Anzac Day Observance in Macau Mon, 25 April 2016 │ 7:30am - 9am │ MGM Macau
ay zac D
Followed by Gunfire Breakfast from 8am
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Mainland companies delay or cancel US$10 bln bond issuance Investment on hold Page 16
Wednesday, April 20 2016 Year V Nr. 1025 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Public contracts
Fivefold increase in contract amount due to facility updates Page 2
Pensions
9 fund managers manage 40 pct of local workforce Page 5
Overcapacity
Steel-producing countries fail to tackle excessive output Page 10
www.macaubusinessdaily.com Management
‘Strong Fighter’ M.U.S.T. team represents Macau in management competition Page 4
Save the soap, save the world
Ready, set, gold! Commodities The world’s biggest producer and consumer of gold. China started a twice-daily price fixing regime yesterday. In an attempt to establish a regional benchmark and bolster its influence in the global market. The Shanghai Gold Exchange members include Chinese banks, jewellers, miners and the local units of Standard Chartered and Australia & New Zealand Banking Group Ltd., according to the bourse. Page 8
Landlocked Land Plans are being drawn up for two reclaimed idle plots. To temporarily be used for warehousing and offices. Meanwhile, the gov’t is facing land grantees in the courts. ‘Owners’ of 21 idle plots have filed appeals against the administration’s decision to take back undeveloped land. Page 2
+4.48%
PetroChina Co Ltd
+3.82%
Belle International Hold-
+3.81%
HSBC Holdings PLC
+3.68%
Hengan International
+3.26%
China Shenhua Energy
+3.15%
Wharf Holdings Ltd/The
+2.87%
China Mengniu Dairy Co
+2.69%
CK Hutchison Holdings Ltd
-0.05%
China Resources Land Ltd
-0.40%
China Resources Power
-0.41%
China Mobile Ltd
-0.50%
Li & Fung Ltd
-0.61%
China Unicom Hong Kong
-1.91%
China Merchants Holdings
-2.92%
23° 26° 23° 27° 23° 27° 23° 26° 24° 25° Today
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Corporate Social responsibility
A simple idea with a world of benefits. Shawn Seipler realised that so many could benefit so easily. Thus, the partially used hygiene items left in hotel rooms birthed Clean the World. By taking semi-used products, sanitizing them, and preventing millions of hygiene-related diseases worldwide. Page 6
eSport – no longer a hobby A newly established electronic sports association. Grow uP eSports seeks to asemble a Macau national team to represent the MSAR abroad. With its first tournament held on the weekend, the group sees eSports as a surefire way to diversify the economy, one game at a time. I SSN 2226-8294
Games Page 3
Sat
Sun
Source: AccuWeather
Tingyi Cayman Islands
Source: Bloomberg
HK HSI April 18, 2016 21,436.21 +274.71 (1.30%)
2 Business Daily Wednesday, April 20 2016
Macau Information
Enhancing transparency of information disclosed by government
its legal analysis of information disclosure and to classify government information this year, according to Mr. Kou. The SAFP The government is currently conducting research on how to disclose official information deputy head said that the government is now working on standardising various government in a more efficient way, said Kou Peng Kuan, deputy head of the Public Administration and departments’ websites in order to distribute information on a timely basis. A variety of Civil Service Bureau (SAFP) in a written reply new search methods will be developed for the to legislator Si Ka Lon’s enquiry that many public to access the information disclosed by government meetings are conducted behind the government, according to Mr. Kou. A.L. closed doors. The government plans to finish
Land
Gov’t says two more idle plots reclaimed The government is in court with the land grantees of twentyone idle plots who have filed appeals against the administration’s decision to take back the undeveloped land. Kam Leong kamleong@macaubusinessdaily.com
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lans for two plots the government reclaimed are under development, according to the president of the follow-up committee for land and public concession affairs of the Legislative Assembly (AL), Ho Ion Sang. According to the legislator, the two idle plots - located in Pac On and a new reclamation zone - are being considered for warehouse and office use, respectively. Mr. Ho spoke to reporters following a closed-door meeting with the Secretary for Transport and Public Works Raimundo do Rosario and the Director of the Land, Public Works and Transport Bureau, Li Canfeng. In 2009, DSSOPT identified 113 plots of land in the territory left undeveloped by their land grantees, of which 48 were ceded to be reclaimed as the delay in the development was deemed liable to the land-lease holders.
As of now, the government has declared land grants of 23 idle plots invalid, including the two successfully reclaimed parcels. Meanwhile, the legislator said the other 21 plots are still under judicial appeal filed by the grantees, adding that the government is confident of winning the lawsuits.
More to recover
“The government has also declared the invalidity of land concessions for seven other plots that are not included in the 113 plots. These are the five plots for the La Scala project, one plot near the Golden Crown China Hotel, as well as the plot for
Public contract
Taipa sewage contract increased fivefold for facility updates The Environmental Protection Bureau claims it will launch a public tender this year for service contracts for two other sewage treatment plants on the Peninsula and in the cross-border industrial zone. The Environmental Protection Bureau claims that the fivefold increase in the value of the latest awarded service contract for the operation and maintenance services of the wastewater treatment plants in Taipa and the Airport is due to the updating of the plants’ facilities. Last Monday, the government announced in the Official Gazette that it had granted a service contract worth MOP52.3 million (US$6.54 million) to the joint venture of Waterleau
Pearl Horizon,” Mr. Ho said. “The government has completed [the work of identifying] sites where development is not fully completed before [holders’ temporary land concessions expired], which means the government would gradually declare the invalidity of land grants for more plots.” The city’s land law regulates that a temporary land concession, which carries a 25-year term, can only become effective once the property project of a site is completed, mandating that no temporary land concession may be renewed. Such regulations allow the government to recover more land plots
even if lease holders were not liable for delays on site developments. As an example, the government decided last year not to reclaim the remaining 16 of 48 idle plots as their landholders were not liable for the delay in developing the sites. However, three of the parcels have recently been declared invalid for their land concessions after their concession expired, whilst another seven are still being evaluated. In addition, of the other 65 of the 113 plots, which were also deemed to have delays in development not liable to the land grantees, the government is planning to take back 13 parcels, according to Mr. Ho.
Property
and Beijing GSS, the value of which had increased more than five times compared to the amount offered MOP8.48 million - in a similar service contract awarded to the same consortium for the 2014 to 2015 period. ‘The tenure for this contract lasts one year. [The contract] includes the changes of the current ageing apertures of the plants and the renovation of their infrastructure facilities, in addition to daily operation and maintenance services,’ the Bureau wrote in response to a Business Daily enquiry. The environmental department added that the MOP8.48 million contract for 2014-2015 with the joint venture was only for a tenure of eight months and that no updates to the plants’ facilities were included. Meanwhile, this year the government will invite public bids for the operation and maintenance service contract for the wastewater treatment plant on the Macau Peninsula and for that in the Zhuhai-Macau Cross Border Industrial Park, the Bureau told public broadcaster TDM Radio on Monday. The environmental department added that it is also researching appropriate locations to build new wastewater treatment facilities in the city. However, it said these new plans would need further evaluation. K.L.
Call for more transparent property data New property index to be released this year. Legislator Ho Ion Sang is seeking more transparency in the real estate market by setting up a new indicator system to help residents be better informed about purchases. The response to the legislator’s enquiry on the topic - by Iong Meng Chao, Director of the Statistics and Census Services (DSEC) - was that vacancy rates of residential and commercial units are released every six months. Vacancy is defined by electricity usage, measured by Companhia de Electricidade de Macau (CEM), and corresponds with a value below 10 kWh, according to DSEC data. In December 2015, Macau’s property vacancy rate was 7.3 per cent, with 6.5 per cent of residential units vacant, DSEC data reveals. The DSEC director said in his reply that Macau’s property index is to be released within the year. This would augment that released by the Financial Services Bureau (DSF) on
the stamp duty paid on property transfers based on total transactions - including residential units, commercial units, offices, industrial units and parking spaces. The information acts as a main indicator for the movement of the property market, Mr. Ieong noted. Additional data on building location, age, unit size, average price per square metre of usable areas in the units and total number of units sold is published quarterly on the official website. The DSEC also publishes data of total transactions made on properties based on total useful area each month. A.L.
Business Daily Wednesday, April 20 2016 3
Macau eSports Electronic sports tide rising in Macau
Macau eager to plug into eSports world Macau eSports association says electronic gaming can diversify the local economy. Nelson Moura nelson.moura@macaubusinessdaily.com
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he newly-established Macau-based electronic sports association of Grow uP eSports wants to see Macau fully develop its eSports potential, and even take a local team to world competitions, according to founder Andrew Pearson. “In Macau, eSports is still not big but it is in Hong Kong, Taiwan, South Korea and is huge in China - where there are around 50 million eSport players. There’s a lot of development yet to be made in Macau,” Pearson told Business Daily. Pearson is a published author on topics such as casino marketing, mobile technology and social media and is the managing director of Qualex Asia. Together with other eSport enthusiasts Pearson founded Grow uP eSports in August last year as an electronic sports association based in Macau with the intent of promoting a competitive eSports culture through various tournaments and events in the territory. Grow uP aims to attract both world-class competitors as well as their fans from all over the world to Macau and is affiliated with Grow uP Gaming, a well-known Portuguese eSports Association that has been operating since 2002. “We’re currently trying that our Association becomes a member of the partnership with the International e-Sports Federation (IeSF) in South Korea to help us expand further into other Asian countries and take a Macau team to the eSports 8th World Championships in Jakarta. Meanwhile, we will organise more future events and chose the best to send to the competition,” says Pearson. This Saturday, Grow uP eSports held its first tournament at Fisherman’s Wharf - with 50 participants signing up for a one-on-one FIFA16 - an online football game - competition via the Association’s website. The competition was conducted in an arena with large-screen TVs, a Grow uP press release announced. The prize pool featured more than MOP10,000 in cash and prizes, sponsored by established companies like RedBull and
Swordsman Investment Consultancy. Grow uP is also planning a series of promotional avenues for eSports in Macau including tournaments, worldwide business networking, charity and educational events.
