Food suppliers identify potential in MSAR F&B Page 4
Wednesday, August 17 2016 Year V Nr. 1110 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Trade
Local trade with China drops in H1 Page 2
Banking
www.macaubusinessdaily.com
Bad debts
Record number of ATM machines in Macau Page 3
Tech
Temasek invests in ICICI as Indian banks move to clear bad loans Page 12
Google launches video calling app Duo for Android and iOS Page 14
Sounding Out the Silver Screen Film
All roads lead to the PRD. The Director of the Cultural Affairs Bureau kicked off the Guangdong-Hong Kong-Macao Film Production Investment and Trade Fair urging local filmmakers to get into the Guangdong film market. Of 25 film projects underway in the PRD, seven are by local filmmakers. Over 50 potential investors were present, hailing from the SARs and Guangdong. Page 6
Spicing up the offer
F&B A worthy promotional tool. But local F&B suppliers consider the Portuguese-speaking Countries Food Products Exhibition Centre still needs more food tasting initiatives. Some 84 suppliers, including locals, display over 1,000 products from seven Portuguese-speaking countries. Page 5
Crystal ball clearer
Strategic offload
Gaming Gaming analysts predict something of a bottoming out. Macau gross gaming revenues in August could fall as low as 4 pct y-o-y. Or register the first revenue increase in more than two years. Delays to the Pac On ferry terminal opening could put a spanner in the works. While analysts note a marginal recovery in both VIP and mass through July. Page 7
Nothing to do with negative Q2 results. So says a Novo Banco Asia S.A source regarding a sale agreement involving the local unit. Presented as part of a larger strategy to sell off international units not part of the group’s core business.
Ageing Thailand
Bank Page 6
HK Hang Seng Index August 16, 2016
22,910.84 -21.67 (-0.09%) Worst Performers
Link REIT
+2.28%
MTR Corp Ltd
Tencent Holdings Ltd
+2.25%
PetroChina Co Ltd
+1.18% +0.94%
China Resources Land Ltd AIA Group Ltd
-2.06% -1.82%
Ping An Insurance Group Co China Merchants Holdings
-1.11%
27° 30° 26° 30° 26° 30° 26° 30° 26° 30° Today
-1.09%
Li & Fung Ltd
+1.75%
Galaxy Entertainment Group
+0.73%
Sun Hung Kai Properties Ltd
-1.72%
Cheung Kong Infrastructure
China Petroleum & Chemical
+1.61%
Hang Seng Bank Ltd
+0.67%
China Mengniu Dairy Co Ltd
-1.48%
Sino Land Co Ltd
-0.88%
Hang Lung Properties Ltd
+1.53%
Kunlun Energy Co Ltd
+0.66%
Bank of East Asia Ltd/The
-1.17%
China Mobile Ltd
-0.81%
-1.01%
Source: Bloomberg
Best Performers
Thu
Fri
I SSN 2226-8294
Sat
Sun
Source: AccuWeather
Population Many Thai firms are investing heavily in healthcare for the aged. In a country where the working age population will decline this year - a first among the emerging economies of Southeast Asia. Page 11
2 Business Daily Wednesday, August 17 2016
Macau Trade
China-Macau trade plummets in H1
T
otal trade value between Macau and Mainland China plunged by 21.3 per cent year-on-year to US$1.68 billion (MOP 13.4 billion) for the first half of the year, due to both of the country’s exports and imports to and from the city notably decreasing. The latest official data, released by the Chinese Ministry of Commerce, shows that the Mainland’s exports to the Special Administrative Region dropped by 21.3 per cent year-onyear to US$1.6 billion during the first half, while its imports from the city were down 22 per cent year-on-year to some US$80 million. For June alone, trade value between the two parties posted a year-onyear decrease of 20.8 per cent to US$310 million. The amount also represents a decline of 6.2 per cent month-on-month. Of the total, China’s exports to
Macau accounted for US$300 million in the month, which plunged by 20.1 per cent year-on-year, or 6.1 per cent month-on-month. In addition, the country’s imports from Macau plummeted 25 per cent year-on-year,
or 6.8 per cent month-on-month, amounting to some US$10 million. In the first six months of 2016 Mainland authorities greenlighted 169 investment projects of local firms in the nation - a fall of 20.3 per cent
year-on-year. Nevertheless, total actual capital employed for these projects rose by 5.4 per cent yearon-year to US$540 million. As at the end of June, the country accumulatively approved 14,567 projects with investment by Macau companies, attracting total capital of US$13.3 billion or 0.8 per cent of the country’s total foreign investment. Meanwhile, Mainland Chinese companies invested US$380 million in the city’s non-financial businesses during the first six months of the year, the Ministry said. For the same period seven local projects were contracted by Mainland companies, worth a total of US$450 million. Accomplished sales of these projects totalled US$830 million. A total of 118,772 Mainland Chinese labourers were registered as working in the Special Administrative Region as at the end of June. K.L.
Land
Public interest needs to be prioritised Chan Meng Kam: Dealing with the issue of land management in the city requires transparency. Annie Lao annie.lao@macaubusinessdaily.com
Legislator Chan Meng Kam criticised the local government for avoiding answering enquiries on the city’s land issues - including the land exchange of the Iec Long Firecracker Factory, a one hundred metre high rise residential project in Alto de Coloane, and Zone C and D in Nam Van - during a meeting at the Legislative Assembly held yesterday. Chan said that the management of land in the city is chaotic and that local residents have a strong distrust of government policy. He emphasised that the government needs to increase transparency in the management of land in the territory. “The government should act on the new Land Law to grant the use
of land to developers; at the same time the government should set up a land database to be viewed by the public,” Chan added. Chan additionally criticised government officials for not giving top priority to the public interest regarding the land issue and only using the rights for others’ benefit. Neither does Chan agree with the urgent procedure posture held by the government in explaining the new Land Law because the land issue relates to public interest. There will only be a need to modify the Land Law if a social consensus is achieved, Chan said.
for help and advice. The number of enquiries submitted for help had increased by 92 per cent. Housing problems headed the concerns of local residents, accounting for 254 cases. In his work summary report Si paid special attention to the incident of Pearl Horizon and questioned how the government can protect the rights of Pearl Horizon residents, noting that until now there has been no clear direction from the government. “The developer only wants to make
a fortune from the project regardless of the legal rights of residents,” he commented. Si also questioned the government’s lack of an accountability mechanism. “Government officials don’t act upon their duties. They always use lengthy administrative procedure as an excuse to delay work,” he said. The government had previously announced five plots of land located opposite the Macau International Airport as being reserved for the development of public housing, and Si suggested that now is the right time to re-open the application procedure to members of the public who need public housing.
Prioritising public interest
Legislator Si Ka Lon said during the meeting that a total of 4,861 complaints had been filed by the public
Construction
China State Construction’s local business soars Hong Kong-listed builder China State Construction International Holdings Ltd. saw its business in Macau surge for the first half of the year despite the economic downturn. According to its filing with the Hong Kong Stock Exchange, the company’s operating profits in the Special Administrative Region soared by 133.4 per cent year-on-year to HK$262 million (US$32.8 million) for the first six months, while total revenue totalled HK$4.2 billion, a year-on-year increase of 121.8 per cent. The builder is contracted for a number of casino/resort projects in
Cotai, including the Wynn Palace, MGM Cotai and The 13. During the period, the company posted a net profit of HK$2.3 billion, which grew by 20.4 per cent yearon-year, while total revenue from all business segments increased by 10.7 per cent year-on-year to HK$18.9 billion. In addition, the Hong Kong-listed firm said in the filing that new contracts in Hong Kong and Macau totalled HK17.7 billion for the first half. ‘Key projects under construction were under smooth operation,’ it added. It expects the prospects for the construction industry in the two Special Administrative Regions to remain ‘promising’ despite the economic slowdown. ‘Facing many challenges in the Hong Kong and Macau economies, the governments will steadily promote infrastructure construction, livelihood-related projects and housing supply to boost the economy and improve people’s livelihood. As such, the prospect of the construction industry remains promising, but will still face risks of labour shortage and political bickering,’ the company believes. K.L.
IC
Iec Long Firecracker Factory slated for heritage designation Ung Vai Meng, Director of the Cultural Affairs Bureau yesterday expressed the Bureau’s approval regarding a report by the Commission Against Corruption (CCAC) upon the Iec Long Firecracker Factory land swap case. Mr. Ung commented on the Bureau’s intention to speed up the application for the factory to be classified and listed as heritage, noting that enquiries regarding the ownership of the factory have been
sent out to other departments. The director said he was glad to learn that the importance of heritage c o n s e r vat i o n i s i n c r ea si n g l y acknowledged by the general public despite differing views on the conservation projects operated by the government. Iec Long Firecracker Factory was part of the biggest ‘land swap’ issue, with the CCAC report investigating the issue released in July. C.U.
