Australian businessman claims he created Bitcoin Digital currency Page 16
Tuesday, May 3 2016 Year V Nr. 1034 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Joanne Kuai Property
Housing transactions rebound in March as prices drop Page 3
Gaming
Emperor Entertainment anticipates significant fall in annual net profit Page 7
www.macaubusinessdaily.com Tax
Chinese authorities started on Sunday to apply VAT in four sectors Page 11
Long Haul Back Revenues April gross gaming revenues fell 9.5 pct to MOP17.34 bln (US$2.17 bln). Marking 23 consecutive months of decline. But comfortably beating median estimates by industry gurus. The industry’s mass market revenue has started to bottom out since last year. With narrowing revenue declines. The next big catalysts to watch for, says an analyst, are the summer travel season and the new resorts from Wynn Macau and Sands China. Page 7
Opening window Economy Easier for Portuguese lawyers to practise law in the SAR. The Macau Lawyers Association plan to clear the way. With aspirants taking the same exam as local lawyers to become official here. The new regulation enforcement date remains unknown. Page 2
Watching the pendulum swing Retail While Hong Kong suffers, Macau’s luxury goods market is recovering. Retail sentiment is better, says Hong Kong tycoon Karson Choi (pictured). Who plans to substantially expand his family’s luxury watch business here. Based on unswerving confidence in Macau’s Mainland customer market. Page 6
PMI Page 10
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24° 26° 23° 27° 24° 27° 24° 28° 23° 28° Today
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I SSN 2226-8294
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Fully stimulated Latest official Chinese data strongly suggests stabilisation in April. A property recovery and credit surge, together with factory gauge, mean the economy will not need extra stimuli in the short term.
Cathay Pacific Airways Ltd
Source: Bloomberg
HK HSI April 29, 2016 21,067.05 -320.98 (1.50%)
2 Business Daily Tuesday, May 3 2016
Macau In Brief Protest
580 citizens protest on Labour Day Some 580 participants joined ten different rallies and assemblies last Sunday afternoon, Public Security Police Force (PSP) reports. According to the police department, it deployed 120 officers to maintain order. Nine of the organisers submitted petitions to Government Headquarters whilst one petitioned the central government’s Liaison Office in Macau. In addition, 141 motor cars and two motorcycles participated in a taxi slow-drive protest on Sunday morning, according to PSP.
PSP
Customs’ servers malfunction causes chaos All borders at Macau experienced some chaotic scenes on Saturday, as servers for auto channels were functioning but all border-crossing identification checking had to be done manually. The Public Security Police (PSP) said that ‘a rare technical problem’ had caused the problem, starting at around 5:00pm. The system was repaired around 7:00pm when ‘order was reinstalled’. The authorities said they did have a backup system but due to the ‘rarity’ of the problem the backup plan failed to be initiated. Police denied the incident was caused by hackers’ attacks, saying they had already discovered the problem and figured out a solution so that such an incident would not be repeated. Immigration
Fewer illegal workers arrested A total of 106 illegal workers were found in the MSAR in the first quarter of 2016, according to data divulged by the Public Security Police Force (PSP). The illegal workers were discovered after a total of 1,175 searches between January and March, conducted on constructions sites, residences, commercial and industrial establishments, and other workplaces, in co-operation or by separate efforts by the PSP and Labour Affairs Bureau. In January, February and March, some 41, 23 and 42 illegal workers were found, respectively. The total of 106 represents a year-onyear 11.67 per cent decrease on the first quarter of 2015 when 120 illegal workers were arrested. In the whole of 2015 the total number of arrested illegal workers in the MSAR was 444, while 483 cases of aid to or employment of illegal immigrants was registered, according to the PSP.
Law Portuguese trainee lawyers to take same exam as local lawyers
New Portuguese lawyer requirements pending Macau Lawyers Association (AAM) says the cap on the number of Portuguese lawyers practising law in Macau will remain the same. Nelson Moura nelson.moura@macaubusinessdaily.com
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awyers from Portugal will be able to sit the same exam as local lawyers in order to become an official lawyer admitted by the Macau Lawyers Association (AAM), but will have to wait for an established enforcing date for new regulations, while previous requirements will stay the same, said Paulino Comandante Secretary General of AAM according to local media reports. Last week, the AAM revised the requirements for Portuguese lawyers wanting to officially practice in the MSAR as a lawyer, decreeing candidates would have to pass the same exam as local lawyers after internship, regardless of already passing the Portuguese law access exam, according to news agency Lusa. However, no date has been established for when the new requirements will be enforced and according to Mr. Comandante at the moment there are currently four Portuguese trainee lawyers who still have to wait for a panel to be formed to perform
the law access exam. With regard to the formation of the panel, the Secretary General admitted the requirement of 15 years experience for a panel member is too high, thus it will be lowered to “14,13 or 12 until we can form a panel,” for the awaiting Portuguese candidates.
A hard find
Between 1996 and 2013, Portuguese lawyers could join the AAM after practising law for a period of between three to six months, without the need to pass any exam; however, in 2013 the protocol between the Portuguese Lawyer Association (OA) and the AAM which allowed the entry of Portuguese lawyers to work in local offices was suspended due to the high number of arrivals of Portuguese professionals. At the time, AAM President Jorge Neto Valente justified the decision stating that more than half of the 250 registered lawyers in Macau were Portuguese, and since 30 Portuguese lawyers had arrived in Macau in that year the “market couldn’t absorb this number of professionals”. Then in 2014 restrictions were imposed by AAM for Portuguese lawyers, such as the necessity of passing a different exam on the juridical differences between the two territories, three years of work experience, and an MSAR Resident Identity Card (BIR), with one of the decisions imposed being the necessity of an access exam panel comprising bilingual lawyers with 15 years of experience
of practising law. However, since the first Law Degree in Macau in Chinese was only created in 1995 there was great difficulty in finding suitable people for the jury to evaluate the access exams by Portuguese lawyers, the President of the AAM explained last week. “In order to overcome this difficulty, there won’t be the need to find people with 15 years of experience and [Portuguese Lawyers] will be able to join in and take the same exam as local candidates in order to enter the profession,” Mr. Valente told TDM radio. He also stated that the changes could “open a window” to the possible reestablishment of the previous protocol with the Portugal Lawyers Association. However, the AAM President stated that the previous approved requirements, such as the demand for a BIR, won’t be changed since “a lawyer can’t work in Macau with a Blue Card (temporary working visa) since he won’t have the necessary requirements to have financial independence.” Another previous limitation that won’t be changed is the cap limit of approved trainee lawyers and lawyers originally from Portugal who can practise in Macau – respectively 50 per cent and 10 per cent. The President of the AAM believes that “although some law firms complain they can’t find qualified lawyers in Macau,” the limitations should be kept in order to prevent a “flood of lawyers from Portugal.”
Business Daily Tuesday, May 3 2016 3
Macau
Property Housing transactions rebound in March as prices drop
Home market picking up
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otal h o u s i n g transactions in the city rebounded by 44.1 per cent yearon-year in March as home prices dropped by double-digit year-on-year, reveals the latest data released last Friday by Financial Services Bureau (DSF). According to official data, a total of 591 housing
transactions were recorded during the month, which is more than double compared to 268 in February this year. In terms of area, most of the transactions were made involving residential property on the Peninsula, which surged 51.1 per cent year-onyear, or 135 per cent monthon-month, to 476 of the total. Meanwhile, transactions on
Taipa and Coloane amounted to 88 and 27 in the month, respectively. The city’s home prices dropped to MOP72,741 (US$9,102) per square metre in the month, down 20.6 per cent year-on-year, or 1.34 per cent month-on-month. The cost of buying a residential unit on the Peninsula decreased 19.1 per cent
year-on-year to MOP74,302 per square metre, whilst those in Taipa and Coloane fell 17 per cent and 16.5 per cent year-on-year, amounting to MOP74,302 and MOP93,703 per square metre, respectively. In terms of property type, 90 per cent, or 542, of total transactions were made on completed units, which increased by 77 per cent yearon-year, or 129.6 per cent month-on-month. This type of unit cost MOP70,602 per square metre on average in
March, which declined by 10 per cent year-on-year but remained flat compared to February this year. Only 49 transactions were made on units still under construction in March. The number represents a drop of 52.8 per cent year-on-year but an increase of 53 per cent monthon-month. The prices of these units dropped 22.3 per cent year-on-year, or 2.76 monthon-month, to MOP91,862 per square metre on average, according to DSF. K.L.
Infrastructure Construction company profits from continued bridge contracts
Staying afloat Authorities have revealed that the shifts of up to seven metres in the island for the Hong Kong-Zhuhai-Macau Bridge should not delay the opening date of the project, despite most of the 22 steel cells used to fix the seawall having drifted three to five metres, with two shifting over six metres, the Highways Department of Hong Kong told media on Friday. Director of Highways Peter Lau Ka-keung said: “From last September to now we have not identified any major movements,” and that “for some six steel cells which had smaller movements we already fixed the problems with our contingency fund because we wanted to catch up with the deadline,” reported the South China Morning Post. For eleven steel cells that moved more than four metres Lau said that the contractor had already conducted work to strengthen the relevant seawalls with its own funds. Lau didn’t reveal the cost necessary to fix a further five steel cells, stating, “We will negotiate with the contractor to see who should bear the costs,” the publication noted. There are 85 total steel cells around
5.83 Billion RMB Profit in 2015 for China Communications Construction Ltd.
the island boundary, with 22 major cases of shifts and others of less than two metres on average. The shifts are due to a new ‘nondredged’ method so far unused in Hong Kong in order to ‘minimize the environmental impact of the Hong Kong Boundary Crossing Facilities (HKBCF) project’ including ‘construction traffic in sea can be reduced by half, and the suspended solids in the sea water can be reduced by approximately 70 per cent,’ according to a press release.
