Thursday, May 5 2016 Year V Nr. 1036 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Joanne Kuai Commerce Legislation
New Consumer Protection Law underway Page 2
Chinese exports to Luso countries down 45 pct y-o-y in Q1 Page 6
Commodities bubble
Measures implemented by Chinese Government to curb speculation succeed Page 8
www.macaubusinessdaily.com Stock exchanges
Trading suspensions in Mainland’s markets an obstacle to joining MSCI index Page 9
Melco Crown consolidates position Gaming Melco Crown Entertainment has announced the repurchase of 155 mln ordinary shares. For a total consideration of US$801mlm from Crown Resorts. Meaning Melco Int’l is now the single largest shareholder of Melco Crown Entertainment. Lawrence Ho (pictured) remains CEO and classified sole Chairman. Meanwhile, the company said its Q1 earnings had declined to US$40.50 mln, or US$0.025 per share, retreating 54 pct y-o-y. Revenue for the quarter rose 4.8 pct to US$1.10 bln. Page 7
Data forecast Pages 8&9
Panama Papers More Panama Papers revelations. Local CPPCC representative and businessman Ngan In Leng set up offshore firms via his hitherto unknown Singaporean nationality. Meanwhile, former Legislative Assembly president Susana Chou appears as director of a company created 30 years ago, according to the Panama Papers. Page 3
HK HSI May 4, 2016 20,525.83 -151.11 (0.73%) Bank of East Asia Ltd/The
+2.89%
China Resources Power
+1.69%
Power Assets Holdings Ltd
+1.60%
China Merchants Holdings
+1.55%
China Resources Land Ltd
+1.49%
Sands China Ltd
-1.96%
China Overseas Land &
-2.07%
China Petroleum & Chem-
-2.60%
Brief encounter Court Lawyers representing key defendants in the Federal UN bribery and money laundering case against Chinese billionaire Ng Lap Seng and a slew of alleged co-conspirators are abandoning the case. Page 6
22° 27° 22° 25° 22° 26° 24° 26° 24° 27° Today
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Source: Source: AccuWeather Bloomberg
Moderating tone A private poll indicates Chinese economic data will moderate in April following a strong March. Growth in bank loans and industrial output is expected to have cooled. While exports may register a decline.
Aftershock
2 Business Daily Thursday, May 5 2016
Macau In Brief
Aviation
MIA passenger volume increases 11 pct in April Some 530,000 passengers were recorded using the local airport in April, up by 11 per cent compared to last year, according to a press release issued by Macau International Airport (MIA) yesterday. Total traffic volume exceeded 4,600 movements, up 2 per cent year-on-year. In the first four months of this year, passenger volume reached 2 million. Passengers using legacy carriers increased 23 per cent year-on-year, accounting for 71 per cent of the total number of passengers travelling through MIA. Analysed by region, Southeast and Northeast Asia accounted for most of the passenger share with 43 per cent; Mainland China was the second highest, with 31 per cent, and Taiwan accounted for 26 per cent. Also, MIA is planning to launch a direct service between Macau and Russia by mid-May. Holidays
Government announces public holidays for 2017
Consumer Law
New Consumer Protection Law underway New Consumer Protection Law aims at protecting consumers from deceptive and frightening business conduct, giving them the right to demand more information on goods and services. Annie Lao annie.lao@macaubusinessdaily.com
T
he revision of the new Consumer Protection Law is in the final stage and will be enforced later, Lewis Chan Hon Sang, a full-time member of the Macao Consumer Council Executive Committee, contended during the TDM radio programme ‘Macau Forum’ yesterday, according to a report on TDM Chinese Radio. The new Consumer Protection Law mainly addresses misleading and intimidating practices by businesses and therefore reinforces the illegal administrative penalties for the wrongdoing, Mr. Chan said.
He pointed out that the Council has not yet investigated the right to have a proof of purchase. According to the results of the consultation, the new Consumer Law is taking into consideration giving the Council the power to access information about goods and services. Mr. Chan believes this can help the government further objectively assess whether the consumer market is healthy. The draft of the law suggests businesses should display all the information that their consumers need to know. It aims to strengthen consumer rights for obtaining information, especially before signing any contract. Necessary information, prices and proof of purchase all need to be disclosed.
Difference in selling price
The Consumer Council analysed data on the retail price of meat for the last four months and found a price difference between different local markets. “Each fresh pork retailer offers different selling prices [of up to] 30 per cent difference. However, when comparing supermarket selling prices, there is a 13 per cent to 47 per cent price difference. Furthermore, when compared to Zhuhai, it shows from 64 per cent to 114 per cent price difference,” Mr. Chan explained.
The MSAR Government has announced 2017 will see 20 public holidays and 7.5 days of holiday as special grant for exempt from work for staff in public administration by the Chief Executive, although no mandatory holidays have been established yet, according to an Official Gazette dispatch. Chinese New Year holidays will fall on January 28, 29 and 30, the Tung Ng Festival (Dragon Boat Festival) will fall on June 9, and the Chong Yeung Festival (Festival of Ancestors) will fall on October 28.
Demand for frozen pork
As Macau’s population increases, no significant increase in the amount of slaughtered pigs has been evident, Ung Sau Hong, a member of the Management Committee of the Civic and Municipal Affairs Bureau (IACM), said during ‘Macau Forum’ yesterday. Macau started importing frozen pork from 2006. Up to 2014, the consumption of frozen pork increased about six to sevenfold. The amount of frozen meat consumed has doubled, indicating that local residents consume a diverse range of food. After IACM cancelled the licence to restrict selling fresh food near the surrounding municipal markets last month, IACM is now processing two retail fresh meat licences, according to Mrs. Ung. She pointed out that the supply actually affects prices. The price of fresh pork had been reduced twice by the end of last year. However, from the last two months, the price of fresh pork has increased three times. Suppliers say the rising price has been caused by the short supply. Mrs. Ung said IACM is still reviewing the municipal regulations and analysing whether it is necessary to continue [retailers] drawing lots for the market stalls.
Smuggling
Zhuhai busts 105 mln yuan wine smuggling case Gongbei Customs has busted a smuggling gang dealing in contraband high-end wines earmarked for Mainland China from overseas, detaining goods valued at 105 million yuan (MOP128.4 million/US$16 million) and arresting 15 suspects. According to TDM radio, the authorities found that two Mainland businessmen running wineries in Zhuhai and Guangzhou had been purchasing a variety of wine from overseas suppliers, including those in Macau and Hong Kong, for illicit profits. The contraband was moved to the Mainland by smugglers organised by a local Macau citizen gang member. They hid the parallel goods in their luggage or attached them to their bodies. The organisation would deliver the wines to different Chinese cities via logistical means. The Chinse Customs department took action against the smuggling gang in Zhuhai, Zhonshan, Guangzhou and Shanghai in March. It says the case is still under investigation.
Government and industry pro fessionals have undertaken further investigation in response to the low profit allegedly earned by retailers as recently claimed by Macau Iong Hap Tong Pork Meat Traders Association, who said they only sell one pig per day on average. However, about 32 per cent of the municipal market stalls sell more than two pigs on a daily basis, according to Tai Kin Ip, director of Economic Services Bureau (DSE) attending ‘Macau Forum’ yesterday. Further action will be taken to understand the data provided by the Macau Iong Hap Tong Pork Meat Traders Association which stated that fresh pork retailers earn about MOP10,000 (US$1,251) profit per month, according to Mr. Ip. The government will release the relevant data after understanding the information provided in due course to the public, Mr. Ip said. This is mainly for new competitors who will be interested in joining the industry to assess the profit earned in order to promote competition and thus adjust selling prices accordingly. “The price of fresh pork sold in the supermarkets is cheaper than from the fresh pork retailers, about 10 to 40 per cent difference. In addition, the supermarkets have to pay for the operational costs, rent, tax, etc., but they can still sell at a cheaper price than the fresh port retailers. As you can see, there is space for fresh pork retailers to adjust their selling price,” Mr. Ip added.
Hotels Going green, picking up gold
Winners of Macau Green Hotel Award 2015 announced Nelson Moura nelson.moura@macaubusinessdaily.com
Macau Green Hotel Award 2015 has been concluded with 17 hotels being awarded, according to a press release from the Environmental Protection Bureau (DSPA). Gold prize winners include Sands Macao Hotel, Crown Towers, Hard Rock Hotel, Grand Hyatt Macau Hotel and Hotel
Okura; the silver award went to Galaxy Hotel, Hotel Guia, Riviera Hotel, Hotel Royal, Mandarin Oriental Hotel, Grand Emperor Hotel and Grand Lisboa Hotel. The award was launched in 2007 and seeks to raise awareness of the importance of environmental management in Macau’s hotel industry, and also provides a platform for showcasing efforts, learning and collaboration. The 2015 edition registered five more hotels awarded the gold prize and four more budget hotels awarded, with the winners of the 2014 edition including MGM Macau, The Venetian Macao Resort Hotel, and the Hotel Beverly Plaza. The programme is organised by
the DSPA in collaboration with the Macao Government Tourism Office (MGTO), with support by the Macau Hotel Association and the Macau Productivity and Technology Transfer Centre. As at the end of March this year a total of 38 hotels had participated and were awarded in all editions of the Macau Green Hotel Award, comprising 35 per cent of all Macau hotels, corresponding to 19,000 rooms, or 60 per cent of all hotel rooms in the territory. The award ceremony will take place in June and the DSPA will start accepting applications for the Macau Green Hotel Award 2016 in the last quarter of this year.
Business Daily Thursday, May 5 2016 3
Macau
Panama papers
Ngan In Leng set up offshore firms via Singaporean nationality Latest Panama Papers leaks reveal another nationality of the local CPPCC representative and businessman Ngan In Leng. But Beijing does not recognize or permit dual nationality.
L
ocal businessman and member of the Chinese People’s Political Consultative Conference (CPPCC), Ngan In Leng, has reportedly hidden the Singaporean nationality he obtained in 2000, violating China’s one-nationality policy, South China Morning Post (SCMP) has reported. The latest batch of Panama Papers obtained by the news outlet indicated that the businessman, originally from Fujian Province,
Local businessman and member of the Chinese People’s Political Consultative Conference (CPPCC), Ngan In Leng.
produced his Singaporean identity card to register two offshore firms owned by him and his family in the mid-2000s.
More coming to light
Former president of the Legislative Assembly Susana Chou appears as the director of a company created 30 years ago, as mentioned in the Panama Papers. According to a database in the Sunday Times, Susana Chou appears as Director of ‘Katanic Investment S.A.’, a public limited liability company headquartered in Panama and created in December 1985. The former LA president, quoted by her spokesperson, said that Katanic Investment S.A. is “a subsidiary like others that Novel Secretaries Limited has in various parts of the world […]
Mr. Ngan is one of the five standing committee members representing the Special Administrative Region in the CPPCC.
it’s a legal company.” Novel Secretaries is a subsidiary of the Novel group, in the textile sector, pertaining to Susana Chou’s family. Katanic Investments S.A. has in its corporate structure a director and secretary of Novel Secretaries Ltd, a company founded in 1979 and headquartered in Hong Kong, with Ma Mang Yin as director and treasurer and Ronald Chao Kee Young also a director. Susana Chou continues to serve as a member of the Macau delegation to the National People’s Congress and served for a decade as the first president of the Legislative Assembly for the MSAR. Lusa
Land
These two offshore companies of Ngan’s were established via Mossack Fonseca, the law firm from which the Panama Papers were leaked, the English-language newspaper said. ‘Instead of using his Macau ID, he gave Mossack Fonseca staff photocopies of his Singapore ID card, which showed that it was issued in December 2000, just a year after China resumed sovereignty over the Portuguese enclave,’ the new report reads. CCPCC annual meeting spokesperson Lu Xinhua said two years ago that Beijing does not permit delegates to hold any overseas nationality, claiming none of the delegates had dual nationality.