Business Daily Wednesday, August 17 2016 3
Macau
ATM
ATM world record 303 ATMs per 100,000 adults - Hello, Guinness Book of World Records? João Paulo Meneses newsdesk@macaubusinessdaily.com
A
ccording to the annual report published by the Monetary Authority of Macau, the MSAR hosted 1,299 ATMs as at the end of 2015. This is an increase of 165 Automated Teller Machines than the previous year, which also puts Macau on the map as the place in the world with the most ATM’s
per 100,000 adults. The last available data on worldwide ATM numbers is from 2014. During 2014, Macau boasted nearly 225 ATMs per 100,000 adults – amounting to one of three best scores in the World Bank ranking regarding money distribution machines. However, if you divide the 1,299 machines by the local adult population of 393,651 (according to the 2011 Census) the number rises to a total of 303 ATM per 100,000 adults. In the following year, 2015, the MSAR was home to 219 ATM machines per 100,000 adults, which means an increase of almost 500 per cent in the last ten years. If we
take into account only the last five years the number increases almost 80 per cent. In the first place ranking of the last World Bank report sat the Republic of Korea – with a total of 291 ATMs per 100,000 adults. Additionally, at the top of the ranking is Canada with 222 ATMs per 100,000 adults, plus the tiny enclave of San Marino (in Europe) with 213 per 100,000 adults. Of the European countries, Portugal took first place with 205. Macau was ranked behind Japan with 127, Russia with 184, France
with 108, the United Kingdom with 129, and the United States with 164 in 2004 (all numbers per 100,000 adults). Singapore, with only 59 ATMs per 100,000 adults, occupies the low end of the spectrum. With regard to total ATMs, the country with the most was Brazil, with 159,898 of the machines. The data shows that Africa is by far and away the continent with fewer ATMs available - with countries such as Chad, Ethiopia and Sierra Leone statistically having 0 ATMs per 100,000 adults.
Number of Banks and ATMs Nº of Banks Nº of ATMs
2005 26 219
2011 27 737
2012 28 866
2013 28 1081
2014 28 1134
2015 28 1299
2005-2015
2011-2015
+ 493%
+76%
SOURCE: AMCM, including locally incorporated banks and branches; excluding Caixa Económica Postal and non-banking credit institutions
4 Business Daily Wednesday, August 17 2016
Macau
F&B
Hungry for opportunity More non-local visitors at food expo. Annie Lao annie.lao@macaubusinessdaily.com
S
ome 50 food and beverage vendors from Macau, Hong Kong and Taiwan joined the 7th Asia Expo & International Food Culture which started on Saturday at the Convention and Exhibition Centre of The Venetian. The event, organised by AVI Exhibition Ltd., witnessed a slight increase in the number of participants when compared to its previous edition, held between April 29 and May 1. Total sales from the event were up compared to the April edition, with
more visitors and tourists attending, partly due to the 11th Worldwide Chinese Life Insurance Congress and the 2016 International Dragon Award Annual Conference starting on Sunday, commented Vivian Ng, manager of AVI Exhibition Ltd. Half of the participants are new to this event and mostly come from Macau, she pointed out. “Previously, we had vendors mostly from Hong Kong. However, this time Hong Kong’s Food Expo was held during the same period as the one in Macau, from August 11 to 15,” Ng explained. The organiser said the food expo
event takes place two to three times per year.
More non-local visitors
This edition of the event has attracted more visitors than the previous one as it only focuses on food and beverage sales, Rammy Chow, owner of CC Mochi in Hong Kong, which primarily sells Japanese rice cakes, told Business Daily. Chow said the previous event involved a more diverse spread of nonfood and beverage products. Gloria Wong, general manager of TOTAL SWISS in Macau, a multinational enterprise which sells nutritional products, told Business Daily that most of the visitors were participants in the other events being held in the integrated resort complex rather than people coming from outside. This differs from the event when held in the neighboring SAR “where most of the visitors come from outside of the event,” Wong commented.
Opportunity in Macau
Mr. Chow noted that although the cost of selling food is more expensive in Macau when compared to Hong Kong due to logistics such as cost of materials, rent and staff wages, Macau people are more likely to spend money on food than those in Hong Kong. “Macau people consider that spending MOP15 on a dessert is not expensive,” Mr. Chow said. Chow opened his shop in Macau this month. Mrs. Wong also noted that Macau people have a high awareness of health and wellbeing and that they are more open to purchasing healthy products – leading her to seize the opportunity to open the first TOTAL SWISS store in Macau on Sunday. “We have a lot of Macau people coming to Hong Kong to buy our products so we spotted the potential market in Macau,” Wong said.
Food focus
Tinna Ho - owner of Lakeport Party Paradise - told Business Daily that the food expo has been successful as it targets the promotion of food and beverages, unlike similar food expo events held in Macau before, which also offered non-food products.
“We have joined similar food promoting events before, including the Macau Food Festival, but not all of the events were successful,” Ho said. Her catering business offers a onestop service for catering and corporate teambuilding activities and functions. She commented upon the lack of a channel to provide feedback for privately run food events, noting that for food expos organised by the local government there’s commonly a platform for participated vendors to collect feedback following the completion of an event. Ho says that she hopes that private food event organisers will create this feedback platform in the future. “One similar food event run by a private organiser, A Plus PR & Advertising company, was also held in the Convention and Exhibition Centre at The Venetian in June of this year but the so-called ‘Food Expo’ hosted only three eateries. It promoted not only food but other products so people came to the event not for food but for other things,” commented Ho.
Corporate chance
The dip in the city’s economy has created more business opportunities for the catering company run by Ho, as corporations have spent more money on teambuilding activities in order to retain staff, she notes. “We have more companies coming to us. They’re willing to spend money on staff teambuilding activities and our orders have increased by 20 to 30 per cent year-to-year due to the economic downturn,” she said. Ho also commented that the casino operators offer stable business orders to her company. “They’ve usually set up a certain amount of money to spend on staff teambuilding,” she added.
Exchange platform
The event acts as a platform for cultural food exchange between different regions for the participating vendors as Ms. Ho says her company has benefited from the event in that she learned about different food cultures, helping expand her business network. “Food in Taiwan tends to have a stronger flavour and the Taiwanese put less emphasis on food presentation. This is unlike Hong Kong, where people put a lot of emphasis on food presentation,” she explained.
Business Daily Wednesday, August 17 2016 5
Macau Trade More than 1,000 products from 84 suppliers have been promoted so far in the Glass House
Gastronomic adventures in the Glass House Local food and beverage suppliers consider the Portuguese-speaking Countries Food Products Exhibition Centre a worthy promotional tool but still want to see more food tasting initiatives in future Nelson Moura nelson.moura@macaubusinessdaily.com
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ocal food and beverage suppliers tell Business Daily that so far the Portuguese-speaking countries Food Products Exhibition Centre has had a good effect in the promoted products but still want to see more food tasting initiatives. The exhibition centre in the Tap Seac Square Glass House - open since March 31 as an initiative by the Macau Trade and Investment Promotion Institute (IPIM) to promote food and beverage products - displays natural foods, snack foods, canned foods, coffee and alcoholic beverages from various Portuguese-speaking countries. IPIM representatives say that during the four months the Centre has been open, some 1,000 products from seven Portuguese-speaking countries have been exposed there, with Portugal and Brazil being the most represented. A total of 84 suppliers – with 20 from the territory - have been invited to showcase their products by IPIM, following registration on the online Economic and Trade Co-operation and Human Resources Portal between China and Portuguese-speaking Countries. According to IPIM Executive
Director Gloria Ung although the official date for the Centre closure is August 27, a possible extension of the exhibition could be on the cards after evaluation of the initiative’s results. “We will talk to associations and suppliers, try to get more products and people involved, and then discuss if there might be another phase of the initiative, and maybe prolong the Centre exhibition,” Ms. Ung told Business Daily
No try, no buy
Although suppliers applaud the initiative, some critics complained to Business Daily that tastings were not allowed of the products in the location, limiting the willingness of buyers to purchase the products. Currently, from Thursdays to Saturdays the Centre allows a supplier to present tastings of its products but Carlos Rodrigues, General Manager of F. Rodrigues (Suc.Res) Lda., Limitada, a supplier of Portuguese food products, believes tastings should be allowed for visitors every day. “It’s a good initiative but I think they should provide not just product exposition but also tasting. Just seeing is not enough; if you’re interested in a food product you’ll want to taste it and see if you like it,” said Rodrigues. Most of the displayed products are intended for business-to-business
Fernando Marques Gin in Exhibition
sale, with a QR code system - a machine-readable optical label that contains information about the item to which it is attached - created by IPIM for visitors to gather more information on a specific product. After a WeChat QR Code scan the visitor is directed to the supplier’s website, where data on the product characteristics and price is provided and in some cases the visitor can purchase the item online. However, Rodrigues thinks there is “no point” in having a scanning system if the visitor can’t try the product itself, since “no-one will buy the product without trying it.” Another point the veteran food and beverage supplier mentioned was the location of the Centre itself, which he considers too far from the more tourist areas of Macau. “Tourists don’t really know the area [Tap Seac Square], so I think they could promote the location and how to get there,” he suggested.
