Macau Business Daily July 28, 2016

Three more land grants declared expired Land Page 5

Thursday, July 28 2016 Year V Nr. 1096 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Joanne Kuai

CE Office receives letter from legal sector regarding Land Law Page 3

Stimulus measures

Japan’s prime minister announces billion dollar injection to revive the economy Page 12

Official data

Chinese authorities show positive trend in industrial profits Page 8

Longstanding legal battle

Promising prospects

LVS The Nevada Supreme Court has reversed a US$70 mln judgment against Las Vegas Sands Corp. in connection with its efforts to secure a gambling license in Macau.

The court said there was insufficient evidence to justify the amount of the judgment in favour of Richard Suen and the Round Square Co., which helped Sands get its license from Chinese officials. But it indicated the US$1 mln Sands wanted to pay wasn’t viable either. Page 7

Fear of the curb

Stock markets China’s shares plunged yesterday, with a gauge of smaller companies sinking 5.5 per cent, as people familiar with the matter said the China Banking Regulatory Commission is discussing stricter curbs on wealth-management products. A measure of the Shanghai Composite Index’s shortterm volatility doubled, after sinking to a two-year low on Monday. Pages 8 & 9

Administration

Stable unemployment rate

The unemployment rate in the SAR hovered at 1.9 per cent for the second quarter of the year.

The total labour force in the city amounted to some 397,800, while the general median monthly employment earnings of the local labour market stood at MOP15,000 (US$1,875).

HK HSI July 27, 2016 22,218.99 +89.26 (+0.40%) Best Performers Belle International Hold-

+2.57%

PetroChina Co Ltd

+1.70%

China Life Insurance Co

+1.69%

Sands China Ltd

+1.66%

China Mengniu Dairy Co

+1.53%

Tencent Holdings Ltd

+1.45%

Bank of China Ltd

+1.25%

China Unicom Hong Kong

+1.22%

CK Hutchison Holdings Ltd

+1.16%

Bank of East Asia Ltd/The

+1.10%

Worst Performers China Resources Land Ltd CLP Holdings Ltd

-2.12% -2.03%

Galaxy Entertainment

-1.52%

Sino Land Co Ltd

-1.40%

Wharf Holdings Ltd/The

-1.12%

China Overseas Land &

-0.95%

China Construction Bank

-0.75%

Tingyi Cayman Islands

-0.58%

Cheung Kong Infrastruc-

-0.51%

New World Development

-0.45%

28° 32° 28° 33° 26° 34° 28° 32° 27° 32° Today

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Labour Page 3

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MOn

Source: Bloomberg

Chief Executive Chui Sai On reiterated the priority to use state-owned land for public housing, facilities for public institutions and infrastructure.

He was answering legislators’ questions on land policy, the education sector and the local economy, among others at yesterday’s plenary session of the Legislative Assembly. Page 2

Source: AccuWeather

Politics

www.macaubusinessdaily.com

2 Business Daily Thursday, July 28 2016

Macau

Society Chief Executive addresses questions from the Legislative Assembly

Questions demand answers Gov’t policies on land, help pledged to local SMEs, and cultivation of local talent were among the hottest topics discussed at yesterday’s Legislative Assembly.

Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

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t’s not easy to operate an SME (small and medium enterprise) in Macau.” So began the question and answer session at the Legislative Assembly with Chief Executive Chui Sai On yesterday.

The question, posed by Legislator Jose Chui Sai Peng, encompassed a number of issues brought up by the legislators during the three-hour session, and answered in part by the Chief Executive, including topics relating to local businesses, employment and non-resident workers, career advancement opportunities, and housing and infrastructure.

SMEs

Legislator Chui Sai Peng’s inquiry as to what policies are being implemented in the SAR to protect the rights of citizens running their own businesses and offer them the chance to compete in an international market dominated by international brands, brought an unexpected response from the Chief Executive.

“SMEs must face many difficulties, not only in Macau […] in Las Vegas in the 1970s over 70 per cent of the SMEs closed due to facing [financial] difficulties,” declared the Chief Executive.

“Independent of the government, for these businesses there are risks.

The government cannot ensure their survival,” stated the CE, commenting that those opening their own businesses must realise the risks

and be prepared to deal with the consequences.

“Aside from helping the youth, we need to inform them, support them […] this market is at a stage of elevated competition and the focus of businesses here is directed at certain sectors,” explained the CE, “we need to do more to inform them that creating companies is not the only way and does not only result in success, there can be consequences.”

The Chief Executive further reinforced the idea of residents fending for themselves in response to Legislator Lau Veng Seng’s enquiry, noting that: “the opportunities have to be seized by each one […] we’ve created a large number of opportunities […] people have to help themselves.”

The official noted that education – an essential factor in improving the workforce’s upward mobility and professed to be the government’s focus – is comprehensive through primary and secondary, and cryptically commented that higher education “could be free – in some aspects,” without providing any details.

Employment

“After finishing primary, secondary and complimentary education, then finding a job is already a path that any person goes through over the course of their life,” commented the Chief Executive, still responding to Lau Veng Seng’s enquiry. Responding to an enquiry by Legislator Kou Hoi In, the CE noted the weight of the gaming sector in the development of the economy and assured that upward mobility was the government’s priority.

“We hope to create opportunities for Macau residents […] aside from croupiers, to middle and upper management […],” stated the CE. When further questioned on the issue by Legislator Kwan Tsui Hang, as well as in relation to non-resident workers, the CE clarified how these local residents were to move up the ladder.

“We will implement the mechanism of dismissal of imported foreign labor,” he said, noting that: “the government has always observed the import of foreign workers as only to compliment the local workforce,” immediately afterwards saying: “together with the police we have carried out inspections and investigations to combat illegal workers.”

This statement, when examined in the context of the construction projects in Cotai employing a large number of foreign skilled workers, as well as being the focus of subsequent police raids to catch illegal labour, was sharply contrasted by the CE’s following statements regarding the soon-to-open projects in Cotai: “as the facilities are finalized, we will create even more opportunities for work for local workers as well as career ascension conditions.”

Reclaiming land

An increasing population and further chances for advancement being seen in the workplace will lead to a growing middle class, noted Legislator Song Pek Kei, regaling that: “the middle class continues to be the most put-upon class […] the government is fighting the symptoms and not the disease.”

The Chief Executive’s response largely avoided specifying any concrete measures for urban development, only noting that “for the sustainable development of Macau and to create a beautiful […] house for Macau [we need] to define the principal ideas

Chief Executive Chui Sai On took legislators’ questions on Government policy and social issues during yesterday’s plenary session of the Legislative Assembly.

behind the urban development,” he said, adding that “this year we’ll start the work on the master plan,” as the first step, followed by “overall implementation.”

This is due to the fact that “before there wasn’t an overall plan, there were segmented plans, now we have a master plan,” the timeline for which “we hope to conclude during the remaining three years of my mandate,” the Chief Executive announced.

However, key elements such as the disruption in the sand supply for the reclaimed land Zone A – which according to the Chief Executive is “three quarters complete,” - have caused problems. “We did not expect this delay. We hope that the problem will be resolved as quickly as possible.”

When confronted with questions regarding the lack of land, the CE was of the opinion that “the legislators can relax since we have enough land,” referring to “28,000 units” of housing to be constructed on the same Zone A, which has yet to resolve the sand issue. Yet in regards to the type of housing, the government will “be more cautious in the types of units being constructed – T2 or T3,” noted the CE. However, for reclaimed land, the lead politician’s opinion is clear: “the priority is for public housing, facilities for public institutions and basic infrastructure […], we hope to have land reserves.”

Infrastructure

Despite the lack of resources, a continual push for increased tourism was key to the Chief Executives responses to enquiries such as that from Legislator Chan Chak Mou on the Hong Kong-Zhuhai-Macau bridge.

“We hope more tourists can come, stay and consume more,” commented the CE. In addition the current efforts to strengthen relationships with neighboring regions will be “even more intensified,” upon completion of the project, with the result: “increasing the opportunities for development in commercial and financial sectors.”

Regarding issues: “elevating our competitiveness […] we must improve our hardware and software areas,” said the CE, noting that in the initial phases “we will encounter unpredicted situations – such as the circulation of goods and people,” and that “it will create opportunities for Macau as well as complications.”

During the question and answer session, the CE also mentioned plans to increase the number of sporting events to increase the city’s visibility, and assured Legislator Gabriel Tong that the annulment of contracts originating at the Iec Long Firecracker factory land swap “won’t affect the property owners”. He also noted the gradual push to create more online services so as to increase the efficiency of public servants and develop tourism opportunities for the territorial waters.

Business Daily Thursday, July 28 2016 3

Macau Employment

General earnings of local workers unchanged at MOP15,000

Unemployment rate remains at 1.9 pct in Q2 In the previous quarter, nearly 10 per cent of the unemployed population were new labour market entrants searching for their first job.

Kam Leong kamleong@macaubusinessdaily.com

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he unemployment rate of the Special Administrative Region hovered at 1.9 per cent for the second quarter of the year, while median monthly earnings of local workers also remained unchanged, the latest data released yesterday by the Statistics and Census Service (DSEC) shows.

Between April and June, the total labour force in the city amounted to some 397,800, up slightly by 0.4 per cent compared to 396,200 during the March to May period.

M ea n w hi l e, th e l ab o u r f o rc e participation rate jumped slightly by 0.3 percentage points periodto-period, to 72.3 per cent for the three months.

Of the total labour force, the employed population accounted for 390,400, an increase of 0.5 per cent period-to-period

from 396,200, while the unemployed population went down by 2.8 per cent to 7,400, compared to 7,600 for the previous period.

According to the DSEC, new labour force entrants searching for their first jobs accounted for nine per cent of the unemployed population, up by 3.9 percentage points.

Median monthly income

For the three months, the general median monthly employment earnings for the entire local labour m a r k e t st o o d at M O P 15 , 0 0 0 (US$1,875), while the median amount for local residents only was MOP19,000. Both amounts remained the same compared to the first quarter of the year.

397,800 Total labour force in the city in Q2

Politics

CE Office receives letter from legal sector regarding Land Law The Chief Executive’s Office has received a letter – signed by some members of the legal sector – regarding the current Land Law, “and commenting on a proposal – by a member of the Legislative Assembly – for an interpretation of the current Land Law,” reads a statement issued by the Chief Executive’s Office. The letter includes a total of 88 signatures, some of them from lawyers.

