Mainland’s forex reserves rise for second month CURRENCIES Page 11
Monday, May 9 2016!YEAR V NR. 1038 MOP 6.00 PUBLISHER PAULO A. AZEVEDO CLOSING EDITOR KELSEY WILHELM GAMING
Analysts see Wynn VIP and mass market stabilising Page 6
VOTING CALL
Australian PM announces double dissolution election on July 2 Page 13
www.macaubusinessdaily.com CREDIT
Credit card turnover drops 6.5 pct in Q1 Page 4
PHONE BETTING BANNED GAMING
DICJ pulls the plug. On proxy phone betting in casinos, effective today. Analysts believe the primarily VIP-centric betting tactic only amounts to 5-10 pct of VIP gross gaming revenue. And won’t hit operators’ EBITDA too hard. Page 5
Pressure persists
Campaign catalyst
Foundation fracas
TRADE FIGURES Weaker growth momentum in exports and an accelerated decrease in imports in April. Revealing relentless pressure on the Chinese economy. Exports in yuan-denominated terms rose 4.1 pct y-o-y in April. While imports dipped 5.7 pct, the General Administration of Customs (GAC) said yesterday. Page 10
POLITICS Changes in the Legislative Assembly election law. The gov’t wants your views. Via a 30day public consultation. Caps on campaign expenses, supervision of electoral activity and a ban on elected members holding political positions in foreign countries come under the microscope. Page 2
DONATION Activists want to rescind the offer. The MOP123 mln donation to Jinan University. Questioning the transparency of the Macao Foundation’s subsidies. As Vice Chairman of the board of the university, the MSAR Chief Executive has been called upon to resign – accused of a conflict of interest. Page 3
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22° 27° 22° 25° 22° 26° 24° 26° 24° 27° TODAY
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Source: Bloomberg
INTERVIEW Pages 8&9
Tencent Holdings Ltd
Source: AccuWeather
Flat-pack pioneer Swedish furniture retail giant IKEA has shifted its local base to Macau Tower. And settled in for the long term. GM Patrick Lindvall tells Business Daily the company is about solutions to needs, servicing a unique market, and creating a better life for everyone. Flat-pack products picked up conveniently is just the start, he says.
HK HSI May 6, 2016 20,109.87 -339.95 (1.66%)
2 Business Daily Monday, May 9 2016
MACAU
Government representatives at the opening of a public consultation for the Legislative Assembly Election Law. POLITICS LEGISLATIVE ASSEMBLY ELECTION LAW REVISIONS CONSULTATION BEGINS
Electoral law to tighten scrutiny of candidates Proposed revision includes the introduction of a ban on elected members of the Legislative Assembly holding any political position in a foreign country. Joanne Kuai joannekuai@macaubusinessdaily.com
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HE government is launching a 30-day public consultation on revisions to the Legislative Assembly Election Law. The consultation period lasts until 5 June, inclusive. The goal is to have the revised law concluded before the next elections for the Legislative Assembly (AL) in 2017. The revisions to the Legislative Assembly Election Law seek to ensure the body maintains a just, fair and open environment for elections of its members, the Secretary for Administration and Justice, Ms Sonia Chan Hoi Fan, said at a press conference last Friday. The Secretary introduced revisions including efforts to define and clarify meanings for promotional efforts associated with an electoral campaign and to regulate such promotional efforts; the introduction under the law of a scheme to monitor campaign expenses; a strengthening of
supervision on electoral activity, including any electioneering done outside Macau; an update of the rules for candidacy; and the introduction of a ban on elected members of the Legislative Assembly holding any political position in a foreign country. In the text with the law revision proposals the SAR Government assumes that the goal is “to prevent the occurrence of similar case” – referencing legislator José Pereira Coutinho, a candidate for the Portuguese Parliament in the last elections.
Budget cap
For the last Legislative Assembly election, held in 2013, nominated parties were allowed to spend as much as MOP5.6 million (US$700,500) in campaigning, well below the limit of MOP8.9 million imposed during the 2009 elections. Nevertheless, the budget was at the time met with criticism by many residents as well as by the AL’s electoral committee - which also condemned the absence of a cap on the amount of donations candidates are allowed to receive. “The Chief Executive determines the budget for campaigns. However, residents have expressed in the past that the ceiling imposed was too high. As such, we now aim to open a discussion on how that amount should be determined. Our first proposal is based upon the budget of the previous (2013) election, adding to that the SAR’s current inflation rate. The second
option has at its core the size of Macau’s population. We want to know what the citizens’ opinions are and we hope they reach out to us,” said Kou Peng Kuan, director of the Public Administration of the Civil Service Bureau.
“We want to know what the citizens’ opinions are and we hope they reach out to us.” Kou Peng Kuan, Director of the Public Administration of the Civil Service Bureau
The proposed revision of the Legislative Assembly Election Law also covers enhanced management of electoral affairs, including the appointment of the members of the relevant Electoral Affairs Commission well in advance of each election; an invitation to members of the Public Prosecutor’s Office to join the commission; a clarification of appeal mechanisms relating to decisions that affect campaign teams; the appointment of a body to handle minor cases of rule infringement; and the imposition of regulations regarding campaign advertising in newspapers and on websites. The suggested revisions were based upon the government’s observation of the fifth Legislative
Assembly Election; the findings of a report on the election and suggestions from the Commission Against Corruption (CCAC) and the Public Prosecutor’s Office, said the Secretary.
International standard
Parts of the proposed revisions – such as the introduction of the concept of criminal responsibility for infringement of provisions in the Legislative Assembly Election Law – were in line with the United Nations Convention against Corruption, said the CCAC’s Assistant Commissioner, Lam Chi Long, during today’s press conference. “We are proposing a step forward when it comes to combating electoral corruption, namely when it refers to illicit activities outside the SAR. Before, we had territorial principles in place and as such we couldn’t enforce the law in some cases and penalties could not be pursued. Now, we propose that the penal law can be applied in cases pertaining to a candidacy to the Legislative Assembly and which took place outside of Macau,” added Lam Chi Long. The Macau Legislative Assembly consists of 33 members, including 26 elected members - 14 directly by the population and 12 indirectly through associations - and seven appointed by the head of government. At the press conference for the presentation of proposals, Sonia Chan emphasised the importance of “stability” in the political system, especially at a time of adjustment in the gaming sector - the pillar of the local economy - saying that at this time efforts should focus on economic development. She added that she hopes to see the final draft to be handed to the Legislative Assembly before the end of the current session, targeting July.
Business Daily Monday, May 9 2016
3
MACAU JINAN - DONATION NEW MACAU ASSOCIATION URGES GOV’T TO WITHDRAW DONATION
MOP123mln donation to Jinan University ignites public furore Local activists are asking the government to withdraw a donation of MOP123 million to Jinan University conducted without the public’s knowledge. Kam Leong kamleong@macaubusinessdaily.com
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HE government’s recent donation of 100 million yuan (MOP123 million/ US$15.4 million) to Guangzhou-based Jinan University via the Macao Foundation has called into question the transparency of the Foundation’s grant of subsidies, as well as Chief Executive Fernando Chui Sai On’s integrity in avoiding conflicts of interest. Last Wednesday, the Mainland Chinese public tertiary institute announced that it had received a donation from the SAR Government worth 100 million yuan for its infrastructure projects and other developments. But the donation soon drew the public’s ire and queries regarding the city’s top official, who serves as the president of the trustees’ council of Macao Foundation, and has been a vice chairman on the board of Jinan University since 2010.
“Withdraw the donation”
Doubting the absence of beneficial treatment and regarding the donation of the Chief Executive transferring benefits “from his one hand to the
other”, local pan-democracy group New Macau Association launched an online petition last Friday urging the SAR Government to rescind the donation, for the top official to resign, and to give legislators the power to review every grant for public projects that exceeds a certain amount. “We urge Chui to step down due to his poor integrity. He did not take any action to avoid his conflict of interest involved in the donation. He may have used his overlapping roles to transfer benefits to other bodies, not only monetary benefits, but also other kinds of benefits, such as fame and reputation,” member and ex-president of the pan-democracy group, Sulu Sou Ka Hou, told Business Daily in a phone interview yesterday. He indicated that this donation to the university shows the government did not make corrections from its under-the-table operations. “I believe this donation is just the tip of the iceberg. There may have been other similar donations given out by the government without the public’s knowledge. It just happens this time that the Mainland side has made an announcement on the donation, or we would not have known anything about it,” Mr. Sou opines.
According to the young pan-democrat, the Association’s petition would last for between one and two weeks, while further actions would depend upon the government’s response to their demands. “If the government could actively respond to our and residents’ demands, of course we don’t hope for other further actions. On the contrary, if it doesn’t give a proper reply we will discuss with other groups that hold similar demands on the issue for further action. But details would rely on the government’s response and residents’ reactions to it,” he said.
Gov’t denies allegations
In a statement released on Saturday the Government Spokesperson’s Office claimed that the donation is for funding Jinan University’s two new dormitories for Hong Kong and Macau students that ‘would benefit Macau students,’ denying that the donation involved the transfer of benefits. ‘The nature of the Board [of the University] is not comparable to the ordinary boards of commercial and business units… The Chief Executive has served as a vice chairman of the Board as invited. He does not receive any payment or benefits [from the position]. There is thus no benefit transfer,’ the Office wrote. Saying it had noticed ‘false rumours and allegations’ against the government’s donation to the university, the Spokesperson’s Office indicated that the donation is a proper contribution from the SAR Government to attribute to China’s development and education following Beijing’s great support of the Special Administrative Region. ‘Macao Foundation’s subsidies to the campus construction of Jinan
University would not affect the SAR Government’s injection into local tertiary education,’ the statement reads, adding that the Foundation operates a supervision scheme overseeing the university’s use of the donation.
