Macau Business Daily 2016-4-29 by Business Daily

Tokyo and Shanghai markets join world’s worst performers in 2016 Stock exchanges Page 16

Friday, April 29 2016 Year V Nr. 1032 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Joanne Kuai Treasury

Fiscal surplus falls 31.2 pct to MOP11.6 bln as at end-March Page 4

www.macaubusinessdaily.com

TAP

Monetary policy

Bank of Japan stands pat in latest meeting, refuses to deploy more stimuli Page 11

Portuguese lawyer connected with Stanley Ho under investigation Page 5

Protest International Workers Day. To be celebrated this Sunday. With local labour unions staging demonstrations per well established tradition. According to police, ten groups plan to march from several venues on May 1 demanding local workers’ job security, compensation for unpaid holidays, work related injuries and demands for a non-smoking working place. Page 6

Ten Groups to March on May 1 Bad debt Package accumulating tour visitors Results Chinese banks dropping

Pioneering entrepreneurs Young entrepreneurs from Portugal want to tap into the China market. A week-long trip to different cities will whet the appetite from May 1. With cultural understanding the bedrock of business opportunity.

profits announcement revealing. Highlighting the heavy weight of bad loans on Mainland books. ICBC confirms joining Bank of China in adopting looser stance on reserve ratio. Pages 10&16

Commerce Page 3

Tourism Some 564,000 visitors on package tours visited Macau in March. Representing a slump of 36.2 pct YoY. Occupancy rates for local hotels and guesthouses dipped 0.9 pct to 76.5 pct. Page 2

21,388.03 +26.43 (0.12%)

PetroChina Co Ltd

+1.89%

Sino Land Co Ltd

+1.79%

Galaxy Entertainment Group

-2.54%

China Petroleum & Chemical

+1.82%

China Unicom Hong Kong

-1.49%

Cathay Pacific Airways Ltd

-4.84%

22° 25° 23° 26° 24° 27° 24° 28° 24° 28° Today

Sat

Sun

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Source: AccuWeather

HK Hang Seng Index April 28, 2016

Source: Bloomberg

Notice Due to the holiday on Sunday May 1, 2016, Business Daily will not be published on Monday. We will be back on Tuesday May 3, 2016 and wish all our readers a very enjoyable holiday. I SSN 2226-8294

2 Business Daily Friday, April 29 2016

Macau Tourism Total visitors on package tours plummet 36.2 pct in March

Fewer visitors, more hotel guests, lower occupancy rate Package tour visitors from Mainland China, which is the major source of tourists to the city, have continued falling. Kam Leong kamleong@macaubusinessdaily.com

he city continued receiving fewer visitors on package tours last month as those from the Mainland kept decreasing, according to the latest official data released yesterday by the Statistics and Census Service (DSEC). Last month, some 564,000 visitors on package tours visited the territory, a slump of 36.2 per cent compared to around 884,000 package tour visitors for March 2015. In addition, compared to February, the total number of visitors on package tours represents a slight decrease of 0.6 per cent. The ongoing fall, without doubt, is due to the continuous drop in the number of package tour visitors from Mainland China – which has plummeted 37.4 per cent year-on-year to

PT AD 2016-04-28.pdf

446,000 compared to 712,600 one year ago. Visitors on package tours from other major markets declined in the month as well. Those from South Korea and Taiwan posted year-on-year decreases of 44.3 per cent and 38.9 per cent to 20,000 and 31,000 during the month, respectively. In addition, visitors from Japan dropped by 20.9 per cent year-on-year to 13,400. By contrast, those from Thailand posted a year-on-year increase of 15.2 per cent to 13,500. For the first three months of this year, the city welcomed some 1.7 million visitors on

26/4/16

package tours, a plunge of 34.3 per cent year-on-year compared to the same period of 2015. Of the total, those from the Mainland fell by 37 per cent year-on-year to 1.3 million.

Outbound travel drops, too

year-on-year to 45,000. For the first quarter of the year, the total number of outbound tourists using the services of travel agencies amounted to 314,000, which represents a decrease of 17.6 per cent year-on-year. Taiwan, Japan and South Korea were the most popular destinations for residents, apart from Mainland China and Hong Kong.

Increased hotel guests

On the other hand, some 108,000 local residents travelled outside the Special Administrative Region by using the services of travel agencies in March, down 18.3 per cent compared to one year ago. Of the total, residents travelling on package tours, in particular, dropped by 20.3 per cent

Meanwhile, some 893,000 guests checked into hotels and guesthouses last month, up 12.7 per cent year-onyear. In particular, guests from Hong Kong surged 44.7 per cent year-on-year to 145,000 whilst those from Mainland China jumped by 9.8 per cent year-on-year to 557,000.

2:54 PM

Período de recolha de opiniões: 26 de Abril a finais de Junho

“Plano Quinquenal de Desenvolvimento da RAEM (2016-2020) Projecto” Segunda parte Reserva de terrenos e planeamento urbanístico

Retoma de terrenos desocupados

Desenvolvimento saudável do sector do jogo

CMY

Apresentação da opiniões via internet: www.cccmtl.gov.mo Email： message@gep.gov.mo Morada： Rua do Desporto, no 185 - 195 , Taipa, Macau

Promoção do desenvolvimento das indústrias emergentes

Criar reserva de terrenos Planear as zonas marítimas e terrestres e elaborar o Plano Director Urbanístico Declarar a caducidade de concessão de 23 terrenos não aproveitados dentro do prazo previsto, com uma área total de 85 mil metros quadrados Declarar igualmente a caducidade de concessão de 10 terrenos que não reúnem condições para a conversão em concessão definitiva, com uma área total de 172 mil metros quadrados

Despite the growth in hotel guests, the average occupancy of local hotels and guesthouses was down by 0.9 percentage points to 76.5 per cent in the month, compared to the same month of 2015. The drop is due to the occupancy rate of local 5-star hotels falling 3.1 percentage points year-on-year to 76.3 over the month. But that of 4-star hotels and 3-star hotels posted a year-on-year increase of 2.4 percentage points and 5.4 percentage points to 79.9 per cent and 79.7 per cent, respectively. As at the end of March, a total of 106 hotels and guesthouses were operating in the territory, up by seven year-on-year. These establishments offered a total of 32,000 rooms, jumping by 4,000 compared to end-March 2015.

Aumentar o número de mesas de jogo em valor não superior a 3% por ano Introduzir mais variedades de serviços de lazer, acolhedores e saudáveis, de recreação, de comércio e negócios, de convenções e exposições e de actividades multiculturais Concluir a revisão intercalar da indústria do jogo

Promoção do desenvolvimento coordenado dos sectores não-jogo Indústria de processamento tradicional: com o esforço conjunto do sector, definir políticas e medidas precisas de apoio Venda a retalho: aumentar o peso da população activa deste sector em relação à população activa total Hotelaria: aumentar o número de quartos e de postos de trabalhos Indústria: Criar produtos industriais com designação Venda a retalho de “Made in Macau” e “Criados em Macau”, para responder ao progresso e à modernização da indústria Hotelaria Construção: Promover a construção das grandes infra-estruturas públicas Financeiro: Promover a construção do “ficheiro de Sector de restauração e bebidas dados de crédito”, da “plataforma de pagamento de terceiros” e do “sistema electrónico de liquidação de títulos” e estudar o desenvolvimento das actividades financeiras com características próprias H O T E L

Turismo de qualidade e roteiros especiais

Convenções e exposições Impulsionar o desenvolvimento de várias actividades, designadamente, a publicidade e propaganda, a logística, a restauração, o turismo e a hotelaria Considerar a “primazia de convenções” como uma direcção e acelerar o fomento das indústrias adjacentes ao sector de convenções e exposições, com vista a atrair turistas em negócios Medicina tradicional chinesa Construir o Parque Científico e Industrial de Medicina Tradicional Chinesa na Ilha de Hengqin Aperfeiçoar o sistema de padronização de medicamentos da medicina tradicional chinesa e o respectivo sistema de controlo Indústrias culturais e criativas Envidar esforços para que os 50 projectos culturais venham a funcionar com sucesso Desenvolver a função de apoio financeiro do Fundo das Indústrias Culturais

Apoio às pequenas e médias empresas Criar o “Plano de acção de apoio às pequenas e médias empresas” e melhorar as actuais medidas de apoio Reforçar a função do Fundo de Desenvolvimento Industrial e de Comercialização Acelerar a divulgação da aplicação das tecnologias de informação Apoiar as pequenas e médias empresas na participação dos projectos de desenvolvimento de Hengqin Proporcionar às pequenas lojas tradicionais e típicas a recriarem as suas marcas Concretizar a escolha dos produtos de concepção ou de origem local nas aquisições de bens e serviços pelo Governo e estimular as concessionárias do Jogo na escolha dos mesmos produtos

Empreendedorismo entre os jovens

Concluir o “Plano Geral para o Desenvolvimento da Indústria do Turismo de Macau” Melhorar de forma adequada a capacidade de carga do turismo Intensificar o desenvolvimento em conjunto entre o sector do turismo e os sectores afins Explorar de forma activa novos mercados e novas fontes de turismo Incentivar os empreendimentos turísticos de grande envergadura para cooperarem em conjunto com as pequenas e médias empresas Formar a marca turística de Macau Consolidar e enriquecer os produtos turísticos e explorar o turismo de lazer, turismo marítimo, turismo de saúde e turismo comunitário Fomentar o novo desenvolvimento do turismo cultural PORT

PASS

Criar um ambiente incubador de empreendedorismo inovador Optimizar o serviço do centro incubador para os jovens empreendedores e introduzir incubadores empresariais modernos Incentivar a entrada de grandes grupos de investimento semente e fundos de investimento de apoio ao empreendedorismo Centrar nos estudos de inovação da ciência e tecnologia, na medicina tradicional chinesa e nas indústrias criativas Aproveitar a cooperação regional para ampliar as possibilidades de negócios trans-regionais

Ambiente incubador de empreendedorismo inovador

Grupos de investimento semente

Cooperação regional

Telefone： 853-2882 3610 Fax： 853-2882 3426 Endereço： Caixa Postal 1201

Cooperação regional e ampliação das possibilidades de negócios Integrar de forma activa no processo de desenvolvimento do País e reforçar o nosso papel e função no contexto do desenvolvimento económico e no processo de abertura do País ao exterior Promover a estratégia de desenvolvimento que se traduz na diversificação adequada da economia local e no aprofundamento da cooperação regional Promover o desenvolvimento da Plataforma de Serviços para a Cooperação Económica e Comercial entre a China e os Países de Língua Portuguesa Participar e apoiar na construção de “Uma Faixa, Uma Rota” Sob a égide da cooperação da Região do Pan-Delta do Rio das Pérolas, aprofundar a cooperação de Macau com as Províncias de Guangdong e Fujian, com Beijing, com Taiwan e com Hong Kong Alargar o âmbito de cooperação, da área comercial e económica para áreas mais diversificadas, designadamente nas áreas de serviços sociais, gestão urbana, cultura e educação e do desporto terapêutico