The rise of eSports
Pearson cited the announcement in 2014 by the Major League Gaming (MLG) - the global leader in eSport - of the construction of the first-inthe-world video game destination development on Hengqin Island as an example of growing regional interest in eSports. The arena will have 15,000 seats and is scheduled to open in 2018 as part of a project with a total investment of MOP22.21 billion, as reported by Business Daily at the time. This follows the continued expansion of electronic gaming competitions in the last few years with ‘hundreds of professional gamers spread worldwide, facing each other through game stations, computers or even cellphones battling online
Environment
Solid waste management scheme slated for release The Environmental Protection Bureau (DSPA) said it would strive to carry out a programme managing the city’s solid waste resources this year, which would include plans for drafting future policies on solid waste. According to Chinese language newspaper Macao Daily, the environmental department aims to reduce local solid waste volume and boost its recycling by economic means and implementing encouraging policies.
The DSPA claimed that it is also necessary to improve the current environmental protection infrastructure - such as facilities for solid waste disposal and to build more recycling facilities. According to the Statistics and Census Service (DSEC) the local refuse incineration plant treated a 509,111 tonnes of solid waste last year, up 11.3 per cent compared to 2014. In addition, the volume of renovation and construction waste sent to landfills surged 10.5 per cent year-on-year to 4,838 tonnes. The Bureau admitted to the news outlet that the city needs to review its current policies for managing solid waste resources as soon as possible as it perceives the volume of solid waste treated can only be reduced if the recycling of such waste increases.
Key Points Over US$578 million in sponsorships of tournaments, players and eSports-related sites Games software revenue estimated to be US$110 billion by 2018 The global eSports market is worth US$748 million and could reach US$1.9 billion by 2018 Asia leads globally with US$321 million in eSports market Worldwide viewing audience at over 188.3 million in 2015 In 2015 the North American market generated US$143 million in revenue through popular online games such as Dota, League of Legends, or Counter-Strike,’ according to an eSport GrowUP statement. Most of the revenue for eSports comes through sponsorships and
advertising of eSports tournaments and athletes, with player sponsorship and eSports-related sites exceeding US$578 million (MOP 4.61 billion). The global eSports market is estimated to be worth US$748 million (MOP 5.97 billion) and will reach US$1.9 billion (MOP 15.17 billion) by 2018, Grow uP quoted SuperData as stating. While organised online competitions have long been a part of video game culture, it wasn’t until the arrival of live video streaming services like Twitch that the e-sports trend was elevated to record numbers, a report from SuperData reveals. In 2015, there was a worldwide viewing audience at over 188.3 million and “the League of Legends Championship sold out the 40,000-seat World Cup Stadium in Seoul a year later, while drawing an online audience of 27 million,” Pearson told Business Daily, adding, “Hopefully, one day some of the casinos will organise an eSports event and the sport will become more recognised in Macau.”
4 Business Daily Wednesday, April 20 2016
Macau Opinion
José I. Duarte
Not there yet Since the beginning of the big contraction, at one moment or the other we heard someone foretelling the end of the crisis soon. Two years on such hope may, at last, get some support from the figures. There are signs that the revenue rout may be levelling out. It is too early to say that the crunch is over, but clearly the downward trend seems to have stopped. The homologous growth rate for the first quarter was negative, as has been the case since mid-2014. But it was, at around minus 13 per cent, noticeably lower than the rates seen in the previous twelve months, when rates were typically over 30 per cent. As a result, the sector’s total revenue appears to be entering a sort of steadier state, somewhere around MOP55 billion per quarter, give or take a couple of billion. Such relative stability notwithstanding, one cannot ignore the average monthly revenues in the last six months were a quarter below the corresponding figure recorded two years before. It is clear profits can still be made, even if the focus of the business becomes the so-called mass market. But margins there are likely to be smaller, and more sensitive to the composition of visitor flows and their spending profiles. Visitor trends are mixed. Figures have been relatively stable but if a trend exists it is a slow decrease in their numbers. That is not necessarily undesirable. Macau needs fewer low-spending single-day visitors and more travellers staying longer and, as a rule, showing higher and more diversified spending profiles. But attracting them may be only achievable at the cost of lower margins. On a more promising note, we can see that the average length of stay of visitors picked up a little in the last three quarters. And the number of visitors coming under the individual visa scheme seems to be stable. These features may hint at a slow change in the composition of visitor flows. However, unless a marked change in external conditions happens - and that seems unlikely at the moment – this is not yet the end of the tunnel. And if the current level of revenue, give or take a little, becomes the ‘new normal’ so many talk about some hard decisions lie ahead. Both the operators of casinos and other tourist-oriented facilities will have to further review and re-assess their investment plans and their growth assumptions. José I. Duarte is an economist and permanent contributor to this newspaper.
Management MUST students represent the city on home turf
Management competition final comes to SAR Nelson Moura nelson.moura@macaubusinessdaily.com
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he largest Strategy and Management Competition in the world is taking place in Macau for the fifth time and runs until April 20. “The event this year comes back to Macau, bringing together 150 participants hailing from the business sector or university students from 25 countries and regions. Lately, there have been a lot of student applications, but the team can be mixed managers with students - competing in a business simulator competition for three consecutive days”, Sasa Choi, Macau Business Association (AGM) Senior Executive officer, told Business Daily. The competition was created in 1980 by Portuguese simulator and model company SDG in partnership with weekly Portuguese newspaper EXPRESSO and the Macau edition is hosted by AGM - a non-profit making organisation that promotes the principles and practice of modern management. Additional sponsors include CTM and Banco Nacional Ultramarino (BNU).
‘Strong Fighter’
“This year’s Macau representatives are a team called ‘Strong Fighter’
- comprising five students from the Macau University of Science and Technology (MUST), who won the Macau qualification in January this year. Macau placed second in last year’s Global Challenge held in Prague (Czech Republic) losing to Russia, but it won the competition in 2007,” said Ms. Choi. In recent years the winning team of the international editions have hailed from Eastern Europe especially Russia and the Ukraine. The People’s Republic of China has also been crowned winner several times, Ms. Choi noted. The next Global Management Challenge will take place in Qatar in 2017. To reach the international chapter each participating team - amounting to a total of 500,000 participants internationally - must first win the Global Challenge competition in their respective country. The winning teams will attend the 2016 Macau final, where participants will be separated into four groups of up to eight teams. The International Final comprises two rounds, with the semi-final yesterday narrowing the field to eight teams and today’s final seeing all teams compete, until the two teams with the best investment performance qualify for the final round. The prize won’t be a monetary one
but a certification awarded to the best three teams.
underwriting profit from the premiums jumped by 12 per cent year-onyear to HK$70.2 million compared to HK$62.6 million in 2014. In addition, the Mainland Chinese company’s operational profit derived from the Special Administrative Region increased by 7.2 per cent yearon-year to HK$92.9 million from HK$86.7 million in 2014. According to official data of the Monetary Authority of Macau (AMCM), China Taiping’s business in Macau primarily focuses on the non-life insurance market. The data indicated that the company led the local sector by achieving total gross premiums of MOP605.2 million for 2015, accounting for 29 per cent of the sector total. ‘Macau will be well-positioned
to consolidate local business and strengthen the market linkage between domestic and overseas business. In addition, it will proactively explore new business lines to ensure the business growth and its leading position in the market,’ the company noted in its annual report. For 2015, China Taiping generated a total of HK$6.34 billion in net profit, which represents a year-on-year jump of 56.9 per cent compared to 2014. According to the report, the company’s total premiums reached HK$138.4 billion, up 24 per cent yearon-year. Meanwhile, the company’s life insurance new business value had also significantly increased by 39.1 per cent year-on-year to HK$6 billion. K.L.
Simulated reality
The rules of the strategy and management competition mandate that participants have to take charge of a simulated company and manage different aspects of a simulated business environment. Teams must make management decisions based upon a simulated company history and the world financial situation in the previous five years. It then has to outline a corporate strategy, launch its strategy by making functional decisions in different areas of the company - such as marketing, production, human resources and finance. It then submits its decision sheet to an online simulator - designed by Edit 515 Limited - which updates to reflect real world trading conditions and business risks. The aim is to present competitors with realistic and complex business scenarios including challenges and problems. The system analyses and compares the teams’ decisions and produces a management report for each team, showing detailed results in financial and operational terms. This process is repeated over five developing decision periods during the competition, simulating a year and a quarter of the companies’ activities.
Insurance
China Taiping’s local written premiums up 7.3 pct in 2015 China Taiping Insurance (Macau) Company Ltd. posted a year-on-year increase of 7.3 per cent in its direct premiums written for 2015, according to the annual report released on Monday by its parent company China Taiping Insurance Holdings Company Ltd. Last year, the local branch of the Hong Kong-listed insurer registered HK$587.9 million (US$73.2 million) in direct premiums written, whilst
Business Daily Wednesday, April 20 2016 5
Macau Pension
Private pension fund assets up 18.6 pct in 2015 Official data shows nine fund managers managed assets worth MOP14.4 billion for 40 per cent of the local workforce. Kam Leong kamleong@macaubusinessdaily.com
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ome MOP14.4 billion-worth (US$1.8 billion) of private pension fund assets were under management by nine local fund managers as at the end of last year, which represents a jump of 18.6 per cent compared to end-2014, official data released by the Monetary Authority of Macau (AMCM) reveals. As at last year-end, 968 private pension plans had been registered in Macau, of which 964 were open funds while the other four were closed funds. These schemes covered a total of 137,128 members, a year-on-year growth of 5.2 per cent, as well as around 40 per cent of the total workforce of 340,553 in the Macau Special Administrative Region.
Half from gaming industry
In fact, nearly half of the scheme members, some 65,447, were working in the local gaming industry. AMCM data shows the coverage of private pension fund in the sector reached 80.5 per cent for 81,300 employees, the highest among other local economic sectors.
In addition, private pension plans were popular among the electricity, gas and water supply sectors, as well as that of financial intermediation. The two industries respectively saw 61.6 per cent and 56.3 per cent of their workers, 862 and 6,301, contributing to the private retirement plans as at the end of last year. However, only 1.62 per cent of 27,900 workers in the field of public administration and social security
bought such private pension plans in 2015.
AIA biggest player
AIA International Ltd. continued to be the biggest player in the private pension fund market. The company was managing assets of MOP5.02 billion for 63,648 local workers under its 279 registered pension plans last year. The value of the assets managed by AIA represents an increase of
22 per cent year-on-year. In addition, it accounted for 34.9 per cent of the total assets managed by all fund managers. Meanwhile, Luen Fung Hang Life Ltd. was managing MOP3.63 billion-worth of assets for 31,297 members in its 215.5 pension plans as at last year-end. The company’s managing asset value accounted for 25.2 per cent of the market total, according to AMCM.
