Public tender sewage treatment plant cancelled Infrastructure Page 5
Wednesday, June 8 2016 Year V Nr. 1060 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor ALEX LEE
www.macaubusinessdaily.com
Guess not this month gaming Just analysts’ predictions, but not so good news. Brokerage firm Sandford C. Bernstein expects a year-on-year decline of between 3 and 9 per cent for the city’s gaming revenues. The average daily revenue in the first week stood at a little over 500 million patacas. Page 3
Nothing we can do about it Finance That’s the official reply from the Financial Services Bureau (DSF) to legislators on why the bureau is spending so much money - hundreds of millions - for public departments to rent their offices. “We’re in a disadvantageous position,” claims the DFS director. Page 2
Nightmare in Zhuhai
Get them out
Labour Cutting foreign workers in gaming positions is not enough. Now, legislator Ella Lei Cheng I wants the government to cap the number of non-resident workers “especially in non-gaming” positions. Page 5
Quota to boost yuan Internationalization China will give a 250 billion yuan investment quota to the U.S., the largest after Hong Kong. The Asian nation is increasing efforts to broaden use of the yuan overseas and lure capital back to the mainland. Page 8
PROPERTY They were promised luxurious properties and great investments. In return they got never-ending problems and nightmares. Over 200 properties were sold in Zhuhai to Macau residents, who yesterday sought the help of the local government. The housing trends in the neighbouring city, once an investment paradise, are changing. Local buyers here are now looking back to Macau due to lower prices compared to just a couple of years ago. The reports on pages 6 & 7
Riding the cuts The Director of the Transport Bureau is less than convinced with the generosity of the ‘Cotai Connection’ bus route. Because, says Kevin Lam to Business Daily, the curbing of bus routes by the three operators is “more of a business decision” aimed at reducing costs rather than a social responsibility move.
21,328.24 +298.02 (1.42%)
China Mobile Ltd
+3.35%
Li & Fung Ltd
+2.75%
Galaxy Entertainment Group
-2.55%
Bank of East Asia Ltd/The
-0.17%
China Unicom Hong Kong
+2.96%
Kunlun Energy Co Ltd
+2.64%
Henderson Land Develop-
-1.39%
Cheung Kong Infrastructure
-0.13%
China Resources Land Ltd
+2.87%
PetroChina Co Ltd
+2.57%
China Life Insurance Co Ltd
-1.03%
Cheung Kong Property
+0.30%
China Mengniu Dairy Co Ltd
+2.84%
Bank of Communications
+2.43%
Tingyi Cayman Islands
-0.29%
Hang Seng Bank Ltd
+0.36%
China Shenhua Energy Co
+2.81%
CNOOC Ltd
+2.29%
Hong Kong & China Gas Co
-0.26%
Sands China Ltd
+0.37%
25° 30° 27° 30° 28° 31° 28° 30° 27° 31° Today
Source: Bloomberg
HK Hang Seng Index June 8, 2016
Thu
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SaT
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Source: AccuWeather
Transportation Page 4
2 Business Daily Wednesday, June 8 2016
Macau Public finance
Infrastructure
Pay or leave it
Public tender, no problem
Government passive about paying high rents for office venues, says the Financial Bureau
Portuguese architect Siza Vieira “naturally” agrees that Hotel Estoril reconstruction project should be by public tender
T
he director of the Financial Services Bureau (DSF), Iong Kong Leong, admits that the SAR government is in a passive position when negotiating rents on office or warehouse venues for the use of public departments. Replying to legislator Chan Meng Kam’s written enquiry, the financial bureau head indicated that public departments spent a total of MOP719 million (US$89.9 million) on renting private venues during 2015, despite the fact that only some 17 departments were fully working inside privately-owned offices. “Frankly speaking, due to surging rents and frequent transfers of property ownerships amid the rapid development of local property market, the government has been in a disadvantageous position whenever it discusses tenancy contracts [with lessors],” the DSF director said. The official added that the government has been avoiding frequently relocating the office venues of public departments in order “to serve
residents better” and “not to cause public inconvenience”. “As such, the government, as the provider of public services, has been passive when bargaining rents after analyzing the pros and cons,” Mr. Iong claimed. In fact, the government’s rental expenses on offices and warehouses for public bodies have been growing in recent years. Back in 2011, the government only spent some MOP420 million on renting private venues, yet such expenditure has increased to MOP1.9 billion in this year’s budget, suggesting a 3.5-fold increase in five years. The directly-elected legislator queried in his interpellation whether the government has already drafted a timeframe and detailed plans for building its own office buildings in order to cut this part of expenses. But the DSF director only replied that the government “would confirm as soon as possible the timeframe and the size” of its planned office building on lot O1 of Pac On in Taipa. K.L.
The Portuguese architect Alvaro Siza Vieira says he “naturally” accepts the Macau government’s decision to hold a public tender for the conversion of the former Hotel Estoril, although the project had previously been commissioned to the Pritzker Prize architect. “I am aware of the decision to organize a contest for the respective project, a decision that I naturally accepted, communicating this to the Secretary for Social Affairs and
Culture,” said the architect in a written response to Lusa news agency. Last Friday, Secretary Tam announced that for “political reasons”, the hotel project would no longer be delivered by direct adjustment to Siza Vieira, as many local architects had expressed an interest in participating, which would only be possible through a public tender. According to the official, “in Macau there are good architects” and a public tender is “more transparent”.
Siza Vieira
Education
Deadline for post-graduate scholarships: June 15 The application deadline for one of the 127 available 2016/2017 post-graduate merit scholarships offered by the Tertiary Education Services Office (GAES) is June 15, a release by GAES states. The scholarships are only available to MSAR permanent residents who are applying for, or currently taking part in, full-time or part-time post-graduate studies in institutions in the Macau territory or abroad. The proposed scholarships will include: 100 scholarships for ‘Masters Courses’ valued at MOP57,000; 20 scholarships of MOP79,000 (US$9873) each for ‘Doctoral studies’; five MOP69,000 scholarships for ‘Integrated Courses for Masters and Doctoral’; and two scholarships for ‘Integrated Courses for Bachelor and Master’ worth MOP50,000 each.
All scholarship applications will be evaluated by GAES and when awarded, will have a duration three years. Any person who has already been awarded educational financial support will have to be approved by a GAES commission. However, according to the education office, with the exception of the ‘Subsidy for the purchase of school supplies to superior school students’ and the ‘Development and Continuous Improvement Program’, generally GAES scholarships can’t be awarded if other subsidies by other Macau public institutions have already been accepted. Applications can be made online, however when Business Daily accessed the Postgraduate Scholarship Online Application System, information on the application platform was only available in Chinese. N.M.
Corporate
Food hampers for underprivileged families
Galaxy Entertainment Group (GEG) has donated MOP300,000 to the Macau Holy House of Mercy and sent a team of volunteers to assist in distributing food hampers to underprivileged families for the fourth consecutive year. Around twenty GEG volunteers packed rice, cooking oil, canned food and other goods and household items into food
hampers and distributed the hampers to more than 300 underprivileged families. Ms. Yama Chan, from the Food and Beverage Department of Galaxy Macau, stated that it was meaningful to participate in this activity because it gave her an opportunity to show love and care to low-income families. She added that she intended to regularly join the charitable activities organized by GEG.
Business Daily Wednesday, June 8 2016 3
Macau
Gaming
Still going down June gaming revenue to fall between 3 and 9 per cent, predicts brokerage firm
T
he city’s gaming revenue is likely to post a year-onyear decline of some 3 to 9 per cent for June, brokerage Sandford C. Bernstein expects, which suggests the local gaming sector may rake in a maximum of MOP16.8 billion (US$2.1 billion) in revenues. “Our channel checks indicate that Macau’s gross gaming revenue for last week was around MOP2.5 billion,
implying an average daily rate (ADR) of some MOP510 million. The ADR is similar to the first week of June 2015 at MOP521 million,” the firm’s analysts Vitaly Umansky, Simon Zhang and Clifford Kurz wrote in a recent report. “Assuming an ADR of MOP530 to 570 million for the remainder of this month, June gross gaming revenue would be MOP15.8 to16.8 billion, representing a year-on-year decline of 3 to 9 per cent [compared to] a
Retail
Le Saunda sales slide 13 pct Footwear retailer Le Saunda Holdings Ltd saw its retail business register a sales decline of 12.9 per cent year-on-year for the first quarter of its fiscal year ended May 31, it told the Hong Kong Stock Exchange yesterday. The company, however, did not disclose the related financial results in the filing. It claimed in the filing that its same store sales dropped by 15.4 per cent in the first quarter, whilst its e-commerce business also plunged by 34.5
per cent in sales compared to the same period last year. The retailer was operating a total of 872 outlets in Macau, Hong Kong and Mainland China as at the end of last month. The shoe producer recorded a dive of 35.5 per cent in its net profit to RMB122.1 million (MOP149.4 million) for its last fiscal year, with businesses in Hong Kong and Macau posting a loss of RMB10.596 million following sales plunging by 29.2 per cent yearon-year to RMB110.7 million. K.L.
10-per cent year-on-year decline in May,” they note. For June 2015, local casinos generated gross gaming revenues of MOP17.4 billion. Meanwhile, regarding the city’s gaming regulator tightening its anti-money laundering rules for local gaming and junket operators since the middle of May, the brokerage perceives such rules “are not unexpected.” “The new set of rules more than doubles the number of provisions included in the anti-money laundering instructions, though critically did not change the threshold of ‘large’ transactions (MOP500,000) required for casinos to report to government authorities,” its analysts claimed.
On the other hand, the investment firm perceives the recent warning issued by China National Tourism Administration (CNTA) regarding bad behaviour to be avoided by Mainland tourists, including gambling abroad, may not necessarily be targeting Macau. “There were no indications whether the warning was targeted against regulated or unregulated gaming”, the analysts wrote, adding “it is more likely that CNTA’s statement is not directed at Macau but towards other Asian gaming jurisdictions such as South Korea and Philippines, some of which have had casino operators in those jurisdictions aggressively market its gaming facilities to citizens in China too”. K.L.
