Macau Business Daily April 13, 2016 by Business Daily

Anzac Day Observance in Macau Mon, 25 April 2016 │ 7:30am - 9am │ MGM Macau

ay zac D

Followed by Gunfire Breakfast from 8am

Car sales in Mainland surge 8.8 per cent year-on-year Auto industry Page 9

Wednesday, April 13 2016 Year V Nr. 1021 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Government

Gov’t to increase information disclosure regarding international trips Page 2

Retail

Chow Tai Fook sales revenue in the SARs registers 26 pct y-o-y slump in Q1 Page 4

www.macaubusinessdaily.com

Transportation

Sale of special licence plates generates MOP6.92 million Page 2

Markets

Volatility in China gradually vanishes after stabilization data Page 8

Open and shut case, says Chui Education A MOP5.9 mln service contract for primary school textbooks. Awarded by the gov’t, without tender, to Macau Association for Promotion of Science and Technology. Legislator Jose Chui Sai Peng – head of the Association and cousin of Chief Executive Fernando Chui Sai On – refutes accusations of influence peddling. Page 3

Moderating downward trend GDP forecast Economists polled in a private survey indicate GDP in China will maintain a downward trajectory. However, a recent batch of positive data encourages thinking that gov’t measures are achieving the desired effects. Page 16

F+B A growing trend for healthy eating in Macau. Generating a variety of models and focuses in the SAR. From take-away stores to online crossovers, the market continues to grow.

+4.26%

China Merchants Holdings

+3.28%

Tingyi Cayman Islands

+3.17%

Lenovo Group Ltd

+2.72%

Want Want China Hold-

+2.26%

Belle International Hold-

+2.23%

HSBC Holdings PLC

-0.54%

China Overseas Land &

-0.62%

China Unicom Hong Kong

-1.01%

China Resources Land Ltd

-1.20%

CK Hutchison Holdings Ltd

-1.36%

Cheung Kong Property

-1.58%

22° 25° 22° 24° 22° 24° 23° 26° 20° 26° Today

Thu

Fri

With local awareness stoked and products diversified to fill the niche. While the usual suspects of rent and scarce labour hold business back. Page 5

A lot on their plate Changing perceptions. Taxi licences should not be viewed as ‘investment tools’, says gov’t. Thus, the highest bid at auction for a taxi licence plate will no longer guarantee success. New taxi regulations will tighten criteria – for companies and qualified individuals. Taxis Page 3

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Sat

Sun

Source: AccuWeather

Macau Diversifies Its Eating Habits

China Shenhua Energy

Source: Bloomberg

HK HSI April 12, 2016 0,504.44 +63.63 (0.31%)

2 Business Daily Wednesday, April 13 2016

Macau

Government Policy

Government to optimise disclosure on information

n order to inform local residents about policymaking and government actions internationally, and engage the community in discussions on these topics in relevant areas, the Macau

SAR Government intends to publicise work reports on political trips outside of the MSAR and for other inspections and seminars conducted outside of the SAR, according to Kou Peng Kuan, Director of the Public Administration

and Civil Service Bureau (SAFP). The measure is expected to be initiated in the second half of this year, allowing the public access to the reports - through a webpage dedicated for this purpose, according to Mr. Kou. This is part of the government’s efforts to enhance transparency and improve the dissemination of information, said the SAFP director in a reply to legislator Ella Lei Cheng I.

Public opinion costs public money

The legislator filed a written enquiry questioning why the government was spending huge amounts of public

money in conducting surveys and public opinion polls and outsourcing such projects to other organisations. According to a report released by the Audit Commission earlier this year 65 government departments have spent more than MOP1.4 billion (US$175.3 million) on 1,514 outsourcing projects on consultancy, research, surveys or studies of a similar nature during the period beginning January 2010 and ending in June 2013. The legislator questioned the necessity of such research and urged the government to make the results of the studies public - as they should be a part of public resources. The SAFP director says that the government has already begun research on the release of government information and expects to finish the analysis on the laws and regulations on the release of government information in order to improve this function and service. J.K.

Transportation Sales of special licence plates plunge

Less expensive to be lucky on the road A licence plate with four ‘lucky eights’ - once worth over a MOP1 million - now costs MOP400,100. The government’s latest sale of ‘special car licence plates’ has only managed to rake in MOP6.92 million (US$865 million), a decline of 41.3 per cent compared to the registered sales of MOP11.8 million just one year ago. This is largely due to the value of the ‘luckiest plate number’ halving. On Monday, the Transport Bureau (DSAT) announced the bid results for 281 special licence plates that are all prefixed by MU. A total of 340 bids were made for these plates, down 45 per cent compared to 619 bids during the same period of last year. These 281 licence numbers were categorised by four groups+ namely, A, B, C and D, with the lowest bid price at MOP100,000, MOP80,000, MOP50,000 and MOP20,000 per category, respectively. The highest bid of MOP400,100 was made for licence plate MU-88-88 5n Group A. This represented a reduction in the offered amount of 64 per cent year-on-year compared to the price offered and paid for MT-88-88 of MOP1.11 million just one year ago. The number ‘8’ has always been perceived as a lucky number in Chinese culture due to its pronunciation

being similar to a character meaning ‘wealth’ or ‘amassing fortune’ in both Cantonese and Mandarin. Meanwhile, the other two license plates in Group A - MU-6666 and MU-99-99 - were sold at MOP398,000 and MOP381,688 on Monday, respectively. This equates to the total turnover of number plates in Group A accounting for 17 per cent of the MOP6.92 million total. In Group B, MU-82-28 was sold for a highest bid of MOP132,800. In Cantonese, the number ‘2’ is a pun on the character meaning easy. Hence, ‘82’ and ‘28’ can be implied to mean: ‘to easily be wealthy.’ In addition, the highest bid in Group C was made for MU77-77 at MOP202,727, followed by that for the MU-68-88 plate at MOP181,000 and plate MU-82-82 at MOP138,888. The acting head of DSAT’s Vehicles Division, Chan Io Fai, explained to Chinese language newspaper Macao Daily on Monday that the notable drop in the sales of special licence plates was driven by the decrease in local demand, coupled with the government’s tightened policies to control the number of vehicles and lack of parking space in the city. K.L.

Business Daily Wednesday, April 13 2016 3

Macau Taxis Government says taxi licence is not an investment tool

Licence bidding criteria to change Revised taxi regulations draft is expected to be handed to the Legislative Assembly this month. Joanne Kuai joannekuai@macaubusinessdaly.com

he highest bid in an auction for a taxi licence plate will no longer be a guarantee of success, according to legislator Chan Meng Kam, president of the Public Affairs Follow Up Committee of the Legislative Assembly, after a closed-door meeting with government representatives yesterday morning on the revision of taxi regulations, according to public broadcaster TDM Chinese Radio’s report. The legislator indicated that the government representatives said that in the instance of the last auction for the 250 taxi licences - valid for eightyears – secured by those who offered the best price it “would probably be the last time”. In future, it’s expected that bidding processes for taxi licences shall be held for companies and individuals. In the case of companies bidding price will only be one of the factors to be considered among other criteria; for individuals, there will be minimum requirements, such as limiting participation in bids to taxi drivers with years of experience. “The government representatives said they hope that in the future taxi [licences] will not be regarded as an investment tool,” said legislator Chan Meng Kam, president of the committee. “The government is inclined to have taxis managed by companies in order to enhance the regulations so as to improve service quality.” Mr. Chan said that according to the data provided by the government, in the first quarter of this year 1,277 taxi violation cases were logged by the Public Security Police Force (PSP). Although the total number amounts to a yearon-year decline, the number of cases of overcharging and refusing to take passengers both registered increases.

According to the latest available data from PSP, in the first three months of this year there were 416 cases of overcharging and 472 cases of taxi drivers refusing to take passengers.

Simplify procedure

The revision of the regulation on taxis also aims at reducing bureaucratic tape in order to make inspection and prosecution easier. The government said that such revisions are all made in the hope of improving the taxi services. “One of the main goals of the new regulation is to simplify administrative procedures,” said Lam Hin San, Director of the Transport Bureau (DSAT). “The new draft will quicken the prosecution and fining process and hopefully speed up the whole process.” With regard to the newly drafted clause in the regulations that say taxi drivers will have their licence suspended when accumulating four violation instances in one year, the DSAT Director said that he believes four to be an appropriate number. Mr. Lam added that last year around 100 taxi drivers or licence holders violated taxi regulations four times within the year, while around 40 breached the regulations eight times in the year. He added that the revised draft will be submitted to the Legislative Assembly this month.

“One of the main goals of the new regulations is to simplify administrative procedures.” Lam Hin San, Director of the Transport Bureau

Education Chui Sai Peng’s Association awarded MOP6 mln contract to compile textbooks

Chui Sai On denies conflict of interest DSEJ says commission of local organisations necessary as no reputable publisher willing to compile textbooks for Macau due to market size constraints. Chief Executive Fernando Chui Sai On denies influence peddling in a contract involving millions of patacas awarded to an association headed by his cousin Chui Sai Peng. This follows a dispatch signed by the Chief Executive published in this week’s Official Gazette. The government has granted the Macau Association for Promotion of Science and Technology, headed by legislator Jose Chui Sai Peng, a MOP5.9 million service contract to compile general knowledge teaching materials for the city’s primary schools. According to the dispatch signed by Chief Executive Fernando Chui Sai On, the government will pay the

millions to the Association over the next two years. The public has expressed concern that such a contract was granted without a public tender, and was instead directly granted to the Association headed by Jose Chui, a cousin of the Chief Executive. “As the Education Affairs Bureau’s statement indicated, the grant of such a service doesn’t necessarily need to go through the Chief Executive. It’s only because the payment has to be made in two instalments in two years that I have to sign it according to Public Finance Management Regulations,” Chief Executive Chui Sai On told reporters on the sidelines of a public event yesterday afternoon. He stressed that everything was done in accordance with the law and that he would recuse himself whenever there were potential conflicts of interest involved. Jose Chui Sai Peng also denies such an accusation.

Education first

“Compiling textbooks is very important. It’s more like an obligation. There is no conflict of interest, rest assured,” said Jose Chui, as reported by Chinese public broadcaster TDM Radio. Jose Chui added that textbook compilation is a matter concerning Macau’s next generation and that his Association attaches great importance to the matter. The Association says it will invite experts from Mainland China, and scientists from overseas to contribute in order to make the textbooks more educational and creative so that teachers are more willing to use the materials and students are

more interested in learning. In a statement issued by the Education and Youth Affairs Bureau (DSEJ) yesterday, the Bureau said that Macau’s textbook market is rather small, hence it cannot attract reputable publishers to draft textbooks on different subjects for Macau. The DSEJ says that they’ve commissioned other local organisations in similar assignments before and that the feedback has been positive. It says that the Association involved this time has great scholars and frontline

educators and is familiar with Macau’s society and the city’s education sector, hence it has assigned the organisation the task and believes it will undertake the job accordingly. The director of the DSEJ also indicated yesterday that schools in Macau have autonomy in choosing textbooks and that there are no orders from authorities for them to choose any specific materials, but they believe that teachers can always make use of more diversified materials to prepare their curricula. J.K.

