Marriott reclaims lead in fight for Starwood hotels acquisition M&A Page 10
Wednesday, March 23 2016 Year IV Nr. 1007 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Joanne Kuai
www.macaubusinessdaily.com
CTM Consolidates Hold On Market Telecommunications A profit of MOP1.15 bln for 2015. CTM’s results represent a 3.82 pct increase y-o-y. Despite its record-breaking investment of MOP693 mln. The telecommunications operator has also announced it will launch e-commerce platform ‘MacauGoodhands’ in the middle of the year. Meanwhile, the company’s mission is to fully convert the 3G market to 4G. Page 2
Gaming
MICE
Gaming
Stock regulation
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Page 3
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Proxies, apps and regulations dominate iGaming Congress
2016 MIECF running from March 31 to April 2
Lippo considers selling interest in Korean casino project
Shanghai Stock Exchange de-lists company for violating disclosure rules
Art Market Page 16
16° 22° 12° 17° 11° 13° 13° 18° 16° 19° Today
Kunlun Energy Co Ltd
Fri
20,666.75 -17.40 (0.08%)
+5.61%
Lenovo Group Ltd
+1.92%
China Merchants Holdings
Cheung Kong Property
+4.42%
CK Hutchison Holdings Ltd
+2.40%
+0.69%
Henderson Land Develop-
China Life Insurance Co Ltd
+1.14%
Cheung Kong Infrastructure
+0.94%
PetroChina Co Ltd
+0.19%
Tingyi Cayman Islands
China Resources Power
-6.68%
Cathay Pacific Airways Ltd
-4.13% -3.17% -2.94%
Source: Bloomberg
HK Hang Seng Index March 22, 2016
Thu
I SSN 2226-8294
Sat
Sun
Source: AccuWeather
Paint it black Less than packed auction halls. Another effect of shifting Chinese currents. Moderation and frugality have provoked a general weakness in the global art market. In recent years, Mainlanders have been the sector powerhouse.
2 Business Daily Wednesday, March 23 2016
Macau Telecommunications
CTM profit up 3.82 pct in 2015 The telecommunications operator earned some MOP1.15 billion last year despite its record-breaking investment of MOP693 million. as at the end of last month following its launch of the new service last October, according to its vice president of Commercial, Ebel Cham. “[The number] of 4G users has actually grown faster than our expectation. But our goal is to have all our mobile users shift to 4G service in the future,” the officer said. Claiming CTM had reduced tariffs several times in 2015, Ms. Cham did not indicate whether the company would reduce its 4G service charges in order to attract more customers. “We have reduced our overall tariff three times last year. Meanwhile, we have launched different packages targeting different customers. We are in a competitive market [in which] I believe all operators are launching different packages for customers to choose,” she said.
“Stable network”
Kam Leong kamleong@macaubusinessdaily.com
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ocal telecommunications operator Companhia de Telecomunicações de Macau SARL (CTM) posted a profit of MOP1.15 billion (US$144.3 million) for 2015, a slight increase of 3.82 per cent year-on-year from MOP1.11 billion, the company announced yesterday at a media Spring luncheon. Last year, the city’s dominant telecommunications service provider generated revenues of MOP5.18 billion, which jumped by 6.3 per cent year-on-year compared to MOP4.87 billion for 2014. The company said its business growth was primarily attributable to areas of business solutions, the Internet, mobile and leased line services.
According to its 2015 annual report released yesterday, CTM had a total of 821,000 mobile customers, of whom mobile data customers amounted to over 200,000 as at last year-end. Meanwhile, its number of Internet customers reached 170,000, of whom 57,000 were home users of fibre broadband.
Record-breaking investment
Meanwhile, the operator said it had invested a total of MOP693 million last year – which includes infrastructure for the 4G network as well as improvement works for its 3G and 2G services. The investment amount, described by CTM as ‘the highest on record,’ represents a hike of 33 per cent compared to 2014. Asked by reporters about the operator’s expected investment amount for this year, Chief Financial Officer
Retail
Chow Sang Sang SAR revenues fall 8 pct Jeweller Chow Sang Sang Holdings International Ltd. saw its turnover in Macau and Hong Kong drop 7.7 per cent year-on-year to HK$11.3 billion (US$1.4 billion) for the whole year of 2015 due to decreased gold prices and slower jewellery sales. The company told Hong Kong Stock Exchange yesterday its same store sales in the two Special Administrative Regions posted a year-on-year decrease of 11 per cent. ‘Macau was still suffering from a dearth of visitors. Shops located in the shopping arcades fared worse than the main street shop,’ the company noted. For 2015, the retailer generated total turnover of HK$19.1 billion, a slight
decrease of one per cent compared to HK$19.2 million for 2014. Meanwhile, its net profit registered a jump of four per cent year-on-year to HK$1.13 billion. On the other hand, the company’s revenues from the Mainland Chinese market totalled HK$7.7 billion last year, up 11.3 per cent year-on-year. Its Taiwanese market registered a year-on-year fall of 12.3 per cent in turnover to HK$116.6 million. ‘The year 2016 will be a challenging one, more so in Hong Kong and Macau than in Mainland China,’ the jeweller said, explaining it sees more opportunities for the Mainland market to grow. K.L.
Patrick Ip declined to disclose the related information yesterday. “I can only disclose that our investment amount will remain at quite a high level… as CTM still aims to develop Macau into a digital city despite the economic downturn,” the CFO claimed.
4G subscribers reach 60,000
On the other hand, the operator’s total 4G subscribers reached 60,000
During yesterday’s press briefing, the Chief Executive Officer of CTM, Vandy Poon Fok Hei, denied the company’s 4G network is unstable and often switches automatically to the 3G network. “The 4G and 3G networks are complementary to each other. The switch from 4G to 3G is not due to network instability but depends on [the design] of mobile phones nowadays,” the CEO said. According to Mr. Poon, the voice function of most mobile phones nowadays is designed based on the use of the 3G network. “As such, when customers make phone calls, the network will automatically shift to 3G but it will shift back to 4G when the call ends,” he explained.
CTM to launch e-commerce platform mid-year
The telecommunications operator also announced yesterday that it would launch a new e-commerce platform named ‘MacauGoodhands’ during the middle of this year. The platform will include a search engine of the city’s varied information and an online shopping mall. According to CTM, the e-shopping platform will target local residents and tourists, in addition to helping local SMEs amid the economic adjustment phase. Currently, the platform is in trial service.
Business Daily Wednesday, March 23 2016 3
Macau Tourism
Macau and Guangdong promote multi‑destination travel in Thailand
Thailand and promote multi-destination travel to Guangdong and Macau. The authorities jointly rolled out the mission to expand their Macao Government Tourism Office (MGTO), international visitor markets and foster regional the Tourism Administration of Guangdong tourism development. The Joint Sales Mission Province, Tourism Administration of includes destination product presentations by Guangzhou Municipality, and Qingyuan Guangdong and Macao designed to introduce Municipal Tourism Bureau held a ‘Joint Sales their tourism resources and products to the Mission of Guangdong and Macau – Bangkok, Thailand’ in the capital of the country yesterday Thai travel trade. The programme also includes a networking luncheon and media interviews. to build connections with the travel trade in
Green Economy 2016 MIECF running from March 31 to April 2
The green machine More than 460 exhibitors from 20 countries and regions are expected to attend 2016 MIECF. Annie Lao annie.lao@macaubusinessdaily.com
T
he 9th 2016 Macau International Environmental Co-operation Forum and Exhibition (2016 MIECF) is themed ‘Green Economy – Opportunities for Waste Management’, as announced by the organising committee at a press conference held yesterday. MIECF is an event initiated by the SAR Government, with the strategic goals of nurturing the environmental business and acting as an information exchange platform between the Pan Pearl River Delta Region in Southern China and international markets for the sharing of techniques and experiences in controlling waste. The event made its debut in 2008.
The event comprises exhibitions, seminars, presentations and technical visits. Green transportation, waste production, strategic waste management, and green hospitality and construction will be discussed by sharing the latest research on how to resolve waste issues to meet Macau’s city needs, said Irene Va Kuan Lau, Executive Director of Macao Trade and Investment Promotion Institute (IPIM), at the press conference yesterday.
Same budget, more exhibitors
This year’s event will occupy 16,900 square metres, with more exhibitors than last year - some 460 exhibitors from 20 countries and regions from the Pan Pearl River Delta Region in Southern China, Portuguese-speaking countries, Asia, Europe and North America. Moreover, 45 speakers from 11 countries and regions will attend, including keynote speaker Professor Walter R. Stahel, who will speak on how to enhance waste management through technology.
The estimated budget for this year’s edition will remain at MOP25 million (US$3.13 million) similar to that of previous editions. The organiser also expects more visitors will come to the event than last year’s 9,600-plus visitors. “The event will attract more visitors compared to last year as the number of exhibitors has been increased this year with more participants from Portuguese-speaking countries,” Ms. Lau explained. About 20 co-operation agreement projects, including not less than 10 projects related to the Pan Pearl River Delta Region in Southern China, will be signed on March 31. Meanwhile, About 300 green matching sessions will be held in the business matching area.
Improving outcomes
The resources used to run the event has registered a decrease since 2008. “Last year, lamps were used during the event with 70 per cent of them energy-saving lamps compared to
36 per cent in 2008; this year, we expect to use no less than 70 per cent or more,” Ms. Lau explained. “In 2008, we produced 1.5 kilograms of rubbish and used 102 garbage trucks to dump the waste at a very high cost, but last year we used recyclable materials to encourage exhibitors not to consume too many resources, with a positive result of 25 garbage trucks. In addition, in 2008 we recycled only 43 per cent of the materials used during the event, but last year it was 80 per cent”. The event will be held at The Venetian Macao from March 31 to April 2.