4 Business Daily Wednesday, June 8 2016
Macau Opinion
José I. Duarte
Branding Macau The Macau Tourism Industry Development Master Plan is currently available for public consultation. Many have, in the past, complained about the lack of documentation setting out some framework for the development of Macau, a role that the annual Policy Address fails to fulfill. Now we are getting an increasing number of ‘plans’. There is a positive side to it. It seems to acknowledge that we need to have some shared idea about the general outlook of what and where we would like to be some time in the future, and a fair expectation about what the actions of the government will be for that purpose. Without that, uncertainty prevails, and short-term calculations will always trump any other considerations. However, the plans must be more than just over-worded documents, where adjectives liberally take the place of substance. We should get two things clear from them. First, a grasp of the methodologies used for the analysis presented; and secondly, a fair understanding of the principles underpinning a particular ‘vision’ about the future and the specific outcomes expected. Otherwise, the significance and impact of any document as a tool for policy setting and as a guide for action will be diminished. It is, therefore, important to set out clearly what our starting point is or, to use the document’s language, our baseline. There is a section in the document where a so-called ‘baseline’ is set, and the associated ‘challenges’ to Macau are identified. But there is at times a feeling that not all statements are as pertinent as they could be. Take, for example, the heading “Tourism branding and city positioning”. No one will disagree that gambling is the “main Branding Image “ [in capitals, in the original] of this city, whereas there are other ‘potential branding qualities’ - the usual stuff about East and West, heritage, and so on, follows. We may object somewhat to the wording but, in essence, that is unquestionable. That the problem is mainly one of branding, as seems to be implied, is open for debate, but we will leave that for now. A more questionable point is the fact that the document defines as a challenge, getting Macau residents to support the city’s branding. This would hardly be a tough obstacle to overcome however, and to say there is a need for stronger promotion of ‘non-gaming tourism products’ in the future does not exactly break new ground. José I. Duarte is an economist and permanent contributor to this newspaper.
Buses
Just business Good marketing, but so far the shuttle bus reduction by gaming operators on Cotai is more a business decision than anything else, Transport Bureau Director Kelvin Lam Hin San and expert Lawrence Fong tell Business Daily. Nélson Moura nelson.moura@macaubusinessdaily.com
T
he Director of the Transport Bureau (DSAT), Kelvin Lam Hin San, and Hospitality and Gaming Professor, Lawrence Fong, share the same opinion: the recent decision by three gaming operators to curb the number of bus routes around Cotai is “more a business decision than a social responsibility decision”. Recently, Galaxy, Melco and Venetian, launched ‘Cotai Connection’, a joint shuttle bus route created to facilitate the transport of guests and local residents around the Cotai Strip, claiming the decision was ‘in compliance with the transportation policy of the Macau SAR government,’ and would ‘advance transportation in Macau,’ while promoting the city as a ‘World Centre of Tourism and Leisure,” according to a joint press release issued by the three operators. “I think the connection bus route between operators is more for enhancing the ‘clustering effect’ o f the Cotai area, as such a kind of arrangement helps to draw people to the Cotai area, particularly important during summer time,” Assistant Professor of Hospitality and Gaming Management at the Faculty of Business Administration from the University of Macau, Lawrence Fong, told Business Daily. “These three properties are not connected by air-conditioned pathways, which may hinder people from traveling between the properties, and the connection bus route would facilitate people to travel. As such, I can’t see a direct link between this arrangement
and the traffic congestion issue in Macau. This arrangement is more like a business-oriented, rather than a corporate social responsibility (CSR) oriented, decision”.
Economy kills buses
“I think they are reducing the shuttle buses because traffic is down and tourism numbers are decreasing,” the DSAT Director, Kelvin Lam, also told this newspaper. Last year DSAT established a planned cut for gaming operators, who were urged by the Traffic Affairs Consultative Committee to reduce the number of routes by 20.55 per cent, from 73 routes to 58 during the current year. On February 11, bus routes between Cotai and Taipa districts were cut and 10 routes were optimised, and in May local media reported that DSAT placed the number bus routes at 65, a decline of only 11 per cent. When questioned if DSAT would enforce the 20 per cent reduction this year, Kevin Lam told Business Daily that, although he wasn’t sure of the exact numbers, gaming operators had already “reduced the buses by 20, or 15, or 10 per cent.” “Of course the Traffic Committee would like to see less people drive and reduce traffic congestion. However, in regards to the frequency of shuttle buses reducing or not, we’re very neutral on that, and we’re not happy if the reduction is due to the gaming revenue and economy going down.” As of last month, Melco Crown had eliminated one of their bus routes, down to 13 routes. Galaxy is still expected to reduce its bus routes by
18.75 per cent this year, and Sands China executed the largest number of route cuts, from 21 to 17 bus routes. Only MGM and SJM Holdings complied with the planned cuts, with 20 per cent and 25 per cent reductions respectively, as reported by Business Daily.
A hint of social responsibility?
Professor Lawrence Fong believes that from a cost reduction perspective, the frequency of the buses should drop, but that in order to boost the number of customers, casinos may need to arrange more trips, so the reduction might also have a social responsibility aspect to it after all. “The report of interim review of the casino industry named casino shuttle buses as one of the causes of traffic congestion in Macau. I think the gaming operators are seriously considering the assessment of their performance in the report, and reducing the number of shuttle bus trips may be one of the CSR strategies,” Fong stated. The average daily utilization of shuttle buses is around 33 per cent, and is identified as a main generator of road congestion in Macau, as mentioned in the ‘Macao Tourism Industry Development Plan’, presented by the Macau Government Tourism Office (MGTO). Nevertheless, Professor Fong believes casino shuttle buses are just one of the causes of traffic congestion in Macau and that improvement of the mass transit system, such as the Light Rail Transit System (LRT), should be at the core of future solutions. Macau’s Pac On ferry terminal, near the airport on Taipa Island, is designed to bring mass-market tourists directly to the nearby Cotai resorts, but it will only start operating next year, and the LRT planned for Macau will not commence until 2019. In its first phase, the LRT will only service the Cotai casino district, according to declarations in December by Secretary for Transport and Public Works, Raimundo do Rosário, as reported by Business Daily.
Business Daily Wednesday, June 8 2016 5
Macau Labour
Infrastructure
Close the borders Legislator insists on restricting foreign workers
U
nionist legislator Ella Lei Cheng I is urging the government to cap the number of non-resident workers in gaming corporations as operators have been hiring more non-resident staff for their non-gaming positions in the recent years, she claims. In her latest written interpellation, the indirectly-elected legislator indicates the city’s gaming operators have not fulfilled the government’s intention of boosting the rate of job promotions for local gaming workers. “The number of non-resident workers being a manager or above in local gaming corporations has been increasing every year since 2010… In addition, there were some 20 per
cent of foreign workers being promoted every year, which is obviously contrasted to the government’s [local-favoring] policy’, Ms. Lei wrote. “The government is responsible to set a lower ratio for the numbers of local and non-resident workers for job positions, especially non-gaming positions, that are suitable for local residents’, she urges, adding the government should implement an existing scheme for non-resident managers so that ‘gaming corporations can provide more developing opportunities for local workers”. Meanwhile, yesterday evening, the government published a media release to reaffirm that it will “maintain the current measure of not importing non-resident workers to the croupier positions of local casinos”. K.L.
Public tender for sewage treatment plant cancelled The public tender for the operation and maintenance of the Macau Sewage Treatment Plant was cancelled yesterday, according to a press release published in the Official Gazette of the Environmental Protection Bureau (DSPA). The cancellation is a consequence of a court case still in process regarding the prevention and preservation program of the project. The new date, time and location for the public tender will be announced later and bidders will be contacted again, the note explained. A.L.
Business
No sign of relief Chow Tai Fook profit drops 46 per cent as China slowdown hits sales Daniela Wei
Chow Tai Fook Jewellery Group Ltd., the world’s largest publicly traded jewellery chain, reported that fullyear profits declined 46 per cent amid weak demand in Hong Kong and Macau, and said the outlook for the region remains challenging as China’s economic slowdown hurt sales of luxury retailers. Net income fell to HK$2.94 billion (US$379 million) for the year ended
March 31, the jeweller said in a statement yesterday. Chow Tai Fook was affected by persistently weak retail sentiment in Hong Kong and Macau, and a decline in tourism, especially from Mainland China due to the stronger U.S. dollar and changing travel preferences, the jeweller said in the statement. “We expect the market environment for the region to remain challenging in the year ahead,” it said. Chow Tai Fook is planning to shut outlets that do not perform well, and reduce its number of employees, Managing Director Kent Wong said in January. Last November, the retailer posted its steepest decline in half-year profits since it went public, of 42 per cent. Bloomberg
6 Business Daily Wednesday, June 8 2016
Macau
Property
Luxury property became a ‘scam’ Macau residents bought 200 luxury properties in Zhuhai, only to discover that the promises are far from being fulfilled. A nightmare that has forced some of the buyers to seek help from the Macau government Annie Lao annie.lao@macaubusinessdaily.com
A
group of Macau homebuyers in Zhuhai are seeking help from the MSAR government for what they consider to be a fraudulent development plan of a high-end property, called Hills Beyond Sea in Zhuhai. About 200 Macau residents, who bought properties in Hills Beyond Sea, signed a petition letter, complaining about the “false promotional plan on
the property they bought”. Mark Ma, one of the residents in Hills Beyond Sea, also the representative of the Macau residents group, accompanied with legislator José Pereira Coutinho, yesterday submitted a petition letter signed by about 80 Macau homebuyers to the Government Headquarters office, requesting assistance. They claim to have been deceived by Zhuhai property developers, Pan Yue Fang Estate Development Ltd. In the letter, the buyers urge the government to intervene by enhancing consumer rights for Macau residents in Zhuhai.