4 Business Daily Wednesday, April 13 2016

Macau Opinion

José I. Duarte

Missing meaning Lately, the expression ‘new normal’ has often been repeated, referring to the present (and future?) situation of the Macau economy. The expression has, in fact, become a cliché. In a way, it mimics the popularity of the same expression, so often used also to allude to the new conditions prevailing in the Mainland economy. What we find less often are people explaining what, in practice, are the most prominent features of the so-called ‘new normal’, and their consequences? What is it that is ‘normal’ or about to become ‘normal’ about them? The expression is overused possibly more as a means of protection than as an attempt at an explanation. By repetition and diffusion, like any good cliché, it allows people to talk about something as if they all understood what was going on and that knowledge was widely shared. So, no-one has to admit that perhaps, just perhaps, we are sailing mostly uncharted waters (another cliché!) and trying to find a sense of direction as we go along. I still have to find a convincing description of what the ‘new normal’ is supposed to be for Macau (or for China, for that matter). Let us look at what is happening with new investments in Cotai. Regularly, we are informed of delays relating to this or that project. Most of the time, they are minor delays, a few months or so. But they can become big, if a small delay follows another, and then another. Sometimes pain is delivered in small instalments. Repetition builds tolerance. We can surely say that delays are not uncommon in big investment projects; they may even be considered a regular feature, at least in some places or under some fairly common conditions. That does not mean they are irrelevant, or that their causes should be dismissed as unimportant. Almost surprisingly, however, we seldom get a clear explanation about the factors behind the delays. The operators, we have to assume, designed their plans for a different political and economic framework. ‘Build and they will come’, ‘the sky is the limit’, and so on does anyone still remember? We could assume that deep reviews of investment plans and cash flows are and have been under way. Yet, nobody’s telling, and nobody seems to be asking how they define their ‘new normal’. But I gather that would be of more than a passing interest to all of us. José I. Duarte is an economist and permanent contributor to this newspaper.

Retail

Chow Tai Fook sales weaken in Q1

how Tai Fook Jewellery Group Ltd. posted a yearon-year decrease of 26 per cent in its total retail sales value for the first three months of this year, driven by decreased sales in Hong Kong, Macau and Mainland China, it announced in a filing with the Hong Kong Stock Exchange yesterday. According to the notice, the company’s retail sales value in the two Special Administrative Regions registered a decline of 26 per cent compared to the same period last year, while retail sales in the Mainland

market also dropped by some 25 per cent year-on-year. Yesterday’s updated sales data of Chow Tai Fook does not disclose the exact sales revenue figures recorded during the quarter. Additionally the jeweller said its same store sales in Hong Kong and Macau had plunged by 27 per cent year-on-year in the first quarter of the year – due to a 22 per cent decrease in the sale of gem-set jewellery and a drop of 27 per cent in the sale of gold products. ‘[Same store sales growth] of Hong Kong and Macau continued to

be dragged [down] by the declining visitation of Mainland tourists to Hong Kong and weak local consumer sentiment in the regions, showing a further deterioration from last quarter,’ the company claimed. Meanwhile, the jeweller’s samestore sales in the Mainland fell by 25 per cent year-on-year during the period. It explained the drop in the region was due to the outflow of holiday consumption, as well as the weakening of consumer sentiment for luxury goods amid the slowdown of economic growth. K.L.

Retail

S. Culture’s local revenues dip in 2015 Hong Kong-listed footwear retailer S. Culture International Holdings Ltd. saw its revenues in Macau register a slight drop of 1.7 per cent year-on-year for 2015 causing the group to dip into the red during the year, according to its 2015 annual report released yesterday. Last year, the retailer’s sales in the Special Administrative Region totalled HK$13.2 million (US$1.65 million), which is marginally down by HK$0.2 million compared to HK$13.4 million registered for 2014. Currently, the retailer has two outlets in the city, located on Avenida de Horta e Costa and in The Venetian Macao, respectively. ‘The Group had maintained the

scale of operations in Macau to reap the highest return with the current level of investment amid the current level of economic conditions experienced in Macau,’ the company remarked in its report. For the year, the retailer posted a net loss of HK$16.4 million for 2015, compared to a net profit of HK$13.4 million recorded in 2014. In addition, its total retail revenues dropped 5.2 per cent year-on-year to HK$513.1 million, with same-store sales decreasing 6.6 per cent year-on-year. ‘This was mainly due to the prolonged sluggishness of the consumer market resulting from the declining spending sentiments of both inbound tourists and local citizens

under the prevailing economic and social conditions,’ the company said in the report. It identified the slowing economic growth of Mainland China, the appreciation of the Hong Kong dollar against the eenminbi, and the high volatility of the stock market - which had ‘further dampened the spending sentiments of general consumers’ – as the main catalysts for the low returns seen in the second half of 2015. Apart from its two stores in Macau, the Hong Kong-listed retailer had in operation 79 retail outlets in Hong Kong, 50 stores in Taiwan and another four in Mainland China as at the end of last year. K.L.

Corporate

Galaxy hosts Macau Association of the Hearing Impaired at Broadway Show

Galaxy Entertainment Group (GEG) invited 80 members and parents of the Macau Association of the Hearing Impaired to Viva La Broadway on Monday. Association social worker Mr. Ocean Chan thanked GEG for the invitation, saying: “Most of the members and parents came to the Broadway Theatre and experienced such a close-up performance for the first time. They hailed the show, especially the archer who demonstrated his expertise during the arrowshooting performance.” The show features dance troupes, vocal artists, a laser show, a mime performance and other elements. After the show the group posed for photos with the Viva La Broadway performers.

Design students go behind the scenes at Studio City A group of 26 lecturers and design major students led by Mr. Patrick Lei, Programme Co-ordinator of the School of Arts of the Macau Polytechnic Institute, went behind the scenes at Studio City. The group was briefed on the design, construction and operation of the Batman Dark Flight simulator as well as visiting the Event Centre, House of Magic and Golden Reel. Ms. Akiko Takahashi, Melco Crown Entertainment’s Executive Vice President and Chief Human Resources/Corporate Social Responsibility Officer, said: “Melco Crown Entertainment fully supports the Macau Government’s vision of diversifying the economy. We believe that introducing fascinating careers in the entertainment production [business] provides the people of Macau with a vision for future career choices.”

Business Daily Wednesday, April 13 2016 5

Macau Healthy food

Growing market for healthy eating Online food stores are becoming the new trend although small businesses are finding it hard to operate in Macau due to expensive rent and staff. Annie Lao annie.lao@macaubusinessdaily.com

he market for vegetarian eating and quality controlled health food has opened up recently in Macau, with a variety of sales and promotion models emerging to meet the growing demand. Business Daily took a bite out of the market to see what it tasted like.

Step 1: Raising awareness

In Macau, there aren’t many options to eat either vegetarian or quality-control healthy food and a market is opening up for vegetarian eateries to meet the demand, says Marisa Randles, owner of the Blissful Carrot, a local fusion organic vegetarian take-away eatery located in Taipa. Marisa says locals are willing to try vegetarian food but the concept of vegetarian eating is still new to many: “Hong Kong people seem to be a lot more into vegetarian food, they have a lot more exposure to this type of food, but for the local Macanese people I think it is more of a new concept for them”. Another healthy food concept Sattva Juicery – found similar difficulties in awareness in setting up their online-based healthy juice business. The juicer is run by sisters Mariana de Oliveira Dias and Maria Bárbara de Oliveira Dias who found that in the beginning selling the healthy eating idea to the public was not easy. However, by raising awareness of the advantages and by promoting a healthy eating lifestyle in Macau the sisters have enjoyed growing success since their August 2014 launch.

Step 2: Diverse offerings

A combination of both the online ordering model and physical shop space emerged in the form of McPherson’s Sweet’s Shoppe, located on Avenida de Almeida Ribeiro. The shop, which opened four years ago and initially sold ice cream and pork chop buns to tourists, has since diversified its offerings to include an online-order healthy lunch box delivery service named Obento-Fit. The shop was started in 2015 by shop owner Sayaka McPherson, who told Business Daily that the physical premises of McPherson’s Sweet’s Shoppe is for tourists only and that locals didn’t go there to buy the ice cream or port chop buns they offered. However, Sayaka sees a growing market for healthy eating options in Macau for locals. “Tourists don’t eat healthy food and the local people want something different from the tourists,”

she explained. Following the decline in the tourism industry, most of the shop’s major customers are working people, she says, with the lunch-box service the shop offers enabling customers to order up to one month in advance – while costing about MOP 60 per lunch box. According to Ms. McPherson, about 90 per cent of her customers are expats who order lunch boxes online, with only 10 per cent people from Macau, but this could be due to a language barrier, she says: “I would love to grow my business into the local market and I’m looking for a local partner who can help my business grow because I don’t speak Cantonese.”

Step 3: To rent or not to rent

The cost of maintaining a small business in Macau is expensive in terms of rental, as are supplies of healthy food from overseas, as well as staffing, Marisa told Business Daily. “There’s no price ceiling limits on increasing rental since rent doesn’t double or triple here - the rent can increase six-fold! We always see shops operating for three to six months before closing down”. To get around this varying cost, Sattva Juicery relies upon a pre-ordering online business model to minimise store costs. “We have an ordering cut-off time of 5:00 pm every day so we make our juice at our production location and the next day we deliver our juice to our customers between 6:00 pm and 8:00 pm,” Ms. Oliveira Dias said. This also cuts down on hiring staff to man a physical store during opening hours, something Blissful Carrot, given it’s location, must contend with. “[It’s] hard to hire staff and the government doesn’t give us enough blue cards we need so we cannot find enough local people to work for us. We’re still short of staff [and] that really holds us back to be able to do more things,” Marisa explained.

Middle ground

A place where all three of these business types come together is the local flea market organised by Blissful Carrot in partnership with the Grand Coloane Resort hotel. Having finished its fifth market last month the organisation is taking a break this month, having run every third Wednesday since November 18 last year. Marisa Randles is the main organiser of the market, and told Business Daily that the market will re-open again in August and September. The market helps support small local businesses by providing a platform to promote

“The best way [to succeed] is to have really good products so people are going to tell their friends.” Maria Bárbara de Oliveira Dias, Co-owner of Sattva Juicery

their healthy products to the local people. “The idea of the flea market was not about generating income, it’s more about gaining exposure for different healthy products we sell to people as well as bringing the community together”, according to the main organiser. Sattva Juicery also benefits from the market, as the co-owner told Business Daily. “In the beginning, the market was great because it was new for locals so a lot of people went there out of curiosity” Dias said. Participants in the market paid between MOP100 and MOP200 each month to have their stalls there, according to Ms. Dias, but location and weather didn’t always encourage visitation to the market, she noted.

“December was a cold month plus it was the Christmas holiday, so a lot of people went away on holiday; but it went up again in January. During Chinese New Year or rainy days, there were not a lot of people, so every month varied a little bit,” Ms. Dias said. “In March, we saw a lot of families coming because the weather was warmer and during winter we didn’t see a lot of young children out,” she added.

