Macau Business Daily September 23, 2016 by Business Daily

University of Macau improves its global rankings Education Page 7

Friday, September 23 2016 Year V Nr. 1137 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Joanne Kuai

www.macaubusinessdaily.com

Politics

Hidden outflows

Online bookings

Legislator criticises the lack of increase in the number of directly-elected legislators under the Electoral Law changes Page 4

China’s tourism spending shows that activities are being used to disguise capital escape Page 10

Marriott’s fight against major Internet travel agencies highlights the next hospitality sector war Page 16

IACM slammed

Audit report

Despite spending MOP98.67 mln in one year, the Civic and Municipal Affairs Bureau has been criticised by the Commission of Audit for its poor management of public recreational areas, resulting in safety hazards, and its failure to monitor outsourcing services paid for with public funds. Page 3

Mainland-Macau trade drops

New bid for Mong Ha

The Infrastructure Development Office (GDI) has received a total of six bids for the re-opening of a public tender for the construction contract of the Mong Ha Social Housing Phase 2 and the reconstruction of the basement area of the Mong Ha Sports Pavilion. The bid amounts range from MOP1.59 billion (US$199 million) to MOP1.83 billion. The construction project has been suspended for the past four years due to legal disputes between the government and the previous contractor.

Trade Total trade between Mainland China and Macau in the first seven months of this year decreased by 26 pct y-o-y, amounting to US$1.96 bln, according to the latest data released by the Ministry of Commerce of the People’s Republic of China. The slide is due to a decrease in the Mainland’s exports to the SAR. Page 5

Outward bound

Public works Page 2

HK Hang Seng Index September 22, 2016

23,759.80 +89.90 (+0.38%)

China Shenhua Energy Co

Worst Performers

China Petroleum & Chemical

+1.67%

Sands China Ltd

-1.61%

Li & Fung Ltd

-0.74%

Link REIT

+2.71%

Tencent Holdings Ltd

+1.61%

HSBC Holdings PLC

-1.43%

Hong Kong Exchanges and

-0.58%

China Mengniu Dairy Co Ltd

+2.58%

Sino Land Co Ltd

+1.58%

Ping An Insurance Group Co

-1.17%

Cathay Pacific Airways Ltd

-0.36%

Hang Lung Properties Ltd

+2.38%

Cheung Kong Property

+1.52%

China Merchants Port Hold-

-1.13%

Sun Hung Kai Properties Ltd

-0.34%

Kunlun Energy Co Ltd

+1.70%

AIA Group Ltd

+1.28%

Bank of China Ltd

-1.09%

Hong Kong & China Gas Co

-0.27%

+4.59%

26° 28° 26° 29° 27° 31° 28° 32° 26° 34° Today

Source: Bloomberg

Best Performers

Sat

Sun

I SSN 2226-8294

Mon

Tue

Source: AccuWeather

ODI Outbound direct investment by China’s financial institutions rose 26 per cent in 2015 to US$24.4 billion, government data shows. Of the total financial ODI, 90 per cent was invested in overseas financial institutions, with the rest going into non-financial firms, according to a report. Page 7

2 Business Daily Friday, September 23 2016

Macau Crime

‘Thunderbolt 16’ operation prosecutes 1,085

The Unitary Police Service (SPU) announced yesterday that a total of 824 cases related to drugs, organized prostitution and crossregional crimes have been filed, with 1,085 people being prosecuted, local broadcaster TDM reported. The two-month action codenamed

‘Thunderbolt 16’ aimed to crack down on cross-border organised crime syndicates and triads in the city. Assistant to Commissioner General of Unitary Police Service, João Augusto da Rosa, indicated yesterday that the results have met expectations, noting that local police will continue to co-operate with Hong Kong and Guangdong police authorities.

Construction

Mong-Ha project to resume next year GDI received six bids for the Mong Ha area renovations. Annie Lao annie.lao@macaubusinessdaily.com

he Infrastructure Development Office (GDI) yesterday received a total of six bids for the re-opening of a public tender for the construction contract of the Mong Ha Social Housing Phase 2 and the reconstruction of the basement area of the Mong Ha Sports Pavilion. The amounts of the bids range from MOP1.59 billion (US$199 million) to MOP1.83 billion. The previous contract was valued at MOP685 million. The new public tender includes the superstructure of the sports pavilion, which was not included in the previous tender. The construction project has been suspended for the past four years due to a legal dispute between the government and the previous contractor. Although part of the foundation works and basement excavation for the sports pavilion had already been finished by the previous contractors, the rest of the unfinished part is still required to be completed by the previous contractors.

Gaming

In order to avoid any further delays in the project, GDI has divided the construction project into different phases so as to target finishing the project on time. Therefore, GDI will apply daily penalties for any construction delays. “A daily penalty of MOP50,000 (US$6,259) will apply to the con tractors for unc ompleted foundation works and basement excavation for the sports pavilion, and MOP100,000 (US$ 12,517) for uncompleted covering part,” the chief construction officer of GDI,

José Lam Wai Hou said. GDI said that the lawsuit regarding the financial disputes with sub-contractors has been settled through a third-party’s mediation. The amount of money involved has not yet been disclosed but the details of the resolution will be published for the public to see later, according to Mr. Lam.

No change in the project

There will be no changes to the overall design and structure of the project, except relating to the poor design of ceramic tiles in the past. This detail

has been properly inspected and the chosen materials for decoration have been adjusted accordingly in order to avoid the same problem from happening again in the future, Mr. Lam explained. The project is expected to begin in the first quarter of next year, with a maximum period of 1,470 working days, according to GDI. The overall cost of the construction project will increase by two per cent due to inflation. According to GDI, the Mong Ha Social Housing Phase 2 will have 37 floors, occupying a total area of 87,500 square metres. The project will be built as a complex building, and will include residential buildings, community facilities, shops, a public car park, a bus transit station and a podium garden. The residential buildings will feature a total of 768 units, including 256 units with one bedroom and one living room, and 512 units with two bedrooms and one living room. In addition, the Mong Ha Sports Pavilion will have five floors, with a ceiling height of between 6 and 16 metres. The Pavilion will be built as a multi-functional sports centre, and will include a basketball court, a handball court, a 5-a-side football pitch, a badminton court, a squash court, a basement area car park and a tour bus station.

Fitch Ratings: 5 pct decline in 2016 gaming revenues

Promising future The rating firm expects slight growth in Macau’s casino revenues to appear in the coming years. Cecilia U cecilia.u@macaubusinessdaily.com

Fitch Ratings expects the city’s gaming revenue will post a five per cent decline this year, stating that ‘the market has found solid footing’. Although the gaming revenues of the city posted a 9.1 per cent decrease

from the start of this year till the end of August, Fitch stated that ‘the market should get a boost from the openings of Wynn Palace and The Parisian this year’. The firm also believes that mass market is, and will be, the major component of the recovery movement in the city’s gaming market. However, the rating firm holds the

view that the gaming market ‘remains susceptible to the macroeconomic and regulatory conditions on Mainland China’. The firm also pointed out that gaming developments in other Asia-Pacific countries could be potential competitors with the MSAR’s gaming industry, including the Mariana Islands, Vladivostok and the Philippines, all of which pay higher junket commissions due to the lower tax structures. However, Fitch remains positive about the longer term development of the city, due to pending infrastructure projects such as the Hong Kong-Zhuhai-Macau Bridge. In addition, the firm said the city’s gaming market remains intact since the Asia Pacific gaming market is still generally underpenetrated.

Positive outlook for future years

The rating agency predicts positive prospects for the city, indicating that the general gaming market expects mid-single digit growth for 2017 and

beyond, as well as high single digit mass market growth and static VIP growth - but the growth will happen only when the economy in Mainland China improves. ‘China must avoid a “hard-landing”, which is consistent with our sovereign team’s outlook, and other possible disruptions such as a large one-off depreciation of the yuan,’ the rating firm indicated in the handbook. With the background of growth in gaming revenue for the coming years, the rating firm believes that ‘Wynn and MGM stand to benefit the most from their respective projects, given their historically limited footprints on the Peninsula.’ The firm indicated that these two gaming operators will be allowed to target more of the mass market segment, given the additional table games and hotel rooms on Cotai. Nevertheless, the restricted number of allocated tables from the MSAR government will inhibit the two operators’ respective projects.

Business Daily Friday, September 23 2016 3

Macau Transportation

Contract on special taxi licence inked

posted yesterday. The taxi company will start its operations on April 1, 2017, providing no The Secretary for Transport less than five handicappedand Public Works, Raimundo Arrais do Rosário and Radio Taxi accessible taxis and 10 large-size taxis, as well as hail services by Macau Taxi Service Ltd. have telephone, mobile applications signed an eight-year notarised and online ordering, in order contract on the city’s special to cope with the demand for taxi operations, according to a Transport Bureau announcement special taxi services.

Society Audit Report: Macau’s recreational public spaces a risk to public health and safety

Not so leisurely The Commission of Audit has slammed IACM for poor management of public spaces and failure to monitor services paid for by public funds. Joanne Kuai joannekuai@macaubusinessdaily.com

totalofaroundMOP98.67 million (US$12.39 million) has been spent on the management and maintenance of Macau’s public spaces that include recreational facilities. Despite the amount spent, much of the equipment is damaged and poses a safety hazard, according to a report issued yesterday by the Commission of Audit (CA). The CA says it has been conducting inspections of the city’s gardens, parks and recreational areas that fall under the management of the Civic and Municipal Affairs Bureau (IACM) for the past two years. The watchdog identified broken glass doors of fire equipment, rusted exercise equipment, smashed tiles and ‘scattered garbage that have

been left for months without being attended’ . “It was found that a large number of facilities and equipment that were examined are in damaged condition and some of them pose security risks,” notes the report. “In total, of the 30 problems detected by the CA, 28 were not detected by the IACM even after their inspections, and 11 of them remained without improvement until March 2016, although the IACM had been

informed with written notice by the CA in April 2014,” it details. The Commission of Audit also points out flaws in the operation of a periodic inspection and repair mechanism, introduced by IACM in order to detect and track problems relating to plant and equipment and hygiene conditions in a timely manner. ‘The audit results showed that the mechanism was designed and executed poorly and security actions were not applied as established,’ states the report.

