Ng Lap Seng once connected to Trump for casino bid US Elections Page 4
Monday, November 7 2016 Year V Nr. 1167 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kam Leong
www.macaubusinessdaily.com
Real estate
Local debt
Top court rejects Pearl Horizon appeal Page 3
Monetary
Sino-Luso
Page 2
Page 4
Money supply slightly up in September
MSAR lacks personnel for platform
US Elections
Continuity vs. rupture marks economic programmes Page 4
China’s government to allow ‘reasonable’ financing Page 8
Blue Skies Aviation
The MSAR’s business aviation market is growing. So says the President of the local Civil Aviation Authority, Simon Chan Weng Hong. Citing local business aircraft movements increasing 5 pct y-o-y for the first ten months of the year. Meanwhile, other industry insiders participating in the Macau Business Aviation Exhibition over the past weekend echo his upbeat sentiments, with talk of excellent future prospects. Page 3 By Aivi Remulla
HK applies property brakes
Juggling act
Lots to do. But it takes myriad resources. Casa de Portugal de Macau President Amélia Antonio tells Business Daily about the trials and tribulations of the non-profit organisation’s ongoing promotion of local culture. As well as helping those wanting to reside and work in the MSAR. The recently re-elected president also highlights the difficulties the group faces in contracting labour and paying down debt. But remains resilient, optimistic and enthusiastic.
Real estate Neighbouring authorities are to implement measures to curb property sales. This, amid escalating prices. The gov’t will raise stamp duties on home purchases. To cool speculation and allow locals easier access to the market. Page 10
Fewer companies, less capital
Interview | Social Work Pages 6 & 7
HK Hang Seng Index November 4, 2016
22,642.62 -40.89 (-0.18%) Worst Performers
Cheung Kong Infrastructure
+3.39%
Hang Seng Bank Ltd
+0.50%
Belle International Holdings
-3.02%
Tencent Holdings Ltd
-0.99%
Power Assets Holdings Ltd
+0.82%
China Resources Power
+0.46%
AAC Technologies Holdings
-1.75%
Hang Lung Properties Ltd
-0.95%
Sino Land Co Ltd
+0.80%
China Mengniu Dairy Co Ltd
+0.41%
Link REIT
-1.18%
Bank of Communications
-0.84%
Cathay Pacific Airways Ltd
+0.78%
AIA Group Ltd
+0.31%
Galaxy Entertainment Group
-1.09%
CITIC Ltd
-0.71%
PetroChina Co Ltd
+0.76%
Sands China Ltd
+0.29%
Want Want China Holdings
-1.05%
CNOOC Ltd
-0.71%
24° 27° 19° 27° 18° 22° 17° 20° 21° 23° Today
Source: Bloomberg
Best Performers
Tue
Wed
I SSN 2226-8294
Thu
Fri
Source: AccuWeather
Economy The number of newly incorpo rated companies in the MSAR decreased 139 y-o-y in Q3. Totalling 1,087. While registered capital plunged 67 pct y-o-y. In the main, these new firms started their business with less than MOP50,000. Page 2
2 Business Daily Monday, November 7 2016
Macau Economy
Total capital of new companies plummets in Q3 The total value of capital registered by new companies plunged by 67 per cent year-on-year in the third quarter of 2016, while the number of newly incorporated companies also declined. Nelson Moura nelson.moura@macaubusinessdaily.com
T
he number of newly incorporated companies in the city, as well as registered capital, posted substantial year-on-year drops in the third quarter of 2016, according to the latest data released by the Statistics and Census Service (DSEC) last Friday. The total value of capital registered by newly incorporated companies fell by 67 per cent to MOP124 million (US$15.5 million) year-on-year in the quarter, mainly due to the considerable decrease of registered capital of Business Services, which dropped by 94 per cent year-onyear. However, registered capital from new companies in the real estate
sector increased by 89 per cent yearon-year to MOP13.2 million in the quarter. The DSEC data also revealed a total of 1,087 newly incorporated companies in the MSAR during the quarter, some 139 fewer than the same period last year. Of all newly incorporated companies, those engaged in Wholesale & Retail and Business Services represented 33.4 per cent and 22.6 per cent of the total, respectively. Analysed by the size of registered capital, some 72 per cent of the new companies registered capital of less than MOP50,000. In fact, only two per cent of the new companies registered capital of over MOP1 million. The total capital of companies with capital over MOP1 million amounted to MOP62.5 million, occupying more than half
of the total capital value of newly incorporated companies. The latest DSEC data also revealed that the majority of capital originated locally or from Mainland China, amounting to around MOP84 million and MOP20 million, respectively. In particular, the nine provinces of the Pan-Pearl River Delta Region contributed MOP 15 million. I n t e r m s o f th e o r i g i n s o f shareholders, those of 730 new
companies were from the MSAR, while 101 joint ventures were set up between shareholders from Macau and those from other countries or regions. Accumulatively, a total of 3,345 new companies were incorporated between January and September, down 630 year-on-year, with the total value of registered capital falling by 57.1 per cent to MOP387 million.
