Vintage retail scene in the city alive and well Shopping Pages 6 & 7
Friday, October 21 2016 Year V Nr. 1156 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro
www.macaubusinessdaily.com
Forex
RMB outflow
Development
Job market
M&A
Reserves of foreign exchange expand in September Page 2
China’s watchdog busts billions in fight against illegal currency flows Page 10
Local government to unveil Zone B plans Page 2
Latest employment data for Australia posts poor performance Page 13
CEO of KNJ easies worries following Global Media acquisition Page 5
Trade and Investment Fair
The big meeting for business returns. This year, the 21st edition of Macau International Trade and Investment Fair kicked off with six official agreements inked between the territory and Beijing, partner city of the event. Portugal plays a pivotal role in this event as a partner country. Page 4
Cautious Crown
Apply within
Public jobs offered by the MSAR Gov’t. Attractive to locals; and possibly domestic talent working abroad. However, analysts consulted by Business Daily say the initiative will have a minor effect vis-a-vis private sector opportunities.
Staff impact Australian group Crown Resorts said yesterday that no charges had been laid against its staff held on the Mainland. Chairman Robert Rankin conceded, however, that the situation was “difficult and complex”. Crown said that “less than half” of its international VIP revenue derived from Chinese high-rollers. Page 9
The Sino-Latin connection
Co-operation China, Macau, S. America. Signatories to a memorandum promoting trade development. Advancing ‘One Belt, One Road, Economic and Commercial Exchange Networking Session between Shaanxi, Macau and Peru’. And propelled by the Peru Chamber of Commerce in Macau and the Shaanxi Federation of Industry and Commerce. Page 8
Challenging shift Human Resources Page 3
HK Hang Seng Index October 20, 2016
23,374.40 +69.43 (+0.30%) Worst Performers
PetroChina Co Ltd
+2.97%
China Resources Power
+1.93%
Belle International Holdings
-2.00%
AAC Technologies Holdings
+2.69%
China Petroleum & Chemical
+0.87%
Hengan International Group
-1.71%
China Resources Land Ltd
-0.70%
Link REIT
-0.62%
China Mengniu Dairy Co Ltd
+2.45%
AIA Group Ltd
+0.86%
New World Development
-1.04%
Sino Land Co Ltd
-0.61%
BOC Hong Kong Holdings
+2.28%
Bank of Communications
+0.86%
CNOOC Ltd
+2.10%
Kunlun Energy Co Ltd
+0.84%
China Merchants Port Hold-
-0.95%
China Overseas Land &
-0.61%
China Mobile Ltd
-0.92%
Sun Hung Kai Properties Ltd
-0.52%
26° 29° 26° 29° 25° 29° 25° 28° 25° 28° Today
Source: Bloomberg
Best Performers
SAT
sUN
I SSN 2226-8294
Mon
Tue
Source: AccuWeather
China’s transformation The National Statistics Bureau has underscored the challenges China is facing in its titanic economic model shift. Despite a batch of splendid indicators there’s a slowdown in income growth. The consumption-based economy has a way to go. Page 10
2 Business Daily Friday, October 21 2016
Macau In Brief Public works
LRT Peninsula route determined by year-end The plan for the Macau Peninsula section of the Light Rail Transit (LRT) will be determined by the end of this year, said Secretary for Transport and Public Works Raimundo Arrais do Rosário on Wednesday after attending the opening ceremony of the 2016/17 Judicial Year. Despite the government concluding public consultations on its three proposals for the Peninsula route in 2014, no plan for the sector has yet been confirmed. The Secretary added on Wednesday that the government would publicly announce the Peninsula plan once it is determined, urging the community to “have a bit more patience,” according to local broadcaster TDM Radio. The government is expecting the Taipa sector of the LRT to be completed in 2019. A.L.
Urban planning
CE: Gov’t to explain Zone B planning at month-end The Secretary for Public Works and Transport will explain to the public why part of the planning for Zone B would be made prior to the completion of the city’s master urban plan, the CE says Kam Leong kamleong@macaubusinessdaily.com
The government will explain to the public its proposed development for part of the urban reclaimed Zone B at the end of this month, Chief Executive Fernando Chui Sai On said yesterday, stressing the authorities had planned in accordance with local laws. At the end of September, the Land, Public Works and Transport Bureau released its drafted drawings for a phase located on the east side of Zone B, on which the Bureau proposes to build administrative and judicial buildings with height limits ranging from between 25 metres to 145 metres. But such a plan triggered doubts in society as the MSAR Government is still working to draft a ‘master urban plan’ and a detailed plan that spells out all the specific land usage requirements, including Zone B. Speaking to reporters on the sidelines of the opening ceremony of Macao International Trade & Investment Fair yesterday morning, the top official stressed that Secretary for Public Works and Transport Raimundo do Rosario would explain to the public following the urban planning committee’s discussion of
the proposed plan on October 31. “According to the government’s understanding of the urban planning law, we can discuss and analyse [the drawings for] every architecture [element] through the urban planning committee before there is any master plan,” Mr. Chui claimed. “Despite the committee being only a consultative body I believe the public can see the government’s appreciation of it for its operation,” he added.
Zone B, a strip of reclaimed land located south of the Macau Peninsula, stretches all the way from near the Macao Science Center to the western part adjacent to the Macau Tower and Nam Van Lake area. Recently, directly elected legislator Antonio Ng Kuok Cheong urged in a written interpellation that the government withdraw the proposed plan for Zone B before a master plan is made public. ‘As the MSAR master urban plan and other detailed plans for each reclaimed zone are still being drafted, the sudden and quiet release of DSSOPT’s drawings for part of Zone B is obviously damaging the city’s legal urban planning procedures,’ the legislative member wrote.
Money
City’s forex reserves expand in September Provident Fund
Residents aged 75 or over may receive Provident Fund today The city’s elderly - aged 75 or over - will receive their requested withdrawals of pensions from their Provident Fund accounts by bank transfer today, according to a press release by the Social Security Fund. As of October 14, the Fund had received 50,000 applications for withdrawal from the Provident Fund account, of which 20,996 were submitted by those aged 75 or over and those receiving disability pensions for over one year have been approved. Eligible Provident Fund account owners may apply to withdraw their pensions from the account once a year. The Fund said it would transfer requested-and-approved withdrawals to those aged between 65 and 74 as soon as November 22. A.L.
The city’s foreign exchange reserves totalled MOP155 billion (US$19.4 billion) as at the end of September, a year-on-year increase of 6.7 per cent compared to MOP143.3 billion one year ago, a preliminary estimate of the Monetary Authority of Macau (AMCM) reveals. In addition, on a month-on-month comparison, the amount of local foreign exchange reserves represents a slight growth of 0.5 per cent, compared to MOP155.8 billion. As at the end of the month, the city’s foreign exchange reserves represented 12 times the currency in circulation, or more than double,
at 100.8 per cent, of Pataca M2 at the end of August. ‘M2’ refers to that part of the money supply that includes physical coins
and currency, as well as readily liquid assets such as on-demand bank deposits and money held in cheque accounts plus all time-related deposits, savings deposits, and non-institutional money market funds. Meanwhile, the trade-weighted effective exchange rate index for the pataca rose 0.21 points month-tomonth but decreased by 0.03 points year-on-year to 105.76 in September 2016. The data suggests the city’s official currency has grown against the currencies of the city’s major trading partners on a monthly basis, while dropping on an annual basis. K.L.
Retail
Luk Fook same-store sales slump 39 pct in SARs Hong Kong-listed jewellery company Luk Fook Holdings (International) Ltd. has registered a plunge of 39 per cent in its same-store sales in Hong Kong and Macau for its second fiscal quarter ended September 30, according to its filing with Hong Kong Stock Exchange on Wednesday. During the three months, the retailer saw its same-store sales of gold products slashed by 57 per cent yearon-year in the two cities, while sales of gem-set jewellery posted a yearon-year decrease of 14 per cent. The Hong Kong-listed company, however, did not reveal the related financial results for the quarter. Its filing indicated the company’s decline in same-store sales in the two Special Administrative Regions had expanded by 15 percentage points compared to the previous quarter, for which a year-on-year decrease of 24 per cent was recorded. The company’s overall same-store sales slipped by 37 per cent year-onyear for the quarter, in particular, that of gold products slumped 47 per cent
year-on-year. It explained in the filing that the decline in overall business performance is due to ‘the continuing overall sluggish retail sentiment, together with a relatively high base due to the small scale gold rush in the same quarter last year and the relatively high price of gold in this quarter’. The company’s same-store sales on the Mainland fell by 23 per cent
year-on-year in the three months, of which gold products declined 43 per cent year-on-year while that of gem-set jewellery dropped 3 per cent year-on-year. As at the end of September, the Hong Kong-based company was operating a total of 185 self-operated shops, of which 11 were located in Macau, an increase of one store compared to one year ago. K.L.
Business Daily Friday, October 21 2016 3
Macau
Society
Government vs. private sector job debate continues Academics and a local recruitment company say the 183 new vacant positions will not have much impact upon the local private labour force Annie Lao annie.lao@macaubusinessdaily.com
T
he MSAR Government offered 183 positions for senior technician level in various government departments, according to a dispatch published in the Official Gazette by the Public Administration and Civil Service Bureau (SAFP) on Wednesday. The salary offered is MOP34,830 (US$4,359) per month for each position based upon the current salary point of the civil servants at MOP81, plus other welfare benefits set for the city’s civil servants. The vacant positions in various government departments are for public administrative management, environmental engineering, museology, electrical and mechanical engineering, law, information technology, auditing, statistics, archaeology, public health, and transportation. For this year, the government is implementing a unified management approach for the first time to recruit civil servants by having two separate assessments. First, a candidate has to undergo a comprehensive capacity assessment conducted by SAFP; once a candidate successfully passes it, then a second assessment of professional competence will be done by a relevant department. In addition, applicants can register online by setting up a public service access account online. Applications, starting from yesterday, will be invited for 20 days until November 8. Eligible candidates must have a Bachelor degree and be Macau permanent residents.
No direct impact
Academics and a local recruitment company told Business Daily that no direct impact from the new government job offerings would affect the local labour force, given most of the new jobs offered by the government are for professional and highly skilled positions.