Poor supervision

According to the report, in 2015, IACM spent MOP98.6 7million, including MOP44.1 million for outsourced cleaning services. This does not include the money that the Environment Protection Bureau paid for outsourced cleaning services for public places.

“However, it was found that the bureau failed to supervise the contracted services suppliers appropriately and certain examined sites remained in poor hygienic conditions for a long period of time, thereby decreasing the willingness of citizens and visitors to use municipal facilities,” notes the report. “The CA also noted that the facilities and equipment damaged with immediate risk were not repaired in a timely manner and there were not even signs placed to remind the public, which prompted the risk of occurrence of accidents.” The Commission of Audit urged the bureau to repair or replace the facilities and equipment found to be in poor condition and that pose an immediate risk, and to improve the inspection mechanism to speed up the detection of problems. “Public services must proceed in a timely manner, and routine follow-up of the facility has to be conducted in order to prevent deterioration and reduce repair costs,” the report adds. In IACM’s response published in the report, the bureau acknowledged the criticism and promised to intensify the cleaning action and strengthen management practices.

4 Business Daily Friday, September 23 2016

Macau

ATFPM leaders

Politics Legislator criticises the lack of increase of directly-elected legislators in the Electoral Law changes

Public questions The Macau Civil Servants Association will conduct a public survey to evaluate the performance of the Chief Executive and his Secretaries, and to assess resident’s level of demand for more directly-elected legislators.

he Macau Civil Servants Association (ATFPM) will carry out a public survey questioning residents about their desire to have more directly-elected legislators and their views on the performance of the MSAR Chief Executive (CE) and his government Secretaries, the association leaders announced in a press conference today. “We will contact by telephone around 3,000 associates and nonassociates, with the survey taking around 30 days to execute, and the study of the results taking 15 days. We will then divulge the results in another press conference and we count with the help of the media and the population to make sure the results are communicated to the society,” stated ATFPM President and Director and directly-elected legislator José Pereira Coutinho, at the press conference. The survey will ask respondents to rate the performance of the CE and his five Secretaries on a scale from one to 10, and will ask respondents how many more directly-elected legislators for the Legislative Assembly (AL) - between two to four or more – they would like to see in the 2017 elections. “The last question is related to Hong Kong, since the city has 70 legislative assembly legislators, 35 are directly elected, 35 are indirectly elected and there’s no appointed legislators.

Coutinho: civil servants salary mechanism flawed When questioned on the statements by Secretary for Administration and Justice, Sonia Chan Hoi Fan that the government would cap the number of civil servants and delay any salary adjustments to next year, Legislator José Pereira Coutinho stated to Business Daily it was a “shame the Secretary prefers not to admit the serious problems existing today in the public sector”. The Legislator considers that not adjusting the current salaries of public employees will “create motivation problems in most public workers” with many employees “being exploited” and

Since next year there will be general elections, we want to know what the residents think of the issue,” Coutinho explained.

“It’s sad to see other associations using the Mid-Autumn Festival holiday to start campaigning and handing out cakes and even red envelopes with money, in a direct attempt to buy votes” Rita Santos, ATFPM President of General Assembly

Currently, the Macau AL consists of 33 members, with 26 elected members - 14 directly by the population and 12 indirectly through associations - and seven appointed by the head of the government. During the event, the ATFPM leaders

being forced to work after the age limit for public employees of 65 years “even after receiving their fund pensions”. “Even with many short work meetings with the Secretary asking to solve these problems to raise the morale and performance in short and long term from the workers, she seems to be opting for a cosmetic operation,” Coutinho told Business Daily. The ATFPM President and Director also stated that it was “immoral and incorrect” to force public workers to apply for budget housing at the same time as private sector workers, due to salary discrepancies between the two sectors.

expressed their “disappointment” that the proposed Electoral Law “hasn’t increased the number of directlyelected legislators in a proportional scale to the one registered in Hong Kong.” “It’s possible to see how the number of parties has increased since the MSAR has been formed, so there is a necessity to increase the number of legislators. With the survey we want to pressure the government that the new Electoral Law changes don’t satisfy the desires of the local population for universal suffrage,” Coutinho stated. Changes to the Electoral Law were approved in the AL in August, requiring alterations on: regulating electoral campaign activities; reinforcing the combating of electoral offences; improving the work of the electoral body; and improving the requirements for candidacy and the provisions for incompatibility of legislators. The Electoral Law will be the subject of further debate in the AL upon the re-starting of plenary sessions, with the government aiming for its enforcement before the 2017 legislative elections.

“With the survey we want to pressure the government that the new Electoral Law changes don’t satisfy the desires of the local population for universal suffrage” José Pereira Coutinho, ATFPM President and Director

A diverse crowd

Rita Santos, ATFPM President of General Assembly, will be the survey general coordinator, with assistance from the ATFPM Deputy Secretary General, Melinda Tam Leng I and General Meeting Chairman of the Power of the Macau Gaming labour group, Stephen Lau. “With my experience in performing surveys as a public employee and with the support of our experts, we will make direct questions, making it a more reliable inquiry. We will also make sure the young population and the casino workers will be included,” Santos stated. According to the ATFPM leaders, the

3,000 respondents will be taken from a database of 40,000 associates and non-associates, with 30 per cent of the contacts being public employees and the remaining 70 per cent being private workers and non-association members. According to Ms. Santos, the reason for the lower percentage of public sector employees, is due to their reluctance to respond to enquiries about government performance for fear of consequences from their superiors. “Of course it won’t be an exactly accurate portrayal of what society thinks, but I believe with 3,000 responses we can get close to knowing about 80 per cent of what the society thinks. It’s a simple question with a simple answer,” Coutinho stated.

Security issues

The ATFPM leaders also reiterated that the privacy and security of the database cellphone contacts and survey results would be assured, with Legislator Coutinho stating that the database system “is not connected to the Internet” and that only he and three ATFPM members had direct access to the information. “The same data base has information on life pensions, from the Portuguese government to many retired people living here, public and private sector employees, so we have to take special care while protecting the data. We only print the individual data, and it’s very hard for others to get access to the copies. We had some attempts of people trying to access the data in the past that weren’t successful, but there’s no issue now,” Coutinho stated.

No electoral list yet

When questioned if the association had already created an electoral list for the 2017 elections, the ATFPM leaders avoided a direct response, only stating that Ms. Santos hadn’t decided to make her candidacy official yet. “We have a lot of experience in electoral campaigns since 2001. If the residents think we’re still useful to them we will be [in the AL], if not we’ll be okay too. I won’t lie, I like being there kicking incompetent people, however we’re not obsessed with it,” Coutinho stated. Ms. Santos stated that in the last election the ATFPM “only had 16 more votes than Angela Leong’s electoral list” an amount she considered too small, adding that Macau didn’t have a “tradition of non-corrupt elections”. “It’s sad to see other associations using the Mid-Autumn Festival h oliday to start campaign in g and handing out cakes and even red envelopes with money, in a direct attempt to buy votes,” Santos stated.

Business Daily Friday, September 23 2016 5

Macau Trade

Mainland -Macau trade drops Total trading volume between Mainland China and the MSAR dropped by 26 pct y-o-y for the first seven months of the year. Annie Lao annie.lao@macaubusinessdaily.com

otal t ra d e b e t w e e n Mainland China and Macau in the first seven months of this year decreased by 26 per cent year-on-year,

amounting to US$1.96 billion (MOP15.7 billion / HK$15.2 billion), according to the latest data released by the Ministry of Commerce of the People’s Republic of China. Total exports from Mainland China to Macau amounted to US$1.87 billion, a decrease of 26.2 per cent. At the

same time, imports to Mainland China from Macau totaled US$90 million, indicating a drop of 23.6 per cent.

cent year-on-year, or 1.6 per cent month-on-month. In addition, the city’s exports to the mainland in July amounted to US$10 million, showing a decrease of 33.3 per cent year-on-year, or 7.2 per cent month-on-month.

July shows decreases

More Macau investments

I n J u l y , th e t o ta l a m o u n t o f trade between Mainland China and Macau was US$300 million, down by 41.9 per cent year-onyear, or a decrease of 1.8 per cent month-on-month. Exports from Mainland China to Macau in July amounted to US$290 million, indicating a drop of 42.2 per

Public Tender

Refurbishing pedestrian path in Taipa DSSOPT has opened a public tender for the revamping of a pedestrian path in Taipa. The Land, Public Works and Transport Bureau (DSSOPT) opened a public tender yesterday to renovate an 800-metre long pedestrian path along Estrada Governador Nobre De Carvalho, near the Garden of Tai Tam Hill. The bureau says they have received 10 bids, with asking prices ranging from MOP19.6 million (US$2.45 million) to MOP30.6 million. The construction will start from the Ouvidor Arriaga roundabout and extend to the end point of the do Istmo roundabout. The project aims to optimize the existing pedestrian path and includes constructing a cover over a corridor of the pedestrian path on the ground, laying tiles and setting up a one-metre high metal fence.

The covered footpath will connect Jardim do Lago and the footpath of the Taipa Houses Museums, as well as the facilities and attractions there. The whole construction project

will be divided into different phases and is expected to begin in the first quarter of next year. The maximum period of construction is 400 days. DSSOPT said that the project would not have much impact on the surrounding traffic during the construction period. A.L.

For the first seven months of this year, Macau invested in 197 projects in China, down by 17.6 per cent year-on-year. Th e act u a l ca p i ta l u s e d f o r these projects totaled US$550 million, down by 14.9 per cent year-on-year. In July, a total of 28 projects invested in by Macau enterprises were approved by Chinese authorities, indicating a month-on-month increase of 12 per cent. However, the actual capital used amounted to US$20million, dropping 83.2 per cent month-on-month. Until the end of July, there were 14,595 accumulated investment projects from Macau in China, worth US$13.34 billion. On the other hand, China invested in US$390 million worth of nonfinancial items in Macau for the first seven months of 2016. Until the end of July, the accumulated total investments totaled US$2.11 billion. Mainland companies were contracted for a total of 16 projects in Macau for the first seven months of the year, worth US$490 million and generating a total of US$990 million in turnover. As at the end of July, the total turnover of all contracts in Macau was US$13.1 billion. Furthermore, as at the end of July, 121,122 Chinese workers were working in the SAR, the Ministry said.

