese and world pricing with a three-year plan for commodities, after buying the LME for US$2.2 billion in 2012. While banks including Jefferies, JPMorgan Chase & Co., and Morgan
Stanley have pared back their metals activities, units of Chinese banks such as Industrial & Commercial Bank of China Ltd., and Bank of China Ltd. have moved into commodities and joined the London Metal Exchange. Meanwhile, the amount of copper held in SHFE warehouses surpassed LME volumes for the first time in more than a decade, underscoring the importance of China as a centre of price discovery. “There are a lot of interesting things going on in this part of the world to connect onshore commodity prices in China with offshore commodities prices,” said Shi. “These are going to be very interesting opportunities.” Bloomberg News
Shanghai booms
While the SHFE is booming, LME trading slipped 4 percent last year for the first decline since 2009, as western financial institutions reduced their exposure to slumping prices, regulators imposed tighter rules, and the exchange raised fees. Although the number of contracts traded on the SHFE exceeded those of the LME, tonnages were much lighter due to smaller lot sizes in Shanghai. Shi and Browning want to capitalize on the growing number of Chinese asset managers looking for overseas investments, and also
London Metal Exchange ring is the place to be at in the commodities world
Business Daily | 9
March 4, 2016
Greater China Service sector activity slows in February Business activity in China’s service sector eased in February on weaker demand, a private survey showed yesterday. The Caixin China General Services PMI (Purchasing Managers’ Index) came in at 51.2 in February, down from 52.4 in January, according to the survey conducted by financial information service provider Markit and sponsored by Caixin Media Co., Ltd. A reading above 50 indicates expansion, while a reading below 50 represents contraction.
Plane engine conglomerate formed
Mainland financial players shake up HK office market Chinese banks have also been opening branches abroad after their government simplified approval procedures Clare Baldwin
M
ainland Chinese financial institutions have expanded their physical footprint in Hong Kong’s prime business district at their fastest pace in five years, driving up rents and underscoring how Beijing’s policies are reshaping the city. While international firms are consolidating and re-locating offices to save money, Beijing is pushing on with plans to draw the former British colony into a Pearl River Delta megaeconomy - and China’s financial institutions are leading the way. Policies such as the ShanghaiHong Kong stock connect and mutual funds recognition schemes point towards greater integration, and with it the sort of landmark purchases that Chinese companies have made in other financial capitals like London and New York. “Ultimately, there will be more mainland Chinese firms in Central,” property consultant Jones Lang LaSalle’s head of Hong Kong research Denis Ma said, referring to Hong Kong’s glittering central business district. “All of the high marks in the rental market, especially in Central, are being set by (mainland Chinese) companies.” Jones Lang LaSalle forecasts prime office rents in the Central business district will jump 5-10 percent this year, even as China grapples with its slowest economic growth in 25 years and tumultuous stock and currency markets. Even though Hong Kong is officially part of China, it has a separate financial and legal system and the influx of mainland companies into the semi-autonomous southern territory is part of Beijing’s push to get Chinese companies to expand overseas. China’s outbound M&A activity hit a record US$113 billion last year, while its financial institutions snapped up landmark properties abroad
including the Waldorf Astoria and Baccarat hotels in New York and an office tower in London. Chinese banks have also been opening branches abroad after their government simplified approval procedures. Widespread expectations of a greater yuan depreciation are another push-factor - even though the central government has dismissed such concerns - as companies seek legal channels to park money abroad. Property consultant Knight Frank said mainland Chinese demand last year accounted for as much as half of new leases in Central, home to the Asia headquarters of global bank HSBC Holdings and the city’s stock exchange. Mainland firms remained “the pillar of leasing demand” for Hong Kong’s best office space, it said, with premium Central office rents jumping 11.5 percent in the year to January 2016. A Hong Kong government index shows office rents in Central and the nearby area of Sheung Wan rose 11.7 points last year.
Winners and losers
Landlords such as Sun Hung Kai Properties Ltd, Henderson Land Development Co Ltd and Cheung Kong Property Holdings Ltd are among the big winners from the influx. The losers are foreign forms that have been edged out of prime locations by Chinese brokerages, investment firms and Chinese banks, including smaller ones that have filed listing applications with the Hong Kong Stock Exchange. Last year, Zhong Zhi Capital took over Barclays Plc’s office space, according to Savills, ahead of the UK bank’s announcement of sweeping cuts at its investment bank and the closure of its Asian cash equities business. State-owned China Everbright Group took over office space
KEY POINTS Mainland financial firms taking over premier office space in HK Office space used to belong to major international firms
China is forming a plane engine conglomerate by teaming up three listed engine makers. According to the firms’ disclosures to the Shanghai and Shenzhen stock exchanges yesterday, authorities have appointed heads of the new giant. The appointments include the chair, Party secretary, general manager and deputy Party secretary. The names of the appointees were not disclosed. The three listed firms are Sichuan Chengfa Aero Science & Technology Co., Avic Aviation Engine Corp. and Avic Aero-Engine Controls Co. The three, already major players in their own right, are now obliged to make coordinated disclosures.
AIIB President confident of winning other members’ trust Jin Liqun, the newly elected first president of the Asia Infrastructure Investment Bank (AIIB), said China as the biggest shareholder is obliged to provide full support for the institution and set to win the trust and confidence of other shareholders. Addressing a lecture at the Copenhagen Business School on Wednesday afternoon, Jin said AIIB is a bank owned collectively by 57 member countries and it is “not a tool of the Chinese government”. “It’s not your privilege, it’s not your right, it’s your duty and it’s your responsibility,” Jin said.