Other ways to market

Word of mouth is the most effective marketing tool for setting up an online healthy juice ordering business, according to Dias. “The best way is to have really good products so people are going to tell their friends,” she said. Apart from participating in the local market, sports events, catering to parties and delivering products to customers, Dias told Business Daily that they have been invited by a local university, Macao Polytechnic Institute (IMP), to join a forum for the Portuguese-speaking Countries around the world about the Portuguese Small and Medium Enterprises based in Macau to promote their business. “We will introduce to the countries our concept and effort in making Macau and beyond a healthier city,” she said.

6 Business Daily Wednesday, April 13 2016

Macau

Gaming

Muted growth Analysts expect April decline in gaming revenues to be slightly better than March. Joanne Kuai Joannekuai@macaubusinessdaily.com

acau’s gross gaming revenues are expected to continue their decline at a double digit pace according to gaming analysts. In March, Macau’s gross gaming revenue fell for the 22nd month in a row to MOP17.98 billion (US$2.25 billion), a 16.3 per cent drop year-on-year. Declines for April revenue are expected to be slightly better than their March counterpart, predicted to register approximately 13 per cent to 15

per cent compared to the same period last year, analyst Cameron McKnight of Wells Fargo Securities LLC opined in a note issued on Tuesday. Mr. McKnight said that their channel checks through the first 10 days of April suggest that the average daily revenue was around MOP550 million, a 5 per cent drop sequentially compared with March average daily revenues of MOP480 million, and a 14 per cent drop when compared to the same period of last year. This comes in spite of new supply growth. The Wells Fargo analyst pointed out that April’s five-year historical sequential growth trend is down 6 per cent month-on-month on average. The firm’s prediction for April implies daily revenues for the month reaching roughly MOP540 million to MOP560 million. The estimation is based on the ‘new normal’ – ‘a weak Chinese economy

and a recovery that is likely to be flatter than prior rebounds, contributing to more muted revenue growth in Macau,’ states the report.

Remain on the path

A double digit decline in April is also anticipated by analysts David Katz and Brian Davis of Telsey Advisory Group (TAG), but with a slightly more optimistic outlook. The group says that according to their industry sources Macau’s April gross gaming revenues are now tracking at a decline level of 10 per cent year-on-year. “This assumes an electronic game estimate for April, which puts monthly gross gaming revenues at HK$16.6 billion (MOP17.10 billion / US$2.14 billion),” said the TAG analysts. This would represent a 5 per cent decline month-on-month and a 10 per cent decline year-on-year. “ M i d w e e k f o o t t ra f f i c a n d

Gaming

New CSO

Imperial Pacific’s Saipan casino pulls in US$186 million in Q1 Hong Kong-listed casino operator Imperial Pacific International Holdings Ltd. has announced that its temporary casino on the Island of Saipan generated gross gaming revenues of US$186 million (HK$1.45 billion) during the first quarter of this year, of which 95 per cent was derived from high rollers. According to the company’s filing with the Hong Kong Stock Exchange on Monday, it raked in US$62.2 million on average each month throughout the quarter, a jump of 36 per cent compared to the monthly average of US$45.7 million

occupancy rates are generally in line with previous weeks and no reports of win or hold percentages having any significant influence. Although we concede that there are some less negative elements in market activity, we remain focused on significant growth in supply going forward and the demand necessary to support it, which is at the moment not evident,” the note issued on Tuesday reads. The analysts also pointed out that their discussion with company management teams suggest that there is “some actual improvement in mass play offset by declines in VIP, which provides for a positive profitability mix shift.” The TAG analysts indicated that declining comparisons will remain in the high 30 per cent range to low 30 per cent range year-on-year for the next five months with indications thus far for low double digit declines this year. Given the environment, the analysts maintain their 11.5 per cent year-on-year decline estimate for Macau’s gross gaming revenues for the whole year of 2016.

registered in November and December of last year. Of its total gaming revenue, US$176.9 million was earned from the VIP segment, whilst that generated by mass tables and slot machines amounted to US$7.96 million and US$1.8 million, respectively. The gaming operator’s VIP table games rolling chip turnover reached US$6.1 billion during the three months, or an average of US$2 billion per month, which represents a 30 per cent year-on-year increase compared to US$1.6 billion accrued during the last two months of 2015. The temporary casino of

the operator was officially launched last November after the group was granted a 25-year gaming concession on the island in August 2014 under its local unit Best Sunshine International Ltd. ‘The company is confident that it will continue to benefit from the trend of tourists exploring alternative gaming venues,’ it wrote in the filing. It expects the island’s visa-upon-arrival policy for Mainland Chinese will allow the company easy accessibility to Chinese visitors, in addition to those from Korea and Japan. As at the end of March, Imperial Pacific owned 16 VIP gaming tables, 32 mass tables and 109 slot machines and electronic tables games in the temporary casino, according to the filing. K.L.

WGG appoints Paul Lee as Chief Sales Officer World Gaming Group has appointed Paul Lee to the newly created position of Chief Sales Officer effective immediately, according to an announcement issued by the company yesterday. “In the next month you’ll see us launching two more major media channels. With all these new products we felt it was important to build out our Sales and Marketing departments and we’re delighted to have Paul join our Chief Marketing Officer Derrick Tran,” said World Gaming’s Chief Executive Officer, Andrew W. Scott, in the statement. “Both Derrick and Paul speak fluent

Cantonese, Mandarin and English and between them they have great networks in Macau, Hong Kong and Mainland China.” Mr. Lee said, “I’m very excited to take on the role of Chief Sales Officer of World Gaming Group. While the Macau economy is changing, I’m sure our new product will be the star of the industry and serve the community well. I look forward to the new challenge and exciting business opportunities in the future.” The company says that it will be making a major product announcement later in April.

Business Daily Wednesday, April 13 2016 7

Macau Tourism

Chinese tourists are turning Japanese

hina’s overseas tourism bonanza is starting to resemble the unleashing of Japanese visitors on the world following the yen’s appreciation in the mid-1980s. Except, unlike the Japanese boom that began to deflate with the economy in the 1990s, China’s outbound push -- already 120 million strong a year -- shows no signs of abating. A vast rural population still to urbanize and a rapidly expanding middle class will underpin a dramatic expansion of overseas travel, according to analysis by Natixis SA. In both the Japanese and Chinese cases, rising household wealth has been the catalyst for a shift in spending “to more sophisticated goods and services, with overseas tourism being one of the preferred ones,” Natixis economists led by Alicia Garcia Herrero wrote in a note. “A strong currency has also supported’’ this. Around half of China’s 1.38 billion people are classed as poor, with an annual income between zero and US$3,000, and most live in rural areas. The government wants to move an additional 81 million residents into urban zones by 2020, a policy set to further bolster demand for outbound travel. Similar to China, Japanese tourism took off as the middle class expanded

Mainland visitors to Macau

totaled 1,799,522 in February, down 5.2 per cent year-on-year, according to the most recent available data from the Statistics and Census Bureau (DSEC). Over 890,00 of these visitors came from the Guangdong province. Total visitation in the first two months by mainland Chinese equaled 3,458,156, a 3.1 per cent decrease year-on-year, according to DSEC data.

and incomes rose; the yen’s appreciated after the 1985 Plaza Accord accelerated the process. Trips to the U.S. were top of the list for the Japanese, with France the most popular European destination. But the bursting of Japan’s real estate and stock market bubbles that led to deflation and stagnation diminished the travel bug. Natixis points out that China’s bonanza is also no sure thing. A slowing economy, a turn away from travel abroad due to Europe’s refugee crisis and the threat of terrorism are among the risks, while China’s own aging population could also cool the

Retail Alibaba looks beyond China

Alibaba expands in Southeast Asia with US$1 billion Lazada deal Alibaba Group Holding Ltd. expanded its e-commerce footprint to fast-growing Southeast Asia with a US$1 billion deal for control of Lazada Group SA as it seeks more sales from beyond China. The company will pay US$500 million for new shares in the closely held company and also purchase stock from existing investors, Alibaba said in a statement Tuesday. Investors in Lazada to sell stakes include Rocket Internet SE, Tesco Plc and Investment AB Kinnevik . Billionaire Alibaba Chairman Jack Ma has set a goal of getting at least half the company’s revenue from overseas, with the Lazada deal adding sales of clothing and electronics in six Southeast Asian markets. While Alibaba has come to dominate e-commerce in its home market, it remains dependent on China for the vast majority of its business. “It has huge cash sitting on its balance sheet so it can do this

500 Million USD Alibaba to pay in new shares as well as purchasing stock from existing investors

kind of investment. It’s also seeking for some future growth drivers,” said Marie Sun, an analyst at Morningstar Investment Service. “It needs to find some other place for future growth.” The agreement values all of Lazada at US$1.5 billion, Rocket said in a separate statement.

Buying Its Way In

Founded in 2012 by Rocket, Lazada operates in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. Indonesia, where it competes with Tokopedia and MatahariMall, is Southeast Asia’s largest economy, with 256 million people. “Overseas expansion requires a lot of investment in logistics, it would take Alibaba much longer to build the business from the ground up,” said Li Yujie, an analyst with RHB Research Institute Sdn in Hong Kong. “What Alibaba could do is integrate the businesses and introduce more existing merchants to Lazada to export their products overseas.” The deal also includes options to buy out certain Lazada shareholders in a 12 to 18 month period after the deal closes, it said. Credit Suisse Group AG advised Alibaba and Goldman Sachs Group Inc. was financial adviser to Lazada. “With the investment in Lazada, Alibaba gains access to a platform with a large and growing consumer base outside China, a proven management team and a solid foundation,” Alibaba President Michael Evans said in the statement. Bloomberg

ardor to head abroad. But the push to expand Chinese cities suggests any slowdown is likely to be short lived, according to the economists. Where the Japanese roamed far and wide in the 1980s, China’s travelers have so far tended to remain closer to home, in Hong Kong and Macau. But that is changing. “We are already

starting to see Chinese tourism becoming increasingly interested in traveling further away,’’ the Natixis economists said. “The reality is that such growth starts from a large base given China’s massive population. Already now, the number of Chinese visitors to France is twice as large as Japan’s tourists.” Bloomberg

8 Business Daily Wednesday, April 13 2016

Greater China Stock markets

Mainland is no longer the epicentre of global volatility Signs of economic stabilization have helped buoy the nation’s financial assets.

hina’s investors are finally getting a chance to catch their breath. After turmoil in the

past year rattled global money managers and undermined confidence in the Communist Party’s grip on the nation’s financial markets, gauges of

volatility in the benchmark equity index and the yuan have fallen to the lowest levels since November. While increasing stability can be seen as a victory for the authorities, and a relief for international investors now fixated on turbulence in Japanese

markets and the upcoming U.S. earnings season, muted price swings aren’t translating into better trading conditions for local brokers amid suspected intervention by state-backed funds. “It’s difficult to make money from this market now as there are few opportunities to do good trades,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co. “The national team is also playing the strategy of ‘buying low and selling high’ to seek some price gaps for profit. That’s why volatility is so low. Fundamentally speaking, neither the economy nor corporate earnings are very impressive and we don’t see any catalysts.”