“At this stage, the Government has no plans to propose further amendments to the Land Law. The Government has always closely adhered – since their respective enactment – to the Land Law, the Cultural Heritage Law and the Urban Planning Law, in relation to planning

and development matters,” reads the statement.

Earlier this month, legislator Gabriel Tong Io Cheng submitted a draft of an “interpretative law” on the Land Law’s clauses regulating provisional land concessions that he wanted the AL to debate and vote upon.

The president of the Legislative Assembly, Ho Iat Seng told reporters previously that because of the draft’s extraordinary nature, Tong has to ask for the Chief Executive’s permission for the draft to be submitted, as mandated in the Basic Law. However, Tong refused to do so and insisted he was only asking for an interpretation of the law, according to Ho Iat Seng.

The DSEC also noted that the median monthly earnings of workers in gaming and junket activities reached MOP19,000 during the quarter, while that of those working for the construction field amounted to MOP15,000.

During the three months, some 83,600 local workers were employed in gaming and junket activities, up by 0.7 per cent compared to 83,100 for the April to May period.

Nevertheless, the construction industry saw its number of workers go down by 0.9 per cent period-toperiod from 47,500 to 47,100, while the number of workers employed in the wholesale and retail trade industry remained unchanged at 42,400.

Sectors

In terms of proportions, those engaged in the recreational, cultural, gaming and other services accounted for 24.5 per cent of the total employed population, followed by hotels, restaurants and similar activities, and construction, which comprised 14.1 per cent and 12.1 per cent of the total, respectively.

Meanwhile, some 10.9 per cent of the employed population were working in the wholesale and retail trade industry in the three-month period, while 7.9 per cent and 7.1 per cent were working in real estate and business activities, and the public administration and social security field, respectively.

Compared to the first quarter of the year, the total employed population in the three months increased by 1,400, with those aged 35 to 44 rising by 1,200, according to the DSEC. In particular, employment in gaming and junket activities rose by 3,000, while that in restaurants and similar activities dropped by 1,500.

4 Business Daily Thursday, July 28 2016

Macau Opinion

Ashley Sutherland-Winch Image Boost Last week, Macau’s Gaming Inspection and Coordination Bureau issued an order to the Macao (Yut Yuen) Canidrome Co Ltd; it must either relocate or shut its operations within two years.

There has been exhaustive news coverage over the past months regarding the fate of the greyhound race track, and I fear that there will be more to come. The Bureau said it had carried out an “exhaustive analysis” of the impact the Canidrome had in helping “diversify the city’s gaming industry” and “position Macau as a world centre of tourism and leisure” while taking into consideration the “social expectations”, but there was no elaboration on how social expectations would be defined.

Two years is a long time in dog years, and in a time when negative press can land in each 24-hour news cycle, this decision term could be lengthy.

In two long years, I wonder what the continued impact on our city will be considering the immense amount of “bad press” we are getting right now. Animal rights groups and celebrities world-wide rally against the track and their voices only grow louder. Is it possible that they could take steps to improve their reputation immediately?

With the recent decision to ban greyhound racing in both New South Wales and the Australian Capital Territory, the spotlight on Macau is growing brighter.

The Canidrome is in need of a huge public relations revamp to calm the public and ensure better treatment of the greyhounds.

At a time when we are working to re-brand our city, the Canidrome could use some help. The Hong Kong Jockey Club (HKJC) is now engaging the 20 to 30 something crowd with “Happy Wednesdays”, with the slogan “I’m a happy racing fan.” The HKJC offers staff who are on-hand to teach the new racing fans how to place bets; they discuss the horses, and even offer virtual reality headsets at the racecourse to take the new generation behind the scenes.

The virtual reality tours show the horse stables to give an up close look at the horses. It may not be a great time for the Canidrome to invest in such high tech marketing, but they could demonstrate to the public that they are making strides to improve their image and visually prove that the dogs are being treated well.

For now, we wait, but an image boost is needed to help the track and Macau. Otherwise, two years is a very long time for results and sad for the “racers” that do not meet the tracks’ expectations.

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

Property

Earnings Property denies illegal fund-raising involvement

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eal estate firm Earnings Property Investment Ltd denied that it was involved in any illegal fund-raising schemes, after it closed two of its branches in the city, Chineselanguage media outlet MASTV reported.

According to the news report on Tuesday, the firm recently shut down its branches located in Areia Preta and in Freguesia de São Lourenço on the Peninsula. The closures mean that the company’s business is now left with only its head office in NAPE and another branch in Fai Chi Kei.

“We understood [the rumors of us running illegal-fund raising schemes] as I am close to Lao Meng Tong, but our businesses are run separately.

[The closures] were due to the general bad environment of Macau,” the company’s executive director, Pak Meng Fan, told MASTV. Lao Meng Tong, the president of Macau Group, is currently being detained by the authorities, along with four other suspects, for allegedly running an illegal fundraising scheme via the Group’s real estate firm Building Agency.

The Judiciary Police (PJ) said last

Finance

AMCM revoked authorisation for 17 offshore companies in Macau in the first half of 2016 The Monetary Authority of Macau (AMCM) revoked authorisation for offshore commercial and auxiliary services in Macau of 17 offshore companies in the first half of 2016, according to an Official Gazette dispatch.

The revoking of the authorisation for offshore activities implies the dissolution and winding up of the offshore trust management institution, according to the AMCM offshore regulations.

In the first half of the year, one new offshore financial institution was granted permission to practice offshore activities in Macau, namely Sinometal Macao Commercial

Offshore Limited.

There where also six offshore institutions that were authorised to change their entities’ names, with two offshore financial institutions being authorised to continue operating in the MSAR without alterations: the offshore Macau branches of Portuguese banks Banco BPI,S.A and Caixa Geral de Depósitos, S.A. Business Daily questioned the AMCM and Macau Trade and Investment Promotion Institute (IPIM), which manages offshore services in Macau, as to the reasons for the offshore authorisation cancellations, but no response had been received by the time the story went to press. N.M.

Government

Macao Foundation awards MOP211.5 mln in Q2 The Macao Foundation awarded a total of MOP211.5 million (US$26.4 million) between April and June of 2016, according to an Official Gazette dispatch.

Of this total, the biggest amount was awarded to the Kiang Wu Hospital Charitable Association, with an amount of MOP38.5 million granted as financial support for the acquisition of medical and computer equipment and for reconstruction works.

The second biggest subsidy, MOP36 million, was awarded to the City University of Macau as financial support to fund studies

and publications, academic teaching activities, support equipment and grants to students.

Other entities that benefited from financial support include the Women’s General Association, with MOP12 million, the Foundation of the Macau University of Science and Technology, with MOP11 million, and the Union of Food Establishments and Macau Drinks with MOP10 million, among others.

In the first three months of 2016 a total of MOP300 million was awarded, according to Official Gazette releases.

N.M.

week that the case involved at least HK$110.4 million and 61 victims.

Mr. Pak noted on Tuesday that the company’s financial status is normal, adding the firm is now shifting its business focus to the Mainland.

The news report quoted a PJ spokesperson as saying that the security body would need to carry out further investigations to check whether there are any reports related to the investment firm.

Earlier this month, the PJ also busted another illegal capital collection scheme allegedly run by investment company Glory Sky International Holdings Group, which involved at least MOP110 million (US$13.8 million) and 126 victims.

The official website of Earnings Property indicates that the firm was established in 2010. The company is a subsidiary of Earnings International Group Holdings Ltd, which was set up last September and is primarily engaged in investment management.

Education

Science Fund disburses MOP9.7 mln in Q2 The Science and Technology Development Fund (FDCT) handed out a total of MOP9.7 million (US$1.2 million) in financial support between April and June, according to an Official Gazette release.

Of that amount, MOP5.3 million was dispensed as financial support for science and technology projects, and MOP4.3 million for education to promote science.

The University of Macau received MOP5.4 million, the biggest amount of financial support from the FDCT, representing 56 per cent of the total support handed out by the fund.

Subsidies to the University of Macau included MOP500,000 for the study of a multifunctional nano-particulate drug delivery system for active ingredients in Chinese medicine targeted to cure liver cancer, and MOP191,440 for a new energy vehicle technology summer camp, among other projects.

In the first six months of 2016, the FDCT handed out a total of MOP24.9 million in science and technology subsidies. In the whole year of 2014, the fund gave out over MOP340 million, according to the FDCT head in a March interview. N.M.

Business Daily Thursday, July 28 2016 5

Macau Land

Three more land grants declared expired

Undecided future Government intends to build public housing on La Scala plot, but local courts are still hearing the developer’s appeal.

Annie Lao annie.lao@macaubusinessdaily.com

T

he land grant of eight land parcels located near Estrada da Ponta da Cabrita in Taipa has been declared expired, as they remained undeveloped when their temporary land concession expired on December 13, 2015, according to a dispatch published yesterday in the Macau Government’s Official Gazette, signed

by Secretary for Transport and Public Works Raimundo Arrais do Rosário last week.

The eight parcels opposite the Macau International Airport were adjacent to five plots that were taken back by the government earlier this year. Together, the plots comprise the site that the high-end residence project La Scala was to have been built on. The local land law mandates that such land concessions, with a 25-year term, are only effective once the property project of the site is completed.

In 2006, Moon Ocean Ltd., controlled by Hong Kong billionaire Joseph Lau Luen Hung and his partner Steven Lo Kit Sing, was approved by the SAR Government to acquire the five plots for MOP1.37 billion (US$162 million). The company was granted the eight land parcels in 2011, which were combined with the five plots into a single parcel of 82,711 square metres for the La Scala project.

Following the corruption case of the city’s former Secretary for Transport and Public Works, Ao Man Long, the Macau Government announced in 2012 and 2013 that Moon Ocean’s acquisition of the five plots and the granted land concession for the eight parcels was invalid.

While the Court of Final Appeal has ruled against Moon Ocean’s appeal of the dispatch that deemed the five land plot grants

void, the developer’s appeal of the dispatch of the combined parcel is still pending a ruling, suggesting lawsuits between the company and the local government are still ongoing. The government indicated earlier that, once taken back, the plot could be developed i n t o m o r e tha n 4 , 000 p u b l i c housing units.

More land

Another two land grants were declared expired in yesterday’s official gazette. One plot of land, designated as area ‘G’ occupying an area of 4,690 square meters, located in the reclamation area of Pac On in Tapia

has also been reclaimed. The area was proposed for the construction of a one-storey industrial building by developer Interbloc - Materiais de Construção (Macau), Ltd but its land grant expired in October 2012, according to the dispatch.

