Macau Business Daily July 14, 2016

Luk Fook same-store sales plunge 24 pct in SARs Retail Page 4

Thursday, July 14 2016 Year V Nr. 1086 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Joanne Kuai Gaming

DICJ visits slots testing labs, appeals for more mass market focus Page 6

www.macaubusinessdaily.com

FIFA deal

Private poll

Wanda to organise China Cup soccer tournament Page 9

Survey forecasts weaker second quarter for Chinese economic figures Page 10

Land Debts Nullified CCAC

Corruption watchdog CCAC has released its report on a controversial ‘land swap’.

Finding that Baía da Nossa Senhora da Esperança Company does not have any rights to most of the site of the Iec Long Firecracker Factory.

Thus, the land exchange agreement entered into with the Macau SAR Gov’t is null and void. Page 3

MOP300 mln budgeted.

For the revamp of the Macau Grand Prix Museum building. Slated for completion by end‑2018. MGTO director Ms. Senna Fernandes added that details of MacauColoane marine travel will be announced this year.

Tourism Page 5

HK Hang Seng Index July 13, 2016

Leave the Land Law alone

Land No change to Land Law. Legislator José Pereira Coutinho vehemently objects to any suggestion otherwise. Land disputes should be settled by improved gov’t administrative transparency, he maintains. Page 2

Falls accelerate

China trade China’s imports and exports both fell at a faster rate in June. Imports dropped 8.4 pct y-o-y in dollar terms, while exports fell 4.8 pct. The monthly trade surplus jumped to US$48.1 bln. Page 8 21,322.37 +97.63 (+ 0.46%)

Worst Performers

Wharf Holdings Ltd/The

+2.32%

CK Hutchison Holdings Ltd

+1.42%

Li & Fung Ltd

-4.10%

Bank of East Asia Ltd/The

-0.81%

Cathay Pacific Airways Ltd

+2.04%

China Shenhua Energy Co

+1.34%

Tingyi Cayman Islands

-1.37%

Sino Land Co Ltd

-0.77%

China Petroleum & Chemical

+1.94%

China Construction Bank

+1.32%

Link REIT

-0.98%

Hang Lung Properties Ltd

-0.75%

CNOOC Ltd

+1.55%

MTR Corp Ltd

+1.22%

China Merchants Holdings

-0.92%

Bank of China Ltd

-0.64%

Ping An Insurance Group Co

+1.45%

Power Assets Holdings Ltd

+1.19%

Hong Kong & China Gas Co

-0.85%

CLP Holdings Ltd

-0.56%

28° 31° 28° 32° 28° 32° 28° 32° 28° 31° Today

Source: Bloomberg

Best Performers

Fri

Sat

I SSN 2226-8294

Sun

Mon

Source: AccuWeather

Under starter’s orders

2 Business Daily Thursday, July 14 2016

Macau In Brief Cultural

Cultural Industries Fund disburses MOP9.8 mln in Q2 The Cultural Industries Fund granted a total of MOP9.87 million (US$1.2 million)-worth of subsidies to nine cultural creative units during the second quarter of the year, according to yesterday’s Official Gazette.

Macau Branch Centre (Centro de Incubação de Marcas de Macau Originário Lda) was the biggest beneficiary having been awarded a subsidy of some MOP6.26 million in the three months.

The amount that the Centre received accounted for 63.4 per cent of the total approved subsidies in the period. Meanwhile, Team Mei Project Consultancy Company Ltd. and Macau Design Centre were subsidised by some MOP964,428 and MOP754,147 during the quarter, respectively.

Land Law Legislator voices objection to change of law for Nam Van land dispute Talent Committee

CDT spent MOP3.6 mln in H1 The Talent Development Committee (CDT) registered MOP3.6 million (US$450,574) in expenses for the first six months of 2016, according to an Official Gazette dispatch. The release signed by Secretary for Economy and Finance Lionel Leong Vai Tac states that the CDT has spent MOP2 million in ‘construction and big repairs’, MOP920,000 in ‘studies, consulting and translation’ and MOP680,000 in non-specified expenses.

Created in 2014, the CDT is responsible for creating different schemes to promote local talent retention and encourage overseas talent to return to Macau. One of the goals of the CDT is to create a talent information database matching individuals with corporations, which is currently unavailable.

Energy

Environment fund hands out MOP2.8 mln in H1 The Fund for Environment Protection and Energy Conservation (FPACE) handed out MOP2.8 million (US$351,701) in the first half of 2016, according to an Official Gazette dispatch. In the first six months of 2016 a total of 58 beneficiaries were awarded. The biggest share was for MOP348,463. The FPACE objective is to improve the quality of Macao’s environment by promoting energy conservation and reducing pollutant emissions, monetizing water resources, and supportin and promoteing the development of environmentally friendly industry.

One of the support plans provided by the Fund is the Subsidy Scheme for Purchase of Products and Equipment for Environmental Protection and Energy Conservation, which subsidises 80 per cent of the total price of purchase of new equipment or its renewal, with a maximum limit of MOP500,000.

In the same period, the Office for the Development of the Energy Sector (GDSE) has only provided one subsidy for Colégio de Santa Rosa de Lima, valued at MOP8,993.

Against the change Coutinho urges the MSAR Government to improve the administrative transparency of land management.

Annie Lao annie.lao@macaubusinessdaily.com

L

egislators José Pereira Coutinho and Leong Veng Chai have urged the government to strictly enforce the Land Law without any changes. The transparency of land management and approval granted by the government needs improvement in order to reduce corruption when dealing with land concessions, Coutinho said during the press conference held yesterday. “ T h e m o r e a d m i n i s t ra t i v e transparency is in the procedure of land approval and management by the government, the less likely corruption will occur,” Coutinho claimed.

“The more administrative transparency there is in the procedure of land approval and management by the government, the less likely corruption will occur” José Pereira Coutinho, legislator When asked whether the Land Law can prevent corruption, Coutinho believes it not necessary to prevent corruption; the need for transparency is more important than just increasing penalties in case of breach of contract.

As the Land Law does not provide much transparency he said that it is not enough to only publish land approvals in the government’s Official Gazette. “The government will have to let the public know how many land plots they have and the usage of the land plots allocated in the future,” Coutinho said.

He suggested a new regulation be implemented when conflicts of interest arose. Any contract-related

disputes should only pass to the courts to deal with, thus the developers should not ask the government to change the current Land Law, Coutinho said.

Too new to change

The new Land Law has been effective for about two years and four months.

“The recent dispute of reclaiming unfinished land causing conflicts of interest with developers [suffering] financial losses should not be the major reason for changing the Land Law,” Coutinho opined.

The Land Law bill was passed with no oppositions via voting in August 2013. In addition, neither lawmaker voiced opposition to the maximum validity of 25 years during the review of the land bill, according to Coutinho.

The Land Law took effect in March 2014, regulating no temporary and conditional land concession can be renewed upon the expiration of 25 years. If the developer fails to complete the projects within the legal

period of 25 years the government is entitled to reclaim the unfinished land under law.

Legislator-cum-law professor, Gabriel Tong Io Cheng asked the Legislative Assembly last month for an explanation of the Land Law’s clauses regulating provisional land concessions. He proposed the government extend the provisional land concession period to more than 25 years. However, Coutinho argued that the interpretation of the Land Law should only be introduced by the government.

Ung Choi Kun, developer-cumformer lawmaker, attending a ‘seminar’ regarding the government’s land management in the city, said that the Land Law violates Macau Basic Law Article 6, which states that the right of private ownership of property shall be protected by law in Macau. Ung said this could affect foreign investors coming to Macau, according to a report by TDM Chinese Radio on Tuesday. However, Coutinho argued that this does not affect foreign investment in Macau as investors don’t have options in selecting what land may be used and the final approval of land use is by government decision.

Business Daily Thursday, July 14 2016 3

Macau Investigation report CCAC releases its findings into land swaps involving Iec Long Firecracker Factory

Up in Smoke CCAC has found that the land exchange agreement signed between the government and the company ‘does not accord with the relevant provisions under the old Land Law’.

Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

A

fter nearly 11 months of investigation, the C o m m i ssi o n Agai n st Corruption (CCAC) has published the results of its investigation into the Iec Long Firecracker Factory, located in Taipa Village. The findings reveal that ‘some acts of the Public Administration obviously violated the ‘principle of legality’ as well as failing to fulfil the ‘duty to state reason’ – the fundamental principles of legal governance and the principle of backing administrative decisions with logical reasoning.

‘According to the report, the CCAC considers that the Commitment concerning the land exchange signed between the Macao SAR Government and the Baía de Nossa Senhora da Esperança Development Company in 2001 does not accord with the relevant provisions under the old Land Law,’ CCAC’s statement issued yesterday reads. ‘Moreover, the Baía da Nossa Senhora da Esperança Company does not have any rights on the most part of the site of the Iec Long Firecracker Factory. Therefore, the agreement of land exchange is null and the Macao SAR Government does not owe the Baía da Nossa Senhora da Esperança Company or any other companies any land grant deals or promises.

In other words, there have been no so-called ‘land debts’.’

The findings relate to the land exchanges, purchases and leases arising from the Iec Long Firecracker Factory and although the CCAC stated in a separate press release that ‘whenever signs of corruption or fraud related to corruption are found, the CCAC will carry out criminal investigation according to

CE orders follow-up

The Chief Executive (CE) has issued an Executive Order, instructing the departments with authority over the case to follow up regarding the issues raised by the CCAC report in accordance with the law, according to a statement issued by the Government Information Bureau.

The Executive Order firstly instructs the Secretary for Transport and Public Works to follow up regarding the invalidation of the Letter of Commitment, and the subsequent issues related to the Iec Long

the law’ the watchdog said it will ‘not make any comment on the case at this stage’ regarding measures being taken against those at fault.

First owners and transfers

The findings of the report note that from an original 1,655 square metre plot of private land ‘owned inside the Iec Long Firecracker Factory’ a group was able to exchange for ‘152,073 square metres of land in Baía da Nossa Senhora da Esperança’ via a series of transactions and land swaps through various companies.

The original owners of the 1,655 square metres were Tan Kun Hong and Tang Ming Hong, who applied for and were leased a 21,668 metre plot of land from the government to operate the fireworks factory. When the industry folded the Portuguese Government, in 1986, rescinded the contract and terminated the validity of the concession. However the land didn’t return to the government.

T h e 1 , 6 5 5 s q u a r e m e t r e s, owned 50/50 by the Hongs were redistributed, with one half sold to Sun Tat Holdings and one half having its rights transferred to an individual named Kong Tat Choi.

Kong Tat Choi was also involved in a separate land plot in Taipa via a company called Samtoly Investment for which, on land (plot BT27) granted in a public tender and for which the company applied for a change in the overall number of floors, it was charged a premium.

This premium was later declared too much by the Land, Transport and Public Works Bureau (DSSOPT) and as such a new deal was negotiated, in which the government ‘owed’ money to the company. The Prosecutor General suggested that this case be linked with the Baía da Nossa Senhora de Esperança case, which had been

Firecracker Factory land swap case cited in the CCAC report.

Secondly, if any indication of corruption or fraud is found, the CCAC shall conduct a criminal investigation of this land swap case.

Thirdly, if any civil servant is found to have been involved in misconduct, the entity empowered to initiate disciplinary process shall commence the proceedings according to the law.

‘The Government reiterates that all land use issues will be handled in accordance with the Land Law,’ the statement reads.

brought up around the same time, and the then director of the DSSOPT agreed to combine the two in its negotiations.

