Retail business blip in July Retail Page 4
Friday, September 30 2016 Year V Nr. 1142 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kam Leong Gaming
MGM expects flat room occupancy in Golden Week Page 8
www.macaubusinessdaily.com
Macau Grand Prix
Jurisdictions
Pirelli replaces Yokohama for tyre supply in November Page 2
US to keep probing Chinese companies related to N. Korean financing Page 12
Luxury Products Rebound Trade
The city’s total merchandise imports increased 1.8 pct y-o-y in August. Following a one-year drop. Thanks to rebounding growth in the importation of gold jewellery and watches. And in large passenger cars. Total exports climbed a respectable 8.4 pct y-o-y, according to DSEC. Page 4
Surplus drying up
No crystal ball required
The exploitation of non-resident workers. Unfair competition faced by local workers. Resulting from the Administration’s lack of direction in labour policies, say University of Macau academics. They urge authorities to think long term, and on a needs basis.
Public finance MSAR’s latest fiscal surplus totalled MOP17.9 bln. Generated from January to August. Plunging 38.4 pct y-o-y. Even though the drop in gaming taxes narrowed to 11.8 pct y-o-y in the period, according to the Financial Services Bureau. Page 2
Telecom complaints top list
Consumers 1,914 complaints. Directed to the Consumer Council in 2015. Complaints about telecom equipment and services head the list. Along with complaints related to real estate in Macau and the Mainland. Page 6
Bearish bets Labour affairs Pages 10 & 11
HK Hang Seng Index September 29, 2016
23,739.47 +119.82 (+0.51%) Worst Performers
CNOOC Ltd
+5.07%
Galaxy Entertainment Group
+1.88%
China Resources Land Ltd
-1.53%
China Resources Power
-0.73%
China Petroleum & Chemical
+4.03%
China Mengniu Dairy Co Ltd
+1.78%
Sino Land Co Ltd
-1.43%
Sun Hung Kai Properties Ltd
-0.50%
+3.81%
Kunlun Energy Co Ltd
+1.52%
China Merchants Port Hold-
-1.20%
China Life Insurance Co Ltd
-0.48%
PetroChina Co Ltd
+3.01%
CITIC Ltd
+1.43%
China Overseas Land &
New World Development
-0.39%
Sands China Ltd
+1.94%
MTR Corp Ltd
+1.41%
Link REIT
Cheung Kong Infrastructure
-0.37%
China Shenhua Energy Co
-1.11% -0.78%
23° 27° 25° 28° 26° 30° 26° 29° 26° 29° Today
Source: Bloomberg
Best Performers
Sat
Sun
I SSN 2226-8294
Mon
Tue
Source: AccuWeather
Yuan forecast Capital outflows in China. They might surge after analysts see the national currency losing international weight. The yuan may be joining the IMF basket of currencies from October 1 but experts see a selling trend dominating investors’ positions. Pages 13 & 14
2 Business Daily Friday, September 30 2016
Macau Public finance
Gaming tax amasses MOP51.7 bln in first eight months
City’s fiscal surplus plunges 38.4 pct as at end-August The total revenue of the city declined 13 pct y-o-y whilst total expenditure increased nearly 4 pct. Nelson Moura Nelson.moura@macaubusinessdaily.com
T
he city’s fiscal surplus plunged 38.4 per cent yearon-year to MOP17.9 billion (US$2.2 billion) between January and August due to falling government revenues for the period, the latest update on the central account by the Financial Services Bureau (DSF) revealed yesterday. According to DSF data, the generated fiscal surplus for the first eight months, despite representing a yearon-year decrease, is still nearly five times more than the government’s budgeted MOP3.5 billion for the whole year of 2016. For the first eight months of the year, the government saw its total revenue drop 13 per cent year-onyear to MOP63.4 billion, as taxes received from the local gaming sector fell 11.8 per cent year-on-year to MOP51.7 billion, reaching 72 per cent of the MOP72 billion the government expects to collect for the whole of 2016. For the period, the city’s total gaming revenues, including all types of gaming activity such as lotteries and horseracing, dipped 9.1 per cent year-on-year to MOP144.4 billion, according to the official data of the Gaming Inspection and Co-ordination Bureau (DICJ).
Meanwhile, the authorities received less revenue from indirect taxes during the eight months, which have fallen 18.9 per cent year-on-year to MOP2.3 billion. In terms of capital revenue, including sales of capital assets, financial assets and reimbursements, the amount almost halved to MOP428.8 million from MOP889 million during the same period of last year. For the whole of 2016, the government anticipates its total revenue will amount to MOP92 billion; based on the amount it received for the first eight months, the MSAR has already reached almost 69 per cent of its annual target.
Rising expenses
On the other hand, total public expenditure increased 3.9 per cent yearon-year during the first eight months of 2016, amounting to MOP45.6 billion. Of the total, 94 per cent, or MOP43 billion, was for current expenditure, which saw an increase of 4.7 per cent compared to MOP41 billion one year ago. The government’s expenditure on investment plan (PIDDA) jumped by 23.5 per cent year-on-year in the first eight months to MOP2.5 billion, only 25 per cent of the MOP11 billion planned for investment in 2016. The MSAR’s expenses on other investments saw a considerable
increase of 54 per cent year-onyear to MOP65.3 million vis-a-vis MOP42.4 million during the same period last year. Between January and August of this year, under the current expenditure, there were no financial transactions, compared to the MOP685.3 million registered one year ago. Meanwhile, capital transactions saw a considerable fall of 82 per cent to MOP7.4 million from MOP41.7 million last year.
The figures also show that the government’s total expenditure for the period accounted for half of the authorised expenses of MOP88.6 billion for the whole year. DSF added in the account information that the amount of expenditure transferred to the city’s Social Security Fund was MOP11.3 billion for the first eight months of the year, a 5.8 per cent decrease from MOP12 billion a year ago.
Motor racing
Pirelli named new tyre supplier for Macau Grand Prix End of the road for Japanese Yokohama’s 33-year supply deal with local GP Italian tyre manufacturer Pirelli will replace Japanese tyre supplier Yokohama in the provision of tyres for this edition of Macau Grand Prix in November, online motorsport magazine Autosport has reported. The new supply deal means that Yokohama’s 33-year Formula Three relationship with Macau Grand Prix has come to an end. The Japanese tyre supplier has provided tyres for the city’s international racing event since
1983 - when the race first adopted F3 regulations. According to an announcement by the World Motor Sport Council of the International Automobile Federation (FIA) on Wednesday, Pirelli will supply control rubber for this year’s races in the Special Administrative Region. This year’s Macau Grand Prix - the 63rd edition - is scheduled to take place over four days from November 17 to 20. A.L.
Public works
Delta bridge link to start in Q4 The construction of the bridge connecting the city’s new reclamation area of Zone A and the artificial island for the Hong KongZhuhai-Macau Bridge is expected to be started during the fourth quarter of this year, local broadcaster TDM radio reported. Yesterday, the Infrastructure Development Office (GDI) opened tenders for the project. The tender has attracted nine bidders. According to the bid invitation notice of the Office, the construction for the project must be completed by
November 30, 2017. The new bridge will be 140 metres long, linking the western embankment of the artificial island with the eastern port of Zone A. The bridge will accommodate four twoway traffic lanes. The Office’s deputy co-ordinator, Cheong Ka Lon, remarked yesterday that the bridge will be adequate to cope with traffic demands, adding that the ongoing reclamation works for Zone A will not affect the construction progress of the new bridge. C.U.
Business Daily Friday, September 30 2016 3
Macau
4 Business Daily Friday, September 30 2016
Macau Trade Imports of luxury goods rebound in August
Local imports rebound following one-year drop In August, both merchandise exports and imports of the MSAR recorded increases. Cecilia U cecilia.u@macaubusinessdaily.com
T
he city’s total merchandise imports registered a yearon-year increase of 1.8 per cent to MOP6.92 billion for August, (US$813 million), indicating an increase for the first time since August 2015, according to the latest data posted by the Statistics and Census Service (DSEC) yesterday. The increase in the total imports is due to the surge in large passenger car imports, which soared 722.9 per cent year-on-year, DSEC said. In addition, the import of luxury goods - namely, watches and gold jewellery - also registered a significant rebound in the month, which is up s40.7 per cent and 16.5 per cent year-on-year, amounting to MOP666.5 million and MOP765 million, respectively. T o ta l m e rc h a n d i s e ex p o r t, meanwhile, registered a year-on-year increase of 8.4 per cent, amounting to MOP973 million (US$122 million). Of
the total exports, the value of domestic exports accounted for MOP224 million, which increased 94.7 per cent compared to the same month last year. The merchandise trade deficit, meanwhile, is recorded at MOP5.94 billion in the month of August. In terms of goods, the export of tobacco and wine posted a
year-on-year increase of 85.8 per cent to MOP70.2 million in the month. However, that of mobile phones saw a year-on-year decrease of 58.3 per cent, whilst construction materials and motor cars & motorcycles fell 51.5 per cent and 47 per cent yearon-year, respectively. According to DSEC, 56.6 per cent of the city’s exports were delivered to Hong Kong for the first eight months of the year, with 17.4 per cent shipped to Mainland China.
Among Chinese cities, a drop of 1.8 per cent was recorded in the city’s exports to the Pan Pearl River Delta in the eight months, amounting to MOP1.13 billion. Meanwhile, exports to Hubei Province and Beijing surged 1,260.8 per cent and 60.2 per cent, respectively. In terms of place of consignment, 35.9 per cent of the city’s imports came from Mainland China in the eight months, followed by some 8.6 per cent from Hong Kong.
Retail
Exhibition
DSEC: Retail business blip in July
World Press Photo Exhibition a picture to behold
But the industry only expected a minor improvement in business prospects. The business performance of the retail trade rebounded in July compared to the first half of 2016, the Statistics and Census Service (DSEC) said yesterday in its first-ever Business Climate Survey on Restaurants & Similar Establishments and Retail Trade. According to DSEC, 26 per cent of its 135 interviewed retailers posted a year-on-year growth in sales in July. In particular, 80 per cent of leather goods retailers and 67 per cent of supermarkets said they recorded a year-on-year increase in sales in July, whilst 33 per cent of interviewed Supermarket respondents reported growth of 20 per cent or more. Nevertheless, all of the interviewed retailers selling motor vehicles claimed they registered a decline in sales in the month compared to one year ago whilst some 78 per cent of the surveyed department stores claimed the same. DSEC said the city’s retailers only expected a minor improvement in their business prospects. For August, only 15 per cent of the interviewed retailers expected year-on-year growth
in sales for the month while 28 per cent expected sales to remain stable. Some 57 per cent of interviewed retailers anticipated a year-on-year decrease in sales in August.