Elevar as capacidades governativas Divulgar as informações do Governo em tempo real e apresentar de forma clara as políticas Rever o sistema dos órgãos consultivos das diversas áreas de políticas Governo electrónico Rever de forma global o Regime jurídico da função pública Estudar o mecanismo de promoção e selecção dos trabalhadores da Administração Pública Reestruturação Rever de forma global os regimes de avaliação do desempenho dos funcional titulares de cargos e dos trabalhadores em geral Optimizar o fluxo administrativo e promover o Governo electrónico Concluir a primeira fase da reestruturação funcional e iniciar os trabalhos da reestruturação orgânica Concluir os trabalhos para a criação do órgão municipal sem poder político Introduzir um mecanismo de avaliação por uma terceira parte Aperfeiçoar o regime de apreciação do desempenho do Serviço “One-Stop” pessoal de direcção Fortalecer o regime de responsabilização do pessoal de direcção Aumentar o número de serviços “one-stop”

Reforço da construção do sistema jurídico Desenvolver plenamente as funções do Comissariado Contra a Corrupção e do Comissariado de Auditoria Prosseguir continuamente os trabalhos de recensão dos diplomas legais Promover a divulgação sistemática da Constituição Nacional e da Lei Básica da RAEM Elevar a qualidade das eleições democráticas e fomentar a cultura Lei Básica saudável das eleições Aperfeiçoar o mecanismo de formação judiciária para a formação de magistrados e funcionários de justiça Promover a elaboração de diplomas legais nas áreas de maior importância Impulsionar, de forma estável, o desenvolvimento do sistema político O desenvolvimento, a médio e longo prazo, do “Plano”, conjuntural e perspectivado para o futuro é crucial para a definição de objectivos, o encorajamento, a uniformização de trabalhos o aumento da eficácia, e a concretização de metas o mais breve possível. Iremos olhar para o futuro com base no presente, garantir a segurança e o desenvolvimento nacional a longo prazo, envidar mais esforços e contributos, para, em conjunto, promover a prosperidade e a estabilidade. 澳門特別行政區政府

Lei Básica

Governo da Região Administrativa Especial de Macau

Business Daily Friday, April 29 2016 3

Macau Commerce Young entrepreneur association bridges Portugal and China

From Euro to Yuan Kelsey Wilhelm kelsey.wilhelm@macaubusinesdaily.com

n the first of May, a group led by an association of young entrepreneurs from Portugal (AJEPC) and one of Portugal’s oldest chambers of commerce (CCIP) will venture into China with a mission to forge new business connections with a broad focus on import-export to investment. Visiting Macau, Zhuhai, Jiangmen, Guangzhou, Changsha, Shenzhen and Hong Kong over a one-week period, the group is spearheaded by Alberto Carvalho Neto, President of AJEPC (Associação de Jovens Empresários de Portugal-China), an association that links young entrepreneurs from Portugal and China and sets out with a goal to create business ties by creating cultural understanding and awareness. “If you don’t come to China often and if you don’t invite Chinese businessmen to go visit your country, your culture, what you are, then it’s very hard to do business,” explains Neto, noting that of the eight total businesses represented on the “business mission”, seven of the companies have no prior experience in China.

“When we promote everything together – when we promote the investment and I have the wine, the cheese, the ham – mostly in China – I can say that I’m going to be much more successful” Alberto Carvalho Neto, President of AJEPC

In order to prepare the businessmen for their trip, the association “held a seminar in Portugal and a seminar on the China side”, complimented by lists noting cultural intricacies including how to hold business cards, meeting and follow-up etiquette and “how to download WeChat” – one of the primary platforms used internally by the group and with clients.

Exporting culture

For those in China interested in Portugal Neto explains that on many occasions the business information provided is accompanied by typical Portuguese products - often a wine tasting, introduction of the Portuguese-language and cultural and tourist aspects of the country. Neto notes that one of the primary barriers encountered with potential investors is that often: “people don’t know where Portugal is”, associating more value to products whose country of origin they link with that country (e.g.) Greece and olive oil,

Young entrepreneurs

AJEPC – Associação de Jovens Empresário de Portugal-China - was founded in 2012 by a group of young entrepreneurs conducting business between Portugal and China who wished to work together and reduce costs while increasing their network. Neto has spent around seven years passing through Macau and applauds the SAR as the “base” of the association - which

Alberto Carvalho Neto – President of AJEPC.

and describes his business strategy - aggregating producers and products to present to potential investors – saying, “When we promote everything together – when we promote the investment and I have the wine, the cheese, the ham – mostly in China – I can say that I’m going to be much more successful,” by providing a sensory experience to contextualize the pitch. This is key in AJEPC’s work to facilitate two primary exhibitions in Portugal: SISAB – the International Trade Fair for Portuguese Food and Beverage, and BTL – the International Tourism Exhibition. The group is pushing now to create the “first exhibition of Portugal-China in Portugal”. Co-operating with “over 50 other associations” in order to organise the exhibition, Neto notes that “it’s very difficult sometimes because we are different associations, with different maturation, thinking some people want money today, others want to invest, some associations are more political, while others – like us – don’t care about politics. ”

eCommerce and Tourism

The May trip, in co-ordination with the CCIP (Câmara de Comércio e Indústria Portuguesa) – a Portuguese chamber of commerce and industry with over 180 years of history behind it – has high hopes for eCommerce

“bridges Portugal and China”. He takes pride in the group’s work to expand its footprint by supporting young businesspeople from Portugal, the Mainland and Macau through start-up and mentoring options noting that, “we understand that we have to give opportunities to young entrepreneurs […] we would have liked to have been given this package seven years ago; we didn’t get it”.

and tourism, despite some of the narrower focuses of some of the companies involved, such as a cork producer “for bottling”. The group will be travelling “by train because it’s safe, you know; it leaves at a certain time and arrives at a certain time” whereas Neto doesn’t put much faith in the reliability of airline scheduling during peak travel times. Additionally for the travellers Neto believes that the companies focused “on investment - if they do their homework - they can have a very successful case”, given a “slow first quarter” - the president sees that in the second quarter businessmen will “open again to new investments” especially given that the strategy so far has “very good yields”. “China wants safe investments and Europe is safe, compared with

China right now.” Neto finds himself at a crossroads, however, given that, “China wants to buy primary things – electricity, water companies. Personally I’m against that; I don’t like these types of investments because we’re selling our most important resources.” When it comes to purchases such as “a luxury house I’m not against it because I’m not going to buy one,” says Neto, but when it comes to purchases more common for the middle-class such as a “100,000 to 150,000 euro house” it can become problematic given that it’s “what me and millions of other young entrepreneurs like me want to buy.” To avoid this type of sell-off Neto suggests that before entering a joint venture, allow the companies to “keep the capital, keep the know-how”.

Congratulations on the 4th Anniversary of Business Daily

4 Business Daily Friday, April 29 2016

Macau Opinion

Pedro Cortés Macau can make the difference It’s been some years now and it’s already one of the biggest events of the year in Macau; one, when one that goes there thinks that all our day-to-day cares are not really problems. With the organisation of the Macau Readers Charity Association, which is a close relative of the publication in which you are reading this column, these days demonstrate that Macau can do better and can diversify its economy and be part of all worlds. With a record number of teams from all parts of the world, from Australia to Zimbabwe, the greens of Caesars – which, following the departure of the former owner, continue to give full support to the initiative – have the world in their fairways, roughs and bunkers. A different world, with so-called different people, but people full of joy. When in our days we rail against everything that happens to us we should all think about those who cannot express themselves as we do – albeit sometimes in a bad way – and the way that they are enjoying the moment and themselves. Stefan Kuehn, a Germanborn world citizen, should be given a special residency permit or an honorary Macau resident’s title. Together with Paulo Azevedo - who, by himself, created a communication empire in Macau - the team, every year, is better by leaps and bounds and creates a special environment for the players, the guardians and their families and friends. People should be encouraged to go and watch the players and the happiness they emanate in every shot. A sometimes innocent feeling of joy that make all think about a better future for this Special Administrative Region and for the entire world. A world where the difference is not considered a handicap but rather an opportunity to make better human beings. Macau is on the map of the Special Olympics organisation and must continue to be on similar maps of tolerance, good behaviour, and faith in the other. Where the important thing is not to have full pockets but, rather, to have full souls which, when we depart one of these days, can have the contentment and feeling of helping and assisting those who are not so fully capable of doing so themselves. In this specific case, it seems that the government is also supporting the cause, which is a very good sign from the departments that have provided sponsorship and other types of backup. For those who are present on the greens and contribute off, Macau should applaud loudly. Pedro Cortés is a lawyer and frequent contributor to this newspaper.

Fiscal surplus But the amount surpasses annual budgeted target

Fiscal surplus falls 31.2 pct to MOP11.6 bln as at end-March

total, down 14.8 per cent year-on-year from MOP23.9 billion. Nevertheless, the fall is milder than the year-onyear decrease of 33.1 per cent that the government posted for the same quarter of 2015. Other direct taxes received by the government also posted a fall of 11.5 per cent year-on-year to MOP785.8 million from MOP887.9 million one year ago. In addition, the government’s capital revenue plunged 67.4 per cent year-on-year to MOP154.4 million during the quarter. This segment of revenues is primarily derived from sales of capital assets, financial assets, and reimbursements not deducted from payments. On the other hand, the total

expenditure of the SAR Government increased slightly by 5.1 per cent yearon-year, amounting to MOP12.4 billion. Of the total, MOP12 billion was current expenditure, the updates show. Despite the increase, the amount of expenditure in the quarter is still under the authorised budget of MOP88.6 billion for the whole year of 2016, which means MOP7.4 billion per month, or MOP22.1 billion each quarter. Meanwhile, the government spent some MOP372.5 million on the Public Investment Plan (PIDDA) in the period, which jumped by 1,552 per cent year-on-year. Nevertheless, it only accounted for 3.3 per cent of the annual allocation of MOP11.5 billion for the sector. K.L.

Introducing competition to the fresh pork market

Kong, the average wholesale price for fresh pork was MOP31.12, in the same period. In addition, the average retail price for fresh pork per kilogram in the first quarter of this year was MOP75.20 in Macau and MOP42.92 in Zhuhai.

The SAR Government demands transparency on wholesale and retail prices of fresh meat in Macau and the neighbouring regions for the public.