Macau a beneficiary as well
On the other hand, the Macao Foundation also issued a statement last Saturday, echoing that the allegations of the Chief Executive transferring benefits is farfetched. ‘Both the Jinan University and the Macao Foundation are public institutes that seek public benefits. It is farfetched to say [the donation] involves benefit transfer… In fact, supporting the construction of Jinan University is also a channel [for the local government] to invest in cultivating local talent from which Macau would ultimately benefit,’ the Foundation wrote. It added that the Foundation has the right to subsidise overseas projects that benefit the city despite local projects being the group’s priority. ‘The whole process [of granting the donation] meets the Foundation’s regulated procedures on granting subsidies,’ it claimed. The body also includes data in the statement stressing Jinan University’s importance in cultivating local talent. The Foundation’s data claims over 20,000 local students have graduated from Jinan University since its establishment. Meanwhile, some 1,976 local students were studying in the institute as at the end of last November, which accounted for 33.7 per cent of the total number of local students studying in the Mainland. It also indicates that more than 2,000 local students have attended 27 courses held by the Mainland institute in Macau since 1999.
4 Business Daily Monday, May 9 2016
MACAU PROPERTY
Agile Property pre-sales reach 4.45 billion yuan in April
CREDIT CARDS 977,048 CREDIT CARDS WERE IN CIRCULATION AS AT MARCH-END
Credit card turnover drops 6.5 pct in Q1 The city’s credit card turnover totalled MOP4.4 billion (US$550 million) for the first three months of the year, which represents a year-onyear decrease of 6.5 per cent, according to the latest statistics released on Friday by the Monetary Authority of Macau (AMCM). In the first quarter, local cash advance turnover amounted to MOP237 million, which accounted for 5.3 per cent of total credit card turnover.
Meanwhile, credit card repayment, including interest and fees, rose 2.7 per cent quarter-to-quarter to MOP4.7 billion. As at the end of March, the total number of personal credit cards in circulation grew 5.5 per cent to 977,048 quarter-to-quarter. The number of cards designated in MOP accounted for 694,250 of the total, up 4.2 per cent year-on-year. In addition, that of Hong Kong Dollar cards
and Renminbi cards increased by 3.4 per cent and 11.2 per cent, amounting to 83,785 and 199,013, respectively. AMCM noted that the majority of Renminbi cards in circulation were dual-currency pataca and renminbi cards. On the other hand, local banks granted credit card limits of MOP22.7 billion as at the end of the quarter, up 7.3 per cent compared to three months ago. Credit card receivables reached MOP2.1 billion, of which the rollover amount accounted for 31.8 per cent, or MOP681.8 million. Meanwhile, the delinquency ratio, which indicates the amount overdue for more than three months to credit card receivables, registered a quarter-to-quarter growth of 0.22 percentage points to 1.35 per cent as at the end of March, according to the monetary authority. K.L.
Mainland Chinese developer Agile Property Holdings Ltd. raked in 4.45 billion yuan (MOP5.58 billion/ US$697.5 million) for the month of April alone in its pre-sales housing projects, up 37.8 per cent yearon-year, according to its filing with the Hong Kong Stock Exchange last Friday. In the month, the Guangzhou-based company pre-sold a total gross floor area of 433,000 square metres, an expansion of 16 per cent compared to 373,000 square metres for the same month in 2015. Agile Property’s residential projects, which are primarily located in Mainland China, are popular among buyers from Macau and Hong Kong. For the first four months of the year the company’s pre-sales value totalled 16.85 billion yuan, soaring 55.9 per cent from a registered 10.8 billion yuan of one year ago. Meanwhile, total gross floor area pre-sold reached 1,708,000 square metres vis-a-vis 1,148,000 square metres during the same period of last year. K.L.
Business Daily Monday, May 9 2016
5
MACAU GAMING LIONEL LEONG: MID-TERM REVIEW TO BE MADE PUBLIC THIS WEEK
Hanging up on phone betting Some gaming analysts expect disruption to VIP business due to the implementation of the proxy betting ban. Joanne Kuai joannekuai@macaubusinessdaily.com
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HE Gaming Inspection and Co-ordination Bureau (DICJ) has banned phone betting in the city’s casinos effective today. The authorities believe that such a ban will help better regulate the junket sector.
“It’s hard to verify whether they’re really betting by phone. To avoid unnecessary misunderstandings or the risk of irregularities we think it’s necessary for the gaming operators to once again be clear about the SAR Government’s stance on this issue,” said Lionel Leong Vai Tac, Secretary for Economy and Finance, on Saturday on the sidelines of a public event. Leong added that previously phone betting was provided to some registered VIPs for the sake of convenience, but that it was difficult to verify the identity of the bidder or the source of the funding when a bet was placed via phone. The Secretary said that in the cities where gaming industry is entrenched phone betting is prohibited and as
Mid-term review of gaming industry findings
The Secretary for Economy and Finance, Mr. Leong Vai Tac, said that he thinks it likely that the report on the mid-term review of the city’s gaming industry would be disclosed to the public this week. The report – over 200 pages in length and published in Chinese – was in its final stages of preparation, Mr Leong told reporters last week. The mid-term review outlines the achievements by the city’s six gaming operators, their involvement in the community, the non-gaming offerings at the resorts they operate, and the way they approach the welfare of employees - including what opportunities had been offered to employees regarding upward mobility or horizontal mobility within their chosen job or career. In other comments to the media, the Secretary
Secretary for Economy and Finance, Lionel Leong Vai Tac.
such should be locally as well. He noted that the impact of such a policy has been evaluated and it is believed it will help to regulate the sector and aid in the healthy development of the gaming industry.
Negative impact
Phone betting is the practice of a junket or a third party placing a live wager in a VIP room on behalf of a client making a bet over a mobile
stressed that the government would follow the principle of allowing growth in the number of new-tomarket gaming tables to the amount of no more than three per cent annually, up to the beginning of the year 2023. This is the principle when assessing new applications for gaming tables, he explained. Mr. Leong added that the suggested target for nongaming revenue was a result of in-depth research. The government was confident that it was an achievable goal, but noted its attainment would require concerted effort from different sectors. The proposal for the Five-Year Development Plan suggested that by 2020 such non-gaming revenue ought to account – on average market-wide in Macau – for more than nine per cent of casino resort revenue. That would be an increase from the average 6.6 per cent in the year 2014.
device or phone. In many instances the player will watch the results streaming live. Although operators do not break down phone betting revenue in their VIP segments, analysts at Sterne Agee CRT believe that phone betting accounts for 5 per cent to 10 per cent of VIP gross gaming revenue. Some disruption to the VIP business is expected, although the earnings before interest, taxation, depreciation and amortisation [EBITDA] impact is likely to be relatively small given the thin VIP margins. For example, Sterne Agee CRT projects that the lack of phone betting will negatively impact Wynn Macau in the amount of around US$5 million per quarter. Las Vegas Sands was the only operator in Macau not to offer phone betting, having put a stop to the practice in October of 2014 citing the Know Your Customer (‘KYC’) rules. Wynn Macau also stopped the practice around the same time, but restarted it in the first half of 2015 according to Sterne Agee CRT. It is believed that some of the phone betting revenue is going to countries such as the Philippines, where Melco Crown Entertainment has a presence.
6 Business Daily Monday, May 9 2016
MACAU GAMING
Wynn confident in positioning of Wynn Palace
Analysts believe Wynn Macau VIP and mass market stabilising. Nelson Moura nelson.moura@macaubusinessdaily.com
W
YNN Resorts Limited has announced that net revenues for the first quarter of 2016 amounted to US$997.7 million, a decrease of 9 per cent compared to US$1.09 billion posted in the first quarter of 2015, according to a filing with the Hong Kong Stock Exchange. The decline was attributed to a 13.8 per cent decrease in Macau operations - under Wynn Macau Limited, of which it holds approximately 72 per cent. The local division generated US$608.2 million in net revenue for the first quarter of the year, compared to the US$705.4
million in the first quarter of 2015, the smallest quarterly decline in revenue from Macau since the third quarter of 2014, according to the report. Adjusted property EBITDA for Wynn Resorts (earnings before interest, taxes, depreciation and amortization) in the first quarter of 2016 was US$300.3 million, down 7 per cent year-on-year and the group registered a profit of US$75.2 million for the quarter, compared to a net loss of US$44.6 million in the first quarter of 2015. In the group’s Macau operations table games turnover in the VIP segment amounted to US$13.47 billion, a 21.4 per cent drop from the first quarter of 2015. Nevertheless Wynn Macau results were in line with pre-announcements on April 5, analysts said. VIP and mass market also showed quarter-to-quarter improvement, with a 12 per cent and 8 per cent increase, respectively, with Wynn
management calling April a ‘very steady month’ claiming Macau results were helped by favourable Labour Day timing and high table hold with Wynn Macau’s executive director Ian Coughlan saying the “worst seems to be over” in a conference call with analysts. The Wynn report also showed Macau debt comprised US$4.20 billion, or 44 per cent of the group’s total debt outstanding, with Union Gaming Securities Asia Ltd. considering the full collection of a single US$8 million junket debt a sign that ‘perhaps a better junket liquidity ability to raise cash than commonly thought, and more importantly speaks towards the desire for those participating in VIP and premium segments to want to do business at Wynn.’ Sanford C. Bernstein believes improvement continues with the midtier mass market growing and the VIP market stabilising, with the planned opening of Wynn Palace in August
a ‘key inflection’, although no official date for the opening has been announced yet.