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4 Business Daily Wednesday, March 23 2016
Macau Opinion
José I. Duarte Looking away Few people will dispute that Macau has a growth problem. Even in the midst of a gambling ‘recession’, the community has to deal with two major issues associated with that sector’s growth and its effects on economic and urban development. The issues I have in mind are building construction, for its various purposes, and transportation, to accommodate both residents and visitors’ needs. They may seem less pressing in the present context, and their extended presence on the public agenda may create some fatigue in our minds and lessen our focus on them. We may even come to feel somehow that they are not so important anymore. However, they are critical for the future development of the city and the wellbeing of the community, something that will become again quite visible as soon as a new growth regime sets in and most of the buildings under construction or planned come to fruition. However little public debate there is about their role and impact in the organisation of the urban space; or the effects on the movement of people and goods within the city and between it and the neighbouring regions. Take the bridge, for instance. Leave aside the fact that its economic case for Macau was never fully developed. Its construction still looks less interesting than some plausible alternatives, but that is mostly part of history now. The fact is that the bridge will land next to the densest areas of the city, and it remains unclear how it will fit with the local road network and how it will impact the local traffic flows. Nonetheless, the conditions of access and transit seem to be a matter of debate only in Hong Kong. Then look at the land reclamation projects, seemingly perceived as the only viable strategy for accommodating the urban sprawl. For years, we have been talking about an always-postponed blueprint for urban development. Its absence weakens the coherence of ongoing building actions and permits, impacts the future choices available to us and delays necessary decisions. Similar questions could be raised about other issues: notably, the “I’m almost there” ferry terminal in Taipa or the “one day I will be there” light rail network in Taipa. (The latter Macauside branch is another subject altogether, which could be forgotten altogether with likely benefits for everyone.) In a sense, we have too many elephants in the room. Not looking at them does not change the fact that they are there. José I. Duarte is an economist and permanent contributor to this newspaper.
Aviation
Airline fuel surcharge in compliance with international standards
I
n respect of a free market, Macau has adopted a low tax policy and does not interfere with flight ticket pricing, including fuel surcharges, Taft Lam, Deputy President of the Civil Aviation Authority (AACM) said in a written reply to legislator Kwan Tsui Hang’s written enquiry. Legislator Kwan questioned why the government does not to control the airline operators’ pricing of air tickets. She said in the written enquiry that the mechanism had lost its balance in the market and questioned
if the government would release data on fuel surcharges from all the airline operators in order to provide better comparisons for the public. The AACM official said the problem of overcharging did not exist in the market, despite the government not controlling the full price of air tickets. Airline operators had different prices on tickets but would adjust according to the international fuel cost. AACM cited examples such as the government being informed that Air Macau was going to cancel fuel surcharges for its tickets in March, with
some other airline operators also reducing or cancelling fuel surcharges. Mr. Lam added that airline operators from Korea and Taiwan are going to reduce their prices regarding fuel surcharges in March. Mr. Lam also said that some Asian operators had [just] cancelled fuel surcharges while some of them had implemented the policy a year ago. Mr. Lam added that the governments of other countries did not usually lead in releasing data regarding fuel surcharges if they did not have laws controlling the charges. B.L.
Transportation
Tourism
Highly‑polluting vehicles days’ numbered
Government to speed up budget hotels aproval
The Environmental Protection Bureau (DSPA) and the Transport Bureau (DSAT) have finished drafting regulations on the standards of limitation on exhaust emission and the enhancement for administrative procedures on inspection for cars in the city, Tam Vai Man, the president of DSPA, said in a written reply to legislator Si Ka Lom’s written enquiry. Meanwhile, Mr. Tam said that DSPA and DSAT had finished drafting the regulations on financial assistance to weed out two-stroke motorcycles. The two regulations are in the progress of entering legislation. He added that the government is working on the cross-boundary project regarding the abandonment of used cars according to the ‘Framework Agreement on Co-operation between Guangdong and Macau’. Upon implementation of the project, used cars that residents turn in voluntarily or vehicles that join the aforementioned financial assistance scheme would be discarded on a priority basis. Legislator Si Ka Lom questioned in the written enquiry if the government is slowing down or giving up on cutting heavy polluting vehicles when there is “no space” to fix the problem. He also enquired as to progress on the cross-boundary project regarding the abandonment of used cars according to the ‘Framework Agreement on Co-operation between Guangdong and Macao’. B.L.
Some 27 budget hotels offering 1,700 rooms are in the process of gaining approval for their application. The government is going to speed up approval of the applications, said Maria Helena de Senna Fernandes, Director of the Macao Government Tourism Office (MGTO) in a meeting on Monday concerning a law on the Prohibition of Providing Illegal Accommodation. Budget hotels are basic accommodation in 2-star hotels and apartments which have been urged by society upon the government to meet the demand in the market. These hotels may reduce the operations of illegal accommodation in the city, although doubts about the reduction of illegal accommodations and the existence of budget hotels have been raised. The latest data from MGTO shows that in January the occupancy rate of one to 2-star hotels was around 56 per cent, 20 per cent lower than that of 3 and 4 to 5-star hotels. The supply of accommodation in this city is increasing. Some 106 hotels and apartments providing 32,000 rooms were listed in Macau in January, of which 88 per cent are 4 to 5-star hotels. In addition, Public Works Bureau (DSSOPT) data reveals that the city has 16 hotels under construction and 34 others at design stage, with some 19,600 rooms expected to enter the market in the future. B.L.
Business Daily Wednesday, March 23 2016 5
Macau Gaming Proxies, apps and regulations dominate iGaming Congress
Asian gaming takes a twist Can Macau compete in the new Asian gaming market? Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
W
ith changing regulation, increased oversight and the upcoming Financial Action Task Force review later this year, gaming operators in Asian countries are searching for new ways to profit in an ever-changing environment. This was a hot topic at iGaming Asia Congress, which continued into its second day yesterday at the Grand Hyatt.
Chinese players, not in Macau
A not-so-new but very effective route around legalised gaming in the country where a player is has been the emergence of proxy gambling, described as “the most exciting part of this industry” by Tim Shepard, Chief Operating Officer of Silver Heritage – a gaming operator based in Asia – in a presentation at the iGaming conference yesterday. Proxy gambling, described by Shepard as “not Internet gambling,” inasmuch as the players are “not gambling online they’re just telling the operator how to play, where to play and how much.” This is legal in the Philippines, Vietnam, Cambodia and Nepal, and in Shepard’s opinion is still
predominantly benefiting those on the Mainland. “People in Mainland China haven’t stopped gambling,” he said in his presentation, “they’re just not coming to Macau to do it. This massive proxy industry has struck up.” This type of gambling is illegal in Macau and cameras aren’t allowed inside casinos, but in places like Vietnam, where no gaming law exists, they’re vastly exploited. He reports that the money from these transactions doesn’t stay in the country where the proxy is playing, but is “settled in China as it always was.”
Vietnam: No regulation
In Vietnam, where the gaming industry is still in its infancy, Professor Augustine Ho Tin Vinh of Stellar Management, points out that the country has “no experience in the gaming industry so they looked to Singapore.”
800 Million USD Amount made in casinos across the border from China in Vietnam last year, according to Professor Augustine Ho Tinh Vinh
Integrated resorts to enter Vietnam were mandated to have an initial investment of no less than US$4 billion following consultation with the Singapore Government. The figure was later revised to US$2 billion. Casinos have sprung up in the country, particularly on the border with China, which region alone generated about US$800 million in gross gaming revenues last year. Recently gaming in international airports was opened up by the government and new charter flights – of which “57 weekly” fly into casinos such as “Crown – not related to the Australian Crown” in the middle of Vietnam where “95 per cent to 99 per cent of their players are Chinese”. Social gaming is also “catching fire,” according to the professor, from “US$100 million in 2014, last year up to US$150 million” and this year “expected revenue is about US$250 million”. Out of the apps available “8 out of 10 are social gaming apps,” he says.
India – black and gray market
India’s gaming falls into a variety of categories, with legal gaming in three cities: Goa, Daman and Sikkim. Betting on ‘games of skill’ including rummy and chess is allowed, and foreign direct investment is allowed for companies that operate based on these principles. Vidushpat Singhanja, of the Federation of Indian Chambers of Commerce & Industry Committee on betting says, “Prizes [from gaming activities] cannot go out to a foreign country”, which is also true when it comes to currency movements, meaning that setting up a gaming oriented company in the country can be difficult. “Restrictions over the rupee and how it can move in and out of the
country [means that companies] can have great difficulty getting that money in and out,” said Indiabet. com’s George Oborne. This requires a presence in the country, as “it’s not too achievable from an office in London.” The dark side of the market is where the majority of the money lies and Mr. Oborne describes the local market as dominated by black market, mostly cricket, with most bets placed over the phone. There’s a push by certain groups to legalise gaming, with operators meeting with
“People in Mainland China haven’t stopped gambling. They’re just not coming to Macau to do it.” Tim Shepard, COO of Siler Heritage Ltd.
members of the government to push to pass legislation towards legalising both land-based and online betting. According to Singhanja, “the market is huge, just by virtue of population” and legalising online gaming could open up a nation that’s racing with China to become the most populated nation in the world to gaming activities at the swipe of a digit. The question lies in whether Macau will be able to compete with new gaming models, diversified gaming types and online or proxy gaming, and the various new forms seed markets can now take their gaming desires to.
6 Business Daily Wednesday, March 23 2016
Macau
Gaming Bernstein warns investors not to rely too heavily on weekly results
Volatility in weekly data increases Gaming analysts say March gross gaming revenues to decline 15 to 17 pct, tracking in line with expectations.
M
acau’s gross ga m i n g r evenue for last week from March 14 to 20 was around MOP4.1 billion (US$513.4 million), implying an average daily rate of MOP585 million, implied by brokerage Sanford C. Bernstein Ltd. Analysts Vitaly Umansky and Simon Zhang said in their latest note released on Monday that such results assumed that for the remainder of this month March gross gaming revenue would be around
MOP17.8 billion to MOP18.3 billion, representing a yearon-year decline of 15 to 17 per cent, which is in line with expectations. However, the analysts caution investors not to rely too much on weekly gross gaming revenue data. They say that over the past few months they have seen volatility in the weekly results increase and their comfort level with the channel checks has been reduced. “While the weekly numbers may still have some relevance, we highlight our reduced conviction level on
the reliability of these figures,” reads the report.