Infrastructure pays
Listed as responsible for ‘design and construction of artificial islands’ on the Highway Departments page is China Communications Construction Ltd. as leader of a joint venture for the project. Despite the group not being listed within the contracts for the HKBCF on the Highways Department’s website the group notes that for their segment – involving the ‘vehicle clearance square and auxiliary construction of Hong Kong Port’ for the bridge, in a filing on the Hong Kong Stock Exchange, attributed a contract value of US$982 million (HK$7.62 billion) – on a project with a total estimated cost of HK$35.9 billion. The group also listed their 40 per cent ownership interest in the estimated HK$25 billion project for the Hong Kong Link Road – on a segment running from the boundary to Scenic Hill – attributed to a joint venture between Dragages-China Harbour-VSL,
according to the HKBCF contract website, for HK$12.87 billion. For the 2015 year the group saw 27 per cent of their new infrastructure construction contracts derive from roads and bridges work, followed by port work at 24 per cent and railway work at 21 per cent. The largest share of new infrastructure construction
contracts came from Africa at 52 per cent of business and the Hong Kong/Macau/Taiwan region only accounted for 10 per cent of contracts. The group saw a total of RMB403.6 billion in revenue and a 10.3 per cent increase culminating in a profit of RMB15.83 billion – a 13.2 per cent increase. K.W.
4 Business Daily Tuesday, May 3 2016
Macau Tourism
Giant Rubber Duck in Macau
The Rubber Duck attracts tourists and benefits the local eateries, according to local Chinese newspaper Macau Daily. The number of tourists and local residents has increased outside the Macao Science Center and at Macau Fisherman’s Wharf. Although some cafés in the Nape area have offered special meals for the Duck, most locals and tourists tend to go to
Macau Fisherman’s Wharf, with more options for food selection at cheaper prices and free parking. Florentijn Hofman is the artist who conceived the Rubber Duck project. The Duck has been touring the world since 2007, visiting Beijing, Hangzhou, Qingdao, Guiyang, Kunshan, Shanghai and Sanya, as well as Hong Kong and Taiwan. The duck will stay in Macau until May 27.
Transportation
Autos stalling Newly registered vehicles decreased by almost a third in Q1 Annie Lao annie.lao@macaubusinessdaily.com
I
n the first quarter of this year, the new registration of motor vehicles decreased by 27.6 per cent year-on-year to 4,001, with that of motorcycles (2,241) and light private cars (1,299) dropping 23.4 per cent and 42.1 per cent, respectively, according to the latest transport and communications statistics from Statistics and Census Service (DSEC). There were 249,215 licensed motor
vehicles in Macau at the end of March, up by 3 per cent year-on-year, in which motorcycles and light private cars accounted for 52 per cent and 41.2 per cent, respectively. Cross-border vehicle traffic recorded a total of 432,917 trips in March 2016, up slightly by 0.4 per cent yearon-year. In the first quarter of this year, cross-border traffic decreased 0.3 per cent year-on-year to 1,258,172 trips, of which vehicle traffic via the Border Gate accounted for 77.5 per cent. Passenger ferry movement between Macau and Mainland China and between Macau and Hong Kong dropped by 4.7 per cent year-on-year to 11,602 trips in March. In the first quarter, it recorded a drop of 3.7 per cent to 34,578 trips. Commercial flight movements at Macau International Airport reached 4,516 in March 2016, up 5.8 per cent year-on-year. The first quarter posted an increase of 8 per cent year-on-year to 13,709 trips. In addition, flight movements to and from Mainland China, Thailand and
Taiwan were up by 1.1 per cent, 24 per cent and 15.5 per cent, respectively. However, flight movements to and from Vietnam dropped 21.1 per cent. Helicopter flight movements between Macau and Mainland China and between Macau and Hong Kong plunged significantly by 41 per cent year-on-year to 630 trips in March. In the first quarter, a fall of 36.8 per cent to 2,371 trips was posted.
Inward air cargo from Taiwan accounted for 59.2 per cent of the total, with a drop of 16.9 per cent, while outward air cargo to Taiwan accounted for 40.1 per cent of the total, increasing by 11.9 per cent. Furthermore, transit air cargo showed an increase of 12 per cent to 1,527 tones year-on-year in the first quarter. The gross weight of containerised cargo by land went up by 23.8 per cent year-on-year to 1,914 tones in March.
Cargo by air and land
More Internet users
Gross weight of seaborne containerised cargo decreased by 26.5 per cent year-on-year to 17,315 tones in March 2016. Air cargo recorded total of 2,838 tones through Macau International Airport in March 2016, up 30 per cent year-on-year due to outward air cargo growth of 49.4 per cent (1,669 tones). In the first quarter of this year, inward air cargo recorded a decrease of 13.4 per cent to 1,470 tones year-onyear. However, outward air cargo posted an increase of 21.5 per cent to 4,168 tones.
Total Internet subscribers increased to 344,917, up 10.8 per cent year-on-year. The cumulative duration of Internet usage recorded a total of 288 million hours, up by 13.7 per cent year-onyear in the first quarter of this year. There were 143,488 fixed-line telephone subscribers in the city at the end of March, down 5.6 per cent year-on-year. There were 1,883,544 telephone subscribers, up 1.9 per cent, of whom stored-value GSM card subscribers accounted for 1,209,173, or 64.2 per cent in total.
Business Daily Tuesday, May 3 2016 5
Macau Retail
Hermes sales buoyed by bags after boosting leather output Sales fell in Macau, though they stabilized in Hong Kong, which remains weak, the CEO said. Hermes International SCA reported first-quarter leather-goods sales that beat analysts’ estimates as the French luxury company boosted purse production and the aftershock of November’s Paris terror attacks eased. Revenue reached 1.19 billion euros (US$1.35 billion), Hermes said Thursday, matching the median analyst estimate. Sales rose 6.2 per cent, excluding currency fluctuations, slightly ahead of the 5.8 per cent estimate. The stock gained as much as 2.7 per cent in Paris. “The biggest and most profitable luxury-goods division saved the day,” wrote Rogerio Fujimori, an analyst at RBC Capital Markets. “France was surprisingly resilient, which probably was driven by its loyal local clientele.” Hermes’s Parisian stores are still suffering from the fallout of last year’s terror attacks, as well as the recent bombings in Brussels, Chief Executive Officer Axel Dumas said on a call with reporters. While store visits in London and Milan are back to normal levels, Paris has yet to recover, he said, seeking to explain a 9.2 per cent drop in sales of silk scarves and ties.
Higher production
Leather-goods and saddlery revenue rose 15 per cent, beating the 12 per cent consensus. Hermes expanded leather production facilities in France last year, boosting supplies. The company’s 15th leather workshop opened this month and investments in another are continuing, Hermes said. Sales of every other major product line dropped. Hermes has served fewer customers in the Middle East due to a drop in tourism and the plunging price of oil, Dumas said. Sales fell in Macau, though they stabilized in Hong Kong, which remains weak, the CEO said. And Hermes’s U.S. retail sales trailed a 4.4 per cent gain in the Americas region, he said. “There’s a lot of volatility,” Dumas said. “We have to adapt to circumstance.” Hermes warned last month that 2016 will be difficult. If that doesn’t change and demand remains subdued in parts of Asia and the U.S., revenue growth could be below 8 per cent this year, excluding currency swings, Hermes reiterated on Thursday. Bloomberg
Trade
External trade dives 20.7 pct to MOP6.5 bln in March The decrease is driven by a 23.2 per cent fall in the city’s total import values. Kam Leong kamleong@macaubusinessdaily.com
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acau’s total external trade plunged by 20.7 per cent year-on-year to MOP6.5 billion (US$813 million) in March due to a significant decline in its total imports, according to the latest official data released last Friday by the Statistics and Census Service (DSEC). In the month, merchandise exports and imports of the Special Administrative Region amounted to MOP1.01 billion and MOP5.49 billion, down 3.9 per cent and 23.2 per cent yearon-year, respectively. Meanwhile, the trade deficit totalled MOP4.48 billion, expanding by 26.5 per cent compared to the same month in 2015. Local imports of mobile phones recorded the most significant fall of 57.6 per cent year-on-year to MOP285.7 million in the month. In addition, imports of watches and gold jewellery decreased by 41.1 per cent and 22.7 per cent year-on-year to MOP318.7 million and MOP429.5 million, respectively. Meanwhile, of total exports,
Retail
Esprit revenue drops 9.1 pct in Asia Pacific Global clothing group Esprit Holdings Ltd. saw its revenue drop by 9.1 per cent year-on-year to HK$2.09 billion (US$260 million) in Asia Pacific during the third quarter of its fiscal year ended March 31, according to
its filing with Hong Kong Stock Exchange last Friday. As at the end of March, the retailer had a total of 803 stores worldwide, of which 505 were in Asia Pacific. It stated in the filing that stores in the region had posted a year-on-year growth of 2.8 per cent in same-store sales. Meanwhile, the company’s total revenues recorded a marginal decline of 0.1 per cent in local currency, totalling HK$13.7 billion. Of this, some HK$9 billion was generated by retail business whilst some HK$4.6 billion was derived from wholesale business. ‘Overall, the continuation of the positive trend in our retail sales performance keeps reinforcing our confidence that the strategic changes in our product and channels management are the right path to restoring the upside potential of the Esprit brand and the long-term competitiveness of our Group,’ the company remarked. K.L.
domestic exports fell 21.5 per cent year-on-year to MOP147.4 million in the month, whilst re-exports dropped 0.1 per cent year-on-year to MOP867 million. The majority of the city’s external exports were non-textiles products, of which the export value decreased 3.9 per cent year-on-year to MOP940.2 million in the month. In particular, the export value of machines, apparatus & parts declined by 10.1 per cent year-on-year to MOP111.6 million, while that of clocks and watches surged 19.6 per cent year-on-year to MOP177.8 million in March. For the first three months of the year, total external trade decreased 19.7 per cent year-on-year to nearly MOP20 billion. Total exports fell slightly by 0.2 per cent to MOP2.7 billion, while total imports plunged 22.1 per cent year-on-year to MOP17.3 billion. Merchandise trade deficit thus widened further to MOP14.6 billion.