Premium soul
‘During the first quarter of 2016, we invested approximately US$177.5 million in Wynn Palace,taking the total investment to US$3.7 billion through March 31 […] we expect to open Wynn Palace in the third quarter of 2016,’ the repot noted. The property had originally been slated to open on March 25 and then June 25 with Deutsche Bank Securities Inc’s analysts believing a ‘late July/ early August opening’ to be reasonable. Telsey Advisory Group also placed great importance upon the new Cotai property, observing that ‘although it will compete with MPEL’s new US$3.2 billion Studio City opened late last year, the US$1.5 billion The 13 [formerly known as Louis XIII, opening late Summer] and Las Vegas Sands US$2.7 billion Parisian [opening in September or October of this year], Wynn expects to capture its fair share of what should be a modestly higher market in 2017’, with the analyst group estimating the Palace will generate a consolidated revenue of US$4.57 billion and a property EBITDA of US$1.29 billion in 2016. “We expected a competitive environment, but Wynn Palace was designed to appeal to the heart and soul of the premium player in Macau. Studio City was designed to appeal to the mass, while The Parisian has a bulk of rooms much smaller than ours. We’ve seen and studied the competition in Macau and respect and have admiration for their execution; but I’ll say it another time - we’re not in that zip code, it will appeal to the player that plays an average of HK1000 to a million,” Steve Wynn CEO of Wynn Resorts stated in a conference call after the quarter report. Union Gaming believe the VIP growth means Wynn Macau is going in the right direction before the opening of Wynn Palace but still warns of a negative market-wide VIP outlook. Revenue from VIP gaming in Macau casinos fell 19.35 per cent in the first quarter of the year, at MOP30.38 billion (US$3.8 billion), compared to the same months in 2015, as reported by Macau Business Daily.
GAMING
MelcoLot posts smaller loss for Q1 Chinese sports lottery operator MelcoLot Ltd. has posted a narrowed loss of HK$5 million (US$622.5 million) for the first three months of this year, an improvement of 43.2 per cent compared to HK$8.8 million posted one year ago, according to its filing on the Hong Kong Stock Exchange last week. The lottery company, a subsidiary of Melco International Development Ltd. chaired by local gaming mogul Lawrence Ho Yau Lung (pictured), saw its total revenues grow just 0.2 per cent year-on-year to HK$11.52 million. The lack of significant marginal growth in total revenues is due to a drop in revenue derived from the provision of services and solutions for the distribution of lottery products, which suffered a 92 per cent yearon-year plunge to HK$0.2 million
from HK$2.5 million one year ago. Nevertheless, the operator’s sales of lottery terminals and parts for the sports lottery jumped 25.6 per cent year-on-year to HK$11.3 million in the three months, compared to HK$9 million during the same period of last year. MelcoLot explained in the filing that the quarterly net loss was offset by the decrease in employee benefits cost to HK$4.7 million from HK$9.2 million, attributable to the increase in interest income to HK$1.4 million from HK$1 million during the quarter. ‘We believe the China lottery market will remain challenging due to the evolving regulatory environment, but with our competitive strength this will undoubtedly bring new opportunities for the Group to capitalise on,’ the company remarked. K.L.
Business Daily Monday, May 9 2016
7
MACAU GAMING TIMING ON COTAI ENTRANCE IMPORTANT
MGM first quarter results ‘below expectations’ Nelson Moura nelson.moura@macaubusinessdaily.com
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IRST quarter results released by MGM China Holdings Limited have ‘missed’ estimates for the analysts from Sanford C. Bernstein, as MGM announced total revenue for the first quarter of the year equaling HK$3.6 billion - a decrease of 25 per cent from a year ago and a 6 per cent decline from the previous quarter. This comes in 6.5 per cent below the analysts’ estimates which the group attributed to ‘weak VIP and somewhat in-line mass’ as VIP gross gaming revenue slumped 39 per cent and mass gaming revenue dropped 8 per cent for the quarter, year-on-year. The operator’s ‘low hold in Direct VIP and Mass’ market also negatively affected its adjusted EBITDA (earnings before interest, taxation, depreciation and amortization) - which suffered a 23 per cent drop year-on-year to HK$995 million for the quarter. The research firm stated that the low hold negatively impacted EBITDA by around HK$70 million.
‘Underperforming’ compared to market
Property EBITDA margin for the quarter grew 100 points
to 27.3 per cent year-onyear, with the main floor business accounting for almost 86 per cent of EBITDA in the first quarter. Bernstein analysts show first quarter gross gaming revenue – at HK$4.39 billion, a 28 per cent decrease year-on-year - as ‘underperforming compared to the Macau market’ which, despite seeing a 13 per cent decrease year on year, saw a 2 per cent increase from last quarter. The firm demonstrated that the VIP and mass market gross gaming revenue decreases were driven by both lower rolling chip volume; however, MGM China stated that it was encouraged by the trends in the mass space. ‘Macau mass GGR has shown improvement for three consecutive quarters now, and we are seeing signs of stabilisation. Our market share in mass segment has been largely stable and our mass table games theoretical win in the first quarter was the highest we have achieved in the past five quarters. We continue to focus on player acquisition and retention of players, while we also aim at increasing share of wallet,’ the group stated in its quarterly report. Both MGM management and Bernstein considered phone betting to be insignificant,
accounting for only 5 per cent of total VIP volume.
Near term risk in shift to Cotai
The group has also announced its continued plans to open MGM Cotai, with expectations that major works will be completed by the end of the year and the opening will occur in the first quarter of 2017, stating the group’s confidence in providing a ‘unique competitive advantage in the non-gaming entertainment market’. Bernstein sees the projects still under the planned budget of US$1.5 billion but warns if the delay becomes more significant beyond the beginning of the second quarter there may be some cost escalation. ‘Macau’s secular trend with Mass business shifting from the Peninsula to Cotai, especially with no project openings, poses near term risk to MGM especially with the opening of Wynn Cotai, until such time as MGM Cotai is open,’ state the analysts, noting this may lead to short term trading performance. Nevertheless, Bernstein still considers MGM China ‘one of the premier operators in Macau with strong management that is delivering outsized results,’ and advises investors to buy stock ‘on weakness.’
8 Business Daily Monday, May 9 2016
MACAU INTERVIEW RETAIL
IKEA is here to stay The IKEA Pick-up Point has moved from its industrial location to its modern venue in Macau Tower enabling the furniture retail company to focus its efforts on enhancing customers’ shopping experiences – with the new location a key element in simplifying product pickups. Patrik Lindvall, General Manager of IKEA Hong Kong - which operates regionally under the wing of The Dairy Farm Company Ltd told Business Daily that this move is a long term commitment for IKEA in the SAR. Annie Lao annie.lao@macaubusinessdaily.com
How does IKEA fit in to the local market? Going back to the basics of IKEA, we want to create a better life for many people. The way we do it is by selling furniture. And the commitment we have when selling furniture is to sell furniture at prices that are affordable to as many people as possible. With the slowdown in the economy, how confident is IKEA in achieving local success? Although the Macau economy is shrinking it is really to our advantage. Regardless of the economy going up or down we’re still working every day to get the best, lowest, prices possible for our customers. The furniture market in Macau is very interesting when compared to Hong Kong - which is very different. We operate both in Hong Kong and Macau. But when you look at Macau, the market is one of the better ones for IKEA. There are a few key reasons. One is that the interest in home furniture in Macau is very high. People are interested in design and home furniture.
CHEONG KAM KA
Patrik Lindvall.
What do you see as significant differences between the two markets? Macau people tend to live in a bigger space than in Hong Kong. For instance, they have a bigger kitchen and a bigger entrance to the apartment. So all of these together create a need for home furniture in Macau. Also, there’s a big need in Macau for clothing storage. The primary activity happening in the Macau home - like most other Asian countries’ homes - is that Macau people like socialising when cooking and eating. They invite their friends to their homes for cooking and eating. It’s not only a trend, it’s a way of being in Asia.
shop at IKEA stores, when there was no IKEA store in Macau. IKEA has been selling to Macau people for 10 years now. IKEA has been in Hong Kong for 40 years, so Macau is still relatively new for us as a market. But one thing that we do is really try to understand how we can make shopping more convenient, more accessible and easier for everyone to do it. So, our customers shop online or at Hong Kong IKEA stores; they can have IKEA products delivered to Macau within a few days, then pick it up which is convenient.
Why are there fewer options for Macau customers when buying IKEA products online? Today, we have around 3,000 items which people can buy online. In total, we offer between 7,000 to 8,000 items. However, what we don’t provide online yet is the small and breakable items such as lights, bulbs, mirrors, etc. - which we don’t ship to Macau. The only reason is that for the breakables, we don’t have a safe way to do it yet and we’re trying to explore how we can.
Why did IKEA relocate its Pick-up Point? In 2012, we had the first Pick-up Point located in an industrial building and from 2016 we have the new Pick-up Point in the Macau Tower, which gives a totally different degree of accessibility and convenience for our customers. We’ve improved bit by bit by listening to our customers’ feedback. One thing that our customers told us was that the old place wasn’t convenient and it didn’t have enough parking space.
Why have a Pick-Up Point here? Beginning from 2006 IKEA had people from Macau coming to Hong Kong to
Why choose the Macau Tower as the new location? It’s really a physical location where
we invest to provide a better shopping experience for our customers and make sure that we serve our customers as well as we can. I’ve been in Macau quite a lot - looking at different properties in order to find a better place for the Pick-up Point. I haven’t seen a better location compared to Macau Tower in terms of convenience. Everyone knows where the Macau Tower is. It’s centrally located between the Macau Peninsula and Taipa, connected in many directions and accessible from the bridges. The infrastructure, the roads that lead here, is ideal. It has public transport nearby so our customers can take a bus or taxi and if they come with a car they have parking spaces.
CHALLENGES Rental must be more expensive at the Macau Tower, how do you minimise operating costs? Moving from an industrial building to a commercial area like the Macau Tower has a different price to pay [associated with it]. However, our focus is not to maximise the money; our focus is to maximise our customer experience first. We believe in investing to be in
Patrik Lindvall
Patrik Lindvall joined IKEA Hong Kong as General Manager in April 2013, bringing with him over 13 years of experience in home furnishing retail. His experience with the Swedish company stretches back to his former role as Managing Director and Business Leader of Asia Pacific for Inter IKEA Distribution Far East based in Singapore and focused on developing the regional market for the Swedish furniture giant. Prior to IKEA, Lindvall worked as an Export Manager and Country Manager for a Swedish storage solution provider in France and Benelux and the GM holds an MBA from the Institute for Management Development in Lausanne, Switzerland. the Macau Tower will be of long-term benefit for both our Macau customers and IKEA because we have committed to staying in Macau for a long time. Therefore, the effort of coming here is not just a short-term but a long-term commitment.