Monetary
Money supply increases in September Meanwhile, total deposits with local banks went up slightly Macau’s money supply continued to increase in September, reveals the latest data released yesterday by the Monetary Authority of Macao (AMCM). Meanwhile, local banks’ overall loan-to-deposit ratio dropped in the month as total deposits grew at a faster pace than total loans. In September, the currency in circulation rose by 0.3 per cent month-on-month whilst demand deposits increased by 2.5 per cent. As a result, the money supply (M1) increased by 2 per cent monthon-month, while quasi-monetary liabilities rose 0.2 per cent. The sum
of the two items - known as M2 thus rose by 0.4 per cent month-onmonth, totalling MOP505.8 billion (US$63.3 billion).
Money laundering Regional evaluation to take place at end of month
MSAR to revise money laundering law The MSAR Government is progressing a law revision on the prevention of money laundering defining gate way activities such as corruption, contraband and the exploitation of prostitution, among others. According to a communiqué by the Executive Council, specific crimes will be considered gateway crimes including corruption, practice of foreign trade outside of authorised locations (amounting to contraband), crimes relating to copyright and in tellectual property, and the exploita tion of prostitution. The law proposal also explicitly mentions that there is no ‘necessity to condemn the previous author of the crimes which led to’ the money laundering, only needing that the ‘knowledge, intention or aim . . . [was] . . . understood through the factual circumstances and concrete evidence’. The definition of participating in money laundering activities will also be extended to include suspects who ‘though not effectively conducted, attempted’ the crime. Auction houses will also join the group of entities subject to abiding by the ‘preventative laws’ and the adoption of ‘due diligence’ including providing identification and verifi cation in relation to contracts, clients and frequent visitors.
The proposal also provides that credit institutions must communi cate suspicious movements to the authorities within 24 hours, and can not share the information supplied by authorities with clients under investigation. According to the MSAR Govern ment, these alterations come about as a ‘response to the deficiencies identi fied’ during the evaluation conducted by the Asia Pacific Group on Money Laundering (APGML) in 2007 and adapting to the 40 recommendations by the Financial Action Task Force in 2012. A new evaluation by the APGML is set to take place at the end of this month. The Executive Council also pre sented law revision proposals for the prevention of terrorism, changing the definition to ‘whom, with the intention of terrorism, travels or at tempts to travel, by any medium, to a territory different from the State or Territory of their nationality or resi dence, with the objective of training, logistically assisting or instructing others’ – punishable by a prison sen tence of one to eight years. The crime of financing terrorism will also include ‘economic resources or property of any type, as well as products or rights that can be trans formed into funds’. Lusa
On a year-on-year comparison, M1 and M2 represented a year-on-year increase of 10.6 per cent and 4.9 per cent, respectively, with total currency in circulation increasing 13.9 per cent year-on-year. Hong Kong Dollars (HKD) represented more than half of the share of the M2, with the local currency (MOP) amounting to 31.1 per cent. Renminbi (RMB), on the other hand, represented only 5.8 per cent of the M2.
Deposits & Loans
Meanwhile, deposits by residents registered a month-on-month increase in the month, up 0.4 per cent to MOP492.5 billion, while non-resident
deposits decreased 0.9 per cent to MOP276.5 billion.The public sector’s deposits with local banks managed to rise 2.5 per cent month-on-month to MOP160.2 billion. Total deposits with the banking sector thus increased 0.4 per cent month-on-month, amounting to MOP929.2 billion. AMCM data indicated that domestic loans to the private sector totalled MOP412.6 million in the month, up by 1 per cent month-on-month. Of the total, MOP121.2 billion was MOP-denominated and MOP267 billion was denominated in HKD, accounting for 29.4 per cent and 64.7 per cent, respectively. In terms of economic sector, the ‘manufacturing industries’ sector saw the biggest quarter-to-quarter increase in approved loans, with a growth of 19.3 per cent, while the ‘transport, warehouse and communications’ sector saw the biggest decrease, down 4.6 per cent month-on-month. On the other hand, external loans fell 0.8 per cent month-on-month to MOP367.4 billion, of which the majority, 51.3 per cent, was denominated in USD, amounting to MOP188.5 billion. In the month of September, the loan-to-deposit ratio for the resident sector slightly increased by 0.1 percentage points to 63.2 per cent compared to August. The ratio for both the resident and non-resident sectors was 83.9 per cent, a decrease of 0.2 percentage points.
Public Works
NAPE drainage network project attracts nine bids Proposed cost for the project range from MOP280mln to MOP530mln The Land, Public Works and Transport Bureau (DSSOPT) received a total of nine bids via a public tender for the construction project of the drainage network in NAPE on the Macau Peninsula on Thursday, according to a press release published by the DSSOPT. Proposed cost for the project ranges from MOP280million (US$35.1million) to MOP530million. Two of the bidders were required to submit additional documents, while the remaining seven bids were accepted. The maximum duration of the project is 1,337 days. The Bureau expected the construction of the project to start during the second
quarter of next year, providing some 50 job opportunities. The construction project is to improve the existing sewage pumping stations and waste drainage network system between NAPE and Areia Preta in order to cope with the increasing amount of sewage discharge in the city. The total length of the 2-metre wide pipeline is about 2,400 metres, according to DSSOPT. DSSOPT added that traffic access between Rua dos Pescadores and the Macau Sewage Treatment Plant could be limited for a period of about six months once construction starts next year. A.L.