Furthermore, another plot of land located in Coloane was also reclaimed by the government due to the expiry of a temporary lease before any completion of the project.

The reclaimed land, covering an area of 10,154 square meters and located on the street of Nossa Sra. de Ka Ho in Coloane, was supposed to have been the site for a steelcasting factory, however the lease expired in March 2014. According to the dispatch, the developer was Sociedade de Investimento e Indústria Sun Fat, Limitada.

6 Business Daily Thursday, July 28 2016

Macau In Brief Subsidy

IACM spent MOP4.35 mln in support of private entities The Civic and Municipal Affairs Bureau (IACM) allocated total funding of MOP4.35 million (US$540,000) to 47 private non-profit organizations in the city for the second quarter of this year, approved by the Chief Executive, according to a dispatch signed by vice-chairman of the Administration Committee of IACM, Lei Wai Nong and published in the Official Gazette yesterday.

The Macao Federation of Trade Unions received the largest funding of MOP2.9 million, representing 67 per cent of the total funding distributed by IACM. The General Union of Neighbours Association of Macau received the second largest funding of MOP 816,739, representing 19 per cent of the total distributed by IACM. And the Taipa Residents Association received MOP110,000 from IACM, making it the third largest recipient.

Retail LVMH profit meets estimates

Troubled SARs DFS first-half revenues hit by troubled Macau and Hong Kong markets.

L

VMH Moet Hennessy Louis Vuitton SE, the world’s b i g g e s t l u x u r y -g o o d s m a k e r, r e p o rt e d fi rsthalf profits in line with analyst estimates, as stronger demand for its champagnes and cognacs offset lower tourism flows to France.

First-half profit from recurring operations remained steady at 2.96 billion euros (US$3.25 billion), the Paris-based company said Tuesday. Analysts expected 2.92 billion euros. Sales rose four per cent on an organic basis in the second quarter, compared to the consensus estimate of 2.9 per cent, an acceleration from the first quarter’s pace.

However, DFS Group continued to face difficult market conditions

in Asia during the first half of 2016, parent company LVMH said. LVMH does not separate the performance of DFS from that of its wider Selective Retailing division, which also includes Starboard Cruise Services and domestic perfumery chain Sephora, as well as Franck et Fils, La Grande Epicerie de Paris and Le Bon Marché Rive Gauche.

But the group noted: “DFS continues to face challenges in Asia due to the difficult environment for tourism, particularly in Macau and Hong Kong.”

On a more positive note, DSF group added: “Its geographic expansion continues with the opening of a new T Galleria in Siem Reap in Cambodia and another will open in the coming months in Venice, Italy.”

Poor SARs market

U.K. media Moodie Davitt Report noted of last year: “DFS profits took a buffeting in Macau and, especially, the hugely difficult Hong Kong market”. Moodie Davitt Report wrote: “Macau’s gambling revenue is the platform on which the retailer’s high-end travel retail is built. The key indicator fell for a second straight year as the corruption crackdown deterred high rollers from the gaming hub.

With revenue down 34.3 per cent to a five-year low (it fell just 2.6 per cent in 2014), the knock-on effect to retail was severe.”

Citi analysts said that the French group may sell its duty-free cruise line business Miami Cruise, and may not renew the DFS Hong Kong airport’s concession at the end of next year.

“DFS Hong Kong has suffered from significant revenue and margin pressures over the past couple of years owing to the structural changes of the Hong Kong luxury retail landscape,” Citi said.

Delegation

Gov’t extends Macauslot delegate’s term for one year The government has extended the appointment of its delegate to MacauslotSociedade de Lotarias e Apostas Mútuas de Macau Lda, Ao Ieong Kit, for one more year until August 3, 2017, according to a dispatch by the Chief Executive Fernando Chui Sai On. The representative will receive MOP6,600 (US$825) per month from the position during this term. The company, founded by gaming tycoon Stanley Ho Hung Sun, holds a local monopoly for non-racing sports betting in the city. The company’s current sports betting concession will only expire on June 5, 2021.

Administration

Correctional Services Bureau head quits

The director of the Correctional Services Bureau, Lee Kam Cheong, is to step down from the position when his current term expires this coming Sunday. According to a press release from the Secretariat for Security yesterday, the Bureau director expressed his intention to leave the leading position last December due to personal reasons, but he will stay working in the Bureau to assist the Secretariat and to follow up the New Prison project, the announcement said. Mr. Lee had headed the Macau Prison since August 2000 until the body was merged with the Youth Correctional Institution at the beginning of this year.

The deputy director of the Bureau, Loi Kam Wan, will be the acting head of the body until a new official director is appointed.

Tourism

MGTO launches tracking study on family hostels today The Macao Government Tourism Office (MGTO) today launched a tracking study into the viability of establishing family hostels in the territory, which aims to determine local residents’ current attitudes towards the issue.

According to an announcement from MGTO yesterday, a questionnaire survey will be conducted to collect public opinions until August 29,

including an online questionnaire and street interviews. The study will target residents who are over 18 years of age and those who have lived in the Special Administrative Region for the past 12 months.

In 2014, MGTO conducted its first official study into the feasibility of family hostels in the city, with the results showing that over 60 per cent of the 2,243 interviewees

supported the idea of introducing such hostel operations to the Special Administrative Region.

But the findings at that time also indicated that only a low proportion of the surveyed residents were in favour of the operations being located in their own community districts, as they were concerned about public security, hygiene conditions, traffic, housing prices and other issues.

MGTO thus concluded at that time that there was no general consensus within the community on whether family hostels should be set up in Macau. K.L.

Business Daily Thursday, July 28 2016 7

Macau Gaming Hong Kong businessman Richard Suen’s demands for a US$70 mln payment by Las Vegas Sands again overturned

Chinese meetings A U.S. Court has ruled that meetings between Las Vegas Sands and Chinese government officials helped the casino company secure a gaming concession in Macau.

Nelson Moura nelson.moura@macaubusinessdaily.com

T

he Nevada Supreme Court has ruled that meetings between Las Vegas Sands Corp. (LVS) and Chinese government officials helped the casino company secure a gaming concession in Macau, according to a July 22 ruling.

However, for the second time, the court has reversed a decision to force casino magnate Sheldon Adelson’s company to pay Hong Kong businessman Richard Suen US$70 million (MOP559 million).

The ruling came after the U.S. court granted a rehearing in the 12-year legal battle between LVS and Suen.

Suen claims it was through his efforts and connections with Beijing officials that the gaming operator obtained its gaming license in Macau.

Nice connections

According to the filing in the Nevada Supreme Court, Round Square, a company registered in Hong Kong and partially owned by Suen, engaged with LVS offering assistance in obtaining a gaming concession, and arranged meetings with high ranking Beijing officials.

‘Suen and his associates set up meetings in Beijing between Sheldon Adelson, LVS’s Chairman and Chief Executive Officer; William Weidner,

LVS’s former President; and highranking officials from the PRC. Eventually, Macau granted LVS a sub-concession that permitted it to build, finance, and operate casinos,' the court’s post-judgement order stated.

During the court hearings, LVS’ former President William Weidner stated that he wanted to benefit from Suen’s connections and meet with China’s Vice Premier Qian Qichen.

The former LVS president also testified that the meetings were valuable for LVS to learn about the Chinese and Macau governments, while making the group appear helpful with China’s bid to host the 2008 Olympics in Beijing.

No pay back

Las Vegas Sands representatives have previously argued – among other reasons to dismiss the claim – that the case should be overturned due to the simple fact that the firm was never granted an official gaming concession by the Macau Government in the first place, but instead received a sub-concession.

In March this year, the court stated ‘insufficient evidence’ to support a May 2013 jury verdict in favour of Suen, and ordered a new trial to determine damages.

Although the Nevada Supreme Court has now sided with Suen, who claimed the arranged meetings were vital in order to arrange the license, the court maintained the ruling that LVS is not mandated to pay the businessman US$70 million, claiming there wasn’t substantial evidence to support the claim that Round Square’s services amounted to that value.

The court ruling stated ‘the contract price and the reasonable value of services rendered are two separate things, and although the contract price may accurately capture the reasonable value of services rendered, it may also depart from it substantially.’

The court also indicated that the US$1 million Sands wanted to pay wasn’t viable either.

8 Business Daily Thursday, July 28 2016

Greater China Secondary sector data

Industrial profits rise but investment challenges grow The figures come as investment cools and growth in home prices eased.

P

rofits earned by China’s industrial firms grew at their fastest pace in three months in June, indicating government spending is supporting the corporate sector though uneven growth and soft investment pose headwinds.

Profits in June rose 5.1 per cent to 616.31 billion yuan (US$92.40 billion),

the National Bureau of Statistics (NBS) said yesterday, the fastest growth since March.

“The bottom line is that the worst has gone in terms of industrial profits,” said Raymond Yeung, an economist at ANZ in Hong Kong.

He said the improvement in China’s upstream prices, as seen in the recent

moderation in producer price index declines, points to a pickup in profits in the second half of the year.

Total profits for the first half stood at 3.0 trillion yuan, up 6.2 per cent from the same period a year ago and compared with a 6.4 per cent gain in the January to May period.

Key Points June industrial profits +5.1 pct y/y, May +3.7 pct Fastest growth in three months 2016 H1 profits +6.2 pct y/y Challenges include uneven growth, soft investment “June profits accelerated from May but unfavourable conditions for companies continue to exist,” NBS official He Ping said in a statement accompanying the data.

He added increased profits were spread unevenly across industries, with profit gains focused on just a few industries including electronics, steel and oil processing.

Profits in the mining sector fell 83.6 per cent in the first half from a year earlier.

Firms faced further difficulties accessing capital in June, he added.

The data, which covers large enterprises with annual revenues of at least 20 million yuan, come as investment cools and growth in home prices eased.

China’s economy expanded 6.7 per cent in the second quarter, but the slightly better than estimated growth rate comes amid a dangerous rise in both debt costs and inefficient loans to state firms. Private investment remains weak, with high funding costs becoming a major obstacle for private enterprises, according to the state planner.

Across several industrial sectors, lukewarm demand and a campaign aimed at reducing surplus has taken a toll on some of the largest state-owned firms.

Sinopec, the country’s largest refiner, last week said crude oil production fell 11.4 per cent on year. Meanwhile, China National Building Material co. said it expects a substantial drop in profits in the first half due to a fall in cement prices.

