Singapore orders BSI bank unit shut as 1MDB probe widens Investigation Page 11
Wednesday, May 25 2016 Year V Nr. 1050 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor kelsey wilhelm Public Administration
Central recruitment system to apply to all public positions
Gold Moon reportedly closes VIP room in Wynn Macau Page 5
Property
Shun Tak to acquire land parcel in Singapore for HK$827 mln Page 5
Yuan outflow control
Mainland insurance purchases in HK face further scrutiny Page 10
Stock connection Markets Hong Kong stock market is speeding up plans. To connect with Chinese bond markets. Based on the Shanghai-Hong Kong experience. The idea is to enable global banks to expand their offshore yuan interest rate portfolio. Page 8
Somewhat affordable Inflation The city’s inflation continues to slow. Hitting its lowest point in five years and seven months - at 3.02 pct y-o-y for April. Last month’s jump reflected higher parking space rentals, more expensive eating out and hikes in the price of motorcars and tobacco, now easing. Page 3
HK HSI May 24, 2016 19,830.43 +21.40 (0.11%) Galaxy Entertainment
Leap of Faith
+2.32%
Sands China Ltd
+2.20%
China Construction Bank
+1.52%
Cathay Pacific Airways Ltd
+1.49%
Hong Kong & China Gas
+1.12%
Tingyi Cayman Islands
-3.17%
China Unicom Hong Kong
-2.73%
Li & Fung Ltd
-2.44%
CNOOC Ltd
-2.10%
PetroChina Co Ltd
-1.35%
China Resources Power
-1.12%
25° 30° 25° 30° 26° 29° 26° 30° 26° 31° Today
THU
FRI
eSports Page 6
I SSN 2226-8294
SAt
SUN
Source: Bloomberg
Cheung Kong Property
Tourism Expert opinions are divided. On the reality of attracting an estimated 40 mln tourists per year by 2025. Per the recently announced gov’t plan. The timely completion of much of the city’s infrastructure is a vital component in the mix. With much riding on the Hong KongZhuhai-Macau Bridge, and the city’s competitiveness vis-à-vis the allure of its neighbours. Page 2
Game changer China produces the largest number of eSports players. Permitting changes to betting regulations on competitive tournaments could thus be lucrative. In a nascent industry in which Europe alone expects to see cash betting grow to US$24 bln by 2020.
+5.04%
Source: AccuWeather
Page 4
Gaming
www.macaubusinessdaily.com
2 Business Daily Wednesday, May 25 2016
Macau
Capacity
Experts divided on new tourism master plan Tourism experts divided on estimated 40 million visitors in 2025 but agree the plan should focus on regional competitiveness Nelson Moura nelson.moura@macaubusinessdaily.com
H
ospitality and tourism experts are divided over the possibility of the city receiving an estimated 40 million visitors in 2025, as presented in the ‘Macao Tourism Industry Development Plan’ (Master
Plan) by the Macao Government Tourism Office (MGTO). The tourism plan estimates that total visitor arrivals in a modest visitor growth scenario could go as high as 40 million, with 5 per cent yearly growth, a scenario University of Macau Associate Professor in Hospitality and Gaming Management Ka Chio Fong told Business Daily was possible.
However, data from the annual Macao Tourism Carrying Capacity Study conducted last year showed that the optimal number of visitors per year shouldn’t exceed 33.7 million. The report was based upon data from the previous year, 2014, and was conducted by the Institute for Tourism Studies (IFT). Professor Ka Chio Fong is still confident that the city will be ready for the estimated increase of visitors if all major projects by the government are concluded on schedule and competition from other Asian countries doesn’t increase. The professor considers nine years to be sufficient time for a large number of infrastructure projects to be completed in the territory - such as the Hong Kong Zhuhai-Macau Bridge, and the lightrail system. On the other hand, José Wong Weng Chou, Assistant Professor at the Faculty of Hospitality and Tourism Management at the Macau University of Science and Technology (MUST), considers the estimated number to be too “optimistic, because when the study was being conducted the economy was still growing, while currently it is slowing down.” “I believe the problem is not if it will be 40 million but if we will maintain the current 30 million visitors, if the number will stay stable,” Professor Weng Chou told Business Daily.
It’s competitiveness, stupid
“In a couple of years there are a couple of new casino resorts opening and according to statistics released
The challenges and solutions
In the tourism Master Plan current land scarcity in the city together with the under-utilisation of the waterfront and a large number of old districts were considered the biggest constraints to improved tourist visitor capacity. As such, MGTO proposed mediumterm measures to upgrade the amenities of all cross border facilities, transport, public space and shopping areas and other visitor spaces through coordinated urban planning. The Macao International Airport was said in the study to be at a 91 per cent rate of utilisation, with MGTO proposing the potential to use the planned Hong Kong Zhuhai-Macau Bridge to connect with the Hong Kong International Airport and explore its more numerous connections with international airports, or link Macau with other Mainland Chinese cities through high speed
by the government a lot of hotels applied for construction. If those hotels are constructed on time I think we can achieve that number of rooms,” the UMAC professor told Business Daily. However the professor still thinks the necessity of affordable accommodation is debatable, since although there is a linkage between number of rooms and tourist numbers, regional competitiveness should also be taken into consideration. “We need to look around in Asia to position ourselves in a correct rate. If you look at Southeast Asia now, in the last 10 years only Macau developed integrated resorts rapidly but I’m not so sure how many integrated resorts will be built in Asia, including the Philippines, Hong Kong and South Korea. Macau is very small so we don’t need to downgrade ourselves to charge less, it depends on demand and supply. If a lot of locations around Asia are demanding lower rates there’s no need for us to match the competition,” the professor told Business Daily. Professor Weng Chou also agreed Macau’s market placement when compared to its regional competitors is essential for the territory’s tourism future. “It’s very good to have the Bridge to Hong Kong and Zhuhai but if visitors decide to go to other cities we cannot make them stay in Macau. We need to improve the competitiveness but I believe the most important thing is to improve our infrastructure, Wi-Fi, roads and nature sights,” Professor Weng Chou stated.
railway networks, as 90 per cent of visitations originate from Greater China. Public transportation was also considered a major issue with most visitors choosing tour buses, walking or non-motorised vehicle to visit the city, preferring shuttle buses operated by the hotels. However, the low average of daily utilisation of shuttle buses, at 33 per cent, was considered a main cause of road congestion in Macao. The increase in affordable tourism accommodation was also considered paramount in the study, as 60 per cent of current rooms are located in 5-star hotels, with the study estimating that in a moderate visitor scenario the number of rooms could increase as much as 35.83 per cent to 51,500 rooms in 2025, while the percentage of overnight stays would increase 6.4 per cent.
Business Daily Wednesday, May 25 2016 3
Macau Inflation Local average prices increase 3.02 pct in April
Inflation lowest in 5.7 years
Tobacco prices continue to surge as inflation slows
Prices in the city have slowed their rate of ascent, to the lowest in more than five years. Kam Leong kamleong@macaubusinessdaily.com
T
he city’s inflation continues to slow down, hitting the lowest point in five years and seven months - at 3.02 per cent year-on-year for April - the latest data released yesterday by the Statistics and Census Service shows. Last month, the city’s composite consumer price index (CPI) reached
108.03 compared to 104.86 one year ago. The inflation rate, compared to 3.31 per cent growth in March, was down 0.29 percentage points. This inflation rate is the lowest since September 2010 – when inflation of 3.83 per cent was registered. According to DSEC, the year-onyear jump in the city’s overall prices last month were due to higher rentals for parking spaces, increasing fees for eating out as well as rises in the price of motorcars and tobacco. During the month, tobacco prices surged nearly 65 per cent year-onyear, driving the price index of alcoholic beverages and tobacco up by 37.2 per cent year-on-year, whilst costs for education increased nearly 9
per cent year-on-year in the month, due to higher tuition fees. In addition, DSEC said higher rentals for parking spaces and the increased price of motorcars caused the price index of transport to register a year-on-year growth of 7.6 per cent in April. However, prices of clothing and footwear, as well as communication costs, posted year-on-year declines of 3.48 per cent and 0.93 per cent, respectively.
Costlier clothing than March
In a month-on-month comparison, the city’s overall prices went up 0.03 per cent compared to March, due to the prices of clothing and footwear jumping 2.18 per cent
month-on-month on account of new arrivals of women’s summer clothing and footwear. Moreover, higher prices of gasoline and motorcars also drove costs of transport up 0.58 per cent compared to that of March, according to the DSEC. Nevertheless, the price index of housing and fuels dropped 0.47 per cent month-on-month in April driven by lower housing rentals asked by landlords coupled with reduced charges for electricity. In addition, costs for recreation & culture dropped by 0.29 per cent month-on-month due to lower prices for package tours. For the first four months of the year the average inflation of consumer goods amounted to 3.5 per cent yearon-year, due to a 38.2 per cent rise in the price of alcoholic beverages and tobacco, as well as the 8.9 per cent and nearly 7 per cent hike in the cost of education and transport, respectively. On the other hand, the average CPI rose 4.09 per cent for the 12 months ended April this year, compared to the previous period. As in the monthly results, increased prices for alcoholic beverages and tobacco as well as that for education were the main factors pushing up prices in the period. CPI-A, which relates to about 50 per cent of households spending between MOP10,000 (US$1,250) and MOP29,999 monthly, recorded yearon-year growth of 2.95 per cent for April and 3.53 per cent for the first four months of the year. Meanwhile, CPI-B, which covers about 30 per cent of households spending MOP30,000 to MOP54,999 monthly, posted yearon-year increases of 3.62 per cent for last month and 3.29 per cent for January to April.