According to SCMP, the two offshore firms that Mr. Ngan owned have been mentioned by other companies run by his family in announcements with the Hong Kong Stock Exchange. Meanwhile, Hong Kong Chinese language newspaper Apple Daily, which has also received copies of the Panama Papers, indicated that Ngan and his family set up another two companies in 2013 in the British Virgin Islands, the business of which is related to the family’s investment holdings businesses in Macau. The Chinese news outlet added that Ngan’s wife Chan Wai Ian and daughter Ngan Iek Peng also hold Singaporean passports, while daughter Ngan Iek Chan and son Ngan Iek hold Australian passports. Mr. Ngan is the founder and former president of the failed low-cost airline Viva Macau, which was declared bankrupt in September 2010 following four years of operations under a sub-concession of the city’s flagship carrier Air Macau. The CCPCC member’s business interests range from property development to entertainment to investments to hi-tech manufacturing. In addition, he is currently the president of the city’s biggest Fujian association Macao Fujian Fellow General Association - as well as president of the Macao Mazu Foundation. Before Mr. Ngan, the Panama Papers had previously disclosed Hong-Kong property tycoon Lee Ka Kit, who is also a CCPCC standing committee member, had declared British nationality and founded offshore companies, according to SCMP.
Finance
Gov’t declares expiry of more land concessions IACM supplementary budget increased in 2016 The MSAR Government has declared the expiry of two land concessions in a dispatch by the Secretariat for Transport and Public Works published in the Official Gazette One of the land plots is located in Taipa, at Baia Pac On, occupying 27,188 square metres, and was awarded to the Companhia de Investimentos Polaris Limitada, for construction of a building complex for residential, commercial, parking
and social facilities. However, the 25 years land grant expired on December 25 of last year. The other land plot, located in Macau at Avenida do Infante D. Henrique, occupies 4,440 square metres and was awarded to Companhia de Géneros Alimentícios Congelados Macau, Limitada, for the construction of a five-floor seafood processing factory. The land grant contract expired on May 17 of last year.
The first supplementary budget for the Civic and Municipal Affairs Bureau (IACM) in 2016 was approved by the Chief Executive, a total of MOP75 million (US$9.4 million), with a 28.8 per cent increase to last year’s budget which totalled MOP58.52 million, according to a dispatch in the Official Gazette. The IACM has spent MOP41,478 in support of private entities in the first quarter of 2016, with the biggest
support for the Taipa Residents Association of MOP8,000 for the organisation of a Chinese New Year’s bazaar. Last year, an official dispatch by Chief Executive Fernando Chui Sai On announced that IACM will be stripped of its functions in the fields of culture, leisure and sport, functions that would be assimilated by the Cultural Affairs Bureau and the Sport Development Board.
4 Business Daily Thursday, May 5 2016
Macau Opinion
Ashley Sutherland-Winch Where are you from? “Don’t ask where I’m from, ask where I’m a local” was the advice presented by Taiye Selasi when she spoke at TEDGlobal in 2014. I recently had the opportunity of watching her talk and I was incredibly moved with how important and valid this statement is to Macau in 2016. Of Nigerian and Ghanaian origin, Selasi describes herself as a “local” of Accra, Berlin, New York, and Rome. Her major point in her twelve-minute speech was highlighting the concept of “We are local where we carry out our rituals and relationships but how we experience our locality depends on our restrictions; meaning, where we are allowed to reside based on passport, politics and government.” What I found interesting in relating her statements to Macau is that in a time of economic distress and financial concern, there has been a recent explosion of digital expression of love and pride for Macau causing me to consider our community’s rituals and relationships. Walking down our streets, you can immediately see that Macau is made up of a diverse population of cultures from China, the Philippines, Europe, Australia, and North America and all groups carry their own rituals and relationships from their places of origin. What you cannot tell from glancing at a person is how long they have lived in Macau and, specifically, whether they are local. When you ask someone where they are from, it isn’t the specificity of the answer it’s the intention of your question and when replacing the language of nationality with the question of locality that makes us truly question where our lives take place. “Human experience is notoriously and gloriously a disorderly affair” said Selasi in her TED Talk. Currently, the hashtag #Macau is sitting at just under 2 million posts on Instagram, the popular social media site having grown exponentially in the past six months following the growing interest of people, both locals and tourists, to tag Macau on their social media. Macau locals are also found to be promoting Macau with new websites and social media campaigns like LiveLoveMacau.com and AmericanInMacau.com that seek to attract attention as they attempt to brand Macau as their home that deserves international attention. So with our mixing pot of cultures here in Macau, with our rich history of Chinese and Portuguese customs, should we take the advice of Selasi? Should we be changing our question from “Where are you from?” to “Where are you local?” Ashley Sutherland-Winch is a Marketing and Public Relations Consultant and frequent contributor to this newspaper.
Intellectual property
Applications for industrial property registration down 26 pct.
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pplications filed for registering industrial property in the city amounted to 943 last month, down 25.9 per cent year-on-year, or 21.4 per cent month-on-month, according to the latest statistic released by Macao Economic Services (DSE) yesterday. In the month, applications for trademark registration accounted for 836 of the total, which decreased by 31.8 per cent year-onyear from 1,225, or down by 26.7 per cent month-on-month from 1,139.
Nevertheless, the government department received 44 applications for registering industrial designs or models in the period, more than twice year-on-year, or 83 per cent month-on-month. In addition, applications for extending current invention patents increased by more than one time to 44 compared to 24 one year ago. The number also represents a month-onmonth increase of 74 per cent from 31 in March. Six others and three applications were received by DSE for registering invention patents and name and
emblem of establishment last month, respectively. Thus the economic bureau received 4,103 industrial-property applications for the first four months of this year, of which those for registering trademarks amounted to 3,855, followed by 144 applications for extending invention patents and 78 other applications for registering industrial designs or models. Meanwhile, applications for invention patent, utility patent and name and emblem of establishment totalled 14, 3 and 9 in the four months, respectively, according to DSE.
Retail
Property
Giordano sales down 10 pct in Q1
Country Garden posts 1.5-fold increase in sales
Clothing retailer Giordano International Ltd. posted a fall of 10 per cent year-on-year in its total sales to HK$1.3 billion (US$162 million) for the first quarter of this year, due to sales decreases in Macau, Hong Kong and the Mainland, according to its filing with Hong Kong Stock Exchange yesterday. For the first three months of this year, the retailer generated a total gross profit of HK$754 million, down 6 per cent compared to HK$798 million during the same quarter of 2015, despite gross margin improving slightly by 2.5 percentage points to 57.7 per cent. Meanwhile, its sales in the two Special Administrative Regions dropped by 7 per cent year-on-year to HK$237 million; gross profit derived from the two cities decreased 5 per cent to HK$156 million from HK$164 million one year ago. ‘Sales in the first two months showed a low single-digit growth despite a high base year-on-year. However, due to the unseasonably cooler weather in March, consumers delayed purchases of Spring merchandise,’ the retailer explained. As at the end of March, Giordano
operated 71 outlets in Hong Kong and Macau, compared to 76 stores one year ago. ‘The number of outlets decreased as we exited non-performing outlets. However, when rental in Hong Kong declines to a reasonable level, we will seek opportunities to re-open outlets,’ it noted. Meanwhile, Giordano’s sales in Mainland China were also down by 12 per cent to 297 million yuan (HK$368 million/US$45.8 million) - from 338 million yuan for the first quarter of 2015. Gross profit from the market also posted a year-on-year decline of 7 per cent to 154 million yuan. ‘Weak consumer sentiment and cooler weather during the Spring season depressed sales in Greater China,’ the retailer said. K.L.
Wilson.Corral
Mainland Chinese developer Country Garden Holdings Company Ltd. saw its contracted sales of housing projects surge by more than 1.5 times to 64.92 billion yuan (MOP79.46 billion / US$9.94 billion) for the first four months of the year compared to 24.3 billion yuan during the same period in 2015. In a filing with Hong Kong Stock Exchange yesterday, the company claimed 50.3 billion yuan of the total sales was attributable to owners of the company. For the period, the developer sold a gross floor area totalling 8.3 million square metres vis-a-vis 3.84 million square metres one year prior. Meanwhile, the Mainland Chinese company noted that it had achieved subscription sales of 16 billion yuan during the three-day May Day Holiday from April 30 to May 2, with gross floor area of some 1.85 million square metres having been sold. The developer is popular among local residents and Hong Kong investors for its residential projects in the country.
Business Daily Thursday, May 5 2016 5
Macau Corruption COUNSEL FOR UN BRIBERY AND MONEY LAUNDERING CASE BOW OUT
Ng and Ashe abandoned by lawyers the legal proceedings in this case,” and that in relation to the firm’s client “it is my understanding that Ambassador Ashe will apply for Court-appointed counsel,” reads a letter from Sills Cummis & Gross and submitted by Gouraige published on the blog. The letter further shows the firm’s disbelief that Ashe will be able to fund the ongoing trial, noting: “although the Indictment was filed in or about late October 2015, the case itself is still at a very early stage, with the Government considering filing a superseding Indictment (which may or may not include additional charges against Ambassador Ashe),” the letter reads.
Ng Lap Seng.
Not alone Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
B
oth Benjamin Brafman, Ng Lap Seng’s lead lawyer on the federal UN bribery and money laundering case the United States government is levelling against him, and Hervé Gouraige, attorney for the former UN ambassador to Antigua and Barbuda, have filed to withdraw as counsel for their respective clients, with Brafman receiving approval by the judge the day after the filing, April 13th, and Gouraige to appear with Ashe before the judge for a status conference on May 9, according to a Dominican blog named Mas in the Cemetery. Brafman did not state the reason for jumping ship but noted that a Mr. Hugh H. Mo, already an attorney on the Ng case, will “continue as counsel
of record on behalf of the Defendant” and that Brafman’s “decision to withdraw should not in any way delay the proceedings,” according to letters published on the blog, allegedly detailing the correspondence between Ng’s lawyer and Judge Vernon Broderick. Mr. Mo runs his own law firm. In response to the change Ng has added three new lawyers to his defence team; namely, Tai H. Park, Douglas R. Jensen and Christopher W. Greer. The three are associated with law firm Park Jensen Bennett, notes the blog.
Ashes to ashes
In a surprising turn of events the law firm representing John Ashe, and spearheaded by Hervé Gouraige, also sought to withdraw as counsel for the former ambassador. Gouraige filed a
request with the judge to postpone the court hearing originally scheduled for today, requesting a two-week delay – which was approved - with the judge setting the hearing date for May 27. However, the day after the request was approved, April 27, Gouraige sent a letter to Judge Broderick “seeking immediate permission for Sills Cummis & Gross P.C. to withdraw as counsel for Ambassador John W. Ashe”, according to letters published on the blog. The decision comes about after Ashe “has been unable to pay our Firm’s outstanding legal invoices for the past several months, and given that he has informed us that he has already exhausted all his available financial resources, he is not in a position to pay the Firm’s past and ongoing legal fees,” reads the letter. The withdrawal of the firm from the case “will have little or no effect on
Francis Lorenzo, who pleaded guilty to six charges levelled against him for conspiracy, bribery, money laundering and tax evasion and told Judge Broderick that he had facilitated the payment of bribes to others as well as accepting money from Ng Lap Seng filed a motion with the judge to modify his home detention order to change his curfew to an eight-hour stretch, from 11:00p.m. to 7:00a.m. daily. Shiwei Yan, former head of the UN’s Global Sustainability project, and charged with bribing John Ashe, had her April 29 hearing postponed to June 9, while Heidi Hong Piao - who pleaded guilty on money laundering charges for transfers involving the former Antiguan Prime Minister and other Antiguan government officials - has had her April 25 hearing adjourned to October 25, the blog reports.