Business Daily Monday, May 9 2016
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MACAU One of the main challenges in Macau - […] a very similar [issue] to Hong Kong - for every retailer is the cost of operations. We have two main costs, actually: rental and labour. Hong Kong is very challenging but Macau is much more challenging. Macau has a much smaller population than Hong Kong; is the market too narrow for IKEA to expand much locally? Although the population of Macau is small, we have a commitment to many Macau people. Regardless if there are 500,000 or five million people in Macau, our commitment is to provide solutions to address people’s needs. We know that people know IKEA in Macau and we also know that the major challenge for our customer is the inconvenience of having to go to Hong Kong to shop. Now we provide the online shopping option - which for us is a one step forward and the second step was to set up a Pick-up Point where it’s easy to access and convenient to go and pick up their goods. Now the pressure is [to see] how we can do this even better. Apart from offering convenience to your customers, does IKEA see other niches in the local market? There is an exception with Macau people. [They] are generally more used to doing things themselves - and IKEA furniture’s concept is built on the ‘flat pack’. We ship in ‘flat packs’ and our customers assemble [the product] themselves; the reason for doing this is to make the cost the lowest possible. Even Macau people are willing to go to Hong Kong to buy IKEA furniture. So it’s a good fit. IKEA and Macau fit well together.
‘Today, we have around 3,000 items which people can buy online. In total, we offer between 7,000 to 8,000 items.’ shops at IKEA are people who are living with their children. The reason why that is, from my personal view, [is that] these people tend to have jobs and children. They also need to have something that is affordable at the same time. They demand quality. So quality and price are the key for IKEA. The second demographic are the people who are living together without children. Mostly young couples and middle-aged people. Do you see an increasing demand for IKEA in Macau? The average household income in Macau is higher than Hong Kong and the average life expectancy in Macau is longer, too. Therefore, the fundamental need of creating their own homes and to have their own space is growing. In terms of belonging, people also need to have a place to socialise - as is the same everywhere. Thus, IKEA has the same purpose in all markets - whether in Macau, Hong Kong or China. So there’s no difference; we all do the same thing. It’s about creating a better everyday life
CHEONG KAM KA
for many people and we do that by offering furniture. What is the competition for IKEA? Absolutely there is competition. There are furniture companies in Macau. However, I found personally that IKEA is filling a gap in the Macau market. [What] Macau tends to have from what I’ve seen is very traditional, more heavy, dark furniture style. Others I have seen are well designed furniture, very up market and very expensive furniture. But I don’t see anyone who has combined the design and function into affordable furniture so I think that is why IKEA came in because we make it affordable to many people in Macau.
IKEA offers one store to shop for all furniture and accessories our customers need in their kitchens. Those are the attributes we create in Macau. How does IKEA see the furniture market in Macau for the near future? From 2006, people in Macau started to travel to Hong Kong for IKEA furniture. In 2012, we opened up the first Merchandise Pick-up Point. This year we opened fully-functional e-commerce. Every time we have improved the convenience. The IKEA business in Macau is growing because the people in Macau accept IKEA and show appreciation so the trust increases between IKEA and our customers.
Does IKEA find it hard to procure labour in Macau? We actually have four people employed and working here. We had a job fair in Macau before. The response was very positive. We talked about the commitment to Macau and being a company that creates a better life for our workers. It’s not just about selling furniture; we want it to be a great place to work in, too.
DEMAND Do locals need IKEA furniture? We have a lot of opportunities for IKEA to provide goods that are related - whether to cooking or eating. So I think from that perspective we’re very positive in Macau. What we’re trying to do is not just sell you products, we’re trying to sell you a solution to a need, whether it is cooking, eating or dining. For instance, dining tables are small in general in Asia Pacific countries. When you look at other markets in the world, dining tables seem to be very sizable. Are there any special products offered by IKEA in Macau to meet these types of need? [Regarding] Hong Kong and Macau, this Pick-up Point is unique. We don’t have a physical store in Macau. In Hong Kong, we don’t have a Pick-up Point because the Pick-up Point would be irrelevant in Hong Kong. The reason why we do that is that we want to provide service that is convenient.
CHEONG KAM KA
What kind of local demographic buys IKEA products? People who are living with children, living together and single people. Basically, different people are also interested in IKEA. However, the biggest demographic who
‘What we are trying to do is not just sell you products, we are trying to sell you a solution to a need.’ CHEONG KAM KA
10 Business Daily Monday, May 9 2016
GREATER CHINA FOREX
April reserves rise to US$3.22 trillion Central bank data showed on Saturday that China’s gold reserves rose to US$74.751 billion at the end of April. China’s foreign exchange reserves rose in April to US$3.22 trillion, central bank data showed on Saturday, marking a second monthly rise this year and suggesting the central bank is easing off its interventions as capital outflows ease. Economists surveyed in a Reuters poll had expected foreign exchange reserves to fall to US$3.2 trillion. The central bank data also comes after a surprise increase in March when foreign exchange reserves rose slightly to US$3.21 trillion, the first monthly increase since November. Prior to that, foreign reserves had dropped US$28.57 billion in February to US$3.2 trillion, the lowest since December, 2011. While China’s reserves have declined steadily since June 2014 when they peaked at US$3.99 trillion, the trend has since moderated, according to recent official data. Capital outflows from China have
begun to ease, according to recent data from the State Administration of Foreign Exchange (SAFE), with net foreign exchange sales by commercial banks in March only slightly up at US$36.4 billion, and considerably lower than US$54.4 billion in net sales earlier in January. Central bank governor Zhou Xiaochuan said at a G20 conference in April that the foreign exchange market had stabilized, with the yuan’s recent trend reflecting market supply and demand and holding steady against a basket of currencies. Nevertheless, economists believe that China still faces a huge challenge of stabilizing the yuan, especially amid a significant supply glut and sluggish demand at home. While cooling expectations of U.S. interest rate hikes have recently eased pressures on the yuan, a future U.S. rate increase still remains a big risk factor for triggering further disruption
for the world’s second-largest economy, economists have said. Since December 2015, the People’s Bank of China has moved to curb currency speculation, including limiting yuan-based funds’ overseas investments and implementing a reserve requirement ratio on offshore banks’ domestic yuan deposits. Chinese officials are also studying the introduction of a currency trading
‘China’s reserves, which are the world’s largest, fell US$513 billion in 2015, marking the largest annual drop in history’
tax to penalize speculators, as well as seeking to ease capital rules for foreign institutional investors to buy onshore stocks and bonds. With the first quarter of 2016 showing signs of moderation in capital outflows, analysts are closely watching whether foreign reserve declines will moderate this year in line with expectations that the yuan will stabilize. Concerns over China’s foreign exchange rate policy flared up last year following a surprise devaluation of the yuan in August and a sharp slide in the yuan this year in January, fanning fears of an economic slowdown. China’s reserves, which are the world’s largest, fell US$513 billion in 2015, marking the largest annual drop in history. Central bank data showed on Saturday that China’s gold reserves rose to US$74.751 billion at the end of April, compared to US$71.485 at end March. REUTERS
THEME PARK
Disney lifts veil in sneak preview of Shanghai park The company is planning a three-day event to mark the opening of its newest park next month. Walt Disney Co. employees and guests received a sneak preview of Shanghai Disneyland last weekend, as the world’s largest entertainment company gets set for next month’s official opening of its
first theme park in mainland China. A trial run for the US$5.5 billion Shanghai Disney kicked off on Saturday. Guests are limited to the resort’s employees, partners
and stakeholders, who can try out some attractions, entertainment and dining on selected dates over a sixweek period. Lines had formed by 10 a.m. outside shops and restaurants in the non-ticketed area, where the World Disney store opened to the public. Wang Xingmiao, a retiree who has never travelled outside of China, is among thousands who came to the site even though he wasn’t on the guest list. “It opens the eyes of old people and young people
to see something like this,” the 78-year-old said outside the World Disney store. “It shows the importance of China that something like this comes to us and we don’t have to go out to see it.” Such trials are a key pre-opening step for all Walt Disney Parks and Resorts destinations and major attractions around the world. The Chinese resort, located in Shanghai’s Pudong district, officially opens June 16. The highly anticipated Chinese park, Disney’s sixth worldwide, comes as the company shocked investors on April 4 when it announced Chief Executive Officer Robert Iger’s top lieutenant Thomas Staggs was departing the company in September, leaving the CEO without an obvious successor. A 26-year-company veteran, Staggs had supervised major expansions such as the Shanghai resort and spearheaded acquisitions for the Burbank, California-based company.