Fraud, they say
The Hills Beyond Sea property was first promoted in 2013 as a high-end villa and apartment building by property developer Hongtai group and Pan Yue Fang Estate Development Ltd. in Doumen, a district of Zhuhai city. It stated the villa complex would be built with luxurious facilities with 2,000-square-meter villas, private gardens, occupying an area of 150,000 square meters, and
high-quality services for property management, etc. However, after construction was completed in December 2014, the property residents found out that all the facilities and services mentioned in the development plan “were not provided at all”. And in fact, some part of the land at Hills Beyond Sea “does not even belong to the property developer,” they accuse.
10,000 RMB per square meter
In addition, the property developer offered the buyers the “most expensive price for the property in the district in Zhuhai,” when it “is not worth the high price,” the group complains. One square meter in the property cost about RMB10,000 (US$1,522), the highest selling price in that district.
In the end, the residents found out that a kindergarten is currently being built in the same location where some promised property facilities should have been built according to the development plan. “The kindergarten was actually granted by the Zhuhai government before, but the property developer did not mention it at all in the development plan, so they told us there would be facilities built for the residents to use,” Mr. Ma explained to Business Daily. With the school under construction, the only entrance to and from the property is now blocked, they say. “It is hard for the residents to get in and out of the property,” Mr. Ma told Business Daily, explaining that they were promised two entrances to the property, a requirement by the Zhuhai government. “The kindergarten is a private entity, and if the owner of the school decided not to allow us to walk past to go into and out of the property, then we basically have no walking path to go home,” Mr. Ma stressed. F u rth e r m o r e, th e r esi d e n ts
City’s housing investors quitting Zhuhai Zhuhai’s residential market is losing its appeal to Macau investors due to the upward trend of its housing prices. Kam Leong kamleong@macaubusinessdaily.com
Zhuhai’s residential property market was once a hot place of cake for the city’s investors. Now, it is losing its appeal as home prices there have been rising in the recent months, local realtors told Business Daily. According to the latest data from the Chinese Index Academy, average home prices in Zhuhai were RMB16,103 (MOP19,485/ US$2,436) per square metre last month, which is the ninth most expensive among one hundred major Chinese cities. Increasing by some 2.72 per cent since April, the average housing
prices in Zhuhai have been climbing month-on-month for five consecutive months. On a year-on-year comparison, the latest average home prices represent a jump of 23.3 per cent compared to the same month last year. “As the housing prices in Zhuhai keep surging, property investors are shifting their focus back to Macau,” Jennifer Un, a senior regional director of Ricacorp (Macau) Properties Ltd, told Business Daily yesterday in a phone interview. “Before, Macau investors were looking around for opportunities outside the Special Administrative Region when the local housing prices were too high. Yet, as the local home prices have dropped to the bottom,
Business Daily Wednesday, June 8 2016 7
Macau
suspected that the property developer probably sold some part of the land to other developers to build the school there.
More problems occurring
The so-called luxurious property has other problems that need to be fixed, such as water leakages Mr. Ma told this newspaper. As if this wasn’t enough, the buyers also complain that they later found out that the property builder had increased the price of car parking spaces to RMB150,000, making limited car parking spaces available for the residents. “The original development plan stated that there would be a total of 888 car parking spaces, but in fact only 380 car parking spaces exist,” Mr. Ma told Business Daily.
And “there is only one security guard currently taking care of the whole property,” he explains.
200 Houses sold to Macau residents
Trying to seek help
About 200 units were sold to Macau residents, accounting for about 25 per cent of the total residents at Hills Beyond Sea, including some 120 units that were bought by Macau residents for investment purposes. The entire property contains about 900 units
in total. The residents have all reached out to the Zhuhai government and different departments of the government, including the property developer, for help since August last year. However, the property problems continue. “Some of the residents even sold their properties in Macau in order to buy a unit in Zhuhai, but they are now facing the uncertainty of not having a home to live in, both in Macau and Zhuhai”.
Customer rights should be strengthened
Consumer rights needs to be enforced and strengthened in Zhuhai, says legislator Pereira Coutinho. “The property buyers have no protection,
therefore, we need to enhance the relevant regulations and enforce the law accordingly. There are about 100,000 Macau residents crossing the border every day,” he said to reporters. The legislator suggested the SAR government should have a meeting with the Zhuhai government to discuss a way to improve buyers’ rights in Zhuhai. ‘For the past few years, we have received some complaints about buying properties in Mainland China, and the Chinese government has closely regulated the property market, especially with off-plan buying, however, not like this case, which involves about 200 units brought by Macau residents,” the legislator said.
Home sweet home coupled with the [investment return] in Zhuhai not being as high as before, capital is flowing back to Macau,” the property agent claimed.
RMB unclear prospect
In addition to the increasing housing prices in Zhuhai, the unclear prospect for the appreciation of the Renminbi is another factor slowing down local investor’s interest in Zhuhai property. “A few years ago, people investing in Zhuhai properties may have done so because they wanted to hold some assets in Renminbi with the then-strong appreciation of the currency. However, with the limited appreciation of the Renminbi now, investors are less passionate about Zhuhai properties,” Jeff Wong, Head of Residential at Jones Lang LaSalle (Macau) Ltd, believes. The JLL property agent added that the lower return rate in Zhuhai attributable to higher housing prices
is also the reason for declining local investor interest in the property market there. Meanwhile, Macau’s home market has been picking up for the past two months. The latest official data published by the Financial Services Bureau (DSF) shows total housing transactions totaled 1,087 in April, soaring by 83.9 per cent year-on-year, or 63.7 per cent month-on-month. “Many users think that now is the appropriate time to buy houses in Macau as those in Zhuhai are increasing to a similar level … We actually see some cases of Macau buyers selling their properties in Zhuhai to purchase a home in Macau,” the executive director of McCore Properties in Zhuhai, Eric Liao, said. “But a number of investors from Macau are still eyeing the further potential of Zhuhai’s housing market. They want to share the fruits from the continuous growth of housing prices,” the Mainland Chinese realtor told us.
Country Garden sales surges 1.5 times in first five months. Chinese real estate developer Country Garden Holdings Company Ltd saw the contracted sales of its housing projects in the Mainland soar by more than 1.5 times for the first five months of the year, reaching total contracted sales of RMB95.5 billion (MOP115.6 billion/US$14.5 billion), compared to RMB36.8 billion one year ago. According to the company’s latest filing with the Hong Kong Stock Exchange, the developer sold a total of 12.08 million square metres of its Mainland properties in the five months since January, which is double the 5.89 million square metres sold during the same period last year. The company said some RMB73.3 billion of the generated contracted sales would be attributable to the shareholders of the company. On the other hand, its major rival in the overseas market, Agile Property
Holdings Ltd, also announced that its pre-sales of residential projects reached RMB21.65 billion for the first five months of the year, a surge of 42.3 per cent year-on-year compared to RMB15.2 billion one year ago. The Mainland residential projects of both Chinese developers are popular among Macau and Hong Kong investors. For May alone, Agile’s pre-sales of housing projects amounted to RMB4.81 billion, which represents a jump of 10.8 per cent year-on-year up from RMB4.34 billion in the same period last year. The Guangzhou-based property developer added that it had accumulatively sold 2.2 million-square-metres of gross floor area of housing projects in the first five months of the year, which indicates the average selling price was RMB9,754 per square metre. K.L.
8 Business Daily Wednesday, June 8 2016
Greater China Investment
Beijing to grant U.S. 250 bln yuan RQFII quota The RQFII is part of China’s effort to expand use of the yuan internationally.
C
hina will grant the United States a 250 billion yuan (US$38 billion) quota under its Renminbi Qualified Foreign Institutional Investor (RQFII) programme, a central bank vice governor said yesterday. Yi Gang made the announcement at the Strategic and Economic Dialogue talks in Beijing, without providing further details such as the timeframe.
Launched in 2011, the RQFII programme allows financial institutions to use offshore yuan to buy securities in mainland China, including stocks, bonds and money market investments. The new quota will significantly expand the RQFII program, which stood at 501.77 billion yuan at the end of May. The quota is the first granted to the U.S. under the programme. Hong Kong has the largest RQFII quota at 270 billion yuan.
Chinese regulators have been pushing to expand foreign investors’ access to domestic financial markets to both make the markets broader and more sophisticated and to attract more capital inflows. But foreign interest has waned after a near-meltdown in China’s equity markets last year and subsequent heavy-handed official intervention to shore stock markets back up. The central bank said in February it would allow all kinds of financial institutions that are registered outside China to buy bonds in the interbank market and would scrap quotas for medium- and long-term investors. The RQFII is also part of China’s effort to expand use of the yuan internationally, which received a setback last August after it suddenly devalued the currency. Yi said yesterday that internationalisation of the currency will be market-oriented. U.S. Treasury Secretary Jack Lew said on Sunday that it was critical for China to continue moving toward a more market-oriented exchange rate.