The Commitment

CCAC’s investigation report shows that in 2000 the rightful holders of the Iec Long factory and representatives of Samtoly, via a letter to the DSSOPT, told the Bureau that all further negotiations regarding the land were to be conducted through Baía da Nossa Senhora de Esperança Development Company, which negotiated with the DSSOPT on a ‘land exchange deal on 10th January 2001’.

This deal was referred to as the Commitment throughout the CCAC report. The Commitment detailed that a plot measuring 152,073 square metres in Taipa in front of the HouseMuseums would be granted to the company, for tourism and residences, with MOP215 million in infrastructure construction promised for the site as well as a MOP213 million price tag for transference of all rights to the Iec Long factory.

This deal was signed by the thenDirector of DSSOPT, supposedly representing the SAR Government.

According to the CCAC findings, however, ‘the Commitment does not comply with the stipulations concerning the power, form and procedures for land concession by lease in the old Land Law, it is unable to constitute a legally binding land concession agreement’ and ‘can hardly constitute a source of rights or legal duties’.

In the document, the Baía da Nossa Senhora de Esperança company leverages land that ‘it does not hold any rights and interests to […] according to the law’ including government land (at inexplicably inflated prices), along with the premium ‘owed’ to the BT27 plot in Macau, without showing proof of ownership of all of the Iec Long property, to obtain the 152,073 square metre plot.

Shun Tak

Part of this plot – amounting to 99,000 square metres, was transferred to Shun Tak Limited upon approval by the government in 2002 for MOP500 million. Shun Tak used this land to apply for a land swap in 2005, together with a company called Sub F Limited, to lease an area measuring

18,344 square metres in the NAPE area ‘for construction of a hotel and residential apartments’.

‘Shun Tak Limited either abandoned a portion of land covering an area of 18,344 square metres in the parcel of land, which was promised by the Macao SAR Government to be granted to Shun Tak Limited, located in Baía de Nossa Senhora de Esperancça that covered a total area of 99,000 square metres, or an equivalent area of land in another location that was to be confirmed in accordance with the urban planning conditions once the concession procedure arising form the Commitment was implemented,’ states the report, not detailing whether Shun Tak was ever granted the land in Taipa. It stated, however, that ‘the concessionaire has already [aside from paying] completed the utilisation of the land’, referring to the NAPE properties and not suggesting that the land be taken back.

What next?

While the land granted in the 152,073 square metre land exchange was legally invalid, so was a further agreement to expand planning conditions by the Director of the DSSOPT with Baía da Nossa Senhora de Esperança company regarding Parcel B - that not sold to Shun Tak - amplifying its usage from a ratio of 3.5 to 10 and when the DSSOPT later reversed their original decision by deciding that the land in Parcel B should be made into a public park no documents ‘indicating the reason, criteria and basis for the modification’ were supplied, notes the CCAC. Overall, ‘how to properly follow up and cope with the consequences caused by the nullity of the agreement of land exchange involving the Iec Long site shall be analysed and studied thoroughly by the legal and public works departments according to the principles of legality, protection of public interest, fairness and good faith,’ noting that the departments will also ‘study and solve’ questions regarding the BT27 land parcel in Taipa and the Shun Tak case - to which the CCAC refers little regarding the actual outcome and current usage of the 99,000 square metresw, supposedly bought by the company for MOP500 million, excluding the 18,344 square metres it is actually able to utilise in the NAPE area.

4 Business Daily Thursday, July 14 2016

Macau Opinion

Ashley Sutherland-Winch Pokémon Protection Pokémon Go mania is sweeping the globe this week and Macau is missing out on all of the action. Pokémon Go is a new free smartphone game that has soared to the top of the download charts since its launch last Monday.

The exciting new game launched in North America, Europe and Australia but unavailable in Southeast Asia - uses a combination of ordinary technologies built into smartphones, including location tracking and cameras, to encourage people to visit public landmarks, seeking virtual awards and collectible characters as they try to capture exotic monsters from Pokémon, the Japanese cartoon franchise. Pokémon Go is an exciting example of a new technology; in this case, augmented reality or AR, which fuses digital technology with the physical world, breaking into mainstream in a major way.

The idea behind AR technology is to overlay digital imagery on a person’s view of the real world, using a smartphone screen or a headset. With Pokémon Go, players traverse the physical world following a digital map, searching for cartoon creatures that surface at random. People look through their smartphone cameras to find Pokémon. When an animated creature appears, they toss Pokéballs at it until it is subdued.

As the world watches the millions of people playing the game, we are already seeing many unforeseen side effects like vehicle accidents (driving while playing), attracting crowds that disturb homeowners, and creating opportunities for criminals to lure players to remote areas where they can be targeted for theft.

The game also has a potential dark side for Internet security. The main way to login is to use a Google account and once you agree to the ‘terms and agreements’ you give full access to the game to enter your Google account. This means, Pokémon Go and its developer Niantic company can access your email, Google documents, seeing what you watch on YouTube, and even accessing the website you viewed last before entering the app.

The major benefit to the delay in the game’s launch in Macau is that we can become more prepared. It might be a good time to create a new Google account that is not tied to your personal email and documents if you choose to participate in Pokémon Go when it arrives in Macau.

Until it launches, mainland China has created a knockoff version of the game called City Spirit Go but it doesn’t include AR which, in my opinion, is the best part.

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

Retail

Luk Fook same-store sales plunge in SARs

H

ong Kong-listed jewellery company Luk Fook Holdings (International) Ltd. saw its same-store sales plunge by 24 per cent year-on-year in Hong Kong and Macau for the three months ended June 30, it informed Hong Kong Stock Exchange yesterday.

Between April and June, the

retailer’s same-store sales of gold fell by 25 per cent year-on-year in the two Special Administrative Regions, while that of gem-set jewellery dropped by 20 per cent year-on-year.

The company did not reveal the related financial figures during the quarter in its filing.

For the three months, the retailer’s overall same-store sales also

recorded a year-on-year decrease of 24 per cent.

‘It was a reduced decline against the [drop of 27 per cent] in the fourth quarter of last financial year mainly due to a narrower same-store sales growth drop in both gold and gem-set jewellery products in Hong Kong and the Macau market,’ the company wrote.

Meanwhile, the company’s Mainland business experienced a fall of 24 per cent year-on-year in same-store sales, as well, with that of gold products tumbling 37 per cent year-onyear, while that of gem-set jewellery fell 8 per cent. K.L.

Business opportunities 2016 Macau Franchise Expo to kick off July 29

Putting the synergy into enterprise

2016 MFE is jointly organised

by IPIM, the Association of Chain and Franchise Promotion, Taiwan, Macau International Brand Enterprise Commercial Association, Macau Chain Stores & Franchise Association, and the Licensing & Franchising Association of HK.

Opportunities to be Seized’ to help create a path to a broader market for those participating exhibitors, capitalising on the unique advantages of Macau.

The countries (and regions) involved this year include Mainland China, Italy, Japan, South Korea, Malaysia, Singapore, Taiwan, Hong Kong, and Macau among others. The event has attracted to those enterprises involved in food and beverages, retail, education, entertainment, finance, real estate, accessories, consulting services and brand agencies.

All kinds of industry

Business opportunities

2016 Macau Franchise Expo plus 2016 Guangdong & Macau Branded Products Fair seeks to create business opportunities for local enterprises as well as international brands.

Several internationally renowned brands are participating in this year’s Macau Franchise Expo (2016 MFE), which will be held at The Venetian Macau-Resort-Hotel Hall A from July 29 to July 31 this year, according to a press release issued by the Macao Trade and Investment Promotion Institute (IPIM) yesterday. The brands hope to succeed in ‘Going Global’ and ‘Bringing in Investment’ through modes of franchise.

IPIM says that by utilising the development trends of ‘Internet +’, MFE will also hold themed forums to show enterprises how to seize the new opportunities in the Internet Era. In addition, it is held at the same time and venue as the 2016 Guangdong & Macau Branded Products Fair, aiming to create a synergy effect to create golden new opportunities for enterprises.

Held seven times, MFE is a premier commercial event integrating exhibitions, forums, business matching and promotion seminars.

Every year it attracts many exhibitors and professional visitors. Last year, it attracted 168 chain, franchise and brand agents and others from 11 countries and regions, with business matching reaching 1,000, and 14,500 visitors attending.

With the forthcoming MFE this year, IPIM will again uphold the concept of ‘Brand Expansion Continues, Business

Besides exhibitions, this year’s ‘Forum on International Franchise Business Opportunities’ will be held on July 29, the first day of the expo. Themed as ‘New Horizons for Chain and Franchise in the Internet Era’, it has invited experts and senior managers from international franchising associations in Asia, Europe, the Mainland and Macau to share their experiences and insights on how to operate a franchise business via the latest Internet developments.

The VIP Buyer Lounge, newly added this year, provides a meeting opportunity for VC fund investors and MFE exhibitors to discuss the possibilities of co-operation projects.

Additionally, with the aim of helping youth start-ups and utilising the chain business mode, 2016 MFE will hold a ‘competition on chain business for youth start-ups’ and invite energetic youngsters dedicated to starting a business to prepare investment plans for the brands involved in MFE this year and make on-site presentation to representatives from the VC fund sponsors, who will be the judges to select outstanding investment plans.

Business Daily Thursday, July 14 2016 5

Macau Macau Grand Prix

Public tender for Touring Car Cup sponsors

The public tender for sponsors of the Macau Touring Car Cup at the 63rd Macau Grand Prix has been launched, according to an Official Gazette dispatch. The tender opened by the Sports Bureau (ID) will receive applications until August 3 for the event taking place between November 17 and 20. Last year, CTM and Hotel Fortuna

were the official sponsors of the Macau Touring Car Cup, a race for heavily modified road-going cars. Last year’s Macau Grand Prix posted a revenue of MOP53 million (US$6.6 million), the highest ever achieved, according to the Secretary for Social Affairs and Culture, Alexis Tam Chon Weng.

Of that amount, MOP37.5 million accrued through sponsorships, with local junket operator Suncity Group the title sponsor.

Tourism

Gov’t to spend MOP300 mln revamping Grand Prix Museum The budget will primarily be used for renovation works, the director of the local tourism office said.

Kam Leong kamleong@macambusinessdaily.com

T

he government’s initial budget for revamping the city’s Grand Prix Museum is set at MOP300 million (US$37.5 million), with renovation works slated for completion by November 2018, the director of Macao Government Tourism Office (MGTO), Maria Helena de Senna Fernandes, said yesterday.

“The estimated cost is primarily for the renovation works as it involves the whole building [of the Tourism Activities Centre] which we have not renovated for over 20 years. Hence, this is a head-to-toe revamping project,” the official said on the sidelines of a luncheon held by The American Chamber of Commerce in Macau yesterday.

In March, Secretary for Social Affairs and Culture Alexis Tam Chon Weng said the government was planning to transform the current Grand Prix Museum, located in the basement of the Tourism Activities Centre, into a Macau-themed one occupying the whole building. He expected that the revamp would take between two and three years.

The tourism office director said yesterday that the authorities are now aiming to make the renovatedmuseum ready for the 65th edition of the Macau Grand Prix, which will be held in November 2018.

“The project is progressing. We are gradually opening tenders for some minor internal works such as for the air-conditioning systems inside the building . . . We expect we will invite bids for the overall revamping works at the beginning of next year,” Ms. Senna Fernandes said.