Liabilities at China’s industrial firms rose 4.6 per cent in June from the same point last year, easing from 4.9 per cent growth at the end of May. On Monday, a senior official from the state planner said China should increase government investment and not compete with private investment.

Profits at China’s state firms fell 8.5 per cent in the first half, the Ministry of Finance said on Monday. Reuters

National markets

Stocks tumble on report of wealth management product curb The China Securities Regulatory Commission this month issued guidelines curbing the use of leverage by structured asset management plans.

Chinese stocks slumped the most in six weeks as a report about possible curbs on wealth management products (WMPs) added to concern that regulatory efforts to reduce risks in the financial system will limit flows into equities.

The ChiNext Index of small-company shares sank 5.5 per cent, the most since June 13, while the Shanghai Composite Index fell 1.9 per cent. The Shenzhen Composite Index lost 4.5 per cent.

Chi na’s ba nki ng regulator is considering tightening curbs on the nation’s US$3.6 trillion market for WMPs, the 21st Century Business Herald reported, citing people it didn’t identify.

Authorities may set a limit on how much WMPs can invest in equities and “non-standard assets” such as loans, the report said.

“There’s an obvious trend that the regulators want to strengthen market monitoring and lower the use of leverage in financial markets to control risks,” said Dai Ming, a fund manager at Hengsheng Asset Management Co. “Under such circumstances, ChiNext is especially vulnerable, given its high valuations and the recent gains.”

The China Banking Regulatory Commission met with some lenders this month on the rule revision and a final version hasn’t been drafted, the 21st Century Business Herald report said. The CBRC didn’t immediately reply to a fax seeking comment.

Closer attention

China’s watchdogs have signalled they’re paying closer attention to the fund managers and brokerages who funnel the nation’s household savings into investments from stocks to bonds and derivatives. The China Securities Regulatory Commission this month issued guidelines curbing the use of leverage by structured asset management plans. Li Chao, vice chairman of the regulator, told a gathering of firms in the northeastern city of Harbin last week to do better due diligence on prospective clients when arranging initial public offerings, secondary share sales and bond issues, people familiar with the matter said.

The outstanding value of WMPs rose to 23.5 trillion yuan (US$3.5 trillion), or 35 per cent of China’s

Business Daily Thursday, July 28 2016 9

Greater China Moody’s estimates

In Brief

Shadow banking assets grew 30 per cent in 2015 Top insurers have been partly fuelled by a splurge on shadow banking-linked products.

Shadow banking activity in China has expanded further and now accounts for nearly a third of the total banking sector assets, raising financial risks in the world’s second-largest economy, rating agency Moody’s Investor Service said yesterday.

Shadow banking assets in China increased by 30 per cent last year, reaching almost 54 trillion yuan (US$8.10 trillion), according to Moody’s estimates.

That is equivalent to about 78 per cent of China’s total economic output and 27.6 per cent of its banking assets.

In 2011, shadow banking products

accounted for 17.2 per cent of total banking assets, and the share grew to 24.3 per cent in 2014.

China’s crackdown on risky practices in the thinly regulated shadow banking system has taken on fresh urgency amid a growing number of corporate defaults, and as policymakers appear worried about the risks of relying on too much debt-fuelled stimulus.

Despite this, shadow banking’s share in bank loans and total bank assets has expanded rapidly, as sectors and firms reeling from overcapacity and poor credit profiles turn to other sources of

funding, and investors hunt for higher yields.

“The rise in overall leverage and further expansion of shadow banking activity are pushing up financial risks,” said the Moody’s report, adding the growth highlights “spillover risks” to the financial system due to its interconnectedness.

Years of breakneck growth for China’s top insurers have been partly fuelled by a splurge on shadow banking-linked products that could punch multi-billion-dollar holes in their balance sheets, a Reuters analysis showed.

Mid-tier Chinese banks are also increasingly using complex instruments to make new loans and restructure existing loans that are then shown as low-risk investments on balance sheets, masking the scale and risks of the slowing economy.

The takeover tussle embroiling top Chinese developer China Vanke has also showed how local banks are increasingly exposed to highly volatile domestic stock markets through shadow lending products.

“The increasing size of the shadow banking system means that during a disorderly contraction, banks could have difficulty replacing shadow banking credit, leaving borrowers who rely on such financing at risk of a credit crunch,” Moody’s said. Reuters

Technology industry

bs gross domestic product, at the end of 2015 from 7.1 trillion yuan three years earlier, according to the China Central Depository & Clearing Co. “The government thinks tighter r e g u l at i o n i s n e e d e d b e c a u s e investments from WMPs helped fuel the stocks bubble last year and then contributed to the crash,” said Larry Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong. “Some of them are just like black boxes, and neither the government nor the investors know for sure which products the banks invest the money in.”

Beijing Shiji Information Technology Co. plunged almost 10 per cent, leading losses in the 100-member ChiNext Index where 94 shares fell. The gauge jumped 21 per cent from its February 29 low through Tuesday’s close. The Shanghai Composite and the Shenzhen Composite are both down more than 15 per cent this year.

Trading volumes in Shanghai were 53 per cent higher than the 30-day average, while in Shenzhen, they were at 31 per cent. The ChiNext index trades at more than 31 times its projected 12-month earnings, compared with 12.8 times for the Shanghai Composite.

‘Drastic reaction’

“It’s hard to see an immediate impact on the markets from the rule,” said Wei Hou, a Hong Kong-based analyst at Sanford C. Bernstein & Co. “This type of drastic reaction is a bit excessive.

The market may have needed some correction as valuation remains stretched if you look at fundamentals.

It could be just one of the excuses for funds to exit the market now.”

The Shenzhen Stock Exchange will demand better disclosure and curb speculation in stocks with “hot topics” such as virtual reality and artificial intelligence, according to a report in the Securities Daily.

“The market is reacting to news of rules on wealth management products,” said Hao Hong, chief strategist at Bocom International Holdings Co. in Hong Kong. “Banking regulators plan to limit the use of funds raised through such products. The measures are aimed at reducing risks at banks.” Bloomberg News

Tsinghua leads creation of domestic chip giant The company is just one of several affiliates of state-backed Tsinghua University.

Tsinghua Unigroup Ltd. merged its memory chip-making operations with Chinese government-run XMC’s, creating a US$2.8 billion company to spearhead the country’s effort to become a global semiconductor player.

The company is folding XMC, also known as Wuhan Xinxin Semiconductor Manufacturing Corp., into its growing portfolio of assets and consolidating their production capacity, Tsinghua’s billionaire chairman Zhao Weiguo said via e-mail. The newly merged entity is called Changjiang Storage Co. and has a registered capital of 18.9 billion yuan (US$2.8 billion), according to a website operated by the State Administration for Industry and Commerce.

Changjiang Storage will count among its shareholders the 138 billion-yuan National Integrated Circuit Industry Investment Fund Co., whose mandate is the development of a domestic chip sector and in which Tsinghua is an investor. Other shareholders include the provincial governments of Wuhan and Hubei, though the website didn’t list their stakes.

Zhao will become chairman of the new entity, he said. Tsinghua, an affiliate of the prestigious Beijing university of the same name, harbours ambitions of becoming a global player in semiconductors. It has pursued deals around the globe as the standard-bearer of China’s effort to build a local industry giant and wean the country off foreign technology. Its core business of semiconductors is seen by the nation’s political leadership as vital to national security.

The company is just one of several affiliates of state-backed Tsinghua University, the school that’s produced Chinese leaders from President Xi Jinping to his predecessor Hu Jintao. Other arms include Tsinghua Unisplendour Co. and Tsinghua Tongfang Co. Together they’ve spearheaded a spate of high-profile acquisitions in recent years. Unigroup bought RDA Microelectronics Inc. and Spreadtrum Communications Inc., and came close to a potential US$23 billion bid for Micron

Real estate

Beijing’s property sales surge Property sales in Beijing rose 64.8 per cent in 2015, boosted by more favourable housing policies, according to a real estate white paper released by the city’s government.

Increased government stimulus sparked a sharp reversal in the market after sales volumes fell 30 per cent in 2014, the white paper said.

The benchmark interest rate for housing loans also dropped to its lower level in almost a decade, after several interest rate cuts, the paper noted.

“The country’s housing credit and tax policies have been at their most favourable levels in recent years,” the paper said.

Securities

Regulator tightens private equity placement rules China’s securities regulator has asked firms to curb the use of borrowed money when participating in secondary private equity placements, the China Securities Journal reported yesterday, citing anonymous investment banking sources. In a recent training session given by the China Securities Regulatory Commission (CSRC), firms were given “window guidance” that any firm owning five per cent or more of a company should not use money raised through wealth management platforms or other third party fundraising platforms to subscribe. In addition, CSRC indicated that firms should limit the use of banking facilities to their intended use.

Financing

‘The newly merged entity is called Changjiang Storage Co. and has a registered capital of 18.9 billion yuan’

China Film to fund with IPO China Film Co., the nation’s largest movie distributor, plans to raise 4.2 billion yuan (US$625 million) in an initial public offering in Shanghai to fund movie production and cinema investments in what would be the largest such sale in China’s entertainment industry. The unit of stateowned China Film Group Corp. plans to sell as many as 467 million shares at 8.92 yuan each, valuing the company at 16.7 billion yuan, the company said yesterday in a filing. The film maker and distributor is raising money amid a boom in the industry as more Chinese go to cinemas.

Promotion deal

Lenovo cooperates with JD.com to boost sales

Technology Inc. But it withdrew from a US$3.8 billion investment in Western Digital Corp. in the face of a U.S. security review.

Its latest target, XMC, began operations in 2008 and says it’s one of the largest players in domestic semiconductors. It’s unveiled plans to participate in the building of a US$24 billion semiconductor manufacturing mega-complex that the government is establishing in its home province.

XMC didn’t respond to a phone call seeking comment.

Closely held Unigroup had sales of 52 billion yuan (US$8 billion) last year with an after-tax profit of 3.9 billion yuan, according to the company. In its chip design business, profit came to US$200 million on sales of 13.5 billion yuan. Its target, XMC, began operations in 2008 as a foundry for memory chip and image sensor production. Bloomberg News

Chinese PC maker Lenovo Group has reached a cooperation agreement with e-commerce giant JD.com, aiming to boost sales of its products on JD.com.