Marine output up 7 pct in 2015
Uptake has to do with Chinese financial policies Consultants expect landlords to see 5-10 pct rental price jump
previously occupied by Wells Fargo & Co and investment conglomerate Fosun stepped into some of HSBC Holdings Plc’s former office space, according to the consultancy’s data. The offices that the Chinese firms moved into - in the Cheung Kong Center, AIA Central and the Citibank Tower - are in premium central locations. Jones Lang LaSalle data shows Chinese demand for office space in Hong Kong’s Central district has more than doubled in the past six years, accounting for a fifth of all Grade A Central office space. In another six years, the consultancy expects it to account for more than a quarter. Last week, China Everbright Ltd announced plans to buy the Dah Sing Financial Centre in Wan Chai for HK$10 billion (US$1.29 billion). That followed whole-office building purchases last November by Evergrande Real Estate Group Ltd and a China Life Insurance Group Co subsidiary. Reuters
China’s marine economy generated 6.47 trillion yuan (US$989.3 billion) in 2015, 7 percent more than in 2014, government data showed yesterday. The sum accounted for about 9.6 percent of the nation’s GDP in the year, according to a report by the State Oceanic Administration (SOA). About 36.2 percent of the total gross output was generated in places surrounding the Bohai Sea in north China, while the Yangtze River Delta contributed 28.5 percent. The contribution of the former was a contraction of 0.5 percent from the year before while the latter’s remained unchanged.
Beijing firm buys German waste-toenergy company An investment group controlled by the Beijing municipal government has bought Germany’s largest waste management company, EEW, for 1.4 billion euros (US$1.5 billion). This is the largest ever Chinese acquisition of a German company, Beijing Enterprises said in a statement on Wednesday. “By learning about the latest German waste-to-energy technology and management expertise, we will help environmental protection in China and contribute to green development,” said Zhou Si, vice chairman of Beijing Enterprises. EEW is Germany’s leading waste-to-energy firm. It operates 18 garbage incinerators in Germany and neighbouring countries.
10 | Business Daily
March 4, 2016
Greater China
February data likely to show little improvement Analysts have been watching closely to parse China’s strategy for reversing a dramatic slowdown in investment over the past year without adding to already high debt levels
Feb exports seen at -12.5 pct y/y vs Jan’s -6.8 pct Feb imports seen at -10.0 pct y/y vs Jan’s -11.2 pct Feb CPI f’cast +1.9 pct y/y vs Jan’s +1.8 pct Feb PPI f’cast -4.9 pct y/y vs Jan’s -5.3 pct
A
raft of China data in coming weeks is expected to point to a further loss of momentum in the world’s second-largest economy, reinforcing expectations Beijing will unveil more support measures in coming months, a Reuters’ poll of economists showed. The data is also expected to show another drop in China’s foreign exchange reserves, suggesting continued capital flight. But the decline may be much less than in January, which could calm anxiety in global financial markets about the stability of the yuan currency. In its latest bid to shore up growth, the central bank on Tuesday injected an estimated US$100 billion into the banking system to cushion the pain from planned job layoffs and bankruptcies in industries plagued by overcapacity. The move came days before the annual meeting of China’s parliament, which must try to engineer a huge economic shift towards services and consumption and away from basic manufacturing, while also keeping growth stable. Markets may be most interested in lending data for February, after an unexpectedly hefty surge in new yuan loans in January to a record 2.5 trillion yuan (US$382.06 billion). Much of that appeared to be generated by real economic activity, rather than speculative activities as is often the case in China. But the figures may have been skewed by Chinese banks’ tendency to lend more money early in the year, and ahead of the long Lunar New Year holidays, which can distort the country’s data trends in the first two months of the year. The outlook for trade, however, is expected to remain grim, reflecting persistent weakness in demand at home and abroad and weighing further on industrial production.
KEY POINTS
Jan-Feb industrial output f’cast +5.6 pct y/y vs Dec’s +5.9 pct Jan-Feb retail sales f’cast 10.8 pct y/y vs Dec’s 11.1 pct Jan-Feb fixed-asset investment f’cast 9.5 pct y/y vs Dec 10.0 pct Feb new yuan loan f’cast 1,200.0 trln yuan vs Jan’s 2510 bln Feb M2 money supply f’cast 13.8 pct vs Jan’s 14.0 pct Feb forex reserves seen easing to US$3.2 trln from Jan US$3.23 trln
Imports were expected to have dropped 10 percent in February after sliding 18.8 percent in January, while exports may have declined 12.5 percent from a year earlier, following an 11.2 percent drop in January, the median forecast of 31 analysts polled by Reuters showed. That may produce a trade surplus of around US$51.15 billion. Industrial output likely grew 5.6 percent in January and February combined, compared with the yearearlier period, weakening from 5.9 percent in December, as firms struggled to cope with persistent deflationary pressures due to overcapacity and soft demand.