According to the official, the current Grand Prix Museum will be closed during the renovation next year and only re-opened when the project is completed.

“After all, the museum has operated

for over 20 years [thus] we believe many internal facilities need to be renovated . . . As the revamp involves the whole building we cannot guarantee good quality of services can be provided to visitors to the building. As such, we are planning to close the building for the renovation next year,” she explained.

Macau-Coloane sea route details announced by year-end

Meanwhile, the MGTO director indicated that the government may be able to announce the details of the launch of a marine travel route connecting the Peninsula and Coloane within this year.

“We have been communicating with operators for commencing a regular service for such a marine route. Due to them being commercial units they need to conduct their own feasibility studies or investment evaluations of the route. Hence, we cannot reveal more details of the plan at the moment,” she claimed.

But the official declined to reveal how many ferry operators are interested in operating the route.

“I believe we can announce the details of the project within this year. However, I don’t think it can be implemented within this year as the project will involve certain infrastructure works and the purchase of new ferries, which will take a certain amount of time. In addition, [the operators] will need time to obtain related permits for the operation,” she said.

Shanghai Disneyland’s impact not apparent

Ms. Senna Fernandes also remarked upon the opening of Shanghai Disneyland, perceiving the impact of the new theme park in the Mainland on the local tourism industry as not yet apparent.

“I won’t say Shanghai Disneyland doesn’t impact Macau at all. But we need a more scientific study of its influences. But for now the impact

Maria Helena de Senna Fernandes, director of Macao Government Tourism Office (MGTO)

is not big. We don’t see visitors not coming to Macau because they need to go to Shanghai Disneyland,” the official indicated, adding the soon-tobe-released data on tourist numbers in June could be a hint regarding the situation.

“For the past few months we have seen changes in the travel

patterns of both Mainland Chinese tourists and international visitors – those on package tours have been decreasing,” the MGTO director claimed, explaining that tourists were now more familiar with the Special Administrative Region.

“Macau is becoming a more familiar destination to them. They might have needed a tour guide in the past but they can now come to the city themselves, especially with the development of the traffic network in the Mainland,” the tourism official told reporters.

6 Business Daily Thursday, July 14 2016

Macau Gaming Paulo Martins Chan visits slot labs

Push for mass market DICJ director says gaming sector needs to undergo structural changes and enhance the development of the mass market.

Annie Lao annie.lao@macaubusinessdaily.com

O

fficials f r o m t h e Gaming Inspection and Co-ordination Bureau (DICJ) have met with representatives from Gaming Laboratories International GLI Asia Ltd. (GLI) and BMM Testlabs, internationally recognised certifying companies for slot machines.

The meetings with these gaming testing laboratories took place last

month to understand the latest trends in the operating procedure of testing laboratories, detection technology and scientific application for slot machines, according to a press release published by DICJ yesterday.

During the meeting, Director of DICJ Paulo Martins Chan indicated that in order to diversify the economy of Macau and maintain sustainable development the gaming industry must undergo structural changes.

He added that the mass market would have to be enhanced through

ways such as providing different types of slot machine games to tourists, so that the gap between the revenues of the slot machine sector and the VIP sector would be narrowed.

TheDICJdirectorsaidthatwouldbethe trend and reiterated the government’s hopes for gaming operators to enhance the proportion of their mass market sector. The idea was supported by GLI and BMM, who said that slot machines could provide tourists with entertainment and contribute to mass market development.

Professionals

In addition, DICJ discussed with the two slot machine certifying organisations the provision of specialised training with better quality

of slot machine testing for local staff in order to improve the competitiveness of casino operators by providing better quality services to tourists.

In order to ensure the operation of slot machines was reliable, authentic and auditable, all the slot machines in Macau must be tested and approved by an independent third party, a slot machine certifying company, before the slot machine is allowed to operate in the casinos, according to current regulations.

Currently, seven slot machine certifying companies are approved by DICJ in the city, including GLI and BMM. Both companies have set up a laboratory for testing slot machines in Macau.

According to DICJ, all employees of GLI are locals and BMM runs in cooperation with Macao Polytechnic Institute (IPM) and provides training for local college students and casino workers.

Horse-betting

Macau Jockey Club’s annual loss gallops to MOP88.4 mln Macau Horse Racing Co. Ltd, which runs Macau Jockey Club, posted an annual loss of MOP88.4 million (US$11 million) for the whole year of 2015, an increase of 72.7 per cent compared to a loss of MOP51.2 million for 2014, the company’s annual results published in yesterday’s Official Gazette reveal.

In fact, the horserace-betting operator has failed to make an annual profit since 2005. As at the end of last year, its accumulative loss totalled MOP3.96 billion for the past decade, according to yesterday’s report.

F o r t h e y ea r, t h e c o m p a n y g e n e ra t e d a t o ta l o f M O P 1 2 5 million in gross gaming revenues from horse-betting, which represents a plunge of 59 per cent year-on-year, according to the official data from the Gaming Inspection and Co-ordination Bureau.

The operator will see its current horserace-betting concession expire on August 31 next year.

It has held the monopoly for the horseracing and betting business in the city since 1978. K.L.

Auction Legal battle for HK$3.8 mln in unpaid wages to crew

Judges order casino ship auctioned off A casino ship that in its heyday made around HK$10 million (US$1.29 million) per day with as many as 400 passengers aboard will be, under Hong Kong court order, sold off to pay its debts after the owner ran into financial difficulties in the postcorruption crackdown environment, reports the South China Morning Post (SCMP).

The ship - named the New Imperial Star - is subject to an evaluation by two appraisers before being auctioned off, an outcome that even if resulting in a sale for scrap will bring in at least US$2 million.

This, however, is only a fraction of what the ship was bought for, notes SCMP, as its purchase price in late 2012 was HK$100 million, and the company that rented it out – Arising International Holdings – did so at a monthly rate of HK$2 million.

C u r r e n t l y , th e 36 - y ea r- o l d 129-metre vessel floats off the docks

of the Kai Tak Cruise Terminal in Hong Kong’s Victoria Harbour. The crew, 20 from the Ukraine, 18 from Myanmar and eight from Mainland China, have been stranded since November after the owner of the vessel failed to pay their wages or airfares, reports SCMP. Some 13 of the crewmembers remain on the ship to maintain operations while 33 went home after receiving advance payments capped at US$4,000 from loans offered ‘by various parties,’ notes the publication.

Crewmembers are expected to receive their wages from the proceeds of the auction within 60 days of its completion. The legal dispute, resulting in the mandate for a judicial sale from the neighbouring SAR’s High Court, is an outcome of HK$3.8 million in unpaid wages to the 46 crewmembers. K.W.

Business Daily Thursday, July 14 2016 7

Macau Politics

U.S. Consul General: ‘Slavery’ in Hong Kong As his term in office winds down Consul General Hart addresses human trafficking, post-election U.S.-China relationships and the “debate” between Hong Kong and the Mainland in a live broadcast.

Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

U

nited States Consul General Clifford Hart, who is set to step down from his position at the end of next week and retire from 33 years in politics, stated yesterday in a live Facebook broadcast that he wishes he could have done more to address the issue of human trafficking in Hong Kong.

The diplomat and U.S. representative for Hong Kong and Macau fielded questions yesterday during the live broadcast, which ranged from topics like the statesman’s favourite city and food to potential results on diplomatic ties following the upcoming American election.

“I got to work on a bunch of important issues when I was here in Hong Kong. One of them I would liked to have done more on, to play a role [in], is in helping Hong Kong address a global question, but in its local manifestation, which is trafficking in persons. A better way to call it, basically say it, is ‘slavery’,” said Hart.

The comments come after the release of the United States’ annual TIP (Trafficking in Persons) report, earlier this year, which placed Macau in Tier 2 (of 3) in its tier placement system. Hong Kong was ranked Tier 2 – Watch List, recommending that the territory ‘enact a comprehensive anti-trafficking law that prohibits all forms of trafficking’ given that it defines the SAR as ‘primarily a destination, transit and to a much lesser extent, a source territory for men, women and children subjected to sex trafficking and forced labour’.

The report further states that ‘the

“There’s a lot of wealth that moves back and forth both in terms of money but also in terms of culture and human relationships.

So I think we’re on good ground right now, let’s hope this continues.”

Clifford Hart, Consul General of the United States for Hong Kong and Macau Government of Hong Kong does not fully meet the minimum standards for the elimination of trafficking; however, it is making significant efforts to do so’.

Hart praised the neighbouring SAR’s work, stating: “The Hong Kong discipline services here are fantastic, I have a high respect for them, but they’re not going to be able to do more than they’re legally empowered to do”.

Screen capture of live Facebook broadcast with U.S. Consul General Clifford Hart

Hart pointed out that “Hong Kong used to be on the cutting edge of dealing with that problem but international standards have moved forward [and] Hong Kong has to keep up with them.” The politician also pointed out that however much people may dislike speaking about the issue it is still a part of global happenings: “It happens everywhere [to] people all over the planet, it’s like murder happens all over the place; that’s bad, too, it’s against the law but it still happens.”

The Consul General expressed hopes on the issue, stating: “I think it will be addressed over time, but I would like to see more progress on that.” Hart did not comment on the situation of human trafficking in Macau.

Post-election U.S. relations

Hart fielded a question from a Macau audience member – Pedro Lobo – who asked “How do you see the evolution of U.S. – China relationship once the next U.S. President is elected?” The diplomat, who spent many of his 33

years in the area working on “China relations”, said that he had seen a “high level of continuity in U.S. policy towards China.”

However, this is not without c e rtai n t e n si o n s : “ Th e r e a r e moments of drama and some areas of disagreement but by and large we behave in a certain way towards the Chinese because it suits our interests. I don’t think those interests fundamentally are going to change,” noted the Consul General.

Hart also spoke about the Hong Kong-China-U.S. relationship, expressing the standpoint that, “The U.S. strongly supports, as a matter of principle, freedom of speech and freedom of peaceful assembly . . . I’d just like to highlight how important it is for all Hong Kongers to pull together for the welfare of this remarkable place.”

The politician pointed out that there was much “debate” happening in the city and that “as the debate goes forward - a very heartfelt debate - that the people of Hong Kong approach it with a results-oriented

civil and peaceful spirit as they approach discussions.” He further commented that the United States Government standpoint is “We support one country, two systems under the Basic Law”.

The career politician is retiring from the area but returning to Hong Kong to work in the private sector following a brief time in the United States. He expressed in the broadcast that he’s content with the current state of affairs regarding relations between the two SARs, China and the U.S, noting that: “Hong Kong and Macau already have mature relationships with the United States.”

“The ties are very close, the dynamic, there’s a lot of wealth that moves back and forth both in terms of money but also in terms of culture and human relationships. So I think we’re on good grounds right now, let’s hope this continues.”

Consul General Clifford Hart will be succeeded by Ambassador Kurt Tong as the United States representative for Hong Kong and Macau.

8 Business Daily Thursday, July 14 2016

Greater China Key Points China exports miss forecasts, outlook clouded further by Brexit Surge in steel exports could lead to greater trade tensions Exports fall 4.8 pct y/y vs f’cast -4.1 pct, down 7.7 pct in H1 Imports fall 8.4 pct y/y vs f’cast -5.0 pct

Commerce

Exports fall more than forecast However the import decline in May was the smallest since late 2014.

Kevin Yao

C

hina’s exports fell more than expected in June as global demand remained stubbornly weak and as Britain’s decision to leave the European Union clouds the outlook for one of Beijing’s biggest markets.