“The U.S.’s rising interest in RMB internationalization is an incentive for the Chinese authorities to stay on the path of financial and FX reforms” HSBC note
Some analysts believe that U.S. support for the expanded use of the yuan will serve to keep China on track to deliver on pledges of currency and other reforms. “In our view, the U.S.’s rising interest in RMB internationalization is an incentive for the Chinese authorities to stay on the path of financial and FX reforms,” HSBC said in a recent research note. Reuters
Inc Shopping
M&A surge seen ebbing as U.S. campaign heats up Chinese foreign acquisitions this year have totalled US$104 billion. Denny Thomas
After snapping up assets at a record pace so far this year, Chinese buyers are expected to hold back in the runup to the U.S. presidential election in November, nervous that campaign rhetoric might invite closer regulatory scrutiny of deals. Uncertainty about the ultimate winner could also give buyers pause, said lawyers and bankers, as the presumptive Republican nominee, Donald Trump, has regularly accused China of stealing U.S. jobs and manipulating its currency for unfair trade advantage. “The identity, let alone the foreign policy of the incoming presidential candidate in the U.S., isn’t exactly clear, and it is fair to say there is considerable uncertainty about how that will play out in the China market,” said Andrew McGinty, a Shanghai-based partner at law firm Hogan Lovells International, who has advised on M&A in China for two decades. Chinese foreign acquisitions this year have totalled US$104 billion, close to the total announced last year, but there have also been a record nearly US$27
billion of failed attempts, mostly in the United States, and mostly due to regulatory pushback. Figures for deals announced in March through May are already down from a peak in February. The latest Chinese outbound deal to run into regulatory trouble is Anbang Insurance Group’s proposed US$1.57 billion bid for U.S. peer Fidelity & Guaranty Life. The New York regulator has asked Anbang to withdraw its application after it failed to provide information requested for processing the deal. Any deal launched for a U.S. target now is unlikely to secure all the required regulatory clearances before the November election, and most buyers will think twice before launching sensitive deals during the most intense period of campaigning, bankers say. “That will create a certain amount of uncertainty within Chinese buyers because people want to know, ‘Well, who is it going to be looking at my deals?’ especially if you consider the CFIUS aspect,” said McGinty, who has nearly two decades of experience in China. The Committee on Foreign Investment
Trump has not made comments on Chinese acquisitions, but has called for 45 percent tariffs on imports from China
in the United States (CFIUS), which reviews deals for potential national security threats, has emerged as a significant risk for Chinese companies making U.S. acquisitions. The United States is also seeking to broaden the committee’s powers.
Hard line
Some technology-related acquisitions from China have faced unexpected and intense CFIUS scrutiny, leading to some deals being pulled. In February, China state-backed Unisplendor Corp scrapped a US$3.78 billion bid for Western Digital Corp after CFIUS said it would investigate the transaction. “This (scrutiny) is not likely to decrease any time soon and may increase, at least in the short term, after a new president takes office,” said Anne Salladin, special counsel with Stroock & Stroock & Lavan LLP, who advises on CFIUS matters. Trump has not made comments on Chinese acquisitions, but has called for 45 percent tariffs on imports from China. Chinese officials have generally avoided criticising Trump directly, though they have disputed his claims. A spokeswoman for Trump’s campaign did not respond to requests for comment. Salladin said Trump has taken a hard line toward China and other countries during the Republican primary campaign, but noted that presidential candidates would often “move toward the centre” during the campaign proper and might, if elected, govern differently from their campaign rhetoric. “I think it’s too early to make any predictions at this point,” she added.
Another area of concern for some experts is how a new U.S. president would tackle the long-contentious subject of foreign currency. China and the United States have traded accusations of currency manipulation for years before Trump’s campaign chimed in. “If that were to come back on the agenda, there could be some friction that would not be helpful for U.S.-China deal-making,” said McGinty.
Key Points China 2016 outbound M&A US$104 bln so far, close to 2015 total But failed M&A attempts also at record nearly $27 billion Several deals fall after regulatory pushback Lawyers say run-up to US election could deter M&A Presumptive Republican candidate Trump critical of China But anti-China sentiment is unlikely to deter Chinese buyers in the longer term, said Alberto Forchielli, founder of China-focused private equity firm Mandarin Capital. “Chinese investments in the U.S. will be less and less popular. It will be a more difficult business climate,” Forchielli said. “Chinese corporates, however, are not worried about U.S. elections. They know that in an electoral year there is a phase of China bashing. They will continue to buy.” Reuters
Business Daily Wednesday, June 8 2016 9
Greater China In Brief Reverse repos
PBOC drains 70 bln yuan from market
Commodity market
Lured by hopes of easy money, amateur mainland traders lose their shirts Investment bank Jefferies estimates there are more than 600,000 active spot commodities traders in China. Samuel Shen and Elias Glenn
Chasing the promise of outsized returns, 48-year-old businessman He Xiaolun started trading oil last August on a platform developed by the Shaanxi Non-ferrous Metal Exchange. Over the next five months, he lost nearly 3 million yuan (US$455,000). “Initially, I lost several thousand yuan,” He said. “The exchange’s trading advisor told me to put in more money, and guided me into trading more frequently.” The exchange did not respond to questions from Reuters. The advisor said clients made trading decisions and it was not the exchange’s fault if they lost money. He and other investors say they were duped by online commodity trading platforms that have cropped up over the last few years in China. Some have been using internet dating sites to lure customers. The country’s securities regulator has said trading on such platforms is highly speculative and therefore risky, and the cause of heavy losses for many clients. The China Securities Regulatory Commission (CSRC) also warned the “large number of complaints and disputes” against such exchanges were a threat to “social harmony and stability”. Outrage among China’s growing class of retail investors over the disappearance of their life savings has become a big headache for the Communist Party after a series of financial scandals in recent years.
Little oversight
By the end of 2015, annual spot commodities trading volume had reached US$4.5 trillion on more than 350 independent exchanges in China, according to data from Euromonitor. Trading volume grew 35 percent annually from 2011 to 2015. Investment bank Jefferies estimates there are more than 600,000 active spot commodities traders in China. But while a bout of turbulence in major commodities futures markets last month triggered a swift response from regulators against “speculation”, there remains little oversight over small regional exchanges. Despite issuing its warning last month on the risks investors faced playing such exchanges, the CSRC says it is not its job to regulate them. “It’s the local government’s responsibility,” said a CSRC official in Shaanxi, central China. Disgruntled investors and some analysts say that results in frequent conflicts of interest, as many small exchanges are backed by regional governments. “These exchanges are big tax contributors to the local government, and are thus protected by them,” said Chang Chengwei, an analyst at Hengtai Futures Co. “At the same time, they’re not supervised by CSRC. This is a regulatory
loophole that puts many small individuals’ money at risk.”
“Lack of political will”
The regulatory ambiguity is a major risk for established companies operating in the sector. Shanghai-based Yintech Investment Holdings Limited, which operates an online platform for customers to trade gold and silver on three spot trading exchanges, raised more than US$100 million in a Nasdaq initial public offering in April. The company cited regulatory changes as one of the key risks to its business in its listing prospectus. Jefferies, which was the book runner for the IPO, said in a May 25 report that a “major risk to Yintech is if the Chinese government attempts to unify the regulatory bodies of the various exchanges”, but concluded that “we do not believe there is enough political will to do so in the short run”. Underlining the lack of clear rules in the sector, one of Yintech’s key trading venues, a regional metals exchange in Tianjin, said last week it was adopting a new trading system that Yintech said was intended to remove a conflict of interest that meant brokerages could profit from their clients’ losses. Although Tianjin Precious Metals Exchange accounted for 40 percent of Yintech’s trading volumes in the first quarter, Yintech CFO Jingbo Wang told Reuters the changes would not affect its business. The CSRC said in its warning last month that some regional exchanges were violating the rules on spot trading. For example, some were conducting intra-day trading with clients, which is only allowed on futures exchanges, CSRC said. The regulator also said some deals were structured so that exchange members were effectively betting against clients. “We’re not trading with other investors,” said businessman He, who lost money on the Shaanxi exchange. “We’re gambling against the exchange itself, at a great disadvantage.” When Reuters contacted the Shaanxi branch of the CSRC concerning He’s complaints against the Shaanxi Non-ferrous Metal Exchange, the questions were referred to the local government. An official at the finance department of the local government
Key Points Around 350 spot commodity trading platforms in China Allegations of fraud against some online trading platforms Regional commodities exchanges have no central regulator Many dominated by investors seeking alternatives to equities
said it was looking into the matter, but “it’s very complicated and takes time”. The exchange itself asked for questions to be submitted by email, but did not reply to the written questions. Saleswoman Miao Lu, who handled He’s account for a member firm of the exchange but has since left to start her own business, said there was nothing wrong with how it operated. “You don’t complain when you make money, right?” she said. “The Exchange just provided a platform. If you have confidence in your ability to make money, you just come and trade.”