Visa impact
Following China’s State Council’s announcement of a 9+2 strategy issued last week which indicated an enlarged Greater Pearl River Delta zone embracing Macau, Hong Kong and nine southern Mainland provinces, the gaming analysts perceive a positive impact upon the local gaming market. The national strategy which aims at “economic, social, technological and
Galaxy Entertainment Group (‘GEG’) provides its team members with opportunities to volunteer in local communities. In celebration of Easter, GEG volunteers organized the ‘Easter Bunny Basket Workshop’ at the Hil Kong Centre of the Association of Parents of
duration of stay, adding more IVS cities, and issuing multi-entry visas, may take place. While an extended allowed duration of stay could positively affect sentiment, analysts see no material impact as most visits to Macau last two to four days. However, adding IVS cities “would be most impactful and positive in driving incremental visitation to Macau . . . If multi-entries are allowed for some key feeder cities, it could be positive support for Macau,” say the analysts. J.K.
Gaming Revenues
Corporate
GEG Organizes ‘Easter Bunny Basket Workshop’
infrastructure integration”, says the individual visit scheme (IVS) policies for the SARs are to be optimised and adjusted, without specifying any detail. Currently, the citizens of 49 IVS cities are eligible to visit the SARs, with most IVS visas to Macau allowing for only one or two entries within a valid period each time of an allowed duration of stay of seven days. Bernstein gaming analysts perceive that following the rollout of the policy, an extended allowed
People with Intellectual Disabilities of Macau, with GEG donating MOP100,000 to the Association. Fifteen GEG volunteer team members went to the Centre. Mr. Michael Mecca, President of GEG, , presented the MOP100,000 donation on behalf of GEG to Ms. Lou Sio Ha, Director of the Executive Board of the Association.
Wells Fargo: March gaming revenue to decline 15 to 16 pct y-o-y Macau’s gaming revenues are expected to decline 15 to 16 per cent year-on-year, said Cameron McKnight of Wells Fargo Securities LLC in a note released on Monday night. The brokerage says that based on their channel checks through March 20, they estimate average daily revenues were around MOP585 million (US$73.25 million) through the first twenty days of the month, a 13 per cent decline
sequentially to February’s average daily revenues of MOP673 million and 16 per cent lower than that of the same period last year despite new supply growth. The estimated 15 to 16 per cent March gross gaming revenue implies roughly MOP580 million to MOP600 million average daily revenues for the rest of the month, slightly higher than that of the past week. The Wells Fargo analyst also indicated that the weekly numbers have been volatile and “expects this pattern to continue given continued instability in the VIP segment”. A weak Chinese economy and a recovery that is likely to be flatter than prior rebounds are cited as contributing to more muted revenue growth in the Macau gaming market. J.K.
Business Daily Wednesday, March 23 2016 7
Macau Culture MACA Song Writers Quest tunes up
Calling for entries Competition to discover local music talent to serve as recruitment campaign for the industry.
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he fourth edition of the Song Writers Quest has started, organiser Macau Association of Composers, Authors and Publishers (MACA) announced at a press conference yesterday. MACA CEO Ung Kuoc Iang said the event, backed by Macao Foundation and Sands China Ltd., seeks to contribute to the local music industry by helping and discovering
local music talent to join the industry, and provide music creators with a platform to demonstrate their talent. Fiona Choi, Event Planning & Membership Officer of MACA, informed the audience about the admission procedure and related terms. MACA Song Writers Quest 2016 is now calling for entries until April 22. During the press conference, MACA announced its panel of celebrity
In Brief judges for this year’s competition, comprising Hong Kong composer, arranger and music producer Schumann, Hong Kong lyricist Gene Lau and Leung Pak Kin and Hong Kong composer Chui Wai Yin. MACA said the judging panel will join forces to select eight songs from all the entries to enter the final round of competition, where they will be performed on Quest night on 2 July at The Venetian Theatre. Seven awards will be presented; namely, Winner, 1st Runner-Up and 2nd Runner-Up for Best Song, Best Music, Best Lyrics, Best Performance, and My Favourite Song. In addition, the eight final songs will be collected for MACA ALBUM VOL. 5, serving as both reward and incentive for entrants.
Terrorism
Government paying close attention to Brussels suicide attacks Explosions occurred in Brussels Airport and metro yesterday. Data from the local travel industry revealed that no Macau tour groups were in Brussels. The Tourism Crisis Management Office (GGCT) said it had not received any enquiry for information or assistance as at 20:00 on March 22. GGCT said it was paying close attention to the explosions and maintaining close contact with the travel industry regarding further developments. For enquiries, Macau residents can call the 24-hour Tourism Hotline at (853) 2833 3000. Two explosions tore through Brussels Airport on Tuesday morning in what Belgian public broadcaster VRT called a suicide attack; another blast rocked a metro station in the capital shortly afterwards. At least 26 people died in the attacks.
Crime
Three arrested on suspicion of money laundering Group photo of MACA representatives and guests,
Gaming
Lippo considers selling interest in Korean-casino project Property developer Lippo Ltd. is considering withdrawing from its joint casino project with US-based gaming operator Caesars Entertainment Corp. in Incheon, South Korea by selling its interest in the project, according to its filing with Hong Kong Stock Exchange yesterday. The developer announced yesterday that the two companies - which obtained a conditional deal to acquire a land plot for the casino project with the vendor MIDAN City Development Co. Ltd. in 2014 - had failed to make the deal unconditional before the deadline on December 31 although the deal has not yet been terminated by any of the parties. Claiming there is no certainty as to whether a final licence [for the project] would be granted, coupled with the ‘current outlook for the
gaming industry in North Asia and the volatility of the global economy’ Lippo said it is in discussion with Caesars ‘for some alternatives which may include the possibility for a third party investor to acquire the Group’s interest in the project.’ The company also stated that it has no interest in participating in any gaming aspect of the project in any event despite still considering participating in certain development related to the project land plot if the land deal could be satisfactorily resolved. Last December, the Hong Kong-listed developer released two filings saying the Korean casino project was clouded with ‘uncertainties’ as their consortium had not mutually agreed on all the conditions in their conditional land sale and purchase
Lippo Centre in Admiralty on Hong Kong Island.
agreement with MIDLAND – which is indirectly owned by Lippo. The consortium, named LOCZ Korea Corp., was given the green light by the Ministry of Culture, Sports and Tourism of the Republic of Korea to design, develop, construct and own the gaming project in Incheon in March 2014. It comprises Lippo’s wholly owned subsidiary Lippo Worldwide, partly-owned OUE International, and Caesars Entertainment’s subsidiary Caesars Korea. The parties planned to invest 743.7 billion won (HK$4.92 billion/US$61.3 million) in the first phase of the project by 2018 and a total of 2.3 trillion won for the whole project, to include a foreigner-only casino, hotels, residential buildings, convention centres and shopping mall. K.L.
One Malaysian and two Macau residents were arrested on suspicion of money laundering in 2014, according to Judiciary Police (PJ) of Macau SAR as reported by local broadcaster TDM Radio. One Taiwan resident was believed to have been cheated by the transfer of HK$300,000 (US$38,625) to a local bank account held by the suspected Malaysian non-resident worker. Some HK$150,000 was transferred to Malaysia in two transactions of HK$75,000 each, while HK$90,000 was withdrawn in cash. Two local residents were suspected by PJ to have assisted in taking the cash to the Mainland, exchanging it for renminbi, and charging for the service. The PJ arrested the Malaysian who owned the local bank account and the two Macau residents. Black market
Customs confiscate HK$1.3 mln-worth of fake watches Some 14 counterfeited watches of six brands with a face value of more than HK$1.3 million (US$162,500) were recently confiscated, according to a statement published by the Macao Customs. Data collecting and analysing tools were used to track an online shop which was suspected of selling fake watches. Customs officers cracked the case as the online shop owner was dealing with the customer in person on March 21. Some 14 fake watches of six brands were found onsite and in the owner’s home. The suspect stated that the watches were bought for RMB1,000 each, and that he expected to sell them for HK$1,800 to HK$3,500.
8 Business Daily Wednesday, March 23 2016
Greater China Stock Markets
Company delisted for first time for breaching disclosure rules New regulations aimed at cleaning out the bourses of inert or underperforming companies came into effect in 2014 but until now the few companies that have delisted have done so due to business performance issues. Samuel Shen and Pete Sweeney
T
he Shanghai Stock Exchange said on Monday that it had for the first time de-listed a company for violating disclosure rules, as Beijing moves to restore the battered reputation of its stock markets. In a statement on its website the exchange said that Zhuhai Boyuan Investment had broken the rules on important matters of information disclosure. Boyuan’s violation was “very grave”, the SSE said in the statement, alleging that the company
had misused capital, forged commercial bills and inflated deposits and shareholder equity. “Removing law-breaking companies from the securities market ... can better protect investor interest and can promote steady and healthy development of the capital markets,” the statement said. Boyuan, whose shares have halted trade since May 28, 2015, said in a separate statement that its last trading day was expected to be on May 11. The company, which Reuters data shows is engaged in motor vehicle sales and mineral trading based out of Zhuhai in Guangdong province, did not answer calls seeking comment.
“This is very positive because it shows the government is actively guiding the market towards rational investment by eliminating bad and misbehaving companies,” said Yang Hai, an analyst at Kaiyuan Securities Co. “In the past it was very difficult for a company to be delisted, which encouraged a culture of speculation and resulted in misallocation of capital.” The lack of a previously strong delisting mechanism, combined with an arduous approval process for new listings, meant that it was difficult to get onto an exchange - but once listed, even more difficult to get knocked off.
Boyuan, for example, has had its shares suspended from trading since May 2015, when the China Securities Regulatory Commission transferred the company’s case to the police. Analysts blamed a lax regulatory system for creating a brisk market in listed shell companies that could be acquired via reverse takeovers, and also for inflating average price-to-earnings ratios in China, despite widespread public concerns that insider trading, dishonest accounting practices and market manipulation were endemic among listed Chinese companies. New regulations aimed at cleaning out the bourses of inert
or underperforming companies came into effect in 2014 but until now the few companies that have delisted have done so due to business performance issues. How investors react to the news is an open question. In the past regulatory crackdowns focused on smaller private companies have seen investors move out of companies seen as lacking government connections into safe government-controlled firms, as occurred in China’s bond market when Beijing signalled it would let issuers default in the cause of rationalising yields to better reflect risk. However, bond investors reacted by moving funds out of private issuers into bonds issued by local government investment vehicles. Chinese market indexes have crashed since June 2015 after a debt-fuelled rally ran out of steam. Government efforts to restore faith in the markets have so far failed to gain traction, and previous policy moves were criticised for attempting to use government intervention to force money back into the market. The Shanghai Composite Index is down over 16 percent so far this year. Reuters
Property
Hong Kong crash averted, if stock traders are right
against the U.S. currency, reaching the strongest level in two months on Monday, while interbank borrowing costs have tumbled from five-year highs as investors scale back bets on higher U.S. interest rates and an economic hard landing in China.