Cheong Kuok In, president of the Chinese Civil Servants’ Association, sent a request letter in June to the Civil Servants’ Salary Assessment Commission, suggesting the
Academics believe that this is a good way for the city to attract fresh graduates returning to Macau from overseas studies. “It is good that the government offers these jobs because a lot of fresh graduates from overseas may actually have a hard time finding jobs such as in the museum sector as this position requires expertise,” Professor Rico Lam Long Wai, head of the Department of Management and Marketing at the University of Macau, told Business Daily by telephone. However, Professor Lam said that some of the local accounting firms may lose some of their employees switching to the government due to the new offerings. “But for the majority of the other jobs listed by the government, I don’t think the impact upon the local labour force in the private companies will be too drastic,” Professor Lam added.
Dream jobs
Government jobs offer a higher salary than the city’s market rate. The different career progression in a government job and the private sector is the main reason for such salary difference, Business Daily has learned. “Private companies usually offer more opportunities for career advancement, therefore a government job usually pays a bit more because they’re more stable and the salary adjustment may not be as frequent as the private companies can offer,” Profession Lam explained. Jiji Tu, Managing Director of MSS Recruitment, also agrees that new government job offerings would not have much impact upon the local workforce market but Ms. Tu believes that many local people generally prefer a government job. “Government jobs have always been the first priority for many people,” Ms. Tu said. However, Ms. Tu also said that the career progression in government jobs is limited compared to people working for a commercial firm.
government increase salary increments of civil servants up to MOP85 from the current MOP81, with an increase rate of 4.94 per cent, according to Macao Daily News.
“For some government jobs, you get high salary and stable working hours, but sometimes the jobs are not very interesting especially at the junior level. But if you’re working in the private sector you get more interesting and challenging dynamics and get a lot more opportunities so you could quickly climb your career ladder to a certain level,” Ms. Tu said. Joey Lao Chi Ngai, director of the Macau Economic Association, also
agreed that the new job openings would not have a direct impact upon the city’s labour market in the private sector. “183 new job positions are not that many, actually, if you divide the number of new job offerings by each government department. And each year, there are people who reach their retirement age so I don’t think this will have a direct impact upon the city’s labour market,” Mr. Lao said.
4 Business Daily Friday, October 21 2016
Macau Opinion
Pedro Cortés*
Yacht barriers The recent news on the non-approval of yachts in Macau Fisherman’s Wharf Marina perfectly demonstrates how the Macau Government views diversification. On the one hand, we have national policies pushing for Macau’s economy to diversify, while on the other we have the Macau Government putting hurdles up and derailing opportunities. In January 2015, this newspaper published an article on the following subject: ‘Soon to be a reality. ‘Free Travel’ yachting between Macau and Zhongshan City in Guangdong. will be a reality by mid-2015’. Well, 2017 is almost upon us - and it seems that there’s no will to make our city more attractive to other tourists. Tourists who come to visit Macau and stay a couple of days, spending money in Macau’s shops. Who return to their home countries advertising, gratis, the conditions of our city. It is only one example among many. Ever since I’ve resided here I hear the mantra of ‘diversification’. At the same time, I read and hear the Central Government urging diversification and the local government putting hurdles and barriers up to the private initiatives of local entrepreneurs with reasons that, frankly, are beyond my comprehension. There are marine traffic issues, for sure, that can be overcome in case there is a vision for the sector. For every sector. I don’t see those restrictions in Hong Kong or Singapore. But in Macau there are always a bunch of reasons making the life of those entrepreneurs more difficult. It is the fate of we islanders. There is that thing called insularity that shadows and tightens the brains of those who cannot see beyond the borders, whether land, sea or air. Macau needs demonstrable vision from its governors. It needs to have a long term plan for its tourism and for real, genuine diversification. Not the diversification that appears in the papers every week; with speeches by officials making everything beautiful . . . except that when it comes to a reality check there’s no substance. Zilch. Nada. I’m starting to believe that the more I try to understand, the less I do. And I also have the view that Macau should have in its key positions people from abroad or at least those who have lived part of their lives overseas. It would help a lot in terms of envisioning the future of our children and, concomitantly, of our economy. *lawyer and frequent contributor to this newspaper.
Investment
MIF opens doors MIF opens doors for foreign investment and increasing local business knowledge, but the Mainland’s focus on Portuguese-speaking countries via Macau could benefit from expanding to encompass other regions. Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
A total of six official agreements were signed between Macau and Beijing, kicking off the first day of the this year’s Macau International Trade and Investment Fair (MIF), the 21st edition of the annual trade fair, which welcomes 1,600 exhibitor stands from over 50 countries and regions to the territory. At the opening ceremony of the event, Dr. Wang Anshun Mayor of the People’s Government of the Beijing Municipality, partner city of the event, joined Paulo Alexandre Ferreira, Secretary of State Assistant and of Commerce of Portugal, partner country of the event, in praising Macau in its role as a platform connecting the Mainland, the SAR and Portugal and Portuguese-speaking countries. “The fire burns best when everyone puts a piece of wood on at the same time,” said Wang Anshung, noting how the recent 5th Ministerial Conference of the Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries (Macau Forum) helped to elevate Macau’s international visibility and bring more focus to this year’s MIF. This was coupled with statements from Secretary of State Ferreira, commenting that the Forum was a “clear sign of the will to deepen and take advantage of the historical ties that have binded us for almost five centuries”. Later events, including the Beijing-Macao Co-operation Partnership 2016 – resulting in the six agreements - covering economy and trade, youth exchanges, cultural affairs, and education, joined the presence of exhibitors and representatives of Chambers of Commerce from various regions, seeking to expand trade options through the various areas.
Commerce
The European Chamber of Commerce, American Chamber of Commerce, African Chamber of Commerce and the Canadian Chamber of Commerce in Macau were just some of the representatives of their regions with booths at the event, with varying objectives for the Fair. Speaking about the European objectives of the event was Chairman of the European Chamber of Commerce, Pedro Cardoso, noting the advantages that these types of event bring to the MSAR. “The (European Chamber of Commerce) pavilion has the objective of sharing the capacities of the EU (European Union) and the capacities that can be perfectly utilised for the MSAR, which has its five year development plan for different areas, from innovation and culture to ‘Smart
City’. Europe has unique capacities in these areas,” said Cardoso. This is something local entrepreneurs should seize upon, noted Cardoso, seeing a “good presence” of local companies at the Fair that can benefit from the networking opportunities. “With those contacts, the companies can not only establish commercial relationships in the future, but also have the opportunity to acquire new ideas for new business opportunities in Macau,” said the president.
Outside Europe
Given the recent Macau Forum, the Macau-Portuguese-speaking countries focus of the central government has become cemented. However, looking towards some of Macau’s other local potential partners, many opportunities present themselves, with some more developed than others. “I think there are a lot of opportunities in smart technologies; that’s an area that is ripe for development,” noted Jim Cunningham, Chief Commercial Consul at the Consulate General of the United States to Hong Kong and Macau, who helped inaugurate the American Chamber of Commerce booth at the Forum. Cunningham holds a positive outlook for future chances for Macau development, commenting that: “we’re going to be bringing in a trade mission to Hong Kong in April of next year and we’d be very excited about the opportunity to bring in Macau officials, Macau businesses to look at how there can be collaboration with some of those companies to make Macau an even smarter city.” Cunningham, as well as Cardoso and local businessman and Chairman of the American Chamber of Commerce in Macau Paul Tse, see the IT sector as a particularly exciting sector for local development. “There’s a three-party arrangement where everyone comes together to promote not just tourism but investment in commercial joint ventures, particularly in the area of IT,” notes Tse, referring to the trifecta of Portugal/Macau/China. “And these are the areas that Macau wants to focus on in its efforts to diversify and this is where countries like Portugal and cities like Beijing can really come and take advantage of the infrastructure that Macau has built up, take advantage of the platform of Portuguese-speaking countries,” said Tse. The president also noted the value of having other countries and regions aside from China, Portugal and Macau. “What is even more important (than the presence of local companies at MIF) is to have a strong presence from other countries and other territories […] it’s getting countries
and territories to come together and participate in joint ventures, each taking advantage of its own strong points and taking advantage of the partners’ strong points,” he said.
Platform
The president of the Executive Board of the African Chamber of Commerce, Ansoumane Douty Diakité, noted how events such as these create exactly that value. “For me, this kind of platform - it’s one of the best platforms in Macau when it comes to really promoting business or the role of Macau as a platform,” he said. However, without criticising the current situation, Diakité acknowledged that some further steps could help benefit nations and businesses without direct ties to the Portuguese-language – a singular focus of the local and central governments recently reinforced by Macau Forum. “Macau has what you call a ‘comparative advantage’ in dealing with the Portuguese-speaking countries that’s why China focuses more, uses more, Macau to reach out to the Portuguese-speaking countries,” said Diakité. “But our chamber, being in Macau, we have a double hat: the first one is we can support the initiative of the Chinese government when it comes to doing things in Portuguese-speaking countries, but also when it comes to reaching out to the old-English or French speaking countries (in Africa), we also have a role to play there,” noted the president, seeing the potential for expansive development.
Products
These types of opportunities can also be seized upon by other producers, noted the president of the Board of Directors of the Institute of European Studies in Macau, José Luis de Sales Marques. “From what I’ve seen so far I think that of the local companies there are two categories of business: ones that are dedicated to import/export […] the other part - they’re the SMEs (small and medium enterprises) and they take advantage of the fair opportunity to put their products in front of the public and do B2C (business to customer) sales,” said the president. This was evidenced by a collaboration by representatives of Portuguese supermarket giant Continente with local distributors as well as the presence of local, and recent winner of StartUp Macau Forum (occurring during the Forum Macau), Phantoms - both holding booths at the fair. “We have the B2C objective for the distributor and then to also establish B2B (business to business) contacts, especially to Mainland China. It’s always a good way to conduct networking,” noted Continente’s Brand Manager in Macau, Tania Periera. “As a startup we’re always trying to get more products out and continue with our business model, to provide more watches out there, to let people recognise our brand,” said the co-founder of Phantoms, Felix Lam. Evidencing the duality of MIF, the local brand hopes to penetrate the international market, whereas the Portuguese supermarket is hoping to enter the Mainland China market.