6 Business Daily Friday, September 23 2016

Macau Opinion

Pedro Cortés

Good investment Last week I had the opportunity to be part of one event in Portugal by the Association of Young Entrepreneurs of Macau, together with the Association of Young Macanese. Many opportunities were presented and contacts made towards investment and cooperation with Portuguese entities. After all these years, it seems that this summit of entrepreneurs considers that Portugal and Portuguesespeaking countries are essential for the expansion of the businesses they have in Macau. The idea of Macau as a platform, should once and for all leave the paper and become real actions towards achieving one of the political goals that Mainland China has set for its Special Administrative Region. Since 1999, there have been many speeches in line with these plans, however not too many investments have been made through Macau. Hopefully, the trend I saw recently at the events in Portugal will continue and we will have Macau and Macau linked businessmen finding opportunities in Portugal, as well as in Portuguese-speaking countries. Today, Portugal is a fashionable country. International magazines are listing Lisbon and Oporto as the best tourist cities. International awards from the tourism industry are in the news. Anyone who visits Lisbon understands why. Day and night the downtown areas of the biggest cities are full of people enjoying the food, the climate and, of course, the friendly people we are. There is an international momentum that can be seized by our local influential people. Truth be told, we have today in Macau, a Consul General of Portugal who has made, and continues to make, a great effort to promote Portugal and bilateral relations. We all hope that all these efforts are not in vain and that our young, and not so young, developers consider that if there is a natural place to invest, such a place is where a common language and culture exists. Personally, I do believe in this trend and that in the future we will have structural bonds for our Macau citizens and that the platform will exist in reality. It is a great investment and a way of positioning Macau in the international context. Let’s see what next month’s Forum of China and Portuguese-Speaking Countries can produce in this area. Pedro Cortés is a lawyer and frequent contributor to this newspaper.

Business Food products, tech, and real estate considered as the biggest interest for young local entrepreneurs

Scouting Portugal A delegation of young local entrepreneurs travelled to Portugal to research and network with the country’s main industries. Nelson Moura with Lusa nelson.moura@macaubusinessdaily.com

delegation of young Macau entrepreneurs has finished a trip to Portugal that focused on industry research and networking. The trip was a joint effort between the Macanese Youth Association (AJM) and Macau Youth Entrepreneur Association (AJEM), taking 22 young local entrepreneurs to Portugal between September 11 and 18. “The trip has fulfilled many objectives. Many of the association members had not been to Portugal before, so any contact is always positive,” Jorge Valente, president of the AJM and Vice-president of the AJEM, told Business Daily. The delegation was comprised of entrepreneurs from different business sectors, with the organisation making sure the members could visit companies and industries of interest to their own local projects.

Something for everyone

In order to know which companies and departments to visit and contact, the associations requested help from aicep Portugal Global, a Portuguese government business department that helps Portuguese companies to expand internationally. The first three days where spent in the northern Portuguese cities of Porto and Coimbra, where the delegation visited entities and companies such as the Portuguese National

Association of Young Entrepreneurs, the Sandeman wine cellars, online gaming development company Bet Fair, and the Pedro Nunes Institute. The remaining three days were spent in Lisbon, where the group visited entities such as Beta-i - a startup accelerator for new technologies and the Millennium BCP bank. “We also used feedback from people that registered for the trip, on what entities or companies they would prefer to visit and get to know. For example, if someone was from the wine sector, we visited a wine cellar, if someone worked in information technology (IT), we visited an IT company,” Valente told Business Daily. The AJM President also added that “Portuguese food products and real estate investments” were some of the areas that raised more interest.

Tech woes

Technology development was also one of the areas that the delegation members got to know better. “Maybe 30 or 40 per cent of the group had already been in Portugal and they considered the programme diverse enough for them to get to know areas they didn’t know yet, such as the Pedro Nunes Institute and the Beta-i. They considered it very interesting, not just in macroeconomic terms, but for their own local projects,” said Valente. The Pedro Nunes Institute was created by the University of Coimbra

in 1991 to promote innovation and technology transfer, having its own laboratories and investing in incubation and acceleration of technology-based start-ups. However the AJM President told Business Daily that although many of the entrepreneurs viewed certain tech ideas as “very interesting”, they considered that implementation in Macau would be challenging. “The [tech] area is very developed in Portugal with many quality companies and start-ups, and the most doubts were on how to link the two regions, how to take a good technology idea and adapt it to a different market, for example, replicating very successful online sales portals in Portugal in the Macau market. Local businessmen in the delegation said they were more worried about how to hire qualified human resources in Macau to do similar websites than the money to fund it,” Valente told Business Daily.

Government help

According to Valente, the Macao Foundation helped finance “around 50 per cent” of the trip’s expenses, with the remaining being paid by the association members. The trip also coincided with the MSAR Chief Executive (CE) Fernando Chui Sai On’s own visit to Portugal to discuss better cooperation between China and Portuguese-speaking countries, however Valente said the timing was “coincidental”. “We knew he was going to Portugal in September but we didn’t make a special effort to be there at the same time (…) The trip was already included in the associations annual schedule,” Valente explained.

Business Daily Friday, September 23 2016 7

Macau Education Times World University Rankings 2016-2017 results announced

University of Macau improves in global ranking Overall, Asia stands out with 289 universities making the list of 980 institutions, and an elite group of 19 in the top 200, up from 15 last year. Joanne Kuai joannekuai@macaubusinessdaily.com

he University of Macau (UMAC) improved it position in the Times Higher Education World University Rankings 2016-2017, moving from the 401-500 band last year to be placed in the 351-400 band this year. The institution’s scores in all sectors, namely Teaching, International Outlook, Industry Income, Research and Citations improved from the previous year. In particular, UMAC has a strong suit in its International Outlook, with 98.8 points out of 100, a 0.4 point increase from the previous year. The Citation category scored 53.3, followed by Industry Income, which scored 46.3. Research received 22 points, while Teaching came in with the lowest score among all the indicators with 21.5, which is still a three point improvement from the previous year. The rankings released earlier this week list the top 980 universities in the world. It is a global university

performance table used to judge world class universities across all of their core missions – teaching, research, knowledge transfer and international outlook.

Strong Asia

When looking at country levels,

nations in Asia stood out. Two n e w Asi a n u n i v e rsi ti es m a d e the top 100 - Chinese University of Hong Kong and Korea Advanced Institute of Science and Technology (KAIST) - while another four joined the top 200 - City University of Hong Kong, University of Science and T e c h n o l o g y o f Ch i n a, F u d a n University and Hong Kong Polytechnic University. Furthermore, China’s two flagship universities both made gains

– Peking University joined the top 30 in 29th place (up from 42nd last year), while Tsinghua University joined the top 40 in 35th place (up from 47th). Asia’s leading institution, the National University of Singapore, came in at 24th – its highest ever ranking. M ea n w h i l e, I n d i a’ s l ea d i n g university – the Indian Institute of Science – edged closer to the top 200, claiming a spot in the 201-250 band, its highest ever position. Overall, 289 Asian universities from 24 countries made the list of 980 institutions, with an elite group of 19 ranked in the top 200,

Tourism Travel agents says Macau has overtaken HK in attracting Mainland tourists

SARs competition Travel industry representatives say Mainland Chinese tourists choose to stay in Macau longer than in Hong Kong. Annie Lao annie.lao@macaubusinessdaily.com

This year’s Golden Week will include a weekend, resulting in a nine-day holiday from October 1 to 9. However, the Hong Kong tourism industry expects the number of Mainland Chinese tour groups going to Hong Kong during the holiday will fall by 10 per cent year-on-year, according to Hong Kong Yahoo News. The president of the Hong Kong Travel Industry Council told the media outlet that currently, there are around 180 tour groups from the Mainland that visit Hong Kong every day, and it is expected that that number will reach 200 during the Golden Week Holidays. However, this would indicate a 10 per cent decrease compared to last

year’s figures. The travel industry representative from the neighboring region pointed out that due to the longer holidays, Mainland Chinese tourists will have more choices and some may prefer long-haul destinations rather than visiting the SARs.

Hong Kong for four days and Macau for one day, to currently a four-day trip to Macau and one day in Hong Kong, mainly due to the two new casino-resorts, Wynn Palace and The Parisian Macao that recently opened in Cotai, Macau. “About 60 per cent of Mainland Chinese tourists travel to Hong Kong for one day instead of four days compared to previous years. This year, as a result, they will go to Macau for four days instead of staying for one day previously,” general manager of a Hong Kong travel agent, Mr. Cheung told Yahoo News. Another industry representative pointed out that the Hong

Kong-Macau one trip multiple destination scheme is not that effective anymore. The insider stated that Hong Kong has lost its charm due to a lack of new attractions. Macau has become the new favored kid, coupled with Zhuhai, Hengqin and Shenzhen emerging as a new popular tour route, while "Hong Kong has been left aside". A hotelier representative added that in order to attract more tourists to stay for longer in Hong Kong, some Hong Kong hotels have lowered their room rates to HK$186 (MOP192 / US$24) per night.

Favored kid

Last year, about 70 per cent of Mainland Chinese tourists chose Hong Kong as their primary travel destination and saw Macau as an ‘Added-Value’ trip, according to the report. But so far this year, about 60 per cent of Mainland Chinese tourists have chosen Macau as a main travel destination with Hong Kong as optional, the report pointed out. The ratio of travel days in both regions has also changed, from tourists staying in

Society ICIJ publishes leaked Bahamas info on offshore database

Fresh leaks Following the Panama Papers released earlier this year, the International Consortium of Investigative Journalists has uncovered another global scandal involving many influential and powerful officials, yet the MSAR has not yet been found to have been involved in the latest leaks. Cecilia U cecilia.u@macaubusinessdaily.com

The International Consortium of Investigative Journalists (ICIJ), in cooperation with German newspaper Süddeutsche Zeitung and news organisations from Europe, South America, Asia and Africa, yesterday released the latest information about offshore companies registered in the Bahamas. According to the latest discoveries however, no offshore companies have been linked to Macau. The leaked files revealed more than

175,000 Bahamian companies that were registered between 1990 and 2016, linked to more than 25,000 people. Officials affected by the leaked Bahamian files include prime ministers, ministers, princes and convicted felons. The new leaks also revealed 539 intermediaries who had served as the middlemen between Bahamian authorities and customers. Unlike the Panama Papers, the information listed in the new Bahamian documents is less detailed in terms of content, but the new leaks do provide

fresh information about the offshore dealings of politicians, criminals and executives as well as bankers and lawyers who help move the money. Again, the ICIJ noted that it is not illegal in general to own or be the director of an offshore company, remarking that in many cases there are legitimate business reasons for setting up an offshore structure. E a r l i e r t h i s y e a r, C h i e f

Executive-appointed legislator and lawyer Vong Hin Fai and local auditor Leong Kam Chun were both named in the Panama Papers as shareholders of an offshore company named Perfect Talent Group Ltd. The offshore company was registered in the British Virgin Islands and set up in January 2004 through Mossack Fonsenca.