Exports to HK, imports from China
During the quarter, the majority of local exports went to Hong Kong,
which accounted for 62.3 per cent of the total, followed by those to Mainland China, occupying 14.8 per cent. In terms of value, the city’s exports to Hong Kong actually decreased by 0.5 per cent year-on-year to MOP1.68 billion. Meanwhile, exports to the EU (MOP41 million) and the USA (MOP30 million) fell 23.1 per cent and 48.2 per cent year-on-year, respectively. Nevertheless, merchandise exports to Mainland China actually increased by 3.5 per cent year-onyear to MOP400 million in the first three months of the year, of which exports to the nine provinces of the Pan Pearl River Delta rose 4.7 per cent to MOP386 million.The major origins of the city’s imports were from Mainland China, which accounted for 36.2 per cent of the total, followed by Hong Kong, Italy and France, representing 9.9 per cent, 8.4 per cent and 7.7 per cent of the total, respectively. But merchandise import values from Mainland China (MOP6.27 billion) and the EU (MOP4.21 billion) in the first quarter of 2016 decreased by 24.4 per cent and 21.8 per cent year-on-year, respectively.
6 Business Daily Tuesday, May 3 2016
Macau Retail Hong Kong luxury moves to Macau along with Chinese tourists
“That plan is in Macau” Halewinner Watches Group will open at least nine more shops in Macau while closing two in Hong Kong.
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uxury-watch retailer Halewinner will almost double its store count in the Chinese gambling hub of Macau, where casinos want time to be irrelevant, dealing another blow to Hong Kong’s staggering retail market. Halewinner Watches Group will open at least nine more shops in Macau while closing two in Hong Kong, Chairman Karson Choi said in an interview. Most of the new stores will be in the Cotai Strip, where Sands China Ltd. will open its Parisian resort this year and Wynn Macau Ltd. will debut the Wynn Palace. “This year we’re still going ahead with our major expansion plan,” said Choi, son of billionaire Francis Choi. “That plan is in Macau.” The peninsula, home to the world’s biggest gambling center, is trying to diversify its image by welcoming luxury-brand shoppers. That effort is helping siphon big spenders from Hong Kong, where the number of visitors from China dropped for nine straight months and retail sales in February plunged the most in 17 years. The outlook isn’t any better for next week’s Labor Day holiday, with the Hong Kong Travel Industry Council estimating the number of package-tour travelers will drop by 50 per cent. The tour-group visitor count, which mostly consists of Chinese tourists from the mainland, plunged 60 per cent in the first quarter from a year before. “We don’t see any recovery signs in the upcoming Labor Day holiday,” said Joseph Tung, the council’s executive director. The gloom engulfed even Apple
Inc., with sales for Greater China plunging 26 per cent in the quarter ending March 30. “The vast majority of the weakness in the Greater China region sits in Hong Kong,” Chief Executive Officer Tim Cook said during an April 26 call with analysts. One reason he cited is the local currency’s peg to the stronger U.S. dollar. “That has driven tourism, international shopping, and trading down significantly compared to what it was in the year ago,” Cook said. Luxury handbag and fashion retailers also are taking hits in the city. Burberry Group PLC sales in Hong Kong fell more than 20 per cent for a third straight quarter, and the company is seeking to reduce its local rent payments. Prada SpA, which held Hong Kong’s biggest initial public offering in 2011, reported sales in Asia fell 16 per cent last year. “The near-term outlook for retail sales will still be constrained by the weak inbound tourism performance and uncertain economic prospects,” the Hong Kong government said after retail statistics were released in late March.
Luxury watches
Choi’s father is billionaire Francis Choi, whose Early Light Industrial Co. Ltd. makes toys for more than 30 brands, including Mattel, Hasbro, Disney and Wow Wee. Early Light also owns properties in Hong Kong and is moving into consumer electronics and medical products to help increase profit margins, the younger Choi, 30, said. Halewinner outlets sell watches from more than 40 brands, including a US$200,000 Jaeger-LeCoultre and a US$180,000 Blancpain. During an April 20 interview at a Halewinner outlet in Causeway Bay, Hong Kong’s premier retail district, Choi wore a steel Audemars Piguet Royal Oak timepiece priced at US$21,000. The family acquired the watch retailer in 2010, when it had just
seven stores. Now it has more than 30 outlets in Hong Kong, Macau and Mainland China. Sales at its Hong Kong stores dropped 30 per cent last year amid China’s economic slowdown, a government anti-corruption campaign and protests by Hong Kong residents claiming the city caters to wealthy mainland visitors at their expense. Zhou Guoliang, 54, a general manager in the electronics industry from Shanghai, and his wife rarely visit Hong Kong nowadays partly because of social tensions. “I heard Hong Kong people insult Chinese,” said Zhou. “We come to bring consumption, and you should be nice and guide visitors.”
“Retailers are still willing to expand in Macau because Chinese visitors will continue to come and play in the gaming hub” Michael Cheng, Asia Pacific & Hong Kong/China retail & consumer partner at PricewaterhouseCoopers LLP
So he’s taking his money to Macau, where he vacations three to four times a year. Zhou once bought a US$7,000 Omega watch and a US$6,000 necklace from Chow Sang Sang Holdings International with his winnings in Macau, although he observed the watches are slightly pricier in the Portuguese city. “People who gamble in Macau go there particularly for amusement and fun ,” said Zhou. “I wouldn’t save the money to bring it back home.” Swiss watch exports to Hong Kong in March fell 38 per cent from a year ago, the most among major markets,
according to the Federation of the Swiss Watch Industry. Chow Tai Fook Jewellery Group Ltd., the world’s largest listed jewelry chain, and Sa Sa International Holdings Ltd. reported slumping sales during the Lunar New Year holiday in February, when the number of mainland Chinese tourists to Hong Kong dropped by 26 per cent from a year earlier. Shares of Chow Tai Fook Jewellery have dropped 44 per cent from a year ago, while competitor Chow Sang Sang Holdings International has declined 30 per cent. The benchmark Hang Seng Index is down 26 per cent from a year earlier. China’s economic slowdown and anti-corruption efforts also affect Macau and its US$30 billion casino industry, yet there are signs the market has hit bottom. Visitor totals for the former Portuguese colony rose 4.2 per cent last month, and a flood of new projects like the Batman Ride targets tourists and families. “Retailers are still willing to expand in Macau because Chinese visitors will continue to come and play in the gaming hub,” said Michael Cheng, Asia Pacific & Hong Kong/China retail & consumer partner at PricewaterhouseCoopers LLP. Halewinner’s 15 shops in Macau experienced a downturn last year, though Choi remains bullish because “the situation improved” by the fourth quarter and the city is the only one in China with gambling. For Hong Kong, he expects sales to drop 10 to 15 per cent this year. The company plans to have more than 20 shops there by year’s end and is trying different methods to engage with customers -- even hosting parties with wine and cigars to show new watches. “Buying things is one of the things you do when you go on a vacation,” Choi said. “They buy because they won some money or because they lost some money. A lot of customers lost some money and come to buy a product so they feel better.” Bloomberg
An employee shows luxury watches to customers inside a Unique Timepieces store, subsidiary of Halewinner Watches Group, in the Causeway Bay district of Hong Kong
Business Daily Tuesday, May 3 2016 7
Macau
Revenue April gross gaming revenue falls 9.5 pct
23rd month of decline Macau gaming revenue stabilizes, falls less than estimated.
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acau’s April casino revenue dropped less than analysts estimated in a sign of stabilization as casinos shift their focus to attracting more casual gamblers and tourists. Gross gaming revenue decreased 9.5 per cent to MOP17.3 billion (US$2.2 billion), according to data from Macau’s Gaming Inspection and Coordination Bureau, marking 23 consecutive months of declines. That compares with a median estimate of a 13.5 per cent drop by seven analysts in a Bloomberg survey and a 16.3 per cent decrease in March. Macau casinos have been in a downturn since mid-2014 as China’s anti-corruption campaign and a slowing economy kept the country’s
high rollers away from the world’s largest gambling hub. Still, the industry’s mass market revenue has started to bottom out since last year with narrowing revenue declines. Operators such as Galaxy Entertainment Group Ltd., Wynn Macau Ltd. and Melco Crown Entertainment Ltd. are strategically focusing on the more profitable mass-market segment of tourists and recreational gamblers with new resorts. “The casinos produced another reasonable monthly revenue performance in what is a seasonally slower shoulder month,” Tim Craighead, a Bloomberg Intelligence analyst, said in an e-mail after the report. “It still looks to us that the business is stabilizing and the next big catalysts to watch for are the summer
travel season and the new resorts from Wynn Macau and Sands China.” The Cotai strip in Macau is home to about a dozen casino resorts. The Macau government has encouraged casino operators to diversify their businesses and forecasts an increase in the proportion of casinos’ non-gaming revenue to 9 per cent by 2020 from 6.6 per cent in 2014, according to the city’s five-year development plan. Other casino operators are also looking for new ideas to diversify their business from high-end gambling. The US$4.1 billion Wynn Palace will offer air-conditioned cable car rides and Sands China Ltd.’s Parisian will feature a half-size Eiffel Tower replica when they open later this year.