Oil losses
Disillusioned by the stock market, bank clerk Wang Lili said she was coaxed into trading crude oil at the start of 2015 via a trading platform that is a member firm at the Beijing Petroleum Exchange and lost 1.1 million yuan in 10 months as prices fell. “The sales manager repeatedly told me that oil prices have bottomed out and it was time to buy,” Wang, from the northern city of Tangshan, said. “I trusted him because Beijing Petroleum Exchange is state-owned and is based in the capital.” Sales agent Dong Hao, who handled Wang’s account, said he no longer marketed for the exchange after an increasing number of complaints, but added that it was up to clients to control risks. “If you lose money, and the casino operator makes money, there’s nothing to complain about,” he said. Beijing Petroleum Exchange’s largest shareholder is the Beijing municipal state-owned asset management company. Other investors include PetroChina Co. Ltd., Sinochem Corporation, and CNOOC Investment Holding. None of the companies replied to phone calls or faxed requests for comment. On March 18, China Central Television (CCTV) aired an investigative report alleging some oil products traded on the Beijing Petroleum Exchange did not have regulators’ approval. In response to the CCTV report, Beijing Petroleum Exchange released a statement on March 25, saying it had launched an investigation into Shihang International, a member firm that was accused in the report of breaching rules by allowing futures trading. Results of that investigation have not yet been published and Shihang declined Reuters’ request to comment. Hou Xiaoyu, a lawyer representing investors suing the exchange, said that, while it was only licensed for spot trading - which typically refers to contracts for immediate settlement - it allowed what he called quasi-futures trading. Contracts traded on the Beijing Exchange are standardized, offer high leverage, change hands frequently and are not for the purpose of actually taking delivery of the products - characteristics of futures rather than spot trading, Hou said. Beijing Petroleum Exchange said in an emailed statement to Reuters that there had been problems with some of its member institutions, which it did not name. The exchange added that it has dealt with issues. Reuters
The central bank yesterday allowed 70 billion yuan (US$10.67 billion) to drain from the market. The People’s Bank of China (PBOC) put 50 billion yuan into seven-day reverse repos, a process by which central banks purchase securities from banks with an agreement to sell them back in the future. The reverse repos were priced to yield 2.25 percent, according to a PBOC statement. Reverse repos worth 120 billion yuan matured yesterday, so the central bank has effectively drained 70 billion yuan from the market. Investment treaty
Beijing to submit sectors “negative list” to U.S. next week China will submit next week its “negative list” offer of sectors that would remain off-limits to U.S. investment in a U.S.-China bilateral investment treaty (BIT), Vice Premier Wang Yang said on Monday. Wang made the comments in opening remarks to the economic track of the Strategic and Economic Dialogue talks in Beijing. U.S. officials have said a negative list that greatly reduces the number of off-limits sectors is critical to reaching a deal. U.S. Treasury Secretary Jack Lew also said he looked forward to seeing the new negative list when U.S. and Chinese BIT negotiators meet next week in Washington. Appointments
State Council changes officials The State Council, China’s cabinet, announced a reshuffle of senior government positions yesterday. The State Council appointed Zhao Zhengping as the vice chairperson of the China Securities Regulatory Commission and Fu Hua as the vice head of the State Archives Administration. In addition, Wang Hong and Zhao Bing will become the vice heads of the State Council’s Counsellors’ Office, relieving Fang Ning of this post. Li Yangzhe and Li Fanrong were appointed deputy directors of the National Energy Administration, replacing Liu Qi and Zhang Yuqing. Yang Yingming was appointed World Bank executive director for China, in place of Chen Shixin. Ship industry
Oil stockpiling to boost tanker market Moves by China to stockpile oil are providing a further boost to the tanker shipping market which is already buoyant due to global bargain-hunting caused by lower crude prices, shipowners said on Monday. Rates for supertankers transporting 2-million-barrel cargoes of crude surged to record highs in late December of over US$110,000 a day and have stayed close to US$60,000 a day in recent weeks, helped by firm appetite for cargoes and a tight supply of ships available for hire.
10 Business Daily Wednesday, June 8 2016
Greater China
Taiwan chip firms
TSMC chief wants mainland investors without board seats Comments come as the new Taiwan government is reviewing China-backed Tsinghua Unigroup’s plan to invest and take board seats in two Taiwanese chip test and packaging firms.
T
aiwan should welcome Chinese investors into the island’s protected chip sector, but they shouldn’t have seats on company boards to ensure protection of prized intellectual property, the chief of the world’s largest contract chipmaker said yesterday. “I think investment (by Chinese investors) should be welcome,” Taiwan Semiconductor Manufacturing Co (TSMC) chairman Morris Chang said. “But don’t let the investor be able
to appoint a director to the board.” “Even if there is one (director) or more than one, then - relatively - it will not be that easy to protect intellectual property,” he said, speaking to reporters after TSMC’s annual shareholders’ meeting. Chang’s comments come as the new Taiwan government, which is wary of its giant neighbour, is reviewing China-backed Tsinghua Unigroup’s plan to invest and take board seats in two Taiwanese chip test and packaging firms. The government is also
considering whether to open the island’s chip design sector to Chinese investors, currently banned. Chang is well respected in the global chip industry, and policymakers and corporate executives in Taiwan regularly reference him on key industry matters.
“Don’t let the investor be able to appoint a director to the board” Morris Chang, Taiwan Semiconductor Manufacturing Co chairman
China’s Taiwan Affairs Office did not immediately respond to a request for comment, but said last year plans by Tsinghua Unigroup to invest in Taiwan should not be politicised. Tsinghua Unigroup chairman Zhao Weiguo declined to comment. TSMC decided to build an advanced plant in China late last year only after the island’s government allowed such investments to be wholly owned in order to protect its intellectual property. Previously Taiwan required chip plant investments in China to operate under a joint venture structure, which was partly aimed at discouraging a rush into China. The go-it-alone style of TSMC, a rival of Intel Corp and a key supplier to Apple Inc, contrasts with global peers partnering up with Chinese investors to crack the Chinese market. Chang said he expected the second half of the year to be “not bad” and reiterated the company’s earlier forecast of 5-10 percent growth in 2016 for operating profit and revenue. Reuters
Funding ecology
Cities need US$1 trillion green finance to cut pollution Green transportation, including 3,000 kilometres of new rail and a 4.8 million fleet of electric cars, will need about 4.45 trillion yuan of funding, according to a report. China’s cities need about 6.6 trillion yuan (US$1 trillion) of green financing over the next five years to reach its pollution-reduction targets, according to a report. Financial markets will need to cover as much as 90 percent of investment funding for clean transportation, energy-efficient buildings and renewable power through 2020, according to the executive summary of the report, “Green Finance for Low-Carbon Cities,” which was commissioned by the Green Finance Committee of China Society for Banking and Finance and Bloomberg Philanthropies. “Public funding should play a leveraging role and facilitate the entry of a large amount of private funding in the low-carbon development of Chinese cities,” according to the report. “The financial sector should establish a system to differentiate potential projects based on their environmental benefits, so that green finance can effectively
direct funding to low-carbon urbanization.” As millions of Chinese have flocked to economic opportunities in cities, urban pollution has grown and forced the government to respond to
public health concerns. Beijing’s smog hazards prompted authorities in December to impose limits on factory output and construction. The volume of pollution from China’s export manufacturers has also contributed to smog levels in Japan and the U.S. west coast, according to the U.S. National Academy of Sciences. Green transportation, including 3,000 kilometres of new rail and a 4.8 million fleet of electric cars, will
need about 4.45 trillion yuan of funding, according to the report. Making buildings more energy efficient will require 1.65 trillion yuan while another 500 billion will be needed to install 64 gigawatts of solar power, according to the report, which was written in partnership with the Paulson Institute, Energy Foundation China and the Chinese Renewable Energy Industries Association. Michael Bloomberg, founder and majority owner of
Transportation pollution is choking some of the biggest cities in China
Bloomberg News and its parent company Bloomberg LP, helped sponsor the research via Bloomberg Philanthropies. Bloomberg also serves as the United Nations Special Envoy for Cities and Climate Change. China has pledged to peak carbon emissions around 2030 when more than 1 billion people are expected to be living in its cities, according to report said. Reducing urban pollution - which account for 70 percent of the country’s total energy-related carbon emissions - is seen as key for China to reach its climate targets. Bloomberg News
Business Daily Wednesday, June 8 2016 11
Asia Optimistic casinos
As Duterte woos China, Philippine casino tycoon gives thumbs up China’s corruption crackdown has meant that an anticipated increase in visitors to Philippine casinos hasn’t eventuated, said Enrique Razon, chairman and founder of Bloomberry Resorts Corp Ian Sayson
K
nown for his foulmouthed tirades against criminals, Philippine President-elect Rodrigo Duterte is taking a more diplomatic approach to China. That’s pleasing the Southeast Asian nation’s biggest casino mogul who relies on high rollers from the mainland. Enrique Razon, the chairman and founder of Bloomberry Resorts Corp., said a plan by Duterte to hold bilateral talks with Beijing over territorial disputes in the South China Sea and the president-elect’s description of Xi Jinping as a “great president” should be good for business. Mainland visitors account for about 40 percent of the VIP customers at Bloomberry’s casinos, he said. “Even if nothing is agreed on during the bilateral talks, it will thaw relations,” Razon told reporters in
Manila yesterday after the company’s annual general meeting. “I think relations will dramatically improve” and Duterte’s anti-crime approach augurs well, he said. Duterte, who takes office June 30, told U.S. President Barack Obama that he may break ranks with Washington and enter bilateral talks with China “if there’s no wind to move the sail.” The Chinese ambassador to the Philippines was also among the first people the president-elect met after his May 9 election victory. China’s corruption crackdown has meant that an anticipated increase in visitors to Philippine casinos hasn’t eventuated, said Razon.
a Philippines’ bank and then to local casinos. “We remain stringent with our financial and security processes” and continue to be vigilant on transactions in our gaming operation, he said.
Bloomberry is still doing business with Kim Wong, one of the operators linked to the heist who returned US$15 million of the stolen funds, because he “brings business,” said Razon. Bloomberg News
‘Good catalyst’
Bloomberry’s share price jumped 7.5 percent yesterday after Razon’s comments. It’s up 20 percent so far this month, compared with a 4.5 percent gain in the benchmark index. Better relations with China will be a “good catalyst” for Bloomberry and other gaming companies, said Jonathan Ravelas, chief market strategist at BDO Unibank Inc. in Manila. The casino and resorts company is committed to protecting the Philippines’ reputation and that’s why it banned 18 Chinese gamblers and a junket operator that were linked to the US$81 million cyber-heist of money from Bangladesh’s central bank, said Razon. The audacious theft put the spotlight on the Southeast Asian nation after it was revealed the money had been routed through
Enrique Razon, chairman and founder of Bloomberry Resorts Corp
Monetary policy
Australia’s central bank stands pat The absence of a clear guidance on future policy moves caught some analysts by surprise Ian Chua
Australia’s central bank held its policy rate steady yesterday, refraining from delivering back-to-back easings and appeared to have lifted the bar for another rate cut in a move that saw the local dollar pop higher. In a widely expected decision, the Reserve Bank of Australia (RBA) kept the cash rate at a record low 1.75 percent after its monthly review. All but one of 52 economists surveyed by Reuters had predicted such an outcome. “The Board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and inflation returning to target over time,” Governor Glenn Stevens wrote in a brief statement accompanying the decision. Along with other major central banks, the RBA is fighting off deflationary pressures but reasonably strong economic growth has allowed it the luxury to pause and see if prices will pick up. Indeed, the rate cut in May came exactly a year after it had last eased. The absence of a clear guidance on future policy moves caught some
analysts by surprise. Back in April when the RBA left rates unchanged, it said: “continued low inflation would provide scope for easier policy.” “We had thought they would reveal some sort of easing bias today. They haven’t done that,” said Tom Kennedy, economist at JPMorgan.
