Malaysia finally appoints new monetary head to replace lauded Zeti Akhtar Central bank Page 11
Thursday, April 28 2016 Year V Nr. 1031 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Joanne Kuai
www.macaubusinessdaily.com
Employment
PMI forecast
Retail
Page 3
Page 9
Page 5
Unemployment rate of local residents up 0.1 pct vis-à-vis Q1
A private poll hints that activity in manufacturing sector likely expanded in April
Coach earnings surge 27 pct in Q3
Watchword: Caution
Treasury Macau’s Fiscal Reserves’ investments returned MOP620 mln in Q1. An annualized return rate of 0.6 pct. While in fixed-income investments, money market placement, currency exposures, income has been registered, the gov’t lost MOP1.22 bln in the equity market. By end‑March, total Fiscal Reserves posted a quarterly increase of 26 pct to MOP436 bln. Page 5
Industry picking up
Escape velocity Gaming Galaxy’s posted Q1 adjusted earnings before interest, taxes, depreciation and amortization rose 6 pct to HK$2.4 bln. Analysts project HK$2.47 billion profit. It was the first y-o-y profit gain since the 1 pct increase of Q3 2014. Page 6
Secondary sector China’s major industrial firms’ profits rose 11.1 pct y-o-y in March. Up from 4.8 pct growth in Jan-Feb, official data showed yesterday. The profits of major industrial companies with annual revenues of more than 20 mln yuan totalled 561.24 bln yuan in March, says the National Bureau of Statistics. Page 8
Law Page 3
22° 27° 22° 25° 22° 26° 24° 26° 24° 27° Today
PetroChina Co Ltd
Sat
21,361.60 -45.67 (0.21%)
+3.38%
HSBC Holdings PLC
+0.77%
Wharf Holdings Ltd/The
-1.83%
Hang Lung Properties Ltd
-2.37%
Ping An Insurance Group Co
+1.08%
China Mobile Ltd
+0.60%
Cheung Kong Property
+1.04%
China Construction Bank
+0.60%
Galaxy Entertainment Group
-2.13%
BOC Hong Kong Holdings
-3.05%
Tingyi Cayman Islands
-2.37%
Want Want China Holdings
-3.56%
Source: Bloomberg
HK Hang Seng Index April 27, 2016
Fri
I SSN 2226-8294
Sun
Mon
Source: AccuWeather
Raising the bar Private notary candidates will have to rack up a minimum five years experience of practising law in Macau. Executive Council proposes new requirements in a bid to raise service quality in Macau.
2 Business Daily Thursday, April 28 2016
Macau Subsidies
Macau University of Science and Technology building.
Science & Technology Fund forks out MOP15.3 mln in Q1
Subsidies Half of the total amount goes to six units
Macao Foundation disburses subsidies of MOP304 mln in Q1
M
MUST Foundation’s subordinating bodies, which include Macau University of Science and Technology, University Hospital, and The International School of Macao. Meanwhile, Kiang Wu Hospital Charitable Association received some MOP36.6 million from Macao Foundation for the reconstruction of the primary and kindergarten campus of the Association’s Keang Peng School. In addition, another tertiary education institute - University of Saint Joseph - was given a subsidy of MOP19.6 million for its 2014/2015 and 2015/2016 annual working plans as well. In terms of local associations, Macao Foundation handed out some MOP21.6 million to the Federation
acao Foundation disbursed total subsidies of MOP304 million (US$38 million) to approximately 500 organisations, education institutes, associations and individuals during the first three months of the year. Nevertheless, subsidies received by six units accounted for half of the total granted amount, according to yesterday’s Official Gazette. The biggest beneficiary of the list is Macau University of Science and Technology (MUST) Foundation, which was approved subsidies amounting to MOP50 million during the first quarter. The Gazette indicated the amount is to subsidise the 2015/16 annual plans of the
PT AD 2016-04-27.pdf
1
26/4/16
of Trade Unions during the three months, including some MOP769,200 for the union’s event of distributing gift bags for Chinese New Year, whilst the remaining MOP20.8 million was for the association’s working plans for this year. In addition, Kai Fong Neighbourhood Association received a total of MOP16.8 million-worth of subsidies in the period, of which MOP801,721 was for the Association’s event of giving out gift bags during the Spring Festival. The People’s Alliance of Macau, backed by legislator and businessman Chan Meng Kam, was also approved subsidies amounting to MOP10.5 million from the Foundation during the quarter, according to the Official Gazette. K.L.
The Science and Technology Development Fund (FDCT) splashed out on subsidies amounting to MOP15.3 million (US$1.9 million) for 13 local education units and associations for their science and technology studies and popular science education during the first quarter of this year. According to the Official Gazette published yesterday, the Fund allocated a total of MOP13.7 million to subsidise local science projects conducted by four institutes or associations; namely, Kiang Wu Hospital Charitable Association, University of Saint Joseph and Macau University of Science and Technology Foundation as well as the University of Macau. In particular, the University of Macau was the biggest beneficiary for this batch of subsidies approved by the Fund. The institute was given a total of MOP8.6 million, which accounted for 56.2 per cent of the total granted, for its 19 science and technology projects during the three months. In addition, Macau University of Science and Technology Foundation received subsidies
2:54 PM
Período de recolha de opiniões: 26 de Abril a finais de Junho
“Plano Quinquenal de Desenvolvimento da RAEM (2016-2020) Projecto” Primeira parte
Cidade turística de lazer Cidade propícia para habitar Cidade saudável
Sete objectivos principais
M
Y
CM
MY
CY
CMY
K
3. Formação gradual de um sector alargado de turismo de lazer Elevação constante da qualidade de vida dos cidadãos
5. Desenvolvimento contínuo da cultura e da educação Resultado manifesto na protecção ambiental
7. Elevação da eficiência de governação e reforço da construção
4. 6.
Oito grandes estratégias de desenvolvimento e sua implementação
Aperfeiçoamento do mecanismo de gestão articulada, coordenar a construção do “Centro” e da “Plataforma”
Intensificar o conceito de desenvolvimento por inovação e formar um esquema de cooperação para a inovação.
Melhoramento no sistema de políticas públicas, elevar a eficácia das políticas de macro perspectiva.
01
Criar a nova imagem de “Macau cultural” e elevar a competitividade da cidade.
02
08 Oito grandes
estratégias de 03
07 desenvolviment
o e sua implementação04 06
Aceleração da construção da cidade inteligente, promover a fusão entre a indústria e a internet.
05
Planeamento científico Integração intensiva Distribuição adequada
Concretizar a estratégia de “prosperidade de Macau através da Educação” e de “construção de Macau com os talentos”.
Aperfeiçoamento do equipamento básico de software e de hardware e elevar a qualidade dos serviços da área do turismo.
Construção da Zona A das Novas Zonas Urbanas
Metro ligeiro
Obras da quarta ligação
Elevação da competitividade da população, promoção da mobilidade horizontal e a ascensão profissional dos trabalhadores Garantia do acesso ao emprego pelos residentes Atribuição de serviços de apoio aos jovens na procura de emprego e no empreendedorismo Aceleração da criação do regime de acreditação profissional
Ascensão profissional
Apoio às camadas mais vulneráveis
2.
do Estado de Direito
Implementação da estratégica de cooperação regional intensificada, e integração no desenvolvimento nacional.
Planear o aumento dos recursos de habitação pública Construção de 28.000 habitações públicas na Zona A das Novas Zonas Urbanas Construção de 4.000 habitações públicas em cinco locais, após ajustes Fomentar o processo da renovação urbana Atribuição de habitação a cerca de 3.800 agregados familiares entre 2015 e 2018
Promoção das infra-estruturas
Novos avanços na optimização da estrutura industrial
Telefone： 853-2882 3610 Fax： 853-2882 3426 Endereço： Caixa Postal 1201
Introdução
Cidade inteligente Cidade cultural Cidade com boa governação
1. Desenvolvimento estável da economia global
Apresentação da opiniões via internet: www.cccmtl.gov.mo Email： message@gep.gov.mo Morada： Rua do Desporto, no 185 - 195 , Taipa, Macau
Para concretizar o objectivo do desenvolvimento económico e do melhoramento das condições de vida da população, o Governo da RAEM elaborou o seu primeiro Plano Quinquenal de Desenvolvimento, um plano geral que define os projectos relacionados com a vida da população e o desenvolvimento urbano. Nos próximos dois dias, será apresentado à população o conteúdo do Plano. Reserva de terrenos, construção de habitações públicas Maior selecção de emprego numa economia diversificada
Perspectivas Construção do Centro Mundial de Turismo e Lazer
C
from the Fund amounting to MOP4.1 million for 8 projects, which represents 26.7 per cent of the total. The Fund gave out some MOP1.58 million-worth of subsidies to nine local high schools to conduct popular science classes or activities, including some MOP185,800 awarded to Macau Association for Promotion of Science and Technology. For this sector, Pui Cheng Middle School Macau and The Workers’ Children High School of Macau were granted some MOP466,050 and MOP425,535 during the first quarter of this year for their different popular science classes and activities, respectively. K.L.
Complexo hospitalar das Ilhas
Comporta
Construção da cidade inteligente Pretender concluir, em 2017, o estudo do plano para o desenvolvimento da nova era de Megadados Prestação de serviços de Triple play Turismo inteligente, tráfego inteligente, saúde inteligente e Governo inteligente
e.Gov
Protecção ambiental Promoção da redução de emissão a partir da fonte, “poluidor-pagador” Promoção do desenvolvimento da água reciclada Promoção da utilização e desenvolvimento de gás natural Promoção da utilização de veículos eléctricos Definição dos critérios, a gestão e os regulamentos sobre as fontes de poluentes
Educação Inovação do pensamento sobre a educação e o seu conteúdo Reforço da avaliação global do ensino não superior Promoção do desenvolvimento do ensino técnico-profissional e do ensino especial Definição de planos a curto, médio e longo prazo para a resolução das escolas situadas em pódios Elevação da capacidade de inovação, formação de quadros inovadores Promoção da cooperação entre as indústrias, as instituições de ensino superior e os centros de pesquisa, articular com a diversificação adequada das indústrias Fomentar jovens de instituições de ensino superior que reúnam os requisitos para estagiarem e intercambiar no exterior Incentivar o regresso de talentos a Macau Definição do plano de formação de quadros profissionais de língua portuguesa e bilingues na áreas linguística, financeira, jurídica e contabilística
Redução do ciclo de pobreza entre gerações através da educação Aperfeiçoamento do mecanismo para reajustar o valor do Risco Social Implementar atempadamente medidas destinadas a aliviar as dificuldades dos grupos vulneráveis Concluir e implementar o Plano de Desenvolvimento Decenal dos Serviços de Reabilitação de 2015 e 2025 Melhorar os benefícios e subsídios e o regime de apoios aos portadores de deficiência Aumentar o número de vagas dos serviços de reabilitação Aumentar a proporção dos autocarros sem barreiras
Enfrentar o envelhecimento da sociedade Incentivar os casais a terem mais filhos Elevar a competitividade e a capacidade produtiva através da educação Aumento do número total de vagas em creches Incentivar os idosos a participarem nos serviços sociais
A B
Cuidados de Saúde
Construção da cidade saudável Aperfeiçoar a rede de infra-estruturas do sistema de saúde Aperfeiçoar incessantemente o sistema de saúde constituído pelos estabelecimentos de saúde pública, não lucrativos e privados, os três principais suportes no sistema de saúde Consolidar e melhorar o sistema da rede de cuidados de saúde primários Aperfeiçoar o sistema de assistência médica para os residentes de Macau Aperfeiçoar o regime de credenciação e inscrição para o exercício da profissão de cuidados de saúde Observar o princípio dos três níveis de prevenção Desenvolver plenamente as amplas funções do desporto, elevar a qualidade física, o nível da saúde e de vida da população
Vamos continuar amanhã…
澳門特別行政區政府 Governo da Região Administrativa Especial de Macau
Business Daily Thursday, April 28 2016 3
Macau Human Resources
Wong Kin, Chao Ka Cheong appointed Fire Services Bureau vice directors
The two deputy vice heads of the Fire Services Bureau, Wong Kin and Chao Ka Cheong, have been officially appointed as vice directors of the security department since April 20, the Official Gazette announced yesterday. According to the dispatch by the
Secretariat for Security, the terms of the two officials will both last for one year. The two firemen are chief fire officers of the body. Mr. Wong has served the fire department since 1997, whilst Mr. Chao joined the Bureau in 1987 and served in the Academy of Public Security Forces between1996 and 2013 before returning to the fire department in October 2013.