Bloomberg Intelligence’s index of Macau gaming stocks rose 16 per cent in the first quarter after about US$46 billion of market value was wiped out last year from the city’s six gambling houses. Still, the rally may be unsustainable, said Paul Chan, Invesco Ltd.’s chief investment officer for Asia excluding Japan. The index dropped 3 per cent last week. While the mass market has seen some recovery signs, Macau casino operators are still exposed to the debt-ridden gaming promoters, who lend to high-stakes gamblers, as the local government continues to tighten its regulation on the industry, according to Hong Kong-based Daiwa analyst Jamie Soo. Junkets are still under significant operating pressure with at least HK$30 billion in bad debt still outstanding at conservative estimates, he wrote. Bloomberg
Gaming Success Dragon opens door to Vietnam greyhound racing
Business
Follow the rabbit
Emperor Entertainment anticipates significant fall in annual net profit
Gaming services firm Success Dragon, through its subsidiary Success Dragon Services Management Limited, has entered into an agreement with Sports and Entertainment Services Joint Stock Company (SES) to provide outsourced management services for the greyhound racing business in Vietnam, according to a recent filing with the Hong Kong Stock Exchange. The SES group currently operates in “importing, purchasing, breeding and training of greyhounds; owning, building and operating of a race course” and is located in Lam Song Stadium in Ba Ria Vung Tau Province in southern Vietnam, opening the venue, organising meetings for the greyhounds, operating the tote board (which displays the odds), marketing and distribution of tickets and the payout of winnings.
Exclusive contract
According to the agreement, Success Dragon subsidiary SDSM has been appointed ‘on an exclusive basis, to manage part of the Racing
Business’, relating primarily to the scheduling of the races, both in the Lam Song Stadium and at other venues; marketing; advertising; managing the tote board; sale and distribution of tickets and payouts; design and management of outlets and stadium; inventory, personnel training; handling equipment leases, and more. The term of the contract is seven years and should not exceed 10 years. In return for the management services by SDSM it receives a monthly management fee amounting to 7 per cent of ‘gross proceeds of all wagers taken or accepted by or for the account of SES in respect of the Races, inclusive of all gross proceeds arising from sale of award winning tickets for the races of such month,’ says the filing. The entrance into such an agreement is to further reinforce the group’s strategy to focus on its core business as a gaming solution and service provider and would enable the group to capture the business opportunities in the
gaming industry in Vietnam and to broaden its income stream, states the filing. The local racing track has sparked controversy in Ireland, as a slew of letters have been sent by the heads of the ISPCA, Dogs Trust and the Irish Blue Cross - animal welfare organisations - to the Minister for Agriculture, Food and the Marine department in Ireland to demand their concerns be heard regarding exports of Irish greyhounds to race in Macau, noted the Sunday Times. The groups request a meeting with the minister after learning that three greyhounds registered to Irish owners were transported to the city in March and had trial runs at the local dog-racing track, the publication reported. Additionally, the greyhounds were still listed as having Irish owners on a website run by the Irish Greyhound Board on Friday. Greyhounds racing at the track which suffer injury or are deemed too slow are reportedly killed at a rate of 30 dogs per month - despite seeing a loss of MOP298.8 million last year, and only paying 25 per cent gaming tax as compared to the other operators’ 40 per cent, local news reports. K.W.
Emperor Entertainment Hotel Ltd. expects to post a significant drop in net profit for the fiscal year ended March 31, it informed the Hong Kong Stock Exchange on Friday. In the filing, the company claimed the fall in net profit is due to a loss on fair value change in investment properties and an impairment loss on prepaid lease payment, both caused ‘by weakening market sentiment and continuous downturn in the property market in Macau.’ It added that an exchange loss on offshore trade renminbi deposits and a moderate decline in revenues amid the general economic and gaming downturn are also factors dragging its profit down. The Hong Kong-listed company currently operates two hotels in Macau; namely, the Grand Emperor Hotel on the Peninsula and Inn Hotel Macau in Taipa. The group’s Peninsula property runs a
gaming business under the licence of Sociedade de Jogos de Macau, S.A (SJM). For the first half of its fiscal year, the hotel operator saw its net profit plunge 58 per cent year-on-year to HK$111.5 million(US$13.9 million), whilst total revenue dropped 17 per cent yearon-year to HK$873.4 million. On the other hand, the group’s parent company, Emperor International Holding Ltd., also told Hong Kong Stock Exchange last Friday that the company is expecting to post a net loss for the fiscal year despite an expected increase in its revenues. ‘Due to weakening consumption market sentiment and recent downtrend of market rental of investment properties in prime locations, the assessment of market property valuation was downward adjusted, [thus] a significant net loss is expected,’ the company noted in its filing. K.L.
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10 Business Daily Tuesday, May 3 2016
Greater China
Financing
Mainland’s cities dive back into debt to fuel growth Local government financing vehicles raised at least 538 billion yuan in bonds in the first quarter. Nathaniel Taplin
With a nod from Beijing, China’s local governments have embarked on a massive new round of off-balance sheet debt financing, underpinning a fragile pick up in the economy but raising red flags on financial stability. The increased borrowing for an economy already swimming in debt adds to concerns about growing bubbles in certain major asset classes, such as real estate and commodities, and a bond market seeing a rise in corporate defaults. Economists say increasing public sector investment - most of it financed locally with debt - is behind improvements in China’s economy. First-quarter GDP rose at the weakest pace in seven years, but other data suggested growth was picking up in March. “With new infrastructure projects effectively all funded by debt and more consumer mortgages, the leverage problem and risks on the financial sector are rising,” Credit Suisse analysts wrote in a research report. Local government financing vehicles (LGFVs), which Chinese cities use to circumvent official spending limits, raised at least 538 billion yuan (US$83 billion) in bonds in the first quarter, up 178 percent from a year earlier and the highest quarterly issuance since June 2014, Everbright Securities said, quoting figures from privately held financial data provider WIND. Issuance in March alone was a monthly record of 287 billion yuan (US$44.3 billion). China’s planning agency, the National Development and Reform Commission, declined to comment on the sharp rise in LGFV issuance. Most of the LGFV debt in the first quarter was made up of so-called enterprise bonds, which the NDRC oversees. Beijing had been trying to move LGFV debt on to municipal balance sheets via the 2014 creation of a municipal bond market. But policymakers retreated from this in the middle of 2015, easing borrowing restrictions as economic growth stumbled. Consequently, LGFV issuance in the first quarter of 2016 was nearly 60 percent as large as the municipal bond issuance meant to replace it, up from just 37 percent in the fourth quarter of 2015, central clearinghouse and brokerage data shows. “In the second half of last year, the government raised the percentage of project financing that can be funded with debt,” said Yang Zhao, chief China economist at Nomura in Hong Kong, helping spark the flurry of LGFV deals. “If they continue on, the
debt-to-GDP ratio could actually go up quite rapidly. I don’t think the policy is sustainable, and you’ll see policymakers slow down the pace of (credit) easing in a quarter or two.” Much of China’s huge debt overhang from the global financial crisis was generated by these same LGFVs which - in addition to funding legitimate infrastructure - became infamous for building ghost cities and roads-to-nowhere as local officials took advantage of crisis level ultra-low borrowing rates. This helped push China’s debt-toGDP ratio to more than 240 percent at the end of 2015, estimates from the Bank for International Settlements show.
Flight to safety
Despite the concerns flagged by analysts, LGFV bonds are proving relatively attractive to investors as a rising number of corporate defaults - including by some non-LGFV state firms with weaker backing - undermines confidence in company debt. Defaults have been on the rise this year, including in industries, such as steel, that suffer from over capacity. “Managers are increasingly concerned about corporate bond credit quality and so they’re getting back into government or quasi-government debt,” said a director at a foreign buyside money manager in Shanghai. Yields on three-year AA-rated LGFV bonds, which in mid-2015 were higher than regular enterprise bonds, now trade 30 basis points cheaper. Enterprise debt is a category of the market mainly used by state affiliated borrowers. “It’s easier to raise money right now, after all LGFV bonds are basically half government bonds,” says Li Xiangdong at the Qinhuangdao Development Investment Holding Group Co Ltd, an LGFV owned by the coal port city of Qinhuangdao in China’s struggling Northeast. “Default risks are low.”
Roads to nowhere?
The latest local government debt binge has raised funds for a variety of projects from parking lots to renovations of tourist attractions in obscure regions. Most new issues posted in April on the website of China’s main bond clearinghouse funded pipelines, or water treatment systems and, more worryingly, housing projects. “There are some parts of the country where (housing) inventories have come down enough for new construction to make sense,” Rosealea Yao of Gavekal Dragonomics wrote in a research note.
“But there are also parts of China where inventories are still rising - and construction is nonetheless picking up, probably because of state-directed spending.” In south-western Guizhou, one of China’s poorest provinces, Jinsha County Construction and Investment Co Ltd, an LGFV, sold 800 million yuan of seven-year bonds on April 27. Among other projects, the funds will help finance a 1.2 billion yuan athletic culture park, including a hotel, shopping street, and a 103,000 square metres stadium and gym complex - roughly twice the size of Europe’s largest soccer stadium that is home to Barcelona football club. The bonds carry an AA rating, the third highest credit rating, with the rating citing strong local government support as part of its rationale, even though Jinsha County Construction’s ratio of operating income before line items over interest payments due has fallen sharply. In 2012 it was 57 times
Key Points Local governments ramp up debt issuance via financing vehicles Q1 issuance soars, March a monthly record, data shows Raises market concerns issuance could exacerbate debt problems Comes as corporate defaults on the rise interest payments due and in 2014 it was less than two times. Calls to the head of Jinsha County Construction finance department went unanswered. After the wave of LGFV deals, rising yields suggest some investors are starting to grow cautious amid a broader selloff in Chinese bonds. About US$15 billion in debt issuance has been delayed in April, including by several LGFVs. Reuters
Business Daily Tuesday, May 3 2016 11
Greater China In Brief FX positions
Forex regulator eases restrictions
The manufacturing PMI compared with 50.2 in March and a median estimate of 50.3 in a Bloomberg News survey of economists. PMI results
Factory stabilization shows little need for added stimulus China had an acrossthe-board rebound in March as corporate profits jumped.