Restaurants
Meanwhile, the business performance of Restaurants & Similar Establishments improved in July compared to the previous months of 2016, DSEC said. According to the survey, the proportion of 167 interviewed restaurants that posted a year-on-year growth in receipts increased to 34 per cent, a record high for the first seven months of this year. Meanwhile, the proportion that recorded decline shrank to 43 per cent. In terms of business prospects, 15 per cent of interviewed restaurant respondents anticipated year-onyear growth in receipts in August 2016 while 44 per cent expected receipts to remain stable. DSEC added that the results of the Business Climate Survey will be released on a monthly basis from now on. K.L.
The World Press Photo presents 155 winning photos by 42 photographers at Casa Garden until October 23. The World Press Photo Exhibition is in its eighth year of exhibiting annual winnings in the city, with 155 works by 42 photographs showing at Casa Garden, it was announced at a press conference yesterday. The organiser of this exhibition Casa de Portugal (CP), supported by Macao Foundation - expressed their tight budget was one of the difficulties to be overcome in holding the exhibition. “We include this [exhibition] in the events in our presentation of budget to the Macao Foundation every year […] Sometimes it’s a bit difficult to balance because Macao Foundation has a rule that [they do not finance] all projects,” explained a CP representative. The representative noted that the association needed to generate part of its income from other areas such as workshops in order to balance their expenses. Meanwhile, the World Press Photo, a non-profit organisation, seeks to
develop and promote the work of visual journalists, adding its major sponsor was Canon and the Dutch Postcode Lottery Fund. “Canon has sponsored us for almost 25 years […] They want people to see what is documented so this is their way of supporting the work of journalists […] They support us financially but not in other ways,” the Project Manager of Exhibitions of World Press Photo, Sanne Schim van der Loeff, said. When asked the reason for choosing Macau as one of the venues to hold this exhibition, Ms. van der Loeff remarked that it due to the invitation of CP. However, she indicated that Macau is a good place to attract exhibition-goers from all areas, hoping the exhibition could attract tourists from Mainland China due to the news censorships in most parts of the country. The World Press Photo Exhibition will start from today until October 23. Entrance to the exhibition is free. C.U.
Business Daily Friday, September 30 2016 5
Macau
6 Business Daily Friday, September 30 2016
Macau Opinion
Pedro Cortés
Macau Trump Money Recent non-contradicted news states that one of the local mogul concessionaires has injected millions of dollars into the United States Republican candidate’s campaign. I have a lot of respect for what that group has made and achieved in Macau. What Cotai is today, and therefore Macau, is also due to the vision of the leader of that corporation. Not that I like that the government authorizes clones and replicas of buildings and concepts that already exist in other places, especially in Las Vegas. I would prefer having an iconic building as in Singapore. I would prefer having known international and local architects conceptualize brand new buildings. That is, of course, debatable, but I kind of don’t like to have a replica of the Eiffel Tower in Cotai. What is non-debatable is the great contribution we have received from United States corporations vis-a-vis our gaming and entertainment industry so far. Sure, there are areas that can be refined and I’m sure that Macau’s top officials have the vision to make this city environmentally sustainable and more attractive to non-gamblers. But back to the point. It seems strange that after almost 13 years since the first property opened in Macau that no-one has advised some persons in those companies that provide financial support to candidates like Mr. Trump that provocative statements carry consequences. Statements like “You look at what China’s doing to our country in terms of making our product, they’re devaluing their currency and there’s nobody in our government to fight them . . . they’re using our country as a piggybank to rebuild China.” (quoted by the great Jake Der Kamp in South China Morning Post two days ago) among other ‘remarkable’ speeches - do not put them in a good light as far as the Chinese (not to say the Macau) Government go. It is elementary, in my view. Maybe I’m wrong and those top management persons were advised locally but pretend they don’t hear. I want to believe that someone in the company has said, “Boss, you should not make this contribution as this can put our position in Macau at risk”. Pedro Cortés is a lawyer and frequent contributor to this newspaper.
Statistics Consumer Council received 1,914 complaints in 2015
Telecommunications sector generates most complaints The amount involved in complaints received by the Consumer Council totalled MOP240 mln, including money involved in over a hundred real estate disputes both in Macau and on the Mainland. Joanne Kuai joannekuai@macaubusinessdaily.com
I
n 2015, the Consumer Council received 7,439 cases, an increase of 6.5 per cent compared to the previous year, the 2015 Work Report of the Council, released earlier this week, reveals. Among the cases, the majority of 5,499 cases are enquiries, some 1,914 are complaints, while the remaining 26 cases are suggestions. Over 97.3 per cent of the cases are handled and closed, an increase of one percentage point compared to 2014.
7,439 Number of cases Consumer Council received in 2015
The amount involved in the complaints exceeded MOP240 million (US$30 million). Among them, over 100 cases concerned consumers buying pre-sale housing units in Macau and Mainland China. The top five areas that received complaints are telecommunications e q u i p m e n t, r ea l estat e, t e l ec o m m u n i cati o n s e rvi c es, public transportation and food and beverages. Case numbers in these five areas totalled 854, accounting for around 45 per cent of all complaints the council received last year.
Top five fields consumers complain about: 1 – Telecommunications equipment 2 – Real estate 3 – Telecommunications services 4 – Public transportation 5 – Food and beverages
Telecommunications dreadful
The Consumer Council’s 2015 Work Report indicates that they’ve received 303 complaints with regard to the telecommunications sector, the most compared to other areas. It amounted to 16 per cent of the total complaints and it’s a growth of 46 per cent compared to 2014. The Council states that the major disputes were about retailers’ marketing strategies and the quality of products. Most consumers complained that retailers provided false or misleading information, mixing authentic products with copycats and exaggerating the functions of the products or hiding important information about the commodities. The Council points out that such behaviour from retailers harm the consumers’ rights of knowing and choosing and cautions the industry to have better self-discipline. The Council also vows to enhance efforts to tackle such behaviour in cooperation with other departments in order to safeguard an image
of credibility of Macau’s retail industry. In addition, the telecommunications services took third place in the most number of complaints that the Council had received. However, cases recorded in 2015 totalled 147, a drop of 33 per cent compared to 2014. Most cases are related to mobile data plan fees, Internet speed and unstable Internet services.
Presale deals danger
A total of 153 complaints were received about the real estate sector, a more than fourfold increase. The Council states most cases involve presale residential units that the consumers have purchased on the Mainland or in Macau - some 112 cases. However, the Council said that due to their efforts and co-ordination with relevant Mainland consumers’ rights protection groups, most cases have been resolved. There are also 15 cases of Macau homeowners
‘Code of Practice’ for food and beverage businesses
The Consumer Council has established a Code of Practice for food and beverage services to further enhance the sense of food safety of Certified Shops, and the prerequisite to label price further safeguards consumers’ rights to information and choice. The Code of Practice for F&B services takes effect from October 1, according to a statement issued by the Council yesterday. It says the Code of Practice for food and beverage services requires Certified Shops of the concerned industry to comply with local regulations to strictly follow the execution of food safety and measurements. Other requirements include: Certified Shops must let
c o m p l a i n i n g ab o u t p r o p e r t y management companies’ service quality or management fees. The public transportation sector generated 100 complaints related to aviation. Passengers reached for help due to flight cancellations and complained that some airlines didn’t provide them with adequate information or not in a timely manner. Some 24 cases of taxi drivers refusing to take passengers or over-charging are on the books, too. The food and beverage sector generated 123 cases, mostly related to expired products, fake products, and overcharging by lying about the quality of the product sold, or in Chinese ‘cheating the scale’. The Council also says that of the complaints they received, around 23 per cent were filed by tourists, a similar percentage to 2014. Tourists’ complaints are mostly to do with telecommunications equipment, clocks and jewellery, clothes and leather, and F&B.
consumers know about the measured weights or volume, retail prices of food or beverage products, while other charges must be listed explicitly, description of ingredients should match the food sold to consumers, and Certified Shops should support the sustainable development of the environment in terms of operations. The Council states that the Code of Practice for F&B services safeguards consumers in areas such as food safety and information transparency; the said Code is currently the seventeenth Code introduced for industries under the Certified Shop mechanism. The Council says it will continue to establish different Codes to raise the overall standard of Certified Shops.
Business Daily Friday, September 30 2016 7
Macau
8 Business Daily Friday, September 30 2016
Macau Gaming
MGM expects hotel occupancy to be flat in Golden Week The company’s CEO, Grant Bowie, sees the city’s gaming revenue for this month as consistent with August. Annie Lao annie.lao@macaubusinessdaily.com
T
he hotel occupancy of MGM China will stay similar to last year’s for this coming Golden Week of National Day starting tomorrow, said the company’s CEO and executive
director Grant Bowie. “Our occupancy is looking quite strong and positive, but we all understand now that these traditionally large holidays are not as busy
as they were in the past because in Mainland China people are changing their holiday patterns,” Mr. Bowie told reporters on the sidelines of an MGM event yesterday. On Tuesday, MGM China offered nearly 6,000 job vacancies, including for both non-gaming and gaming positions, for its new property MGM Cotai. According to Mr. Bowie, the gaming
September gaming revenue consistent
Gaming
Angela Leong urges casino-entry ban for gaming workers Angela Leong On Kei, legislator and executive director of Macau casino operator SJM Holdings Ltd., has urged the government to legislate to ban gaming workers from entering casinos during their off-duty hours as soon as possible. The gaming boss claimed in a written commentary that she is concerned about the government’s lack of timetable in implementing the casino entry ban for gaming workers.
company will also transfer some of its current employees to the new project from the company’s property on the Peninsula. He stressed that the company would prioritise the hiring of locals for its positions. “At this point in time [the plan] is to get as many people as possible from Macau, so we have no determination at this point in time about how many people we will need to bring in from offshore,” the MGM CEO claimed. MGM Cotai, a HKD24 billion (US$3.1 billion) project, is expected to open in the second quarter of 2017. The new property will offer approximately 1,500 new hotel rooms and suites to the territory.