8 Business Daily Friday, September 23 2016

Greater China ODI

Foreign expenditure tops inward investment But while China goes on a buying spree, foreign partners in the US and EU have complained of a lack of reciprocal access to Chinese industries.

hina invested more money abroad last year than foreign firms piled into the country, data showed yesterday, a first for the world’s second largest economy as Beijing looks overseas as part of its drive to transform its economic growth model. Overseas direct investment (ODI) soared more than 18 per cent to an all-time high above US$145 billion last year, exceeding the US$135.6 billion of foreign direct investment. This “historic breakthrough” was a result of the “enhancement of China’s comprehensive national power”, deepening cooperation, and Beijing’s strategy of encouraging Chinese firms to “go abroad” in search of growth, the government said. Chinese firms “have to make use of international resources and markets to transform and upgrade”, the commerce ministry’s representative Zhang Xiangchen told reporters at a news conference. “We feel companies currently are keen to go abroad and actively integrate into global innovation, manufacturing and market networks.” The data was revealed in the 2015 Statistical Bulletin of China’s Outward

Tag

Foreign Direct Investment. China’s economy grew at its slowest pace in a quarter of a century last year, and continues to decelerate as the country faces multiple development bottlenecks. Among these are manufacturing overcapacity, insufficient domestic demand and increasing energy and

resources consumption. To enhance their competitiveness, cash-flush Chinese firms have sought to acquire foreign brands, technologies and resources.

Showing off

Last year Chinese firms conducted US$54.4 billion of mergers and acquisitions, including the takeover of Italian tyre maker Pirelli by stateowned ChemChina. And 2016 has seen an even greater flurry of activity. In the first eight months of this year, M&A surged to US$61.7 billion, the

ministry said, as Chinese companies scored massive investments, from Hollywood studio Legendary to leading German robotics firm Kuka and Swiss seed giant Syngenta. “We think Chinese companies’ overseas takeovers can help them a c q u i r e h i g h- e n d p r o d u c t i o n elements such as design, research and development, marketing and service to upgrade their positions in the global value, industrial, logistics chains,” said Zhang, adding that they can also contribute to the economies of host countries. But problems remain for these firms as they pursue overseas expansion, he said. “Some companies went with overseas takeovers blindly. We found some firms did not make sufficient research into basics such as the purpose and necessity of overseas M&As. Some… rushed to expand while some were driven by irrational reasons to simply follow the craze or show off.” But while China goes on a buying spree, foreign partners in the US and EU have complained of a lack of reciprocal access to Chinese industries, with many sectors off-limits or restricted to outside investment. Among them are telecommunications, media, energy, and legal and financial services. China’s stock of investment in the European Union totalled US$64.5 billion in 2015 and US$40.1 billion in the US, data showed. In an appearance in New York this week China’s premier Li Keqiang said “China’s door, once open, is unlikely to be closed”, the state-run China Daily reported. He added that there are “tremendous investment opportunities” between the US and China and assuring business leaders. AFP

Business Daily Friday, September 23 2016 9

Greater China Oil industry

In Brief

Russian overtakes Angola as nation’s biggest exporter China’s total crude imports last month grew nearly a quarter above year-ago level to the second-highest ever. Russia reclaimed the top spot as China’s largest crude oil exporter in August from Angola, customs data showed on Wednesday, reflecting stockpile building and increasing demand from independent refiners during the month. Russian imports surged 50.2 per cent in August to 4.64 million tonnes, or 1.09 million barrels per day (bpd), as demand from independent refineries, also known as teapots, picked up. Russia was the biggest Chinese supplier for the first time since May after Angola shipped the most in July. Saudi Arabia has also held the top spot. For the first eight months of the year, Russian imports have climbed 30 per cent higher than last year to 34.14 million tonnes, or 977,330 bpd.

Falling domestic oil production has squeezed commercial inventory, promoting refiners to increase imports in August to refill storage, according to a research note from BMI research. The unfolding maintenance season as well as newly opened storage facilities will further help imports in the fourth quarter, BMI said. Teapot refiners operating in the north-eastern Chinese province of Shandong increased their run rates to as high as 46.9 per cent of capacity during August, according a report from ICIS-C1 Energy last month. China imported 4.36 million tonnes, or 1.03 million bpd, of oil from Saudi Arabia, up 11.7 per cent year on year. For the year to date, Saudi remained

the top supplier with shipments rising 1 per cent from a year earlier to 997,520 bpd. Shipments from Oman in August rose 37.9 per cent from a year earlier to 3.56 million tonnes, or 837,396 bpd. Supplies from Iran were up 48.4 per cent in August to 3.17 million tonnes, or 746,029 bpd. For the first eight months of the year, imports rose 7 per cent from the year earlier period to 20.55 million tonnes, or 588,294 bpd.

Key Points Russian supplies at 1.09 mln bpd, up 50.2 pct Saudi shipments at 1.03 mln bpd, up 11.7 pct Oman shipments at 837,396 mln bpd, up 37.9 pct Iran imports at 746,029 bpd, up 48.4 pct Imports from Iraq fell 28.9 per cent in August from a year earlier to 2.4 million tonnes, or 545,161 bpd. In the January to August period, imports gained 4.6 per cent from a year ago. Reuters

Under global scrutiny, Beijing has to cut steel exports Beijing promised to cut steel capacity this year by 45 million tonnes and by 100-150 million tonnes over five years.

China’s international commitment to cut its massive steel capacity has to result in a reduction in exports, an official from the World Steel Association said, as countries around the world scrutinise Beijing’s progress tackling a chronic glut. While the world’s biggest steel producer appears to be throwing more weight behind efforts to cut capacity, China’s 2016 exports remain on track to beat last year’s record 112 million tonnes and domestic production rose for a sixth straight month in August.

‘China’s surplus steel capacity stands at around 300 million tonnes’ “They have to reduce exports. Unless they reduce exports... (the capacity cuts) are not effective,” Kazuo Tanimizu, head of the raw materials committee at the World Steel Association, told Reuters on the side-lines of a Chinese steel and iron ore conference. “It’s an international commitment.” Faced with global anger from Asia to the United States and Europe over a flood of cheap Chinese steel products, Beijing promised to cut steel capacity this year by

Motor City sets up fund developing hydrogen vehicles Long positioned as China’s Motor City, Wuhan, capital of central China’s Hubei Province, has set up a fund to invest in the industry for the hydrogen energy automobiles of the future. On Wednesday, the city government signed a deal with two top Chinese universities - Tongji and China University of Geosciences - to jointly set up a fund worth 200 million yuan (US$30 million) in efforts to initiate the industry. Wuhan is China’s major auto production base, home to the Shanghai General Motors responsible for the Buick Excelle, the Dongfeng Renault plant, PSA, Honda and dozens of auto part-makers. Agriculture ministry

Import ban on some U.S. beef lifted China has conditionally lifted an import ban on some shipments of U.S. boneless beef and beef on the bone, the agriculture ministry and quality watchdog said yesterday. The lifting of the ban applies to imports of beef that are under 30 months old, according to a statement posted on the Ministry of Agriculture’s website. The removal of the ban remains subject to completion of quarantine requirements, which will be issued later, the ministry said, without providing further details.

World Steel Association

Manolo Serapio Jr

R&D

45 million tonnes and by 100-150 million tonnes over five years. By the end of July, China had only achieved 47 per cent of its 2016 target and steel exports in the first eight months had risen 6.3 per cent from a year ago to 76.35 million tonnes. China’s surplus steel capacity stands at around 300 million tonnes, according to industry estimates, or about triple the 2015 output of the world’s second-biggest producer Japan. “We are monitoring how they will achieve their target,” said Kanimizu. “Honestly speaking their production

isn’t going down.” The World Steel Association represents more than 150 steel producers covering 85 per cent of the world’s production, including some major Chinese producers. Crude steel production by member mills of the China Iron and Steel Association rose 4.7 per cent in the first 10 days of September from late August to 1.76 million tonnes per day, the highest since June, according to Macquarie. China’s own steel demand has peaked, said Kanimizu, while demand in some other emerging economies, such as India, which is driven by its infrastructure boom, is gaining momentum. Jeremy Platt, an analyst at UK steel consultancy MEPS, believes China’s steel exports will remain high at around 100 million tonnes a year for the foreseeable future. The capacity cuts have to mean a reduction in net capacity and not just a case of out of date plants being replaced by new ones, said Platt. Reuters

IMF

RMB’s inclusion in SDR an important milestone The inclusion of the Chinese currency, Renminbi, in the Special Drawing Right (SDR) basket by the International Monetary Fund (IMF) is an important milestone for the international monetary system, said a senior IMF official on Wednesday. The preparations for the inclusion work continue on track, said Siddharth Tiwari, director of the strategy, policy and review department of the IMF, at a press conference on the preparations of the new SDR basket. International affairs

Beijing to strengthen coordination with Venezuela China is willing to strengthen coordination and cooperation with Venezuela on international affairs, said Chinese Foreign Minister Wang Yi here on Wednesday. Wang made the remarks while meeting with his Venezuelan counterpart Delcy Rodriguez on the side-lines of a series of UN General Assembly high-level events. China expects the two nations to stay united, jointly overcome difficulties and achieve their respective national development goals, said Wang. China has been paying great attention to its relations with Venezuela. It is willing to deepen and enhance bilateral exchanges and cooperation in all fields with the Latin American country, Wang said.