4 Business Daily Wednesday, May 25 2016
Macau Opinion
Trade
Macau-Belgium trade value reaches US$43 million
José I. Duarte Not good enough The media perform an essential role as sources of information for all the members of our increasingly complex societies end economies. The relationship between all kinds of organisations, public or private, and the media is not always easy – nor is it meant to be. But it is critical for the workings of our societies that both sides strive to make the information conveyed relevant, clear and objective. These thoughts came to my mind as I was reading some recent news in the local press. BNU is requesting its customers, as the law on private data protection requires, to allow them to share their information with the corporate owners in Portugal. There is nothing extraordinary in that. But as we read the news, several concerns pop up. They become more disquieting the more one reads. It is never specified what kind of information we are talking about. Personal data, we are told; but its exact scope is not well defined. Personal data can be just customer identification, or all the data related to a customer that the bank possesses. It’s vague. Is the request restricted to some types of data, or is it an open-ended request for any kind of information that the bank holds or will ever hold on the customer, known or unknown to the latter? Is the authorisation assumed to be perpetual? Can it be revoked? One justification the bank invokes for the request amounts to a general principle of good banking governance –‘Know your customer’. It seems somewhat odd as one has to assume that BNU knows their customers. If not, transmitting their information - or lack thereof - to any entity outside is unlikely to be of much use. Another mentions the need to disclose customer information for the purpose of ‘consolidated supervision.’ There seems to be no effort to inform the public or the customers about what exactly is meant by that supervision, or the nature of individual customers’ information. And will other banks be under the same obligations? Other aspects might be mentioned, but a full dissection of the matter is beyond the purpose here. On a sensitive topic, where many public and private, collective and individual interests cross and, at times, collide, the news failed somehow. One side seems to have made no effort to go as far as it could; the other failed to demand as much as it should. The result is, I dare to say, unsatisfactory. José I. Duarte is an economist and permanent contributor to this newspaper.
on Monday at a Belgian chocolate event. According to Ms. Ung, the trade exchange between the two The value of bilateral trade between Macau and Belgium parties includes a variety of trade types encompassing products as well as services. She estimated that Macautotalled US$43 million (MOP344 million) for the first Belgium bilateral trade will further develop in the quarter of this year, a jump of 43.3 per future. Meanwhile, the Consul General of Belgium in cent compared to some US$30 million Hong Kong, Michèle Deneffe, said on Monday for the same period of 2014, executive that there are only some 25 Belgians member of Macao Trade and working in the Special Administrative Investment Promotion Institute Region at the moment. (IPIM) Glória Batalha Ung said
Public administration
Central recruitment system to apply to all public positions
T
he government is planning to expand the scope of the central recruitment system for civil workers to all job levels, the director of the Public Administration and Civil Service Bureau (SAFP) Kou Peng Kuan disclosed in a reply to legislator Si Ka Lon’s interpellation. Currently, the central recruitment system of the government is only adapted to the hiring of senior officers and assistant officers of public bodies. The directly-elected legislator enquired whether the current policy would lead public departments to avoid opening jobs for the two positions as the procedures of the central recruitment system are more complicated than those of other public hiring channels. But the SAFP head claimed that the government would widen the current scope of the central recruitment system. “[The scope] will be expanded to all the job positions under law number 14/2009, which covers 14 ordinary positions and 20 special positions of officers and administrative assistants,” the official wrote. He added that the future amended recruitment system would be divided into two stages. The examination for the first stage - on general abilities - would be executed by the SAFP, whilst only examinees passing the first stage would have the opportunity to take the next examination related to their professions. “SAFP would also provide instructions for the second stage of examinations, such as the examination
procedures, feasible evaluations and standards, in order to make the whole recruitment process fair, equal and transparent,” the Bureau head claimed. The central recruitment system for
public servants, implemented in the middle of 2011, has been under review following last year’s Policy Address. According to Mr. Kou, the government is currently drafting the bill amending the current regulations. K.L.
Land
STDM
CEM expects clearance of Morais Power Station this year
Stanley Ho’s sister involved in legal battle over STDM shares
Local sole power distributor CEM – Companhia de Electricidade de Macau - expects the company will vacate its Macao Power Station in Avenida de Venceslau de Morais in the northern district of the Peninsula within this year, the company’s advisor to the executive committee, Iun Iok Meng, said yesterday. The CEM advisor told reporters that the company’s environmental assessment of the removal of the current station’s chimney and the aged power generators would be completed during the next quarter. But he added that the company would not leave its office building.
Last November, the electricity company filed a proposal with the government giving up the plot its major power station currently occupies. The government has said that the plot would be used for public housing following CEM’s departure. On the other hand, a twohour power outage hit the districts of Iao Hon yesterday morning from one o’clock - CEM explained yesterday afternoon that the outage was due to mice chewing the control circuit in a substation of the power distributor. The electricity halt affected some 680 homes.
A court case in Hong Kong between billionaire Eric Hotung and businesswoman Winnie Ho Yuen-ki has revealed the business dealings between the sister of gaming magnate Stanley Ho and her former lover, Hong Kong newspaper South China Morning Post (SCMP) reports. The case revolves around HK$2 million that Hotung allegedly handed to Ho based upon trust decades ago, which he claims was spent on property oversea, the Hong Kong newspaper says. On the first day of the case Ho stated she had invested the money in her brother’s two companies, Sociedade de Turismo e Diversoes de Macau (STDM) and Shun Tak Shipping Company, after Stanley Ho was granted a gaming licence in 1961. However, Ho claims the money was not given to her on trust and that she had already paid back around HK$1.6 million, the newspaper reported. In
correspondences between Hotung and Ho, revealed to the court on Monday, Hotung said he wanted to split the proceeds of the ‘on trust’ investment equally between his heirs but that the money was allegedly used for other purposes, including houses in Portugal, London and Los Angeles, SCMP reported. The now 90-year old also claimed he invested through Ho because his grandfather, Sir Robert Hotung, was against his children’s involvement in gambling, and that he wasn’t on good terms with Stanley Ho at the time. Hotung’s trust firm Lare Sare is suing Ho, her company Moon Valley Inc., and Michael Hotung - Ho and Hotung’s son out of wedlock - claiming in court that Ho held his property on trust and that the property, any profits from the investment and the shares in STDM should be handed to him, the SCMP reported. N.M.
Business Daily Wednesday, May 25 2016 5
Macau Property
Agile Property proposes name change to Agile Group
business development and is in the best interests of the company and the shareholders as a whole,’ the GuangzhouMainland Chinese property developer based company wrote in the filing, Agile Property Holdings Ltd. has proposed changing its company name to claiming that the proposed new name Agile Group Holdings Ltd., according to a ‘can also refresh the Company’s corporate filing with the Hong Kong Stock Exchange image and identity.’ The developer’s residential projects, primarily located on Monday evening. ‘The Board is of the in Mainland China, are popular among opinion that the change of company investors from Macau and Hong Kong. name will benefit the company’s future
Property
Shun Tak to acquire land parcel in Singapore for HK$827 million
S
hipping and property conglomerate Shun Tak Holdings Ltd. has announced that it has won the bid to acquire a freehold land parcel in Singapore for a consideration of SG$145 million (HK$826.5 million/US$102.9 million), according to its filing with the Hong Kong Stock Exchange on Monday. The land parcel, located at No. 9 Cuscaden Road in the central business district of Singapore, occupies approximately 2,391 square metres and currently accommodates a double-storey bungalow that did not generate any income in the past two years, the company revealed in a recent filing on May 12.
According to Shun Tak, the property is destined for hotel purposes under the current zoning plan of the
Singapore authorities. But it also noted that the plot could be converted into residential use if Singaporean
Gaming
GGR
Gold Moon reportedly closes VIP room in Wynn Macau Junket operator Gold Moon Group ceased its operation in Wynn Macau on May 21, according to local gaming labour group Forefront of Macau Gaming (FMG). The labour association posted online an internal notice from the junket to its workers, which states that the closure is due to ‘Wynn Macau has decided to terminate its co-operation with the VIP [operator] from this month,’ adding that the ceasing of the operation was made ‘very reluctantly’. Business Daily contacted Wynn Macau for clarification on the issue yesterday, to which the gaming operator confirmed that: “Gold Moon no longer operates at Wynn Macau”.
authorities give the greenlight on the modification to the project. The bid for the land parcel was placed by Shun Tak’s indirect wholly-owned subsidiary Shun Tak Real Estate (Singapore) Pte. Limited. According to the May 12 filing, the preliminary independent valuation of the property for hotel use was SG$131 million as at May 5 this year. ‘The Company considers the acquisition beneficial to the development of the hospitality business of the Group and potentially beneficial to the property development business of the Group,’ it wrote in a previous filing. ‘The acquisition will expand the footprint of the Group’s business to a gateway city in the region. It is also a rare opportunity for the Group to enhance its asset portfolio under freehold title in the prime area of a well-developed country,’ the company added. K.L.
Gold Moon Group also indicated in the notice that it would end its labour contracts with all workers in the Wynn VIP room and disburse severance pay based on the city’s labour law. This is not the first time Gold Moon Group has closed its VIP rooms in the city during the gaming downturn. In January 2015, the junket promoter shut down its VIP room in Sands Cotai Central,
which operated some 16 gaming tables. Following the closure of the VIP room in Wynn Macau, the junket’s gaming business in the Special Administrative Region is only left with two VIP rooms in Altira Macau and Galaxy Macau, respectively. However, the official website of the junket shows that its business footprint also covers Singapore and the Philippines. In addition, it operates a gaming business on the Mainland Chinese cruise ship ‘Chinese Taishan’. K.L.
Analysts: 5pct Gross Gaming Revenues increase for Macau in May Macau Gross Gaming Revenues (GGR) in May show a 10 per cent decrease yearon-year but a five per cent increase from April, analyst group Telsey Advisory Group states in a release. The consulting brokerage firm results include electronic game estimates for May, putting monthly gross gaming revenue at HK$17.7 billion (US$2.27 billion/MOP18.2 billion). Even though the cumulative gross gaming revenue for the first four months of the year is down 12.4 per cent year-on-year, Telsey maintains its forecast for an 11.5 per cent decline in 2016. The analysts also note that there are ‘no indications of impact from variability in hold percentage’ and that ‘property visits suggest a marginal uptick in mass
gaming activity’ with VIP activity showing signs of normalisation. ‘Our discussions with c o m p a n y m a n ag e m e n t teams suggest that there is some actual improvement in mass play offset by declines in VIP, which provides for a positive profitability mix shift,’ stated the consulting firm in its release. Nevertheless, the analysts consider the results ‘modestly positive’ for ‘Wynn, LVS and MGM’, although they expect the planned Wynn Palace opening in early August to help Wynn be ‘a taker of share’ while other operators could ‘experience pressure’. Overall, Telsey states the results are consistent with their forecasts and that valuation levels are ‘at the more attractive end of the range’. N.M.
Corporate
MGM launches wellness technology offerings
A new wellness, beauty and vitality offering debuts at the MGM Macau today, as the group introduces its Tria Spa. The spa offers the latest technology for beauty products as well as traditional treatments, tailored by guests’ needs. The new spa experience features signature treatments including the HydraFacial MD and SoSound Therapy Lounge as well as Asian-influenced therapies. Misty Stewart, the Director of Spa,
with over 16 years in the field, notes that: “We all want quick results without having to resort to the drastic means of surgery or injections and that is absolutely achievable now. With the huge increase in products, techniques and safety across the latest and greatest in beauty and wellness technology, Tria concentrates on your personal wellness, beauty and vitality desires to focus on crafting a tailored treatment that combines the best of tradition and technology to create results-orientated solutions to suit your individual needs.”
UMAC welcomes Nobel Prize Winner Prof. Mario Capecchi
Co-recipient of the 2007 Novel Prize in Physiology or Medicine Professor Mario Capecchi was welcomed by the University of Macau on Monday to receive a Doctor of Science honoris causa degree from the university in recognition of his contributions to the development of gene targeting and biomedical treatment of cancer. The professor also gave a lecture which noted that gene targeting has become a widely used technology in the
study of gene functions in mammals. The gene targeting technology allows scientists to manipulate DNA sequences in the genome of living mice and chooses which genes to mutate and how, enabling the study of complicated biological processes including growth, learning and behaviour as well as causes for disease onset. The professor discussed how his work could be used to create mouse models to facilitate research on human diseases, including cancer and neuropsychiatric disorders.