Xi meeting
Iger met with Chinese President Xi Jinping on Thursday in Beijing, in which Xi cited Disney as an example of expanded cooperation between U.S. and Chinese firms. “What the Walt Disney
Company has been able to achieve in China, I think, is a perfect example of cooperation, but it also came after years of understanding, years of building up a deep respect for one another and appreciation for each other’s interests,” Iger said in remarks to Xi at the meeting. The CEO has called Shanghai Disneyland the company’s greatest opportunity since Walt Disney bought land in Florida in the 1960s. He’s counting on 330 million Chinese living within a three-hour train or car trip of Shanghai to fill the resort, which boasts two hotels and the largest castle it has built. Tickets for the Shanghai park, three times the size of Hong Kong Disneyland, are priced at 499 yuan (US$77) for peak periods such as weekends and summer holidays, and 370 yuan at other times. Disney is planning a threeday event to mark the opening of its newest park next month, which will include a red carpet premiere of its Lion King Broadway show, the first time the production will be performed in Mandarin. The company has been on a recruiting drive to staff up the park, which Iger said last year would employ about 10,000 workers. BLOOMBERG NEWS
Business Daily Monday, May 9 2016
11
GREATER CHINA IN BRIEF HEALTH SYSTEM
Regulator to launch probe into drug firms
TRADE DATA
April exports, imports decline more than expected China had a trade surplus of US$45.56 billion in April, versus forecasts of US$40 billion. Kevin Yao
C
HINA’S exports and imports fell more than expected in April, underlining weak demand at home and abroad and cooling hopes of a recovery in the world’s second-largest economy. Exports fell 1.8 percent from a year earlier, the General Administration of Customs said yesterday, reversing the previous month’s brief recovery and supporting the government’s concerns that the foreign trade environment will be challenging in 2016. April imports dropped 10.9 percent from a year earlier, falling for the 18th consecutive month, suggesting domestic demand remains weak despite a pickup in infrastructure spending and record credit growth in the first quarter. “Both exports and imports came in weaker than expected, in line with the soft trade performance across Asia, pointing to another challenging year for emerging markets,” said
Zhou Hao, senior emerging market economist at Commerzbank in Singapore. China’s exports to the United States - the country’s top export market fell 9.3 percent in April from a year earlier, while shipments to the European Union - the second biggest market, rose 3.2 percent, customs data showed. China’s cabinet has vowed to take steps to boost exports, including encouraging banks to boost lending, expanding export credit insurance
Key Points April exports -1.8 pct y/y vs f’cast -0.1 pct April imports -10.9 pct y/y vs f’cast -5.0 pct April trade surplus US$45.56 bln vs f’cast $40 bln April trade performance worse than expected
and raise tax rebates for some firms. China had a trade surplus of US$45.56 billion in April, versus forecasts of US$40 billion. Economists polled by Reuters had expected April exports to fall 0.1 percent, after a surprise 11.5 percent rise in March, and expected imports to fall 5 percent, following March’s 7.6 percent decline.
Momentum may weaken
China’s economic growth slowed to 6.7 percent in the first quarter - the weakest since the global financial crisis, but activity picked up in March as policy steps to boost the economy, including six interest rate cuts since late 2014, seemed to be taking effect. Concerns of a hard-landing in China had eased after the strong March data, but analysts have warned the rebound may be short-lived. Economists expect a slowdown in credit growth and industrial production in April although inflation could accelerate. Key economic data is expected over the next two weeks. “The market has to prepare a little bit for the downside risk in other Chinese data and some sort of market correction might be inevitable,” Zhou said. Amid shrinking global demand, China still managed to grow its share of world exports to 13.8 percent last year from 12.3 percent in 2014, indicating the country’s export sector remains competitive despite higher costs. REUTERS
STRATEGIC SHIFT
IMF: Maybe time for Beijing to tighten policy Despite a flurry of easing measures from China at the start of the year helping stabilise rattled global markets. Marc Jones
It could be time for China to tighten monetary policy rather than ease it further to avoid the risk of overheating in parts of the giant economy, one of the International Monetary Fund’s top officials said on Friday. The deputy division chief of the IMF’s Asia department, Roberto Guimaraes, told Reuters that further Chinese interest rate cuts and stimulus could increase the chance of unhealthy debt growth. “You need sometimes to jump-start growth if the growth is decelerating too quickly, but at the same time you don’t want to revive old growth engines. So the monetary policy (at present) perhaps goes a little bit too much in that direction,” Guimaraes said at an event organised by the CSFI think-tank.
The opinion may raise a few eyebrows. A flurry of easing measures from China at the start of the year helped stabilise rattled global markets and more than fifty central banks have cut rates or used other forms of easing since the start of 2015. For the IMF though there are concerns. China’s corporate debt now stands at about 160 percent of gross domestic product and it has said corporate loan vulnerabilities need to be urgently addressed. “The first step would be not easing policy further,” Guimaraes said. “Second would be signalling that perhaps there will be some sort of normalisation of monetary policy, raise interest rates gradually or having liquidity managed to make sure there is not excess liquidity in the system.” Part of reason for the view is that despite its debt concerns, the IMF doesn’t expect a sudden and painful ‘hard landing’ of China’s economy. Th e c o u n t e r a rg u m e n t that cheaper borrowing could help consumer consumption and accelerate a better balance in China’s manufacturing economy was potentially valid, he said, but that it
could be done in alternative ways such as increasing social safety nets that would cut the need for precautionary savings. Guimaraes also spoke about the volatile moves in the Japanese yen, which is also creating powerful currents in Asia. It has surged 15 percent over the last six months and has been particularly unpredictable this year despite some radical moves such as the introduction of sub-zero interest rates. “I think right now we are in a situation where perhaps a little bit more guidance (from the Bank of Japan) would be welcome,” Guimaraes said. “There are a lot of upsides to that. Clarifying that there are a lot of global factors which have been behind the recent movements of the yen and not just the policy actions.” He said the IMF was watching the situation closely but that currency markets had maybe over interpreted the moves. “I think people were thinking too closely that this appreciation of the yen had to do with negative rates and that the policies were not working. REUTERS
China’s price regulator plans to launch a “large-scale and systematic” anti-trust investigation soon into foreign and local drug firms, state newspaper China Daily said, citing a source close to the regulator. The planned probe comes after China’s state planning agency, recently summoned U.S. pharmaceutical firm Pfizer, as well as a number of distribution companies and medical device manufacturers, to collect data and information, the newspaper said on Saturday. It said that the National Development and Reform Commission (NDRC) is collecting evidence to see whether these companies may have violated competition regulations. AGREEMENT
First step in pledge to U.N. to fund development China signed an agreement with the United Nations on Friday to pay US$20 million annually for a decade to help fund peace, security and development activities, taking the first step in fulfilling a US$1 billion pledge made by President Xi Jinping. The money will be paid into a newly established U.N. Peace and Development Trust Fund, and China’s contribution will be split evenly between supporting peace and security, and implementing a 2030 agenda for sustainable development. U.N. SecretaryGeneral Ban Ki-moon was “extremely appreciative of this generous contribution to the United Nations,” his spokesman Stephane Dujarric told reporters. MONETARY POLICY
PBOC pledges policy fine-tuning China’s central bank said on Friday that it will fine tune policy in a pre-emptive and timely way, as the economy still faces downward pressure despite signs of steadying. The People’s Bank of China will stick to its long-standing prudent stance and keep the yuan currency basically stable, the bank said in its first-quarter monetary policy implementation report. The central bank said it would create “an appropriate monetary and financial environment for structural adjustments, transformation and upgrading”, and take measures to ward off systemic financial risks. BANKERS
ICBC’s chairman to retire The chairman of the Industrial and Commercial Bank of China Ltd (ICBC), Jiang Jianqing, is poised to retire and will help set up a Chinese government fund aimed at promoting investment in Central and Eastern Europe, two sources with direct knowledge of the matter told Reuters. Jiang, 63, has led China’s biggest bank for 16 years, overcoming an insolvency crisis when its non-performing loan ratio was more than 20 percent in 2004, and orchestrating a US$19.1 billion dual listing in 2006 - the world’s biggest initial public offering at that time.
12 Business Daily Monday, May 9 2016
GREATER CHINA
STOCK MARKETS
Regulator studying impact of overseas-listed firms relisting in Mainland Any move by the regulator could affect the wave of Chinese companies who last year decided to de-list from U.S. stock exchanges. Samuel Shen and Paul Carsten
C
HINA’S securities regulator said it is analysing the potential impact of overseas-listed Chinese companies coming home to relist on mainland exchanges, potentially bad news for tech firms trying to come home and cash in on high valuations. The valuation gap between the domestic and overseas market and speculation on shell companies should be paid attention to, Zhang Xiaojun, a spokesman for the China
Securities Regulatory Commission (CSRC), said at a weekly briefing on Friday, according to remarks posted on CSRC’s official Weibo microblog. The CSRC is studying the market impact of overseas-listed Chinese companies relisting in the A-share market through IPOs, mergers and acquisitions, as well as restructuring, Zhang added. The regulator made the comments following rumours that it would block domestic listings by companies currently listed overseas, the Shanghai Securities News reported. “For companies already in the process of relisting at home, the faster they get done the better because regulatory uncertainties are rising,” said a banker, who declined to be identified because they were not permitted to speak to media. “We may also suggest that some clients opt for the new third board, given that there are fewer regulatory hurdles.”
The news may reassure Chinese stock investors, who worry that battered domestic markets are in no condition to absorb another round of IPOs by hot tech companies, seen as cannibalising funds from already-listed companies and weakening overall market performance. Domestic media have reported at least 20 Chinese firms listed overseas are considering delisting to come back and relist in China, some of them via “back-door listings” or “reverse
Key Points Valuation gaps, shell companies must be looked into - CSRC Firms should hasten listing plans as regulations changing-banker Tighter relisting rules pose hurdles for tech firms
mergers” that involve injecting assets into an already listed firm, thus skipping the long approval queue for IPOs. An overall dilution in share values is a point of particular sensitivity as a flood of new IPOs was widely blamed for contributing to a massive stock market crash last summer. Any move by the regulator could affect the wave of Chinese companies, particularly in the tech sector, who last year decided to de-list from U.S. stock exchanges and instead trade on domestic boards, a trend that intensified as Chinese stock markets rallied through mid-2015. Those firms include Internet security and search firm Qihoo 360 Technologies Co Ltd, and dating app Momo Inc, backed by Alibaba Group Holdings Ltd, both of which said they plan to delist. Qihoo declined to comment when contacted by Reuters. Repeated calls to Momo offices were not answered. Other Chinese companies have already raised funds and gone private on the expectation that they would be welcomed at home. Domestic tech tickers still enjoy extremely high valuations relative to global peers, some of them in triple digits. The ChiNext Growth Board boasts an average price earnings ratio of 65, compared with 21 for the Nasdaq 100. REUTERS
COMMODITIES MARKET
Shanghai Chaos spreads wings, opens office in Hong Kong It is already registered with the Securities and Futures Commission of Hong Kong for dealing futures contracts.
the ability to use exchanges outside of China, which mostly only detail commodity positions by categories such as financial and non-financial, not by individual firms. The Shanghai Futures Exchange, which offers a wide range of products
Pratima Desai
Shanghai Chaos, one of China’s largest commodities fund managers, has opened an office in Hong Kong to diversify activities and try to keep its commodities trading under the radar of the market, two sources with knowledge of the matter said. Metal industry sources said the fund house plans to use a much larger number of banks and brokerages, of which there are many more in Hong Kong than in Shanghai, so that its positions are not easily identifiable. The advantage of Hong Kong is
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including copper, aluminium, zinc and nickel, lists positions by broker on its website. “If you know which broker or brokers Chaos uses, it’s not difficult to work out their positions,” a broker source said. The Hong Kong arm, named Chaos International Financial, opened its offices at the beginning of this year and has a very small staff, sources said. A one-page website: http:// chaosinternational.com says “We’re Hiring”. It is already registered with the Securities and Futures Commission
Key Points The advantage of Hong Kong is the ability to use exchanges outside of China, which mostly only detail commodity positions by categories such as financial and non-financial.