Business Daily Monday, November 7 2016 3
Macau Aviation
Local business aviation market taking off In the wake of the economic slump of 2015, this year’s business aviation market has rebounded, with many perceiving the local aviation market has excellent prospects Cecilia U cecilia.u@macaubusinessdaily.com
F
ollowing an adjustment in 2015, the business aviation market in the MSAR has grown by 5 per cent in terms of aircraft movements compared to the same period of the previous year, President of the Civil Aviation Authority of Macao SAR (AACM), Simon Chan Weng Hong said during the opening of the 2016 Macau Business Aviation Exhibition last Friday. Mr. Chan indicated that the business aviation market in neighbouring Hong Kong is stronger compared to the market in Macau, but he pointed out that there are customers who specifically desire to fly to Macau. “In terms of quantity, the market in Macau is one third of Hong Kong’s”, said the President of AACM. He perceives, however, that the business aviation market enjoys excellent prospects, adding that the future performance of the market will show steady growth.
More professional
Mr. Gao opined that the exhibition is becoming more professional, indicating that many leading aviation companies from Mainland China had attended the exhibition. He said that this year’s show had attracted not only notable business jet operators but manufacturers, too. Maggie Xu, Brand and Quality Supervisor of one of the exhibitors - Nanshan Jet Company Limited
Top court dismisses Polytex’s appeal for Pearl Horizon plot that the loss to the company due to the official dispatch could actually be measured - based on their estimated profits if the project could be completed. The government declared Polytex’s land grant for the Pearl Horizon plot invalid in the Official Gazette, stating that the company had failed to complete the residential project before its temporary concession, which carried a term of 25 years, expired on December 25 last year. The request of the company to overturn the government’s decision was rejected by the city’s Administrative Court last December and the Court of Second Instance in June this year.
Public contracts
DSAT concedes Bureau at fault The Transport Bureau (DSAT) has concurred with the investigation re port issued by the city’s anti-graft watchdog, the Commission Against Corruption (CCAC), revealing that the DSAT has outsourced its public car park management services and its management of financial accounts, according to a press release published by DSAT on Thursday evening. According to the Bureau, it is ex pected that the outsourced internal operations will be opened for a public tender by the end of this year or early next year in order to standardise the public car park management in the city. The Bureau added that it has recovered all due payment from the previous management companies. According to DSAT, the Bureau has reviewed and revised its ten der-opening system for public car park management services since last
Limited, indicated that the exhibition provides a platform for operators as well as manufacturers to seek potential customers, noting that the business aviation market can extend further to other businesses such as the design of the plane interior.
Gao Yuanyang - an associate professor at Beihang University on the Mainland, as well as the host of a business forum held during the exhibition – was attending the city’s aviation exhibition for the fifth time. Echoing Mr. Chan’s remark, the academic believes that the aviation market in Macau is experiencing rapid growth. “In terms of business aviation market, following Beijing, Shanghai, Shenzhen and Hong Kong, the airport in Macau has the fifth largest number of business jets landing in the whole country”, Gao said.
Real Estate
The city’s Court of Final Appeal has turned down an appeal made by property developer Polytex Corporation Ltd. to overturn the MSAR Government’s decision to take back the land plot designated for the Pearl Horizon project. The ruling was passed down by the top court last Tuesday. According to the verdict published last Friday, the developer requested the highest court to terminate the effectiveness of a dispatch by Chief Executive Fernando Chui Sai On regarding reclaiming the land plot on the grounds that the reclamation would create ‘unrecoverable loss’ for the company. The top court, however, perceives
- also agreed that this year’s aviation exhibition had attracted more professional customers. Joanne Zhou, Project Manager of the organiser of this year’s show from Nam Kwong International Conference and Exhibition Company
year. The public department also stressed that it has strengthened its internal supervision for punishing any wrongdoing. CCAC’s investigation report was released on Wednesday revealing the outsourcing of public car park management services against DSAT, stating the Bureau had divided its service contracts into parts to grant ‘short-term management service contracts’ instead of the legally-regu lated ‘operation contracts’ in order to avoid the invitation of public tenders and the signing of notarial contracts. In addition, CCAC complained that the Bureau had not conducted ap propriate measures to chase for the income owed by some management companies, but paid them service fees on time and even mulled granting new contracts to the same companies again. A.L.
Simon Chan Weng Hong, President of the Civil Aviation Authority, speaks at the opening of the 2016 Macau Business Aviation Exhibition.
Direct flights to Portugal still up in the air
President of Civil Aviation Authority of Macao SAR (AAC) Simon Chan revealed on the sidelines of the Business Aviation Exhibition that the launch of direct flights between Portugal
and Macau has yet to be achieved, noting that the introduction of a regular route requires stable demand and a significant market. He said that in the meantime passengers flying to Portugal from Macau could transit via Beijing.
Business
IPIM disburses MOP4.1 mln to SMEs this year Meanwhile, DSE aims to help local firms catch up with the digitalised business market Cecilia U cecilia.u@macaubusinessdaily.com
The Macao Trade and Investment Promotion Institute (IPIM) disbursed MOP4.1 million (US$513,240) to support 510 SMEs (small and medi um-sized enterprises) in the city from January to October this year, the Pres ident of Administrative Committee of IPIM, Lourenço Cheong Chou Weng, said during TDM radio programme ‘Macao Forum’ last Friday. Mr. Cheong indicated that the fund ing seeks to support SMEs to expand their businesses in the city as well as in other regions. Tai Kin Ip, Director Macao Eco nomic Services (DSE), also attended the radio programme, saying that more than 9,600 local firms had applied for the SME Aid Scheme, of which 8,600 applicants had been approved. The DSE director added that the bureau has distributed some MOP2.4 billion through the scheme so far, of which MOP1.2 billion has been repaid by local SMEs. Mr. Tai noted that cases of incom plete payment are rare, which on ly affects three per cent of the total number of beneficiaries.