Unemployment rate
Stable labour market Unemployment rate of local residents up 0.1 pct vis-à-vis Q1. Annie Lao annie.lao@macaubusinessdaily.com
T
he city’s latest unemployment rate remains at 1.9 per cent, with the underemployment rate 0.5 per cent, remaining stable as in the previous quarter, according to the latest employment survey for January to March 2016 from the Statistics and Census Service (DSEC). The survey shows that while the general unemployment rate remained unchanged as in the previous
quarter, the unemployment rate of local residents reached 2.7 per cent, edging up 0.1 percentage point The total labour force in the city was 396,600
with its participation rate 72.3 per cent, including the employed population of 389,000, falling 1,400 compared to the previous quarter.
Law
Increasing demand for notary services Candidates for private notary positions will have to have at least five years of experience as a lawyer The Executive Council of Macau has proposed a revision to the requirements for law practitioners to become a private notary, including a mandatory five-year period of experience in the MSAR for any possible candidates. “In order to meet the increasing need of notary services and improve the service quality, we need to raise the requirements for private notaries to adapt,” Executive Council spokesperson Leong Heng Teng said at a press conference in Government Headquarters. Until now, according to current notary law, any lawyer practising law may apply for a private notary position. One of the proposed changes
Total employed people decreased by 4,100, including 2,900 people who worked in the construction industry. For those aged between 55 and 64, it shows a drop of 1,200 people. The total unemployed population was 7,700 people with an increase of 300 people compared to the previous period. Fresh labour force entrants seeking their first job accounted for 6.3 per cent of the total unemployed, down 0.6 per cent compared to the previous quarter. Analysed by industry sector, total employment in construction accounted for 48,200 people, down 2,900 people quarter-to-quarter, while those in restaurants and engaged in similar activities accounted
for 27,700, up 1,500 people quarter-to-quarter. Furthermore, the hotel industry and gaming & junket industry posted a decrease in employment.
Median monthly wages unchanged
The median monthly wages for overall employed people was around MOP15,000 (US$1,877) for the first quarter of this year, which remained stable quarter-to-quarter. With those working in gaming & junket activities and construction, the median monthly employment wage was MOP19,500 and MOP15,000, respectively. In addition, the median wages of employed local residents remained unchanged at MOP18,000 compared to the previous quarter.
Public tender
is a mandatory five consecutive years of experience in the MSAR, or as a public notary for the same period of time without any record of disciplinary cautions by the Macau Lawyers Association (AAM) for any lawyer considering applying for a notary graduate course. “The necessity of notary services is increasing, and so far the five-year limit hasn’t been demanded but we believe this can improve the quality of the service,” Leong Heng Teng told reporters. Lawyers who already have experience as public notaries will only be required to present an application since their “judicial knowledge and specific formation” will be equivalent to the required performance of private notary duties, spokesperson Leong Heng Teng said. The Executive Council also proposed an increase in the number of classes on the subject of notary and registry from 50 to 75 on the training course for private notaries. Once the course is complete, the lawyer would have as long as three years to function as a private notary before the qualification of the course expires. Currently, there are 57 notaries in functions. Of
317 registered lawyers, 203 lawyers have practised law in the MSAR for at least five years, and will thus be eligible for this position if the new proposals are accepted. “We don’t believe all of them will apply but the current process will be able to respond to notary demands” Leong stated. AAM indicated the need for notary services in October last year. They said at the time that private notaries “were having problems meeting the increasing demand for the market’s necessities”, news agency Lusa reported. A problem they explained was the increase in the use of Mandarin in legal contracts while the large majority of notaries in the MSAR speak Portuguese. The AAM also warned at the time of the risk of a possible excess of notary professionals which could lead to “unregulated competition” due to no limitation. The Executive Council hasn’t stated when the law changes will be enforced, only that it would be sent immediately to the Legislative Assembly (AL), where a limit of private notary vacancies will be discussed, without a guarantee it will be approved “this year, or next.” N.M.
Public tenders for Cinematheque. Passion A public tender for the threeyear rental of Cinematheque. Passion – located near the Ruins of St. Paul’s - is open until June 25, with participants able to inspect the location on May 18 at 3:00pm, according to the Official Gazette. Interested parties should submit proposals along with a MOP180,000 deposit, although rental prices for the property have yet to be defined. A 35 per cent weighting will be attributed in the evaluation of the project to the price, with a 45 per cent weighting given to the threeyear operational proposal with a focus on the first year of operations. A further 20 per cent will depend upon professional experience of the company and individuals acting as operational director and consultant.
A separate public tender - for the four-year rental of C-Shop, located on Praia Grande next to New Yaohon - is also now underway, with participants able to inspect the location on May 4 at 3:00pm, according to the Official Gazette. Proposals must be submitted before June 13 by 5:00pm along with a MOP20,000 deposit, with the applications to be opened on the 15th of the same month. The shop, which has had many occupants over the years, is reserved for the ‘exploration of a commercial shop for original cultural and creative products from Macau.’ The base price for the month rental is not yet defined. However, the bidding price will be considered as a factor which accounts for 20 per cent of the whole appraisal process. Other evaluative factors include the business plan (20 per cent), products – including diversity, artistic and cultural spin and contribution to the promotion of Macau’s cultural and creative brands (20 per cent), design of the interior (20 per cent) and curriculum and experience (20 per cent).
4 Business Daily Thursday, April 28 2016
Macau Opinion
Ashley Sutherland-Winch
Out of the Box The technology world and social media internationally are very excited about the recent release of the Microsoft HoloLens that started shipping this week. This device joins the Google Glass and other smart wearable devices in the market offering Augmented Reality (AR). AR is a blending of virtual reality and real life allowing users to be able to interact with virtual content in the real world and be able to distinguish between the two where Virtual Reality (VR) is about the creation of a completely fabricated world designed in a way that the user cannot tell what is real and what is not. The goal of each technology is to immerse the user, but both systems complete this task in different ways. AR allows users to continue to be in touch with the real world while interacting with virtual objects around them and in opposition VR isolates the user in a made up world. Macau offers visitors the ability to explore fantasy worlds in our city by offering a break from the real world and in a sense a new reality during their time in town. I am eager to see how the growing interest in Augmented Reality will affect our city and how it can ultimately benefit business in a very cool new way. Imagine the ability to walk into a restaurant and use an AR device that allows you to choose a menu item and then make additions or deletions to the dish as you please or enter a hotel room with blank walls and use an AR device that adds a wall size TV, art masterpieces and even a flawless view of Macau out of the window on a foggy day. The possibilities are endless for our technology savvy businesses to cater to the growing interest of the consumer. AR also offers opportunities to companies to provide high-tech step by step instructions and tutorials for employees, and even to the customer to some extent if they provide service or support in their store. Ultimately, AR allows companies to present engaging content to their target market which can result in higher sales and reach. Augmented Reality is going to be an exciting new trend to watch in our market that can only enhance our already magical city and I’m looking forward to seeing how our companies start using this out of the box technology in Macau. Ashley Sutherland-Winch is a Marketing and Public Relations Consultant and frequent contributor to this newspaper.
HZMB
Indeed drifting away
T
he Highways Department of Hong Kong admitted on Tuesday that the landing point of the artificial island accommodating its border-crossing facilities for the Hong Kong-Zhuhai Macau Bridge has moved by up to 2.9 metres. According to Hong Kong media reports, the authority released a statement on late Tuesday night, indicating the landing point at the northwest corner of the reclamation had recorded movements of between one to 2.9 metres. Hong Kong’s senior media worker, Howard Winn, reported at the beginning of this month that the construction of an undersea tunnel for the cross-boundary bridge
has been halted for a few months following “the landing point on the artificial island moving some 3.5 metres”. Mr. Winn also claimed that parts of the island, especially the seawall, had been moving due to attempts to “speed up the settlement of the reclamation”. ‘After assessments, reclamation consultants believed the seawall’s condition was stable ... The Highways Department will continue to closely monitor the situation,’ South China Morning Post quoted the department as saying in the statement. The Highways Department also told media that the completion of the Hong Kong part of the Delta bridge is still slated for the end of next year,
whilst that for the undersea tunnel linking to Tuen Mun is expected by the end of 2018. Last September, movements of up to 6 to 7 metres were recorded in different parts of the same reclamation, the Hong Kong department has admitted. The artificial island, which occupies some 150 hectares, will accommodate Hong Kong Boundary Crossing Facilities that serve as a transportation hub and provide clearance facilities for goods and passengers. The completion of the super bridge was first scheduled for the end of this year but Hong Kong put back the date until the end of 2017 last year following delays on its part. K.L.
Rent Rent increase proposed to be capped at 29.25 pct
Mulling the rent adjustment mechanism The sub-committee deliberating the bill hope to hand it for all legislators to vote on in August. The Third Standing Committee of the Legislative Assembly (AL) is currently discussing the proposed law to introduce a rental control mechanism. One member of a nine-member legislators group proposing the bill suggested that the annual increase in rent should be capped at 29.25 per cent, according to local media reports. The draft suggests setting the cap based on a coefficient scheme of the city’s consumer price index (CPI) plus the prevailing conditions of the real estate market. However, the committee deliberating on the bill stated that according to the Civil Code interest
rates cannot be charged above three times the legal rate, which now stands at 9.75 per cent, hence an increase in the rate should not be higher than 29.25 per cent. On November 12 last year, the Legislative Assembly passed the first reading of the bill, which suggests the Chief Executive would be entitled to set the rate for a cap on rent increase. In addition, it is suggested an arbitration body be established in order to mediate conflicts between landlords and tenants, Business Daily reported at the time. It was also suggested that in the case of stores and lawyer’s offices, rental contracts could have a minimum duration of three years, while habitations would keep the current two-year limit, TDM Radio reported. Cheang Chi Keong, president of the AL’s Third Standing Committee, indicated that the proposed cap will help control rising rents, and protect low income families. “The principle is to have a mechanism and now it is up to the Committee to define how that mechanism will be created,” the legislator stated. The legislator also indicated that without control some store rents
could increase 50 per cent, therefore establishing a 29.25 per cent cap is a good compromise between controlling rents and letting the market find its own level. N.M.
Business Daily Thursday, April 28 2016 5
Macau Treasury Gov’t down MOP1.22 bln in equity market in Q1
Fiscal Reserve investment returns MOP620 million in Q1 The gain represents an annualised rate of return of around 0.6 per cent for the period.