Imports also shrank more than forecast, suggesting the impact of a flurry of measures to stimulate growth in the world’s second-largest economy may be fading, after encouraging readings in May. “The uncertainty of Brexit is likely to weigh on demand for China’s exports to the EU, similar to the situation when the European bebt crisis in 2011-12 intensified,” ANZ economists Raymond Yeung and Louis Lam wrote in a note.

“Clearly, China’s external outlook will still face tremendous challenges.”

Exports fell 4.8 per cent in June from a year earlier and were down

7.7 per cent in the first half of 2016, the General Administration of Customs said on Wednesday, adding that China’s economy faces increasing downward pressure and the trade situation will be severe this year.

Imports dropped 8.4 per cent from a year earlier.

That resulted in a trade surplus of US$48.11 billion in June, versus forecasts of US$46.64 billion and May’s $49.98 billion.

Economists polled by Reuters had expected June exports to fall 4.1 per cent, matching May’s decline, and expected imports to fall 5 per cent, following May’s 0.4 per cent dip.

The import decline in May was the smallest since late 2014, raising hopes that China’s domestic demand was picking up.

However, China’s imports of iron ore, crude oil, copper and soybeans all eased in June from the preceding month.

“The world economy still faces

many uncertainties. For example, Brexit, expectations of an interest rate hike by the Federal Reserve, volatile international financial markets, the geopolitical situation, the threat of terrorism ... these will affect the confidence of consumers and investors globally and curb international trade,” customs spokesman Huang Songping told a news conference.

“We believe China’s trade situation remains grim and complex this year. The downward pressure is still relatively big.”

June industrial output, investment and retail sales will be released on Friday, along with second-quarter gross domestic product, which is expected to show a slight loss of momentum from earlier in the year.

Outlook dark

Exports to the United States - China’s top export market - fell 10.4 per cent in June on-year, while shipments to the European Union - its second biggest market - fell 3.6 per cent.

Still, China’s steel exports were the second-highest on record, pointing to sluggish demand at home but also

likely to signal even greater tensions with its major trading partners.

Fresh weakness in the yuan currency appears to have done little so far to help China’s struggling exporters.

The yuan fell about 3 per cent versus the dollar and nearly 6 per cent against a broader basket in the second quarter, though Chinese officials have said repeatedly they will not purposely devalue the currency to boost exports.

Analysts at ANZ said currency depreciation impacted the headline growth numbers. Exports in yuan terms rose 1.3 per cent.

The data also showed first-half imports from Hong Kong surged 130 per cent. Analysts say large jumps in such imports in the past have been a channel for capital outflows through fake invoicing as companies worry about the yuan weakening.

But spokesman Huang said that the increase in imports from Hong Kong was mainly driven by gold, noting that imports actually fell 2 per cent after stripping out gold imports.

“Although gold imports are rising fast, the imported value is not very big. We cannot reach a conclusion on large-scale capital outflows due to surging imports from Hong Kong,” said Huang. Reuters

FIFA deal

Management style

Mainland gets its richest man to back “best football competition in Asia”

Chambroad boss takes to manage company

Over the last 18 months, Wang Jianlin’s Wanda has sealed a series of high-profile sports investments to build up its sports business arm.

Sue-Lin Wong

China, backed by its richest man, has struck a deal with FIFA to host the first China Cup from next year, a competition that will pit its national side against three international “firstclass” teams - and hopefully pave the way to soccer glory.

Chinese property tycoon Wang Jianlin, whose Dalian Wanda conglomerate is already a high-level FIFA sponsor, said on Wednesday that his group and the

“We aim to become the best football competition in Asia... We will use all possible measures to ensure we achieve this.”

Wang Jianlin, Chinese property tycoon

Chinese property tycoon Wang Jianlin

Chinese Football Association would host the contest in the southern city of Nanning: four games played over a week every January.

European clubs often have a break around that time, potentially allowing national sides to pit their best - as China hopes. Eventually, it wants a total of eight teams to play.

“We aim to become the best football competition in Asia,” Wang told reporters in Beijing. “We will use all possible measures to ensure we achieve this.”

China would qualify automatically for a contest that does allow them to earn points for global rankings - an opportunity for a country that wants to climb the FIFA table where it is currently languishing at 81, below Equatorial Guinea and Haiti. China is preparing to compete for a spot in the 2018 World Cup. Soccer in China has been plagued by poor performances on the field and match-fixing scandals. But President Xi Jinping, a self-professed avid soccer fan, has spoken in the past of “three wishes” for China: to qualify for another World Cup since their first and only appearance at the 2002 finals, to host a World Cup, and to eventually win one.

China has since said it wants to turn its team into one of the world’s best by 2050.

“We are duty-bound as people in the soccer industry, as members of the Chinese Football Association, to vigorously develop Chinese football,” said Yu Hongchen, vice president of the Chinese Football Association.

“This is our responsibility and it is also the demand of the times.”

Dalian Wanda has been at the forefront of China’s push into the business of sport, building up a sports arm which already owns a 20 per cent stake in Spanish soccer club Atlético de Madrid.

Over the last 18 months, Wanda has sealed a series of high-profile sports investments to build up its sports business arm, from the purchase of the organiser of Ironman Triathlon races, World Triathlon Corp to the purchase of Swiss-based sports marketing firm Infront, in a US$1.2 billion deal last year. Reuters

In an industry where alcoho at meetings, Chambroad trie by banning drinking during Chen Aizhu

For Ma Yunsheng, taking care of Mum and Dad is not just a part of doing business, but the key to its success.

Every month, the parents of workers at China’s Chambroad Holding, an US$8 billion oil refining and petrochemical company, get 200 yuan (US$30), if their child is an ordinary worker, or up to 10 per cent of their managerial offspring’s salary.

The manager’s parents also receive free apartments and access to elder care facilities within walking distance of their homes in Boxing, a town of 500,000 people in eastern China’s Shandong province, where Chambroad is headquartered.

Chambroad’s Chairman Ma Yunsheng, 53, looked to the deeply-held traditional Chinese value of filial piety, or respect for one’s parents, in instituting these perks, he told Reuters in an interview. This corporate culture, rooted in the teachings of Chinese scholar Confucius, has driven Chambroad’s ten-fold growth in revenue over the past decade to 50 billion yuan (US$7.51 billion) in 2015, he said.

“The priority of Chambroad’s management thinking goes to its staff first, then the local government, then its shareholders,” said Ma, who in 1995 took over the small lubricant oil plant that Chambroad started out as in 1990.

He became chairman when the company was privatised in 2000.

Speaking from his office adorned with Chinese calligraphy, Ma, an avid

Business Daily Thursday, July 14 2016 9

Greater China Sino-EU meeting

In Brief

Premier says government committed to market reforms He insisted that China was taking strong and determined measures to tackle the problem of overcapacity.

China’s Premier Li Keqiang told European Union officials yesterday that the country was committed to market reforms and remained determined to tackle a steel capacity glut that has sharpened tensions between the two sides.

Li, speaking at an EU-China business summit, said China had always abided by its commitments on reform, and would work to improve market access for foreign companies in the hope that all firms could compete on a level playing field.

“We want trade between China and Europe to grow on a stable platform,” he said.

European enterprises working in China have long complained about unfair restrictions that make it difficult for them to compete with local rivals.

European Commission President JeanClaude Juncker told the summit that Beijing should remove barriers and improve legal certainties.

China’s sprawling steel sector has come under global scrutiny after a record surge in cheap exports were

Chinese Premier Li Keqiang (C-R) talks to European Commission President Jean-Claude Juncker (C-L) yesterday

s cues from Confucius

ol is commonly imbibed es to be a role model g weekdays for staff. calligrapher himself, said Chambroad aims to become a century-old brand by following the same golden rule used during the past two decades.

From that lubes plant, Chambroad has expanded to running a 70,000 barrelsper-day oil refinery, producing petrochemicals and managing property.

Chambroad is among over 20 private refining firms that China’s government gave crude import licenses to starting in 2015, making them the stars of the global oil market as they snapped up Russia, North Sea and South American supply.

However, Ma plans to steer Chambroad away from its roots as an independent refiner, called “teapots” because of their relative smaller size.

“The priority of Chambroad’s management thinking goes to its staff first, then the local government, then its shareholders” Ma Yunsheng, Chambroad’s Chairman

Investments will go toward fuel retailing, logistics, and the production of high-quality chemical precursor materials, setting its sights on profitability rather than turnover.

“Longer-term refining will be in surplus...instead of expanding capacity, we’ll be looking for the right partners to invest in,” he said.

Confucian values

Ma’s ambitions to turn Chambroad into a research and development centre to train other Chinese private firms have materialised in the brick-and-wood Chambroad Institute next to his office.

It houses a 500-strong research team studying subjects from basic chemicals to waste treatment.

Ma said he measures how well Chambroad is performing through a combination of profit and tax rate paid back to the government. At this point that target is about 30 per cent of revenues for the group that employs about 12,000 people.

Other perks Ma has instituted to drive performance include granting Chambroad’s 109 top managers a 500,000 yuan car allowance, paid out monthly.

blamed for plant closures in Britain and elsewhere, sparking a rise in anti-dumping complaints and putting the country’s market economy status in jeopardy.

European Trade Commissioner Cecilia Malmström said that steel overcapacity needlessly pits Chinese and European workers against one another, while Juncker also warned that China’s huge industrial capacity surplus should not be allowed to hurt relations with the European Union.

“China’s will to solve the problem of steel overcapacity is resolute and our measures are effective” China’s Premier Li Keqiang Li insisted that China was taking strong and determined measures to tackle the problem of overcapacity, adding that China does not use subsidies to give its industries a competitive edge.

“China’s will to solve the problem of steel overcapacity is resolute and our measures are effective,” said Li. “We hope that the European side can look at this issue from an unbiased perspective,” Li said, calling for the two sides to resolve trade disputes through bilateral discussions.

China is willing to speed up negotiations with the EU to secure bilateral investment deals, Li said, while also calling on the European Union to create a stable environment for bilateral trade.

China maintained sound economic growth in the second quarter, the premier said, but he warned that the basis for strong economic performance was not yet strong. Reuters

Mid-level managers receive 250,000 yuan, a Chambroad spokeswoman said.

Chambroad staff said Ma likes to hire outside the company and bestows a lot of trust in new hires. This is unique for private Chinese businesses where most bosses tend to turn the companies into family operations.

“Chambroad won’t be a family business...it will be five or more groups.

My mission will be complete if each of them can run independently or form an alliance,” said Ma, adding that he hones his management skills while deliberating during sleepless nights.

Ma also poses management questions to an internal social media group called “West Point of the 80s” for Chambroad employees born during that decade.

In an industry where alcohol is commonly imbibed at meetings, Chambroad tries to be a role model by banning drinking during weekdays for staff.

Following the Confucian value that a leader has obligations to his followers, Ma slapped himself with a penalty of 300,000 yuan for drinking spirits over a dinner with local government officials. Reuters

Steel subsidy spat

Ministry says U.S. deliberately misread WTO rules China’s Commerce Ministry said yesterday the United States had deliberately misinterpreted World Trade Organization (WTO) rules after the U.S. Commerce Department found in favour of subsidy rates for Chinese steel. The U.S. Commerce Department found in favour of anti-dumping measures for imports of stainless steel sheet and strip from China and said it had set a preliminary subsidy rate of 57.30 per cent for a Chinese steel manufacturer, according to a preliminary finding released on Tuesday. China’s commerce ministry said in a statement it was not satisfied with the decision and that it would use the WTO dispute settlement process to defend its interests.