Annual growth in urban fixed asset investment, a crucial driver of China’s economy, likely grew 9.5 percent in January and February from a year ago, easing slightly from December’s 10 percent growth. Annual retail sales growth was seen at 10.8 percent in the first two months of the year, just below December’s 11.1 percent. China combines activity indicators for January and February in an attempt to smooth out the Lunar New Year effect. The Reuters poll also showed the economy is facing persistent deflationary risks. Consumer price inflation may have picked up marginally to 1.9 percent in
Baidu joins Geely urging authorities to hasten autonomous-driving law The race to bring to market self-piloting cars will depend in part on how receptive regulators are to the technology
T
he chairmen of Internet search provider Baidu Inc. and automaker Zhejiang Geely Holding Group Co. urged China’s government to speed up the drafting of a legal framework for autonomous driving technology. Baidu Chief Executive Robin Li and Li Shufu, founder of Volvo owner Geely, wrote in separate proposals to a Chinese political advisory body that early establishment of a legal system governing autonomous driving would boost development of the technology and attract investment. China’s carmakers and tech companies are competing in the space with the likes of Google Inc. in the U.S., Daimler
February from 1.8 percent in January, while producer prices fell 4.9 percent, less than January’s 5.3 percent fall but marking the fourth straight year that Chinese firms have had to cut prices of their goods in the face of sluggish demand and growing competition. Foreign exchange reserves likely fell for a fourth straight month, easing to US$3.2 trillion from US$3.23 trillion in January as the central bank continued to sell dollars to defend the yuan and staunch capital outflows. But the drop is expected to be much smaller than the near US$100 billion fall in January and record US$107.9 billion decline in December. Reuters
AG in Germany and Nissan Motor Co. in Japan. “Autonomous driving technology brings along new challenge and opportunity to China’s automobile industry,” Geely’s Li said in his proposal to the Chinese People’s Political Consultative Conference. “It is an urgent task to start preparing for the establishment of our legal framework.” The race to bring to market selfpiloting cars will depend in part on how receptive regulators are to the technology. In the U.S., the National Highway Traffic Safety Administration last month told Google it will interpret the company’s software as a “driver,” a step toward compliance with safety standards. The agency also plans a US$4 billion grant program over 10 years to fund automated vehicle pilot projects. Nissan, Japan’s secondlargest automaker, plans to make autonomous-drive features available in its domestic market this year. Japan and Germany are proposing international standards through the United Nations Economic Commission for Europe. Bloomberg News
Business Daily | 11
March 4, 2016
Asia
Call for unity as Australian Prime Minister faces critical milestones Political analysts say the multi-millionaire former tech entrepreneur needs a decisive election victory to quell rampant dissension within his Liberal party Colin Packham
A
ustralia’s deputy leader called for government unity yesterday as Prime Minister Malcolm Turnbull’s polls plummet amid party divisions and ahead of a critical budget and looming election later this year. Deputy Prime Minister Barnaby Joyce said the honeymoon was over for Turnbull, who became leader in a party room coup in late 2015 and is now under pressure on several policy fronts and facing party instability blamed on the man he toppled, former prime minister Tony Abbott. “I think we’ve got to all get to get together as one, we’ve got to go to the election unified there will be an election this year,” Joyce told reporters in Canberra. “Quite obviously honeymoons don’t go on
Australia, with five prime ministers in eight years. But political analysts say the multi-millionaire former tech entrepreneur needs a decisive election victory to quell on-going dissension within his Liberal party. An election is due by January 2017, but Turnbull who does not control the upper house Senate has hinted he may go to the polls early, within five months, in the hope a new Senate will present an easier path for legislation. Critical for an election Former Australian Prime Minister Tony Abbott (C, back) looks on as he attends a Coalition joint party room meeting at Parliament House victory is Turnbull’s first in Canberra budget due in May, but the end of a decades-plus forever,” Joyce said of a tie with opposition Labor mining boom in resource-rich Turnbull’s leadership. is a now possibility according Australia and plummeting commodity prices has left Turnbull’s conservative to a Newspoll last week. Turnbull’s ascension the government struggling Liberal government was on course to for an easy election last September was seen to raise revenue. victory, but polls have as possibly ending an era In December, Australia tightened in early 2016 and of political instability in forecast its budget deficit
would swell to A$37.4 billion (US$27.32 billion) in the year to June. Government spending has increasingly become an area of division within Turnbull’s Liberal party. He has been forced to rule out changes to several revenue raising policies, including negative gearing, which allows property investors to write off losses against taxable income, and a rise in a consumption tax. The right wing of Turnbull’s government, with rival Abbott as its de facto leader, maintains a need to reduce spending, amid a socalled “budget emergency”. “Abbott seems intent on undermining Turnbull,” said John Uhr, Director, Centre for the Study of Australian Politics, Australian National University. Reuters
12 | Business Daily
March 4, 2016
Asia
Women in Asia-Pacific still face difficulties joining workforce Despite in 12 out of 18 Asia-Pacific markets women outnumber men in university education gross enrolment rate
Access is crucial to integrating female talent in the economy as women still don’t have the same access to job opportunities or even social networks as men
D
espite more women than men in Asia-Pacific having tertiary education, there still exists a large gender gap that hinders women from achieving their full economic potential through participation in the workforce or presence in leadership positions, according to the latest MasterCard Index of Women’s Advancement released yesterday in the lead-up to International Women’s Day. The index measures the socioeconomic standing of women across 18 Asia-Pacific markets and is comprised of three main indicators which are derived from additional sub-indicators: Capability (Secondary Education, Tertiary Education), Employment (Workforce
Participation, Regular Employment) and Leadership (Business Owners, Business Leaders, Political leaders). The scores show the proportion of women to every 100 men. A score of 100 indicates equality between the sexes. In 12 out of 18 Asia-Pacific markets, women outnumber men in university education gross enrolment rate, with New Zealand, Australia and Thailand taking the top spots at 141.8, 137.5 and 134.5 respectively. However, in terms of overall index scores, the top three markets, New Zealand, Australia and the Philippines all scored a much lower figure, at 78, 76 and 71.4 respectively. And apart from the top three markets and