6 Business Daily Wednesday, May 25 2016
Macau eSports
Brave new eSports world An eSport expert believes China could capitalise on online betting given its status as the country producing the largest number of eSports players. Nelson Moura nelson.moura@macaubusinessdaily.com
C
hina, with 530 million gamers and 42 million people who regularly watch or participate in amateur eSports tournaments as of 2015, could profit hugely from eSports betting, according to data presented by iGaming company UltraPlay. In a session named ‘Capitalising on the eSports Phenomenon’ Borislav Borisov, Chief Operating Officer of UltraPlay, stated that: “China might start having some changes in eSports betting regulation,” as the enthusiasm for eSports grows and is in line with the creation of the area’s first governing body, World Esports Association (WESA). The eSports sector comprises competitive tournaments between professional video game players that are conducted before live audiences and broadcast over the web. It contributes significantly to the US$91 billion made off the global video game market; just in 2015 there were 4,677 eSports tournaments internationally, with US$65.12 million in awards with US$140 million in terms of advertising investment for gaming teams, data cited in the presentation revealed. “It’s an already crazy huge market with an average annual growth rate of 7.6 per cent per year, and there are very few other current competitive sports that can compete with eSports in terms of money being made,” Borisov stated.
Virtual games but real cash
When it comes to betting on eSports, Borisov divides the market into three major betting models: cash betting,
Key Points -Just in Europe eSports cash betting turnover is bigger than rugby or golf -Cash betting on eSports could reach US$24 billion by 2020 -eSports will have an estimated audience of 145 million people in 2017 -China has 530 million gamers with 42 million people watching or participating in amateur eSports tournaments
‘skins’ betting, and social and fantasy league betting. ‘Skins’ betting is when a customer picks a team and chooses items to be used in the virtual match (swords, guns). If case the chosen team wins he will be awarded those items or have to give up his own,” Boris stated. These items can be sold to other players, and represent a real money value but currently can’t be converted to actual currency, although according to Eilers and Krejcik Gaming – a research firm - cited in the presentation, last year the ‘skins’ betting market was valued at US$5 billion in Europe alone. In ‘Skins’ betting customers can be freely awarded through playing the game without any additional investment, a lack of account and verification requirements, and a usually massive turnover, data in the presentation revealed. However, the value of the ‘skins’ suffers large fluctuations and the fact that a high percentage of players are under-age can create regulations problems.
Cash Betting
When it comes to pure cash betting, according to Borisov, in 2015 the eSport market had a US$300 million turnover in Europe, with an estimated US$10billion by 2018 and US$24 billion by 2020. “In worldwide terms, it makes eSport the 7th biggest sport in terms of turnover, bigger even than rugby and golf,” says Borisov. Unlike ‘skins’ betting, cash betting involves real money bets on anything happening in a live transmitted virtual game tournament, from betting whether a team will manage to plant a bomb in Counter Strike (an online first person shooter game) to how many members of a certain team will be killed in a League of Legends battle (an online multiplayer battle arena), according to the presentation. “When it comes to cash betting, 90 per cent of UltraPlay customers place all bets through a computer desktop, since most already use the computers to play or watch eSports tournaments. It’s also a predominantly male market of people between 18 and 35, who unlike other more conventional types of gambling won’t stop betting to attend other issues like their kids. In fact, they probably won’t have kids,” Borisov said.
An aspect of eSports cash betting that Borisov considers important is the tendency of consumers to be very loyal to a certain game, continuing play from student years through gainful employment – leading to the chance, at a certain point in their lives, to start betting real cash in their game of choice tournaments.
“You don’t need to pay for cable and you can access it for free. Also, just imagine you can see through the eyes of your favourite professional player; can you imagine being able to see through the eyes of Cristiano Ronaldo?” Borislav Borisov, Chief Operating Officer of UltraPlay
“Cash betting has a large variety of markets for betting and rigorous client information which can facilitate regulation, but at the moment needs more operator regulation,” Borisov added.
Social and Fantasy League
Social and Fantasy League betting, works as conventional sports fantasy betting, but instead of creating a fantasy soccer team and betting on it, the customer will pick a team of professional eSport gamers and bet on their outcome in a tournament. According to data quoted from research firm Eilers and Krejcik Gaming, the Social and Fantasy League betting market turnover in Europe in 2015 reached US$20 million with an estimated increase to US$2 billion in 2020. “The advantage Fantasy League betting has over conventional sport betting is in one word: accessibility. You don’t need to pay for cable
and you can access it for free. Also, just imagine you can see through the eyes of your favourite professional player; can you imagine being able to see through the eyes of Cristiano Ronaldo?” Borisov added. In term of disadvantages, different countries have different Fantasy League games preferences and it doesn’t provide the same instant gratification as ‘skins’ or cash betting, the eSports expert said.
A new sport is born
Apart from the three mentioned models, eSports offers similar profit methods just like any conventional sport, especially for game developers, eSports team members, league and regulatory bodies, and live streaming platforms and advertisers. “West Ham, a soccer team from London, even hired the second ranked FIFA football simulator player to play for them in virtual football tournaments,” Borisov said. The UltraPlay Chief Operating Officer considers eSports as the new frontier in sports betting with clear advantages over other sports, such as a Free to Play model, hundreds of opponents online, a myriad of free live streaming platforms like Youtube, accessibility to handicapped people and the strong community involvement gamers have. According to the presentation, in 2017 the estimated audience for eSports will rise to 145 million people, which will put eSports over American Football with 151 million viewers in 2015. “Also, the current eSports enthusiast is already in the 21 to 35 target age group sports bookmakers look for, and 33 per cent of them are already betting,” Borisov mentioned.
Hindrances
Many challenges still remain for eSport betting, such as the fact that online gamers still prefer to bet on virtual gaming contents, while general sports bookmakers are usually not knowledgeable about the eSport market, with sport betting sites struggling to understand the gaming community. The lack of data and statistics in eSports can also be a barrier for bookmakers, who live on data for odds predictions. Borisov, however, sees the void as a business opportunity for anyone collecting and selling eSports data, while advising current sport bookers to hire traders with real interest in eSports. Legislation and regulation of eSports is also an issue “as with any gaming sector” but the eSports expert believes that the sheer size of the gaming community and the openness and accessibility of the Internet just “gave birth to a new sport.”
Business Daily Wednesday, May 25 2016 7
Gaming
Singapore
Despite slowdown, Genting confident in Singapore operations and Korean project
Genting chairman: “If it’s a cash cow, it’s okay to be stagnant”
A
ccording to the executive chairman of Genting Singapore, in the wake of sliding profits and upcoming competitors in the market, the casino is still a “cash cow”, debts are under control, and the new Korean casino will help maintain the group’s forward motion, reports Singapore’s Business Times. “I think gaming has already been oversold, as can be seen
by the Macau situation but having said that, of course, there are opportunities such as Jeju,” the chairman told the publication, saying, “Let’s see what Jeju brings for Singapore.” The comments come in the wake of a 22 per cent share price drop over the past year, causing Lim to note that the bottom line isn’t pretty and the group is cautious beyond its outlook past the Jeju operation, states the publication.
“So we do things one step at a time. Will we do more beyond Jeju? Sure, if Jeju turns out to be a success, we will look at something else but not before Jeju is up and running. The focus in Singapore now is on how to make Jeju a success,” said the executive chairman.
Strong despite slump
With regard to the Singapore operation of the group the chairman notes that: “If
fewer people are visiting, you would expect to make less. But if we can maintain our margin, which is fairly attractive, I think the company should be okay,” noted Lim, commenting: “If it’s a cash cow, it’s okay to be stagnant.” The Business Times notes that with the performance of Resorts World Sentosa the Singapore Genting operation has seen a slump in earnings, which is unlikely
to shift throughout 2016, with core profit for the first quarter amounting to S$66 million (MOP382.23 million) – only 17 per cent of the full-year estimates. Despite this, Lim believes that the group’s write-off of bad debts and funds creation system is up to the challenge, stating: “You just have to have a strategy that will provide you with the right reserves to be able to do this sort of business; otherwise, you shouldn’t do it at all.” The Genting group operates casinos in Singapore, the US, UK, Philippines and Malaysia. K.W.
8 Business Daily Wednesday, May 25 2016
Greater China Currency stance
Yuan watchers see decline, no disorder as PBOC le China’s monetary authority in February and March followed a strategy of allowing limited gains against the dollar to arrest capital outflows
I
nvestors are about to find out whether global markets can cope with a sliding yuan. China’s currency is down more than 1.1 percent this month amid rising odds of a Federal Reserve interest-rate increase in June, a sustained retreat that hasn’t been seen since a January slide spurred a worldwide rout in equities. Natixis Asia Ltd. and Roy Teo at ABN Amro Bank NV, the yuan’s top forecaster, see further declines for the currency without a repeat of the chaos. “The central bank has learned its lesson and it won’t let the market fall into panic as it did in January,” said Iris Pang, Hong Kong-based senior
economist for Greater China at Natixis Asia, which had among the most bearish forecasts for the yuan during the height of the January turmoil. “But this is the start of a new bout of depreciation, and the good times of enjoying a stable exchange rate against the dollar and a weaker currency versus the basket is forever gone.” China will use the currency’s daily fixing, intervention and stepped-up verbal support to avoid spooking investors, according to Teo. The yuan’s slump at the start of the year, and its shock devaluation in August, roiled markets around the world. Traders so far aren’t preparing for a repeat, with historical volatility on a gauge of global
equities at the lowest in almost a year. The probability of the yuan dropping to 7 a dollar by the end of 2016 has moderated to 13 percent, from more than 30 percent in January, options prices show. The People’s Bank of China scrapped its market-based mechanism for managing the yuan on January 4 and returned to setting the exchange rate based on what suits authorities the best, the Wall Street Journal reported, citing unidentified people close to the central bank. China’s monetary authority in February and March followed a strategy of allowing limited gains against the dollar to arrest capital outflows, and guiding depreciation against the currencies of trading partners to help exports. That plan, which worked well amid the greenback’s biggest quarterly decline since 2010, has been thwarted by a surge in the dollar as the Fed prepares to raise borrowing costs. “You are starting to see some hedging of a weaker yuan in the options market, but this is more of a market positioning on a bit of hedging risk,” said ABN Amro’s Teo. “I do not expect this to be of similar magnitude to that of January or August.”
