Macau Business Daily May 12, 2016

Automotive industry drifting towards overcapacity Car market Page 9

Thursday, May 12 2016 Year V Nr. 1041 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Joanne Kuai Aviation

www.macaubusinessdaily.com

Products restricted

Macau Charter flights to Russia from May 17 Page 7

Chinese regulator asks some banks to stop selling classified asset management products Page 9

Energy

Prices of vehicle petroleum & diesel decrease 6.2 pct in Q1 Page 4

Gaming Macau’s casinos operators have invested about MOP260 bln (US$33 bln) in 13 years up to 2014. A University of Macau Institute for the Study of Commercial Gaming review says all six operators have fulfilled concessionary requirements. But the junket industry needs to contend with issues like custody of client money and credits. Page 5

All in the detail The Chief Executive Electoral Committee responds to the city’s master development plan. Talent cultivation, transportation, and digital interconnectivity figure among the hot topics.

Five-year plan Page 3

Reining in bonds

CE denies transfer of interest Jinan donation He’s board vice chairman of Jinan University. But the Chief Executive denies receiving any related remuneration or interest.

While protests are planned against the 100-mln yuan donation, Chui upholds freedom of speech. Page 2

20,055.29 -187.39 (0.93%)

Galaxy Entertainment Group

+0.81%

Sands China Ltd

+0.36%

China Resources Land Ltd

China Merchants Holdings

+0.46%

CNOOC Ltd

+0.22%

Tencent Holdings Ltd

Swire Pacific Ltd

+0.43%

BOC Hong Kong Holdings

+0.22%

Cheung Kong Property

+0.11%

Belle International Holdings

-2.76%

+0.06%

China Mengniu Dairy Co Ltd

-2.83%

AIA Group Ltd

-2.14%

-2.18%

Source: Bloomberg

HK Hang Seng Index May 11, 2016

Corporate debt Mainland banks have claimed the top spots for Asian bond market underwriting. A shopping spree in domestic companies has led to sharp funding demand. Rules limiting competition from foreign banks have also ignited the corporate debt market. Pages 8&9

I SSN 2226-8294

2 Business Daily Thursday, May 12 2016

Macau Courts

Gov’t wins landfill litigation

The Court of Final Appeal has ruled that the government could fine the contractor in charge of the dike works for the building materials landfills in Cotai for delaying the completion of the works for 64 days over the regulated date. The city’s ex-Secretary for Transport and Public Works Lao Si Io dispatched in 2013 to fine Companhia de Construção

de Obras Portuárias Zhen Hwa Limitada some MOP8.87 million (US$1.1 million) for the delay. The company later filed an appeal with the Court of Second Instance, which ruled in the company’s favour last July. The incumbent Secretary for Transport and Public Works Raimundo Rosario, dissatisfied with the decision of the lower court, filed another appeal with the city’s top court.

Jinan donation

Chief Executive denies transfer of interest The CE says any financing exceeding MOP500,000 (US$62,549) has to be approved by the Macao Foundation trustees’ council.

Nelson Moura nelson.moura@macaubusinessdaily.com

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n a press briefing prior to the Five-Year Development plan hearing session, Chief Executive (CE) Fernando Chui Sai On stated that he has not received any “remuneration or interest” by performing the functions of vice chairman on the board of Jinan University whilst CE and President of the Macao Foundation trustees’ council.

This statement follows the government’s recent donation of 100 million yuan (MOP123 million/US$15.4 million) to Guangzhou-based Jinan University via the Macao Foundation for its infrastructure projects and other developments, which aroused a public outcry for alleged conflict of interest.

Chui Sai On stated he was “invited” to become a member of the Jinan University board, and that although he has many functions his decisions are made “according to the law and regulations.”

“I was invited to be a board member of Jinan University and Fujian

Gov’t refutes Apple Daily’s commentary on Chui

The Government Spokesperson’s Office issued a statement late Tuesday night, rejecting allegations in a commentary published by Hong Kong newspaper Apple Daily that Chief Executive Fernando Chui Sai On had transferred benefits to his family members before being involved in the controversial Jinan donation.

In Apple Daily’s commentary published on Tuesday, journalist John Ng accused the city’s top official of awarding a consultation contract on local medical reform programmes to a company started by his wife whilst he served as Secretary for Social Affairs and

Macau SAR Chief Executive Fernando Chui Sai On.

University, and I do not receive any remuneration or interest by performing these functions,” said Chui Sai On. He added that any financing over MOP500,000 (US$62,549) has to pass through the Macao Foundation trustees’ council - a council he presides over - in order to be evaluated and approved,.

“Jinan University has helped Macau immensely with talent cultivation, and according to our data more than

20,000 qualified personnel [from Macau] have been educated by the University, of whom more than half of the qualified personnel are from the health sector. Also, right now there are 1,900 students from Macau enrolled in the university,” the CE stated.

According to Foundation data, 20,000 local students have graduated from Jinan University since its establishment and some 1,976 local

Culture, in addition to a medical procurement contract granted to another company related to his wife.

The writer also claimed Chui had granted a contract relating to the construction of Tac Seac Square to his cousin Chui Sai Cheong in 2003, as well as having recently awarded a science textbook contract worth millions of patacas to the Macau Association for Promotion of Science and Technology, headed by another cousin, Jose Chui Sai Peng.

‘It is not true that the consulting company recruited for the medical reform study is related to the wife of the Chief Executive as mentioned by the commentary,’ the statement reads, adding the other mentioned grant of the

procurement contract to Mrs. Chui was false as well.

Furthermore, the Spokesperson’s Office stated that Chui Sai Cheong did not participate in the Tap Seac construction project or other related works, while the grant of the textbook contract to Chui Sai Peng’s association meets local regulations.

Both Chui Sai Cheong and Jose Chui Sai Peng are indirectly elected members of the Legislative Assembly.

‘The Government Spokesperson’s Office respects the freedom of speech and that of the press. Nevertheless, regarding commentaries without any factual base or being non-factual, the Office has to clarify,’ the Office stated. K.L.

students were studying in the institute as at the end of November.

Freedom of speech

After the donation came to public attention, local pan-democracy group New Macau Association launched an online petition urging the MSAR 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. Four groups have also planned protests for next Sunday in front of the Legislative Assembly Building to urge the government to rescind the donation. When questioned about the protests the Chief Executive stated, “The government defends the right of free speech from the public as long as the protest is legal and safe. The government is always willing to hear the opinions of the public and I’ve also heard voices in favour of the performance of the Macao Foundation. It’s logical everybody who is criticised also wants to be complimented after listening to different opinions.”

This week, the Jinan University Macao Alumni Association posted a statement in at least nine local Chinese language newspapers backing the Macao Foundation, stating the donation meets the Foundation’s regulated procedures on granting subsidies.

Business Daily Thursday, May 12 2016 3

Macau Banking

BNU and Novo Banco Asia close Q1 with profit

BNU Macau had a total MOP510.3 million at the end of 2015, an increase of 15.1 per cent from 2014, in accord with the bank’s annual Banco Nacional Ultramarino (BNU) has closed the first quarter with MOP153.6 million average growth of 16 per cent since 2012.

Meanwhile, Novo Banco Asia, the Macau (US$19.21 million) profit, according to data subsidiary of the Portugal bank Novo published in the Official Gazette yesterday.

Banco SA, closed the first quarter of 2016 The bank, which belongs to Portuguese with MOP80,859 (US$10,115) profit, while banking corporation Caixa Geral de registering total revenue of MOP13.71 million Depositos, had a total of MOP424.9 million with MOP13.65 million in costs as at March 31. in revenue with MOP271.2 million in costs.

Five-Year Plan Electoral Committee members give their view of Five-Year Plan

All for a better tomorrow Chief Executive Election Committee advises Five-Year Plan improve on education, sustainable development and diversification of economy.

Nelson Moura nelson.moura@macaubusinessdaily.com

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round 150 members of the Chief Executive Election Committee participated in the Five-Year Development Plan hearing session planned by the Government’s Policy Research Office (GEPG) at the Macau East Asian Games Dome convention centre, in order to share suggestions on the current development plan.

Most comments revolved around the need to include more detailed reforms on qualified personnel education, interconnectivity of the cities online systems, sustainable development and diversification of the economy.

The session was presided over by the Director of the Government’s Policy Research Office, Lao Pun Lap, who in his opening remarks stated that: “Macau is witnessing an economic restructuring, and this Five-Year Plan has strategies to improve the life of the population of the MSAR, to make Macau a world centre of tourism, and an intelligent and cultural city,” while remembering the plan was created after a long consultation process with the GEPG and hoping the Election Committee members could help improve it with their opinions.

The Five-Year Development Plan has established as its seven key points maintaining stable economic growth, improving the structure of industries, improving the city’s role as an international tourist destination, improving the quality of life and the quality of education for residents, protecting the environment, strengthening the efficiency of the government and expanding the structure of the legal system.

“The government of China is aware of the plan and wants us to also focus on the economy, innovation and life quality of the population while diversifying the economy and forming more qualified personnel,” Chief Executive Fernando Chui Sai On said in a press briefing prior to the session.

“The government’s Policy Research Office is constantly receiving opinions from the population and we’ve performed many sessions to hear them for different decisions of the Five-Year Plan. Only after considering all opinions will we be able to update the plan,” the Chief Executive told journalists.

Talent for an intelligent city

The session saw 25 members share their opinions on the topics of the plan they believed were lacking in content, with one of the recurring areas being an effort to increase qualified personnel in the MSAR.

Members of the labour sector said only two sections focused on employment in the plan, stating that due to Macau’s current demand for qualified employees there should be a bigger focus on optimising education and the quality of those employees as a way to diminish the unemployment rate. Some suggestions included a database of qualified professionals be created to verify what areas need more human resources.

“When it comes to youth entrepreneurship, if we can create a good young team of professionals we will guarantee the future of government employees and create the basis for Macau’s economic and social development,” said Ho Pui Fan, a member of the Macao Chamber of Commerce. Members of the education and professional sectors also raised education as a crucial issue to increase the quality of employees in the MSAR and increase innovation and entrepreneurship.

Intelligent city

The improvement of the city’s interconnectivity in order to create an “Intelligent City” as envisaged by the FiveYear Plan was considered dependent upon the quality of the education sector to create innovative technology professionals and on the improvement of the city’s Internet system.

“We should use the Internet to improve our services, using the iCloud service and other systems to improve the economy while telecommunications and other operators should collaborate to improve the population access of the information,” said Wong Cheong Nam, a member of the professional sector.

The improvement of the ‘One Stop’ licensing service for food and beverage establishments was considered an example of how efficiency in MSAR departments could be created by better online systems, and improve the environment for SMEs. Wong Ian Man from the industrial sector mentioned “some businesses have to wait more than a year for their licence, while in Hong Kong businesses can receive a temporary licence before the official licence is received. Of course, we have to hear from society but can’t ignore efficiency.”

Traffic issues

Reducing the number of cars and increasing electric or sustainable vehicles was one of the most commonly raised issues lacking in the plan with Tong Chak Sam from the transport sector mentioning that Macau “still has a big traffic problem, with blocked lanes every day,” a situation that harms merchandise transport since unloading areas are normally occupied by light vehicles.

“The traffic management service is obsolete and I hope a reform can be made. On a daily basis we have no choice but to break the law and maybe pay a fine so if the light rail system is not completed and if we don’t see more exclusive lanes for public and goods, transport problems will continue,” Tong told session members.

The possible increase in traffic after the Hong Kong-Zhuhai-Macau Bridge is completed was also addressed, with

members urging the government to develop more alternative means of transport and improve the traffic system before the Bridge’s planned completion in 2017.

Attracting tourists by diversifying

The Five-Year Plan objective to turn Macau into a World Centre of Tourism and Leisure by the mid-2030’s was also addressed with many association members believing this can only be achieved through the diversification of the MSAR economy.