Using the square
Portuguese products
Fernando Marques has conducted business in Macau for almost twenty years as Executive Director of CME, a distributor of products from Portuguese-speaking countries, and has been involved in many IPIM initiatives in the MSAR and Mainland China. Among other products he has displayed in the Centre are frozen meat, fish, butter, coffee, and Portuguese wines. He is currently presenting Portuguese gin in the Centre until Saturday. Marques told Business Daily that he believes the Centre has had a positive effect upon the sales of the
products he promotes and that it has even helped him make contact with e-commerce companies from Mainland China who visited the exhibition. “I think the marketing and promotion involved has been good for business, although sometimes it’s hard to see if the success of a product exposed was because of the advertising or the quality or novelty of the product itself,” Marques told Business Daily. As a suggestion, Marques thinks IPIM could use the space in front of the Centre to create a tasting fair or a festival where all the involved suppliers’ products could give residents a taste.
Not a tasting centre
Gloria Ung has responded by saying that the Centre was designed as “an exhibition place, not a tasting area” and that allowing the daily tasting of 1,000 products would be impractical and create an unnecessary waste of the food products. “If an exhibitor product is crabs or meat, something that needs to be cooked, it would be complicated, and what if people wanted to try a wine. Should we specially open the bottle?” she asked. In terms of the Centre’s location, the IPIM Executive Director says exhibitors’ products get a lot of exposure - not just in the Centre but also at local fairs such as the Macao Franchising Expo, and in local hotels like the Ritz, Emperor and Beverly. “We’ll always listen to suppliers’ opinions and think of ways to improve product promotion and how to collaborate,” the IPIM Executive Director told Business Daily.
“It’s a good initiative but I think they should provide not just the product exposition but also tasting. Just seeing is not enough; if you’re interested in a food product you’ll want to taste it and see if you like it.” Carlos Rodrigues, General Manager, F. Rodrigues (Suc.Res) Lda., Limitada Centre exhibition area
6 Business Daily Wednesday, August 17 2016
Macau Society
Opportunities for Macau film production Filmmakers from Guangdong, Hong Kong and Macau exposed to funding and information exchange opportunities. Cecilia U cecilia.u@macaubusinessdaily.com
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total of 25 film projects c r eat e d b y r e g i o n a l filmmakers were introduced at the opening ceremony of the 2016 Guangdong-Hong Kong-Macao Film Production Investment and Trade Fair, held in the Regency Hotel’s Banquet Hall yesterday. Of the 25 projects, seven are local Macau productions. The filmmakers were joined by over 50 investors from the three
regions as part of the fair’s initiative to instigate film creation in the region. By providing a platform for exchanging information and pairing services between filmmakers and investors from the three regions, the fair hopes to create more investment opportunities and aid the development of film production in the three regions, said Ung Vai Meng, Director of the Cultural Affairs Bureau (IC). “Guangdong has 900,000 people [going to the cinema to] watch films […] it will be advantageous for Macau
filmmakers to get into the Guangdong film market,” he commented. “Three local film projects were funded by Mainland investors in the first edition of the Fair,” the Director noted. The IC head also stated that his Bureau offers a Support Programme for the Production of Feature Films for local filmmakers disbursing financial support as well as professional advice from reputable filmmakers. This year, the Fair welcomed more than 40 investors from neighbouring Guangdong Province, with around 20 attracted without having received direct invitations from the Fair’s organizers.
Opportunity knocking
Mr. Wong Kong Po, a director from Kuan Nei Film Guild in Macau and one of the Macau filmmakers
participating in the Fair, expressed the opportunities presented by the fair regarding networking with other filmmakers and investors from Hong Kong and Guangdong. The local film director also indicated that the market for film production in Macau is still at a very early stage. “The film market in Macau is relatively late and small but there are quite a number of works produced locally therefore I believe the productions will improve as long as more new productions keep on coming out,” Mr. Wong opined. He suggested that the government provide an online platform where local filmmakers can post their works for local audiences as well as from other regions to help in increasing the awareness of local film culture. He also mentioned the support offered by the government in assisting local filmmakers attend similar fairs held in other places. An investor from Guangdong also attending the Fair mentioned that investment in filmmaking is a growing trend, as the film industry in Mainland China has become increasingly popular in recent years. The investor came to the Fair to look for productions that had similar traits to popular films in the current market but he also commented that he additionally considers the potential of the production to create a positive impact upon society. The investor discovered most works from Macau are small budget productions and expressed interest in learning more about them. The Fair, co-organised by the Cultural Affairs Bureau, the Hong Kong Film Development Council and the Guangdong Administration of Press, Publication, Radio, Film and Television, is now in its third year.
Banking Local law firm MeMD involved in bank deal
Novo Banco Asia sale unrelated to negative results The Novo Banco Asia sale agreement wasn’t due to recent negative results, it is claimed, although the process might impact its future performance, an inside source told Business Daily Nelson Moura nelson.moura@macaubusinessdaily.com
The Novo Banco Asia S.A. (Novo Banco Asia) sale agreement wasn’t due to the Macau unit’s recent negative results, it is claimed, although the process might impact its future performance, an inside source has told Business Daily. Last week Portuguese banking group Novo Banco S.A. (Novo Banco) agreed on the sale of its Macau unit to Hong Kong incorporated brokerage firm Well Link Group Holdings Limited. Novo Banco Asia posted losses of some MOP551,000 (US$68,965) for the second quarter of 2016, registering an accumulated MOP23.18 million in revenues and MOP23.73 million in expenses in the period between April and June of this year, as reported by Business Daily. However, according to an inside source at the ban the deal wasn’t due to the recent negative results “since the unit has always had positive results until last year”. “The agreement is part of the Novo Banco objective to sell a group of international units that are not part of the core business,” the source said. Novo Banco Asia generated a total of MOP4.6 million in profits last year. Business talks were brokered by Haitong Bank S.A. (Haitong), an investment bank from Hong Kong.
In 2015, Haitong purchased Espirito Santo Investment Bank (BESI), the investment unit of the bankrupted Portuguese bank Banco Espirito Santo (BES) - later transformed into Novo Banco.
Future impact
According to the same source, since the sale has yet to be completed or authorised no changes to the actual
structure have yet been made, with any changes in the hands of future investors or owners. The value of the purchase also has yet to be revealed and the deal is now pending approval by the Portugal Central Bank and the Monetary Authority of Macau (AMCM). “Only if the deal is approved will the involved investors decide the business plan and business model, and the people they wish to work with,” Business Daily was told. However, according to the source the moment the Macau unit entered into the purchase process “the [unit’s] structure was conditioned by it” and might impact its future results.
Local law firm involved in deal
Macau general law and notary MdME has collaborated with Portuguese law firm Morais Leitão, Galvão Teles, Soares da Silva (MLGTS) in consulting work for Novo Banco in the sale of its Macau unit, according to a bank release. Portuguese firm MLGTS has created a multidisciplinary Asian Team that works directly or in close co-operation with MdME in legal support for clients with interests in Asia, especially those from Portuguese-speaking countries. MdME has confirmed to Business Daily that it performed an “assessor” role in the deal in collaboration with MLGTS but that details of the deal and amounts involved were confidential. N.M.
Business Daily Wednesday, August 17 2016 7
Macau Gaming Analysts: Pac On ferry terminal opening delay might affect gaming revenue
On the cusp of a comeback Gaming analysts predict gross gaming revenues might fall in August by as much as 4 per cent yearon-year . . . or register the first revenue increase in more than two years. Nelson Moura nelson.moura@macaubusinessdaily.com
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aming analysts predict that Macau gross gaming r ev e n u e s i n A u g u s t could fall as low as 4 per cent year-on-year or register the first revenue increase in more than two years. Delays to the Pac On ferry terminal opening were considered to potentially have a negative effect on gaming growth. According to Wells Fargo analysts’ estimates Macau gross gaming revenues might decrease 4 per cent year-on-year, with predicted average daily revenues (ADR) of between MOP580 million (US$72.6 million) and MOP600 million.
Bernstein analysts had a more positive outlook, stating that after the negative results registered in July ‘gaming volumes have recovered marginally for both VIP and Mass, and VIP hold rate continues to be above normal.’ Gaming revenue for the month of July fell less than analysts’ expectations for the period, dropping 4.5 per cent year-on-year to MOP17.8 billion, marking the 26th consecutive month of decline in gross gaming revenues for the MSAR. However, Bernstein analysts consider that the month of August might register the first yearly increase in gross gaming revenues in more than two years. Bernstein predictions for August are set between a 3 per cent decrease
and a 1 per cent increase in gross gaming revenues, with an estimated turnout of between MOP18.1 billion and MOP18.8 billion. The analysts’ predictions consider that average daily revenues for August amount to between MOP580 million and MOP620 million.