Bearish bets
Betting against the yuan became such a popular trade among hedge funds earlier this year that billionaire investor Bill Gross compared it to the 1992 speculative attacks on Britain’s pound. The offshore exchange rate’s discount to the currency, a barometer
Overcapacity
Steel industry not encouraging large exports China exported a record of 112 million tonnes of steel last year China, the world’s top steel producer, is not encouraging large exports of the product and has taken measures to control shipments offshore, the country’s steel association said yesterday. “The Chinese steel industry is willing to solve trade disputes through cooperation ... it strongly opposes protectionism and making the steel trade a political issue,” the China Iron & Steel Association (CISA) said in a report on its website. CISA said a rise in Chinese steel exports has been driven by a recovering global economy, rising international demand and higher competitiveness. It said the government has taken measures such as increasing export duties on some steel products and cutting export rebates. China exported a record of 112 million
Key Points China steel assn strongly opposes protectionism Surging steel exports driven by demand and competitiveness
tonnes of steel last year, despite the cancellation of tax rebates on boron steel, as the country’s producers aimed to offset a slowing domestic economy and waning demand that drove prices down by 36 percent during 2015. Global steel producing rivals have alleged China is dumping cheap exports after a slowdown in demand at home, creating a major trade irritant amid a worldwide steel glut. “The steel overcapacity is a global issue,” CISA said, adding that the global capacity utilization rate was 69.7 percent in 2015 compared with China’s rate of 71.2 percent. The United States slapped Chinese steelmakers with final import duties of 522 percent on cold-rolled flat steel on Tuesday after finding their products were being sold in the U.S. market below cost and with unfair subsidies. However, China’s Commerce Ministry said Saturday that U.S. efforts to protect its steel industry will not solve the sector’s fundamental problems, which stem from past protectionist measures. China currently has an annual crude steel capacity of 1.13 billion tonnes and has aimed to streamline its bloated steel sector by cutting between 100 million and 150 million tonnes per year of capacity by 2020. China has shut more than 90 million tonnes of capacity for 2011-15, CISA added. Reuters
for depreciation pressures, swelled to a record 2.9 percent early this year and is now at 0.14 percent. Capital outflows, which swelled to an estimated US$1 trillion in 2015, have abated as well. Pessimists are now holding off after being burned as the authorities intervened in the spot market, clamped down on capital flows and waged a verbal campaign that dismissed short-sellers as delusional. The extra cost for three-month options to sell the yuan against the dollar over contracts to buy dropped to the lowest in four months in May, while the currency’s implied volatility, which tends to rise when traders expect bigger price swings, was about half of January’s peak. Traders are now placing a 32 percent chance of a Fed rate increase next month, compared with 4 percent a week ago, as more U.S. central bank officials spoke of the possibility of action. Boston Fed President Eric Rosengren told the Financial Times that he’s getting ready to back a tighter monetary policy, while his San Francisco counterpart, John Williams, said on Fox News that the June meeting could be “appropriate” for increasing borrowing costs.
‘More measures’
“The PBOC won’t let the market develop very strong expectations for depreciation, which will drive up demand for foreign currency from domestic individuals and companies,” said Gao Qi, a strategist at Scotiabank in Hong Kong, who expects the yuan to drop to 6.7 a dollar by end-2016. “But I expect the financial markets to be relatively
Agro investment
Mainland tycoon saves Australia lam Wen is seeking to share his techniques with farmers throughout Australia, part of efforts that may help defuse concern over agriculture deals David Stringer
When biting winter winds whip through the paddocks of the 170-year-old Lal Lal sheep farm in Australia’s central Victoria this year, a Chinese wool tycoon will be trying to help revive an ailing industry. He’s also hoping to overturn scepticism toward foreign investors. Wen Qingnan, who bought Lal Lal in 2014, plans to build shelters for newborn lambs inside an unused hay shed to help boost survival rates by as much as 40 percent. He’s also expanded the flock. Such measures may help restore wool profits in a country that is the world’s top exporter. Over the past two decades, farmers were hit hard by cheaper alternative fibres and saw output shrink. But not everyone welcomes infusions of foreign cash. A surge in Chinese investments in agriculture is fuelling concern about lost local control of prized farm land in Australia, a major shipper of everything from beef to wheat. It’s a theme gaining importance among rural voters before a national election scheduled for July. Wen, who runs the largest processor of raw wool in China, is convinced Australians will come around. “The public attitude toward foreign agriculture investments will change once they see more and more investors are making contributions to the local economy and communities,” said Wen, president of Jiangsu province-based Tianyu Wool Industry (Zhangjiagang Free Trade Zone) Co. “I feel confident that exchange and sharing of ideas and techniques will be beneficial to everyone.” Australia has led the world in fine wool output almost since high quality merino flocks were established there in the 1800s. But exports have declined
44 percent since 1981 and are forecast to slip even further this year, partly because wool is more expensive to produce than cotton or synthetic fibres. Many farmers are losing money. By scanning all ewes to check for multiple pregnancies and by providing additional feed and shelter, Wen aims to improve lamb mortality rates. In Australia, an estimated 10 million die after birth each year, animals that could profitably produce more wool. At Lal Lal, Wen’s target is to increase survival rates 30 percent to 40 percent. He also expanded his flock to about 12,000 sheep after purchasing 1,600 animals since October. Wen is seeking to share his techniques with farmers throughout Australia, part of efforts that may help defuse concern over agriculture deals. In the most recent fiscal year, government data show proposed investments by entities in China and Hong Kong jumped almost fourfold to A$2.5 billion (US$1.8 billion), based on those approved by the Foreign Investment Review Board. “Where transactions work well and are successful is where foreign investors, particularly Chinese investors, are engaging with their local community,”
“I feel confident that exchange and sharing of ideas and techniques will be beneficial to everyone” Wen Qingnan, President of Jiangsu Tianyu Wool Industry
Business Daily Wednesday, May 25 2016 9
Greater China Markets links
earns lesson Hong Kong Exchange to speed up stable in the second half, so China will likely take more measures to open up the capital account. The government will introduce capital control measures only if there’s massive panic in the market.”
More declines
Analysts are still predicting a 1.6 percent drop in the onshore yuan to 6.66 a dollar by the end of this year, as a slowdown in China’s economy worsened. Data including on industrial production and retail sales missed estimates for April, while exports posted a surprise decline. The Chinese currency was trading at 6.5540 on Tuesday, after declining for three straight weeks in the longest such run since December and hitting a threemonth low on Monday. A gauge of the greenback’s strength has risen 3.3 percent this month, after a 4.1 percent plunge in the first quarter. Shorting the Chinese currency against the dollar, Japanese yen and Russian ruble would help investors position for the nation’s policy of gradually weakening its currency on a trade-weighted basis, Deutsche Bank AG strategists including Mallika Sachdeva wrote in a May 20 note. “The PBOC will likely be more reactive,” said Eddie Cheung, a currency strategist at Standard Chartered Plc in Hong Kong. “It will be similar to them putting on measures to slow outflows this year. Currently it’s still unclear that the Fed will hike in June, but there are certainly a lot of financial market risks.” Bloomberg News
mainland bond connect scheme The bourse and Thomson Reuters also signed an agreement for the creation of a new series of Renminbi indices Michelle Chen
The operator of Hong Kong’s stock exchange said yesterday it will “work very quickly” on a plan to link bond markets in China with those in the Asia’s financial centre, giving global investors more access to yuan-related assets. The concept would be similar to a landmark program which connected the Hong Kong and Shanghai stock markets in 2014, said Charles Li, chief executive of Hong Kong Exchanges and Clearing (HKEx). The plan would allow global banks to further develop offshore yuan interest rate products, Li said. “So we probably will work very quickly, trying to build a bond connect in a similar fashion and manner to the stock connect,” Li said. China said earlier this year it is opening up its interbank bond market to foreigners to provide more avenues for investment. Moody’s rating agency estimates China’s onshore bond market had a total 48.5 trillion yuan (US$7.5 trillion) of outstanding bonds at end-2015, the third largest globally after the U.S. and Japan. The Shanghai-Hong Kong Stock
mbs to show perks of foreign cash said Meredith Paynter, Sydney-based head of the food and agribusiness sector practice at law firm King & Wood Mallesons. Paynter advised on the 2015 acquisition of an Australian dairy company by a joint venture that included China’s New Hope Dairy Holdings Co.
Investment vital
Foreign investment is vital to developing agriculture, especially because the estimated shortfall between the capital needed and domestic funds available may reach A$850 billion by 2050, according to Australia and New Zealand Banking Group Ltd. The lack of local funding hasn’t dimmed perceptions that overseas investors will undermine local food security. About 60 percent of Australians oppose foreign deals in agriculture, while 56 percent say the government allows too much investment from China, according to a 2014 Lowy Institute
poll. Earlier this month, Shanghai Pengxin Group dropped its A$317 million bid for cattle rancher S. Kidman & Co., amid opposition from the Liberal-National coalition government. Kidman’s landholdings span 101,000 square kilometres, or about 1.3 percent of Australia’s land mass. The Labour Party says the government risks sending the wrong signal to overseas investors. The coalition holds a 51 percent to 49 percent lead over Labour, according to a Fairfax-Ipsos poll published May 21 by the Sydney Morning Herald.
Election race
In a tight election race, the rural vote is crucial for Prime Minister Malcolm Turnbull, whose junior coalition partner, the National Party, has been a vocal critic of foreign investment in farms. At Lal Lal’s red-brick Federation-era homestead, located a 90-minute drive
Connect had promised to open up China’s capital markets to foreign investors, heralding bolder stock market reforms with the ultimate goal of full capital account convertibility. But an onshore stock market crash in 2015 and weak markets - Chinese stocks are among the worst performing in Asia this year - have discouraged many potential investors, prompting the exchange to widen its focus to adding more currency and fixed-income products to its menu. Yesterday the Hong Kong bourse and Thomson Reuters signed an agreement for the creation of a new series of Renminbi (RMB) indices, details of which will be announced in the next few weeks. The new index series will offer global investors benchmarks that reflect the development of the yuan’s effective exchange rate against other major currencies and are designed to be transparent and tradable. Li said 2016 will be a big product year focusing on the yuan foreign exchange rate. The HKEx has received regulatory approval to launch cash-settled Euro-Yuan, Japanese yen-Yuan, Australian dollar-Yuan and Yuan-US dollar futures on May 30. Reuters
west of Melbourne, wool growers and buyers from as far away as Uruguay have visited to discuss production methods. Wen is also inviting local producers to China. Improving the survival rate of single lambs by 5 percent and twin lambs by 10 percent could raise farm profits by as much as A$250 million a year, according to Australian Wool Innovation Ltd., an industry group. On average, Australia’s mortality rate of about 15 percent compared with global range of 9 percent to 20 percent. The decline in Australia’s wool exports is largely a result of meagre farm earnings, Wen said in an e-mailed response to questions. Small sheep farms lost 0.4 percent on their total capital employed in the five years to fiscal 2014, according to the Australian Bureau of Agricultural and Resource Economics and Sciences. “I strongly believe the general public reception will change if we work together and create more wealth in Australia,” Wen said. Bloomberg News
In Brief Learning push
More funds to subsidize compulsory education The Chinese government has allocated 134.5 billion yuan (US$20.5 billion) to subsidize compulsory education this year, the Ministry of Finance said yesterday. The funds, taken from the central coffer, increased by 3 percent from spending in 2015, the ministry said in a statement. China requires children to receive nine years of compulsory education, normally from the ages of 6 to 15. The subsidy should be used to balance education resources between urban and rural areas, according to the statement. Part of the subsidy will also be spent on improving rural students’ nutrition and the livelihood of rural teachers. Fuelling economy
Government urges faster local spending China’s local governments must quicken spending to help reduce the size of unspent budget funds and support the economy that faces downward pressure, the Ministry of Finance said on Monday. The comment came after data showed China’s fiscal expenditures in April rose 4.5 percent from a year earlier, slowing sharply from a 20.1 percent jump in March. The government has pledged to ramp up fiscal support this year, boosting the fiscal deficit to 3 percent of gross domestic product (GDP), after economic growth last year cooled to a 25-year low. Construction
Mainland investors to build industrial park at Oman A group of Chinese investors have signed an agreement to build an industrial park at Oman’s southern port of Duqm in a project that could attract billions of dollars of investment, government and company officials said on Monday. The Omani government is working to develop the area around Duqm, on a stretch of barren coast 550 km south of the capital Muscat, into a major business zone as part of efforts to diversify the economy beyond oil. The industrial park deal could provide a big boost to that project and reduce pressure on Omani state finances, which have been hurt by low oil prices. Vehicles
New electric vehicle a boon to rural logistics A Chinese auto maker launched a new mini-van e-vehicles to assist logistics across the mountainous areas of rural China. The first van rolled off the production line at Changfan New Energy Automobile, based in southwest China’s Chongqing city, on Monday. The company said the chassis and battery of the vehicle, which has a maximum range of 230 kilometres, are optimized to make it perform better on steep gradients. The van costs 100,000 yuan (US$15,275), but buyers only need to front about 40,000 yuan as the remainder will be covered by a government subsidy, according to marketing vice president.