Tam Pou Iong from the labour sector stated he would like to see the government “demanding more of gaming operators” and that gaming companies “realise more non-gaming activities passing from 6 per cent to 9 per cent.” This concern was reiterated by members of the Culture, Hotel and Tourism sector defending nature conservation and the creation of leisure areas while preserving Macao’s unique culture as an essential element to attract tourism.

In the session’s closing remarks Lao Pun Lap stated how the government needs to improve “communication methods to improve the execution of the plan and to reach our goal of sustainable development. It’s the first Five-Year Plan and we need to study and evaluate each question by the members so we can improve it.”

‘Many members believe building Macau into a World Centre of Tourism and Leisure can only be achieved through the diversification of the MSAR economy.’

4 Business Daily Thursday, May 12 2016

Macau Opinion

Ashley Sutherland-Winch Do You Snap?

You may have heard it back in 2011, a cumulative groan heard around the world as people exclaimed, “More social media?!” It’s possible, however, that you may not have really paid attention until 2015 because you thought of it as an app that was a plaything for teenagers; but unless you’ve literally been living under a rock you have heard of Snapchat.

Now, Snapchat is the fastest growing form of social media for people aged 18-34, the demographic of the ‘movers and the shakers’, the consumers, and possibly the most important customer that you have right now. It’s now time for you to start taking Snapchat seriously for your business.

To summarise, the image messaging application software product that exists in twenty languages, including simplified Chinese, allows users to send and receive photos and videos with content or even ads, with statistics reporting that of the 100 million Snapchat users currently on record, 400 million ‘snaps’ or messages are sent per day.

Whether or not you cared in the past, now it’s time to get your business excited about utilising Snapchat for your brand.

Here are a few of the areas that international businesses have started to maximise exposure with the popular app: provide access to live events, deliver private or premier content, offer contests, perks or promotions, take people behind the scenes, and even partner with influencers.

Global brands and content creators are using Snapchat to produce daily stories that engage and excite their audiences. Snapchat stories, a timeline of sorts that only has a life of twenty-four hours, are a string of snaps used to create a video narrative. To date, there are over 1 billion views of Snapchat stories each day and companies are scrambling to build snaps so that their audiences can discover a new and innovative side of their brand with the use of the platform’s tools and features by adding filters, geofilters, text, emojis, music and more, all from within the app.

To be relevant in today’s social media, in a new world where Facebook is now considered ‘social media for grandparents’, Snapchat accounts should be a major part of your brand. I’m really looking forward to seeing more businesses in Macau joining the Snapchat revolution or I fear that just like a Snapchat story your brand’s relevance could quickly become irrelevant in twenty-four hours or - like a snap - gone in ten seconds or less.

Ashley Sutherland-Winch is a Marketing and Public Relations Consultant and frequent contributor to this newspaper.

Energy Prices of vehicle-use petroleum & diesel decrease 6.2 pct in Q1

Cheaper energy Kam Leong kamleong@macaubusinessdaily.com

T

he city registered cheaper costs for buying petroleum, diesel and unleaded gasoline for automotive use during the first quarter of this year as the average oil prices in the international market continued retreating, according to the latest energy survey released by the Statistics and Census Service (DSEC).

For the first three months of the year, average selling prices of petroleum and diesel for vehicle use amounted to MOP10.7 (US$1.3) per litre, down 6.2 per cent compared to MOP11.4 per litre during the last quarter of 2015.

Meanwhile, selling prices of unleaded gasoline for automotive use decreased 5.3 per cent quarter-to-quarter to MOP9.17 per litre

on average compared to MOP9.68 per litre three months ago.

In addition, average costs of bottled liquefied petroleum gas and centralised liquefied petroleum gas posted quarter-to-quarter declines of 1.6 per cent and 1.8 per cent, amounting to MOP13.3 per kilograms and MOP35.6 per cubic metre in the three months, respectively.

In terms of consumption, residents’ use of liquefied petroleum gas soared 20 per cent quarter-to-quarter for a total of 13,814 tons in the first quarter. In particular, consumption of this energy by households surged 24.8 per cent quarter-to-quarter to 4,523 tons.

DSEC explained that such a notable increase in the consumption of liquefied petroleum gas was due to the seasonal effect.

Nevertheless, local total consumption of electricity was down 13.2 per

cent quarter-to-quarter to some one billion kWh, whilst per-capita energy consumption dropped slightly by 0.2 per cent quarter-to-quarter.

On the other hand, Macau’s imports of electricity plunged 22.4 per cent quarter-to-quarter to 778 million kWh during the three months, due to the local generation of electricity surging 38.1 per cent in the quarter, DSEC said.

Imports of fuel oil, meanwhile, jumped 35.5 per cent year-on-year to 39 million litres during the three months, compared to 28.8 million litres three months ago.

Of the total energy consumption of the Special Administrative Region, electricity accounted for 47 per cent, which is down 7.2 percentage points quarter-to-quarter, while fuel oil made up nearly 20 per cent of the total, rising 6.5 percentage points compared to the previous quarter. K.L.

F&B Company posts HK$3.9 mln profit for Q1

Future Bright’s prospects looking up Local restaurant operator Future Bright Holdings Ltd. saw its net profit double to HK$3.9 million (US$487,500) for the first three months of the year compared to HK$1.9 million one year ago, it informed the Hong Kong Stock Exchange yesterday.

The operator claimed that the notable increase in its net profit was attributable to the reduced losses in its three restaurants in Huafa Mall in Zhuhai as well as the improved performance of the company’s food souvenir business.

According to the filing, the company’s turnover derived from the food souvenir business soared 49.2 per cent year-on-year to HK$9.4 million for the three months compared

to HK$6.3 million during the same quarter of the year.

Nevertheless, the total turnover of Future Bright still registered a yearon-year decrease of 6.8 per cent to HK$173.7 million from HK$186.4 million one year prior due to turnover generated by its restaurant business, primarily located in Macau, dropping 9 per cent year-on-year to HK$152.3 million.

‘The management considers that the operating environment in Macau is still quite challenging in 2016 with considerable uncertainty, and much will depend on the incoming number of visitors and the level of their consumption spending,’ it noted in the filing.

For the whole of last year, the restaurant operator dipped in the red from a net profit of HK$168.8 million in 2014, posting an annual net loss of HK$45.9 million due to losses in its food souvenir businesses and Zhuhai restaurants, in addition to lower turnover from its restaurants in the Special Administrative Region. K.L.

Business Daily Thursday, May 12 2016 5

Macau Interim Review Interim results on the gaming industry show ups and downs for local economy and society

Gov’t: Six operators fulfil promises DICJ plans to raise capital requirements for gaming promoters and is preparing to set up a credit database to weed out risky gamblers.

Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

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acau’s casino operators were all found to have ‘fulfilled the capital commitments in their contracts’ during the period under evaluation, with the six investing a total of more than MOP262.31 billion (US$32.82 billion) in the SAR during the period between 2002 and 2014, according to a government-commissioned interim review of the 20-year gaming licences issued.

The Interim Review of Gaming Liberalization for Games of Fortune in Macao: economical, social, livelihood impacts and operating conditions of the Concessionaires covers nine research topics divided into four primary sections: Economy, Society and quality of life of the population, compliance with the contractual obligations and commercial exploitation on behalf of the concessionaires and sub-concessionaires and gaming promoters.

The report was commissioned by the Office of the Secretary for Economy and Finance and conducted by the Institute for the Study of Commercial Gaming by the University of Macau with a delivery date set for September 2015. The results of the research team concluded that the six gaming operators have all fulfilled the capital commitments in their contracts and that the gaming industry has created both positive and negative impacts upon the society and economy of Macau.

Casinos follow through

Of the MOP262.31 billion accrued by all six gaming operators over 13 years, The Venetian Macao was found to have invested most in the territory some MOP86.97 billion - amounting to 33 per cent of the total investment by the casino resorts in the territory.

Melco held the second highest investment, of MOP52.68 billion, amounting to 20 per cent, closely followed

by Galaxy, with MOP50.91 billion,

Secretary for Economy and Finance, Lieonl Leong Vai Tac, gives further details on the “Interim Review of Gaming Liberalization for Games of Fortune in Macao: economical, social, livelihood impacts and operating conditions of the Concessionaires” at a press conference.

making up 19 per cent. These were trailed by Wynn – MOP31.83 billion (12 per cent), SJM – MOP21.89 billion (8 per cent) and MGM – MOP18.02 billion (7 per cent).

The Venetian also led the way by sector, with the proportion of its non-gaming revenues making up 79 per cent of its overall take in 2014, compared to SJM, which made up 98 per cent of its revenue from gaming.

Wynn came a close second, with 87 per cent, while Melco had 91 per cent, MGM 95 per cent and Galaxy at 96 per cent.

Bigger non-gaming

“To make the industry bigger,” noted Secretary for Economy and Finance Lionel Leong Vai Tac, “we shouldn’t just look at gaming revenue, not just quantity […] we hope to help the sector improve the process – how to improve mass market, to increase investment in non-gaming, in other sectors of Macau, this will be our focus,” he stated.

Total non-gaming revenues in 2014 for the six operators generated MOP23.2 billion. In the same year, the report notes, the state of Nevada generated casino revenues amounting to ‘one million or more American dollars’ – corresponding to 44.5 per cent of the overall economic activities undergone - which proves, according to

the report ‘that the division between the revenues from the gaming sector and the non-gaming activities in the MSAR are excessively concentrated.’

This led to the report noting that The Venetian is ‘relatively superior to the rest of the concessionaires/sub-concessionaires’ in the division of gaming and non-gaming activities and the number of employees engaged in these sectors.

Hashers rules on junkets

“We cannot only depend upon a small number of people, a small number of customers to generate the largest revenue. In the face of international competition we need to discover new customers, new growth points,” said Secretary Leong on the sidelines of the interim report launch.

Between 2002 and 2014 the dependence upon gaming promoters has fallen, as the trend shifts towards the mass market. When more than a decade ago, 60 to 70 per cent of the gross profit of casinos came from VIP rooms, notes the report, in 2015 this figure had dropped to around 54 per cent.

The report notes that the main problems facing junket operations are related to: ‘access and termination of activity, increase of negotiating power, credit for play and betting,

Results of the Interm Review Positive Aspects

Negative Aspects

Foreign Direct Investment increased from MOP3.034 billion in 2002 to MOP36.17 billion in 2013

Standard of living affected, especially those less educated have weaker purchasing power due to inflation

Gaming Sector directly/indirectly created 210,000 new job posts till 2014

Elevated housing prices exceed the purchasing power of most residents, creating conflicts and social instability

Unemployment went from 6.3 pct to 1.7 pct from 2002 to 2014

Development of production technology and management level have entered period of stagnation

GDP per capita rose from MOP128,433 to MOP713,514, multiplying 4.6 times from 2002 to 2014

SMEs suffer from rising rent prices, inflation and lack of human resources

Gov. accumulated MOP487.1 billion in financial reserves in 2014, 98 times that registered in 2002

SMEs unable to provide services to largest client- integrated resorts - due to international standards on goods and services, invite-only tenders, huge quantity demand unable to meet by local business

Execution of large-scale public works

Problematic gaming habits - especially for croupiers those in the gaming industry

Total hotel rooms went from 9,000 to 28,000 from 2002 to 2014

Rise in Crime related to gaming affect social order and city's international reputation

Luxury commerce and retail 'contributes to positioning of Macau as tourism and leasure center'

Rise in corruption, public money used for gambling, money laundering

More shows

Criminality associated to gaming compared to total criminal cases registerd rose from 12.8 pct to 25 pct-30 pct from 2002 to 2014

Work productivity reached MOP1.052 million in 2014, import of non-resident workers for management positions and introducing advanced management improved productivity

Overdependence on the gaming sector for work, 1/5 of population employed in gaming sector

Attract elevated invesment to SMEs

Change of traditional value and attitudes towards foreigners

Increase by 34,986 in number of registered companies from 2002 to 2014 Increase in professional training

deposit of funds and chips and their protection, raising funds and deposits,’ and the ‘illicit use of commercial gaming’.