The official pointed out that the amount of loans approved for SMEs is based upon the scale, type of product and other consideration factors of their business. He added that local companies are welcome to provide further information for re-evalua tion if they are dissatisfied with the amount approved.
E-commerce
Mr. Tai indicated that the city cur rently has six local e-commerce platforms, involving online sales, insurance services and other ser vices. In addition, DSE is to launch free WIFI service in 12 areas of two major streets located in the southern and central districts. With the promotional event ‘1212 Blue Street’ to kick off soon, some au diences of the radio show questioned whether the event merely seeks to benefit certain e-commerce compa nies. The official, however, stressed that the event is only part of the vast range of e-commerce [options], add ing that the MSAR Government has already approved the licences of two e-commerce operators. The economic bureau also offers assistance to local SMEs to utilise dif ferent types of e-payment service.
4 Business Daily Monday, November 7 2016
Macau Opinion
US elections Local businessman had connections with both candidates of US Presidential Election
Ng Lap Seng reveals Trump connection Sheyla Zandonai*
Creative culture Since the liberalisation of the gaming industry, Macau has been expanding its ser vice-based economy. The more the gaming sector has incorpo rated the bulk of locally available human and urban resources thereby increasing the demand for foreign labour and capital the more the city has abandoned its already fading links with its manufacturing industries: textiles, toys and firecrackers, to name but a few. Today, there is poignancy in rescuing the latter through some form of urban conservation initiative, and revival in generat ing small or medium entrepre neurial endeavours, such as the local garment stores which still proliferate in more traditional neighbourhoods. In fact, because gambling in its ultimate corporate form – the Integrated Resort – is capital, material, and labour-intensive, and because it has so far gen erated attractive revenues, the sector has drained large amounts of Macau’s resources from other economic activities, thus manu facturing has nearly disappeared from the economic spreadsheet. Official statistics estimate that roughly 30 per cent of Macau’s population may be employed in casinos and related businesses such as hotels and restaurants. It also generates thousands of jobs, which would explain why the city’s economy has become so heavily service-driven. If the gambling economy is such a great source of resources and income, why bother develop ing other sectors and activities? Because gambling remains a politically sensitive subject in China, which has made, and still makes, the city vulnerable to the oscillations of top-down political decisions and moral ideologies. The multiplication maths that link gambling to a spectrum of entertainment and leisure services, and an unrelent ing government push to develop so-called cultural and creative industries, have started to slightly change the market profile. Here the MSAR Government is thinking one step ahead. At least, in theory. The service-based ‘creative city’ harnesses the cultural and social potential of activities that en gage creativity, knowledge and information. In spite of all the recent hype, the now near-ubiq uitous ‘cultural and creative’ tag attached to public endeavours intended to diversify the local economy actually embrace a range of good old businesses: publishing, cultural heritage, per forming arts, architecture, design, music, advertising, and so on. These are knowledge-based ac tivities that should indeed be tar geted for development through long-term educational strategies that are at the core of any com prehensive public policy seeking to increase the quality of a city’s cultural and human capital. The money is there, and political will seems to be invested. So what could possibly go wrong?
*scholar and contributor to this newspaper.
The Wall Street Journal states that Ng Lap Seng was part of a joint bid in 2001 for an MSAR gaming licence in conjunction with US presidential candidate Donald Trump, convicted Hong Kong billionaire Joseph Lau Luen Hung and late billionaire property developer Nina Wang Nelson Moura nelson.moura@macaubusinessdaily.com
A
part from past connec tions with the Clintons, local billionaire Ng Lap Seng had also had former ties with the current Re publican party candidate for the US Presidential Election, Donald Trump, the Wall Street Journal reported. According to the newspaper, the Macau developer, who is current ly under investigation in the US for alleged corruption, joined Trump and other locally renowned inves tors in a bid for a gaming licence in 2001, with the consortium planning to operate from the Fortuna Hotel, a property on the Macau Peninsula owned by Mr. Ng, and invest US$1.4 billion (MOP11.1 billion) if the bid was successful. According to reports cited by the newspaper, Trump Hotels & Casino Resorts Holdings would have been the casino operator for a Macau com pany called Baia da Nossa Senhora Entertainment Company. Other partners of Mr. Trump and Mr. Ng for the casino bid included Hong Kong billionaire and property developer Joseph Lau Luen Hung, currently a fugitive having been
Sino-Luso
found guilty of bribery and money laundering by Macau courts in 2014 and sentenced to five and half years in prison. Another renowned partner in the Trump deal mentioned in the re port was Nina Wang, a Hong Kong billionaire property developer con sidered Asia’s richest woman when she passed away in 2007. However, after the bid process, only three licences were awarded whilst Mr. Trump’s consortium finished in the bottom half of a group of 18 bidders, after factors such as expe rience, pledged investment levels and ability to create jobs were taken into consideration, the WSJ reported.
‘This was not a deal Mr. Trump was seriously considering’, Hope Hicks, a spokeswoman for Mr. Trump said, as quoted by the newspaper. The local businessman is currently under house arrest in the US for al legedly bribing former ex-president of the United Nations (UN) General Assembly, John Ashe, in exchange for support from the global organi sation to build a conference centre in the MSAR through his development company Sun Kian Ip Group.