Tourism

Mainlander’s arrivals in Da Nang grow Vietnam’s central coastal Da Nang city, a famous tourism destination, welcomed some 211,000 person-times of Chinese visitors in the first half of 2016, said the city’s tourism department yesterday. The figure posted an increase of 8.3 per cent yearon-year, Da Nang tourism department told Xinhua over phone. Da Nang is located some 600 km south of capital Hanoi. Chinese visitors accounted for over 26 per cent of total foreign arrivals to Da Nang city, which has made contribution to the city’ s state budget revenue, Nguyen Xuan Anh, Secretary of the Da Nang city party committee said.

State enterprises

New firm to develop aircraft engine China set up a new stateowned enterprise (SOE) specializing in developing aircraft engines, the country’s top SOE regulator announced yesterday. The State-Owned Assets Supervision and Administration Commission of the State Council (SASAC) will provide capital for the new company, according to a statement from SASAC. Aircraft engine is among the major science and technology projects listed in China’s 13th Five-year plan (2016-2020).

Expansion

Wanda buys Europe’s largest movie theatre operator Chinese conglomerate Dalian Wanda Group took another step toward becoming a global movie theatre operator by buying its largest European counterpart, the company announced Tuesday. Wandaowned AMC Entertainment Holdings, the second largest movie theatre chain in North America, will buy the London-based Odeon & UCI Cinema Group with 242 theatres and 2,236 screens in Europe in a deal valued at about 920 million pounds (US$1.2 billion). Wanda said that the transaction will make it the biggest movie theatre operator in the world.

10 Business Daily Thursday, July 14 2016

Greater China GDP forecast

Survey shows second-quarter growth slowing The AFP poll forecasts China will just meet the goal, predicting 6.6 per cent.

Bill Savadove

C

hina’s growth slipped to a new seven-year low of 6.6 per cent in the second quarter, according to an AFP survey, despite government efforts to spur activity in the world’s second-largest economy.

The forecast for expansion in gross domestic product (GDP), based on a poll of 17 economists, represents an easing from 6.7 per cent in the first three months of the year.

As the world’s biggest trader in goods China is crucial to the global economy and its performance affects partners from Australia to Zambia.

Investors worldwide have been worried by its slowing growth.

“Momentum remains downward, so if the government would like to maintain a 6.5 per cent minimum

growth rate in the next several years, more aggressive stimulus will be needed,” Brian Jackson, Beijingbased economist at IHS Economics, told AFP. The slowdown comes as policymakers seek to retool the economy, embracing weaker growth as a trade-off for structural reforms to wean the country off cheap exports and massive government spending in favour of domestic consumption.

GDP expanded 6.9 per cent in 2015 - its weakest in a quarter of a century - and the government has targeted growth in a range of 6.5-7.0 per cent for this year. The AFP poll forecasts China will just meet the goal, predicting 6.6 per cent.

Official Chinese figures are viewed with widespread scepticism, and just days ago the government altered its

growth calculation method for the second time in less than a year.

“China’s quarterly GDP releases are being greeted with increasing scepticism and for good reason,” Capital Economics said in a recent research report.

“The speed of growth that it points to is increasingly hard to believe given the clear structural drags that the economy is facing.”

Still, most wave off fears of a “hard landing” for China.

“We expect data for the second quarter of 2016 to further reinforce our view that China has not collapsed,” PNC Financial Services Group senior international economist Bill Adams said in a research note, though he added the country still faces “daunting challenges”.

Adding to the uncertainty, recent flooding in China could cut into industrial production although at the same time give the government the opportunity to build infrastructure for water control, which could be positive for longer-term growth.

“Infrastructure will likely remain a key sector that policy makers rely on to stabilise growth,” Rong Jing, an economist at BNP Paribas in Beijing, told AFP.

“If the government would like to maintain a 6.5 per cent minimum growth rate in the next several years, more aggressive stimulus will be needed”

Loosening seen

Lower commodity prices, a decline in private spending and weak exports all dragged on the economy in the April-June period, analysts said.

Brian Jackson, Beijing-based economist at IHS Economics

Britain’s decision to exit the European Union, could actually benefit China, some analysts argue.

“If ‘Brexit’ results in slower growth in the UK and anxiety in the developed West and in emerging Europe, the Chinese share of global growth could rise even higher,” Andy Rothman, investment strategist at Matthews Asia, said in a research note.

In order to maintain expansion, the central bank must maintain its loose monetary policy, possibly by again cutting the proportion of funds banks must set aside as reserves as well as interest rates - which it has already lowered six times since late 2014.

An annual summer gathering of Chinese leaders at the beach resort of Beidaihe could yield other economic policies after the State Council, or cabinet, called for support to boost private investment, analysts said.

“The government is likely to introduce further loosening but not necessarily strong stimulus,” Zhao Yang, an economist at Nomura in Hong Kong, told AFP. “Economic growth will likely continue to slow down in the next two to three years,” he said, adding the level could drop to 5.0 per cent or even less. AFP

Employment

Goldman Sachs sees slower wage growth in mainland The nation’s jobless rate is set to climb to 6.5 per cent this year China’s pay gains are trending down and unemployment is higher than government figures show, according to Goldman Sachs Group Inc. analysts who describe the nation’s wages data as “among the least transparent official statistics.”

Wage increases may have slowed to 7.3 per cent in the first quarter from more than 10 per cent in 2013, and will decelerate further to 6.7 per cent in 2017, analysts including Maggie Wei wrote in a report. The estimates are based on an indicator constructed by the economists from various official indexes.

“An extended moderation in wage growth could weigh on consumption growth as the slowdown in revenue growth in both the industrial and services sectors spills over to household sectors and consumption,” the economists wrote. “While any deceleration in wage growth would be another modest headwind to economic growth, more stimulative policies

could be rolled out to support consumption growth.”

China’s official wage data are only

released annually, the latest being 10.1 per cent in urban areas in 2015.

The urban registered unemployment rate has barely budged for five years and excludes about 270 million migrant workers whose jobs are more vulnerable in economic downturns.

The nation’s jobless rate is set to climb to 6.5 per cent this year, according to Goldman’s estimates. That’s higher than the official survey-based unemployment at about 5 per cent and the registered rate at about 4 per cent. Bloomberg News

“An extended moderation in wage growth could weigh on consumption growth” Goldman Sachs’ analysts

Business Daily Thursday, July 14 2016 11

Asia

Key Points Benchmark rate cut 25 bps to 3.00 pct BNM: More downside risks to global economy post-Brexit vote Change to keep economy on ‘steady growth path’ - c.bank Cut is Malaysia’s first rate change since July 2014

Bank Negara Malaysia

Central bank

Malaysia surprises market by cutting its benchmark rate The last time the central bank cut the benchmark rate was in February 2009.

Joseph Sipalan

M

alaysia’s central bank surprised markets yesterday by cutting its key interest rate for the first time in seven years, saying the move would help the country remain on a “steady growth path”.

Bank Negara Malaysia (BNM) cut

the overnight policy rate (OPR) by 25 basis points to 3.00 per cent.

“Global growth prospects have also become more susceptible to increased downside risks in light of possible repercussions from the EU referendum in the United Kingdom,” BNM said.

“International financial markets could also be subject to greater volatility going forward. In this light,

global monetary conditions are expected to remain highly accommodative,” it added.

All 13 economists in a Reuters poll had forecast no change to BNM’s key rate. The widely-held view was that there was no strong push factor for any shift in policy now.

Southeast Asia’s third-largest economy has posted five quarters of slowing growth tied to weakness in global crude and commodity prices.

In January, Malaysia revised its 2016 growth projection downwards to 4.0-4.5 per cent from 4.0-5.0 per

cent on expectations of a sustained slump in global crude prices.

The last time the central bank cut the benchmark rate was in February 2009, when it was slashed by 50 basis points to 2.00 per cent.

Inflation is not a worry for the central bank. The annual pace was a seven-year high in February, at 4.2 per cent, but it slowed the next three months, reaching 2 per cent in May, and BNM expects it to trend lower for the rest of the year due to low energy and commodity prices as well as tepid global inflation.

Yesterday’s monetary policy committee meeting was the second chaired by Governor Muhammad Ibrahim, who succeeded long-time chief Zeti Akhtar Aziz on May 1. Reuters

Currencies

Australian political woes put kiwi dollar parity with Aussie in view The currency pared some of its gains after Australian Prime Minister Malcolm Turnbull claimed victory in a cliff-hanger election this week Rebecca Howard

After trouncing Australia on the rugby pitch, New Zealand might also be close to tackling its bigger trans-Tasman rival in the foreign exchange markets with its currency within striking distance of parity with the Aussie dollar.

Typically considered the poorer cousin of the two antipodean currencies - both sought for relatively high yields - New Zealand’s more favourable investment conditions are now attracting capital that would otherwise go to Australia.

The kiwi dollar, nicknamed for the country’s native flightless bird, is benefiting from solid economic data and a benchmark interest rate of 2.25 per cent, the highest among developed countries.

The Aussie, meanwhile, is weighed by political uncertainty, a less attractive interest rate - at a record low of 1.75 per cent - and the possibility of losing its coveted triple A rating.

Cameron Bagrie, ANZ’s Chief Economist for New Zealand in Wellington, expects to be “popping champagne at some stage” as political headlines take the shine off Australia’s strong investment credentials.

“Momentum is with the New Zealand dollar,” he said, although he expects parity to be hit over the next couple of years rather than overnight.

The currency pared some of its gains after Australian Prime Minister Malcolm Turnbull claimed victory in a cliff-hanger election this week, ending fears of a hung parliament.

However, Ben Alexander, Chairman of Ardea Investment Management, a Sydney-based fixed interest boutique managing NZ$6.5 billion (US$4.72 billion) in assets, thinks the currency can still hit parity “quite easily”.

A reluctance by the Reserve Bank of New Zealand to cut interest rates has redirected yield-hungry capital away from Australia, Alexander said.

While a high currency would normally stoke talk of rate cuts in New

Zealand, the central bank has recently flagged soaring property prices as a reason to hold rates, adding to the currency’s allure.

Too soon?

To be sure, an outperforming currency strengthens national pride and those long the kiwi more than it does the real economy: the higher currency is good for imports and outbound tourists, but bad for exporters, a major driver of the dairy-producing economy.

And it’s not the first time there has been talk of a parity party.

Unlike the 2015 Rugby World Cup final in Twickenham, England, where New Zealand overwhelmed Australia 34-17 to become world champions for a record third time, so far there’s no champagne.

In late 2005, bars in Wellington

“Momentum is with the New Zealand dollar” Cameron Bagrie, ANZ’s Chief Economist for New Zealand

were rumoured to be stocking up for the big event but hopes were dashed when it failed to push through.

In April 2015 the Kiwi hit around A$0.9979, the closest it has gotten to parity since the two currencies free-floating in the 1980s. Prior to that the two hit parity in 1972. Once again, however, the champagne stayed on ice.

Alex Sinton, a senior currency dealer with ANZ in Auckland, said a party might be on the cards although in previous years “it was a tough ask to check timing, order the appropriate drinks etc although there was plenty of talk.”

