Bloomberry: Jeju casino deal with Iao Kun not extended Gaming Page 7
Tuesday, September 27 2016 Year V Nr. 1139 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Joanne Kuai Single’s Day
Jack Ma’s conglomerate sure to beat e-shopping day figures record Page 8
Transportation
www.macaubusinessdaily.com Investigation
DSAT: real-time information on public buses by year-end Page 3
Chinese Government probes banks and bankers linked to North Korea’s nuclear programme financing Page 9
New gaming market: tech savvy millennials Gaming
Betting on skill-based video games, such as virtual reality games, could be the new turf for gaming operators to explore. Business Daily talked with business representatives and gaming experts, who told us betting on skill-based electronic games could be a way for the Macau gaming sector to “reinvent” itself and target a more tech savvy new generation of players. However, regulations still need to be put in place. Pages 4 & 5
Work to resume on LRT Taipa depot
Public works The SAR government has granted a MOP1.07 bln contract to China Construction Engineering (Macau) Company to resume work on the superstructure of the Light Rail Transit depot in Taipa. Page 2
Poker scam
Crime The Judiciary Police (PJ) have busted a casino betting fraud case involving a pit manager who stole decks of poker cards. The group successfully cheated the casino out of around MOP24 million, but police say they don’t yet know exactly how the scam worked or what was done to the cards. Page 6
Smart City study
Macau University of Science and Technology hosted the Macau Smart City Conference for the promotion of sustainable and smart city development in the SAR, and revealed its new Macau Smart City Institute.
Reshaping Chinese state firms
Urban development Page 2
HK Hang Seng Index September 26, 2016
23,303.62 -382.86 (-1.62%) Worst Performers
Hang Seng Bank Ltd
+0.29%
CLP Holdings Ltd
-0.69%
AAC Technologies Holdings
-4.48%
Sands China Ltd
-3.29%
Power Assets Holdings Ltd
+0.13%
Hong Kong Exchanges and
-0.78%
China Merchants Port Hold-
-4.17%
Lenovo Group Ltd
-3.05%
MTR Corp Ltd
+0.00%
Ping An Insurance Group Co
-1.08%
China Resources Land Ltd
-4.07%
CNOOC Ltd
-2.33%
Henderson Land Develop-
-0.43%
Bank of China Ltd
-1.12%
Bank of Communications
-3.52%
Cheung Kong Infrastructure
-2.31%
Link REIT
-0.53%
HSBC Holdings PLC
-1.21%
Belle International Holdings
-3.32%
Galaxy Entertainment Group
-2.23%
28° 34° 23° 32° 22° 25° 25° 27° 26° 29° Today
Source: Bloomberg
Best Performers
Wed
Thu
I SSN 2226-8294
Fri
Sat
Source: AccuWeather
Fund for reform China yesterday established a national fund for structural adjustment of state-owned enterprises. The fund has an estimated capital of 350 billion yuan (around US$50 billion) and will mainly invest in programs related to scientific innovation, international operations and asset restructuring. Page 10
2 Business Daily Tuesday, September 27 2016
Macau Politics
Liaison Office appoints new head of Human Resources
Liaison Office in Macau, according to local Chinese broadcaster TDM Chinese Radio. The former head of the A press release from the Human Resource Department, Liaison Office in Macau has announced that Chu Xiaoyan Chang Yuxing, will serve in another office in Mainland has been officially named as China and will not be involved the new head of the Human in any affairs related to the Resource Department of the Central People’s Government’s Liaison Office in the MSAR.
Infrastructure
New MOP1.07 bln contract granted for LRT depot
T
he MSAR government has granted a MOP1.07 billion (US$8.56 billion) contract to China Construction Engineering (Macau) Co. Ltd to resume work on the superstructure project of the Light Rail Transit (LRT) depot in Taipa, according to yesterday’s Official Gazette. The new contract will cover four years until 2019, with the government paying the contractor MOP77 million this year, MOP420 million in 2017, and MOP350 million and MOP223 million in 2018 and 2019, respectively. Earlier this year, the government terminated its contract with the original contractor of the project – a consortium of Mei Cheong and Top Builder - by paying the joint venture some MOP85 million following major delays in the construction. This original contract, signed in 2009, was initially valued at MOP555 million over four years. The delays in the depot works
Urban development
have also resulted in changes to the government’s contract with LRT cabin supplier Mitsubishi, requiring an additional payment of some MOP700 million.
Currently, the superstructure of the LRT depot is expected to be completed in 2019, the Secretary for Transport and Public Works, Raimundo Arrais do Rosário has said.
The superstructure of the depot is composed of three sections: the main building and auxiliary building that accommodate maintenance areas and other operational facilities, in addition to a parking garage that is to be used as a docking area for the trains. K.L.
Photo by John Ho Io Meng
MUST unveils Macau Smart City Institute
Smart study MUST hosts Macau Smart City Conference for promotion of sustainable smart city development in Macau. A Smart City Institute has been established by the Macau University of Science and Technology (MUST). Organized by MUST, coorganized by TongFang Technovator International Limited (Beijing), and sponsored by the Macao Foundation, the Ceremony for Plaque-Unveiling of the Macau Smart City Institute and Opening of the Macau Smart City Conference was held at MUST yesterday. The Institute is a new instalment for MUST, which aims to reinforce research and industrialization of smart city concepts, mainly focusing on the development
o f k e y t ech n o l o gi es, a p p l i e d research, public platform research and services, talent training, and other work in relation to common problems faced by smart cities, in the hope of moving forward smart city research and applications in Macau.
Political significance
MUST President, Liu Liang addressed the ceremony and noted that the Five-Year Development Plan of the Macau SAR Government, which was released in early April, clearly stated that Macau would speed up its smart city development. “MUST responded quickly and aligned itself with the work priorities of the government by unifying and integrating the personnel and academic resources of the relevant faculties of the University to establish the Institute,” said Mr. Liu. “We aim to construct the most top-end academic and technological platform to assist the SAR government in achieving its goal of smart city development, and supply excellent talents and intellectual resources.”
He added that such programs match the urgent need for further development of the Macau society, and are therefore of great practical significance.
Empowerment
Chairman of the Macao Science and Technology Development Fund (FDCT), Mr. Ma Chi Ngai also delivered a speech. He stated that MUST attached great importance to characteristics and priorities in the development of research, and simultaneously paid close attention
to the development of key research projects in Macau, as evidenced by its swift action in founding the Macau Smart City Institute for smart city research, which has been a key area for the development of characteristic research in recent years. He said that the FDCT hopes that the Macau Smart City Institute established by MUST will not only empower research, education, and industrialization of smart city initiatives, but will also move forward research and application of smart city projects in Macau.
Public works
MOP278 mln for Gov’t Office Building in Pac On The construction contract for a multi-functional government building on the reclaimed land plot O1 in Pac On has been granted to Construction Engineering (Macau) Co., Ltd at a cost of MOP278 million (US$34.7 million), according to a dispatch in the Official Gazette released yesterday. The payment of the contract is to be made in three instalments over three consecutive years, starting this year with a MOP42 million payment, MOP150 million in 2017 and MOP86 million in 2018. The reclaimed land plot O1 is located
at the junction of Estrada do Pac On and Rua da Felicidade, occupying an area of 4,392 square metres. According to previous comments by Sam Weng Chon, director of the Infrastructure Development Office (GDI), the Pac On multi-functional building will consist of workshop and office areas from the ground floor to the second floor of the building. The third and fourth floors of the building will be used as a parking lot. The director also said that a 2,500 square metre warehouse will be located on the fifth floor or higher of the building.
Energy
CEM to reduce energy tariffs next month Companhia de Electricidade de Macau (CEM) will lower electricity tariffs next month, the company’s advisor to the executive committee, Iun Iok Meng, stated to local public broadcaster TDM. According to CEM’s advisor, the tariff decrease is mainly due to “the new electricity prices of China Southern Power Grid” and a falling RMB exchange rate since July of this year. TDM Radio stated that the single-day peak in electricity consumption in August was 932 megawatts
recorded on 9 August, around four per cent higher than last year’s record. The CEM advisor also believes Macau will finish the year with a five per cent year-on-year increase in energy consumption. As a way of making the city’s power supply more stable and less dependant on Mainland China, the CEM advisor stated the company will start using natural gas generators in the planned electric substation, replacing the old diesel ones, to power the new Islands District Medical Complex. N.M.
Business Daily Tuesday, September 27 2016 3
Macau Transport
DSAT: real-time information on public buses by year-end DSAT aims to provide real-time information for all public bus routes by the end of this year. Annie Lao annie.lao@macaubusinessdaily.com
T
he Transport Bureau (DSAT) expects that a mobile application to provide realtime information on arrival times of public buses at bus stops will be able to cover all the bus routes in the city by the end of this year. The statement was included in a response by the director of DSAT, Kelvin Lam Hin San to legislator Kwan Tsui Hang’s written enquiry, urging the Bureau to implement the
DSAT to regulate vehicle lights The Transport Bureau (DSAT) plans to regulate the improper use of vehicle high-beam lights and illegally modified car headlights next year, through a supplementary administrative regulation. The statement was made by the director of DSAT, Kelvin Lam Hin San in response to a written enquiry submitted by legislator Ella Lei Cheng I, in which she urged the Bureau to regulate the misuse of vehicle lights in the city, which can dazzle other drivers on public roads. Lei pointed out that no current regulation has quantitative criteria on the use of vehicle
complete real-time information system for the city’s public buses as soon as possible. The current trial mobile application can only cover about three-fifths of the city’s bus routes, according to legislator Kwan. Starting from this Wednesday, 19 more bus routes will be added in the application, totaling 40 bus routes altogether, according to DSAT. At the same time, four electronic display screens providing information about bus arrival times will be installed at the bus stops at Rua do Campo, the Tap Seac Multi-sport
lights on the road. The director of DSAT said that relevant departments would study the feasibility of conducting technical inspections on the intensity and angle of vehicle lights. In addition, the Bureau is also planning to improve the city’s Road Traffic Law. As a result, a draft revision of the regulations will be submitted to the Executive Council and the Legislative Assembly (AL) for consideration. The revised draft of the Road Traffic Ordinance will be submitted to the Executive Council within this year, the director of the Bureau added.