M
acau’s Fiscal Reserve ended the first quarter of 2016 with a total investment return of approximately MOP620 million (US$77.6 million), representing an annualised rate of return of around 0.6 per cent for the period, according to a statement released by the Monetary Authority of Macau (AMCM) yesterday. AMCM indicates that following the approval by the Legislative Assembly of the 2014 government budget balance, MOP90.29 billion was transferred to Macau SAR’s Fiscal Reserve during February 2016 in accordance with the prescribed law. As at the end of March 2016, the total amount of the SAR’s Fiscal Reserve recorded a quarterly increase of 26 per cent to MOP436.01 billion (preliminary figure), which comprised MOP132.82 billion as the Basic Reserve and MOP303.19 billion as the Excess Reserve.
As at the end of March 2016, the investment portfolio of the Fiscal Reserve comprised global exposures to fixed-income, equity and money markets, while currency allocation mainly covered the USD, HKD and CNH/CNY.
Market breakdown
According to AMCM, the quarterly performances of the investments in individual financial markets show mixed results. The fixed-income market, with proven credit quality of assets in the corresponding portfolio and support for bond prices through lower expectations of a U.S. rate hike and sufficient supply of global liquidity recorded an income of about MOP0.60 billion in the first quarter. AMCM indicated fixed-income investments continued to be one of the main sources of income for the Fiscal Reserve. Money market placements, in line
with the transfer of a 2014 government budget surplus to the Fiscal Reserve by law within the period, were deployed into proper tenors in a timely manner. The quarterly interest income was about MOP0.58 billion.
1.22 Billion patacas Losses of Fiscal Reserve investment in equity market in Q1
Among the currency composition of the Fiscal Reserve, the USD weakened on expectations of the rate hike deferral by the U.S. Federal Reserve. The CNY/CNH slightly strengthened due to positive effects of economic stabilisation measures implemented by the central government. The overall revaluation gain
from currency exposures amounted to about MOP0.66 billion for the first quarter of 2016.
Narrowed loss
Equity markets experienced great volatility in the first quarter with a plunge followed by a significant rebound. Along with a stabilising global market, equity investments in the Fiscal Reserve have recovered a majority of the loss in the earlier period of the quarter. At the end of March, the quarterly loss of the equity portfolio narrowed to approximately MOP1.22 billion. ‘The AMCM will continue to strictly comply with the investment philosophy that emphasises safety, efficiency and prudence, according to the statutory requirements and policy functions of the Fiscal Reserve, with an objective to optimise the overall investment management of the Fiscal Reserve,’ reads the statement.
Retail
Coach earnings surge 27 pct in Q3 Despite an improved performance, the handbag maker has announced global jobs cuts. Kam Leong kamleong@macaubusinessdaily.com
L
uxury handbag maker Coach Inc. reported net income of US$112 million (MOP896 million) on a GAAP (generally accepted accounting principles) basis for its third fiscal quarter ended March 26, which represents an increase of 27.2 per cent year-on-year, according to the company’s filing with Hong Kong Stock Exchange on Tuesday. During the period, the company saw its total net sales jump 11 per cent yearon-year to US$1.03 billion. Of the total, those generated by its Coach brand increased year-on-year 3 per cent to US$954 million, while international sales of the brand also rose 5 per cent year-onyear to US$448 million. ‘Total China sales rose 2 per cent in constant currency and declined two per cent in [US] dollars with double-digit growth and positive comparable store sales on the Mainland offset in part by continued weakness in Hong Kong and Macau,’ the company noted. As at the end of the fiscal quarter, Coach had a total of 181 directly-operated retail stores in Hong Kong, Macau and Mainland China.
Meanwhile, the company’s shoemaking business under the brand Stuart Weitzman reached net sales of US$79 million during the three months. “We are very pleased with our third quarter performance, highlighted by a return to growth for the Coach brand, driving overall operating profit growth. Our performance was in line with expectations,” Victor Luis, Chief Executive Officer
(CEO) of the company, said in a statement.
Job cuts
Nevertheless, the CEO announced in the same statement that the company is cutting jobs globally and reorganising its management, which will incur pre-tax of US$65 million to US$80 million. ‘The Company has announced a series of operational efficiency initiatives focused on creating an agile
and scalable business model...which are associated with organizational efficiency, primarily related to the reduction of corporate staffing levels globally, as well as accelerated depreciation,’ the CEO said. In addition, the handbag and shoemaker is anticipating a reshuffle in its management: Andre Cohen is being promoted to President of North America and global market, whilst Todd Kahn is
being promoted to President, Chief Administrative Officer and Secretary, with its Pres ident and Chief Operating Officer, Gebhard Rainer, and President of global market ing, David Duplantis, leaving the group. “These actions will allow us to emerge as a brand-led company with fewer layers, larger spans of responsibility and a consistent global voice across merchandising and marketing,” Mr. Luis stated.
6 Business Daily Thursday, April 28 2016
Macau Gaming
Interim gaming review to be released early next month Public opinions will be collected following the release of the interim gaming review. Annie Lao annie.lao@macaubusinessdaily.com
T
he interim gaming review report will be released early next month, following which public opinions will be collected, according to Lao Pun Lap, director of the SAR Government’s Policy Research Office, as reported by local public broadcaster Chinese radio TDM yesterday. Mr. Lao says he hopes the review will help the six gaming operators develop strong principles of providing services of integrity and quality in the development of the gaming industry. Mr. Lao made the comments whilst attending talk show programme ‘Macau Forum’ yesterday. The SAR’s first master development plan - the draft of which was revealed yesterday - indicates that the government expects the non-gaming revenues of gaming operators’ to comprise nine per cent or more of their total portfolios by 2020. Lei Ngan Leng, Advisor to the Office of the Chief Executive, who also attended the talk show, said the government hopes all six gaming operators would be able to achieve the target. Ms. Lei said the government
would supervise gaming operators in pushing their non-gaming sectors which will be evaluated in terms of both quantity and quality. In addition, she said the government would push forward necessary policy support in order to achieve such an objective.
families to come to Macau, which can also help boost overall gaming revenues. “Non-gaming elements and gaming elements are both interrelated; the gaming operators realise the need to increase non-gaming elements [which are] both wanted by the government and society. Most importantly, the market needs this adjustment,” said Lionel Leong Vai Tac , the Secretary for Economy and
Finance, after attending a public event in Hengqin yesterday. He added that following the release of the review report there would be no formal public consultation although the government would continue to gather opinions from members of the public. The interim gaming review is a report describing fact and not for a consulting purpose as Paulo Martins Chan, Director of the Gaming Inspection and Co-ordination Bureau (DICJ) explained. “After releasing the review, we will collect public opinions regarding the report and future development,” said Mr. Chan. Mr. Chan said that detailed discussions about increasing the threshold for gaming promoters [junkets] to enter the market have not yet started.
Collecting public opinion
There are various ways to collect public opinions for Macau’s first FiveYear Development plan, said Lao Pun Lap. The government actively invites all sectors of the community to submit public opinions on the plan. In addition, individuals and groups can submit their opinions via websites, telephone, by post or in person, according to Mr. Lao. The overall Five-year plan is different from other public plans; thus, more time is needed than other general public consultations, which usually last for a period of 30 days, Ms. Lei explained. The more appropriate methods of collection public opinions will be developed based on the overall responses gathered, she said.
Non-gaming
Increasing non-gaming offerings can attract more middle class people and
Gaming
Galaxy posts first profit gain since 2014 on new resorts Analysts say the new resorts helped the operator gain market share and improve its shift toward the mass-market as well as non-gaming business. Galaxy Entertainment Group Ltd. posted the first quarterly profit gain in more than a year as its new resorts drew in more casual gamblers and tourists. First-quarter adjusted earnings before interest,
taxes, depreciation and amortization rose 6 per cent to HK$2.4 billion (US$309 million), the Hong Kong-based company said Wednesday. Analysts projected profit of HK$2.47 billion, based on the median of five estimates in a
Bloomberg News survey. It was the first year-on-year profit gain since the 1 percent increase in the third quarter of 2014. The “solid” performance of Galaxy’s new projects “should drive best-in-class
profit momentum,” DS Kim, an analyst at JPMorgan Chase & Co. in Hong Kong, wrote in a note April 18. The new resorts helped the operator gain market share and improve its shift toward the mass-market as well as non-gaming business, he said. An anti-graft campaign and slowing economy in China have discouraged high-rolling VIP gamblers to Macau, the world’s biggest gambling hub, where gross gaming revenue has fallen for 22 straight months. Galaxy, along with with the Macau units of Wynn Resorts Ltd. and Las Vegas Sands Corp., are looking to attract tourists to new family-friendly resorts.
Galaxy was unchanged at 10:44 a.m. in Hong Kong trading at HK$28.20 a share. The benchmark Hang Seng Index gained 0.1 per cent.
Casual gamblers
The casino operator reported mass market revenue from tables attracting casual gamblers was at HK$5 billion, a 17 per cent increase from a year earlier and a 2 per cent rise from last quarter. Revenue contributed by highend gamblers saw a 17 per cent year-on-year decline, as the company continues to allocate resources to the mass market and non-gaming, the company said in a statement. Galaxy’s Macau Phase Two and Broadway Macau resorts, the first new projects in Macau in three years, began operating in May last year and features a 3,000-seat theater to broaden its appeal to families and tourists. The two properties have boosted Galaxy’s exposure to the mass-market segment. The Macau government has encouraged casino operators to diversify their businesses and forecasts an increase in the proportion of casinos’ non-gaming revenue to 9 per cent by 2020 from 6.6 per cent in 2014, according to the city’s 5-year development plan. Other casino operators are also looking for new ideas to diversify their business from high-end gambling. Melco Crown Entertainment Ltd. held its Hollywood-themed Studio City opening last October. The US$4.1 billion Wynn Palace will offer air-conditioned cable car rides and Sands China Ltd’s Parisian will feature a half-size Eiffel Tower replica when they open later this year. Bloomberg
Business Daily Thursday, April 28 2016 7
Gaming Wealth Gaming rises and commodities fall on Rich List
Bet365 founding family’s fortune soars 60 pct worth rise last year by £110 million to £2.78 billion, Play tech founder Teddy Sagl – who reached the top 50 for the first time at 44th place – due to his £2.5 billion. Betfred’s Fred and Peter Done came in at 82nd with a combined £1.3 billion, calvinayre reports.
3.8 Billion pounds Approximate combined family net worth of the Coates family
T
he Coates family, formed by father Peter, daughter Denise and her brother John saw their combined family fortune skyrocket 60 per cent from 2014 and tripling from their 2013 total, landing them #24 on the Sunday Times
Rich List, published yearly, reports calvinayre. This is the first appearance for Bet365, founded by Peter Coates, on the list, and earned the company the title of highest ranking digital business as well as Denise Coates the title of Britain’s “richest self-made woman”.
The combined net worth of the family is around £3.8 billion (MOP44.36 billion), says the publication, although this does not put the Coates in top position in the gaming-related side of the chart – that is conceded to David and Simon Reuben, co-owners of Arena Racing Company
and property investors with a net worth of £13.1 billion, bringing them to the pinnacle of the Times’ list. Other gaming-related moguls who made the Times’ list – classifying Britain’s 1,000 wealthiest people – included former PokerStars CEO Mark Scheinberg, who saw his net
Second on the list, chasing the Reuben brothers were two other brothers: Sri and Gopi Hinduja, who jumped over last year’s richest man and Warner Music Group owner Len Blavatnik, given the Hinduja brothers £13.1 billion compared to Blavatnik’s £11.6 billion due to a £1.6 billion slump in his wealth, reported the Guardian. Newcomers to the list included Formula One world champion Lewis Hamilton and actor comedian Sacha Baron-Cohen. K.W.
eGaming
Malaysia to launch first 24-hour eSports channel Astro Malaysia Holdings Bhd are the first out of the gate to launch a dedicated 24-hour eSports channel, according to the group’s news site Astro AWANI. The channel - named eGG or Every Good Game – will be broadcast for free to all Astro and Astro on the Go customers starting June on channel 808. According to the report fans of eSports will be able to watch tournaments including League of Legends, Dota 2, Counter Strike: Global Offensive, Hearthstone, Heroes of the Storm, Starcraft II and more throughout Malaysia. Vice President of Sports for Astro, Lee Chong Khay, says eSports is a growing trend among the millennials – who are expected to number 218 million worldwide by year-end. “eGG plans to partner with main game organisers and developers to
bring live top tier global tournaments and on demand content,” said Lee in a statement. The broadcaster was the first of the pay-TV operators to air last year’s Dota 2 Championship, stating in the report that it was “huge among the younger demographics.” According to eSports Earnings – a contribution-based website that aggregates information on eSports - so far total prize money in the month of April exceeds US$4.65 million (MOP37.15 million), with average earnings per player at US$2,228 spread across a total of 203 tournaments, with average tournament prize pools reaching US$22,888 and over 2,000 active players. In 2015, total prize money exceeded US$65.13 million. So far this year total prize money amounts to over US$18.08 million.