Retail
Bonjour, Macau pulls in HK$219 million in 2015 Health and personal care group Bonjour recorded a profit of HK$432.23 million (US$55.73 million) for the year 2015, according to a filing with the Hong Kong Stock Exchange Monday. The group operates a total of 47 stores, three of which are located in Macau, two on the Mainland and 42 in Hong Kong. The group saw retail sales in Hong Kong and Macau decline 17.5 per cent over 2015, reaching HK$2.273 billion, compared to the HK$2.756 billion registered the previous year. Profit decreased
Telecommunications
China Unicom: Q1 profit to drop 85 pct y-o-y China Unicom, despite claiming to be ‘on track’ in a filing Monday with the Hong Kong Stock Exchange, announced an 85 per cent drop in profit for the first quarter of 2016, compared to the same period last year. This amounts to some RMB480 million (US$74 million / MOP592 million), which, despite the year-onyear drop, is still an improvement on the RMB4.554 billion loss the group saw in the fourth quarter of last year. The group attributes the slowdown
primarily to ‘selling and marketing expenses’, which increased 16 per cent year-on-year, as well as ‘lower usage fee, higher energy charges and property rentals,’ among others, leading to an expected 37 per cent increase year-on-year in network, operation and support expenses. The group reported it expects a net addition of mobile billing subscribers ‘of approximately 6.61 million’ during the first quarter period, ‘successfully turning around the downward trend in mobile subscribers’ suffered in the past consecutive months. The group also predicts their mobile service revenue will grow by around 9 per cent quarter-on-quarter to reach RMB36.2 billion in the first quarter, which would represent a year-onyear decline of around 1 per cent.
82.5 per cent at HK$33.3 million compared to the HK$190.5 million of 2014. Revenue from Macau operations in 2015 amounted to HK$219.5 million, a 5.2 per cent drop compared to the previous year, while Hong Kong operations reaped HK$2.05 billion, an 18.6 per cent drop from the previous year. “The coming year will remain challenging for retailers,” said Chairman Wilson Ip Chun Heng in the filing. “We believe we can maintain our strong foothold in the region and to grow at a measured pace while Bonjour will be the trusted cosmetic retail brand for customers,” he said. The report further states that the year ahead will be very challenging because of economic uncertainty, social and political issues and intensive competition.
6 Business Daily Wednesday, April 20 2016
Macau Volunteers from the Neighbourhood Association of Macau at Clean the World soap-recycling workshop.
CORPORATE SOCIAL RESPONSIBILITY Hotel amenity recyclers to boost footprint in Asia
Cleanliness is next to godliness Clean the World highlights sustainability and corporate social responsibility in the hospitality industry to make a difference. Joanne Kuai joannekuai@macaubusinessdaily.com
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ave you ever wondered what happens to the half-used shampoo sachets and bottles and little bars of soap when you check out of a hotel? Shawn Seipler asked that question, which later led him to launch Clean the World – a social enterprise that specifically targets partially-used hygiene products that are liable to end up in landfills. “We collect and recycle soap and hygiene products discarded every day by the hospitality industry and other sectors that generate environmental waste,” Shawn Seipler, founder and CEO of Clean the World, told Business Daily in an exclusive interview. “Through the distribution of these and other donated products to impoverished people, it prevents millions of hygiene-related deaths each year, reduces the morbidity rate for hygiene-related illnesses, and encourages vigorous childhood development.” Since its creation in 2009, Clean the World’s proprietary hospitality programmes, sanitation technology, recycling, and up-cycle processing
methods have diverted over 2,500 tons of waste while simultaneously collecting, recycling and distributing more than 30 million bars of soap to children and families in need in over 100 countries.
Macau partners
Clean the World has partnered major hospitality brands - with around 4,000 hotels joining the programme globally. Here in Macau, the non-profit organisation also boosts its presence with the growing sector in the MSAR. “One of our best partners is Sands in Las Vegas, and about two and a half years ago they said, ‘We’ve got great presence in Macau; we’d like you to bring the Clean the World organisation to Asia’”, said Mr. Seipler. “After Sands, we set up the facility [recycling operation centre] which we put in Hong Kong for very strategic reasons to serve all of our hotels in the region. We were then very quickly able to add a number of great hotels in Macau to join our programme.” According to data provided by the organisation, the organisation currently has 15 partner hotels from Macau, covering more than 15,000 hotel rooms. The proprieties include those at Sands, Galaxy, MGM and Wynn Macau, as well as the Mandarin Oriental.
Good cause
“In Macau, we’ve diverted around 99,000 kilograms of waste from 2014 to March 2016,” said Mr. Seipler. “In terms of how we get the hotels to join our programme, we
basically tell them, look, there are a number of reasons why you want to join our programme: number one, it’s a green and sustainable programme – we’re diverting waste from going into landfills… Also, this programme is going to save lives. We have all the studies that show that in the developing world, they need soap.” “Additionally, the programme for the hotels is a very good HR [human resources] programme, it’s an employee morale programme. So many of the housekeepers come from the Philippines, Vietnam, Cambodia, Thailand - so many places where we oftentimes send soap to. They really appreciate the programme. They like the fact that they’re part of the programme that’s helping those local communities and in the region as well,” he added.
99,317 Kilograms Amenities recycled by Clean the World in Macau from 2014 to March 2016
The founder of the organisation explains that its primary source of funding for the operation is hotels themselves, which the organisation is “grateful” to. “Not only do they implement the programme and participate, but they are also paying a programme fee based on the size of their hotel,” explained Mr. Seipler. “The
Shawn Seipler out to Clean the World
Clean the World was founded in 2009 by Shawn Seipler (pictured). As the Vice President of Sales and Marketing for an e-commerce technology company, he travelled several days a week. The idea for soap recycling came about after he learned that the barely used bars of hotel soap he left behind each morning ended up in a landfill. That led to Clean the World, a not-for-profit corporation registered in Florida. Clean the World is a social enterprise that offers sustainable, socially responsible programmes to the hospitality and meetings industry. With the goal of preventing millions of deaths caused by acute respiratory infection and diarrhea-induced diseases, the organisation distributes hygiene products to impoverished people around the world.
programme fee covers all of the shipping, manufacturing – we have a manufacturing plant in Hong Kong; all the soap is completely sterilised and manufactured.” Mr. Seipler added that to date they have not received any funding from government agencies although “We’re applying and are hopeful that we’ll receive funding from [government] agencies in Hong Kong and Macau and in the region.”
Millennial impact
“Around 4,000 hotels have joined our programme across the globe. However, here in Asia we have 40 of those 4,000. Our footprint in Asia is not as large as our footprint is in North America - the U.S., Canada - as well as in Europe, ” said Mr. Seipler. The founder of Clean the World admits that one of the challenges in this region lies in the mindset and believes that the growing influence of the millennial generation and geo-travellers will help them enhance their footprint in Asia. “I think that the response to sustainability and social impact is more pronounced and more understood in North American and in Europe. The notion of sustainability and CSR [Corporate Social Responsibility], those are new ideas here in Asia. We’re seeing them really beginning to progress,” he added. “Of course they’ll be driven by the millennial[s]. I think they’re going to drive corporations to really care about CSR and sustainability. In turn, we’ll have more hotels joining our programme.” Mr. Seipler also disclosed to us that besides current operations in Macau, Hong Kong, Singapore and Taiwan, Clean the World is establishing itself in Thailand and Japan. In addition, the Mainland China market is also in the pipeline, with more details to be released in due course. “If everything goes to plan, we’ll begin operating in hotels in Mainland China around the June timeframe of this year. And from that point forward, we should be able to offer the programme to every hotel in Mainland China, as well,” he said.
Business Daily Wednesday, April 20 2016 7
Macau Heist Interpol helps identify suspects
Retail
Bangladesh identifies 20 foreign suspects in cyber theft
Bauhaus to close more than ten stores this year
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angladeshi investigators have identified 20 foreigners - 12 Philippine nationals and eight Sri Lankans - suspected to have been involved in the cyber heist of tens of millions of dollars from its central bank, a police officer said on Monday. The officer gave no other details, but the suspects appear to be those who received some of the payments, and not the hackers. The hackers breached Bangladesh Bank’s systems between Feb. 4 and Feb. 5 and tried to steal nearly US$1 billion from its account at the Federal Reserve Bank of New York.
Most of the payments were blocked but US$81 million was routed to accounts in the Philippines and diverted to casinos there. Another US$20 million was sent to a company in Sri Lanka but the transfer was reversed because the hackers misspelled the name of the firm, raising a red flag at the routing bank.
20 foreigners
Mohammad Shah Alam, a senior officer at the criminal investigation department of the Bangladesh police, said Interpol had helped identify the foreigners suspected to be involved in one of the largest cyber heists in history. “We have identified at least 20 foreigners with name and
full particulars who we believe were involved,” Alam told reporters. Another official on his team said the results of the investigation had been submitted to Philippine and Sri Lankan authorities. Both Alam and the other official who declined to be named said they could not provide more details about the foreign suspects because investigations were not complete.
Investigations continue
A Senate committee in the Philippines is holding hearings into how the money stolen from the Bangladesh central bank wound up with two casinos and a junket operator in the country. Sri Lanka’s criminal police department is also investigating the cyber theft, but has declined to provide any information. Alam, the Bangladesh police officer, said there was no evidence yet of anyone inside the Bangladesh bank being involved in the hacking of its computer systems. Police were investigating if service providers to the central bank had been negligent in setting up secure computer systems, he said. Reuters
Increasing rent and a slowing Mainland economy push Bauhaus to close stores. Clothing retailer Bauhaus International (Holdings) Ltd. closed six stores last year and more than ten stores are expected to close down this year, reported the Hong Kong Economic Times yesterday. Retail stores are being pressured to lay off staff, according to Wong Yui Lam, Executive Chairman of the Board and CEO of Bauhaus International (Holdings) Limited. The costs of running retail stores cannot decrease further and the business is in decline, with a significant slump apparent in the wake of Chinese New Year Mr. Wong told the media. Despite cuts in rental prices in some street stores Bauhaus stores are mainly located in shopping malls and don’t benefit from falling rent in the street stores, Wong said, observing, “Some industries can still put up with the rising rental price so they can run the business. But I cannot make a profit from it”. Mr. Wong revealed that although some stores can still make “a little profit” they have elected to close down
due to market conditions falling further. Bauhaus currently has 80 stores in Hong Kong. The CEO said that last year they were pressured to drop their sales prices and now the pressure has further increased, with expectations for business to worsen this year. In addition, due to the high cost of maintaining inventory the volume of inventory is actually only half of last year’s, according to Mr. Wong. Bauhaus’ previously published results showed sales decreasing in Macau and Hong Kong by 14 per cent during the fourth quarter of the fiscal year of 2014 and the first quarter of 2015. A.L.