Ongoing training
The MGM Local Talent Continuing Education Series Kick Off Ceremony was held at the MGM Macau Grand Ballroom yesterday. During the ceremony, MGM presented three programmes for their employees for career advancement, with the objective of diversifying its employees’ skill sets. These programmes - Diploma in Gaming Management; Gaming Industry Occupational Quality Training; and MGM High School Diploma Programme -started
this month. A total of 411 MGM employees joined the programmes, according to MGM. “We clearly see that these programmes can create an opportunistic advantage to ourselves,” Mr. Bowie said. To organise these programmes, MGM China has partnered with the Labour Affairs Bureau, Macao Polytechnic Institute, Macau Federation of Trade Unions and Escola Secundária Luso-Chinesa de Luís Gonzaga Gomes.
Commenting upon the city’s gaming revenue for this month, he predicted it would be reasonably consistent compared to August. In August, local casino revenue posted an increase of 1.1 per cent year-on-year, marking the first growth in 27 months. “We hope to see improvement year-on-year, particularly for the mass market,” Mr. Bowie said. Asked his opinion on the government’s intention to ban off-duty casino workers from entering gaming venues, the executive perceives education and offering special supports to be the correct solution for workers with gaming problems. “I’m not personally a supporter of banning gaming workers from entering casinos during non-working hours; I think this does not associate with gaming problems. I think it’s a social issue,” he said.
Chinese medicine
Macau-Guangdong industrial park promotes TCM in Lisbon She noted that gaming problems are serious among gaming workers, indicating gaming workers account for one-third of the city’s problematic gamblers as shown in 2013’s official data. Currently, the Gaming Inspection and Co-ordination Bureau (DICJ) is still discussing whether to ban gaming workers from entering casinos during their non-working hours. She suggested the government and gaming operators work together to tackle this problem such as organising cultural and recreational activities, seminars and training courses for gaming workers. According to the 2015 report of the Central Registry System of Individuals with Gambling Disorder published by the Social Welfare Bureau, 147 cases of gambling disorder were registered last year, of which over 20 per cent involved dealers. A.L.
The Traditional Chinese Medicine Science and Technology Industrial Park of Co-operation between Guangdong and Macao (GMTCM Park) has organised a seminar for promoting Traditional Chinese Medicine (TCM) in Portugal, according to a press release published yesterday by the Park’s managing company, Guangdong-Macau Traditional Chinese Medicine Technology
Industrial Park Development Co., Ltd. The event took place on September 22 at the Economic and Commercial Delegation of Macau in Portugal’s capital of Lisbon. The seminar was organised jointly by the entities and government departments of Mainland China, Macau and Portugal, such as Macau’s Health Bureau, the People’s Republic of China State Administration of Traditional
GMTCM Park signs agreement with Portuguese units
Chinese Medicine and the Portuguese Traditional Medicine Institute. At the seminar, the Park signed co-operation agreements with the General Directorate of Food and Veterinary Portugal and the Portuguese Association of Dietary Supplements. The seminar also showcased 17 kinds of products such as herbal medicines and food supplements produced by six Macau and Mainland China factories. The Park, a MSAR Governmentbacked project being developed in Hengqin, is expected to be operational in the first half of 2017. As of August this year, the project’s first phase had already attracted investment worth RMB2.3 billion (US$345.2 million/MOP2.7 billion) for its headquarters project, which includes a testing centre, a research centre, and a genetically-modified pilot plant. N.M.
Business Daily Friday, September 30 2016 9
Macau
10 Business Daily Friday, September 30 2016
Macau Labour polices Academic: Gov’t is the root of plight both non-resident and local workers facing
The local labour plight Academics believe the government’s lack of direction in labour policies is the cause of the exploitation of non-resident workers and unfair competition that local workers are facing. Nelson Moura Nelson.moura@macaubusinessdaily.com
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he government’s opaque polices on non-resident workers, its lack of projection of future human resource demands, as well as local employers’ lack of social responsibility have led to the city’s exploitation of migrant workers, in addition to having imposed unfair competition on local workers, experts specialised in labour and social polices believe. At the beginning of the month, a fatal accident took the life of a non-resident worker on the construction site of gaming operator SJM Holdings Ltd’s Grand Lisboa Palace in Cotai. Construction was later ordered to halt by the Labour Affairs Bureau (DSAL) until safety improvement measures could be imposed. From the perspective of experts like Alex Choi Hang Heung, Assistant Professor of the Department of Government and Public Administration at the University of Macau (UM), this tragedy resulted from the aforementioned factors. “Local workers will say that this is an example of the government not regulating migrant workers in a proper
way so they demand more government regulations,” the professor said. “But if you [look at] the situation of the migrant workers, they’re being exploited, underpaid, and are put in more dangerous situations”.
Dispensable goods
Not long after the fatal accident, a group of local construction workers sought help from unionist legislator Ella Lei Cheng I. The group submitted a letter of complaint to the DSAL, claiming some 100 local construction workers had only been hired for two or three days for the Grand Lisboa Palace construction site before being dismissed. The group added that the contractors for the project had employed 3,700 non-resident workers who had received lower pay than local workers. In the UM Assistant Professor’s opinion, as the responsibilities to provide a safe working environment and fair remuneration falls on employers, those enforcing labour regulations should be assumed by the government. Nevertheless, Melody Lu Chia-Wen, an Assistant Professor of the Department of Sociology of UM, indicated that the responsibilities for the
plight of the migrant workers hasn’t been well represented in the local media,” the academic added.
employers to offer fair remuneration and other social responsibilities are also down to the government which “should make [employers] comply with local labour laws [since] employers always try to hire cheaper labour and reduce costs”.
“If you take the situation of the migrant workers, they’re being exploited, underpaid, and put in more dangerous situations” Alex Choi Hang Keung, Assistant Professor of the Department of Government and Public Administration at the University of Macau
To improve the situations of local labourers, Professor Choi believes the city’s labour groups or non-government organisations and other civil societies should stage stronger movements “on the side of migrant workers”. “Under the current media situation in Macau, the voices of the local workers have been heard and examined but the
The paradox
The stance of the professor was also reflected in his recent research paper – ‘The politics of consent in the casino economy: Negotiations and contests of the migrant worker system in Macau’. The academic slams the government’s stance on labour policies – which prioritise local workers and have created the foundations for collective discrimination of migrant workers. “Migrant workers are considered supplementary to the local labour force,” Professor Choi said. “So the message is clear: migrant workers are disposable, and it is considered that they should only be here until the local economy has [no] need for them,” he said. But the academic also indicated in his paper that the government’s lack of clear migration policies has ‘paradoxically’ enabled a ‘politic of consent’ leading to the expansion of non-resident workers in the territory. According to data cited in the paper, the number of non-resident workers has jumped to 182,246 as of November 2015 from 32,183 in 1999. Meanwhile, the latest data from the Public Security Police Force (PSP) shows there were 180,751 non-resident workers working in the city as of September this year. These workers are primarily from Mainland China, the Philippines and Vietnam.
No clear plans
Despite many in society pushing the government to construct a more
Gaming NagaCorp and Bloomberry announce withdrawal from Cyprus casino bid
Now a one-horse race Melco International, controlled by Lawrence Ho, is now the only bidder for the country’s gaming licence. Nelson Moura nelson.moura@macaubusinessdaily.com
Cambodian gaming operator NagaCorp Ltd. and Philippines casino investor Bloomberry Resorts Corp. have both announced that they will not proceed with their final bids for the gaming licence up for grabs in Cyprus, suggesting a consortium involving local gaming tycoon Lawrence Ho Yau Lung’s company - Melco International Development Ltd. - is now the only bidder in the running for the concession.
On Wednesday, NagaCorp announced in a filing with Hong Kong Stock Exchange that it is to forego its bid for the gaming licence in Cyprus, stating the decision was made following ‘careful review and given all the latest information available’. It added that giving up on bidding for the gaming licence on the Mediterranean island would be in the ‘best interests’ of its shareholders. Meanwhile, Bloomberry has confirmed to Business Daily that it will quit the bid as well. ‘We are
not proceeding with our bid to obtain the single gaming licence in Cyprus,’ the company wrote in an e-mail, without detailing the reasons for its withdrawal. The winning bidder of the tender will be granted a gaming concession for 30 years, including the right to a monopoly in Cyprus for the first 15 years. On Wednesday, Melco International told Business Daily that its joint venture with Hard Rock and Cyprus group Phasorui Ltd. would submit the final bid for the gaming licence for Cyprus on October 5. Asked by Business Daily regarding its comments on being left as the sole bidder for the tender, Melco said it had ‘no comment to add at this point,’ claiming it would focus on the tender submission for the time being. Cypriot news outlet Philenews recently reported that NagaCorp
and Bloomberry might give up their bids for the gaming licence as they were not able to secure suitable plots for their proposed projects. The deadline for the final bid was first scheduled for July 5 but was extended to October 5 by the authorities per the request of NagaCorp and Bloomberry. The two gaming operators claimed at that time that they needed more time ‘to reach an agreement regarding the land acquisition and time to overcome state bureaucracy’. As of now the sole bidder for the tender, the Melco-Hard Rock joint venture, will be allowed to build a luxury hotel with 500 rooms, in addition to 100 gaming tables and 1,100 slot machines, if it succeeds in landing the concession. The consortium is planning to develop the casino-resort project in Limassol, the second largest city on the southern coast of Cyprus.
Business Daily Friday, September 30 2016 11
acau Macau
systematic migration policy by limiting non-resident labour quotas and number every year, Professor So thinks only small concrete steps have been taken by the authorities.
“The government is trying to react to the two sides and be the good guy; they don’t want to antagonise local labour and generally speaking want to comply with the demands of the casinos and the hospitality industries” Melody Lu Chia-Wen, Assistant Professor of the Department of Sociology at the University of Macau “The government has avoided bringing out a more transparent policy. In addition, they have also set little restrictions, such as the regulation that casino dealers should be local residents,” he said. “Per example, after local labour groups pressed the government to install more restrictions the government imposed a regulation that employers would have to pay a tax of MOP250 (US$31.3) for each employed non-resident worker. Of course, the local labour groups consider the amount too small and ineffective, since migrant workers’ wages are much smaller than local workers and with some industries even having a possible reduction of that tax,” the professor added. The tax amount that the academic
refers to is the tax employers need to pay to the Social Security Fund (FSS) for each non-resident worker.