Clinton connection
The Macau developer’s connections to Democrat Party candidate Hillary Clinton were revealed in US con gressional reports three years prior to his joint bid with Donald Trump. The then-report revealed that the local businessman had played a role in a campaign finance scandal involving former US President Bill Clinton. In 1998, US House and Senate com mittee reports found that Mr. Ng was included in a group of donors to the Democratic National Committee that had illegally funnelled foreign mon ey, the WSJ reported. According to the committee re ports, Mr. Ng made donations to the Democratic National Committee in co-operation with Charlie Trie, a mu tual friend of the Clintons, which ena bled the local businessman to attend a 1994 presidential gala in Washington, and visit the White House ten times in two years. US federal investigations haven’t implicated the Clintons in the scan dal, with Mr. Trie pleading guilty to campaign financing violations. However, while Mr. Ng admitted to having provided money to Mr. Trie, the Macau billionaire claims to have no knowledge of the use the money was put to.
Architects believe urban planning is crucial for the MSAR’s economic development
Flaky platform The former deputy chief of the Infrastructure Development Office believes that the MSAR doesn’t have the required human resources to work as a platform between China and Portuguese-speaking countries Architect André Ritchie, former deputy chief of the Infrastructure Development Office (GDI), has expressed doubts about the actual implementation of the city as a platform between China and Lusophone countries due to a deficit in local “human landscape”. “It is not enough to solely build the physical infrastructure”, Mr. Ritchie said. “We can have the bridge connecting Macau with Hong Kong and Zhuhai: we can have new border checkpoints, we can even expand the boundaries of the border. However, if we don’t have personnel or skilled labourers capable of implementing the idea of the platform, it won’t be worth it”. “Macau has a lot of money, we are in a favourable position. But even if we can buy the best bread oven in the world, the bread will never be good if the dough isn’t good”, the architect said prior to the discussion ‘Rethinking Macau’s Urban Role: The Platform, The Pearl River Delta and the Lusophone World’ where he was to discuss the human landscape of the city. Mr. Ritchie, who led the GDI for the Macau Light Rapid Transit (LRT) development between 2007 and 2015, recalled the era of “great enterprises” in the 1990s during the Portuguese administration. “The construction of the Amizade Bridge [the second one in the city], the airport, the incineration plant
and the deep water port. There was a political speech at the time to make Macau the bridge between Portugal and China and transform Macau into a service centre, but I sincerely don’t know if it came true. Infrastructure was built, but the development part - human sophistication, I think - has failed,” he added. The architect also recalled that the government wished to have bilingual staff in several areas, including legal, commercial, and accounting, among others, for the implementation of the platform. However, he believes this would require the work of “many generations”, adding this would be the crucial factor in determining whether Macau could work as a platform.
Urban factor
Pa u l o R eg o - di r ect o r o f th e Macau Platform newspaper, and speaker at the same roundtable - was, however, less skeptical, stating that the platform between China and Portuguese-speaking countries “is completely linked to urbanism”. “Platform means a trilingual, intelligent, qualified service society that communicates with many different realities”, he explained, pointing out that to do so it is “necessary to have an idea for the city”. “If we really want to build a globally recognised platform, we
have to think about the architecture of the city, the way we organise it, so that this service society works, interrelates and is seductive,” Mr. Rego stated. Specifically, Paulo Rego pointed to the construction of a large-scale library in the city centre, which he said would be an example of “a good idea for the platform” in addition to the construction of public spaces, such as spaces for start-ups. He perceives that the government should also make some changes to local universities so that they can be “more interactive and less scholastic”.
Brazilian lessons
Brazilian researchers in the area of urban planning - Margareth da Silva Pereira and Fabiana Izaga from the Federal University of Rio de Janeiro - also participated in the debate organised by the International Council of Architects of Portuguesespeaking Countries. Despite the many differences, Ms. Izaga argued that Macau and the Brazilian city of Rio de Janeiro have “common situations” and can help each other seek resolutions to their problems. “Rio de Janeiro, like Macau, has been expanding the city with successive landfills. We’ve cut hills and landfills. We rebuild on top of the preexisting fabric of our colonial heritage, and I also see this reconstruction work here in Macau”, Ms. Izaga said. However, in Macau “there are thicker layers,” she said, pointing to the example of Taipa Village, located next to the casino strip. “That small village, for me, is almost submerged in many ways. It was there, it is contiguous with the brutal scale of casinos, but there is no urban seam that could make the transition between these fabrics. Macau is a bit more complex in this sense because it has these economic flows”, she added. Lusa
Business Daily Monday, November 7 2016 5
Macau Art
Portuguese artist to light up The 13
Portuguese artist Joana Vasconcelos is preparing two “large-scale projects”, with hearts their main theme, involving Macau and Paris. The artist has nearly completed the Macau piece, which is set to occupy a space in the lobby of The 13, comprising a heart made up of fabric and lights. The Paris piece, ready
in early 2018 according to the artist, is to occupy a metro station in the French capital. “The Paris project is for the Porte de Clignancourt (located in the 18th Arrondissement of the city) and is a heart made of tiles, with LEDs which move” and will be placed at the exit of the metro station which acts as a flea market, says the artist. Lusa
Gaming
Sands enjoys boost from The Parisian Macao The new casino-resort project raked in US$19.2 million in adjusted property EBITDA during its first 18 days of operation.