Even if no actual champagne is uncorked “I am pretty sure there will be some celebrating and some commiserating on such a move to parity,” said Sinton. Reuters

12 Business Daily Thursday, July 14 2016

Asia In Brief Fiscal soundness

South Korea plans to reduce treasury debt South Korea is planning to reduce its treasury debt by between 1 trillion won and 2 trillion won (US$873.82 million to US$1.75 billion) won this year as the government aims to improve the fiscal soundness of its balance sheet, a finance ministry official told Reuters yesterday.

The decision was made as the government is compiles a draft of the roughly 10 trillion won supplementary budget it plans to announce next week, the official said. To reduce debt, the government plans to either buy back existing bonds ahead of maturity or cancel some planned treasury bond auctions.

Sentiment

Australian consumer confidence eases A measure of Australian consumer sentiment eased in July as political uncertainty caused by a cliff hanger election at home and the Brexit vote clouded the near-term economic outlook.

The Melbourne Institute and Westpac Bank survey of 1,200 people found consumer sentiment fell by 3 percent in July, from June when it dipped 1 percent. That still left the survey index 7.4 percent higher than July last year at 99.1, though optimists were slightly outnumbered pessimists. “With the major events of ‘Brexit’ and prolonged election uncertainty it is not surprising to see a fall in the Index,” said Bill Evans, chief economist at Westpac.

Tax abuse fight

New Zealand sets up trust register to curb evasion The country has long been identified as offering a trust regime popular with the offshore trust business.

Charlotte Greenfield

N

ew Zealand said yesterday it will introduce a registry of foreign trusts that local tax and law enforcement agencies could use to investigate suspected money laundering and tax evasion.

The registry was recommended after an independent review by accountant John Shewan last month, in the wake of the Panama Papers revelations, who found the trusts were open to being used to hide illicit funds and tax abuse.

Professional trust formation agents and lawyers were waiting to see whether the ramped-up disclosure rules would scare off foreign clients who had favoured the trusts for their secrecy.

New Zealand has long been identified as offering a trust regime popular with the offshore trust business. The tax department recommended a review of taxation of foreign trusts in 2014, though this did not take place at the time.

Finance Minister Bill English said the register would “ensure that our foreign trust disclosure rules are strengthened and New Zealand’s reputation is protected.”

The government will introduce a bill to Parliament in August, requiring the Inland Revenue Department (IR) to establish the registry.

‘New Zealand trusts could bring in as much as NZ$50 million in fees a year’ Those setting up trusts would have to provide the names, contact details, and tax identification numbers of the settlors and beneficiaries of foreign trusts.

“Until we see the bill implementing automatic exchange of information there is a concerning lack

of clarity about who will be able to access the proposed register of foreign trusts,” said David McLay, a Wellington-based lawyer who specialises in tax law and trust formation.

“Until we resolve that lack of clarity we cannot answer the question of whether there will be a loss of trusts from New Zealand.”

Wellington is currently considering how it would implement rules on exchanging tax details with other countries under the G20-led automatic exchange of information, a global standard to crack down on offshore tax evasion.

Currently, New Zealand’s tax department could only access information about foreign trusts on request.

It has said that it would not entertain “fishing requests” by foreign governments for information.

There had been 142 exchanges of information between IRD and foreign tax authorities in 23 countries in the past seven years, Shewan’s report said.

New Zealand trusts could bring in as much as NZ$50 million in fees a year, with almost 12,000 foreign trusts costing around NZ$4,000 in annual fees, according to lawyers.

The value of the trusts is not known.

Reuters

Japan’s spokesman

Government not considering helicopter money Japan’s top government spokesman said yestrday the government was not considering “helicopter money” as an option, denying a media report that its advisers were suggesting the policy. The Sankei newspaper reported on Wednesday that Etsuro Honda, an economic adviser to Prime Minister Shinzo Abe, told the premier that now was a good time to embark on the policy, in which money is printed and directly handed to the private sector to stimulate the economy. Chief Cabinet Secretary Yoshihide Suga told a news conference that the Bank of Japan would decide monetary policy steps based on market movements and economic environment.

Bank robbery

Suspected Singapore robber to be ‘sent abroad’ A Canadian suspected of robbing a Singapore bank of S$30,000 (US$22,250) will be sent abroad, Thailand’s police chief said on Wednesday, but he did not say whether he would be sent to Singapore or Canada. The rare bank robbery in Singapore sparked a flurry of debate about whether the country has grown too complacent about security, with crime rates among the lowest in the world. Thai Police Commissioner General Jakthip Chaijinda told reporters in Bangkok that Singapore had asked for the suspect to be extradited to Singapore.

Finance Minister Bill English said the register would “ensure that our foreign trust disclosure rules are strengthened and New Zealand’s reputation is protected”

Monetary policy

Abe’s stimulus plan to moderate central bank projections Markets currently expect the BOJ will cut its inflation forecasts and expand stimulus this month.

Leika Kihara

The Bank of Japan (BOJ) will factor in the government’s planned fiscal stimulus package in producing new quarterly projections this month, which will help moderate any cuts to its inflation forecasts, sources familiar with its thinking said.

The boost to growth from the fiscal package and the postponement of next year’s scheduled sales tax hike may take some pressure off the central bank to expand an already massive stimulus programme, some analysts say.

“A downgrade to the BOJ’s price forecasts is inevitable. But the bank may use expansionary fiscal policy to keep the cuts at a minimum if it wants to avoid easing,” said Yoshiki Shinke, chief economist at Dai-ichi

Governor Haruhiko Kuroda has stressed that he won’t hesitate easing policy if needed

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 N. 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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Life Research Institute.

The BOJ is usually reluctant to factor in the effect of fiscal stimulus packages unless details, including

the actual size of spending, are finalised and announced by the government.

Prime Minister Shinzo Abe has yet to announce the size of his planned stimulus package and may not finalise the amount before the BOJ’s policy meeting on July 28-29, when the bank conducts a quarterly review of its growth and price forecasts.

But the BOJ will likely take into account the impact from the upcoming package, which analysts say could be worth around 10 trillion yen (US$96 billion), and the boost to consumption from a delay in the

Business Daily Thursday, July 14 2016 13

Asia Malls fever

In India, private equity firms see new allure in old world retail A major challenge for retailers is the lack of high quality malls to house incoming brands.

Aditi Shah

E-commerce in India has been booming and online giants like Amazon are spending big bucks on the world’s fastest growing major economy. Yet some investors are pouring money into retail mainstays of a bygone era - shopping malls.

Private equity investors like Blackstone and Rothschild-backed Xander Group are looking for malls in India, betting that people will flock to stores as more foreign brands open and online retailers ease their aggressive discounting.

Indian malls, which are evolving from ramshackle collections of stores to modern plazas complete with air conditioning and family entertainment centres, are seen as a gateway to brands that a growing middle class aspires to own.

The rise of the mall in India, at a time when many in the United States are becoming debt-ridden white elephants, has been helped by a flurry of new regulations that are encouraging investors to take a fresh look at traditional retail.

They include easing foreign investment rules for single-brand retailers, longer shopping hours and a new framework for establishing real estate investment trusts (REITs).

“Almost every retailer would like to be here, and as they come they need quality space,” said Siddharth Yog, chairman of Xander, whose Virtuous Retail arm owns 5 million square feet of operational and underdevelopment malls in India.

Xander is looking to buy and build new malls in cities like Delhi, Mumbai and Hyderabad, said Yog, as the outlook for physical retail stores brightens in India.

Online retailers under pressure

Investors had long shied away from shopping malls in India, amid weak consumer spending and deep

sales tax hike scheduled for April 2017, the sources said.

“The prime minister has made it quite clear there will be a sizable stimulus package aimed at beating deflation,” said one of the sources.

“It would be strange not to take into account the effect of such a package in compiling estimates.”

Less upbeat on trend inflation

At its June policy meeting, the BOJ used downbeat language in its outlook for consumer inflation, suggesting it might cut its rosy price projections for the current and possibly next fiscal year due to weak consumption and a strong yen.

Key Points BOJ to factor in fiscal plan in July forecasts-sources Add fiscal package to offset downward pressure on prices Boost from fiscal plan may take some pressure off BOJ BOJ may modify view trend inflation improving steadily However, a boost from looser fiscal policy would offset some of the downward pressure on prices, helping the BOJ make the case Japan is on track to hit its price target.

The sources said while the BOJ may offer a slightly bleaker view

discounts by online retailers like Amazon and local rivals Flipkart and Snapdeal.

Now online upstarts are under pressure from investors to produce returns, and this, combined with government regulation to ease online discounts, is reducing their advantage.

With consumer spending in India set to top US$3.6 trillion by 2020, and brands like Ikea, H&M, Aeropostale and GAP planning forays into a country where new rules allow shops to remain open 24 hours a day, private equity firms see strong potential.

Key Points Blackstone, Xander seek investments in shopping malls in India Consumer spending in India set to top US$3.6 trillion by 2020 Ikea, H&M, Aeropostale and GAP to roll out more stores “With the same mall space generating more footfalls and revenues ... it’ll definitely make organised retail properties enticing for investors,” said Anuj Puri, chairman and country head at real estate consultant, Jones Lang LaSalle (JLL), India.

Puri expects mall valuations and yields from retail properties to rise and attract investor interest, especially as REITs offer them a clear exit path.

“There’s definitely a revival in interest in shopping malls and that’s more to do with improved outlook for returns from these investments on the back of a revival in economic growth,” said a Mumbai-based industry banker.

The banker added that funds like Blackstone, Brookfield and Canada Pension Plan Investment Board

on prices from its current assessment that underlying trend inflation is “improving steadily”, this would not immediately trigger monetary easing if bank board members feel they can stick to their forecast that inflation will accelerate ahead.

Markets currently expect the BOJ will cut its inflation forecasts and expand stimulus this month to show its determination in hitting its 2 per cent price goal.

The BOJ now projects core consumer inflation to hit 0.5 per cent in the current fiscal year ending in March 2017 and 1.7 per cent the following year, much higher than private forecasts of around 0.1 per cent and 0.8 per cent, respectively.

Many BOJ policymakers prefer to avoid a sharp cut in their fiscal 2017 inflation forecasts as that would mean pushing back again the timing for hitting the bank’s price target - now set at “around fiscal 2017”.

BOJ Governor Haruhiko Kuroda has stressed that he won’t hesitate easing policy if needed to hit the price target.

But many board members are wary of acting too soon given the bank’s dwindling policy tool-kit.

“Data on prices and inflation expectations are all very weak, so it’s hard to argue that the broad price trend is improving. But there’s a good chance the BOJ will forgo easing in July because it’s uncertain whether the benefits of more action exceed the costs,” said Shinke of Dai-ichi Life Research. Reuters

Shopping Mall at Jalandhar

(CPPIB) were looking at the sector from a medium- to long-term return standpoint.

Quality space scarce

A major challenge for retailers is the lack of high quality malls to house incoming brands, partly because the economic slowdown of 2011-2012 forced debt-laden developers to revise or abandon projects.

Consulting firm A.T. Kearney estimates that India has just onetenth of the mall space of the U.S. market, despite having a population four times larger.

For investors, the dearth of malls and growing demand from retailers means faster rental growth and higher yields.

Retail rents in some malls have risen by as much as 20 per cent over the past year, and shopping centre yields in India are at about 11 per cent compared with 4.9 per cent in Singapore and 4 per cent in London, according to JLL. This also means the race to buy

assets could be frenetic, with only about 20 per cent, or 39 million square feet of existing malls, being investment-worthy.

Thus far in 2016, investors have spent US$397 million on just two deals to buy malls in India, said JLL, compared with negligible investment in recent years.