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6 Business Daily Thursday, May 5 2016
Macau Macau businessman signing a memorandum of understanding (MOU) with Brazil’s Curvelo Municipal Government on business worth US$10 million.
Trade
Macau looks for business in Brazil Macau economic delegation meets Brazilian counterparts looking for business opportunities. Nelson Moura nelson.moura@macaubusinessdaily.com
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Macau economic delegation organised by the Macau Trade and Investment Promotion Institute (IPIM) recently participated in the ‘Exchange Meeting Between Sao Paulo and Macau Businessman’ organised by the Sao Paulo Commerce Chamber, according to a dispatch by IPIM. More than 60 businessman from Macau and Brazil sought to
improve the economic and commercial co-operation between China, Brazil and Portuguese-speaking countries and reiterate the importance of the Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries (Forum Macao), while local businessman shared their business experiences and professional acumen. During the exchange session IPIM proceeded to register Brazilian businessman on its online platform, with Brazilian businessman Ezquias Sodre saying he “had a strong interest in the Chinese market, and hoped to find business partners through the platform,” according to Forum Macao. Also, Macau businessman Deng Haiqiang, Managing Director of Love of Crystal, together with the President of the Association for the Promotion of South America and Portuguese-Speaking Countries, signed a memorandum of understanding (MOU) with Brazil’s Curvelo Municipal Government on business worth US$10 million, according to Forum Macao. Haiqiang stated he had already signed a US$4 million co-operation mining agreement with the city in 2012 with IPIM’s support, with this year’s deal expanding co-operation to the import and export of goods
including food produce, electronic appliances, furniture and ceramics. Macau’s economic mission also attended Sao Paulo’s ‘Feira APAS 2016’, an international trade fair for the supermarket sector organised by the Paulista Association of Supermarkets, from 2nd to 5th May, and visited the Portuguese bank Caixa Geral de Depositos branch, which co-operates with Macau’s branch of Bank of China and Banco Nacional Ultramarino (BNU) for financial assistance and co-operation between Mainland China, Macau and Brazil.
An important partner
In the event presentation session IPIM President Jackson Chang stated that the Brazilian economy is the best positioned in South America, and the territory’s most important Portuguese-speaking country trade partner. Macau and Brazil trade has reached MOP323 million (US$ 40,47 million) with March trade reaching MOP29.7 million, according to data from the Statistics and Census Services (DSEC) in 2015, while trade in merchandise between China and Portuguese-speaking countries reached US$16,727 billion in the period spanning January to March 2016 representing a 23.03 per cent
decline year-on-year, according to Forum Macao quoting data from China Customs. Chang invited the businessman present to attend Forum Macao’s Ministerial Conference in November, and stated that Macau was already included in the global strategic plan in China’s 13th Five-Year Plan, with IPIM planning to create a Department for the Economic and Commercial Promotion of Portuguese-speaking Markets per Forum Macau, according to IPIM. In the event the vice-president of the Sao Paulo Commerce Chamber, Roberto Ticoulat, presented China as Brazil’s most important trading partner and announced that a representative office was already established in Macau, Forum Macao said. He then reiterated how Brazil had many business opportunities awaiting Mainland China and Macau businessman, in sectors such as food and aviation. Brazilian companies are increasingly eyeing China as a growing market for premium food products and since China’s ban on beef imports from Brazil was lifted last year China has become the “leading buyer” for Brazilian beef, according to Brazil’s Trade and Investment Promotion Agency, known as Apex-Brasil.
Commerce
Chinese exports to Luso countries down 45 pct y-o-y in Q1 Trade between China and Portuguese-speaking countries amounted to US$16.73 billion in the first quarter of 2016, according to data from China Customs and published by Forum Macau. This represented a 23.03 per cent decline year-on-year compared to the US$21.73 billion seen in the first quarter of last year. Imports by China from Portuguese-speaking countries saw a 2.1 per cent drop year-on-year for the quarter, amounting to US$10.88 billion, while exports from China destined for the countries saw a 44.95 per cent drop to US$5.84 billion in the same period.
The total value of goods traded between the parties saw a month-on-month rise of 9.96 per cent, with imports to China from the countries rising 11.39 per cent from the previous month and imports up 7.13 per cent for month of March. Total trade value amounted to US$5.53 billion in the third month of the year, of this US$3.97 billion was conducted between Brazil and China. Brazil continued to be China’s largest trading partner amongst the eight countries sharing a common language, with US$11.6 billion in trade for the first quarter of year, split between US$4.24 billion imported to Brazil from China
and US$7.36 billion exported to China from Brazil. This still represented a 47.27 per cent drop in Chinese products exported to the country, and a 19.3 per cent drop in imports to China from Brazil. Angola came in second in the pool, with US$3.4 billion in trade between the petroleum-rich country and China, with Chinese
exports to the country falling by 75.36 per cent year-onyear and imports to China also falling by 27.58 per cent. Trade was heavily weighed towards Angolan exports, amounting to US$3.1 billion, while imports from China to the country only amounted to US$345 million.
São Tomé and Príncipe continued to have a one-sided trading arrangement with China, with the superpower buying up US$1.27 million in exports from the country, while the country recorded no imports from China for the quarter. K.W.
Business Daily Thursday, May 5 2016 7
Macau Gaming Lawrence Ho solidifies control of Melco Crown Entertainment
Gaming
Melco Crown net Q1 profit retreats 54 pct CEO Lawrence Ho revealed that “May with Golden Week has started off great” and the “mass market is stabilising but the VIP segment is still going through structural changes”. Nelson Moura* nelson.moura@macaubusinessdaily.com
M
elco International Development Limited (Melco) has announced in a press release that Melco Crown Entertainment (MCE), which operates City of Dreams and Studio City in Macau, has entered into a share repurchase agreement with Crown Asia Investments Pty. Ltd. (CAI), a wholly-owned subsidiary of Crown Resorts Limited. MCE agreed to repurchase 155 million ordinary shares
from CAI for a total of US$800 million (MOP6.39 billion) at a per share price of US$5.2. As a result of the deal the shareholder’s agreement between CWN and Melco International will be amended but Lawrence Ho will remain CEO and classified sole chairman of Melco, while the equity interests of Melco and public shareholders in MCE will be increased to approximately 37.9 per cent and 34.7 per cent. “This is a tremendous milestone for Melco,” Lawrence Ho stated in a press release. “The transaction will meaningfully strengthen Melco’s financial position by incorporating MCE’s full financial contributions into the Group’s portfolio as an accounting subsidiary. It demonstrates Melco’s positive outlook for Macau’s long-term future. It will also enhance the Group’s overall portfolio of high-quality assets and facilitate our efforts in realising Melco’s global expansion vision.” Sanford C. Bernstein considers the deal positive as it “gives control firmly to Lawrence Ho and MCE will maintain a strong liquidity
position with over US$1bbillion in cash on hand, out of Studio City and Melco Crown in the Philippines”.
“Stabilizing environment”
Meclo Crown Entertainment also released its unaudited financial results for the first quarter of 2016. It said its earnings declined to US$40.50 million, or US$0.025 per share. This was a 53.5 per cent drop from US$87.11 million, or US$0.054 per share, in last year’s first quarter. Net revenue for the period amounted to US$1.10 billion, representing an increase of around 5 per cent from US$1.05 billion for the comparable period in 2015. The gaming operator attributes the increase in net revenue to Studio City, which started operations in October last year and City of Dreams Manila, which commenced rolling chip operations in February 2015, partially offset by lower rolling chip revenues and mass market table gaming The management said the mass market was stabilising, revealing the May 1 holiday
ignited some positive yearon-year growth, while playing down concerns about the bad debt risk. “April, similar to March, wasn’t a particularly great month, but I think May with Golden Week has started off great; generally, as a company, we think the mass market is stabilising but the VIP segment is still going through structural changes,” said Ho at a conference call last night discussing the first quarter results. “In respect to the bad debt provision, that particular US$18 million, it’s a single incident that related to one junket that operated since 2008 in Altira. I think their last two quarters’ contribution is quite minimal. We use a more prudent way to look into that matter. In respect of the other junkets’ portfolios in MCE, I think we shall categorise it as being more stable; and with contribution from the pitfall junket operators have actually been increasing in the last few quarters,” said Ted Chan Ying Tat, Melco Crown’s chief operating officer during the conference call. *with J.K.
Gaming
Summit Ascent, operator of the Tigre de Cristal hotel and casino in Vladivostok, Russia has announced a change in its principal place of business, in a filing with the Hong Kong Stock Exchange yesterday. The headquarters, formerly located on the 6th Floor of Victoria Centre on Watson Road in the North Point area of Hong Kong will switch to a new location on the 37th Floor of The Centriumon on Wyndham Street in Hong Kong’s Central district. Summit Ascent holds 60 per cent of the gaming and hotel operations for the Russian casino, which test launched in October of last year and held its grand opening on November 11. According to their annual report the group saw a HK$85.4 million loss for the 2015 year, while generating an adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of HK$14.3 million. According to the report the group hopes to be ‘running at close to optimal levels[…] sometime during the summer of 2016’ on the project chairman Lawrence Ho calls “the largest integrated resort ever built in the Russia Federation”.
Gaming
IGT to introduce next generation OnPremise mobile betting at G2E As part of International Gaming Technology’s (IGT) offerings on display at the Global Gaming Expo Asia from May 17 to 19 the group plans to exhibit its next generation OnPremise mobile betting options for smartphones and tablets. This embedded system allows casino patrons to play on multiple live tables simultaneously from their device in any permitted area within a casino, according to a press release. “At G2E Asia, IGT will introduce the next generation of our OnPremise mobile betting solution with back betting and side betting features that can help our customers further capitalise on the immense regional popularity of baccarat, while meeting the increasing player demand for mobile gaming solutions,”
Ho’s Russian casino project moves HQ
said Walter Bugno, Chief Executive Officer of IGT International. Features of the OnPremise system to be displayed include integration with Player’s Club programmes for rewards options, side betting capabilities, omni-channel games, one touch access and convenience applications, among others.
Growth
For the fourth quarter of 2015, IGT reported a net loss of US$76 million, despite a 44 per cent growth in the fourth quarter consolidated revenue to US$1.36 billion, compared to the US$951 million registered in the same quarter of 2014, according to their fourth quarter earnings release. The group saw an adjusted
EBITDA of US$449 million, and sold 11,562 gaming machines worldwide during the quarter, the most recent available data.
G2E
Speakers at the Global Gaming Expo include the Director of Macau’s Gaming Inspection and Co-ordination Bureau (DICJ), Mr. Paulo Martins Chan with an opening address titled ‘Transformation in Changing Conditions’. IGT’s CEO Walter Bugno will also give a speech titled ‘CEO Perspectives: How Slot and Game Developers Change to Meet New Demand’, moderated by GGR Asia’s Michael Grimes. Additional topics for the expo include the ‘Value of the Non-Gaming Customer’, ‘iGaming State of Play – Asia’, ‘Social Casino Trends’, ‘Next Frontier Markets in Asia and Western Europe’ and ‘Impacts of Locals, Junkets as Developers and Developing Entertainment’ among others.