A cut this month had been highly unlikely in any case after minutes of the May meeting indicated the central bank had considered keeping rates unchanged, suggesting last month’s unexpected easing was pre-emptive rather than an urgent response to low inflation. Moreover, recent data showed the economy grew at its fastest pace in over three years last quarter. Yet historically low inflation means
the central bank has room to ease again if needed. Government figures in April showed key measures of underlying inflation slowed to an annual rate of 1.6 percent in the first quarter, the lowest on record and well under the RBA’s long-term target band of 2 to 3 percent.
Key Points RBA keeps cash rate at record low 1.75 pct Says steady policy consistent with sustainable growth Aussie dollar climbs more than half a U.S. cent on neutral tone “The Reserve Bank is effectively in wait-and-see mode now,” said Craig James, chief economist at CommSec. “Like everyone else, they are waiting for the next inflation figures to decide the next move in interest rates.” The Bureau of Statistics releases second quarter consumer price data at the end of July, leaving the August policy meeting a ‘live’ one. “Despite the lack of forward guidance in today’s statement, we continue to expect the Bank to ease further, given that core inflation is likely to remain below the RBA’s target band. We maintain our pick for the timing of the next cut as August,” said Phil Odonaghoe, economist at Deutsche Bank. Reuters
12 Business Daily Wednesday, June 8 2016
Asia In Brief Industry data
India’s steel imports lowest in 14 months India’s steel imports fell in May to their lowest level in at least 14 months, provisional government data showed, thanks to the country’s efforts to cut cheap overseas purchases. India imported 546,000 tonnes of finished steel last month, nearly 41 percent lower than the same month a year earlier, data from the Joint Plant Committee (JPC) of the steel ministry showed. The JPC website shows monthly steel import data since April 2015. In February, the government imposed a floor price on the import of 173 steel products and in March extended import taxes on some products until 2018. Dollar evolution
Philippine c.bank optimistic on Fed’s upbeat assessment The Federal Reserve’s upbeat assessment of the U.S. economic outlook is good for the global economy especially for its trading partners such as the Philippines, the governor of the Bangko Sentral ng Pilipinas said yesterday. “While our view is that our current stance of monetary policy remains appropriate, we should nevertheless use this breather from the Fed to further consolidate our own domestic sources of resilience so we can take advantage of external developments,” Amando Tetangco said in a mobile phone message. The central bank next meets on June 23 to review policy.
Monetary policy
India’s central bank governor looks for room to cut interest rates Rajan’s policy statement struck a more cautious tone than it had done at the last policy review in April. Suvashree Choudhury and Rafael Nam
T
he Reserve Bank of India is looking for room to reduce interest rates further, but there are concerns over upward pressures on food and commodity prices, Governor Raghuram Rajan said after leaving rates unchanged at a policy review yesterday. Aside from uncertainty over the timing of any rate move, investors in India are also concerned whether Rajan, a much admired former International Monetary Fund chief economist, will be given an extension when his term expires in September. Rajan gave nothing away, telling reporters: “You will know when there is news.” Reuters reported last week he was likely to be offered another two years, should he want it, but markets were spooked after a regional newspaper cited sources close to Rajan saying he could walk away. The decision to hold the repo rate steady at a five-year low of 6.50 percent was widely expected, with the
central bank needing to see whether monsoon rains would dampen food price rises, after inflation accelerated to a stronger-than-expected 5.39 percent in April. Rajan’s policy statement struck a more cautious tone than it had done at the last policy review in April, but it said the RBI’s stance would remain “accommodative”. Speaking to a news conference after the review, the central bank chief made clear that he wanted to able to lower interest rates, having already brought them down by 150 basis points since January 2015, including a 25 bps reduction in April. “We’re looking for room to ease,” Rajan said. Apart from needing a good monsoon, Rajan’s statement said inflation risks could also be offset by astute management of stocks by the government, and by companies increasing supply capacity. The statement said the RBI saw “an upward bias” to its previous projections of consumer inflation of around 5 percent during the year started in April.
New Zealand dollar
Central bank tipped to hold rates New Zealand’s central bank is expected to hold rates this week, although economists acknowledge a cut is conceivable given low inflation and the strong New Zealand dollar. Fourteen of 23 economists polled by Reuters expect the Reserve Bank to keep rates on hold at a record low 2.25 percent on Thursday while nine expect a rate cut. The central bank surprised markets in March when it cut rates by 25 basis points and has said further reductions may be necessary given New Zealand’s tepid inflation. IPO
Hotel Lotte listing to be delayed until June South Korea’s Lotte Group is expected to delay a planned listing for Hotel Lotte Co Ltd until after June, a regulatory source with direct knowledge of the matter said yesterday. Hotel Lotte, whose US$4.9 billion IPO is slated to be the world’s biggest this year, has delayed a roadshow as it needed to disclose an ongoing bribery investigation, according to people familiar with the matter. Hotel Lotte had previously planned to list this month. According to local rules, Hotel Lotte must list before the end of July or start its listing process over again.
Raghuram Rajan, Governor of the Reserve Bank of India (RBI), reacts a media conference after the second bi-monthly monetary policy statement at the RBI head office, in Mumbai yesterday.
“At least one more”
The RBI cite d several uncertainties regarding price trends, including a rebound in oil prices, the implementation of a pay hike for millions of government employees and pensioners, households’ rising inflation expectations, and sticky core inflation. “The statement is couched in many conditions. I think to see the policy as hawkish is a bit premature,” said Abheek Barua, chief economist of HDFC Bank in New Delhi. “There is room for at least one rate cut until December.” All but one of 44 economists polled by Reuters last week had expected the RBI to leave the rate unchanged this time. But most had expected a possible final cut in the current easing cycle sometime between July and September, so long as food prices were kept in check. After the policy decisions were announced the broader NSE share index rose 0.4 percent, while the rupee strengthened to 66.85 per dollar from Monday’s close at 66.96. The benchmark 10-year bond yield rose 1 bp to 7.48 percent from its previous close. Meantime, Rajan repeated a pledge to ensure the financial system had adequate liquidity, and reiterated his call for banks to pass on benefits of earlier RBI rate cuts to borrowers, as they have only lowered lending rates by 65 bps since early 2015. Reuters
New index
Japan’s central bank sees modest pickup in consumption A pick-up in consumption is crucial to the success of the central bank’s massive monetary stimulus programme. The Bank of Japan’s (BOJ) new index showed yesterday that private consumption rose 0.8 percent in April from the previous month, underscoring its view that household spending is holding up on expectations of a slow but steady increase in wages. The central bank began releasing the new index to get a more comprehensive view of private consumption, which makes up 60 percent of Japan’s gross domestic product (GDP) and holds the key to its policy decisions. Household spending remained weak in the first quarter and recent surveys have shown a mixed picture on the outlook. Department store sales slumped in April on weak demand for luxury items. But supermarket and convenience store sales were firm in a sign that shoppers, while being selective, are not making across-the-board spending cuts. The government’s existing data on household spending, which is used to calculate Japan’s GDP, showed a
0.4 percent fall in April from a year earlier, much less than a median market forecast for a 1.4 percent decline. The BOJ introduced its own consumption index amid growing criticism from lawmakers and analysts that the government’s data, compiled from a survey of just 9,000 households, was distorted because of its small sample base. A pick-up in consumption is crucial to the success of the central
bank’s massive monetary stimulus programme aimed at accelerating inflation, now ground to a halt, to 2 percent. Some companies have recently cut prices to lure consumers after spending slumped. The BOJ is hoping that consumption will rebound so that companies can raise prices of their goods again. The new BOJ index measures the strength of consumer spending based on supply-side data, such as retail sales and surveys on corporate business activity, and would have a strong correlation to consumer sentiment surveys, according to the central bank. Reuters
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 Aivi Remulla 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 Founder & Publisher
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The RBI has targeted inflation of around 5 percent by March 2017 and 4 percent over the medium term. Growth of 7.9 percent in the March quarter cemented India’s ranking as the world’s fastest growing large economy, yet it needs even faster growth to create jobs for millions of youngsters joining the workforce. The RBI said it would projected economic growth of 7.6 percent for 2016/17 - using a different measure from the official gross domestic product data - and described upside and downside risks as evenly balanced.
Business Daily Wednesday, June 8 2016 13
Asia Private poll
Bank of Korea seen keeping rates on hold in June The central bank is also expected to downgrade its current economic forecasts in its quarterly review in July. South Korea is expected to keep interest rates on hold this week before cutting them next month as inflation refuses to accelerate and exports are far from rebounding anytime soon, a Reuters poll found yesterday. Nineteen out of 23 analysts surveyed in the poll said they expect the Bank of Korea (BOK) to hold its monetary policy rate unchanged at 1.50 percent this week, while the remaining four forecast a cut to 1.25 percent. Of those analysts who saw a hold for this week, 13 said the central bank would cut interest rates soon, with most expecting a cut pointing to July as the right timing. Six out of the 23 analysts saw no change for the rest of the year.
rates on hold in May. Most rate cuts in recent years saw a split vote in the month before. Some of those who see a rate cut are convinced this month’s vote will be split because one board member was recorded in last month’s minutes calling for a rate cut soon. “The timing for the pending Federal Reserve rate hike is a bit concerning, but I believe the governor’s comments that BOK policy is not hinged on the Fed’s actions,” Kong said.