Business Daily Friday, October 21 2016 5
Macau Acquisition KNJ plans to expand Portuguese media group into digital news world
We come in peace The CEO of KNJ Investment Limited rules out censorship and layoffs despite the fact that the company’s acquisition deal with Portuguese media group Global Media may affect management nominations Nelson Moura* nelson.moura@macaubusinessdaily.com
C
EO of KNJ Investment Ltd. Kevin Ho King Lun stated on Wednesday that no layoffs would take place following his company’s acquisition of 30 per cent share of Portuguese company Global Media Group. The local businessman said on the sidelines of the Young Entrepreneurs Forum of China and Portuguese-speaking Countries that the Portuguese media group would be able to continue its operation with its “current professionals”, despite the company undergoing a restructuring, dismissing 134 of its employees in 2014. However, KNJ’s 17.5 million euro (MOP153.4 million/US$19.2 million) investment may influence the company’s new appointments to its board of directors and executive committee.
page views. Mr. Ho said on Wednesday that he would not control the news content produced by the group’s outlets nor place any restrictions on coverage of Chinese affairs upon completion of the deal. “The editorial department is always independent and we will never affect the editorial side,” said the businessman, a nephew of former MSAR Chief Executive Edmund Ho Wah and director of locally based Tai Fung Bank Limited.
The CEO also admitted that there was some resistance from the group’s shareholders to the acquisition even though “not as much as was reported”. Ho went on to say: “[The shareholders] hadn’t been completely informed about our intentions. I’ve explained to them my plans and guaranteed that we would not affect operations”.
New media investment
Founded in 2012, KNJ has so far focused on investments in real estate, health and restaurants, whilst the businessman perceives the investment in Global Media meets the world trend of investing in new media. The KNJ CEO announced his company would develop a 10-year plan to make Global Media, which has “a big reputation in Portugal,” return to its “glory days” by transitioning
No censorship
Global Media owns and manages some of the most important new outlets in Portugal, including print newspapers, radio and online news market. According to Portuguese media ranking service Ranking Netscope, the group led the press market in terms of online readership in September, with some 54.6 million
The KNJ CEO announced his company would develop a 10-year plan to enable Global Media to transition from traditional press to digital media during the first phase of development.
the group from traditional press to digital media during the first phase of development. In addition, he plans to expand the media group to other Portuguese-speaking countries such as Brazil and Angola. “As a Macau investor, we’re taking into account that Global Media has already had an Angolan investor [António Mosquito] so it’s natural for the company to expand to Portuguese-speaking countries,” Mr. Ho said. “As a citizen of Macau and China, this will be a good move in terms of business for me, too”. The CEO also mentioned Global Media may consider opening a news outlet in Macau although that is not the current plan of the enterprise for the time being. Nevertheless, the major shareholder of local weekly magazine Plataforma Macau, Paulo Rego, who is an intermediary for the acquisition deal, could be integrated into the Portuguese media group. *with Lusa
6 Business Daily Friday, October 21 2016
Macau
10 Vintage. Terence and Elva (Vintage Market). Photo by Cecilia U Business Antique and vintage shops in Macau
Is old the new black? Vintage culture has been popular in recent years, with flea markets and boutique shops selling second-hand items all over the world. In Macau, two local vintage shops see the potential and are trying to promote vintage culture to Macau locals. Meanwhile, antique shops in Macau have been long established since pre-Portuguese times, and one local antique shop has even reinvented itself to suit the market Cecilia U cecilia.u@macaubusinessdaily.com
U
nlike ‘retro’, ‘vintage’ includes the use of old items that have been used by someone in the old days while the former is a culture that imitates past fashion or trends, and in Chinese culture it is taboo to use or wear second-hand items of unknown or unfamiliar provenance. However, ‘Vintage Culture’ is becoming more acceptable and even popular, with ‘Vintage Culture’ already well established in other parts of the world, where one can find many flea markets and boutique shops selling second-hand. Terence and his wife Elva, owners of Vintage Market, who have sold second-hand fashion as well as vintage products for some two years, both agree that the vintage market in Macau is improving compared to a few years ago. Initially, Elva owned an online shop selling vintage clothing, and later they were offered an opportunity to open a shop and decided to do a business uncommon in the city – second-hand vintage clothing. “In the beginning, our first store sold only women’s clothing with only a small rack selling men’s clothing, but later we found out that a lot of male customers who were shopping with their girlfriends were interested in vintage men’s clothing, so we decided to take the store next to our first shop and enlarge our business,” Elva tells Business Daily. Despite the improved prospects for second-hand vintage products, currently there are still too few shops in this field in Macau, says Mimi Yung, Director of 3-45 am, a store selling high-end foreign vintage and antiques established six months ago. Meanwhile, in Macau, many old antique shops are selling products
that are over 100 years old such as porcelain and jade, many of which can be found on Rua dos Ervanarios and near Rua de Santo Antonio. The antique market has long been established in the city but many antique shops are struggling with the rise of antique markets in Mainland China, says Sam Wai Lon, owner of a 17-year old antique shop located on Rua Tercena. Mr. Sam initially had a shop near Future Bright Amusement Park selling stamps due to the frenzy for
stamp collecting during the 1990s, and he himself is a collector of old things. However, the trend of collecting stamps soon faded and this prompted him to buy a shop - So Ta Fao Antique - to sell only the old things that he had collected. Unlike his competitors, who mainly specialised in high-end antiques within the area, one can find old items such as blue-and-white porcelain to water bottles from the 70s.
Current vintage and antique market
Vintage Market is now a two-shop store situated next to each other, with one selling different kinds of objects such as water bottles and postcards, and the other a boutique shop. Terence and Elva said customers will always go to have a look at the shop next door after they have finished shopping in their boutique shop. In addition, having a bigger shop selling vintage clothing means more styles can attract more customers. “Both of us have a lot of styles that we like and we try to include all of
them in the shop; our wide range of styles attract many different customers - from the elderly to children - and they are also being introduced to other styles at the same time,” say the owners of Vintage Market. Meanwhile, with the high price of vintage products and antiques, Ms. Yung says there are still customers willing to purchase because of past memories generated by the products which are fading fast in the active city. “The product that is here now will not be here tomorrow because of its rarity; with many of the items still functioning, the thing that customers purchase is not the product itself but the related precious memories attached to the product,” Ms. Yung explained.
“The thing that customers purchase is not the product itself but the related precious memories attached to the product.” Mimi Yung, Director of 3-45 am While Western vintages and antiques are rarely found in the city, Sam indicated that people are more attached to local vintage and antiques rather than Western items, noting that a picture of the Border Gate taken in the 70s will recall memories for many people.
Difficult period
Mimi Yung (3-45am) photo by Greg Mansfield
Unlike Vintage Market and 3-45am, both recently established, So Ta Fao Antique saw the changes in the market in recent decades, while Mr. Sam revealed that because of the current downturn of Macau’s gaming industry the vintage and antique market is also being affected, revealing that he seldom makes a profit. “This year, even the other antique shops near St. Paul’s Ruins say business is even worse than during the outbreak of SARS (severe acute respiratory syndrome) in 2003,” Mr. Sam said. Compared to Sam’s business, Terence remarked that the gloomy economy in the city has only slightly affected their sales. He perceives that because of the diversity as well as the uniqueness of their products
Business Daily Friday, October 21 2016 7
Macau customers are generally willing to shop in their store.
Collections
Ms. Ying told Business Daily that the items in 3-45am cannot be found in the city, stating that the products come from the United Kingdom, France, the United States and Japan. “Everything that is now in the store was chosen by my own observation in person, hence every item is genuinely vintage and antique,” said Ms. Yung. She added that the price of the items include the cost of shipping and air transportation. Similar to 3-45am, the clothing in Vintage Market comes mostly from Japan, with some from flea markets in Thailand, Europe and the United States. So Ta Fou Antique, with a wide range of objects, collects from different channels. Mr. Sam collects them by buying from suppliers who approach him. He also explained that back in the past he would go to houses no longer occupied by anyone along with other connoisseurs to collect things that had been abandoned.
Promoting vintage and antique culture
For Terence and Elva, more similar shops selling vintage clothing or objects is a good thing for the market in Macau because they perceive that competition will help them improve. In order to increase awareness of vintage culture, they have organised a vintage flea market to promote vintage in the city, although this can prove to be challenging for them. “It’s quite difficult to have a suitable venue to hold this sort of activity, plus the flea market event is self-funded, without the help of the government. However, we believe our hard work in approaching every detail of the event ensures the quality of the event itself,” he said.
Terence and Elva also emphasise the importance of communication with their customers, noting that the exchange of opinions helps their business improve and them to understand what customers want.
“This year, even the other antique shops near St. Paul’s Ruins said business is even worse than during the outbreak of SARS (severe acute respiratory syndrome) in 2003.” Sam Wai Lon, owner of So Ta Fao Antiques The owner of So Ta Fao Antique, on the other hand, it is difficult to encourage local citizens to engage in the vintage and antique culture, unlike the livelier scene in Macau’s swinging neighbour – Hong Kong. “A lot of antique shops in Hong Kong have many local customers because Hong Kong has a lot more people; these shops will survive even if they’re located in shopping malls,” he explains.
Challenges
Like many shops in Macau in recent years, rental expense is always the biggest challenge for such SMEs’ , and Mr. Sam reveals that he is one of the victims. Nevertheless, since his new landlord is also a connoisseur
Sam Wai Lon. Photo by Cecilia U
the rental that the property owner offers is comparatively reasonable. He is also concerned that the property owner will take back the shop and operate his own business. Another big challenge is the decrease in supply of vintage and antique products, says Sam. Since 3-45 am was only established six months ago Ms. Yung says the biggest challenge is to attract more customers to get to know the shop. She also believes that more time is required to cultivate the culture in the city. She indicates that in Macau most people will abandon the things they find old or no longer functional, whilst in other regions people prefer second-hand furniture rather than buying a whole new set. She perceives that the idea of recycling should also be the reason for using second-hand objects.
Terence and Elva, on the other hand, find the hiring of personnel their biggest challenge. They note that they cannot offer a favourable wage to employees despite the great interest of the employees themselves.
Future direction
Ms. Yung tells Business Daily that 3-45 am aims to expand the shop if investors are interested in their business, noting that expansion provides the choice of selling large items such as bulkier furniture. For Terence and Elva, they will continue to promote vintage culture in the city by improving their work on flea market events in the hope of attracting a wider interest. Terence also emphasised that the shops open not only for the action of trade, but focus more on communication.