Pavilion, the Public Security Police Force Headquarters in Praceta de 1 de Outubro and A-Ma Temple. According to DSAT, since the free mobile application became available at the end of July this year, about 25,000 people have downloaded the application, with an average of 2,300 daily active users. The additional 19 bus routes to be included in the application are 2A, 3A, 3X, 6B, 7A, 8,8A, 10A, 10B, 18,28A, 28B, 30,50,52,55,71, H1 and MT2, according to DSAT.
Pre-planning
Legislator Kwan mentioned in her written enquiry that the “Macau
Road Public Transport for Collective Passengers” contract will expire in two years, and she asked whether the Bureau would undertake a review of the city’s current bus services in order to prepare for the future public tender of the bus service contract, when it expires. The director of DSAT replied that the Bureau is now undertaking a planning process for the operations of the city’s public buses in the future. The planning includes reviewing the pros and cons of the existing operational mechanisms of the city’s public buses. Part of the planning process will also examine the different management models run by neighboring regions, the director said. The Bureau is open to receiving public opinions regarding the public bus service in the city.
4 Business Daily Tuesday, September 27 2016
Macau
Gaming US casinos look to skill-based video games to attract younger players
Money making skills Local gaming experts don’t believe any new regulations on betting for skill-based electronic games will be created soon, but see potential in the concept as a way to diversify entertainment and gaming offerings in casinos for a younger market.
L
ocal ga m i n g ex p e rts consider that betting on electronic video games in Macau’s casinos is still only a distant reality due to the lack of regulations and awareness of the sector, but nonetheless see its potential as a way to attract a new generation of gamers who are more interested in betting on games of skill than chance. Last week, Gamblit Gaming an American gaming company specialising in real-money gambling and skill games for online and landbased casinos - announced it would adapt a Virtual Reality horror/action game for its gambling offering for physical casinos, tech news website VentureBeat reported. The company’s objective is to cater to a younger crowd of gamers, more interested in betting on skill-based games than in the more traditional chance-based gaming present on casino floors. “I don’t have any doubt that [electronic skill-based betting] is the future for all the integrated resorts and casinos, not just in Las Vegas but in Macau too,” says Fernando Pereira, Operations Director of Virtualmente, a digital studio based in Portugal and Macau that develops VR technology. “Virtual Reality or VR games betting goes back to the topic of betting not on chance but on skill-based games. I believe that eventually slot machines will be a small corner of the casino, something vintage, and skill-based games will take centre stage,” Pereira told Business Daily. Pereira - who is also the President of Grow uP eSports, a local nonprofit electronic games association
- believes younger generations are not as attracted to chance-based casino games like older generations, and believes local gaming operators could only profit from catering to this new market sector. According to a study on the entertainment preferences of millennials - people born between 1980 and 2000 - by the Lloyd D. Levenson Institute of Gaming, Hospitality & Tourism (LIGHT) at Stockton University in the American state of New Jersey, while 72 per cent of non-millennials from the study group played slot machines, only 44 per cent of millennials were interested in them. The study, published in July this year, also revealed that 40 per cent of millennials would be willing to bet on slot machines if it involved a level of skill, with respondents that played video games being slightly more interested in skill-based betting. “Young people want more competitive games where something comes from merit, and are not enthusiastic about just pressing a button and leaving things to chance. Enjoying computer or mobile video games is part of it,” says Pereira.
Not that soon
Fernando Pereira believes that before any exploration of betting on electronic skill-based games can begin, each game will have to be “regulated properly” and a legal framework will need to exist for the new industry. In May this year, the US states of Nevada and New Jersey implemented regulations on skill-based games, however Pereira doesn’t see Macau
gaming authorities legalising such games any time soon. He considers that in the case of VR skill-based games - similar to the one created by Gamblit Gaming where the result depends on the player’s actions and abilities - there’s just no current legal framework, and gaming authorities are not “rushing to install it”. He adds that Macau’s position is to “sit down behind and wait for what is done in other countries until it feels a new trend is internationally accepted”. For the Virtualmente Operations Director, the solution could be to find a balance between skill and chance games. “Last year, I was at the Macau gaming show at the Venetian casino and I already saw many gaming operators offering fantasy sport solutions, sports simulators, with all the results being created by a computer algorithm. These kinds of games might be easier to be accepted by casinos, since they’re not totally skill-based,” says Pereira.
Get them young
Desmond Lam Chee Shiong, an Associate Professor in Hospitality and Gaming Management at the University of Macau (UMAC) also agrees that betting on skill-based electronic games could be a way for the Macau gaming sector to “reinvent” itself and target a more technologically savvy new generation of players. “This is a new trend and I think
Innovative regulations
This year in May, the US states of Nevada and New Jersey - where the US’s two biggest gaming areas, Las Vegas and Atlantic City, are located - defined what constitutes a game of skill, a game of chance and a hybrid game that incorporates both elements, and how to regulate slot machines or casino devices with such games.
casinos are still figuring out if it is something that will hit it off with our Chinese gamblers,” Desmond Lam told Business Daily. The gaming expert sees this new form of gambling as being “in line” with the government’s call to diversify the city’s customer base and build a stronger mass market, closely linked to leisure and entertainment versus the VIP market.
“Young people want more competitive games where something comes from merit, and are not enthusiastic about just pressing a button and leaving things to chance” Fernando Pereira, Operations Director of Virtualmente “Gaming operators should look into creating unique propositions within their gaming floors. Currently, each casino is more or less the same,” the UMAC Associate Professor notes. However like Pereira, he also considers the monitoring and revisiting of the city’s gaming
In the state of New Jersey, the new legislation defined that casinos are prohibited from making the games harder or easier to win while a game is already in progress, based on a player’s skill, and how peer-topeer skill-based gaming should be monitored in order to prevent any collusion or money laundering activities.
Business Daily Tuesday, September 27 2016 5
Macau legislation to be essential, and that currently authorities are still unsure if electronic skill-based games betting “is the way the go”.
Step by step
According to a gaming law advisor working for one of Macau’s leading gaming operators - who asked to remain anonymous - the legalisation of betting on electronic skill-based games would have to proceed in two ways.
“Gaming operators should look into creating unique propositions within their gaming floors. Currently, each casino is more or less the same” Desmond Lam, Associate Professor in Hospitality and Gaming Management at the University of Macau “First it would be necessary for gaming authorities to create a specific regulation for every specific game, since all casino games are regulated from Baccarat to Blackjack. Then it would have to be decided if the exploration of these games would be allowed in casinos or if it would operate as a concession,” the legal advisor told Business Daily. According to the gaming law expert, an electronic video games concession could be similar to the five-year concession currently
provided by the MSAR government to Macao Slot Co. for football and basketball betting. “It’s two different scenarios. Although the first one I believe would make more sense, since the casinos already have the infrastructure in place and the investment capacity to purchase the machines,” the gaming law advisor adds. The legal advisor doesn’t believe the Macau government is purposely resisting the implementation of innovative regulations on electronic skill-based betting, but that the authorities are simply “not really aware of [the new market]” due to the novelty of the concept. Nevertheless, he also agrees that with casino gaming revenues decreasing, betting on skill-based video games could be an alternative offering to the more traditional casino games.
“We can see that different generations are interested in different products. Young generations are more interested in games similar to the ones they play on smartphones or computers, that require different skills. If casinos expand their offer both in terms of games or entertainment, they could also expand the numbers of potential
Betting against zombies
The Brookhaven Experiment is a Virtual Reality survival shooter game created by video game developer Phosphor Games. The video-game developer partnered with Gamblit Gaming in order to adapt the game for casino floors, allowing gamers to bet money on whether they will survive a wave of zombies.
clients,” he told Business Daily. B u s i n e s s Da i l y q u e s t i o n e d the Gaming Inspection and Coordination Bureau (DICJ) as to whether any possible legislation on skill-based electronic games in casinos was being considered, but no response was received by the time of print.
Gamblit Gaming specialises in helping video game developers, publishers, and casino operators to adapt video games for integrated resorts, from racing to action video games. Both companies expect to be able to present the game at this year’s Global Gaming Expo (G2E) in Las Vegas, between September 27 and 29.
6 Business Daily Tuesday, September 27 2016
Macau Fraud
PJ busts MOP24 mln casino fraud case
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he Judiciary Police (PJ) have busted a casino betting fraud case worth MOP24 million (US$3 million), according to a report by TDM Chinese Radio yesterday. The PJ arrested one casino pit
manager and three VIP promoters for cheating on a poker game. The four arrested individuals are all aged around 30. The PJ said the casino pit manager was suspected of stealing a deck of poker cards from the casino, and then passing
it to one of the other suspects to bring back in to the VIP room to place bets. In about half an hour, they successfully cheated the casino out of around MOP24 million. The PJ also suspects that the all the betting was done under the table,
while the other suspects were recording the betting process during the game. The police say they do not yet know exactly how the scam worked or what was done to the cards. The fraud crime case is still under investigation by the PJ. A.L.