According to the contract, the two sides plan to sell 60 billion yuan (about US$9 billion) worth of Lenovo products through JD.com in the next three years. The two companies also agreed to work together in meeting demand, precision marketing and rural e-commerce. JD.com is the largest retail channel for Lenovo products. Under the agreement, Lenovo has promised to debut some new products on JD.com, while JD.com has agreed to provide Lenovo with data analysis, marketing, warehousing, and technology support.

10 Business Daily Thursday, July 28 2016

Greater China

‘The state planner said the capacity cutting programme was only one part of China’s efforts to rejuvenate the steel sector’ Overcapacity

Government offers more funds for ‘difficult’ steel cuts The National Development and Reform Commission identified the closure of so-called “zombie firms” as a priority

C

hina is facing extreme difficulties in its bid reduce overcapacity in the steel industry and will provide more funds to help handle layoffs and debts, the country’s state planner said in a statement on its website yesterday.

China has pledged to cut steel capacity by around 45 million tonnes this year, and by 140 million tonnes by 2020, in a bid to tackle a price-sapping annual surplus estimated at around 300 million tonnes, nearly double the annual output of the European Union.

But it reached less than 30 per cent of its annual target in the first half of 2016 as local governments rushed to finalise their closure plans.

The National Development and Reform Commission (NDRC) said in a notice published on its website that the next stage of capacity cuts would be “extremely difficult” as China tries to reach its targets.

It planned to “increase financial support for the easing of steel overcapacity” and ensure that unemployment and debt were handled properly.

The state planner, in an account of

a government meeting held earlier this week, said China would also impose harsh penalties for the illegal construction and expansion of steel plants.

The NDRC identified the closure of so-called “zombie firms” - non-viable firms that are still operating - as a priority, saying it would use tougher environmental, efficiency, quality and safety standards to drive them out of the market.

Many in the industry have expressed concern that an improvement in steel prices, particularly in the second quarter of this year, has undermined China’s efforts to cut capacity by allowing zombie steel firms to return to profit.

But China’s vice-industry minister Feng Fei said at a press briefing on Monday that while some capacity had

come back on line, it did not include plants that had already been ordered to shut down.

The state planner said the capacity cutting programme was only one part of China’s efforts to rejuvenate the steel sector, with the country still committed to creating global industrial champions through the use of mergers and acquisitions.

Two of China’s biggest steel firms, Baosteel and the Wuhan Iron and Steel Group have already announced that they are planning to “restructure” together.

“It is not simply a matter of easing steel overcapacity, but a need to focus on structural adjustment and upgrading our country’s steel sector to transform from a large steel nation to a strong steel nation,” the NDRC said. Reuters

Growth evolution

Taiwan GDP seen returning to expansion Authorities slashed its 2016 GDP outlook for the third time in May to 1.06 per cent Faith Hung

Taiwan’s trade-reliant economy is expected to have returned to on-year growth in the second quarter from three straight quarters of decline, as the contraction in exports slows and investment increases.

The expected growth, however, would be unlikely to change the government’s meagre full-year GDP estimate of 1.06 per cent with weak global demand maintaining pressure on the island’s central bank to trim interest rates again.

economy was expected to have returned to on-year growth of 0.56 per cent in the second quarter from three straight quarters of decline.

Ec o n o m i sts d o n o t p r o vi d e quarter-on-quarter estimates, though the government does report annualised, seasonally adjusted quarterly figures.

Th e g ove rnm e nt wi l l i ssu e preliminary gross domestic product data on Friday at 0030 GMT. The expected launch of Apple

Inc’s new iPhone model later this year and typically stronger demand ahead of the Christmas shopping season are unlikely to provide much support for Taiwan’s exports in the second half of this year, some analysts said.

Taiwan is a major Asian production house for global tech names such as Apple, making components for smartphones, notebook PCs and other gadgets.

The island’s export orders, a gauge of global technology demand, contracted for the 15th straight month in June, though at a slower-thanexpected pace while exports fell for

the 17th month in a row.

Taiwan’s central bank is widely expected to cut interest rates again in its September quarterly meeting following four straight rate cuts since last September.

“We think Taiwan needs to cut the rate further...Asian countries will need to cut interest rates gradually,” said Frank Lee, north Asia chief investment officer of DBS Bank. DBS sees Taiwan’s GDP growing 0.9 per cent in 2016, he added.

Taiwan slashed its 2016 GDP outlook for the third time in May to 1.06 per cent, slower than 1.47 per cent growth it had previously forecast.

The 2016 export estimate was revised to a 3.65 per cent contraction, deeper than the 2.78 per cent fall predicted earlier. Reuters

Key Points Q2 GDP seen returning to growth after 3 quarters of decline Export outlook remains weak on soft global demand Taiwan govt’s 1.06 pct target for full-year 2016 wouldn’t change Central bank expected to trim interest rate again in Sept “Private investments topped expectation and the drag by exports on the economy had narrowed in Q2,” said analyst Anita Tsai of Masterlink Securities in Taipei. “But global economic growth has been slow. Taiwan has been hit too.”

A Reuters poll showed Taiwan’s

The island’s export orders, a gauge of global technology demand, contracted for the 15th straight month in June

Business Daily Thursday, July 28 2016 11

Asia CPI

Australia inflation slowdown sets scene for rate cut The biggest price gains came in healthcare, petrol, tobacco and new home purchases.

Wayne Cole

A

ustralian consumer prices rose at the slowest annual pace since 1999 last quarter while core inflation remained at a record low, setting the stage for a cut in interest rates as early as next week.

The headline CPI index rose just 1.0 per cent in the year to June, while key measures of underlying inflation held at 1.5 per cent, all well below the Reserve Bank of Australia’s (RBA) target band of 2 to 3 per cent.

The central bank had already cut rates to an all-time low of 1.75 per cent in May following an alarmingly weak inflation report for the first quarter. Many analysts now look for a repeat performance at the RBA’s next meeting on August 2.

“We think that this print is low enough to see the RBA provide a bit more support to the economy,” said Tom Kennedy, an economist at JPMorgan.

“For us, this is definitely consistent with the idea that the cash rate needs to go lower.”

Investors were a little less sure and slightly lengthened the odds of a cut next week to 50 per cent, from 60 per cent. A move by November is fully priced in.

Yields on three-year government paper stood at 1.56 per cent, well under the overnight cash rate, while

the Australian dollar was a shade softer at US$0.7501.

The Australian Bureau of Statistics reported its headline consumer price index (CPI) rose 0.4 per cent last quarter, from the first quarter when it fell 0.2 per cent.

The biggest price gains came in healthcare, petrol, tobacco and new home purchases. That was balanced by falls in domestic holiday travel and accommodation, motor vehicles and telecoms.

The expectations loop

While Australia’s economy is growing at a relatively brisk 3.1 per cent, it has

not escaped the deflationary tides washing around the world. An excess of supply, particularly from China, is weighing on prices for all sorts of tradable goods.

At home, fierce competition and slack in the labour market has dragged wage growth to recessionary lows.

An influx of foreign retailers has fuelled a price war in everything from food to furniture, encouraging consumers to put off purchases in the hope of getting items cheaper later.

An added wrinkle has been a slowdown in rents, which make up a big chunk of the CPI basket. A boom in buying properties to rent out has combined with record levels of new home building to depress growth in rents to levels not seen in more a decade.

All of which has led expectations of future inflation to slip, a trend that threatens to become the sort of selffulfilling cycle that has so bedevilled Japan and Europe.

“Something like two-thirds of (the components comprising) CPI is now growing at less than 2 per cent per annum,” noted Michael Blythe, chief economist at Commonwealth Bank.

Key Points Q2 consumer prices +0.4 pct q/q, 1.0 pct y/y Underlying inflation averages around 1.5 pct y/y Market implies 50-50 chance of rate cut next week “The risk is that it does feed into expectations over time as we’ve seen in other countries,” he warned. “It just makes the job of running monetary policy that much harder.” Reuters

Monetary policy

Bank of Korea chief discards rate going to zero The governor added that the bank’s policy would also focus on supporting economic growth rather than price stabilisation.

South Korea’s central bank chief said yesterday that the country’s monetary policy rate cannot be slashed to zero per cent anytime soon because the bank needs policy space to back on-going corporate restructuring.

“We have limits that keep us from going to zero rates,” said Bank of Korea Governor Lee Ju-yeol in a lecture at parliament.

“In case of sudden market volatility we have to scrutinise foreign flows. It may seem we are acting slowly but there is much for us to think about and consider.”

Lee said the bank had to look at growth and financial conditions, as well as the on-going restructuring of the country’s massive shipping and shipbuilding industries, when changing its base rate - currently a record low 1.25 per cent.

South Korea expects a 20 per cent drop in major shipbuilders’ capacity and a 30 per cent drop in their workforce by 2018 from 2015, after the restructuring process.

In light of this, the government is waiting for parliament to ratify a 11

trillion won (US$9.68 billion) extra budget to buffer the economy against possible shocks from the corporate overhaul.

exhausting and a let-down. It wasn’t just me who felt this but other participants as well. The communiqué was little different from previous ones,” he said.

The world’s biggest economies said they would work to support global growth and better share the benefits of trade at the meeting, dominated by

Key Points BOK says needs policy space for corporate overhaul Current policy rate at 1.25 pct Recent G20 talks “a letdown”

The bank’s policy will also focus on supporting economic growth rather than price stabilisation because there was currently no danger of rapid inflation, the governor added.

Disappointing G20 talks

Yesterday’s remarks were made after the governor returned from the recent meeting of finance ministers and central bank governors from the Group of 20 countries in Chengdu, which he called “a let-down.”

“I felt this round of talks was

Bank of Korea Governor Lee Ju-yeol

the impact of Britain’s exit from the European Union and fears of rising protectionism.

Lee said signs of protectionism were popping up globally as monetary and fiscal policies became less effective at improving economic conditions.

“Central bank chiefs are continuously sending warning signs against excessive monetary easing as there will be consequences from low rates,” Lee said. Reuters

12 Business Daily Thursday, July 28 2016

Asia In Brief Trade

Thai exports slip Thailand’s customs-cleared exports fell less than expected in June, helped by shipments of cars and gold, commerce ministry data showed yesterday, but demand from some major markets remained weak.

Exports declined 0.1 per cent from a year earlier, compared with the median forecast for a fall of 2.02 per cent in a Reuters poll. Shipments to China fell 11.9 per cent from a year earlier and ones to Japan dropped 3.8 per cent. But exports to the United States rose 4.7 per cent and those to Europe were up 0.9 per cent.