Suncity: three hotels for Vientam resort Suncity Group has announced that the casino resort project the group is involved with in Hoi An, Vietnam will includes three hotels, with the first phase to be completed in the first quarter or 2019, according to a press release from GGRAsia. The first phase will ‘include approximately 1,000 lodging rooms [in] three hotels, residential villas and apartments, along with a championship golf course, food and beverage offerings, retail areas and a variety of further leisure and entertainment facilities,’ GGRAsia quotes the press release as stating. No information was provided as to the gaming components of the casino resort, located in Vietnam’s Quang Na Province and named the Hoi An South Integrated Resort. The project is under development by the joint venture Hoi An South Development Co Ltd. – comprised of Suncity, VinaCapital Group Ltd. – a Vietnam-based asset management firm and Gold Yield Enterprises Ltd – a subsidiary of Hong Kong-based jewellery giant Chow Tai Fook Enterprises Ltd. Overall, the integrated resort occupies 985 hectares and, according to the press release, will be broken into seven phases, with total investment estimated at US$4 billion upon completion. The project is also estimated to create around 2,000 jobs. The cost of the first phase of the project is estimated at US$500 million and will occupy up to 160 hectares, Business Daily reported; the first phase was originally meant to begin construction in mid-2015. The integrated resort’s casino will still only be available to foreign gamblers, unless Union Gaming’s prediction on the green-lighting of up to four integrated resorts for locals to gamble in – one each for the north, central, south and southwest zones, with Hoi An a shoe-in for the central zone’s licence – eventuates before the predicted 2019 opening date. K.W.
8 Business Daily Thursday, May 5 2016
Greater China Performance Data
April economic figures to show more modest evolution
C
hinese economic data in coming weeks is expected to show activity moderated in April after a strong showing in March, adding to questions over whether the world’s second-largest economy is recovering, a Reuters’ poll of economists showed. Growth in bank loans and industrial output is expected to have cooled, while exports could decline, albeit marginally, after expanding for the first time in nine months in March. Fixed-asset investment may have expanded at a faster rate, however, while producer price deflation likely eased, easing strains on companies’ balance sheets. April will give investors their first look at the state of the economy after the volatile first quarter when data can be distorted by the long Lunar New Year holidays. Stronger-than-expected March readings and a jump in prices of raw materials such as steel had fuelled hopes that the country’s prolonged economic downturn was bottoming out and business conditions were improving. But official and private factory surveys earlier this week showed
Industrial output is expected to have risen 6.5 percent, lower than March’s 6.8 percent spike.
expansion slowed in April, raising doubts about whether the March pickup will prove sustainable. Economic activity increased on the back of record bank lending in the first quarter, but worries of a speculative commodity bubble and fast-rising home prices, as well as spreading debt defaults and bad loans, have for now caused regulators to tap the brakes on expectations of further aggressive stimulus. Chinese banks likely extended 900 billion yuan (US$138.53 billion) in new yuan loans in April, down sharply from 1.37 trillion yuan in March. M2 money
supply likely rose 13.5 percent from a year earlier, quickening from 13.4 percent. “We think the momentum of policy easing has peaked in the near term. We expect China’s policy stance to remain largely unchanged in the next couple of months, with Q2 data release and July’s politburo meeting as the next potential opportunity to revisit current policies”, UBS analysts wrote in a note Tuesday on the outlook for upcoming data. Industrial output is expected to have risen 6.5 percent, lower than March’s 6.8 percent spike but higher than
recent months, as increased government spending on construction projects has spurred a recovery in production of steel and other building materials. Exports likely reversed, however, dipping 0.1 percent and suggesting that March’s strong 11.5 percent rise may have been a Lunar New Year anomaly. Exports fell 9.6 percent in the first quarter from a year earlier. Imports are estimated to have fallen 5 percent, an improvement from a 7.6 percent decline in March but pointing to still-lacklustre domestic demand. China’s trade surplus may have risen to $40 billion.
Speculation fight
Authorities win skirmish in commodities market Prices retreated after commodity exchanges in Dalian, Shanghai and Zhengzhou increased transaction costs and widened trading limits. Manolo Serapio Jr
C
hinese regulators appear to have successfully popped a m i n i -b u bb l e f o r now in steel and other commodity futures, scaring off speculators who piled in last month to drive steep gains in the prices of
raw materials from coal to cotton. China has vowed that it won’t allow its commodity futures markets to become a “hot-bed” for speculators, fearing that price movements not based on fundamentals could skew investment decisions and hamper efforts to rein in overcapacity.
The price of the most traded steel product on the Shanghai Futures Exchange - which jumped nearly 17 percent in just four days in mid-April fell for the second consecutive day yesterday and has given up all of its gains since the buying flurry began. At the same time, the level of open interest - the number of open contracts - has dropped sharply, suggesting many investors have liquidated their positions before prices fall even further. “Speculative funds have exited the market at the moment and I think it’s time to take a break,” said a researcher at a Shanghai-based fund, who declined to be named because he is not allowed to speak to media.
Prices retreated after commodity exchanges in Dalian, Shanghai and Zhengzhou increased transaction costs and widened trading limits, making speculative investment more difficult. David Flanagan, chief executive of Australian iron ore miner Atlas Iron, said last month that “mom and pop” trading was affecting prices and cited a meeting with the manager of a Chinese steel mill. “Her maid is earning a multiple of her salary by trading iron ore futures,” he told reporters in Perth. “That has an influence on the iron ore price.”
Rebar gives up gains
Reinforced steel used in construction, known as rebar, led
the mid-April surge, along with iron ore, coking coal and coke as investors jumped on the coattails of a rally in steel prices after China boosted spending on construction to spur growth. The buying spread to other commodity futures including cotton and eggs, raising fears of a boom-and-bust cycle similar to China’s stock market crash last summer. Open interest in rebar on the Shanghai exchange fell to 2.7 million lots this week from 3.7 million lots on April 18. On the Dalian Commodity Exchange, open interest in its most-active iron ore contract fell to less than 800,000 lots on Tuesday, the lowest since November 2015. But a surge in open interest on nickel futures in Shanghai as traders bet on a recovery in prices from 13-year lows led a broker to warn that trading in the metal could soon face curbs. “It will probably be only a matter of time before Chinese regulators step in to dampen this trading,” broker Triland said in a note this week. Open interest on Shanghai nickel has doubled to more than 650,000 lots in the past month, outstripping trade in London as traders look to improving order books at stainless steel mills in China. In the long run, however, analysts said prices would be dictated by the fundamental drivers of supply and demand. “Ultimately the fundamentals are going to dictate (direction) even if we get these brief periods where prices are volatile,” said Daniel Hynes, commodity strategist at ANZ Bank. Reuters
Business Daily Thursday, May 5 2016 9
Greater China Reform push
For those looking for signs of stabilisation, more encouraging takeaways may come from investment and price data. Growth in urban fixed-asset investment, which had been on a steady decline the last two years, likely accelerated to 10.9 percent in the first four months of the year, the highest since August, from 10.7 percent in the first quarter. Four years of producer price deflation, meanwhile, may show further signs of easing, likely due to the rebound in commodity prices. Factory-gate prices are expected to have declined 3.8 percent, slower than March’s 4.3 percent fall. Consumer inflation may have hit the highest levels since May 2014. Economists expected a 2.4 percent rise in the consumer price index, though that would be only slightly better than 2.3 percent in March and below the government’s 3 percent target. Much of the recent rise is due to high pork prices, which rose 28.4 percent in March. The Beijing municipal government said on Tuesday it would release 3 million kilograms of frozen pork reserves to combat high prices. Forex reserves likely fell to US$3.2 trillion from US$3.21 trillion after a surprise increase in March, but the narrow decline indicates analysts do not expect a return of the widespread capital flight seen just a few months ago. Pressure on the yuan has eased as the U.S. dollar has weakened, though the yuan still faces depreciation pressure as Beijing remains in a monetary easing stance while the U.S. Fed contemplates raising rates, which could revive the dollar. Retail sales growth was seen at 10.5 percent in April, flat from March. Reuters
In Brief
Finance Minister lauds Germany’s economic revival The so-called Hartz labour reforms are often credited with reviving Europe’s largest economy. Ye Xie and Bonnie Cao
China is looking to Germany for inspiration on how to retool its economy. Finance Minister Lou Jiwei twice referred to Germany’s successful transformation from “the sick man of Europe” to an economic powerhouse in the 2000s to make his case for reforms in China, during a panel discussion in Frankfurt Tuesday. “Germany seized the opportunity and pushed through structural reforms,” Lou, 65, said during an annual meeting of the Asian Development Bank. “As we all know, if we do not reform, we’ll fall off the cliff.” Facing the slowest economic expansion since 1990, China’s government has pledged to close unprofitable factories, lay off workers and cut debt levels. Its determination, however, has been questioned in recent months as a surge in lending raised concern that the government may instead be prioritizing short-term growth over reforms. While China faces different economic challenges than Germany at the turn of the century, it shares the need to improve productivity amid resistance from vested interest groups fighting change.
Lagged behind
In the early 2000s, Germany’s economy had gone from being a post-World War
II miracle to a laggard in Europe after its bloated social welfare programs eroded the country’s competitiveness. By 2003, then-Chancellor Gerhard Schroeder was overhauling labour rules and social programs in one of the biggest changes since the foundation of the federal republic in 1949. The so-called Hartz labour reforms are often credited with reviving Europe’s largest economy. Germany’s reforms also created the kind of political backlash that China’s Communists couldn’t tolerate. With the changes spelling an end to job security for many Germans, divisions deepened in Schroeder’s party and he lost to Angela Merkel in 2005 elections.
“As we all know, if we do not reform, we’ll fall off the cliff” Lou Jiwei, China’s Finance Minister
“Structural reforms are painful,” but they laid the foundation for Germany to weather the global financial crisis in 2008 and emerge as the economic leader in Europe, Lou said Tuesday. Lou, a protégé of reformist former Premier Zhu Rongji, has eased fiscal targets to support reforms, and the government has pledged training for laid-off workers and help with corporate debt restructuring. Policy makers aim to strengthen the social safety net as part of a strategy to boost consumption by encouraging people to save less. Bloomberg News
Forex
Yuan fix cut in biggest move since devaluation China’s central bank yesterday fixed the yuan currency nearly 0.60 percent weaker against the US dollar, according to the national foreign exchange market, the biggest downward move since devaluing the unit in August last year. The People’s Bank of China set the value of the yuan - also known at the renminbi (RMB) - at 6.4943 to US$1.0, weakening 0.59 percent from the fix of 6.4565 the previous day, according to data from the Foreign Exchange Trade System. China only allows the yuan to rise or fall two percent on either side of the daily fix. Commerce
Authorities to simplify processes for gold trade China will test a new policy that aims to make the import and export of gold a lot easier, according to a statement jointly issued by the People’s Bank of China and the General Administration of Customs. The new policy, set to be tested from June 1, will allow gold companies to clear customs up to 12 times with one permit, the statement said. Previously, gold companies had to apply for a permit for every import or export consignment. The new measure will simplify the approval procedures and improve the gold trade environment, according to the statement. IPO
Property portal SouFun seeks backdoor listing
Mainland markets
Stock suspensions seen as obstacle to MSCI inclusion Of the 23 surveyed, 10 predicted MSCI will announce it will include Chinese shares in indexes in June. If anything stops MSCI Inc. from including Chinese shares to benchmark indexes in its review, it will be the overuse of trading halts. That’s according to a Bloomberg poll of strategists and fund managers, with 16 of the 23 surveyed naming stock suspensions as a main obstacle to inclusion. Capital controls, government intervention, stock beneficiary ownership and cross-border investment quotas were other common concerns ahead of MSCI’s decision in June, the survey showed. China’s exchanges allowed trading halts that shut down half the stock
market as officials struggled to stop a US$5 trillion selloff last summer. The index compiler said in March a decision to include 5 percent of yuan-denominated shares in its index will depend on regulators implementing changes so that widespread halts can’t happen again. Some 335 companies are currently suspended, or about 12 percent of the total on the Shanghai and Shenzhen exchanges, according to data compiled by Bloomberg. “Our daily flow is affected as we
‘The index compiler said in March a decision to include 5 percent of yuandenominated shares in its index will depend on regulators implementing changes’
cannot sell shares,” said Victoria Mio, chief investment officer for China in the Hong Kong unit of Robeco, which manages US$305 billion globally and took part in the survey. “That also leads to some problems with stock pricing.”