Paulo Martins Chan, Director of the Gaming Inspection and Co-ordination Bureau described the junket operations as “very important to Macau’s gaming industry” and that “we have to recognise its position; we also have to admit that there will be irregularities in junket regulations

262.31 Billion patacas Investment by concessionaires/ sub‑concessionaires in the territory from 2002-2014

and we have to implement regulation to control this.”

The director believes it necessary to create a database relating to junket activity, including debtors, stating that it is “important to the healthy development of the sector”, and noting that, through talks with junket operators the group thinks it’s feasible and that “ we need support from the public and a consensus from the legal sector”. In terms of the department’s activities “anything, any measure that is going to help the development of the sector, as long as it’s legal, we will do it.” This includes increasing the threshold for entry for gaming promoters from its current MOP100,00 to a potential MOP10 million.

Licence renewal

Regarding the renewal of the 20-year concessions on the gaming contracts no decisions were announced, although Secretary Leong noted “We have to be very cautious. We need to know what steps we will take to guarantee our competitiveness in the global arena,” stating a need to have “better soil for the healthy growth of the gaming industry.”

Leong stated that he believed the “Macau people are concerned about the economic development” of the SAR, given its reliance upon the gaming sector, noting that different places in the world, including our neighbouring regions have gaming industries, and that “we need to make the gaming operators aware of the fact that the mass market can be further developed.”

He added at Wednesday’s briefing that the government will also have to consider the quality of life of Macau residents when considering whether to renew casino licences.

6 Business Daily Thursday, May 12 2016

Macau Entertainment

Blue Man Group coming to Macau Founded in New York in 1991, it serves The Blue Man Group show will run from August 11 to 28 at The Venetian Macao Theatre, according to a press release issued by Sands China. The stage show features a combination of science, comedy, music and vibrant visual effects.

The Blue Man Group is a comedy entertainment company, which has performed in more than 15 countries.

to celebrate the human spirit through music, science, art and theatre.

Chris Wink and Phil Stanton, two of the Blue Man characters, also act as Co-CEOs of the company. Chessman Production Ltd. Macau, Sliding Doors Entertainment, and BASE Entertainment Asia together bring this performance to Macau for the first time.

Banking security

Gemalto to provide digital security for Macau banks Nelson Moura nelson.moura@macaubusinessdaily.com

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emalto, a digital security company based in Amsterdam, Netherlands, will provide digital security to Macau banks through Joint Electronic Teller Services Ltd. (JETCO), according to a company press release. Gemalto provides software application and secure personal devices such as smart cards, and its Ezio Mobile Suit, a developed authentication device application for securing mobile banking services, will be included in JETCO, a bank consortium chartered to develop innovative and secure financial technology services for over 21 member banks in Hong Kong and nine banks in Macau.

Gemalto’s authentication application will provide JETCO with servers for mobile enrolment and provisioning, authentication and messaging, while allowing data encryption and advanced protection against malware attacks for

users wanting to make fund transfers from bank accounts to their friends via Peer-toPeer (P2P) payments using mobile numbers, Gemalto stated in its press release.

“JETCO has been investing in mobile technology in recent years to transform themselves from an ATM network operator to a major player in contactless payment services,” said Suzanne Tong-Li, President for Greater China and Korea at Gemalto in the press release.

“With a wide portfolio of secured mobile banking and payment solutions, we can help JETCO to grow their ecosystem even further, offering next-generation services such as cardless withdrawals and payments, eCommerce and mPOSbased payments.”

JETCO is used by eight Macau banks, including Banco Nacional Ultramarino (BNU) and Bank of China (Macau) and currently operates in more than 3,000 ATMs in Hong Kong, Macau and over 20 cities across Mainland China, according to the company’s website.

Funding

Trade

DSE disbursed MOP12 mln in Q1

MIF reinforcing co-operation between regions

The biggest share of the funding - MOP 3.7 mln - was allocated to Macao Motor Car Mechanics Union.

The Industrial and Commercial Development Fund for individuals and private organisations has been released for the first quarter of this year, disbursed by Macao Economic Services (DSE), and signed by the Director of the DSE, Tai Kin Ip, according to the Official Gazette.

Total funds of some MOP12 million (US$ 1.5 million) has been granted, of which the largest amount is about MOP3.7million, accounting for 29 per cent of the total funding,

was allocated to Macao Motor Car Mechanics Union for operating expenses on its Light and Heavy Vehicle Maintenance Plan.

The second largest funding was for about MOP3.3 million, representing 26 per cent of the total, disbursed to China Travel Service Gongbei Port Guangdong, including about MOP89,895 to hold the 2016 3rd Asia Sales Kick-Off Meeting as a sponsorship fund and about MOP3.2 million for running 2016 Pfizer GEP POA. In addition, around MOP1.8 million, which makes up 14 per cent of total funds, was allocated to 116 entities for Financial Support for the Small and Medium Sized Enterprise Plan to sponsor enterprises on construction and the costs of website maintenance, ranging from MOP4,480 to MOP20,000. A.L.

MIF is back in October for three days.

The 21st Macao International Trade & Investment Fair (MIF) will take place from October 20 to 22 at The Venetian Macao-Resort-Hotel, according to a press release issued by Macao Trade and Investment Promotion Institute (IPIM).

Continuing last year’s theme of ‘Co-operation – Key to Business Opportunities’, the 21st MIF seeks to strengthen regional co-operation.

A ‘one-stop ’ platform will be built by partner countries and cities for the first time, featuring an ‘exhibition to showcase products and services, forums discussing thematic topics and business matching’ in order to establish bilateral and multilateral economic co-operation and exchanges.

The three-day event includes thematic forums, seminars, promotional sessions and business negotiations.

An online registration service will be available for enterprises to find potential suppliers and buyers on the online business matching service platform.

MIP attracted business delegations, exhibitors and visitors from over 50 countries and regions last year.

This year’s fair has been reduced to three days from four days last year.

The fair is organised by IPIM and co-organised by 15 Macau, Mainland China and Hong Kong trade and economic government agencies, chambers of commerce and business associations, and is jointly coordinated by the Macao Convention & Exhibition Association, Macau Fair & Trade Association and Association of Advertising Agents of Macau. A.L.

Business Daily Thursday, May 12 2016 7

Macau Aviation

Charter flights to Russia from May 17 Business Daily. ‘The success of launching An air charter company is planning to launch a charter flight service between Moscow in Russia and Macau on May 17, local airport operator Macau International Airport Company Ltd. (CAM) announced yesterday. However, the operator did not indicate the name of the airline due to some details of the service remaining under negotiation, a CAM spokesperson told

this new route will fill up the blanks of the current long-haul routes of Macau International Airport,’ CAM wrote in a press release, adding the charter company is optimistic about the potential of the local market following increasing demands from Delta region passengers to Russia. In 2012, the city signed a mutual travel visa exemption agreement with Russia.

Gaming US$5 mln in basic technical service fee for three-year project

Melco Development to service Jeju Casino project Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

M

elco International Development Limited’s subsidiary Melco Gaming Assets Management (Korea) Limited has agreed terms to provide consultancy services for a casino to be developed in Jeju Island, South Korea, according to a filing with the Hong Kong Stock Exchange.

New Silkroad Korea, a wholly-owned subsidiary of New Silkroad Culturaltainment Limited, owns a majority interest in the casino project – for which Melco will provide ‘consultancy, advisory and technical services, including with regard to the building, equipping and fitting-out of the Casino and the preparation and organisation of the Casino’s marketing activities,’ notes the filing.

The fees payable by New Silkroad Korea for the ‘the first three years of

Management of Melco and New Silkroad pose for a photo.

the proposed arrangement’. amount to US$5 million (HK$38.8 million), with the fee to be ‘satisfied’ by the issuance of stock options to Melco Gaming or its designated party.

The fee amounts to approximately 22.6 million shares at an issue price of HK$1.725 per share, representing

approximately 1.00 per cent of the issued share capital of the company at the time of the announcement.

The group announced that the threeyear period coincides with the period required for the construction of the casino and that any additional technical services fees for further periods – if the casino is not completed in three years time – are ‘payable in cash’.

The agreement still requires Melco Gaming to complete its due diligence regarding financial, legal and business affairs of New Silkroad Korea, ‘to the reasonable satisfaction of Melco Gaming,’ notes the filing.

Mr. Su Bo, Chairman and Executive Director of New Silkroad, said that the partnership would enable the company to “benefit from the extensive experience and expertise of the respected international gaming brand, through its participation in the design and early-stage development of our mega-casino,” expecting the development to have the “highest standards in operations and internal controls” to allow the company to “diversify our business into overseas tourism real estate industry” and “grow into a larger and more sustainable company,” according to a press release published by the group.

New Silkroad holds a 72 per cent equity stake in Development Golden Beach, awarded the eighth of eight gaming licences for Jeju Island, as well as operating a casino on the island, notes the release.

Gaming

Imperial Pacific seeking partners for Saipan project Hong Kong-listed Imperial Pacific International Holdings Ltd. is interested in seeking investors or business partners for the second phase of its casino-resort project on the island of Saipan, the company’s director of Global Capital Markets, Shen Yan, reveals.

According to Mr. Yan’s interview with Hong Kong online financial wire FINET.HK, the casino operator hopes to go for an asset-light strategy for its second-phase project on the island in the Pacific Ocean by seeking co-operation partners such as real estate developers, so that shareholders of the company could have a bigger return by only managing gaming-related business.

Currently, Imperial Pacific is operating a ‘temporary casino- on the Pacific island, which was soft-opened last November, whilst the first phase of its casino-resort project is slated to open during the first quarter of 2017, providing a total of 265 rooms, 250 gaming tables and 400 slot machines.

A recent filing by Imperial Pacific with the Hong Kong Stock Exchange indicates the company’s rolling chip turnover from the VIP segment totalled US$3.2 billion (MOP25.6 billion) in April.

Mr. Yan disclosed to the news outlet that the company’s VIP room in Saipan receives approximately 60 to 70 customers each month, suggesting rolling chip turnover per head amounted to some US$350 million monthly.

Despite the company executive perceiving Saipan has already outpaced Melbourne in Australia to become the fourth biggest gaming market in the world, following Macau, Las Vegas and Singapore, Imperial Pacific announced last week its VIP gaming operations at the casino had already reached saturation for the time being.

The company forecast in another filing last week that its VIP business would stop growing before the completion of its first phase of the casino-resort project there.

As at the end of March, the casino operator operated a total of 16 VIP gaming tables, 32 mass tables and 109 slot machines and electronic table games in its temporary casino, generating gross gaming revenues of some US$186 million for the first quarter of the year.

Gaming

Galaxy boss hopes gov’t greenlights smoking lounges The chairman of casino operator Galaxy Entertainment Group Ltd., Lui Che Woo, expressed his hopes that the SAR Government would not implement a full smoking ban in local casinos and would allow casinos to set up smoking lounges, according to Hong Kong media reports.

The gaming operator boss, speaking to reporters after the company’s annual board meeting in Hong Kong on Tuesday, said the implementation of a full smoking ban would affect casino businesses, urging the government to make a decision based on the situation.

He added that the government should take Singapore and the Philippines as references – where smoking lounges are allowed for smokers, encouraging the government to give the nod to smoking rooms inside local casinos.

On the other hand, Mr. Lui reckons that the city’s two new implementations related to the gaming industry - the ban on phone betting and the application of UnionPay card-terminal with identification systems would not unduly influence Galaxy’s business.