W
ith new data suggesting that China’s economy stabilized in April amid a property recovery and credit surge, analysts say there is little need for stepped-up monetary easing in the immediate future. China’s official factory gauge, the manufacturing purchasing managers index, stood at 50.1 in April, the nation’s statistics agency said Sunday. That is the second consecutive month the indicator has moved above 50, which indicates improving conditions. The non-manufacturing PMI, which signals conditions at services and construction firms, slid slightly to 53.5 last month after a big jump in March. The stabilizing readings eased urgency to add monetary stimulus, which risks fuelling housing prices or flooding overcapacity sectors such as steel or coal with cheap credit. Maintaining the pace of growth in China while reining in overcapacity is the delicate balance the government is trying to strike this year, and it is ready to pull the trigger again on further stimulus if signs indicate a sharp slowdown. “The near future is an observation period for the stimulus package,” said Ming Ming, a Beijing-based fixed-income analyst at Citic Securities Co. “There won’t be any big moves temporarily. Risk in the financial markets - including commodities,
property and bond markets - is the focus right now.” The manufacturing PMI compared with 50.2 in March and a median estimate of 50.3 in a Bloomberg News survey of economists. That indicates a slight weakening from the strong, unexpected jump seen in March. The sub-index of new orders in April stood at 51, indicating a rebound, while that of new exports and imports dropped, and the employment gauge showed that factories are reducing staff. “Monetary policy will remain supportive in general, while some sort of management, such as targeted tightening in the property market, is possible at some point,” said Zhou Hao, a Singapore-based economist at Commerzbank AG. “The Chinese government only rolls out some short-term stimulus when the data are at the worst. It doesn’t want to see all the steel mills firing up again or the market’s speculation momentum get too strong.” China had an across-the-board rebound in March as corporate profits jumped, and new credit, investment, industrial output and retail sales beat economists’ estimates. Those stronger readings may have the central bank hold off on stimulus for a while. Economists see the People’s Bank of China keeping the benchmark one-year lending rate at a record low 4.35 percent through the third quarter, before cutting it to 4.1 percent in the fourth.
to Bloomberg Intelligence economists Tom Orlik and Fielding Chen. “Once again, China’s return to growth has come through a revival in lending and construction - at the expense of progress on deleveraging and re-balancing,” they wrote. Additional lending may keep factories humming longer, yet risks building up debts and adding to redundancies at “zombie firms” that are kept alive by banks’ rollovers. The PBOC signalled less appetite for stimulus last month after the release of economic growth data in the first quarter.
“There won’t be any big moves temporarily. Risk in the financial markets … is the focus right now.” Ming Ming, Beijing-based fixed-income analyst at Citic Securities
The resilience of data stemmed in part from a surge in old growth drivers such as steel, infrastructure and properties, according
Still, it’s probably too soon to call a stop to further easing by the PBOC. “A combination of improving growth data in March, substantial stimulus already in the system, and official hints that ‘prudence’ is now the priority, has trimmed bets on additional stimulus,” Orlik and Chen wrote. “That makes sense, but with April’s growth data so far uninspiring, it’s too early to make a definitive call on a shift in policy.” Bloomberg News
The government first began experimenting with a VAT in 1979 and started applying the tax to specific sectors in 2012. The final four sectors to adopt a VAT on Sunday are construction, property, finance and life services - which includes food and beverage, healthcare and tourism industries. Premier Li Keqiang had said the reforms would be adopted by May 1 in his work report at the annual parliament in March. A business tax directly taxes businesses, whereas a VAT - sometimes known as a goods and services tax - is borne by the end consumer, reducing the burden on companies which are facing rising costs and a slowing economy. Consumers will pay varying levels of VAT, depending on the industry, China’s Vice Minister Shi Yaobin told a news conference in April. Most of the services sector was previously subject to a business tax rate of either 3 or 5 percent.
The government hopes the reforms will cut firms’ tax burdens by more than 500 billion yuan (US$77.23 billion) this year, part of a broader push for “supply-side reforms” aimed at cutting red tape and scaling back the role of government in business to allow market forces greater room to flourish. China’s 2016 government deficit is set to rise to 3 percent, up from 2.3 percent in 2015, primarily due to the discrepancies created by tax cuts for business, Premier Li had said. Local governments are set to be worse off under the new tax scheme, as they were previously highly reliant on revenue from the business tax. Revenues from the VAT will be shared between China’s central and local governments, with each receiving 50 percent, the Ministry of Finance said on its website on Saturday. China’s services sector accounts for more than 50 percent of the economy. Reuters
Lending, construction
Fiscal reform
Tax overhaul aims to cut business costs The government hopes the reforms will cut firms’ tax burdens by more than 500 billion yuan. China has rolled out a value-added tax (VAT) system across all industries that previously had a business tax, in the most ambitious overhaul of its tax regime in three decades. The world’s second-largest economy is stumbling through its slowest growth in a quarter century but is continuing with tough reforms in its transition to a services-oriented economy from one powered by manufacturing.
China’s foreign exchange regulator said on Friday it will allow banks to issue more FX-related products for risk-hedging purposes. That includes allowing banks to hold bigger short-dollar positions at the end of the day, the State Administration of Foreign Exchange (SAFE) said in a statement on its website. The regulator said the change would help maintain onshore liquidity of foreign currency and help reduce exchange rate risk. The adjustment comes as the yuan remains under depreciation pressure as Beijing remains in a monetary easing stance while the U.S. Fed contemplates raising rates, which would further support the dollar. Results
Top coal producer reports less profits China Shenhua Energy Company Limited, the nation’s top coal producer, has said its net profits plummeted 28.3 percent year on year to 4.74 billion yuan (US$734 million) in the first quarter of 2016. Shenhua, a Stateowned enterprise listed both in Shanghai and Hong Kong, said in a statement that its revenue in the first quarter fell 4.6 percent to 39.4 billion yuan. Shenhua’s coal segment reported a year-onyear decrease of 49.6 percent in gross profit in the first quarter of 2016, owing to falling coal prices and rising sales cost, according to the statement. Education
Deal with Kenyan universities China University of Petroleum has entered into a partnership with Mount Kenya University (MKU) on training of experts in the oil industry. The deal of the partnership was signed on Sunday by Chairman of MKU, professor Simon Gicharu and Dr. Fengchi Luan, Dean, College of International Education at China University of Petroleum. Through the deal, the two higher learning institutions will engage in students exchange so as to develop joint scientific and technological research projects. The two institutions will jointly promote and develop academic cooperation, exchange teaching staff and research personnel. Results
CITIC Securities firstquarter net profit falls China’s biggest brokerage, CITIC Securities Co Ltd , on Friday reported a 57 percent drop in first-quarter net profit to 1.64 billion yuan (US$253 million) from 3.82 billion yuan a year earlier. The brokerage published its first-quarter results in an unaudited stock exchange filing. The fallout from the market turmoil last summer means brokerages are more subdued about prospects for this year, with many cutting costs to bolster capital and expecting to take a hit from tougher rules on margin finance.
12 Business Daily Tuesday, May 3 2016
Asia Federal budget
Australia walks fine line between growth and austerity Recent data showed economic growth picked up momentum in the fourth quarter, providing a political boost to the coalition government. Jane Wardell
The Australian government is expected to announce a A$5 billion (US$3.8 billion) fund for major public
transport projects as part of its federal budget, a spending plan under more scrutiny than usual as it doubles as an unofficial election campaign launch.
Treasurer Scott Morrison, presenting his rookie budget today, faces the tough job of delivering a pro-growth, voter-friendly spending plan without any leeway to offer “big bang” reforms or significant tax giveaways. As Australia heads to an early election on July 2 after political wrangling that resulted in the dissolution of parliament, Morrison and
Prime Minister Malcolm Turnbull (pictured) has stressed his spending plan will be a break from Abbott’s deeply unpopular 2014 budget.