Environment

Stimuli plan

Abe says Japan to compile US$265 billion injection Details of the package will be announced by the government next week.

Leika Kihara

J

apanese Prime Minister Shinzo Abe said yesterday his government would compile a stimulus package of more than US$265 billion to reflate the flagging economy, media reported, though it is unclear how much will be spent to directly boost growth.

Key Points

Philippines will not approve open-pit mine

Abe says spending package to exceed Y28 trln - Jiji

The Philippine minister in charge of mining said she will not allow the US$5.9 billion Tampakan gold and copper mine in southern Mindanao island to operate as an openpit site and vowed to shut more operations causing environmental destruction.

The Tampakan project is the biggest stalled mining venture in the Southeast Asian country, failing to take off after the province where it is located banned open-pit mining in 2010. Commodities giant Glencore Plc quit the project last year. “I will not allow the Tampakan project,” Regina Lopez told reporters, as long as it is planned as an open-pit mine.

Of the total, 13 trln yen will be “fiscal spending”

Results

Japan’s Line Corp swings to net profit Japan’s Line Corp, reporting earnings for the first time since listing, yesterday said it swung to a profit in the first half of the year as advertising revenue soared. The operator of Japan’s dominant mobile messaging application posted net profit of 2.6 billion yen (US$24.3 million) versus a net loss of 5.29 billion yen a year earlier. Revenue grew 19.8 per cent to 67.3 billion yen. The firm, which earns the bulk of revenue from games and selling adverts, emojis and electronic stickers, said advertising sales grew 76 per cent compared with the first half of 2015.

Strategic outlook

Kiatnakin Bank cuts 2016 loan growth target Thailand’s Kiatnakin Bank said yesterday it has cut its 2016 loan growth target to 3-5 per cent from 15 per cent due to global economic uncertainties and fierce competition in the Thai banking sector. Kiatnakin Bank, one of the country’s top-five auto loan providing banks, posted a decline of 1.6 per cent in lending in the first half of this year, it said in a statement. The revision came after the bank reported its first-half performance which saw hire purchase loans, a majority of its portfolio, contract 2 per cent from a year earlier.

Earlier-than-expected announcement puts heat on BOJ Yen, politics may sway BOJ in favour of easing BOJ meets for two-day rate review ending on Friday

The premier’s 28 trillion yen (US$265.30 billion) stimulus package, which exceeds initial estimates of around 20 trillion yen, includes 13 trillion yen in “fiscal measures,” Jiji reported. Those measures are likely to include spending by national and local governments, as well as loan programmes.

Abe’s announcement, via a speech in southern Japan, came earlier than expected and pressures the Bank of Japan (BOJ) to match his big spending plan with additional monetary easing at its closely-watched rate review ending on Friday.

Japanese Prime Minister Shinzo Abe

Trade poll

South Korea exports seen falling again A Reuters poll projected July’s annual inflation at 0.8 per cent, steady from June.

South Korea’s exports in July likely fell more sharply than they did in June, a Reuters poll showed yesterday, a drop that would be extend the streak of declines to 19 months.

The latest fall would reflect fewer working days in July compared with a year ago and persistently sluggish global demand.

The median forecast of 14 analysts was for a drop of 4.6 per cent from a year earlier, following June’s 2.7 per cent fall.

The same poll showed imports were expected to have dropped 9.5 per

cent this month versus a 7.7 per cent fall in June.

“Increasing protectionism by key economies following Britain’s vote to exit the European Union and political uncertainties in the U.S. and Europe will probably drag down exports in the second half of the year,” said Kim Doo-un, economist at Hana Financial Investment.

Kim said factors to focus on until year-end are the possibility of a currency war from competitive policy easing by countries and exchange rate volatility.

Fear of protectionism was a focus at last weekend’s Group of 20 finance chiefs meeting. Its communiqué underscored the role of open trade policies and a strong, secure global system in promoting inclusive growth.

On South Korea’s industrial output, the Reuters poll forecast a rise for

Key Points June industrial output seen +0.2 pct s/adj m/m July exports seen -4.6 pct y/y, imports -9.5 pct y/y July CPI seen +0.8 pct y/y a second month by a seasonally adjusted 0.2 per cent, following June’s 2.5 per cent increase, thanks to production by IT companies such as SK Hynix Inc. “Improving chip exports likely boosted production, leading to positive output for a second month while the decline in auto exports acted as a cap for growth,” said Park Ok-hee, an economist at IBK Securities.

The output data will be released on July 29 while trade data will be come on August 1. Inflation data will be released on August 2. Reuters

Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Joanne Kuai; Nelson Moura; Annie Lao; Kelsey Wilhelm Group Senior Analyst José I. Duarte Design Aivi 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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“The amount is so large that the stimulus package is bound to have a big economic impact. It is impossible to spend this much money in one extra budget, so this may take place over the next few years,” said Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities.

“The BOJ is likely to ease policy, including increasing government debt purchases, so you could say the BOJ can absorb the new debt. It also makes it easier to show that the BOJ and the government are working together.”

Details of the package will be announced by the government next week, Abe was quoted by Jiji as saying.

Many central bank policymakers prefer to put off taking action as they expect the anticipated fiscal stimulus package, and a delay in implementing

the next sales tax hike, to boost growth and brighten the prospects for hitting their 2 per cent inflation target.

But yen moves and political considerations could be decisive factors for BOJ policymakers agonizing over whether to expand stimulus yet again or to save their dwindling policy resources for when the economy takes a turn for the worse.

Abe ordered his government earlier this month to craft a stimulus plan to revive an economy dogged by sluggish consumption, despite three years of his “Abenomics” mix of hyper-easy monetary policy, big spending and promised reforms.

Sources have told Reuters the package will have a headline figure of at least 20 trillion yen. But only about 3 trillion yen would come from direct spending by national and local governments, they said, with the rest comprised of loan programmes and subsidies to inflate the total amount. Reuters

Business Daily Thursday, July 28 2016 13

Asia Cabinet changes

Indonesia president brings World Bank exec back as finance minister Former finance head Bambang Brodjonegoro has been shifted to chief of the country’s planning agency.

Gayatri Suroyo and Wilda Asmarini

Indonesia’s president yesterday appointed World Bank managing director Sri Mulyani Indrawati as the country’s finance minister, among a wider cabinet reshuffle aimed at increasing the effectiveness of his team.

Former Indonesian army general Wiranto will replace Luhut Pandjaitan as the chief security minister. The trade, energy, transport and industry ministers are also among those replaced.

president’s economic team lifted financial markets, with stocks up more than 1 per cent and the rupiah strengthening 0.4 per cent against the dollar.

“Sri Mulyani’s appointment is a game-changer because it restores a certain amount of investor confidence and means having a steady hand on the tiller with a solid record as a reformer,” said Paul Rowland, a Jakarta-based analyst.

In 2010, Indrawati joined the World Bank after serving as both Indonesia’s chief economic minister and finance minister under then-president Susilo Bambang Yudhoyono.

Indrawati, who has a Ph.D in economics from the University of Illinois and is not a member of a political party, won praise for successfully managing Indonesia’s economy through the 2008 global financial crisis.

“The president wants a dream team to manage economic policies so that we can accelerate (growth).

He needs Sri Mulyani,” said David Sumual, chief economist for Bank Central Asia.

Political factors

Some within the president’s circle had recommended her for a cabinet position in the first reshuffle, but she turned it down.

Widodo last year replaced key members of his economics team in an effort to boost investor confidence over a flagging economy.

Analysts also said yesterday’s reshuffle was politically motivated as Widodo sought to consolidate support from parties like Golkar that have been keen to join the ruling coalition.

“There is the need to acknowledge the support of parties like Golkar which have thrown their weight behind his government,” said Keith Loveard of Jakarta-based Concord Consulting.

Bambang Brodjonegoro, the finance minister that Widodo appointed in 2014, has been shifted to head the country’s planning agency.

The change in finance ministers comes just after Indonesia launched a tax amnesty in an effort to bring home billions of dollars that Indonesians have parked overseas. Reuters

Key Points Sri Mulyani Indrawati back in post held under last president Many changes made in 2nd cabinet shuffle in less than a year Widodo: Challenges facing us are ‘not easy’

The new cabinet, inaugurated yesterday, includes one member of Indonesia’s second-largest political party, Golkar, which was in opposition to Widodo when he was elected in 2014.

“Approaching two years of my administration, the challenges we are facing are not easy,” Widodo told reporters at the palace. “We have to confront our poverty problems, we need to decrease the economic gap between the rich and poor.”

The addition of Indrawati to the

Indonesian President Joko Widodo (C) waves as he is accompanied by Vice President Jusuf Kalla (2-R), Coordinating Minister for Maritime Affairs Luhut Panjaitan (R), Industry Minister Airlangga Hartarto (L) and Finance Minister Sri Mulyani Indrawati (2-L) shortly after a press conference at Merdeka Palace in Jakarta, Indonesia, yesterday.

Mobile payment

Australia’s big banks team up to challenge Apple Some banks in countries beyond Australia have been reluctant to accept the system.

Matt Siegel

Australia’s three biggest banks, including no. 1 lender National Australia Bank (NAB), yesterday said they had lodged a joint application with anti-trust regulators seeking approval to collectively negotiate with Apple Inc to install their own electronic payments applications

Key Points NAB, CBA, Westpac join forces in spat over Apple Pay Banks seeks approval to negotiate jointly with Apple Move marks escalation of Australian fin-tech struggle

on iPhones.

Apple, which operates its own Apple Pay mobile wallet, does not allow third-party electronic payment apps to be loaded onto to the hugely popular smartphones. The banks are seeking to be able to negotiate jointly for access to Apple’s phones without themselves being accused of violating anti-competition law.

The move escalates a power struggle between Australia’s dominant lenders and Apple on financial technology, a growing force in shaping global retail banks’ strategy. The three banks have resisted signing deals to use Apple Pay and want iPhone users to be able to

install the electronic wallet systems they have already developed and financed themselves.

A spokeswoman for Apple in Australia wasn’t immediately available to comment on the move by the banks. For Apple, the payments app offers a potentially lucrative new stream of revenue from services and software as iPhone sales retreat - on Tuesday it reported a 15 per cent drop

in sale of the device.