10 Business Daily Friday, September 23 2016

Greater China Outbound yuan

Suitcases of cash: travel data hint at capital outflow The U.S. and Japan are among nations that break out spending by visitors from China.

he explosive growth of spending overseas by Chinese tourists dwarfs the increase in the number of Chinese traveling abroad. The most likely reason? Disguised capital outflows. So says former U.S. Treasury official Brad Setser, who drilled into the spending data provided by some of the most popular destinations for Chinese travellers. The nation’s tourism deficit - a measure of foreign visitor expenditure in China minus what its citizens spend overseas soared to US$206 billion in the 12 months through June 30, up from

US$77 billion in 2013, the last year of the yuan’s one-way appreciation trajectory. While outbound tourism has grown decently - to about 120 million visitors last year from 98 million in 2013 - that acceleration pales in comparison with the spending figures. Chinese tourists seem to be packing more than just sunscreen and cameras on vacation. The data discrepancy suggests they’re also shifting cash by buying homes while studying abroad, signing up for life insurance products in Hong Kong, or opening deposit accounts to squirrel money offshore, Setser said. That’s bad news

for the global economy. “Right now, the world as a whole needs Chinese demand for its goods and services far more than it needs Chinese demand for bank deposits and bonds,” said Setser, now a senior fellow at the Council on Foreign Relations in New York. “It helps us understand how the slowdown in China over the past few years is impacting world growth.”

Data discrepancies

The U.S. and Japan are among nations that break out spending by visitors from China. The U.S. data, which include spending on education by students from China, shows a steady increase, but on a trajectory nowhere near as steep as Chinese data show. Japanese and European Union

“Right now, the world as a whole needs Chinese demand for its goods and services far more than it needs Chinese demand for bank deposits and bonds” Brad Setser, U.S. Treasury official

numbers reveal similar discrepancies, says Setser. Hong Kong, historically the most frequently visited destination by Chinese tourists, doesn’t break out spending by Chinese tourists, but its data have usually moved in line with China’s tourism imports. That relationship has broken down in recent years, he says. The most likely explanation for such gaps is that China’s data is capturing the movement of capital overseas, where as the U.S., Japanese and Hong Kong numbers don’t. Other factors also likely contribute to the discrepancy. China revised the way it compiles its balance of payments data to make better use of things like credit card spending, and that first impacted the numbers in 2014, says Setser. Luxury goods bought overseas and not declared in China to avoid taxes also could account for a portion of the gap, he says. Because China doesn’t have a completely open financial account, some outflows would naturally be disguised as something else, he says. China has been grappling with outflow pressures since mid-2014, when it became clear the yuan’s multi-year appreciation bet was over. Outflows peaked late in 2015, with companies fudging trade receipts to shovel money out, or buying overseas assets. That spurred intervention to support the currency and efforts to enforce restrictions on how much money Chinese people can move abroad. Explaining the gap in tourism spending, Setser said it looks like the Chinese data “is capturing something different from what it was intended to capture.” Bloomberg News

Biz deal

Wanda said to be nearing movie alliance with Sony Pictures For the Hollywood arm of Sony winning the backing of Wanda could help it gain greater access to China’s restricted movie market. Anousha Sakoui and Christopher Palmeri

Billionaire Wang Jianlin’s Dalian Wanda Group Co. is nearing an agreement to collaborate on movie projects with Sony Corp.’s film unit, according to a person with knowledge of the matter.

“Wanda is a big deep-pocketed partner so to not go it alone makes much sense” Amir Anvarzadeh, Singapore-based global head of Japan equity sales at BGC Partners Inc.

An accord could involve cofinancing and other forms of cooperation, such as marketing, said the person, who asked not to be identified because the matter is still private. Wanda may finance up to 10 per cent of some films, the person said. Representatives at Wanda and Sony either declined to comment or didn’t immediately respond to

queries. For China’s Wanda, which operates the largest number of movie screens worldwide, a deal with the studio behind the “Spider-Man” movies would build on Wang’s ambitions to expand in Hollywood after snapping up independent film producer Legendary Entertainment

for US$3.5 billion this year. Wanda’s AMC Entertainment Holdings Inc. has also agreed to buy Carmike Cinemas Inc., which would make it the biggest operator of cinemas in the U.S. For the Hollywood arm of Sony, the Japanese maker of the PlayStation, winning the backing of Wanda could help it gain greater access to China’s restricted movie market. Wanda operates the largest movie-theatre chain in China, where the box office is headed towards overtaking the U.S. by as soon as next year. “Wanda is a big deep-pocketed

partner so to not go it alone makes much sense,” Amir Anvarzadeh, Singapore-based global head of Japan equity sales at BGC Partners Inc., wrote in an e-mail. “Overall, it’s a positive development and we just have to wait and see how much its potential contribution could be.” Earnings at Sony’s film unit, which includes Columbia Pictures, slumped 34 per cent last fiscal year as the studio struggled to find hits in recent years. Deadline.com reported earlier Wednesday on the Sony-Wanda talks. Bloomberg News

Business Daily Friday, September 23 2016 11

Asia Benchmark rate

New Zealand’s central bank stands pat Economists said the central bank had been unlikely to cut yesterday after the economy grew at its fastest clip in two years. Rebecca Howard and Charlotte Greenfield

ew Zealand’s central bank kept its benchmark interest rate at a generous 2.0 per cent yesterday, remaining an outlier in a world of ultra-low or negative interest rates, but the high New Zealand dollar and tepid inflation may soon spur it to cut. Economists polled by Reuters had widely expected the Reserve Bank of New Zealand’s decision, with only one of the 18 surveyed expecting a rate cut. The RBNZ left the door wide open for a cut later this year, knocking the New Zealand dollar off a two-week high to 0.7316 versus 0.7374 ahead of the decision. It has since pared some of those losses and is trading at 0.7364. The decision came hot on the heels of the Bank of Japan overhauling its policy focus and the U.S. Federal Reserve standing pat at ultra-low interest rates. ASB Senior Economist Jane Turner noted the RBNZ preferred to amend rates in tandem with the publication of its monetary policy statement, which it does four times a year, with the next statement due in November. “It gives them the ability to provide more context,” Turner said, adding that the RBNZ would only have opted to cut yesterday if there was a marked change from the August review.

Economists also said the central bank had been unlikely to cut yesterday after the economy grew at its fastest clip in two years and dairy prices have pushed higher over August. Markets are now pricing in a 70 per cent chance the Reserve Bank of New Zealand will cut rates in November after Governor Graeme Wheeler reiterated yesterday that further easing

would be needed versus a 56 per cent chance before the decision. “Monetary policy will continue to be accommodative. Our current projections and assumptions indicate that further policy easing will be required to ensure that future inflation settles near the middle of the target range,” said Wheeler in a statement. The reiteration of the phrase “will be required” has cemented expectations for further rate cuts, said BNZ Senior Economist Stephen Toplis. “One can only assume that the RBNZ intends reducing the cash rate by 25 points to 1.75 per cent when it delivers its November 10 Monetary

Policy Statement,” he said. New Zealand’s central bank is mandated with keeping annual inflation at between 1 per cent and 3 per cent. It is currently running at 0.4 per cent. Wheeler noted yesterday that annual CPI inflation was expected to weaken in the September quarter, but was tipping a rise after that to reflect “the policy stimulus to date”. New Zealand’s central bank has cut rates twice this year to the current record low of 2.0 per cent.

Key Points Central bank says more easing will be needed Markets price in 70 pct chance of Nov. rate cut New Zealand dollar weakens after RBNZ jawboning

Governor Graeme Wheeler reiterated yesterday that further easing would be needed

He said, however, that while longterm inflation expectations were well-anchored at 2 per cent “the sustained weakness in headline inflation risks further declines in inflation expectations.” The central bank has consistently said a decline in inflation expectations would spur it to action. Wheeler also continued to underscore the central bank’s dissatisfaction with the high exchange rate and noted that weak global conditions and low interest rates relative to New Zealand’s were putting pressure on the export and import-competing sectors. “A decline in the exchange rate is needed,” he said. Reuters

Stock markets

India regulator asks bourse to probe unfair HFT access claim High-speed transactions account for 40 per cent of total volume in India. Santanu Chakraborty

India’s markets regulator has asked the National Stock Exchange of India Ltd. to investigate claims of some high-frequency trading firms gaining unfair access at the country’s biggest bourse. The Securities & Exchange Board of India has also asked the exchange to deposit all revenue from fibre links between colocation facilities, which refers to placing traders’ servers next to that of an exchange, and brokers’ offices in an escrow account pending the probe, NSE Chairman Ashok Chawla said by phone yesterday. The NSE will hire an external agency to investigate the “alleged manipulation” of its technology and will submit a report to the regulator within three months, Chawla said. Sebi’s order, reported by the Economic Times yesterday, comes a month after it proposed checks on algorithmic trading to ensure players have fair access to exchanges. High-speed transactions account for 40 per cent of total volume in India, the highest proportion in the developing world and up from low

single digits five years ago, according to Aite Group, a Boston-based consulting firm. While Sebi’s order is encouraging, the “commissioning of the inquiry ought to have been done directly by the regulator itself,” Deven Choksey, managing director of Mumbai-based K.R. Choksey Shares & Securities Pvt., said by phone.

‘India’s brokerage associations have said regulator’s efforts could increase complexity and lead to disruption’ Speed bump

The regulator’s draft guidelines issued in August suggested a fraction-ofa-second speed bump, alternating

trades between different types of orders and a mechanism to prevent traders from cancelling an order until it is confirmed by the exchange. India’s brokerage associations have said Sebi’s efforts could increase complexity and lead to disruption. A Sebi spokesman didn’t immediately respond to an e-mail seeking comment. The regulator’s advisory committee in April recommended a probe into whether NSE officials worked

with OPG Securities Pvt. to give the New Delhi-based firm unfair access, according to a copy of an internal report seen by Bloomberg News. It also called for the probe to examine whether Way2Wealth Brokers Pvt. benefited from a dedicated fibre-optic line between NSE and BSE Ltd., India’s second-biggest bourse. OPG has previously denied any wrongdoing. Officials at Way2Wealth didn’t respond to a request for comment. Bloomberg News

12 Business Daily Friday, September 23 2016

Asia In Brief Reserves position

Malaysia’s foreign reserves at US$97.7 bln Malaysia’s central bank, Bank Negara, said yesterday that its international reserves amounted to 392.5 billion ringgit (US$97.7 billion) as of September 15. The international reserves were consisted of US$89.7 billion in foreign currency reserves, US$0.8 billion in International Monetary Fund (IMF) Reserves Position, US$1.1 billion in Special Drawing Rights (SDRs), US$1.5 billion in gold and US$4.6 billion in other reserves assets. Its reserves position is sufficient to finance 8.1 months of retained imports and is 1.2 times the short-term external debt.