Workers rights
Entry ban for casino workers discussed The Macau Gaming Enterprises Staff Association of the Macau Federation of Trade Unions (FAOM) discussed in a seminar, whether to ban gaming workers from entering casinos during their non-working hours, the local
Chinese broadcaster TDM Chinese Radio reported. Zeng Zhonglu, a professor at Macao Polytechnic Institute (IPM), provided results from foreign studies of employees working in the gaming
industry, revealing that the chances of dealers becoming addicted to gambling are two to three times higher than for average people, in particular for workers who had worked in the industry for less than three years. For that reason, Zeng emphasised the importance of educating new dealers. In terms of enforcing laws to regulate this situation, the IPM professor suggested checking the identity of every gambler upon entry, but
acknowledged that such a policy might be technically difficult and hard to put into practice, as well as affecting the individual rights of gaming workers. Some dealers support establishing laws to prevent gaming industry employees from gambling in casinos, as well as to prevent cases of fraud and missing chips, which are common. However, dealers are also concerned that such laws might lead to the dismissal of some workers, and as such, they hope related parties will be careful when considering the penalties for breaking the law.
Labour
Casino workers visit DICJ Representatives from the Power of the Macao Gaming Association visited the Gaming Inspection and Co-ordination Bureau (DICJ) yesterday and met with DICJ director Paulo Martins Chan. In a statement issued by the casino workers group, the group said it had discussed a possible entry
Casino
ban for casino workers who have gambling addiction problems. They also urged the authorities to take into consideration the opportunities gaming operators have provided to employees in terms of promotions and professional training, when the government assesses the renewal of gaming licenses.
SJM and Melco Crown exempt from paying complementary tax Sociedade de Jogos de Macau, S.A. (SJM) and Melco Crown Entertainment Limited (Melco Crown) have both been exempted from paying the city’s complementary tax on casino gaming profits, the Official Gazette announced yesterday. The exemption for SJM will come into effect on January 1, 2017 and will last until March 31, 2020, whilst Melco Crown’s exemption will begin on January 1, 2017 and end in 2021. In Macau, aside from paying the Income Complementary Tax, casinos and gaming areas are all required to pay
Special Gaming Tax which is paid monthly and calculated on the gross gaming revenue at a rate of 35 per cent. Complementary Tax, by contrast, is paid by individuals or corporations irrespective of where their residence or headquarters are situated, based on the amount of total income earned. Usually, for those who have a taxable income of over MOP300,000 the Complementary tax rate is 12 per cent of their total income, according to the Taxation Association of Macau. C.U.
Corporate
GEG hosts “World Class, Asian Heart” party
In striving to provide diverse opportunities for locals to develop their career paths, Galaxy Entertainment Group (“GEG”) hosted a recruitment party with the theme of “World Class, Asian Heart”. GEG team members were present at the event to answer attendees’ questions and demonstrate the “Asian Heart” service philosophy.
Many attendees expressed that they were impressed by GEG’s facilities and hotel operations, which have greatly promoted the integration of non-gaming elements into the industry. Eight sessions of the “World Class, Asian Heart” party have been held recently. GEG team members welcomed the pre-registered participants and introduced GEG, its service philosophy, its facilities and its future development plans.
Business Daily Tuesday, September 27 2016 7
Macau
Gaming
Bloomberry: Jeju casino deal with Iao Kun not extended The Philippine gaming operator said it did not reach an agreement with the junket operator to extend the closing date of their deal on the Jeju Sun Hotel & Casino. Kam Leong kamleong@macaubusinessdaily.com
P
hilippine gaming operator Bloomberry Resorts Corporation denied yesterday that it had agreed to extend the deadline for local junket operator Iao Kun Group to complete their share purchase deal on the Jeju Sun Hotel & Casino in South Korea. In a press release on its second quarter results last week, Iao Kun said it and Bloomberry ‘have agreed to extend the required closing date for
the acquisition,’ adding the company was still in negotiations regarding the funding arrangements for the deal. However, in a statement to the Philippine Stock Exchange yesterday, Bloomberry stated, ‘Bloomberry Resorts Corporation would like to clarify that it has not agreed to the extension of the closing date for the said transaction with Iao Kun.’ The two parties jointly announced in June that the local junket operator would acquire the South Korean casino-resort and a non-expiring gaming concession in the country
from Bloomberry for KRW117.5 billion (MOP814.4 million/US$101.8 million). The announcement, released on June 23, indicated that the expected completion date for the deal would be ‘in 45 days’.
Another way out?
Iao Kun’s chairman, Lam Man Pou, said in last week’s release that the company is “looking forward to completing the acquisition of the Jeju Sun Hotel & Casino as well as a non-expiring transferrable gaming license”. Regarding its overseas operations, the junket operator has conducted a “strategic review” of its VIP business in the Special Administrative Region. At the end of August, it closed its VIP room at Sands Cotai Central.
Meanwhile, its two VIP rooms in Galaxy Macau and StarWorld Hotel, both part of Galaxy Entertainment Group, were also shut down in the middle of this month. But Galaxy said in a recent statement that it was the one terminating its promoter agreements with Iao Kun due to the latter’s “breach of the agreements”, adding that it planned to take legal action against the junket operator. For the first eight months of the year, the junket operator’s rolling chip turnover was halved to US$2.41 billion, compared to US$4.8 billion during the same period in 2015. Meanwhile, it saw its net losses widen to US$107.9 million for the first half of the year, compared to US$6.7 million one year ago. The junket promoter is now left with only two VIP rooms in the city, located at City of Dreams in Cotai and L’Arc Macau on the Peninsula. It is also running trial gaming operations in casinos in Perth and Melbourne, Australia.
8 Business Daily Tuesday, September 27 2016
Greater China Online commerce
Jack Ma’s Ant Financial expects to rack up a Singles’ Day record Valued recently at US$75 billion by CLSA Ltd., it’s said to be exploring an IPO in Hong Kong as soon as in 2017.
A
nt Financial, the Chinese payments giant controlled by billionaire Jack Ma, expects this year’s Singles’ Day shopping extravaganza to top 2015’s roughly US$14 billion as domestic consumption remains resilient despite an economic slowdown. The online financial services company expects to handle a record amount of sales on November 11, an annual 24-hour online shopping marathon pioneered by affiliate Alibaba Group Holding Ltd. that’s become a barometer for Chinese Internet retail. As the operator of leading payments service Alipay, Ant Financial plays a key role in the smooth exchange of the enormous sums of cash in play. Alibaba and Ant have plenty riding on the event, which is closely watched by investors and a source of immense pride for both companies. It’s also attracted some controversy: the U.S. Securities and Exchange Commission has been looking at data reported from the promotion last year, Alibaba said in its annual report in May. Vice Chairman Joseph Tsai has said the company is cooperating with the regulator, sharing facts in an investigation it had voluntarily disclosed. “We have our partners and employees working around the clock in
anticipation of 11/11 this year. We expect and we hope it to be even bigger than last year,” said Douglas Feagin, the former Goldman Sachs investment banker who now heads Ant’s international operations. “We have many more merchants and products and service available on the platforms, and I can tell you that many are in the advanced stages of planning.” China’s largest online financial services company, known as Zhejiang Ant Small & Micro Financial Services Group Co., serves some 450 million users and competes with Tencent Holdings Ltd. in online payments as well as Internet services from dining to food delivery. Valued recently at US$75 billion by CLSA Ltd., it’s said to be exploring an IPO in Hong Kong as soon as in 2017. “We see the benefits of being a public company but there is no timetable,” Feagin told Bloomberg News before a media event in Shanghai. Ant’s now trying to replicate its local success overseas, especially in Asia. It wants to follow in the footsteps of the tens of millions of Chinese who venture abroad annually, enabling their dining, shopping and other needs on the road. Alipay is now accepted by more than 80,000 off-line retailers around the world, Feagin said. And yesterday, it announced a deal to get the service
accepted at 10 international airports from Munich to Tokyo and Seoul. It’s also on the prowl for acquisitions. Ant Financial and Primavera Capital Group are buying a stake in Yum! Brands Inc.’s Chinese operation for US$460 million, a deal that gets its payments platform on KFC and Pizza Hut restaurants across the country. It already owns a slice of Paytm, one of India’s largest digital transactions platforms. And it will soon get approval to complete its purchase of a 20 per cent stake in Thailand’s Ascend Money, Feagin said, a step toward becoming a
larger player in Southeast Asia. Growth in e-commerce at home however is straining Ant’s network, which also hosts the country’s largest money-market fund and a plethora of other financial services. Ant will keep investing in security and expanding its capacity, Feagin said. The company is also looking for overseas technology to get a leg up on Tencent, its fiercest rival in Internet finance. For instance, it recently acquired EyeVerify Inc., a biometric authentication technology for securing consumers’ online data and transactions. Bloomberg News
Jack Ma during last year Single’s Day edition
Financial targets
Beijing probes North Korea bank suspected of nuclear link China has fully followed United Nations resolutions on North Korea. China is investigating executives of a North Korean bank believed to finance the illicit procurement of arms and materials related to the isolated country’s banned nuclear programme, South Korea’s JoongAng Daily reported yesterday. China and the United States have agreed to step up cooperation in the U.N. Security Council and in law enforcement channels after North Korea’s fifth nuclear test on September 9, the White House said last week. While China is North Korea’s sole major ally, it disapproves of its nuclear and missile programmes. The Chinese-U.S. cooperation includes targeting the finances of Liaoning Hongxiang Industrial, a Chinese conglomerate headed by a Communist Party cadre, that the Obama administration
A military parade in Pyongyang
thinks has had a role in helping North Korea’s nuclear programme, the Wall Street Journal reported at the time. The JoongAng Daily said Chinese authorities were investigating a top official of the Kwangson Banking Corporation at its branch in the Chinese border city of Dandong. The U.S. Treasury designated the bank in 2009 under an order that targets entities supporting North Korea’s arms trafficking because of its suspected involvement in procuring “dual-use” technology with both civilian and military application. “The head of the branch, Ri Il Ho, temporarily returned to North Korea, so the deputy executive is being investigated,” a source told the JoongAng Daily. The paper did not identify its source, who it said was “well-informed on North Korea affairs”. In March, after the latest round of U.N. sanctions, the United Nations extended an asset freeze to all funds held abroad by the bank.