Price swings

Average moves of less than 0.4 percent in the Shanghai Composite Index in the past month are a far cry from last summer’s rout, when daily fluctuations exceeding 3 percent were the norm. A gauge of 30-day price swings on the gauge has declined to less than half the level reached in mid-February, while 10-day historical volatility is below that of Japan’s Topix measure. Signs of economic stabilization have also helped buoy the nation’s financial assets. The Shanghai Composite Index has rebounded 14 percent since a January low, paring its declines this year to 15 percent, while the yuan has

recovered its losses this year after tumbling to the weakest level since 2011. Factory-gate prices gained in March from the previous month for the first time since 2013, while central bank data last week showing an unexpected increase in foreign-exchange reserves. China’s exports probably rose 10 percent last month from a year earlier, according to a Bloomberg survey of economists before the figures are released today, while quarterly gross domestic product data will be announced Friday.

State intervention

Average daily turnover on China’s stock markets over the past 30 days is just a third of last year’s peak. The yuan dropped 0.1 percent in both onshore and offshore trading. Volatility in the nation’s currency is likely to remain subdued as long as the State Administration of Foreign Exchange stops the yuan from weakening, according to Wang. “The offshore yuan market has already shrunk to a pretty small scale after the government intervention,” Wang said. “Unless the government wants the yuan to depreciate, the market isn’t likely to have very big movements as most speculators have fled the market. The onshore market is under control of SAFE and now the government wants the yuan to be stable.” Bloomberg News

State investment

Health systems

Rail projects account for nearly half of infrastructure

Illegal ticket touts d

Local governments launched a large amount of public-private partnership projects in 2015 to finance infrastructure development. Transportation and municipal construction projects accounted for over half of China’s total infrastructure investment since 2015, according to a research report from an investment bank. Railway and metro systems accounted for 46 and 33 percent, respectively, of total planned investment among the infrastructure projects approved by the country’s top economic planner, the National Development and Reform Commission (NDRC), according to a report released by China International Capital Corporation Limited (CICC) on Monday. The NDRC sped up approval of infrastructure projects in September 2015 after conferring with China Development Bank and Agricultural Development Bank of China about introducing ten initiatives to promote infrastructure investment and stabilize economic growth. Since then, the NDRC has approved over 100 projects or plans to build transportation and metro systems with total investment of more than two trillion yuan (US$309.6 billion), the report said. Local governments launched a big amount of public-private partnership (PPP) projects in 2015 to finance infrastructure development. As of the end of February 2016, the PPP centre of the Ministry of Finance had compiled 7,110 PPP projects with total investment of 8.3 trillion yuan. Of those, 6,000 projects with total investment of 6.8 trillion yuan have been launched since 2015, according to the report.

The report showed that most PPP projects are still in the identification phase, accounting for 69% of total investment. Shandong, Guizhou, Yunnan, Sichuan and Henan are the five provinces with the largest amount of investment. No PPP projects had been initiated by the government of Shenzhen, which has a sound fiscal status. Accelerated project approval boosted growth of construction orders and newly started fixed asset investment (FAI) projects. According to the CICC industry research team, the value of infrastructure contracts signed by major central construction state owned enterprises (SOEs) grew 17.1 percent in 2015, much faster than the 2014 rate of 5.1 percent. The planned investment of newly started FAI projects announced by the National Bureau of Statistics has accelerated since the fourth quarter of 2015 and jumped 41 percent year on year in the first two months of this year. Infrastructure-led investment recovery benefited SOEs, whose FAI grew 20.2 percent year on year in the period from January to February, much faster than non-SOEs’ 5.7-percent growth, according to the report. CICC expects investment growth to recover in 2016 and the pace of infrastructure investment growth is likely to pick up with more projects to start. Meanwhile, FAI growth is expected to speed up, and accelerated investment growth will also help the economy bottom out. Xinhua

‘6,000 projects with total investment of 6.8 trillion yuan have been launched since 2015’

The street crime casts light on the scale of the challenge President Xi Jinping faces as he looks to overhaul a creaking and underfunded public health system. Adam Jourdan

s day breaks, hundreds of patients wait to see doctors in a queue that snakes around the Peking Union hospital in Beijing. Many will wait in vain - “scalpers” like Yu Wei have already illegally bought and sold appointment tickets for the day ahead. Yu, 32, makes a living touting the tickets that Chinese hospitals sell in advance for consultations. His tickets will get a patient in front of a doctor in two days, he says, compared with a wait that can be up to a fortnight. Dodging passing police patrols as part of his daily routine, Yu charges 850 yuan (US$131) for a “special care” appointment ticket - almost three times the face value. He told Reuters he keeps 200 yuan from each sale, with the rest of the profit going to hospital insiders who he said help him secure the tickets. “The city’s upper middle class are always willing to pay this amount or even higher - as long as they can get an appointment,” Yu said, speaking between frequent phone calls that he said came from would-be clients. In the background, other scalpers competed for custom, shouting out their prices. The street crime casts light on the scale of the challenge President Xi Jinping faces as he looks to overhaul a creaking and underfunded public health system to deliver on a promise of affordable and accessible care for all. In line with this drive, authorities

have tried to crack down on healthcare corruption and police say they have detained some 240 scalpers in Beijing alone this year. Many patients and doctors say, though, the timeserved practice is just a symptom of deeper issues: a dearth of doctors and low salaries meaning graft is endemic. “Scalpers are a real headache for us,” a spokeswoman for the Peking Union hospital surnamed Chen told Reuters by phone. “There’s a crackdown on them, but it’s a hard problem to cure.” The spokeswoman added the hospital and its doctors were victims of scalpers and were not involved in the practice.

Dozens of scalpers

A viral video earlier this year of a woman with her sick mother raging against scalpers brought a public outcry and calls for arrests and tough jail sentences.

Business Daily Wednesday, April 13 2016 9

Greater China Automotive Industry

Automakers association forecast vehicle sales to increase A government tax cut on small engine vehicles enacted in October that carries through the end of the year is continuing to lift sales. Vehicle sales in China are expected to grow 5 percent in the second quarter of 2016, China’s automakers association said yesterday, slowing slightly from the first three months of the year. The world’s largest auto market grew 6 percent in the first quarter from a year earlier, the China Association of Automobile Manufacturers (CAAM) told a briefing in Beijing. That was in line with the association’s overall target for the year. “For April, or even the second quarter, we are confident that the good performance from the first quarter will continue,” said Yao Jie, the association’s Deputy Secretary-General. The association is confident second quarter sales will be up 5 percent, he said. China’s market has entered a period of unprecedented uncertainty, analysts say, as the economy expanded at its slowest pace in 25 years in 2015. Car sales nearly contracted last year before snapping back thanks to a tax cut on small engine vehicles that extends until the end of 2016. In March, stronger demand for multi-purpose vehicles and commercial

vehicles sales contributed to the 8.8 percent rise in overall sales for the month, Yao said. March’s growth compares with a 0.9 percent year-on-year decrease in February, and a 7.7 percent rise in January. A government tax cut on small engine vehicles enacted in October that carries through the end of the year is continuing to lift sales, association officials said, with that segment growing 10.7 percent year-on-year last month. Growth in new energy vehicle sales, a bright spot throughout last year’s slowdown, fell drastically as it is unclear whether many local governments will renew subsidies this year. Sales of “new energy vehicles”, pure

Futures contracts

HKEx plans to launch Asian FX products The Hong Kong stock exchange plans to launch renminbi currency futures contracts against the Indonesian rupiah and the Malaysian ringgit in the coming months, its chief executive said yesterday. Charles Li told an industry event the exchange plans to launch the currency pairs “sometime in the coming months” without giving a specific time frame. There has been a growing push by the Hong Kong Exchanges and Clearing Ltd (HKEx), one of the top five exchanges in Asia, to diversify its revenue streams away from its traditional equity trading business because of weak stock markets. Fiscal measures

Tax reform to support economy

defy crackdown Authorities have promised to intensify their crackdown. But when Reuters visited hospitals in Shanghai and Beijing, dozens of scalpers operated in plain sight, loudly offering tickets for sale. A spokesman at the Beijing city health department said police needed to “strengthen” their efforts, and it would take some time to see any real results. China’s national health ministry did not immediately respond to requests for comment. Feng Jianqi, a police officer involved in leading the crackdown on scalpers in Beijing, said the police could not resolve the issue alone. Part of the problem was that so many patients wanted to see the same doctors, he said. “It’s just not realistic to totally eradicate scalpers. It’s just too hard,” he told Reuters by phone.

electric and plug-in hybrid cars, grew only 46 percent, the first time in at least a year CAAM has reported monthly growth of less than 100 percent in the segment. The association said last month that many local governments have delayed releasing new subsidy policies for green cars this year, and the subsequent uncertainty over whether subsidies would decrease or continue at the previous rate hurt sales. Local governments generally offer subsidies in addition to those given by the central government. Yao said yesterday he hopes to see more clarity in the new energy vehicle market and that he was satisfied with the increase in March. Reuters

In Brief

The problem is acute for patients like Cao Dongxian. The middle-aged school teacher travelled to Beijing in May last year from his home in Shandong province after local doctors refused to carry out a risky intestinal cancer operation.

Key Points ‘Scalpers’ buy up appointment tickets, re-sell at high fee Practice has stirred public anger, prompted crackdown Beijing police say over 240 scalpers detained this year But officials, doctors say issue hard to “cure” Headache for China in drive to reform nation’s healthcare

State insurance coverage is limited in China, meaning patients often have to pay a large part if healthcare costs themselves, especially those with major longterm diseases like cancer or diabetes. Keen to avoid paying scalpers, Cao spent months queuing in hospital lines for repeat tests before doctors eventually said his cancer needed an urgent operation. Cao was then told he would have to begin queuing again: this time for a hospital bed. “It was October by the time I got to have my operation ... more than four months,” Cao said. “On top of that your body’s in pain - it really hurts.”

‘Market price’

In hindsight, Cao said he wished he had gone to scalpers straight away. Doctors also appear resigned to the practice, as wealth spreads in China and patients accept the reality that paying more will bring speedier treatment. “(Basic) appointment fees don’t reflect the economic value of doctors’ skills and experience,” said Wu Yuan, an eye doctor at the Peking University First Hospital in Beijing. “Scalpers are simply selling the doctor’s appointment at a price the market is prepared to pay,” Wu said. He said the practice was routine but that he had no knowledge of any doctor involvement in ticket resales. Even as China’s hospitals suffer, the broader market for drugs and services is a lure for firms like e-commerce giant Alibaba Group Holding and hospital operator Phoenix Healthcare, attracted by a wider healthcare bill that is set to hit US$1.3 trillion by 2020. For patients like Cao or Zhang Pengyu, a 38-year-old realtor from the outskirts of Beijing, scalpers are source of frustration and anger, but sometimes a necessary evil. He waited unsuccessfully for three nights to see an ear, nose and throat doctor at Beijing Tongren Hospital. He finally gave in to scalpers, paying 3,000 yuan for a 10-minute appointment that should have cost just 200 yuan. “I wanted to queue myself and not pay so much money, but I just couldn’t wait any more. I didn’t have time,” said Zhang. Reuters

China’s value-added tax reforms will help support the economy and speed up structural adjustments, Vice Finance Minister Shi Yaobin said yesterday, playing down concerns such reforms could fan property speculation. China will replace a business tax with a value-added tax in its construction, real estate, financial and consumer services sectors, effective from May 1, and the government hopes to cut taxes by more than 500 billion yuan (US$77.32 billion) in 2016. “This will help stabilise economic growth...and also help improve economic structures,” Shi told a news conference. Forex

S.Korea agrees swap deal South Korea said it has agreed in principle with China to extend an existing bilateral currency swap deal worth 360 billion yuan (US$55.67 billion) before it expires next year, the finance ministry said in a statement yesterday. The agreement was made between South Korean Finance Minister Yoo Il-ho and People’s Bank of China (PBOC) Governor Zhou Xiaochuan on the sidelines of an annual board meeting of the InterAmerican Development Bank (IDB) in the Bahamas. A finance ministry official said the two officials had not met to specifically address the swap, but to discuss issues regarding the two countries in general. IT forum

Professionals discuss cyber security in HK The first HK-Mainland Cyber Security Forum was held in Hong Kong yesterday to promote development of cyber security technology and industry in the Chinese mainland and Hong Kong. Jointly organized by the Bureau of Cyber Security of Cyberspace Administration of China (CAC) and the Office of the Government Chief Information Officer (OGCIO) of Hong Kong Special Administrative Region, the forum aimed at enhancing cooperation and exchange on cyber security between the mainland and Hong Kong.