Blackstone, which has invested US$2.7 billion in Indian real estate, mainly office buildings, is now in advanced talks to buy one million square feet of retail space from Larsen & Toubro in suburban Mumbai, two people familiar with the deal said.

A Blackstone spokesman declined to comment.

The surge in investment could revive India’s sluggish real estate market and kick start projects, say developers.

“Money is fungible and developers can use it to invest in other projects or reduce borrowing in existing ones,” said Sriram Khattar, head of Indian developer DLF Ltd’s rental business.

Reuters

14 Business Daily Thursday, July 14 2016

International In Brief Prime Minister

Russia’s decline of economic indicators slows down Russian Prime Minister Dmitry Medvedev said Tuesday that Russia’s economic indicators have slowed their decline. “The situation on global financial markets is still unfavourable for us. Though our key economic indicators have narrowed losses, they’re still in the negative zone,” the Russian news agency TASS quoted Medvedev as saying. He added that total macroeconomic and budget stability persists, and price growth has slowed down significantly to less than 4 per cent since the beginning of this year, which is almost twice as low as in the first half of 2015.

Monetary outlook

Fed’s Mester heartened

by U.S. job rebound The sharp rebound in U.S. job growth last month eased concerns that the country’s labour market had regressed, a top Federal Reserve official said yesterday, repeating she continues to expect gradual interest rate rises. Cleveland Fed President Loretta Mester, speaking in Sydney, largely repeated a July 1 speech in London in which she said it was too early to judge the full effect of Britain’s vote to leave the European Union on the U.S. economy. However Mester noted the recent data on the U.S. labour market was heartening.

Funding projects

Argentina finalizes World Bank deal Argentina has approved agreements with the World Bank for US$845 million in the last two weeks, Argentine Economy Minister Alfonso Pram-Gay announced Tuesday, along with the bank’s Managing Director Sri Mulyani Indrawati. The funds are raised for three projects.

First, Argentina will launch the Comprehensive Network Program for Protecting Children and Youths with US$600 million to deal with poverty problems and improve living conditions for children in vulnerable situations. Meanwhile, US$200 million will be allocated to mitigate the effects of climate change by preventing possible floods in the Arroyo Vega basin in Buenos Aires.

Angola’s inflation

Price rises almost three times projections Prices in Luanda rose by 31.8 per cent in the last 12 months to June, reaching all-time highs and almost tripling government projections.

According to a monthly report from Angola’s National Statistics Institute on inflation in the country, measured by prices rises in the capital city, year on year inflation in June was 22.19 per cent. In the State Budget the Angolan government projected inflation from January to December of 11 per cent. Inflation has been rising continuously since September 2014.

IEA

Huge stocks overhang threatens oil price recovery Oil prices slumped to their lowest in over a decade at US$27 a barrel earlier this year from as high as US$115 in 2014 Dmitry Zhdannikov

T

he global glut in oil is refusing to ease and acts as a major dampener on crude prices despite robust demand growth and steep declines in non-OPEC production, the International Energy Agency said yesterday.

The IEA, which coordinates the energy policies of industrial nations, said it had revised up its forecasts of 2016 and 2017 global oil demand growth by 0.1 million barrels per day from last month to 1.4 million and 1.3 million bpd respectively.

It said demand was growing thanks to good consumption in India, China and, surprisingly, Europe.

“This (European demand growth) is unlikely to last, though, with the on-going precariousness of the European economies now dealing with added uncertainty following the result of the UK referendum on membership of the European Union,” it added.

Oil prices slumped to their lowest in over a decade at US$27 a barrel earlier this year from as high as US$115 in 2014 after OPEC raised production to fight for market share against higher-cost producers such as the United States.

The slump forced many producers outside the Organization of the Petroleum Exporting Countries to curb output and prices recovered to around US$50 in recent months, also supported by production outages in countries such as Nigeria and Canada.

But it was not enough to reduce the glut that had accumulated over the past two years. Commercial inventories in industrialised nations rose by 13.5 million barrels in May to a record high of 3.074 billion, the Paris-based IEA said.

Inventories kept building in June, pushing oil in floating storage - one of the most expensive methods of stockpiling - to its highest levels since 2009, the IEA said.

“Although market balance is upon us, the existence of very high oil stocks is a threat to the recent stability of oil prices,” the IEA said.

“Although stocks are close to topping out, they are at such elevated levels, especially for products for which demand growth is slackening, that they remain a major dampener on oil prices”.

Middle East gains market share

The IEA also said recent data suggested growth could be slowing in some key consuming nations.

In China, data for May suggested that year-on-year demand growth was only 130,000 bpd. In the United States, estimated gasoline deliveries in April were up just 75,000 bpd yearon-year, some 410,000 bpd below the IEA’s expectations.

On the supply side, after a steep drop by 0.9 million bpd in non-OPEC production in 2016 to 56.5 million bpd, output is expected to recover modestly by 0.2 million bpd in 2017.

Meanwhile, OPEC crude output stood in June at an eight-year high of 33.21 million bpd with Saudi Arabia pumping at near-record rates of 10.45 million bpd and Nigerian flows partially recovering from rebel attacks.

Iranian output rose to 3.66 million bpd in June, up 50,000 bpd on May and 750,000 bpd since the easing of Western sanctions at the start of the year.

Key Points OECD stocks kept rising in May, June to new highs Global oil demand robust, but not enough to ease glut Middle East market share rises to highest since 1970s “As such, the Middle East’s market share of global oil supplies rose to 35 per cent, the highest since the late 1970s and an eloquent reminder that even when U.S. shale production does resume its growth, older producers will remain essential for oil markets,” the IEA said. Reuters

Brexit

IMF sees “negligible” impact on U.S. growth They kept unchanged its previous U.S. economic growth forecasts of 2.2 percent for 2016 and 2.5 percent in 2017.

Britain’s vote in a referendum to leave the European Union has caused uncertainty and increased risks to the U.S. economy but thus far it looks likely to have a pretty “negligible” impact on U.S. growth, the International Monetary Fund said.

The IMF said in its formal annual review of the U.S. economy and policies that the June 23 “Brexit” vote has prompted a rise in the dollar that has been less than feared, up about 1 percent in nominal effective terms, while stock markets have recovered losses incurred right after the vote.

Meanwhile, a safe-haven rush into U.S. Treasuries has lowered yields, and home and business financing costs, considerably.

“The net effect on growth is pretty negligible,” Nigel Chalk, the IMF’s mission chief for the United States, told reporters on a conference call.

The IMF kept unchanged its previous U.S. economic growth forecasts of

2.2 percent for 2016 and 2.5 percent in 2017, issued a day before the British referendum.

‘The IMF staff report said the United States faces a confluence of forces that will weigh on future gains’ While financial market volatility or a further rise in the dollar’s value represent downside risks to U.S. growth, the IMF saw upside risks from oil prices, including a delayed positive effect on consumption and a lessening drag from reduced oil-related investment.

However, the IMF said a “more complex and harmful” downside risk is that the potential growth rate may be lower than previously estimated, with a smaller output gap. It said growth in future years under this scenario could settle at well below 2 percent.

“If true, this would mean the U.S. economy could soon bump up against capacity constraints that would slow growth and generate domestic inflationary pressures with negative global spillovers,” the IMF said in its report.

The IMF staff report said the United States faces a confluence of forces that will weigh on future gains, including a rising share of the U.S. labour force shifting into retirement, aging basic infrastructure, low productivity gains and labour markets and businesses that appear less adept at reallocating human and physical capital.

The IMF board of directors stressed the need for Washington to take broad range of measures to tackle longerterm challenges, including boosting federal infrastructure spending and reaching agreement on skills-based immigration reform. Reuters

Business Daily Thursday, July 14 2016 15

Opinion Business Wires

The Korea Herald Cross-border investment between South Korea and China has risen sharply this year, fanned by the Korea-China free trade agreement, industry data showed yesterday. The trade pact took effect in December 2015. According to the Kora International Trade Association, South Korean entities invested US$2.2 billion in China during the first five months of the year. The figure is 12.2 per cent higher than that recorded during the same period last year.

At the rate recorded in the January-May period, South Korean investment in China throughout the year is estimated to reach US$5.3 billion.

All change in the world of industrial metals trading?

C The Phnom Penh Post The first comprehensive survey of the accessibility and usage of Cambodian financial services found that only 17 per cent of the Kingdom’s adult population is banked, with poor access to financial services among the key impediments to financial inclusion of those living in rural areas. The FinScope Consumer Survey, whose top line findings were released yesterday, is a representative study of the usage of and access to financial services in Cambodia. The comprehensive data sets were extrapolated from 3,150 interviews of adult Cambodians nationwide conducted over a three month period ending January 2016.

Thanh Nien News A slowdown in the first six months means it will be unlikely for Vietnam to achieve the economic growth target of 6.7 per cent this year, a senior legislator has said. Nguyen Van Giau, chairman of the National Assembly’s Economic Commission, said the economy cooled down due to a decline in agriculture, expanding only 5.52 per cent in the first half, compared to 6.32 per cent recorded in the same period last year. He was speaking in Hanoi on Tuesday when his legislative committee reviewed the country’s economic performance. Some government officials have lowered their expectations.

The Jakarta Post Four (Indonesian) publicly listed stateowned enterprises (SOE) have announced rights issues to raise funds for expansion, including from state capital injections allocated in the revised 2016 state budget.

The companies – construction firms PT Pembangunan Perumahan and PT Wijaya Karya, steel maker PT Krakatau Steel and toll road operator PT Jasa Marga – are slated to receive a combined Rp 9 trillion in state capital injections. “We already have the schedule” for the rights issue, SOE Minister Rini Soemarno said after attending a coordination meeting on the matter at the Coordinating

hina has loomed large over the world of industrial raw materials for many years.

The prices of metals from aluminium to zinc have long swayed to the beat of the world’s largest manufacturing nation.

But this is the year that China has emerged from the limelight to take centre-stage in the trading of those metals.

On one day alone, March 10, trading volumes on the Dalian Exchange iron ore contract exceeded one billion tonnes, more than the combined annual output of the world’s biggest three producers, Rio Tinto, BHP Billiton and Brazil’s Vale.

The following month, on April 21, more than 240 million tonnes of steel rebar traded on the Shanghai Futures Exchange (ShFE), equivalent to around a third of China’s steel production last year, not just of construction-destined rebar but of every imaginable type of steel product.

Such was the crowd surge of Chinese retail investors through the domestic commodities trading space earlier this year.

Trading conditions became so tumultuous that Chinese exchanges frantically upped margin and deposit levels to disperse the hordes.

Activity has since calmed down but no-one can be left in any doubt as to the seriousness of China’s ambitions to move from primary price-taker to primary price-setter across the industrial spectrum.

Those ambitions obviously challenge the London Metal Exchange (LME), which has dominated base metals trading for the last century.

The LME is currently fending off internal critics, who are looking at a potential new trading platform, and increasingly aggressive moves by the U.S. giant CME into the industrial metals space.

This is still something of a phoney war for the top seat at the global metals trading table, but hostilities are only likely to intensify.

“

Shanghai surge

Andy Home a Reuters analyst

London’s multiple challenges What ShFE has done, however, is stop any other exchange from muscling in on its territory.

When the LME was bought by Hong Kong Exchanges and Clearing in 2012, its new owners were confident they were uniquely positioned to prize open the Chinese market.

But there has been no metallic equivalent of the Hong KongShanghai stocks trading pipeline switched on last year.