Ferry terminal impact
According to Bernstein, the new Taipa Pac On ferry terminal will need six to nine months-worth of preparation work before it is operational, placing the estimated start date after February 2017 at the earliest and stretching to May of the same year For the analyst firm any delays to terminal operation start could have a ‘negative factor in Mass gaming growth and migration to Cotai this year’. The construction work on the new ferry terminal in Taipa has been completed and inspected, with the total cost coming in at MOP3.8 billion, while the government expects that it will open for service at the beginning
of next year, Business Daily reported previously.
Table shuffle at Wynn Palace
With Wynn Macau Ltd. confirming it will transfer 250 tables from its Wynn Macau property to Wynn Palace after the Gaming inspection and Co-ordination Bureau (DICJ) allocated 100 tables readily available upon opening, gaming analysts don’t predict a significant impact upon gaming revenues. ‘We believe the impact on Wynn Palace will not be significant in the neart erm,’ Bernstein analysts stated, adding that a similar or lower table allocation to Las Vegas Sands’ The Parisian, opening on September 13, will also have ‘a small or even zero’ impact.
MGM Cotai
In the wake of statements by MGM China CEO Grant Bowie, who stated last week that he expects the company’s Cotai property to have no VIP tables when it opens in the second quarter of 2017, Wells Fargo believes that the new property will struggle to be profitable. ‘Lacking contribution from the traditionally lucrative VIP segment, MGM Cotai’s mass revenues will need to be strong enough to justify the property’s high fixed cost base, while at the same time contributing to earnings,’ Wells Fargo analysts stated. Nonetheless, Bernstein analysts believes that the DICJ will grant MGM Cotai a table allocation of higher than 150 tables upon opening in 2017, with a possible increase in 2018.
Smoking ban impact
Wells Fargo addressed the recent postponement of the debate on the total smoking ban at the Legislative Assembly (AL) to October, predicting that the market will move to a full smoking ban in integrated resorts, a move they consider might ‘crimp VIP revenues by another 10-15 per cent when it happens’.
Gaming
Imperial Pacific: Out of the red in H1 The company credits its increased profits to casino operations in Saipan. Kam Leong kamleong@macaubusinessdaily.com
Casino operator Imperial Pacific International Holdings Ltd. expects the company to emerge from the red for the first six months of this year, driven by increased profits from its gaming business on the Island of Saipan. ‘The Group is expected to record a substantial increase in profit for the six months ended 30th June 2016 as compared with the loss for the corresponding period in 2015,’ it wrote in a filing with the Hong Kong Stock Exchange on Monday night. ‘The expected turnaround from loss to profit is mainly attributable to the operating profits generated by the Temporary Casino [in Saipan],’ the operator added. For the first half of last year, the casino operator registered an expanded loss of HK$168.9 million (US$21 million) compared to HK$19.6 million for the same period in 2014. In addition, its revenue dropped by 52.9 per cent year-on-year to HK$138.2 million. The temporary casino, officially launched last November, operated a total of 16 VIP gaming tables, 32 mass tables and 109 slot machines and electronic table games as at the end of March, according to a company filing in April.
The same filing indicated that its gross gaming revenue at the gaming property totalled US$186 million, suggesting an average of US$62.2 million per month, an increase of 36 per cent compared to the monthly average of US$45.7 million between
November and December last year. Meanwhile, the company’s VIP table games rolling amounted to US$13.6 billion for the first six months of the year, according to its previous announcements. But the casino operator had said in May that the VIP gaming operations on the island had already reached saturation, estimating business from the segment would stop growing before
the completion of its sister project, the Grand Mariana Casino and Hotel Resort. The new project - slated to open in the first quarter of 2017 - will provide more than 200 new gaming tables and 400 slot machines in addition to accommodation and entertainment facilities. Imperial Pacific’s gaming concession on the island, granted by the archipelago’s local authorities in August 2014, is under a local unit called Best Sunshine International Ltd. and carries a term of 25 years.
8 Business Daily Wednesday, August 17 2016
Greater China In Brief Politics
May sends Xi letter as U.K.-China ties hang on nuclear plant U.K. Prime Minister Theresa May has written to Chinese President Xi Jinping and Premier Li Keqiang to express her desire to enhance trade and strategic ties, her nation’s new Asia envoy said. Alok Sharma, on his first official visit to China since being appointed Minister for Asia and the Pacific last month, told Chinese Foreign Minister Wang Yi in Beijing on Monday that the U.K. attaches great importance to cooperation with Beijing, according to an online statement by China’s foreign ministry. Sharma called China an “important global strategic partner.” The message comes amid growing uncertainty over what was only recently touted as a “golden era” of bilateral relations. May last month postponed approval of the 18-billion-pound (US$23 billion) Hinkley Point nuclear power plant in southwest England -- the first to be built in the country in three decades. Aviation
Air China sees steady growth in passenger, freight traffic Air China said Tuesday that it had witnessed steady growth in passenger and freight during the first seven months of the year. The number of passengers jumped 7.2 per cent year on year to 55.4 million during the JanuaryJuly period, the airline said in a statement filed to the Shanghai Stock Exchange. In July alone, Air China carried 8.54 million passengers, up 6.7 per cent year on year. Freight traffic also rose steadily, hitting 977,200 tonnes in total volume during the first seven months, up 4.4 per cent from one year earlier. Last month, freight volume increased 3.2 per cent year on year to 142,500 tonnes. The company said that it had introduced four aircraft in July, and removed one plane from service. It had 607 airplanes in service at the end of last month, according to the statement. Policies
China making headway on Belt and Road Initiative Capacity, infrastructure and education cooperation with countries under the Chinaproposed Belt and Road initiative is progressing well, an official said. The total value of bilateral capacity cooperation has exceeded US$100 billion under the framework, said Zhao Chenxin, spokesperson for the National Development and Reform Commission (NDRC) at a news briefing. So far, Chinese companies have built 46 cooperation zones in countries along the routes, while China’s Ministry of Education has inked over 60 deals with those countries, according to Zhao. In 2015, nearly half of the international students in China came from countries along the routes, Zhao added. Nearly 400,000 foreign students from 202 countries and regions came to study in China in 2015, data showed.
Ride-sharing Authorities say the merger “cannot move on” if Uber and Didi fail to file a formal application
Uber-Didi’s Chinese mega deal expected to breeze past regulators The commerce ministry or other agencies are expected to nix such a high profile deal involving a bona fide national champion, legal and industry experts say.
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n alliance between the top two players in an industry often piques an antitrust watchdog’s scrutiny. Less so with the Chinese megamerger between the two largest ondemand ride services on the planet, Uber Technologies Inc. and local champion Didi Chuxing. Didi’s decision to buy out Uber’s Chinese operation creates a US$35 billion ride-sharing juggernaut holding sway over almost 90 per cent of the market. Yet the odds are slim that the commerce ministry or other agencies will nix such a highprofile deal involving a bona-fide national champion, legal and industry experts say. Helping the chances of a deal sailing through is the struggle by China to come to grips with a regulatory framework for the sharing economy, an industry with which it has little experience. While Uber and Didi have operated in the country for years, it was only last month that the government sai d th e y w o u l d m a k e th e m legal. Regulators are also likely to provide a generous classification of the company’s market: though it reigns supreme in ride-sharing, it’s only one of scores of players in the nation’s transport system. “It requires a very complicated and professional process to determine monopoly status. Revenue and market share figures usually do not show the full picture,” said Huang Yong, a senior member of an antimonopoly board of experts advising the State Council, China’s cabinet. “In Didi’s case, the regulators will need to draw a clear boundary of the market car-hailing apps are
operating in, which will require loads of sophisticated research.”
Anti-monopoly
The Ministry of Commerce’s Antimonopoly Bureau is the primary body for assessing the antitrust impact of deals but other national bodies can get involved. Ministry spokesman Shen Danyang told reporters August 2 that the merger “cannot move on” if Uber and Didi fail to file a formal application, while stopping short of saying it will investigate. Approval from the anti-monopoly bureau for a deal is typically needed for companies with more than 400 million yuan (US$60 million) in annual revenue each and more than 2 billion yuan in combined sales. A formal review could then take months. But if ministry regulators accept that Didi’s reported revenue falls under those thresholds, the anti-monopoly bureau can simply let the deal through. Didi may not meet that threshold because it only takes a cut of the money that flows through its platform from ride-sharing, and has avoided charging commissions on taxi hailing in its push to lure drivers and users. Didi and Uber China are also said to be loss-making, because of a massive outlay in subsidies. What also helps is that regulators have traditionally emphasized the policing of sensitive state-owned enterprises with millions of workers such as banks and steelmakers, rather than fast-evolving web businesses, said Richard Lim, managing director of GSR Ventures. An example was when the government handed out wireless licenses to rival carriers to curtail China Mobile Ltd.’s dominance of fourth-generation services.