Monetary response

Australia central bank upbeat on economy Despite retail sales have been anaemic and consumer confidence is falling. Swati Pandey

he Reserve Bank of Australia governor Philip Lowe gave an upbeat assessment of the economy in his first public appearance yesterday, but left the door ajar for more rate cuts as policy makers look to shore up record-low inflation and wages growth. Newly appointed Lowe, who was speaking before a parliamentary economics committee, however,

emphasised the limits to monetary policy, saying it was “not particularly useful” to continue cutting rates in the hope that it will eventually lift growth. The RBA has cut rates twice this year, most recently in August, taking the cash rate to a record-low 1.50 per cent. “Lowe’s most notable conclusion is that the commodity headwinds are easing,” Michael Blythe, chief economist at Commonwealth Bank, said.

Forex

S.Korea says it will act to curb one-sided FX moves South Korea’s finance ministry said yesterday it will adopt “appropriate responses” to prevent one-sided moves in domestic financial markets in the wake of the Federal Reserve’s overnight decision to keep interest rates on hold. The ministry added it will also bolster monitoring of potential risks such as growing household debt before a looming Fed rate hike before year-end. The statement was released after a joint meeting of officials from the government, regulator and central bank to discuss the outcome of the Fed’s meeting on Wednesday. Bonds

Queensland state aims to extend debt yield curve Australia’s Queensland Treasury Corporation (QTC) said it plans to sell long-term debt to lock in attractive terms amid falling interest rates and a global hunt for yield. QTC Head of Investor and Government Relations Richard Jackson said Australian dollar bonds would continue to be the predominant funding vehicle because they cost the least. Estimates show it would cost QTC around 30 to 40 basis points more to raise foreign currency denominated debt, such as U.S. dollars, largely due to the currency swap into Australian dollars. Bad debt

Vietnam’s HCM City faces high rate of tax debts Vietnam’s Ho Chi Minh City currently has accumulated tax debts of nearly 1,588 billion Vietnamese dong (US$71.2 million), with debts surging in the last two years, the municipal Customs Department said yesterday. Of the total tax debts, over 1,355 billion Vietnamese dong (US$60.7 million) are considered bad debts. Of the US$71.2-million tax debts, nearly half are from businesspeople who have either fled or gone missing. Other big tax debtors include those who have had their enterprises dissolved and those who have been prosecuted or are under investigation now.

Strong inflation

Philippines holds key rate as strong growth set to stoke CPI Consumer price-gains are expected to accelerate near the mid-point of the central bank’s 2 to 4 per cent target in 2017. Siegfrid Alegado and Ditas Lopez

The Philippines left its benchmark interest rate at a record low, conserving its firepower as higher government spending strengthens the growth outlook.

“The Philippines remains an outlier, particularly on the growth front, which is led by domestic demand”

took office on June, is increasing spending on infrastructure and social programs to bolster growth to as much as 7 per cent this year and 7.5 per cent in 2017. Asian policy makers are balancing the need for stimulus against risk including higher U.S. interest rates that could heighten financial market volatility.

“The Philippines remains an outlier, particularly on the growth front, which is led by domestic demand,” Euben Paracuelles, an economist at Nomura Holdings Inc. in Singapore, said before the decision. “Monetary policy is likely to remain on hold for the year. Growth is likely to remain strong and inflation, despite on the downside now, will move toward the bank’s target.” Consumer price-gains are expected to accelerate near the mid-point of the central bank’s 2 to 4 per cent target in 2017, after projected to average slightly below goal this year. The economy expanded 7 per cent last quarter, the fastest in Asia after India. Bloomberg News

Euben Paracuelles, an economist at Nomura Holdings Inc. in Singapore Bangko Sentral ng Pilipinas kept the overnight borrowing rate at 3 per cent, it said in Manila yesterday, as predicted by all 16 economists surveyed by Bloomberg. The bank announced in May a policy overhaul, including lowering the benchmark and narrowing the band around it. President Rodrigo Duterte, who 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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“Some three-quarters of the decline in mining capex is in place and if recent increases in commodity prices are sustained the drag on incomes will come to an end.” Still, Lowe said it was “possible” that interest rates could fall further, depending upon inflation, the job market, housing and global factors. Futures market lowered expectations of another cut this year, implying a 24 per cent chance by Christmas from over 30 per cent earlier this week. The RBA hinted at a stable outlook for interest rates in minutes of its September meeting on Tuesday, after holding rates this month as the economy marked a quarter of a century without a recession. “Our judgement is that (the) easing in monetary policy is supporting jobs and economic activity, and thus improving the prospects for sustainable growth and inflation outcomes consistent with the medium-term target,” Lowe told parliament on Thursday. The central bank chief appears before the committee twice a year to answer questions on the economy and monetary policy. A career central banker, Lowe has just taken over from Glenn Stevens who spent a decade in the top job. Recent data showed gross domestic product (GDP) grew 3.3 per cent in the year to June, the fastest pace in four years. Yet employment still dipped in August and the swelling numbers looking to work longer hours pointed to plenty of spare capacity in the labour market. Inflation is also running below the central bank’s 2-3 per cent target, with the consumer price index (CPI) falling in the March quarter for the first time since the 2008 global financial crisis. Reuters

Business Daily Friday, September 23 2016 13

Asia

Shinzo Abe, Prime Minister of Japan addresses the General Debate of the 71st Session of the United Nations General Assembly at UN headquarters in New York, 21 September. Lusa

Prime Minister

Japan’s shrinking population not burden but incentive Abe has focussed on mobilising women and the elderly to compensate for a shrinking workforce. Linda Sieg and Kiyoshi Takenaka

rime Minister Shinzo Abe said Japan’s ageing, sh r i n k i n g p o p u l a t i o n was not a burden, but an incentive to boost productivity through innovations like robots, wireless sensors and Artificial Intelligence. Abe’s comments on Wednesday came days after official data showed that Japan has 34.6 million people aged 65 and older, or 27.3 per cent of the population - the highest proportion among advanced nations. “I have absolutely no worries about Japan’s demography,” Abe said in a prepared speech at a Reuters Newsmaker event, noting that nominal gross domestic product had grown despite losing 3 million working-age people over the last three years. “Japan may be ageing. Japan may be losing its population. But these are incentives for us,” he said. “Why? Because we will continue to be motivated to grow our productivity,” Abe added, citing robots, wireless sensors, and Artificial Intelligence as among the tools to do so. “ S o , Ja p a n ’ s d e m o g ra p h y , paradoxically, is not an onus, but a bonus.” Abe has said he wants to halt the slide in Japan’s population at 100 million people by 2060, about onefifth below the current level. The government also aims to raise the fertility rate from 1.4 births per woman to 1.8 - still below the 2.1 needed to prevent a population from shrinking. Abe has focussed on mobilising women and the elderly to compensate for a shrinking workforce rather than tackle head-on the politically touchy topic of immigration, although some changes are being considered on that front. He outlined plans for labour-market reform, which he said would help boost long-term growth, but steered clear of a move many experts say is vital - making it easier for companies to fire workers. A divide has emerged between a f a l l i n g n u m b e r o f sa l a r i e d w o r k e rs a n d a r i si n g t i d e o f part-time or other “irregular” employees, whose lower wages and scant job security depress spending and constrain consumer confidence.

Abe vowed that a task force he is convening will fill this gap and ensure equal pay for equal work, as well as find ways to encourage more women and older people to work. But he declined to directly address a question on whether the government would make it easier to dismiss workers who do not have the needed skills. Instead, Abe referred to a domestic debate about whether to settle dismissals with cash payments rather than in court. “I have no intention of introducing a system where you can fire people freely with monetary compensation,” he said. Abe, who returned to office in December 2012 for a rare second term pledging to reboot the economy with mix of ultra-easy monetary policy, fiscal spending and reforms, reiterated that the economy remained his top priority. Critics worry he might switch his attention to trying to revise Japan’s post-war pacifist constitution, as Abenomics seems to be running out of steam.

BOJ shifts focus

Hours before Abe spoke, the Bank of Japan made an abrupt shift to targeting interest rates on government bonds to achieve its elusive inflation target, after years of massive money printing failed to jolt the economy out of decades-long stagnation. Abe welcomed the decision, expressed confidence in his handpicked central bank chief, Governor Haruhiko Kuroda, and vowed to work with the BOJ. “The government and the BOJ will work as one in close coordination to accelerate ‘Abenomics’,” he said. “ W e hav e n ’ t esca p e d f r o m deflation yet. I believe we can make steady progress toward escaping from it.” The prime minister also said his government would seek quick approval by parliament of the TransPacific Partnership (TPP) pact and urged the United States to do the same. “Please do ratify the TPP,” Abe said. “We are simply waiting for you to take a leadership role. ‘Come along, America’, should be my own message to you.” U.S. President Barack Obama’s administration intends to make a final full-court push to convince

Republican leaders in the U.S. Congress to approve the 12-nation trade deal in a “lame duck” session after the Nov. 8 presidential election. Both Hillary Clinton, the Democratic Party candidate, and Republican candidate Donald Trump are opposed to the pact, which is unpopular with U.S. labour unions and environmental groups. Abe also made a pitch for Japan’s high-tech “maglev” railway, suggesting once again that the

technology, which Central Japan Railway Company (JR Tokai) aims to use to link the cities of Tokyo and Nagoya by 2027, would be a good fit for the New York-to-Washington route. “The distance between Tokyo and Nagoya is almost the same as that between New York and D.C.,” Abe said. “And by the way, you could do the same thing here with the maglev technology that is there for you to get.” Reuters

14 Business Daily Friday, September 23 2016

International In Brief Logistics

Maersk alters course with freight and energy split Rocked by low freight and oil prices, Denmark’s A.P. Moller-Maersk will split itself up and focus on transport and logistics while seeking a way out of energy in a keenly anticipated revamp aimed at reviving its fortunes. The 112-year-old conglomerate will focus on its core businesses, comprising Maersk Line, APM Terminals, Damco, Svitzer and Maersk Container Industry, while seeking “solutions” for its smaller energy operations. But some said the US$30 billion company had not gone far enough. The company gave no details on how far this process had already progressed. Official invitation

Angola invites Portuguese president and PM to visit Angola’s foreign minister said in New York on Wednesday that his country wanted to intensify meetings with Portugal and wanted to receive a visit from the Portuguese prime minister, António Costa, this year. “We want the visits between the two countries to extend to the highest levels of our leaders, such as the president and the prime minister,” Georges Chicoti told Lusa. The Angolan minister also said that the Portuguese economy minister, Manuel Caldeira Cabral, would go to Angola for the Luanda International fair, scheduled for November. Environment

EU wants to speed up approval of Paris climate deal European Union environment ministers will try next week to overcome an embarrassing delay in the bloc’s approval of the landmark Paris accord on global warming that Europe has long championed, Slovakia said on Wednesday. The EU was a prime mover behind the success of last autumn’s climate talks but is now a laggard in ratifying the December deal it produced to slash greenhouse gases and keep global temperature increases to “well below” 2 degrees Celsius. The EU can only become a party to the accord if the bloc as well as each of its 28 member states deposit their ratification with the United Nations simultaneously.