“Some industries can still put up with the rising rental price so they can run the business. But I cannot make a profit from it.” Wong Yui Lam, Executive Chairman of the Board and CEO of Bauhaus International (Holdings) Limited
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8 Business Daily Wednesday, April 20 2016
Greater China In Brief Donation
Founder of Tencent to give US$2 bln in shares to charity The founder of China’s Tencent Holdings Ltd, Pony Ma, said he plans to donate 100 million company shares, worth more than US$2 billion, to the firm’s charity foundation in one of China’s biggest philanthropic pledges ever. Ma, whose fortune is estimated to be about US$18.8 billion, said the donation would go towards supporting medical, educational and environmental causes in China. China has overtaken the United States as the country with the most billionaires, according to an October survey of the super-rich, but philanthropy has been slow to take off with wealthy people preferring to keep a low profile. Auction redux
HKEx set to re-introduce closing auction Hong Kong Exchanges & Clearing (HKEx) has scheduled the re-introduction of a closing auction for July 25, three individuals briefed by the exchange told Reuters, in a long-awaited development that will bring the bourse in line with its international peers. The HKEx proposed re-introducing a closing auction, a common mechanism used to reduce volatility at the end of a trading session, in January 2015, but did not give guidance on when it would be implemented. The HKEx first launched a closing auction in May 2008 but scrapped it 10 months later after design flaws actually exacerbated price swings, leading to fears it was being manipulated.
HKEx rules
BlackRock asks Hong Kong to stop listed companies hoarding cash If the proposals are accepted HKEx would need to hold a public consultation to make the changes to the listing rules according to BlackRock executive. Eduard Gismatullin
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lackRock Inc., the world’s largest money manager, has asked Hong Kong’s regulators to force companies to return excessive cash holdings to their shareholders. The U.S. asset manager wants Hong Kong Exchanges & Clearing Ltd. to change its listing rules, said Pru Bennett, head of corporate governance in the Asia-Pacific region for BlackRock. Firms that hold more than 50 percent of their net assets in cash should be compelled to give any funds above that threshold to shareholders. The exchange’s listing rules do not set a level beyond which a company is defined to be holding excessive cash. BlackRock started its campaign after it failed to prevent a company called G-Resources Group Ltd. from selling its largest asset, a US$775 million gold
China aims to expand an existing free trade agreement with New Zealand, Premier Li Keqiang told Prime Minister John Key during a meeting in Beijing, state media said yesterday. New Zealand was the first OECD country to sign a free trade agreement with China, in 2008, and China became New Zealand’s largest export market in 2014. “China will work to expand trade within the framework of the FTA and create conditions on broadening the agreement,” the official China Daily paraphrased Li as telling Key. China will also expand cooperation overall with New Zealand, in areas such as agriculture and food safety, Li added. Public investment
Ecuador to receive US$2 bln from CDB Ecuador signed off on Monday on a credit line for US$2 billion from the China Development Bank (CDB) to finance public investment, the Finance Ministry in the quake-hit Andean country said in a statement. The first tranche, of up to US$1.5 billion, will be disbursed in the coming weeks. In parallel, state-run oil company Petroecuador reached a future oil sales deal with Petrochina “at market price,” the ministry added.
‘Doesn’t make sense’
“We’ve raised this mechanism as a possibility with the regulators in order to avoid situations like with G-Resources,” Bennett said in an interview. “To have a company listed where the majority of assets are in cash really doesn’t make sense. That’s not the type of investment we consider.” BlackRock owns about 9 percent of G-Resources, according to data compiled by Bloomberg. The asset manager opposed the company’s decision to sell the mine and use the proceeds to become a financial-services firm. It was not alone. Shareholders representing a 41 percent stake voted against the sale at a special general meeting last month. The other 59 percent voted with management. This is not the first time that G-Resources has moved from one industry
to another. Until June 2009, the company traded as Smart Rich Finance Holdings Ltd., selling electronic goods and financial information. The business changed its name after agreeing to buy the Martabe gold and silver mine in Indonesia for US$221 million.
Keeping cash
G-Resources has discussed expanding its financial-services division since late 2014, Richard Hui, an executive director, said March 8. Jackie Wah, also an executive director, declined to comment on Tuesday. If a company makes a cogent explanation for keeping cash then shareholders should approve it for a one-year period at an annual meeting, Bennett said. Otherwise, any excess above the 50 percent should be distributed in the form of a dividend, buyback, or some other way, she said. Bennett also serves as a member of the SFC’s public shareholders group. BlackRock hasn’t heard back from G-Resources about the dividend, she said, declining to say whether the firm would need to sell its shares in the mining company. Neither the Hong Kong exchange nor SFC have replied to BlackRock’s proposals, she said. “There are too many companies, including quite large ones, which are sitting on humongous piles of cash that could be better deployed,” said Webb, who is also a member of the SFC’s takeovers and mergers panel. “You need to have some threshold beyond which it is completely unreasonable to be holding so much of your shareholders’ money.” If the proposals are accepted HKEx would need to hold a public consultation to make the changes to the listing rules, Webb said. He hasn’t heard back from the exchange. Bloomberg News
M&A
Mainland investors seek control of Yum! Brands unit
Trade deal
Beijing looks to broaden FTA with NZ
mine in Indonesia, and keeping the proceeds. BlackRock is not the only investor in the former British colony to seek greater influence over listed companies. David Webb, a publisher and activist investor, is trying to make firms invest in productive projects, rather than holding lots of cash. He also campaigns against firms where the majority shareholder sells the assets to change the company’s focus to a different industry. Webb has urged the exchange’s listing committee to compel companies to return excess cash. BlackRock wants Hong Kong’s Securities and Futures Commission to back these efforts. The SFC is responsible for safeguarding the interests of investors in Hong Kong. HKEx declined to comment on BlackRock’s proposal, saying it welcomes market participants’ feedback. An SFC spokesman didn’t respond to a request for comment.
Singapore state fund Temasek Holdings Pte and Chinese investment firm Primavera Capital Ltd. are separately vying for stakes in Yum China. Jonathan Browning, Cathy Chan and Ed Hammond
China wants to get control of the most popular fast-food chain in the country. A consortium backed by sovereign fund China Investment Corp. has expressed interest in buying a majority stake in Yum! Brands Inc.’s China business, which runs more than 7,100 KFC and Pizza Hut eateries across the nation, people with knowledge of the matter said. The investor group, which also includes KKR & Co. and Baring Private Equity Asia, is conducting due diligence on the unit, according to the people, who asked not to be identified as the information is private. A deal could value Yum! China at US$7 billion to US$8 billion, the people said. Such an investment would provide Louisville, Kentucky-based Yum with cash that could be used to fund a dividend and its planned share buyback, as well as help reduce exposure to a business with shrinking market share, one of the people said. A majority purchase by the CIC consortium would give a domestic entity control of a leading fast-food chain in the Chinese market for the first time. “It’s a matter of this being the type of asset that comes up for sale very rarely and the Chinese have been looking all over the world for good buys,” Ben Cavender, a Shanghai-based analyst at China Market Research Group, said Tuesday by phone. “Consumers are the bright spot in China right now.”
The China-backed investor group is interested in buying as much as 100 percent of Yum China, two of the people said. Yum is considering all options, though it may still decide to pursue the sale of a minority stake or proceed with a previously announced tax-free spinoff of the business, according to the people. The company isn’t currently running a formal sale process, one of the people said.
State investor
Singapore state fund Temasek Holdings Pte and Chinese investment firm Primavera Capital Ltd. are separately vying for stakes in Yum China, the people said. Beijing-based private equity firm Hopu Investment Management Co., led by dealmaker Fang Fenglei, was also considering a potential investment in Yum China, though deliberations are at an early stage, a person with knowledge of the matter said last month. A representative for Yum said in an e-mailed statement the company continues to make “good progress” since it announced the separation of its China business, declining to comment further. CIC’s Beijing-based press office didn’t immediately reply to an e-mail seeking comment, while representatives for Baring and KKR declined to comment. “We decline to comment on market speculation,” Temasek said in
600 Number of outlets this year the company plans to add to its more than 7,100 restaurants across China, according to its website
an e-mailed statement. Fred Hu, the founder of Primavera, didn’t answer several calls to his mobile phone seeking comment. The performance of locally owned chains continues to trail foreign peers like KFC, which opened its first Chinese outlet in Beijing in 1987. The biggest home-grown operator, Hua Lai Shi Catering Management & Service Co., had a three percent market share last year compared to Yum’s 24 percent, according to Euromonitor International. Yum has lately seen its dominance in the world’s second-largest economy wane, as its market share in the country has fallen from 39 percent in 2010, Euromonitor data show. The company plans to add 600 outlets this year to its more than 7,100 restaurants across China, according to its website.
Activist pressure
McDonald’s Corp., Yum’s biggest rival, has also been considering introducing a partner in its Chinese operations. The company said March 31 it’s seeking franchise partners in mainland China, Hong Kong and South Korea to invest fresh capital and localize decision-making. McDonald’s plans to add more than 1,500 restaurants in those markets over the next five years, on top of the existing 2,800 outlets, which are mostly company-owned. Yum bowed to activist-investor pressure in October and agreed to separate its China business from its U.S. operations. Hedge fund manager Keith Meister, a protege of billionaire Carl Icahn, said Yum’s Asian market could be better served with a more focused business. China accounted for about 53 percent of Yum’s revenue last year, data compiled by Bloomberg show. Temasek has pursued consumer and retail deals across Asia, joining a consortium to acquire Tesco Plc’s Homeplus supermarket chain last year and buying a minority stake in Hong Kong retailer A.S. Watson & Co. for US$5.7 billion in 2014. Investments in China made up 27 percent of its portfolio as of March 2015, the second-biggest country position after Singapore, according to its latest annual report. Bloomberg News
Business Daily Wednesday, April 20 2016 9
Greater China Gold price
New yuan gold benchmark launched The fix will boost Chinese power in global bullion market. A. Ananthalakshmi and Ruby Lian
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op consumer China launched a yuan-denominated gold benchmark yesterday, as the country took an ambitious step to exert more control over the pricing of the metal and boost its influence in the global bullion market. The benchmark is a culmination of efforts by China over the last few years to reform its domestic gold market in a bid to gain a bigger say in the bullion industry, long dominated by London where the global spot benchmark price is set. As the world’s top producer, importer and consumer of gold, China has baulked at having to depend on a dollar price in international transactions, and believes its market weight should entitle it to set the price of gold. The new benchmark may not be an immediate threat to London, but with time and full convertibility of the yuan it could become widely used and help China’s efforts to boost the global use of its currency. The Chinese benchmark price, derived from a 1 kg-contract traded by 18 participants on the Shanghai Gold Exchange (SGE), was set at 256.92 yuan per gram (US$1,234.49 per ounce) in yesterday’s morning session.