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as Vegas Sands Corp., the world’s largest casino owner, reported a jump in profit af ter opening its newest resort in Macau, a sharp contrast to rival Wynn Resorts Ltd., which said its newest Chinese property was off to a slow start. Sands’ profit rose to 72 US cents (MOP5.8) a share, excluding some items, the Las Vegas-based company said Thursday in a statement. Ana lysts were predicting 60 US cents, the average of estimates compiled by Bloomberg. Sands, founded by billionaire Shel don Adelson, opened the US$2.9 billion Parisian resort in Macau in September. The property features a half-sized replica of the Eiffel Tower, as well as a water park for kids and a shopping mall with street perform ers. It made its debut amid signs of a recovery in gambling in Macau, the only place in China where casinos are legal.
Sands shares rose as much as 5.6 per cent to US$59.94 in New York trading Friday. Wynn, which had dropped 9.3 per cent on Thursday after its earnings report, recovered some ground Friday, climbed 1.2 per cent to US$88.55. The company saw a 19 per cent increase in visitors to its Macau prop erties in September, compared to the same month last year, executives
said on a call with investors. Sands’ neighboring Four Seasons resort posted a 7 per cent increase in retail sales, which Adelson attributed to the Parisian opening. Gambling volume rose and restaurants are full. “People want to see that Parisian theme approach,” Sands President Rob Goldstein said on a conference call after the results were announced. “The Eiffel Tower, that facade has great curb appeal. ” Total revenue at Sands grew 2.6 per cent to US$2.97 billion, ahead of projections of US$2.82 billion.
New Properties
The company and other Macau op erators built their newest properties during a two-year slump in the mar ket, prompted by a Chinese govern ment crackdown on corruption on the mainland. The region experienced its third straight month of gambling growth in October. Reports of higher visitation early in October also sug gest the market is rebounding. Sands’ strong quarter outshone that of Wynn Resorts, which posted quarterly sales that missed analysts’ estimates as its new US$4.4 billion project in the former Portuguese
colony of Macau failed to lift bet ting revenue. One of the reasons may be nearby construction, which impeded ac cess to the property. Wynn has been working with the Macau govern ment to make improvements, such as crosswalks, to make it easier to get to. Wynn also said it underestimated demand for casual dining options at the new property and is expanding those. Sands’ new Parisian Macao con tributed US$19.2 million of adjusted property earnings before interest, taxes, depreciation and amortization (EBITDA) during its first 18 days of operation, the company said. Adjust ed property earnings at the Sands’ biggest property, Venetian Macao, surged 23 per cent to US$314.8 mil lion. The tally at the Sands Cotai rose 3.6 percent to $176.6 million. Net sales at the Venetian Macau increased to US$772.5 million, compared with US$699.6 million a year earlier. In Sands’ home market of Las Vegas, property earnings increased 6.9 per cent to US$85.3 million. Earnings at the Singapore’s Marina Bay Sands edged up slightly to US$390.7 million, up slightly from a year earlier. Bloomberg
6 Business Daily Monday, November 7 2016
Macau
“We’re constantly stressed in order to conduct the activities we’re doing” Amélia Antonio, re-elected President of the Casa de Portugal de Macau (CPM)
Interview | Social work
The house that makes a home Recently re-elected President of the Casa de Portugal de Macau (CPM) Amélia Antonio describes how the non-profit organisation is affecting culture in a lasting way, the difficulties in contracting labour under current regulations, the group’s effort as a springboard for those wanting to stay and work in Macau - and the tough times faced by the group after having to relocate the Lusitanos restaurant. Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
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ow does CPM contribute to Macau? I’m very proud of the overall functioning of the Casa de Portugal, in particular in the arts and crafts school which I think was a large investment by CPM and that has grown significantly. Our current drama is lack of space because if we had space we’d have even more activities. I think this has been the part, so far, which has grown most and has taken on a useful social function for CPM members and even for Macau overall. We run activities and training in different artistic areas and that acts as a vehicle for culture. All of these courses help in the development and centralisation of cultural aspects. Therefore, I think that it’s a path that maybe takes more time but is more efficient in helping Portuguese culture endure than only through different types of activities – shows, debates, expositions. Aside from the satisfaction of seeing that students acquire that knowledge and that they’re capable
of putting it into practice, they’re able to create a final product that in some cases is good enough to enter the market. How does CPM interact with DSEJ and help people apply their continued education subsidies? DSEJ (the Education and Youth Affairs Bureau) said that the programme (for continued education) will be continued but we still don’t know when we can apply for next year; we’re not sure if there’s going to be a gap between the end of this one, which is in December, and the beginning of the next one. Because inbetween the first and the second a gap occurred. There was a period of no-man’s land; we had courses to follow through with and people asking if we could wait until they had received their subsidies. This can’t be like this because we have to follow a programme of activities. So I can’t get to the end of the year and tell the Macao Foundation that I didn’t do this or that course because I was waiting for… We, everything that’s possible to include in this programme, we include, to make people’s lives easier.