Business Daily Tuesday, September 27 2016 9
Greater China In Brief Taiwan
C.bank sees 2017 GDP slightly higher
Debt
Authorities warns on city bank risks The nation’s more than 130 city commercial banks have piled into shadow lending just as bad loans are rising. Alfred Liu
China’s banking regulator told the nation’s city banks to learn the lesson of the global financial crisis and get back to their traditional businesses, building pressure for the lenders to curb opaque shadow financing. “City commercial banks should change as soon as possible the situation of allocating more funds into investing than lending, and developing their offbalance-sheet businesses too fast,” Shang Fulin, the chairman of the China Banking Regulatory Commission, said in a transcript posted on the agency’s website. Shang’s speech to a city commercial bank conference was dated last Friday. He urged the lenders to stick to the principle of simplifying and going back to their “main” businesses, citing this as the mainstream approach around
the world in the aftermath of the global financial crisis. Bank of Tangshan is a prominent example of the off-loan-book wizardry that turbo-charges the growth of some small and mid-sized banks. Traditional loans accounted for less than a quarter of the lender’s assets and a “marginal
M&A
Vistra, Permira among final bidders for unit of Bank of East Asia Like several other financial institutions Bank of East Asia has been hit by regulatory challenges and a slowdown in the China and Hong Kong economies. Denny Thomas
The bank branch in Dandong then moved to an office in a building also used by Hongxiang and continued to operate, though without a sign, the JoongAng Daily said. Asked about the report of the Kwangson probe, Chinese Foreign Ministry spokesman Geng Shuang said he did “not understand” the situation. But China has fully followed United Nations resolutions on North Korea, which put wide-ranging sanctions on the country, and fulfils its international obligations when it comes to non-proliferation export controls, Geng added.
Key Points Targets officials of Kwangson Banking Corp -paper China disapproves of North’s nuclear, missile programmes North Korea conducted its fifth nuclear test on September 9 A report by the Asan Institute for Policy Studies in Seoul and the C4ADS think-tank in Washington last week identified more than US$500 million in trade from January 2011 to September 2015 between the North and the Liaoning Hongxiang Group, which states on its website that it trades heavily with the North. More than 20 customs and city officials in Dandong are being investigated over favours to Ma Xiaohong, Hongxiang’s founder and top executive, the JoongAng reported, citing a source “knowledgeable about relations between Beijing and Pyongyang”. In recent weeks, Chinese authorities have frozen certain assets related to Ma and some of her relatives and associates, according to government and corporate filings cited by the Wall Street Journal. Other unidentified “North Korean employees” living in China were also under investigation, the JoongAng said. Reuters
proportion” of credit risk, UBS Group AG said in a report in June. The lender declined to comment when Bloomberg reported on the bank in August. “The city commercial banks should be aware that they neither have the ability nor the negotiating edge to compete with the big banks” in arranging financing for big clients, Shang said. Dotted across China from Harbin in the north to the tropical island of Hainan in the south, the nation’s more than 130 city commercial banks have piled into shadow lending just as bad loans are rising. Shang’s comments add to efforts by the government to contain the risks. Bloomberg Bews
Bank of East Asia, under attack from activist investor Elliott Management, has received about five final bids from suitors including Vistra Group and buyout firm Permira for its share registry business that is valued at about US$800 million, people familiar with the matter said. Ping An Insurance Group of China and Australia’s Link Market Services are the other suitors that have placed final bids for the business, called Tricor Holdings, the people added. The deal, if successful, would mark the first major sale of any business by Bank of East Asia, which was established nearly a century ago. While several Hong Kong-based family-owned banks have sold out due to deteriorating market conditions, Bank of East Asia survived as an independent bank in a market that is dominated by HSBC and Standard Chartered plc. A sale of Tricor could also help Bank of East Asia management placate some shareholders and win their support in the battle against Elliott, which has called for a sale of the bank itself. The bank posted a 37 per cent drop in half-yearly profit last month, hit by a surge in loan impairment losses. It has been looking to sharply cut its operational costs and retreat from
non-core businesses to shore up profitability. Hedge fund Elliott, which owns 7 per cent of Bank of East Asia and has been critical of its performance, has been agitating for change and started legal proceedings against the bank in July over a share issue. Bank of East Asia has rejected Elliott’s demand that the bank be put up for sale. The Hong Kong bank announced plans to review its 75.6 per cent holding in Tricor in February. Hong Kong port operator NWS Holdings Ltd, backed by billionaire Cheng Yu-tung, owns the remaining stake and is also considering selling its holding. Final bids for the business, that generated about US$55 million in earnings before interest, tax, depreciation, and amortization, were due last week. Vi s t ra a n d P e r m i ra a r e t h e frontrunners for Tricor, one of the people said. Bank of East Asia, Ping An, Link and Permira declined to comment. Baring Asia Private Equity, which owns Vistra, also declined to comment. Sources declined to be identified as the discussions are confidential. Bank of East Asia shares have jumped 12.3 per cent this year, nearly double the gains of the benchmark Hong Kong index. Reuters
Taiwan’s economic growth in 2017 will be slightly above this year’s, and its current loose monetary policy was sufficient to spur economic growth, according to a central report submitted to the island’s legislature. The report, seen by Reuters yesterday, said it would be difficult for the export-driven economy to grow substantially as unemployment was rising and domestic consumption remained soft. “China’s economic restructuring, the Brexit and the increasing chances the Fed will raise interest rate at year-end will further cloud global economic growth prospects,” said the report. Markets
Guotai Junan plans to issue 1 bln HK shares Chinese brokerage Guotai Junan Securities Co Ltd plans to issue up to 1.04 billion Hong Kong shares, the company said in a Shanghai stock exchange filing late on Sunday. The firm plans to raise at least US$2 billion in a Hong Kong listing in the first half of 2017, people close to the plan told IFR, a Thomson Reuters publication early in September. The proceeds will be used to raise capital for domestic and foreign securities-related business development and investment, the filing said. The brokerage went public in June 2015. Disaster relief
Government allocates injection to typhoon-hit provinces China yesterday allocated 220 million yuan (US$33 million) to typhoon-hit Fujian and Zhejiang provinces for disaster relief work. The money, allocated by the Ministry of Finance and the Ministry of Civil Affairs (MCA), will be used in relocating and compensating people affected by Typhoon Meranti and in rebuilding work. Meranti, the strongest typhoon that hits China this year, has left at least 28 dead and 15 others missing in Fujian and Zhejiang.
Strategy
Didi invests in bicycle-sharing platform ofo China’s leading on-demand mobility (ODM) company Didi Chuxing yesterday announced its investment in ofo, one of the country’s leading bicycle-sharing platforms. Didi Chuxing said it has invested tens of millions of U.S. dollars in ofo, as part of a multi-layered partnership between the two companies in the urban mobility sector. Created on the campus of Peking University in April 2014 as a student start-up project, ofo applies mobile internet technology to optimize biking resources on China’s campuses. The startup has won over a robust user community across China, and has nearly 70,000 bikes shared every day.
10 Business Daily Tuesday, September 27 2016
Greater China
For some sectors reform means mega-mergers - such as the marriage last year of top train makers China CNR Corp and China CSR Corp
Reform
Government launches state enterprise restructuring fund China has made reform of state enterprises, many suffering from surplus production capacity, a nationwide priority.
C
hina has launched a 350 billion yuan (US$52.5 billion) restructuring fund as the government pushes ‘supply-side’ reforms that have included mergers of inefficient state enterprises and laying off workers in struggling sectors such as coal and steel. The China State-owned Enterprises Restructuring Fund will be managed by the State-owned Assets Supervision and Administration Commission (SASAC), the Economic Information Daily, a newspaper run by the official Xinhua news agency, reported yesterday. SASAC did not immediately comment. Ten state-owned enterprises have provided initial registered capital of 131 billion yuan, the newspaper said.
It did not spell out how the rest of the funds would be raised or how the proceeds would be used. China has made reform of state enterprises, many suffering from surplus production capacity, a nationwide priority as economic growth slows. For some sectors reform means mega-mergers such as the marriage last year of top train makers China CNR Corp and China CSR Corp - to create national champions with the heft to compete on the world stage. China is not the first country to create a fund to support state firms going through hard times. The South Korean government has approved a US$9.5 billion fund to help recapitalise state-run banks exposed to the country’s troubled shipping sector.
The Chinese fund is targeting sectors facing overcapacity, said Zhou Hao, senior emerging markets economist at Commerzbank. “This fund aims to facilitate the destocking and deleveraging process,” Zhou said. The 10 firms investing in the Chinese restructuring fund include China Mobile Ltd, China Railway Rolling Stock Corp, China Petroleum & Chemical Corp and China Chengtong Holding Group Ltd, a restructuring platform supervised by SASAC that will lead the fund. China’s debt-ridden state sector, including its sprawling oil-and-gas industry, has struggled under a system that requires state firms to maximise economic gains while fulfilling government policy objectives. As part of a five-year plan, the government has vowed to create innovative and globally competitive enterprises through mergers, asset swaps and management reforms. China will reduce the number of state-owned enterprises this year
to no more than 100 from 106, state media reported in July, citing SASAC Deputy Secretary-General Peng Huagang, who added that 10 central SOEs were in talks to create five groups.