The country’s second-biggest lender, Commonwealth Bank of Australia, and number three, Westpac Banking Corp, teamed up with NAB to file the application with the Australian Competition and Consumer Commission (ACCC).

The big three have been joined in the move by smaller lender Bendigo and Adelaide Bank.

The ACCC declined to comment on the application.

The spokesman for the bloc of lenders, Lance Blockley, Senior

Advisor at banking industry group Novantas, said the move is the first challenge by banks to Apple on mobile payments restrictions of which it’s aware.

While Apple rival Samsung Electronics Co and Alphabet Inc’s Google have developed proprietary payments systems known as Samsung Pay and Android Pay, Samsung smartphones and other Android handsets accept third-party mobile payment apps.

Apple Pay rollout

Australia and New Zealand Bank, which signed a deal to use the Apple Pay system in April, is the only of the country’s ‘Big Four’ banks not to join the action.

Apple has rolled out its payments system to six countries so far - the United States, China, Britain, Canada and Singapore, as well as Australia with plans to expand to many more.

Some banks in countries beyond Australia have been reluctant to accept the system, though in recent months Apple has added four banks in Singapore to its sole partner there, American Express, as well as Canada’s five big banks.

To use Apple Pay, consumers pay for goods and services by holding hold their iPhones over special Apple payment terminals, as well as vending machines that accept contactless payments.

The three Australian banks contend that while Apple allows apps on iPhones using other commonplace technology, such as Wi-Fi and Bluetooth, restricting the technology through which mobile wallets function - known as Near Field Technology - constitutes anticompetitive behaviour. Reuters

14 Business Daily Thursday, July 28 2016

International In Brief Drug industry

GSK invests £275m despite Brexit Drugmaker GlaxoSmithKline yesterday revealed plans to invest £275 million into three of its British manufacturing sites, shrugging off Brexit worries. The investment worth US$361 million - will be ploughed into facilities in Barnard Castle in northeastern England, Ware in the southeast, and Montrose in Scotland, GSK said in a statement. The move will “boost production and support delivery of its latest innovative respiratory and large molecule biological medicines”, it said, adding that the “vast majority” of products will be exported globally. GSK, which already employs 6,000 staff across its nine manufacturing plants in Britain, also noted that the investment would provide new job opportunities.

Monetary policy

Nigeria battles inflation to stimulate growth Nigeria on Tuesday hiked the Monetary Policy Rate by 200 basis points from 12 per cent to 14 per cent to combat inflation and stimulate growth, an official said. Godwin Emefiele, Nigeria’s apex bank chief who announced the decision of the Monetary Policy Committee after a twoday meeting in Abuja, said eight out of the 12-member committee attended the meeting. The Central Bank of Nigeria (CBN) Governor told reporters that out of the eight, five members voted in favor of monetary tightening, while the remaining three members voted to hold the rate at 12 per cent.

GDP

British economy picked up speed ahead of Brexit vote The Bank of England wrong-footed investors earlier this month by keeping rates on hold.

Andy Bruce and Ana Nicolaci da Costa

B

ritain’s economy picked up speed in the three months up to its vote to leave the European Union, data showed yesterday, helped by the biggest upturn in industrial production since 1999.

Second-quarter gross domestic product beat expectations to grow by 0.6 per cent, up from 0.4 per cent in the first three months of the year, the Office for National Statistics said.

Output in the three months to June was 2.2 per cent higher than a year earlier, the strongest annual growth in a year and exceeding a forecast for it to hold steady at 2.0 per cent.

Much has been changed by the Brexit vote, however.

“The collapse in all surveys of activity and confidence undertaken since the referendum suggest GDP is on course to contract in Q3,” Pantheon Macroeconomics’ chief UK economist Samuel Tombs said.

Finance minister Philip Hammond said again after the data that the government had the tools to support the economy as it entered a “period of adjustment” as it prepared to leave the EU. “Along with the Bank of England, this government will take whatever action is necessary,” he said.

The improvement in economic growth in the second quarter reflected strong industrial output, services and construction in April, which largely dissipated in May and June.

That chimed with the view of the National Institute of Economic and Social Research that growth slowed markedly towards the end of the quarter.

A closely-watched business survey last week showed corporate activity contracted this month at the fastest pace since 2009, around the nadir of the global financial crisis.

A Reuters poll of economists last week suggested it was more likely than not that Britain will slide into recession in the coming year.

The Bank of England (BoE), which estimated second quarter growth would come in at around 0.5 per cent, looks likely to cut interest rates for the first time since 2009 next week, although economists are divided about whether it will ramp up its quantitative easing programme.

Key Points UK economic growth beats forecasts in Q2 But momentum expected to fade quickly following Brexit vote Industrial output surges in Q2 at fastest pace since 1999 The BoE wrong-footed investors earlier this month by keeping rates on hold, although it held out the prospect of a stimulus package.

The ONS said the pick-up in growth was driven jointly by services and industrial production, the latter of which expanded 2.1 per cent on the quarter - its best performance since 1999. Reuters

Commerce

Peru to seek other trade deals if TPP dies Peru will seek free trade deals with Australia and other Pacific Rim countries if the Trans-Pacific Partnership agreement it signed onto dies in the U.S. Congress, the incoming president said on Tuesday. Centrist Presidentelect Pedro Pablo Kuczynski, a 77-year-old former investment banker, said leaders of both political parties in the United States have attacked the TPP to build support ahead of the Nov. 8 election, and that the 12-member pact might be ratified by Congress afterward.

“When the electoral cycle is over let’s see what happens,” Kuczynski said in a press conference.

M&A

Regulator mulls new TAP ownership settlement Parpública and Atlantic Gateway, a joint venture owned by Portuguese road transport magnate Humberto Pedrosa and US-Brazilian airline entrepreneur David Neeleman, have notified Portugal’s Competition Authority (AdC) of a deal under which it is to share control of TAP, the national airline, with the Portuguese state. In a statement posted on its official website, the AdC states that it was notified on 20 July of the operation that consists in the acquisition of joint control by Parpública Participações Públicas, a state investment company, and by Atlantic Gateway, SGPS over TAP - Transportes Aéreos Portugueses.

London skyline

M&A

AccorHotels buys concierge group in Airbnb response strategy In February, the company bought a 30 per cent stake in Oasis Collections, an American marketplace for private rentals.

Dominique Vidalon

AccorHotels said yesterday it had entered exclusive talks to buy concierge service provider John Paul, further beefing up its response to the challenges of Airbnb.

Under the terms of the deal, AccorHotels - the world’s fifth-largest hotel group - will acquire 80 per cent of John Paul for about US$150 million in equity and debt, with the company’s Chief Executive and founder David Amsellem keeping the remaining 20 per cent, AccorHotels said in a statement.

“The acquisition of John Paul enables us to accelerate our global strategy to position the customer experience at the very heart of our

initiatives,” said AccorHotels Chief Executive Sebastien Bazin.

Bazin has long warned that revenue from traditional hoteliers is under threat from companies like Airbnb, who have made it more popular to turn to accommodation other than hotels when on vacation or on business.

His response to the threat of the so-called sharing economy has been a flurry of acquisitions in the sector.

In February, AccorHotels bought a 30 per cent stake in Oasis Collections, an American marketplace for private rentals, and a 49 per cent stake in Squarebreak, a French start-up offering high-end rentals in France.

In April, it bought British onefinestay,

which specialises in renting out luxury private homes with hotelstyle services.

Founded in Paris in 2007, John Paul merged with LesConcierges in 2015, creating a group with a consolidated turnover of US$70 million and a combined workforce of 1,000 people across North America, Europe, Africa, Asia and Pacific.

Key Points AccorHotels buys several sharing-economy rental sites Focus on high end of short-stay private rental market AccorHotels said John Paul’s enterprise value (EV) should be close to US$150 million, or a ratio of 11 times 2017 EV over estimated core earnings before interest, tax, depreciation and amortisation (EBITDA). Reuters

Business Daily Thursday, July 28 2016 15

Opinion Business Wires

The Korea Herald South Korea’s land prices continued to grow in the first half of the year, government data showed yesterday, amid a residential building construction boom partly created by a series of government measures aimed at boosting the property market. In the six months ended June 30, land prices gained 1.25 per cent from six months earlier, accelerating from a 1.07 per cent increase over the same period last year, according to the Ministry of Land, Infrastructure and Transport. The tally marks the steepest rise in eight years after a 2.72 per cent spike posted in the first half of 2008.

Republican Presidential nominee Donald Trump delivers his address during the final day of the 2016 Republican National Convention at Quicken Loans Arena in Cleveland, Ohio, USA, 21 July 2016.

Trump, the risk even central banks can’t backstop

The Age Selling public assets has created unregulated monopolies that hurt productivity and damage the economy, according to Australia’s consumer and competition tsar, who says he is on the verge of becoming a privatisation opponent. In a blistering attack on decades of common government practice, Australian Competition and Consumer Commission chairman Rod Sims said the sale of ports and electricity infrastructure and the opening of vocational education to private companies had caused him and the public to lose faith in privatisation and deregulation.

Taipei Times A refusal by the Chinese Nationalist Party (KMT) caucus to enter into negotiations on any issue regarding budget proposals for state-owned businesses means the extraordinary legislative session’s budget review will be prolonged until Friday.

The Legislative Yuan (pictured) is to vote on 1,668 different proposals from the KMT on either slashing or freezing funding, nearly five times as many as last year, even after the Democratic Progressive Party (DPP) caucus said that it would drop its own 818 proposals for slashing and freezing funding. The DPP proposed to have a marathon session lasting until midnight on Friday to get through the bulk of the proposals.

Viet Nam News The Ministry of Trade and Industry (MoIT) is urging local footwear makers to further invest in support industries instead of depending excessively on imported raw materials and losing out on profits and competitiveness. MoIT’s data shows that the country’s export revenue from leather and footwear products in the first six months of 2016 reached nearly US$6.3 billion, an increase of 8.8 per cent over last year. This figure is expected to grow once the Free Trade Agreements (FTAs) come into effect, substantially reducing or phasing out import taxes.

I

f Brexit didn’t scare financial markets confident in the support of central banks, maybe the prospect of President Donald Trump will.

That Brexit, which will slow global growth and imperil the European Union, led to a rally in riskier assets is testament to investors’ mastery of the lesson of the past eight years: if rain threatens, central banks will put up tents.

Yet in Trump, just now enjoying a post-Republican convention bump in the polls, we may have found a factor too negative - and specifically too inflationary - for even central banks to make better.