Hard call
Among the 23 surveyed, 10 predicted MSCI will announced it will include Chinese shares in indexes in June, five said the compiler wouldn’t, while eight said it was hard to tell. With an estimated US$16 billion of investment flows at stake, Chinese regulators are pushing for the nation’s US$5.9 trillion stock market to be included in the MSCI’s global benchmarks. In February, the nation’s foreign-exchange regulator issued rules making it easier for overseas investors to shift money out of the country and apply for investment quotas. Major financial companies are finding the decision hard to call. Goldman Sachs Group Inc. said in a report last week there’s equal odds that Shanghai and Shenzhen-listed stocks will be included this June, while Citigroup Inc. said this month that there’s a 51 percent chance. Bloomberg News
SouFun Holdings Ltd. plans to switch its stock listing from the U.S. to China, joining companies including Dalian Wanda Commercial Properties Co. that are seeking higher valuations on mainland stock exchanges. SouFun, China’s biggest real estate web portal, is seeking to move its shares to the Shanghai stock exchange via a backdoor listing by acquiring a majority stake in storage-battery manufacturer Chongqing Wanli New Energy Co. Wanli will raise 3 billion yuan (US$462 million) through private placements to purchase SouFun assets, Wanli said. The plan is pending regulatory approval. Agriculture
Nationwide inspection of water law enforcement China’s top legislature announced yesterday the beginning of a nationwide inspection on water conservation law enforcement to aid agricultural water conservation and strengthen protection of water resources. The inspection team should focus on investment in farmland water conservation facilities and promote the use of water-saving irrigation technology, said Ji Bingxuan, vice chairman of the Standing Committee of the National People’s Congress (NPC) at a plenary meeting in Beijing. The inspection should boost water resources and protection of facilities and speed up reform of the property rights system for small farmland water facilities, Ji said.
10 Business Daily Thursday, May 5 2016
Greater China IPO
Dalian Wanda Commercial considers backdoor listing There are nearly 800 companies waiting for regulatory approval to list on the mainland’s Shanghai and Shenzhen bourses.
just 15 months after its stock market debut, unhappy with its share performance and preferring to place its bets on an upcoming Shanghai listing, after submitting an application last year.
Dalian Wanda Commercial declined to comment on the backdoor listing proposal. Wang, China’s richest man, sits atop a business empire with interests sprawling from finance to entertainment and
sports. The planned change of base for the property business comes as Wang seeks ways to tackle a slowdown in China’s real estate industry. As part of its plans to delist from Hong Kong, Dalian Wanda has offered to make around US$1 billion in interest payments to investors if fails to re-list the property developer in Shanghai within two years of taking it private.
Wang Jianlin sits atop a business empire with interests sprawling from finance to entertainment and sports.
Clare Jim
C
hinese tycoon Wang Jianlin’s Dalian Wanda Commercial Properties may seek a ‘backdoor listing’ on the Shanghai stock exchange if it does not get regulatory approval to launch a planned initial public offering there soon, according to two people with knowledge of the matter. The prospect of buying a shell company as a means to establish a listed presence in Shanghai - known as a backdoor listing - was raised internally at the same time as parent Dalian Wanda Group worked out plans to take the Hong Kong-listed real estate developer private, one of the people said. The company, with a market capitalisation of close to US$30 billion, is planning to de-list from Hong Kong
According to China’s stock market watchdog, the China Securities Regulatory Commission, there are nearly 800 companies waiting for regulatory approval to list on the mainland’s Shanghai and Shenzhen bourses. With around just 10 IPOs on average in Shanghai each month, the logjam could make a backdoor listing potentially quicker. State-backed property developer Greenland Holdings completed an 18-month backdoor listing process last year via an asset swap with real estate investment and services affiliate Shanghai Jinfeng Investment Co. “Look at Greenland, a backdoor listing is not too difficult and is much quicker,” said one of the people familiar with the matter, who is involved in Dalian Wanda’s plan to take the Hong Kong business private. “There are many options (for Wanda). If the (IPO) queue is quick then it will queue, if not it can buy a shell company,” the person said. Reuters
Key Points May buy listed shell firm if IPO process drags -sources Move to Shanghai comes as firm plans Hong Kong delisting Backdoor listing ‘not difficult, quicker’ – source
Investment
Mobius says buy commodity stocks as rebound’s just beginning A measure of materials producers on China’s large-cap CSI 300 Index rallied 27 percent from the January low to a peak in mid-April, before losing 5 percent. Kyoungwha Kim
Mark Mobius is piling into commodity stocks in China, saying that a rebound in raw-material markets is only getting started after prices sank too far and that gains may be extreme. Templeton Emerging Markets Group will add more raw-material stocks from Asia’s top economy, according to Mobius, executive chairman of the group, who’s been investing in emerging markets for more than four decades. Many of them will be good holdings for the long term, he said in an e-mail interview, without identifying particular companies. China’s commodity producers, which were the worst mainland equity investments over almost a decade, have led this year’s rebound as China boosted stimulus and local investors swarmed into the nation’s futures markets, with bets on everything from steel bars to cotton. The Bloomberg Commodity Index rallied for a second month in April, and assessments are stacking up that the worst of the rout is now over, including from industry veteran Tom Albanese, a former head of Rio Tinto Group.
‘Down too far’
“We have already seen how both commodity prices and the commodity stock prices went down too far, beyond realistic assessments,” Mobius said. “We can now expect movement on the upside to be extreme in percentage terms. If there is a move down, there is a good chance
that we would increase.” The Bloomberg Commodity Index, a measure of returns from 22 raw materials, surged 8.5 percent in April to extend a rebound from the lowest since 1991. A measure of materials producers on China’s large-cap CSI 300 Index rallied 27 percent from the January low to a peak in mid-April, before losing 5 percent. Not everyone is bullish about the outlook. Commodity prices may ease in the third and fourth quarters, Graham Kerr, head of miner South32 Ltd., said at a conference in Sydney yesterday. Goldman Sachs Group Inc. said in a note dated April 22 that while there were signs of a revival, including gains in oil, it was premature to embrace these so-called green shoots.
Property revival
China’s investors have honed in on raw materials this year amid signs of a pickup in demand after policy makers talked up growth and the
“There is no question that derivatives and specifically commodityfutures prices have an impact on real prices” Mark Mobius, Templeton Emerging Markets Group’s executive chairman
property market rebounded, with rebar, coking coal and cotton all surging. Still, the explosion in futures trading alarmed regulators and prompted exchanges in Shanghai, Dalian and Zhengzhou to boost fees and issue warnings. “There is no question that derivatives and specifically commodity-futures prices have an impact on real prices,” Mobius said. “There is of course a knock-on impact on stock prices of commodity companies since the market takes its lead from commodity prices even if those prices may not be realistic, and unduly impacted by futures prices.” Templeton Emerging Markets Group’s executive chairman Mark Mobius.
Mobius has been consistent in recent weeks in signalling his optimism. In February, he told Bloomberg TV that Templeton Emerging Markets was buying Chinese stocks selectively on speculation assets will rebound toward the year-end, and this month said he expected oil to rally back to about US$60 a barrel. While commodity markets will remain volatile, the long-overdue uptrend will continue, according to Mobius. “Many, not all, of the companies are good investments for the long term and even, in some cases, for this year,” he wrote. “Yes, the rising trend is sustainable but keeping in mind the volatility.” Bloomberg News
Business Daily Thursday, May 5 2016 11
Asia Economic growth
Indonesia’s GDP grows at slower pace than forecast
economist in Singapore who had projected 5.4 percent first-quarter growth, said there was “some loss in growth momentum” as he had expected stronger public investment. “This will raise the question of the sustainability of the recovery, but we would still argue that the recovery will continue, led by domestic demand,” he said. Tim Condon, ING’s Asia chief economist, said the lower growth pace in January-March than the previous quarter “is probably a one-off and the economy is in a sort of healing mode but obviously not a straight line path”.
The statistics bureau also said the unemployment rate was 5.50 percent in February. Nilufar Rizki and Hidayat Setiaji
I
ndonesia reported lower than expected growth in the first quarter, but many economists still expect enough of a rebound this year that the country can avoid further slowing and grow more than 5 percent in 2016. The statistics bureau said yesterday that Southeast Asia’s largest economy expanded an annual 4.92 percent in the January-March quarter, below the median 5.05 percent in a Reuters poll and the October-December pace of 5.04 percent. Growth weakened for the fifth straight year in 2015, to 4.8 percent, as poor commodity prices, contracting exports, tepid investment and waning consumption produced the lowest growth rate since 2009. But the economy gained some momentum in the second half of last year as newly-appointed ministers accelerated government spending. The statistics bureau took an optimistic tone. “Our start in 2016 is better than the start of 2015,” said bureau head Suryamin. “Economic activity almost always slows in the first quarter, especially after growing higher in the fourth quarter. In the first quarter of 2015, annual growth was 4.73 percent.
Seeking more investment
Realising Indonesia cannot still rely on natural resources for growth, President Joko Widodo has worked to expand its weak manufacturing sector. The Finance Ministry has offered tax incentives and promised a cut in corporate income taxes. It also plans a tax amnesty this year, which it believes will bring in significant funds to help finance development. The central bank cut its key benchmark rate three times in the first quarter, by a total of 75 basis points. Also, Bank Indonesia has announced it will use a new benchmark in August, an effort to more effectively get banks to lower lending rates. Some analysts expects more cuts to the benchmark. Rangga Cipta of Jakarta-based brokerage Samuel Sekuritas said the first quarter growth figure calls for a 50 basis point cut to the benchmark. Widodo has pledged to get Indonesia’s growth up to 7 percent a year by 2019, the last year of his term. The government’s target for growth this year is 5.3 percent, while the central bank’s latest outlook was 5.2-5.6 percent. Reuters
El Niño factor
Bureau data showed consumption was stable in the first quarter and there was a rise in government-led investment from a year earlier. However, investment growth was weaker than in the December quarter. The bureau said a major reason for slower growth was a drought worsened by the El Niño weather phenomenon, which hurt crop output. Darmin Nasution, chief economics minister, said another reason was slowing loan growth. Euben Paracuelles, a Nomura
Key Points Q1 growth 4.92 pct y/y, vs 5.04 pct in Q4 Q1 growth -0.34pct q/q, not seasonally adjusted Govt’s full-year 2016 growth target is 5.3 pct
President Joko Widodo has worked to expand the country’s weak manufacturing sector.
Stats bureau: 2016 started better than 2015 did
Jobs’ data
New Zealand employment unexpectedly accelerates The fourth-quarter jobless rate was revised from 5.3 percent and was the lowest in seven years. Tracy Withers
New Zealand’s employment growth unexpectedly accelerated in the first quarter while the jobless rate increased as more people sought work. Employment rose 1.2 percent from the fourth quarter, when it gained a revised 1 percent, Statistics New Zealand said yesterday in Wellington. Economists had forecast a 0.6 percent increase, according to the median estimate in a Bloomberg News survey. The jobless rate rose to 5.7 percent from 5.4 percent; analysts tipped 5.5 percent. New Zealand’s economy was unable to generate enough jobs as the labour force grew the most in more than 11 years, pushing the jobless rate higher. A slack labour market has hampered Reserve Bank Governor Graeme Wheeler’s efforts to
get subdued inflation back to the middle of his 1-3 percent target. “The first-quarter employment data appear strong, but suggest that spare capacity in the labour market is not yet a thing of the past,” said Nick Tuffley, chief economist at ASB Bank in Auckland, who expects the central bank to cut interest rates two more times this year. “Overall, the various labour surveys suggest that wage pressures are likely to remain subdued.”