Key Points Fund will be managed by state-asset group SASAC, report says Initial registered capital is 131 billion yuan Reform of state owned enterprises is a priority China’s central state-owned enterprises will complete their restructuring by the end of next year by introducing private capital and strategic investment into their projects, the Economic Information Daily reported earlier this month, citing unnamed insiders. Reuters
Corruption
Authorities to prosecute former top executives for alleged graft The prosecutor said all three are suspected of taking bribes and abusing their positions for personal advantage. China will prosecute former senior officials of energy giant Sinopec Group and China Southern Airlines as well as a one-time top security official in Tibet for suspected graft, the prosecutor’s office said yesterday.
President Xi Jinping launched a sweeping crackdown on deep-rooted corruption after assuming power almost four years ago, ensnaring top politicians, leaders of state enterprises and senior bankers.
In a short statement on its website, the state prosecutor said it had begun proceedings against former Sinopec Group president Wang Tianpu, former China Southern Airlines general manager Si Xianmin, and Le Dake, once a senior security official in restive Tibet. It was not possible to reach any of the three for comment and unclear who their lawyers are. A Sinopec spokesman said the firm
supported the case against Wang, as corruption was tolerated by neither the ruling Communist Party nor the state, and contradicted the company’s core values. China Southern officials could not immediately be reached for comment.
Key Points Officials of Sinopec Group, China Southern Airlines targeted Former top security official in Tibet also faces action Suspected of taking bribes, abusing their positions prosecutor
President Xi Jinping launched a sweeping crackdown on deep-rooted corruption after assuming power almost four years ago
The prosecutor said all three are suspected of taking bribes and abusing their positions for personal advantage. It added that the prosecutor had protected the rights of the accused, in line with the law, and heard the opinions of their defence teams. The statement gave no details. The announcement is the next step in the legal process before the three face trial, which could still be several months away and is likely to happen behind closed doors. The three have already been investigated by the party’s internal anti-corruption watchdog and will almost certainly be found guilty, as Chinese courts are controlled by the party and do not challenge its accusations. Reuters
Business Daily Tuesday, September 27 2016 11
Asia Financial sector
Malaysian banks brace for profit hits While Malaysian banks’ have some US$10 billion in exposure to the oil and gas sector overall, this represented just 3 per cent of their gross loans as of June. A. Ananthalakshmi and Liz Lee
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alaysian l e n d e rs are bracing for a hit to profits this year as they bump up provisions for sour loans to the local oil and gas services sector that has been battered by the slump in energy prices and cutbacks in projects. The problem mirrors pain playing out in neighbouring Singapore, where the collapse of oilfield services firm Swiber Holdings Ltd has stoked concerns about the size of the city-state’s biggest lender DBS Group Holdings’ exposure to the industry. Last month, Malaysia’s Perisai Petroleum Teknologi, an offshore oil and gas services provider, said it was aiming to renegotiate terms with bondholders on a S$125 million (US$92 million) bond. A day later, Malaysia’s biggest bank Malayan Banking Bhd (Maybank) reported a tripling in loan provisions that was partly responsible for a 27 per cent decline in second-quarter net profit - further fanning concern about the sector. “While Malaysian O&G names are in a relatively better liquidity situation than their Singapore peers, we expect this to continue to remain an issue for these banks due to the volatility in oil prices,” said Nomura analyst Tushar Mohata. But analysts also note that while
Malaysian banks’ have some US$10 billion in exposure to the oil and gas sector overall, this represented just 3 per cent of their gross loans as of June. On an individual basis too, Maybank and rivals CIMB Group Holdings Bhd and RHB Bank Bhd all have 3-4 per cent of their total loans in the oil and gas sector. By contrast, loans to the sector
accounted for about 6 per cent of total loans at Singapore’s three listed banks. DBS has some US$17 billion in exposure to the sector, Maybank has just US$4.6 billion. “We expect the impact on profits to be manageable. Despite increased stress over the last few years... banks’ revenues have been sufficient to absorb the higher impairment costs and profitability has remained adequate,” said Elaine Koh, a director at Fitch Ratings. Since Maybank reported results last month, 13 analysts have cut their predictions for annual net profit forecast to an average 6.15 billion ringgit,
a decline of about 10 per cent from last year and 6.6 per cent lower than earlier estimates. Still, chances are more loans to the sector are likely to go sour, particularly if oil prices, which have slumped 60 per cent over the past two years, do not see a significant pick-up. A planned cost cutting drive by state oil firm Petroliam Nasional Bhd (Petronas) of up to US$12 billion over four years is also set to exacerbate woes.
“We expect the impact on profits to be manageable.” Elaine Koh, a director at Fitch Ratings UOB KayHian analysts have highlighted several offshore services firms as having risky gearing levels. These included UMW Oil & Gas, which it said had maturing short-term loans worth 2 billion ringgit, as well as Dayang Enterprise Holdings Bhd. UMW declined to comment. Dayang said the firm has enough cash to comfortably ride through the next two years. “Indeed, we have a few sizeable loans but none are due in the next one year, and we have also not defaulted on any loans so far. We will still be able to sustain the company even if operations stops,” Bailey Kho, head of corporate affairs at Dayang, told Reuters. Reuters
Maybank headquarters in Singapore
Trade
NZ posts wider than expected deficit Milk powder exports fell to their lowest level since August 2009. New Zealand reported a wider-than-expected trade deficit in August, as milk powder exports fell to a seven-year low and meat exports also waned. New Zealand posted a monthly trade deficit of NZ$1.26 billion (NZ$910.85 million) in August, data from Statistics New Zealand showed yesterday, while the annual trade deficit was NZ$3.1 billion.
3.39 billion NZ$ August’s exports
Economists polled by Reuters had forecast a monthly deficit of NZ$765.5 million, and an annual deficit of NZ$2.7 billion. Exports totalled NZ$3.39 billion for the month, compared with NZ$3.96 billion the previous month. Imports came in at NZ$4.65 billion versus NZ$4.4 billion.
Milk powder exports fell to their lowest level since August 2009 and all top destinations of milk powder fell in value and quantity, with both China and the United Arab Emirates seeing a drop in value of over half, Statistics New Zealand said. BNZ Senior Economist Doug Steel said, however, that while milk powder exports were softer than expected,
“things will improve on that front” after recent price gains. Whole milk powder prices - the staple of New Zealand’s dairy export basket - reached one-year highs this month as a global supply glut showed signs of easing. The price recovery is bringing some relief to farmers, 85 per cent of whom have been operating at a loss, and
giving a boost to the dairy sector, which accounts for around a fifth of New Zealand’s export revenue and remains the backbone of the Pacific island nation’s economy. He was less upbeat about meat exports, which were down 26 per cent in August compared with August 2015, with declines in both beef and lamb. Steel said the outlook for lamb exports to the United Kingdom remained challenging, in particular given the high New Zealand dollar. Reuters
12 Business Daily Tuesday, September 27 2016
Asia GDP forecast
India seen growing 8 per cent a Year India has become the centre of the world’s oil demand growth and the country’s economic growth will affect global commodities, Citigroup Inc. said in a research note. Dan Murtaugh
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he world’s second-largest country by population after China will see its economy expand at about 8 per cent a year through 2021, Citi researchers including Ed Morse said. The country’s workingage population will increase by 220
million over the next 20 years, and about 240 million people will move to cities. Urbanization and rising incomes will boost demand for transportation fuels, gold jewellery and electricity generation, while looser regulations should spur increased exports of iron ore into the market. India’s economy won’t copy China’s near-decade of
double-digit economic growth that pushed oil prices into the US$100a-barrel range, but will be enough to impact global supply-and-demand balances of several commodities, Morse said. “While India is no China, the sub-continent’s largest economy is becoming the third largest oil consumer and importer of oil, with a tangible impact on oil, coal and iron ore markets, less so on metals,” Morse said. “As India’s base rises, so too should its global commodities’ impacts.” Citi expects 2016 to be the best in four years for commodity investments.
“As India’s base rises, so too should its global commodities’ impacts.” Ed Morse, Citigroup researcher
The Bloomberg Commodity Index is up 7.4 per cent this year. Oil, zinc, copper and soft commodities will be the best investments in 2017, with Brent crude seen averaging US$60 a barrel after ending this year around US$50. India’s crude demand has grown by 350,000 barrels a day this year, higher than China, as the country surpassed Japan to be the world’s third-largest oil buyer. Gasoline demand has risen 14 per cent this year and should continue to increase at double-digit rates as car and motorcycle purchases climb, Morse said. Coal demand will grow between 6 per cent and 8 per cent a year through 2020 as the country tries to electrify more rural areas. Domestic production of coal for power will rise even faster, reducing imports, while a strong domestic steel-production outlook means the nation will have to increase metallurgical coal imports. Gold demand should remain high in the country, which accounts for almost a quarter of global demand for the precious metal, as falling unemployment and steady inflation spur buying of jewellery, coins and gold bonds, Citi said. Iron ore exports will grow to 20 million tons a year from 6 million tons in 2016 as the government reduces and eliminates export duties and companies restart mines. One commodity group that won’t see as much impact from India’s expansion is meat, according to Citi. India is home to more vegetarians than any other country, with more than half its 1.25 billion people identifying as partially vegetarian or vegan, according to Citi. Bloomberg News
Price goal
Japan’s central bank head says ready to use every tool The Bank of Japan made an abrupt shift last week to targeting interest rates on government bonds to achieve its elusive inflation target. Leika Kihara
Bank of Japan (BOJ) Governor Haruhiko Kuroda, in his first speech since the BOJ’s decision last week to overhaul its radical stimulus programme, said the central bank stood ready to use every available tool to achieve its 2 per cent inflation target. While the BOJ would be mindful of the impact ultra-easy policy could have on banks’ profits, that would not prevent it from expanding stimulus further if needed to revive Japan’s economy. “There is no better opportunity than now to completely get out of deflation. Talking about the limits of monetary policy does not help at all,” Kuroda said in a speech yesterday to business leaders in Osaka, western Japan. “There is no limit to monetary policy,” he said. “In designing monetary policy, the BOJ will relentlessly pursue innovation and never hesitate to challenge.” The BOJ made an abrupt shift last week 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. Under the new framework, the BOJ’s main means for monetary easing would be to deepen negative
interest rates from the current minus 0.1 per cent, or lower its 10-year government bond yield target - now set at around zero per cent, Kuroda said. The pace of the BOJ’s bond purchases could fluctuate depending on how much the central bank needed to buy to achieve its yield curve target, Kuroda said.