10 Business Daily Wednesday, April 13 2016

Greater China Cars’ revolution

BYD seeks Tesla-like buzz for its dynasty cars Tesla’s shares have gained 19 percent in the past year, while BYD has slumped 15 percent in Hong Kong trading. electric vehicles as the government has encouraged technology companies to help upgrade the traditional auto industry.

Bigger pie

YD Co. showed off its latest compact SUV model in a lights-and-dance show in Beijing on Monday, as China’s largest electric-car maker seeks to replicate Tesla Motors Inc.-like buzz to compete in a crowded market. The Yuan, named after the 13th-century Chinese dynasty established by the conquering Mongols, starts from 59,900 yuan (US$9,265) for the gasoline-engine version. Its arrival - timed ahead of the Beijing motor show later this month - marks BYD’s entrance into the entry-level sport utility vehicle segment popular with young urban families and single professionals. The automaker perhaps best known globally for winning an investment by Warren Buffett’s Berkshire Hathaway Inc. has made branding its top priority for the next two to three years, BYD’s senior vice president Stella Li said in an interview. While likening BYD Chairman Wang Chuanfu to a marathon runner and Tesla Chief Executive Officer Elon Musk to a

“BYD will probably need to build a greater awareness to maintain its market share” Stella Li, BYD’s senior vice president

sprinter, she acknowledged BYD’s inability to draw lines of consumers out the doors of retail outlets clamouring for its cars. “We don’t have the ability now to sell tens of thousands of cars before producing a single one,” Li said, referring to the reservations consumers have placed for Tesla’s Model 3 this month. “The day we can do that will be the day our brand is established.” By naming its models after different Chinese reigns as part of a Dynasties line, BYD is setting itself apart from other automakers that use letters

and numbers to denote their lineup - think Audi’s A6, BMW’s 3 Series and Mercedes-Benz’s S-Class. At the same time, BYD risks creating a brand identity so tied to Chinese culture that it resonates less in overseas markets.

Mass-market image

Chinese carmakers, like the Korean and Japanese brands before them, are struggling to upgrade their image and move beyond reputations for making cheap, utilitarian vehicles sometimes accused of ripping off more established competitors. For BYD, a mass-market image hampers the company’s ability to charge a premium and differentiate its brand. As China’s biggest maker of electric vehicles, BYD is vulnerable to being squeezed out of the top end of the market by companies such as Tesla, with its cult-like appeal that consumers pay a premium for. At the low end, dozens of small-time manufacturers are competing on price. A host of companies, many without auto-making experience, also have staked a claim to creating connected

“With the increasing size of the new-energy vehicle pie, many players are coming in and the industry will enter a period of reshuffle,” Chairman Wang said last night. “We are thinking about what we should do going forward every single day.” Tesla’s popularity and China’s expanding set of electric-car competitors are putting pressure on BYD, said Steve Man, a Hong Kong-based analyst covering the auto industry at Bloomberg Intelligence. “Elon Musk’s recognizable fame and success as an entrepreneur makes him a strong voice for Tesla,” he said. “BYD will probably need to build a greater awareness to maintain its market share.” Tesla’s shares have gained 19 percent in the past year, while BYD has slumped 15 percent in Hong Kong trading. Gary Tao, Tesla’s Beijing-based spokesman, didn’t comment on Li’s remarks about Tesla. “What BYD hopes to achieve through its brand image is to position us as a company that’s grounded, that will deliver what we promise and one with a long-term target,” Li said. “We don’t seek a moment’s glory or satisfaction, but take a long-term view. BYD hopes to create a business that’ll be around for a hundred years.” While BYD is selecting a consulting firm to advise on its branding makeover, subtle changes already emerged during the Monday event in Beijing. Instead of delivering his speech behind a lectern, as he did last year during an inaugural BYD fan event in Shenzhen, Wang roamed the stage in a Steve Jobs-style presentation. He laid out the company’s vision and its responsibility to make the air cleaner and roads safer to the hundreds of gathered fans and media, eschewing use of technical terms to describe the company’s technology. “We are lucky to grab the rare opportunity in a hundred years when demand for electric vehicles picks up,” Wang said, flanked by the company’s cars. “We have to shoulder our responsibilities to make a change and benefit our children.” Bloomberg News

Bankruptcy

Solar giant says president ‘assisting’ enquiries Suntech Power collapsed in 2013 after it announced its main Chinese unit Wuxi Suntech would seek bankruptcy and restructuring. The new president of Chinese solar giant Wuxi Suntech Power is “assisting an inquiry” at Customs’ request, its parent said yesterday after reports he had gone missing. Tang Jun was only person from the company helping the investigation and the issue being probed remained unknown, a spokesman for Suntech’s parent Shunfeng International Clean Energy (SFCE) told AFP yesterday, adding the firm’s operations

were “all normal”. Tang is the latest senior Chinese businessman to drop out of circulation for unclear reasons. In January one of China’s most prominent clothing firms, Metersbonwe, announced its chairman Zhou Chengjian had returned to work, a week after saying he had disappeared amid speculation he had been caught up in an insider trading investigation. Weeks earlier Guo Guangchang - chairman of Fosun, one of the country’s biggest private-sector conglomerates - had vanished from public view in connection with an investigation by authorities, before re-emerging. Suntech Power was once the world’s largest solar panel producer, at a time when Chinese manufacturers were flooding the global market

with cheap products, causing trade disputes with the EU and US. The firm collapsed in 2013 after it announced its main Chinese unit Wuxi Suntech would seek bankruptcy and restructuring, resulting in a

bond default in the US worth over half a billion dollars. The company later said it would receive a US$150 million local government bailout and it was eventually bought by Hong Kong-listed Shunfeng for 3.0 billion yuan

(now US$462 million). China Business News reported yesterday that Tang had only taken up his position as president a few months ago and the inquiry could be linked to issues at his previous firm. AFP

Business Daily Wednesday, April 13 2016 11

Asia Business poll

Aussie Inc confidence and jobs gauge surge Australia’s economy is proving resilient in the shadow of recent global turbulence. Michael Heath

ustralian business confidence jumped and an employment gauge in the survey surged to the highest in almost five years, signalling a healthy job market and reducing the likelihood of an interest-rate cut. The local currency gained. The sentiment index doubled to six points last month, according to a

National Australia Bank Ltd. survey of more than 400 firms conducted March 23-31. The business conditions gauge - a measure of hiring, sales and profits - climbed to 12, matching the highest level since before the 2008 global financial crisis. The employment index jumped four points to five, its best result since 2011. “This is an especially good result in the context of a downbeat global economic outlook,” said Alan Oster,

chief economist at NAB. “Low interest rates and a more competitive currency, even given recent strength, are expected to remain key drivers domestically. Consequently, our outlook for the economy remains unchanged - and with the non-mining recovery expected to progress further, monetary policy is likely to remain on hold for an extended period.” Australia’s economy is proving resilient in the shadow of recent

financial turbulence in China, negative interest rates in Japan and Europe and weaker commodity prices that have combined to increase global risk. The Reserve Bank of Australia cut rates to a record-low 2 percent in May last year in an easing cycle designed to cushion the economy from unwinding mining investment and encourage services industries to pick up the slack. While gross domestic product grew a robust 3 percent last year and the unemployment rate has fallen to 5.8 percent, the Australian dollar has rebounded more than 10 percent since mid-January.

It’s complicated

RBA Governor Glenn Stevens, in a statement after leaving the cash rate unchanged last week, warned that “under present circumstances, an appreciating exchange rate could complicate the adjustment under way in the economy.”

“With this result, the long-running upward trend in business conditions has resumed” Alan Oster, Chief economist at National Australia Bank

The renewed currency conundrum reflects the Federal Reserve’s caution on the speed of its policy tightening and a rebound in iron ore, Australia’s biggest export. It placed at risk the sustained labour market improvement and burgeoning tourism and education industries that are boosting services exports’ share of GDP. Yet yesterday’s business confidence report suggests firms are weathering the changes. “With this result, the long-running upward trend in business conditions has resumed, suggesting the non-mining recovery is becoming more entrenched, brushing aside the challenges faced from offshore,” Oster said. “The rise in employment conditions put the index back on its strong upward trend, to be more consistent with solid employment growth outcomes in the official labour statistics.” Bloomberg News

Currency intervention

Japan’s Finance Minister to take steps vs. yen rise Aso said he expected the G20 to discuss the issue again when they meet this week in Washington. Tetsushi Kajimoto

Finance Minister Taro Aso said yesterday that Japan could act against the yen’s rise as needed, based on a G20 agreement backing currency stability, if “one-sided” and “speculative” moves were observed in the currency market. Aso told reporters that finance leaders from the Group of 20 major economies agreed in Shanghai in February that excessive volatility and disorderly moves in the exchange rates hurt financial stability, and he expected the G20 to discuss the issue again

when they meet this week in Washington. Aso has the power as finance minister to instruct the Bank of Japan to intervene in the currency market. It cannot do so on its own authority. The dollar was hovering near 108 yen, not far off a 17-month low of 107.63 yen hit this week on bets that the U.S. Federal Reserve would go slow in future interest rate hikes. Aso expressed a hope that the G20 would reaffirm their commitment on the stability of currencies. “We would take necessary steps under certain circumstances if one-sided and speculative moves were observed. I believe we can respond in line with the G20 agreement.” The finance minister’s comments echo remarks by Chief Cabinet Secretary Yoshihide Suga, the government’s top spokesman, that the G20 agreement would not prevent Japan from acting in the market. Despite verbal warnings from Japanese policymakers, the yen has rallied against the dollar, with investors

expecting Tokyo to refrain from intervention at least until after this week’s G20 meeting in Washington. The yen’s rapid gains threaten to hurt Japan’s export sector and its prospects for defeating two decades of deflation and stagnation.

Tax evasion

Aso said G20 finance chiefs will also discuss the issue of

tax evasion at their meeting in Washington, following the “Panama Papers” leaks - revelations about the clients of a Panamanian law firm specialised in setting up shell companies. Some 96 jurisdictions have committed to automatically exchange tax information with other governments in the next two years. Panama is now the only major

financial centre among the countries that have not committed to the automatic sharing of tax information with other governments, according to an OECD report last month to G20 finance ministers. “The OECD’s response will probably be to ask Panama whether it would provide information or be isolated,” Aso said. Reuters

Japanese Finance Minister Taro Aso.