Home values surged more than 360 percent from a 2003 nadir through mid-September.
Stocks rally
Kana Nishizawa
H
ong Kong homeowners could be forgiven for fearing the worst. In a city notorious for its real estate booms and busts -- including a 70 percent tumble triggered by Asia’s financial crisis in the late 1990s -- property prices are once again sliding from all-time highs. Yet there’s little reason to worry that the latest slump will spiral into another crash, if shares of Hong Kong’s biggest developers are anything to go by. After a 34 percent selloff from its June peak through January 21, the Hang Seng Properties Index has jumped 18 percent in just two months -- outpacing the broader
Hong Kong equity market by almost 7 percentage points. The last time the property stock gauge reversed a drop of similar magnitude, in October 2011, home prices began climbing three months later. The index has been a decent leading indicator over the long term, too, foreshadowing turning points in the housing market 70 percent of the time since 1994, according to data compiled Bloomberg. While that’s not a perfect track record, it does bolster the case of optimists who say the current slide in property values is just a temporary correction, rather than a prolonged tumble. “A price recovery in the physical market is very likely,” said Wee Liat Lee, an analyst at BNP Paribas SA in Hong Kong who predicts home prices
will bottom out by year-end and resume annual gains of about 10 percent through 2019. “The reason why share prices are able to lead is because fund managers do a thorough analysis of the physical market condition and predict it will turn,” said Wee, who has a buy rating on all but one of the Hong Kong-listed developers he covers.
Volumes rebound
Analysts point to several reasons why a crash is unlikely. For one, sales volumes are starting to recover as prices drop to levels that entice buyers. After falling to the lowest level in at least 14 years in mid-February, secondary transactions in major housing estates rebounded five-fold to a nine-month high in the week ended March 13, according to Midland Realty. The market is thawing as fears over an exodus from Hong Kong assets fade. The city’s dollar has rebounded from the weak end of its trading range
“The reason why share prices are able to lead is because fund managers do a thorough analysis of the physical market condition and predict it will turn” Wee Liat Lee, Analyst at BNP Paribas SA in Hong Kong
Hong Kong could reconsider some of its property curbs if prices fall too far, said Cusson Leung, the head of Hong Kong research, conglomerates and property at JPMorgan Chase & Co. Over the past six years, authorities have increased the minimum down payment requirement on mortgages, lifted taxes on non-resident homebuyers and introduced a special stamp duty for purchasers who flip properties within 36 months. Leung, who sees home prices dropping another 10 percent in 2016 to levels that would make government easing more likely, has overweight ratings on developers including Cheung Kong Property Holdings Ltd. and New World Development Co. Cheung Kong Property, which gets about 84 percent of its revenue from the residential market, and New World, which relies on the residential segment for 46 percent of sales, have both jumped more than 20 percent since the Hang Seng Properties gauge started rallying in January. The index has recorded 23 swings of at least 30 percent since Bloomberg started compiling the data in 1994.
Priciest market
Of course, the stock market does sometimes diverge from the physical property market, and Hong Kong faces multiple headwinds - including shrinking retail sales, declining port cargoes and waning interest from Chinese tourists - that could translate into lower demand for real estate over the long term. There’s also the problem of affordability. Hong Kong was ranked as the most expensive housing market among 87 major metropolitan areas as of the third quarter of 2015, according
Business Daily Wednesday, March 23 2016 9
Greater China M&A
In Brief
Bang & Olufsen in talks to be bought by Sparkle Roll A sale of the 91-year-old electronics maker would mark the end of an era for a company known globally for its simple, clean Nordic designs. Adam Ewing
Bang & Olufsen A/S, the Danish maker of high-end hi-fi systems, is in talks to be bought by Sparkle Roll Group Ltd. as the Chinese luxury-goods distributor seeks to add to its product range. Sparkle Roll, which sells RollsRoyce and Bentley cars as well as luxury watches, said yesterday several elements in the discussions remain to be resolved. The price needs to be “reasonable” and reflect “the significant uncertainty and the investments needed to ensure further development and growth,” Sparkle Roll said in a statement, without disclosing pricing or payment details. Its market value is about half of B&O’s. New ownership would allow B&O’s management to focus on turning around the company and increase sales, said Qi Jianhong, Sparkle Roll’s
Vice finance minister
No secret US-China exchange rate deal
largest shareholder according to data compiled by Bloomberg. B&O, which makes US$8,000-plus TVs, has struggled to win buyers for its products as prices for flat-screen sets tumble and more people listen to music on smartphones rather than home hi-fi systems. “B&O would benefit from a different ownership structure than the present in order for the company to free up resources, accelerate growth and facilitate consolidation,” Qi Jianhong said in Sparkle Roll’s statement. Shares of B&O rose as much as 8 percent and traded 2.9 percent higher at 70.50 kroner as of 10:07 a.m. in Copenhagen, giving the manufacturer a market value of about 3 billion kroner (US$452 million). B&O stock has tumbled about 14 percent this year. A sale of the 91-year-old electronics maker would mark the end of an era for a company known globally for its simple, clean Nordic designs. Ole Andersen, the chairman of B&O, told Danish newspaper Berlingske in 2014 that the company is too small to stay independent and must either scale back business areas or seek partners.
B&O partnered with Sparkle in 2012 to boost sales in China and last year said it would sell its automotive sound-system business to Harman International Industries Inc. to focus on consumer products. The turnaround wasn’t fast enough as it lost a large amount of money developing and building TVs, Chief Executive Officer Tue Mantoni said March 18 after announcing a partnership to outsource TV production to LG Electronics Inc. Sparkle Roll, traded in Hong Kong, distributes top-end cars, watches, wine and cigars in China, ranging from Bentleys and Bugattis to 100,000 yuan (US$15,000) bottles of French wine. Like others in the luxury industry, Sparkle Roll has been hit by President Xi Jinping’s anti-corruption crackdown. Revenue has shrunk to HK$2.6 billion (US$335 million) in financial year 2015, down 40 percent from financial year 2012. Qi Jianhong was ranked 422nd on Hurun Report’s 2015 Rich List in China, which put his wealth at 8 billion yuan. Bloomberg News
M&A
to an annual survey compiled by Demographia, after home values surged more than 360 percent from a 2003 nadir through mid-September. The government will continue to increase housing supply and curb demand from speculators, Hong Kong Chief Executive Leung Chun-ying said yesterday. “We’ve been reducing our exposure to Hong Kong property,” said Charlie Awdry, a London-based portfolio manager at Henderson Global Investors Ltd., which oversees more than US$131 billion. “If you look at the longer-term trend of where the industry fundamentals are going, they tell you that physical property prices are heading down in Hong Kong and there is a lot of supply coming.”
Cheap shares
The latest home-price data show continued downward pressure. Centaline Property Agency’s index of secondary-market values sank 2.15 percent in the week ended March 13, the biggest drop since 2008, to extend its decline since mid-September to 13 percent. Still, that hasn’t stopped shares of real estate companies from rallying. The Hang Seng Properties gauge climbed to the highest level in more than three months on Thursday, and closed yesterday within 2 percentage points of a bull market. Hong Kong’s property stocks have more than priced in the potential for lower home values, according to Sandy Mehta, the chief executive officer of Value Investment Principals Ltd., a Hong Kong-based advisory firm. The Hang Seng property gauge’s price-tobook ratio fell to 0.58 in January, the lowest level since 1998, and was trading at 0.69 yesterday, according to data compiled by Bloomberg. “Discounts to current marked-tomarket land and asset values are high, even if one assumes prices may decline,” said Mehta, whose stock picks include New World. “There is a lot of value for investors who have a one to two year time horizon.” Bloomberg News
Foxconn considering cutting takeover offer for Sharp The two companies are still aiming to finalise the deal by the end of this month.
China’s vice finance minister said yesterday there was no secret agreement between the United States and China regarding adjustments to exchange rates. The comment by Zhu Guangyao at a forum follows speculation in foreign exchange markets that finance ministers at the recent G20 summit in Shanghai may have reached a tacit understanding in which the United States agreed to allow the dollar to depreciate, relieving pressure on other currencies. The dollar fell to a five-month low against major currencies last week. Provisions
Seven banks may lower coverage ratio Seven listed banks may have received permission to lower their loan loss provision coverage ratios, Caixin reported yesterday, citing multiple unidentified sources. According to current regulations, banking loan loss provisioning ratios should not be less than 150 percent in China. The China Banking Regulatory Commission had no immediate response to a faxed request for comment, and could not be reached by phone. Loan loss provision ratios measure banks’ ability to withstand future losses from bad loans, and are calculated using the cash set aside for future losses and the total volume of non-performing loans. Bank of China
Taiwan’s Foxconn is working towards reducing its planned investment into loss-making Japanese electronics firm Sharp Corp by around 100 billion yen (US$893 million) from an initial plan of 489 billion yen, two sources familiar with the matter said yesterday. Foxconn, formally known as Hon Hai Precision Industry Co, is seeking to slash the offer to factor in a likely deterioration in Sharp’s earnings in the financial year to March 31, and bigger losses in the future than originally expected, the sources said. Both Foxconn and Sharp declined to comment. Sharp late last month said it would issue around US$4.4 billion worth of new shares to give Foxconn a two-thirds stake, but the Taiwanese company put its takeover bid on hold at the 11th hour after the Japanese company revealed previously undisclosed liabilities. Sharp, once a leader in high-end displays for smartphones and TVs, has struggled due to the slow pace of innovations and stiff competition from nimbler Asian rivals.