Competition lowers prices

is collected by a mechanism of longterm monitoring and market research, according to Macao Daily. Since the official data is measured in kilograms, it is not expressed in ‘Sima kilograms’ - the measurement used in local Macau fresh meat markets. Therefore, conversion is required for accurate comparison, as one Sima kilogram equals 604.79 grams. The President of Macau Iong Hap Tong Pork Meat Traders Association - Che Su Peng - questioned the accuracy of the data released by the Food Prices Panel and denies that local butchers are buying pork at cheap prices from wholesalers and selling it on at over-inflated prices to earn larger profits. Mr. Che explained the breakdown of the pork retail profits to Business Daily, saying pork costs MOP30.3 per kilogram on average - higher than the official data of MOP27.03, according to Che. On average, one pig costs about MOP1,820 with a total weight of about 175 kilograms, he said. By adding up all other expenses - such as slaughtering, utilities and delivery - the total cost of selling one pig at market is about MOP3,485, says Che. According to him, based on an average retail price of MOP39.9 per kilogram for fresh pork, gross revenue is about MOP4,264 for one pig thus net profit is about MOP799. Given Che’s breakdown, he urges the government to further investigate whether fresh pork retailers are actually making a large profit and asks it to stop spreading “rumours”.

he city’s fiscal surplus amounted to MOP11.6 billion (US$1.4 billion) as at the end of March this year. Even though it represents a slump of 31.2 per cent compared to MOP16.8 billion one year ago, the amount has already surpassed the government’s budgeted annual target of MOP3.5 billion. According to the latest updates of the central account by the Finance Services Bureau (DSF), the SAR Government generated revenues of MOP23.9 billion during the first three months of the year, down 16.2 per cent year-on-year. In particular, direct taxes from local casino operators accounted for MOP20.4 billion, or 85 per cent of the

Fresh meat retail

Chief Executive (CE) Fernando Chui Sai On is urging increased transparency in the pricing of fresh meat in the MSAR. In an attempt to show disparity in wholesale and retail prices the Chief Executive showed official data on the pricing of fresh pork at the Legislative Assembly (AL) last week, comparing the data to that from Hong Kong and Zhuhai. The data demonstrated that wholesale prices for Macau’s pork is the lowest of the three regions while the retail price for the city’s pork is highest compared to the neighbouring cities. According to the data provided by the CE, for the first quarter of this year the average wholesale price for fresh pork was MOP27.03 (US$3.38) per kilogram, whereas the average wholesale price for fresh pork in Zhuhai was MOP30.43. In Hong

The MSAR Government wants to open up the fresh meat market in order to introduce more competition in Macau. Locally there are a total of nine markets, including 127 stalls selling fresh meat and 317 stalls selling fish, according to local Chinese newspaper Macao Daily’s report this week. In addition to market sales some supermarkets have recently begun selling fresh pork and notably the overall number of pigs slaughtered for consumption has increased; however, the number of pigs slaughtered in markets remains unchanged, according to the publication. However, sales in supermarkets have been insignificant in terms of impacting the retail prices of the whole market as indicated by the publication. It says that introducing more retailers may promote healthy competition.

Incompatible data

Regarding data on a number of wholesale and retail pork prices in Macau, Hong Kong and Zhuhai published by the government and quoted by the Chief Executive at the Legislative Assembly, the Food Prices Panel explained that the data

Business Daily Friday, April 29 2016 5

Macau Business Geocapital administrator under scrutiny

Hospitality

Portuguese lawyer connected with Stanley Ho under investigation

HNA Group to buy Carlson Hotel Inc.

Administrator at Stanley Ho’s investment company Geocapital called to explain ruinous Portuguese national airline TAP deals. Nelson Moura nelson.moura@macaubusinessdaily.com

awyer and Geocapital administrator Lacerda Machado has deemed the TAP deal with VEM and Atlantic Gatways, a deal where he served as an advisor, as profitable for the Portuguese airline, news agency Lusa reported. The statements by Machado were made at a session in the Portuguese parliament in order to clarify his role as a ‘negotiator’ during the deal. Portugal’s Attorney General’s office is conducting an investigation into Air Portugal’s (TAP) purchase of VEM, a Brazilian aircraft maintenance unit Macau casino magnate Stanley Ho previously acquired, on suspicion that the deal involved corruption, money-laundering and embezzlement, among other crimes, Business Daily reported at the time. The probe is also focusing on the deal that saw 50 per cent of TAP being bought by the Atlantic Gateway consortium, a group that also has some connections to the Macau magnate through Hainan Airlines, as Business Daily reported. The fist deal goes back to 2005, when Portuguese national airline TAP together

with Geocapital - an investment company based in Macau and focused on investments in banking, infrastructure and energy in Portuguese-speaking markets - acquired 15 per cent of VEM maintenance unit belonging to a bankrupt Varig a Brazilian airline, as reported by Business Daily from Portuguese newspaper Publico. At the time, Ho acquired 85 per cent of VEM through Geocapital, of which he is president, and where Machado was working as a collaborator. In 2007, TAP acquired 20 per cent of Geocapital’s share in VEM, planning to get back a return in eight years, however VEM, now renamed M&E Brazil, had accumulated significant losses. Machado explained that the Brazilian company was bought at an “incredibly low price, and desperately needed to be sold,” denying any financial advantage to Geocapital, where he works now as administrator.

Airline money

The lawyer, a personal friend of Portugal’s Prime Minister Antonio Costa, has

been serving as a government advisor for business deals, and denied any involvement in TAP’s deal with Atlantic Gateway at the hearing, Lusa reported. Hainan Airlines, Asia’s fourth largest airline, is owned by the HNA Group, a Chinese conglomerate that also owns 45 per cent of Ho’s Hong Kong low cost airline Hong Kong Express. According to Publico the HNA Group exercised indirect control of TAP since the group holds a 23,7 per cent in Brazilian airline Azul, the airline that is part of the Atlantic Gateway consortium, which, after a deal signed in February with the Portuguese government, holds a 45 per cent stake in TAP. The deal with the Portuguese Government was allegedly done with convertible loans worth 90 million euros of HNA Group money, through Hainan Airlines and with Machado’s assistance. “I didn’t know them and I didn’t bring them, but this deal could be the best ever to happen to TAP, the Lisbon airport hub, and for the Portuguese economy,” Machado said in his statement, Lusa reported.

HNA tourism group, a unit of the HNA Group, has agreed to buy Carlson Hotels Inc., gain ing brands including Radis son and Park Plaza, Bloomb erg reported. The HNA Group, based in Haikou, China, has dealings in aviation, hold ings, capital, tourism and logistics, and owns Hainan Airlines, which has bought 45 per cent of Stanley Ho’s low coast airline Hong Kong Express, according to Portu guese newspaper Publico. The HNA Group acquired Carlson and its 51.3 per cent stake in Rezidor Hotel Group AB, Carlson’s Brussels-based master licensee for Europe, the Middle East and Africa, and may begin a takeover bid for all of Rezidor, Bloomberg reported. Financial terms of the transaction weren’t disclosed but the Carlson hotel group could gain about $2 billion in a sale. Carlson Hotels has 1,400 properties with more than 220,000 rooms under op eration and development in 115 countries and territories. Besides Radisson, Radisson Blu and Radisson Red, the company owns the Quor vus Collection, Park Inn by Radisson, Country Inns & Suites by Carlson and the Club Carlson frequent-guest programme.

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6 Business Daily Friday, April 29 2016

Macau Stock

‘The 13’ changes stock name from ‘LOUIS XIII H’ next Tuesday

The 13 Holdings Ltd. - formerly known as Louis XIII Holdings Ltd. – has announced that its stock name on the Hong Kong Stock Exchange will officially be changed to ‘THE 13 HOLDINGS’ effective 9:00 am on Tuesday from the current ‘LOUIS XIII H’. The hotel operator proposed the change of its corporate name at the end

of February this year. In Wednesday’s filing, the company said the new name has been effective since March 28. The company’s luxury hotel ‘THE 13’ in Coloane is slated to open in late Summer this year. Its co-chairman Stephen Hung has explained that the company’s new name - his lucky number is 13 - “fits perfectly” with his vision.

Demonstration Ten groups plan to protest on May 1

Multiple demonstrations planned for Labour Day Labour Day protests will bring attention to local workers’ job security, compensation for unpaid holidays, work related injuries and demands for a non-smoking working place. Annie Lao annie.lao@macaubusinessdaily.com

en groups are planning to stage demonstrations on May 1, according to a statement issued by the Public Security Police (PSP) yesterday. According to police, the groups will start parading separately from Weng Neng Square, Triangle Garden, Iao Hon Garden, Macao Science Center and march to Government Headquarters, the Central People’s Government Liaison Office of the Macao SAR and Legislative Assembly to hand in petition letters. Also, another group will hold a rally at Tap Seac Square. PSP said the groups did not mention

how many participants will join the demonstrations. Three groups – namely, Love Macau Association, Forefront of the Macao Gaming, and Association for the Rights of New Gaming Practitioners – will together hold a street demonstration on Labour Day to represent local casino workers, said Cloee Chao Sao Fong, director of Forefront of the Macao Gaming at a press conference held yesterday.

Demands

The protests will urge the government to safeguard local workers’ rights and reduce the hiring of non-resident workers, increase casino workers’ salary, pay compensation for overlapping holidays, pay compensation

for work related injuries, and demand an anti-smoking working environment, according to Ms. Chao. “Overall gaming revenue has dropped so the casinos are hiring fewer workers. We hope the casino operators put priority into hiring local workers first over non-resident workers,” Ms. Chao said. Some also complain about construction sectors from the casino companies hiring more non-resident workers than before. They also demand upward career mobility for locals. “About half of the total workers on construction sites are non-resident workers,” said Leong Lei Kan, director of Love Macau. “Many of the local workers have less education, whereas non-resident workers tend to possess higher education. It is impossible for us to compete with them,” he said. In addition, building more public housing is needed for low-income workers in the city, said Wu Shao Hong, director of Love Macau

Association. In addition, they urge the government to enforce the law to tackle corruption issues regarding procurement for public works, said Mr. Wu. Furthermore, reducing motorcycle parking in the city by the government does not meet the demand of motorcyclists. “Currently, Macau has about 100,000 motorbikes, but there’s only about ten thousand motorbike parking spaces, Why does the government still want to cut down the parking space for motorbikes?” queried Mr. Wu. Following the day of protests, the groups will schedule a meeting to meet up with different governmental departments to discuss the petition and exchange ideas according to William Wu, chief supervisor of Love Macau. Their protest will start from Iao Hon Garden and march to Government Headquarters, then finally to Nam Van Lake for a rally, says Wu.

More protests

Macau Youth Dynamics will launch their protest at 3:00pm departing from Weng Neng Square, marching to Government Headquarters, Lei Kuok Teong told Business Daily. “We want to urge the government to build more public housing and enforce the Land Law to stop the Coloane project ” Several taxi associations will start a slow drive by local taxi drivers to protest ‘unfair treatment’ of local taxi drivers in terms of licensing and the law, the Professional Taxi Drivers Federation told Business Daily. The protest will start at 10.30 am, departing from Macao Science Center and driving to the Legislative Assembly, where it will submit a petition. The number of participating taxis is as yet unconfirmed but some 200 taxis will join the protest according to Jornal Tribuna de Macau.