Georgette Tan, Communications group head for Asia-Pacific, MasterCard
Singapore, all other markets in AsiaPacific had scores below the 70-point mark with Japan (49.5) and four South Asia markets -- Bangladesh (45.5), Sri Lanka (44.3), India (38.0) and Pakistan (23.4) -- among the lowest and only markets scoring below 50 points. The gap reflects educational attainment is not translating into workforce participation in many markets, the report showed, as with
more women than men are entering university in New Zealand, China and the Philippines, women are still much less likely to be in the workforce. “Gender gaps in access to education have narrowed over the years, but we still have a long way to go before women across Asia-Pacific are equally represented in business and politics. The lack of critical mass in women’s representation and participation in the economy -- coupled with the inadequate and inconsistent implementation of equality legislation -- continues to be the biggest challenge for women and is reflected across all markets irrespective of the pace of economic development,” said Georgette Tan, group head, Communications, AsiaPacific, MasterCard. “Access is crucial to integrating female talent in the economy as women still don’t have the same access to job opportunities or even social networks as men. A range of factors impacting the economic contributions made by women in the workforce also need to be addressed including country-specific sociocultural factors, traditional beliefs, and government policies. Closing the gender equality gap and levelling the employment playing field would benefit not just women, but the global economy as a whole,” Tan added. Xinhua
South Korean inflation picks up faster than expected The index rose for most sectors with the exception of industrial products
S
outh Korea’s annual inflation in February trounced expectations and picked up faster than forecast, data showed on Thursday, undermining market conjecture over the central bank soon cutting rates to prop up growth. The consumer price index rose 1.3 percent in February from a yea earlier, Statistics Korea said, up from a 0.8 percent increase in January. It matched a 1.3 percent gain seen in December last year. The index rose for most sectors with the exception of industrial products, which slipped on low oil prices. The CPI rise was higher than the median 1.0 percent
gain projected in a Reuters survey. “Looking ahead, we expect a further rise to the
2 percent level until the end of this year under the assumption of a significant rebound in oil prices in H2,”
Societe Generale analysts said in a note to clients, referring to the Bank of Korea’s current inflation target of 2 percent. The analysts added there would be no reason for the Bank of Korea to implement a rate cut because core inflation, which strips out volatile food and fuel prices, accelerated to 1.8 percent in February in annual terms. In monthly terms, February’s headline inflation jumped to 0.5 percent from no change in January, the highest since January last year. Yesterday’s data also showed the consumer index for services rose 2.4 percent in February on-year, rising
at the same pace as it did in January and backing the government’s claims that consumption is recovering steadily. Although the market consensus is currently for a rate cut at the central bank’s March 10 policy meeting, minutes from February’s meeting released Wednesday showed a majority of the bank’s policy committee members were in a waitand-see mood. Many of them saw increased risks both in terms of the economic recovery and financial stability, which were best served by keeping policy steady, according to the minutes. Reuters
editorial council Paulo A. Azevedo, José I. Duarte, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Newsdesk João Santos Filipe, Michael Armstrong, Óscar Guijarro, Kam Leong, Joanne Kuai, Bami Lio, Annie Lao GROUP SENIOR ANALYST José I. Duarte Designer Francisco Cordeiro WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, José Carlos Matias, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia Assistant to the publisher Lu Yang | lu.yang@projectasiacorp.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.
Business Daily is a product of De Ficção – Multimedia Projects Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 editor editor@macaubusinessdaily.com newsroom newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com
Business Daily | 13
March 4, 2016
Asia
Indian central bank pores over budget Additional expenses on salaries and a shortfall in receipts could force the government to cut back on capital expenditure to meet its fiscal deficit target Suvashree Choudhury
S
ome Indian central bank officials are worried that a populist federal budget could put the onus of driving growth on them but limit their ability to respond through big rate cuts this year. Finance Minister Arun Jaitley increased spending on farm and social sectors in the 2016-17 fiscal year on Monday in a boost to rural India, where most of the country’s 1.3 billion people live. He curbed capital expenditure growth compared to the previous year, yet stuck to his commitment to reduce the fiscal deficit to 3.5 percent of gross domestic product. Three policymakers aware of the Reserve Bank of India’s deliberations on the budget said they are combing through the numbers to test how Jaitley struck a balance, and question some of the assumptions. An expected US$16.6 billion salary and pensions hike for government employees, for example, is inflationary and hasn’t been fully accounted for in the budget, they said. Also, they said the government’s revenue expectation from asset sales appeared optimistic given that these fell nearly two-thirds short of the target in 2015-16. Additional expenses on salaries and a shortfall in receipts could force the government to cut back on capital expenditure to meet its fiscal deficit target. That would hit growth and increase pressure on the RBI to do more, the officials said. “If private investment doesn’t pick up, the burden on monetary
policy to boost growth will increase,” one of them said. A finance ministry official said the impact of higher salaries on inflation will be marginal. Yesterday, Junior Finance Minister Jayant Sinha acknowledged that a tight fiscal policy will help in further monetary policy easing. “If we don’t provide that (macroeconomic stability) space to monetary policy by generally running a relatively tighter fiscal policy, we cannot expect monetary policy to loosen up as a result of that,” Sinha said at an event. “This is the kind of environment we have tried to create on the macro side.” The RBI did not have an immediate comment. On Tuesday, RBI Deputy Governor S.S. Mundra said he thought the budget was balanced, with long-term benefits. The views of the three officials, who asked not to be named, only partially reflect RBI thinking, but do give fresh insight into the bank’s post-budget thinking and highlight some issues the RBI is likely to focus on this year as it deliberates on future monetary policy. It has already cut the benchmark repo rate by 125 basis points to 6.75 percent in 2015. Analysts and traders expect another 25 basis point cut in response to the budget, followed by a similar cut later in the year, perhaps by June.