Rate cuts
Wheeler last week said there were signs of capacity pressures building in the economy that may boost prices. He held the official cash rate at a record-low 2.25 percent while saying further policy easing may be required. All 15 economists surveyed by Bloomberg expect a quarter-point cut on June 9.
The fourth-quarter jobless rate was revised from 5.3 percent and was the lowest in seven years. The RBNZ in March forecast the jobless rate would be 5.5 percent in the first quarter. Last month, it said the rate “is an inadequate indicator of labor market slack” and unveiled a new internal gauge which it said showed the labour market was broadly in balance at the end of last year. Employment rose the most since the third quarter of 2013, the statistics agency said Wednesday. Still, the unemployment rate increased as even more people sought work, with the number of people unemployed jumping by 10,000 to 144,000. Employment rose 28,000 in 1Q Working-age population increased 29,000 to 3.69 million Labour force rose 38,000 to 2.54 million - biggest increase since 2004
Participation rate rose to 69 percent in 1Q from 68.5 percent in 4Q Employment rose 2 percent from year earlier vs median forecast of 1.3 percent. Record immigration is making it easier for employers to fill positions without raising wages, with annual net immigration rising to
67,620 in March. Wages for non-government workers excluding overtime rose 0.4 percent from the fourth quarter, more than the 0.3 percent increase forecast by economists. From a year earlier, wages rose 1.8 percent, up from 1.6 percent in the year ended in the fourth quarter. Bloomberg News
12 Business Daily Thursday, May 5 2016
Asia Public fund
Malaysia dissolves 1MDB advisory board However, 1MDB president Arul Kanda will remain in his role until further notice, the statement said. Malaysia’s finance ministry said yesterday it would dissolve the board of advisers at 1Malaysia Development Berhad (1MDB) and take over its remaining assets, in an apparent move to scale down a state fund whose scandals have rocked the government. Parliament’s Public Accounts Committee (PAC) last month had called for the 1MDB advisory board, chaired by Prime Minister Najib Razak, to be abolished, after a probe into alleged graft and mismanagement at the fund, whose debt in January had totalled about 50 billion ringgit (US$12.5 billion). The finance ministry, which is the sole shareholder of 1MDB, said in a statement it would also comply with the PAC’s recommendation to remove Article 117 and change all references of “Prime Minister” to “Minister of Finance”, in the fund’s company articles. Najib is also the finance minister. Article 117 requires the prime minister’s written
approval for all of 1MDB’s financial commitments, including investments, and matters such as the appointment of the board of directors. Ownership in 1MDB’s subsidiaries and land assets in Bandar Malaysia Sdn Bhd,
‘Last week, 1MDB did not meet its deadline to pay a US$50.3 million coupon on a US$1.75 billion bond following a standoff with Abu Dhabi sovereign fund’
Prime Minister Najib Razak chaired the advisory board of 1MDB.
TRX City Sdn Bhd, Air Itam and Pulau Indah will be transferred to the Ministry of Finance Incorporated, the ministry said. It did not say what happens to the debt linked to these assets. In its report, the parliamentary committee had slammed the board of state fund 1MDB for being irresponsible and urged a probe into its former chief executive, but stopped short of implicating Najib.
The ministry also accepted the resignation of 1MDB’s board members, who had collectively stepped down after the release of the report. New board members would be appointed to reflect the limited business profile of 1MDB, it said. However, 1MDB president Arul Kanda will remain in his role until further notice, the statement said. “(Arul) will continue to focus on his specific mandate
to implement the rationalisation plan, which will include resolution of the recent contractual dispute with IPIC (International Petroleum Investment Co),” the ministry said. Last week, 1MDB did not meet its deadline to pay a US$50.3 million coupon on a US$1.75 billion bond following a stand-off with Abu Dhabi sovereign fund IPIC, triggering cross defaults on some of its other bonds. Reuters
Military spending
Singapore set to pick helicopters as arms spending rises Data from IHS, a consultancy, estimates Singapore’s annual defence budget will hit US$10.72 billion in 2020. Siva Govindasamy
Singapore will soon pick the winner of a US$1 billion tender for military utility helicopters, the first of several lucrative deals the island nation is pursuing as it modernises its air force and navy amid rising tensions in the region. With Southeast Asia’s largest defence budget, Singapore is a key prize for global arms companies as it looks to invest in new technology and replace ageing equipment. China’s increasingly assertive actions in the South China Sea, which are worrying Southeast Asian countries, are partly a factor, say analysts, given that these have led to Singapore’s neighbours spending more on their militaries. Modern military technology also helps Singapore to keep its edge and compensates for its small size and population, said Richard Bitzinger, a regional security expert at the S.Rajaratnam School of International Studies in Singapore. Data from IHS, a consultancy,
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estimates Singapore’s annual defence budget will hit US$10.72 billion in 2020, up from US$9.08 billion in 2015 and about US$8.23 billion in 2011. The most immediate decision for Singapore is to replace its Super Puma helicopters, which are made by European aerospace giant Airbus. Singapore is seeking around a dozen multi-mission aircraft to deploy off ships and on land. Airbus and the helicopter division of Finmeccanica have been shortlisted and are in final discussions before a decision is made, said sources familiar with the details of the procurement. A decision will be made “soon”, defence minister Ng Eng Hen said in April. Airbus declined comment and Finmeccanica did not respond to questions.
Hardware spree
The city state is also studying tactical lift helicopters to replace its Boeing Chinooks, transport-cargo planes to replace its ageing Lockheed Martin C-130s, and maritime patrol aircraft to replace its Fokker 50s, say several sources familiar with the country’s requirements.
Key Points Airbus, Finmeccanica shortlisted for US$1 bln helicopter deal Other choppers, planes, patrol boats on Singapore shopping list Big spending Singapore a key prize for defence companies China actions in South China Sea spur regional arms investment
Singapore could also order the Lockheed F-35 Joint Strike Fighter by the end of the decade and is studying Joint Multi Mission Ships that can carry several aircraft, add the sources, who did not want to be identified due to the sensitivity of the matter. Multiple unmanned platforms for airborne surveillance, are also under consideration. Last December, Singapore confirmed upgrades worth more than US$900 million for its Lockheed F-16 fighters. In the coming years, it will also receive new submarines manufactured by Germany’s ThyssenKrupp, Airbus A330 air-to-air refuelling tankers, and Littoral Mission Vessels (LMVs) to replace its patrol vessels. Singapore’s defence ministry referred all questions on the country’s upcoming procurements and policies to its minister’s speech during a budget debate in Parliament. “Rising nationalism and improving economies have fuelled many Asian countries to spend larger and larger sums to modernise their militaries,” Minister Ng said during the speech in April. “So as you look around at our security challenges, this troubled peace around us reaffirms our policy on steady and prudent defence spending.” The next decision for Singapore after replacing its Super Puma helicopters could be on the Joint Multi Mission Ship - in effect a helicopter and tactical aircraft carrier. These will eventually replace Singapore’s Endurance-class support ships, and can be used for disaster relief in the region - something Singapore has regularly undertaken - and potentially allow the land-scarce
country to deploy air assets beyond its shores. ST Marine, a unit of state-owned Singapore Technologies Engineering, displayed a model of such a ship at a defence exhibition in 2014. The company told Reuters that it has completed “conceptual and functional design” on the vessel. “This would put us in a good position to be able to respond swiftly in the event of a RFP (request for proposals), when it comes,” said a ST Marine spokeswoman in an emailed response. International defence contractors including Boeing, Lockheed Martin, and Airbus are also expected to be vying for various other modern requirements such as transport planes, maritime patrol aircraft, and fighter jets. Airbus Helicopters, Boeing and Lockheed referred all questions about future procurements to the Singapore government. Defence firms are generally reluctant to discuss potential deals with Singapore. “Everything concerning Singapore’s defence is sensitive. Leaking any information will lead to the company losing the contract,” said one retired employee of a major defence contractor. Singapore, however, does its research, rarely changes its mind and pays promptly, making it is a highly valued customer for defence companies. “Singapore is pretty desirable for every defence contractor,” Bitzinger, the security expert, said. “The value of winning a contract from Singapore goes beyond the dollars and cents. It is an affirmation of the product and the company.” Reuters
Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Joanne Kuai; Nelson Moura; Annie Lao; Kelsey Wilhelm Group Senior Analyst José I. Duarte Design Francisco Cordeiro Web & IT Janne Louhikari Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@projectasiacorp.com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily. com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com
Business Daily Thursday, May 5 2016 13
Asia Missing reserves
Bangladesh Bank officials to meet NY Fed, SWIFT Hackers tried to steal nearly US$1 billion from Bangladesh Bank’s settlement account at the New York Fed. Sanjeev Miglani and Serajul Quadir
B
angladesh’s central bank chief will meet the head of the Federal Reserve Bank of New York and a senior executive from global financial messaging service SWIFT next week to seek the recovery of about US$81 million stolen by hackers, officials in Dhaka said. Two Bangladesh Bank officials said the bank believed both the New York Fed and SWIFT bore some responsibility for the February cyber heist. The officials spoke on condition of anonymity since they were not authorised to brief the media. The bank’s governor Fazle Kabir, New York Fed President William Dudley and a SWIFT representative will meet in Basel, Switzerland around May 10, they and another person briefed by the central bank said. It was not immediately clear who would represent SWIFT. Spokeswomen for SWIFT and the New York Fed declined comment. Hackers tried to steal nearly US$1 billion from Bangladesh Bank’s settlement account at the New York Fed in early February by sending
fraudulent transfer orders through SWIFT. Of the 35 transfer orders sent, 30 were blocked. Four transfers to a Philippine bank for a total of US$81 million went through while a US$20 million transfer to a Sri Lankan company was reversed because the hackers mis-spelled the name of the firm. “There is a responsibility the New York Fed has to accept,” said one of the Bangladesh Bank officials. “If you stopped 30 transactions, why did you not stop the others? “SWIFT also bears responsibility,” the official said. “It’s supposed to be a closed system. Now you have seen they have disclosed that there have been attacks previously on its software.” Last week, SWIFT acknowledged that the Bangladesh Bank attack was not an isolated incident but one of several recent criminal schemes that aimed to take advantage of the global messaging platform used by about 11,000 financial institutions. The other Bangladesh Bank official said lawyers would be present at the meeting. Ajmalul Hussain, a Dhaka-based lawyer hired by the central bank to help it retrieve the funds, could not be reached for comment. His office said he was out of the country. It was not immediately known if Bangladesh Bank had retained any U.S. or European law firm to help recover the money. However the bank said in an internal report in March it was considering
“preparing the ground to make a legitimate claim for the loss of funds” against the New York Fed “through a legal process.” Both central bank officials said Kabir, the governor, would be accompanied by an official from the accounts and budgeting department on the trip to Basel and would seek the recovery of the stolen funds. Basel is the headquarters of the Bank for International Settlements, a group of major central banks. The stolen US$81 million was sent to a bank in the Philippines and quickly passed on to casinos and casino agents. Most of it remains missing. However, one junket operator has returned about US$10 million to authorities in Manila and promised to hand over another US$5 million. One of the Bangladesh Bank officials expressed confidence that there would be a resolution to the dispute soon, though he didn’t provide any evidence for the optimism. Reuters
‘The stolen US$81 million was sent to a bank in the Philippines and quickly passed on to casinos and casino agents’
In Brief Monetary policy
S.Korean banks asked BOK to lower reserve ratio South Korean banks requested the Bank of Korea (BOK) consider lowering the reserve ratio in April as economic conditions have soured since the ratio was lifted in 2006, an official from the Korea Federation of Banks told Reuters yesterday. The official, who had direct knowledge on the issue and asked not to be named, said the request was made to Bank of Korea Governor Lee Ju-yeol on April 25 after a regular meeting of local banks at the federation headquarters in Seoul. South Korean banks are currently required to have 7 percent of deposits in reserve. Car industry
Australian new vehicle sales a record Australian new vehicle sales boasted their busiest April on record with another strong result for commercial vehicles pointing to solid business investment in the month. The Australian Federal Chamber of Automotive Industries’ VFACTS report on Tuesday showed total sales were 87,571 in April, up 7.2 percent on a year earlier Australians spend around A$20 billion on vehicles annually, equal to almost 9 percent of household consumption. The strength of demand is a contrast to softness in retail sales and suggests consumers are still confident enough to splash out on big ticket items. Real estate
New Zealand house prices rise New Zealand house prices rose 12 percent in the year to April, the government property valuer said yesterday, as record low interest rates drew more buyers into the market. The 12 percent rise in Quotable Value’s (QV) residential property price index compared with an annual rate of 11.4 percent in March. The index is now 16.9 percent above the market’s previous peak in late 2007. “All the main centres around New Zealand and many regional centres have seen home values increase during April, with the promise of continued record low interest rates providing confidence in the housing sector,” said QV spokeswoman Andrea Rush. Smartphones
India rejects Apple’s plan to import used iPhones India has rejected a plan by Apple Inc to import used iPhones, government officials said, a blow to the U.S. tech giant which has been seeking to revive flagging sales of its flagship smartphones. Apple sells what it calls refurbished iPhones at a discount in some countries including the United States, and extending this practice to India would have likely helped it gain market share against competitors with much cheaper offerings. India, which has been pushing a ‘Make in India’ initiative to enhance the competitiveness of its manufacturing industry, rejected the proposal citing rules against importing used electronics.