We have people who use their whole subsidy, we have students that aren’t old enough to use them. For example, in the music courses we have many students, and some of them can’t use the subsidy because they’re not old enough to. How about teachers; do you have much turnover? We haven’t had much variance in (the number of teachers). For one reason, we don’t have the venue capacity. A large part of the courses take place after the working day. So they end up all happening at once. We’ve run out of possibilities in terms of space. Especially with the music courses we have a ton of problems because of the sound. Have you encountered any problems with the noise law? No; we can give the courses we want to give. At the moment, if it’s the subsidised courses these can’t go on after 10. That’s the limit. Sometimes people stay there working until late, they’re doing something, having fun, so they stick around. Since we’re in an industrial building, we don’t have those (sound) limitations, we have others, including the building being very old, having four cargo elevators that aren’t working and only one elevator for people that’s doubling as a cargo elevator. How do you see the current situation for the cultural and creative industries? I think that not much has been done, it hasn’t progressed. That’s my opinion. And we, when we started this training area it was very much from that perspective. This was trying to cover two areas – one was the spread of culture because there’s nothing better than the arts by which to spread culture. The second would correspond with an area of interest of the government - which is the development of these cultural and creative industries. You work quite a lot with nonresident workers. How do you see their situation? Someone who comes to give courses, receive training in areas – whatever they may be – are people that should have their residency. They should set
themselves up calmly and serenely; it’s bad enough that those already with their residency are subject to increased requirements for renovation, let alone a non-resident worker. I think it doesn’t make any sense. So I’ve resisted and made certain efforts so that those who have conditions to be a resident should be a resident, they shouldn’t be a non-resident, or should be a nonresident with other characteristics. I know that not everybody is of that opinion; especially because the nonresident worker is linked, stuck to, the employer and therefore some people might even think it more practical, more secure to know that they have a person who can’t look elsewhere. I think the opposite.
“Someone who comes to give courses, receive training in areas – whatever they may be – are people that should have their residency” What efforts do you make as a nonprofit entity to help these people? As an association we create conditions for people to develop their knowledge and capacities but we cannot offer a career to people that’s brilliant or satisfactory - or pay what a company could pay. So I think that these people, after having their feet firmly on the ground and developing and showing what they’re capable of doing, if they have the chance to have a better life, something that gives them better economic conditions, that they should have the chance to follow that career. We shouldn’t stop them; we just have to find more people. And we restart the process. In some areas I’d say that we’re even a type of springboard. Even though that’s not the vision of the immigration department or the officials who think that even if you’re a resident, if they’re given their residency to do
Business Daily Monday, November 7 2016 7
Macau a job they should continue doing that job, because otherwise why should they continue to be a resident. With the students that you’re training from a young age, are there expectations that they’ll become the teachers? No, I don’t think so. What’s most important regarding the youngest students is opening up perspectives. The ability for them to have contact with different areas, learn to exhibit, to translate, to show their emotions – gaining self-confidence, social capacity, and learn a group of attitudes that permits them to eventually – in areas completely different that have nothing to do with art – be able to have a better career path, be better students. I think that in particular in terms of studies and particular characteristics of students, this training that they get now is very important in terms of them opening up to others, the arts, life in general. We learned that through feedback from the parents. Have you offered any courses related to event management? We haven’t offered any courses in that area so far; we’ve been doing events, we go forward (laughs) but we haven’t giving training in that area. Because it has yet to come up and I see a lot of supply in the market and whoever is already in the companies, etc., I don’t see them very open to going and receiving the training of that type. What happens here with us is that there are people in these areas that have developed and now they’re working in various places. We have former collaborators working in the House of Dancing Water, quite a few in The Venetian. We’ve got quite a few spread out throughout the MSAR that have passed through the CDP and then used that springboard and now are occupying these positions. I think that if the government and Immigration - if they thought twice they’d understand the importance of this. These people who give training and are getting to know Macau, developing their aptitudes and then occupying these positions – they’re contributing to the local development of all of these activities. Instead of having to go grab someone for one
event, who’s only here to do one thing, in one area, without learning about Macau or meeting anyone. For Macau, this is much more productive and richer – in both economic terms and social participation terms – than someone who comes here to work on a job for four months . . . and bye-bye. And they find these jobs to the point that they leave us. On the one side it makes me very happy and proud. Later though I have to deal with the practical problems; and the practical problem isn’t arranging someone competent to do that job: the problem is to go and get someone with those capacities I have to start the paperwork all over again! To explain that they come to fulfil an important function and it’s not due to the fact that they don’t make the minimum wage, that they can’t work, and they shouldn’t be here. But this is a cyclical fight; each time one of these people advances the process begins again.
“We were stuck with over a million to pay to the bank, which was undersigned by myself and a member of the board” Where do you sell the creative and cultural products made by students? When there are fairs such as the Lusofonia, the São Joao, at Christmas we organise a sale – there are at least three times a year in which students can bring their products and put them up for sale. But when we had the São Paulo project, the now defunct Lusitanos, we had a sales point that sold Portuguese products – wines, cheeses etc., and locally made products [such as] jewellery, ceramics – all made by students and with the quality to be put up for sale. There was a more-or-less systematic sale system set up. Now we don’t have the conditions to have these for sale
“As an association we create conditions for people to develop their knowledge and capacities but we cannot offer a career to people that’s brilliant or satisfactory - or pay what a company could pay”
all the time as we did before. In that space it was very beautiful, everything was well laid out, and it had an aesthetic presence. Now we’re limited to certain moments – fairs, stands – but the space is something that really is lacking.
the shows. If somebody (famous) shows up in the territory, I have to try and invent funds to hire them. Now they’ve opened up a small thing allowing me to request to use funds differently but it has to be at least two months in advance.