Las Vegas
Red Rock IPO raises US$531.4 million In its initial public offering on Tuesday, Red Rock Resorts Inc. raised US$531.4 million (MOP4.25 billion), making it the sixth company to go public in the United States in April and the second gaming company to go public this year, according to Reuters. The integrated resort operator, with locations in Red Rock, Green Valley Range and Palace Station, priced its 27.25 million shares at US$19.50 per share, the midway point in its indicated US$18 to US$21 range. Red Rock is primarily owned by brothers Frank and Lorenzo Fertitta, and formerly operated under the
name Station Casinos until it filed for bankruptcy in 2009, following a US$5.4 billion deal undertaken by the brothers to privatize the company in 2007 and a struggling Las Vegas economy leaving the company with a large burden of debt. The company emerged from bankruptcy in 2011, however, with the brothers regaining control – earning them the lion’s share of the proceeds from the IPO despite the companies US$2.2 billion total debt, according to the news agency. Red Rock listed its shares Wednesday on Nasdaq under the ticker ‘RRR’.
8 Business Daily Thursday, April 28 2016
Greater China Official data
Stronger March industrial profits add to economic rec
Debt at Chinese industrial companies increased 5.2 percent on a yearly basis to 55.22 trillion yuan as of end-March
P
rofits earned by Chinese industrial companies rose 11.1 percent in March from a year earlier, adding to signs that the country’s economic slowdown may be bottoming out. Industrial profits rose to 561.24 billion yuan (US$86.50 billion) in March, the National Bureau of Statistics (NBS) said on its website yesterday. That brought total first-quarter profits to 1.34 trillion yuan, up 7.4 percent from a year earlier and improving from a 4.8 percent rise in the January-February period. The data covers large enterprises with annual revenue of more than 20 million yuan from their main operations. The first-quarter gains were largely led by chemical companies and agricultural and food processing companies, which posted 20.8 percent and 12.1 percent growth compared with the same period a year earlier. But heavy industry and mining continued to struggle, with ferrous metal smelting and rolling firms seeing profits fall 15.8 percent in the quarter and profits for coal miners slumping 92.6 percent. Oil and gas producers posted a loss. Debt at Chinese industrial companies increased 5.2 percent on a yearly basis to 55.22 trillion yuan as of end-March, the bureau said. China’s economy grew 6.7 percent in the first quarter this year from a year earlier, its slowest pace in seven years, but better-than-expected consumer, investment and factory data
have fuelled hopes that the economy’s prolonged downturn may be easing. Still, analysts are worried that the improvement may be largely driven by companies taking on more debt, raising questions about whether the seeming pick-up in the broader economy can be sustained. Adding to that caution, the statistics bureau warned that profits from investment and non-core activities “increased dramatically”, and that the rise in profits was not seen across the industrial spectrum.
Key Points March industrial profits rise 11.1 pct y/y, up 7.4 pct in Q1 Chemical, agri-food sectors post best gains; mining struggles But big share of rise came from investments, non-core activity Soft demand, high inventories, financing challenges still weigh The bureau said that 30.5 percent of industrial profits in March stemmed from investments and non-core activities. “The pickup in March industrial profits was partly due to an improving economy, but it was not a balanced and stable recovery,” NBS official He Ping said in a statement accompanying the data. Slowing demand, high inventories and financing difficulties still trouble
the sector, he added, and it remains to be seen whether the increase in profits is sustainable. Producer prices in March fell 4.3 percent from a year earlier, extending their decline to a full four years, but at a slower rate than a median forecast in a Reuters poll of a 4.6 percent decline.
Economists said the slower fall in producer prices was driven by recovering global commodity prices and also an uptick in construction activity at home. Premier Li Keqiang said at a State Council meeting last week that China will take steps to boost exports, including encouraging banks to boost lending,
TM
Brand guidelines
Thursday Ad outlined.indd 1
4/27/2016 5:01:27 PM
Business Daily Thursday, April 28 2016 9
Greater China Industry forecast
covery hopes
h.
April official factory PMI to rise modestly The official manufacturing PMI data will be released on May 1, along with the official services PMI.
expanding export credit insurance and raise tax rebates for some firms. Profits at China’s state-owned firms fell 13.8 percent in the first quarter from a year earlier, though the rate of decline eased slightly from the first two months of the year, the Ministry of Finance said on Tuesday. Reuters
Activity in China’s manufacturing sector likely expanded modestly in April for the second month in a row, a Reuters poll showed, adding to hopes that a prolonged downturn in the world’s second-largest economy is easing. The official manufacturing Purchasing Managers’ Index (PMI) is expected to rise to 50.4 in April from 50.2 in March, according to a median forecast of 28 economists polled. Such a level would be the highest since October 2014, but it may be too early to tell if the rebound is simply seasonal or something more sustainable. While slightly stronger than March, the April forecast is still not far above the 50.0 mark which separates expansion in activity from contraction. A more robust reading could reinforce views that policymakers can now take a less aggressive stance after a more than one-year blitz of fiscal and monetary stimulus. To be sure, economists believe the long suffering manufacturing sector is beginning to benefit from a recovery in the property market, which is boosting demand for materials from cement to steel. China’s property investment growth quickened to 6.2 percent in the first
In Brief three months of 2016 as national sales growth accelerated to a near three-year high on a range of official stimulus measures. Exports also returned to growth in March for the first time in nine months, though global demand still appears stubbornly sluggish. “The pick-up in recent activity is underpinned by the real estate sector and the de-stocking of the property market,” said Raymond Yeung, a Hong Kong-based economist with ANZ Bank. Strong loan growth and a recovery in prices of some raw materials such as steel and iron ore may also have been factors, he said. Profits earned by China’s industrial companies rose 11.1 percent in March from a year earlier, accelerating from the January-February period, the National Bureau of Statistics said yesterday.
Bank of China’s nonperforming loans rose 4 percent from the beginning of the year. A slide in Bank of China Ltd.’s bad-loan buffer to below a regulatory minimum added to signs that the authorities could be set to loosen standards for how the country’s banks provision for a growing mountain of nonperforming credit. “The regulator is probably tolerating such a temporary breach and a cut in the ratio is on the way,” said Hou Wei, a Hong Kong-based analyst at Sanford C. Bernstein & Co. Bank of China might have disclosed a flat or declining first-quarter profit, rather than the 1.7 percent increase it reported Tuesday, if it had maintained its buffer at the approved minimum, he said. Bank of China breached the requirement for the first time by reporting a 149.1 ratio of provisions to existing nonperforming credit as of the end of March, below the 150 percent requirement set in 2009 by the China Banking Regulatory Commission (CBRC). No comment was immediately available from a CBRC press officer yesterday. In another sign that the CBRC may loosen requirements, the chairman of China Construction Bank Corp. said on Monday that a reduction in the ratio to about 120 percent to 130 percent would be “reasonable” and “possible.” The regulator “may differentiate among different banks on ratios,” Wang Hongzhang said.
Earnings season
The earnings season for China’s banks, which will see Industrial & Commercial Bank of China Ltd., Bank of Communications Corp., and Agricultural Bank of China Ltd. report first-quarter profit on Thursday, is underscoring the challenges
for policy makers and bankers from a rising tide of nonperforming debt. China may have US$1.3 trillion of loans to borrowers without sufficient income to cover interest payments, with potential losses equivalent to 7 percent of gross domestic product, according to an International Monetary Fund report this month. Additionally, IMF staffers warned on Tuesday that one of the government’s planned initiatives - letting lenders convert troubled loans into equity stakes in debtor companies - could leave “zombie” companies afloat and lead to conflicts of interest for bankers. At Nomura International (HK) Ltd., analyst Sophie Jiang said that the coverage ratio should be cut as a counter-cyclical measure and she was assuming a reduction to about 120 percent when estimating earnings for banks. She wasn’t sure how a breach of the requirement would be viewed by the CBRC.
CBRC’s tools
The CBRC’s tools for disciplining banks can include suspending new product approvals, cutting loan quotas, or issuing instructions for a coverage ratio to be returned to the regulatory minimum, Hou said. While the CBRC has warned that banking executives could lose their jobs if they fail to control risks as assessed by indicators including bad-loan
Services trade deficit widens China’s trade deficit in services widened to US$21.0 billion in March from February’s US$16.0 billion, the foreign exchange regulator said yesterday. March’s gap was largely led by a US$19.1 billion gulf in spending between Chinese who spent more abroad than foreign tourists did in China, data from the State Administration of Foreign Exchange (SAFE) showed. In the first three months, the services trade deficit stood at US$57.7 billion yuan. China had a US$24.6 billion surplus on trade of goods in March, according to SAFE data Property
‘China official PMI seen at 50.4 in April vs 50.2 in March’ First-quarter profit gains were largely led by chemical companies and agricultural and food processing companies, but “old economy” heavy industry and mining continued to struggle, with ferrous metal smelting and rolling firms seeing profits fall. The official manufacturing PMI data will be released on May 1, along with the official services PMI. The Markin/Caixin factory PMI, a private and separate gauge of manufacturing activity, will be released on May 3. Reuters
Requirement ratio
Debt headache swells as bank breaches badloan buffer
Tourists spending
coverage ratios, it’s also no secret that officials have been considering easing the 150 percent requirement, in line with banks’ lobbying. Bank of China’s net income rose 1.7 percent to 46.6 billion yuan (US$7.2 billion) in the three months ended March 31 from a year earlier, the lender told Hong Kong’s stock exchange.
‘The CBRC’s tools for disciplining banks can include suspending new product approvals’ After grinding out small profit gains in 2015 - Bank of China managed an increase of less than 1 percent - China’s biggest banks may be set to report full-year declines in 2016, according to analysts’ estimates. Bank of China’s nonperforming loans rose 4 percent from the beginning of the year to 135.8 billion yuan, accounting for 1.43 percent of outstanding credit as of the end of March, the statement showed. With Chinese banks’ bad loans at an almost 10-year high, the government may let lenders issue securities backed by nonperforming loans. Bloomberg News
Heilongjiang province cuts land sales
The government of China’s northernmost province Heilongjiang said it aims to reduce a housing glut to a “reasonable level” by 2018 through restricting land sales and offering subsidies to rural folk looking to buy homes in urban areas. Heilongjiang, a traditional heavy industry powerhouse that shares a border with Russia, is one of the many Chinese provinces hit by huge housing overhangs as economic growth slows. China’s government has set destocking its main goal for the real estate sector this year. Bank products
ICBC bank launches first U.S. credit cards The Industrial and Commercial Bank of China (ICBC) USA launched its first U.S. credit cards in New York on Tuesday, aiming to serve consumers who travel frequently between the world’s two largest economies. The largest bank and card issuer in China is offering new credit cards featuring two brands, UnionPay and Visa, for the needs of newcomers to the United States who seek to find bank services and those travelling to China who find it difficult to make payments without cash. For both networks, the ICBC offers two levels of cards: preferred and premier. Partnership
Cisco, Inspur form Internet tech JV Chinese cloud computing and big data services provider Inspur Group and U.S. technology multinational Cisco have formed a joint venture (JV). With an initial investment of US$100 million, the JV will develop Internet technology serving business areas including information infrastructure, cloud computing, smart cities and metadata, said Inspur chairman Sun Pishu yesterday. The formation of the JV follows an agreement signed by the two companies in Seattle in September. Inspur will take a 51-percent stake in the JV and Cisco 49 percent.