14 Business Daily Thursday, May 5 2016
International In Brief Dam spill
Brazil files US$44 bln lawsuit against Vale, BHP Federal prosecutors in Brazil filed a 155 billion-real (US$43.5 billion) civil lawsuit on Tuesday against iron miner Samarco and its owners, Vale SA and BHP Billiton, for a collapsed tailings dam in November that killed 19 people and polluted a major river. The 359-page lawsuit, which is also against the two states affected by the spill and the federal government, is the result of a six-month investigation led by a task force set up after the disaster, prosecutors said in a statement. The total damages, prosecutors said, were calculated based on the cost of the Deepwater Horizon oil spill in the United States. Health rules
EU court upholds restrictive law on cigarettes Europe’s highest court yesterday upheld a tough EU law on standardising cigarette packaging and banning advertising of e-cigarettes, paving the way for its adoption this month. The EU Court of Justice’s rejection of a legal challenge brought by Philip Morris International and British American Tobacco, could weigh on profits for the tobacco industry and sets a precedent for other governments to crack down on a habit that causes nearly six million deaths a year worldwide. The legal challenge, which was also supported by Japan Tobacco International and Imperial Brands, can now be taken no further.
Weakness looming
Bad loans and bankruptcies sound the alarm for Turkey Growth is expected to cool to 3.5 percent this year, the World Bank said last week.
A
fter years of growth fuelled by credit and domestic consumption, bad debts and bankruptcies are rising in Turkey, squeezing banks and exposing a fragile real economy which risks denting support for the ruling AK Party. In its first decade in power, the AKP, founded by President Tayyip Erdogan, built its reputation on growing Turkey’s wealth, overseeing a sharp rise in incomes and providing new roads, hospitals and airports in what was long an economic backwater. But as he seeks support for an executive presidency to replace Turkey’s parliamentary system, a decision that could be put to a national vote later this year, Erdogan may no longer be able to count on Turkey’s rising prosperity to win him votes. Growth is expected to cool to 3.5 percent this year, the World Bank said last week, well below peaks of near double digits in the early AKP years. A sharp drop in tourism after a spate of bombings this year and unrest in the largely Kurdish southeast are also taking their toll. Foreign investors are wary and banks are increasingly reluctant to extend new credit, squeezing the
most indebted firms. So far in 2016, 240 companies have requested temporary relief from creditors, almost as many as in the whole of last year, according to sirketnews.com, which compiles the data. Istanbul-based pulses producer Sezon Pirinc filed for bankruptcy postponement at the end of last year, hit by souring consumer sentiment at home and difficulties in some Middle East export markets. Erdogan forged the AKP as Turkey slid into financial crisis in 2001. It won a growing share of the vote in three successive parliamentary elections as incomes rose sharply, winning loyal support from a class of industrialists whose businesses thrived. The government has vowed reforms to boost productivity and investment in industry as the economic headwinds build. But many economists say they are too slow coming. Pressure is also likely to mount on the central bank, whose new governor was appointed last month. Erdogan has long lobbied for lower interest rates to stoke growth despite stubborn inflation, unnerving financial markets concerned about the independence of monetary policy.
Bankruptcies jump
Dairy firm Aynes Gida, a household name for two decades, went to court in January for bankruptcy postponement after defaulting on payment of its 50 million lira (US$18 million) bond, it said in a stock exchange filing.
Monetary policy
Czech c. bank seen keeping crown cap The Czech central bank will keep the outlook for its weak crown policy unchanged when its board meets today but is likely to later extend it by several months into the second half of 2017, a Reuters poll showed. At its last policy meeting on March 31, the Czech National Bank (CNB) said it was likely to maintain its weak crown policy until mid-2017. The central bank has prevented the crown from strengthening beyond 27 to the euro since 2013, in order to help lift inflation after it cut rates to 0.05 percent in 2012.
Turkey’s President Tayyip Erdogan.
A.P. Moller-Maersk returned to profit at its main container shipping business in the first quarter, helped by cost cutting and a pick up in volumes, it said yesterday. The Danish company’s Maersk Line plunged to a loss in the last quarter of 2015 for the first time in nearly three years, in an industry battered by a faltering global economy and a glut of vessels available for hire. Maersk Line made a profit of US$37 million in the first three months of 2016, compared with analysts’ average forecast for a loss of US$121 million in a Reuters poll.
Bad loan boom
The average NPL ratio rose to 3.3 percent in the first quarter from 2.8 percent a year ago, regulatory data showed, while the biggest jump in bad loans was those to small and medium-sized businesses, which rose to 4.4 percent. Fahrettin Yahsi, chief executive of Islamic lender Albaraka Turk, said he expects the sector average could rise to up to 4.8 percent this year. But some bankers and analysts think the actual rate of non-performing loans could be double that, as banks sell some of their bad portfolios, restructure loans and lengthen the maturities of some debt to keep the loans alive. Hilmi Guvener, CEO of Turkasset, which buys distressed debt from banks, said he expects sales of bad loan portfolios to triple to 6 billion lira this year. Non-performing loans rose mainly in construction and tourism, he said. While no-one is expecting a deep crisis in the financial sector, analysts say the debt problems will slow growth, as the economy has largely relied on domestic demand since 2012. Reuters
U.S. suit settlement
Seven banks to pay US$324 million for manipulating rate
Results
Maersk shipping business returns to profit
Earlier this year supermarket chain Begendik was bidding to buy 10 stores from the Turkish unit of Britain’s Tesco. It not only failed to do the deal, but later applied for bankruptcy postponement. And in April, a century-old clothing retailer, Atalar Giyim, applied for bankruptcy. Smaller firms, long the engine of the Turkish economy, are also struggling to cope after the government hiked the minimum wage by 30 percent this year. In January, the number of registered workers dropped by 379,000 or 2.7 percent, according to think tank TEPAV, with two-thirds of that decline at small and medium-sized companies. Iron and steel companies as well as food and technology retailers are at particular risk, said Ozlem Ozuner, chief executive of credit insurance firm Euler Hermes Turkey, citing the impact of low commodity prices and recent over investment. Ozuner believes around 14,800 companies will go bankrupt this year, an 8 percent increase on last year. That will take its toll on the banking system, as rising non-performing loans (NPL) erode the lending appetite required to boost growth in an economy with low savings.
The banks were suspected of agreeing among themselves between 2009 and 2012 to set the daily benchmark rate for interest rate exchange contracts, or swaps. Seven big banks, including Bank of America, JP Morgan, Credit Suisse and Deutsche Bank, have agreed to pay a total of $324 million to settle a lawsuit accusing them of market manipulation of interest rates. The settlement Tuesday followed a federal judge’s ruling in March admitting the class action lawsuit brought by investors and pension
funds against the banks. In all about 15 banks were named in the suit for alleged manipulation of the ISDAfix rate, the benchmark for interest rate derivatives. US District Judge Jesse Furman, in rejecting a motion to dismiss the suit, said the claims were similar to those made against some of the same banks involving manipulation of the London interbank offered rate, or Libor, lawyers for the plaintiffs said. “It appears that that sort of rate manipulation can be economically sensible and feasible given that many banks (including some defendants) have admitted that in approximately the same period of time, they conspired to fix similar benchmark rates -- namely, Libor and the leading benchmark interest rate for the foreign exchange market in order to maximize profits,” Furman was quoted as saying by the plaintiffs’ lawyers. The banks were suspected of agreeing among themselves between 2009 and 2012 to set the daily benchmark rate for interest rate exchange contracts, or swaps.
To accomplish that, the plaintiffs charged, they would make multiple electronic orders just before setting the rate, delaying other on-going operations that had been made at different rates. Under the settlement, JP Morgan will pay US$52 million, while Bank of America, Credit Suisse, Deutsche Bank and the Royal Bank of Scotland will pay US$50 million each. Citigroup will pay US$42 million and British bank Barclays Plc US$30 million. “We are very pleased that these banks are offering our clients hundreds of millions of dollars in recovery,” said David Scott, a lawyer for the plaintiffs. The banks had no immediate comment. “We will continue to vigorously pursue relief from the remaining defendants, substantially aided by the cooperation we secured in these settlements,” Scott said. Eight other banks were not part of the settlement, including BNP Paribas, Goldman Sachs, HSBC and Morgan Stanley. AFP
Business Daily Thursday, May 5 2016 15
Opinion Business Wires
Taipei Times President Ma Ying-jeou urged the incoming Democratic Progressive Party (DPP) administration to continue his government’s work on transportation infrastructure, adding that the new administration should also support the Suhua Highway improvement project. Ma made the remarks at a ceremony marking the breaking through of the Kuanyin Tunnel, the longest tunnel in the project. His administration decided to upgrade the Suhua Highway after the proposed Suhua Freeway Project failed to secure approval from the Environmental Protection Administration’s environmental impact assessment committee, he said.
The Korea Herald Hyundai Motor and its smaller affiliate Kia Motors saw their sales in China grow for the first time this year in April, raising prospects that their prolonged slump in the world’s largest market might be easing, industry data showed yesterday. The two Korean carmaking giants sold a combined 146,722 cars last month in China, up 1.8 percent from a year earlier, according to the data obtained by the Englishlanguage division of Yonhap News Agency. The figures could be adjusted later as they are preliminary results. This marked the first on-year uptick in their sales in China this year.
The Times Of India Foreign direct investment (FDI) in India increased to US$37.53 billion during April-February period of the last fiscal, Parliament was informed on Monday. It was US$30.93 billion in 2014-15. “FDI equity inflow has increased from US$22.42 billion in 2012-13 to US$37.53 billion in 2015-16 (up to February),” commerce and industry minister Nirmala Sitharaman said in a written reply to the Lok Sabha. Services attracted the most (US$5.95 billion) during the first eleven months period of 2015-16. It was followed by computer software and hardware (US$5.83 billion), trading (US$3.67 billion) and automobile (US$2.44 billion).
The Star Bank Muamalat Malaysia Bhd is ready to list on Bursa Malaysia if the shareholders said so, said chairman Tan Sri Dr Munir Majid. He said the shareholders would certainly look for ways to add values to their holdings and find ways, including listing. “If such a corporate exercise reaches us, we will have to deal with it. Listing as an option has being mentioned before. “We are a small bank that needs to grow - organic or mergers and acquisitions (M&A),” he told reporters after the bank signed a Corporate Integrity Pledge (CIP) here.