Credible budget
RBI Governor Raghuram Rajan has said that sticking to a fiscal
Youngest Aussie billionaire declared bankrupt
KEY POINTS Civil service pay rises inflationary - policymakers Expected divestment revenues look over-optimistic May force govt to trim capital spending plans Inflation impact of pay rises only marginal - finmin official
consolidation roadmap, while taking steps to boost supply-side bottlenecks and control subsidy spending, will help create space for further rate cuts. He has also pledged to bring down India’s notoriously high inflation to 5 percent by March 2017 and 4 percent in the medium term. The officials said the 2016-17 budget was more credible than last year’s, with realistic estimates on tax revenues, capital expenditure and supply-side measures to control food prices - indicating room for one more rate cut. But the bank has told the government it expects a bigger jump in retail inflation due to salary and pension revisions than the government’s calculations, one of the officials said. Reuters
Australian self-made coal baron Nathan Tinkler has gone from being the nation’s youngest billionaire to officially bankrupt in just five years, capping a dramatic fall from grace after he failed to appeal a court order. Tinkler, a larger-than-life character who spent millions on sporting clubs and horse racing, making enemies along the way, apologised yesterday to creditors and his family, while telling a newspaper that “I can hear the champagne corks popping in the background”. The 40-year-old started out in the mining industry as an electrician before building up his wealth on a series of canny coal transactions.
Thai consumer sentiment at 3-month low Thai consumer confidence fell to a threemonth low in February, a university survey showed yesterday, hurt by concerns over global and domestic economic prospects as well as high living costs. Consumers felt the country’s economic recovery was slow and the impact of drought had increased, the University of the Thai Chamber of Commerce said in a statement. Southeast Asia’s second-largest economy has struggled to recover since the army seized power in May 2014 with exports and domestic demand remaining sluggish. The junta has introduced stimulus measures and stepped up infrastructure projects in an attempt to lift activity.
India buys 60,000 tonnes of Australian wheat Millers in India have made their first international wheat purchases of the year, taking two Australian shipments in recent deals for arrival in April, trade sources said yesterday. About 60,000 tonnes of Australian prime wheat was sold to mills in southern India at US$230 a tonne, including cost and freight, the three sources said. India last year bought about half a million tonnes of premium Australian wheat, the biggest such volume in more than a decade, after adverse weather damaged its domestic crop.
S.Korea says capital outflow trend easing Foreign capital outflows from the South Korean securities markets continued for a fourth consecutive month in February but there were signs of the trend easing, the country’s finance ministry said yesterday. Data from the ministry showed foreign investors reduced their holdings of South Korean domestic bonds by a net 4.2 trillion won (US$3.46 billion) and sold a net 0.2 trillion won worth of stocks during February. It was the fourth month of net foreign outflows from the country’s securities markets. The data was included in a statement about a scheduled meeting of economy-related ministers.
14 | Business Daily
March 4, 2016
International Brazil holds interest rates to avoid deepening recession Brazil’s central bank kept interest rates on hold on Wednesday as widely expected, opting to avoid inflicting more harm on an economy mired in its worst recession in decades despite a surge in inflation. In a split vote, the bank’s monetary policy committee, known as Copom, kept its benchmark Selic rate at 14.25 percent for the fifth straight time. An overwhelming majority of analysts expected the bank to maintain borrowing costs at a near-decade high. Two of the Copom’s eight members once again dissented and voted for a 50-basis-point rate hike.
Economic condition confuses Fed U.S. economic activity continued to expand in most districts from early January to late February but conditions varied considerably across regions and within sectors, the Federal Reserve said on Wednesday. The decidedly mixed picture illustrates the headache Fed policymakers face when they next meet to decide the path of interest rates on March 15-16. Consumer spending increased in the majority of districts, the Fed said in its Beige Book report of anecdotal information collected from business contacts across the country.
Venezuela says upcoming oil meet will discuss actions Venezuela’s Oil Minister Eulogio Del Pino said more than 15 countries will attend an upcoming oil meeting to discuss an output freeze plan and possible further actions, state oil company PDVSA said in a statement on Wednesday. Further details were not immediately available. Del Pino said last month that Qatar, Russia, and Saudi Arabia have agreed to a meeting in mid-March as part of efforts to stabilize oil markets.
Britain’s FCA targets life insurers in transparency probe Britain’s Financial Conduct Authority has launched a probe into six insurance firms including Prudential and Old Mutual as part of a review into the treatment of long-time life insurance customers. The other firms identified were Abbey Life, Scottish Widows, Countrywide and Police Mutual. The financial watchdog has been monitoring whether insurers have treated customers locked into pension and other savings plans fairly compared with new customers. As part of this assessment, the FCA sampled a number of documents sent to customers who had requested either to surrender or transfer their policies.
Exxon Mobil eyes acquisitions Exxon Mobil Corp said on Wednesday it would continue to cut spending as long as crude prices remain low, but the world’s largest publicly traded oil company added it may look at potential acquisitions in a bid to offset a dip in production. Exxon, which has a triple-A credit rating, raised US$12 billion in the debt market earlier this week, leading analysts to speculate the oil major may be gearing up for an acquisition spree. The company said it has the financial flexibility to boost spending if the right opportunities present themselves.