Prime Minister Malcolm Turnbull are cautioning that the country has to “live within its means.” “It’s not a typical budget,” Morrison told reporters in Canberra yesterday. “This is not a time to be throwing money around.” “You have to spend money wisely, you have to target it and the ultimate test is will it drive jobs and growth we’ll afford the things that need to be afforded in health and education.” The ruling Liberal Party-led coalition government is running neck and neck with the Labour Party, latest opinion polls show, putting Turnbull in a tough position as he seeks his first mandate since wresting the top job from the hugely unpopular Tony Abbott in a leadership coup last year. Turnbull has stressed his spending plan will be a break from Abbott’s deeply unpopular 2014 budget - but unlike Abbott who had another shot in 2015, Turnbull has no time to recover before the election if voters don’t like what they see today. The government is keen to drive home the message
that it alone can be trusted to manage an economy hampered by the end of a oncein-a-century mining boom and balance public finances after years of deficits. Recent data showed economic growth picked up momentum in the fourth quarter, providing a political boost to the coalition government. A rally in prices for some of Australia’s top exports, such as iron ore, promises to boost the government’s tax take which could prevent another embarrassing miss on the deficit. Morrison should report the red ink matched forecasts at around A$37 billion (US$28.2 billion) this financial year and allow him to offer the aspirational goal of small fiscal surpluses from 2021-22 onwards. Major Projects Minister Paul Fletcher said the A$5 billion Asset Recycling Initiative, which requires state and territory governments to privatise assets to fund their share, would have an economic impact. “Infrastructure is enormously important to our productivity, to our competitiveness,” Fletcher said. The budget is also expected to announce an easing of the company tax burden and to tighten loopholes in multinational tax arrangements. Reuters
Bad loans solutions
India’s bank debt-for-equity deals a warning for China China is studying plans for potential regulations that would allow commercial lenders to swap non-performing loans of companies for stakes in those firms. Devidutta Tripathy
Indian lenders are struggling to find new owners for unprofitable steel and infrastructure companies they took over under a debt-for-equity swap, a warning sign for China, which is launching a similar scheme. Indian banks have either taken over or are in the process of seizing majority control in 18 firms with a combined debt of about US$15 billion, under a central bank plan that allows them to swap the companies’ debt for equity and freeze non-performing loans, brokerage Religare Capital Markets estimates. The Reserve Bank of India’s Strategic Debt Restructuring (SDR) swap plan - aimed at reducing a US$121 billion corporate bad debt mountain - envisages banks passing on control to a new owner within an 18-month grace period. Buyers, however, are not flocking in. Lenders to Electrosteel Steels, the first test case in the scheme, were dealt with a blow earlier in April as the only investor interested in a stake in the company, London-headquartered securities broker First International Group Plc, withdrew its interest, the broker said. That followed a collapse of talks with prospective buyer Tata Steel, which had wanted a sharp discount. A new suitor, the Dalmia business family, has shown interest, according
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China is studying plans for potential regulations that would allow commercial lenders to swap non-performing loans of companies for stakes in those firms. The International Monetary Fund said last week that China’s massive corporate debt problem could be eased through debt-to-equity conversions only if these apply to viable firms that undergo restructuring.
Going slow
The Reserve Bank of India’s Strategic Debt Restructuring swap plan envisages banks passing on control to a new owner within an 18-month grace period.
Key Points Indian banks struggle to find new owners for indebted firms Metals downturn, hefty infrastructure debts discourage investors China banks to face challenges in debt-for-equity swaps –analyst to bankers, but there is no offer yet. In the meantime, the banks have classified Electrosteel’s around US$1.7 billion debt as non-performing, an admission the plan is not working. Both Electrosteel and Tata Steel declined comment.
Chinese lenders are facing rising pressures from slowing economic growth, with non-performing loans reaching a 10-year high of 1.27 trillion yuan (US$196 billion) at the end of 2015. “The difficulty faced by Indian banks in finding new owners highlights the challenges that Chinese banks might also face,” said Chua Han Teng, Asia analyst at Fitch affiliate BMI Research. “Chinese banks will likely seek to proceed cautiously with the proposed debt-equity swap plan, and will be extremely selective given that it is not the expertise of banks to manage these highly-indebted companies.”
Indian banks are going slow on debt-equity swap deals after a raft of such transactions in the second half of 2015. While the lack of buyers is discouraging banks, lenders have also been tied up in a separate clean-up exercise ordered by the RBI which wants full loan disclosure by March 2017. “I don’t think (this) is a scheme in its current composition, its current framework, that has enough value for a bank to get into,” said Rana Kapoor, CEO at Yes Bank, India’s fifth-biggest private sector lender. RBI Governor Raghuram Rajan has acknowledged that the SDR scheme had yet to be successful. “We are seeing more buyers come in to the system but a full-fledged operation of (the debt-to-equity swap scheme), I think we are yet to see.” Prospective buyers are discouraged by the prolonged downturn in the steel sector, which has been hit by dumping from China, a senior banker with a state-run Indian lender told Reuters. Investor interest has also been low in infrastructure, despite a government plan to spend $1 trillion to revive the sector, as many large projects that were stalled during a three-year long economic downturn have yet to be revived. Reuters
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Business Daily Tuesday, May 3 2016 13
Asia Bank of Korea Governor Lee Ju-yeol.
In Brief VAT
Sri Lanka seeks to raise US$685 million from taxes Sri Lanka is seeking to raise 100 billion rupees (US$685.6 million) in revenue in 2016 by increasing the value added tax (VAT) and new taxes effective from yesterday, Finance Minister Ravi Karunanayake said late on Sunday. The VAT will rise to 15 percent from 11 percent and will be imposed on private sector health services as the government struggles to reduce a ballooning budget deficit amid a debt crisis. The move is part of the government’s plan to meet a repeated request to raise revenue from the International Monetary Fund. Private poll
Australia’s business conditions stay positive
Bank of Korea
Governor backs structural reform The central bank’s labour union criticised calls for quantitative easing.
S
outh Korea’s central bank governor threw the full weight of the bank behind a structural reform effort yesterday, but did not mention whether the bank would be engaging in quantitative easing, which it is under pressure to provide. The governor’s comments followed a day after Finance Minister Yoo Il-ho said in a television interview that policymakers were contemplating the best strategy to support two state-run policy banks involved in a massive overhaul of South Korea’s shipping and shipbuilding industries. “We should be extremely wary of the possibility of any temporary effects like negative influences on financial markets or a worsening of corporate liquidity,” Bank of Korea
Governor Lee Ju-yeol told his top officials before leaving for the annual meeting of the Asian Development Bank. Lee added corporate structural reform was “very important” for Asia’s fourth-largest economy. South Korean President Park Geun-hye has said allowing the Bank of Korea to undertake some form of quantitative easing should be considered to ensure credit goes where it is needed during the structural reform process. Park has said the quantitative easing mix being considered was not of the kind that has been seen in advanced economies such as the U.S., Japan or the European Union. “We are thinking of a mix of fiscal and monetary policy rather than just
one,” Yoo said on Sunday. When asked whether quantitative easing being undertaken by the central bank was possible, Yoo added that it too was a candidate for inclusion in the policy mix. Last Friday, the central bank’s labour union criticised calls for quantitative easing, saying it could harm the central bank’s independence and the union would protest against it for as long as possible. “What the government is calling for is not quantitative easing. They are crying out wine and selling vinegar,” the union said in a statement. A task force of officials from the government, central bank and other related bodies, will hold its first meeting later this week - chaired by the first vice finance minister. Reuters
January last year, and declined 8.1 percent in March, while imports dropped 13.9 percent then. April’s trade surplus stood at US$8.84 billion, down from a US$9.86 billion surplus for March. May exports are likely to show similar weakness, as downside risks are growing, the ministry said. The International Monetary Fund cut its world growth forecast to 3.2 percent from 3.4 percent in April while the World Trade Organisation also slashed its global trade volume growth forecast to 2.8 percent from 3.9 percent. Economists polled by Reuters had forecast South Korea’s exports to fall 11.0 percent last month. Imports had been expected to drop 12.5 percent. “It’s unlikely we’ll see a sharp rebound anytime soon. Much of this depends on oil prices and if oil climbs over US$40 to US$50 dollars a barrel towards year-end we might see this slump ease,” said Stephen Lee, economist at Samsung Securities in Seoul. “If April inflation is weaker than expected, the Bank of Korea will feel the heat to cut rates soon.”
April inflation data will be released today. Lee said the central bank may lower interest rates from the current 1.50 percent possibly mid-year to coordinate policy if the government announces more stimulus then. Shipments to China and the U.S. fell more sharply in April, with those to China dropping 18.4 percent, the worst fall in three months. Exports of steel, cars and machinery all saw deep declines, slumping 17.4 percent, 18.3 percent and 15.6 percent, respectively. Offsetting some of the weakness, ship exports jumped 25.2 percent in April on-year and smartphone shipments rose 3.2 percent over the same period. The ministry said 1.5 fewer working days in April this year due to an election hurt exports, but the average export value per working day was US$1.82 billion in April, the highest since November last year, the ministry said. Exports in volume terms also rose 5.5 percent in April from a year ago, rebounding from a 1.9 percent fall in March. Reuters
Exports
South Korea’s April trade slump deepens Shipments to China and the U.S. fell more sharply in April. Christine Kim
South Korean exports fell at a sharper pace in April as fewer working days ate into shipments already suffering from weak global demand and low global commodity prices, and the trade ministry said it was not optimistic about conditions in May. Preliminary data showed April exports slid 11.2 percent from a year earlier, while imports dropped a faster 14.9 percent, the Ministry of Trade, Industry and Energy said on Sunday. Both figures were worse than economists had expected. Exports from Asia’s fourth-largest economy have been falling since
Australian firms reported another solid month of sales, profits and employment in April, suggesting the broader economy was coping with a protracted slowdown in mining investment. National Australia Bank’s monthly survey of more than 400 firms showed its index of business conditions dipped three points to +9 in April. That was down from its highest since early 2008 but still above the long-run average. Its business confidence index slipped a point to +5, following a three point increase in March. Labour day
Myanmar pledges to promote, protect rights Myanmar has pledged to promote and protect labour rights, including ending forced labour and stronger enforcement of child labour law in the country, the Ministry of Labor, Immigration and Population said yesterday. In a statement, the ministry invited all interested partners to join with the government in its efforts to promote rights at work, encourage decent employment opportunities, enhance social protection and strengthen dialogue on labour-related issues. Labour Minister U Thein Swe called on the employers to respect the rights of workers in accordance with the Labour Law while pursuing their own interest. CPI
Australian inflation gauge remains subdued A private-sector gauge of Australian consumer prices showed inflation slowed further in April despite a pick up in petrol and heath care costs, underlining the case for a cut in interest rates perhaps as early as this week. The Reserve Bank of Australia (RBA) holds its monthly board meeting today and speculation is rife it may chose to cut its 2 percent cash rate given official measures of underlying inflation slowed to a record low in the first quarter. The slowdown in annual core inflation to around 1.5 percent meant real interest rates had risen in the last few months.