The operator’s deputy chairman, Francis Lui Yiu Tung, also remarked that the company’s performance during the past Labour Day Holiday was not bad, with the casino business stable. He hopes the openings of other new casino projects will attract more visitors to Macau.

8 Business Daily Thursday, May 12 2016

Greater China Funding

Debt-hungry companies fuel local banks’ takeover Mainland’s banks have been aggressively taking market share from foreign banks in the Asian leveraged buyout loans market.

Umesh Desai and Denny Thomas

C

hinese banks have for the first time claimed the top spots for Asian bond market underwriting, on the back of a booming local corporate bond market and increased funding needs of companies in the world’s second-largest economy.

China has hosted the world’s biggest corporate debt market since 2014, and local banks are making hay while regulatory restrictions limit the ability of foreign rivals to compete.

Bank of China, China Construction Bank, Industrial and Commercial Bank of China (ICBC), CITIC Securities and Agricultural Bank of China now sit at the top of the Debt Capital Market (DCM) league table for Asia Pacific excluding Japan for the year to date, Reuters data show.

HSBC, last year’s leader of the table, which covers all local currency bonds, dropped to seventh, while Citigroup slipped to ninth position from second.

“Multi-national companies have

limited finance demand, given the sluggish growth, while Chinese ones are enthusiastically seeking overseas expansion and need capital from offshore markets,” said Leon Qi, China banking analyst with Daiwa Capital Markets.

Among the deals joint managed by Chinese banks was Exim Bank of China’s three-tranche bond raising US$3 billion, the biggest corporate deal of the year.

Chinese banks have also been making inroads in other investment banking business in Asia, including equity capital markets (ECM), which account for about half of investment banking fees in the Asia Pacific region.

Chinese banks now account for eight of the top 10 slots in the ECM league table in Asia, with CITIC, which in 2013 bought Asia-focused CLSA, leading the field.

Chinese banks worked on the two largest Asia Pacific IPOs this year, the US$1.94 billion listing of China Zheshang Bank Co Ltd and the US$990 million offering of Bank of Tianjin Co Ltd. They have also been aggressively taking market share from foreign banks in the Asian leveraged buyout loans market.

Their dominance in Asia extends to the syndicated loan market, where the top three positions as mandated arrangers are already held by ICBC, Bank of China and China Construction

Bank, latest Thomson Reuters data shows for the year to date.

Aggressive overseas expansion

Mergers and acquisitions (M&A) is the only segment where Chinese banks are yet to make a serious dent, with foreign investment banks still taking six of the top 10 slots, led by Goldman Sachs.

Though they have not made inroads in investment banking business outside Asia, they are nevertheless benefiting from funding corporate China’s aggressive overseas expansion as domestic growth slows.

Chinese companies have launched about US$100 billion worth of outbound M&A so far this year, already within touching distance of last year’s record US$104 billion tally.

Chinese banks’ near dominance of Asian DCM has been driven by domestic companies’ increasing switch to bonds

in the yuan currency, also known as the renminbi (RMB), which come with lower coupon rates than dollar bonds.

“Chinese financial institutions are taking advantage of this shifting market landscape to cater to the financing needs of their customers and grow their own presence in the capital markets offshore,” said Daiwa’s Qi. According to Standard & Poor’s, China’s corporate debt market, at an estimated US$16.1 trillion outstanding, dominated the Asia-Pacific region’s US$25.5 trillion aggregate and is a significant portion of the global total of US$50.5 trillion.

S&P expects Chinese corporate debt to hit US$28.5 trillion by 2019 or 40 percent of the global sum.

“The onshore RMB market is huge versus the other local currency markets

Key Points Chinese banks take top 6 slots in Asia ex-Japan DCM league HSBC slips to 7th from 1st in 2015, Citi to 9th from 2nd China banks aided by world’s largest corporate bond market Foreign banks hamstrung by regulatory restrictions

Market outflow

Hong Kong ETF shows global traders just don’t like city’s stocks Net outflows since the end of June last year now total US$1.5 billion.

Whether Hong Kong stocks rally or slump, investors in the biggest U.S. exchange-traded fund tracking the equities just want out.

Traders have pulled a net US$142 million from the iShares MSCI Hong Kong ETF in May, poised for an 11th straight

month of net outflows and the longest string of declines on record. While the underlying stock index has fallen 2.6 percent this month, investors were net sellers even in March, when the gauge staged its biggest rally in four years.

The U.S.-listed ETF tracks

the MSCI Hong Kong Index, which represents largely local companies including Hong Kong Exchanges & Clearing Ltd., developer Sun Hung Kai Properties Ltd. and utility CLP Holdings Ltd. The gauge tumbled 3.4 percent last week, spurring investors to pull a net US$125 million from the ETF - the second-largest net sales in a year.

Net outflows since the end of

June last year now total US$1.5 billion. A 9 percent surge by the gauge in March failed to entice investors, who yanked US$31 million that month.

Investors are turning to other country ETFs, with developing-nation funds in particular luring capital, says Joshua Crabb, Hong Kong-based head of Asian equities at a unit of Old Mutual Plc. The iShares MSCI Emerging Markets ETF drew net inflows of US$2.6 billion this year, while Vanguard FTSE Emerging Markets ETF is on course for a third straight month of inflows, data compiled by Bloomberg show.

Better choices

In recent years, buying and holding Hong Kong shares has been a poor investment compared with major peers. The MSCI Hong Kong index has risen 4.3 percent in total over the past five years, compared with average annual inflation of 4.2 percent during the period. The MSCI All-Country World Index advanced 14 percent, with Japan’s Topix index and the S&P 500 climbing more than 50 percent.

Valuations make the case

“The property index is already coming down, so why should people buy Hong Kong?”

Pu Yonghao, Chief investment officer of Fountainhead Partners

for buying Hong Kong stocks.

Their lagging performance has left the MSCI measure of the city’s shares trading at a 38 percent discount to MSCI Inc.’s global gauge on a price-earnings basis. The city also comes out well on Transparency International’s corruption perceptions index and its foreign currency debt is rated AAA

by S&P Global Ratings, while many of its largest companies have overseas earnings that shield them from a stuttering local economy.

Property gloom

Still, challenges are piling up for Hong Kong’s economy, which is projected to grow at its slowest pace in four years this year. Retail sales plunged 12.5 percent in the first quarter amid falling numbers of mainland visitors.

For Fountainhead Partners, it’s uncertainty over the property market that makes Hong Kong stocks most unappealing to foreign investors. Home prices have fallen 13 percent from last year’s peak and analysts warn the worst is still to come. Higher U.S. interest rates would boost borrowing costs, thanks to the Hong Kong dollar’s peg to the greenback. Real estate developers and owners have a 27 percent weighting in the MSCI Hong Kong index.

“Global investors don’t look at Hong Kong as an ideal market because Hong Kong is mostly driven by real estate and trade,” said Pu Yonghao, chief investment officer of Fountainhead Partners, which oversees about US$600 million. “The property index is already coming down, so why should people buy Hong Kong?” Bloomberg News

Business Daily Thursday, May 12 2016 9

Greater China Financial risks

in the Asian region, and recently we are seeing a lot of the Chinese issuers turning homewards to issue debt,” said a DCM banker at one of the top five Chinese banks.

Last month, Agile Property raised 1.2 billion yuan (US$184 million) in 4-year bonds at a coupon of 5.8 percent, substantially lower than the coupon range of 8.25-9 percent attached to its dollar-denominated bonds over the previous five years.

In the first quarter of this year Asian issuance of bonds in the ‘G3’ currencies - U.S. dollar, euro and yen - has fallen 16 percent as the pipeline slowed following three record years.

“This is the reason why there is a skew, as Chinese local bond markets are expanding amid a slowing G3 bond market,” said the banker. Reuters

In Brief

Regulator tells some banks not to issue certain products Classified asset management products are very risky products, particularly when the market is volatile.

China’s banking regulator has asked some commercial banks to suspend issuance of classified asset management products, in Beijing’s latest effort to curb financial risk amid a rising number of debt defaults, people with knowledge of the matter said yesterday.

The China Banking Regulatory Commision (CBRC) transmitted the so-called window guidance, a sort of informal administrative edict, orally, the three people said.

The CBRC did not give an immediate comment when contacted by Reuters.

Classified asset management products each have two sub-products, one priority and one secondary. The former is promised repayment first in the event of losses, but returns are smaller. The latter carries higher returns but bears the brunt of losses.

Typically, classified asset management products are very risky products, particularly when the market is volatile.

“The guidance was conducted orally, without giving reasons,” said a source.

“However, regulators are apparently worried about bond defaults or off-balance sheet risk, with urban commercial banks’ businesses typically more

radical than major banks.”

Chinese markets are pricing in increasing risks following an unprecedented number of defaults this year. A long list of high-yield bond issuers in the US$8 trillion domestic debt market are due to make debt payments this month.

The CBRC, in a move to rein-in the rapidly growing ‘shadow loans’ industry, told commercial lenders earlier this month to properly account for lending products that may appear on their balance sheets as lower-risk investments.

“Classified asset management products are not the mainstream of urban commercial banks’ businesses,” said a bank senior executive.

“Regulators are just sending a warning, which, however, will have a relatively bigger impact on those with stronger asset management capabilities.”

Among around 150 city commercial banks, those already listed in the Shanghai and Shenzhen stock exchanges fall into the category referred to by the executive, such as Bank Of Beijing Co Ltd and Bank of Nanjing. Reuters

‘Chinese markets are pricing in increasing risks following an unprecedented number of defaults this year’

Auto industry

State planner says auto sector shows signs of capacity glut Many of the production facilities being built were planned while auto sales in China were still booming at double‑digit rates.

Winni Zhou and Jake Spring

China’s automotive industry is seeing the emergence of structural overcapacity as market growth slows, the country’s top planning body and the automakers’ association said in a joint statement yesterday.

Idle production capacity rose significantly last year, as sales in the world’s largest auto market tapered in an economy expanding at its the slowest rate in 25 years.

The statement issued by the National Development and Reform Commission (NDRC) and the China Association of Automobile Manufacturers (CAAM) indicated that the problem may worsen, with capacity to produce 6 million more vehicles currently being built.

China had capacity to build 31.2 million vehicles in 2015, the pair said in the statement, compared with sales of 24.6 million that year.

China’s Premier Li Keqiang has vowed to take on overcapacity in industry, as the country shifts away from an investment- and heavy industry-led economy toward consumption and more value-added manufacturing.

The latest statement, issued to reporters at a press conference in Beijing, gave directives for how to avoid worsening overcapacity.

“First, as commercial vehicle capacity utilisation is low, it is not appropriate to blindly increase investments in

production capacity,” the two bodies said.

“Secondly, investment in the battery space is hot, while companies are fragmented and technology and development levels are uneven. We must guard against low-level redundant investments.”

The industry must strengthen development and commercialisation of new products and technologies, raise production capacity utilisation and launch cooperation in international production, according to the NDRC and CAAM statement.

Overcapacity has yet to hit passenger vehicles, however, with a “relatively reasonable” 81 percent capacity utilisation rate for the segment, compared with 52 percent for commercial vehicles, the pair said.

Many of the production facilities being built were planned while auto sales in China were still booming at

double-digit rates, rather than accounting for the new norm of single-digit sales growth.

Vehicle sales in China rose 6.3 percent in April from the same month last year to 2.1 million units, CAAM said.

That compared with an 8.8 percent year-on-year rise in March, and a 0.9 percent fall in February.

In the first four months of 2016, sales grew 6.1 percent as compared with the previous year, the association said, just above its prediction of 6 percent growth for the year. Reuters

Key Points Capacity for 6 mln units being built Warns of overcapacity in commercial vehicles, batteries Auto sales grew 6.3 pct y/y in April

Vice premier

Nation will meet economic growth goal China’s economy faces downward pressure but will be able to meet its economic growth target for the year, China’s vice premier Zhang Gaoli (pictured) said at a forum in Beijing yesterday. Growth in M2 money supply slowed in April versus March, Zhang said at a meeting on tax administration hosted by the OECD. M2 money supply grew 13.4 percent in March. China has set a target for 6.5 percent to 7 percent GDP growth in 2016, after growth fell to a 25-year low of 6.9 percent in 2015.