8 Business Daily Friday, October 21 2016
Macau Business Three regions to have joint booth at this year’s MIF
Looking to South America Business and government representatives from the Chinese Province of Shaanxi, Macau and Peru signed a co-operation agreement during the economic networking session Nelson Moura nelson.moura@macaubusinessdaily.com
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memorandum agreement for commercial and trade development between the Chinese Province of Shaanxi, Macau and Peru was signed during an economic networking session held yesterday. The agreement stated a liaison and co-ordination office will be established by Shaanxi company Shan Ao Investment Holdings Limited in order to co-ordinate business co-operation initiatives between the three regions. The event - titled ‘One Belt, One Road, Economic and Commercial Exchange Networking Session between Shaanxi, Macau and Peru’ - was jointly organised by the Peru Chamber of Commerce in Macau and the Shaanxi Federation of Industry and Commerce, bringing together nearly 100 business and government officials from various regions. “This event tries to make a bridge between Shaanxi, a faraway region in China, Macau and Peru, and I believe it’s the first time we’ve united the three regions. We also have a joint booth at the Macao International Trade & Investment Fair (MIF) to promote Peruvian products such as wine, quinoa and other organic products. The Peru Government gives
priority to commercial relations with China so we always participate in MIF since there are people coming from all regions of China,” the Peru Consul in Hong Kong and Macau, Sergio Manuel Avila Traverso, told Business Daily. According to statements by former Peruvian Prime Minister Pedro Cateriano in May, China’s investment in Peru as of that time reached US$22.7 billion (MOP181.3 billion) with trade between the two countries reaching US$15.5 billion in 2015, news agency Xinhua reported. According to data from the
Observatory of Economic Complexity (OEC) Mainland China is Peru’s main trading partner, with the South American country’s biggest import from Mainland China being electronic equipment, while Peru mainly exports copper and iron ore. Trade between Macau and Peru reached US$1.1 million in 2014 with Macau’s biggest import being knitted clothes, according to OEC data.
Joint efforts
A joint booth for Shaanxi and Peru was set up at this year’s Macao International Trade & Investment Fair (MIF) taking place from October 20 to 22 in order to promote the two regions’ products and promote synergies between entrepreneurs. “Shaanxi avails itself of Macau’s platform advantage in order to help privately-run enterprises go out in
addition to popularising Shaanxi’s unique food culture to Hong Kong and Macau, Portuguese-speaking countries and Latin American countries. Peru will exhibit its local tourism projects, agricultural and livestock breeding products, and readymade textile samples,” it was announced during the event. The Peru Chamber of Commerce in Macau also used the occasion to match small and mediumsized enterprises for business and investment opportunities in Shaanxi and Peru, thereby contributing to the city’s economic diversification. In statements to Business Daily, Secretary for Social Affairs and Culture Alexis Tam said: “South American countries like Peru and Brazil are important trading partners, and since we’re trying to make Macau an international centre for tourism and leisure we need co-operation with international communities in Latin America.”
Business Daily Friday, October 21 2016 9
Gaming
Untapped potential of Northern Asian market
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he second day of M G S Entertainment Summit 2016 - taking place at The Venetian Macao, Cotai alongside the exhibition throughout the three days of November 15 to 17 - will feature keynote speaker Robert (‘Bobby’) J. Soper, President and Chief Executive Officer of Mohegan Tribal Gaming Authority.
Results
Australia’s Crown says no charges laid against staff held The plan to spin off some Australian hotels is designed to split the assets from Crown’s underperforming businesses in Macau Aaron Bunch and Tom Westbrook
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ustralia’ s t o p casino operator Crown Resorts said yesterday no charges had been laid against 18 of its staff held in China for alleged gambling crimes, adding to a sense of confusion that has surrounded the company’s biggest crisis. Ahead of an annual shareholder meeting at the company’s casino in Perth, the Crown board endorsed plans to spin off some Australian hotels to minimise exposure to its underperforming businesses in the Chinese gaming hub of Macau. But the arrest of the staff, three of whom are Australian nationals including head of international VIP gambling Jason O’Connor, in China last week was the main concern for investors as the company’s shares hit a new 10-month low. “While I know we all have many questions, we must be very cautious and measured in our commentary at this sensitive time in the process,” Chairman Robert Rankin told the meeting, adding that “no formal charges” had been laid. When a shareholder, Tshung Chang, complained about the lack of information, Rankin said the situation was “difficult and complex”. A Malaysian national was also among the group, he said, but the company has not provided details on the nationalities of the other detainees.
The staff were being held for unspecified “gambling crimes” and investigations were ongoing, China’s foreign ministry told Reuters on Monday. It was too early to determine what impact the arrests would have on Crown’s business, Rankin said, amid fears it will hurt the company’s ability to attract Chinese VIP gamblers to its Australian casinos, including a A$2 billion (US$1.54 billion) resort under construction on Sydney’s harbour-side.
Key Points Too early to assess impact of arrests on business - chairman Crown board supports plan to spin-off Australian resorts Properties would be listed as new company on ASX Would split Australian hotels from underperforming Macau casinos Analysts have linked the detentions to Chinese laws banning casinos from advertising or promoting gambling in the Chinese mainland, such as offering credit to high-spending clients. Melbourne-based Crown holds a 27 per cent stake in Macau-based Melco Crown Entertainment Ltd and relies heavily on Chinese gamblers at its casinos in Perth and Melbourne.
The detentions sent Crown shares tumbling 14 per cent on Monday and the sell-off continued yesterday. Crown shares fell 2 per cent, while the broader S&P/ASX 200 index was flat. In an unusual move, Crown issued a statement after the meeting saying “less than half” its international VIP annual revenue, or about 12 per cent of total revenue, came from Chinese high-rollers. In fiscal 2016, Crown reported group revenue of A$3.6 billion.
Spinning out
The plan to spin off some Australian hotels is designed to split the assets from Crown’s underperforming businesses in Macau, which has seen VIP gambling revenue shrink amid a Chinese crackdown on corruption. Crown said the spun-off unit would be listed as a new company on the Australian S e c u r i t i e s E xc h a n g e a n d would include hotels in Melbourne and Perth. M ea n w h i l e C r o w n w o u l d work on a broader demerger of its international businesses, it added. It did not give a timetable for the listing or a price guide for the assets. F u n d m a n ag e r G e o rg e Clapham, managing partner of Arnhem Investment Management, said the breakup - first mooted in June - would release value for investors. “Splitting out of the international business and the domestic casinos I think makes sense,” said Clapham, whose fund owns shares in Crown. Reuters
Soper says he plans to discuss the untapped potential of the Northern Asian market, especially Northern China, Korea and Japan. In addition, the highlight will be, among other things, their Integrated Resort project in Incheon, South Korea, the development process in that market, and Asian opportunities moving forward. Having vast experience in the gaming industry in the United States, Mr. Soper finds the journey to the East a unique experience, observing that, “While there are more similarities than differences, doing business in a foreign jurisdiction has unique challenges such as language barriers, cultural differences and different regulatory rules and processes for developing and operating”. “Operationally, VIP business is run differently with more prominence of junkets and rolling chip programmes. Non-gaming trends and brands can be different as well, especially in food & beverage, where certain Western influences such as the celebrity chef concept have less relevance,” he added. Since March 2015, Soper has served as President of Mohegan Tribal Gaming Authority (MTGA) overseeing all day-to-day operations of the MTGA. In tandem with overall operation and management of the company’s properties, Mr. Soper is responsible for evaluation and overview of the business development of MTGA.
Elevating the mass market in Macau Speaking of the Macau market, he says that with the existing 35 casino resorts currently operating in Macau, and more to be expected, the city can utilise this multitude of product to differentiate itself from other markets. “Ultimately, Macau will need to leverage this concentration of resort product in a manner to position the jurisdiction similar to what Las Vegas has done in the Western hemisphere in order to elevate mass market visits further,” says Soper. He will deliver his keynote speech on the second day of the MGS Entertainment Summit 2016. Titled ‘New Frontiers: Gaming’s Giant Leap Forward’, the summit will explore the crucial combination of quality legislation, innovation and investment, and the balance needed to drive new business opportunities in a changing global market. “The Macao Gaming Show has seen tremendous growth over the past four years, and we anticipate this will be the best one yet. As gaming and resort operations continue to expand throughout Asia, this event has become more prominent. It will be a great opportunity to network and interact with the who’s who of Asian gaming,” he says. From November 15 to 17, the key question which will be tackled by representatives from the government, the global investment community, and the broad-based gaming and entertainment sector will be: how do you bring pioneering new technologies to vibrant new markets with fresh and visionary political thinking? Featuring more than 15 sessions, the MGS Entertainment Summit 2016 will gather together representatives from the Chinese Government, major casino and entertainment operators in Macau, Las Vegas and around the world, cultural and service industry experts, legal and international advisors, and the world’s major investment houses to explore the new business landscape and the legislation, technological innovation and financial co-operation necessary to maximise the vast opportunities that lie ahead for the gaming and entertainment industry.
MGS Entertainment Summit 2016’s second day keynote speaker Bobby Soper will introduce Mohe-gan Sun’s integrated resort project development in Incheon, South Korea.
10 Business Daily Friday, October 21 2016
Greater China Reform drive
Transition challenges highlighted as income growth slows A breakdown in economic growth by industry issued yesterday found new weakness
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onsumption is driving China’s economic growth, but a further slowdown in income growth in the third quarter highlights the challenges to the country’s transition away from manufacturing and heavy industry. Per capita disposable income in China rose 6.3 per cent year-on-year in the January to September period to 17,735 yuan (US$2,6314), according to data from the statistics bureau, down from 6.5 per cent growth in the first half of the year and the slowest since 2013, the year in which the data was
first released. Incomes rose 7.7 per cent a year ago. Maintaining strong per capita income growth faces increasing difficulty, a National Statistics Bureau (NBS) official wrote in a commentary yesterday, with special attention needed for migrant workers and employees displaced by the state-ordered closure of excess production capacity. Indeed, migrant workers’ incomes rose only 5.9 per cent in the first nine months of the year, with momentum for future growth looking weak. “Related departments and regions
Growth in the construction sector also slowed in the third quarter
should step up work to ensure basic necessities and re-employment for those that have lost jobs, in order to lessen the negative impact of industrial restructuring on incomes,” wrote NBS official Wang Pingping.