Forty big banks test blockchain-based bond trading system Banks reckon the technology could save them money by cutting out middlemen and making their operations more transparent Jemima Kelly
F
orty of the world’s biggest banks, including HSBC and Citi, have tested a system for trading fixed income using the technology that underpins bitcoin, fintech company R3 CEV said yesterday. The banks are part of a consortium of 42 major lenders, brought together last year by New York-based R3 CEV to work on ways blockchain technology could be used in financial markets - the first time so many have collaborated on using such systems. A blockchain is a huge, decentralised ledger of transactions that can be used to secure and validate any exchange of data, including real assets, such as commodities or currencies. Bitcoin’s blockchain was the first, but others have since been built that offer additional features and can be programmed. That means the technology can enable so-called smart contracts: agreements that are automatically executed when predetermined conditions are met. For this experiment, the banks tried five different blockchaintechnology providers to test trading fixed income: Ethereum, often considered the most advanced and ambitious, Chain, Eris Industries, IBM and Intel. “W e h a v e r a i s ed th e b a r significantly with the sheer number of global financial institutions,
distributed ledger technologies and cloud providers working together ... to demonstrate how this nascent technology can be applied to ... an actively traded asset class,” said the head of R3’s Collaborative Lab, Tim Grant. Banks reckon the technology could save them money by cutting out middlemen and making their operations more transparent. But analysts say it is early days - bitcoin was invented just six years ago and developers are still working on the technology. Indeed, the G20’s Financial
Climate change poised to hurt food supplies Almost three-quarters of all climate‑related deaths expected to occur in China and India
T
he effects of climate change on food production could cause 500,000 extra deaths by 2050 compared to a world without global warming, according to a study released yesterday. If greenhouse gas emissions continue at current rates, this would cut projected increases in food availability by about a third before mid-century, the study found. As of 2015, some 800 million people in the world are undernourished, meaning they cannot meet daily minimum dietary energy requirements, the UN’s Food and Agriculture Organization has said. With the global population set to increase from seven to nine billion by 2050, food production will have to expand even more rapidly if all the world’s people are to have enough to eat.
But global warming -- on track to boost temperatures three degrees Celsius by 2100, compared to preIndustrial-Era levels -- is threatening to make that difficult or impossible, experts warn. “Climate change effects are expected to reduce the quantity of food harvested, which could lead to higher food prices and reduced consumption,” according the study, published in the medical journal The Lancet. Even these grim projections may be overly optimistic, it warns, because they only count calories and fail to anticipate a likely worsening in the balance of future diets. The proportion of fruits and vegetables in diets, for example, will almost certainly decline in a climatechange-addled world, he said.
Stability Board said on Saturday assessing the systemic implications of fintech innovations would form part of the task force’s core policy work this year and global regulators could propose rules to prevent them from destabilising the broader financial system. Chain’s CEO Adam Ludwin said: “R3 is further accelerating the adoption of blockchain technology by demonstrating, instead of simply asserting, the commercial advantages of this emerging approach to financial services.” Reuters
Low- and middle-income countries will probably be hit hardest, with almost three-quarters of all climate-related deaths expected to occur in China and India under a so-called “business and usual” climate scenario. Even if the world’s nations succeed in holding the rise in global temperature to 2C, there would still be an additional 150,000 climaterelated deaths due to changes in diet and calorie intake, the researchers found. “Climate change is likely to have a substantial negative impact on future mortality, even under optimistic scenarios,” Springmann said. The study used agricultural economic models coupled with different projections for greenhouse gas emissions and development forecasts to evaluate the impacts on global food production, trade and consumption in 2050. Experts evaluating the research said it was worthwhile, but cautioned that such projections are uncertain. “It is very difficult to estimate exactly what climate change impacts will be,” commented Andrew Challinor, a professor at the University of Leeds in England. Extreme climate events -- such as the wheat harvest failure in Russia in 2010 -- will also become more common, he added. AFP
Business Daily | 15
March 4, 2016
Opinion Business
wires
Leading reports from Asia’s best business newspapers
This election will be good for labour, bad for capital
INQUIRER.NET
James Saft
The anti-money Laundering Council (AMLC) has implemented a freeze order on several bank accounts suspected of being linked to a money laundering transaction worth as much as US$100 million—said to be the single largest transaction of “dirty money” uncovered in the country. Inquirer sources said the AMLC sent freeze orders to several financial institutions for several bank accounts that effectively stopped the movement of funds into or out of them. At the same time, however, banking officials familiar with the issue expressed doubts if authorities would be able to seize the bulk of the funds.
a Reuters columnist
THE KOREA HERALD Over the coming year, the Bank of Korea will make available a total of 9 trillion won (US$7.28 billion) in low-interest loans for small and medium-sized enterprises in a bid to reinvigorate the economy. Of the amount to be channelled to SMEs through commercial banks, starting Tuesday, 3 trillion won will be used to support their trade finances and 2.9 trillion won will be spent on boosting their capital investment. The remainder is earmarked to help startups. The measure is in line with a stimulus package announced last month to spur the country’s slowing growth.
VIETNAM NEWS The remittances to HCM City, which is one of the top localities nationwide receiving the largest volume, reached more than US$900 million in the first two months this year. According to the State Bank of Viet Nam’s HCM City branch, most of the remittances flew into production and business. Industry insiders said that the remittances were poured significantly into the city thanks to the recovery of domestic investment channels, especially real estate, where the government has so far not allowed foreigners to own houses in Viet Nam.