Media warning

“National Team” should refrain from frequent trading China’s “National Team” of state-backed investors should refrain from frequent trading, as their recent “buy low, sell high” strategy distorts stock market behaviour and discourages new investors, the state-run Economic Information Daily reported on Wednesday. “National Team” investors, which include the China Securities Finance Corporation, and the Buttonwood Platform Ltd, a unit of China’s foreign exchange regulator, trade too frequently, and have effectively become counter-parties for other market players, the newspaper, affiliated to the official Xinhua News Agency, said.

City leaders meeting

Mainland, U.S., New Zealand to pioneer economic links Around 600 business leaders from China, the United States and New Zealand will gather in Auckland next week as part of a new municipal alliance between the three countries. The summit of the Tripartite Economic Alliance in Auckland aims to set a new standard for how modern cities could engage and collaborate, said Auckland city Mayor Len Brown yesterday. In November 2014, the mayors of Auckland, Guangzhou and Los Angeles signed the world-first Tripartite Economic Alliance agreement, and began working together to enhance trade and economic relations.

Going public

BOC Aviation to launch IPO on Monday Aircraft leasing company BOC Aviation Pte Ltd plans to launch its Hong Kong initial public offering on Monday, aiming to raise about US$1.1 billion with a rare fixed-price listing, IFR said, citing people close to the deal. Singapore-based BOC Aviation, an arm of Bank of China Ltd, will likely sell shares at a fixed price equivalent to 1.1 times its 2016 price-to-book value, Thomson Reuters publication IFR reported yesterday.

A fixed-price flotation is unusual, with most IPOs setting an indicative range before deciding on the final pricing, depending on demand.

10 Business Daily Thursday, May 12 2016

Asia Monetary policy

Bank of Korea likely on hold in May Data out late in April showed South Korea’s economic growth halved in the first quarter from the previous period.

South Korea is expected to keep interest rates on hold this week but may cut in June or July to improve economic conditions for on-going corporate restructuring in the shipping and shipbuilding sectors.

Twenty-four out of 26 analysts surveyed in a Reuters poll said yesterday they expect the Bank of Korea (BOK) to keep its monetary policy rate unchanged at 1.50 percent this week, while the remaining two forecast a cut to 1.25 percent.

All those who saw a hold said it would be due mainly to the central bank board’s four new members

making their debut at this Friday’s meeting and adjusting to proceedings.

For the central bank’s next move, 17 out of the 24 who saw a hold this week forecast the bank would lower rates in either June or July. Six respondents saw no change through year-end while one gave no forecast on future movements.

Three analysts out of the entire poll said they saw two rate cuts before year end.

“Indicator-wise, it isn’t the right timing for the board to cut rates as they were left unchanged in April despite all the bad numbers in the first quarter,” said Yoon Yeo-sam, fixed-income analyst at Mirae Asset Daewoo Securities.

“If the government comes out with a supplementary budget or some stimulus somewhere between June through August then we might see a rate cut for policy coordination then.”

The central bank, government and

related parties such as the country’s financial regulator are currently discussing, with a June 30 deadline, a plan to inject capital into state-run banks exposed to troubled shipbuilders and shipping lines should those banks suffer a credit crunch, sparking financial jitters.

South Korea, which has the world’s three largest shipyards including Hyundai Heavy Industries Co Ltd and Samsung Heavy Industries Co Ltd has seen all three sustain record

Key Points 24 out of 26 analysts see base rate frozen this week First rate meeting for 4 new board members Majority see rate cut in June or July

losses last year and almost no new build orders so far this year due to weak oil prices.

All the analysts polled agreed that a rate cut, if one occurs, would be aligned with government efforts to keep economic growth steady during the shipping industry restructuring process.

The BOK may also want to analyse the U.S. Federal Reserve’s policy meeting in mid-June for clues on when the Fed may raise interest rates, some analysts said.

Data out late in April showed South Korea’s economic growth halved in the first quarter from the previous period as poor exports and weak capital investment hobbled activity.

Policymakers have said the second quarter is bound to be better, but analysts have expressed scepticism over this optimistic outlook.

Sentiment has improved, with consumers and manufacturers feeling better about economic conditions, but exports continued to fall in April, extending the declining streak that began January last year - the longest on record. Reuters

Monetary policy

Thailand holds key rate, sees higher risks to growth Deflation finally ended as annual headline consumer prices in April rose for the first time in 16 months.

Orathai Sriring and Kitiphong Thaichareon

Thailand’s central bank kept its key interest rate unchanged yesterday, as expected, saying the current monetary policy remained conducive to economic recovery.

The Monetary Policy Committee (MPC) voted unanimously to leave the oneday repurchase rate at 1.50 percent, where it has been since April 2015, and a quarter point above the record low during the global financial crisis.

“The committee judged that the Thai economy would continue to expand at a rate close to the previous assessment but face greater downside risks on the domestic front,” the MPC said.

“Current monetary conditions eased further as bond yields remained low, and commercial bank lending rates declined,” it said.

“Therefore, the policy rate should be kept on hold to preserve policy space.”

Bank of Thailand Assistant Governor Jaturong Jantarangs said that cutting the policy rate alone “won’t help increase consumption and investment because monetary policy is not an impediment to that”.

All but one of 21 economists polled by Reuters predicted the rate hold, as benign consumer prices gives

policymakers leeway to keep rates low.

Deflation finally ended as annual headline consumer prices in April rose for the first time in 16 months although the gain was tiny.

Headline consumer prices would gradually rise as the base effect of high oil prices waned, the MPC said.

Saving the bullet

“The MPC will think about saving the bullet for later if need be,” said Charnon Boonnuch, senior economist at Tisco Securities. “We see no policy change this year.”

Key Points Committee votes 7-0 to keep policy rate at 1.50 pct C. bank says current rate level conducive to economy Sees higher risks from slowing consumption, investment Says economy should still grow close to forecast

Prices rose again in April.

However, some still expect a rate cut. Jack Chambers, senior economist of Moody’s Analytics in Sydney, predicted one by the end of the second quarter.

Uncertainty stemming from Thailand’s coming constitutional referendum may crimp domestic demand further, he added.

Although an army coup in May 2014 ended months of political unrest, the junta has struggled to revive Southeast Asia’s second-largest economy. Exports and domestic demand remain weak, the latter due to high household

debt, low farms prices and drought.

The junta has introduced stimulus measures as well as stepped up spending and investment plans in a bid to lift growth, although big infrastructure projects have been slow to get started.

The BOT forecast economic growth of 3.1 percent this year. Growth last year was 2.8 percent.

Consumer confidence hit a seven-month low in April, according to a university’s index, while car sales have yet to recover after three years of contraction. Reuters

Business Daily Thursday, May 12 2016 11

Asia In Brief Shops performance

Indonesia March retail sales grow

Indonesia’s retail sales in March grew 11.6 percent from a year earlier, a much faster pace than the prior month mainly due to better sales of spare parts and accessories and other household equipment, a Bank Indonesia survey showed yesterday.

February annual retail sales growth was revised to 10.6 percent from an initial 9.9 percent. The survey of 700 retailers in 10 major cities expect growth in April to be slightly slower at 11.3 percent, due to weaker sales growth in information and communication equipment.

Real estate

Singapore’s housing rental prices keep downward trend

Real estate

New Zealand central bank concerned about house prices The RBNZ has previously tightened lending rules to curb soaring house prices.

N

ew Zealand’s central bank is “increasingly concerned” about the nation’s overheated housing market, Governor Graeme Wheeler said, possibly slowing the pace of further monetary easing as fresh data showed home prices reached record highs last month.

The housing market has long been a source of concern for the central bank, in particular in the nation’s largest city, Auckland.

“We are concerned about the rate of house price inflation in Auckland,” Wheeler said at a media conference on Wednesday after presenting the central bank’s twice-yearly Financial Stability Report.

Analysts said the rapid rise in housing values could make the RBNZ cautious about further easings after it slashed rates to a record low 2.25 percent earlier this year.

“Tension will remain for the time being between the monetary policy and financial stability objectives. In the short term this may continue to temper the RBNZ’s willingness to cut the OCR much further,” said ASB Chief Economist Nick Tuffley.

The central bank kept its benchmark

interest rate unchanged in late April but reiterated further easing may be needed given weak inflation.

Some analysts expect another rate cut in June, although worries around house price inflation may delay any more easings.

“Data was a reminder that a lower OCR is not without its risks, and highlights the need for more non-OCR measures to tackle housing demand,” said ANZ Bank Senior Economist Mark Smith.

Wheeler said because of the risks from house inflation the bank will “seriously” look at further

“It’s not just Auckland. We are seeing house price pressures building up elsewhere in the country” Colleen Milne, Real Estate Institute of New Zealand chief executive

macro-prudential tools to curb lending. These could include speed limits around debt-to-income levels.

The RBNZ has previously tightened lending rules to curb soaring house prices and it said yesterday that those measures have reduced the share of risky lending on bank balance sheets.

The central bank said there was no time frame to present any new measures.

“We need to do more analysis and have discussions with the finance minister,” said Wheeler.

Data from the Real Estate Institute of New Zealand (REINZ) yesterday showed New Zealand house prices rose 1.4 percent in April, while sales volumes rose a seasonally adjusted 12.8 percent.

REINZ chief executive Colleen Milne said in a statement that a “chronic lack of supply” was driving prices across New Zealand.

Yesterday, Wheeler said policymakers’ concerns over home prices went well beyond Auckland.

“It’s not just Auckland. We are seeing house price pressures building up elsewhere in the country,” he said. Reuters

Tycoon on the run

India’s bid to bring home tycoon Mallya rebuffed The 60-year-old Formula 1 boss is the subject of a non-bailable warrant issued by a special judge in Mumbai.

India has failed in its initial attempt to secure the return of debt-strapped tycoon Vijay Mallya from Britain but New Delhi said yesterday it would continue to seek his repatriation to face his creditors.

Mallya flew to London two months ago, under pressure from bankers

seeking to recover about US$1.4 billion owed by his collapsed Kingfisher Airlines. He has since said he is living in “forced exile”.

India, which has revoked Mallya’s diplomatic passport, requested on April 28 he be deported but now acknowledges there is no immediate prospect this will happen because Mallya has the right to remain in Britain.

Vikas Swarup, spokesman for the Ministry of External Affairs, said the British government had told India that Mallya does not require a valid passport as long as it was valid when his leave to remain in the country was granted.

“At the same time the UK acknowledges the seriousness of the allegations and is keen to assist Government of India (GoI),” Swarup said in a statement to Reuters. “They have asked GoI to consider requesting mutual legal assistance or extradition.”

The 60-year-old Mallya, a Formula

1 boss known as the “King of Good Times” for his party lifestyle, is the subject of a non-bailable warrant issued by a special judge in Mumbai.

India’s Enforcement Directorate, a government agency set up to fight financial crime, has accused Mallya’s UB Group of using 4.3 billion rupees (US$64 million) of bank loans to Kingfisher to buy property overseas.

Creditors, led by State Bank of India, have rejected an offer of partial repayment by Mallya, who had given a personal guarantee for the Kingfisher loan.

They have demanded that the former billionaire attend a hearing in India’s Supreme Court.