Comments from Fed chief Janet Yellen last week that watered down market views of a U.S. rate hike in June probably bought the BOK enough time to lower rates in South Korea, other analysts noted. Another popular view among respondents favoured July for a rate cut. This would follow the finance ministry announcing its policy for the second half of the year and revising its economic forecasts in late June. Also, a July rate cut would be helpful to an ongoing structural overhaul of the country’s giant but ailing shipping and shipbuilding sectors, they said. The Bank of Korea is also expected
Key Points 19 out of 23 analysts see rate hold on Thursday Rate cut seen soon, most possibly in July BOK seen harmonising policy with govt -analysts “The BOK monetary policy board is going to hold this week as they wouldn’t cut without giving some kind of signal beforehand,” said Kong Dong-rak, general manager at Korea Asset Investment Securities, referring to the unanimous vote that kept
Bank of Korea governor Ju-yeol Lee presiding over a central bank meeting
to downgrade its current economic forecasts in its quarterly review in July. This year’s GDP forecast currently stands at 2.8 percent. Economic activity in Asia’s fourth-largest economy has been tepid overall with recovery steady but slow, largely due to constricted trade. South Korean exports fell unexpectedly in May while inflation cooled, and the trade ministry said conditions for trade are unlikely to show a sharp turnaround anytime soon. Inflation eased more than expected to a four-month low of 0.8 percent in May, down from 1.0 percent in April and slipping further away from the central bank’s inflation target of 2.0 percent. Reuters
14 Business Daily Wednesday, June 8 2016
International In Brief GDP
Eurozone growth sneaks up a notch Growth in the eurozone strengthened to a revised 0.6 percent in the first quarter of 2016, official EU data showed yesterday, a sign that the sluggish economy in Europe may be improving. The Eurostat statistics agency said growth in the 19-nation single currency bloc accelerated in January to March at a slightly greater pace than the previously estimated 0.5 percent. This expansion was stronger than the 0.3 percent posted in the two previous quarters in the eurozone and gave the bloc 1.7 percent growth year-on-year. The EU bloc of 28 countries also grew by 0.5 percent in the first quarter, Eurostat said. Q2 data
German firms increase output German industrial output rose slightly more than expected in April, data from the Economy Ministry showed yesterday, suggesting that the motor of Europe’s largest economy was humming along at the start of the second quarter. Following two consecutive falls in output, the rise added to signs that German firms were managing to muddle through despite a faltering global economy curbing appetite for their goods. Output rose by 0.8 percent on the month, just ahead of the consensus forecast in a Reuters poll for a 0.7 percent increase. Aircraft industry
Airbus narrows gap with Boeing Airbus sold 83 aircraft in May, narrowing rival Boeing’s lead in the race for orders after a slow start to the year, figures released yesterday showed. New business included 60 new-generation narrow-body jets to at least one customer whose name was not disclosed, bringing the total number of aircraft ordered so far this year to 200. After adjusting for cancellations, which included two A350-900s ditched by leasing firm Awas in May, net orders for the first five months stood at 162 jets, Airbus said. Boeing remained ahead on orders, with 298 bookings or 268 after cancellations. Restructure
Shell deepens spending cuts Royal Dutch Shell Plc cut spending plans further and promised increased savings following its record purchase of BG Group Plc, as Europe’s largest oil company continues to adjust to the slump in energy prices. Shell will spend US$29 billion this year, it said yesterday. That compares with a May forecast for capital expenditure “trending toward” US$30 billion, which was itself down from an earlier projection of US$33 billion. Synergies from the BG acquisition will provide US$4.5 billion in savings in 2018, up from an earlier estimate of US$3.5 billion.
File photo of Janet Yellen during a press conference
Dollar price
Fed’s Yellen sees rate hikes ahead, but few hints on when She listed four main risks to the U.S. economy - slower demand and productivity, and inflation and overseas risks Jonathan Spicer and Jason Lange
F
ederal Reserve Chair Janet Yellen on Monday gave a largely upbeat assessment of the U.S. economic outlook and said interest rate hikes are coming but, in an omission that stood out to some investors, gave little sense of when. Overall, Yellen said, “I see good reasons to expect that the positive forces supporting employment growth and higher inflation will continue to outweigh the negative ones.” While last month’s jobs report, released Friday, was “disappointing,” and bears watching, policymakers will respond “only to the extent that we determine or come to the view that the data is meaningful in terms of changing our view of the medium- and longer-term economic outlook.” Though she stressed surprises could emerge that could change her expectations, and listed four main risks to the U.S. economy - slower demand and productivity, and inflation and overseas risks - she concluded by downplaying them all and flagging her expectation that “further gradual increases in the federal funds rate are likely to be appropriate.” Still, Yellen was careful not to give
any hints about the timing of a next rate increase, in contrast to a speech on May 27, when she said such a move would probably be appropriate “in coming months.” To some investors, the absence of a timeframe in Monday’s remarks suggests the Fed will delay its next rate hike well beyond next week, when U.S. central bankers next gather to make monetary policy. Economists now see September or possibly July as the most likely time for a quarter-point policy tightening, while traders in futures markets are betting on later in the year. But to others, Yellen’s repeated emphasis on the positive aspects of recent economic data continues to suggest a rate hike in the near future. “The fact that she did remove that timeframe I think just suggests that June’s off the table, July is possible if the data cooperates,” said Omar Esiner, chief market analyst for Commonwealth Foreign Exchange in Washington. “She’s a little bit more upbeat in that respect than the Street and I think that was a main takeaway for me.” The U.S. central bank raised rates from near zero in December in the first U.S. policy tightening in nearly a decade. Prospects of another hike this
month were all but killed by a report last week showing only 38,000 jobs were created in May, somewhat muting recent upbeat data on consumer spending, housing and overall U.S. growth. Although the jobs report was “concerning, let me emphasize that one should never attach too much significance to any single monthly report,” Yellen said at the World Affairs Council of Philadelphia. “Other timely indicators from the labour market have been more positive.”
“The fact that she did remove that timeframe I think just suggests that June’s off the table” Omar Esiner, Chief Market Analyst for Commonwealth Foreign Exchange in Washington
While Yellen did not repeat her line from a week-and-a-half ago when she said rate hikes would probably be appropriate in coming months, she said she remained optimistic inflation would rise to the Fed’s 2-percent goal because oil prices had reversed their downward path and the dollar had steadied after a long period of gains. Reuters
Conflict of interest
Isabel dos Santos resigns board positions after Sonangol appointment Angola’s ruler, José Eduardo dos Santos, appointed his daughter Isabel dos Santos, to be the chair of national company on Thursday. Isabel dos Santos, who took over as chair of the board of directors of Angolan state-owned oil company Sonangol on Monday, has resigned her board positions at Portuguese companies NOS and Efacec and the Angolan-Portuguese bank BIC, effective as of the end of July or as soon as her successors are found. She said in a communiqué that “the immediate resignation from the board positions in the companies that conduct her main investments
in Portugal are purely due to her appointment as the chair of Sonangol”, adding that “(the decision) aims to avoid problems of conflict of interest on the one hand and bolster the guarantees of transparency in the performance of the new job, on the other”. On Friday, investment bank Haitong (former BESI) said it would be “highly unlikely” that the regulators allowed the involvement of Isabel dos Santos in Sonangol
and Santoro, which own qualified stakes in two banks in Portugal. BPI and BCP. Angola’s ruler, José Eduardo dos Santos, appointed his daughter Isabel dos Santos, to be the chair of Sonangol on Thursday. Another son runs the country’s sovereign fund, in a fashion that the first PM of independent Angola Marcolino Moco says is a ‘presidential monarchy’. On Saturday a group of 12 Angolan lawyers said they would file an injunction at the Supreme Court to suspend the daughter’s nomination as a father cannot legally appoint a daughter to such a post according to the constitution. Lusa
Business Daily Wednesday, June 8 2016 15
Opinion Business Wires
Taipei Times Campaigners against nuclear power said they would file a lawsuit against Premier Lin Chuan over his remark that the government is mulling the restart of the No. 1 reactor at the Jinshan Nuclear Power Plant in New Taipei City’s Shimen District, which they said would endanger public safety. Lin came under attack from campaigners, who described the reactivation plan as reneging on the Democratic Progressive Party’s promise of going nuclear-free by 2025. Green Consumers’ Foundation chairman Jay Fang and veteran anti-nuclear power campaigner Lin Jui-chu said they would file a lawsuit against the premier because the reactivation would be a crime against public safety.
Australia’s LNG sector knows its enemies, but not how to fight them
New Zealand Herald New Zealand is poised to exceed half a trillion dollars worth of gross debt as mortgage lending accelerates at its fastest rate since the global financial crisis. Averaging more than US$100,000 for every New Zealander, increasingly alarmed economists and market watchers fear soaring house prices may be taking us into bubble territory. Lending for housing is growing at an annualised rate of 8.3 per cent - a level not seen since 2008 (when lending rates were on their way down from pre-GFC peaks above 10 per cent).
Bangkok Post The Finance Ministry has proposed using Section 44 powers to crack down on loan sharks who charge higher interest than the law allows, says finance permanent secretary Somchai Sujjapongse. The ministry will also instruct the Revenue Department to investigate whether loan sharks who charge relatively high interest have paid income tax correctly, Mr Somchai said without elaborating on how Section 44 would be used. The proposal is part of state agencies’ new efforts to rescue low-income earners from underground lenders after recent measures such as nanofinancing failed to root out the problem.
Inquirer.net The (Philippine) Bureau of the Treasury Monday sold all P20 billion in treasury bills offered as it also considers increasing borrowings in light of the incoming Duterte administration’s plan to ramp up spending. The auction was almost twice oversubscribed with more than P38 billion in tenders for the securities. The Treasury accepted P8 billion in 91day IOUs maturing on September 7 at an annual rate of 1.588 percent, down from 1.674 percent a month ago. Also fully awarded were P6 billion in 182-day debt paper that will mature on December 7.