The members in the yuan gold fixing process include China’s big four state-owned banks, Standard Chartered, ANZ, jewellery retailers and gold miners. The yuan price will be complementary to the prices in London and futures trading hub New York, the World Gold Council (WGC) said. “It is a stepping stone to a new multi-axis trading market consisting of London, New York and Shanghai and signals the continuing shift in demand from West to East,” WGC’s CEO Aram Shishmanian said.
Limited use
“The Shanghai gold benchmark will provide a fair and tradable yuan-denominated gold fix price ... will help improve yuan pricing mechanism and promote internationalisation of the Chinese gold market,” Pan Gongsheng, deputy governor of the People’s Bank of China said at the launch in Shanghai.
The benchmark price will be set twice a day following a few minutes of trading in each session. The London benchmark, quoted in dollars per ounce, is set via a twice-daily auction on an electronic platform. The London afternoon fix on Monday was set at US$1,234.30 an ounce.
The launch of the yuan gold benchmark does not necessarily mean all market participants in China will begin to use the price for imports, sales and other transactions. While domestic players could start to use the price immediately, foreign suppliers might have reservations. The London price has for over a century been accepted as the benchmark price. “(They) are aware it is a time consuming process. It is not going to happen in one day, one month or even one year,” a source familiar with SGE’s thinking said. “China has to show to the world over a consistent period of time that the price is open, rational, reasonable and that there is no manipulation.” Transparency in the fixing process has come under scrutiny since a scandal broke out in 2012 over the rigging of the London interbank offered rate, or Libor. The London gold fix, previously set via a teleconference among banks and facing allegations of manipulation, was replaced in 2015 by electronic auctions. Reuters
10 Business Daily Wednesday, April 20 2016
Greater China
Commodities negotiations
Major steel producers fail to reach deal on overcapacity Tensions have erupted between other producers, with Japan leading criticism of Indian minimum prices for imported steel. Philip Blenkinsop and Sue-Lin Wong
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hina and other major steel-producing countries failed to agree measures to tackle a global steel crisis as the sides argued over the causes of overcapacity, prompting U.S. criticism of Beijing’s approach and an angry response from Chinese officials. A meeting of ministers and trade officials from over 30 countries, hosted by Belgium and the OECD on Monday, sought to tackle excess capacity, but concluded only that it had to be dealt with in a swift and structural way. Washington pointed the finger at China over the failure of the talks, saying Beijing needed to act on overcapacity or face possible trade action from other countries. “Unless China starts to take timely and concrete actions to reduce its excess production and capacity in industries including steel ... the fundamental structural problems in the industry will remain and affected governments - including the United States - will have no alternatives other than trade action to avoid harm to their domestic industries and workers,” U.S. Secretary of Commerce Penny Pritzker and U.S. Trade Representative Michael Froman said in a statement.
Asked what steps the Chinese government would take following the unsuccessful talks, China Commerce Ministry spokesman Shen Danyang told reporters yesterday: “China has already done more than enough. What more do you want us to do?” “Steel is the food of industry, the food of economic development. At present, the major problem is that countries that need food have a poor appetite so it looks like there’s too much food.” The OECD said global steelmaking capacity was 2.37 billion tonnes in 2015, but declining production meant that only 67.5 percent of that was being used, down from 70.9 percent in 2014. Britain in particular has felt the squeeze as its largest producer Tata Steel has announced plans to pull out of the country, threatening 15,000 jobs. Last week, more than 40,000 German steel workers took to the streets to protest against dumping from China. China, the world’s top steel producer, has been ramping up exports of steel in recent years, as it battles to steer its economy into services-led growth and away from traditional manufacturing, while keeping employment levels high. China’s steel exports jumped 30 percent from a year ago to 9.98 million tonnes in March despite a slew of anti-dumping measures globally. But blaming China for woes in the global steel industry is simply a lazy excuse for protectionism, and such finger-pointing will be counter-productive, China’s official Xinhua news agency said in a commentary on Monday.
“It’s more been their competitive advantage into Asian countries which has really driven that rise in exports,” said Daniel Hynes, a commodity strategist at ANZ Bank. “I think that will continue and will keep those export levels relatively high despite the pressures we’re seeing now.”
Deep divisions
At a news conference following Monday’s meeting, deep divisions between China and other producers were clear.
Key Points Belgium OECD meeting fails to tackle global steel glut Washington says Beijing must act or face possible trade action China says has cut capacity, criticisms “lazy protectionism” China exports a function of competitive advantage – analyst Cecelia Malmstrom, the EU’s trade commissioner, insisted governments should not grant subsidies that keep unviable plants running and should subject state-controlled firms to the same rules as the private sector. China’s assistant commerce minister, Zhang Ji, said China had cut 90 million tonnes of capacity and had plans to reduce it by a further 100150 million tonnes. “That is only 10 million tonnes less than the capacity in Europe,” he said, although critics say it would still have a capacity of around 1 billion tonnes, far in excess of its needs. China’s main iron and steel body
has previously acknowledged that the flood of Chinese steel product exports is damaging to the country’s efforts to gain market economy status from the European Union - an important goal for Beijing as the domestic economy slows. Li Xinchuang, the vice secretary of general of the China Iron and Steel Association, rejected the U.S. criticisms. “It is a totally pointless complaint from the U.S. and it’s biased against China,” Li told Reuters by phone. “China’s steel industry is market-based and Chinese steel products have good quality, low price and good service. The complaint on government subsidies is also crap.” Tensions have erupted between other producers, with Japan leading criticism of Indian minimum prices for imported steel at a recent World Trade Organisation meeting and Japan and South Korea coming under fire for exporting steel products cheaper than they sell them at home. In a step by Beijing to reduce trade frictions with Washington, it has agreed to scrap some export subsidies on a range of products including steel the United States said last week. But there were signs the spat was spreading. The United Steelworkers (USW) said on Monday it has filed a case with U.S. regulators seeking to stem a “flood” of aluminium imports the trade unions says have damaged U.S. producers and threatened jobs. The case is the latest move by the U.S. aluminium industry to try and get authorities to investigate the impact of rising imports, particularly from China. Reuters
Business Daily Wednesday, April 20 2016 11
Asia Monetary policy
Bank of Korea holds rates The bank had lowered its growth forecast for this year to 2.8 percent from 3.0 percent. Christine Kim
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outh Korea’s central bank kept interest rates untouched yesterday for a 10th straight month, and its governor stressed that the current rate level supports economic growth, although a lowered growth forecast for this year kept expectations of a rate cut alive. The Bank of Korea (BOK) committee held its base rate steady at 1.50 percent, as expected, while observing the fallout from a parliamentary election earlier this month and policy changes in other countries. Governor Lee Ju-yeol said later the bank had lowered its growth forecast for this year to 2.8 percent from 3.0 percent. The inflation forecast for 2016 was also downgraded to 1.2 percent from 1.4 percent. “First quarter growth was weaker than we expected. Global growth that dragged down trade in addition to low oil prices also contributed to the lower forecast,” Lee told a news press conference. “However, our stance is that the economy will show steady improvement after the second quarter.” Lee stressed throughout the news conference that current interest rates supported
Key Points BOK holds interest rates at 1.50 pct (Reuters poll 1.50 pct) Analysts still see rate cut happening, key is timing BOK revises 2016 GDP forecast to 2.8 pct from 3.0 pct BOK Gov: Q1 weaker than expected, but steady growth seen past Q2
the economy, but he noted there was a limit to the degree which interest rate measures could work, a point he also stressed at last week’s G20 meeting of finance ministers and central bank governors in the United States. “The troubles we face are more from structural than economic factors and it is the BOK board’s firm stance that fiscal and monetary policy should work together (to overcome them),” he said. Lee may have painted a sunnier view of the economy going forward, but analysts said the on-going recovery was still too fragile and needed more help, preferably from monetary policy. “TheBOKisweighingwhento cutrates.Ithinkitwill(cut)when globalmarketssettledownmore and when the bank can confirm it will have policy cooperation (from the government),” said Peter Park, economist at NH Investment & Securities. “It’s just a matter of time. I still feel there is a high chance we will see a cut in the second quarter.” A steady majority of analysts has largely seen the BOK as likely to cut rates in the nearterm to lend the torpid economy a further boost before additional rate hikes in the U.S. make it more difficult for the South Korean central bank to act. Exports, the country’s traditional engine of growth, have been falling since last year while the recovery in domestic consumption has softened after surging late last year. The bank may also change its tune after four board members are replaced later this week. The incoming members have been seen as doves by some market participants, which in turn supported rate cut views. Reuters
Bank of Korea Governor Lee Ju-yeol is deep in thought during a key rate setting session of the Monetary Policy Committee at the central bank in Seoul, yesterday.