Real estate strong, financials and construction weak
A breakdown in economic growth by industry issued yesterday highlighted a relatively strong consumer and services sector, but also found new weakness in other areas. China reported on Wednesday that its economy expanded by 6.7 per cent in the third quarter, in line with expectations, with over 70 per cent of growth coming from consumption. Growth in the retail and wholesale sector accelerated to 7.0 per cent for July-Sept from 6.5 per cent in the second quarter as China’s consumers kept spending, yesterday’s data showed. China’s red-hot property market grew 8.8 per cent in the third quarter, unchanged from the second quarter. The real estate sector was the fastest growing segment of the economy, along with “other services”, which also grew 8.8 per cent. Other services includes many consumer services such as media and education, but also scientific research, social services and utilities. Economists believe the greatest near-term risk for China is a possible correction in the high-flying property
market, which accounts for about 15 per cent of GDP, as more than 20 cities have introduced measures to restrict home purchases after prices this year skyrocketed in many markets - especially top-tier cities. The financial industry grew 5.6 per cent in the third quarter, faster than 5.3 per cent in the second quarter but slower than some analysts had expected considering the low base created by a market crash in the yearago period. “(Financial services) is lower than what I expected, a downside surprise. It doesn’t seem to be consistent with the stock market performance in the third quarter, which seemed to recover,” said Raymond Yeung, chief Greater China economist for ANZ in Hong Kong. Growth in the construction sector also slowed in the third quarter, to 6.0 per cent from 7.3 per cent in the second quarter, as new housing starts fell 19.4 per cent in September. A weaker property market, along with slower auto sales after a tax incentive expires this year, present the biggest challenges to growth, says JP Morgan chief China economist Haibin Zhu. “Growth momentum is still trending downwards - the fourth quarter will be even weaker. If the government wants to stick to the 6.5 per cent growth target, 2017 will be more challenging,” Haibin said in an interview. Reuters
Illicit outflows
Capital flow crackdown results in US$148 billion underground bust China’s reserves, the world’s largest, have hovered around the US$3.2 trillion level since February China’s campaign to crack down on illegal capital outflows saw its currency regulator bust underground banking operations that involved more than 1 trillion yuan (US$148 billion), according to a newspaper published by the country’s central bank. The State Administration of Foreign Exchange also seized US$8.43 billion in foreign exchange funds as part of the nationwide checks on illegal outflows, the Financial News reported yesterday, citing Zhang Shenghui, an official at the regulator. SAFE didn’t immediately respond to questions submitted by fax by Bloomberg. The news underscores both the desire of Chinese to diversify money out of their country, and the determination of authorities to restrict outflows that put pressure on the nation’s currency and trigger even greater capital flight. The yuan has depreciated 7.8 per cent against the U.S. dollar since the People’s Bank of China’s mini-devaluation in August last year. It has fallen 1 per cent this month alone. “As regulators tighten the formal channels, underground activities
seem to be heating up,” said Raymond Yeung, chief greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. China has repeatedly shown it’s prepared to play hardball when it comes to heading off any disorderly declines in the yuan, including through ramping up offshore yuan borrowing costs in Hong Kong. Chinese investors determined to squirrel money out have turned to life-insurance policies in Hong Kong,
“As regulators tighten the formal channels, underground activities seem to be heating up” Raymond Yeung, chief greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong
camouflaged tourist spending abroad and faked trade invoices among their creative methods. Declining yuan deposits in offshore banks also point to the demand to get money into other currencies. A flurry of investment banks recently have warned that capital outflows could be larger than anticipated amid on-going demand for foreign currency. Deutsche Bank AG expects outflows will intensify in the next few months as economic growth slows and the yuan weakens.
Outflows underestimated
Goldman Sachs Group Inc. analysts have estimated that outflows may be larger than they look because an increasing amount of capital is exiting the country in yuan rather than in dollars. While China’s currency reserves
have stabilized, and lenders’ net foreign-exchange purchases for clients have fallen close to a one-year low, official data show that US$27.7 billion in yuan payments left China in August. That’s compared with a monthly average of US$4.4 billion in the five years through 2014. Such large cross-border moves can’t be explained by market-driven factors and need to be taken into account when measuring currency outflows, according to MK Tang, Hong Kongbased senior China economist at Goldman Sachs. Illicit flows could have increased to US$246 billion in the third quarter of 2016 from US$133 billion in the previous three months, according to Iris Pang, senior economist for greater China at Natixis SA in Hong Kong. “Some outflow channels are blocked but that doesn’t block demand,” said Pang. “New grey and black markets may emerge.” SAFE suspended foreign-exchange settlement and sales at three banks earlier this year after they failed authentication checks, the Financial News reported, without naming the lenders. The regulator will strengthen oversight against underground banks and other foreign-exchange violations, according to the newspaper. In July, Pan Gongsheng, head of the foreign exchange regulator and also a deputy central bank governor, said that China would step up monitoring of cross-border capital flows. Bloomberg News
Business Daily Friday, October 21 2016 11
Greater China WTO
In Brief
Beijing scores victories against some U.S. anti-dumping methods The zeroing methodology tends to increase the level of U.S. anti-dumping duties on foreign producers Tom Miles and David Lawder
China won the bulk of a World Trade Organization complaint against certain U.S. methods of determining anti-dumping duties on Chinese products in a WTO dispute panel ruling released on Wednesday. China brought the complaint in December 2013, one of a string of disputes challenging Washington’s way of assessing “dumping,” or exporting at unfairly cheap prices.
‘China’s Ministry of Commerce welcomed the ruling saying that the WTO panel had “upheld China’s principal claims”’
the imports are sold at prices below production costs. The panel ruled against the U.S. Commerce Department’s practice of “zeroing” in cases involving targeted dumping. In zeroing, the department typically assigns a value of zero any time a producer’s export price is above that producer’s normal home market price, partly to account for freight and customs charges. In practice, the zeroing methodology tends to increase the level of U.S. anti-dumping duties on foreign producers. Some points of China’s argument were rejected by the WTO panel, including a claim that the Commerce
Department systematically punishes Chinese state enterprise by assigning them high anti-dumping rates. Either side can appeal the ruling within 60 days. China’s Ministry of Commerce welcomed the ruling saying that the WTO panel had “upheld China’s principal claims” on the unlawfulness of targeted dumping and the separate rate applied in certain U.S. anti-dumping measures. The dispute related to several industries including machinery and electronics, light industry, metals and minerals, with an annual export value of up to US$8.4 billion, it said. “The United States is disappointed by these findings,” a spokesman for the U.S. Trade Representative’s office said in a statement. “We will carefully review the report and consider next steps. Nothing in the report will undermine the commitment of the United States to impose antidumping duties to address injurious dumping,” the USTR spokesman added. Reuters
China has published and is soliciting public opinion on a draft revision to the country’s food safety regulation, which stipulates stricter rules for online food sales. The draft, published by the State Council’s Legislative Affairs Office on Wednesday, stipulates liabilities for food producers as well as operators of online sales platforms for food safety violations. If any food producer has been punished for food safety problems, online sales platforms should immediately stop serving the offender, according to the draft. The draft says China’s food safety law and regulations should also be applied to imports and exports of food through e-commerce channels.
Industrial output growth target in reach
Changing partners
JP Morgan weighs exiting joint venture in Mainland The venture posted net income of US$7.7 million in the first half of 2016 JPMorgan Chase & Co. is in talks to sell its stake in a Chinese investment-banking joint venture, a sign that foreign banks are getting frustrated with partnerships they can’t control. The New York-based bank is in talks to sell its minority stake in JPMorgan First Capital Securities to its local partner, First Capital Securities Co., according to a statement from the Chinese firm yesterday. No agreement has been reached, according to the statement. JPMorgan wants to find a new partner for a venture in which it can wield greater control, according to a person with knowledge of the matter who asked not to be identified. HSBC Holdings Plc, which remained on the side-lines as JPMorgan and rivals like Credit Suisse Group AG set up minority-owned entities, last year announced plans for a China
Food safety draft stipulates stricter regulations
Stabilization
Specifically, the panel found fault with the U.S. practices of determining dumping margins in certain cases of “targeted dumping,” in which foreign firms cut prices on goods aimed at specific U.S. regions, customer groups or time periods. Dumping is normally found when a foreign producer’s U.S. prices are lower than its home market prices for the same or similar goods, or when
Cathy Chan and Alfred Liu
E-commerce
securities partnership in which it will hold a controlling stake. “Having a minority stake in a China joint venture is no longer attractive because their role is rather passive and they only have limited participation,” Wong Chi Man, a Hong Kong-based analyst at China Galaxy Securities Co., said by phone. “I wouldn’t be surprised if other foreign firms follow suit.”
Underwriting, M&A
JPMorgan set up the joint venture with First Capital in 2010 after having lagged behind rivals including Goldman Sachs Group Inc. in forming tieups. It holds a one-third stake in the company, whose business includes equity and debt underwriting and mergers advice. The venture posted net income of RMB51.7 million (US$7.7 million) in the first half of 2016, compared with a loss of RMB23 million a year earlier. It ranks 53rd among underwriters
of share sales in China this year, data compiled by Bloomberg show. Deutsche Bank AG’s local partnership is ranked 10th, the highest among foreign-backed ventures, according to the data. “JPMorgan believes in the longt e rm prospects of Chin a an d remains fully committed to our China franchise,” the bank said in an e-mailed statement confirming the announcement by First Capital. “We have a long-term strategic vision for our business in the country and continue to evaluate our options to strengthen our position in China in order to better serve our clients.”