Corporate

COD fifth tower garners prestigious awards for construction safety

Melco Crown Entertainment announced that the Fifth Hotel Tower of City of Dreams has garnered four gold awards and three silver awards at the 5th Macau Construction Safety Award Scheme organised by the Macau Labour Affairs Bureau. Last year, City of Dreams became the first and only hotel and integrated resort in Macau to receive the OHSAS 18001 Occupational Health

and Safety Management Certification from worldwide international certification body the British Standards Institute (BSI Hong Kong). Mr. Lawrence Ho, Co-Chairman and Chief Executive Officer of Melco Crown Entertainment, said, “Melco Crown Entertainment is committed to maintaining the very highest standards of Occupational Health and Safety practice... I am glad that our efforts have been recognised by the Macau Government as a leading example of industry practice.”

Macau Sailing offers sailing outings

Macau Sailing is offering full-day and half-day tours of Macau Harbour and neighbouring islands for the coming Summer in addition to Sunset Tours where guests can relax and enjoy views of the local skylines. The vessel of the

company was built in the city’s historic Coloane shipyards half a century ago, which is one of the oldest and the last of its kind still in operation in the Pearl River Delta region. It has also recently acquired a 24-foot (7.3-metre) sailing boat for the company’s sailing classes.

Business Daily Friday, April 29 2016 7

Gaming Diversity

Gaming

MGM Resorts International fifth in DiversityInc ranking

Marina Bay Sands has casino licence renewed

Kelsey Wilhelm kelsey.wilhelm@macaubusinesdaily.com

n annual survey by DiversityInc saw MGM Resorts International take 5th place in its Top 10 Regional Companies listing. This list, which evaluates companies based on increasing workforce and management diversity, as well as strong supplier diversity, saw MGM follow the Federal Reserve Bank of Atlanta, Horizon Blue Cross Shield of New Jersey, Comerica Bank and the Blue Cross Blue Shield of Michigan

in the rankings, with the Michigan healthcare insurance provider taking first place. According to a press release, this is the eleventh consecutive year that MGM Resorts is mentioned by DiversityInc, and founder and CEO of the company Luke Visconti encourages the ongoing efforts by companies to submit to be ranked. “It’s clear that corporate America understands how diversity and inclusion strengthens everything from recruiting and retention to overall business success.” Visconti noted that over 1,000 companies submitted

to be evaluated, commending their “commitment and dedication to diversity management.” The list evaluates companies on hiring, retaining and promoting women, minorities, people with disabilities, LGBT and veterans and only companies with over 1,000 United Statesbased employees are eligible to enter. Data is evaluated based on 183 factors and driven by a 300-question survey – leading to four main areas of evaluation: Talent Pipeline, Equitable Talent Development, CEO/Leadership Commitment and Supplier Diversity. MGM Resorts launched a Diversity and Inclusion Initiative in 2000 and noted that approximately 66 per cent of the company’s employees are minorities, with 43 per cent of the workforce being female, and 42 per cent representation of minorities in management ranks. “At MGM Resorts, we are striving through our inclusion practices to leverage the talents of our highly diverse workforce for greater contribution to our company’s success,” says Phyllis A. James, Executive Vice President and Chief Diversity Officer of MGM Resorts International, calling the company’s efforts a: “long-term, perpetual journey.” DiversityInc also released a list of their Top 50 companies for Diversity in which the top five listed companies, led by Kaiser Permanente, a healthcare company, included pharmaceutical company Novartis, ‘professional services company’ EY, telecommunications giant AT&T, and accounting and consultancy firm PricewaterhouseCoopers.

The Casino Regulatory Authority of Singapore has ‘renewed the casino licence of Marina Bay Sands Pte. Ltd (MBS),’ – the subsidiary of Las Vegas Sands Corp’s Marina Bay Sands, in Singapore – according to a news release by the Authority. The licence renewal came into effect on Tuesday and lasts for three years, following the authority’s ‘assessment of the matters’ and ‘having regard to the independent opinion of an evaluation panel,’ says the report. This comes after Genting Singapore saw its licence renewed for its Resorts World at Sentosa Pte. Ltd casino starting from 6th February, also for a three-year period. According to a Fitch Ratings report in December the Singapore Government is ‘unlikely to grant new licences’ for casinos in the citystate after 2017, reports GGRAsia. In a conference call with analysts following the Las Vegas Sands first quarter results – announced last week – chairman of the company Sheldon Adleson said that the firm could consider the sale of the Singapore company’s retail assets following the expiration of a government-imposed moratorium next year, the publication reports. “We always have thoughts of monetizing anything except our core assets. We have been thinking about how we cannot monetize anything… in Singapore,” said Adelson, noting that “we may or may not sell a portion,” the publication reported.

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8 Business Daily Friday, April 29 2016

Greater China Dalian market

Commodities cool as exchange boosts anti-speculation moves Dalian doubled the transaction fees on steelmaking raw materials coking coal and coke futures from yesterday. Manolo Serapio Jr

teel and iron ore futures in China steadied yesterday, while other commodities fell as a key Chinese exchange stepped up measures to combat speculative froth behind a recent market surge. Financial investors have charged into Chinese commodities futures this year, driving up contracts including iron ore, rebar, cotton and even eggs, leading many to warn of similarities with a boom in the country’s stock markets, which reversed into a sharp crash last summer. This week has seen a marked pullback as exchanges raised the cost of trading to avoid mirroring the outcome in stocks. Coking coal futures were the hardest hit yesterday, falling by the downside limit of 6 percent, after the Dalian Commodity Exchange imposed higher transaction fees for the fourth time in a week. “In general, there will still be some volatility, but not as much as we have seen recently because there’s more vigilance from the exchanges,” said

Helen Lau, analyst at Argonaut Securities in Hong Kong. The Dalian exchange said the series of steps it took this week were meant to reduce speculation and market risks. “The aim is to restrict the oversized space for profiting from short-term trades, reduce elevated holdings of related products and curb speculation,” the exchange said late on Wednesday. Dalian doubled the transaction fees on steelmaking raw materials coking coal and coke futures from yesterday. It will also widen the trading limit for both contracts to 7 percent from 6 percent from today and increase the minimum margin to 9 percent from 8 percent. For a second straight day, coking coal on Dalian fell by the 6 percent

Key Points Dalian bourse hiked fees on coking coal, coke 4 times in a week Dalian iron ore, Shanghai rebar up slightly Coking coal fell by 6 pct maximum floor maximum allowed, closing at 729.50 yuan a tonne. Coke fell 1.2 percent. Dalian had also raised transaction fees on iron ore futures twice this week. The commodity exchanges in Shanghai and Zhengzhou have also imposed curbs to restore calm after a week-long surge.

Analysts say the rally, which for iron ore lifted prices more than 50 percent this year and sometimes involved daily trade volumes greater than China’s entire 2015 imports, defied supply-demand fundamentals as investors bet that signs of stabilisation in China’s economy would feed further price gains. The surge in volatility rattled industrial players who use the commodity markets for hedging, with some taking losses or cutting exposure, driven out by a flood of money from hedge funds and retail investors. Steel rebar on the Shanghai Futures Exchange, the leader of last week’s big spike, closed up 0.8 percent at 2,539 yuan a tonne. Turnover on the contract reached nearly 50 percent more than the total value of trade on the Shanghai stock exchange on April 21. On the Dalian Commodity Exchange, the most-traded iron ore contract rose 1.1 percent to 446 yuan a tonne after dropping by the 6 percent limit for a second straight day on Wednesday. At their peak this year, Dalian iron ore had risen 73 percent and Shanghai rebar 62 percent. Rebar has fallen more than 4 percent so far this week and iron ore, has given up 6 percent. Lau said she did not expect rapid increases in steel prices to continue as Chinese mills have boosted production, easing the market tightness. Shutdowns by mills in the past year and a pickup in seasonal demand had curbed Chinese steel supplies. “Towards the weak season from June or July, speculative activity (on steel) will gradually wane,” she said. Cotton on the Zhengzhou Commodity Exchange fell 3.8 percent, Shanghai aluminium dropped 2.8 percent, and Dalian soybeans fell 2.7 percent. Reuters

Business Daily Friday, April 29 2016 9

Greater China REGULATOR

Moody’s appeals Hong Kong ruling that penalized report The case was the first disciplinary move taken by the regulator since it started overseeing credit ratings in June 2011. Eduard Gismatullin

oody’s Investors Service has appealed a Hong Kong tribunal’s ruling that penalized the ratings business for publishing a critical report about Chinese companies. The U.S. firm has served a notice of appeal with respect to the Securities and Futures Appeals Tribunal decision on March 31, Donough Foley, senior vice president for government and public affairs at Moody’s Asia Pacific, said in an e-mailed statement yesterday. The SFC (Securities and Futures Commission) charged Moody’s for a 2011 report about 61 Chinese companies, claiming it misled investors and caused notable share price drops at the corporations named in the note. Last month the tribunal backed the regulator and ordered Moody’s to pay a HK$11 million (US$1.4

million) penalty. That judgment alarmed analysts and investors in Hong Kong, where some fear the SFC’s action could strangle critical commentary about the local markets. The case was the first disciplinary move taken by the regulator since it started overseeing credit ratings in June 2011. “Sadly, while almost certainly not the intent, the SFC’s targeting of Moody’s will have the impact of limiting the flow of information in Hong Kong’s markets,” Tan Chin Hwee, chief executive officer for Trafigura Group Pte Ltd. in the Asia

Pacific region, wrote in a note distributed by Smartkarma, an online research platform earlier this month. “This will harm the development of all of its financial markets, as ratings agencies and brokerages will be extra careful with any comments they may make.” An SFC spokesman didn’t immediately respond to a request for comment.