Money authority
Japanese Gov’t taps Shinsei Bank executive for central bank board New-elected Masai said she supports governor’s style of shocking markets with unexpected policy changes. Sumio Ito and Leika Kihara
Japan’s government has nominated Takako Masai, an executive at Shinsei Bank Ltd and an advocate of aggressive monetary easing, to join the Bank of Japan’s (BOJ) policy board. Masai, a 51-year-old executive officer of the Japanese commercial bank and an expert on currency markets, would replace former commercial banker Koji Ishida, whose term expires in June, the government said in a statement yesterday. The appointment means the BOJ’s nine-member board will once again include a female, having been left with none after former International Monetary Fund economist Sayuri Shirai’s term ended in March. The departure of Ishida, who voted against the BOJ’s decision to deploy negative interest rates in January, would give Governor Haruhiko Kuroda a stronger grip of the board if he were
to expand monetary stimulus further. Market players welcomed the choice of Masai, saying she will have a balanced approach on monetary policy and bring to the central bank expertise on financial
markets and banking affairs. “The government seems to have taken a balanced approach with this appointment, as it could have chosen someone with more radical views on monetary policy,” said Masamichi Adachi,
Bank of Japan headquarters in Tokyo.
senior economist at JP Morgan Securities. As a currency expert at Shinsei, Masai had in the past indicated support for the BOJ’s aggressive monetary easing, including the introduction of negative interest
rates, which she says has helped the economy and stabilised financial markets. “The dollar/yen and stock prices would have fallen more had the BOJ not acted in January,” Masai told Reuters in February. “The key channel currency markets look at in terms of monetary policy is how much real interest rates fall,” she said, a view in line with the BOJ’s current approach to assessing the impact of policy on borrowing rates. Masai also said she supports Kuroda’s style of shocking markets with unexpected policy changes, which she attributes to the governor’s previous experience as a top currency diplomat overseeing Japan’s exchange rate policy. “Mr. Kuroda’s approach is that of a former currency diplomat,” she said. “You don’t offer articulate guidance when you do currency intervention.” Reuters
12 Business Daily Wednesday, April 20 2016
Asia
Gender gap
Singapore loses to less developed peers in board diversity Malaysia saw the largest year-on-year increase in female board representation to 12.5 percent from 8.3 percent. Jonathan Burgos
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ingapore, Southeast Asia’s most advanced economy, is falling behind its less developed peers when it comes to women breaking the glass ceiling at companies. The island nation is ranked near the bottom on female representation on company boards in the Asia-Pacific region, behind only South Korea and Japan, according to a Korn Ferry study of 2014 annual reports in 10 economies. Women made up 7.7 percent of the boards of the largest publicly listed companies in Singapore, 2.6 percent in
South Korea and 3.3 percent in Japan, the executive search and organizational advisory firm said in a press statement. In contrast, Malaysia saw the largest year-on-year increase in female board representation to 12.5 percent from 8.3 percent, while companies in India reported an increase to 8.6 percent from 7.3 percent. “Singapore in general believes more strongly on meritocracy and there are other priorities superseding gender diversity,” Alicia Yi, managing director for board and CEO services at Korn Ferry, said in Singapore yesterday. “But if it’s through meritocracy, you would think that there would be more women that you’d see naturally on company boards.” Government policy or support help, such as targets, quota or disclosure requirements, according to Korn Ferry.
Malaysian target
Malaysia is the only country in the study to have set a target of 30
percent female representation by 2016, and provided active support for companies to reach the goal, Korn Ferry said. In India, the law requires all listed companies to have at least one woman on the board, it said. Australia is the best performing country in the region with 21.9 percent female board members among companies listed on the nation’s stock exchange. Aided by gender diversity policies in its corporate governance council reporting rules, the country is the only one in the survey where more than 20 percent of board members are women, almost double what it used to be in 2011, according to Korn Ferry. “Singapore needs to set guidelines and targets,” said Marleen Dieleman, associate professor at National University of Singapore’s business school. “They need to make a political decision to do something more substantial.”
Other takeaways from the study: - Companies with at least 10 percent female board members delivered a 14.9 percent return on equity in 2014 compared to 12.6 percent for those without. - Women make up 10.2 percent of all directors in the 10 Asia-Pacific economies studied, up from 9.4 percent in 2013 and 8.0 percent in 2012. - The Asia-Pacific region is behind economies such as the U.S., the U.K. and the European Union in terms of female representation on boards. At the current pace of growth, the region wouldn’t catch up for another decade. - All-male boards are no longer a majority in the region, falling to 39 percent in 2014 from 53.2 percent in 2012. In the Financial Times Stock Exchange 100 companies, there are no longer any all-male boards. The study examined the largest 100 publicly listed companies’ 2014 annual reports in Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Singapore and South Korea. Korn Ferry collaborated with the National University of Singapore on the study. Bloomberg News
Snap election
Australia’s Turnbull bets his political future on a difficult budget He expects to deliver all that without growing a national deficit already expected to hit US$29.1 billion in fiscal 2016 and last another five years. Byron Kaye and Ian Chua
Australian Prime Minister Malcolm Turnbull yesterday gambled his political fate on a budget that he hopes will shore up his dwindling appeal with voters without blowing out the country’s budget deficit. With an early election in July a near certainty, Turnbull also hopes to silence increasingly loud accusations of dithering after his
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government suggested several new revenue-raising measures only to rule them out later. Hikes on tobacco tax, closing tax loopholes for wealthy pensioners and limiting corporate tax havens are among the cash-raising measures the conservative leader has left open to possibility, according to local media reports. Under Australian electoral rules, Turnbull was free to call a vote anytime until January 2017, but he has been anxious to revamp a Senate dominated by unaligned minor parties and the centre-left opposition Labour party. After the Senate voted down a controversial labour reform bill on Monday, he used a rare constitutional mechanism, only allowed in Australia after the upper house rejects a bill twice, to dissolve both houses of parliament and put them to a vote.
In the meantime, he will try to deliver a budget that can make good on promises to guide the country through a once-in-a-generation commodities downturn and into a new phase of tech-savvy entrepreneurship. He expects to deliver all that without growing a national deficit already expected to hit A$37.4 billion (US$29.1 billion) in fiscal 2016 and last another five years. “This is his chance to say ‘I do have policies and we do have a plan’,” said Annette Beacher, Chief Asia-Pacific Macro Strategist at TD Securities. “He’s been losing ground in the polls because everyone thinks he doesn’t have a plan, so this is big for Turnbull.”
Six leaders in six years?
A campaign effectively lasting 74 days is double Australia’s conventional five-week window and adds to a sense of
instability that has been battering the country’s Federal government for half a decade. Before Australia’s last general election in 2013, another former prime minister, Julia Gillard, announced a September poll date in January of that year, 228 days in advance and lasting a quarter of her three-year term. If Turnbull loses on July 2, Labour opposition leader Bill Shorten will be the country’s sixth leader since 2010 - and the sixth to be introduced to U.S. President Barack Obama and British Prime Minister David Cameron.
Key Points Australia leader plans May 3 Budget Expects election to be held on July 2 Move is intended to clear deadlock in hostile Senate
Nevertheless, business groups said the gambit may stabilise sentiment. “The idea of minor parties holding government to ransom does not create the best climate in which business can operate,” Australian Chamber of Commerce and Industry spokeswoman Patricia Forsythe said, referring to the Senate deadlock. Council of Small Business Australia CEO Peter Strong said that, while his members face a longer election campaign, “we’ve got a budget. The community gets to see what they’re doing... and then we see the opposition’s response”. Paul Bloxham, HSBC’s chief economist of Australia & New Zealand, said Turnbull has made clear the government won’t be delivering a lot of sweeteners. “It is going to be a budget that focuses on consolidating the budget position,” he said. Reuters
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Business Daily Wednesday, April 20 2016 13
Asia Easing wave impact
Asia’s rich urged to buy dollars A gauge of 10 Asian currencies excluding the yen has fallen 0.1 percent this month.
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oney managers for Asia’s wealthy families are telling clients to buy U.S. dollars as a rally this year in regional currencies begins to sputter. Credit Suisse Group AG is advising its private-banking clients to bet the greenback will gain versus a basket of peers that includes the South Korean won, Taiwan dollar, Thai baht and Philippine peso. UBS Group AG said investors should buy the currency against the Singapore dollar and yen. Stamford Management Pte, which oversees about US$250 million for Asia’s rich, urged clients to buy the U.S. dollar each time it falls below S$1.35. The Monetary Authority of Singapore’s unexpected easing on April 14 has fuelled speculation that other policy makers, concerned about a worsening global economic outlook, will follow suit. A gauge of 10 Asian currencies excluding the yen has fallen 0.1 percent this month. The Bloomberg-JPMorgan Asia Dollar Index climbed 1.9 percent in the first three months of the year, the first gain in seven quarters, as traders adjusted bets on the timing of U.S. interest-rate increases. “We see good opportunity now to hedge against U.S. dollar strength after the strong rally in Asian currencies in the first quarter,” said Koon How Heng, senior foreign-exchange strategist at Credit Suisse’s private banking and wealth management
unit in Singapore. “There are risks that other Asian central banks may follow up with some more easing in the second half if their respective growth outlooks deteriorate further.”
Yuan, Fed
The prospect of renewed weakness in the Chinese yuan and two interest rate increases by the Federal Reserve in the second half of the year will boost the greenback, Heng said.
“Dollar strength will continue to prevail for the next few months, which would be negative for emerging-market currencies” Jason Wang, Chief executive officer of Stamford Management
Singapore’s central bank said last week it would seek a policy of zero appreciation against an undisclosed basket of currencies, returning to a neutral stance it adopted in the global financial crisis in 2008. It cited “a less favourable external environment” in its policy statement, two days after the
International Monetary Fund warned of the risk of negative shocks to the global economy. Policy makers in New Zealand, South Korea and Taiwan will probably cut interest rates in the coming months to revive growth, said Mansoor Mohi-uddin, a strategist at Royal Bank of Scotland Group Plc in Singapore. The Bank of Japan is set to increase asset purchases and lower the deposit rate further when it sets policy on April 28, he said.