Foxconn is now considering paying less for Sharp stock from its planned 118 yen per share, but the Taiwanese iPhone assembler continues to pursue a two-thirds stake in Sharp, the sources said. The two companies are still aiming to finalise the deal by the end of this month, according to the sources. Foxconn is also negotiating with Sharp’s main creditors to trim the purchase of about half of the preferred shares owned by the banks, worth 200 billion yen in total, or offer a lower price for these shares, the sources added. Moreover, banks are also ready to offer additional financial support to Sharp, including extending the Marchend deadline and lowering the interest rate on billions of dollars in loans extended to the beleaguered Japanese electronics giant, they said. The core banking units of Mitsubishi UFJ Financial Group Inc and Mizuho Financial Group Inc have extended the vast majority of Sharp’s 510 billion yen in syndicated loans which are due at the end of the month. Reuters
Loans over US$50 bln for overseas M&A State-owned Bank of China said it has extended US$56.3 billion worth of loans to fund 188 overseas acquisition deals by Chinese companies in the past six years. The deals funded by Bank of China included those in industries ranging from electronics, infrastructure, commerce and leasing, it said in a statement posted on its website on Monday. The bank also signed loan contracts worth US$9.7 billion during the 2009-2015 period to aid Chinese exporters, and US$82.6 billion worth of lending to finance Chinese companies’ overseas operations. Jimmy Choo
Asia growth to help outperform luxury market British shoemaker Jimmy Choo said strong demand in Asia would help it grow faster than the overall luxury market this year, after it posted a 7.2 percent rise in underlying revenue in 2015. “Jimmy Choo continues to outpace the sector despite the challenging competitive environment,” said Chairman Peter Harf in a statement on Tuesday. “The company successfully reversed the first half decline in wholesale revenues and remains on track with growth forecasts in Asia and Japan where brand awareness continues to grow strongly.”
10 Business Daily Wednesday, March 23 2016
Greater China
Taiwan’s central bank headquarters in Taipei Monetary policy
Taiwan approaching zero-rate world with mystery benchmark Despite central bank has said such policies hurt consumer spending and financial stability and do little to spur investment. Justina Lee
T
aiwan’s interest rates are much closer to zero than you’d think. While the central bank is forecast by economists to cut its benchmark to 1.5 percent Thursday, what really matters is how it adjusts an overnight money-market rate policy makers don’t make public. The rate on one-day certificates of deposit, which the authority communicates confidentially to banks, is said to have been lowered 19 basis points to 0.2 percent since the current easing cycle began in August. With the overnight rate approaching zero, the Central Bank of the Republic of China (Taiwan) is running out of room to revive a shrinking economy. Though the overnight mark usually moves in conjunction with the policy rate following quarterly reviews, the island’s monetary authority can influence borrowing costs between meetings by adjusting it daily. While Europe and Japan
have adopted negative interest rates, the CBC has said such policies hurt consumer spending and financial stability and do little to spur investment. “Most central banks don’t want rates at zero; it’s a last resort,” said Raymond Yeung, an economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. “So the overnight rate might just go down by a few basis points over the next 12 months.” The policy rate will be reduced from its current five-year low of 1.625 percent, according to 25 of 26 economists surveyed by Bloomberg. Twenty-two forecast a cut to 1.50 percent, three project a move to 1.375 percent, and one see no change.
Market impact
The CBC’s open-market operations have a bigger impact on the market than the official benchmark, which is seen as a policy signal, according to Yeung. The official gauge is a discount rate on bills offered by lenders to obtain funds from the authority and is seldom used because of the
ample liquidity in Taiwan’s banking system, he said. Changes to the one-day rate have recently preceded moves in the official policy rate and influenced bond and currency markets. The CBC lowered the overnight rate for the first time in three years on August 11, the day China unexpectedly devalued the yuan, and the benchmark was cut a month later following a scheduled review. A second easing of the policy rate followed in December. The oneday rate was last reduced in January, and local bond yields have since plunged to record lows in
“Most central banks don’t want rates at zero; it’s a last resort” Raymond Yeung, Economist with Australia & New Zealand Banking Group
anticipation that policy will be loosened further.
Gloomy outlook
The central bank has ample reason to ease: the island’s economy has shrunk for the past two quarters, exports have slumped for 13 straight months and core inflation has remained below 1 percent for a year. While 16 of 21 economists in a Bloomberg survey expect the CBC to cut the benchmark rate at least twice this year, opinions are divided on how low the overnight rate will go. Taiwan may cut the one-day rate marginally or even keep it unchanged this week, said Claire Huang, a Hong Kong-based economist at Societe Generale SA. Chih-Chiang Hsu, an economics professor at National Central University in Taoyuan who conducts research for Cathay Financial Holding Co., said it’s unlikely to fall further. Leon Chu, a fund manager at Franklin Templeton SinoAm Securities Investment Management Inc., doesn’t rule out the prospect of the rate turning negative. “The decline of Taiwan’s economy is a slow and long-term process, so the central bank won’t exhaust its tools in one go,” said Taipei-based Chu, who helps Franklin Templeton SinoAm oversee NT$154.8 billion (US$4.8 billion). “There’s a possibility for Taiwan to move toward negative rates since this has been the trend for export-oriented economies.” Bloomberg News
Investment
State firms boosting green energy in Australia A unit of China Shenhua is already part operator of several wind farms in Tasmania. Melanie Burton
Chinese state-owned companies are expected to boost their investment in Australia’s expanding renewable energy sector, attracted by a national leadership that is more favourable to the industry than its forerunner. With six to eight state-owned enterprises already involved in or looking closely at Australian energy assets, Melbourne-based financial advisors SILC Group said more deals were on the cards, with so-called green power coming under particular focus. They would follow State Power Investment Corp’s (SPIC) A$300 million (US$230 million) buyout of a wind farm in New South Wales last week, as well as its US$2.5 billion purchase in December of Pacific Hydro, a company which has wind farms in Australia, Brazil and Chile.
“There was always interest, but now there’s increased interest from the Chinese,” said Peter Munns, an executive director at SILC, which works with China state-backed firms. “Chinese companies always like our rule of law, our currency risk and stable economy. They like renewables, they also like poles and wires because the revenue is underpinned by regulation.” After coming to power last year, the government led by Prime Minister Malcolm Turnbull in December reversed a decision by the previous administration banning the country’s clean energy fund from investing in wind power projects, opening the door to more deals in the sector. Former prime minister Tony Abbott had described wind farms as “ugly” and “noisy”. Munns told Reuters in an interview last week that Chinese firms were
looking for projects with long term off take agreements that would get them a foot in the door in Australian markets, as well as local expertise that would help them grow. “They don’t just want to have one wind farm here, they want to have a portfolio,” said Munns. “Most want to do solar as well. But they probably think that’s a couple
Key Points China state companies to do more deals in Aus energy -SILC 6 or so units of state firms invested in or evaluating projects Renewables such as wind power in focus Attracted by govt steps on green energy
of years down the track before it’s as economic and as viable as wind is.” A unit of China Shenhua is already part operator of several wind farms in Tasmania, while Beijing Jingneng Power has a stake in the Gullen Range wind farm in New South Wales. Other Chinese state-owned companies that have said they are looking at Australian energy assets include Shanghai Electric Power Co Ltd and Cecep Wind-power Corp. Wind farms are Australia’s No. 2 renewable energy source, behind hydropower but ahead of solar, providing around 4 percent of its total energy demand. Meanwhile, a tender for New South Wales poles and wire firm Ausgrid, to be decided by mid-2016, has attracted the attention of China State Grid and Southern Power. State Grid already has a 41 percent stake in South Australia’s electricity grid. Reuters
Business Daily Wednesday, March 23 2016 11
Greater China M&A
Marriott wins back Sheraton-owner Starwood with new offer Marriott said it believes it could achieve US$250 million in annual cost synergies within two years. Mike Stone and Arunima Banerjee
S
tarwood H o t e l s a n d Resorts Worldwide Inc, owner of the Sheraton and Westin brands, accepted a sweetened US$13.6 billion acquisition offer from peer Marriott International Inc, spurning China’s Anbang Insurance Group’s latest bid. The bidding war for Starwood has pitted Marriott’s ambitions to create the world’s largest lodging company with about 5,700 hotels, against Anbang’s drive to create a vast investment portfolio of high-yielding U.S. real estate assets. Earlier this month, Anbang agreed to pay Blackstone Group LP US$6.5 billion for Strategic Hotels & Resorts Inc, whose 16 luxury properties include the Four Seasons Washington D.C., after buying New York’s Waldorf Astoria Hotel last year for US$1.95 billion. If Anbang stays in the race and launches a successful new bid for Starwood, the acquisition would be the largest ever by a Chinese company in the United States. Starwood’s merger agreement with Marriott now prevents it from communicating with
Key Points Marriott’s new offer worth US$79.53 per share, or US$13.6 billion Offer tops Anbang’s US$78-per-share bid Combined company would have more than 5,500 hotels worldwide
Anbang, but the Chinese company could still make an offer for Starwood’s board to consider before its shareholders vote on the Marriott deal on April 8. Anbang would not comment on Monday on whether it was planning a new bid. “It’s likely that the Anbang consortium will increase its offer because that group may be motivated more by obtaining Western assets and shifting capital outside China than by generating value or earnings accretion,” Nomura Securities International Inc analysts wrote in a note. Marriott raised the cash portion of its offer to US$21 per share from US$2 per share, valuing the total bid, which also includes stock, at US$79.53 as of Friday’s close of trading. The company had clinched a deal with Starwood in November for US$72.08 per share. “In the further diligence we have completed in last five months, we have become even more convinced of the tremendous opportunity presented by this merger,” Marriott Chief Executive Officer Arne Sorenson told analysts on a conference call. “That confidence is reflected in our higher offer.” Marriott said it believes it could achieve US$250 million in annual cost synergies within two years after closing the deal with Starwood, up from US$200 million estimated in November 2015 when it signed its original merger agreement. Despite the higher price, Marriott is still getting Starwood for less than 12 times its estimated 2017 earnings before interest, tax, depreciation and amortization, which the Nomura analysts argued was “compelling value.” “We believe this is the best bid Marriott is willing to make,” Canaccord Genuity analyst Ryan Meliker wrote in a note.