Providing services

The Securities and Futures Appeals Tribunal ruled that Moody’s was carrying on its regulated activity of providing credit rating services. The

three-judge panel also found breaches of the code of conduct, which requires licensed persons to act fairly in the interests of clients and market integrity. The ratings company had developed a framework of red flags that highlighted possible governance and accounting risks at the Chinese non-financial rated companies. The report examined the companies for possible credit rating reviews, but it was not the actual exercise of a review, according to Moody’s. Many of the companies were listed on the Hong Kong exchange. Several of those named in the research note have subsequently encountered financial difficulties, including filing for bankruptcy. “They appear to have gone down the right path,” Trafigura’s Tan wrote. “If anything, the clear failing of Moody’s report was not being negative enough

on these selected companies.” Moody’s isn’t alone in being pursued by the SFC for matters relating to research. The authorities have gone after U.S. short-seller Andrew Left for his 2012 report on Evergrande Real Estate Group Ltd., a Chinese real estate developer, claiming the analyst misled investors, causing the company’s shares to plunge. Some market participants agree with the SFC’s challenge of Moody’s and the tribunal’s determination that regulatory licensing enforces restrictions on freedom of opinions. “It is more likely a case for SFC to play tough” on rating firms, said Jeffrey Chan, a founding partner at Oriental Patron Financial Group in Hong Kong. “The clear regulatory intention is to uphold integrity of the market of Hong Kong and SFC would not tolerate poor quality research reports.” Bloomberg News

“The clear regulatory intention is to uphold integrity of the market of Hong Kong and SFC would not tolerate poor quality research reports.” Jeffrey Chan, Founding partner at Oriental Patron Financial Group in Hong Kong

M&A

Evergrande pays US$1.5 billion to boost Shengjing Bank stake According to the company the transaction will be funded by internal resources. Evergrande Real Estate Group Ltd. agreed to buy Shengjing Bank Co. domestic shares worth 10 billion yuan (US$1.54 billion), extending a shopping spree by the Chinese developer facing mounting debt. Evergrande will lift its stake to 27.2 percent after acquiring just over 1 billion shares from five shareholders through a unit, the firm said in a filing to the Hong Kong stock exchange yesterday. Shengjing Bank received approval in January from China’s banking regulator for a consumer-finance firm, one of a handful of banks to hold such a license, Evergrande said in the filing, adding it expects the purchase to generate high returns. Under Chairman Hui Ka Yan, one of China’s richest men, Guangzhou-based Evergrande has embarked on a spending spree that has seen the developer’s debt swell. Evergrande may want to improve its access to funding and securing a stake of more than 20 percent also means that it can record a share

of Shengjing Bank’s profits in its earnings.

‘Easier access’

“Becoming a major shareholder of a bank helps Evergrande gain easier access to funding,” Ross Lee, a credit analyst at Bank of China Hong Kong Ltd., said by phone. “It seems like the company is aiming to have a controlling stake in the bank eventually, forming its own ‘Evergrande Bank.’” Evergrande is paying 10 yuan a share for the stake, equivalent to a 7.8 percent premium to Shengjing Bank’s closing price in Hong Kong on Wednesday, data compiled by Bloomberg show. Industrial & Commercial Bank of China Ltd. shares trade at a 20 percent premium in Shanghai to their Hong Kong price. It’s one of a string of acquisitions. Evergrande agreed earlier this month to pay 3.6 billion yuan for a stake in China Calxon Group Co. Last year, it bought Mass Mutual Tower in Hong Kong for HK$12.5 billion

(US$1.6 billion), the most ever paid for a commercial building in the city, as well as agreeing to buy 13.5 billion yuan of assets from New World China Land Ltd. The transaction will be funded by internal resources, Evergrande said. The developer, through a subsidiary, paid HK$3.89 billion for 5.59 percent of Shengjing Bank last month, saying in a statement that the acquisition was a “reasonable investment.”

Land costs

Chinese developers have been scouting for cash-yielding assets, such as insurers, after soaring land costs helped push them further into debt. Evergrande, in November, bought a 50 percent stake in Great Eastern Life Assurance Co.’s Chinese joint venture for 3.9 billion yuan. Banks could serve as an alternative financing vehicle as onshore funding is becoming expensive, Toni Ho, an analyst at RHB OSK Securities Hong

Kong Ltd., said by phone. It’s “likely” more developers will acquire stakes in commercial banks or insurers, Ho added. The company has become the most indebted of 198 listed Chinese real estate developers, Bloomberg-compiled data show. There is a 6.2 percent probability it will

“It seems like the company is aiming to have a controlling stake in the bank eventually, forming its own ‘Evergrande Bank.’” Ross Lee, Credit analyst at Bank of China Hong Kong

miss payments in the next 12 months, up from 1 percent a year ago, according to the Bloomberg Default Risk model that tracks metrics including share performance, liabilities and cash flow.

Cash flow

Evergrande had negative free cash flow of 22.3 billion yuan in the second half of last year, up from a negative 16.5 billion yuan in the first half, according to data compiled by Bloomberg from the firm’s financial statements. The developer “generates very large negative free cash. Hence, the acquisition will ultimately be funded by increased debt,” Charles Macgregor, head of Asian high-yield research in Singapore at Lucror Analytics, wrote in a note, maintaining a hold rating on the stock. Evergrande’s US$1.5 billion 8.75 percent 2018 notes rose 0.2 cents on the dollar to 97.3 cents, the biggest jump since April 14. Bloomberg News

10 Business Daily Friday, April 29 2016

Greater China Annual results

National banks under pressure as bad loans rise The ratio of NPLs to total loans had gone up for 10 consecutive quarters by the end of 2015

he era of easy money seems to be drawing to a close for Chinese banks as annual results showed their bad loans piling up fast while profits slowed sharply last year. All 16 lenders listed on China’s A-share market have now released their annual earnings, all posting higher non-performing loans (NPLs) in 2015. Some saw bad loans jump more than 50 percent year on year. Chinese lenders, including listed and unlisted ones, had 1.27 trillion yuan (US$196 billion) of bad loans by the end of 2015, up 51.2 percent year on year, according to data from China’s banking regulator. The ratio of NPLs to total loans had gone up for 10 consecutive quarters by the end of 2015. Meanwhile, the combined net

profits of all Chinese lenders climbed only 2.43 percent, compared with 9.65 percent in 2014, the data showed. The Agricultural Bank of China, one of the country’s “big four” commercial banks, was one of those under intensified pressure. It saw net profits edge up merely 0.7 percent year on year, while its NPL ratio rose to 2.39 percent from 1.54 percent a year earlier. The increase in bad loans came as China moved to reduce the capacity of oversupplied industries and close “zombie companies,” those that survive only on bailouts, to restructure and upgrade a slowing economy. Facing extreme financial difficulty or already having been shut down, many firms were unable to pay back debts, and that had a knock-on effect on other firms tied to them in business, said Zeng Gang, a banking

researcher with the Chinese Academy of Social Sciences. Most non-performing loans went to manufacturing, wholesale and retail trade, as well as the mining industry, according to the banks’ annual reports. Meanwhile, dud loans in the country’s mid-west rose more significantly than in the east.

committed to peace and stability in the South China Sea. While China will firmly safeguard its sovereignty, rights and interests, it is willing to peacefully solve the disputes through friendly consultation and dialogue with the countries directly involved, he said. China will work with Southeast Asian nations to make the South China Sea a region of peace, friendship and cooperation, according to Xi. He also touched on a number of other international conflicts and points of crises, calling for more international support for Afghanistan’s reconstruction. He said China will play a constructive role in the Istanbul Process on Afghanistan.

China supports an “Afghan-led, Afghan-owned” inclusive political reconciliation process, hopes the country can realize peace, stability and development at an early date, and is ready to provide assistance, according to the president. He said China stands for and will continue to help promote a peaceful settlement of the Syrian issue and the Palestine-Israel issue through political negotiation. China has played a constructive role in the signing of a comprehensive agreement on the Iran nuclear issue and will continue to press ahead the implementation by joint efforts with all sides, Xi added. He reaffirmed China’s adherence

“The banking industry goes with the economic cycle” Mo Kaiwei, Researcher with the China Academy of Regional Finance

“The mid-west has a high concentration of steel and coal firms, which are at the forefront of capacity reduction,” said Xiao Yaofei, a researcher at the Guangdong Institute for International Strategies. The asset quality pressure on Chinese banks will continue in 2016, global rating agency Moody’s forecast earlier this month. The passing of a time when banks made money effortlessly is in line with China’s economic transition, said Mo Kaiwei, a researcher with the China Academy of Regional Finance. “The banking industry goes with the economic cycle. It is quite normal that banks’ asset quality and profits decrease when China’s economy faces greater downward pressure,” he wrote in an analysis article. Are the banks capable of digesting the bad loans and reining in the risks? Mo is among the analysts who think so, citing fast growth in business revenue, steady income from interests and adequate loan loss provisions, expenses that are set aside as allowances for bad loans. While banks’ own profits have so far been used to write off bad loans, there has been consideration of a debt-equity swap program that would allow banks to exchange bad debt for stocks in the companies concerned. China is also ready to let banks issue asset-backed securities collateralized by NPLs. Even at its current level, the NPL ratio of Chinese banks is still far below that in other major economies, whose NPL ratios range from 3 percent to 5 percent, Mo noted. Chinese lenders’ NPL ratio stood at 1.67 percent at the end of 2015, according to official data. Mo believes rising bad loans are not necessarily a bad thing, as the phenomenon could force banks to be more prudent when extending credit and develop a more sophisticated business model. Xinhua

REGIONAL SECURITY

Xi addresses CICA foreign ministers’ meeting The president said China is always committed to peace and stability in the South China Sea. Chinese President Xi Jinping addressed the opening ceremony of the fifth foreign ministers’ meeting of the Conference on Interaction and Confidence Building Measures in Asia (CICA) in Beijing yesterday. Xi’s speech covered the Korean Peninsula nuclear issue and the South China Sea. On the nuclear issue, Xi reiterated China’s full adherence to the UN Security Council resolution, and its commitment to denuclearization of the Korean Peninsula, securing peace and stability on the peninsula and resolving issues through dialogue and negotiation. He urged all the parties involved to exercise restraint, avoid provocation, and pull the nuclear issue back to a track of dialogue and negotiations at an early date. The president said China is always

Chinese President Xi Jinping

to a peaceful foreign policy, vowing “China will unswervingly take a peaceful path of development, maintain an international order with the purposes and principles of the UN Charter at the core, promote a new-type international relationship featuring cooperation and reciprocity, and be committed to building a common destiny for mankind.” The CICA was established in 1992 as a forum for dialogue and consultation on security issues in Asia. It has 26 member countries and 12 countries and international organizations as observers. Xinhua

“China will unswervingly take a peaceful path of development, maintain an international order with the purposes and principles of the UN Charter at the core” Xi Jinping, President of China

Business Daily Friday, April 29 2016 11

Asia Central bank

Japanese authorities surprise holding off monetary stimulus The Bank of Japan also cut its GDP outlook and pushed back a timeline for its ambitious 2.0 inflation target. Harumi Ozawa

he Bank of Japan (BOJ) shocked markets yesterday as it held fire on fresh stimulus measures, sparking questions about whether there is anything left in its policy arsenal to kick start a sliding economy. Dealers were caught off guard by the decision, which sent the yen skyrocketing, especially after another set of weak economic data in the morning had turned up the heat on policymakers to ignite stalling growth. The BOJ also cut its GDP outlook and pushed back a timeline for its ambitious 2.0 inflation target - now expected before early 2018 rather than by September 2017. The move underscored the challenges of conquering years deflation that have weighed on growth. The central bank’s consumer price target is a cornerstone of Tokyo’s broader drive to reignite the world’s number three economy. “This is the last chance for (BOJ governor Haruhiko) Kuroda,” said Hideo Kumano, chief economist at Dai-ichi Life Research Institute. “But the reality is that achieving the inflation target is going to be

A man shops at an electronic products retail store in Tokyo. According to data released by the government, Japan’s consumer prices dropped 0.3 percent in March.

extremely difficult.” Kuroda yesterday repeated that he “won’t hesitate” to pull the trigger on new stimulus, but said he wanted to see how a negative-rate policy announced in January was taking hold. “I don’t think our ability to ease further has become limited,” Kuroda told reporters. The rate move - which aims to encourage lending by essentially charging banks for storing some excess reserves in BOJ vaults - was widely panned as a desperate move to save Prime Minister Shinzo Abe’s faltering growth drive, dubbed Abenomics. Markets had expected the BOJ would tinker with the new policy or expand its massive 80 trillion yen (US$740 billion) annual asset-buying plan.