Competition alive
A spate of recent technology-industry mergers have passed without incident: Meituan and Dianping were able to combine in group buying and food, while Ganji.com and 58.com Inc. got together in the classified ads business. “The antitrust in China tends to be focused on big traditional industries,” said Lim, an early backer of Didi. “In China, the anti-monopoly regulators are not very focused on technology.”
‘It requires a very complicated and professional process to determine monopoly status. Revenue and market share figures usually do not show the full picture” Huang Yong, a senior member of an antimonopoly board of experts advising the State Council’ If a merger goes ahead, government bodies are expected to keep a close eye on Didi with the ride-hailing service expected to gradually do away with subsidies once aimed at grabbing market share. Taxi companies -many backed by local governments -- have railed against the company’s rapid expansion, saying it threatens their drivers’ livelihoods. Yet few significant moves are made in China without first checking in with influential government bodies and garnering their tacit approval. Given the millions of users that could be affected, Didi is likely to have sounded out senior officials. As an additional deterrent to an investigation, the top post in the ministry’s anti-monopoly bureau has remained vacant since January. “Competition is very much alive in the market after the merger,” said Dong Xu, a researcher from Analysys. Given the speed with which the industry is evolving, even relative minnows like Yidao, backed by Chinese internet giant LeEco, or publicly-traded Ucar could grow their market share over time, she said. They “are all prepped up to grab market share from those who lower subsidies.” Bloomberg
10 Business Daily Wednesday, August 17 2016
Greater China M&A
Battle for China Vanke heats up as Evergrande raises stake Clare Jim and Donny Kwok
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battle for control of China’s largest home builder heated up after the country’s No.2 player raised its stake in China Vanke to nearly 7 per cent, sending Vanke stock higher with investors and analysts betting more share raids are in store.
The move by highly indebted but ambitious China Evergrande Group comes amid a rare public Chinese boardroom spat. Vanke is already fending off a potential bid from its biggest investor, financial firm Baoneng Group, which has built up a 25 per cent stake despite the developer’s protests. In a filing late on Monday, Evergrande said it had paid 5.46
billion yuan (US$823 million) for another 2.14 per cent stake in Vanke, becoming its no. 3 investor. The stake increase came nearly two weeks after Evergrande surprised investors by buying 4.68 per cent of Vanke for 9.1 billion yuan, citing the latter’s “strong results” as a reason for the investment. Officials at Vanke, worth about US$40 billion by market value, declined to comment on Evergrande’s latest move. Evergrande, which has a market capitalisation of about $10 billion and had total long-term debt twice that amount as of end-2015, declined to comment on whether it might increase its holding or seek representation on Vanke’s board. “Evergrande will buy more; from its track record it wouldn’t stop at a 6 per cent-plus stake,” said UOB Kay Hian analyst David Yang in Shanghai. “Getting involved in this (Vanke) battle will not do Evergrande much harm.” Yang said he expected Evergrande to seek seats on Vanke’s board at the latter’s next annual shareholder
meeting in March 2017. In a report earlier this month, JP Morgan analysts wrote that Evergrande, which has a track record of hostile takeover attempts, hoped to exercise influence on Vanke. Shares in both home builders rose on Tuesday after Evergrande disclosed a move that leaves only Baoneng and state-owned China Resources Group as bigger investors in Vanke. Vanke’s Shenzhen-listed shares surged 7 per cent to a record high, while its Hong Kong-listed shares rose more than 1 per cent, outpacing a flat benchmark index. Evergrande rose 1 per cent. Wang Shi, Vanke’s chairman, has publicly opposed Baoneng’s moves in the past, urging regulators to investigate the funding of its purchases of Vanke shares. Baoneng has declined to comment on Vanke’s request. Evergrande has spent over US$4 billion snapping up shares in companies this year, including taking control of smaller rival China Calxon Group, and earlier this month ratings agency Moody’s said its first Vanke purchase was credit-negative. Still, early this month it paid about $60 million to buy more of trading company Langfang Development Co Ltd, raising its stake to 15 per cent. Reuters
among China’s slowest-growing economies for more than two years. Liaoning posted a 1 per cent contraction in the first half of the year, while Heilongjiang expanded 5.7 per cent and Jilin 6.7 per cent, Zhao said. The country as a whole failed to reach overcapacity cut targets for both coal and steel in the first half,
Zhao said. As of July, about 95 million tons of coal capacity and 21 million tons of steel capacity were cut, less than half the fiscal year objective for both, he said. Progress is uneven among regions and areas with the most overcapacity worry that reducing it will erode economic growth, Zhao said. Bloomberg
National strategy
China plans targeted measures to lift hard-hit northeast economy The National Development and Reform Commission will outline 137 major initiatives and targeted policies to support Liaoning, Jilin and Heilongjiang. China’s main government agency for economic planning and reform plans to issue a three-year plan for boosting growth in the hard-hit northeastern rustbelt provinces. The National Development and Reform Commission will outline 137 major initiatives and targeted policies to support Liaoning, Jilin and Heilongjiang, spokesman Zhao Chenxin told reporters Tuesday at briefing in Beijing. “The three provinces have actively faced downward pressure, but have seen some positive changes,” Zhao
said at a briefing on Tuesday. Economic growth improved from the first quarter, but “sharp divergence is still seen among regions.” The region posted some of the country’s strongest growth rates when smokestack industries powered an unprecedented building spree. It now sags under the weight of excess capacity in steel and coal as the world’s second-largest economy shifts toward services, which accounted for more than half of output last year for the first time. The three provinces have been
Energy
EIA: China to become world’s 2nd largest shale gas producer by 2040 China is expected to produce over 20 billion cubic feet of shale gas per day (Bcf/d) by 2040, becoming the world’s second largest producer after the United States, said the U.S. Energy Information Administration (EIA) on Monday. The production will account for more than 40 per cent of the country’s total natural gas production by 2040, the EIA predicted. In the past five years, China drilled more than 600 shale gas wells and produced 0.5 Bcf/d of shale gas as of 2015, said the EIA in its International Energy Outlook 2016 and Annual Energy Outlook 2016. The U.S. shale gas production will stay in the first place as it is projected to more than double from 37 Bcf/d in
2015 to 79 Bcf/d by 2040, accounting for 70 per cent of total U.S. natural gas production, said the EIA. Canada is now the world’s second largest shale gas producer, producing 4.1 Bcf/d in 2015. Its shale gas production is projected to continue
increasing and will reach less than 10 Bcf/d, accounting for almost 30 per cent of its total natural gas production by 2040. Shale gas will also become the major drive of the world’s natural gas growth in the next 24 years, said
the EIA. The world’s shale gas production by 2040 is expected to quadruple the level in 2015 and reach 168 Bcf/d, accounting for 30 per cent of world natural gas production. The world’s natural gas production is expected to increase by about 62 per cent during the same period of time. At present, only the United States, Canada, China, and Argentina have commercial shale gas production. The EIA believes that with technological improvements, more countries, primarily Mexico and Algeria, will begin to produce shale gas. These six countries are projected to account for 70 per cent of global shale gas production by 2040, said the EIA. Xinhua
Business Daily Wednesday, August 17 2016 11
Asia In Brief Yangon
Myanmar invites tender for building overbridge highway linked to new int’l airport Myanmar’s Department of Civil Aviation is inviting tender from home and abroad for building an overbridge highway to link downtown Yangon with the Hanthawaddy International Airport under construction in Bago region, the local Voice daily reported Tuesday. The Hanthawaddy international airport will be the fourth international airport in the country and also the largest of its kind in Myanmar. The project, introduced to avoid traffic jam en route to the airport, will start from the point of Pazuntaung township and reach the airport through Parami road, No. 3 Highway and then Taukkyan township. The bridge project is to be completed in the same year of 2020 when the new Hanthawaddy international airport is to be put into service. Hanoi
Vietnam strives to have social insurance coverage of half of population by 2020
Aging Thailand working-age population to decline this year
Firms in ageing Thailand bet on demand surge for robots and diapers The government expects people over the retirement age of 60 will reach 20 per cent of the population by 2020, adding strain to an already stretched healthcare sector. Khettiya Jittapong and Pairat Temphairojana
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hai elderly care robot Dinsow can not only keep track of your medication and video-phone your relatives, but can also exercise with you and even entertain you with its karaoke skills. Its manufacturer, CT Asia Robotics, is one of many Thai firms investing heavily in healthcare for the aged in a country where the working-age population will decline this year - a first among the emerging economies of Southeast Asia. By the end of 2016, almost 15 per cent of Thailand’s roughly 68 million people will be over the retirement age of 60. The government expects the proportion to reach 20 per cent by 2020, adding strain to an already stretched healthcare sector.