12 Business Daily Wednesday, April 13 2016

Asia Strategic move

Nomura to cut around 500-600 jobs in Europe The retreat signals a heavy blow for Nomura management’s international ambitions. Emi Emoto and Thomas Wilson

omura Holdings Inc plans to cut between 500-600 jobs, mainly in its European cash equities business, as Japan’s biggest brokerage tries to stem years of heavy losses racked up in its long-term drive to become a major global industry player, people familiar with the matter said yesterday. Some jobs will also go in Nomura’s global markets division in the Americas, the people said, and it wasn’t immediately clear whether Nomura will shut down its European cash equities operation entirely. The people declined to be identified because they were not authorised to speak to the media. The retreat signals a heavy blow for Nomura management’s

Key Points Some jobs also to go in Americas - sources Part of efforts to stop heavy losses overseas - sources Cutback a major blow to Nomura international ambitions Other institutions also scaling back in cash equities

international ambitions. The brokerage bought Lehman Brothers equities and investment banking business in Europe and Asia in 2008, at the height of the global financial crisis, as part of a concerted strategy to expand from its domestic stronghold and become a major force in international finance. The move comes as other big institutions also scale back in international cash equities due to sluggish trading volumes and rising costs against a backdrop of jitters about the global economy. British lender Barclays has closed its cash equities business in Asia, Asia-focused Standard Chartered closed its equities franchise and Societe Generale shut its India equities research desk. Nomura’s overseas business is set to report for a sixth straight annual pre-tax loss for the year ended March 2016. Between October-December 2015 alone, the overseas business lost 19.9 billion yen (US$173 million). Joey Wu, a spokeswoman for Nomura based in Tokyo, declined to comment. As of December 31, Nomura had 3,433 employees in Europe, company data shows, just over 10 percent of its global workforce of 29,069. Over half of its total employees are based in Japan. News of the planned cuts was reported earlier by Bloomberg. Reuters

Image makeover

South Korea woos economy class golf lovers The high cost of playing has kept many golf lovers off the greens. Christine Kim

f the government has its way more South Korean golfers will be carrying their own clubs, walking between holes rather than riding in a cart, and there will be more public courses. The government wants more people to play by making the sport more affordable and less elitist. It is not a mission to find a new generation of champions in a nation that currently fills half of the top ten slots on the Ladies Professional Golf Association (LPGA) tour. It’s about money, and is part of a much larger drive to encourage people to spend more, in a bid to offset the hard times South Korea’s big exporters are facing. Inside a 109-page document published last month that outlined efforts to boost a plodding economy were a series of micro-measures dedicated to boosting participation in a range of sports. But the efforts to democratise the game of golf were eye-catching given the

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curious place the sport occupies in South Korea’s status conscious society. “Golf has become very popular among the public, while at the same time it has an elitist, extravagant image and is very expensive,” Lee Hoseung, the Finance Ministry’s director-general for economic policy, told Reuters. “We feel it is right that we develop golf as a public sport, ease some of the consumers’ burden, expand the sport’s base and heighten the golf industry’s international competitiveness,” Lee said, raising hopes of more foreign golf tourists.

Cheap, artificial alternative

Proud of South Korean women’s success, golf has held a special place in South Korean hearts since Pak Se-ri became the youngest-ever winner of the U.S. Women’s Open in 1998. But the high cost of playing has kept many golf lovers off the greens. Instead, they go to golf lounges like the Loving You

Golfzon in Seoul’s Gangnam district to enjoy the artificial experience of driving a ball down a fairway projected on a screen. “Sure, it might not feel real, but it’s cheap and convenient,” said 44-year-old Lee Seung-yeop after teeing off in Loving You’s “Tiger Woods” room. Lee plays screen golf at least three times a week. But he only steps on a real course maybe once a month. It is easy to understand why. Joining a private club remains prohibitively expensive for most South Koreans, even though the joining fees have fallen by a third since peaking at 317 million won (US$275,125) in 2008. A round of golf for a group of four at a public course in South Korea costs roughly US$175 to US$220 per person. Fees for a shared caddy range between US$70 and US$105, which, the government noted, is way more than golfers in neighbouring Japan have to pay. For all that, South Koreans lavish around US$13 billion annually on golf, or roughly US$260 per capita. Golf accounts for 38 percent of participation sports revenue in South Korea. But interest in the sport is plateauing. After double-digit gains over most of the 2000s, visitors to South Korea’s 473 golf courses rose just 5.3 percent last year, the slowest in three years, according to

the Korea Leisure Industry Institute. Meantime, screen golf lounges have boomed, with the number reaching more than 7,000 last year, according to the Korea Simulation Golf Culture Association.

Official handicap

The ebbing fortunes of the real game has left many private courses in financial straits. Nearly half of the country’s 234 members-only golf clubs had burned through their capital by the end of 2014, according to government data. As a solution, the government is encouraging private clubs to turn public by lending them money at low rates to repay membership fees, and to lower the voting share needed to take a private club public from 100 percent to 80 percent.

“Golf has become very popular among the public, while at the same time it has an elitist, extravagant image and is very expensive” Lee Hoseung, Finance Ministry’s directorgeneral for economic policy

To make the game more affordable for the less welloff, the government has also advised course operators to relax rules requiring players to use golf carts and caddies. Back in 1999, the then president Kim Dae-jung had basked in the afterglow of Pak Se-ri’s victory by formally encouraging the popularisation of golf. Yet official attitudes have been ambivalent toward a sport that was seen as a pastime of the rich. Private courses, for example, pay taxes on top of ordinary business taxes. And, South Korean leaders, including current President Park Geun-hye, have gone as far as warning public servants against playing the game, without actually imposing a ban. Even South Korea’s military euphemistically refers to some roughly 30 golf courses on its bases as “physical training facilities.” “The government has turned golf into a sin and heavy taxes are pushing golfers away from courses,” said Lee Jong-kwan, a spokesman at the Korea Golf Course Business Association, which represents private clubs. The government’s recent moves could help redress the balance. “If I didn’t have to think about money I would go actual golfing,” said Jeong Won-cheol, a 34-year-old lounge player. “No question.” Reuters

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Business Daily Wednesday, April 13 2016 13

Asia In Brief

Trade

S.Korea’s export prices fall

Bank of Japan headquarters.

Banks’ loans

Negative rates failed to boost Japan lending in March The policy has put pressure on lenders’ profitability because they are being forced to lower interest rates on loans more than those on deposits. Gareth Allan and Shingo Kawamoto

apanese loan growth slowed to the weakest pace in three years in March, signalling the central bank’s introduction of negative interest rates has yet to spur credit in the world’s third-largest economy. Loans excluding trusts rose 2 percent from a year earlier, slowing from 2.2 percent in February, the Bank of Japan (BOJ) said yesterday. Deposits increased 3 percent, easing from 3.1 percent in February. The figures are the first for a full month after the BOJ began charging lenders 0.1 percent interest on some of their reserves on February 16. The policy has put pressure on lenders’ profitability because they are being forced to lower interest rates on loans more than those on deposits. Bank shares are the worst performers on the benchmark Topix index this year amid speculation that the central bank will cut rates further to stem an 11 percent gain in the yen against the dollar, which

threatens to undermine an economic recovery. “Putting aside deciding whether the policy is a failure after just one month, we were quite sceptical as to whether negative rates would boost loan demand,’’ said Takashi Miura, a Tokyo-based analyst at Credit Suisse Group AG. “Home lending will come back if rates settle and demand grows, but we’ll need to see an increase in corporate loans to get back to the 2.5 percent levels we’ve seen lately,’’ he said, referring to overall loan growth.

Shares rise

Bank shares jumped yesterday after the central bank adjusted its negative-rate program to reduce the portion of lenders’ reserves that are subject to the 0.1 percent charge. The Topix Banks Index closed 5.3 percent higher, paring this year’s decline to 32 percent.

“We’ll need to see an increase in corporate loans to get back to the 2.5 percent levels we’ve seen lately” Takashi Miura, Tokyo-based analyst at Credit Suisse Group

BOJ Governor Haruhiko Kuroda told lawmakers on March 16 that it would be “theoretically possible” to reduce rates to as low as minus 0.5 percent. Standard & Poor’s estimated in February that negative rates will erode the profitability of regional lenders by 15 percent and major banks by 8 percent. The average rate on all new loans at the nation’s banks plunged to a record-low 0.793 percent in February, central bank figures show. Banks including Mitsubishi UFJ Financial Group Inc. have cut rates on ordinary yen deposits to just 0.001 percent. That would pay the equivalent of just US$10 in annual interest on a US$1 million balance.

Charging customers

While banks have resisted passing on the costs of negative rates to most depositors, a few have indicated they will charge some institutional customers. Sumitomo Mitsui Financial Group Inc. is planning to impose fees on foreign banks for some of their cash held in yen-denominated accounts. Trust banks are considering fees on trust accounts of some institutional investors. The adjustment to the Bank of Japan’s policy announced late Monday increased the portion of lenders’ current-account balances to which a zero interest rate is applied, thus shrinking the portion that is subject to the minus 0.1 percent rate, a BOJ official said, asking not to be named due to its policy. Bloomberg News

Monetary policy

Bank Indonesia said to adopt reverse repo as benchmark rate The shift is being made to enhance the effectiveness of its policy changes to influence markets. Bank Indonesia plans to overhaul its main tool of monetary policy, adopting a seven-day reverse repurchase rate as the new benchmark, according to people familiar with the matter. The central bank of Southeast Asia’s biggest economy will ditch the current reference rate, which isn’t directly tied to money markets, according to the plan scheduled to be announced Friday, said the people, who asked not to be named as the

discussions were private. Bank Indonesia will strengthen its policy framework and announce it on Friday, said Andiwiana Septonarwanto, its deputy director of communications. With the seven-day reverse repo rate, Bank Indonesia will be using as its benchmark a tool for draining liquidity from the system. The monetary authority sells securities with an agreement to buy them back in seven days. Bank Indonesia currently offers such contracts at a 5.5 percent rate. The shift is being made to enhance the effectiveness of its policy changes to influence markets, according to the people familiar with the matter. The central bank is talking to analysts and other stakeholders for policy feedback, Septonarwanto said.