‘Limited impact’

“Markets now think the impact of any more BoJ easing measures is limited,” said Minori Uchida, head of Tokyo global markets research at Bank of Tokyo-Mitsubishi UFJ.

Official figures earlier yesterday showed consumer prices fell the most in three years. The worse-than-expected fall 0.3 percent in March from a year ago - came as separate data showed household spending remains weak, although factory output rebounded and the labour market was tight. Japan’s economy has largely defied several years of central bank and government remedies aimed at boosting prices as well as broader activity. Yesterday, the central bank pointed to weakness in overseas

“This is the last chance for (BOJ governor Haruhiko) Kuroda” Hideo Kumano, Chief economist at Dai-ichi Life Research Institute

markets and the impact of deadly earthquakes in southern Japan this month, which led to factory shutdowns, for scaling back its economic growth projections. The economy shrank 0.3 percent in the last quarter of 2015 and there are concerns that the January-March GDP data will also come in weak. Abe swept to power more than three years ago vowing to revive the country’s fortunes with a mix of policies centred on central bank monetary easing, targeted government spending and deregulation. But his attempts to power inflation has been hit by falling energy prices, coupled with recent robustness in the yen driving down the cost of imports. This month, the International Monetary Fund this month cut its growth forecast for the country, saying GDP would shrink next year as a planned sales tax rise tightens consumer spending. It also warned that deflation - a persistent and debilitating decline in prices - could return to Japan. AFP

Monetary policy

New Zealand central bank keeps cash rate unchanged Economists are still expecting the central bank to cut the rate in June. Rebecca Howard and Charlotte Greenfield

New Zealand’s central bank kept its benchmark interest rate unchanged yesterday at 2.25 percent but reiterated further easing may be needed given weak inflation. “Monetary policy will continue to be accommodative. Further policy easing may be required to ensure that future average inflation settles near the middle of the target range,” said Governor Graeme Wheeler in a statement. However, the central bank governor also noted that inflation is expected to strengthen as the effects of low oil prices drop out and as capacity pressures gradually build. He said the bank will remain closely focused on economic data. Wheeler emphasized there are “many uncertainties” around the outlook. Internationally these relate to prospects for global growth, particularly around China. The main domestic risks relate to weakness in

the dairy sector, the decline in inflation expectations, the possibility of continued high net immigration and pressures in the housing market, said Wheeler. Wheeler underscored that the exchange rate remains higher “than appropriate” given New Zealand’s low commodity export prices. “A lower New Zealand dollar is desirable to boost tradables inflation

and assist the tradables sector,” said Wheeler. Economists are still expecting the central bank to cut the rate in June. “He’s kept his cards close to his chest. He’s certainly kept the prospects of further easing alive in June, the door certainly remains open to that,” said ANZ Senior Economist Philip Borkin. ASB Chief Economist Nick Tuffley also still expects a cut in June.

He notes, however, the statement “gives little added urgency relative to that of March’s, and no hint that the RBNZ is currently anticipating a need for the OCR to drop below the 2 percent level the RBNZ’s forecasts currently imply.” Eighteen economists polled by Reuters had expected the Reserve Bank of New Zealand (RBNZ) to keep rates on hold while six had forecast a rate cut. Reuters

12 Business Daily Friday, April 29 2016

Asia Yangon panorama

Myanmar’s Mr Clean says he takes ‘red tape road’ to profit Companies and international agencies have long identified corruption and a lack of transparency as major obstacles to doing business in Myanmar. Timothy Mclaughlin

Scaffolding around the 139-year old Burma Railway Headquarters, a redbrick colonial relic at the centre of a half billion dollar property development in central Yangon, hasn’t seen much action since the project was announced four years ago. Serge Pun, the 63-year-old project developer and one of Myanmar’s richest men, says his Landmark development

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- which includes office, residential and hotel space - has been strangled by red tape and costly delays all because of his adherence to clean business. It’s a frustrating contrast to the luxury and high-end property boom in other parts of the Myanmar’s commercial capital. “It has been a very long and arduous red tape road,” Pun said in an interview. “Good governance always has a price to pay and the price we are paying is a delay.” Companies and international agencies have long identified corruption and a lack of transparency as major obstacles to doing business in Myanmar. Pun’s grievances underscore the challenges the newly-elected National League for Democracy (NLD) faces as it seeks global investment for urgent development needs. And despite his own clean credentials, Myanmar’s

complicated business environment means Pun has at times dealt with internationally blacklisted entities with key market positions. Landmark, was first announced in 2012 and is one of the country’s most high-profile international investments. Despite prominent backers - including the International Finance Corporation, a branch of the World Bank that finances private ventures; Asia Development Bank and Mitsubishi Corporation - the project hasn’t yet broken ground. The latest deadline for lease extensions from the Ministry of Rail Transport, which owns the land, was missed at the end of March. A senior ministry official said refurbishment of the old building is in progress but needed to be carried out “without affecting the heritage values.” The official didn’t comment on the status of the lease extensions or explain why it had yet to be granted. It remains a crucial issue for the project. “The lease extensions have a significant impact on the project’s financial viability

both from a debt and equity perspective,” said Vikram Kumar, IFC’s Myanmar manager.

Go-to partner

For investors keen to break into the frontier market, Pun serves as a go-to partner to help navigate local complexities, notably international sanctions still in place on many Myanmar nationals and businesses. Pun built his conglomerate, Yoma Strategic Holdings , from scratch and his business empire includes real estate, banking, aviation and cars. Over three decades, he has become one of Asia’s richest men while cultivating a reputation as “Mr Clean” in a country long known as anything but. Neither he nor his companies have been subject to international sanctions. Companies from American fast-food chain KFC to Indonesian healthcare operator Lippo Group have partnered with him. However, the business reality in Myanmar means some otherwise straightforward business ventures run through blacklisted companies. One of KFC’s Myanmar

outlets, for example, is at the new Yangon airport terminal, which was built and run by businessman Steven Law, who is on the U.S. sanctions list. Pun said that the deal doesn’t violate sanctions because it was done through Yoma, not KFC, and that it complies with Yoma’s code of conduct. U.S.-based Yum! Brands, which owns KFC, did not respond to emailed requests for comment. U.S. Treasury said it doesn’t comment on the “existence or possibility of sanctions violations.” The NLD is yet to release a plan addressing remaining sanctions, but recently slapped curbs on the value of gifts officials can accept, a small step to fulfilling its pledge to eliminate graft. For now, U.S. sanctions still create headaches, often indirectly tying up Myanmar-related bank transfers, even if they don’t involve blacklisted entities. “When you actually try to do business, everybody doesn’t understand whether you are a jade miner or not - they just say it is too troublesome to transact your fund remittance,” Pun said. Reuters

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Business Daily Friday, April 29 2016 13

Asia Digital wallet

Apple, ANZ Bank strike deal to bring Apple Pay to Australia The American company has partnered with a bank widely seen as trailing its three bigger peers in digital technology. Matt Siegel and Swati Pandey

pple Inc expanded its Apple Pay digital wallet in Australia yesterday after ANZ became the country’s first bank to support the mobile payment service, executives at the pair told Reuters. Apple Pay allows users to register credit cards on devices such as iPhones, and pay for goods and services by swiping the devices over contactless payment terminals. Apple charges card providers for transactions via the service, which it introduced to Australia last year with American Express Co. The latest partnership extends the service to ANZ customers and represents the culmination of months of talks with the bank and three bigger peers. Of the four, ANZ and Westpac Banking Corp have already agreed to support rival Android Pay from

Alphabet Inc unit Google. Collectively, the four banks account for 80 percent of all credit cards that consumers have linked to mobile payment systems, in a country with a relatively high rate of contactless payment. The partnership also coincides with Apple’s first-ever drop in iPhone sales during a quarter in which services such as apps, music and payment emerged as the firm’s second-largest business. “Our customers ... are much closer to being able to leave their wallets at home,” Jennifer Bailey, vice president of Apple Pay, said in an interview. Apple has partnered with a bank widely seen as trailing its three bigger peers in digital technology, a situation ANZ’s new Chief Executive Shayne Elliott has set out to change with Apple Pay, as well as by hiring Google’s Australia managing director. “It would be pretty hypocritical

In Brief of me to ... do all this hoo-ha about digital banking and then not be at the forefront of change,” Elliott said in an interview. For Apple, the partnership is a “coup” as it would increase pressure other banks to follow suit, said Foad Fadaghi, managing director of technology researcher Telsyte. “The similar forces that drove other numerous banking corporations in say the U.S. or Europe to get onboard will probably start to also kick in in Australia as well,” he said. Analyst David Ellis at Morningstar said one partnership does not automatically entail success because the big four banks have such dominance over payment systems. “It’s a different market here in Australia to the U.S. and to other global economies ... but who knows,” he said. “iPhones have the highest market share in Australia of smartphones, so the banks won’t want their customers being put at any disadvantage to competitors within their peer group.” Reuters

Key Points ANZ becomes first Australian bank to offer Apple Pay Move a “coup” for Apple -analyst ANZ shares up 0.5 pct, outperforming peers

Manpower

Singapore’s unemployment at 1.9 pct Singapore’s unemployment rate remained low at 1.9 percent in the first quarter, according to preliminary estimates by the Ministry of Manpower yesterday. Unemployment rate declined among residents and citizens, which was largely due to a lower labour force participation rate among youths aged 15 to 24, the ministry said. Total employment grew by 11,400 in the first quarter of 2016. This was lower than the seasonally high growth in the fourth quarter of 2015 and a reversal from the decline in the first quarter of 2015. Prices evolution

Philippines sees annual inflation at 0.7-1.5 pct Annual inflation in the Philippines will likely be in a range of 0.7-1.5 percent in April, reflecting higher fuel prices as well as power and water rates, Bangko Sentral ng Pilipinas Governor Amando Tetangco said yesterday. Headline inflation in March stood at 1.1 percent. Earlier in the day, Tetangco said the central bank does not see any major development that would necessitate a shift in its steady policy stance. His remarks came after the Fed showed little sign it was in a hurry to raise interest rates. Stimuli

S.Korea’s president says needs to look at QE South Korean President Park Geun-hye said yesterday there is a need to consider “selective” quantitative easing to provide liquidity where it is needed in light of on-going structural reforms, media reported. “We need to aggressively look at selective ways of quantitative easing to secure funds for structural reform, but not the easing we’ve seen in places like the U.S., Japan and the European Union,” Park said. Park was reiterating comments made earlier this week about considering a version of QE that would involve changing the central bank’s charter to let it buy more types of securities.