Regional easing
“The MAS move raises the risk other central banks become more willing to ease policy as Singapore’s economy is seen as a bellwether for Asia,” he said. The U.S. dollar will advance to S$1.42 by the first quarter of 2017 and 122 yen in 12 months, said Kelvin Tay, regional chief investment officer at UBS’s wealth management business in Singapore. “The rally in Asian currencies was overdone,” Tay said. “It wasn’t on the back of really strong fundamentals coming through.” The greenback is set to gain to S$1.40 versus the Singapore dollar in the next few months, said Jason Wang, chief executive officer of Stamford Management. He had advised clients to buy the U.S. currency when it declined toward a nine-month low of S$1.3415 in March, saying that it was unlikely to fall below S$1.35 again this year. Bloomberg News
In Brief Automobile technology
Hyundai Motor, Cisco to team up
Hyundai Motor said yesterday that it will partner with Cisco Systems to develop Internet-connected car technology, part of the automaker’s push to develop “high-performing computers on wheels”. Auto and tech firms are increasingly forming alliances to expand services that hook cars up to Internet, particularly as the race to develop self-driving cars heats up. Hyundai said Vice Chairman Chung Eui-sun met Cisco Chief Executive Chuck Robbins in Seoul and agreed to co-develop in-vehicle network technology for high-speed transfer of large amounts of data. Energy sector
Chevron signs up gas deal with Alinta Chevron has agreed to sell 20 petajoules a year of gas from its Wheatstone project to Alinta Energy in Western Australia starting in 2020, securing a customer for more than a quarter of the domestic gas output from Wheatstone. The contract, lined up at a tough time for producers looking to seal long-term deals amid a gas supply glut, is for seven years, Chevron said yesterday. “This agreement is an important step in Chevron’s rapidly expanding domestic gas business in Western Australia,” Chevron Australia managing director Roy Krzywosinksi said in a statement. Forex
Japan’s Finance head to tackle rapid FX moves
Money measures
India’s Rajan says FX intervention to continue to reduce volatility India’s central bank governor said he was closely watching inflation developments as well as monsoon rain forecasts in terms of impact on monetary policy. Gertrude Chavez-Dreyfuss
The Reserve Bank of India will continue to use currency intervention to reduce volatility in the country’s exchange rates, the bank’s governor, Raghuram Rajan, said on Monday. “There is a school of thought that says: Let the exchange rate move wherever it will,” said Rajan, at the Inaugural Kotak Family Distinguished Lecture held at Columbia Law School in New York. “That’s something we could do,” Rajan said. “But in emerging markets,
with institutions not as strong as industrialized countries, you find there are collateral effects of both the capital moving in and going out.” India will intervene in the currency market when there’s a sustainable risk in global markets and the country sees a flood of capital coming in, he said. “We really don’t want the currency to move only as result of capital flows,” Rajan said. “We would like it to be more focused on the underlying fundamentals of trade and services.” India’s foreign exchange reserves swelled to a record high of $360 billion for the week ended April 1, largely on account of the central bank’s dollar purchases to rein in the rupee’s strength as foreign funds poured into Indian financial markets. Rajan confirmed that India’s reserve build-up was a result of the central bank’s intervention. “So we let the exchange rate move, we never stand in the way, but we pick up some as flows come in,” he added.
India’s central bank governor said he was closely watching inflation developments as well as monsoon rain forecasts in terms of impact on monetary policy. “As evidence of inflation and monsoon build one way or the other, this will give us more information about the direction of monetary policy,” Rajan said. “We’re still in an accommodative mode. Precisely when and by how much we will raise interest rates, we will have to see.” Earlier this month the Reserve Bank of India cut its key lending rate by 25 basis points to 6.5 percent. India’s monsoon in the past two years has been poor, resulting in some drought, but the La Nina weather phenomenon this year is expected to produce a better monsoon. A third consecutive drought would have meant a spike in food prices, plunge in purchasing power of the rural economy, and slower economic recovery overall. Reuters
Japanese Finance Minister Taro Aso said yesterday that he would take “various steps” against excessive currency moves, while declining to comment on the possibility of intervention to stem a rise in the yen. “Rapid currency moves, whether up or down, are unwelcome and stable currencies are most desirable,” Aso told reporters after a cabinet meeting. “We will take various measures against a rapid yen rise or fall.” Restructure
Qantas cuts H2 domestic capacity growth plan Australia’s Qantas Airways Ltd said on Monday it was cutting planned domestic capacity growth in the second half due to slower than expected demand, sending its shares on their biggest one-day fall in more than two years. In a statement to the Australian Securities Exchange, Australia’s flagship carrier said it was cutting domestic capacity growth to between 0.5 percent and 1 percent for the second half, from 2 percent previously, due to “changed demand conditions”.
14 Business Daily Wednesday, April 20 2016
International In Brief Global warming fight
Top investors urge leaders to sign Paris climate accord Global firms responsible for tens of trillions of dollars in investments yesterday urged the world’s leading economies to sign the landmark Paris accord to limit global warming adopted at a UN summit in December. Seven organisations that represent over 400 investment funds sent a letter to the leaders of G20 nations calling on them “to sign the Paris Agreement on April 22nd at the United Nations in New York.” “We believe that the Paris Agreement is an historic breakthrough that delivered an unequivocal signal for investors to shift assets towards the low-carbon economy,” it says. Private poll
German investor sentiment rises in April Investor confidence in Germany rose for the second month in a row in April as favourable economic news from China helps stabilise sentiment in Europe’s biggest economy, a leading survey showed yesterday. The investor confidence index calculated by the ZEW economic institute increased by 6.9 points to 11.2 points in April, the think tank said in a statement. Analysts had projected a slightly smaller rise in the index to around 8.0 points this month. “Surprisingly positive economic news from China seem to have improved the sentiment amongst financial market experts,” said ZEW’s head of international finance and financial management, Sascha Steffen. Tax haven
Panama to adopt tax reporting standards Panama will adopt international tax reporting standards and participate in the automatic exchange of tax information by 2018, President Juan Carlos Varela told Japanese media yesterday, as his country came under a harsh spotlight in the wake of revelations arising from the “Panama Papers” controversy. “To prevent the illegal use of Panama’s financial systems, we would like to cooperate with other countries to improve transparency,” Valera told broadcaster NHK yesterday, during a visit to Tokyo. Members of the OECD will visit Panama as early as this week to negotiate specific methods for sharing information. Eurozone goals
Spain revises 2016 deficit target up Spain has raised its public deficit target this year from 2.8 percent of GDP to 3.6 percent, the economy ministry said yesterday, meaning it will once again overshoot the limit demanded by Brussels. The government already missed its target last year, with the country’s public deficit coming in at 5 percent of gross domestic product, far higher than the 4.2 percent initially predicted by the ruling conservatives. This was the eighth consecutive year that Spain overshot its fiscal target, making it one of the worst performers in the eurozone.
ECB survey
Eurozone bank sector on mend Credit standards on loans to households for house purchases tightened.
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urope’s battered financial sector is showing further signs of mending and banks are increasingly competing for custom by easing credit standards, a key European Central Bank survey showed yesterday. The ECB said its quarterly bank lending survey (BLS) showed banks are easing credit standards for loans to enterprises, an encouraging sign, since the chronic weakness of credit activity in the euro area has previously been blamed for the absence of any noticeable recovery in the 19 countries that share the single currency.
“In response to the April 2016 bank lending survey (BLS), euro area banks reported a further net easing of credit standards on loans to enterprises in the first quarter of 2016,” the ECB report said. “Competitive pressures remained the main factor behind this easing.” By contrast, credit standards on loans to households for house purchases tightened, the ECB said. At the same time, demand for loans is also increasing, the ECB found. “Net demand for loans continued to increase across all loan categories, especially for housing loans,” the survey showed. “The low general level of interest rates and favourable housing market prospects contributed most to the increase in housing loan demand. For loans to enterprises, the rise in
demand can be attributed to financing needs for working capital, the low level of interest rates, M&A (mergers and acquisitions) activity and fixed investment.” The eurozone central bank has previously complained that its ultra-easy monetary policy had not been feeding through into the real economy, because banks are not passing the money on in loans, particularly to the small and mid-sized enterprises (SMEs) which are the region’s economic backbone. In an attempt to address this, the ECB stepped up its controversial programme of sovereign bond purchases, known as quantitative easing or QE, in March and also made ultra-cheap loans available to banks on condition they lend it on to the real economy. AFP
Financial risks
U.S. regulators concerned about leverage in large hedge funds The Financial Stability Oversight Council also took a light stance on addressing liquidity. Lisa Lambert and Ross Kerber
The heads of the major U.S. financial regulatory agencies on Monday raised concerns about a concentration of leverage in large hedge funds and called for a working group to collect and analyse data on the privately held firms in a report on asset management. But the Financial Stability Oversight Council (FSOC), tasked with finding and reducing systemic risk, did not designate any asset managers as “systemically important” - a move that could ease concerns that have gripped the fund industry for years. In a public meeting late on Monday, the regulatory group, including the U.S. Treasury secretary and chair of the Securities and Exchange Commission (SEC), updated its two-year-old review of risks to the U.S. financial system posed by hedge, mutual and other funds’ liquidity, leverage and redemptions. In the update, it set the stage for an analysis of hedge fund risk, noting the council was “constrained by limitations in the available data.” The working group, largely made up of staffers of member agencies,
will report by year-end on items including counterparty exposures, margin investing, trading strategies and possible standards for measuring leverage. The Managed Funds Association, the hedge-fund industry’s trade group, said it hopes “to have a constructive dialogue with this newly formed group.” It added its industry is smaller than many other parts of the market, and hedge funds’ leverage is, on average, lower than that of banks. The council also took a light stance on addressing liquidity and redemption risks, saying it would wait to see how the SEC implements funds rules proposed nearly a year ago. The council will “review and consider whether risks to financial stability remain,” it said, adding it “will take into account how the industry may evolve in light of any regulatory changes.” It also suggested certain steps that “should be considered” in how funds handle illiquid assets, redemption costs, and financing. The SEC proposed requiring mutual funds and exchange-traded funds to set up programs for managing liquidity risks and broaden disclosures about their liquidity and redemption practices. Regulators and investors have been concerned that a market sell-off could result in a situation where some funds and ETFs could not sell assets quickly enough - and at sufficiently high
prices - to pay all investors seeking to redeem shares. At Monday’s meeting, SEC Chair Mary Jo White said that “although there is overlap,” FSOC’s update “should not be read as an indication of the direction that the SEC’s final asset management rules may take.” The council’s mission dates to the Dodd-Frank financial reform law of 2010, which designated some large banks as “systemically important,” a regulatory label indicating they are “too big to fail.” That designation can trigger capital requirements and other regulatory oversight. So far regulators have faced difficulty in designating nonbank firms as one of the Systemically Important Financial Institutions, or SIFIs, which is also allowed under Dodd-Frank. On March 30 a U.S. district judge rescinded the designation for major insurer MetLife Inc, which had argued that the FSOC used a secretive and flawed process in determining it could harm the whole system if it went into distress. The U.S. government has appealed that decision. U.S. asset managers including BlackRock Inc and Vanguard Group, which collectively have about US$18 trillion, have fought for years to avoid being designated as SIFIs. Industry representatives have argued their products invest directly and do not use the type of leverage that caused problems during the financial crisis. It is also unclear what type of government involvement a designation would invite. Vanguard, BlackRock and Fidelity declined comment on the FSOC’s report. Reuters
Business Daily Wednesday, April 20 2016 15
Opinion Business Wires
The Age The Reserve Bank of Australia has supported the market’s view that no rate cut is imminent, but underscored a sense of growing discomfort with the value of the Australian dollar. The Australian currency was trading at the highest level since mid-2015 when the board of the RBA last gathered. “Members noted that an appreciating exchange rate could complicate progress in activity rebalancing towards the non-mining sectors of the economy,” the minutes of the RBA’s April 5 monetary policy meeting reveal. RBA governor Glenn Stevens and the board signalled they would be keeping an eye on employment trends.