10 Business Daily Wednesday, May 25 2016
Greater China Yuan outflow
Purchases of Hong Kong insurance under further scrutiny by regulators. Purchases of insurance and related investment policies by mainland Chinese visitors to Hong Kong rose 30 percent last year to HK$31.6 billion (US$4.1 billion), according to the city’s insurance regulator.
Mainland regulator
The Hong Kong regulator said it’s working closely with its counterpart on the mainland, and will step up its inspections of insurance companies’ compliance with anti-money laundering regulations, according to the statement. Last year, Hong Kong’s former Insurance Commissioner Annie Choi warned of growing money-laundering risks in the city’s insurance industry, in particular in cases where the value of policies
Surging demand for insurance in Hong Kong has been boosted by mainland Chinese seeking to move money abroad Daniela Wei and Alfred Liu
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hinese insurance purchases in Hong Kong are under further scrutiny, with the city’s regulator saying it’s in talks with industry participants on new rules to protect the surging numbers of buyers from the mainland.
“It is necessary to enhance protection of the mainland buyers,” who may not understand the potential risks before signing contracts, the Office of the Commissioner of Insurance said in an e-mailed statement late Monday. Chinese purchasers of Hong Kong policies will be required to sign an acknowledgment that they
understand the key elements of the policy they are buying, the regulator said, adding that it expects to implement the new rules in the second half of the year. Surging demand for insurance in Hong Kong has been boosted by mainland Chinese seeking to move money abroad amid a weakening economy and expectations of further declines in the yuan. Multiple credit-card swiping to buy insurance products, which isn’t illegal in Hong Kong, has provided Chinese individuals a way to avoid limits on capital outflows set
‘The Hong Kong regulator said it will step up its inspections of insurance companies’ compliance with antimoney laundering regulations’
is inflated after purchase. The latest move by the Hong Kong regulator follows reports of a parallel crackdown by the China Insurance Regulatory Commission on sales of overseas insurance policies. The CIRC informed its branches on May 13 to investigate illegal sales of overseas insurance policies in China, Caixin reported Monday. Overseas firms aren’t allowed to promote foreign insurance products on the mainland through such means as organizing investment seminars, Caixin said, citing a person close to regulators. Separately, the Chinese regulator warned last month against risks connected with purchases of insurance products in Hong Kong by mainland Chinese. Products denominated in currencies such as the Hong Kong and U.S. dollars pose currency risks for mainland buyers, according to a statement from the insurance regulator. Policyholders risk being unable to make timely premium payments if foreign-exchange policies were to change, the CIRC said. Since February, Chinese regulators have moved to restrict residents’ purchases of insurance in Hong Kong, by limiting the amounts that can be transferred to buy certain policies using credit cards or online transactions. Bloomberg News
Going public
Logistics giant takes backdoor route to listing The planned deal comes weeks after Chinese regulators unveiled plans to tighten scrutiny of companies seeking backdoor listings Donny Kwok and Twinnie Siu
Giant Chinese courier company SF Holdings (Group) has struck a 43.3 billion yuan (US$6.6 billion) deal with a little-known metals company that effectively gives the firm known as ‘China’s Fedex’ a backdoor route to a listing on the Shenzhen stock market. With an eye on attracting investors as it lines up expansion overseas, SF Holdings has reached an asset swap and new share accord with Maanshan Dingtai Rare Earth & New Materials Ltd, the latter said in a filing. Under terms of the deal, which is subject to regulatory approvals, Dingtai will officially acquire SF, funding the purchase by issuing new shares to the courier. Reinvented as a logistics company, Dingtai will then
Key Points SF Holdings in accord with littleknown listed metals firm Asset swap, share deal with Shenzhen-listed Dingtai 8 bln yuan new shares sale to finance growth Biggest ‘backdoor listing’ since Focus Media US$7.2 bln deal China regulators stepping up backdoor deal scrutiny
be controlled by SF, whose founder and Chairman Wang Wei will run the new business. SF’s ‘backdoor listing’ is the latest in a series of moves by big, privately held Chinese firms seeking a quicker route to a stock market presence than a time-consuming traditional initial public offering. The plan by SF is the biggest such deal since digital advertising company Focus Media’s $7.2 billion backdoor listing last year. The planned deal comes weeks after Chinese regulators unveiled plans to tighten scrutiny of companies seeking backdoor listings to benefit from top valuations in mainland China. Trading in Dingtai shares, suspended since April 5, will remain halted pending further notice. Dingtai last traded at a price-to-earnings ratio of 126 times, Thomson Reuters data showed, giving it a market value of about US$500 million. SF, the main competitor in China for international courier firms like DHL and Fedex Corp, didn’t respond to requests for comment. With logistics a key development focus area for China in the coming years, its listing follows similar moves by smaller peers YTO Express and STO Express. Targeting a 60 percent jump in net profit to 3.48 billion yuan in 2018 from this year, SF had previously filed for clearance to launch an IPO, Thomson Reuters publication IFR reported.
Shenzhen Stock Exchange headquarters
In an interview last year, an executive told Reuters SF, which already delivers to more than a dozen countries including the United States and Japan, was planning major expansion into Southeast Asia and Europe that would see a rapid build-up in its fleet of aircraft.
Under terms of the deal, Dingtai also plans to sell new shares to 10 private investors, raising 8 billion yuan to upgrade logistics facilities. CITIC Securities, Huatai United Securities and China Merchants Securities acted as financial advisers for the deal. Reuters
Business Daily Wednesday, May 25 2016 11
Asia
Monetary policy
Australia central bank chief says committed to inflation-targeting policy This would be Stevens’ final few public appearances before he steps down from the top job in September. Ian Chua
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ustralia’s central bank is committed to using an inflation target when setting monetary policy, a system it has used for over 20 years, the head of the Reserve Bank of Australia said yesterday, even in the current disinflationary environment. Glenn Stevens said having a “medium-term low single-digit inflation goal” is still relevant as the system has “adequate flexibility to look at the broad picture and make sound decisions.”
“It is, I think, easily the best monetary policy framework we’ve ever had and we’ve tried most of them over a long run,” he told a gathering of business people in Sydney. Stevens said it is not about controlling inflation in a very short period, but rather keeping it within a target over the medium term. “Right now, (the inflation rate) is one point something, but on average in the long-run, it’ll start with a two and that is a piece of uncertainty you can put away.” Stevens was answering questions on a broad range of topics at the Trans-Tasman Business Circle. The governor’s comments came amid increasing questions about whether it was appropriate for central banks to still use an inflation-targeting framework given the threat of global deflation. Stevens was also speaking publicly for the first time since the May 3
policy review, when the RBA cut the cash rate by a quarter point to a record low 1.75 percent, citing surprisingly low inflation. The RBA has also slashed its inflation forecast for this year to below its 2 to 3 percent target band, prompting investors to price in the risk of at least another easing later this year.
“It is, I think, easily the best monetary policy framework we’ve ever had and we’ve tried most of them over a long run” Glenn Stevens, Reserve Bank of Australia governor
Markets are keen for a clearer hint on whether the RBA would cut again. As usual, Stevens kept his cards close to his chest. On the exchange rate, the central banker said the Australian dollar “at the moment is doing what it is expected to do.” “Sometimes, in the past, it has moved in ways we thought it was not consistent with fundamentals and we’ve on occasions - not anytime lately - been prepared to put our money where our mouth was with intervention. Other times we’ve just said things.” This would be Stevens’ final few public appearances before he steps down from the top job in September. Deputy Governor Philip Lowe has been appointed to take over the reins then. Asked what advise he has for his successor, Stevens quipped it would help to “grow a thick skin.” Reuters
Laundering probe
Singapore shuts bank unit linked to 1MDB The probes into the Malaysian fund have cast an unwelcome spotlight on Singapore, which has been trying to burnish its anti-money laundering credentials. Singapore’s central bank yesterday ordered BSI’s operations in the citystate to close down as Switzerland opened criminal proceedings against the private bank based on its investigation into transactions by Malaysia’s troubled state fund, 1MDB. The Monetary Authority of Singapore (MAS) said it had withdrawn Swiss-based BSI Bank’s status as a merchant bank in Singapore and directed it to shut down for serious breaches of anti-money laundering requirements and other lapses. In a statement, MAS said it has referred to the public prosecutor the names of six current and former members of BSI Bank’s senior management and staff to evaluate whether they have committed criminal offences. “This is the first time that MAS is withdrawing its approval for a merchant bank since 1984, when Jardine Fleming (Singapore) Pte Ltd was shut down for serious lapses in its advisory work,” MAS said.