SWIFT vulnerable

Philippine central bank says foiled attempts to hack its website Monetary authorities believe the country’s banking system remains strong. Karen Lema

The Philippine central bank has foiled attempts to hack its website, its governor said yesterday amid a warning from global financial network SWIFT about recent multiple cyber fraud incidents targeting its system. SWIFT’S disclosure came as law enforcement authorities in Bangladesh

and elsewhere investigated the February cyber theft of US$81 million from the Bangladesh central bank account at the New York Federal Reserve Bank. “There were attempts, and I think this is a fact of life, but we have been able to turn them back,” Amando Tetangco told reporters. “Attempts are always there.” Tetangco stressed the hacking only involved its website and that it has been updating its cyber security systems. He did not say when the hacking attempts occurred. “We continue to update the firewalls, the security features as we move along. It is a continuing effort,” he said. “What is important is that these attempts should not be successful.” Philippine lawmakers and investigators are looking into how US$81 million hacked from the New York Fed account of Bangladesh’s central bank wound up with two casinos and a junket operator in the Philippines

in one of the biggest cyber heists in history. Bangladesh’s central bank was vulnerable to hackers because it did not have a firewall and used second-hand, US$10 switches to network computers connected to the SWIFT network, an investigator said. SWIFT, or the Society for Worldwide Interbank Financial Telecommunication, is a cooperative owned by 3,000 financial institutions. Despite the bank heist controversy, the Philippine central bank believes the country’s banking system remains strong. But it has directed banks and financial institutions in the Philippines to strengthen their know-your-customer practices following a separate website hacking incident involving the country’s poll body. The hackers had posted online voters’ personal information from the poll body, raising concerns about the possibility of identity theft. Reuters

Deforestation

Myanmar to stop teak production this year Myanmar will stop teak wood production and reduce logging of hardwood this year due to severe deforestation, official media reported yesterday. The number of teak trees in Myanmar has gradually declined due to illegal logging. The rate of forest coverage in Myanmar has decreased to 45 percent in 2015 from over 57 percent in 1990, according to the Ministry of Natural Resources and Environmental Conservation. The ministry is planning to replant teak in Bago mountain ranges in a bid to protect natural resources.

14 Business Daily Friday, April 29 2016

International In Brief Eurozone

Economic confidence rebounds Economic confidence in the euro area rose in April, snapping three months of declines that had sent the index to the lowest in more than a year. A gauge of executive and consumer confidence increased to 103.9 from 103.0 in February, the European Commission in Brussels said yesterday. Economists had forecast a gain to 103.4, according to a Bloomberg survey. The pick up in the sentiment indicator follows weaker readings at the start of the year, when China-led concerns about emerging market growth sent ructions through global markets. BIS recommends

Big banks should curb dividends, share buybacks The amount of cash big banks have used to fund share buybacks and dividend pay-outs since 2007 has topped US$1.7 trillion, a huge figure that could be better used to strengthen their capital or lend, the Bank for International Settlements said on Wednesday. The accumulated spend on buybacks and dividends between 2007 and 2014 period was US$1.73 trillion, far outstripping the extra US$405 billion in retained profits they kept on their books over the period, BIS data showed. But dividend pay-outs and share buybacks erode bank capital, Hyun Song Shin, head of research at the BIS, said. Unemployment

Spain’s jobless queue rises in first quarter Unemployment in Spain rose to 21 percent over the first three months of the year, official statistics showed yesterday, an increase that was quickly shrugged off by acting Economy Minister Luis de Guindos. Spain is only just emerging from a damaging crisis that has seen its unemployment rate rise to dizzying heights and the ruling conservatives have made creating jobs one of their priorities as fresh elections loom. The INE statistics agency said unemployment rose 0.1 percentage points compared to the last quarter of 2015, with 11,900 more people seeking work over the first three months of the year. Results

Deutsche Bank posts surprise profit Deutsche Bank posted a surprise net profit in the first quarter that was helped by lower litigation costs, but Chief Executive John Cryan warned investors not to expect good results for the full year. Quarterly net income fell 58 percent to 236 million euros (US$267.5 million) after its investment bank slumped in volatile markets and following its exit from certain businesses, but beat analysts’ average expectation for a net loss of 249 million euros. Posting no profit or a low profit this year would be a sign of progress, Cryan said.

U.S. Congress session

U.S. Congress passes legislation to protect firms’ trade secrets Theft of intellectual property, including trade secrets, is estimated to cost American firms more than US$300 billion a year. Richard Cowan

he U.S. Congress on Wednesday passed and sent to President Barack Obama legislation strengthening legal protection for companies’ trade secrets, including manufacturing processes and computer methods. The House of Representatives voted 410-2 to approve the “Defend Trade Secrets Act” on the heels of it being unanimously passed by the Senate earlier this month. The legislation, which is backed by the White House, would open the door for companies to sue in federal court for damages related to theft of trade secrets. House Judiciary Committee Chairman Bob Goodlatte said the measure “will help American innovators protect their intellectual property from criminal theft by foreign agents and those engaging in economic espionage.” In urging its passage, Goodlatte rattled off iconic U.S. products including fried chicken from the fast food restaurant KFC and Coca Cola, saying the legislation would provide

further protections for their secret recipes. Theft of intellectual property, including trade secrets, is estimated to cost American firms more than US$300 billion a year, according to a 2013 report by the Commission on the Theft of American Intellectual Property. Trade secret theft already is a federal crime, but without the right to sue in federal court, companies must

“In today’s digital environment, it has never been easier to transfer trade secrets across the globe with the click of a cell phone, tablet, or computer key” Jerrold Nadler, U.S. Representative, the leading Democratic co-sponsor of the legislation

seek redress in state courts amid a patchwork of state laws. Corporations such as Boeing Co and Johnson & Johnson , as well as the U.S. Chamber of Commerce and computer software lobbyists representing companies such as Apple Inc and Microsoft Corp, have pushed for the enhanced protections. Backers of the legislation have cited a case last year in which a South Korean company, Kolon Industries, was found guilty in U.S. federal court of conspiracy to steal trade secrets from DuPont. The foreign firm was ordered to pay US$85 million in criminal fines and US$275 million in restitution for illegally obtaining information on the chemical company’s Kevlar body armor, which resulted in nearly $1 billion in economic losses for DuPont, according to lawmakers. In allowing civil suits in federal court for illegal procurement of trade secrets including manufacturing processes, formulas, computer algorithms, industrial designs, business strategies and customer lists, the legislation aims to create uniform standards for what constitutes trade secret theft. Reuters

IMF

Mixed forecast for Latin American, Caribbean economy The fate of major regional economies is divided, with Mexico set to grow 2.4 percent and Colombia 2.5 percent. The International Monetary Fund (IMF) yesterday predicted a 0.5 contraction in the GDP growth of Latin American and Caribbean region for 2016, marking the first time for the area to see a dip for two years in a row since 1983. In a newly released report on “Regional Economic Outlook for Latin America and the Caribbean,” the IMF said that the “deceleration in activity reflects weak external demand, further declines in commodity

prices, volatile financial conditions and important domestic imbalances and rigidity.” However, the global financial body predicts that the region will return to growth in 2017 with a GDP rate of 1.5 percent. According to the report, the best South American players for 2016 are Panama, which is expected to grow by 6.1 percent, Dominica, St. Kitts and Nevis and Nicaragua. The fate of major regional economies is divided, with Mexico set to grow 2.4 percent and Colombia 2.5 percent. However, other regional powerhouses will tumble, with Argentina predicted to contract by 1 percent, Brazil by 3.8 percent and Venezuela by a staggering 8 percent. Mexico received a mild endorsement by the agency, which said that the country will be supported by “healthy private domestic demand and spillovers from a strong U.S. economy. The depreciation of the peso and lower electricity prices should boost manufacturing production and exports.” As for other major South American economies, the IMF report forecast

that Brazil and Venezuela face similar economic and political problems, while Argentina can be more optimistic about the future. “Brazil is mired in a deep recession,” it said, adding that “Argentina’s medium-term growth prospects have improved noticeably as a result of an on-going transition to remove domestic imbalance and distortions and correct relative prices.” Venezuela is expected to see its economy shrink by 4.5 percent in 2017, the report said. Ecuador will contract by 3.8 percent, but the situation is likely to worsen once the influence of the recent earthquake on the country’s economy is factored in, the IMF said. Xinhua

‘The IMF report forecast that Brazil and Venezuela face similar economic and political problems’

Business Daily Friday, April 29 2016 15

Opinion Business Wires

Philstar The (Philippine) government granted most income tax holidays (ITH) to underperforming sectors over the past few years, highlighting the need to restructure incentives that have taken more than P80 billion in state revenues. In a study by the Board of Investments, a copy of which was obtained by The STAR, mass housing and agricultural products topped the number of projects which have sought perks from the investment promotion agency from 1995 to 2012. Broken down, 655 mass housing projects and 479 farm counterparts were granted ITH of up to eight years, depending on their classification.

Straits Times CapitaLand’s wholly owned serviced residence business unit, The Ascott Ltd, is acquiring a prime property in the heart of Islington, London, through its serviced residence global fund with Qatar Investment Authority (QIA). Ascott will invest a total of £52 million (S$100.4 million) in the 108-unit property which will be named Citadines Islington London, the company announced on Thursday (April 28). Citadines Islington London is the US$600 million fund’s third investment, some five months after its maiden acquisition of two properties in Paris and Tokyo in November 2015.

The advantages of taking on more risk as you age

Vietnam News The agro-forestry-fisheries export turnover in April was estimated at US$2.97 billion. This brings the figure for the first four months of this year to over US$10 billion, up 11 per cent against the same period last year. In the first four months of 2016, Việt Nam shipped 2.06 million tonnes of rice abroad and raked in US$916 million, up 11.8 per cent in volume and 13.8 per cent in value. Meanwhile, the shipping of 91,000 tonnes of cashew nuts brought home US$689 million, an increase of 14.6 per cent in volume and 7.1 per cent in value.