On Wednesday, the BOJ dropped its previous target of increasing base money at an annual pace of 80 trillion yen (US$792 billion), a move analysts saw as an acknowledgement that its huge bond buying programme was reaching its limits. The BOJ said it will keep buying bonds at the current pace for the time being, but warned that the pace could slow in the future as long as it could achieve the yield target.
Key Points Slowdown in bond buying would have no policy implications Talking about monetary policy limits won’t help-Kuroda Main easing means would be short- and long-term rate cuts
Several corporate executives present at the meeting complained about the yen’s recent ascent to a one-month high, saying that it could hurt their export-reliant businesses. Kuroda said he would watch closely how recent yen gains could affect Japan’s economy, and warned of lingering overseas uncertainties that could cloud prospects of Japan’s recovery. “It’s basically desirable for currency rates to move stably reflecting economic fundamentals,” Kuroda said, stressing that it was a shared understanding among Group of 20 nations that excess volatility and disorderly currency moves hurt growth. Reuters Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Joanne Kuai; Nelson Moura; Annie Lao; Kelsey Wilhelm Group Senior Analyst José I. Duarte Design Aivi N. Remulla Web & IT Janne Louhikari Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@projectasiacorp.com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com Founder & Publisher
Business Daily is a product of De Ficção – Multimedia Projects
But such changes in the amount of bond purchases would have no policy implications, he added, hosing down market speculation the BOJ was eyeing a future tapering of asset purchases. The BOJ may instead top up asset purchases or accelerate base money expansion, if economic and price conditions warranted such “powerful” monetary easing, he said. “The BOJ stands ready to use every possible policy tool, if it judges necessary to achieve its objectives,” Kuroda said.
Business Daily Tuesday, September 27 2016 13
Asia Investment
In Brief
Vietnam sees FDI attraction down Foreign investors have been pouring most money in industrial manufacturing and processing. Vietnam is expected to attract some US$16.43 billion of foreign direct investment (FDI) in the first nine months of 2016, posting a year-onyear decrease of 4.2 per cent, according to the Ministry of Planning and Investment (MPI) yesterday. Accordingly, as many as 1,820 newly-registered FDI projects worth US$11.165 billion were granted
licenses in nine months, up 27.1 per cent in volume and 1.1 per cent in value year-on-year. Meanwhile, from January to September, some US$5.265 billion was registered to add to 851 existing projects, down 13.9 per cent in value and up 84.6 per cent in volume year-onyear, said MPI’s Foreign Investment Agency on its website.
11.02 billion US$ Jan-Sept estimated FDI disbursed in Vietnam
At the same time, it is estimated that in nine-month period, a total of US$11.02 billion of FDI has been disbursed in Vietnam, up 12.4 per cent year-on-year. During the period, foreign investors have been pouring most money in industrial manufacturing and processing, with some US$12.15 billion, accounting for 73.9 per cent of total FDI attraction. Real estate business ranks second with around US$1 billion while expertise, science-technology activities sit third place with US$649 million , said the agency. In the first nine months, among 65 countries and regions with FDI projects in Vietnam, the Republic of Korea is taking the lead with US$5.58 billion, followed by Singapore and Japan with respective capital registration of US$1.84 billion and US$1.7 billion. Several major FDI projects being licensed in nine-month period include LG Display project in northern Hai Phong city with investment of US$1.5 billion, LG Innotek project in Hai Phong with investment of US$550 million, and Amata project in southern Dong Nai province with investment of US$309.3 million among others During January-September period, the FDI sector is likely to earn US$89.471 billion from exports (excluding crude oil), up 9.3 per cent year-on-year, accounting for 69.7 per cent of Vietnam’s total export revenue. Meanwhile, the sector spends US$74.019 billion on imports, up 0.9 per cent year-on-year, making up 59 per cent of the country’s total imports. The FDI sector is estimated to enjoy a trade surplus of US$15.452 billion during the period. Xinhua
Investigation
South Korea prosecutors request arrest warrant for Lotte chairman The request for an arrest warrant comes after prosecutors questioned Shin Dong-bin last week. Joyce Lee
South Korean prosecutors have requested an arrest warrant for Lotte Group chairman Shin Dong-bin (pictured), the retail-to-chemicals group said yesterday, the latest twist in a broad criminal probe into the country’s fifth-largest conglomerate. A prosecution source with direct knowledge of the matter said prosecutors have sought a Seoul court’s approval for the arrest warrant as part of an investigation into suspected embezzlement and breach of trust. The person declined to be identified as he was not authorised to speak to media.
Key Points Warrant request needs Seoul court approval Court hearing on request expected around Weds -Yonhap The Lotte probe, which began in June, has already scuppered a planned US$4.5 billion initial public offering by the group’s Hotel Lotte arm, hampered potential mergers and acquisition deals and served as the backdrop of the apparent suicide of one of the group’s top executives last month. The request for an arrest warrant comes after prosecutors questioned Shin, 61, last week. Shin is in South Korea and will fully cooperate with
the investigation, a Lotte Group spokesman said, declining to comment on why the warrant had been requested. Seoul Central District Court is expected to hold a hearing around Wednesday, September 28 to
determine the validity of the warrant request, South Korea’s Yonhap News Agency reported. Yonhap reported earlier yesterday, citing the office, that prosecutors were seeking an arrest warrant concerning about 200 billion won (US$181 million) in funds in suspected embezzlement and breach of trust. A spokesman for Seoul Central District Prosecutors’ Office confirmed the warrant request had been submitted, declining to comment on reasons for doing so. A judge at the Seoul Central District Court authorised to speak to media about prosecutors’ arrest warrant requests could not be immediately reached for comment. Reuters
Trade
Thai exports unexpectedly rise Thailand’s customs-cleared exports in August unexpectedly rose for the first time in five months, led by auto shipments, but it is too early to tell if the trade-dependent economy’s recovery is starting to solidify given the stillsoft global demand. Exports increased 6.5 per cent from a year earlier, commerce ministry data showed yesterday, compared with the median forecast for a fall of 1.4 per cent in a Reuters poll. In July, shipments fell 6.4 per cent. In August, imports dropped 1.5 per cent from a year earlier, producing a trade surplus of US$2.13 billion for the month. Official data
Singapore factory output weaker than expected Singapore’s industrial production in August barely grew from a year earlier, as a slide in marine and offshore engineering output and a fall in pharmaceuticals production tempered the positive impact from an expansion in electronics output. Manufacturing output rose 0.1 per cent from a year earlier in August, data from the Singapore Economic Development Board showed. The median forecast in a Reuters survey was for an expansion of 0.6 per cent. On a month-onmonth seasonally adjusted basis, factory output was flat in August, weaker than the median forecast of an increase of 1.8 Trade
S.Korea’s import volume speeds South Korea’s import volume posted the fastest monthly growth in nearly two years last month, indicating expectations for economic recovery in the near future, central bank data showed yesterday. The import volume index stood at 124.58 in August, up 7.5 per cent from a year earlier, according to the Bank of Korea (BOK). It marked the fastest increase since December 2014. Import volume of general machinery jumped 22.7 per cent, with those for chemical products gaining 18.9 per cent. Imports of primary metals and textile goods grew 10.8 per cent and 9.2 per cent respectively. Inflation
Vietnam’s CPI to hike in September Vietnam’s consumer price index (CPI) in September is expected to hike by 0.54 per cent against the previous month and 3.34 per cent year-on-year, said the General Statistics Office (GSO) yesterday. The country’s September CPI is forecast to go up by 3.14 per cent compared to December 2015. These figures drive the average nine-month CPI to rise by 2.07 per cent year-on-year. According to the GSO, the hike in September CPI was attributed to the tuition fee increase in all 53 localities across Vietnam.
14 Business Daily Tuesday, September 27 2016
International In Brief Funds misuse case
Ex-IMF boss Rato on trial over bankers’ luxury sprees Former IMF chief Rodrigo Rato went on trial yesterday accused of overseeing a “corrupt system” that helped him and other executives misuse funds when he was the boss of two of Spain’s top banks. Protesters shouted “thief” and “fraud” at the former economy minister and deputy prime minister as he arrived at the courthouse outside Madrid. Rato is standing trial with 64 other former executives and board members at Caja Madrid and Bankia, whose near-collapse sparked an EU bailout of Spain’s financial sector. He is the third former or current IMF chief to face trial. Energy minister
Russia receives no proposals from OPEC
Real estate
UK mortgage approvals hit 19-month low But consumer borrowing overall remained strong with personal loans and overdrafts rising by a net 343 million pounds.