Mallya has denied wrongdoing, calling the charges against him “preposterous”. He has also offered a settlement to his creditors that they have so far refused to consider. No comment was immediately available from a Kingfisher spokesman. Reuters

Singapore’s rental prices for public housing units fell further in April, while rental prices for private apartments stayed the same, according to data by the Singapore Real Estate Exchange (SRX) yesterday. Singapore’s rental prices for public housing units fell by 0.6 percent in April from March. On a year-on-year basis, the rental prices for public housing flats built by the Housing and Development Board (HDB) dipped by 4.3 percent in April. Rental volume also declined by 2.2 percent, with an estimated 2,048 flats rented in April, SRX Property said.

Fisheries

Myanmar sets national fishing quota Myanmar has set national fishing quota at 100,000 tons based on a survey of fish resources, official media reported yesterday. The survey was conducted in 2013 and 2015 by local and foreign experts including those from FAO. The 100,000 tons were prescribed as the estimated fishing quota out of the current fish population of 560,000 tons, according to an official from the Department of Fisheries. Fish floating volume above water dropped from 1 million tons to 110,000 tons according to the 19791980 and 2013 surveys with a decline of 90 percent.

Pharma industry

International medical expo starts in Vietnam The 23rd Vietnam MediPharm 2016 kicked off in Vietnam’s capital Hanoi yesterday, drawing participation of 350 domestic and international exhibitors.

Those exhibitors from 30 countries and regions include Bangladesh, Belgium, China, the Czech Republic, Germany, China’s Hong Kong, China’s Taiwan, India, Indonesia, Israel, the Republic of Korea, Japan, the Netherlands, Malaysia, the Philippines, Poland, Russia, Singapore, Sweden, Thailand, the United States, and Vietnam among others, said the website of the expo. Over 450 booths at the expo will showcase materials, pharmaceuticals, pharma-chemicals, pharmaceutical processing, manufacturing, packaging equipment and machinery, among others.

12 Business Daily Thursday, May 12 2016

Asia Bank heist

Bangladesh theft probe said points to three hacker groups The central bank has been roiled since the hack was disclosed in March, and several officials have stepped down.

I

nvestigators examining the theft of US$81 million from Bangladesh’s central bank have uncovered evidence of three hacking groups - including two nation states - inside the bank’s network but say it was the third, unidentified group that pulled off the heist, according to two people briefed on the progress of the bank’s internal investigation.

FireEye Inc., the company hired by the bank to conduct the forensics investigation, identified digital fingerprints of hacking groups from Pakistan and North Korea, the two people said. It hasn’t found enough data to determine whether the third group, the actual culprit, was a criminal network or the agent of another nation.

The twists and turns add to the mystery of who pulled off one of the largest cyber heists in history.

The hackers, pairing theft with havoc within the global financial system, used the Swift inter-bank messaging system to move cash into fake accounts in the Philippines but were discovered before they could complete an attempted transfer totalling US$951 million.

The U.S. Federal Bureau of Investigation suspects an insider with access to the computers at the Bangladesh central bank played a role in the caper, according to the people briefed on the investigation. Police in Bangladesh said they have found negligence within the bank but haven’t determined whether there was any criminal intent.

Spokesmen for Pakistan’s interior and information technology ministries didn’t respond to requests for comments. Telephone and e-mailed requests for comment to North

Korea’s delegation to the United Nations went unanswered.

‘Weak link’

A year in the making, the hacking scheme ran through the Swift messaging system and the central bank’s accounts at the Federal Reserve Bank of New York, exposing crucial weaknesses in the global financial system.

Government officials in the Philippines and Sri Lanka are investigating where the purloined money may have gone. Members of the U.S. Congress have asked for additional information about whether there were lapses in security by institutions duped in the scam.

Hundreds of billions of dollars are moved internationally through the Swift system daily. The group warned users last month that it was aware of several similar attacks. It didn’t indicate whether it suspected the same hackers or whether more money was taken.

Skilled perpetrators

The Bangladesh forensic results, provided to the bank in the last few days, highlight the challenges of identifying skilled perpetrators in cyberspace, where hackers can mimic others and route their actions around the world to confuse trackers.

The people briefed on the investigation agreed to provide details for this article only if not identified, citing the small circle of people who have been briefed so far.

“These guys started to lay the groundwork for their hack or their robbery a year ago. They set up their false accounts, with false IDs” Leonard Schrank, Swift’s chief executive officer for 15 years through 2007

On Tuesday, the new head of Bangladesh’s central bank met in Basel, Switzerland, to discuss the investigation with officials from the New York Fed and Swift. In a brief joint statement, the parties said they were committed to recovering the proceeds of the fraud, bringing the perpetrators to justice and working together “to normalize operations.”

Representatives for the New York Fed, Swift and Bangladesh central bank declined to provide additional details about the progress of the investigation. Vitor De Souza, a spokesman for FireEye, declined to comment on the report.

USB port

FireEye was unable to determine how the thieves first entered the Bangladesh bank’s network, according to one of the people. One possibility is that malware was introduced into the network by someone inside the bank or a technician working with the bank. Malware can be introduced quickly onto a network by someone inside with something as simple as a thumb drive in an open USB port. The forensics investigation hasn’t found any evidence of this, the person said.

The potential role of any insider is still being investigated. The FBI has been assisting the inquiry at the request of the Bangladesh central bank.

Jillian Stickels, a spokeswoman for the FBI in Washington, declined to comment on the investigation. The Wall Street Journal reported earlier Tuesday that the FBI suspected the involvement of an insider.

The Bangladesh Bank hasn’t yet been able to determine whether an employee was involved, according to a panel it appointed to review the incident. An official from Bangladesh’s police said it hasn’t received information from the FBI about a possible insider and that no arrests had been made.

Bangladesh officials have sought to cast Swift as bearing some responsibility, this week releasing details about Swift technicians who made upgrades to the bank’s system late

last year. Reuters previously reported on the officials’ findings.

The way that technicians from Swift set up the network at Bangladesh Bank “was not according to the agreed plan,” Shah Alam, a senior official in Bangladesh’s Criminal Investigation Department, told Bloomberg on Tuesday.

“We have also found that some officials at Bangladesh Bank who were in charge of maintaining the network fell short of their responsibilities,” he said, adding that police were still trying to determine if the officials’ actions went beyond pure negligence.

Such allegations are false, inaccurate and misleading, Swift said in a statement on its website.

Moral responsibility

The Bangladesh central bank has been roiled since the hack was disclosed in March, and several officials have stepped down. Atiur Rahman resigned as Bangladesh’s central bank governor, saying he took moral responsibility after failing to immediately inform the Finance Ministry of the theft. Two of his deputies were also removed.

Attribution of a breach is notoriously difficult, even for the U.S. government. In this case, the task was hampered as investigators sifted through the handiwork of multiple hacking groups, attributing the heist at various stages of the investigation first to one group and then the next, according to one of the people briefed.

Hackers used the Swift system to make illicit payments to accounts in several countries, creating sophisticated malware designed to operate on the bank’s Swift messaging system.

As the hackers navigated through the bank’s network unseen for weeks, they deployed a smorgasbord of tools that included two pieces of malware dubbed Nestegg and Dyepack, according to one of the people briefed on the report.

The ease with which the hackers manipulated the interbank system and the significant resources used to create and customize the malware raise the possibility of more attacks against international institutions, people involved in the bank probe said.

Simple errors

After scouting the computer system, the hackers impersonated bank officials, sending instructions through the Swift system to move nearly US$1 billion to several bank accounts in several countries.

Most of the transfers were stopped or reversed because of simple errors made by the hackers, including a spelling error. Clues to the missing millions have led from computers in Bangladesh to a colourful cast of characters including a bank manager and casino operators in the Philippines and the head of a non-profit foundation in Sri Lanka.

Swift, which stands for Society for Worldwide Interbank Financial Telecommunication, is a cooperative that is a vital component in global interbank transfers. It has said that its systems weren’t compromised but that messages were sent through its system by attackers who appeared to have “good knowledge of the bank systems and their security procedures.” Bloomberg News

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Business Daily Thursday, May 12 2016 13

Asia Commodities

Japan’s biggest traders see no recovery in sight The top five trading houses had a combined US$11 billion in impairment charges in the year ended in March.

Stephen Stapczynski and Ichiro Suzuki

Japan’s top trading houses see no recovery on the horizon for the commodities crash that forced some of the first-ever annual losses by the champions of the nation’s economy, accelerating their shift away from energy and raw materials.

The country’s five biggest traders all expect further declines in oil, which has already slumped about 60 percent over the past two years. Mitsubishi Corp. sees prices sliding 19 percent in the current fiscal year, while rival Mitsui & Co. sees a 15 percent decline. Itochu Corp. sees Brent, the global benchmark, slumping almost 29 percent.

“The negative price pressure on metals and fuels will continue for the next two or three years,” Tatsuo Yasunaga, Mitsui chief executive officer, told reporters Tuesday. “We must waste no time strengthening our non-resource businesses.”

The forecasts illustrate the predicament Japan’s “sogo shosha,” or general trading houses, find themselves in after investing heavily in metals and energy at the height of the commodities boom. The companies, which supply everything from gasoline to noodles in resource-poor Japan, are now seeking to diversify businesses and assets away from energy and mining projects.

The top five trading houses had a combined 1.23 trillion yen (US$11 billion) in impairment charges in the year ended in March as the value of metal, oil and gas assets declined. In particular, Mitsubishi booked a 271 billion yen charge on a copper project in Chile, while Sumitomo Corp. recorded a 77 billion yen write-down

on a nickel venture in Madagascar.

Mitsubishi’s stock price has plummeted about 30 percent in the past year, while Mitsui has dropped 22 percent. That compares with a 15 percent decline for Japan’s Nikkei 225 Stock Average.

Natural gas

Mitsui forecast an 8.7 percent decline in Henry Hub natural gas prices to US$2.4 per million British thermal units, while Mitsubishi assumes copper will fall 11 percent. Sumitomo expects iron ore to average US$50 a ton, down from US$56, and sees thermal coal falling to US$60 per ton from US$65.

The bearish forecasts come even as crude rebounded from a 12-year low earlier this year on signs a global oversupply will ease. The International

‘The nation’s top two trading houses, Mitsubishi and Mitsui, reported this week their first ever annual losses’

In Brief Energy Agency said last month that global production from outside the Organization of Petroleum Exporting Countries will plunge by 700,000 barrels a day this year even as demand increases by 1.2 percent.

The nation’s top two trading houses, Mitsubishi and Mitsui, reported this week their first ever annual losses. The companies, which anticipate oil prices remaining stagnant for as long as three more years, both aim to strengthen non-resource businesses.

Mitsui expects its energy-related business to break even in the current fiscal year after booking more than 70 billion yen in impairment charges on gas and oil projects last year, according to CEO Yasunaga.

Itochu Corp., Japan’s third-biggest trader by market value, has been diversifying away from energy and posted the highest profit among the traders. It sees Brent crude averaging US$35 in the year ending March.

The global benchmark has averaged US$43.69 in the current fiscal year through May 9.

Mitsubishi is aiming to increase investments in non-resource areas including consumer goods manufacturing and motor vehicles, while Mitsui plans to shift investment into infrastructure projects, food business and TV shopping. One of Sumitomo’s largest profit contributors the previous fiscal year was its Media, IT Solution, Network & Supermarket division that includes a stake in Japan’s largest home shopping network. Bloomberg News

Thailand will shutter its largest gold mine by the end of the year after the government said concern the project was damaging the environment and sickening workers outweighed its economic benefit.

Kingsgate Consolidated Ltd., the Australian producer which operates the Chatree mine through its Akara Resources Pcl unit, halted its shares yesterday in Sydney and said it’s seeking clarification of the situation.

Kingsgate got 62 percent of full-year revenue from the operation in fiscal 2015, according to data compiled by Bloomberg.

Akara must close and rehabilitate the Chatree mine, about 280 kilometres north of Bangkok, once its metallurgical plant ceases operations by the end of this year, Industry Minister Atchaka Sribunruang said Tuesday. The company had been

Toyota Motor Corp forecast on Wednesday a bigger than expected 35 percent tumble in net profit for the current year, snapping three straight years of record profit, hit by a sharp appreciation in the yen.