Future plans
The two experts both agree that the government needs to carry out a clearer policy on non-resident workers. Professor Lu suggests the government establish a mechanism to implement certain measures when incidents like that on the Grand Lisboa Palace project happen. The sociology expert believes any successful migrant labour policy would require a comprehensive overview of Macau society’s manpower demands, not just an analysis of the current job population but an estimate of future population characteristics. “The projection needs to see how the population will be in 10 years time, what kind of young people will be
raised in Macau, what kind of education they will have and what kind of skills they are being trained for - and then you can plan for human resources labour shortage,” she said. Professor Lu added that the current labour shortages in the city are actually decided by industry pressure on the government, especially by the gaming sector, demanding what kind of workers it needs. “The government doesn’t have a whole picture of the situation so they have to comply with the pressures from the industry. Then, of course, local workers want to be protected, so there’s a deadlock,” she said. “The government is trying to react to the two sides and be the good guy; they don’t want to antagonise local labour and generally speaking want to comply with the demands of the casinos and the hospitality industries,”
the professor added. In order to face industry pressure and reduce the number of migrant workers, the sociology professor believes the government needs to project population structure and skill levels so that it can ask the industry to work within this projection in order to promote local labour to managerial positions. “It’s a bit hard to do a casino industry projection but the government needs to,” she said. “Then it should say ‘okay you need this foreign labour right now, but in 10 years we’re going to train these people to fit the demand’. This way you have a clear strategy of fading out migrant workers at all skill levels”. “This is not just a matter of the casino sector, though; you need to do a white paper on Macau’s future society population policy,” the sociology academic concluded.
12 Business Daily Friday, September 30 2016
Greater China M&A
Billionaire healthcare deal spree reveals nation’s ambitions Chinese drugmakers still face challenges making global deals because they are up against larger international rivals.
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hen a branch of the Chinese army set up a medicine factory in 1939, it was intended mainly to help in the fight against the Japanese. It would later be used by Communist fighters during China’s civil war before evolving into a state-owned drug company. Today, the facility is privately owned and on the front line of a different type of struggle. Its owner, Hong Kong-listed China Grand Pharmaceutical and Healthcare Holdings Ltd., has big ambitions to scale up and compete against Big Pharma firms around the world. That means doing deals to break into markets from the U.S. to Africa or to bring international brands into China, said Shao Yan, chief executive officer of China Grand Pharma, in an interview. “ Ev e n t h o u g h C h i n a’ s pharmaceutical industry is still in the middle of consolidation and price wars, we hope to escape from this and do more work in terms of innovation and internationalization,” said Shao, 53, who’s been CEO since 2008, and overseen a twelve-fold increase in the company’s revenue to more than US$400 million last year. Such a two-pronged strategy is typical among front-runners in China’s health industry today. Drugmakers are seeking an edge in the domestic market, where price competition is cut-throat. At the same time, they’re trying to upgrade from selling raw chemicals to exporting finished pills around the world. Chinese companies have announced more than US$5.2 billion of overseas health-care acquisitions this year, according to data compiled by Bloomberg, a fifteen-fold jump from 2012. Among the most prominent deals, Humanwell Healthcare Group, a Chinese maker of anaesthetics and
contraceptives, bought U.S.-based generic drug maker Epic Pharma LLC for US$550 million. Shanghai Fosun Pharmaceutical Group Co., backed by Chinese billionaire Guo Guangchang, agreed to buy Indian drugmaker Gland Pharma Ltd. for about US$1.3 billion, gaining drug factories that supply to the U.S. Chinese drugmakers still face challenges making global deals because they are up against larger international rivals. Many are still unknown entities overseas and must prove to sellers that they have the financial wherewithal to close the deal. But if they succeed, consumers around the world can expect to see more and more “Made-in-China” drugs in their medicine cabinets. Shao said his closely held parent company, China Grand Enterprises, has made international bids, including one for Swedish drugmaker Meda AB’s U.S. operations and another for the American generic drug business of Belgium’s UCB SA. At the time of the bidding process last year, people familiar with the matter valued those deals at about US$1 billion each.
The Chinese company lost out in both instances. Mylan NV, which is run from Canonsburg, Pennsylvania, ultimately won Meda by agreeing to buy all of the company for US$7.2 billion and Philadelphia-based Lannett Co. bought the UCB business. Shao said China Grand continues to look for other deals. China’s exports of finished pharmaceutical products grew by 11 percent last year, according to industry groups. But that expansion came even as safety questions around some Chinese products have lingered, and as U.S. inspections uncovered violations at several factories. A drug application overhaul by the Chinese regulator last year turned up widespread problems of incomplete and fraudulent data. While some Chinese companies have been pulled up by regulators, others say they have taken measures to boost standards. China Grand Pharma mainly aims to export finished drugs to developing markets and hasn’t faced regulatory actions from the U.S. or European drug quality watchdogs, according to the company. Meanwhile, a string of smaller Chinese firms are also seeking to become bigger suppliers to Western multinationals, and are trying to forge international deals to boost this side of their business.
Tucked away in China’s southwestern Chongqing metropolis, Porton Fine Chemicals Ltd. which employs about 1,600 people and had about US$162 million in revenue last year, supplies chemical components that are used in HIV and hepatitis drugs worldwide. Porton in its annual report says it serves 16 of the world’s 20 largest drugmakers, and mainly supplies to two major clients, Johnson & Johnson and Gilead Sciences Inc. While Chinese companies have long been a source of ingredients for generic drugs, multinationals have largely sought to control the supply chain for the newest medicines, Ju Nianfeng, chairman and co-founder of Porton said. Ju hopes to break into this area by acquiring established manufacturers of pharmaceutical ingredients in Europe and the U.S. “Clients prefer to source from Western companies which already have better track records,” said Ju. “It will take us time to build such trust and track records.” Even with a willingness to pay up, Chinese companies haven’t always succeeded in nabbing the most attractive overseas assets. In an e-mail, China Grand Enterprises, the parent company, said that when it sought to buy the UCB generics business, the seller was concerned about uncertainties related to national security screenings of foreign buyers in the U.S. UCB declined to comment. The listed company Shao oversees is looking for assets worth US$100 million to US$500 million focused on eye treatments and cardiovascular drugs. Meanwhile, the parent, which owns businesses ranging from real estate to financial services, continues to scout for U.S. deals, potentially using the Hong Kong traded unit and partnering with private-equity firms, Shao said. His company bought a 33 per cent stake in a small German maker of cardiovascular devices called Cardionovum GmbH last year, and hopes to bring its products to China by 2018. “We’ve been through three or four cases, one succeeded and two did not,” said Shao. “These are special stories about Chinese companies trying to do overseas M&A, and they’re a learning process.” Bloomberg News
N.Korea sanctions
U.S. probing more Mainland firms Discussions are also under way on a possible new U.N. sanctions resolution on North Korea. David Brunnstrom
The United States is investigating a number of Chinese companies for suspected breaches of sanctions on North Korea, and Chinese banks and firms should understand that dealing with North Korea is “risky,” a senior U.S. official said on Wednesday. China said it opposed any country using its own laws for “long-arm jurisdiction,” after the United States on Monday sanctioned China’s Dandong Hongxiang Industrial Development Co for using front companies to evade sanctions on North Korea’s nuclear weapons and ballistic missile programs.
It was the first time the United States has taken such a step against a Chinese firm, and Daniel Fried, sanctions policy coordinator at the U.S. State Department, told a U.S. Senate hearing the action should serve as a warning. He said it would be better if China took such actions itself. Fried declined to name other Chinese firms under investigation, or firms elsewhere in the world, but added: “We are actively looking at a number of targets ... Clearly our actions on Monday indicate that we are willing to sanction Chinese companies who are evading U.S. and U.N. sanctions.” “Of course, the preferred option is for China to do more,” Fried said.
“It would also be useful if Chinese banks and companies understood that increasingly, dealing with North Korean companies, especially those that are sanctioned, is going to be risky; frankly not worth it.” The United States acted against the Chinese firm after North Korea conducted its fifth and largest nuclear test on September 9. Daniel Russel, the senior U.S. diplomat for East Asia, told the same hearing that although China had agreed to a tough round of U.N. sanctions on North Korea in March, there was much more it could be doing to ensure proper implementation of existing sanctions and by agreeing new steps. “We recognize that changing Chinese behaviour is a prerequisite for changing North Korea’s behaviour,”
Russel said. Chinese Foreign Ministry spokesman Geng Shuang reiterated at a regular briefing yesterday that China was willing to cooperate, but it opposed any country extending the jurisdiction of its domestic laws internationally. “We will severely punish according to law any company or individual if there is verified evidence of violations,” Geng said. The U.S. officials said North Korea coal exports were a focus of current sanctions discussions with China in the U.N., Security Council, as was Pyongyang’s income from labour exports to countries including China and Russia. Fried said coal exports to China, which bring North Korea around US$1 billion annually, were the largest single generator of foreign currency for the isolated country, accounting for about a third of its export earnings. Reuters
Business Daily Friday, September 30 2016 13
Greater China Capital outflow
Fund exodus accelerates as further yuan weakness expected Mainlanders’ purchases of Hong Kong stocks through an exchange link with Shanghai have also outpaced overseas investors’ buying of mainland equities. China’s capital outflow through crossborder sales of funds is accelerating amid expectations the yuan will weaken further. Mainland investors’ accumulative net buying of Hong Kong-registered public funds under the mutual recognition of fund program more than doubled to 7.8 billion yuan (US$1.2 billion) as of August 31 from a month earlier, according to data released by the State Administration of Foreign Exchange on Wednesday. That’s almost 96 times the sales of mainland funds in Hong Kong. “The northbound funds have a relatively optimistic outlook for the next two years and will continue to do well,” said Desiree Q Wang, head of China at JPMorgan Funds (Asia） Ltd. in Shanghai. “The southbound ones face the twin negative factors of yuan depreciation and a sluggish stock market.” Mainlanders’ purchases of Hong Kong stocks through an exchange link with Shanghai have also outpaced overseas investors’ buying of mainland equities, and earlier this month hit the highest level since April 2015 after officials scrapped an overall ceiling in August. The yuan has dropped 7 per cent to 6.67 against the dollar since China devalued the currency in a surprise move on August 11 last year. While the Fed left rates unchanged at its Sept. 20-21 meeting, most members of
the Federal Open Market Committee indicated that they expect to raise interest rates before the end of the year if the U.S. economy continues to improve modestly.