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ritain’s housing market showed signs of slowing in August with the number of mortgages approved by banks falling to its lowest level since January 2015 and analysts said they expected further weakness ahead as Brexit uncertainty dampens demand next year. British banks approved 36,997 mortgages for house purchases last month, down from 37,672 in July and 21 per cent lower than in August 2015, the British Bankers’ Association said on Monday. The figures extended a slowdown which began at the start of this year ahead of the introduction of a new tax on homes bought by landlords
in April and Britain’s referendum decision to leave the European Union in June. “The outlook for stagnation in households’ real incomes next year, as inflation picks up and hiring slows sharply, points to a prolonged period of weakness in mortgage lending ahead,” Samuel Tombs, an economist at Pantheon Macroeconomics, said. A rise of 1.5 per cent in the average mortgage value in August pointed to a slowdown in house price growth over coming months, Tombs said. Howard Archer, an economist at IHS Global Insight, said house prices would likely be flat until the end of 2016 and fall by 3 per cent in 2017 as the start of talks over Britain’s exit
from the EU exacerbated uncertainty about the economic outlook. The BBA said growth in net credit card lending slowed in August, rising by 136 million pounds compared with an increase of 290 million pounds in July. But consumer borrowing overall remained strong with personal loans and overdrafts rising by a net 343 million pounds, the biggest increase since May, underscoring how consumers appear to have taken the Brexit vote in their stride. The data was collected after the Bank of England cut interest rates to a new record low of 0.25 per cent on August 4. The BBA figures do not include lending by mutually owned building societies, which accounts for around third of mortgages. The next release of the more comprehensive Bank of England lending data is due on Thursday. Reuters
Russian Energy Minister Alexander Novak said that his department didn’t receive any proposals to reduce oil production from the Organization of Petroleum Exporting Countries (OPEC), the Russian news agency TASS reported Sunday. “Nobody offered us such proposals,” Novak was quoted as telling journalists in Algeria, adding that at the moment they were only talking about “freezing” the level of oil production. The 15th International Energy Forum will be held in Algiers from September 26-28, during which OPEC will hold an informal meeting to discuss oil price and production. Oil crisis
Algeria plans bank privatisations Algeria plans to allow its dominant state banks to list on the local stock exchange to help develop its financial markets and diversify sources of funding after the oil price slide, a senior financial official said. The plan will open the door for foreign investors to acquire controlling stakes in banks, reversing a rule requiring Algerian firms to keep a majority shareholding in any partnership with foreigners, the official told Reuters. Algeria’s six government-run banks account for most of the sector’s assets. French companies such as Societe Generale and BNP Paribas have the strongest presence among foreign-owned banks. Restructure
Pfizer says not to split into two U.S. drugmaker Pfizer Inc said yesterday it had decided not to separate into two publicly traded companies at this time. Pfizer has for several years weighed whether a split makes sense, largely because its patent-protected medicines routinely enjoy sales growth, while its portfolio of generics usually post declines. Investors shifted their focus to whether Pfizer would split after the company terminated a US$160 billion deal to acquire Irish drugmaker Allergan Plc in April due to new U.S. tax inversion rules. The company said yesterday the decision would not impact its 2016 forecast, and that it preserved the option to split in the future.
Ifo Survey
German business confidence soars as Brexit fears ‘disappear’ Ifo said morale had improved across the board, from manufacturing and retailing to the services sector. Michelle Fitzpatrick
German business confidence soared to its highest level in more than two years in September, the Ifo economic institute said yesterday, recovering from a post-Brexit slump and signalling a rosier outlook for Europe’s largest economy. The closely-watched index unexpectedly jumped to 109.5 points from 106.3 points in August to reach its highest reading since May 2014, the Munich-based Ifo said. “The German economy is expecting a golden autumn,” Ifo president Clemens Fuest said in a statement. Analysts surveyed by Factset had predicted the mood to stay unchanged. The figure is all the more surprising after the index suffered a steep fall in August, when Ifo said the German economy had fallen into “a summer slump” as companies worried about the fallout from Britain’s decision to leave the European Union. “The prominent Ifo index suggests that Brexit fears have disappeared as quickly as they had emerged,” said Carsten Brzeski, chief economist at ING Diba. Ifo said morale had improved across the board, from manufacturing and retailing to the services sector,
with confidence in the construction industry reaching a new high. “Companies are clearly more optimistic about the months ahead. They are also more satisfied with their current business situation,” said Fuest.
‘Pinch of salt’
But analysts cautioned against reading too much into the survey, after a recent string of disappointing data out of Germany pointed to a gloomier picture. German exports plummeted in July as demand weakened from outside the euro area, while industrial production shrank and demand for industrial orders showed only a slight increase. Nordea Markets’ Holger Sandte said the September optimism should be taken “with a pinch of salt”. “We find the improvement a bit too strong to really reflect what is going on in the economy,” he said. Capital Economics analyst Jennifer McKeown agreed. “In all, we doubt that growth will be as strong as the Ifo now suggests, particularly with a modest rise in inflation set to damage the previously healthy consumer recovery,” she said. “But it does suggest that the German
economy will continue to outperform its peers and reduces concerns raised by the latest hard data that growth could be grinding to a halt.” Ifo’s headline figure is based on a survey of some 7,000 businesses who are asked about the current climate and their expectations for the next six months. Within the index, current business sentiment climbed from just under 113 points in August to 114.7. Confidence in the future outlook soared from 100.1 points to 104.5.
“It does suggest that the German economy will continue to outperform its peers and reduces concerns raised by the latest hard data that growth could be grinding to a halt.” Jennifer McKeown, Capital Economics analyst
Germany’s Bundesbank expects the economy to grow by 1.7 per cent this year and 1.4 per cent in 2017, according to forecasts released before the Brexit referendum was held in June. AFP
Business Daily Tuesday, September 27 2016 15
Opinion Business Wires
The Straits Times (Singaporean) Prime Minister Lee Hsien Loong (pictured) will make a four-day official visit to Tokyo, during which he will meet his Japanese counterpart Shinzo Abe. The trip marks 50 years of diplomatic relations between the two countries, said Singapore’s Ministry of Foreign Affairs in a statement yesterday. PM Lee will receive from Mr Abe Japan’s top honour for a foreign dignitary on behalf of the late founding Prime Minister Lee Kuan Yew. Japan has posthumously awarded Mr Lee the prestigious Grand Cordon of the Order of the Paulownia Flowers to recognise his contributions to the development of bilateral relations over several decades.
The promise of bank mergers New Zealand Herald Lending to property investors buying homes in Auckland fell 18 per cent in August after the Reserve Bank imposed new lending restrictions in July. Central bank data show lending to investors in New Zealand’s biggest city fell to NZ$1.31 billion in August from NZ$1.59b in July. It’s the lowest month for lending to Auckland investors since January when NZ$973 million was committed by the banks as an earlier round of loan restrictions dampened interest in the market for a couple of months. Still, the impact of the restrictions hasn’t had as much impact as the first round of Auckland-specific restrictions.
The Star Foreign investors returned to Bursa with the strongest inflow in 10 weeks, according to MIDF Research. “Last week, foreigners bought RM733.4mil after they offloaded RM565.9m the week prior amid a three-day trading week. Foreigners’ participation rate remained relatively strong last week at RM921.36mil albeit lower than the RM1,214.63mil recorded the week before,” it noted in its weekly report. The research house said there were net buyers in the last five trading days of the week after four days of net selling prior due to the short trading week.
Jakarta Globe Bank Indonesia, the country’s central bank, plans to lower the cap for interest rate credit cards in its latest attempt to push con-cash transactions among Indonesian customers. The central bank would limit the maximum credit card interest rate to 2.25 per month or 27 per year, from today’s 2.95 per cent per month or 35.4 per cent per year, deputy governor Ronald Waas said over the weekend. “The regulation is not yet out, but the board of governors have agreed that [the interest rate] will go down, because we want to encourage noncash transactions through credit cards,” Ronald said.
T
he banking business has fallen on hard times. The combination of persistent low interest rates, increasing regulatory compliance costs, and the rise of new competitors taking advantage of financial technologies (fintech for short) has produced, in Europe in particular, excess capacity and low profitability – and a strong temptation to merge. In a difficult market, mergers – by enabling banks to cut costs, share information-technology platforms, and increase market power, thereby relieving pressure on margins and rebuilding capital – make sense. And the banks know it. Witness the recent merger talks between Deutsche Bank and Commerzbank, both of which have faced huge declines in market capitalization. So a wave of mergers may be on the way. The question is whether that approach really can solve banks’ problems and benefit society. To be sure, mergers and acquisitions are not always a matter of escaping trouble. In fact, M&A activity – both the number and size of transactions – was picking up before the 2008 global financial crisis, including across borders within and beyond the eurozone. After peaking in 2007, such activity diminished, as domestic restructuring took precedence, particularly in countries such as Greece and Spain, which had to implement difficult adjustment programs. Moreover, the M&A approach does not always work. In October 2007, a consortium formed by the Royal Bank of Scotland, Fortis, and Banco Santander acquired ABN AMRO – the world’s biggest bank takeover to date. RBS and Fortis failed soon after and had to be rescued. Nonetheless, supervisory bodies favour mergers to save banks in trouble. Competition authorities tend to be more reluctant, recognizing the danger that largescale mergers can consolidate an anti-competitive market structure, while creating even more “too big to fail” banks that may cause financial instability in the future. But they are often overruled or compelled to acquiesce. The US Department of Justice agreed to the merger between Wells Fargo and Wachovia, among others, soon after the 2008 financial crisis, and the UK Office of Fair Trade was overruled in the merging of HBOS and Lloyds. Competition is not the only source of merger-related tension among authorities. There is also friction between national supervisors, who prefer domestic mergers, and supranational supervisors, who prefer cross-border mergers within their jurisdiction (the eurozone, in the European Central Bank’s case). The benefits of cross-border consolidation are that market power is diluted in a large market, and more diversification is obtained, though these gains come at the price of weakened cost synergies. From the banks’ perspective, cross-border mergers may potentially be the better option, as long as they occur within a single supervisory framework. That way, they can benefit from common supervision and resolution. The eurozone’s new supervisory framework, supervised by the ECB and possessing a common resolution authority, reflects this recognition of the benefits of cross-border mergers. But Europe lags when it comes to such mergers,
“
Xavier Vives Professor of Economics and Finance at IESE Business School and the author of Competition and Stability in Banking.