CFIUS review
The consortium led by Anbang had challenged Marriott with an initial
nonbinding offer of US$12.8 billion on March 14, raising it later to US$13.16 billion, or US$78 per share in cash. An acquisition of Starwood by Anbang would probably face scrutiny by the Committee on Foreign Investment in the United States, an interagency panel that reviews deals to ensure they do not harm national security. However, sources have said both sides believe that deal would receive CFIUS clearance. A Marriott-Starwood combination would bring together 20 brands, including Ritz Carlton and the Autograph Collection. “The power of the information and guest relationships to me is the greatest value that would come out of this for Marriott,” said Bjorn Hanson, a professor of hospitality and tourism at New York University. “Control of so much information enables for there to be better targeted marketing and pricing,” he said. The combined company will have more than 5,500 hotels with 1.1 million rooms worldwide, giving Marriott a greater presence in Europe, Latin America and Asia and allowing it to better compete with apartment-sharing start-ups such as Airbnb. Marriott’s merger with Starwood has cleared antitrust review in the United States and Canada. Approvals from the European Union and China are pending. Under the revised agreement, Starwood would pay a breakup fee to Marriott of US$450 million, up from US$400 million previously. The investor group Anbang is leading also includes private equity firms J.C. Flowers & Co from the United States and China’s Primavera Capital. Lazard and Citigroup Global Markets Inc are financial advisers to Starwood, and Cravath, Swaine & Moore LLP is its legal counsel. Deutsche Bank Securities and Gibson, Dunn & Crutcher advised Marriott. PJT Partners Inc is Anbang’s financial adviser, while Skadden, Arps, Slate, Meagher & Flom LLP is its legal counsel. Reuters
In Brief Taiwan
Jobless rate at 16-month high in February Unemployment in Taiwan stood at 3.95 percent last month, a new high since October 2014 mainly due to holiday factors. The jobless rate in February was up from 3.87 percent for January and 3.69 percent in February 2015, said a press release from Taiwan’s statistics agency yesterday. The number of unemployed people rose slightly to 462,000, compared with a total of 11.23 million employed. Many people change jobs after the Lunar New Year, which falls on February 8 this year, while some temporary jobs came to an end during the same period, the agency said. Trade
Chile hails Beijing as its top trade partner China now is Chile’s leading trade partner, with their bilateral trade volume having grown fourfold in the past decade, local media reported on Monday. “In 2015, Chilean exports to China amounted to 16.671 billion U.S. dollars, while imports totalled US$14.8 billion,” El Mercurio, a Chilean local daily, said. In 10 years, “the trade volume between the two countries has grown fourfold from 8.122 billion dollars in 2005 -- the year before a free trade agreement (FTA) went into effect -- to US$31.471 billion in 2015,” it said, adding that “this figure represents 25 percent of Chile’s foreign trade.” Derivatives
Cathay Financial sets aside loss provisions Cathay Financial Holdings, Taiwan’s No.1 financial holding firm, said yesterday it has set aside T$1.4 billion (US$43 million) in provisions to cover potential losses from customer defaults on a popular yuan derivative trading product. The firm’s banking unit, Cathay United Bank, is one of a number of Taiwanese banks that face losses from defaults on a product once seen as a sure bet for investors after the recent slide in China’s currency. The combined losses in the banking industry could run to hundreds of millions, or even billions, of U.S. dollars, analysts have estimated. Liabilities
Yurun unit default on shortterm notes China Yurun Food Group Ltd said that a default by a unit on short-term notes worth 500 million yuan (US$77 million) has in turn triggered other provisions which require the immediate repayment of debt worth 1.45 billion yuan. The unit, Nanjing Yurun Food Co Ltd has arranged partial repayment of the short-term notes but the meat processing company’s board of directors believes the likelihood of an immediate repayment for the other debt is not high, it said in a statement late on Monday. It added that it is in talks with banks on the matter.
12 Business Daily Wednesday, March 23 2016
Asia Taxi Apps
Indonesian taxi drivers stage violent anti-Uber protest Anger has been growing among taxi drivers worldwide at the challenge presented by US company. Olivia Rondonuwu
T
housands of Indonesian taxi drivers staged a violent protest Tuesday against Uber and other ride-hailing services, blocking major roads in the capital, clashing
with drivers from app-based rivals and setting tyres alight. The protesters, who also included motorised rickshaw and bus drivers, adorned their vehicles with signs saying “stop illegal taxis” and rallied in front of parliament and the communications ministry, in an
upsurge of anger at apps that the drivers say are threatening their livelihoods. As convoys of vehicles brought downtown Jakarta to a standstill, the demonstration turned violent, with protesters jumping up and down on vehicles that refused to take part, while taxi drivers and rivals from app-based services clashed and hurled rocks on a main thoroughfare. Commuters faced rush-hour travel chaos, with even the motorcades of President Joko Widodo and the vice president getting stuck in the gridlock, making both men late for a meeting. Anger has been growing among taxi drivers worldwide at the challenge presented by US company Uber, one of the world’s most valuable start-ups, and a flurry of other app-based services that typically offer cheaper fares than traditional transport operators. Herman, a 49-year-old taxi driver involved in the Jakarta protest who goes by one name, said his earnings had dwindled from around 250,00 rupiah (US$20) a day several months ago, to almost nothing due to the increased competition. “I haven’t paid my rent, and I need to feed my three children and my wife,” he said. The demonstration came after weeks of rising tensions between traditional public transport operators in the sprawling, traffic-clogged metropolis of 10 million and a flurry of new ride-hailing services. As well as Uber, Malaysian app Grab and home-grown motorbike taxi-hailing app Go-Jek are providing stiff competition for Jakarta’s taxi drivers.
‘Unfair competition’
Taxi drivers stand beside their vehicles during a mass strike in Jakarta yesterday.
Traditional taxi, motorbike taxi and other public transport drivers are angry that the new services are offering rides at lower prices, claiming they are not paying taxes, and are operating without official permits. “Why should thousands of people who didn’t pay tax, get a permit, or undergo car checks roam the roads
freely while we have had to fulfil those duties?” said Yohannis Rorimpandey, a protester who works for Blue Bird, one of Indonesia’s biggest taxi groups. After rallying outside parliament, a large group of protesters moved to the communications ministry, demanding that the minister block the apps. Uber and other app-based services currently operate in a legal grey area in Indonesia, and there is an on-going debate in the government about how to handle them. Indonesian law gives a narrow definition of “public transport”, which does not include the ride-hailing apps, and the transport ministry has sought to ban them. However the communications ministry has refused to block the services, saying that it is committed
“You can’t defy technology, it just needs to be regulated” Jusuf Kalla, Indonesia’s Vice President
to supporting the growth of the digital economy, and President Joko Widodo has also backed the apps. Jakarta police estimated that up to 6,000 drivers were involved in Tuesday’s protest, and 6,000 police were out on the streets for the protest. It was the second anti-app protest by drivers in the space of a week, but the first was on a much smaller scale. There was little sympathy for the protesters among commuters caught in the rush-hour travel chaos in the heaving capital. “Must it be anarchy? This only scares passengers and makes them prefer app-based taxis,” said Twitter user Petricia Yuvita. And there was no sign that the government was ready to give in to the protesters’ demands. “You can’t defy technology, it just needs to be regulated,” said Vice President Jusuf Kalla. AFP
Coal
Australia’s New Hope sees Asia market bottoming out UBS analysts said they saw little chance of Japanese thermal coal contract prices improving for the 2016‑17 contract year. Sonali Paul
New Hope Corp, Australia’s top independent coal producer, sees signs the Asian thermal coal market has bottomed out, with prices expected to creep up over the medium term. New Hope said growing ship queues at the port of Newcastle were a positive signal, showing demand remained firm for Australian coal
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from power stations in Japan, South Korea and Taiwan. Managing Director Shane Stephan said that at the same time, growth in Australian thermal coal supply had tapered following a ramp-up over the past few years, when miners sought to maximise output to cut their costs per tonne as prices slumped. That has helped keep benchmark coal prices at Newcastle in the low US$50-a-tonne level for the past six to eight months, following a 60 percent slide since 2011. “It seems to have found - one hates to say a floor - but it seems to have stabilised around that level. We still believe in the medium term there will be some price improvement, but it is likely to be
moderate,” Stephan told Reuters in an interview yesterday. He said prices could rise “towards” US$60 a tonne, but declined to predict anything beyond that. UBS analysts said they saw little chance of Japanese thermal coal contract prices improving for the 2016-17 contract year, in face of ample supply and waning Chinese demand. “There is a wash of coal. China is retreating from the trade and their import level is dropping by over 30 percent per annum,” UBS analyst Glyn Lawcock said at a briefing in Sydney. New Hope, which also produces oil, yesterday reported a 56 percent slide in net profit before one-offs to A$15.0 million (US$11 million)
for the six months to January from A$34.2 million a year earlier, hit by weaker coal and oil prices. It is counting on cost cuts and expansion, with its recent A$850 million acquisition of Rio Tinto’s 40 percent stake in the Bengalla coal mine in the Hunter Valley, to spur growth. Stephan said the company was unlikely to chase further acquisitions for now, while it beds down the Bengalla purchase and fights green groups to secure a mining lease by September to keep its New Acland mine in Queensland open. “I’d never say no, but I think the focus of the company has now shifted very much to our existing operations and our joint venture interest in Bengalla,” he said. Reuters
Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Michael Armstrong; Óscar Guijarro; Kam Leong; Joanne Kuai; Bami Lio; Annie Lao; Kelsey Wilhelm Group Senior Analyst José I. Duarte Design Francisco Cordeiro Web & IT Janne Louhikari Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani 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. 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 E-mail newsdesk@macaubusinessdaily. com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com
Business Daily Wednesday, March 23 2016 13
Asia Bank of Japan
Lower house approves reflationist Sakurai for board The government nominee looks certain to be approved by the upper house today. Tetsushi Kajimoto
J
apan’s lower house of parliament gave its approval yesterday for academic and reflationist Makoto Sakurai to join the Bank of Japan’s (BOJ) divided policy board, a move seen as tipping the balance more in favour of Governor Haruhiko Kuroda’s push for radical stimulus. Sakurai, a think tank executive, would replace Sayuri Shirai, a former International Monetary Fund economist who voted against the BOJ’s decision in January to adopt negative interest rates. Shirai’s five-year term ends on March 31. Sakurai’s addition to the board and Shirai’s departure would ease pressure on Kuroda, who faced a 5-4 vote in January, when he pushed through a surprise decision to cut a bench mark interest rate below zero. “Kuroda has now likely secured six votes and won’t have to worry about his suggestions scraping through on a 5-to-4 vote,” said Takafumi Yamawaki, chief bond strategist at JP Morgan Securities in Tokyo. “BOJ policy will likely move forward with Kuroda’s opinion at the centre. Board members who can oppose the governor are decreasing,” he said. The government nominee looks certain to be approved by the upper house today, given the ruling
coalition’s solid majority in both chambers of parliament. Sakurai’s first policy-setting meeting will be on April 27-28, when the central bank will issue a quarterly report of its long-term economic and price projections. Etsuro Honda, a key economic adviser to Prime Minister Shinzo Abe, has said Sakurai would back Kuroda if the governor decides to ease again. “Sakurai is an aggressive reflationist and he would be a powerful supporter for Kuroda,” Honda told Reuters this month. “He has an unwavering conviction that deflation can be beaten by means of monetary policy.” Sakurai has ties with Abe aides Yale University professor Koichi Hamada and ruling party lawmaker Kozo Yamamoto - both of whom are architects of Abe’s stimulus programme and advocate bold monetary policy. Reuters
Key Points Sakurai seen close to Abe’s reflationist advisers Nomination to tip votes at board more in favour of Kuroda Upper house of parliament to endorse govt’s nominee
The move is seen as tipping the balance more in favour of Governor Haruhiko Kuroda’s push for radical stimulus
14 Business Daily Wednesday, March 23 2016
International In Brief Germany
Business confidence rises in March German business confidence rose in March as companies become less sceptical about the outlook for Europe’s biggest economy, the Ifo economic institute said yesterday. The Ifo institute’s closely-watched business climate index rose by a stronger-than-expected one point to 16.7 points in March, Ifo said in a statement. Ifo calculates its headline index on the basis of companies’ assessments of the current business environment and the outlook for the next six months. The sub-index measuring current business rose by 0.9 point to 113.8 points and the outlook sub-index climbed by 1.1 points to 100 points, the institute said. Oil
Petrobras posts record loss Brazil’s state-controlled oil company Petrobras posted its biggest-ever quarterly loss on Monday after booking a large write-down for oil fields and other assets as oil prices slumped and refinery projects faltered. Petróleo Brasileiro SA, as the company at the epicentre of Brazil’s massive corruption scandal is commonly known, had a consolidated net loss of 36.9 billion reais (US$10.2 billion) in the fourth quarter, according to a securities filing. The bigger-than-expected shortfall was 48 percent larger than the 26.6 billion-real loss a year earlier, the previous record.