THE JAKARTA GLOBE The government has agreed to lower taxation tariffs imposed on property acquisitions under the local version of real estate investment trusts, or REIT, on Wednesday, paving the way for more than US$3.6 billion in total issuances of the investment instruments. The move is part of the government’s economic stimulus package, which seeks to rejuvenate property sector that suffered from slowing demand last year. The government will impose a 0.5 percent final income tax on sales of property to REIT, from a previous 5 percent, Chief Economics Minister Darmin Nasution said.
A woman holds an illustration of US Democratic presidential candidate Hillary Clinton before a campaign rally at the Jacob K. Javits Convention Centre in New York
T
he 2016 U.S. presidential election is a circus which will produce an outcome and policies that will tend to fatten labour’s share of the economy while reducing that of capital. And yes, that means there may be more emphasis not on growing the pie but on how it is divvied up, a factor which might possibly depress longer-term growth and would definitely tend to drive profit margins lower. Super Tuesday is past and now Democrat Hillary Clinton and Republican Donald Trump look to be on rails to their parties’ nominations. I am assuming Trump loses in a general election, as betting and polling now indicates. If he wins, I wish you the best of luck with your investments. You will need it. I won’t spend too much time working through what would happen if his policies, as now laid out, are put in place, because I don’t think it is at all likely they ever will be or even that they answer to the term ‘policies’. Suffice to say that we will have volatility during the election season, with risk premia rising to take the Trump factor into account. Yet Trump’s rise is significant in a way that goes beyond “where have we gone wrong?” soul searching. Investors shouldn’t so much worry about what President Trump would do, as he likely won’t get a chance, but rather
take a hard look at the broader underlying forces which might continue to make themselves felt after his candidacy. And no, I’m not talking about stupidity and folly, though they too won’t fly back to New York with him in Trump Force One when this is all over. Hillary Clinton is being forced left of her natural position by both her primary opponent, Bernie Sanders, and by Trump in a general election. While of course she will run against Trump’s more outrageous positions on, well, everything, she is smart enough and well advised enough that she will grasp that to win she must appeal to the voters whose economic vulnerability Trump exploits. Sanders, and Elizabeth Warren, have been successful in pushing Clinton to the left in financial services regulation, and given that this too is under girt by Main Street’s sense of being cheated by forces beyond its control, it is likely she’ll keep going in this direction as she squares off against Trump. Stronger financial regulation probably means slightly lower growth in the near term, but with the hope that we face fewer destabilizing booms and busts. Longer term that could actually be good for asset prices, but in the near term it means less leverage and is probably a negative for returns.
Labour share Trump’s positions on immigration and trade, though
If he (Trump) wins, I wish you the best of luck with your investments. You will need it.
ranging from wrong-headed to outrageous, are popular, at least in part, because voters in middle- and lower-income groups have seen their share of the pie decline, not for years, but for decades. Wages and salaries are now 43.8 percent of GDP, up very slightly from all-time lows in 2010 but still in a long-term downtrend which started above 50 percent in 1969. Corporate profit margins have moved in roughly the opposite direction, upward, for roughly the same amount of time and are now not far off of all-time highs. Globalization has been great for capital and for people at the very top in the U.S. with the skills to surf its wave. That it
has also been good for many in India, Mexico and China who have been lifted out of poverty is not a point which will get much airing between now and November. What may well get more attention are policies which might protect U.S. jobs, or which might raise U.S. wages, especially in the bottom 80 percent which globalization has hurt. Within this context, it may not be a surprise that the U.S. just imposed a 266 percent tariff on imports of some steel from China and a lesser range of tariffs on six other countries. Though I wouldn’t expect a trade war from a Clinton administration, it will be keen to be seen to be willing to fight the corner of U.S. wage earners, and perhaps less sensitive to the competing demands of multinational corporations. I cannot imagine a Clinton administration approaching a trade deal in the same corporate-friendly spirit as the Obama White House took to the Trans-Pacific Partnership. Taxation too will probably be more redistributive than in a world where Trump elected to stay home. Trump’s longestlasting legacy might be that he leaves Republican economic orthodoxy of low taxes and hope for growth fatally wounded. These outcomes may be for good or ill, but what they will be is bad for corporate profit margins in aggregate. Reuters
16 | Business Daily
March 4, 2016
Closing Chinese government to transform old industrial areas by 2022
Indonesian consumer confidence remains optimistic
China will continue to move factories from overcrowded cities to cheaper locales and transform old urban industrial areas over the next few years, with the aim of basically completing the process by 2022, the country’s top economic planning agency said yesterday. It is the country’s latest move to improve urban planning to achieve sustainable economic and social development. Although relocating and transforming old urban industrial zones is a difficult task, the push will help ease pressure on mega-cities and drive economic growth in the long run, the National Development and Reform Commission said in a statement on its website.
Consumers remained optimistic in February, but were a bit more concerned about the availability of jobs, a central bank survey showed yesterday. The central bank’s consumer confidence index fell slightly to 110.0 in February from 112.6 in January. A reading above 100 indicates optimism. The decrease in both the present situation and expectation indexes lowered the February consumer confidence index, said the survey of about 4,600 respondents in 18 major cities in Indonesia. Consumers said they expected inflationary pressures to increase in May, in line with price increases for processed food, beverages, cigarettes and tobacco.