owing to a broader lack of financial integration. Indeed, in the European Union, member countries’ own banks tend to be the dominant players in the domestic market – say, BNP Paribas in France or UniCredit in Italy. In the United States, by contrast, the same large banks – such as Bank of America, JPMorgan Chase, and Wells Fargo – tend to dominate a large number of different states. US banks have had more space to diversify. For European banks – which must navigate vast differences in culture, language, and law in pursuing cross-border mergers – this has been much more difficult, especially because many of them also need to cut overcapacity drastically. As a result, in the near term, European banks are more likely to pursue domestic – or, at most, regional – consolidation. For the United Kingdom, which voted in June to “Brexit” the EU, the situation is particularly complicated. The UK long benefited from an open policy on acquisitions by foreign banks, which allowed, for example, the Spanish Santander Group to bid for Britain’s Abbey National in 2001. But Brexit will probably move supervision of UK-based banks out of the EU framework, raising the cost of cross-border deals and implying a loss to British consumers. As the UK banking sector’s competitiveness suffers, the temptation to return to the kind of light-touch regulation that enabled the crisis in the first place could intensify. As for the rest of Europe’s banks, now might be the time to consider the merger option. Mergers are no silver bullet, but they could help to alleviate serious problems relatively quickly – though, in the longer term, the banks would still have to tackle the legacy of heavy and rigid structures and rebuild their reputations, with a strong focus on consumer service and fairness. At the same time, if a merger strategy is to work for the good of society, competition must be preserved. If incumbents simply continue to get larger, blocking new competitors from entering the market, they will end up facing intrusive regulatory compliance programs and higher capital requirements. New market entrants would have more flexibility and thus might be able to offer new, more appealing deals to customers. This is why bank supervision and competition policy must work in tandem to ensure a level playing field. On one hand, regulations must apply to all firms performing banking functions, including new fintech institutions. On the other hand, implicit subsidies to too-big-to-fail banks must be dropped. Bank mergers hold much promise, particularly in Europe. To realize their potential will require the right policy mix, focused on consumer protection and fair competition. Europe’s banks and banking authorities will need to step up their game. Project Syndicate
Mergers are no silver bullet, but they could help to alleviate serious problems relatively quickly.
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16 Business Daily Tuesday, September 27 2016
Closing Commerce clash
Beijing extends anti-dumping duties on U.S. chicken
a year ago that found the domestic industry could be harmed if anti-dumping duties were discontinued. China’s Ministry of Commerce (MOC) The MOC said duties would remain unchanged announced yesterday that it will extend antidumping duties on U.S. white-feathered broiler at 46.6 per cent to 73.8 per cent. chickens for another five years, starting today. Disputes over broiler chickens - chickens that reach slaughter weight by about 13 weeks of China imposed anti-dumping duties on age - have been a major source of contention chicken products imported from the Unites in the often tense trade relations between the States in September 2010, claiming that world’s two largest economies. chicken products subsidized in the Unites China also imposed anti-subsidy duties of States were being dumped on the Chinese around 4 per cent on U.S. broiler chicken market at lower than market prices. The latest decision followed a review launched products. Xinhua
Nutrition habits
Investors urge food companies to shift from meat to plants The campaign follows an Oxford University study which said US$1.5 trillion in healthcare and climate change-related costs could be saved by 2050 if people reduced their reliance on meat in their diet. Simon Jessop
A
group of 40 investors managing US$1.25 trillion in assets have launched a campaign to encourage 16 global food companies to change the way they source protein for their products to help to reduce environmental and health risks. The investors, which include the fund arm of insurer Aviva and several Swedish state pension funds, wrote to the food companies on September 23 urging them to respond to the “material” risks of industrial farming and to diversify into plant-based sources of protein. Among the companies targeted were Kraft Heinz, Nestle, Unilever, Tesco and Walmart, a statement by the Farm Animal Investment Risk & Return Initiative, which organized the investor group, said yesterday. “The world’s over reliance on factory farmed livestock to feed the growing global demand for protein is a recipe for a financial, social and environmental crisis,” said Jeremy Coller, founder of the FAIRR initiative and chief investment officer at private equity company Coller Capital. Pollution from intensive livestock production is already at too high a level, while safety and welfare standards are too low and the industry cannot cope with the projected increase in global protein demand, Coller said.
“Investors want to know if major food companies have a strategy to avoid this protein bubble and to profit from a plant-based protein market set to grow by 8.4 per cent annually over the next five years,” Coller said. The campaign follows an Oxford University study which said US$1.5 trillion in healthcare and climate change-related costs could be saved by 2050 if people reduced their reliance on meat in their diet. The study also pointed to growing political pressure on companies to change, citing a consultation in Denmark on the introduction of a red meat tax and a Chinese government
plan to reduce its citizens’ meat consumption by 50 per cent, FAIRR said. Ella McKinley, ethics analyst at Australian Ethical Investment, which is taking part in the campaign, said the need to change food production models was essential to help to limit climate change. “Forward-looking companies can move now to encourage more sustainable diets by reducing reliance on meat and growing the market for plant-based protein alternatives. In the process, companies make their own protein supply chains more resilient to future shocks,” she said. The other companies written to by FAIRR were General Mills, Mondelez International, Ahold-Delhaize, The Co-operative Group, Costco Wholesale Corporation, Kroger Company, Marks & Spencer, Wm Morrison Supermarkets, Ocado,
Sainsbury’s and Whole Foods Market. A Nestle spokeswoman said the company did not use much meat, “so our main strategy is not to focus on replacing the meat that we do use as its impact would be minimal. Our main opportunities lie in innovating new products using alternate proteins”. “In terms of timetables and targets, this is still a relatively new area, where in many countries the consumers are not fully prepared to replace or reduce meat in their diets. Our focus is to innovate great tasting solutions to encourage consumers to try them and over time make small, sustainable shifts towards a higher plant-based, more balanced diet.” Kraft Heinz declined to comment when contacted by Reuters. The CoOp said it had yet to receive the letter. Mondelez also declined to comment because it had not yet seen the letter, while a Sainsbury’s spokesperson said: “We’re aware of the issue and are looking forward to receiving a copy of the letter.” A Walmart spokesman said the company was not familiar with the campaign and so could not provide comment, while a Kroger spokesman said the firm had not received the letter but was happy to talk with the investor group. The remaining companies were not immediately available to comment. Among the other investors to join the campaign were Nordea Asset Management, the fund arm of Norwegian lender Nordea, Boston Common Asset Management, and Impax Asset Management, as well as a number of charities and other ethical investors. Reuters
OECD
Prices plummet
Portugal
Carbon prices 80 per cent too low to protect climate
Cambodia asks China to speed up rice loan
State reimburses 2015 personal income tax
Carbon prices are about 80 per cent lower than where they need to be to protect the climate, according to the Organisation for Economic Cooperation & Development. Emission costs, whether through fuel taxes or trading systems, probably need to rise to at least 30 euros (US$34) a metric ton, the OECD said in a report based on an analysis of six industries in 41 countries. If nations were to boost efforts to charge for pollution at the level of the median nation, the carbon price gap would narrow to about 53 per cent. The report is an attempt to show nations they can embark on climate action for the first time or adopt more ambitious measures without hurting their economies more than their peers. Ninety per cent of the world’s emissions are taxed or priced below the “conservative” 30-euro benchmark, while 60 per cent aren’t priced at all, the OECD said. Climate pledges must be more ambitious as nations need to cut emissions at least 40 per cent by 2050 from current levels, it said. The report covered countries responsible for 80 per cent of global energy use and carbon dioxide emissions, spanning China and Brazil to the U.S. and Europe. Bloomberg News
Cambodia asked China yesterday to speed up a US$300 million loan to help Cambodia’s rice sector that has been hurt by plummeting prices amid fierce global competition. Deputy Prime Minister Hor Namhong told China’s ambassador to Cambodia, Xiong Bo, during a meeting yesterday that Cambodia urgently needed the funds which it first asked for last year. Rice farmers in Cambodia have had a hard time competition with other Southeast Asian rice exporters such as Thailand and Vietnam because of expensive transport and higher electricity prices. The lack of overseas demand has pushed prices lower to around US$193 per tonne from around US$250 in August. “The Cambodian people are facing a crisis of rice prices which fell rapidly,” said Namhong, adding that he had also asked China to make good on its pledge to buy 300,000 tonnes of Cambodian rice annually. “I asked the Chinese ambassador to report this to the Chinese government to hurry up to buy rice as China had promised to help our farmers,” he said. Cambodia exported 530,000 tonnes of rice last year, well below its target of 1 million tonnes. Reuters
Portugal’s Ministry of Finance returned a total of €2.3 billion in personal income tax as a result of its processing of taxpayers’ declarations for the 2015 tax year, the government announced yesterday. In a statement, the ministry said that a total of 5 million declarations for 2015 were submitted to 31 August - the legal deadline for reimbursements to be paid out - of which 95 per cent were online, up five percentage points from the previous year. According to the statement, 99.7 per cent of all declarations were dealt with by the deadline, including those submitted later than required. Of the 5 million total, 2.6 million declarations gave rise to reimbursement while 746,000 prompted the tax authorities to issue demands for payment. The total amount reimbursed to taxpayers, at €2.3 billion, was up €344 million on the previous year, while the total amount demanded was €1.2 billion, down €107 million. The implementation for the first time of new rules on when reimbursements must be paid out meant that the average time taken for this was 48.5 days, up from 43.5 last year and 40.55 in 2014, the ministry said. Lusa