Taipei Times President Ma Ying-jeou vowed to safeguard the fishing rights of Taiwanese fishermen in international waters and denied Japan’s claim that the Okinotori atoll is an island. The Presidential Office issued a statement saying that Ma made the pledge during a high-level national security meeting attended by Vice President Wu Den-yih, Premier Simon Chang and top officials from the ministries of foreign affairs and national defence, the Coast Guard Administration and the Council of Agriculture. The meeting was called to discuss countermeasures to the Japanese Coast Guard’s confiscation of the Taiwanese fishing boat about 150 nautical miles of the Okinotori atoll on Monday.

our lifecycle fund with its tapering equity allocation may be injurious to your wealth. Lifecycle, or target-date funds, which are typically designed to hold less and less equities as a saver reaches and then enjoys retirement, have been a financial phenomenon in recent years. Assets held in U.S. target-date funds have increased more than six-fold in the past decade, according to Morningstar data, reaching US$763 billion. Such strategies are intuitive - cut risky holdings when you are actually going to be needing the money - and often deliver as desired by managing to withstand withdrawals over a 20-year retirement. A new study finds that some alternative strategies do better, both in investment performance terms, in mitigating the risk of running out of money and, depending on how wealthy you are, at leaving you with a lump sum for inheritance or further spending needs at the end of the 20 years. “Our findings reveal that the dependence on the target-date fund approach creates an illusion of security in retirement, mainly because of its low standard deviation, and should be reconsidered,” Osei Wiafe of Griffith University and Anup Basu and En-Te (John) Chen of Queensland University of Technology write in a recent study. Running thousands of simulations, the report looked at the performance of a variety of strategies in the retirement, or drawdown, period. The basic variables were how much was held for what period in equities versus safe assets like bonds and what percent of the portfolio value the saver takes each year as income over the 20 years. Seven strategies were used: ranging from a classic target-date fund tapering of equities to steady allocations of varying aggressiveness. Particularly interesting was the good performance of a contrarian strategy called reverse lifestyle, which actually increases equity holdings during retirement. Not only did reverse lifestyle show a lower chance of running out of money before the 20 years of retirement was over, it also produced more money allowing for more income at the end of the 20 years. Given that many people will now live far longer than the 20 years assumed when these plans were first designed, this is an important point.

“

James Saft Reuters columnist.

“Overall, higher equity levels are good for the right tail of the distribution, providing the possibility of high terminal wealth levels for investment strategies. If the purpose of a retirement portfolio is to provide high wealth levels and generate a sustainable level of consumption in retirement, an equity-dominated strategy provides a better chance of meeting this purpose,” according to the study. Of course, if you save insufficiently during your working life, all of this won’t matter. Glide paths don’t help if you never get up above the trees and telephone wires. Contrarian strategies, which increase equity weighting as the saver ages further into retirement, do better than conservative and traditional strategies at creating this terminal wealth, while lifecycle strategies limit the upside. Of course there are trade-offs. If you hold an aggressive 100 percent equity strategy your median final pot of money is more than seven times as large as with a more conservative lifecycle allocation of decreasing equities down to zero. Aggressive portfolios are also more likely to run out of money during the 20 years, though the risks remain small at a 4 percent withdrawal rate. The problem with conservative strategies, like those which hold static but low amounts of equities, is that they simply don’t generate enough investment gain. One general point of the study was that strategies with substantial equity weightings give better risk-adjusted outcomes. “Conservative strategies are unable to withstand the stress of periodic income withdrawal demands, especially as we experience elongated lifespans. Alternatively, contrarian strategies such as reverse lifecycle strategies are able to take advantage of the market movements whilst remaining relatively stable and providing better retirement outcomes and decreased chances of portfolio ruin,” according to the study. Taking more risk as you age will for many people be a gut-wrenching decision, but looks like it may be the right one. Reuters

Contrarian strategies, which increase equity weighting as the saver ages further into retirement, do better than conservative and traditional strategies

Equity dominates

Much of this depends, of course, on how much you start with and what your goals are. In general, though, the higher equity-weighted strategies produced good results and had a higher chance of generating excess wealth at the end of the 20 years.

”

16 Business Daily Friday, April 29 2016

Closing Results

Spring Air net up 44 pct to a record on travel boom

China’s largest budget carrier Spring Airlines posted a 44 percent jump in first-quarter net profit to a record 366.7 million yuan (US$56.61 million), lifted by robust travel demand. Airlines in China are benefiting from a surge in travel by the Chinese, and lower fuel prices. Earlier this month, Spring Airlines chairman Wang Zhenghua told reporters the company seeks to double the size of its fleet to 100 aircraft by 2018. In a stock

exchange securities filing yesterday, Spring Airlines also said 2015 net profit rose 50.2 percent to 1.33 billion yuan. The airline had already flagged the 2015 profit growth in January. Spring Airlines has been profitable since it was launched in 2005 by Wang. Last year, it became the first budget airline to list shares on the Shanghai Stock Exchange. But a 24 percent fall in its shares this year could lead the company to consider investing in businesses that can provide bigger returns, Wang told reporters this month. Reuters

Stock markets

Asia’s giants turn into US$11 trillion headache for traders The Shanghai Composite lost 0.3 percent yesterday, and is heading for its third monthly loss this year. Kana Nishizawa, Yuko Takeo and Anna Kitanaka

sia’s two biggest stock markets are jostling for an ignominious prize. Japan’s Topix index and China’s Shanghai Composite Index have tumbled more than 13 percent in 2016 to rank along Nigerian and Mongolian shares as the world’s worst performers. In the two years through the end of December, the Asian gauges outperformed MSCI’s global measure by at least 20 percentage points. The Bank of Japan stood pat on monetary policy

yesterday, sending Tokyo stocks tumbling, while the Shanghai measure fell to a one-month low. The benchmark gauges in two of the world’s largest stock markets, which have a combined value of almost US$11 trillion, are declining as investors detect a reduced appetite from policy makers to boost monetary stimulus. Yesterday’s BOJ decision was the first under Governor Haruhiko Kuroda where a majority of economists expected easing that didn’t materialize, while strategists now see China’s central bank keeping its main interest rate on hold until the fourth quarter.

“Neither China nor Japan have a solid plan on dealing with their slowing economies,” said Tomomi Yamashita, a fund manager at Shinkin Asset Management Co. “There is still scope for easing, and as for Japan there are fiscal policies they can carry out. There’s still hope. But today there was just too much hope on the BOJ.”

BOJ Decision

The Topix sank 3.2 percent yesterday after the central bank kept bond-buying, interest rates and exchange-traded fund purchases unchanged. The stock gauge has fallen for four straight days, handing losses to foreign investors who piled the equivalent of US$4.9 billion into the market last week, the most in a year. Overseas traders were net sellers of Japanese equities for the first 13 weeks of 2016. “I give up,” Ryuta Otsuka, a strategist at Toyo Securities Co. in Tokyo, said by phone after the BOJ decision. “It’s a really disappointing result and I feel like throwing in the towel. It cuts because we had so much hope.”

The Topix posted four straight annual gains through 2015, while even a US$5 trillion rout in Chinese shares last summer couldn’t stop the Shanghai Composite from being the world’s top-performing major market over the last two years. The declines for both gauges in 2016 compare with a 2.5 percent advance by the Standard & Poor’s 500 Index, which is closing in on last year’s record.

Mean reversion

“We have gone through periods where those two markets have done very well in recent years so there’s always mean reversion with outperforming markets taking a backseat for a while,” said Shane Oliver, head of investment strategy at Sydney-based AMP Capital Investors Ltd., which oversees about US$120 billion. Over a longer period both China and Japan’s stock markets have had lengthy stints in which they’ve disappointed investors, he said. The Shanghai Composite lost 0.3 percent yesterday, and is heading for its third monthly loss this year. The benchmark index is down 17 percent in 2016, the most among global gauges, after rallying 67 percent in the previous two years.

“Neither China nor Japan have a solid plan on dealing with their slowing economies” Tomomi Yamashita, Fund manager at Shinkin Asset Management

“Japan has an issue with a very strong yen,” said Khiem Do, the Hong Kong-based head of multi-asset strategy at Baring Asset Management. “China’s underperformance is expected. There’s concern still over the strength of the renminbi and concern real rates are still too high. Japan is a surprise. We didn’t expect the yen to reach 108.” Bloomberg News

Results

Bad loans

Car industry

PetroChina posts first quarterly loss

ICBC joins BOC in breaching BYD predicts 5-fold jump debt coverage rule on green-car boom

China’s biggest oil and gas producer reported a 13.8 billion yuan (US$2.1 billion) loss in the three months ended March 31 from a 6.15 billion yuan profit a year ago, Beijing-based PetroChina said Thursday in a statement to the Hong Kong stock exchange. It’s the first quarterly loss since the company was listed in 2000. PetroChina’s oil and gas output is expected to fall for the first time in 17 years in 2016 as it shuts high-cost fields that have “no hope” of making profits at current prices, President Wang Dongjin said last month in Hong Kong. China’s decision to cut natural gas prices for industrial users in November further reduced margin in PetroChina’s gas-wholesale business. Average realized crude price fell to US$27.27 a barrel during the quarter. Brent oil, the global benchmark, averaged about US$35 a barrel in the first quarter, from about US$55 a year ago. Prices hit a 12-year low in January. While the crash in prices hurt the exploration and production division of the company, cheaper oil was a boon for the company’s refining operations. Bloomberg News

Industrial & Commercial Bank of China Ltd., the world’s largest lender by assets, breached a regulatory requirement for bad-loan coverage as it reported a 0.6 percent gain in profit in the first quarter. The bank’s provisions for bad loans stood at 141.2 percent of existing nonperforming credit, compared with a regulatory minimum of 150 percent, the Beijing-based lender said in a statement to Hong’s Kong stock exchange yesterday. Net income rose to 74.76 billion yuan ($11.5 billion) in the three months ended March 31 from 74.32 billion yuan a year earlier. One of China’s biggest banks, Bank of China Ltd., this week reported that it had breached the minimum provision rule, the first lender to do so. Government officials are considering loosening the requirement, a move that would lend support to banks’ profits as the lenders digest an increased volume of bad loans. Analysts including Sophie Jiang, of Nomura International (HK) Ltd., say the level could be reduced to 120 percent without risk to the financial system. Bloomberg News

Chinese automaker BYD Co Ltd, backed by Warren Buffett’s Berkshire Hathaway Inc, forecast yesterday a five-fold jump in first-half net profit, citing strong demand for its electric and plug-in hybrid vehicles. The Shenzhen-based company forecast a 382 percent to 425 percent rise in net profit for the first half to 2.25 billion to 2.45 billion yuan (US$347.29 million-US$378.16 million), according to stock exchange filings. For the first quarter, BYD reported 851 million yuan (US$131.35 million) in profit, a seven-fold increase year-on-year and in line with its forecast last month of a 495 percent to 644 percent rise. The automaker reported a similarly large rise for 2015 full-year net profit last month as overall new-energy vehicle sales in China more than quadrupled thanks to aggressive government policies including subsidies, tax incentives and more leeway in awarding license plates for green cars. That surge has carried through to this year with sales of electric and plug-in hybrid vehicles doubling in the first quarter. Reuters