Chaos plans to use a larger number of banks and brokers Hong Kong office opened earlier this year, has very small staff
of Hong Kong for dealing futures contracts. A senior company official declined to comment and calls by Reuters to Chaos’s administrative office in Shanghai were not answered. Chinese funds have become increasingly influential in global financial and commodity markets in recent years and their activity has contributed to wild price swings, including a 12 percent collapse in copper prices in January 2015 and a 9 percent drop in July last year. Chaos also plans to offer prime brokerage services to hedge funds, which want to borrow stocks or bonds to sell short - bets on lower prices. Prime brokers also lend cash, offer clearing and risk management services to hedge funds. Shanghai Chaos Investment was set up about 10 years ago and traders said it has 10 billion yuan (US$1.5 billion) under management. REUTERS
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Business Daily Monday, May 9 2016
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ASIA ELECTIONS
Turnbull calls on Australians to vote on July 2 Current prime minister will need a decisive election victory to shore up his authority over Abbott loyalists and give him an opportunity to pursue his own more socially progressive agenda.
P
RIME Minister Malcolm Turnbull called Australia’s election for July 2, triggering an eight-week campaign set to be dominated by a battle over tax cuts and which party can best steer the economy as the mining-investment boom ends. “Our economic plan for jobs and growth is as clear as it is critical,” said Turnbull, 61, after asking Governor-General Peter Cosgrove to dissolve both houses of parliament. “These are exciting times, but we must embark on these times, embrace these opportunities with a plan.” With polls showing his Liberal-National coalition faces a tight race to win a second term in office, Turnbull is under pressure to maintain party discipline during the lengthy campaign and convince voters he’s best-placed to manage the world’s 12th-largest economy. A win for the former investment banker would put a capstone on an era of political turbulence that’s seen Australia churn through six prime ministers in eight years. Turnbull is promising to cut tax rates for companies and high-income earners and boost infrastructure spending as he seeks new drivers of growth. Standing in his way is union-backed Labour party leader Bill Shorten, 48, who’s portraying the coalition as out of touch with
average workers. Shorten, a former trade union leader, says he would end tax perks for property investors that have contributed to house prices in Sydney and Melbourne soaring out of reach for poorer Australians. He’s also promising a royal commission into the finance industry after trust in the sector was eroded by poor financial advice offered by banks. “At this election, Australians will have a very clear choice,” Turnbull said in a televised news conference in Canberra. “To keep the course, maintain the commitment to our national economic plan for growth and jobs, or go back to Labour with its higher taxing, higher spending debt and deficit agenda, which will stop our nation’s transition to the new economy dead in its tracks.”
“Turnbull is really banking that voters will trust his coalition’s historic ability to manage the economy” Haydon Manning, Politics professor at Flinders University in Adelaide
While Labour and the coalition are tied on 50 percent in a Galaxy poll published yesterday, the opposition party has a mountain to climb to win the election. The coalition has 90 seats in the 150-member lower house, to Labour’s 55 and betting odds show the government is the clear favourite. A winning A$1 bet on the coalition would return A$1.33, while the opposition would give A$3.25, according to bookmaker Sportsbet. “I will fight this election to help
Australian Prime Minister Malcolm Turnbull speaks to the media during a press conference at Parliament House in Canberra yesterday.
create a vibrant economy, growing jobs with reasonable conditions and security for all,” Shorten told reporters in Tasmania yesterday. “I will fight this election to make Australia a fairer place.” This is the first so-called double dissolution ballot since 1987, meaning all 76 seats in the Senate will also be up for grabs. In a normal election, only half of the upper-house seats from each state are contested. Turnbull claimed a constitutional trigger to call the election when the
Senate twice blocked legislation to revive a watchdog for the building industry - which the coalition says is plagued by militant unions. Industrial relations will be another major issue in the campaign, with the coalition saying Labour is beholden to its union backers and Shorten arguing the government is against workers’ rights. Both Shorten and Turnbull are fighting their first election campaigns as party leaders and will be seeking to cement their authority. BLOOMBERG NEWS
SUPPORT FOR RAZAK
Malaysia’s ruling party sweeps state polls despite scandals The strong showing by the BN coalition was also helped by a breakdown in the opposition alliance. Malaysia’s ruling coalition secured a landslide victory in the Borneo state of Sarawak on Saturday after a campaign led by the prime minister, who is facing a financial scandal involving a state-owned fund. The Barisan Nasional (BN) alliance expanded its majority to 72 out of the 82-seat state legislative assembly, a result that Prime Minister Najib Razak is likely to use as an endorsement of his tumultuous leadership. But the coalition’s win is largely credited to the popularity of Sarawak’s Chief Minister Adenan Satem, who
took over the reins in 2014. Sarawakians have rallied behind Adenan, who is seen as a Najib’s ally, after the state leader brokered greater autonomy for the resource-rich state and dealt with long standing issues such as recognition of native land rights. “As BN chairman, I thank the voters for their trust,” Najib said in a statement after the poll results. His party would not squander the mandate of the people, he said. Najib’s critics have said that the Sarawak polls are not a measure of the support for Najib or the ruling party as they are fought on local issues. Najib has for months faced calls for him to step down after news broke that US$681 million were deposited into his bank account before the 2013 national election, and over his handling of a multi-billion dollar scandal linked to state fund 1Malaysia Development Berhad (1MDB). The prime minister has denied any wrongdoing and consolidated power by sacking dissenters within his party, the United Malay National Organisation (UMNO), and using a controversial sedition
law to clamp down on other critics. The strong showing by the BN coalition was also helped by a breakdown in the opposition alliance, the Pakatan Harapan. The ethnic Chinese-dominated Democratic Action Party (DAP) - which had a sizeable haul of 12 seats in the last state polls in 2011 - was
left with just seven seats this time around, while the People’s Justice Party (PKR), the party of jailed opposition leader Anwar Ibrahim, retained three seats. Saturday’s win, however, comes with its fair share of controversy as federal opposition leaders cried foul over the state government’s decision to bar entry to most
of them over the two-week campaign period ahead of the polls. Immigration remains a sovereign right of the state. The opposition also accused Najib and his ruling BN of abusing government powers during the election campaign by promising some 3.5 billion ringgit in projects and investments for the state. REUTERS
Malaysia’s Prime Minister as well as Barisan Nasional Party (The National Front Party) Chairman Najib Razak (C) waves to supporters after attending the opening ceremony of a development project ahead of the Sarawak election at Kuching, Sarawak.
14 Business Daily Monday, May 9 2016
INTERNATIONAL IN BRIEF FUNDS RULES
Dutch propose more flexible EU money market European Union plans to phase out up to half of the bloc’s 1 trillion euro (US$1.14 trillion) money market funds (MMFs) could be watered down under a compromise proposed by the Dutch. EU member states with a strong fund industry presence such as Ireland, Luxembourg and Britain have been battling to prevent the European Parliament phasing out so-called constant net asset value or CNAV funds, which account for half of the MMF market. The new proposal by the Dutch EU presidency comes after three years of wrangling over the funds. FINANCIAL SYSTEM
Bank of Canada aims to develop stress test framework The Bank of Canada plans to develop a framework for stress tests that will incorporate different sectors of the financial system to enhance its contribution to macroprudential oversight in Canada, Deputy Governor Lawrence Schembri said on Friday. In a speech focused on what central banks can do to contribute to financial stability, Schembri said the system-wide framework would cover banking, insurance and investment funds, as well as financial markets and financial infrastructures. Central banks must rethink their role in financial stability in light of the severity of the global financial crisis, he said. NIGERIA
President Buhari signs delayed budget Nigeria’s President Muhammadu Buhari signed the delayed 2016 budget into law on Friday, ending weeks of wrangling with lawmakers and tripling capital expenditure as Africa’s biggest economy contends with its worst crisis in years. The 6.06 trillion naira (US$30.6 billion) budget is an attempt by Africa’s top oil exporter to stimulate an economy hammered by the fall in crude oil prices. Oil sales make up about 70 percent of national income. The budget assumes oil production of 2.2 million barrels per day at 38 dollars a barrel, Budget Minister Udoma Udo Udoma told reporters shortly after the signing. MEETING
German Vice Chancellor urges debt relief for Greece German Vice Chancellor Sigmar Gabriel urged euro zone finance ministers to start talks on debt relief for Greece, saying it made no sense to crush the green shoots of economic recovery with further austerity measures. The finance ministers of the euro zone’s 19 countries are due to meet in Brussels on May 9 to discuss Greece’s debt and a new set of contingency measures that Athens should adopt to ensure it will achieve agreed fiscal targets in 2018. “The euro group meeting on Monday must find a way to break the vicious circle,” Gabriel, who is also Economy Minister, said in an emailed statement to Reuters on Saturday.
REFORM DRIVE
Saudi shake-up rolls on with big reshuffle of economic posts Prince Mohammed’s programme has been presented as a sweeping rethink of the entire way that Saudi Arabia’s government and economy will function. had also served from 2011 to 2013 as executive director for Saudi Arabia at the International Monetary Fund in Washington. He is set to take over a central bank with more limited functions than it had under his predecessor. While SAMA remains responsible for monetary policy, it will no longer act as the country’s biggest sovereign wealth fund because a larger one is being created under the Vision 2030 reforms.