Market volatility
“Since the Chinese government has stepped up oversight of other channels of capital outflows due to expectations of further yuan weakness, we believe
northbound funds will continue to see strong growth,” said Johnny Fang, Shanghai-based senior analyst at Z-Ben Advisors Ltd. The mainland stock market’s volatility in the past year has helped accelerate the flight of capital as Chinese investors seek to diversify their assets, while damping interest from international investors in mainland funds. The benchmark Shanghai Composite Index has fallen 42 per cent from last year’s June peak. The gauge is down 16 per cent this year, compared to an 8 per cent gain in Hong Kong’s Hang Seng Index. “Volatility in the A-share market since the beginning of the year
reduced the appeal of the southbound funds to investors in Hong Kong, who also have other channels to invest in A-shares,” said Winni Liu, deputy director for international business at China Southern Asset Management Co. “Hong Kong investors are also not very familiar with mainland fund managers and their products.” Twenty three mainland fund management firms have won approval for a total of 44 southbound funds as of Aug. 31, according to Liu. Authorities have granted mutual recognition status to seven Hong Kong funds, including two JPMorgan products that Wang said attracted more than 90 per cent of the capital. Bloomberg News
14 Business Daily Friday, September 30 2016
Greater China Mainland markets
Yuan derivatives trade dries up as drop swells hedging costs Foreign holdings of yuan assets in stocks, bonds, loans and deposits slumped to 3.4 trillion yuan in June. Kyoungwha Kim
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edging against further declines in Asia’s worst-performing currency has become so expensive that some global investors are throwing in the towel on yuan bonds. The cost of swapping dollars for China’s currency has risen above the yields on onshore sovereign notes as depreciation extends into a third year. Daily trading in yuan derivatives, which accounts for more than 40 per cent of the total for the currency, slumped 30 per cent from three years earlier, data from the Bank for International Settlements show. While central banks will need to buy the yuan as it becomes the International Monetary Fund’s fifth reserve currency on October 1, waning interest from global fund managers is a blow to an economy tackling an exodus of capital. Twenty-nine of 34 strategists surveyed by Bloomberg forecast depreciation in the coming year, despite China’s efforts to open up the bond market and challenge the dominance of the greenback in global trade. “Buying bonds and hedging the currency using a cross currency swap isn’t attractive,” said Rajeev de Mello, Singapore-based head of Asian fixed income at Schroder Investment Management Ltd., which oversees US$460 billion of assets. “Foreign investors would rather not buy domestic bonds. The yuan’s inclusion into the Special Drawing Rights basket will have a medium- to long-term effect on investor appetite.” Rising swap costs will slow a
Chinese program to encourage inbound investing. The Renminbi Qualified Foreign Institutional Investors system, set up in 2011 to allow financial companies to establish yuan-denominated funds offshore to invest in mainland securities, has expanded 26 per cent in the past year to 510 billion yuan (US$76 billion). The extra interest payments to lenders of offshore yuan in threeyear cross currency swaps averaged 3.5 per cent this year, up from a fiveyear average of 2.5 per cent. That compares with the 2.38 per cent yield on similar-maturity sovereign bonds onshore, which fell 17 basis points this year. In 2013 and 2014, the yield was higher than the swap cost. The
onshore yuan, which fell 2.7 per cent this year to 6.6708 per dollar despite intervention to slow the losses, will decline to 6.8 in a year’s time, according to the median forecast in a Bloomberg survey. “Market participants would like to sell the yuan until it reaches a level perceived by them to be fair,” de Mello said. “Instead, these investors sell currency forwards and thereby drive up the offshore interest rates.”
Swap trading
Average daily turnover of yuan derivatives fell to US$10 billion in April from US$14 billion three years ago, the latest BIS triennial survey showed Sept. 1. “We don’t expect massive inflows from active funds,” said Edmund Goh, a Kuala Lumpur-based investment manager at Aberdeen Asset Management. “I don’t think the returns are superior. The cross currency swap is
volatile and pricing can be messy.” The situation is unlikely to change until the yuan resumes appreciation or the central bank tightens monetary policy, he said, adding that this is unlikely in the near term given the economy is growing at the slowest pace since the 1990s.
“Buying bonds and hedging the currency (yuan) using a cross currency swap isn’t attractive” Rajeev de Mello, Singapore-based head of Asian fixed income at Schroder Investment Management Ltd Foreign holdings of yuan assets in stocks, bonds, loans and deposits slumped to 3.4 trillion yuan in June, down 26 per cent from a year earlier, according to CEIC Data. Bonds held by overseas entities remained little changed at 764 billion yuan. Central bank buying took up some of the slack, with treasury bonds owned by external institutions rising 45 per cent in August from a year earlier to 345 billion yuan, Chinabond data show. “Most of the initial demand after SDR inclusion will be from sovereign investors that have a set desire or obligation to own renminbi,” said Sacha Tihanyi, a senior emerging-market strategist at TD Securities LLC in New York. “For them, the swap rate and lower yield on government bonds wouldn’t be a concern. For the more speculative community, however, it may be a disincentive.” Bloomberg News
Trade
Brazil is a target of China’s probe into sugar imports S. American country is the world’s largest sugar producer and exporter, with China its largest buyer. Marcelo Teixeira
Brazil is one of the countries to be included in a probe by the Chinese government over large sugar imports, the head of Brazil’s cane industry group Unica, Elizabeth Farina, told Reuters on Wednesday.
‘Sugar producers around the globe suffered from a cycle of low international prices from around 2012 to 2015’ Farina said Unica was notified b y B razi l ’ s F o r ei g n M i n i st r y regarding the probe. It is expected to send preliminary comments to China’s government by October 12. According to Farina, Australia, Thailand and South Korea will also be investigated. The Asian country bought almost 10 per cent of total Brazil centersouth exports in 2015/16 of 23 million
tonnes, according to data from Unica. “It is worrying, of course, since China is our largest buyer. They could adopt safeguards to protect their local industry,” Farina said. Safeguards are usually implemented through sharp increases on import
tariffs, said the Unica’s head, adding that they could hurt the flow of sugar to China. China said last week it was launching a probe into soaring sugar imports dating back to 2011 that it said was hurting the local sugar industry. The investigation is expected to take up to six months. “They (Chinese) said there was an increase of more than 600 per cent
on imports since 2011. We are still translating their documents to try to better understand their allegations,” Farina said. Unica said it hired a law firm with a branch in China to follow the probe. Sugar producers around the globe suffered from a cycle of low international prices from around 2012 to 2015, when prices started to recover on expectations for a global sugar deficit. New York raw sugar futures are currently hovering around the highest levels in the last four years. Reuters
Business Daily Friday, September 30 2016 15
Asia GDP
Vietnam’s slower growth may miss target for year Economy grew an annual 6.4 per cent in the third quarter. My Pham and Ho Binh Minh
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eakness in mining and agriculture dragged on Vietnam’s third quarter growth and may see it miss the 6.7 per cent growth target this year, a government economist said yesterday. The mining sector contracted 6.8 per cent in the July-September quarter from a year ago, after falling 5.3 per cent in the previous quarter, according to the latest government data. Adverse weather, including drought in the coffee belt and salination in the Mekong Delta, have put the brakes on Vietnam’s rapid growth, biting into its industrial and agricultural production, its exports and imports.
as among the most resilient in a turbulent Asia, grew an annual 6.4 per cent in the third quarter, the fastest pace since growth of 7.01 per cent in the last quarter of 2015. That was below the 6.87 per cent in the same period last year, the General Statistics Office said in its monthly report. “We hope there will be significant growth in the fourth quarter, may be equal to Q4 2015,” Tuyen told reporters.
Economists supported his assessment, predicting the exports and manufacturing led economy would pick up as the impacts of drought start to wane. “With weather patterns now returning to normal, growth should rebound soon,” Gareth Leather of Capital Economics said in a research note. “Other sectors of the economy should continue to grow at a decent pace.” The Asian Development Bank on Tuesday tipped the economy to rise in the second half of 2016, buoyed by more foreign direct investment (FDI), exports, domestic lending and
a slight agriculture recovery. The government is expecting US$11 billion in actual FDI in the first nine months, up 12.4 per cent from a year ago, and on track for a record US$15 billion for the full year. The ADB has lowered its annual growth forecast to 6 per cent, from 6.7 per cent projected earlier. The World Bank in July trimmed its forecast to 6 per cent. The economy expanded 6.68 per cent in 2015, the fastest pace since 2007 and extending growth momentum that started in 2012. Exports rose an estimated 6.7 per cent in the first nine months of 2016 from a year earlier to US$128.21 billion, well below the 10-per cent growth target set by the government Reuters
Key Points GDP growth target for year likely to be missed - gov’t economist Q3 economic growth 6.4 pct y/y, below 6.87 pct year-ago period Jan-Sept GDP +5.93 pct, vs 6.53 pct year-ago period “GDP growth in 2016 will be lower than target but how much lower will depend mainly on the mining sector,” said Ha Quang Tuyen, head of the General Statistics Office’s National Accounts Department. Vietnam’s economy, widely seen
Weak consumption
Japan’s retail sales slip renews pressure on policymakers The Diet will soon start to deliberate upon a government stimulus package with planned spending of 7.5 trillion yen. Stanley White
Japan’s retail sales fell more than expected in August for the sixth straight month of annual declines due to falling sales of clothes and home appliances - keeping policymakers under pressure to find ways of beefing up household spending. Retail sales fell 2.1 per cent in August from a year earlier, more than a median market forecast for a 1.8 per cent annual decline, data from the Ministry of Economy, Trade and Industry showed yesterday. The weak reading underscores the relative fragility in Japan’s economy, with slow wage growth and gloomy prospects of recovery weighing on household spending. “I don’t expect consumer spending to continue falling but future gains are likely to be very modest,” said Hiroaki Muto, economist at Tokai Tokyo Research Centre. “The government has already got the stimulus package it wanted. We need to see more incoming data to determine if the situation is
bad enough to force the Bank of Japan (BOJ) to lower its assessment of consumption.” Retail sales fell 1.1 per cent from the previous month, the first decline in three months, the data showed.