10 Business Daily Thursday, April 28 2016
Greater China CPI
Australia takes disinflationary turn Even inflation in the services sector, which has been stubbornly high for years, slowed to under 2 percent Wayne Cole
A
ustralia is suddenly at risk of succumbing to the bane of global deflation that could unmoor future price expectations and force reluctant policy makers to cut interest rates deeper into record territory. The country’s benign inflation outlook was upended yesterday when data showed consumer prices surprisingly fell in the first quarter, pulled by the tumbling cost of oil. Key measures of underlying inflation also slowed to their lowest since the series began in 2002. The disturbingly weak report revived talk the Reserve Bank of Australia (RBA) could cut the already record-low 2 percent cash rate at its May policy meeting next week, and knocked the Australian dollar down over a U.S. cent to US$0.7639. “It looks like the disinflationary trend intensified in the first quarter,” said Su-Lin Ong, a senior economist at RBC Capital Markets. “Inflation has never stood in the way of a rate cut, the question is whether a miss of its target range pushes the RBA more in the direction of easing.” Investors answered by ramping up the chance of a cut next week to 48 percent, from just 12 percent ahead
of the data. That probability rises to 90 percent by August. Yields on three-year government paper fell 12 basis points, the largest daily drop since June last year, in a sign the global curse of deflation could force the RBA’s hand just as it has seen authorities in Europe and Asia take unprecedented easing steps to restore momentum. The RBA has repeatedly said that low inflation would allow room for a further cut, but it has also sounded unconvinced ever-easier policy
Key Points Headline CPI unexpectedly falls, core price measures very weak Revives risk of rate cut, perhaps as early as next week Aussie dlr tumbles as yields drop, rate futures jump
was the right prescription for the economy.
Expectations unanchored?
Australia enjoyed relatively rapid growth of 3 percent last year and recent news on business conditions and investment has been upbeat. Unemployment ticked down to 5.7 percent in March and further away from last year’s highs of 6.2 percent. The country had also been fortunate in that expectations of future inflation were not falling away as they had in Europe and Japan, a slippage that can become self-fulfilling. Yet yesterday’s price numbers were so weak that it pointed to a danger expectations could become unanchored. The Australian Bureau of Statistics reported its headline consumer price index (CPI) fell 0.2 percent last quarter, the first decline in seven years. Annual inflation slowed to 1.3 percent, from 1.7 percent, led by falling petrol and food prices.
Key measures of underlying inflation rose by just 0.15 percent on average in the first quarter, easily the lowest outcome since the series first began in 2002. The annual pace slowed to 1.6 percent, again the lowest on record and well under the RBA’s long-term target band of 2 to 3 percent. That would be a shock to the central bank which had projected core inflation would bottom around 2 percent. Even inflation in the services sector, which has been stubbornly high for years, slowed to under 2 percent. “While this is not a problem for short periods, the risk is that thanks to a combination of deflationary pressures globally, soft demand domestically and very weak wages growth, inflation could remain well below target for an extended period,” said Shane Oliver, chief economist at AMP Capital. “This is a risk that the RBA cannot ignore and as a result we remain of the view that it will cut interest rates again in the months ahead.” Reuters
Monetary policy
Singapore central bank says providing appropriate support Analysts say markets should prepare for the risk of the central bank following up this month’s easing with another policy move. Jongwoo Cheon
Singapore’s central bank said recent monetary policy easings will support the economy and boost inflation over the next two years against a backdrop of weakening growth among the citystate’s key trading partners. Earlier this month, the central bank unexpectedly eased its exchange-rate based monetary policy, its third easing in 15 months, to bolster growth. In its half-yearly macroeconomic review released on Wednesday, the Monetary Authority of Singapore (MAS) said the latest easing, along with the government’s budget this year, provided appropriate support for the economy. “Cumulatively, these policy recalibrations will help keep the level of real GDP close to its potential in 2016 and 2017,” the central bank said in the review. “These moves will also ensure price stability over the medium term by providing a partial offset to disinflationary pressures, boosting
CPI-all items inflation by an average of 0.7 percentage point per annum over the next two years.” Singapore’s US$290 billion trade-reliant economy has come under severe strain over the past two years in the face of a global downturn in demand, weighing on exports and leaving its manufacturing sector grappling with losses. The central bank expects headline inflation at minus-1.0 to 0 percent this year, but it said CPI-all items inflation would remain negative. In the semi-annual report, the MAS said wage growth is expected to slow to 2.53.0 percent in 2016 from 3.5 percent last year.
Singapore’s headline consumer prices in March posted a record 17th straight month of annual declines. The economy failed to post growth in the first quarter from the previous three months on an annualised basis, missing expectations as service sector activity weakened.
Accommodative monetary policy
The MAS said the more accommodative monetary policy setting combined with the government’s mildly expansionary fiscal policy provides “an appropriate and complementary macroeconomic mix to ensure medium-term price stability and sustainable growth.”
Monetary Authority of Singapore headquarters.
The central bank expects modest economic growth in coming quarters as trade-related industries face cyclical headwinds. “In early 2016, the weakness widened to more industries,” it said. “The pullback was most evident within the modern
Key Points MAS: easings to keep real GDP level close to potential MAS: easings seen boosting headline inflation by avg 0.7 ppt MAS sees modest economic growth in quarters ahead
services cluster, with financial sector activity hit by falling credit demand and lower fee income from fund management after a surge at year-end.” The central bank maintained its forecasts for the city-state’s economy to grow 1-3 percent this year and expected no recession in 2016. Analysts say markets should prepare for the risk of the central bank following up this month’s easing with another policy move, suggesting a one-off currency devaluation in the event the economy deteriorates further. The financial industry has seen cutbacks by large investment banks leading to vacancies at Singapore’s gleaming office towers nearing their highest level in almost a decade. Singapore, one of the world’s leading financial hubs, houses thousands of global companies who use the city-state as a regional hub for Southeast Asia and Asia. “Signs of a further downshift have emerged in the domestic corporate landscape, with forward-looking business expectations pointing to a weaker outlook in H1 2016,” the MAS said. Singapore’s manufacturing sector has been hit by a fall in global oil prices, which have dampened demand for oil rigs built by Keppel Corp and Sembcorp Marine. Reuters
Business Daily Thursday, April 28 2016 11
Asia Central bank
Malaysia names deputy central bank governor Muhammad Ibrahim was seen as one of the favourites to take over current governor.
M
alaysia named a deputy governor as the new chief of the central bank yesterday, after months of market uncertainty ahead of the retirement of longstanding leader Zeti Akhtar Aziz. Muhammad Ibrahim, will take over effective May 1 for five years, according to a statement from the Prime Minister’s office. “I am confident that under Muhammad’s leadership, Bank Negara Malaysia can continue its service in helping the government, providing advice and views for catalysing the country’s economic growth, as well as administer monetary policy and overseeing the country’s financial industry, including continuing Bank Negara Malaysia’s efforts to grow the financial industry,” Prime Minister Najib Razak said in the statement. The ringgit turned firmer after the announcement. Muhammad has a tough task ahead, with slumping oil and commodity prices dragging on the economy and a simmering political scandal at home that has worried global investors. He will chair his first policy meeting on May 19. His first public appearance will be when first quarter growth figures are announced on May 13.
in 2015 by worries about the impact of tumbling energy prices on the government’s finances and political uncertainty. The ringgit lost nearly 19 percent against the U.S. dollar last year. Zeti, who steps down on April 30, was named as one of the world’s best central bank chiefs by Global Finance magazine in 2009. Muhammad was seen as one of the favourites to take over from Zeti, having been one of her deputies since 2010. During a career spanning 32 years with the central bank, Muhammad held a key role during the Asian financial crisis as managing director of Danamodal Nasional Berhad, a bank recapitalization agency.
The new governor s a member of the central bank’s monetary policy committee and is an independent director on the board of national oil firm Petronas. A chartered accountant and University of Malaya graduate, he holds a master’s degree from Harvard University and a postgraduate diploma in Islamic banking and finance from the International Islamic University Malaysia. Southeast Asia’s third-largest economy grew 5 percent in 2015, slowing from 6 percent in 2014. In January, Najib revised the 2016 budget to reflect sharply lower oil prices and cut this year’s GDP forecast to 4.0-4.5 percent from 4.0-5.0 percent. Reuters
Moody’s comment
S.Korea stimulus would only have limited impact Any stimulus undertaken by South Korea would only offset the impact from global economic conditions on the country’s trade-reliant economy rather than override it, a vice president at Moody’s Investors Service told reporters yesterday. “(South) Korea is a bellwether of the global economy. So any stimulus that is either monetary or fiscal policy will only offset rather than overwhelm these pressures from the external demand,” said Christian de Guzman, vice president and senior credit officer of Moody’s sovereign risk group in a teleconference. Results
Nintendo sees smartphone games pushing up profit Japan’s Nintendo Co Ltd said yesterday it expects operating profit to rise 36.9 percent in the year through March 2017 as the videogame maker plans to finally release its popular games for smartphones. Nintendo estimates operating profit to grow to 45 billion yen (US$404.9 million) from 32.9 billion yen a year prior, when earnings were roughly in line with a forecast announced in February. The outlook compared with the 63.4 billion yen average of 17 analyst estimates compiled by Thomson Reuters.
Zeti’s steady hand
After Zeti’s steady hand on the tiller for 16 years, businesses and investors will be looking for policy continuity and assurances about the central bank’s independence. So far this year, Malaysia’s currency and bond markets have enjoyed a degree of calm after being battered
Restructure
Temasek revamps investment teams
Key Points New governor, Muhammad Ibrahim, is long-time c.bank official He succeeds highly-respected Zeti Akhtar Aziz
New Maylasian central bank governor Muhammad Ibrahim.
Ringgit firms on news of the appointment
Trade figures
South Korean exports tumbling A private poll predicted imports to be down 12.5 percent in April. South Korea’s exports in April are expected to have suffered double-digit declines as global demand showed few signs of turning a corner while less working days in the month compared to a year ago also hurt the final numbers. Exports from Asia’s fourth-largest economy are seen down 11.0 percent this month from a year earlier, according to the median forecast in a Reuters survey, extending a slump that began in January last year. South Korea and other key export-reliant economies in Asia, including Japan, Taiwan and Singapore, have been hit hard by a global downturn in demand that’s prompted a scramble among policymakers to restore momentum. Slowing growth in China, Korea’s biggest export market, is seen as a major reason for the falling shipments across the region. There might be some light at the end of the tunnel though.