The global growth funk
T
he International Monetary Fund and others have recently revised downward their forecasts for global growth – yet again. Little wonder: The world economy has few bright spots – and many that are dimming rapidly. Among advanced economies, the United States has just experienced two quarters of growth averaging 1%. Further monetary easing has boosted a cyclical recovery in the eurozone, though potential growth in most countries remains well below 1%. In Japan, “Abenomics” is running out of steam, with the economy slowing since mid-2015 and now close to recession. In the United Kingdom, uncertainty surrounding the June referendum on continued European Union membership is leading firms to keep hiring and capital spending on hold. And other advanced economies – such as Canada, Australia, Norway – face headwinds from low commodity prices. Things are not much better in most emerging economies. Among the five BRICS countries, two (Brazil and Russia) are in recession, one (South Africa) is barely growing, another (China) is experiencing a sharp structural slowdown, and India is doing well only because – in the words of its central bank governor, Raghuram Rajan – in the kingdom of the blind, the one-eyed man is king. Many other emerging markets have slowed since 2013 as well, owing to weak external conditions, economic fragility (stemming from loose monetary, fiscal, and credit policies in the good years), and, often, a move away from market-oriented reforms and toward variants of state capitalism. Worse, potential growth has also fallen in both advanced and emerging economies. For starters, high levels of private and public debt are constraining spending – especially growth-enhancing capital spending, which fell (as a share of GDP) after the global financial crisis and has not recovered to pre-crisis levels. That falloff in investment implies slower productivity growth, while aging populations in developed countries – and now in an increasing number of emerging markets (for example, China, Russia, and Korea) – reduce the labour input in production. The rise in income and wealth inequality exacerbates the global saving glut (which is the counterpart of the global investment slump). As income is redistributed from labour to capital, it flows from those who have a higher marginal propensity to spend (low- and middle-income households) to those who have a higher marginal propensity to save (high-income households and corporations). Moreover, a protracted cyclical slump can lead to lower trend growth. Economists call this “hysteresis”: Long-term unemployment erodes workers’ skills and human capital; and, because innovation is embedded in new capital goods, low investment leads to permanently lower productivity growth. Finally, with so many factors dragging down potential growth, structural reforms are needed to boost potential growth. But such reforms are occurring at suboptimal rates in both advanced and emerging economies, because all of the costs and dislocations are frontloaded, while the benefits occur over the medium and long term. This gives opponents of reform a political advantage.
“
Nouriel Roubini Chairman of Roubini Global Economics and Professor of Economics at New York University’s Stern School of Business.
Meanwhile, actual growth remains below the diminished potential. A painful deleveraging process implies that private and public spending need to fall, and that savings must rise, to reduce high deficits and debts. This process started in the US after the housing bust, then spread to Europe, and is now on-going in emerging markets that spent the last decade on a borrowing binge. At the same time, the policy mix has not been ideal. With most advanced economies pivoting too quickly to fiscal retrenchment, the burden of reviving growth was placed almost entirely on unconventional monetary policies, which have diminishing returns (if not counter-productive effects). Asymmetric adjustment between debtor and creditor economies has also undermined growth. The former, having overspent and under-saved, had to spend less and save more when markets forced them to do so, whereas the latter were not forced to spend more and save less. This exacerbated the global savings glut and global investment slump. Finally, hysteresis further weakened actual growth. A cyclical slump reduced potential growth, and the reduction in potential growth prospects led to further cyclical weakness, as spending declines when expectations are revised downward. There are no politically easy solutions to the global economy’s current quandary. Unsustainably high debt should be reduced in a rapid and orderly fashion, to avoid a long and protracted (often a decade or longer) deleveraging process. But orderly debt-reduction mechanisms are not available for sovereign countries and are politically difficult to implement within countries for households, firms, and financial institutions. Likewise, structural and market-oriented reforms are necessary to boost potential growth. But, given the timing of costs and benefits, such measures are especially unpopular if an economy is already in a slump. It will be no less difficult to leave behind unconventional monetary policies, as the US Federal Reserve recently suggested by signalling that it will normalize policy interest rates more slowly than expected. Meanwhile, fiscal policy – especially productive public investment that boosts both the demand and supply sides – remains hostage to high debts and misguided austerity, even in countries with the financial capacity to undertake a slower consolidation. Thus, for the time being, we are likely to remain in what the IMF calls the “new mediocre,” Larry Summers calls “secular stagnation,” and the Chinese call the “new normal.” But make no mistake: There is nothing normal or healthy about economic performance that is increasing inequality and, in many countries, leading to a populist backlash – both on the right and the left – against trade, globalization, migration, technological innovation, and market-oriented policies. Project Syndicate
‘Thus, for the time being, we are likely to remain in what the IMF calls the ‘new mediocre,’ Larry Summers calls ‘secular stagnation,’ and the Chinese call the ‘new normal.’
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16 Business Daily Thursday, May 5 2016
Closing Strategy shift
Adidas seeks buyer for golf businesses
The company said it would aim to sell the bulk of its loss-making golf business to focus on shoes and clothing, after its core Adidas brand reported strong quarterly sales, particularly in the United States. The German sportswear firm, which launched a review of its golf unit last August, said yesterday it would focus on selling golf shoes and clothing under the Adidas label and would seek to sell the TaylorMade, Adams and Ashworth brands. After peaking around 2000 when Tiger Woods was in his
prime, the number of people playing golf in the United States, which accounts for half the global golf market, has fallen sharply. “We expect this will remove the earnings volatility of an equipment business with higher fixed costs and lower sales visibility than traditional sportswear,” said UBS analysts, who have a “neutral” rating on Adidas shares. Adidas bought TaylorMade in 1997 as part of its US$1.4 billion acquisition of French skiing label Salomon, developing it into the world’s biggest golf supplier. It bought Ashworth in 2008 and Adams four years later. Reuters
Eurozone
ECB urges rigorous debt-reduction rules The Stability and Growth Pact dictates that government debt should not be higher than 60 percent of GDP. Alessandro Speciale
L
ow interest rates are helping to reduce euro-area public debt, but rigorous enforcement of European Union fiscal rules is also needed to bring the burden down by a “sizable” amount, the European Central Bank said. Since the end of the financial crisis, euro-area countries have struggled to unwind a debt ratio that stood at around 93 percent of gross domestic product in 2015, with low inflation and anaemic growth adding to the challenge. Easing that strain remains a key policy priority, and monetary stimulus provides an opportunity by keeping government borrowing costs low, the ECB said in a study published yesterday. “High government debt poses significant economic challenges and makes the economy less resilient to shocks,” the central bank said. “A high debt burden limits the room for fiscal policy to counteract a negative demand shock or may hurt the recovery if pro-cyclical fiscal policies need to be implemented in recessions.” Assuming no change in interest rates, the average decline in the euro-area debt ratio would be 1 percentage point a year from 2016-2026, cutting the burden to about 84 percent of GDP by the end of that period, the ECB study showed. With government borrowing costs 0.5 percentage point higher, the pace of debt reduction
would be half as fast. If countries strictly adhere to the EU’s Stability and Growth Pact, the ratio could drop by 2 percentage points a year to less than 75 percent by 2026, the ECB said. By implementing structural reforms that increase potential economic growth, the burden could fall even further. The Stability and Growth Pact dictates that government debt should not be higher than 60 percent of GDP, or that countries should enact measures to reduce it by one twentieth of the overshoot per year on average. Multiple euro-area countries had debtto-GDP ratios over 100 percent last year, including Greece’s 177 percent and Italy’s 133 percent, European
Commerce position
Commission data show. A key issue though is whether those rules are enforced, as countries have consistently been given more leeway by the EU. France, Italy and Spain have all received warnings in recent years after missing targets on deficit or debt, but none of them has been sanctioned.
compliance with the requirements of the debt reduction benchmark is not unduly delayed,” the ECB said. “By converging toward lower levels of government debt and regaining fiscal buffers, the euro area will increase its resilience and fiscal space to cope with potentially adverse economic shocks in the future.” Bloomberg News
Debt pileup
“The pact’s debt criterion has effectively not been implemented since the start of economic and monetary union,” the ECB said. “In the absence of a correction mechanism for past fiscal slippages, all of this contributed to a piling-up of government debt.” The Frankfurt-based central bank said the debt rule was a “major lesson” from the European debt crisis and called for it to be applied “rigorously” to ensure the 19-nation bloc’s fiscal soundness. “It should be ensured that
IP suit
“It should be ensured that compliance with the requirements of the debt reduction benchmark is not unduly delayed” European Central Bank study
Poverty fight
Beijing urges ‘reasonable’ Apple loses China trademark Cambodia launches plan to views after Trump comments case for “iPhone” end hunger by 2025 Trade between the world’s two biggest economies is mutually beneficial, Beijing said yesterday after presumptive US Republican presidential nominee Donald Trump accused China of “rape”. In the run-up to Tuesday’s Indiana primary, where the businessman swept to victory and his last serious challenger Ted Cruz bowed out of the race, Trump told a campaign rally: “We can’t continue to allow China to rape our country, and that’s what we’re doing.” “We’re going to turn it around, and we have the cards, don’t forget it,” he said. “We have a lot of power with China.” Asked about Trump’s comments and whether Beijing was nervous about the prospect of him becoming US president, foreign ministry spokesman Hong Lei told reporters that the election was a US internal affair and China had no comment on it. But he went on: “I want to point out that US-China trade relations are essentially mutually beneficial and win-win in keeping with the shared interests of both sides.” Hong added: “We hope that everyone can view such cooperation from an objective and reasonable perspective.” Trump has repeatedly blasted the Asian giant for its trade policies, blaming it for weakening the US economy and taking American jobs. AFP
Apple Inc has lost a battle for the use of the “iPhone” trademark on leather goods in China after a Beijing court ruled against the world’s biggest technology company in favour of a local firm, state media reported. The Beijing Municipal High People’s Court said Xintong Tiandi can continue to use the phrase “iPhone” on its leather goods, according to the Legal Daily, the official newspaper of China’s Justice Ministry. Apple declined to comment. Some enterprising firms are quick to snap up trademarks that are known overseas but not registered locally, in the hope of a pay-off down the line. In 2002, Apple applied for the “iPhone” trademark for computer hardware and software in China, but that was only approved in 2013. Xintong Tiandi created its trademark for leather goods in 2007, the first year Apple’s iPhone went on sale. The U.S. firm has been disputing the Chinese firm’s intellectual property rights since 2012. The Beijing court dismissed Apple’s appeal, saying the U.S. firm could not prove the “iPhone” brand was well-known in China before 2009, when it first started selling the handsets on the mainland. Reuters
The Cambodian government in collaboration with the United Nations launched the national action plan for Zero Hunger Challenge (ZHC) yesterday, an initiative to eradicate hunger in the Southeast Asian country by 2025. Speaking at the launching ceremony, Deputy Prime Minister Yim Chhay Ly, also chairman of the Council for Agricultural and Rural Development, said the government is committed to achieving the sustainable development goal to “end hunger, achieve food security and improve nutrition, and promote sustainable agriculture”. “The government is looking forward to working with development partners, civil society organizations and the private sector to eliminate hunger and malnutrition in Cambodia by 2025,” he said. To assist the government to achieve the goal by the target date, the Food and Agriculture Organization of the United Nations (FAO), World Food Programme (WFP) and the United Nations Children’s Fund (UNICEF) are providing collective assistance to help Cambodia with the National Action Plan to implement the ZHC initiative. FAO Regional Representative Kundhavi Kadiresan said it was estimated that more than 2 million Cambodians out of the kingdom’s 15 million people are living in hunger. Xinhua