HSBC, Goldman
HSBC is still waiting for regulatory approval to take a majority share in its planned partnership in the free-trade zone of Qianhai, and it’s unlikely to be operational this year, the U.K. bank’s China CEO Helen Wong said this month. HSBC Chief Executive Officer Stuart Gulliver has said it would be the first securities venture in China mostly owned by a foreign bank. Goldman Sachs has also been seeking more control of its securities partnership in the country. Mark Schwartz, who is stepping down as the firm’s Asia-Pacific chairman, had a long-term goal of securing permission to take full ownership of the investment-banking venture his firm formed with Beijing Gao Hua Securities Co. in 2004, according to people familiar with the matter. “JPMorgan’s move makes sense to me because foreign banks have a lot more options than before,” said China Galaxy’s Wong. “They can go to different free-trade zones like the ones in Shanghai and Qianhai if they aren’t happy with their current shareholding.” Bloomberg News
China stands poised to meet its full-year target of a 6-per cent increase in industrial output, an official said yesterday. As the country’s economy stabilizes, industrial output is expected to continue to expand in the fourth quarter, Huang Libin, a senior official with the Ministry of Industry and Information Technology, said. China’s industrial output expanded 6 per cent in the first three quarters of 2016, largely due to strong performance in the high-tech and equipment manufacturing sectors. Industrial output is used to measure the activity of large designated enterprises with an annual turnover of at least 20 million yuan (US$2.97 million). Sectorial data
Express delivery sector continues to grow China’s express delivery sector has grown steadily in the first three quarters of the year thanks to the country’s continued efforts to boost consumption and services, according to the State Post Bureau. Revenue for Chinese express delivery businesses reached over RMB270 billion (about US$40.2 billion) in the first nine months of 2016, up 44 per cent year on year, the bureau said. A total of 21.1 billion deliveries were made during the same period, up 54 per cent year on year, the bureau said. China is aiming to nearly quadruple revenue of its express delivery market by 2020 from the 2014 revenue of 204 billion yuan. Co-operation
Stronger financial links with Luxembourg China and Luxembourg have agreed to strengthen bilateral cooperation regarding their respective financial sectors. The pledge was made during Chinese Vice Premier Ma Kai’s separate meetings with Luxembourg’s Grand Duke Henri and Prime Minister Xavier Bettel. During the meetings, Ma said China cherishes its friendship with Luxembourg, and sees the country as a trustworthy partner in the European Union. Hailing bilateral ties in the fields of finance, steel and aviation, Ma said China is willing to further strengthen high-level interactions with Luxembourg, build political mutual trust and promote people-to-people and cultural exchanges.
12 Business Daily Friday, October 21 2016
Asia In Brief Gold
India’s gold imports to hit 9-month high India’s overseas purchases of gold likely hit a nine-month high in October, as a flip in domestic prices to a premium prompted banks and refiners to resume imports ahead of the festival season, industry officials told Reuters. While higher purchases could widen India’s trade deficit given bullion accounts for a major chunk of its imports, they would underpin global gold prices that have come off 7 per cent from two-year highs hit in July as expectations of a U.S. interest rate hike by yearend strengthened the dollar. India is the world’s No.2 gold consumer after China. Public spending
Philippines posts budget surplus in August The Philippine government has posted 32.6 billion pesos (US$676.59 million) budget surplus in August, dragging down the eight-month fiscal gap to 138.4 billion pesos (US$2.87 billion), the Department of Finance said yesterday. The surplus in August was the first under the administration of President Rodrigo Duterte, the department said. During the month, government revenues reached 209.6 billion pesos (US$4.35 billion), up by 19 per cent from the same month last year, while expenditures rose by 9 per cent in the same month last year.
Monetary remedy
Singapore recession risk raises chance of policy easing Analysts say the central bank is giving itself room in case it needs to act fast Jongwoo Cheon
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he growing risk of a recession in Singapore has raised the prospects of an off-cycle easing in policy, although for now the consensus among economists is for the central bank to sit tight in the hope the economy sparks to life. Ten out of 15 economists polled by Reuters said their base prediction was for monetary policy to remain unchanged at the next review in April, 2017, similar to the no-change stance seen at last week’s meeting. However, after the city state’s economy contracted sharply in the third quarter, with its services sector in recession and manufacturers hit by weak global demand, many analysts are hedging their bets. Four expect the Monetary Authority of Singapore to provide more stimulus, while one saw a 50-50 per cent possibility. And, of the ten in the “no change” camp, four said the chances of further stimulus were rising. More to the point, underscoring
the uncertainty around Singapore’s growth outlook, eight of the 15 analysts saw some chance of an off-cycle move. “We see the risk of easing, especially if economic conditions deteriorate further,” said Weiwen Ng, an economist for ANZ in Singapore.
Key Points 10 of 15 analysts see MAS standing pat in semiannual April meet Four expect re-centering as baseline scenario Eight see small chances of off-cycle move Four in “no change” camp see increasing risks of easing ANZ expects the Monetary Authority of Singapore (MAS) to stand pat in April with a 40 per cent chance of easing by pushing the centre of the currency band 1 per cent lower. The MAS manages monetary policy
Cambodia
Central bank urges promotion of local currency usage Neav Chanthana, deputy governor of the National Bank of Cambodia (NBC), or the central bank, yesterday called for the broad promotion of the use of local currency riel in order to reduce dollarization. Foreign currencies, comprising mainly U.S. dollars, accounted for 83 per cent of cash and bank deposits in Cambodia at the end of 2015, up from 56 per cent in 1995, according to the NBC. Chanthana said the Cambodian economy has entered another phase of development, referred by the IMF as the new frontier economy. In this context, dollarization may become costly for the economy, he said. Price optimization
Bangladesh tenders to import oil products Bangladesh Petroleum Corp (BPC) has issued an international tender to import oil products as part of efforts to buy at cheaper rates by moving away from direct-term deals with suppliers of fuel products. State-owned BPC is seeking 965,000 tonnes of 500 ppm sulphur gasoil, 120,000 tonnes of 180-centistoke high sulphur fuel oil and 90,000 tonnes of jet fuel, a tender document showed. The tender closes on October 31 and is valid for 75 days to Jan. 13, 2017. The delivery of the cargoes should be carried out in phases in the first half of 2017, a BPC official told Reuters.
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by changes to the exchange rate, rather than interest rates, letting the Singapore dollar rise or fall against the currencies of its main trading partners based on its nominal effective exchange rate (NEER) because trade flows dwarf the city state’s economy. “Re-centering” would be the most likely form of easing the central bank would take, analysts say. In theory, the MAS could also change the width or the slope of the currency band, but a wider band would also allow for a stronger currency, while setting the Singapore dollar on a path of continued depreciation can be challenging as investors may want to dump it in one go.
Wiggle room
Last week the MAS held policy steady despite a surprising economic contraction, and said the neutral policy stance will be needed for an “extended period to ensure medium-term price stability.” Analysts say the central bank, which said it will continue to closely monitor economic developments, is giving itself wiggle room in case it needs to act fast. “That is a kind of description which suggests that they are giving themselves room to act if things get worse,” said Michael Wan, economist at Credit Suisse in Singapore, seeing 50 per cent possibility of an off-cycle easing. The MAS eased monetary policy twice last year, once in an unscheduled policy review in January 2015. Most economists, however, say the central bank may need to save its ammunition for any external shocks, while some others expect Singapore could turn to fiscal stimulus to help spur growth. The government is expected to announce next year’s budget in the first quarter, before MAS’ April meeting. “If fiscal measures are heavy lifting, the response from monetary side could be more measured and more calibrated,” ANZ’s Ng said. Reuters
GDP
Vietnam’s 2016 growth slowing Weakness in mining and agriculture pressuring annual performance Mai Nguyen
Vietnam expects annual economic growth of 6.3-6.5 per cent this year, below target and slowing from last year’s 6.68 per cent, as weakness in agriculture and exports dragged on one of Asia’s most resilient economies. 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. Vietnam’s exports should grow 6 to 7 per cent this year, below the 10-per cent target, while total loans as of now is seen growing 11.24 per cent from the end of last year, Prime Minister Nguyen Xuan Phuc said yesterday. “Besides advantages, we faced many difficulties and challenges; global growth and trade were both lower than expected and prices of many basic goods and crude oil were low,” Phuc said in an address to the country’s national assembly. Gross domestic product growth,
however, is seen rebounding to 6.7 per cent next year, Phuc said, while average inflation is expected to hit 4 per cent and exports are seen growing 6-7 per cent. Weakness in mining and agriculture pressured Vietnam’s annual growth to 6.4 per cent in the third quarter, the fastest quarterly pace
this year but below the 6.87 per cent in the same period last year. Inflation this year is seen at 4 per cent, in line with the government target of keeping the consumer price index from rising above 5 per cent, while foreign reserves hit a record US$40 billion, Phuc said. Lower GDP is expected to push Vietnam’s public debt ratio closer to a ceiling of 65 per cent of GDP, he added, posing more challenges for Vietnam’s already tight state budget. Vietnam’s economy expanded 6.68 per cent in 2015, the fastest pace since 2007 and extending growth momentum that started in 2012. Reuters
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Business Daily Friday, October 21 2016 13
Asia Job market
Australia’s employment surprisingly weak, stirs rate risk Consumer price data for the third quarter due next week will be crucial for deciding monetary policy Wayne Cole
Australian employment unexpectedly fell 9,800 in September as firms shed a huge 53,000 full-time jobs, a disappointing report that slugged the local dollar and could rekindle speculation of further rate cuts. Yesterday’s data from the Australian Bureau of Statistics showed the unemployment rate stayed at a threeyear trough of 5.6 per cent, but only because more people stopped looking for work. Indeed, the participation rate dropped to its lowest since May 2014 at 65.5 per cent.
Key Points Sept employment falls 9,800 vs forecasts of +15,000 Full-time jobs dive 53,000 in unusually large move Unemployment stays at 3-year low of 5.6 pct Aussie dlr slips as data adds to risk of rate cut The fall in employment in September was also the second straight month of declines and confounded analyst forecasts for a rise of 15,000. The sheer size of the fall in fulltime jobs did raise some flags with analysts, who suspected sampling problems with the data may have overstated the weakness.
“Some very big moves going on in these figures and it always pays to be suspicious when you get very big moves,” said Michael Blythe, chief economist at Commonwealth Bank. “But it’s something that will have the Reserve Bank thinking hard about what they need to do with when they meet next month.” Just this week Reserve Bank of Australia (RBA) Governor Philip Lowe emphasised that rising underemployment and weak hours worked meant there was a lot more slack in the labour market than the unemployment rate on its own might suggest.