The LME remains thwarted by Chinese regulations from opening up delivery points on the mainland, while HKEx’s attempt to woo investors with “mini” yuan-denominated metal contracts has struggled to gain momentum. Volumes in the three main contracts, copper, aluminium and zinc, totalled 12,529 lots in the first half of this year, down from 29,895 in the first half of 2015.

The LME’s bigger concern might be its own falling volumes, down 8.0 per cent so far this year.

Activity has fallen across the LME’s portfolio with the single exception of nickel, up 0.6 per cent so far this year, and the new steel contracts.

The exchange blames the market, specifically the current “pricing uncertainty” that is deterring industrial hedgers.

Parts of the market, however, blame the LME, specifically the fee hikes across some of the exchange’s short-dated spread structure.

A group of discontents is looking at setting up its own trading platform under the guiding hand of former LME chief executive Martin Abbott.

That may, or may not, pose a future threat to the LME franchise. A more imminent one seems to be coming from across the Atlantic.

What Shanghai Futures Exchange has done... is stop any other exchange from muscling in on its territory

Shanghai steel trading grabbed the headlines in the first half of this year.

Volumes on the ShFE rebar contract surged to over three billion tonnes in March, which even allowing for Chinese exchanges’ habit of counting both buy and sell transactions in their volume figures, is a huge number.

But it’s not just rebar. Volumes across all ShFE’s metals contracts have been booming, particularly those that had previously been shunned by local players such as aluminium, up 335 per cent year-on-year, and new contracts such as nickel, up 248 per cent.

Indeed, with 98 million tonnes traded in the first six months of this year, ShFE nickel volumes comfortably exceeded the 61 million tonnes notched up by the LME. The emergence of this new liquidity hub has caused a mass relocation of nickel stocks away from the LME warehousing system into ShFE sheds, which currently hold 103,000 tonnes of metal.

This gravitational pull is exerting an ever greater influence on London nickel trading.

But Shanghai is still some way from grabbing London’s price-formation role in the global industrial metals markets.

It doesn’t yet offer options trading, a key component for price hedging strategies.

As shown by the extraordinary volume and price surges earlier this year, ShFE and other Chinese exchanges are prey both to the disruptive effects of retail speculators and of the authorities who act to dampen their animal spirits.

And more importantly, ShFE remains first and foremost a domestic market trading venue.

Its contracts are priced to include value-added-tax. It has no delivery points outside of China. It remains cordoned off from the international market-place by the country’s great wall of capital controls.

CME the challenger

CME (Chicago Mercantile Exchange) is rolling out an increasing number of contracts in what appears to be a direct challenge to London’s dominance of global base metals trading.

The most successful of these have been the aluminium premium contracts. The U.S. Midwest contract, indexed against S&P Global Platts assessments, has traded 930,175 tonnes so far this year, compared with 936,175 in the whole of 2015.

The European and Japanese premium contracts, meanwhile, also appear to be gaining traction.

The LME can afford to take a sanguine view of these contracts, even if its own premium products have failed to trade at all. After all, every tonne traded on a CME physical premium contract implies a tonne still traded on the LME’s basis price aluminium contract.

More direct a challenge comes from CME’s aluminium, zinc and lead contracts, which it has added to its longstanding copper contract over the last year.

These are still struggling to build momentum. Lead, for example, has notched up just 5 lots of activity so far and that in the month of June.

But aluminium volumes have grown by 68 per cent to 3,729 lots so far this year and CME copper volumes, up 22 per cent in the first half in stark contrast to a 5 per cent decline on the LME, offer a warning to the London incumbent. CME, meanwhile, is expanding its attack with a new aluminium alloy contract in the works.

Such is the rapidly changing landscape of futures trading in industrial metals; intensifying rivalry between CME and the LME in the west, stand-off between London and Shanghai in the east, and new contracts in all three regions.

The shift from a unipolar to a multi-polar global pricing model is not going to happen quickly, but there is a growing sense that the process is under way. Reuters

”

16 Business Daily Thursday, July 14 2016

Closing Inc sentiment

Vietnamese enterprises expect higher production

per cent of local firms expected orders to increase while 9.5 per cent of them estimated About 55.4 per cent of Vietnamese enterprises reduction in orders. expected their production volume to increase The office said 48 per cent of local businesses expected the processing and manufacturing in the second half (H2) of 2016, according to the General Statistics Office (GSO) yesterday. sector to improve.

In the first six months of 2016, Vietnam At the same time, some 9 per cent said witnessed the highest rise of businesses production volume would be reduced while resuming operation over the past few years, around 35 per cent predicted stability in production, local Vietnam News, an edition of according to GSO. Specifically, from January to June, some Vietnam’s state-run news agency quoted the 14,902 enterprises resumed their operations, GSO as saying yesterday. up 75.2 per cent year-on-year, said GSO. Xinhua Regarding production orders, around 48.5

Theme parks

Shanghai buzz boosts Tokyo Disney visitation The opening of Hong Kong Disneyland in 2005 boosted foreign tourists’ visits to Tokyo Disney by 4.2 per cent in the following fiscal year.

Monami Yui and Grace Huang

T

he o p e rat o r o f Tokyo Disneyland expects overseas visitors to more than double by 2020 to around 4 million as Walt Disney Co.’s first resort outside the U.S. rides on publicity generated by Shanghai’s new theme park and a government plan to draw more tourists to Japan.

Oriental Land Co. which is licensed to operate the Tokyo resort consisting of Disneyland, DisneySea, hotels and shopping malls, forecasts its annual investments of 50 billion yen (US$481 million) on park attractions and new hotel projects will help it capture about a tenth of the 40 million foreign visitors to Japan by 2020, said executive director Akiyoshi Yokota on Tuesday. The resort attracted 8.5 per cent of the 21.4 million foreign visitors to the country in the year ended March 2016.

“Shanghai Disneyland is a plus for us as it is likely to boost the recognition of Disneyland in the region,” said Yokota, who’s in charge of finance and accounting at Oriental Land, in an interview in Tokyo. “There are wealthy

Chinese people who may want to come to the one in Tokyo after experiencing it in Shanghai.”

The company, partly owned

by Tokyo train operator Keisei Electric Railway Co., forecasts it can maintain the visitor ratio at around 10 per cent of the country’s annual tourists despite a stronger yen, said Yokota. The world’s second-biggest theme park market grew 11 per cent last year to hit 823 billion yen, according to Euromonitor I n t e r n ati o n a l , ev e n as Japanese consumers tighten spending over the country’s economic uncertainty.

The resort plans to increase the number of foreign language-speaking staff to prepare for the influx of overseas visitors, Yokota said.

It raised admission prices for the third consecutive year in April.

Maintaining that pace of visitors may be challenging, said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co. in Tokyo.

“It will be hard for Oriental La n d t o i n c rease t ota l visitors beyond the current 30 million level before it expands capacity, which won’t happen before 2020,” the fund manager said. “It’s

questionable whether the increasing trend will keep up its pace.”

Shanghai buzz

Still, Tokyo Disneyland may see a visitors bump from the buzz around Disney’s first park in mainland China, which opened in Shanghai on June 16, rather than competition, said Seiichiro Samejima, an analyst at Ichiyoshi Research Institute Inc. The opening of Hong Kong Disneyland in 2005 boosted foreign tourists’ visits

to Tokyo Disney by 4.2 per cent in the following fiscal year, he said.

Japan’s national visitors target could also come under threat amid the yen’s surge in the aftermath of the Brexit vote, making Europe a more attractive destination for tourists from China, the country’s largest source of foreign visitors accounting for 26 per cent in the first five months of this year, according to the Japan National Tourism Organization.

Rich guests

Yokota dismissed those fears, insisting the strong yen won’t deter foreign visitors to the park because he says the park’s guests tend to be

affluent consumers. The theme park’s mainstay are Japanese, who account for 94 per cent of visitors. The park’s number of visitors rose to a record 31.4 million in the year ended March 2015 due to special events inspired by the movie “Frozen.”

Tokyo Disneyland opened in April 1983, becoming the first Disney park built outside the U.S., while the adjoining DisneySea, which features water-based rides such as the Tower of Terror and Indiana Jones, opened 18 years later.

Oriental Land is considering building a new hotel near the park, Yokota said.

The company is weighing options, as there’s demand at the low-end for budget accommodations while Tokyo Disney still doesn’t have a luxury hotel offering, he said. Oriental Land opened its fourth Disney-branded hotel in June. Bloomberg News

“Shanghai Disneyland is a plus for us as it is likely to boost the recognition of Disneyland in the region” Akiyoshi Yokota, executive director of Oriental Land Co.

Tokyo Disney

Prices outlook

Revolving doors

Safety hazards

Japan lowers CPI forecasts in blow to inflation gambit

Moscovici says Barroso ‘should have reflected’

Ikea recalls furniture in China after North America move

Japan’s government yesterday cut its forecasts for consumer prices and economic growth, a blow to the Bank of Japan’s ambitious project to achieve 2 per cent inflation with massive purchases of government debt.

The government expects consumer prices to rise 0.4 per cent in the current fiscal year ending in March 2017, down from a 1.2 per cent increase projected in January.

Also, the government yesterday forecast consumer prices to rise 1.4 per cent for fiscal 2017, well below the 2 per cent target the BOJ says will be met during the fiscal year to end in March 2018.

The downgrade reflects weaker-than-expected economic growth, slumping oil prices and a strong yen, which is pushing down import costs.

The government expects the economy to expand 0.9 per cent in the current fiscal year, down sharply from 1.7 per cent projected in January.

Yesterday’s downgrade is likely to fuel expectations the BOJ will lower its own forecasts at a meeting later this month and expand monetary easing to try to convince households and companies that the economy will not return to deflation. Reuters

José Manuel Durão Barroso should, as a former president of the European Commission, have reflected on the “political, ethical and personal” implications before accepting a position with US bank Goldman Sachs, the European commissioner for economic and financial affairs, Pierre Moscovici, said yesterday.

Barroso, who is also a former prime minister of Portugal, is to become non-executive chairman of the bank’s UK subsidiary Goldman Sachs International (GSI), the company announced on 8 July. He is also to act as an advisor to the bank.

In an interview with France’s Europe 1 radio, Moscovici said that although “it is not prohibited” for a former commission president to take on such a high-profile role at a commercial organisation, Barroso should have made a “political, ethical and personal reflection” on the effects of his hiring by Goldman Sachs.

When political figures move over to the private sector they should “think of the image they project”, Moscovici added, stressing that when he himself ends his term as commissioner he will not be heading for Goldman Sachs.

Barroso, 60, headed the European Commission from 2004 to 2014. Before that he was prime minister of Portugal for two years. Lusa

Swedish furniture giant Ikea is recalling more than 1.6 million cabinets and other items in China over potential safety hazards, the government and the company said, following a similar move in North America.

The Chinese government said in a statement the furniture being recalled could fall over if not properly fixed to the wall, possibly causing injuries or death to children.

Ikea announced two weeks ago that it was recalling more than 35 million chests and dressers in the United States and Canada as regulators said six children had died in accidents.

China’s General Administration of Quality Supervision, Inspection and Quarantine which issued the statement Monday - did not say whether any accidents had occurred in mainland China involving the furniture being recalled.

The recall includes Ikea’s “Malm” line, said the government agency, which published a detailed list of items, which were made between 1999 and 2016 and include imports.

In a statement on its website, Ikea apologised to Chinese consumers. AFP