After net profit rose 6.4 percent in the year ended March to 2.31 trillion yen (US$21.26 billion), Toyota is forecasting it will drop this year to 1.5 trillion yen. That is far short of an average estimate of 2.25 trillion yen for the current year, based on predictions from 28 analysts polled by Thomson Reuters I/B/E/S. Monetary push

Australian consumer mood brightens A measure of Australian consumer sentiment jumped in May as expectations for economic conditions and family finances improved markedly after last week’s cut in interest rates to all-time lows. The survey of 1,200 people by the Melbourne Institute and Westpac Bank showed its index of consumer sentiment climbed 8.5 percent in May, from April. That left the index 0.8 percent higher versus May last year at 103.2, meaning optimists outnumbered pessimists. The index was at its highest since January 2014.

Japan’s sales tax decision after G7 summit

Thailand to shut largest gold mine

Suttinee Yuvejwattana, Supunnabul Suwannakij and David Stringer

Toyota forecasts 35 pct net profit fall

LDP lawmaker

Environmental action

A decision to shutter the facility comes after Thailand’s government ordered a review of Chatree last year following complaints from local residents.

Results

seeking a five-year renewal of Chatree’s metallurgical license, which was scheduled to expire Friday. The government will allow the company to run the plant to the year-end, it said.

Contamination inquiries

A decision to shutter the facility comes after Thailand’s government ordered a review of Chatree last year following complaints from local residents. The announcement came “as a complete surprise” to Akara, which said it has “proven conclusively that we cause no harm to the health of our community or to its environment.”

Kingsgate was ordered last year to temporarily suspend output and conduct inquiries into concerns about potential arsenic and manganese contamination in nearby villages. The producer doesn’t use either arsenic or manganese at the site, though it does use cyanide, it said at the time.

“We need to make the decision for the public’s benefit and to solve the conflicts” Atchaka Sribunruang, Australia’s Industry Minister

A government-commissioned report presented to Thai ministers last month offered a “scientific rebuttal of unsubstantiated and vexatious allegations of contamination,” the producer said in the April filing.

“Even though there is no clear conclusion whether the environmental and health impact and problems of local residents comes from Akara’s gold mining, we need to make the decision for the public’s benefit and to solve the conflicts,” Atchaka told reporters in Bangkok.

Chatree output

The Chatree mine produces about 130,000 ounces of gold annually and has operated for 15 years, according to a Kingsgate filing last month. The project generated 52 billion baht (US$1.5 billion) in revenue in that time, and provided the government with about 7 billion baht in royalties, Atchaka said. Chatree is capable of at least 7 more years of production, according to Kingsgate.

“From the end of December, there will be no gold mine until the issues are clear,” Thailand’s Prime Minister Prayuth Chan-Ocha said in response to questions over the move. The government will need to assist more than 1,000 workers who will be affected by the decision, he said.

Chatree is Kingsgate’s only producing asset after it completed the sale of its Challenger gold mine in Australia in March. Bloomberg News

Japanese Prime Minister Shinzo Abe could make a final decision on a sales tax increase planned next year after Group of Seven summit between May 26-27, a ruling party lawmaker and one of the architects of the premier’s economic policy said yesterday. Kozo Yamamoto, a Liberal Democratic Party (LDP) lawmaker, said the decision rested with Abe on whether to press ahead with the planned increase in the tax from 8 percent to 10 percent in April next year. There is speculation that Abe could postpone the tax increase due to the stagnant economy weak consumer spending.

Recall costs

Takata looks at restructuring Japan’s Takata Corp posted its third annual loss in the past four years, hit by costs for recalls of its potentially deadly airbag inflators and said it was considering a drastic review of its inflator division and the sale of non-core businesses. It also said it has appointed a team of five experts to help with its restructuring plan which it hopes to have in place by autumn. The company reported a full-year net loss of 13.1 billion yen (US$120 million) for the year ended in March.

14 Business Daily Thursday, May 12 2016

International In Brief Colombia’s Santos

UK leaving EU would be “big mistake” Colombian President Juan Manuel Santos said yesterday it would be a “big mistake” for Britain to leave the European Union when it holds a referendum on its membership of the bloc next month.

“I lived here for 10 years. I consider London my second home and from my personal point of view, it would be a very big mistake to leave the European Union,” Santos said in response to a question at a meeting with investors in London. Other foreign leaders, including U.S. President Barack Obama and Japanese Prime Minister Shinzo Abe, have said they think Britain should stay in the EU. OECD

Panama joins global tax info sharing deal Panama, rocked by a recent major tax scandal, has joined around 100 countries in an agreement to share financial information automatically to tackle tax evasion, the Organisation for Economic Cooperation and Development said yesterday. The information sharing scheme was already in the works when Panama came under pressure after the leak of thousands of confidential documents from a Panamanian law firm in April showed their failure to cooperate in global efforts to clamp down on tax evasion by the rich and powerful. Bahrain, Lebanon, Nauru and Vanuatu are also signing up to the agreement on automatically swapping tax information.

Socialist Party rebellion

French government to impose labour reform by decree The decision to invoke special constitutional powers underlines the deep rifts running through the ruling Socialist Party.

Michel Rose and Ingrid Melander

U

nable to put down a rebellion within their own ruling party, French President Francois Hollande and his Socialist government on Tuesday opted to force unpopular labour market reforms through the lower house of parliament without a vote.

Prime Minister Manuel Valls announced the move after the collapse of talks with rebel Socialist lawmakers over the bill, which seeks to make hiring and firing easier. It follows weeks of trade union and student-led street protests.

“It is my duty to move forward and make sure this text is adopted,” Valls told parliament after an emergency cabinet meeting.

“I won’t apologise for this: this bill is good for businesses and it is good for workers,” he said, as opponents of the bill booed and fellow ministers applauded in support.

The decision to invoke special constitutional powers underlines the deep rifts running through the

ruling Socialist Party a year ahead of presidential elections and Hollande’s own weakness ahead of declaring whether he will run for re-election.

“It’s a heavy-handed way of using the constitution to prevent the nation’s representatives from having their say,” Laurent Baumel, a rebel Socialist lawmaker told reporters, calling the decision “anti-democratic”.

Hollande’s move not to compromise with his own legislators sends a signal to international investors and ratings agencies, who have for years pressed for more pro-market reforms in the euro zone’s second largest economy.

But it also exposes France’s most unpopular leader in recent memory to a vote of confidence, quickly called by opposition conservatives.

A no confidence vote by lawmakers in the lower chamber today would dissolve Valls’ government. However, despite the divide within the party, the government is expected to survive.

Key Points Government skips parliament on key labour reform Decision exposes divisions within ruling Socialist party No-confidence vote scheduled for today

Lawmakers to the left of the Socialist Party said they would try to gather enough signatures to put forward their own no-confidence motion.

The option to push legislation through by decree is made possible by a rarely used clause in France’s constitution - known as 49.3 - which underlines the strong powers wielded by the executive under France’s presidential system.

It is the second time in as many years Hollande and Valls have used the clause, having last year rammed a law through parliament which loosened up Sunday trading rules and regulations in the transport and legal sectors.

France has some of the most protective labour regulations in the euro zone. The government says the proposed legislation will encourage companies to hire and bring down a jobless rate that is stuck above 10 percent.

Although Valls diluted parts of the labour bill in March, the bill retains measures giving more flexibility to employers to agree in-house deals with employees on working time.

It also offers companies less restrictive conditions for layoffs made for economic reasons.

Hollande has said he will only run for a second term if he succeeds in creating jobs. Government opponents said Hollande’s time was up.

“We are witnessing the slow but certain demise of the government,” conservative lawmaker Eric Ciotti told reporters. Reuters

Diplomatic gaffe

Just return stolen assets, Nigeria’s Buhari tells UK PM Nigerian President Muhammadu Buhari said yesterday that he did not want an apology from Prime Minister David Cameron for calling his country “fantastically corrupt”, but said Britain could return assets stolen by officials who fled to London.

“I am not going to demand any apology from anybody.

What I am demanding is the return of the assets,” Buhari told an anti-corruption event hosted by the Commonwealth Secretariat in London. “This is what I’m asking for. What would I do with an apology?” he said to cheers from many civil society organisations and Nigeria delegates in the audience.

Verdict

U.S. judge rules tycoon Wyly committed tax fraud Texas tycoon Sam Wyly engaged in “deceptive and fraudulent actions” in a yearslong scheme to dodge taxes on more than US$1 billion held in offshore trusts, a federal bankruptcy judge ruled on Tuesday. U.S. Bankruptcy Judge Barbara Houser ruled that there was “clear and convincing evidence” against Wyly who will be required to pay, according to the Texas Law Book, as much as US$1.4 billion in back taxes and penalties. The Internal Revenue Service had initially sought US$3.22 billion in back taxes, penalties and interest from Wyly and Caroline Wyly.

French Prime Minister Manuel Valls.

Civil engineering

America’s infrastructure US$1.44 trillion short through 2025 The American Society of Civil Engineers estimated that from 2016 through 2025, each household will lose US$3,400 annually because of infrastructure deficiencies.

Hilary Russ

America will fall US$1.44 trillion short of what it needs to spend on infrastructure through the next decade, a gap that could strip 2.5 million jobs and US$4 trillion of

gross domestic product from the economy, a report from a society of professional engineers said on Tuesday.

The American Society of Civil Engineers (ASCE) estimated that through 2025, the United States has funded only about 56 percent of its needed infrastructure spending.

The nation needs to spend US$3.32 trillion to keep its ports, highways, bridges, trains, water and electric facilities up to date but has funded only US$1.88 trillion of that, ASCE said. The shortfall rises to US$5.18 trillion through 2040 without new funding commitments.

U.S. GDP was US$18 trillion in 2015, according to the International Monetary Fund.

“America is currently spending more failing to act on its infrastructure gap than it would to close it,” said Greg DiLoreto, past president of ASCE and chair of the Committee for America’s Infrastructure.

Examples of major U.S. infrastructure failures abound, from

Flint, Michigan’s drinking water crisis to travel delays at New York’s LaGuardia Airport and the deadly 2007 I-35W Mississippi River bridge collapse in Minneapolis.

Crumbling infrastructure “has a cascading impact on our nation’s economy, impacting business productivity, gross domestic product, employment, personal income, and international competitiveness,” said the ASCE report, an update to a previous report released three years ago.

It also dampens families’ disposable income. From 2016 through 2025, each household will lose US$3,400 annually because of infrastructure deficiencies, ASCE said.

Since its last report, most areas have been stable or shown modest improvement and have been buoyed by recent federal, state and local investments.

But surface transportation has worsened, with the gap increasing compared to previous studies, the group said. Reuters

Business Daily Thursday, May 12 2016 15

Opinion Business Wires

New Zealand Herald Labour leader Andrew Little said Prime Minister John Key’s ejection from Parliament in Question Time was “shameful” and showed he had “lost control.” Mr Key was thrown out of Parliament yesterday after he kept talking in a robust exchange about the Panama Papers despite the Speaker turning off his microphone and telling him to sit down. Green co-leader James Shaw had demanded Mr Key apologise for his claim that Greenpeace and Amnesty were implicated in the Panama Papers, when the charities had been used without their knowledge in sham trusts.

Of Trump and Treasuries - the story is no story

The Straits Times Regulators said yesterday that they are looking into the latest leaks to come out of the Panama Papers, and will take action if any Singaporean named in the cache is found guilty of wrongdoing.

The joint statement from the Ministry of Finance and Monetary Authority of Singapore came after the International Consortium of Investigative Journalists (ICIJ) unveiled data on some 200,000 offshore entities set up by wealthy individuals around the world. The ICIJ put up the data onto a searchable online database early Tuesday morning. The data, which comes from nearly 40 years of archives of Mossack Fonseca, includes records on thousands of Singapore-linked entities.