Indeed, such was his u n c e rtai n t y ab o u t th e l ab o u r market that it left analysts with the impression a sustained rise in the jobless rate could trigger another cut in rates. Consumer price data for the third quarter due next week will be crucial. A very low reading for underlying inflation could make a case for an easing as early as the RBA’s Nov. 1 board meeting. Surprisingly low readings for inflation prompted the RBA to cut rates in August and May, taking them to a record low of 1.5 per cent. Investors have since priced out much chance of another easing, in part because yet cheaper borrowing
could overheat already bubbly housing markets in Sydney and Melbourne. Interbank futures still only imply a 16 per cent probability of an easing in November, though the local dollar did take a knock on the jobs report, falling a third of a U.S. cent to US$0.7695. “When you have a labour market not looking as robust as you would have thought, then it reduces the chance that wages will pick up and inflation will pick up, and that increases the chance that they will need to lower rates again,” said Janu Chan, a senior economist at St George Bank. “We had a rate cut forecast for November and still do.” Reuters
14 Business Daily Friday, October 21 2016
International In Brief Planning minister
Portugal to start negotiating EU funds in 2017 Portugal’s government wants to start negotiating future European Union funds with officials in Brussels as early as next year, to ensure that some of the priorities in its National Reforms Plan are included, the minister for planning and infrastructure, Pedro Marques, has said. In an interview with the daily Público, Marques made reference to the five-year framework accords under which EU funds are assigned to projects in member states. “We want at least to start the renegotiation of community funds with the European Commission in 2017, given that the approval process is slow,” the newspaper quoted him as saying. President Rouhani
Iran must be hospitable to foreign investors Iran’s President Hassan Rouhani said yesterday that his country must be hospitable to foreign businessmen, two days after a high-profile Iranian-American and his father were jailed for 10 years as spies. “The businessman and investor who wants to come, we must be hospitable. They must come and leave Iran easily,” Rouhani said in a speech to promote trade in Tehran. “All the efforts... of the government in the last three years including in the (nuclear deal) have been designed to remove obstacles in the way of businessmen, entrepreneurs, exporters of goods and services, entry of capital and banking relations,” said Rouhani. Trade fair
Cuba seeks to attract foreign investment Cuba will seek to attract foreign investment with a new business portfolio to be unveiled at the International Trade Fair of Havana (FIHAV 2016) scheduled for between October 31 and November 4. Cuba’s Minister of Foreign Trade and Investment, Rodrigo Malmierca, said the Caribbean nation has updated its business opportunities to include the largest number of projects for foreign investment. Malmierca said the business portfolio added new proposals under a recently approved foreign investment law and included all priority sectors for the island, including tourism, renewable energy, oil exploration, food imports and nickel mining. Clothing hit
U.K. retail sales stagnate U.K. retail sales stagnated for a second month in September as rising prices and warm weather hit demand for clothing. The figures, from the Office for National Statistics yesterday, also showed that sales excluding auto fuel were unchanged from August. Small increases on both measures had been expected by economists. Clothing and footwear sales fell 2.8 per cent after prices surged 5.2 per cent on the month and Britain enjoyed one of the warmest Septembers on record. A strong July helped retail sales increase 1.8 per cent in the three months through September, the best quarter since the end of 2014.
Private poll
Gulf growth forecasts cut further despite oil rebound Spending cuts designed to bring the budget deficit under control are weighing on consumer spending Andrew Torchia
A
nalysts are continuing to cut economic growth forecasts for big Gulf Arab economies despite rebounding oil prices, suggesting they do not expect oil above US$50 a barrel to let governments ease austerity policies, a quarterly Reuters poll found. Oil has bounced above US$50 in recent weeks from around US$30 early this year, after Saudi Arabia changed course and decided to support output cuts by OPEC. Yesterday’s poll of 18 private sector economists, conducted in the past couple of weeks, showed they expect dearer oil to benefit Saudi state finances; their median forecast for Saudi Arabia’s fiscal deficit is now 12.1 per cent of gross domestic product this year and 7.8 per cent next year.
Key Points
last poll, and 1.4 per cent next year compared to 1.7 per cent. Spending cuts designed to bring the budget deficit under control are weighing on consumer spending, and a senior International Monetary Fund official told Reuters this week Riyadh had little room to slow its austerity drive. The performance of Saudi Arabia’s economy “will be determined by the fiscal consolidation and the on-going monetary squeeze as weak deposit growth and high government borrowing keep monetary conditions tight,” said Simon Williams, regional chief economist for HSBC. “With external demand likely to remain subdued, we expect these weak drivers to cap growth at around 1.5 per cent. This pace of expansion will stand some three to four percentage points below the oil-boom average, and is likely to see unemployment in the overwhelmingly young country rise.”
A separate poll of energy analysts in a Reuters poll earlier this month were not convinced OPEC’s proposal to cut output for the first time since 2008 would result in much higher prices. Elsewhere in the Gulf, analysts cut their GDP growth forecasts for the United Arab Emirates, the region’s second biggest Arab economy, to 2.3 per cent from 2.5 per cent for this year, and to 2.5 per cent from 2.7 per cent for next year. Predictions were also lowered for Qatar for both years. The median forecast for the UAE’s fiscal deficit was lowered to 5.4 per cent of GDP this year from 6.4 per cent. But Qatar, Oman and Bahrain are expected to run larger deficits this year than previously forecast. Kuwait is now expected to run a 12.8 per cent deficit this year instead of 5.3 per cent, and 3.0 per cent next year instead of 1.5 per cent. Domestic political tensions have delayed austerity measures planned by the cabinet, and parliamentary elections called for Nov. 26 may cause some steps to be watered down, at least temporarily. Reuters
Analysts reduce forecasts for Saudi fiscal deficit But Riyadh has little room to ease austerity policies Saudi growth forecasts for 2016, 2017 lowered slightly Growth forecasts also cut for UAE Much bigger deficit seen for Kuwait as austerity stalls
Those numbers are still very high by international standards but an improvement from the July poll, when analysts predicted a deficit of 13.5 per cent this year and 9.4 per cent in 2017. Nevertheless, growth forecasts for Saudi Arabia have not risen. The analysts now expect gross domestic product to expand 1.1 per cent this year, against 1.2 per cent in the
Independence from Brexit
Scotland publishes independence referendum bill The prospect of another referendum is already causing concern among North Sea oil investors Scotland’s government published a draft independence referendum bill yesterday as a fallback plan if it is not able to keep strong ties with the EU and win more powers from London as part of Brexit talks. The bill would give non-British EU citizens living in Scotland, who were not allowed to take part in the EU referendum, the right to vote on independence. Scotland voted by 55 per cent to stay part of Britain in 2014, but then voted by 62 per cent to remain in the European Union in June, sparking a political crisis after Britain as whole voted to leave. The bill is broadly the same as the original Scottish Independence Referendum Act 2013 which enabled a vote the following year. Its opening paragraph states: “A referendum is to be held in Scotland on a question about the independence of Scotland. The question is -’Should Sc o t l a n d b e a n i n d e p e n d e n t country?’” In her foreword to the consultation, Scottish First Minister Nicola Sturgeon said: “The UK government’s recent statements on its approach to leaving the EU raise serious concerns for the
Scottish Government. “We face unacceptable risks to our democratic, economic and social interests and to the right of the Scottish Parliament to have its say,” she said. She said her government “remains willing to work with the UK Government to negotiate a future relationship with Europe... which works for the United Kingdom as a whole”. But she added: “If it becomes clear that it is only through independence that Scotland’s interests can be protected, then the people of Scotland must have the ability to reconsider that question, and to do so before the UK leaves the EU.” Prime Minister Theresa May has said she plans to trigger the formal procedure for leaving the European Union by the end of March, opening up a two-year negotiating window. The prospect of another referendum is already causing concern among North Sea oil investors. A report by BMI Research, a subsidiary of global credit rating agency Fitch, said: “A second vote on Scotland sovereignty is the main downside risk to our North Sea
production forecast, the chances of which will substantially increase if a ‘hard Brexit’ is realised.” It said a second independence campaign would “cast a great shadow of uncertainty over the regulatory framework governing the petroleum sector”.
“If it becomes clear that it is only through independence that Scotland’s interests can be protected, then the people of Scotland must have the ability to reconsider that question” Nicola Sturgeon, Scottish First Minister
“Companies operating in the North Sea could potentially hold off making investments in that time period, waiting instead until Scotland’s fate has been determined.” AFP
Business Daily Friday, October 21 2016 15
Opinion
Brace for an offshore deluge of China property bonds Christopher Langner a Bloomberg Gadfly columnist
T
he door is starting to close for Chinese developers’ debt sales at home. This was foretold, and it will change the face of high-yield investing in Asia. The Shanghai Stock Exchange has temporarily stopped approving at least some property bond sales, Bloomberg reported Wednesday, citing people familiar with the matter. I argued on Oct. 10 that if real estate curbs in some Chinese cities didn’t work, authorities could target funding avenues for developers as they had done in 2010. Unfortunately, that seems to be the case. For high-yield bond investors, this has serious implications. The outperformance of junk debt in Asia has been driven mostly by a mismatch between supply and demand. Issuance has dried up since late 2014 as Chinese property c o m p a n i e s, t h e billion yuan biggest sellers of subDevelopers’ local bond investment-grade sales since start of 2015 dollar securities, increasingly turned to the domestic market. Spurred by the end of a soft ban on local fundraising, publicly traded developers sold more than 565 billion yuan (US$84 billion) in onshore debentures since the start of 2015. As that route is closed, they’re likely to return to international markets. There was a small taste of what could happen in April, when a failed domestic note sale sent some developers back into the offshore market, prompting yields to rise. As I argued then, global bondholders should be concerned not only about an increased supply of dollar securities: Worse is the fact that junk-rated companies have used the domestic market to boost leverage rather than repay foreign notes. Now, the developers that will return to the offshore market are even weaker than they were two years ago. As supply begins to outweigh demand, and given the lower quality of balance sheets, the premium for dollar debt in the region is likely to start rising. As it does, Chinese real estate companies will feel pressured to refinance upcoming maturities sooner rather than later, creating a vicious circle that could quickly undermine the gains accumulated by investors in Asian junk credit. The one straw for offshore bondholders is that the Shanghai suspension is temporary, and applies to an exchangeregulated bond market that’s smaller than its interbank equivalent. Even so, about 70 per cent of the 433.9 billion yuan of bonds sold by developers in the onshore market this year was regulated by the Shanghai bourse, according to data compiled by Bloomberg. The exchange’s action signals authorities’ rising concern over an overheating property market. If the suspension is extended to the interbank bond market, then watch out. Bloomberg Gadfly
565
When “dark markets” are unfair to mutual fund investors
F
unds conducting off-exchange trades within their own fund family are likely favouring their “stars” at the expense of the also rans. As usual, unsuspecting investors are left paying the bill. A Bank for International Settlements paper, published in August, shows evidence that this form of “dark market” trading is almost certainly not always being done in a way fair to all investors in a given fund family. For many years, funds within the same corporate family of funds have been allowed to “cross-trade”, a process where one fund which wants to sell a security then exchanges it with another which wants to buy, never actually using the open public markets. While 90 per cent of these trades pay no commission, and are therefore theoretically better for clients, the practice has a checkered history. Before new regulations were put into place in 2004, cross trades were, on average, being done at significantly less advantageous prices than could be had on public markets. That’s improved, but still at issue is the extent to which fund families use cross-trading as a means to favour their best performing or most lucrative funds. “We offer support to the hypothesis that star funds benefited from cross-trading at the expense of junk funds,” according to the working paper for the Bank for International Settlements, which acts as a central bank to central banks. “This strategy had relevant implications for fund ranking, fund selection, and fund manager evaluation. Our results suggest that fund alphas potentially misrepresent the real ability of fund managers to create value for their investors.” The study used a sample of trades done in this way by U.S. asset managers between 2004-2010. Fund management companies have a motivation to favour some of their funds over others, either because they charge higher fees or are outperformers which will attract the lion’s share of inflows. “Tying cross-trade level data to fund performance, we find that cross-trading potentially boosted the risk-adjusted performance of star funds by around 1.7 (percentage points) per year on average (causing an equivalent loss for the least important funds). This result casts doubt on the fraction of performance delivered by mutual funds that is really due to skill,” according to authors Alexander Eisele of University of Lugano, Tamara Nefedova of Université Paris-Dauphine and Gianpaolo Parise of the BIS.