‘By the end of 2016, almost 15 per cent of Thailand’s roughly 68 million people will be over the retirement age of 60’ “Doctors and nurses have responded positively to Dinsow because it helps them monitor patients,” said Chief Executive Chalermpon Punnotok.
CT Asia Robotics has got 1,000 orders from Thailand and Japan for the 85,000 baht (US$2,445) droid, he said. Thailand’s population swing toward the elderly comes as living and education costs rise along with economic development that has outpaced neighbours, according to the World Bank. Th e g o v e r n m e n t e st i m a t e s households spend almost of third of their income on caring for elderly relatives, and KGI Securities estimates healthcare spending will be as high as 7.0 per cent of gross domestic product by 2026 from 4.5 per cent in 2015. Thailand’s US$4 billion medicine and healthcare industry is therefore gearing up for a surge in demand for elderly care products, as well as for doctors, nurses and care givers, plus hospital beds, nursing homes and customised private housing. Housing developers such as Sena Development PCL and Nusasiri PCL have been adding features to cater to elderly tenants, such as ramps for wheelchair users, sliding doors, touch-screen light switches and emergency alarm systems. “Elderly clients make up about 10 per cent of our customer base,” said Sena’s Deputy Chief Executive Kesara Tanyalakpark. “That could easily rise to 15 per cent or more in coming years.” In personal products, diaper maker DSG International Thailand PCL has seen adult diaper sales grow 30 per cent this year, and expects doubledigit growth over the next five years, said its chief operating officer. “We see Thailand moving in the direction of Japan whereby the adult
diaper market will become larger than the baby diaper market, perhaps in 10 years’ time,” Justine Wang told Reuters. Another company seeing opportunity in the demographic change is medical equipment supplier Samaphan Health, which with Taiwan’s Apex Medical Corp sells mattresses to prevent bed sores as well as respiratory products to aid sleep. “Demand from wealthy clients is very strong,” said Managing Director Chinnakarn Samalapa. Sales of its elderly care products have grown 10 per cent annually since 2011 and will continue growing, he said. “They don’t mind spending to improve the quality of life for elderly relatives.”
Key Points Working-age population to fall this year for first time Healthcare spending to hit 7 pct of GDP by 2026 -KGI Firms invest heavily to cater to greying population With so much money being spent on care, the government is considering allowing reverse mortgages which would allow elderly homeowners to convert some of their home value into cash - an initiative that would further boost the market for goods and services targeting the elderly, economists said. But as the market booms, some seemingly essential products and services could take a little longer than others to benefit. Thai Riei & Elderly Care Recruitment Co opened in January but attracting customers is a challenge, said Facility Manager Pornchanok Jeanmpudsa. The reason, she said, was a cultural perception that nursing homes are places to abandon the elderly. Reuters
Vietnam is striving to have social insurance coverage of some 50 per cent of its population by 2020 and that of health insurance hits some 90 per cent, said Vietnamese Deputy Prime Minister Vu Duc Dam on Tuesday. Dam made the remarks at a conference held in the capital Hanoi, Vietnam’s state-run news agency VNA reported on Tuesday. According to Dam, health insurance currently covers over 79 percent of the population, while only 25 per cent of the population joined social insurance. The portion is too small due to existing mechanisms as well as residents’ habits, the official said. In Vietnam, around 12.4 million people joined compulsory state social insurance as of the end of July 2016. Seoul
South Korea posts trade surplus for 54 months South Korea posted trade surplus for 54 months in a row thanks to faster fall in imports than exports, customs data showed on Tuesday. Revised figure for trade surplus was 7.6 billion U.S. dollars in July, keeping a surplus trend since February 2012, according to the Korea Customs Service (KCS). Exports, which account for about half of the economy, declined 10.3 per cent from a year earlier to 41 billion dollars, while imports tumbled 13.6 per cent to US$33.4 billion. Shipments of computers and peripherals surged 48.6 per cent last month, but other major export items posted a decline. Exports of semiconductors, cars and oil products reduced 2.7 per cent, 12.7 per cent and 10.4 per cent respectively, with those for ships, auto parts and display panels sliding 43.1 per cent, 10. 7 per cent and 26.5 per cent respectively.
12 Business Daily Wednesday, August 17 2016
Asia India Balance sheets of bad debt curbed Temasek’s ability to extend loans
Temasek invests in ICICI as Indian banks move to clear bad loans Temasek added to its investments in India after outgoing Reserve Bank of India Governor Raghuram Rajan set lenders a March 2017 deadline to rid their balance sheets of bad debt.
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emasek Holdings Pte bought shares in ICICI Bank Ltd., India’s largest privatesector lender by assets, as the nation’s central bank pushes lenders to clean up bad debts that have weighed on earnings. The Singapore state-owned investor bought 2.55 million American depositary receipts of ICICI in the second quarter, worth US$18 million at the end of June, according to a Monday filing with the U.S. Securities and Exchange Commission. Temasek also acquired stakes in U.S. aircraft parts manufacturer B/E Aerospace Inc. and emerged as a shareholder in biotech firm Intellia Therapeutics Inc, which had its initial public offering in May. Temasek added to its investments in India after outgoing Reserve Bank of India Governor Raghuram Rajan set lenders a March 2017 deadline to rid their balance sheets of bad debt, which have curbed their ability to extend loans. The proportion of Indian banks’ stressed assets, which include restructured and soured loans, to total advances surged to a 16-year high of 11.5 per cent as of March 31, RBI data show. “While ICICI is clearly not immune to the asset quality pressures afflicting the Indian banking sector at present, the bank’s robust capital buffers and cleaner balance sheet relative to its public sector peers leaves it better positioned to take advantage of a potential economic revival in India,” Nicholas Yap, a Hong Kong-based credit strategist at MUFG Securities Asia, said via e-mail.
and mining, an amount that came on top of the 33 billion rupees it put aside to cover soured loans in the March quarter. Temasek had previously owned ICICI shares and had been reducing its stake in the Indian lender since 2009. It didn’t own shares before the purchase of the ADRs in the second quarter, according to Bloomberg data. ADRs in ICICI have lost 25 per cent over the past 12 months, and traded at US$7.33 on Monday. They were little changed in the second quarter.
Bank holdings
Temasek has trimmed its exposure to traditional banks in favor of holdings in media, telecommunications and technology firms in more recent
years, as it repositioned its portfolio to highlight long-term trends such as growing middle-income populations and transforming economies in countries such as China and India. Banks now make up less than 40 per cent of Temasek’s investments in China, down from 70 per cent, though Temasek remains invested in some of the nation’s biggest lenders. At the same time, the firm has diversified into sectors such as technology, consumer and real estate, according to the latest annual report. In India, which boasts the fastest expansion rate among the world’s major economies, Temasek’s assets include stakes in Godrej Consumer Products Ltd. and car manufacturer Mahindra & Mahindra Ltd., data compiled by Bloomberg show. Temasek’s annual review published last month also showed it had bought stakes in Glenmark Pharmaceuticals Ltd. as well as CarTrade, an online auto classifieds company. Money managers who oversee more
than US$100 million in equities must file a Form 13F with the SEC within 45 days of each quarter’s end to show their U.S.-listed stocks, options and convertible bonds. The filings don’t show non-U.S. securities or how much cash the firms hold.