In Brief
“As global trade volume keeps falling this will likely stunt our export growth, but in April we saw some positive indicators out of China,” said Kim Doo-un, economist at Hana Financial Investment. “We may see some improvement from that end, in terms of IT products and cosmetics.” China posted its slowest economic growth since 2009 in the first quarter, data showed earlier this month, but other activity indicators were better than expected thanks to a surge of new debt there. April this year had 22.5 working days, compared to 24 days in the same month last year. The Reuters poll predicted imports to be down 12.5 percent in April. The same survey forecast March industrial output to have edged up a seasonally adjusted 0.1 percent on-month, slowing from a 3.3 percent gain in February which was the
fastest growth in 6-1/2 years. Lee Sang-jae, chief economist at Eugene Investment & Securities, said factory output probably benefited from new smartphone and car releases. However, it would be premature to say the economy is on track for a strong rebound given the still-weak external trade picture. April inflation is expected at 1.0 percent on-month, unchanged from March, the polled showed, underpinned by a bounce in global oil prices and gains in housing costs as more South Koreans tend to move as the weather gets warmer in spring months. That would still leave inflation lower than the central bank’s target of 2 percent. March industrial output data will be released on April 29 while April trade numbers are to be announced May 1. April inflation data will be published May 3. Reuters
Singapore’s Temasek Holdings said it would combine its sector and market investment teams and named senior executives Chia Song Hwee and Dilhan Pillay Sandrasegara as presidents of its international business. As part of the reorganisation, Dilhan will take over as head of Americas from Boon Sim, who will leave on May 1, state investor Temasek said in a statement on Tuesday. Temasek, a major global investor with stakes in Standard Chartered, Chinese banks and Singapore’s top companies, managed about S$266 billion (US$197 billion) as of March 31, 2015. Defence contract
Australian PM defends submarine local build with France Australian Prime Minister Malcolm Turnbull yesterday defended a decision to build a A$50 billion (US$40 billion) submarine fleet in partnership with France in Australia, rather than opt for a faster build that would have seen initial work offshore. Turnbull said Australia planned to sign a full contract with France’s DCNS Group by the end of the year after announcing that the stateowned naval contractor beat bidders from Japan and Germany to win one of the world’s most lucrative defence contracts.
12 Business Daily Thursday, April 28 2016
Asia Investment
Japanese insurers’ holdings of foreign securities set for new heights The insurers held a dim view on JGBs, which has seen the benchmark 10-year yield drop to a record low.
J
apanese life insurers expect to lift holdings of foreign securities to record levels this fiscal year as they hunt better returns than the record low domestic yields prevailing under the Bank of Japan’s negative interest rate policy. Summaries of investment plans obtained by Reuters in interviews and at news conferences this month showed all nine of Japan’s largest private life insurers plan to increase their foreign bond holdings in the year through March 2017. Their holdings of foreign bonds and stocks probably hit a record in the just completed 2015/2016 fiscal year, but the
numbers have not been released yet. Life insurers had held a record 73.28 trillion yen (US$659.41 billion) of foreign bonds and stocks in the year through March 2015, according to data from the Life Insurance Association of Japan. Of these, roughly 67 trillion were in foreign bonds and 6 trillion in foreign stocks. The top nine life insurers, which manage nearly 200 trillion yen in assets, began losing their traditional taste for Japanese government bonds (JGBs) as yields sank after the BOJ embarked on a massive easing programme in 2013. Nippon Life, Japan’s largest insurer, said it would diversify its bond portfolio away from predominantly U.S. Treasury bonds to corporate bonds and European government bonds, depending on the cost of currency hedging. The Japanese insurers will also increase efforts to diversify their foreign bond investments.
“We expanded foreign bond investments to include countries like New Zealand and Italy last fiscal year. We look to invest in more countries this year,” said Iwao Matsumoto, general manager for investment planning at Sumitomo Life, the fourth largest insurer. Taiyo Life, the fifth largest, said while it will continue investing in currency-hedged foreign bonds, it plans to step up holdings in higher yield assets such as foreign corporate debt.
Dim view on JGBs
The insurers held a dim view on JGBs, which has seen the benchmark 10-year yield drop to a record low of minus 0.135 percent in March. The nine insurers will either trim their yen bond holdings or keep them steady in fiscal 2016/17. “The current yield levels are far off their fair value levels based on our calculations... We cannot buy at today’s levels. We have no plan to
buy bonds with negative yields,” said Yoshihiko Yamashita, chief executive at the investment division of Meiji Yasuda, the third largest life insurer. In addition to foreign bond investments, some insurers are seeking returns through other kinds of assets. “We would like to diversify our risks and strengthen our income generation capacity via a new style of investment in middle-risk, middle-return assets such as infrastructure funding,” said Tatsusaburo Yamamoto, general manager of investment planning at Dai-ichi Life Insurance, the second biggest life insurer. Asahi Life said will also diversify its investments and aim for higher returns in instruments like dollar-denominated Additional Tier 1 (AT1) bonds issued by large Japanese banks. Reuters
Key Points Search for higher returns abroad to continue in FY2016/17 Diversification of investments to gather pace
National securities are not so compelling for Japanese insurers.
Results
Nomura slips to first quarter in red since 2011 Annual pre-tax profit at Nomura’s retail division fell 21 percent compared to last year. Thomas Wilson
Nomura Holdings Inc, Japan’s biggest brokerage, said it slid to its first quarterly net loss since 2011 as its wholesale division fell into the red, its retail division weakened and its overseas operations lost money for a sixth straight year. Two weeks after it warned it would cut some overseas jobs and operations, Nomura yesterday booked a fourth-quarter net loss of 19.2 billion yen (US$173 million), compared with a net profit of 82.0 billion yen a year
Business Daily is a product of De Ficção – Multimedia Projects
earlier. The loss included a 16 billion yen charge for redundancy packages. The cutbacks announced this month signal an admission that Nomura’s latest drive to achieve it long-cherished ambition to become a global player had run into trouble. Having run up US$3.5 billion in losses overseas in six years, it said it was axing a brokerage unit and hundreds of jobs in Europe and the Americas. The weak January-March quarter squeezed Nomura’s full-year net profit to 131.6 billion yen, 41 percent below the earlier’s 224.8 billion yen - its best annual result for nine years. The annual profit came in well below a consensus forecast of 181.35 billion yen by 10 analysts polled by Thomson Reuters Starmine. Nomura said yesterday its overseas operations posted an annual loss of 79.6 billion yen, affected by the tough market conditions that have made it harder for global banks like Goldman Sachs and Morgan Stanley to turn a profit. The brokerage said it global markets business - part of its wholesale
division - was impacted by widening spreads and market disruption after the introduction of negative interest rates by the Bank of Japan earlier this year. The wholesale division lost 22.8 billion yen between January and March, Nomura said. Annual pre-tax profit at Nomura’s retail division fell 21 percent
compared to last year. In January-March alone, retail profit fell by 70 percent year-on-year to 12.2 billion yen, as market volatility resulted in sluggish investor activity, the brokerage said. Meanwhile the company separately announced plans to spend up to 20 billion yen buying back its shares. Reuters
Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Joanne Kuai; Nelson Moura; Annie Lao; Kelsey Wilhelm Group Senior Analyst José I. Duarte Design Francisco Cordeiro Web & IT Janne Louhikari Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@projectasiacorp.com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily. com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com
Business Daily Thursday, April 28 2016 13
Asia In Brief IMF
NZ’s financial regulators tested The International Monetary Fund (IMF) is to assess New Zealand’s banking and insurance sector to see how regulators compare with international standards, the Reserve Bank of New Zealand said yesterday. A report in the Reserve Bank Bulletin said the IMF’s Financial Sector Assessment Programme (FSAP) for New Zealand would start later this year. The IMF would examine how the Reserve Bank regulated and supervised financial institutions, and how the Financial Markets Authority regulated capital markets and financial market conduct. An IMF team would visit New Zealand first in August and again in November. Results
Results
Australian banks face earnings drag as bad debts climb Domestic bank shares are among the worst performers on the benchmark index so far this year. Swati Pandey
A
bad debt blowout is likely to end a dream run of six straight years of record profits for Australia’s banks as they report half-yearly earnings next week, piling pressure on a sector already on the defensive over a series of financial scandals. The increase in bad debts of about A$3.4 billion (US$2.62 billion), according to an estimate by UBS, could pull interim earnings for at least one of the top four lenders lower, while the others should continue to see profit growth albeit at a slower rate than during the heyday of the commodities boom. Dark clouds are gathering over Australia’s financial sector, which sailed through the global crisis but now faces slowing profit growth, rising defaults linked to the commodities price bust and questions over corporate responsibility in an election year when bank misconduct is shaping as a hot issue. “This is going to be an interesting time for the banks. Capital management and asset quality are the two main issues,” Bell Potter analyst TS Lim said.
No.4 lender ANZ Banking Group will post an over 5 percent drop in cash profit for the six months to March on Tuesday, the first such fall since March 2009, according to Thomson Reuters I/B/E/S, marking the end of six golden years of consecutive record profits for the so-called Big Four lenders. Analysts have downgraded earnings per share estimates for each of the four major banks by 1-2 percent, weighed by concerns about credit quality and dividend cuts. Australian bank shares are among the worst performers on the benchmark index so far this year, down 5.6 percent to 13 percent.
Debt distress
The Big Four have together lent about A$66 billion to the resources sector, about 1.8 percent of their combined loan book of A$3.6 trillion, latest filings show. ANZ is the most exposed, with its mining book at 2.2 percent of total loans. Last month, ANZ warned that bad debt charges for the first-halfended March could almost double. “Many people are expecting a dividend cut from ANZ. Some of the large single-name corporate exposures
are going to cause an increase in bad debts but it’s not a systemic issue,” Bell Potter’s Lim said. The banks have also had to wear exposure of more than A$3 billion to several high-profile corporate collapses in recent months, including those of steelmaker Arrium, retailer Dick Smith and mining magnate Clive Palmer-owned Queensland Nickel. But the banks should not expect any sympathy from the Australian public after a string of scandals over wealth mismanagement, insurance scams and benchmark interest rate rigging has tarnished their reputations. Hoping to head off opposition Labour Party calls for a high-powered judicial probe into the industry, the Australian Bankers Association last week promised unprecedented reforms to protect consumers and boost transparency. No.3 lender Westpac Banking Corp will kick off bank earnings on Monday with cash profit expected to grow by 7.7 percent for the six months-ended March 31. For top lender National Australia Bank that measure is likely to grow by around 2 percent to A$3.35 billion when it reports today, according to the I/B/E/S estimates. No.2 lender Commonwealth Bank of Australia follows a June-ending calendar year and will report third quarter numbers in May. Reuters
Drought impact
India likely to become net importer of sugar Analysts were divided over whether India would cut its 40-percent import duty on raw sugar. India is likely to become a net importer of sugar in 2016/17 as back-to-back drought years dry irrigation channels and ravage cane fields, with output in the country’s biggest producing state seen dropping over 40 percent. That would mark the first time the nation has been a net importer of the sweetener in four years, with the switch likely to support global prices that have already been rising this year. It would also give rival producers such as Pakistan, Thailand and Brazil the chance to boost shipments from their ports.
The El Niño weather phenomenon, which brings dry conditions to many regions, has stoked the worst drought in decades in some parts of India, with thousands of small-scale sugar cane growers in Maharashtra state failing to cultivate crops for the next marketing year, starting October. “Even for drinking water we are relying on water tankers. It wasn’t possible for anyone from our village to cultivate cane,” said Baban Swami, a farmer standing in a parched field in the Latur district of Maharashtra, around 500 km southeast of Mumbai. That could help push overall output below consumption for the first time in seven years. The world’s biggest sugar consumer is set to churn out 25.7 million tonnes in the current season, with Maharashtra contributing 8.5 million tonnes. Indian mills are contracted to export nearly 1.5 million tonnes this season.