Bangkok Post The Small and Medium Enterprise Trade and Service Sentiment Index (TSSI) rose to 100.4 in March, rebounding from a big drop in February when severe drought and weak purchasing power cut the index sharply, according to the Office of Small and Medium Enterprises Promotion (Osmep). Osmep’s director Salinee Wangtal said March’s TSSI was up from 92.6 in February because of the improved performance of both the trading and service sectors as a result of the government’s stimulus packages. She attributed the better performance to government spending and measures to improve the livelihood in rural areas.

Inquirer.Net Presumptive President Rodrigo Duterte captured the imagination and votes of millions of Filipinos but he remains relatively “unknown” in business circles in Metro Manila, causing a degree of anxiety over how the economy will fare under his term. Already, there are calls among the business elite for details of his business policy, possible form of government and his Cabinet line-up, starting with who will lead the Department of Finance and the National Economic and Development Authority, an analyst said. Business leaders polled by the Inquirer all revealed a similar line of thinking—that Duterte needed to reveal more about his views on how to sustain the country’s economic growth.

I

t is a testament to, er, something, that a man with Donald Trump’s track record becomes the presumed Republican nominee for President, says the things Trump says and has little discernible impact on financial markets.

Trump, no stranger to bankruptcy court, first indicated last week that “I would borrow knowing that if the economy crashed, you could make a deal” and then moved on Monday to reassure that, after all, the U.S. can’t default because it can “print the money.” Treasury markets, where investors trade what are supposed to be the world’s safest securities, were singularly unmoved.

Do investors not believe Trump, not believe in Trump or simply don’t believe he’ll make much difference to current policy even if successful in his bid for the presidency?

The answer is probably a mixture of all three, with a bit of the perverse incentives through which investment advisors are paid thrown in just for good measure.

For his part, Trump swears up and down his comments about “a deal” weren’t indicating a partial or soft default, though his explanation fails to make clear the economic benefit of a deal to swap older debt for new, especially one that was voluntary on both sides.

I cannot recall any modern major party presumptive nominee who ever said anything that might possibly be construed as meaning the U.S. wouldn’t honour debts in full or keep the dollar strong.

In the world I thought I lived in, investors in U.S. government debt trade the prospect of higher returns elsewhere for unrivalled liquidity and security. Donald Trump on the other side of the table when things turn bad is not what these investors sign on for.

Mind you, Donald Trump in the White House is very likely not what they will get, at least if the very preliminary polls are to be believed. So perhaps they don’t believe in Trump’s chances and are dismissing his debt management expertise along with his many other plans few believe will come to pass.

He may, after all, not mean what he says. Who could possibly know? Would you like to bet?

“Trump’s stated economic policies are at times conflicting and often changing, which also makes it difficult for investors to interpret the possible consequences,” Libby Cantrill of bond investment giant PIMCO wrote in a note to clients.

“What are investors supposed to do with a candidate whose economic ideology is divergent

“

James Saft Reuters columnist.

from that of his party’s, not to mention often inconsistent and fluid?”

Perhaps the most optimistic explanation is that investors have faith that U.S. institutions are strong enough to withstand a President Trump, or take comfort in the constraints the law puts on the power of the president.

Not paid to be right

As usual, to understand how financial markets react to events we should recall how participants are paid and under what terms of engagement they operate. The vast majority of investment managers, the people who make the decisions about buying and selling Treasuries and other assets, aren’t paid to be “right” but paid to beat the market or their peers.

The risk for them isn’t, strictly speaking, the risk of loss but the risk of underperformance. Losses come and go, but underperformers lose assets under management and sometimes get fired. So taking a big bet on your ability to anticipate not only the American electorate but one Donald Trump is perhaps not a great idea for you personally or for your clients.

None of which is to say that markets won’t begin to react to Trump as we get closer to the election and get more information about his prospects and plans.

Remember too that during the debt-ceiling crisis of 2011 prices of Treasuries rose, partly due to the fear a government shutdown or default would be bad for the economy and partly because, in a world of imperfect credits, the U.S. remained, and remains, the best. Stock markets, by the way, won’t like it so much.

Jeffrey Gundlach, CEO of DoubleLine, and as such a power in the bond markets, has said, variously, that Donald Trump will win the election and that his policies on trade would actually benefit Treasuries, which will rally in price on expectations that economic growth would be hit.

Still it is hard to under-sell exactly how strange this whole situation is, which is perhaps another reason for how calm things remain.

Extrapolating from economic policies is one thing, no longer trusting the good faith of the heretofore most creditworthy borrower in the world is quite another. Reuters

I cannot recall any modern major party presumptive nominee who ever said anything that might possibly be construed as meaning the U.S. wouldn’t honour debts in full or keep the dollar strong.

”

16 Business Daily Thursday, May 12 2016

Closing Cross-Strait cooperation

Mainland, Taiwan to discuss cooperation in fraud crackdown

discussions on April 21, the mainland will continue to enhance cross-Strait cooperation to fight crime, better protect victims’ Work groups from the Chinese mainland and Taiwan will discuss interests and achieve judicial and social justice, Ma said. A Taiwan delegation arrived in Beijing on April 21 to discuss telecom fraud cross-Strait cooperation in fighting telecommunications fraud from May 12 to 14 in Zhuhai in south China’s Guangdong Province, with mainland police. They also visited a Beijing detention center that was holding 45 alleged telecom fraud criminals from Taiwan said a mainland spokesperson yesterday. The discussions will who were deported from Kenya last month. The spokesperson be held under the framework of the cross-Strait agreement on said the mainland had received applications to visit from the joint crime crackdown and mutual judicial assistance signed in families of the detainees, and would receive them from May 15 in 2009, said Ma Xiaoguang with the State Council Taiwan Affairs accordance with relevant regulations. Xinhua Office at a press conference. Based on a previous round of

International organizations

OECD and IEA ponder divorce after years of friction Energy markets have changed radically as non-IEA China has overtaken the United States as the biggest energy user and the shale revolution has turned the latter into a net exporter.

Bate Felix and Barbara Lewis

T

he West’s energy watchdog, the International Energy Agency, faces a possible legal split from its parent body following decades of

friction and fresh disagreements over cooperation with China, a document seen by Reuters shows.

Any divorce from the Paris-based founder, the Organisation for Economic Co-operation and Development (OECD), might complicate funding and confuse governance of the IEA, whose role includes coordinated stocks releases to address global oil shortfalls.

The dispute also highlights the complexity of cooperation between China and Western organisations such as the OECD, which has a stated commitment to democracy and market economies.

An OECD document, seen by Reuters, said that its council sent a letter to the IEA in April proposing a separation, citing years of IEA resistance to OECD rules on administration,

financial audits and the China issue.

“The IEA started negotiating with China in 2016 to establish an IEA centre in Beijing, without prior consultation with the OECD which, as the IEA was aware, was itself negotiating with China to create a policy centre and a country office,” the document said.

The OECD declined to comment, as did an IEA spokeswoman, who said any separation would be a decision for member states.

Created in 1961 to stimulate economic progress and world trade, the OECD originated from the Organisation for European Economic Co-operation, set up in 1948 to help administer the Marshall Plan to reconstruct Europe with U.S. financial aid.

The IEA was established in 1974 at the proposal of U.S. Secretary of State

Henry Kissinger to help industrialised nations deal with the oil crisis after the Arab embargo squeezed supplies and sent prices surging.

Since then, energy markets have changed radically. OPEC no longer has the same power, non-IEA China has overtaken the United States as the biggest energy user and the shale revolution has turned the latter into a net exporter.

The IEA’s Executive Director Fatih Birol has made strengthening ties with emerging powers the agency’s top priority, choosing China for his first trip into the job and breaking with the practice of previous chiefs, who began their tenure by visiting an IEA country.

Should a separation take place, the OECD said it would “assist and support the IEA to ensure that the productivity and effectiveness of the IEA remain unimpaired during transition”.

But it also said that it would then be up to “the IEA member countries to provide the IEA with all the necessary powers and capacities to administer itself as a fully independent international organisation.”

Compared with the much bigger OECD, which groups 34 of the world’s leading economies and has about 2,500 staff, the IEA has 240 employees and 29 member states, all of which are also OECD members.

Under its autonomous status, its governing board consists of energy ministers of member countries, which contribute four fifths of its budget of around 27 million euros (US$30.74 million) with the rest generated from sales of publications.

Douglas Hengel, a former U.S. diplomat who liaised with the IEA and is now at the German Marshall Fund think-tank, predicted that member states would prefer to retain the current status of the IEA rather than make it just another department of the OECD or an entirely independent body.

“I think it’s a tempest in a teacup kind of issue,” he said. “I don’t think the member states will want to change.” Reuters

Official meeting

M&A

PM’s aide

Obama to visit Vietnam from May 22 to 25

Hutchison-O2 deal halted by EU

U.S. wants Japan to refrain from FX action

U.S. President Barack Obama is scheduled to visit Vietnam later in May, according to Vietnam’s Ministry of Foreign Affairs (MoFA) yesterday.

The visit will be made on May 22-25 at the invitation of Vietnamese leaders, MoFA’s Press and Information Department told Xinhua.

Meanwhile, the White House said Tuesday in a press release on its website that Obama will visit Vietnam “where he will hold official meetings with Vietnam’s leadership to discuss ways for the U.S.-Vietnam Comprehensive Partnership to advance cooperation across a wide range of areas, including economic, people-to-people, security, human rights, and global and regional issues.”

In Vietnam’s capital Hanoi, Obama is expected to deliver a speech on U.S.-Vietnam relations while at meetings and events in Hanoi and Vietnam’s southern economic hub of Ho Chi Minh City, he will discuss the importance of approving the Trans-Pacific Partnership in 2016, said the press release.

Obama will also meet with members of civil society, the Young Southeast Asian Leadership Initiative, entrepreneurs, and the business community, according to the White House. Xinhua

The European Union blocked CK Hutchison Holdings Ltd.’s bid to create the U.K.’s biggest mobile carrier, the latest setback to consolidation that telecommunications operators say they need to funnel money into new networks.

Hutchison’s plan to buy Telefonica SA’s U.K. mobile-phone business for as much as 10.25 billion pounds (US$14.8 billion) and merge it with its Three unit risked raising prices and shrinking choice for customers, the European Commission said yesterday. The companies’ pledges to increase investment and freeze prices didn’t do enough to appease antitrust concerns, the EU authority said.

“We had strong concerns that consumers would have had less choice finding a mobile package that suits their needs and paid more than without the deal,” EU Competition Commissioner Margrethe Vestager said in an e-mailed statement on Wednesday. “It would also have hampered innovation and the development of network infrastructure.”

The EU ban is a blow to tie-ups in the fragmented European mobile industry. Regulators cleared previous deals that reduced the number of operators to three on condition that the merging companies offer space to smaller rivals. Bloomberg News

U.S. policymakers are “pretty clear” in their views that Japan should refrain from any steps to intentionally weaken the yen, such as intervention in currency markets, a key economic adviser to Prime Minister Shinzo Abe said yesterday.

Japanese financial authorities thus face a tough situation, with few options to contain unwelcome yen rises, said Koichi Hamada, an emeritus professor at Yale University who has close contacts with senior U.S. and Japanese policymakers.

“U.S. authorities have been pretty clear in their views that they don’t want Japan to do anything to weaken the yen further,” Hamada told a seminar in Tokyo after having met several senior policymakers in the United States.

“For Japan, it would be a choice of enduring (unwelcome yen rises) a bit longer, or intervene in the market,” knowing that doing so could anger the United States, he said.

Japanese policymakers have escalated their verbal warnings to investors against pushing up the yen too much, with the finance minister saying Tokyo will intervene if “one-sided” yen rises last long enough to hurt the economy. Reuters