Key Points Aug retail sales -2.1 pct yr/yr vs f’cast -1.8 pct Retail sales fall for 6th straight month Parliament to soon start debate on stimulus package Doubts remain about strength of economy Japan’s economy grew faster over April-June than initially estimated due to upward revisions to capital expenditure and inventories, but there are concerns from a recent run of weak data on exports, factory output and household spending. The parliament will soon start to
deliberate a government stimulus package with planned spending of 7.5 trillion yen by the national and local governments on infrastructure projects in an attempt to boost domestic demand. Economists say the package, which is sure to be passed in parliament, could support growth but still worry whether wages will rise fast enough
to spur consumer spending. The BOJ overhauled its policy framework last week to focus on controlling interest rates after more than three years of aggressive money printing failed to ignite inflation. The new framework could face its first major test when the BOJ updates its economic forecasts in early November, some economists say. Reuters
16 Business Daily Friday, September 30 2016
Asia In Brief Retail
S. Korean department store sales rise South Korea’s department store sales rose for a third straight month in August thanks to widespread discounting ahead of a major public holiday this month, government data showed yesterday. Combined sales at department stores run by Hyundai Department Store, Lotte Shopping and Shinsegae Co rose 4.1 per cent on-year, data from the Ministry of Trade, Industry and Energy said. This followed a 7.0 per cent jump in July. Sales of all individual categories at department stores rose in August, with the exception of men’s clothing. The same data showed August sales at discount stores fell 1.3 per cent from a year ago.
Forex
Indonesia’s central bank expects reserves to rise Governor also warns that if the money coming from a tax amnesty does not go into the real economy, it could inflate asset prices. Hidayat Setiaji
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ndonesia’s central bank expects a US$38 billion increase in foreign exchange reserves by the end of 2017, partly due to the government’s flagship tax amnesty programme, its governor said yesterday. The amnesty offers low penalty rates for taxpayers who declare previously untaxed assets at home and abroad. It was introduced to help
the government to keep the budget deficit below the legal limit and expand the country’s tax base. As of yesterday, taxpayers had committed to return home almost US$10 billion of money kept abroad. Under the amnesty, the returned funds must stay in Indonesia for three years. Governor Agus Martowardojo said based on Bank Indonesia’s (BI) model, foreign exchange reserves could rise to US$114.9 billion by the end
Market access
Wal-Mart in talks to buy stake in Indian retailer
BI comfortable with rupiah at 13,200-13,500 a dollar in 2017 “When a lot of people want to pay the amnesty fee, they withdraw money from banks and that tightens the money market,” Martowardojo said. He said BI provided liquidity and stabilised monetary condition. BI is comfortable with the rupiah trading at 13,200-13,500 a dollar on average in 2017 and it will keep a presence in the market to ensure the rupiah is at a level that supports Indonesia’s competitiveness, Martowardojo said. Reuters
Myanmar calls for protection of migrant workers
Thai Bangkok Dusit to build luxury healthcare centre Bangkok Dusit Medical Services Pcl (BDMS), Thailand’s largest hospital operator, plans to spend 12.8 billion baht (US$370 million) to build a luxury healthcare centre to serve rising demand from tourists seeking premium medical services. BDMS said in a statement yesterday it will spend 10.8 billion baht to buy land and properties including five-star hotel Swissotel Park Nai Lert in Bangkok’s central business area. Another 2 billion baht will be spent on developing the healthcare centre. The investment comes as the Thai military government seeks to promote tourism, one of the rare bright spots for Thailand, a popular destination for medical tourism in particular.
Free trade pact
New Zealand, Gulf states renew efforts to seal deal Main exports to the Arabian region include dairy, lamb and wood, key components in the Pacific nation’s export basket. New Zealand and the Gulf Cooperation Council will work to get a stalled free trade pact back on track after trade ministers from the Pacific nation and Saudi Arabia agreed to deepen trade ties. New Zealand Trade Minister Todd McClay met his Saudi Arabian counterpart Majid bin Abdullah Al Qasabi this week, with the two leaders agreeing to push for an early completion of the deal that was wrapped up in 2009 but never ratified.
“Certainty around tariff free access would ensure a greater sense of certainty for future trade”
“Certainty around tariff free access would ensure a greater sense of certainty for future trade,” he said. In a joint statement, the two ministers said the trade relationship would continue to expand once the pact is finalised and agreed to continue efforts to achieve its early completion. The next step would be for GCC countries to meet and for New Zealand officials to meet with the GCC Secretariat and member countries in order to finalise the agreement, McClay said. Export New Zealand Executive Director Catherine Beard said the move was a positive one. “Gulf States were good markets for New Zealand’s food and beverage exports and reducing tariffs on dairy, meat, horticultural and other products
would help New Zealand’s competitiveness in those markets,” she said. Dairy giant Fonterra Co-operative Group Ltd, the world’s largest dairy exporter, was also upbeat and said the deal would create opportunities for its food services business. Two-way trade between New Zealand and the Gulf Cooperation Council, which includes Saudi Arabia, United Arab Emirates, Qatar, Kuwait, Oman and Bahrain is worth about NZ$3 billion ($2.19 billion) annually and the GCC is New Zealand’s sixth largest trading partner. Beard noted that the FTA could also open up markets for services in areas such as education and information and communications technology. Nathan Penny, rural economist for ASB Bank, said any progress was welcome. “If we can make some ground on this one, while some like the Trans-Pacific Partnership and others stall, this is some good news to offset some of that,” he said. Reuters
Tim Ritchie, Chief Executive Officer of New Zealand’s Meat Industry Association
Chief Executive Officer of New Zealand’s Meat Industry Association Tim Ritchie said an FTA would allow New Zealand to maintain its competitive position in these markets. Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Joanne Kuai; Nelson Moura; Annie Lao; Kelsey Wilhelm Group Senior Analyst José I. Duarte Design Aivi N. Remulla Web & IT Janne Louhikari Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@projectasiacorp.com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com Founder & Publisher
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Indonesia FX reserves seen at US$151.5 bln by end-2017
BI to “sterilize” amnesty inflows if necessary
Labour conditions
Health industry
Key Points
Reserves were US$113.5 bln at end-August
Wal-Mart Stores Inc is in talks to buy a minority stake in India’s largest e-commerce firm Flipkart, two people familiar with the matter said, as the world’s biggest retailer aims to break into a fast growing but highly competitive online retail market. One of the sources said the U.S. retailer was looking to invest between US$750 million and US$1 billion in Flipkart, but the final value and size of the stake would depend on the outcome of talks about the Indian company’s overall valuation.
The Confederation of Trade Unions Myanmar (CTUM) has called for adopting a specific law for protection of Myanmar migrant workers, saying there are still exploitation by the agents even though memorandums of understanding are signed between the government and overseas employment agencies, official media reported yesterday. The CTUM, represented by its director Htwe Htwe Thein, made the call at a workshop in Yangon Wednesday. U Thein Swe, Minister of Labour, Immigration And Population, said the ministry is making efforts to create decent job opportunities and to help workers at home and abroad receive basic rights and safety in their migration.
of this year and jump to US$151.5 billion by the end of 2017, from the US$113.5 billion as of last month, partly because of inflows generated by the amnesty. “If (the inflow) goes only into equity, bonds and property in a large amount, it can cause bubbles,” Martowardojo said, adding that there are risks of capital reversal too after the lock-up period for returning funds ends. He said the BI would “sterilize” the repatriated funds if they were invested heavily in financial assets. Most of the money promised to be returned has not yet entered the Indonesian banking system, senior bankers told Reuters this week, but the amnesty has already affected the money market.
Business Daily Friday, September 30 2016 17
Asia Bank of Japan
Governor seen succeeding on curve where Greenspan struggled Kuroda’s targets for the yield curve take Japan’s monetary policy further into uncharted territory as he struggles to stoke inflation. Japan’s primary dealers are backing Haruhiko Kuroda to do what Alan Greenspan and Ben Bernanke couldn’t - control long-term bond yields. Yield forecasts among dealers surveyed by Bloomberg have risen in line with the goals revealed by the Bank of Japan (BOJ) governor on September 21 to pin 10-year sovereign bond yields near zero and steepen the curve. The median estimates among the 13 respondents are for benchmark yields to rise to minus 0.05 per cent at year-end, while those on 20-year debt climb to 0.3 per cent. In a poll three weeks ago, they projected minus 0.15 per cent and 0.23 per cent respectively. While Greenspan and Bernanke never specifically targeted long-term yields when they headed the Federal Reserve, Greenspan called their failure to rise a “conundrum” when he increased overnight rates from 2004 to 2006. His successor Bernanke encountered the opposite problem in 2009 when long-term yields surged at the start of quantitative easing. Kuroda’s advantage lies in the size and flexibility of his asset purchase program. “Barring a big external shock that pushes down yields globally, the BOJ should be able to control the yield curve,” said Kazuhiko Ogata, the Tokyo-based chief Japan economist at Credit Agricole SA, one of the 21 brokerages obliged to participate in
government debt auctions. “If you take the BOJ at its word, the 10-year yield will move stably around zero, and policy makers probably want a spread with 20-year yields of about 50 basis points.” Since the policy announcement last week, the 10-year yield retreated to a one-month low of minus 0.09 per cent on Wednesday in Tokyo. It was little changed yesterday at minus 0.08 per cent. The yield curve - as measured
by the spread between yields on two- and 30-year debt - initially contracted to as little as 66 basis points by Sept. 23. It was at 75 1/2 basis points at the close of trade the day before the BOJ’s announcement. More clarity should come today, when a statement is due detailing the central bank’s plans for asset purchases in the coming month. Kuroda has expressed concern that too flat a curve threatens to undermine the BOJ’s efforts to spur the economy. While setting a target to keep the 10-year yield at current levels “around zero per cent,” the central bank said it will maintain government bond purchases “more
or less” at an annual pace of 80 trillion yen (US$789 billion), but scrapped guidelines on which maturities to buy. A core gauge of inflation declined 0.5 per cent in July, the most since March 2013, the month before Kuroda introduced his stimulus program. “It’s going to be a prolonged battle to reach the 2 per cent inflation target, so they’ve adopted a policy framework that won’t be criticized as unsustainable,” said Souichi Takeyama, a rates strategist at SMBC Nikko Securities Inc. in Tokyo. “Now that the BOJ has increased flexibility, it’s that much more important to have close communication with the market.” Bloomberg News
‘Investors have signalled doubts about Kuroda’s chances of success, with questions still hanging about just how the central bank intends to implement its yield curve controls’ Bank of Japan governor Haruhiko Kuroda
18 Business Daily Friday, September 30 2016
International In Brief EU’s Dombrovskis
Planned global banking rules not balanced A planned reform of global banking rules being discussed by the United States, Europe, Japan and other major economies risks negatively affecting European banks and needs to be changed, the EU financial services commissioner said yesterday. The Basel Committee, a body of banking supervisors from nearly 30 countries, set the year-end as the deadline to conclude an overhaul of existing banking rules - known as Basel III - meant to make the sector safer. It has been criticised by opponents for increasing the capital banks must hold against risk. M&A
EU probes Deutsche Boerse-LSE megamerger The EU on Wednesday launched an in-depth investigation into whether the blockbuster attempt by the Frankfurt stock exchange to merge with its London exchange rival harms competition. The LSE and Deutsche Boerse tie-up would create a financial markets behemoth competing with the likes of the Chicago exchange and ICE in the United States as well as the Hong Kong stock exchange in Asia. The EU team, led by the hardened Competition Commissioner Margrethe Vestager, has 90 days to assess the merger which has already hit turbulence after the shock decision by Britain to quit the European Union.