B/E Aerospace, Intellia
The filing showed Temasek’s 2 per cent stake in B/E Aerospace was valued at $98 million as of June and its 790,527 shares in Intellia were worth US$17 million. Since its May public listing, Intellia’s shares are up 5.2 per cent. The filing also detailed Temasek’s increased stake in Alibaba Group Holding Ltd., valued at US$4.3 billion at the end of June. Temasek last month reported the first decline of its portfolio in seven years as its holdings were battered by last year’s market rout. The value of its assets decreased 9 per cent to S$242 billion (US$180 billion) for its fiscal year ended March 31. Bloomberg
Bad debts
ICICI last month posted a 25 per cent drop in first-quarter profit as provisions for bad debts rose. In April, the bank reserved 36 billion rupees for possible defaults by companies in sectors including cement, power
Shipping
Demand grows for sushi and other Japanese cuisine
Yamato to seek partners for Vietnam, Thailand businesses Chris Cooper and Kiyotaka Matsuda
Yamato Holdings Co., Asia’s biggest package-shipping company, is looking for partners to start a chilled
delivery service in Vietnam and Thailand as demand grows for sushi and other Japanese cuisine, according to people familiar with the plan. The company, which pioneered
the details haven’t been firmed up yet. It may also decide to start the business alone, they said. Yamato is expanding its operations overseas as it targets a growing middle-class in Southeast Asia, while the population shrinks in its home country of Japan. The company, which started the world’s first home cold delivery system in Japan in 1988, is the biggest provider of the service in the country and has already started the service in Singapore, Hong Kong, Malaysia, China and Taiwan. Hiroyuki Yamamoto, a spokesman for Yamato, said no decision has been taken yet on the expansion. The Tokyo-based company is adding partners in distribution overseas and agreed to take a stake in Malaysia’s GD Express in January to help grow its logistics business. Yamato got about 2 per cent of its sales of 1.4 trillion yen (US$14 billion) from overseas in the year ended March, according to the company. Bloomberg
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 business in Japan, wants to start ventures to provide services to restaurants and small businesses in the next few years, two people said, asking not to be identified because
Business Daily Wednesday, August 17 2016 13
14 Business Daily Wednesday, August 17 2016
International Tech Google launches video calling app Duo for Android and iOS
Google debuts new chat app to rival Skype, FaceTime The app runs on Wi-Fi and cellular networks, automatically switching between different types and speeds of connection and adjusting video quality. Alistair Barr
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oogle nailed e-mail with the 2004 introduction of Gmail. Now it’s the No. 1 form of electronic correspondence in the U.S. But as traditional e-mail falls out of favor with a growing sliver of the population, Google has struggled to make its messaging tools relevant or introduce new ones that resonate with younger users. Now Google is trying again with a new video chat application called Duo. The app works with mobile devices running Google’s Android operating system and Apple Inc.’s iOS. It runs on Wi-Fi and cellular networks, automatically switching between different types and speeds of connection and adjusting video quality. Duo also uses phone numbers, rather than a Google account or Gmail address, making it easier to call friends, family and other people already stored on smartphone contact lists. The company’s existing video calling and messaging app, Hangouts, requires a Google account which limited adoption, especially in emerging markets. Facebook Inc.’s
WhatsApp and Messenger, Skype -- now owned by Microsoft Corp. -- and Apple’s FaceTime used phone numbers to grow faster.
Simple way
A confusing array of communication options has held Google back. It has two e-mail services -- Gmail, which is the top e-mail service in the U.S. based on unique visitors, according to ComScore, and Inbox; three text offerings, Hangouts, Messenger and the upcoming Allo; and now two video chat services, Duo and Hangouts (which offers texting and video calls). This scattershot approach, and Google’s late start, is becoming more costly for the Alphabet Inc. division as messaging evolves from a simple way to communicate quickly into one of the next big technology platforms supporting digital commerce, advertising and new services powered by artificial-intelligence. “Google missed it because of the requirement that you needed a Google ID to communicate with others,” said Ankit Jain, a former Googler and executive at SimilarWeb Inc., which measures website and mobile app usage.
Hangouts ranked 84th among Android apps in the U.S. in July, bas e d o n i n sta l l s a n d u sag e, according to SimilarWeb. That l agg e d Fa c e b o o k M e s s e n g e r, WhatsApp and Snapchat.
Product rules
Nick Fox, a 13-year Google veteran, was tasked by Google Chief Executive Officer Sundar Pichai 18 months ago with fixing the sprawl. Soon after, his new team formulated a strategy and started building Duo and Allo.
“Google sees communication as this essential human need, whether that’s through text, a picture, calling someone or doing a video call” Nick Fox, Vice President of Google’s Communications Division “Google sees communication as this essential human need, whether that’s through text, a picture, calling someone or doing a video call.” Fox said in a recent interview.
This insight is a decade old and has guided Facebook’s strategy since its creation in 2004. Asian companies, like Tencent Holdings Ltd.’s WeChat and Line, have grown into tech powerhouses by connecting people through communication apps and offering related services on top of their networks. Skype, founded in 2003, became a leading video chat app on a similar foundation. So how is Fox going to catch up? Job number one is clearing up the bloated smorgasbord of Google communications services. Hangouts will be a workplace service, offering group video conferencing mostly via desktop computers and office laptops, Fox said. It will be integrated more with Google’s work software, such as Docs, Sheets and Slides, which will be easier to share.
Smart app
Duo is a mobile app and only allows one-to-one video calling, limiting it as a consumer offering. Allo, a messaging service coming out later this year, will also target consumers, Fox said. Google’s Messenger is a basic text system, part of a group of services provided to wireless carriers that work closely with Android. The second tactic: Bringing what Fox says is better technology to the new services to catch up with rivals. Duo constantly performs “bandwidth estimation” to understand how much video can be delivered. If Wi-Fi weakens, it switches to a phone’s cellular network. If a cellular signal drops as low as 2G, Duo will automatically cut video and maintain audio. Allo will use Google’s expertise in AI to automatically understand texts and provide useful suggestions. Google will also let third-party developers create chatbots that will interact with Allo users through messages. That’s already being tried by other companies such as Facebook and Microsoft, but Google has been working hard on AI for about a decade, so it may be more advanced. “First build a great product,” Fox said, repeating a common Google mantra. “Once you get people to love it, they will share it with friends and co-workers and it grows.” Google was late in other technology and caught up, Fox noted. Gmail started in 2004, more than six years after Yahoo Mail, but Google’s offer of mountains of free storage won over hundreds of millions of users. Google’s Chrome emerged in 2008 -- over a decade after Microsoft’s Internet Explorer -- and is now the most popular web browser partly because of speed and frequent updates.
Beyond tech
Better technology may not be enough to catch up, Jain said. WhatsApp and Snapchat offered something useful enough to persuade many people to switch away from their existing communication service where all their friends already were. Duo’s promise of video calling for everyone on Android and iOS is something that Hangouts already offers, but that didn’t move the needle enough, he noted. “It’s worth another shot, but having better tech can’t be the only thing,” Jain said. Bloomberg
Business Daily Wednesday, August 17 2016 15
Opinion Business Wires
The Phnom Penh Post The National Bank of Cambodia held a seminar on the state of the economy in the first half of the fiscal year on Saturday, forecasting 7.1 per cent GDP growth for the rest of the year. Speakers highlighted the strength of the Kingdom’s banking sector, which is a major boost to the economy. Bank deposits and loans reached 67 and 80 per cent of GDP respectively for the first half of the year, while inflation remained low at 2.8 per cent over the period. The local currency exchange rate stood at around 4,044 riel to the US dollar, they added.
Taipei Times Phison Electronics Corp, a Taiwanbased NAND flash controller supplier, plans to consolidate two overseas subsidiaries that have been embroiled in a financial scandal in a bid to enhance the company’s long-term development, a company financial statement said yesterday. Phison’s decision came after prosecutors and investigators raided company offices, as well as the offices of subsidiary Ostek Corp, in Hsinchu last weekend on suspicion that Phison inflated revenues and profits via three subsidiaries, including Ostek and two offshore businesses. Investigators said that the company had hidden fake transactions of US$40 million between Phison and its subsidiaries during the period from 2009 to 2014.
The Korea Herald Major South Korean firms are set to soon begin their annual process of hiring new employees, offering tens of thousands of jobs to fresh college graduates and firsttime employees, industry sources said Tuesday. Most large South Korean firms hold two hiring events -- one in spring and the other in fall - to accommodate those graduating in such seasons. Local industry leader Hyundai Motor Co. will be one of the first to launch the process as it is set to hold a job fair later in the month before it will begin receiving job applications between August 30 and September 9.
Thanh Nien News A Vietnam Airlines aircraft heading to Ho Chi Minh City on Monday had to return to Hanoi’s Noi Bai Airport after it hit a bird. Flight VN249 made the emergency landing about 20 minutes after departure. The crew had heard unusual sounds in the engine, the national carrier said in a statement. At the airport, technicians found a dead bird carcass in the engine, it said. “The problem has been identified as a collision between a bird and the aircraft,” a Vietnam Airlines representative said. All passengers were transferred to another aircraft to resume their journey to HCMC.