Indian imports have in the past boosted global sugar prices, traders said. Meanwhile, analysts were divided over whether India would cut its 40-percent import duty on raw sugar. Some said mills would ask for the tax to remain unchanged so domestic prices would rise further, while others said the food ministry could push for a duty-cut to relieve inflationary pressures. Reuters
Key Points Drought has scorched land, hit sugar cane crops Maharashtra sugar production seen falling over 40 pct in 2016/17 India output likely to drop below demand for first time in 7 yrs
LG Display Q1 down but beats forecast South Korea’s LG Display Co Ltd said yesterday its first-quarter operating profit fell 95 percent from a year earlier, beating market expectations but still the weakest in four years as soft tech demand hit display panel prices. The world’s top liquid crystal display maker has warned of difficult market conditions due to sluggish global economic growth and industry oversupply. Researcher IHS says prices of liquid crystal displays for products including laptops, TVs and smartphones were broadly weaker in March. Action plan
Thailand tightens up legislation on ivory trade Thailand has strengthened the implementation of its National Ivory Action Plan to stop illegal ivory trade, the Tourism Authority of Thailand (TAT) disclosed yesterday. Thailand is stepping up efforts to bring an end to an illegal trade on ivory and ivory products by strengthening the nation’s legislations to be in line with the Convention on International Trade in Endangered Species of Wild Fauna and Flora. According to TAT, the plan has included the National Ivory Act of 2015 that has been amended to recognize African elephants as protected species and to regulate any ivory trade in or passing through Thailand. Stimuli injection
Cambodia approves investment projects The Council for the Development of Cambodia (CDC) approved 45 fixed-asset investment projects with a total investment of US$1 billion in the first quarter of 2016, according to its press release yesterday. During the January-March period this year, the CDC gave green light to 36 projects in industries, five in tourism, three in agriculture and agro-industry, and one in infrastructure development. “These projects will create nearly 50,000 new jobs,” the press release said. According to the press release, domestic investors topped the chart among all investors in Cambodia, followed by China and Japan.
14 Business Daily Thursday, April 28 2016
International In Brief Expansion
Dubai Islamic Bank plans US$861 million share issue
The Bank of England has said Brexit nerves are weighing on investment and hiring.
Dubai Islamic Bank PJSC, the United Arab Emirates biggest bank complying with Muslim banking rules, said it plans to raise 3.6 billion dirhams (US$861 million) from a share issue, as first-quarter profit increased. The state-controlled lender will sell 988.4 million shares at 3.20 dirhams apiece, it said in a statement to the Dubai bourse yesterday. DIB’s board approved the start of the share sale process that will almost double share capital and support growth, it said. DIB reported a 18 percent rise in first-quarter profit to 1 billion dirhams, the bank said. Subsidies
German confirms plan to promote e-cars Germany announced plans yesterday to invest a total of around 1 billion euros (US$1.13 billion) to promote electric cars, whose number on the roads it wants to bring to 1 million by 2020 from only 50,000 now. “Of this, 300 million euros will be used on the charging infrastructure between 2017 and 2020,” Finance Minister Wolfgang Schaeuble said, unveiling the plans during a news conference with other government ministers. Under the new plans, buyers of electric cars will get a 4,000 euro incentive, which will be shared equally by the government and the car industry. Results
Barclays weathers tough start to year Barclays followed its U.S. rivals in reporting falling investment banking revenues in a tough first three months of the year but investors welcomed signs of resilience under new Chief Executive Jes Staley. The lender also said yesterday that it was in discussions to sell its French retail banking operations to AnaCap Financial Partners, as part of efforts to shed “non-core” assets. First quarter pre-tax profits fell to 793 million pounds (US$1.15 billion), below the average forecast of 846 million pounds from analysts polled by the company. Monetary policy
Egypt central bank seen holding rates The Egyptian central bank’s monetary policy committee is expected to hold interest rates steady today as it continues to assess the impact of last month’s rate hike of 150 basis points, a Reuters poll showed. Eight out of 10 contributors to the Reuters poll said they expect the committee to keep rates unchanged on April 28. Egypt has been facing a foreign currency shortage since the 2011 uprising drove away tourists and foreign investors, both major sources of hard currency. Reserves more than halved from 2011 to US$16.56 billion in March.
GDP
British economy loses pace OECD warns of damage from Brexit.
T
he U.K. economy lost momentum in the first quarter as services posted their weakest performance for almost a year and industrial production continued to decline. Economic growth slowed to 0.4 percent from 0.6 percent in the final three months of 2015, as forecast in a Bloomberg survey of economists. The estimate, published by the Office for National Statistics in London yesterday, matched the weakest reading since the end of 2012. Gross domestic product rose 2.1 percent from a year earlier. The latest overview of the economy came as the Organization for Economic Cooperation and Development (OECD) issued a warning about the potential fallout from Brexit, joining groups including the International Monetary Fund and the Bank of England. It said Britain would be hit by tighter financial conditions, weaker confidence, higher trade barriers and restrictions on labour mobility. The result would be an economy 5 percent
smaller by 2030 compared with continued EU membership.
Lopsided growth
The GDP figures underscore the lop-sidedness of Britain’s 13 consecutive quarters of expansion. Services, the largest part of the economy, expanded 0.6 percent, though the pace of growth slowed from 0.8 percent in the fourth quarter. Industrial production shrank for a second straight quarter, declining 0.4 percent on the back of weaker manufacturing and oil output, and construction declined 0.9 percent. The slowdown in services was driven by business services and finance, which grew 0.3 percent in the first quarter - less than half of the pace of the previous three months.
Rates outlook
The Bank of England (BOE) has said Brexit nerves are weighing on investment and hiring - unemployment rose for the first time in seven years between December and February - and economists increasingly
expect policy makers to maintain the benchmark rate at a record-low 0.5 percent until next year. On Friday, Goldman Sachs Group Inc. pushed back its rate-increase forecast to the second quarter of 2017 from the fourth quarter of this year. Provisional figures show that services grew 0.2 percent in March following a 0.1 percent gain in February. Industrial production jumped 1.9 percent after a 0.3 percent contraction the previous month. Construction fell 4.4 percent for a third month of decline. While the economy as a whole returned to its pre-recession size in 2013, population growth meant that Britain remained poorer on a per capita measure until last year. GDP per head grew 0.2 percent in the first quarter, down from 0.4 percent in the fourth quarter. The report released yesterday is the first of three estimates from the ONS and may be revised as it’s based on about 44 percent of the information that will ultimately be available. Bloomberg News
Crisis measures
Venezuela enforces public sector leave on 3 weekdays Economy has plunged along with the price of the oil it relies on for foreign revenues. Venezuela’s government has announced enforced leave for public sector employees three workdays a week, in a bid to tackle an electricity shortage that is causing power cuts and protests. “There will be no work in the public sector on Wednesdays, Thursdays and Fridays, except for fundamental and necessary tasks,” Vice President Aristóbulo Istúriz said on television Tuesday. It is the latest drastic measure by the government as it grapples with an economic crisis that has left Venezuelans queuing for hours in shops to buy scarce supplies. President Nicolás Maduro said the new reduction in workdays, which affects the country’s two million public sector employees, would last “at
least” two weeks, as he addressed the nation in his weekly state television program Tuesday. As part of its energy-saving push, the government on Monday launched a rationing plan with power cuts of four hours a day for 40 days in towns and cities across multiple states - but not in Caracas. The move raised discontent among citizens already suffering from shortages of medicines and basic goods such as toilet paper and cooking oil. “I ask for greater understanding, support, solidarity, action and awareness,” Maduro said of the new energy-saving measures. He also rejected the protests and violence that have erupted as the measures were implemented in the western city of Maracaibo, where attacks on businesses and at least one food-transporting truck have taken place, media reports said. “Whoever attempts violence during circumstances such as these... will be hit with the fullest weight of the law, because they are committing serious crimes against security and the homeland,” he said. Maduro’s latest announcement comes after the government cut reduced the workday for public sector employees to six hours and put them on paid leave on Fridays until June 6.
His vice president also said Tuesday that primary and high schools would now be closed on Fridays. The government blames the power shortage on a drought caused by the El Niño weather phenomenon, which has caused the country’s hydroelectric dams to run low.
‘Government also said it was shifting its time zone forward by 30 minutes to save power by adding half an hour of daylight’ Venezuela is hoping for a lot of rain over the coming weeks to replenish the reservoirs while the restrictions are in place. Critics say the shortage is the result of economic mismanagement and inefficient running of the energy network. Last week, the government also said it was shifting its time zone forward by 30 minutes to save power by adding half an hour of daylight. AFP
Business Daily Thursday, April 28 2016 15
Opinion Business Wires
The Korea Herald In contrast with Hyundai Motor, its sister automaker Kia Motors saw its operating profit jump 23.8 percent to 633.6 billion won (US$554 million) in the first quarter from the same period last year, boosted by sales in its sport utility vehicle lineup, according to the company yesterday. Hyundai Motor’s operating profit fell 15.5 percent to 1.34 trillion won on-year in the first quarter, hit by sales drop in China. Kia’s net profit also increased 4.6 percent to 944.6 billion won during the JanuaryMarch period compared to 903.2 billion won a year ago. The revenue rose 13.2 percent to 12.65 trillion won.
The Times of India At a time when beverage giants such as Coca-Cola are planning to opt for plastic packaging (bottles), US fried chicken chain KFC is trying to go the opposite way. Starting with its Rice Bowlz, it will introduce edible packaging in the country later this week. Previously made of plastic, the bowls that are used to serve rice and gravy will now be made of tortilla. This is the Yum Brands-owned company’s second attempt at ready to-eat packaging after edible coffee cups in UK. KFC will pilot the project in Bengaluru, keeping in mind the Karnataka govern ment’s ban on plastic that was imposed last month.
Jakarta Post Vice President Jusuf Kalla (pictured) has condemned local government officials who often misspend state money on luxurious facilities, resulting in a deceleration of the country’s development since the reformation era. Despite a massive increase in the state budget for local governments since 1998, the economic growth rate has not followed suit. “Before the reformation era, our state budget was only about Rp 200 trillion, with 50 percent of it being allocated for national development. Now, it has increased 10 times to Rp 2 quadrillion, but our economic growth is still insignificant,” he said in Jakarta on Tuesday.
Bangkok Post The Architect’16 Expo has drawn more overseas producers of construction materials than previous events as foreign companies are keen to use Thailand as a base to tap into emerging Southeast Asian markets. Chatree Munka, managing director of exhibition organiser TTF International Co, said the number of foreign companies participating in this year’s architecture fair, which started yesterday, rose 23% from last year to 250. Most of the overseas exhibitors are from China and include firms covering sanitary ware, kitchens, tiles, lighting, doors, windows and prefab houses. There are also companies from Taiwan, Japan, Vietnam, Spain, Italy, Australia and the US.
Family picture featuring G20’s central banks governors and finance ministers this month.
Why are central banks on trial again?