Too strong to fall

EU banks may need rescue funds equalling twice their ECB capital The European Banking Authority said in July that the region’s banks may need as much as US$524 billion in additional funding. Boris Groendahl

he euro area’s biggest banks will face “indicative” requirements for loss-absorbing funds this year to avoid confusion as global and European regulators wrap up work on new standards, according to Elke Koenig, head of the Single Resolution Board. The Brussels-based SRB, the resolution authority for 142 banks including Deutsche Bank AG and BNP Paribas SA, will use the minimum capital requirement set by the European Central Bank as a proxy for capital that would be needed to absorb losses in a crisis, Koenig said in an interview this month. The ECB last year set an average requirement for the highest-quality capital of 9.9 per cent of risk-weighted assets. Requiring banks to have at least that same amount again in loss-absorbing liabilities will ensure that they can recapitalize themselves quickly after restructuring, Koenig said. This minimum requirement of own funds and eligible liabilities, or MREL, is calculated at the “30,000-foot level,” and more precise levels tailored to each bank will follow after the ECB sets new capital requirements and changes are made to capital, bank-failure and insolvency rules, she said. “We want to avoid confusing the markets by saying, this is our decision this year, knowing that it will be different next year,” Koenig said. “So we take an indicative step this year. For next year, we hope that some of the dust has settled.” The requirement to have sufficient eligible liabilities to absorb losses and recapitalize a bank is the cornerstone of the European Union’s bank-failure legislation. The MREL requirement is similar to the total loss-absorbing capacity standard set by the Financial Stability Board for the world’s biggest banks. The European Banking Authority said in July that the region’s banks may need as much as 470 billion euros (US$524 billion) in additional MREL-eligible funding under conditions similar to those cited by

Koenig. The EBA sample consisted of 114 banks representing 70 per cent of the EU’s banking assets, including lenders not overseen by the SRB. Koenig declined to comment on estimates and said the EBA study’s parameters weren’t identical with the SRB’s plans for indicative MREL levels. While EU law doesn’t set a deadline for banks to reach their MREL target, she said three to four years was a realistic assumption.

‘Moot point’

Koenig said the planned indicative MREL level will also allow banks to satisfy a requirement in EU law for 8 per cent of own funds and total liabilities to be wiped out before access can be granted to rescue funds, Koenig said. “What we found out, a bit to my surprise, was that the 8 per cent becomes a fairly moot point,” she said. “Assuming risk density of 40 per cent to 50 per cent and SREP ratios of 9, 10, 11 per cent, banks have to be there anyway. It’s a real backstop.” A crucial factor in how hard it will be for banks to reach the target could be changes to insolvency laws that

Gabon oil workers will stay at home over concerns about potential violence when a court delivers a final verdict on the central African country’s disputed election result, their union said. The statement, signed by the union’s deputy secretary general, Sylvain Mayabi Binet, added that the minimum service at Gabon oil installations will be assured by “expatriate staff whose families are not exposed to the danger of likely unrest”. Riots erupted after results from an August 27 election handed victory to incumbent President Ali Bongo by fewer than 6,000 votes.

“We take an indicative step this year. For next year, we hope that some of the dust has settled.” Elke Koenig, head of the Single Resolution Board “The German law solves the nocreditor-worse-off problem for the entire pile of senior bonds; the French proposal means you need to build it up,” she said. “I don’t doubt that you can build it up, but you can’t do it overnight. The German proposal solves the problem today. But if the Commission and the member states decide they want to go the French way, it’s at least a solution going forward. I hope they will decide soon.” Bloomberg News

Elke Koenig

U.S. candidates

Major Republican donors spend big on Senate races, not Trump

Riot protection

Gabon oil workers to stay home until election result

have already started in countries including Germany, France and Italy. The French model, which effectively introduces a new asset class sandwiched between senior and hybrid bonds, could be rolled out throughout the bloc, Koenig said.

Sheldon Adelson was reported to be considering spending only US$5 million to help Trump. Some of the Republican party’s top financiers are pouring money into the effort to maintain control of the Senate, while they’re showing far less enthusiasm for Donald Trump, the presidential nominee, new filings show. The casino magnate Sheldon Adelson and his wife, Miriam, contributed US$20 million in August to a group backing Republican Senatorial candidates, according to reports submitted to the Federal Election Commission on September 20. Meanwhile,

Adelson, the biggest donor in the 2012 election cycle, was reported to be considering spending only US$5 million to help Trump. With less than two months until the election, the reports Tuesday showed little sign of a last-minute surge that would help Trump compete on the airwaves with Hillary Clinton, who has raised and spent far more than Trump and began September with US$152 million on hand between her campaign and joint accounts with the Democratic party. Trump claims to have a net worth of more than US$10 billion, but has mostly relied on outside donors since he defeated his last primary opponents in May. Trump has had success attracting small-sized contributions from millions of fans, but said earlier this month that his August fundraising haul was US$90 million, a fraction of Clinton’s.

Clinton advantage

So far, Clinton has also had a lopsided advantage when it comes to support from outside groups such as superPACs, which can accept donations of unlimited size from individuals and corporations. The main group supporting her, Priorities USA Action, brought in US$23.4 million in August from the hedge-fund manager George Soros and other donors, bringing the group’s total fundraising since last year to more than US$130 million. Meanwhile, two of the three biggest pro-Trump groups together reported raising just US$4.2 million in August, including a US$1 million check from Cherna Moskowitz, the Miami widow of a casino entrepreneur. The Senate is a different story for Republicans. Kenneth Griffin and Paul Singer, two hedge-fund managers who haven’t supported Trump, gave sevenfigure sums to the Senate Leadership Fund, the pro-Republican super-PAC to which the Adelsons also gave. The group gathered US$28 million in August, more than doubling its total fundraising. Bloomberg News

Business Daily Friday, September 23 2016 15

Opinion Business Wires

The Phnom Penh Post Cambodia’s first home-grown crowdfunding platform is providing local NGOs and entrepreneurs with an alternative way of raising capital for their projects and ventures, filling a gap as traditional donor funding dries up. Launched in March 2016, TosFund has raised close to US$14,000 for projects posted on its online site during its first six months of operation. The platform is based on crowdfunding, where projects are solicited to a large pool of potential investors with the hope of raising sufficient capital through numerous small individual monetary contributions.

The Jakarta Post A weakening economy has led many high-end customers (in Indonesia) to hold off purchases of luxury cars, thus this year’s sales are expected to be flat, similar to last year. According to Ferrari Jakarta CEO Arie Christopher, since the end of 2013, the luxury automotive market got hit hard, as the commodity boom ended and the rupiah depreciated. “Moreover in April 2014 the government increased automotive taxes [affecting] luxury vehicles. Until now, sales have never been as high as before,” Arie told The Jakarta Post without disclosing any numbers at the launch of Ferrari’s 488 Spider in Jakarta on Wednesday.

US Federal Reserve Chair Janet Yellen speaks at a press conference after announcing that the Federal Reserve plans to leave interest rates unchanged

Central banks arrive, as usual bearing gifts

W Taipei Times The Ill-gotten Party Assets Settlement Committee yesterday said it froze a bank account of the Chinese Nationalist Party (KMT) over the issuance of 10 checks worth a collective NT$520 million (US$16.54 million) immediately after a law was promulgated prohibiting political parties from disposing of assets presumed to have been obtained illegally. Following the implementation on August 10 of the Act Governing the Handling of Ill-gotten Properties by Political Parties and Their Affiliate Organizations, the KMT on August 11 withdrew NT$520 million from Bank SinoPac and asked Bank of Taiwan to issue 10 checks worth NT$52 million each, reportedly to pay for party expenses and employees’ salaries, committee spokeswoman said.

The Straits Times The push for dual-class share listings does not mean the Singapore Exchange will encounter more company failures and governance issues, according to senior exchange adviser Gautam Banerjee. Mr Banerjee, who chairs the Listings Advisory Committee, told The Straits Times the new listing structure would not be a radical change as it is not expected to bring in a flurry of applicants, and sufficient safeguards will be in place. Mr Banerjee believes firms in the new economy and tech sectors, where founders want to retain control over the business and intellectual property after going public, will prefer a dual-class listing.

ednesday brought a double gift for risk investors: the usual, as the Federal Reserve declined yet again to raise rates, and the exotic, as the Bank of Japan (BOJ) declined to carry on undercutting its financial sector. The contrast between the supportive framework for asset prices and the disappointing outcomes for the economies in question is stark. Japanese shares rose nearly 2 percent and bank stocks leapt 7 percent after the BOJ not only refrained from taking interest rates further into the negative but pledged to steepen the yield curve. The S&P 500 rose 1.1 percent and the Nasdaq hit an all-time high after the Fed remained on hold despite what it acknowledged as a strong labour market. Acknowledging the obvious, Japan abandoned its target of raising inflation to 2 percent in two years, opting instead for an open-ended commitment to keep doing what has not worked yet until inflation rises above 2 percent. The Fed, divided by a 7-3 vote, with the minority wanting a 25-basis-point hike now, appeared to be at cross purposes with itself. “The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives,” the Fed said in its statement. While the clear implication was of a rate hike soon, perhaps at the first post-election meeting in December, this confidence is hard to reconcile with its own projections, which show more and more evidence that the Fed is buying into the narrative of long-running secular stagnation. The median projection for long-run economic growth in the U.S. fell to 1.8 percent, marking the first ever such forecast below 2 percent. The Fed also cut its projections for where rates will end 2017 by half a point to 1.1 percent and by the same amount for 2018 to 1.9 percent. Note that not only do three FOMC members want rate hikes now, there are three further whose “dot plot” estimate of appropriate rates show they favour no hikes this year. “The committee is more split than it has been at any time in our memory. This split in views will make FOMC communication and action increasingly difficult this year. In particular, we believe that this level of dissent will make it difficult for the committee to keep the possibility of a December rate hike live in the minds of market participants and, indeed, households and businesses,” Michael

“

James Saft a Reuters columnist

Gapen and Rob Martin, economists at Barclays, wrote in a note to clients.