14 Business Daily Tuesday, May 3 2016
International In Brief Oil
Russian output down in April Russian oil output fell slightly to 10.84 million barrels per day (bpd) in April, Energy Ministry data showed yesterday, as production declined at large energy firms Lukoil, Gazprom Neft and Gazprom. Two sources close to the ministry had told Reuters that production would edge down in April because of seasonal maintenance at oilfields and refineries. Russian oil output hit its highest in nearly 30 years in March at 10.91 million bpd. Leading global oil producers are trying to keep production high to preserve market share, a move that has driven oil prices sharply lower since mid-2014. Strategy
Qatar fund uses more external managers Qatar’s sovereign wealth fund is reducing its focus on investments in Europe and placing more of its money with external managers following an internal review, sources familiar with the matter told Reuters. Qatar Investment Authority, estimated by industry tracker Sovereign Wealth Fund Institute to hold US$256 billion of assets, is known as an aggressive investor in high-profile European assets. But its review, which follows sharp falls in the prices of some of the European assets and a plunge in oil and gas prices, led to an understanding that they are “overcommitted” in Europe and should put less emphasis on direct investment, the sources said. Global warming
Half of leading investors ignoring climate change Almost half of the world’s top 500 investors are doing nothing to address climate change through their investments, a study showed yesterday. A report by the Asset Owners Disclosure Project (AODP), a not-for-profit organisation aimed at improving the management of climate change, found that just under a fifth of the top investors - or 97 managing a total of US$9.4 trillion in assets - were taking tangible steps to mitigate global warming. These include investing in low polluting assets or encouraging the companies they invest in to be greener.
PMI
Euro zone factory growth weakens in April The euro zone economy grew 0.6 percent quarter-on-quarter in the January-March period, early data showed on Friday. Sumanta Dey
E
uro zone factories did slightly better in April, with output not losing as much momentum as initially thought but growth in activity remaining weak despite the second-deepest price-cutting since early 2010, a survey showed yesterday. The surveys paint a mixed picture of the wider economy. Manufacturing growth was strong in Italy
and Spain last month and Germany showed signs of reviving, but activity in France contracted at the steepest rate in a year. Markit’s manufacturing Purchasing Managers’ Index (PMI) for the euro zone rose to just 51.7 from March’s 51.6, slightly better than an earlier flash estimate of 51.5. A reading above 50 indicates growth. “The survey is signalling an anaemic annual rate of growth of manufacturing production of just less than 1 percent, which is half the pace seen in the months leading up to the recent slowdown,” said Chris Williamson, chief economist at Markit. “The survey data therefore so far show no signs of European Central Bank stimulus or the weaker euro helping to revive the manufacturing sector, at least for the euro area as a whole.” The euro zone economy grew 0.6
percent quarter-on-quarter in the January-March period, early data showed on Friday. While that was more than expected, inflation once again fell below zero last month as energy prices dropped. What is likely to make for grim readings in the survey for ECB policymakers is the deep discounting manufacturers have to resort to in order to drum up new business, even though deflationary pressures appear to be easing slightly. The output price index came in below the flash reading of 47.7 at 47.4, higher than March’s 47.1. However, the latest result was the second-lowest since early 2010. A sub-index measuring output, which feeds into a composite PMI due on Wednesday and is seen as a good guide to growth, fell to 52.6 from 53.1 but was slightly better than the flash reading of 52.5. Reuters
Restructure debt
Puerto Rico declares moratorium on payment The island faces a US$70 billion debt bill it knows it cannot pay, a staggering 45 percent poverty rate and a shrinking population as citizens flee to the mainland U.S. Puerto Rico’s governor on Sunday declared a moratorium on a US$422 million debt payment due yesterday by the island’s Government Development Bank (GDB), the most significant default yet for the U.S. territory facing a massive economic crisis. Governor Alejandro Garcia Padilla said in a televised speech that he signed the moratorium on Saturday in what he characterized as a “painful decision” based on inaction from the U.S. Congress, which continues to debate a legislative fix for Puerto Rico’s US$70 billion debt load. Garcia Padilla, addressing Puerto Rico’s 3.5 million people in Spanish, said the island’s American citizens had sacrificed much for the nation throughout history and asked Congress on many occasions for tools to
restructure its financial liabilities. “We do not want a bailout. We haven’t asked for a bailout. We haven’t been offered a bailout,” he said as the U.S. territory’s economic crisis enters its most dire stretch yet. Puerto Rico, a tropical paradise in economic purgatory, faces a US$70 billion debt bill it knows it cannot pay, a staggering 45 percent poverty rate and a shrinking population as citizens flee to the mainland. The legality of this move to invoke the moratorium, which effectively means defaulting on the debt, is almost certain to be challenged by the GDB’s creditors, and could spawn costly lawsuits and perpetuate more economic uncertainty for the island. “One of our operating assumptions is that protracted or chaotic litigation will reduce aggregate recoveries,” Moody’s Investors Service senior credit officer Ted Hampton said. Though island agencies have defaulted in the past, they have been small and isolated. The failure to pay by the GDB could reverberate through the local economy as it serves as Puerto Rico’s primary fiscal agent. GDB has held talks with groups holding some of its US$4 billion in bonds to try to restructure the debt consensually. The moratorium covers
yesterday’s payment on the GDB’s 2011 Series B Senior Notes. The missed payment at GDB could mean the beginning of the end to how the bank conducts operations. It could be wound down by a receiver and its deposits shifted to a new entity. Some creditors say government reforms could allow the island to pay its debts without hurting its people, while Garcia Padilla, whose administration has not published annual financial statements since fiscal year 2013, insists it needs relief from debt payments. The default ratchets up pressure on Congress to find a legislative solution for Puerto Rico, which owes another US$1.9 billion of debt on July 1, including about US$777 million in general obligation debt backed by its constitution. U.S. House Speaker Paul Ryan initially called for a plan by March 31. However, draft legislation from the House Natural Resources Committee, which would put Puerto Rico’s finances under federal oversight and allow it to restructure debt through a bankruptcy-like process, has faced opposition from liberal and conservative wings of both parties. Congress is in recess until the week of May 9th. Reuters
Securities firms support
Fed may need more powers The U.S. Federal Reserve may need more powers to provide emergency funding to securities firms in times of extreme stress in order to deal with a liquidity crunch, New York Federal Reserve President William Dudley said on Sunday. “Providing these firms with access to the discount window might be worth exploring,” Dudley said in prepared remarks at a financial markets conference in Amelia Island, Florida organized by the Atlanta Fed. The discount window is a credit facility through which banks borrow directly from the U.S. central bank in order to cope with liquidity shortages.
Puerto Ricans march to reject the proposal of a fiscal control board as a measure to solve the fiscal crisis on the island during International Worker’s Day in San Juan, Puerto Rico. The sign reads ‘Decolonization Now!’
Business Daily Tuesday, May 3 2016 15
Opinion Business Wires
The Phnom Penh Post Prime Minister Hun Sen took aim at corrupt government officials that tack on unofficial fees for the transportation of goods, saying that an elimination of fees would cut the cost of logistics and increase the Kingdom’s trade competitiveness. Speaking in Sihanoukville, he cited a confidential report that claims unofficial fees account for 48 per cent of transportation costs. The prime minister described these unofficial fees as a form of “bribery” and called on relevant stakeholders to work with the Transport Ministry to solve the issue urgently.
The Times of India The government is expected to clean up IDBI Bank’s pool of non-performing assets by transferring them to a fund before offering up to 10% equity to strategic investors as part of the plan to reduce its stake below 50%. Reaffirming the government’s commitment to go ahead with the stake sale during the current financial year despite protests from employees, top-ranking sources told TOI that the finance ministry was also expected to seek clarity on the capital infusion plans of prospective investors, besides undertaking an HR exercise.
China’s commodity trading curbs are working, at least for now
I Jakarta Globe Indonesian online ride-hailing service Go-Jek is in talks with potential investors to raise fresh funds to expand the business, as the heavy subsidies it gives to drivers to keep rates competitive are unsustainable in the long run, its chief executive said on Friday. Go-Jek has become popular among commuters on the traffic-clogged streets of Jakarta as its phone app removes much of the hassle of finding a driver and negotiating fares. GoJek, which has a network of more than 200,000 motorbike taxi drivers, is battling aggressively with other ride-hailing apps such as Grab and Uber.
The Asahi Shimbun The United States on Friday flagged concerns over economic policies in China, Japan, Korea, Taiwan and Germany and put them on a new monitoring list, mostly due to their large surpluses. It is the first time the U.S. Treasury has implemented provisions passed in Congress this year as part of a trade bill that provided it with new ways to address possible unfair currency practices. None of the five countries satisfied the criteria for enhanced scrutiny, which is triggered when a country has a significant bilateral trade surplus with the United States, a material current account surplus and engages in persistent one-sided intervention in the currency market.
t’s sometimes tempting to take a Western view of China and conclude that Beijing’s attempts to limit speculation in commodity futures in order to prevent price bubbles are ill-advised and ultimately doomed to failure. It’s likely that market participants schooled in the Western ethos of light-touch regulation will baulk at China’s latest attempt to force the market, in this case for commodities, to behave in the fashion deemed appropriate by the authorities. The China Securities Regulatory Commission (CSRC) said on April 29 that it won’t allow domestic commodity futures markets to become a “hot-bed” for speculators, comments that confirmed a Reuters story that exchanges in Dalian, Shanghai and Zhengzhou had been asked to bring speculative trading under control. The measures implemented by the exchanges include raising trading margins, with the Dalian Commodity Exchange lifting them to 8 percent from 7 percent for iron ore, as well as boosting transactions costs. Dalian also increased transactions fees on coke and coking coal contracts three times between April 22 and April 28, as well as boosting the minimum margin to 9 percent from 8 percent. The Shanghai Futures Exchange increased transactions fees for steel rebar to 0.01 percent from 0.006 percent on April 25, and also cut night trading hours by two hours from four hours previously. While other commodities were also affected by new measures, it’s worth noting that the biggest, and most aggressive changes, were in the steel complex. This is logical given it appears much of the froth in China’s commodity markets has been driven by rapid price spikes in steel, as well as for its raw materials, iron ore and coking coal. Dalian iron ore futures surged 65 percent from the end of last year to the peak of 479 yuan (US$74) a tonne, reached on April 25, the day the first of the restrictions were announced. Since then the price has slipped to close on April 29 at 456 yuan a tonne. But more importantly, the volumes of contracts traded has plummeted, with 1.911 million exchanged on April 29, down from the record 10.46 million on March 10 this year. By way of comparison, daily volumes for iron ore futures in 2015 ranged from around 150,000 to about 5 million. At the record volume of over 10 million contracts, it meant that paper iron traded on that day was just over 1 billion tonnes, which is more than China’s imports for the whole of 2015, which totalled 952 million tonnes. It was much the same story for coking coal, with daily volumes dropping from a record 1.536 million contracts on April 26 to just 530,996 on April 29, which is closer, but still above, the peak day for 2015 of 437,638 contracts on November 20.