Government pressure

Monetary authorities around the world use different rates as benchmarks to influence borrowing costs across the economy. The Reserve Bank of India uses a repo rate. In Japan, policy makers have adopted a negative interest rate on a share of

funds commercial lenders park with the central bank, in an effort to force them to boost lending. Indonesia’s central bank has come under pressure from government to reduce interest rates to help spur an economy that grew last year at its slowest since 2009. President Joko Widodo said in an interview on February 11 he wanted interest rates to “fall, fall, fall, fall and keep falling” so that the country could better compete with neighbours. Bank Indonesia sees weak transmission of its monetary policy, Juda Agung, executive director of monetary policy, said at its most recent rate meeting last month. Lending rates only declined four basis points even after the authority cut the benchmark rate by a total of 75 basis points to 6.75 percent this year and the reserve requirement ratio by 150 basis points, he said. The currency has strengthened for four straight months as the interest-rate cuts attracted almost US$4 billion into local currency sovereign bonds. Bloomberg News

South Korea’s export prices denominated in the local currency declined for the first time in four months due to the ascent of the South Korean currency to the U.S. dollar, boosting worries about weak profitability of local exporters, central bank data showed yesterday. The export price index stood at 80.72 in March, down 1.5 percent from the previous month, according to the Bank of Korea (BOK). The index fell for the first time in four months, marking the lowest in almost 30 years. Commerce

Sri Lanka’s January trade deficit narrows Sri Lanka’s January trade deficit narrowed 9.1 percent year-on-year, the central bank said yesterday. The trade deficit narrowed to US$695 million in January from US$765 million in the same month a year earlier, the central bank said in a presentation to the media. January imports declined 5.5 percent from a year earlier, while exports edged down 2.5 percent, the data showed. Water festival

Thailand sees tourism revenue rising Thailand expects tourism to generate revenues of 15 billion baht (US$428.08 million) during the threeday Songkran festival, some 10 percent more than last year, the country’s tourism minister said on the eve of the water festival. Sometimes referred to as the world’s biggest water fight, the festival marks the beginning of Thailand’s traditional New Year and is a major tourist attraction, and a time when Thais visit family and perform religious purification ceremonies. Tourism Minister Kobkarn Wattanavrangkul said 495,000 foreign tourists will visit Thailand during the festival, which starts today and ends on Friday. Infrastructure

India plans to build bridge to connect Sri Lanka India has said that it is considering inking a pact with Sri Lanka to build a bridge connecting the two neighbouring countries. “The project is under consideration, it is under discussion. But nothing has been finalized,” Indian Road Transport, Highways and Shipping Minister Nitin Gadkari told the media in the national capital Monday. The minister said that preliminary talks on the project have been held with Sri Lankan President Maithripala Sirisena and Prime Minister Ranil Wickremasinghe. “The Sri Lankan side is interested in the project,” he added.

14 Business Daily Wednesday, April 13 2016

International In Brief Consumer prices

U.K. inflation rate hits 15-month high U.K. inflation accelerated to a 15-month high in March as an early Easter boosted air fares and clothing prices increased. Consumer prices rose 0.5 percent from a year earlier, the fastest pace since December 2014, the Office for National Statistics in London said on yesterday. That exceeded the 0.4 percent median estimate in a Bloomberg survey of economists. Core inflation, which excludes volatile food and energy prices, quickened to 1.5 percent, the most since October 2014. While inflation remains well below the Bank of England’s 2 percent target, the figures suggest it is picking up after almost a year of hovering around zero. U.S. Inc

Small business confidence hits two-year low U.S. small business confidence fell to a fresh two-year low in March amid persistent worries about sales and profits, the latest indication that economic growth braked sharply in the first quarter. The National Federation of Independent Business (NFIB) said yesterday its small business optimism index dipped 0.3 point to a reading of 92.6 last month, the lowest since February 2014. It has declined from a reading of 100 in December 2014 and has pushed further off its 42-year average of 98. Gross domestic product growth estimates for the first quarter are currently well below a 1 percent rate. CPI

German inflation inches higher in March Inflation in Germany edged higher in March, with rising prices for food, services and rents offsetting falling energy prices, final data showed yesterday. Germany’s national inflation yardstick, the consumer price index, rose by 0.3 percent in March after zero percent in February, the federal statistics office Destatis said. And using the Harmonised Index of Consumer Prices (HICP) - the barometer used by the European Central Bank - the inflation rate stood at plus 0.1 percent in March, compared with minus 0.2 percent in February. The final data confirmed a preliminary flash estimate released at the end of last month. Oil industry

Barrel hits 2016 high above US$43 Oil reached a 2016 high above US$43 a barrel yesterday, supported by hopes that an upcoming meeting of oil producers will agree steps to tackle a supply glut, and by a weak U.S. dollar and further signs of strong demand in China. Many members of OPEC plus outside producers such as Russia are meeting Doha, Qatar, on Sunday to discuss freezing output. The dollar fell to its lowest in nearly eight months against a basket of currencies, supporting commodities. Brent crude was up 50 cents at US$43.33 a barrel at 0842 GMT and earlier in the session reached a 2016 high of US$43.53. U.S. crude gained 39 cents to US$40.75 a barrel.

Eurozone

France selling 50-year bond as QE helps extend debt life Some investors will use the debt sales as an opportunity to switch from German debt into slightly higher-yielding Dutch and French bonds.

uro zone governments’ drive to push back the expiry date of their debts stepped up a gear yesterday, with France selling 20- and 50-year bonds to lock in ECB-depressed borrowing costs. The European Central Bank’s bond-buying programme, expanded in March to 80 billion euros a month from 60 billion, has pushed shortterm yields into negative territory and has brought longer-term yields closer to zero. The top-rated countries in the euro zone have a choice between effectively being paid to borrow for up to five years or paying a meagre interest rate to borrow for 10 years or more. But extending the debt’s average maturity allows a sovereign to reduce refinancing pressure and boost investor confidence in its ability to service its obligations. France is marketing a bond expiring in 2066, which is six years longer than its previous longest-dated bond, with the initial pricing guidance showing only an 18 basis points yield premium over the 2060 issue, according to IFR.

Two weeks ago, Ireland issued its first 100-year debt at an yield of 2.35 percent, which was a tad more than it paid to borrow over three month in 2012 on its return to the market after a two-year hiatus at the height of the crisis. Last year, Belgium sold 50 million euros in 100-year debt. Yield-starved pension funds and insurers are the main investors in bonds with ultra-long maturities. They tend to buy and hold so they are attracted by the yield premium over shorter-term debt and are not put off by the risk of a sudden sell-off if the economic outlook improves and the ECB stops buying bonds. Japanese investors are traditional buyers of French bonds, attracted by the high ratings and yield pick-up over Germany.

Small steps

Given euro zone countries’ big debts, it will take a long time to see a fundamental improvement in debt structure, despite increased volumes of long-dated issuance in recent years. The average maturity of France’s debt stood at 7 years and 66 days at the end of February, compared with 7 years and 5 days at the end of 2013, data from the country’s debt agency showed. In Italy, the average maturity was 6.49 years at the end of February, recovering from a low of 6.38 years at the end of 2014, but still off 2010

highs of 7.20 years. In Spain it was 6.55 years in March, up from 2013 lows of 6.20 years, but off 2007 highs of 6.85 years. Earlier yesterday, the Netherlands sold 875 million euros of 30-year bonds. Germany sells up to 0.5 billion euros of 30-year inflation-linked bonds. Some investors will use the debt sales as an opportunity to switch from German debt into slightly higher-yielding Dutch and French bonds, which are also relatively safe. This called a halt on German 10-year Bund yields’ push towards zero. German 10-year yields were up 3 basis points on the day at 0.15 percent, having hit a one-year low of 0.075 percent on Monday and a record low of 0.05 percent last April. Thirty-year German bond yields rose to 0.85 percent, up 5 basis points, in line with their Dutch and French peers. Reuters

“Supply is the driver now ... but the big picture has not changed and we will go towards zero in the 10-year” Jan von Gerich, Nordea chief fixed income analyst

Inflation

Nigerian prices soar to almost four-year high Price growth has been outside the government’s 6 percent to 9 percent target band for 10 months. David Malingha Doya

Nigeria’s inflation rate climbed to the highest in almost four years in March, adding pressure on the central bank to ease foreign-exchange controls that are pushing up consumer prices. Inflation in Africa’s largest economy and oil producer accelerated to 12.8 percent on an annualized basis, the highest since July 2012, from 11.4 percent in February, the Abuja-based National Bureau of Statistics said by e-mail yesterday. Food prices rose 12.7 percent in March from a year ago, compared with 11.4 percent in the

previous month, driven up by transportation costs, the planting season and foreign-exchange movements, the statistics agency said. The Nigerian central bank has pegged the naira at 197-199 per dollar since March last year, and restricted trading in foreign currencies, making imports more costly for a nation that’s a net importer of refined fuel and food products. Importers struggle to access foreign exchange at the official rate, with the naira falling to around 320 on the black market. “Import prices are a factor in the inflation rate,” Babajide Solanke, an analyst at Lagos-based FSDH Merchant Bank Ltd., said by phone before the data was released. The central bank “should probably look at adjusting foreign exchange controls.”

Median estimate

The median of 16 economist estimates compiled by Bloomberg was

for inflation to reach 11.8 percent. Consumer prices rose 2.2 percent in March from the month before. While the government capped pump prices at 87 naira (US$0.44) a litre based on the official exchange rate, the average price for a litre of gasoline was 135.69 naira in March, according to a separate report from the statistics agency. Marketers regularly sell fuel above the level of the price cap. The government announced last week that it’s asked international energy companies to provide foreign currency to retailers to make import-orders. The central bank increased its benchmark interest rate by 100 basis points to 12 percent last month after inflation accelerated to more than 10 percent in February. Price growth has been outside the government’s 6 percent to 9 percent target band for 10 months. Bloomberg News

Business Daily Wednesday, April 13 2016 15

Opinion Business Wires

Jakarta Globe Indonesia will “formalize” cooperation with the US Internal Revenue Service on the side-lines of the annual Spring Meetings of the International Monetary Fund and the World Bank Group this week as part of the government’s efforts to boost tax revenue, Finance Minister Bambang Brodjonegoro (pictured) said on Monday. “We want to formalize cooperation between the IRS and the [Indonesian] Directorate General of Taxes because we want to improve the directorate’s capacity to be like the IRS,” Bambang told reporters, noting that he has scheduled a meeting with US Treasury Secretary Jack Lew.

Even in the eurozone GDP growth is slightly above its (admittedly very meagre) potential, according to the author

The deflation bogeyman Vietnam News The southern region (of Vietnam) has received US$1.7 billion worth of foreign direct investment (FDI) in the first quarter of 2016, according to the Ministry of Planning and Investment’s Foreign Investment Agency. This value accounted for 51.6 per cent of the total FDI registered in the country, making the region the leading performer in terms of FDI attraction. The agency said in its recent report that the positive results were due to the region’s huge potential in developing industries such as hi-tech, IT, oil and gas, in addition to several services in banking, finance and tourism sectors.

The Asahi Shimbun In its first official numerical targets, the government is seeking to supercharge the number of fuel cell vehicles in the nation from the current number of about 500 to 800,000 by 2030. The ministry of trade and industry’s plan, announced March 16, calls for research and development to reduce the cost of fuel cells to one-fourth the current level. It also plans to increase the number of hydrogen stations fourfold to about 320 by fiscal 2025. Considered the “ultimate eco-car,” FCVs are powered by electricity that is generated through a chemical reaction between hydrogen fuel and airborne oxygen, producing only water as an emission.