“
James Saft a Reuters columnist
Lie down with agents, wake up with issues
That 1.7 percentage point per year “reallocation” of returns from one fund to another is quite significant, given that it is itself far higher than the typical equity management fee, and a chunky percentage of an overall annual return in an average year. This is a classic example of the kind of “agency issue” endemic to fund management in which investors hire managers as their agents to act in their best interests and then have only very imperfect means of making sure they are not self-dealing. There are plenty of caveats here, both because the identities of the funds cannot be known with complete certainty and because the effects appear to have diminished after regulatory reform. It is also worth noting that cross-trading went from 6.0 per cent of total trading activity before the 2004 reforms to below 1.0 per cent today. The study also found that cross-trades varied from market benchmark prices by more in stocks which were illiquid and highly volatile which may be expected. More concerning was that cross-trades were further off public market levels as well when the asset manager had weak governance, larger internal markets, and strong incentives for reallocating. These cross trades were also more likely to be struck at either the highest or lowest price of the day, suggesting that they were sometimes being priced after the fact in order to pad one fund’s performance at the expense of another. This report is reminiscent of a May study which found it highly likely that fund managers who run mutual funds and hedge funds at the same time, or side-by-side, were similarly shifting performance towards hedge funds, which pay them better. Mutual funds with at least one side-by-side manager underperform those without any by 9.6 basis points per month, or 1.15 percentage points a year, using a standard measure of outperformance, or alpha, according to the study. One clear way to help the situation would be to require more granular disclosure of trading allocations of all sorts, the better to allow regulators and investors protect their interests. Until that happens, it may make sense to be wary of fund families, and especially their funds which are underperforming. Reuters
Fund management companies have a motivation to favour some of their funds over others, either because they charge higher fees or are outperformers which will attract the lion’s share of inflows
”
16 Business Daily Friday, October 21 2016
Closing Environment
China rebukes firms for breaking emission limits
comply with emergency measures, the Ministry of Environmental Protection said in a notice yesterday. China’s environment ministry has criticised The ministry said 11 enterprises in Hebei and firms in Beijing and surrounding provinces for exceeding emission limits and ignoring emergency nine in neighbouring Shandong province were restrictions during the region’s latest smog crisis. found to have exceeded emission limits during a recent period of heavy smog from Sunday to As part of efforts to control hazardous air Wednesday. pollution, Beijing and Hebei province have It identified a subsidiary of the Tangshan Thermal implemented rapid response systems to limit Power Company as well as cement and glass traffic and force firms to cut production or slow manufacturers in the region, and also said a construction work during heavy smog. number of construction sites in Beijing had failed But investigations over the past week revealed to follow regulations to reduce dust. Reuters that a number of enterprises were failing to
Trade
Taiwan’s export orders beat forecast The Ministry of Economic Affairs attributed the growth to strong demand for handheld devices Liang-Sa Loh and Faith Hung
T
aiwan’s annual export orders grew for the second straight month in September, as vendors rushed to stock up on supplies for Apple’s iPhone 7 and other tech gadgets to meet year-end demand. Stronger-than-expected orders are in line with the government’s improved economic growth forecast for 2016 and market expectations the central bank will hold off on further interest rate cuts to support the export-reliant economy.
economy is improving,” he said. “After all, global trade volume is still decreasing. It would be difficult for Taiwan to grow on its own.” The ministry attributed the growth to strong demand for handheld devices. “Information and telecommunications products order value hit a record high in September,” the ministry said in a statement. “It is mainly due to the launch of global brands’ new handheld devices and increased demand for mid- to low-end handheld devices.”
The ministry added that it sees October’s order value rising from September. Taiwan’s export orders are seen as a leading indicator for Asia’s exports and reflect shipment activity 2-3 months ahead. Traditionally, exports are bigger in the second half of the year due to new product launches before Christmas. Ta i w a n S e m i c o n d u c t o r Manufacturing Co (TSMC), an Apple Inc supplier, has raised its forecast for 2016 revenue after setting new profit and sales records in the third quarter, as analysts said it was riding high on supplying parts for iPhone 7.
Orders from most of Taiwan’s key markets increased with those from China up 3.7 per cent, the United States 12.9 per cent and Europe 1.8 per cent. Orders from Japan dropped 14.9 per cent. Taiwan’s government had expected stronger global demand to lift the island’s prospects, raising its 2016 GDP outlook in August after cutting the forecast three times in a row. The central bank in September left its policy rate unchanged for the first time after four consecutive cuts, saying it has done all it can to support the economy and called for more structural policies to keep growth on track. Reuters
Key Points Sept orders up for second month, beat forecast U.S. orders rise 12.9 pct, China jumps 3.7 pct Oct order value to rise from Sept - ministry September orders rose 3.9 per cent from a year earlier, the Ministry of Economic Affairs said yesterday, after rising a surprising 8.3 per cent in August - its first gain in 17 months. A Reuters poll had forecast a 1.83 per cent rise for September. “The better-than-expected export order growth benefitted entirely from Apple Inc’s new iPhone,” said Leon Chu, an analyst of Franklin Templeton SinoAm Securities Investment Management Inc in Taipei. “If export orders in the fourth quarter grow 3.5 to 5 per cent each month, then it means the overall
Taiwan Semiconductor Manufacturing Co (TSMC), an Apple Inc supplier, has raised its forecast for 2016 revenue after setting new profit and sales records in the third quarter
PM Najib
Bilateral ties
Monetary policy
Malaysia expected to grow at up to 5 per cent in 2017
Xi, Duterte agree on full improvement of ties
Indonesia cuts interest rate for sixth time
Malaysian Prime Minister Najib Razak said yesterday that he expects the economy to improve further in 2017, with growth of up to 5 per cent. “We commit to ensuring that the economic fundamentals of the nation remain resilient and strong - including policy on deficit targets, spurred economic activity, and the long-term health of the financial system,” Najib said in a statement, released a day before the budget announcement today. He added that the country was on course to grow between 4 and 4.5 per cent this year. The prime minister said that he would make further announcements on infrastructure, development, public transport and health, fiscal incentives for small and medium enterprises, and human capital and skills training in the 2017 budget. Najib said next year’s budget will also focus on raising the disposable income of the people and provide more affordable housing. Analysts are expecting a populist budget aimed at currying favour with voters, as there is speculation that Najib might call a snap election early next year. Reuters
Chinese President Xi Jinping and his Philippine counterpart Rodrigo Duterte yesterday agreed that the two countries will properly handle differences and achieve full improvement and greater progress in bilateral ties. Calling the countries “neighbours across the sea,” Xi said that though their relations have gone through twists and turns, the foundation of the China-Philippines friendship and the willingness to cooperate remain unchanged. China highly values its relations with the Philippines, and is ready to work with the country to cement political trust and win-win cooperation, properly handle differences and become good partners, Xi said during talks with Duterte in Beijing. He said managing differences in the South China Sea issue through dialogue and consultation is an important foundation for the healthy and stable growth of China-Philippines relations. China supports the efforts of the new Philippine government in fighting against drug, terrorism and crime, and would like to conduct cooperation with the Philippines in these areas, Xi said. China is ready to enhance cooperation with the Philippines under the framework of the Belt and Road initiative, he added. Xinhua
Indonesia’s central bank cut its benchmark interest rate for a second month in a row, injecting stimulus into the economy before the U.S. Federal Reserve moves to tighten policy. Governor Agus Martowardojo and his board lowered the seven-day reverse repurchase rate to 4.75 per cent from 5 per cent yesterday, as forecast by 12 of 26 economists surveyed by Bloomberg. The rest had predicted the benchmark rate would remain unchanged. Bank Indonesia has cut interest rates six times this year to boost an economy that continues to undershoot President Joko Widodo’s growth target of 7 per cent set two years ago when he came to office. With inflation at the lower end of the 3 per cent to 5 per cent target and expectations mounting that the Fed will raise rates in December - and possibly undermining the currency - policy makers in Indonesia are finding more room to ease. “They do want to sneak in one more at least before the year’s end,” Wellian Wiranto, an economist at Oversea-Chinese Banking Corp. in Singapore, said before the decision. “This month is the most likely candidate” ahead of the U.S. election and the Fed’s meeting, he said. Bloomberg News