Hong Kong retail sales fall for 11th straight month in January The city is confronting mounting economic challenges as the prospect of U.S. interest rate rises drives fears of capital outflows further headwinds.” The value of retail sales fell for a second year in 2015 down 3.7 percent - the biggest decline since 2002 when they dropped 4.1 percent. Hong Kong is confronting mounting economic challenges as the prospect of U.S. interest rate rises drives fears of capital outflows that could put pressure on the financial hub at a time when China’s economy is growing at its slowest pace in 25 years. Tensions that have rocked the city, including protests over the Lunar New Year that was sparked off by street vendors, have added to the strains on the retail and tourism industries already suffering from a drop in mainland tourists.
H
ong Kong retail sales, which suffered their worst decline in 13 years last year, saw weak sentiment extending into January on slumping tourist arrivals, weak local consumption and a strong local currency.
Retail sales in January slid 6.5 percent from a year earlier to HK$43.6 billion (US$5.61 billion) in value terms, compared with an 8.5 percent decline in December. In volume terms, January sales decreased 5.2 percent. “The near-term
Hong Kong bourse revamps gold futures
H
outlook for retail sales will remain constrained by the sluggishness in inbound tourism,” the government said in a statement. “External uncertainties, including a dimmer global economic outlook and U.S. interest rate normalisation, may add
Expensive destination
The strong Hong Kong dollar, which is pegged to the U.S. dollar, has made the city an expensive destination and China’s cash-rich tourists are heading for more exotic destinations. Hong Kong tourist
arrivals, which fell 2.5 percent in 2015 in the first decline since 2003, dropped 6.8 percent from a year ago to 5.23 million in January. Mainland visitors, which accounted for 77 percent of the total, slumped 10 percent to 4.04 million. Hong Kong’s comparatively high rents also hurt retailers as fewer mainland tourists come to shop, forcing operators to close and scale back expansion. January sales of jewellery, watches, clocks and valuable gifts in value terms fell 16.3 percent, a 17th consecutive month of decline. Department store sales slid 3.6 percent on year, against a 12.3 percent drop the previous month. Wearing apparel fell 4.9 percent while medicines and cosmetics decreased 3.6 percent. Hong Kong’s top jeweller Chow Tai Fook Jewellery Group and cosmetics chain operator Sa Sa International Holdings saw sales declines at least 20 percent during the key Lunar New Year shopping season in February. Department store operator Lifestyle International also saw a double-digit decline in sales during the holiday. Last week, Hong Kong rolled out a multi-billion dollar package of sweeteners to bolster its economy as a slowdown in China and rising political tensions deepen its economic woes.
National Committee starts annual session
Uber and Ola race to offer motorbike taxis in India
C
U
ong Kong Exchanges and Clearing Ltd. plans to revamp its gold futures, targeting Chinese investors after ending the previous contract a year ago. The new contracts will be for physical delivery denominated in yuan and U.S. dollars, said Romnesh Lamba, the co-head of market development at the bourse. The previous contract, which was started in 2008, was cash-settled and quoted only in U.S. dollars. It was suspended after gold pricing was transferred to an electronic auction on March 15 from a century-old procedure. Prompted by stock-market volatility and economic growth concerns, consumers in China, the world’s largest consumer of the metal, are expected to buy more gold this year to store value, according to the World Gold Council. The Hong Kong exchange will be competing with CME Group Inc., the world’s largest futures market, and ASX Ltd., Australia’s biggest exchange group, in developing gold contracts to capture Chinese clients. “There is more demand for physical delivery for gold,” Lamba said in an interview on Wednesday without elaborating when the futures will be offered. “We are in the mode where we’d like to do more product development.”
hina’s top political advisory body convened its annual meeting yesterday, kicking off a political high season that will continue with the opening of the country’s top legislature later this week. Yu Zhengsheng, chairman of the Chinese People’s Political Consultative Conference (CPPCC) National Committee, opened the session at the Great Hall of the People in the heart of Beijing. In a dark suit and a red tie, Yu commended the political advisory body’s work last year in helping formulate the 13th Five-Year Plan, comprehensively deepen reforms and advance law-based governance, improve people’s well-being, promote ethnic unity and religious harmony, and develop a favourable external environment for China’s development. Special consultative meeting revolving around issues, such as reform of the government’s review and approval system and judicial structural reform, were held, while suggestions on a number of draft legislation and regulations, including the environmental protection tax law and the marine environmental protection law, were offered, Yu noted. Yesterday’s CPPCC session marks the start of the most important two weeks on China’s political calendar this year.
Bloomberg News
Xinhua
Reuters
ber and its Indian rival Ola yesterday launched pilot taxi motorbike services within hours of each other, as competition between the two taxi apps ramps up. Both start-ups are trialling the motorbike taxis in the traffic-clogged southern city of Bangalore, seeking to grab a greater share of India’s ultracompetitive ride-hailing market. The American firm’s UberMOTO will start at 15 rupees (US$22 cents) per ride while Ola’s Bike Taxis will start at 30 rupees, but have a lower fare per kilometre. “This will help users get to where they want to be within minutes, especially in traffic-prone cities like ours,” said Pranay Jivrajka, chief operating officer of Ola, India’s biggest taxi-hailing app. Ola plans to scale up the service in the city in the coming weeks, he said. Ride-hailing apps have risen rapidly to become a multi-billion-dollar industry in India’s congested cities, but have faced controversy over safety. An Uber driver was convicted in October of raping a 25-year-old passenger in late 2014, a case that sparked accusations the California firm failed to conduct adequate background checks. AFP