Eurozone
ECB says banks’ provisions vs bad loans “reasonable” Fears the euro zone’s top banking watchdog might impose higher provisions contributed to a slump in shares earlier this year. Francesco Canepa and John O’Donnell
P
rovisions against bad loans at euro zone banks are “reasonable”, the European Central Bank’s head of supervision said yesterday, adding a planned clean-up of lenders’ balance sheets would take into account their difficulties. The ECB has made tackling non-performing loans, which are curbing a recovery in lending, one of its priorities for 2016 and launched a review of how banks should deal with bad debt. Fears the euro zone’s top banking watchdog might impose higher provisions or losses on soured bank credit contributed to a slump in euro zone banking shares earlier this year, particularly in countries where the level of bad loans is higher, such as Italy.
The ECB’s chief supervisor, Daniele Nouy, appeared to address some of these concerns yesterday by saying provision levels were already “reasonable” and the clean-up would take place over a long time and take into account the challenges banks are facing. “We have provisioned to a reasonable level these non-performing exposures and this is giving us a very solid ground to ... address the issues,” Nouy told the European Parliament’s economic committee in Brussels. “We definitely take into account the difficulties of the situation but it’s something totally achievable.” She dismissed, however, the notion of a generalised write-off of bad loans, arguing it may be ineffective and set a dangerous precedent. “Should there be a major write off? I’m sceptical about that because I don’t believe that a single tool can address different situations,” Nouy said. “It goes against the establishment of a sound culture, which is ‘you repay your loans’.” The ECB has developed individual plans with banks to tackle loans at risk of non-payment, Nouy said in her opening statement, adding she expected progress in the coming years.
“The ECB has worked extensively with banks ... to develop individual ... action plans,” Nouy said. “While it will take some time to bring down bad loan stocks, good progress over the next few years can be expected.” Nouy also reiterated her concerns that low interest rates may erode profits at some banks, limiting their ability to generate capital. The ECB cut its three main rates to new record lows earlier this month. “Low profitability is a concern for supervisors because it may impact the medium-term sustainability of some business models,” Nouy said. “ C e rtai n i n sti t u ti o n s m i ght struggle to generate capital while having limited access to financial markets.” Nouy’s hearing was briefly suspended following explosions at Brussels airport, which killed 13 people, and a further blast at a metro station in the Belgian capital shortly afterwards. Reuters
Key Points Bank provisions against bad loans are reasonable - Nouy Clean-up to take time, consider difficulties
Tourism
Thomas Cook holiday demand falls British holiday company Thomas Cook said customers were delaying booking holidays, uncertain of making plans as they see previously popular destinations such as Turkey as less safe. Thomas Cook said bookings for the summer period, when it makes all its profit, were 5 percent lower than last year as customers organised their trips later, continuing a pattern it highlighted in February. Shares in Europe’s second largest holiday company fell as much as 7 percent to reach their lowest level for three years, on a day when all travel stocks fell on news of two explosions in Brussels.
Public Protector seeks funds to investigate President
Gas
Zuma got the backing of his party at a three-day summit this weekend.
BG Egypt has suspended work at some development projects in Egypt after the company was unable to reach agreement over the price of gas with the government, an official at the Egyptian General Petroleum Corp (EGPC) told Reuters yesterday. “BG has stopped work at 9A+ and 9B after failure to reach an agreement on the fixed price to be paid for extracted gas, and it withdrew rigs working on the 9A+ wells on the seventh of March,” the EGPC official said.
South Africa’s Public Protector, the nation’s top anti-corruption watchdog, will approach the national treasury for funds to investigate President Jacob Zuma’s relationship with the wealthy Gupta family, Beeld newspaper reported yesterday. Thuli Madonsela, whose term as Public Protector expires in October, was quoted as saying her office was bound by law to look into a complaint lodged last week by the Democratic Alliance (DA), an opposition party. But the watchdog’s budget has been cut ever since an investigation into a 250 million rand (US$16.44 million) state-funded security upgrade to Zuma’s private residence, Beeld reported. “We want to ask the treasury for a special fund for our special
BG Egypt suspends some development wells
European Central Bank’s chief supervisor, Daniele Nouy
South Africa
investigations. Then we can appoint a team of external forensic investigators and conclude the investigation quicker,” Madonsela was quoted as saying. Zuma, who last month offered to foot part of the bill for the improvements, is facing calls for his resignation after deputy finance minister Mcebisi Jonas said last week he was in December offered his boss’s job by the Gupta family. In the past week, other senior officials have also accused the Gupta family of wielding undue influence in government activities. The Guptas, whose businesses stretch from media to mining, have denied offering government jobs and say they are pawns in a plot to oust Zuma. Zuma got the backing of his party
at a three-day summit this weekend. Zuma sacked finance minister Nhlanhla Nene in December and appointed a junior politician with no record of national financial management to the post, before rapidly backtracking and summoning past finance minister Pravin Gordhan a few days later. The DA is asking Madonsela to investigate, among other things, whether Zuma used his influence to benefit the Gupta family. Madonsela, who said her office would contact treasury soon, sees the investigation lasting between two and six months if the extra funding is secured. Madonsela’s office did not immediately respond to calls for comment. Reuters
Business Daily Wednesday, March 23 2016 15
Opinion Business Wires
BANGKOK POST Mortgage competition is heating up with banks racing to offer lower interest rates for the first three years to attract homebuyers. The race to win new customers comes before lower interest rates from the government’s property stimulus measures expire next month. Average rates from mortgage lenders for the first three years have fallen to 3.5-3.6% from 3.8-3.9% as the property stimulus package announced late last year comes to an end. The rate cuts have been enacted mostly by large and mid-sized lenders.
Today, young people face job insecurity throughout their lives.
The new generation gap THE TIMES OF INDIA Rating agency ICRA on Monday projected Indian economic growth to improve to 7.7 per cent in next fiscal, led by domestic consumption demand on the back of implementation of 7th Pay Commission and OROP recommendations. The agency, in its Macroeconomic Update, however, said that although the fresh project pipeline appears robust, commencement of work will lag announcements, given moderate capacity utilisation in some sectors. Indian economy is estimated to have grown 7.6 per cent in current fiscal. As per official projection, growth is likely to be between 7-7.75 per cent in 2016-17.
THE KOREA HERALD More than half the online consumers in Seoul used mobile phones to shop in 2015, according to a poll. Government data showed that 66.7 percent of online consumers said they used smartphones for shopping. The figure reflects a 20-percentage point jump from the previous year. The data was based on a survey conducted by the Ministry of Science, ICT and Future Planning on people aged 12 or older in 2,973 households in Seoul. Last year, 46.4 percent of people used mobile devices including phones for shopping, increasing from 28.9 and 35.5 percent in 2012 and 2013, respectively.
THE JAKARTA POST Indonesian courier companies on Monday expressed their optimism over the future of their business amid the ASEAN single market, citing a number of barriers to entry that will temporarily stop overseas companies from entering the country’s logistics industry. The Express Couriers Association of Indonesia (Asperindo) said the launch of the ASEAN Economic Community (AEC) late last year did not pose a major threat to local courier companies, as they were ready to cooperate with each other to improve services and expand operation networks across the archipelago.