The Star Malaysia is targeting to attract 40 billion ringgit worth of investments from the manufacturing and services sectors this year. Malaysian Investment Development Authority chief executive officer Datuk Azman Mahmud said that of the 40 billion ringgit, about 800 million ringgit would be for the medical device segment. “For the first quarter of the year, we have approved 651 million ringgit investments for the medical sector, compared to 194.7 million ringgit achieved in the same period of 2015. “The approved medical device investments would create 1,610 job opportunities,” he said.

entral banks throughout the developed world have been overwhelmed by the fear of deflation. They shouldn’t be: The fear is unfounded, and the obsession with it is damaging. Japan is a poster child for the fear. In 2013, decades of (gently) falling prices prompted the Bank of Japan to embark on an unprecedented monetary offensive. But while headline inflation increased for a while, the factors driving that increase – a competitive depreciation of the yen and a tax increase – did not last long. Now, the country is slipping back into near-deflation – a point that panicked headlines underscore. But, contrary to the impression created by media reports, the Japanese economy is far from moribund. Unemployment has virtually disappeared; the employment rate continues to reach new highs; and disposable income per capita is rising steadily. In fact, even during Japan’s so-called “lost decades,” per capita income grew by as much as it did in the United States and Europe, and the employment rate rose, suggesting that deflation may not be quite as nefarious as central bankers seem to believe. In the US and Europe, there is also little sign of an economic calamity resulting from central banks’ failure to reach their inflation targets. Growth remains solid, if not spectacular, and employment is rising. There are two key problems with central banks’ current approach. First, they are focused on consumer prices, which is the wrong target. Consumer prices are falling for a simple reason: energy and other raw material prices have declined by more than half in the last two years. The decline is therefore temporary, and central banks should look past it, much as they looked past the increase in consumer prices when oil prices were surging. Instead, central banks should focus on the rate of revenue increase, measured in nominal GDP growth; that is, after all, what matters for highly indebted governments and enterprises. By this measure, there is no deflation: The GDP price index (called GDP deflator) in developed countries is increasing by 1-1.5%, on average. In the eurozone, it is rising at 1.2%. This may fall short of the European Central Bank’s target of “below but close to 2%,” but not by a margin substantial enough to justify the ECB’s increasingly aggressive use of monetary instruments to stimulate the economy. Moreover, nominal GDP growth exceeds the longterm interest rate. When, as is usually the case, the long-term interest rate is higher than the GDP growth rate, the wealthy may accumulate wealth faster than the rest of the economy – a point made by the economist Thomas Piketty. But today, nominal GDP growth far exceeds average long-term interest rates (which, in some countries, include

Daniel Gros Director of the Centre for European Policy Studies.

risk premia of up to 100 basis points) – even in the eurozone, where nominal GDP growth is expected to reach about 3% this year. This means that financing conditions are as favourable as they were at the peak of the credit boom in 2007, and much better than they have been at any other point in the last 20 years. One might expect this evidence to compel central bankers to rethink their current concerns about deflation. But they remain committed to pursuing their inflation targets, convinced that even a slight bout of deflation could initiate a downward spiral, with falling demand causing prices to decline further. This is their second mistake. Of course, a deflationary spiral is possible, and its consequences could be serious. If real interest rates were significantly positive, demand could plummet, pushing down prices to the point that it becomes impossible for borrowers to service their debts. Such a spiral contributed to the Great Depression in the US in the 1930s, with prices falling, in some years, by some 20-30%. But we are nowhere near such conditions today. In fact, nominal interest rates are at zero, while the broadest price indices are increasing, albeit gently. Given that financing conditions are so favourable, it is not surprising that domestic demand has remained robust, allowing unemployment to return to pre-crisis lows almost everywhere. The eurozone is the only large developed economy where unemployment remains substantial, and thus the only economy where the case could be made for a downside risk of deflation. But even in the eurozone, GDP growth is slightly above its (admittedly very meagre) potential, so that the remaining output gap is being closed gradually. Furthermore, the only reason why unemployment remains high in the eurozone is that the labour-force participation rate has continued to increase throughout the recession; and, indeed, employment is returning to pre-crisis levels. This is the exact opposite of what the deflation hawks warn about. The popular “discouraged worker” hypothesis holds that a slide into deflation is costly, because a long recession induces workers to leave the labour force altogether. That is simply not the case in Europe today. The evidence is clear. Developed-economy central banks should overcome their irrational fear of a deflationary spiral, and stop trying desperately to stimulate demand. Otherwise, they will find themselves with massively expanded balance sheets, and very little to show for it. Project Syndicate

“The eurozone is the only large developed economy where unemployment remains substantial”

16 Business Daily Wednesday, April 13 2016

Closing Health law

Singapore bans smoking in reservoirs, parks

Singapore will ban smoking in reservoirs and parks from June 1, Senior Minister of State for the Environment and Water Resources Amy Khor told Parliament yesterday. Singapore currently bans smoking in all indoor areas and most of the common areas of residential and public buildings, including public museums and amusement centres, common corridors, staircases, covered walkways and linkways, all pedestrian overhead bridges, within 5 meters of bus shelters and hospital outdoor compounds.

Starting from June, new premises will include 17 reservoirs, parks in public housing estates and under the purview of Jurong Town Corporation, Singapore’s principal developer and manager of industrial estates and their related facilities, as well as neighbourhood parks under National Parks within private housing estates, local media quoted Khor as saying. However, the owners of these premises will have the option to set up designated smoking points and will be responsible for their maintenance, said the Ministry of Environment and Water Resources (MEWR). Xinhua

GDP forecast

Growth seen at slowest pace since 2009 Recent indicators including factory purchasing managers’ indexes and producer price index have also hinted at some initial signs of stabilization.

conomists say that China grew at its slowest pace since the financial crisis in the first quarter, highlighting continued downward pressure on the world’s second largest economy despite some tentative recent signs of stabilization. Growth in first quarter gross domestic product (GDP) likely slowed to 6.7 percent from the same period last year, down from 6.8 percent in the fourth quarter of 2015, according to a Reuters poll of 64 economists. That would be the weakest pace of expansion since the first quarter of 2009, when growth fell to 6.2 percent. China’s economy grew 6.9 percent in 2015, its slowest rate in more than two decades. Forecasts for annual growth in the first quarter ranged from 5.8 percent to 7.2 percent, with a median of 6.7 percent.

the shifting dates for the long Lunar New Year holiday - industrial profits unexpectedly rose by 4.8 percent from a year earlier, ending a seven-month streak of declines. Other recent indicators including factory purchasing managers’ indexes and China’s producer price index have also hinted at some initial signs of stabilization. “In Q1, we saw some stabilization in March for the real part of the economy, and property investment also rebounded in January and February, so it shows that the hard core activity seems to have slightly picked up,” said Yang Zhao, chief China economist at Nomura in Hong Kong. “But in terms of the contribution of financial sector in Q1, it’s going to have significantly retreated. That’s why we think the overall GDP will continue to slow down from the last Q4,” he said.

Analysts said that despite some signs of green shoots and an uptick in consumer price inflation (CPI), the central bank was likely to keep monetary policy accommodative to hit money supply and growth targets, and aid heavily indebted industrial firms to refinance expensive debt. “CPI inflation is already higher than the one-year deposit rate, meaning the room for additional rate cuts is limited,” said Ding Shuang, head of Greater China economic research at Standard Chartered in Hong Kong. “But bank required reserve ratio cuts will continue as they will be necessary to achieve the 13 percent money supply growth target this year,” he said. China’s bank has been engaged in an extended easing campaign since late 2014, most recently releasing an estimated $100 billion for lending by cutting bank reserve ratios on Feb.

29. Policymakers have also said they intend to ramp up fiscal support for the economy in 2016, boosting the fiscal deficit to 3 percent of GDP.

Monthly indicators

A raft of monthly indicators will be released with the GDP data on April 15, and analysts will be looking for additional evidence of tentative economic improvement. Industrial output likely grew 5.9 percent in March from a year earlier, slightly up from February’s 5.4 percent figure while urban fixed asset investment, a crucial driver of China’s economy, likely accelerated to 10.3 percent in the first quarter as a whole, from 10.2 percent in January and February. Annual retail sales growth was seen at 10.4 percent in March, rising slightly from the previous month’s 10.2 percent. Reuters

Hopeful signs

While downdrafts from uneven global demand, over-investment in several key sectors and weakening productivity among state-owned firms remain, recent signs of a tentative pick-up in real estate and industry provide some reasons for optimism. Annual growth in fixed asset investment quickened to 10.2 percent in January and February combined from 10 percent in the whole of 2015, while industrial profits during those two months unexpectedly rose by 4.8 percent from a year earlier, ending a seven-month streak of declines. During those two months - China combined their data to account for

Analysts said that despite some signs of green shoots and an uptick in consumer price inflation, the central bank (headquarters pictured) was likely to keep monetary policy accommodative.

Foreign investor scheme

Bills of exchange

Economic plan

Beijing may cut inbound investment quota

Bank of Tianjin faces US$121 million fraud

Vietnamese parliament sets development targets

China’s foreign exchange regulator may cut investor quotas under its Qualified Foreign Institutional Investor (QFII) scheme if an investor does not use up 60-70 percent of the allotment within a year after it is approved, two sources close to the matter told Reuters yesterday. The State Administration of Foreign Exchange (SAFE) is also in the progress of reviewing and verifying the quotas of all existing QFIIs and the clean-up is expected to be completed by June, sources said. China launched the QFII scheme in 2002 and the total quota was expanded to US$150 billion last year. But investor appetite for Chinese assets has diminished amid a slowdown in the world’s second-largest economy and as the yuan depreciated sharply. It fell 4.5 percent against the dollar in 2015. As of March, the outstanding amount of QFII was at US$80.95 billion, only slightly higher than US$80.8 billion a month earlier and about 12 percent higher than a year ago, according to SAFE statistics. Asset managers have access to China through QFII or new alternative avenues for investments such as the Shanghai-Hong Kong Stock Connect scheme. Reuters

China’s Bank of Tianjin has been defrauded of more than US$120 million, it said, the third such giant crime against banks in the country this year. A “risk incident” at a Shanghai branch involved 768 million yuan (US$122 million) and was related to its notes business, the bank said in a statement to the Hong Kong stock exchange. Notes, also known as bills of exchange, are securities issued by financial institutions, often as short-term financing tools, and payable to the bearer. Financial magazine Caixin said that the notes had been sold to the bank as part of a repurchase agreement. The bank “paid the money when buying the notes, but the notes went missing when the time came to resell”, Caixin quoted people familiar with the matter as saying, leaving the bank unable to recoup its funds. A number of bank employees who handled the bills had turned themselves in to police, it added. The bank, which only listed in Hong Kong in late March, said in its statement on Friday that the incident happened “recently”. AFP

The Vietnamese parliament passed a resolution yesterday on a five-year socio-economic development plan for the 2016-2020 period. The plan sets the overall targets of ensuring macro-economic stability, striving for a higher economic growth than the previous five-year period, accelerating the implementation of strategic breakthroughs, restructuring the economy with renewed growth model, and increasing productivity, efficiency and competitiveness. The resolution was passed by 93.52 percent of the deputies at the 11th session of 13th National Assembly which closed yesterday. Specific goals set by the plan include an average gross domestic product (GDP) growth of 6.5-7 percent per year, and GDP per capita of around 3,200-3,500 U.S. dollars by 2020. The proportion of industry and services is projected to make up 85 percent of GDP while the total investment capital should reach around 32-34 percent of GDP. The budgetary overspending will be brought to less than 4 percent of GDP by 2020. The ratio of agricultural workers in the labour force will stand at around 40 percent. Unemployed rate in urban areas is to be reduced to less than 4 percent. Xinhua