Angus McDowall and Katie Paul
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AUDI Arabia’s King Salman on Saturday replaced his veteran oil minister and restructured some big ministries in a major reshuffle apparently intended to support a wide-ranging economic reform programme unveiled last week. The most eye-catching move was the creation of a new Energy, Industry and Natural Resources Ministry under Khaled al-Falih, chairman of the state oil company Aramco. He replaces the 80-year-old oil minister Ali al-Naimi, in charge of energy policy at the world’s biggest oil exporter since 1995. But major changes were also made to the economic leadership, with Majed al-Qusaibi named head of the new Commerce and Investment Ministry, and Ahmed al-Kholifey made governor of the Saudi Arabian Monetary Agency (SAMA), the central bank. The changes, announced in a series of royal decrees, go far beyond Salman’s previous reshuffles since he became king in January last year, and also put the stamp of his son, Deputy Crown Prince Mohammed bin Salman, author of the Vision 2030 reform programme, on the government. Prince Mohammed’s programme has been presented as a sweeping rethink of the entire way that Saudi Arabia’s government and economy will function to prepare for a future that is less dependent on oil income. Some of the most important elements of the plan, which will be fleshed out in coming weeks, involve creating a massive sovereign wealth fund, privatising Aramco, cutting energy subsidies, expanding investment and streamlining government. The plan also seeks to boost revenues by increasing the number of foreign pilgrims outside the main annual Haj, and encouraging Saudis to spend money at home by creating more entertainment opportunities.
Rapid rise
Prince Mohammed’s dizzying rise since his father became king has astonished Saudis and, in becoming second in the line of succession
Quest for efficiency Key Points Veteran oil minister Naimi replaced by Aramco chairman Reshuffle appears intended to support sweeping economic reforms Reorganisation of ministries may boost efficiency drive behind his cousin, he has swept past dozens of other contenders. The 80-year-old Naimi, for his part, has for two decades been the most influential man in world energy, able to move oil markets with a mere word, but his influence had appeared to decline sharply under King Salman. He has been appointed as an adviser to the royal court. Falih has long been seen as a leading contender to replace him. Like Naimi a career Aramco man, he was chief executive of the oil giant from 2009 until last year, when he was made company chairman and health minister. Whether he will play the same role as Naimi did in the Organisation for Petroleum Exporting Countries (OPEC), or in crafting Saudi oil policy, remains unclear, however. The new SAMA governor, Kholifey, is promoted from deputy governor for research and international affairs. He replaces Fahd al-Mubarak, who has held the post since December 2011. A veteran of SAMA and graduate of King Saud University in Riyadh and Colorado State University, Kholifey
Finance Minister Ibrahim Alassaf, who has held the post since 1996, remains in place. However, other economic departments have over the past year taken over some of his ministry’s responsibilities. Saturday’s decrees broke up the Water and Electricity Ministry, with the water portfolio added to a new Environment, Water and Agriculture Ministry, and electricity added to the new energy ministry. Those changes may help Saudi Arabia to cut subsidies, reduce domestic power and water consumption, make sure that energy pricing meshes clearly with industrial development goals, and that nuclear and solar policy are more carefully integrated. “The merging of ministries is opening the door to efficiency gains that the government is keen to enforce,” said John Sfakianakis, a former adviser to the government and head of economy at the Jeddah and Geneva-based Gulf Research Centre. Two other senior economic figures, royal court adviser Yasir al-Rumayyan and former SAMA governor Mohammed al-Jasser, were appointed advisers to the Secretariat General of the Cabinet. Tawfiq al-Rabeeah, formerly commerce minister, was appointed health minister in place of Falih, Suleiman al-Hamdan was appointed transport minister, and the Pilgrimage Ministry was renamed the Haj and Umrah Ministry. The royal decrees also merged the ministries of labour and of social affairs into a new department, and created a new Commission for Recreation and Culture. REUTERS
CYBER CRIME
Digital currency firm co-founder gets 20 years in U.S. prison Much of its business came from criminals seeking to launder proceeds from Ponzi schemes, credit card trafficking, identity thefts and computer hacking. Nate Raymond
The co-founder of Liberty Reserve, the operator of what had been a widely-used digital currency, was sentenced to 20 years in prison on Friday for conspiring to help cyber criminals launder hundreds of millions of dollars using its services. Arthur Budovsky, 42, was sentenced by U.S. District Judge Denise Cote in Manhattan, who said a substantial punishment was warranted for his role in running a money laundering operation that prosecutors said was of unprecedented scope. “Sad to say, Mr. Budovsky used his enormous talents here in a way that led to widespread harm,” she said. Budovsky, who pleaded guilty in January to conspiracy to commit money laundering, was also ordered
to forfeit US$122 million and fined US$500,000. He said nothing in court as his lawyer, John Kaley, argued for less than 15 years in prison. “Remorse has been exhibited here,” he said. But Assistant U.S. Attorney Christian Everdell sought the maximum 20-year sentence given Budovsky’s role “at the helm of this sweeping enterprise.” Liberty Reserve operated a widely used digital currency, processing more than US$8 billion in financial transactions and earning Budovsky over US$25 million, prosecutors said. Much of its business came from criminals seeking to launder proceeds from Ponzi schemes, credit card trafficking, identity thefts and computer hacking, prosecutors said.
The company was shuttered in May 2013 as Budovsky was arrested amid U.S. efforts to crack down on the use of digital currencies including bitcoin to evade law enforcement and launder money. Four other people pleaded guilty, including Liberty Reserve co-founder Vladimir Kats, who is set to be sentenced this week. Budovsky and Kats, who met as teenagers working as camp counsellors in Brooklyn, previously were convicted in 2006 on New York state charges for operating an earlier digital currency exchange as an unlicensed money transmitting business. They launched Liberty Reserve in 2005, and after their arrests, moved it to Costa Rica, where Budovsky became a citizen. Liberty Reserve users would buy and redeem its digital currency, LR, through third-party exchangers who in turn bought and sold LR in bulk from Liberty Reserve, authorities said. Of US$7.26 billion in transactions by Liberty Reserve’s top 500 accounts, US$2.6 billion were for investment opportunities, mostly Ponzi schemes, prosecutors said. REUTERS
Business Daily Monday, May 9 2016
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OPINION BUSINESS WIRES
The Times of India Markets regulator Sebi has ordered two Swar group companies and their directors to refund investors’ money, which was raised through illegal investment schemes, in three months. Besides, the firms - Swar Agrotech India and Swar Agroteak and Housing (India) - their directors are also barred from the capital market for four years. It was alleged that the companies had launched and operated collective investment schemes without obtaining registration from Sebi. A Securities and Exchange Board of India (Sebi) probe found that the firms had mobilised funds from their customers through various investment plans.
The Korea Herald Debts owed by South Korea’s three major shipbuilders more than doubled over a period of five years ending in 2015 due to disadvantageous contract terms, according to their business reports yesterday. The combined borrowings by Hyundai Heavy Industries Co., Samsung Heavy Industries Co., and Daewoo Shipbuilding & Marine Engineering Co. jumped to 23.9 trillion won (US$20.68 billion) at the end of 2015 from 10 trillion won at end-2010, the data showed. Industry analysts said a sharp increase in the so-called “heavy tail contracts” may have contributed to the surge in the shipbuilders’ debt load.
Philstar The Philippine Stock Exchange on Saturday elected a new board of directors, majority of which are holdovers from the previous board. “In terms of composition of the board, it is pretty much the same,” said PSE president and CEO Hans Sicat, who is now on his sixth term. Sicat said former PSE chairman Wilson Sy regained a seat on the local bourse’s board. “We have an addition. A former chairman of the old Manila Stock Exchange, Mr. Sy is coming back to the board,” Sicat said. Sy is replacing David Chua, president of Asia Pacific Capital Equities & Securities Corp.
Thanh Nien News LG Display Group, the screen-making subsidiary of South Korea’s LG Electronics, on Friday started work on a US$1.5 billion factory in Hai Phong City. The facility, covering more than 40 hectares in Trang Due industrial park, is slated to go into operation next year. It will produce digital displays using LG’s latest technology organic light-emitting diode, or OLED, according to a memorandum of understanding the group signed with the People’s Committee of Hai Phong last month. Prime Minister Nguyen Xuan Phuc said LG Display Group’s project along with others will create a major electronics and information technology complex in Vietnam.