C
entral banks have been on a roller-coaster ride in the last decade, from heroes to zeroes and back again. Is another downswing in their fortunes and reputations now starting? In 2006, when Alan Greenspan retired after his 18-year reign as Chair of the US Federal Reserve Board, his reputation could hardly have been higher. He had steered the US economy through the dot-com boom and bust, had carefully navigated the potential threat to growth from the terror attacks of September 11, 2001, and presided over a period of rapid GDP and productivity growth. At his final Board meeting, Timothy Geithner, then-President of the New York Fed, delivered what now seems an embarrassing encomium, saying that Greenspan’s stellar reputation was likely to grow, rather than diminish, in the future. Only three years later, the Nobel laureate economist Paul Krugman, borrowing from Monty Python’s parrot sketch, was able to say that Greenspan was an ex-maestro whose reputation was now pushing up daisies. Central banks were widely seen to have been dozing at the switch through the early years of this century. They allowed global imbalances to build up, looked benignly on a massive credit bubble, ignored flashing danger signs in the mortgage market, and uncritically admired the innovative but toxic products devised by overpaid investment bankers. The early reactions by central banks to the deepening crisis were also unsure. The Bank of England (BoE) lectured on moral hazard while the banking system imploded around it, and the European Central Bank continued to slay imaginary inflation dragons when almost all economists saw far greater risks in a eurozone meltdown and associated credit crunch. Yet, despite these missteps, when governments around the world considered how best to respond to the lessons of the crisis, central banks, once seen as part of the problem, came to be viewed as an essential part of the solution. They were given new powers to regulate the financial system, and encouraged to adopt new and highly interventionist policies in an attempt to stave off depression and deflation. Central banks’ balance sheets have expanded dramatically, and new laws have strengthened their hand enormously. In the United States, the Dodd-Frank Act has taken the Fed into areas of the financial system which it has never regulated, and given it powers to take over and resolve failing banks. In the United Kingdom, bank regulation, which had been removed from the BoE in 1997, returned there in 2013, and the BoE also became for the first time the prudential supervisor of insurance companies – a big extension of its role. The ECB, meanwhile, is now the direct supervisor of more than 80% of the European Union’s banking sector. In the last five years, central banking has become one of the fastest-growing industries in the Western world. The central banks seem to have turned the tables on their critics, emerging triumphant. Their innovative and sometimes controversial actions have helped the world economy recover. But there are now signs that this aggrandizement may be having ambiguous consequences. Indeed, some central bankers are beginning to worry that their role has expanded too far, putting them at risk of a backlash.
“
Howard Davies Chairman of the Royal Bank of Scotland.
There are two related dangers. The first is encapsulated in the title of Mohamed El-Erian’s latest book: The Only Game in Town. Central banks have been expected to shoulder the greater part of the burden of post-crisis adjustment. Their massive asset purchases are a life-support system for the financial economy. Yet they cannot, by themselves, resolve the underlying problems of global imbalances and the huge debt overhang. Indeed, they may be preventing the other adjustments, whether fiscal or structural, that are needed to resolve those impediments to economic recovery. This is particularly true in Europe. While the ECB keeps the euro afloat by doing “whatever it takes” in ECB President Mario Draghi’s phrase, governments are doing little. Why take tough decisions if the ECB continues to administer heavier and heavier doses from its monetary drug cabinet? The second danger is a version of what is sometimes called the “over-mighty citizen” problem. Have central banks been given too many powers for their own good? Quantitative easing is a case in point. Because it blurs the line between monetary and fiscal policy – which must surely be the province of elected governments – unease has grown. We can see signs of this in Germany, where many now question whether the ECB is too powerful, independent, and unaccountable. Similar criticism motivates those in the US who want to “audit the Fed” – often code for subjecting monetary policy to Congressional oversight. There are worries, too, about financial regulation, and especially central banks’ shiny new macroprudential instruments. In his new book The End of Alchemy, former BoE Governor Mervyn King argues that direct intervention in the mortgage market by restraining credit should be subject to political decision. Others, notably Axel Weber, a former head of the Bundesbank, think it is dangerous for the central bank to supervise banks directly. Things go wrong in financial markets, and the supervisors are blamed. There is a risk of contagion, and a loss of confidence in monetary policy, if the central bank is in the front line. That points to the biggest concern of all. Central banks’ monetary-policy independence was a hard-won prize. It has brought great benefits to our economies. But an institution buying bonds with public money, deciding on the availability of mortgage finance, and winding down banks at great cost to their shareholders demands a different form of political accountability. The danger is that hasty post-crisis decisions to load additional functions onto central banks may have unforeseen and unwelcome consequences. In particular, greater political oversight of these functions could affect monetary policy as well. For this reason, whatever new mechanisms of accountability are put in place will have to be designed with extraordinary care. Project Syndicate
Have central banks been given too many powers for their own good?
”
16 Business Daily Thursday, April 28 2016
Closing Chinese fortunes
Alibaba’s Jack Ma regains Asia’s richest man title
Alibaba Group Holding Ltd. Chairman Jack Ma (pictured) overtook Dalian Wanda Group Co.’s Wang Jianlin as Asia’s richest man after the e-commerce giant’s financial affiliate raised a record amount in its latest round of fundraising. Ma added US$4.3 billion to his fortune on Tuesday after his Ant Financial’s latest deal, expanding his wealth to US$33.3 billion, according to the Bloomberg Billionaires Index. That puts him ahead of Wang’s US$32.7 billion and Hong Kong tycoon Li Ka-shing’s US$29.5 billion. Ma’s lead among Asia’s billionaires
could be short lived as Wang reorganizes his entertainment business and seeks to relocate his property unit’s listing in search of higher valuations in mainland China - deals that could affect the property-to-entertainment mogul’s fortune. Alibaba’s billionaire chairman owns 6.3 percent of Alibaba and 37.9 percent of Ant Financial, whose full name is Zhejiang Ant Small & Micro Financial Services Group Co., after the fundraising. Ma is also said to be planning to take Ant Financial public in what could be China’s largest IPO since 2010. Bloomberg News
Results setback
Asian retailers and suppliers don’t empathize with Apple’s mood The company’s revenue from the region, which includes Hong Kong and Taiwan, dropped 26 percent in the March quarter, making it the weakest region in the world.
A
fter announcing its first-ever drop in iPhone sales on Tuesday, Apple Inc sought to reassure investors by saying its latest and cheapest model was in strong demand after being launched in late March. Some retailers and suppliers in Asia aren’t so sure. In a Reuters survey of 10 retailers in Hong Kong, Beijing, Shanghai and Shenzhen, seven - including four Apple Stores - reported solid early demand, but three third-party retailers said sales were weak. Two suppliers of components for Apple phones, including the new iPhone SE, said they were seeing lower orders. “I’ve been dealing with iPhones for five to six years now. This current quarter for Apple feels weak,” said an executive at a Taiwan-based company whose components are used in iPhones including the SE model, which markets for US$399. “Our current shipment situation for Apple is not like the last two years. There are more iPhone models, but the total volume of iPhones is falling.” Such a mixed outlook from Greater China, its most important market after the United States and generator of a quarter of the company’s revenue, could be a major cause of concern for Apple. The company’s revenue from the region, which includes Hong Kong and Taiwan, dropped 26 percent in
Suppliers are not upbeat
Some Apple’s products didn’t perform as well as expected.
the March quarter, making it the weakest region in the world. Apple did not respond to requests for comment on the Reuters survey.
Still popular
“iPhone is still popular but sales have dropped because... there’s no new model and the SE is similar to 5C. So it doesn’t sell well,” said Zhu You Peng, a salesman at Apple product reseller Xiongyu in Shenzhen. The 5C was Apple’s last attempt to produce a cheaper phone, back in 2013. Zhu said it sold around 300 iPhones per month last year but the number has dropped to around 100-200 this year. That view contrasts with upbeat comments about the phone from Apple’s Chief Financial Officer Luca Maestri on Tuesday. “The situation right now around
M&A
Key Points China/HK retailers provide mixed views of demand for iPhone SE Parts suppliers say they see soft demand Huawei further gains global market share the world is that we are supply-constrained,” he told Reuters, referring to the iPhone SE. “The demand has been very, very strong.” The iPhone SEs are sold out in Apple’s own stores in mainland China and customers have to wait about three weeks to get the product delivered by Apple, according to Apple’s websites. The size of the original supplies to the stores is unclear.
Corruption
Apple is under pressure to show that the decline in iPhone sales represents just a hiccup, rather than a permanent shift for the product that fuelled its meteoric rise. It isn’t the only challenge facing the U.S. technology giant. Its mobile entertainment services were blocked online in China earlier this month just at a time when it wants to grow services business as potential source of revenue against tapering iPhone sales. The New York Times reported that a state regulator had demanded Apple halt the services. The new phone was seen as an important offsetting influence in subsequent periods until Apple launches its iPhone 7 - widely expected around September. The lower price point was part of a strategy to compete against Asian rivals in emerging markets such as China. At the iPhone SE product launch in March, Apple vice president of iPhone Product Marketing Greg Joswiak singled out China as a target market, saying four-inch displays like that on the iPhone SE were still popular with first-time smartphone buyers. Another supplier said iPhone orders will be lower in the second quarter and second half of this year. It also provides a component for the SE model. That adds to concern that Apple may further lose momentum in China, where slowing economic growth may prompt more consumers to snap up cheaper phones. Aided by strong market share gain in China, Chinese smartphone vendors shipped more smartphones globally than Apple and Samsung Electronics Co combined had supplied for the first time in the first quarter, according to research firm TrendForce. Underscoring the surging growth for Chinese vendors, Huawei Technologies Co Ltd, third-largest after Samsung and Apple, reported earlier this month a 62 percent growth in global smartphone shipments in the first quarter. Reuters
ECB
Everbright, HK’s Friedman China stats bureau called buy Albania’s airport operator out for profiting from data
Growth in eurozone private sector slows slightly
China Everbright Group, a state-backed financial firm, has bought into Albania’s international airport in partnership with a Hong Kong-based investment firm, the latest deal highlighting China’s ambition to rebuild Silk Road trade links with Europe and Asia. Beijing has estimated its much-hyped “One Belt, One Road” initiative will add US$2.5 trillion to China’s trade over 10 years and Chinese firms are increasingly lending their support with aggressive investment in overseas infrastructure projects. China Everbright Ltd, a unit of the group, said it would acquire the airport’s developer and operator, Tirana International Airport, taking over the concession until 2025. Passenger numbers at the airport jumped to 2 million in 2015, up from 600,000 ten years earlier, making it one of Europe’s fastest growing airports, it said in a statement. The concession can also be extended by two years if the Albanian government approves. Terms of the deal were not disclosed. A spokesman for China Everbright Ltd said it owns 75 percent of the venture with Friedman Pacific holding the rest. He added that China Everbright will continue to look at opportunities to acquire quality assets in Europe. Reuters
Growth of loans to the private sector in the euro area slowed slightly in March, European Central Bank data showed yesterday. For the ECB, the statistics are a key indicator of the economic health of the single currency area, as borrowing is a main financing source for corporate investment which in turn should boost the eurozone’s currently weak economy. In March, approved loans rose 1.0 percent from a year ago, slightly slower than growth of 1.2 percent in February, an ECB statement said. When certain strictly financial transactions are stripped out, the growth in loans stagnated, with credit accorded to households and companies up 0.9 percent in March, unchanged from February. The ECB has launched a raft of policy measures to get credit flowing, most significantly a massive programme to buy public sector bonds to pump liquidity into the system. The ECB recently beefed up that programme and also launched a new scheme of ultra-cheap loans to banks on condition they lend them on to households and businesses. Growth in the overall money supply, known as M3, stood at 5.0 percent in March, the ECB also said yesterday. AFP
China’s Communist Party anti-graft watchdog said yesterday that hundreds of staff working for the country’s statistics bureau have been using data for personal gain, including collecting fees for providing information and other services. The Central Commission for Discipline Inspection listed a series of problems at China’s National Bureau of Statistics (NBS), including a failure of statistical measurements to keep pace with the development of China’s economy. In a lengthy report, the commission said that 313 staff at units controlled by the statistics bureau were asked to return 3.23 million yuan (US$497,450) in fees for the irregular provision of data services. The statistics bureau republished the commission’s report on its own website. Problems were also found with purchase contracts for mobile data collection devices. There was an issue with more than 600,000 yuan in training fees included in the equipment purchase contract, the report said. The former head of the statistics bureau, Wang Bao’an, was sacked in January after authorities announced an investigation. Reuters