Shipping giant shows why we’re in deep water on deflation
I
t’ s a sign of stunted investor expectations when an 89 per cent slide in quarterly profit triggers a 3 per cent share price jump. In fairness, AP Moeller Maersk, the Danish conglomerate that also reported a 16 per cent decline in revenue on Friday, is doing better than many rivals in oil, shipping and logistics. At least it made a profit. Even so, a 2 per cent annualized return on invested capital during the most recent three-month period was just one-fifth of its target. By ousting CEO Nils Andersen in June and replacing him with Soren Skou, head of container shipping, the company has raised expectations of a swift turnaround. The new man has shown a relish for cost-cutting, though such zeal won’t be enough by itself and highlights a double-bind in which many industrial groups find themselves: they’re tightening belts furiously, but suffering as customers do the same. Skou declined to reveal any initial findings of his strategy review on Friday -- an update is due by the end of September. It seems probable he’ll tinker with the company’s structure. A separation or sale of the oil unit might help moderate a conglomerate discount and create value. But arguably that’s the easy bit. Maersk has plenty of cash already: its liquidity reserve stands at US$11.5 billion. What the company needs badly is a plan to deploy that capital in a manner that earns a decent return. That’s going to prove much more difficult. Global demand is weak and Maersk’s industries are beset by overcapacity, which creates a deflationary price environment. Meanwhile, collapsing interest rates keep alive the over-leveraged shipping and oil companies whose bankruptcy would otherwise ease the way for fresh growth elsewhere. Faced with this environment, Maersk’s only real
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Chris Bryant a Bloomberg Gadfly columnist
option has been to slash spending. Under Skou’s watch, the container shipping business has already cut unit costs by almost 40 per cent since early 2012. Cheaper fuel helps, but there’s also better capacity utilization and lower admin costs. Similarly, the oil business has reduced operating expenses (excluding exploration costs) by a quarter over the past year, meaning the company expects to break even with oil prices at US$40 to US$45 a barrel, roughly where it was trading Friday. But therein lies the rub. Maersk’s efficiency drive has helped it claim a bit more market share: container demand grew 2 per cent in the second quarter whereas Maersk’s volumes increased at more than three times that rate. However, that doesn’t by itself stimulate the necessary levels of confidence and sustained international demand. On the contrary, lower spending merely adds to the pernicious deflationary spiral at the heart of a fragile global economy. Ultimately, that’s bad for a conglomerate like Maersk too because the drought imports price deflation into other parts of its empire, such as drilling and freight-handling terminals. Of course, the recent wave of alliances and M&A in container shipping may eventually spur capacity rationalization and thereby support prices. But for now that excess -- caused by ordering far too many ships -- will continue to be a burden (even if prices have recovered a little). Ultimately, cutting gets you only so far. As with the economy, what Maersk really needs is growth. Over to you, Skou. Bloomberg Gadfly
Global demand is weak and Maersk’s industries are beset by overcapacity, which creates a deflationary price environment
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16 Business Daily Wednesday, August 17 2016
Closing Gaming
MGM Resorts increases stake in MGM China
MGM Resorts International has entered into an agreement to acquire 188.1 million shares in MGM China from Grand Paradise Macau Limited - a company controlled by Pansy Ho - as announced in a press release from the company yesterday. The share buy represents about 4.95 per cent of MGM China’s total shares. ‘As consideration for the MGM China shares, MGM Resorts will issue 7,060,492 shares of its company to a company owned by Ms. Ho, pay cash [of] US$100 million, and make a deferred cash payment of US$50 million over a maximum of five years, upon satisfying certain conditions,’ notes the release. Upon completion the transaction will increase MGM Resorts’
ownership of MGM China to 56 per cent, up from the former 51 per cent. Contrarily, Ms. Ho has also entered into an agreement to acquire 4 million shares of MGM Resorts from the Tracinda Corporation – which will increase Ms. Ho’s stake to 4.8 per cent. “This transaction further strengthens the relationship between the Company’s major shareholders and reinforces their collective commitment to MGM China and Macau,” stated Chief Executive Officer and Executive Director of MGM China Grant Bowie. The release notes that ‘Ms. Ho and Grand Paradise Macau Limited together will own 22.49 per cent vs. the previous 27.44 per cent position [in MGM China]. Ms. Ho will remain a major shareholder of MGM China and continue to play a significant role in our business.’ K.W.
Stock market
China State Council approves Shenzhen-Hong Kong stock link Sam Mamudi
T
he long-planned stocktrading link between Hong Kong and the mainland city of Shenzhen has been approved, a step toward opening China’s US$6.5 trillion equity market to international investors. Chinese Premier Li Keqiang announced the State Council’s endorsement, according to a statement on the body’s website. No further details were revealed.
Hong Kong Exchanges & Clearing Ltd., which operates the city’s bourse, said it will hold a press conference at 9 p.m. local time Tuesday, hosted by Chief Executive Officer Charles Li and Chairman Chow Chung Kong. SGX FTSE China A50 Index futures rose 0.6 per cent at 5:36 p.m. Investors had expected the gateway to Shenzhen to open last year, but officials held off as they grappled with the fallout from the summer’s US$5 trillion equity rout and January’s botched introduction of circuit breakers. The Shenzhen
Composite Index is down 12 per cent in 2016. “The Shenzhen link has been rumoured and eagerly awaited for some time,” said Sandy Mehta, CEO of Hong Kong-based Value Investment Principals Ltd. “Many of our foreign investor client base has been on the lookout for Shenzhen stock opportunities in the hope that they can access this new market through the link.” The news comes about two months after MSCI Inc. cited accessibility issues in deciding not to include
mainland-listed shares in its global benchmark indexes, a blow to government efforts to raise the profile of the country’s markets and increase the international importance of the yuan. Officials have been reviewing plans to expand the exchange link to Shenzhen after starting the stock connect program between Shanghai and Hong Kong in November 2014. Overseas investors can also trade in China through quota-regulated qualified foreign investor programs.
Buy
Foreigners have used about half their quota for buying Shanghai shares since the program began. Chinese traders have recently shown more appetite for investing in Hong Kong stocks, with net buying surging in June and less than 20 per cent of the 250 billion yuan (US$38 billion) quota left unfilled. Tuesday’s announcement had been telegraphed by officials from the mainland and the city. On Aug. 11 Charles Li told CNBC in an interview that the link with Shenzhen was “imminent.” Premier Li in March said the link would start this year. A person familiar with the matter said a year ago that China’s State Council had signed off on the plan. “While there aren’t any details yet, the fact that the State Council approved the plan does show some progress from just indication of support or preparation,” said Mari Oshidari, a Tokyo-based senior strategist at Okasan Securities Group Inc. “Markets are likely to take this positively.” Bloomberg News
Trade
Cash
Politics
U.K. advised to focus on U.S., China in post-Brexit trade deals
Vietnam plans to reduce half of cash use by 2020
China calls on Nepal’s factions to unite for stability
The U.K. should focus on nailing down post-Brexit trade deals with the U.S. and China and not spend too much time negotiating with India, Canada or Australia, according to a study by Global Counsel. Using a string of metrics, the London-based consultancy found that China, the U.S., Japan and Russia offer the greatest opportunities for commercial arrangements once Britain has left the European Union and so is able to liaise one-on-one with other countries. India was not among the top ten nations and Canada ranked 23rd, behind Taiwan, Global Counsel said. Gulf countries such as Saudi Arabia are also not worth spending too much time on. “U.K. trade policy will require ruthless prioritization,” Gregor Irwin, Global Counsel’s chief economist and a former U.K. government official, said in a report. The criteria used by the group to work out where to focus were the strength of economies, the height of trade barriers and whether U.K. investment already flowed there. How well British exporters already did was also taken into consideration. The reduction of trade barriers and the attempt to catch up with EU peers are the main challenges facing the U.K. in China. Links with the U.S. are already strong and worth intensifying, according to the report. Bloomberg
Vietnamese government has recently approved an e-commerce development plan for the 2016-2020 period, which targets that some 50 per cent of consumers in big cities will turn from cash to other forms of payment. The government also expects all public services and all bidding to be online, with the contract implementation process published in the national bidding website, local VietnamNet online newspaper reported Tuesday. Chiefs of several banks said the target of getting 50 per cent of residents in large cities to use non-cash payment methods could be achieved soon since online banking services like mobile banking are booming. The plan targets that some 30 per cent of Vietnamese population will shop online and spend US$350 each person annually by 2020. Meanwhile, business-to-customer e-commerce turnover is set to increase 20 per cent to hit US$10 billion by 2020, accounting for five per cent of the country’s total retail and services turnover, said the plan. Besides, all supermarkets, shopping malls and convenience stores will accept credit cards while around 70 per cent of telecom, electricity and water service providers will accept online payments from customers. According to the e-Commerce and Information Technology Department under Vietnam’s Ministry of Industry and Trade, as of 2015, some 48 million Vietnamese people used the Internet and around 35 million had smart phones. Xinhua
China’s Foreign Minister Wang Yi said on Tuesday he hoped all political factions in Nepal would unite and promote stability, after Nepal sent an envoy to Beijing to clear up questions over the future of bilateral agreements. Nepal’s Maoist Prime Minister Prachanda, 61, who led a decade-long insurgency that ended a feudal monarchy, replaced communist K.P. Oli this month amid uncertainty about a slew of deals made by Oli during a visit to Beijing in March. Those deals included permission for Nepal to use Chinese railways, roads and ports to trade with third countries, and signalled a shift by the landlocked Himalayan nation away from its traditional reliance on overland trade with its southern neighbour, India. Wang told the envoy, one of Prachanda’s trusted lieutenants from the insurgency period, Krishna Bahadur Mahara, that China’s friendship toward Nepal would not change even with the political shift. “China expects that all political forces in Nepal will strengthen unity and jointly advance Nepal’s peace, stability and development,” Wang said. He said China hoped “to carry out the consensus already reached by the two countries’ leaders” and deepen cross-border transport, trade and energy cooperation, the foreign ministry said in a statement. Mahara told Wang the foundation of bilateral ties was firm and would not change because of the new government, according to the Chinese statement. Reuters