Emerging markets should go for the gold
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RE EMERGING-MARKET CENTRAL banks overweight in dollars and underweight in gold? Given a slowing global economy, in which emerging markets are probably very grateful for any reserves they retain, this might seem an ill-timed question. But there is a good case to be made that a shift in emerging markets toward accumulating gold would help the international financial system function more smoothly and benefit everyone. Just to be clear, I am not siding with those – usually American far-right crackpots – who favour a return to the gold standard, in which countries fix the value of their currencies in terms of gold. After all, the gold standard’s last reign ended disastrously in the 1930s, and there is no reason to believe that a return to it would turn out any differently. No, I am just proposing that emerging markets shift a significant share of the trillions of dollars in foreign-currency reserves that they now hold (China alone has official reserves of US$3.3 trillion) into gold. Even shifting, say, up to 10% of their reserves into gold would not bring them anywhere near the many rich countries that hold 60-70% of their (admittedly smaller) official reserves in gold. For some time, the rich countries have argued that it is in everyone’s collective interest to demonetize gold. Sure, we hold a lot of gold, these countries say, but that is a vestige of the pre-World War II gold standard, when central banks needed a stockpile. Indeed, back in 1999, European central banks, seeing no reason to keep holding so much gold, entered a pact to start reducing their stocks in an orderly fashion. The sales made sense at the time for most of the participating countries: The real backing for their debt was the tax reach of their governments, their high levels of institutional development, and their relative political stability. The 1999 pact has been revisited periodically, though since the most recent edition in 2014, most rich countries have taken a long pause, still leaving them with extremely high gold reserves. Emerging markets have remained buyers of gold, but at a snail’s pace compared to their voracious appetite for US Treasury bonds and other rich-country debt. As of March 2016, China held just over 2% of its reserves in gold, and the share for India was 5%. Russia is really the only major emerging market to increase its gold purchases significantly, in no small part due to Western sanctions, with holdings now amounting to almost 15% of reserves. Emerging markets hold reserves because they do not have the luxury of being able to inflate their way out of a financial crunch or a government debt crisis. Simply put, they live in a world where
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Kenneth Rogoff Former chief economist of the IMF, is Professor of Economics and Public Policy at Harvard University.
a large fraction of international debt – and an even larger share of global trade – is still denominated in hard currency. So they hold reserves of such currencies as a backstop against fiscal and financial catastrophe. Yes, in principle, it would be a much better world if emerging markets could somehow pool their resources, perhaps through an International Monetary Fund facility; but the trust required to make such an arrangement work simply is not yet there. Why would the system work better with a larger share of gold reserves? The problem with the status quo is that emerging markets as a group are competing for rich-country bonds, which is helping to drive down the interest rates they receive. With interest rates stuck near zero, rich-country bond prices cannot drop much more than they already have, while the supply of advanced-country debt is limited by tax capacity and risk tolerance. Gold, despite being in nearly fixed supply, does not have this problem, because there is no limit on its price. Moreover, there is a case to be made that gold is an extremely low-risk asset with average real returns comparable to very short-term debt. And, because gold is a highly liquid asset – a key criterion for a reserve asset – central banks can afford to look past its short-term volatility to longer-run average returns. True, gold does not pay interest, and there are costs associated with storage. But these costs can be managed relatively efficiently by holding gold offshore if necessary (many countries hold gold at the New York Federal Reserve); and, over time, the price can go up. It is for this reason that the system as a whole can never run out of monetary gold. I don’t want to create the impression that by shifting into gold, emerging markets would somehow benefit at the expense of advanced economies. After all, the status quo is that advanced-economy central banks and treasuries hold vastly more gold than emerging markets do, and a systematic shift by emerging markets will bid up its price. But this is not a systemic problem; and, in fact, a rise in gold prices would close part of the gap between demand and supply for safe assets that has emerged due to the zero lower bound on interest rates. There has never been a compelling reason for emerging markets to buy into the rich-country case for completely demonetizing gold. And there isn’t one now. PROJECT SYNDICATE
BY NEXT YEAR-END, WE CAN ALSO LAUNCH THE OPEN BID FOR THE CONSTRUCTION OF THE LRT STATION FOR BARRA.
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16 Business Daily Monday, May 9 2016
CLOSING ELECTIONS
Business titans secretly fund Philippine presidential bets A mere 308 Filipinos funded the 2010 presidential election, turning them into virtual venture capitalists financing high-risk start-ups.
Filipinos walk past elections campaign posters in Las Pinas, south of Manila, Philippines, yesterday. 54 million eligible Filipinos will vote for 12 of 24 senators today.
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HILIPPINE presidential favourite Rodrigo Duterte has flippantly brushed aside campaign trail allegations of accepting million-dollar gifts, while his rivals have refused to disclose their backers, deepening concerns over business titans’ shadowy grip on politics. The Philippines has one of Asia’s biggest rich-poor divides, with poverty rates remaining stuck in recent years despite strong economic growth, and analysts say one of the reasons for the disparity is the debt that politicians owe their secret backers. Under the nation’s campaign financing laws, there are no caps on how much people or companies can give to candidates, nor are there limits on individual donations. They also do not have to reveal their backers until a month after polling day.
Duterte has entrenched himself as the clear frontrunner for today’s elections by portraying himself as a frugal, anti-establishment politician who is tough enough to take on the elites. “When I become president, by the grace of God, I serve the people, not you,” Duterte told reporters last week, referring to the elite. But in the final stages of the campaign trail Duterte, who is meant to earn less than US$2,000 a month as the mayor of the southern city of Davao, was hit with allegations that millions of dollars had poured into secret bank accounts. He initially denied there were any hidden accounts. After a journalist deposited money into them, he admitted they did exist and that 193.7 million pesos (US$4.2 million) were deposited into them on his birthday two years ago, nearly 10 times his declared assets.
“That only means I have many rich friends,” he said, refusing to disclose who they were. Asked at an earlier national television debate to name his campaign donors, Duterte gave a mocking answer, answering “Emilio Aguinaldo”, a leader of the Philippines’ 19th-century war for independence from colonial power Spain.
Buying politicians
His rivals similarly have felt no obligation to tell voters who their backers are, let alone how much they have been paid by them. Senator Grace Poe, who has been in politics for just three years and fashions herself as a lily-white poster image of change and probity, has been widely rumoured to be backed by taipans Eduardo Cojuangco and Ramon Ang. They are in charge of San Miguel Corporation, one of the nation’s biggest conglomerates.
Cojuangco was one of dictator Ferdinand Marcos’s cronies until the 1986 “People Power” revolution sent the strongman into US exile. Cojuangco fled on the same plane but returned three years later and kept building his business empire, while also running a political party that today is backing Poe. When asked by AFP to confirm that Cojuangco and Ang were funding her campaign, Poe spoke only in general terms that there was nothing wrong with taking money from people linked with Marcos. “All candidates have support from both sides of the fence. If they say they don’t have any they’re lying,” Poe replied. She said her backers and their donations would be revealed after the election, as per the law. Marcos’s son and namesake, who is seeking to cement a remarkable political comeback for the family by being elected vice president today, also referred only to his legal obligations, when asked by AFP in an interview to disclose his backers. Ferdinand Marcos Jnr, whose late father was accused of looting US$10 billion from state coffers during his two-decade rule, rejected the notion that he would be beholden to his secret donors. “That would imply that you bought a politician. I don’t think I would allow that to happen to myself,” Marcos Jnr said.
Weak laws
In the Philippines, campaign spending is meant to be capped at 10 pesos per voter, which this year will mean a maximum budget for each presidential candidate equivalent to about US$11 million. In some advanced Western democracies the donations are typically limited to relatively small sums to encourage a larger section
of the population to put their representative into office. However in the Philippines the uncapped donations mean the funding can be provided by big-money donors in hopes of currying favours with an entire government, according to Ronald Mendoza, newly appointed dean of the Ateneo School of Government in Manila. He said the porous election finance safeguards made the economy vulnerable to being held captive by big-time punters’ personal interests.
“All candidates have support from both sides of the fence. If they say they don’t have any they’re lying” Senator Grace Poe, Philippine’s presidential candidate
“Only a few can give such large amounts.... so you’re no longer accountable to people who voted you in. You become more accountable to the person who actually financed you,” Mendoza told AFP. Historically, Mendoza said this led to monopolies and economic stagnation, since reforms were blocked and competition discouraged to enable campaign benefactors to recoup their investment on the new leader. A mere 308 Filipinos funded the 2010 presidential election, turning them into virtual venture capitalists financing high-risk startups, according to a study by the Manila-based Philippine Centre for Investigative Journalism (PCIJ). AFP
NORTH KOREA
PROPERTY
CAPITAL GROWTH
Kim says he won’t use nukes unless attacked
China to curb land supply Myanmar weighs plan for for cities with property glut Yangon’s city development
North Korean leader Kim Jong Un said he will only use nuclear weapons if his country comes under a nuke attack, and called for improving relations with other nations as a “nuclear power.” Kim said at the first Workers’ Party congress in 36 years that North Korea should try to send more satellites into space, according to the Korean Central News Agency. The comment reaffirms his intention to develop long-range rockets that the U.S. says can be converted into inter-continental ballistic missiles. Kim’s comments at the biggest political event under his rule confirm North Korea remains unwilling to abandon its nuclear-arms development or reform its centralized economy anytime soon. After its fourth nuclear test the country has reiterated its demand that the U.S. treat it as a nuclear power in future negotiations. “As a responsible nuclear weapons state, our republic will not use a nuclear weapon unless its sovereignty is encroached upon by any aggressive hostile forces with nukes,” Kim said at the congress in Pyongyang, KCNA reported. North Korea will cooperate with efforts to stop the spread of nuclear weapons for the eventual goal of “global denuclearization,” he said, according to KCNA. BLOOMBERG NEWS
China will reduce or stop land supply for cities where there is a property glut while boosting supply in areas that face stronger housing demand, the People’s Daily said on Sunday, citing the Ministry of Land and Resources. The government aims to keep arable land of more than 1.865 billion mu (124.33 million hectares) under a five-year plan (2016-2020) by limiting construction land - or land for industrial or property development, the newspaper said. “Land supply will be reduced and even halted for cities that have relatively high property inventories while land supply will be appropriately increased in areas where there are tensions in property supply and demand,” it said, citing the ministry. While property prices in top-tier Chinese cities are booming, prices in smaller cities are still weakening, complicating government efforts to spread wealth more evenly and arrest slowing growth. Beijing has identified food security as one of its biggest challenges over the next decade, as its population is still rising and vast tracts of its farmland have already been swallowed up due to rapid urban and industrial growth. REUTERS
Myanmar has been drawing a master plan for development of Yangon city with the participation of people’s representatives, legal experts, public administrators and experts with international experiences. According to the three-phase scheme of the Japan International Cooperation Agency (JICA), Phase-1 is concerned with downtown area, while Phase 2 and phase 3 are related to the outskirts and satellite towns, official sources said yesterday. The project for all round development of Yangon city is said to pose the biggest challenge to the new regional government. Yangon region’s new chief minister U Phyo Min Thein noted that in an attempt to revitalize the city of Yangon, there are many cases of not meeting quality standard, which was attributed to the lack of accountability. He said the city is being faced with the overflowing of drainage canals as they are blocked by little thrown away by careless citizens. He warned that tax payers will not be satisfied with a government which allows the people live in the midst of a garbage dump. XINHUA