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Clyde Russell Reuters columnist.
Shanghai rebar volumes slumped from 23.97 million on April 21 to 11.42 million on April 29, a figure still near the top of the 2015 range of about 900,000 to 13 million.
Measures working - so far
While it’s still early days for the new measures, it appears on first blush that they are working exactly as intended. Prices have come off, but not plummeted, and volumes are also down, but not so much as to raise concerns that liquidity is being choked off for legitimate users of futures contracts, such as steel mills, miners and major commodity traders. Again, there is still much that could go wrong, but it seems that this intervention is playing out more successfully than last year’s measures to stop short-selling that roiled China’s equity markets. Perhaps it’s easier to calm a speculative bubble than it is to stop people selling in a market that’s already heading south. The main risk is that the measures to calm markets end up driving away major users of the market, thus hurting the very people they are intended to help. It’s possible that once the hot money goes to find the next trendy asset class the measures will be relaxed, but one thing market participants tend to hate is uncertainty and constantly changing rules and regulations. Certainly, steel mills, miners and commodity traders should welcome a market that is trading in a more rational fashion. It’s clear that the huge price gains this year weren’t really supported by any major fundamental shift in the supply-demand dynamics for iron ore, coking coal and steel. While some gains in recent weeks would have been justifiable on the basis of an improving outlook for steel demand on the back of stimulus spending on infrastructure and construction, as well as re-stocking of the supply chain, it doesn’t appear that rallies of more than 60 percent were warranted. In coming weeks if prices tend to ebb and flow in line with a combination of news events and supply-demand data, and commodity volumes stabilise at levels closer, or above, their longerterm norms, then the CSRC is likely to be able to claim victory, at least in this round. Reuters
The China Securities Regulatory Commission said on April 29 that it won’t allow domestic commodity futures markets to become a ‘hot-bed’ for speculators
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16 Business Daily Tuesday, May 3 2016
Closing Diplomatic tour
Japan to support Mekong countries with US$7 bln “Japan would like to work with the countries of the Japan wants to work with countries in the lower Mekong river basin and will help them improve infrastructure and bolster development with 750 billion yen (US$7 billion) in aid over three years, its foreign minister said yesterday. Foreign Minister Fumio Kishida made the pledge to help the Southeast Asian economies in Thailand’s capital, Bangkok, where on Sunday he began a week-long visit to the region in which Japan competes with China for influence.
Mekong region to create a framework to support efforts by the Mekong countries in a detailed manner, on a regionby-region basis or on a theme-by-theme basis,” Kishida said in a speech. Japan announced the three-year plan last year. Kishida is also due to visit Myanmar, Laos and Vietnam. Yesterday, he met Thai Prime Minister Prayuth Chan-ocha (pictured together), who has led a military government since the army took power in a May 2014 coup. Reuters
Cryptocurrencies
Australian confirms his identity as bitcoin creator The treatment of bitcoins for tax purposes in Australia has been the subject of considerable debate. it, breathed life into it,” he wrote. “You have given the world a great gift. Thank you.” However Wright did not make a clear admission that he was Nakamoto. “Satoshi is dead,” he said. “But this is only the beginning.” Unlike traditional currency, bitcoins are not distributed by a central bank or backed by physical assets like gold, but are “mined” by users who use computers to calculate increasingly complex algorithmic formulas.
Byron Kaye
A
ustralian tech entrepreneur Craig Wright has told the BBC he was the creator of controversial digital currency bitcoin after years of speculation about a person who until now has gone by the name of Satoshi Nakamoto. The BBC reported yesterday that Wright gave some technical proof demonstrating that he had access to blocks of bitcoins known to have been created by bitcoin’s creator. But he declined requests from The Economist to provide further proof that he was Nakamoto. “Our conclusion is that Mr Wright could well be Mr Nakamoto, but that important questions remain,” The Economist said. “Indeed, it may never be possible to establish beyond reasonable doubt who really created bitcoin.” The BBC said prominent members of the bitcoin community had confirmed Wright’s claim. “I was the main part of it, but other people helped me,” the BBC quoted Wright as saying. In December, police raided Wright’s Sydney home and office after Wired magazine named him as the probable creator of bitcoin and holder of hundreds of millions of dollars worth of the cryptocurrency, which has attracted the interest of banks, speculators, criminals and regulators.
“I was the main part of it, but other people helped me” Craig Wright, Entrepreneur and allegedly Bitcoin creator
The treatment of bitcoins for tax purposes in Australia has been the subject of considerable debate. The Australian Tax Office (ATO) ruled in December 2014 that cryptocurrency should be considered an asset, rather than a currency, for capital gains tax purposes.
Yesterday, the ATO said it had no comment while police were not immediately available for comment.
“Passion and intellect”
In a blog post dated yesterday, Wright appeared to out himself as bitcoin founder by posting a technical ex p l a n ati o n , i n c l u di n g
examples of code, of the process by which he creat e d th e c u r r e n c y . H e thanks all those who had supported the project from its inception. “This incredible community’s passion and intellect and perseverance have taken my small contribution and nurtured it, enhanced
Bitcoin experts say that unmasking Satoshi Nakamoto would be significant for the industry. Not only would the proven founder likely hold some sway over the future of the bitcoin protocol, but Nakamoto may also hold enough bitcoin to influence its price. As an early miner of bitcoins, Nakamoto is sitting on about 1 million bitcoins, according to bitcoin expert Sergio Demian Lerner. That is equivalent to about Us$450 million at current exchange rates. Reuters
CPI
Harvesting air
Executive remuneration
Indonesia annual inflation eases to 3.6 percent
Australian company bottles World’s largest sovereign air for Chinese consumers fund to weigh in on salaries
Indonesia’s inflation accelerated at slower pace in April to 3.6 percent on yearly basis from 4.45 percent in March, allowing the central bank to continue to hold its benchmark interest rate this month, statistic bureau and analyst said here yesterday. Head of the National Statistic Bureau Suryamin said that deflation on food prices, 0.94 percent in April, contributed the highest to the slowing inflation. On month, consumer price index reached minus 0.45 percent in April, falling from 0.19 percent in March, he revealed. “Among the highest contributive factors to the deflation include the reduction of prices of subsidized-fuel prices, red chili, rice and fish and others,” Mr. Suryamin told a press conference at the bureau headquarters. The government cut subsidized fuel price at the beginning of April as global oil prices drop significantly. Core inflation, excluding volatile components and prices determined by the government, eased by 3.41 percent in April on year, compared with percent 3.50 percent in March, Suryamin said. Economic Analyst from Bank Danamon Wisnu Wardana said that with the annual inflation in April was below the expectation of analysts from the lender which is 3.77 to 3.88 percent. Xinhua
Australian entrepreneurs in Sydney are paving the way for a new export to China - cans of Australian air. John Dickinson and Theo Ruygrok, founders and directors of Green & Clean, devised a way for those overseas and in China to have a taste of Australian air harvested from some of the nation’s most iconic locations. Ruygrok told Xinhua yesterday he found that pollution in some parts of China was quite heavy and he wanted to do something about it. “When I came back to Australia (from China) and found pristine locations that we have, we came up with the idea of bottling pure air from those locations,” Ruygrok said. Green & Clean harvests air with a mobile farming unit from some of Australia’s most picturesque and pristine locations such as Sydney’s Bondi Beach and Queensland’s Gold Coast. The company sold the cans of air in souvenir shops and airports, where customers can take “part of Australia back to their home country.” Ruygrok recommended users take 10 deep breaths from the can to help clear their lungs, which contains approximately 140 breaths of clean Australian air. Xinhua
Norway’s sovereign wealth fund, the biggest in the world with shares in more than 9,000 companies, will take a closer look at the controversial issue of executive pay, the country’s central bank said yesterday. “It is a theme that we will watch,” Martha Skaar, a spokeswoman for the division of the Norwegian central bank responsible for managing the fund, told AFP on Monday. The fund is worth nearly 7 trillion kroner (US$868 billion) and a powerful influence on how the companies it invests in are run. The issue of excessive executive compensation has become a hot topic for investors. The Fund will write a “position paper” to show where it stands on the issue, the spokeswoman said. No release date had been fixed. In an interview with the Financial Times published Sunday, the head of the Norwegian fund announced that it planned to add its powerful voice to the debate. “We have so far looked at this in a way that has focused on pay structures rather than pay levels. We think, due to the way the issue of executive remuneration has developed, that we will have to look at what an appropriate level of executive remuneration is as well,” Yngve Slyngstad, chief executive of the fund, said. AFP