S
omething interesting has emerged in voting patterns on both sides of the Atlantic: Young people are voting in ways that are markedly different from their elders. A great divide appears to have opened up, based not so much on income, education, or gender as on the voters’ generation. There are good reasons for this divide. The lives of both old and young, as they are now lived, are different. Their pasts are different, and so are their prospects. The Cold War, for example, was over even before some were born and while others were still children. Words like socialism do not convey the meaning they once did. If socialism means creating a society where shared concerns are not given short shrift – where people care about other people and the environment in which they live – so be it. Yes, there may have been failed experiments under that rubric a quarter- or half-century ago; but today’s experiments bear no resemblance to those of the past. So the failure of those past experiments says nothing about the new ones. Older upper-middle-class Americans and Europeans have had a good life. When they entered the labour force, well-compensated jobs were waiting for them. The question they asked was what they wanted to do, not how long they would have to live with their parents before they got a job that enabled them to move out. That generation expected to have job security, to marry young, to buy a house – perhaps a summer house, too – and finally retire with reasonable security. Overall, they expected to be better off than their parents. While today’s older generation encountered bumps along the way, for the most part, their expectations were met. They may have made more on capital gains on their homes than from working. They almost surely found that strange, but they willingly accepted the gift of our speculative markets, and often gave themselves credit for buying in the right place at the right time. Today, the expectations of young people, wherever they are in the income distribution, are the opposite. They face job insecurity throughout their lives. On average, many college graduates will search for months before they find a job – often only after having taken one or two unpaid internships. And they count themselves lucky, because they know that their poorer counterparts, some of whom did better in school, cannot afford to spend a year or two without income, and do not have the connections to get an internship in the first place. Today’s young university graduates are burdened with debt – the poorer they are, the more they owe. So they do not ask what job they would like; they simply ask what job will enable them to pay their college loans, which often will burden them for 20 years or more. Likewise, buying a home is a distant dream. These struggles mean that young people are not thinking much about retirement. If they did, they would only be frightened by how much they will need to accumulate to live a decent life (beyond bare social security), given the likely persistence of rock-bottom interest rates.
Joseph E. Stiglitz Nobel laureate in Economics, is University Professor at Columbia University and Chief Economist of the Roosevelt Institute
In short, today’s young people view the world through the lens of intergenerational fairness. The children of the upper middle class may do well in the end, because they will inherit wealth from their parents. While they may not like this kind of dependence, they dislike even more the alternative: a “fresh start” in which the cards are stacked against their attainment of anything approaching what was once viewed as a basic middle-class lifestyle. These inequities cannot easily be explained away. It isn’t as if these young people didn’t work hard: these hardships affect those who spent long hours studying, excelled in school, and did everything “right.” The sense of social injustice – that the economic game is rigged – is enhanced as they see the bankers who brought on the financial crisis, the cause of the economy’s continuing malaise, walk away with mega-bonuses, with almost no one being held accountable for their wrongdoing. Massive fraud was committed, but somehow, no one actually perpetrated it. Political elites promised that “reforms” would bring unprecedented prosperity. And they did, but only for the top 1%. Everyone else, including the young, got unprecedented insecurity. These three realities – social injustice on an unprecedented scale, massive inequities, and a loss of trust in elites – define our political moment, and rightly so. More of the same is not an answer. That is why the centre-left and centre-right parties in Europe are losing. America is in a strange position: while the Republican presidential candidates compete on demagoguery, with ill-thought-through proposals that would make matters worse, both of the Democratic candidates are proposing changes which – if they could only get them through Congress – would make a real difference. Were the reforms put forward by Hillary Clinton or Bernie Sanders adopted, the financial system’s ability to prey on those already leading a precarious life would be curbed. And both have proposals for deep reforms that would change how America finances higher education. But more needs to be done to make home ownership possible not just for those with parents who can give them a down payment, and to make retirement security possible, given the vagaries of the stock market and the near-zero-interest world we have entered. Most important, the young will not find a smooth path into the job market unless the economy is performing much better. The “official” unemployment rate in the United States, at 4.9%, masks much higher levels of disguised unemployment, which, at the very least, are holding down wages. But we won’t be able to fix the problem if we don’t recognize it. Our young do. They perceive the absence of intergenerational justice, and they are right to be angry. Project Syndicate
“These three realities – social injustice on an unprecedented scale, massive inequities, and a loss of trust in elites – define our political moment, and rightly so”
16 Business Daily Wednesday, March 23 2016
Closing BRICS
India to hold summit in October in Goa ministerial, senior officials, working groups, India’s External Affairs Minister Sushma Swaraj yesterday said the upcoming BRICS summit will be held in its western state of Goa in October. “The 8th BRICS summit would be organised in Goa on 15-16 October this year,” Swaraj said. A statement issued by India’s foreign ministry said India assumed BRICS chairmanship from the Russian Federation for the year 2016. “Over fifty meetings and events, at the
technical, and track-II levels, are proposed to be organised during India’s BRICS chairmanship through the year,” the statement said. Swaraj unveiled the BRICS logo for the duration of India’s BRICS chairmanship and launched India’s BRICS website. The last BRICS summit was held in the Russian city of Ufa in July 2015. BRICS is an association of five countries Brazil, Russia, India, China and South Africa. Xinhua
Art Market
New York auctions paint sombre picture of Chinese buyers The Chinese art market domestically fell 23 percent in 2015 to around US$11.8 billion. Elizabeth Dilts
A
long with oil, stocks and steel, China’s roiling economic slowdown has deflated the buoyancy of another sector: the Asian Art market. Wealthy Chinese art collectors had driven art sales skyward in recent years for Chinese and Western art, such as the Modigliani nude that was bought by an anonymous Chinese buyer last year for US$170.4 million, the second highest price ever paid at auction. But at New York’s Asia Week, 10 days of auctions and gallery tours held in mid-March that are considered a barometer for the Asian art market, Sotheby’s reported that aggregate sales slumped to the lowest since 2013. Christie’s International reported sales of US$37 million, less than a quarter of the US$161 million sold during the same week in 2015, and a handful of auctions at both houses failed to sell 30-40 percent of pieces, according to press releases. “Things were in a heated upward spiral for some time and there’s no question it has come off the boil,” said John Berwald, whose London-based gallery, Berwald Oriental Art, sold one of the eight pieces of late 17th century Chinese porcelain it exhibited during Asia Week. Art Week’s sales last year surged in part because of demand for a rare private collection sold by Christie’s. However, the dip in this year’s sales mirror a global trend. The Chinese art market domestically fell 23 percent in 2015 to around US$11.8 billion, with art sales falling 7 percent worldwide, according to the 2016 TEFAF Art Market Report, published by the Dublin-based research and consulting firm Arts Economics.
Good ‘not so long ago’ times in art auctions.
Chinese art collectors command 19 percent of the art market, and auction sales for perennial favourites like Chinese classical paintings and calligraphy sold well despite the downward trend, said Jonathan Stone, Christie’s chairman and international head of Asian Art. “There isn’t a shortage of buyers” for prized items, Stone said. But buyers sat on their hands during auctions for less mainstream art like snuff bottles, some ceramics and furniture. Tighter budgets, even for billionaires, made Chinese buyers more
“Things were in a heated upward spiral for some time and there’s no question it has come off the boil” John Berwald, Berwald Oriental Art gallery owner
selective, said James Lally, whose New York gallery J. J. Lally & Co. exhibited 75 pieces of Chinese jade. Lally sold about 80 percent of the jade collection, with buyers from China purchasing about 40 percent of the items, including a jade necklace from the Zhou Dynasty that went for a sum in the low six figures. “It’s come back down to Earth,” said Lally. “After two to three decades of euphoria, we have a much more mature market where people are indeed more price-sensitive.” Reuters
Oil
Forex
Vietnam
Iran invited to talks on output freeze
Beijing considers Tobin tax to contain capital outflows
Prime Minister admits increasing debt pressure
Qatar said yesterday that it has invited Iran to join talks among the world’s top oil producers next month on implementing a proposed output freeze to stabilise plummeting prices. The Qatari energy ministry said all 13 OPEC members including Iran had been invited to the April 17 talks in Doha with key non-cartel producers including Russia. Russian Energy Minister Alexander Novak said last week that Iran had indicated it was “ready to participate” despite its demand for an exemption from the freeze to allow it to boost its exports after its return to international markets following the lifting of Western sanctions. The prospect of an Iranian exemption has kept world crude prices under pressure, despite the increase in Iranian output so far being more than outweighed by a sharp fall in production by other OPEC members, notably Iraq. Next month’s meeting in Doha is a follow-up to talks last month between Qatar, Russia, Saudi Arabia and Venezuela in which they first mooted the output freeze. AFP
China is studying a Tobin tax as a possible policy tool to curb capital outflows, an official at the country’s foreign exchange regulator said yesterday, even though he added that such flows have eased in recent months. Wang Yungui, head of the policy and regulation department at China’s State Administration of Foreign Exchange, did not mention a time frame or other details about when such a tax might be rolled out in the world’s second largest economy. “We would not exclude the possibility of implementing a Tobin tax in the future to curb the pace of short-term capital flows. And we will continue to study it,” he said. The comments followed similar remarks from a deputy governor of the People’s Bank of China, who said on March 19 that a Tobin tax is still an “academic subject”. Chinese officials have floated the idea of the Tobin tax, a scheme to penalise short-term currency speculators that was first proposed by Nobel prize-winning American economist James Tobin in 1972. Reuters
“Public debt has been increasing quickly, payment pressure remains high, while managing and using loans at several projects have been ineffective,” said Vietnamese Prime Minister (PM) Nguyen Tan Dung yesterday. The remarks were made by Dung while presenting a report on the work of Vietnamese government and Prime Minister in 2011-2016 tenure at the on-going 11th session of the 13th National Assembly in Vietnam’s capital Hanoi. According to the report’s statistics, Vietnam’s public debt-to-GDP ratio as of the end of 2015 was 62.2 percent. Earlier statistics showed that as of the end of 2013, the figure stayed at 54.2 percent. The report presented by Dung also reads that during the 2011-2016 tenure, the government and PM have strengthened management and uses of loans and controlled public debt within stipulated limit. A resolution adopted by Vietnamese parliament in 2013 regulated that the proportion of public debt must not exceed 65 percent of GDP as of the end of 2015. Xinhua