Global trade
IMF chief warns of weak growth, lure of protectionism Lagarde cited some reasons for optimism, such as strengthening labour markets and falling poverty in the United States.
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he head of the IMF on Wednesday renewed warnings against protectionism and trade restrictions, saying that the global economy risked prolonged low growth and that advanced economies faced painful inequality. Christine Lagarde, the International Monetary Fund’s managing director, said the current global recovery was still fragile following the Great Recession of 2008-2009 and that populist political currents rising in the developed world threatened to undo the progress made. “For the past several years, the global recovery has been weak and fragile and this continues to be the case today,” Lagarde said in prepared remarks delivered at Northwestern University, near Chicago. “Especially for advanced economies - while there are some good signs - the overall growth outlook remains subdued.” “We continue to face the problem of global growth being too low for too long, benefiting too few,” she said.
Lagarde spoke ahead of next week’s annual meetings of the IMF and World Bank, at which development bankers gather to discuss global efforts at poverty reduction. The topics she raised were likely to be front and centre at the conclave. Her words also echoed the IMF’s message in recent weeks. Ahead of the Group of 20 summit in China earlier this month, Lagarde warned that high debt, weak demand, eroding work forces and labour skills were weakening incentives for investment and slowing productivity, threatening to create what she called a “low growth trap.” Lagarde cited some reasons for optimism, such as strengthening labour markets and falling poverty in the United States, efforts by China and India to achieve more sustainable growth, as well as signs of improvement in Brazil and Russia. But she said that falling commodity prices had hit the Middle East and poor countries in Sub-Saharan Africa particularly hard.
Government relieved
U.S. Congress passes funding bill The U.S. Congress approved a stop-gap funding bill on Wednesday that averts a looming federal government shutdown and provides urgently needed money to help battle an outbreak of the Zika virus. Passage of the bipartisan legislation came shortly after Republicans and Democrats ended a months-long fight over whether Washington should provide aid to the city of Flint, Michigan, as it struggles with a crisis over contaminated drinking water. Separate legislation was approved by the House of Representatives earlier in the day setting aid for Flint. It must now be reconciled with a somewhat different bill passed by the Senate. Central bank
Russia says no target to raise gold’s share in reserves Russia’s central bank is ready to keep buying gold from banks but has no quotas or objective to increase gold’s share in its reserves, the bank’s First Deputy Governor Dmitry Tulin said on Wednesday. “We are not currently selling foreign currency from reserves but keep buying gold for which prices are rising, which has led to a rise of gold’s share in reserves,” Tulin told reporters. “We don’t have an operational target of increasing gold’s share in reserves but it may grow naturally,” he said, adding the bank had made an offer to banks to buy gold.
IMF Managing Director Christine Lagarde answering students’ questions after Lagarde delivered her speech at the 2016 IMF/World Bank Annual Meetings. Lusa.
The IMF has also signalled it expects to downgrade its forecasts for US growth due to sub-par performance in the first half 2016. Citing an increase in protectionist measures around the globe since 2012, Lagarde referred to raised trade barriers as being among the “failed recipes of the past.”
“If we turn our backs on trade now, we would be choking off a key driver of growth at a point when the global economy is still in need of every bit of good news it can get” Christine Lagarde, the International Monetary Fund’s managing director Both US presidential nominees have said they oppose the US government’s Pacific Rim trade pact, the Trans-Pacific Partnership, and voters in Britain this year chose to secede from the European Union, creating new barriers to trade between the two sides. “If we turn our backs on trade now, we would be choking off a key driver of growth at a point when the global economy is still in need of every bit of good news it can get,” Lagarde said. “Restricting trade is a clear case of economic malpractice.” Lagarde also called on governments to fight economic inequality, by investing in the education of girls - “a proven, high-return investment” - as well as offering vocational training to workers displaced by off-shoring, outsourcing and new technologies. AFP
Cryptocurrencies
Banks adopting blockchain faster than expected But while almost every major bank has said it is looking into the technology, widespread financial adoption has been thought to be at least 5 to 10 years away. Jemima Kelly
Banks and other financial institutions are adopting blockchain technology “dramatically faster” than initially expected, with 15 per cent of top global banks intending to roll out full-scale, commercial blockchain products in 2017, IBM said on Wednesday. The technology company said 65 per cent of banks expected to have blockchain projects in production in three years’ time, with larger banks - those with more than 100,000 employees - leading the charge. IBM, whose findings were based on a survey of 200 banks, said the areas most commonly identified by lenders as ripe for blockchainbased innovation were clearing and settlement, wholesale payments, equity and debt issuance and reference data. Blockchain, which originates from digital currency bitcoin, works as an electronic transaction-processing and record-keeping system that
allows all parties to track information through a secure network, with no need for third-party verification. But while almost every major bank has said it is looking into the technology, widespread financial adoption has been thought to be at least 5 to 10 years away. Consultancy Oliver Wyman said in a report in February it would take at least a decade for blockchain to overhaul core parts of the financial industry. “The industry is hurtling toward blockchain adoption far faster than many expected,” IBM said in its report. “2017 looks to be the year banking on blockchains shifts from zero to sixty.” The company also conducted a separate survey of 200 other global financial markets institutions, 14 per cent of which intended to implement commercial blockchain products in 2017. “First movers are setting business standards and creating new models
that will be used by future adopters of blockchain technology,” said IBM Banking and Financial Markets general manager Likhit Wagle. “These early adopters are better able to anticipate disruption, fighting off new competitors along the way.” Microsoft and Bank of America Merrill Lynch said on Tuesday they had teamed up on a new project using blockchain in trade finance, aiming to create a framework that could eventually be sold to other businesses.
“2017 looks to be the year banking on blockchains shifts from zero to sixty.” IBM IBM also said it had announced several new blockchain ventures at this week’s Sibos financial conference in Geneva, including a project with currency settlement system CLS to develop a new payment netting service. Reuters
Business Daily Friday, September 30 2016 19
Opinion
China’s progress is killing the instant noodle Adam Minter a Bloomberg View columnist
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crumpled instant-noodle bowl ground into the mud is an unlikely symbol of economic vitality. But during China’s boom years those bowls were as ubiquitous around Chinese construction sites as the high-rise cranes above them. That was no accident. For millions of Chinese workers, instant noodles were the convenient meal of choice, available for a few cents in every commissary and convenience store. And China’s instant-noodle makers prospered. Between 2003 and 2008, annual instant-noodle sales expanded to US$7.1 billion from US$4.2 billion. But just as China’s economy has slowed, so too has its appetite for instant noodles. Earlier this month, Tingyi, China’s biggest noodle maker, was removed as a component of Hong Kong’s Hang Seng Index after seeing its noodle profits drop 60 per China’s cent. China’s workers instantare also able noodle sales and willing are down 6.75 to pay more per cent this for their year, the fourth consecutive day-to-day year of decline. needs. The first problem is demographics. China’s instant-noodle makers grew in parallel with an economic boom that was fuelled by the migration of low-cost workers from the countryside. But China’s working-age population has been in decline since 2010, and in 2015 the migrant population fell for the first time in 30 years. With more workers staying home, the incentive - and desire - to eat a pre-packaged bowl of noodles was likely to decline, and it has. There’s also the matter of the slowing economy. In 2015, sales growth of inexpensive food and consumer products hit a five-year low, according to a June study from Bain. Declines were particularly steep in products that cater to blue-collar workers, such as cheap beer (down 3.5 per cent) and instant noodles - a phenomenon that Bain partly blames on Chinese jobs migrating to lower-wage countries. What’s bad for noodle makers is great for many others. Rising wages have improved living standards and expectations for millions of Chinese workers. Pay a visit to a southern Chinese factory these days, and the food options are much improved. With employees becoming more scarce, benefits like better food are becoming increasingly important. China’s workers are also able and willing to pay more for their day-to-day needs. According to one recent Chinese consumer survey, half of China’s consumers now seek out the “best and most expensive” product. A 25-cent bowl of instant noodles doesn’t make the grade. Then there are health concerns. Instant noodles have developed a nasty reputation in China thanks to scandals and rumours and a 2012 food-poisoning incident. There are long-standing allegations that noodles are contaminated with plasticizers. Legitimate or not, scandals don’t help the reputation of a down-market product that’s loaded with salt and preservatives. Even with these problems, instant noodles had the advantage of convenience. Now even that edge is being dulled. The streets of Chinese cities are swarmed by motorcycle and bicycle food-delivery men and women racing to deliver orders that are competitive in price with Chinese fast food. In 2015, the value of those deliveries was US$20 billion - up 55 per cent from 2014. Fast, healthier options are just an app away, even for students and factory workers. China’s instant-noodle makers and importers are struggling to re-start growth. But these days there’s competition from South Korea, with its far superior food-safety reputation. One option is to sell noodles to other emerging Asian economies such as Vietnam, where consumption is still growing along with the manufacturing sector. That won’t make up for China’s shrinking market, but China’s new class of consumers don’t offer more enticing options. Bloomberg View
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OPEC logo seen at the Palace Congress building during 15th International Energy Forum (IEF15) and informal meeting of the Organization of Petroleum Exporting Countries (OPEC) ministers in Algiers, Algeria, 28 September 2016. Lusa.