I
t should be a golden age for Australia’s liquefied natural gas (LNG) producers as they sit on the cusp of becoming the world’s largest supplier of the fuel that holds the largest growth potential among its fossil rivals. But instead of taking a moment to reflect on its achievements, industry leaders used their annual conference to both lament and lambaste what they believe are unfair attacks on LNG from a variety of sources. In a marked change of tenor from conferences in prior years, it seems the LNG industry now knows who its enemies are, but is less certain how to tackle them. Enemy number one is the rising tide of environmental activism that is managing to sway public opinion against new natural gas exploration and production, and also influencing politicians that had previously been champions of the industry. Enemy number two is coal, with LNG needing to make a stronger case in developing countries why it should be the fuel used to generate electricity, rather than coal, which is roughly twice as polluting and not that much cheaper since the falling crude oil price dragged LNG down to record lows. Identifying your enemies is one thing, knowing how best to fight them is another. Andrew Smith, chairman of Shell Australia, told the Australian Petroleum Production and Exploration Association conference on Monday that the LNG industry is “the subject of an orchestrated, organised and well-funded campaign to hem in its further development.” To many in the LNG sector it’s a struggle to understand why they attract the ire of environmental activists, given the industry’s view that natural gas is a better alternative to coal and one that can realistically be used as the world transitions to renewable energy from fossil fuels. The industry has been slow to realise that for some green groups all fossil fuels are evil and must be opposed vigorously, and they have stepped up campaigns against the extraction of natural gas from coal seams, the method that supplies the three new LNG plants in Queensland state. And activists have had success, with groups such as Lock the Gate making land access more challenging for energy companies being one example. They have also scored political successes, with Victoria and New South Wales, Australia’s two most populous states, both imposing moratoriums on exploration for natural gas and the opposition Labour Party in the Northern Territory promising to do the same if elected. At a federal level, the opposition Labour Party, which is neck-and-neck with the ruling Liberal Party in polls ahead of a July 2 general election, promising to institute a policy that would effectively reserve some natural gas production for
“
Clyde Russell a Reuters columnist
domestic use. If implemented such a policy would likely drive up natural gas costs and undermine spending on exploration as well as make it extremely unlikely that Australia would add to the 10 LNG plants in operation or nearing completion.
Need for winning tactics
But how can the industry fight, or at least lessen the impact of, environmental activism? Up until now they have relied on trying to counter arguments with fact-based publications and articles and working with the communities in which they operate. This may help them in the rural areas where they operate, but it doesn’t defeat activists who are very skilled in using social and mass media to publicise their views, which are often filled with misinformation and half-truths. In short, the industry has been playing Mr Nice Guy against people who have no interest in dialogue, cannot be won over by respected science and are prepared to walk very close to the edge of legality in their tactics. How exactly the LNG industry can take the gloves off while still meeting corporate legal requirements is difficult to see, but a more determined campaign may be in order if they are going to grow in future years. Fighting enemy number two should be easier, after all, coal is the global bogeyman for climate change. But this is also a challenge for the LNG industry as some of their members straddle both camps, such as BHP Billiton , which is Australia’s biggest oil and gas producer as well as one of the world’s leading miners of coking coal. The LNG industry should be advocating that governments impose carbon pricing, which would hurt coal and boost natural gas, and backing this up with investments in downstream industries in Asia that will use up the existing LNG surplus and create demand for future growth. Encouraging coal-to-gas switching and preventing coal-fired plants from being built in the first place should be an aim of the LNG sector, and one that would help them realise the golden age of LNG. If the COP21 aim of no net carbon emissions by 2050 is to be realised, natural gas has to displace coal in the next few years, given that power plants typically have lives of around 40 years, and once built, they tend to be used. LNG can still enjoy a golden age, even if it is relatively short, but it needs to start winning some battles. Reuters
The industry has been playing Mr Nice Guy against people who have no interest in dialogue
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16 Business Daily Wednesday, June 8 2016
Closing Chongqing Forum
Nissan’s Infiniti looks to offer highway self-driving on new models
autonomous driving features, such as those beyond highways, will require advances in infrastructure and regulation, Roland Krueger, Infiniti’s president, said. Infiniti, the luxury division of Japanese carmaker The luxury brand is planning to step up its investments Nissan, is considering rolling out highway self-driving in autonomous driving in China by launching an capabilities for most new models, its president said yesterday. Executives for Chinese and global automakers accelerator to nurture smart transportation-related start-ups and is considering locations in Beijing and speaking at final day of the Global Automotive Forum in Chongqing urged the industry to pursue autonomous Shanghai, he said. A similar effort in Hong Kong, where the brand is based, is supporting a start-up that driving as an advance that will reduce congestion and produced an app to monitor open parking spaces, for traffic deaths. For Nissan’s Infiniti, only the Q50 sedan is currently equipped with its latest generation steering example. That capability could potentially lead to a car being able to automatically guide itself to an available system that allows for autonomous driving above 60 parking space, Krueger said. Reuters kilometres per hour on the highway. More advanced
Trade data
Taiwan’s May exports contract for 16th month Demand from key markets remained sluggish, with export declines to China and Japan worsening from April J.R. Wu and Liang-Sa Loh
T
aiwan’s exports shrank for the 16th straight month in May, with persistently weak demand for the island’s signature tech goods offering little hope that global conditions are getting better. The near double-digit fall in exports comes amid easing expectations for an imminent U.S. interest rate rise and reinforces the view Taiwan’s own central bank will likely cut rates for the fourth straight meeting this month. “The risk is on the downside,” said Ma Tieying, economist with DBS in Singapore, who said she was going to
lower her forecast for 2016 economic growth to below 1 percent from 1.4 percent. Taiwan’s official estimate for economic growth this year stands at 1.06 percent. Exports in May fell 9.6 percent from a year earlier, less than an 11 percent contraction forecast in a Reuters poll, but deeper than April’s 6.5 percent fall. Demand from key markets remained sluggish, with export declines to China and Japan worsening from April. Exports in May fell 10.2 percent to China and dropped 8.9 percent to Japan. U.S. shipments fell 8 percent, while those to Europe grew more
Public loans
slowly at 2.1 percent. “There is little chance exports in June can grow,” said Yeh MaanTzwu, director of the statistics department with the finance ministry, which issued the data. “But the decline will certainly narrow.” Exports of electronics components in May fell 1.6 percent from a year earlier, while information, communication and audio-video goods were off 5.5 percent. Optical equipment, which includes displays, were down 23.5 percent. China’s slowdown and concerns the global smartphone industry is losing momentum have darkened the outlook for Taiwanese manufacturers. DBS said in a report that seasonal demand for electronics would rise in the second half helped by the release of new smartphone models, but whether demand will exceed the previous year remains doubtful.
Lobby survey
Manufacturing activity on the island, as measured by the Nikkei/ Markit PMI, worsened for the second straight month in May as new orders, output and employment all fell.
Key Points May exports -9.6 pct y/y, 16th month of decline Exports to China -10.2 pct y/y; to U.S. -8.0 pct Exports shrink faster to Japan, slow sharply to Europe Taiwan’s central bank is due to meet on June 30 for its quarterly policy meeting. The government late last month cut its forecast for the third time for economic growth this year and predicted a deeper contraction for annual exports. Reuters
Weaker yuan
Vietnam to spend over European firms’ pessimism PBOC says foreign reserves US$12 billion on paying debt in mainland at all-time high at four-year low Vietnam will spend around 273.3 trillion Vietnamese dong (over US$12.25 billion) on paying government debts in 2016, according to the E-Portal of the Vietnamese government yesterday. Following a plan on borrowing, paying government debts and borrowing limits in 2016 ratified recently by Vietnamese Prime Minister Nguyen Xuan Phuc, the government plans to borrow some 452 trillion Vietnamese dong (nearly US$20.27 billion) from domestic and international sources this year. Among the figure, some 254 trillion Vietnamese dong (US$11.39 billion) will make up for state budget deficit and around 60 trillion Vietnamese dong (US$2.69 billion) will be used for investment. Meanwhile, some 43 trillion Vietnamese dong (US$1.93 billion) of official development assistance will become on-lending and the the other 95 trillion Vietnamese dong (US$4.26 billion) will refinance loans. According to Vietnamese Ministry of Finance, in the first five months of 2016, the country’s state budget spending reached 466.3 trillion Vietnamese dong (US$20.91 billion), up 4.7 percent year-on-year. During the period, Vietnam’s state budget revenue hit 396.2 trillion Vietnamese dong (US$17.76 billion), up 4.5 percent year-on-year. Xinhua
Pessimism among European companies about their prospects in China has hit an all-time high, a lobby group said yesterday, saying the country’s slowing growth has been accompanied by an “increasingly hostile” business environment. Fifty-six percent of European firms polled by the European Chamber of Commerce in China said they are finding it more difficult to do business in the world’s second largest economy, a fivepoint increase from a year ago, the group said in its annual Business Confidence Survey. Nearly a third of the firms said they were bearish about their profitability in China, the highest rate ever and up eight points from 2015’s numbers, it said. Looking ahead, more than 40 percent of respondents said they may have to cut costs in the country through methods including layoffs while 11 percent said they have made plans to shift investment to other markets, the report said. Nearly 60 percent complained that the recent tightening of Internet controls has negatively impacted their business, a 17-point jump from 2015, it said. AFP
China’s foreign-exchange reserves slipped to the lowest level since late 2011 as a rallying dollar ate into the value of its holdings. The world’s largest currency hoard fell by US$28 billion to US$3.19 trillion in May, the People’s Bank of China said in a statement yesterday. That was almost in line with the US$3.2 trillion median forecast of economists surveyed by Bloomberg. “Depreciation expectations faded and the central bank didn’t burn its reserves to intervene in the foreign exchange market,” said Li Wei, a China and Asia economist at Commonwealth Bank of Australia in Sydney. “The drop was largely due to the valuation effect of a strong dollar, which leads to the depreciation of other currencies.” That was confirmed by the reserves figure denominated in International Monetary Fund Special Drawing Rights, which rose to 2.28 trillion units from 2.27 trillion in May. Despite fresh weakness against the greenback, the PBOC hasn’t had to deplete its cash to support the yuan as some stability returns to the currency. While reserves have been generally steady this year, halting the steep decline of 2015, the May tally extends the decline to 20 percent from the near US$4 trillion peak in June 2014. Bloomberg News