Strategically irresponsible

The remarkable thing - and this applies both to the Fed and the BOJ - is not the disagreement around policy but exactly how radical it has been forced to become and remain. Markets put the probability of a December hike at just above 50 percent, demonstrating scant confidence that the Fed will be able to hike a second time even a full year after the first. Fed Board member Lael Brainard’s characterization last week of a “new normal” in monetary policy in which the asymmetric risk of an economic stall argues for only proceeding very slowly now seems much closer to consensus than it would have been in past months. Similarly, the BOJ, saying it will seek to blow its own 2 percent inflation target to the upside, is trying to appear strategically irresponsible, willing to do the unthinkable for a central bank in order to obtain the otherwise unobtainable result of rising inflation expectations. It isn’t that it’s wrong for the Fed to give labour a bit of time to fatten at capital’s expense, or for the BOJ to want consumers to fear an inflation many have never known. Both of these outcomes makes sense in the bizarre world policy makers find themselves in, yet neither has a good track record of working to achieve the goals of strong growth and moderate inflation. Both policy paths are also hugely supportive for asset prices and risk, at least in the short to medium term. That makes the best bet in all of this to be continued management of monetary policy in a risk-friendly way. The Fed may not hike in December and certainly will not if fallout from the election, or other issues, leads to a market set-back. The risks for the Fed are of turning Japanese, hamstringing it from returning to normal. For the BOJ, as Japan is already in a long malaise, there is no doubling back in the direction of policy, only fine tuning. Central bank decision days will continue to be a kind of secular Christmas, with investors playing the role of kids. Reuters

The remarkable thing - and this applies both to the Fed and the BOJ - is not the disagreement around policy but exactly how radical it has been forced to become and remain.

”

16 Business Daily Friday, September 23 2016

Closing IATA

Airlines to post record profit in 2016

Global airlines are expected to post record profits of almost US$40 billion this year, the head of industry body IATA said yesterday, but he warned the sector faced threats from terrorism, a sharp rise in oil prices and protectionism. Alexandre de Juniac, who took the reins at the International Air Transport Association on September 1, also called on Southeast Asian nations to invest in infrastructure to cope with surging demand for air travel in the fast-growing region.

He said that collective net profit for the airline industry worldwide would hit US$39.4 billion, up from US$35.3 billion in 2015. De Juniac said carriers had benefited from a sharp fall in the price of oil - fuel costs are their biggest single expense - and a resilient travel market despite slow global economic growth. IATA data shows that the fuel bill for airlines worldwide is expected to fall to US$127 billion this year, down 44 per cent from 2014 when oil prices peaked at more than US$100 a barrel. AFP

Online bookings

Marriott won the Starwood battle, now it’s on to the Expedia war Marriott wants to reduce the middlemen’s influence, because bookings that flow through them deprive hotels of information about guest habits and spending patterns. Hui-yong Yu

he bidding war for Starwood Hotels & Resorts Worldwide Inc. made global headlines as Marriott International Inc. fended off China’s Anbang Insurance Group Co. to become the world’s biggest hotel operator. Now Marriott has to figure out how to use its new edge in another long-simmering battle.

“Regaining control of our inventory is absolutely critical” Robert Finvarb, Marriotts owner This one is against the likes of Expedia Inc. and Priceline Group Inc., online travel agents with commissions that eat up 10 per cent or more of what someone pays for a room. Marriott and others are fighting back with discounts and free Wi-Fi to frequent guests who book directly with them, and reminding travellers they earn zero loyalty points when reserving through other websites. The Internet agents in turn have tried to up the ante by pushing major brands lower in search results, says Thomas Allen, a Morgan Stanley analyst. The stakes are substantial: Spending on hotel rooms in the U.S. alone was

almost US$150 billion last year, up 7.3 per cent from 2014, and online travel agents captured about 15 per cent of total room nights, according to lodging-data provider Kalibri Labs. In some markets, such as Miami Beach, online agents account for a much higher per centage of bookings, says Robert Finvarb, who owns Marriotts in and around Miami. “Regaining control of our inventory is absolutely critical,” Finvarb says.

Negotiating power

The good news for Marriott is that size matters. It’s about to be so big - the US$14 billion Starwood deal is set to close before the market opens Friday - that it will have unprecedented negotiating power. Marriott wants to reduce the middlemen’s influence, because bookings that flow through them deprive hotels of information about guest habits and spending patterns. That’s crucial data, says David Loeb, a senior analyst at Robert W. Baird & Co. “When you own the customer, it’s more profitable.” With Starwood, owner of 10 brands from Aloft to Westin, Marriott has more than 1.1 million rooms on six continents, almost 50 per cent more than No. 2 Hilton Worldwide Holdings Inc. “Targeting the loyal customers and keeping them in the family is critical,” says Scott Berman, principal and industry leader for hospitality and leisure at PwC. Marriott may one day decide to blend the frequent-stay points programs of its 27 brands. Starwood’s

Monetary move

loyalty cohort includes an outsize share of higher-spending business travellers; then-Chief Executive Officer Frits van Paasschen said in 2012 that the top 2 per cent of customers were responsible for 30 per cent of profits. Starwood has about 21 million people in its program, and Marriott some 56 million. “A major reason we’re doing this deal is the loyalty programs,” says Marriott CEO Arne Sorenson.

Keeping customers

Before Starwood, only one-quarter of Marriott’s rooms were non-U.S.; now more than a third are. Marriott had 17 hotel brands, including Bulgari and Ritz-Carlton, pre-Starwood. Expedia - which owns websites including Hotels.com, Hotwire.com and Travelocity.com - isn’t cowed. Hotel chains are just competing against each other when they push direct booking, says Cyril Ranque, president of lodging partner services for Expedia. Most people are brand-agnostic and want to see the full assortment of choices that online agents can offer, he says. “We’re not seeing these

Defaults swaps

efforts as changing consumer behaviour much.”

Catching up

Anyway, Ranque says, Expedia has the advantage in digital marketing and other online services with technology expertise that outstrips that of any hotel chain. Priceline, which owns Booking.com and Kayak.com, declined to comment. Expedia earlier this month said it will provide technology support to Marriott’s vacation packages sold through its website. There are new players getting into the game. Google is making a push into travel services, with a mobile trip planner called Destinations and a new travel-guide app called Trips, and Facebook Inc., which is enabling users to buy products they see advertised on the social-media giant’s website, may include room reservations. “Everybody’s jumping on this booking bandwagon. Everybody realizes how lucrative it is,” says Bashar Wali, president of Provenance Hotels in Portland, Oregon, which owns a Westin, one of Starwood’s brands, and several independent hotels. He’s betting on Marriott using the power of its bulk to negotiate more favourable commissions, but says one thing about his industry and the online agents isn’t going to change. “It’s a love-hate relationship, and will always be.” Bloomberg News

Central bank

Indonesia cuts key rate in Beijing said to allow trading India names three independent fresh bid to lift slow growth of CDS in interbank market economists for policy panel Indonesia’s central bank, moving while inflation is the lowest in years and as the Federal Reserve stood pat, escalated efforts to spur lending by cutting its benchmark interest rate for the fifth time this year. Bank Indonesia (BI) yesterday trimmed the 7-day reverse repurchase rate, its benchmark since last month, by 25 basis points to 5.00 per cent. And Governor Agus Martowardojo indicated more easing might be ahead. “We are monitoring, if all economic indicators are maintained, we are still in an easing condition, a loosening condition, and this loose condition will continue until the end of this year to early 2017,” he said. To analysts, yesterday all the stars were aligned for the central bank to cut, especially after the Fed’s decision and less-hawkish comments about the pace of future U.S. interest rate hikes. In August, BI changed its benchmark to the 7-day reverse repurchase rate in a bid to better transmit monetary policy to the market. Reuters

China’s central bank has approved trading of credit-default swaps (CDS) by financial institutions in the nation’s interbank market, as it seeks to help investors tackle rising non-payment risks among the country’s borrowers, according to people familiar with the matter. The National Association of Financial Market Institutional Investors (NAFMII), a unit under the People’s Bank of China, will likely make an announcement soon, the people said, asking not to be identified because the information isn’t public. Chinese investors have called for tools to hedge credit risks after at least 18 local bonds missed payments this year, compared with seven for the whole of 2015. NAFMII had been considering starting trading of new versions of CDS products and held a meeting in Beijing in May at which some market participants voted to pass proposed rules, people familiar with the matter said around that time. “To have CDS is a very good thing because so far there are no meaningful hedging tools in the domestic market yet,” said Liu Dongliang, a senior analyst at China Merchants Bank Co. in Shenzhen. Bloomberg News

India’s government has picked three economists from the academic world for a new monetary policy committee to set interest rates, as the Reserve Bank of India gets ready for a landmark switch in the way it decides policy. They will join RBI Governor Urjit Patel and two senior officials from the bank’s monetary policy department. Patel, who took over the helm at the RBI earlier this month, will have the casting vote in the event of a tie. The non-RBI members named yesterday are Chetan Ghate, a professor at Indian Statistical Institute; Pami Dua, a director at the Delhi School of Economics; and Ravindra Dholakia, a professor at the Indian Institute of Management in Ahmedabad, in Prime Minister Narendra Modi’s home state of Gujarat. All are low-profile and India-based, unlike Patel or his predecessor Raghuram Rajan, who had both worked at the International Monetary Fund at one point before joining the RBI. A former IMF chief economist, Rajan was feted on the global policy circuit, but he rubbed up Modi’s nationalist supporters the wrong way with his blunt social commentary about India. Reuters