Key Points MAS shuts unit of private bank BSI for money laundering First bank to be closed in city state since 1984 Swiss authorities say BSI in breach of money laundering rules BSI Group CEO to step down The investigations in Switzerland and Singapore surrounding 1Malaysia Development Bhd (1MDB) focus on alleged fraudulent financial transactions that were used to funnel money to politically-connected individuals and possible money laundering. The probes into 1MDB have cast an unwelcome spotlight on Singapore,
which has been trying to burnish its anti-money laundering credentials. “BSI Bank is the worst case of control lapses and gross misconduct that we have seen in the Singapore financial sector,” said Ravi Menon, managing director of MAS, in a statement. BSI said in a statement its group CEO Stefano Coduri will step down and it has undertaken steps to strengthen management, including the introduction of a new chief risk officer and the appointment of a new group legal counsel. 1MDB did not immediately respond to a request for comment. Swiss authorities said in February that a criminal investigation into 1MDB had revealed that about US$4 billion appeared to have been misappropriated from Malaysian state
companies. The Malaysian fund, whose advisory board is chaired by Malaysian Prime Minister Najib Razak, was also probed by Malaysian authorities. The Malaysian attorney general’s office in January cleared Najib himself of any criminal offences or corruption, declaring that $681 million deposited into his personal bank account was a gift from Saudi Arabia’s royal family. Singapore’s white collar police, the Commercial Affairs Department (CAD), have discovered a web of murky transactions at BSI, charged two people in connection with its investigations, frozen bank accounts and questioned bankers in what it described as its most complex cross-border investigation ever. Reuters
12 Business Daily Wednesday, May 25 2016
Asia Reform drive
Indonesia eases foreign ownership in “Big-Bang” liberalisation The liberalisation is part of Widodo’s strategy to expand the manufacturing and tourism sectors in the country Gayatri Suroyo and Fransiska Nangoy
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ndonesia has issued new regulations opening dozens of business sectors to foreign investors, a measure described by President Joko Widodo as a “Big Bang” liberalisation of the economy. Widodo signed the new presidential decree last week and his administration published yesterday, easing restrictions on a range of enterprises including tourism businesses, transportation companies and movie theatres. Restrictions on ownership of businesses in the retail and port services
Key Points Govt releases details of revised negative investment list Eases department store ownership rule, cap small e-commerce
sectors were scaled back, although the regulations introduced stricter controls on telecommunications towers and on e-commerce. The liberalisation is part of Widodo’s strategy to expand the manufacturing and tourism sectors in Southeast Asia’s largest economy to reduce its reliance on exporting raw commodities. The new regulation also eased the foreign ownership cap for maritime cargo handling at ports, several specific airport services and telecommunication services, as well as internet provision, to 67 percent versus the previous 49 percent limit. In addition to the changes already announced, the new regulations allow foreigners to own 67 percent of department stores with sales floor area of 400 square metres to 2,000 square metres, as long as they are located in a mall, whereas previously they could only invest in a department store with a sales floor larger than 2,000 square metres. As was announced in February, the restaurant business, film industry, cold storage, waste management and pharmaceutical raw materials sectors were among those opened up completely to foreign ownership. However, the new regulation set a 49 percent foreign ownership cap on small e-commerce businesses,
overturning the government’s earlier statement that it will open up the sector 100 percent. It also bans foreigners from owning a business in telecommunications tower services and management. “This is the first time in many years, maybe more than 10, that Indonesia has taken steps to open up investment rather than close it,” said Lin Neumann, managing director of the
American Chamber of Commerce in Indonesia, adding that American companies have expressed interest in the sectors the government said it would open. But it may still take time before Indonesia sees more inward foreign direct investment, Neumann said. “Let’s see how easy it is to come in. Hopefully the bureaucracy will respond.” Reuters
M&A
India’s state banking trouble-shooter says it’s time for mergers southern India. Rai said that, with state banks trading at just 0.5 times book value, valuations were attractive for minority shareholders to subscribe to planned rights issues, alongside the government.
State banks hold most of India’s US$120 billion in troubled loans Douglas Busvine
Having bitten the bullet on bad loans, India’s stateowned banks now need to merge into half a dozen well-capitalised institutions than can underwrite economic growth, the official overseeing the sector’s overhaul said. Vinod Rai, the veteran bureaucrat appointed this year to run the new Banks Board Bureau, told Reuters the government stood ready to inject fresh funds beyond the US$3.7 billion earmarked in the 2016/17 budget. Restoring banks to health is vital for Prime Minister Narendra Modi to revive lending, investment and create jobs for the million young Indians who join the labour market
Key Points Govt ready to inject extra funds this fiscal year Mergers to create at most six state banks - cleanup chief SBI takeover of subsidiaries kicks off consolidation Decision on lending panel within weeks
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Taking a haircut
each month. Rai said stronger banks should decide which of their bad loans to shift off their balance sheets, while weaker banks need fresh capital before a round of consolidation that would cut the number of state banks to no more than six from 27 now. “In the current budget, the government has put in about 25,000 crores (US$3.7 billion), but it has not said that this is the end,” Rai said in an interview. “If the need arises, in the current year, the government has said it would be willing to come forward with more.” State banks - which account for around 70 percent of lending in Asia’s third largest economy - hold most of India’s US$120 billion in troubled loans after a lending spree under the last
government hit trouble. The government set up the Banks Board Bureau in April to drive balance sheet improvement and consolidation the sector. It will evolve into an investment holding company for state-owned banks, shielding them from political interference in management appointments and lending decisions. Reserve Bank of India Governor Raghuram Rajan has set a deadline of March 2017 to clean up the sector.
Merger drive
Rai, a 68-year-old former auditor general of India, said consolidation has already begun with State Bank of India’s move to absorb five subsidiaries and Bharatiya Mahila Bank, a bank for women set up in 2013.
He expects more mergers but declined to be specific on timeframes. Well-performing larger banks could tie up with one another, he said, while smaller, troubled lenders could be taken over once recapitalised - if they offered good value to suitors. Specifically, Bank of India - the country’s third-largest state bank by assets - would not be considered a merger candidate until it was recapitalised. Kolkata-based UCO Bank, the state bank with a large presence in eastern India, would be “re-energised” as a standalone institution and not merged. And Indian Overseas Bank, after recapitalisation, could be absorbed by an acquirer that could leverage off its large branch network in
India’s state banks have been reluctant to write down loans, especially to high-profile borrowers like liquor tycoon Vijay Mallya. Rai said talks were well advanced on creating a separate mechanism to review such cases and expedite balance sheet clean-ups. This mechanism could be a committee, involve an existing joint lenders’ forum, or new guidelines from the RBI, he said. A solution that could include all three options is expected within weeks. Rai said there were no plans to create a “bad bank” to relieve lenders of dud loans. India has more than a dozen asset reconstruction companies, or ARCs, with state banks owning stakes in four. The government has let promoters take full control of ARCs and scrapped caps on foreign direct investment. “There is sufficient financial interest to invest in the ARCs,” said Rai. “But all are waiting to see whether the PSBs (public sector banks) are willing to transfer their stressed assets.” Reuters
Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Joanne Kuai; Nelson Moura; Annie Lao; Kelsey Wilhelm Group Senior Analyst José I. Duarte Design Francisco Cordeiro Web & IT Janne Louhikari Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@projectasiacorp.com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily. com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com
Business Daily Wednesday, May 25 2016 13
Asia Think tank
In Brief
South Korea growth to remain below 3 percent State think tank added that monetary policy should be more accommodative to help inflation South Korea’s economy is likely to expand at a slower pace than initially expected, an influential state-run think tank said, after it downgraded its growth forecast for this year and urged accommodative policy to help spur activity and inflation. In a biannual review of forecasts, the Korea Development Institute (KDI) said yesterday growth in Asia’s fourth-largest economy is expected at 2.6 percent in 2016, and 2.7 percent in 2017. That compared to its previous forecast in December of 3.0 percent growth for this year. The GDP projection for 2017 was new. “Our economy will gradually improve on domestic consumption and construction investment, but growth will stay in the 2 percent range as exports will continue to be weak,” the think tank said in a report. Low interest rates and depressed global oil prices are expected to support consumption, it said. The KDI said government policy should aggressively support corporate restructuring of troubled companies but also called on safeguards to protect against any short-term shocks from the process.
It added that monetary policy should be more accommodative to help inflation, currently at 1 percent, reach the Bank of Korea’s inflation
“Our economy will gradually improve on domestic consumption and construction investment, but growth will stay in the 2 percent range as exports will continue to be weak” Korea Development Institute report
target of 2 percent. Easier policy would help buffer a slowdown in growth that could materialize from the corporate overhaul, the report said. South Korea’s largest shipbuilders and shipping companies are currently undergoing structural reforms as the industries are suffering from a global commodities plunge and falling trade volumes. The Bank of Korea has cut interest rates four times to a record-low of 1.50 percent between 2014 and 2015, with the most recent rate cut occurring last June. Most market participants now see the central bank cutting interest rates again by 25 basis points in June or July to support economic activity. Although the think tank is run by the government, it formulates its own economic forecasts. The finance ministry is expected to announce its revised forecasts in June. Reuters
Fiscal boost
Indonesia says tax amnesty to boost revenue by $12 billion Only about 27 million Indonesians are registered taxpayers of the 250 million population Hidayat Setiaji
Indonesia’s finance minister on Monday said an amnesty programme would boost tax revenue by an additional 165 trillion rupiah (US$12.15 billion) if it becomes effective in June, an estimate far more optimistic than that of the central bank and analysts. Under the tax amnesty, the government would offer low rates for taxpayers who declare untaxed assets at home and abroad in order to broaden the country’s tax base. A bill backing the programme was proposed by the government last year but parliament has delayed discussion on it due to public disquiet about forgiving tax avoiders. Minister Bambang Brodjonegoro, who last year gave a lesser estimate for additional revenue under the amnesty, said the optimism stemmed
from newly obtained data of undeclared offshore assets of about 6,500 Indonesians, amounting to more than US$800 billion. That is almost the size of the country’s gross domestic product. He said many Indonesians bought assets abroad after the oil boom in the 70s, when Indonesia was a net exporter, and after the Asian financial crisis of the late 90s. The country has struggled to improve tax compliance for years. “We’re tired of seeing other countries taking advantage of Indonesia’s economy. We want to end this, we want fairness. Taxes should be imposed where the business is happening,” he
told a parliamentary hearing about the amnesty programme. Central bank governor Agus Martowardojo told the hearing the figure for the amnesty programme would be US$41 billion of inflows and 53.4 trillion rupiah of additional tax revenue. Brodjonegoro dismissed Bank Indonesia’s (BI) calculation as “only taking into account illicit outflows”. ANZ in a note last month put the figure at about 9.1 trillion rupiah of revenue boost from the amnesty. “The Tax Amnesty law will be a huge boon for Indonesia, even if it falls short of target, potentially bringing in as many dollars as foreign direct investment inflows,” ANZ said. The BI governor on Monday said the amount of inflows should help boost growth in Southeast Asia’s largest economy by 30 basis points each in 2016 and 2017. It should also help the rupiah strengthen by 150 points against the U.S. dollar this year and 120 points in 2017, Martowadojo said. Reuters
Exports
S. Korea’s trade terms worsen South Korea’s terms of trade worsened for the first time in three months as exports fell sharply last month, central bank data showed yesterday. The income terms-of-trade index, which measures how many goods can be imported with total export proceeds, stood at 138.54 in April, down 0.6 percent from a year earlier, according to the Bank of Korea. It marked the first decline in three months. From the previous month, the index tumbled 7.8 percent. The net terms-of-trade index for goods came in at 101.99 in April, down 2.2 percent from a month ago. Inflation
Vietnam’s CPI increases 0.54 pct in May Vietnam’s Consumer Price Index (CPI) is estimated to increase by 0.54 percent in May compared to the previous month, according to the General Statistics Office (GSO). The CPI in May this year is likely to rise by 2.28 percent compared to the same period in 2015, the GSO said in a report on its website. All the 11 groups of commodities in the CPI calculation basket witnessed climbing prices. Price of transportation group is expected to post the highest increase of 2.39 percent compared to the previous month. PM aide
Japan sales tax rise to win global trust Raising Japan’s sales tax to 10 percent from 8 percent as planned from April would be the best way to win the trust of international society, unless special circumstances intervene, a close aide to Prime Minister Shinzo Abe said yesterday. Speaking to Reuters in an interview, Deputy Chief Cabinet Secretary Koichi Hagiuda also said he could not rule out the possibility that Abe would call a snap election for parliament’s lower house if opposition parties submit a threatened no-confidence motion. Speculation has swirled that Abe would postpone the sales tax hike and call a snap general. GMO
India puts off engineered cotton seed order
“We’re tired of seeing other countries taking advantage of Indonesia’s economy. We want to end this, we want fairness” Bambang Brodjonegoro, Indonesian Finance Minister
Indonesian Finance Minister Bambang Brodjonegoro
India has temporarily withdrawn an order capping royalties on any new variety of genetically-modified (GM) cotton seeds, a government source said on Monday, bringing relief to U.S.-based Monsanto Co, the market’s sole supplier. “We are temporarily withdrawing the order,” said the source, who is involved in the decision-making process but didn’t wish to be named because he is not authorized to talk to the media. In an order last week, the farm ministry said any company providing any new, advanced variety of GM cotton would not be allowed to charge royalties of more that 10 percent of the price of seeds.