The Times of India Small and payments banks have not yet devised a business model which can be termed viable, SBI chairperson Arundhati Bhattacharya said on Monday. “Neither the payments banks nor small finance banks seem to have as yet devised a business model that can be said as viable,” said Bhattacharya, whose bank has tied up with Reliance Industries for a payments bank venture. Addressing a banking seminar organised by industry lobby IMC here, she added, “...a mobile banking customer, who is also a customer for payment services, will be less free to migrate to a competition for mobile services.”
Oil producers get worst possible outcome, destroy remaining credibility
Jakarta Globe German Chancellor Angela Merkel praised Indonesia’s developments and achievements while meeting with President Joko Widodo in Bundeskanzleramt, Berlin, on Monday (18/04). “It is a challenging duty for a country to develop itself, especially for Indonesia with 250 million citizens and 17,000 islands. I am amazed by Indonesia’s achievements. Surely, we can discuss many issues together,” Merkel said in an official statement. Prior to the visit, Joko said the two will focus on efforts to increase and strengthen partnerships in vocational education in a number of sectors.
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t was the worst possible outcome for oil producers at their weekend meeting in Doha, with their failure to reach even a weak agreement showing very publicly their divisions and inability to act in their own interests. Expectations for the meeting had been modest at best, with sources in the producer group predicting an agreement to freeze output. But even this meagre hope was dashed by Saudi Arabia’s insistence Iran join any deal, something the newly sanctions-free Islamic republic wouldn’t countenance. From a producer point of view, an agreement including Iran that shifted market perceptions on the amount of oil supply available would have been the best outcome. The acceptable result would have been an agreement that froze production at already near record levels, with an accord that Iran would join in once it had reached its pre-sanctions level of exports. What was delivered instead was confirmation that the Saudis are prepared to take more pain in order not to deliver their regional rivals Iran any windfall gains from higher prices and exports. The meeting in Qatar on Sunday effectively pushed a reset button on the crude markets, putting the situation back to where the market was before hopes of producer discipline were first raised. What happens now is that the market will have to continue along its previous path of re-balancing, without any assistance from the Organization of the Petroleum Exporting Countries (OPEC) or erstwhile ally Russia. Brent crude fell nearly 7 percent in early trade in Asia on Monday, before partly recovering to be down around 4 percent. The potential is for crude to fall further in coming sessions as long positions built up in the expectation of some sort of producer agreement are liquidated in the face of the reality of no deal. It’s likely that recriminations will follow for some time among the oil producers, with the Russians and Venezuelans said to be annoyed at what they see as the Saudi scuppering of a deal that had almost been locked in.
Clyde Russell Reuters columnist.
for the grouping to reach some sort of agreement. For the time being, OPEC’s credibility is shot, and won’t be restored by even a future agreement as it will take actual, verifiable action to convince a now sceptical market. However, as the events in Doha showed, the Saudis are unlikely to agree to anything in the absence of Iranian participation, and that is also equally unlikely. While the Mexican standoff between the OPEC rivals continues, the oil market will have to continue re-balancing through other paths. What re-balancing has been achieved so far hasn’t really involved OPEC or Russia, with those countries pumping at, or close to, record levels in recent months. Rather, supply from other producers has gradually fallen, such as Canadian oil sands and U.S. shale. This process is likely to continue to prove fairly slow, meaning that crude markets are probably in for an extended period of more than adequate supply. Of course, demand is the other side of the equation, and here again the process is fairly gradual, although more constructive, especially if China’s economy is regaining some momentum as suggested by recent data, and India’s fuel demand continues to motor along. But for now, the market will take the collapse of any producer discipline, coupled with the obvious tensions between the Saudi and Iranian/Russian camps as a sign that oil is once again in bearish territory. Reuters
“… the oil market will have to continue rebalancing through other paths”
The Phnom Penh Post Australian authorities have expanded the scope of an on-going investigation into Australian mining firm OZ Minerals over claims it engaged in bribery in Cambodia in 2009, the firm said in its latest annual report. The ASX-listed miner said the Australian Federal Police (AFP) was taking a closer look at its former Cambodian operations as part of an investigation into the 2009 buyout of a partner in the company’s former joint venture gold exploration project in Mondulkiri province. The Australian mining company first came under scrutiny in 2011.
Future deal undermined
This will make it harder for any future agreement, with the OPEC meeting on June 2 the next chance
16 Business Daily Wednesday, April 20 2016
Closing Freight figures
Mainland’s Q1 transport investment up 7 pct
China reported 254.6 billion yuan (US39.35 billion) in fixed investment in highways and waterways in the first quarter (Q1), the transport ministry said yesterday. A total of 4.87 billion trips were made and 8.79 billion tonnes of freight were transported via railways, highways and waterways in Q1, Ministry of Transport official Zhang Dawei said. The number of journeys was down 1.8 percent from the same period last year, and freight tonnage rose 2.1 percent year on year. In Q1,
the cargo-handling capacity of major ports increased 1.7 percent year on year to 2.76 billion tonnes, and the container throughput increased 1.9 percent to 50 million standard units, Zhang said. Logistics business volume surged more than 50 percent in the first three months, he said, compared with the same period last year. Zhang expects the current momentum in freight transportation to remain throughout the first half of 2016 while passenger traffic growth will remain subdued as a result of industrial restructuring. Xinhua
Rebalancing investment
Chinese firms delay or cancel US$10 billion bond issuance Analysts said that cancellations likely represent a recalibration of risk appetite as investors assess rising defaults and shifting monetary policy.
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hinese firms have delayed or cancelled at least 68.8 billion yuan (US$10.63 billion) of bond and other fixed income issuance so far in April, as investor concerns over debt defaults mount. Around 70 firms have delayed or cancelled issues, many in excess capacity industries including cement and mining, according to data compiled from China’s two main clearinghouses for the interbank market and the interbank market operator. An increasing number of Chinese firms in old industrial sectors have encountered repayment difficulties in the past six months as economic growth slows and the government pushes on with painful structural reforms. That has led to higher rates of cancelled bond issues as investors shy away from those sectors. After China Shanshui Cement’s default in November, which helped push low-rated bond yields higher, firms cancelled or postponed more than 40 billion yuan of bond issuance. Although the number of cancellations is striking, analysts said that it likely represents a recalibration of risk appetite as investors assess rising defaults and shifting monetary policy, rather than a fundamental turn in the market as a whole. “You’re seeing a little more credit defaults, including from (stateowned enterprises), which is making the market nervous,” said Zhou Hao, senior emerging market economist at Commerzbank in Singapore. “The central bank also looks less aggressive right now, which could trigger a little bit of deleveraging and
a widening of spreads, especially for credit bonds. From the central bank’s point of view, it’s justified, because it needs to see how inflation develops, but the bond market is kind of a victim of this wait-and-see policy.” Chinese fixed income yields, including treasury rates, have moved up noticeably since the beginning of the month in what traders and analysts say is a reaction to signs of strong supply growth and reduced expectations of further monetary easing, in addition to a rash of defaults by industrial firms including Dongbei Special Steel Group Co Ltd. Benchmark five-year treasuries are up 17 basis points since the beginning of April, although sharp rises following last week’s strong March activity data appear to have levelled off. Corporate spreads over treasuries have also risen, although they remain well below levels from the third quarter of 2015 for most issues above high-yield grade. A separate report from the online financial magazine Caixin, using only data from the market operator, found that close to 60 billion yuan of debt had been cancelled or delayed in April. Reuters
Key Points Around 70 firms have delayed or cancelled issues Many in excess capacity industries including cement, mining Chinese bond yields up sharply in April Traders flag improving economic data, credit risks
Monetary authorities
M&A
Regional expansion
Negative rates force central Australian cattle firm agrees BOC to set up local branch banks to take more risk buyout by China group in Brunei Negative interest rates in the developed world have forced central bank managers to take more risks as they strive to maintain the value of the trillions of dollars worth of assets they hold in reserves, a survey showed yesterday. The poll of 77 managers, responsible for reserves worth US$6 trillion, also showed some 32 central banks are now invested in China’s renminbi, up from 20 a year ago, before the decision to add it to the IMF’s SDR basket of reserve currencies. The negative rates prevalent in Japan and a number of European markets has forced managers to withdraw capital from some currencies and move into markets they previously would have tended not to invest in, the report showed. Some 80 percent of those surveyed by publisher Central Banking Publications said the trend of negative rates had had an impact on reserve management strategy. One European reserve manager quoted by the survey said that central banks had reduced their exposure to currencies including the euro, the Swiss franc, and Swedish and Danish crowns as part of the response to negative rates. Reuters
Australian cattle producer S. Kidman & Co has attracted its second public foreign buyout offer in six months, agreeing a deal with a Chinese-led group that will need the regulatory approval that was denied its previous suitor amid a public outcry over assets passing into non-Australian hands. A consortium involving China’s Hunan Dakang Pasture Farming Co Ltd and Shanghai CRED Real Estate Stock Co Ltd agreed to buy Kidman for A$370.7 million (US$288 million), the companies said yesterday. The 117-year-old target is Australia’s fifth-largest cattle producer. But Australian Treasurer Scott Morrison last November blocked a previous foreign buyout of Kidman and its 101,000 square kilometres of farmland. Investment in Australian farm assets by Chinese players has been expected to rise since the countries entered a US$100 billion free trade agreement last year. The move by Dakang, worth US$2.9 billion by market value, would give a first toehold in Australia, though it already owns land in New Zealand. Reuters
Brunei’s central bank, the Autoriti Monetari Brunei Darussalam (AMBD) said yesterday that approval has been granted for Bank of China (Hong Kong) Limited (BOCHK) to establish a branch in Brunei. In a press release on its website, AMBD said that the BOCHK is incorporated in Hong Kong and is owned by the Bank of China Group (BOC). It further explained that the BOC Group has been listed as the fourth largest bank worldwide in terms of Tier 1 Capital and the seventh largest bank in terms of assets, according to The Banker in 2015. AMDB views the establishment of a banking presence by BOCHK in Brunei as a positive boost for the local economy, in line with AMBD’s strategic plan to welcome reputable financial institutions to operate in Brunei, according to the press release. The approval of BOCHK is seen as one of Brunei’s urgent measures to anchor expectations of foreign investors, who have been increasingly concerned about the economic and investment environment after two global banking giants closing or cutting their banking business in Brunei. Xinhua