Now the hard work starts for OPEC’s planned oil output cut
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nder-promise and then overdeliver is a well-worn tactic to boost one’s fortunes, with OPEC’s somewhat woolly promise to cut crude oil output the latest example of this strategy. Virtually nobody thought the oil producer group had even the remotest chance of reaching an agreement on production at its informal meeting this week in Algeria, a view that was constantly reinforced by OPEC’s energy ministers in comments and interviews. Yet the meeting ended with the group committing to reduce output by as much as 740,000 barrels per day (bpd) from the end of the year, the first agreement on cutting production the often fractious group has managed in eight years. This tentative deal sent the price of Brent crude soaring as much as 6.5 per cent to a high of US$48.96 a barrel on Wednesday, showing the value of surprising the market. But the real question is whether this is the start of sustainable gains for the oil price, and much will depend on what OPEC actually does, and how the rest of the producers respond. Firstly, apart from the shock value of delivering an agreement, all OPEC actually did was kick the can down the road to their November meeting. However, let’s not underestimate the significance of even a tentative agreement without flesh on its bones. OPEC is an organisation that has been riven by regional rivalries in its recent past, which has undermined its effectiveness and credibility. The obvious tension between top producer Saudi Arabia and would-be No.2 Iran has been palpable, so the mere fact that they can reach even what appears to be an in-principle agreement is quite an achievement. The real work now has to be done by November, as each OPEC member figures out what it is prepared to do in order to reduce the group’s output from around 33.24 million bpd currently to the newlyagreed 32.5-33 million bpd. It would seem that the bulk of this burden will have to fall on Saudi Arabia, not only because it is the biggest producer, but also because the others such as Iran and Iraq are still trying to boost their output. Other OPEC members such as Libya and Nigeria are currently producing well below historic levels because of internal conflicts, while others such as Venezuela and Angola are in such dire fiscal positions that they simply cannot countenance pumping any less oil. Saudi Energy Minister Khalid al-Falih already hinted at this on Tuesday, in saying that Iran, Nigeria and Libya would be allowed to produce
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Clyde Russell a Reuters columnist
“at maximum levels that make sense” as part of any output limits. Given that it’s known that Iran wants to up its output from the current 3.6 million bpd to around 4 million bpd, this means to effect an overall OPEC reduction of about 740,000 bpd, more than 1.1 million bpd would have to be cut elsewhere.
Saudis, non-OPEC the key
Finding OPEC members willing to reduce output at all may be tricky, other than some token amounts from the more minor members. Basically it comes down to whether the Saudis are prepared to pull back their production by perhaps as much as 1 million bpd, or roughly 10 per cent of their current output. Simple maths suggests that if you forego 10 per cent of your output you need at least an 11-per cent increase in prices to compensate for the lost revenue, meaning Brent would have to rise about US$60 a barrel and stay there for it to make financial sense for the Saudis to carry the bulk of the burden of lowering OPEC’s output. This likely means that the Saudis will be pushing for Iran to limit its production, and will also be putting pressure on Iraq as well, arguing that it’s not feasible for the kingdom to take all the pain alone. The other wild card is how other producers around the world react. Russia, the largest exporter outside of OPEC, may be prepared to join output curbs if it believed it would result in a sustainable price rise. But oil output in the United States may well reverse its recent declines and start rising again as producers there aren’t beholden to anything other than the profit motive. U.S. shale oil output is expected to drop for an 11th straight month in October, according to the Energy Information Administration. But higher crude prices may lead to a rapid reversal in U.S. crude output as shale producers have shown they can boost pumping fairly rapidly. It’s also likely that any sustained price rise will lift output in other non-OPEC producers such as Canada and Brazil. Overall, there are good reasons to be sceptical as to whether OPEC’s first agreement since 2008 will actually be implemented, or even work if its does. But it does show that those writing the group’s obituary will have to wait a while yet. Reuters
Finding OPEC members willing to reduce output at all may be tricky, other than some token amounts from the more minor members.
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20 Business Daily Friday, September 30 2016
Closing Visiting toll
Lisbon tourist tax hits annual target in July
The tourist tax on stays in Lisbon up until July this year, collected €7 million for the city hall, the same amount it had expected to receive in the entire year, according to figures published yesterday. The city hall said that there were now 3,588 establishments on the platform used to monitor the tax, including 201 hotels and 3,211 private homes. The municipal tourist tax, which was
approved in 2014, began to be levied in January on all tourists staying in Lisbon (including locals) at a rate of €1 a night. The municipality also told Lusa that out of the €7 million, half a million had been paid by Airbnb, following an agreement between the two sides covering the months of May and June. Airbnb, an online platform for renting houses and rooms for short periods of time, has been collecting the tourist tax since 1 May and paying it to the city hall every quarter on behalf of its hosts. Lusa
Monetary stance
Taiwan holds fire, may wind down rate-cut cycle The central bank’s assessment came after the statistics agency last month raised its gross domestic product growth forecast to 1.22 per cent. Faith Hung and Liang-Sa Loh
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aiwan’s central bank left its key policy rate unchanged on Thursday, saying it has done all it can to support the trade-dependent economy and called for more structural policies to keep growth on track. The decision to keep the discount rate at 1.375 per cent, as widely expected, probably means the central bank will wind down a rate-cut cycle started in September 2015, economists said.
The central bank cut rates over four successive meetings to reverse a technical recession amid a slowdown in China and unclear prospects for the United States, both key trading partners. Concerns over the impact of Brexit on global trade had also led to more loosening in June to buffer the economy. Since then, improvements in export-related and manufacturing activity, along with mild inflationary pressures, have given the central bank leeway to pause. A few economists now expect no further easing for 2016.
“The central bank has done everything possible to help the economy grow,” central bank governor Perng Fai-nan told a news conference after policy committee members met for their quarterly meeting. “We can’t say our loose monetary policy has hit its limit, but it’s pretty loose,” Perng said.
Conditions to remain loose
Monetary conditions will remain loose, but holding rates steady will help keep consumer prices and the financial system stable, the central bank said in its post-meeting statement. “I don’t think they will cut rates anymore. They put it across quite clearly that the economy has stabilised,” said Shuhui Chia, Asia
country risk analyst for BMI Research in Singapore. Chia, who had earlier forecast one more rate cut for 2016, said she now expects the discount rate to remain unchanged for the rest of the year. The central bank’s assessment came after the statistics agency last month raised its gross domestic product growth forecast to 1.22 per cent, after cutting it three times previously, and estimated GDP growth would be better in 2017 at 1.88 per cent.
Key Points Benchmark discount rate unchanged at 1.375 pct C.bank cut rates at its past four meetings to support economy Says to keep policy loose to support domestic growth - c.bank Taiwan winding down on rate-cut cycle - economists The second half of the year tends to see a pick-up in activity for Taiwan’s export-oriented economy due to year-end holiday demand. The central bank governor said Taiwan’s economy needs to be driven by both domestic and external demand, such as public infrastructure spending, like expanding airports and subway systems. “We cannot rely only on monetary policy. We have to accommodate with other policies,” he said. Perng, 77, said he would step down when his term ends in 2018, an announcement that was not wholly surprising. His retirement has been a subject of speculation for some time as he has been at the helm of the central bank for nearly two decades. Reuters
Taiwan’s central bank headquarters in Taipei
Investment
Investment
Corruption
Li Ka Shing Foundation Mainlanders step up Wanda fires executive discloses interest in Postal Bank to New Zealand hotel challenge who bribed official Hong Kong’s Li Ka Shing Foundation has disclosed a 2.8 per cent interest in Postal Savings Bank of China Co Ltd, a state-backed lender that raised US$7.4 billion through an initial public offering in Hong Kong this month. The ownership arises from performancelinked notes issued by a financial institution, the foundation said in a statement, without elaborating. The indirect stake is worth HK$10.78 billion (US$1.39 billion), according to a Reuters calculation based on yesterday’s closing price of the bank’s stock. The foundation of Hong Kong billionaire Li Ka-shing has rarely disclosed the details of its investment portfolio in the past. Li’s interest in Postal Savings Bank comes at a time when he has come under fire from Chinese state media for divesting billions of dollars of investments from mainland China. In one of several critical articles, the People’s Daily, the Chinese Communist Party’s official mouthpiece, published an editorial late last year on its social media account calling Li’s actions “immoral” and “unpatriotic”. Li himself has since said that he resolutely supports China and its president Xi Jinping. Reuters
Chinese investment in New Zealand’s tourism sector is ticking up as China continues to be New Zealand’s fastest growing visitor market, Economic Development Minister Steven Joyce said yesterday. New Zealand had also seen a lot of interest from Asian companies in general in its bid to build an extra 26 hotels over the next 10 years to accommodate the on-going surge in tourist numbers, Joyce told Xinhua during an official engagement in the North Island city of New Plymouth. “Some Chinese investors, some Japanese investors, investors from other countries interested in building more hotels - some of them are already active here,” Joyce said. On top of well publicized Chinese investments in the biggest city of Auckland and in the South Island mountain resort of Queenstown, Joyce was aware of “a few new ones that are interested in potentially coming in.” “We’re definitely seeking investment from China in a whole range of industries and we’ve seen some great successes in recent times, with Chinese investment in the accommodation sector and more generally in hotels,” he said. Xinhua
Chinese entertainment and real-estate giant Wanda said yesterday it had fired an executive implicated in the bribery of a local government official. The announcement followed media reports that the executive had been named in court documents related to a government corruption trial. Wanda said in a statement that former manager Leng Chuanjin had “seriously violated” company rules by using corporate funds to pay a local party chief 300,000 yuan (US$45,000) as it sought to shake off partial government ownership and move into private hands. The company first learned about the bribery case from media reports that Jin Cheng, former party chief of Wanda’s home district, had been sentenced to jail on corruption charges, it said. According to the Benxi Intermediate People’s Court’s judgement, two Wanda executives used company funds to pay Jin the sum in two instalments. The bribes were to “thank” Jin for helping Wanda transition from a state-owned company into a privately-held firm, the court said. Yesterday Wanda said it had fired Leng from his post as chief engineer, frozen his shares and dividends, and ordered an audit of his financial ties to the company. AFP