14 Business Daily Wednesday, May 25 2016
International In Brief Slowdown
German slip in confidence German investor confidence dropped for the first time in three months in a sign that growth momentum is set to slow after the economy expanded at its strongest pace in two years. The ZEW Centre for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months ahead, fell to 6.4 from 11.2 in April, reflecting concerns over a U.K. exit from the European Union. Economists in a Bloomberg survey predicted an increase to 12. Heists aftermath
SWIFT to unveil new security plan The SWIFT secure messaging service that underpins international banking said yesterday it plans to launch a new security programme as it fights to rebuild its reputation in the wake of the Bangladesh Bank heist. The Society for Worldwide Interbank Financial Telecommunication (SWIFT)’s chief executive, Gottfried Leibbrandt, told a financial services conference in Brussels that SWIFT will launch a five-point plan later this week. Banks send payment instructions to one another via SWIFT messages. In February, thieves hacked into the SWIFT system of the Bangladesh central bank. Ports sale
Greek workers to demonstrate against privatisations Port workers will walk off the job on Thursday for 48 hours to protest against the sale of the country’s two biggest ports, which Athens has promised to international lenders in exchange for much-needed bailout loans. Privatisations, a key term of Greek bailouts since 2010, have generated only a fraction of an initial 50 billion euro (US$56 billion) target and have met strong union resistance. Port workers, who fear job cuts, have staged repeated strikes. “Selling the ports is a mistake, it won’t help bring growth,” George Gogos, general secretary of the Piraeus Port dock workers’ union, told Reuters. Leaders’ meeting
G7 to examine economic risk Leaders from the Group of Seven advanced economies will examine potential risks to the global economy when they gather this week for their summit in western Japan, government sources told Reuters. While the global economy was not at a critical stage, uncertainty was rising and the G7 leaders were expected to promote a combination of monetary, fiscal and structural policies to spur growth in their communiqué, the sources, who were not authorised to speak to the media, said. The G7 groups Britain, Canada, France, Germany, Italy, Japan and the United States. The G7 leaders were also expected to reaffirm their previous commitment to stability in the foreign exchange market, they said
Results
Investment banks suffer worst first quarter since crisis The downturn comes as banks are having to comply with new regulations Anjuli Davies
R
evenue at the world’s 12 largest investment banks fell 25 percent in the first quarter from a year ago as economic uncertainty and investor caution led to the slowest start since the financial crisis, a survey showed yesterday. Trading in fixed income, currencies and commodities (FICC) divisions, which are particularly exposed to economic conditions, declined 28 percent yearon-year to US$17.8 billion,
data from industry analytics firm Coalition shows. Since 2011, revenues in FICC are now down 49 percent and headcount in that area is down 33 percent, the data shows. Credit and securitisation have experienced particularly steep revenue declines of 62 percent and 74 percent respectively during that period. Coalition tracks Bank of America Merrill Lynch, Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, Societe Generale and UBS. The downturn comes as banks are having to comply with new regulations forcing them to hold more capital, reduce risk-taking and scale back market-making activities, all of which are squeezing liquidity from
an array of capital markets. Other divisions proved equally dismal, with revenues down across the board. In banks’ equity businesses, a bright spot last year, revenues were down 20 percent year-onyear in the first quarter to US$11.7 billion as investors
‘Since 2011, revenues have fallen on aggregate by 11 percent in equities with headcount declining 12 percent’
reduced risk appetite. Since 2011, revenues have fallen on aggregate by 11 percent in equities with headcount declining 12 percent, the data shows. Investment banking divisions (IBD), which advise on mergers and acquisitions (M&A), and equity and debt underwriting saw a 25 percent decline compared to last year to US$7.8 billion as reduced deal volumes and a slump in capital markets activities weighed. Equity capital markets (ECM) activity plunged 58 percent year-on-year to US$1.1 billion, after a dearth of new listings in choppy markets. Since 2011, ECM revenues are now down 59 percent. IBD revenues have fallen 23 percent since 2011 on aggregate, with headcount dropping 14 percent. Reuters
Antitrust case
U.S. appeals court revives Libor lawsuits The decision could help investors in several lawsuits in Manhattan seeking to hold banks liable for billions of dollars in damages for alleged price-fixing Jonathan Stempel
A U.S. appeals court on Monday revived private antitrust litigation accusing major banks of conspiring to manipulate the Libor benchmark interest rate, in a big setback for their defence against investors’ claims of market-rigging. The 2nd U.S. Circuit Court of Appeals in Manhattan reversed a lower court judge’s dismissal of investors’ antitrust claims against 16 banks, including Deutsche Bank AG, UBS AG, Bank of America Corp and JPMorgan Chase & Co because she found no showing of anticompetitive harm. “Appellants sustained their burden of showing injury by alleging that they paid artificially fixed higher prices,” Circuit Judge Dennis Jacobs wrote for a three-judge appeals court panel. Libor, or the London Interbank Offered Rate, underpins hundreds of trillions of dollars of transactions and is used to set rates on credit cards, student loans and mortgages. It is calculated based on submissions by banks that sit on panels.
“It strengthens the hand of investors in other price-fixing cases based on benchmarks that were reached in collaborative, or outright collusive, arrangements” Lawrence White, a professor at New York University’s Stern School of Business
But investors including the University of California and cities such as Baltimore, Houston and Philadelphia accused big banks of suppressing Libor during the financial crisis to boost earnings or make their finances appear healthier. The decision could help investors in several lawsuits in Manhattan seeking to hold banks liable for billions of dollars in damages for alleged price-fixing in U.S. Treasuries, commodities, currencies, derivatives and other rates. One such lawsuit, concerning credit default swaps, led to a US$1.86 billion settlement last September with a dozen banks. “It strengthens the hand of investors in other price-fixing cases based on benchmarks that were reached in collaborative, or outright collusive, arrangements,” said Lawrence White, a professor at New York University’s Stern School of Business. Robert Wise, a lawyer at Davis Polk & Wardwell who argued the appeal on the banks’ behalf, declined to comment. “It’s a long-awaited vindication of fundamental antitrust principles,” said Michael Hausfeld, a lawyer for some plaintiffs in the Libor and other antitrust cases. “It establishes a roadmap for similar allegations in other cases involving benchmark rate-fixing by financial institutions.”
Looking under the hood
Monday’s decision overturned a March 2013 dismissal by U.S. District Judge Naomi Reice Buchwald in Manhattan of antitrust claims that could justify triple damages. Though she allowed lesser claims to proceed, Jacobs said the allegations suggested that the banks had crossed
a line, turning their cooperative rate-setting process into collusion. “The Sherman Act safeguards consumers from marketplace abuses,” and Buchwald’s dismissal of claims based on that antitrust law was “unsound,” Jacobs wrote. Monday’s decision did not address the case’s merits. “It means the court is entitled to look under the hood,” said Herbert Hovenkamp, an antitrust law professor at the University of Iowa. “The district judge got it wrong by adopting a categorical rule that because the banks were cooperating in setting Libor they could not be violating antitrust rules.” Michael Carrier, a Rutgers University law professor, said: “This decision is a reminder that price-fixing is taken very seriously, and is the most serious antitrust offense there is.” But Keith Hylton, a Boston University law professor, said the decision does not signal victory for investors in similar cases. “The likelihood of the plaintiffs actually having suffered harm is quite speculative in some of these,” he said. Some other banks that were sued are Barclays Plc, Citigroup Inc, Credit Suisse Group AG, HSBC Holdings Plc, Royal Bank of Canada, Rabobank BA , Royal Bank of Scotland Group Plc and Societe Generale. The private litigation is separate from Libor rigging probes that have resulted in roughly US$9 billion of sanctions worldwide, including US$2.5 billion against Deutsche Bank in April 2015. Several bank affiliates have pleaded guilty to criminal charges, and more than 20 people have been criminally charged. Reuters
Business Daily Wednesday, May 25 2016 15
Opinion Business Wires
THE KOREA HERALD Six South Korean banks made the global top 100 banks list, though none of them were included in the top 50 bracket, data showed yesterday. The six South Korean banks in the top 100 are KB Financial Group, Shinhan Financial Group, Hana Financial Group, Woori Bank, Nonghyup Financial Group and the Industrial Bank of Korea, according to an analysis of data of Bankscope, a global database on information about banks worldwide. The list is based on Tier 1 capital, a core measure of a bank’s financial strength.
Family picture of climate change meeting attendants in Paris last December
Toward a viable climate target
THANH NIEN NEWS Vietnam’s trade ministry and General Electric on Monday signed an agreement to develop 1,000 megawatts of wind-power capacity for Vietnam by 2025. The memorandum of understanding was signed in the presence of Vietnamese President Tran Dai Quang and US President Barack Obama during the latter’s state visit to Vietnam. As part of the agreement, GE will help identify potential projects in partnership with local developers to provide enough electricity for 1.8 million families in Vietnam. The US company has a wind turbine equipment and components factory at Hai Phong, from which it can supply local projects.