The basic post-Brexit analysis was this: the U.S. economy is passable and developments elsewhere will pin the Fed down, leaving it unable to hike rates as it might otherwise wish. Other central banks, meanwhile, will be disposed to ease, driving money into riskier investments. So far, so good for risky assets like stocks and highyield bonds.

T r u m p , h o w e v e r, s e e m s determined to enact policies which would be both bad for growth but, partly by stoppering up free trade and inciting trade wars, highly inflationary. In other words, stagflation.

Trump, of course, may well not win and may not have the votes in Congress to advance his policies if he does, but a Trump able to actually make policy will all but force the Federal Reserve to ultimately move to higher rates to head off inflation.

“The populist overhaul scenario may cause a riskoff fixed income move,” analysts at HSBC wrote in a note to clients citing the potential for 4-to-5 per cent inflation as a result of a Trump win.

“Increased economic policy uncertainty is typical during an election season, but potentially greater this time given the unconventional nature of the Trump candidacy and high levels of global policy uncertainty.”

While the tax cuts Trump is calling for might be stimulative in the short term, the far more important impact could be from much higher prices, both as a result of tariffs and trade wars or the repatriation under pressure of production to the U.S. by global corporations.

So far, markets do not seem too bothered. But a rash of post-convention polls all showed Trump with a lead on Hillary Clinton, prompting the FiveThirtyEight forecasting blog to give him a 54.5 per cent chance of winning an election if held July 25.

If we see those sorts of numbers in a month, after

“

James Saft a Reuters columnist

the Democrats get their convention bump, expects investors to become much more worried.

Extraordinary policies and the madness of crowds

We can’t know if Trump would, or could, govern as he has run, but he certainly is doubling down in his campaign on a set of extraordinarily economically negative policies.

In an interview on Sunday, Trump said the U.S. might need to leave the World Trade Organization and backed hitting companies which moved production out of the U.S with a punitive tax.

Asked about a hypothetical in which a U.S. company moved a plant to Mexico and then seeks to import air conditioners, Trump said a tax would be imposed.

“It could be 25 per cent. It could be 35 per cent. It could be 15 per cent. I haven’t determined. And it could be different for different companies.”

Remember too, that while a divided Congress can block a president’s legislation, considerable powers have been transferred to the executive branch in recent years to impose tariffs and trade sanctions and negotiate trade agreements.

Trump is the kind of problem central banks can’t kiss and make better.

Consider too what it might do to the risk premia imposed by investors on U.S. assets. If you think there is a global shortage of safe assets now, wait until investors confront the genuine possibility of a U.S. president who has openly mulled defaulting on sovereign debt as a negotiating tactic. Interest rates might rise not just to account for higher inflation but also for the potential for unpredictable policy or outright bad faith by the U.S. None of this is likely. Trump may lose, may change his stripes or may be effectively blocked

by Congress or the courts if he doesn’t.

Yet the psychology of financial markets in the aftermath of the great financial crisis is the result of low growth, low inflation and faith in central banks. Thus we have all-time highs in leading equity indices despite mediocre fundamentals.

Introduce a change in which inflation looks to head up while growth goes down and the Fed will rapidly change from a reason to buy risk to a reason to sell. Reuters

Trump is the kind of problem central banks can’t kiss and make better

”

16 Business Daily Thursday, July 28 2016

Closing Technology drive

Beijing eyes world-class cyber-tech multinationals

be in place, ridding the country of reliance on overseas technology. Cyber security must be vastly improved, and a number China aims to develop a number of cyberof globally competitive multinational tech multinationals by 2025, according to an official statement yesterday. The “Outline companies will be established. The plan makes strengthening IT development of National IT Development Strategy” will capacity, promoting wider use of IT and steer IT development in China for the next optimizing the IT development environment decade. By 2020, key technologies should be up to world standards, competitiveness the three basic strategic missions. The of the industry must increase substantially plan emphasizes unified control of Internet security and informatization under a and IT development will be a driving force leading group which will approve major for modernization. By 2025, a leading global mobile communication network will policy decisions. Xinhua

Trade deal

With or without TPP, Vietnam forging ahead The TPP was signed in February and has yet to be ratified by members including Australia, Japan and Singapore.

Nguyen Dieu Tu Uyen

F

or Vietnam’s government, talk of a collapse in a trade pact stretching across the Pacific Ocean from the U.S. to Malaysia is failing to dent confidence.

Wh e th e r th e T ra n s- Pa c i f i c Partnership - a 12-nation preferential trade agreement that covers about 40 per cent of the global economy - is approved by the U.S. Congress or not, authorities in Vietnam are forging ahead with plans to cut taxes and reduce red tape for businesses to make them more globally competitive.

“With or without TPP, our goal is to improve our investment environment,” Tran Xuan Ha, a deputy finance minister, said in an interview in Hanoi on July 22. “With TPP, our corporate sector will need to be even more competitive, to ensure it retains market share.”

Vietnam is riding the wave of a foreign investor-led economic boom that’s seen the Southeast Asian nation transform from mainly an exporter of agricultural commodities, such as rice and coffee, to a manufacturing hub. That’s a development path that’s unlikely to be reversed even if TPP fails to take off, given the opposition to the accord by both U.S. presidential nominees, Donald Trump and Hillary Clinton.

“Vietnam stands to gain from TPP, but so do many of the other countries,

including the U.S.,” Sebastian Eckardt, lead economist for the World Bank in Vietnam, said in an interview in Hanoi. For Vietnam, “it’s an upside potential rather than a downside risk if it doesn’t come through.”

The World Bank estimates the Southeast Asian economy will expand 6 per cent this year, down from an earlier projection of 6.2 per cent following the worst drought in three decades. Foreign-investment pledges surged 85 per cent in the first four months of the year compared to the same period in 2015, according to the statistics agency.

agreements in not only reducing tariffs on a range of products, but also offering protection on intellectual property rights.

The TPP was signed in February and has yet to be ratified by members including Australia, Japan and Singapore. It will come before the National Assembly in Communist Party-controlled Vietnam for approval later this year.

U.S. risks

Ha said the Finance Ministry will submit draft regulations next month to Prime Minister Nguyen Xuan Phuc to ease business taxes and support start-up companies. The department is recommending the corporate income-tax rate for small and medium-sized enterprises be

lowered to 15 per cent or 17 per cent from the current 20 per cent.

“We are very ready to go through all our internal procedures,” Ha said.

“TPP will bring a lot of opportunity for our economy as well as a lot of challenges for our SMMEs.” Vietnam’s export industry is heavily skewed toward foreign investment, which accounts for 71 per cent of the sector, according to the World Bank. Increasing the participation of domestic companies in trade remains a challenge, particularly in the face of trade deals such as TPP, the lender said in a report last week.

Getting the trade deal approved will be difficult in the U.S., where the presidential election campaign has been dominated by antiglobalization sentiment. If the U.S. Congress fails to ratify the agreement in a so-called lame-duck session after the November vote, it would face an uncertain fate in front of new legislators.

Ha declined to comment on whether he thinks the U.S. will ratify the deal. Bloomberg News

“It’s an upside potential rather than a downside risk if it doesn’t come through.”

Sebastian Eckardt, lead economist for the World Bank in Vietnam

TPP is set to boost Vietnam’s gross domestic product by 8 per cent by 2030, making it among the biggest gainers of the trade accord, according to the World Bank. The pact - a centrepiece of U.S. President Barack Obama’s foreign policy objective in Asia - is more ambitious than other

Financial orientation

Liquidity injection

Results

MAS issues new guidelines PBOC steps in to cool on outsourcing risk management money market

Japan’s Nintendo logs loss despite Pokemon Go

The Monetary Authority of Singapore (MAS) yesterday issued new Guidelines on Outsourcing Risk Management to financial institutions following extensive industry and public consultation.

The newly issued guidelines provide expanded guidance to the industry on prudent risk management practices for outsourcing, including cloud services, which have been adopted by a growing number of financial institutions.

MAS stated that key changes to the guidelines include introduction of a new section on cloud computing that sets out MAS’ stance on cloud computing; removal of expectation for financial institutions to pre-notify MAS of material outsourcing arrangements; as well as revision to the definition of “material outsourcing arrangement” to include, under certain circumstances, an arrangement that involves customer information.

Ong Chong Tee, deputy managing director of MAS, said that the new outsourcing guidelines reflect MAS’ continuing efforts to strengthen guidance to financial institutions in this area.

“The revised guidelines build on the existing ones to better capture evolving threats such as offshoring business models and heightened cyber risks,” added Ong. Xinhua

Video game giant Nintendo said yesterday it logged a huge first quarter net loss, despite global hoopla over the launch of Pokemon Go which came too late to boost figures.

The company lost more than US$233 million on a stronger yen and lacklustre sales, and Nintendo warned last week that even the craze for the new app was unlikely to translate into bumper profits going forward.

The Super Mario maker said unit sales of its Wii U game consoles more than halved from the same quarter last year while a soaring yen helped erase profits.

The reporting period for the three months through the end of June was too early to include any rise from the launch earlier this month of the Pokemon Go mobile game that has swept the world, including Japan from last week.

“In terms of earnings, it’s going to be a tough year for Nintendo since it has no plans to release new consoles or promising titles for now,” said Hideki Yasuda, an analyst at Ace Research Institute.

The company is the creator of the Pokemon franchise but the game, released on July 5, was developed and distributed by US-based Niantic, a spinoff of Google. AFP

China’s central bank boosted the supply of cash in the financial system, helping push the benchmark money-market rate down from a three-month high.

The People’s Bank of China sold 180 billion yuan (US$27 billion) of seven-day reverse-repurchase agreements, which inject funds into the banking system. That’s the biggest single-day offering of the contracts since June 29. This comes after the seven-day repurchase rate rose for six straight days, the longest run since August 2015, amid demand for tax payments and speculation that intervention to support the yuan was causing a shortage of the currency.

“Factors including tax payments and currency-market stabilization make medium-sized and small lenders short of funds,” said Ming Ming, Beijing-based head of fixed-income research at Citic Securities Co. “The money market will probably remain tightly balanced, as the central bank would want to maintain a neutral monetary policy stance.”

Corporate tax payments are estimated to drain about 400 billion yuan from the financial system this month as commercial lenders park funds at the central bank. Speculation that the PBOC bought yuan to support the exchange rate were boosted as the Chinese currency surged in afternoon trading last week. Bloomberg News