L
ast December in Paris, 195 governments reached a consensus on how to curb climate change over the coming decades. But, as usual when it comes to the United Nations, the deal that was struck was big on stated ambition, but far more modest when it comes to commitments to concrete action. The Paris climate agreement includes a pledge to keep warming “well below two degrees Celsius above pre-industrial levels.” Furthermore, at the request of the world’s most vulnerable countries, language was added promising “to pursue efforts to limit the temperature increase to 1.5º.” The trouble is that these aspirations are not matched by the commitments called for by the treaty. Instead, the agreement’s system of voluntary mitigation pledges will allow global emissions to rise until 2030, likely leading to a warming of 3-3.5º by 2100. This looks like a prime example of inconsistency in policymaking. The problem lies, first and foremost, with the goals spelled out in the agreement. Targets like limiting warming to 1.5º or 2º cannot effectively guide policymakers and the public. They address the whole Earth system, not individual actors or governments. By failing to state explicitly what individual countries are required to deliver, it allows leaders to support targets that seem ambitious, while pursuing mitigation efforts that are in reality insignificant. No scientific formula can describe how to share the burden of global mitigation equitably among countries, leaving every government able to declare confidently that its policies are in line with any given temperature target. An evaluation of whether the goals are being attained can be carried out only on a global level, and thus no country can be held responsible if the target is missed. As a result, every UN climate summit concludes with expressions of grave concern that the overall efforts are inadequate. This has to change. The conventional approach is to call for more consistency between talk, decisions, and actions. But inconsistency is inherent to policymaking. Diplomats and politicians treat talk, decisions, and actions independently, in order to satisfy the demands of a diverse set of stakeholders and to maximize external support for their organizations. In climate policy, most governments choose a progressive stance while talking and deciding, but a more cautious one when it comes time to act. Ambitious UN climate targets have not served as a prerequisite, but as a substitute for action. This is no reason to give up on climate targets altogether. Complex long-term policymaking works only if ambitious goals are in place. But targets cannot be vague aspirational goals; they must be precise, evaluable, attainable, and motivating. The
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Oliver Geden Head of the European Union research division at Stiftung Wissenschaft und Politik, the German Institute for International and Security Affairs.
Paris agreement itself offers one possible approach. Hidden behind a vaguely defined formula, a third mitigation target has been introduced: reaching zero emissions in the second half of the century. A target of zero emissions tells policymakers and the public precisely what must be done, and it directly addresses human activity. Every country’s emissions must peak, decline, and eventually reach zero. This provides a transparent system to evaluate the actions not only of national governments, but also of cities, economic sectors, companies, and even individuals. Defection would be discouraged because it is easy to see – and more important, to explain to the public – whether emissions are going up or down. Such a target would put all new fossil-fuel-based infrastructure under intense scrutiny; if we need to drive emissions down, why build another coal plant or badly insulated building? A shared vision of zero emissions could even spark a race to cross the finish line first. Sweden wants to be there by 2045. The United Kingdom has announced that it plans to come up with a zero-emissions target soon. Germany might follow, after its next elections. Scientists prefer exact thresholds for climate stabilization, and policymakers like powerful symbols. That is why temperature targets dominate the global climate discourse. But history proves that this does not automatically lead to action. Replacing temperature thresholds with an effort to reduce emissions to zero would ensure accountability and minimize political inconsistency. There is precedent for such an approach. The Montreal Protocol for protecting the ozone layer primarily addresses harmful substances, trying to accelerate their phase-out, rather than defining a stabilization target for the ozone layer. The gap between real-world emissions and what will be needed to keep warming below the agreed-upon limits is rapidly widening. The UN has tasked the Intergovernmental Panel on Climate Change to conduct a detailed investigation of how to meet the – already unrealistic – ceiling of 1.5°C. This implies a risk that the world will waste valuable time on yet another debate about lofty goals. Whatever our temperature target, global emissions have to peak soon and decrease afterwards – all the way to zero. The Paris climate agreement will be remembered as a success only if we manage to shift our focus from talk to effective action.
Complex long-term policymaking works only if ambitious goals are in place
BANGKOK POST The Small and Medium Enterprise Development Bank of Thailand (SME Bank) expects a net profit of 2 billion baht this year after earnings reached 718 million baht in the first four months. The state-backed bank recorded a net profit of 181 million baht in April alone, said chairwoman Salinee Wangtal. The bank had suffered a massive net loss of 4.03 billion baht in 2012 before rallying back to net profits of 396 million in 2013, 176 million in 2014 and 1.24 billion last year.
THE STAR The move by Public Bank and Hong Leong Bank to raise their base rates (BR) is a positive move in alleviating some of the pressure on their net interest margins amid an environment of declining interbank rates, said Maybank IB Research. In a note yesterday, the research house said that Public Bank and Hong Leong Bank have raised their BR by about 10 basis points to 3.75% and 3.94% respectively. Standard Chartered had also followed suit by raising their BR to 3.77%. The scope for other banks to follow suit with a BR adjustment appears limited at this stage due to the declining rates.
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Project Syndicate
16 Business Daily Wednesday, May 25 2016
Closing Out of order
India bank says third of ATMs don’t work
working at that point,” he said in a speech in Mumbai late Monday. Many ATMS did not make provisions for disabled citizens, the A third of India’s cash machines don’t work, deputy governor added. The World Bank the central bank said, posing a challenge estimates that about 53 percent of Indian for the government as it strives to provide adults now have access to a formal bank banking services to millions of poor citizens account. Functioning ATMs are seen as vital living in rural areas. The Reserve Bank of India surveyed almost 4,000 ATMs across the to driving financial inclusion, particularly in country with a “sample size fairly representing remote areas where banks may not open geographies and bank categories”, according branches. In his annual budget speech in February India’s finance minister, Arun Jaitley, to Deputy Governor S.S Mundra. “Survey results are not comforting in any way. Almost announced a “massive nationwide rollout” of ATMs over the next three years. AFP one third of the ATMs were found to be not
Energy market
Record U.S. LPG exports to Asia hit naphtha Asian naphtha cracks for May 3-23 averaged US$56.40 a tonne, the lowest for the same period since 2009. Seng Li Peng
A
sian petrochemical makers will use around twice as much liquefied petroleum gas (LPG) in June as in the previous two months, undercutting already weak margins being earned on traditional chemical feedstock naphtha, trade sources said. U.S. exports of LPG to Asia are hitting their highest rates ever this year and exacerbating the usual seasonal May-July pick-up in use of the fuel in cracking plants. This will put more short-term pressure on naphtha cracks, or profits earned from making the light fuel, which have weakened as refiners ramped up processing rates because of cheap crude. The weak cracks will in turn drag on overall refining margins, which had previously been supported as strong demand for gasoline and naphtha offset poor markets for other fuels. “U.S. LPG exports this month are high. Propane will certainly stay in the cracking pool this summer,” said one Singapore-based source who trades naphtha. “LPG used (in crackers) in July could go over 350,000 tonnes. It could even reach 400,000 tonnes.” Asian naphtha cracks for May 3-23 averaged US$56.40 a tonne, the lowest for the same period since 2009. Still, petrochemical plants will likely return to using mostly naphtha from August. LPG is mainly an alternative that becomes attractive when it is not needed for winter heating demand or other industrial uses.
Asian petrochemical makers usually replace up to 15 percent of their naphtha with LPG when prices for the second feedstock are about 92-93 percent of the naphtha price.
Preparing for higher LPG flows
For June, at least 300,000 tonnes of LPG are expected to replace naphtha in Asian crackers, up from under
Key Points U.S. LPG exports to Asia in May near Feb record of 1 mln T -IHS Naphtha under pressure as more LPG used as chemical feedstock But LPG impact on naphtha seen as short-term, seasonal
200,000 and 150,000 tonnes respectively in May and April, traders said. If substitution climbs to 400,000 tonnes in July, that would match a monthly record touched in June 2014, based on traders’ estimates. There is no official data tracking the use of LPG as a chemical feedstock. “Higher global LPG availability in 2015, on the back of strong supply growth, has certainly filtered through to flows to Asia in the short-term,” said David Wech, managing director of consultancy firm JBC Energy. But he added that a relatively greater potential for a cold winter could lead to stronger demand and higher prices for LPG as early as August. Demand for LPG as a feed for refining units that produce propylene, a precursor to plastics, could also mop up the extra supplies and push
prices up. U.S. LPG exports to Asia this year are expected to hit a record of 300,000 barrels per day (bpd) - nearly 800,000 tonnes a month - data from JBC Energy showed. Exports from the United States to Asia in May are expected to be similar to a monthly record of about 1 million tonnes in February, consulting firm IHS said. Asia’s top naphtha importer Formosa Petrochemical Corp in Taiwan has revamped its crackers and South Korea’s Hanwha Total Petrochemical has built a storage tank to prepare for a flood of LPG expected to hit Asian shores. Petrochemical consumption will account for 15 percent of total Asian LPG usage by 2017, up from 11 percent in 2015, according to IHS. Reuters
M&A
Markets
China
National fund buys 65% stake in sports media firm
China issues 3.3 trillion yuan of bonds in April
Construction industry expects sluggish growth
A Chinese fund has bought a controlling 65 percent stake in leading international media rights company MP & Silva, according to a statement yesterday, as Chinese investors snag another overseas sporting target. Beijing Baofeng Technology Co., one of the fund’s investors, also said that it had signed an agreement for strategic cooperation with the London- and Singapore- headquartered MP & Silva. MP & Silva distributes sports programming to more than 200 broadcasters in 215 countries, including English Premier League football and Formula One auto racing, according to its website. No value was given for the stake purchase. Bloomberg News has reported the deal values the sports media company at US$1.4 billion. Shanghai Jinxin Investment Advisory Partnership Co., set up by Baofeng and three other partners, is buying the stake, the statement said. Before the deal, the main shareholders of MP & Silva Group were two founding partners, Andrea Radrizzani and Riccardo Silva. AFP
Some 3.3 trillion yuan (US$504 billion) worth of bonds were issued in China’s interbank bond market last month, including 288.2 billion yuan of treasury bonds and 1.1 trillion yuan of local government bonds, the central bank said yesterday. Turnover in the country’s money market grew 46.3 percent from a year earlier but shrank 18 percent from March to 50.9 trillion yuan in April, according to a statement on the website of the People’s Bank of China. In April, the one-month interbank weighted average interest rate offered was 2.11 percent, up 2 basis points from March. The stock markets were generally sluggish last month. The benchmark Shanghai Composite Index closed at 2938.32 at the end of April, down 2.18 percent from the end of March, while the Shenzhen Component Index retreated 3 percent from one month earlier to 10,141.54. The daily average volume of the Shanghai stock market dipped 9.6 percent from March to 212.61 billion yuan, whereas that of Shenzhen rose 3.4 percent month on month to 360.4 billion yuan. Xinhua
China’s construction sector will remain lacklustre with slowing revenue growth this year due to on-going economic hardships, global rating agency Moody’s predicted. “The industry will see low-single-digit revenue increase, similar to the 2 percent recorded in 2015 and down from 8.7 percent in 2014,” said Lu Chenyi, a Moody’s vice president and senior analyst, citing construction companies’ large order backlogs and long lead times for project completion. The construction of both residential and commercial buildings will likely be sluggish during the coming 12 to 18 months due to the economic slowdown, moderating property-sales growth and high level of developed but unsold properties in lower-tier cities, Lu said. Despite a surge in property sales in the first quarter, the high inventory has caused property developers to slow the pace of new projects, which means fewer contracts for companies that construct these properties. However, large companies will report strong revenue growth from overseas owing to their technical expertise, strong brand equity, large scale and reputations, Moody’s said. Xinhua