Do you try and set up your own tents/ sales points? If something’s not incorporated into an event it’s incredibly difficult. I have requests from two years ago that still haven’t been responded to.
The situation created by having to leave the São Paulo property created a lot of problems . . . ? The equipment from the Lusitanos has to stay at the headquarters of the CPM because we got stuck with a huge debt as the exit didn’t allow time for us to start paying off the investments made, and we got stuck with a debt that CPM had never had before. We were stuck with over a million to pay to the bank, which was undersigned by myself and a member of the board. So whether you want to or not, Amelia, you’re a voluntary fireman (laughs). In a case like this there’s no way that I could say that I wasn’t going to be in the elections. I couldn’t abandon things at this stage. Everything that we can do outside of the Macao Foundation programme we do, so that we can get money to pay off this debt. If it wasn’t for that effort we could never get out from under it. This year, I thought I’d finally be able to pass on the torch. I think that people need to rotate. Until the debt is almost taken care of, if someone comes, great - but it can’t be because I can’t go. If someone comes and wants to run CPM, saying they want to, they know what the situation is of CPM and they want to take on that responsibility – great. The members decide what they want. Ten years is a long time, especially in the way that CPM was founded. When CPM was founded the first budget was around MOP100,000 (US$12,500). We went around asking for contributions so we could buy materials, chairs, tables. Now, these years, in the past 10 years, we’ve managed to pass to this situation in which we have a budget of MOP10 million. And we’re constantly stressed in order to conduct the activities we’re doing. It’s been progressive growth; there’s only not more growth because I can’t handle it. I can’t go further.
Did the culture and creative industries fund help you at all? Right from the beginning it had one requirement that separated us from it. It was applicable to companies in Macau with at least two years operation. We have quite a bit more - 15 years - but we’re not a company, we’re a non-profit association. So when it took off we were on the margins. At the time I complained because - effectively when this area began taking off here, if anybody was doing anything in it, it was us. If anybody trained people and put them into work, it was us. But we’re a non-profit organisation – we don’t have the right to participate in the conversation. How do you handle funding? We’re exclusively funded by Macao Foundation, by the government – through the Macao Foundation. After that we try to do other things outside of the Foundation’s programme because the programme is very divided – due to the internal regulations of the Foundation. You ask for project A,B,C,D . . . then when they provide it, it’s supposed that the money will be used exactly as delineated in the budget, in year A,B,C, D. If I manage to run project A without spending as much money, and if I managed to save some of the budget from that project I can’t transfer that into project B. So what is left over I’m obliged to give back to the Foundation. And what is missing I have to figure out how to manage it because I’m not going to be left owing. And we have to create the budget one year ahead of time. And a year beforehand I have no idea what’s going to be happening. I don’t know who I’m going to be able to bring for
8 Business Daily Monday, November 7 2016
Greater China Local debt
Government to allow “reasonable” financing needs The finance ministry insisted China’s local government debt is under control
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hina will allow local gov ernments to meet “reason able” funding requirements to support economic growth next year, the finance min istry said on Friday, saying that the sector’s risks were under control. Beijing has imposed tight controls in recent years on new local govern ment debt issuance to help ward off financial risks following a borrowing binge since the global financial crisis. In a statement on its website, the ministry said it would continue to allow local governments to swap high-cost maturing debt for low er-cost debt, a programme it kicked off in 2015.
Steps will be taken to “meet local governments’ reasonable financing needs to support steady local eco nomic growth”, the ministry said. “Local governments will continue to issue bonds to replace the existing debt to help reduce interest burdens, ease debt repayment pressure and guard against financial risks,” it said. China’s overall debt has jumped to more than 250 per cent of GDP from 150 per cent at the end of 2006, the kind of surge that in other countries resulted in a financial bust or sharp economic slowdown, some analysts say. The finance ministry insisted Chi na’s local government debt is under control and its debt burden would not
show a big change this year. Local government debt was 89.2 per cent of revenues in 2015 - below the international warning line, and 38.9 per cent of GDP, lower than most emerging economies, the ministry said. China capped the rise in outstanding local-government debt at RMB17.2 trillion in 2016, from RMB16 trillion in 2015. This excludes bonds issued under the debt swap scheme. Under the swap, local governments issued RMB3.2 trillion in bonds in 2015 and the ministry said by the end of September this year the total had risen to RMB7.2 trillion. The minis try said the swaps would cut local government interest payments by RMB600 billion over the course of 2015 and 2016. Some analysts estimate that total
debt refinancing will amount to RMB11 trillion in 2016 and 2017. The ministry did not provide any estimate for new local government bond issuance in 2017. But Wen Bin, an economist at Minsheng Bank, said local governments would be allowed to issue new debt next year to sup port the broader government drive to boost infrastructure investment and the economy.
Key Points China will meet reasonable local financing needs - ministry Says local debt risks under control, debt ratios to be steady “Local governments are under pressure to expand expenditures but their revenues could slow given the downward pressure on the econo my,” he said. The ministry said local government fiscal revenues would maintain a medium-to-high growth rate, which would help control local debt risks. Still, the ministry warned the ability of some local governments to repay their debt had weakened and the debt risks of some regions exceeded warning lines. “The size of local government debt remains large although the struc ture has changed, I don’t expect policies to be relaxed,” said Zhang Yiping, an economist at Merchants Securities. Reuters
M&A
Wanda extends Hollywood push with Dick Clark deal The drive has raised concern among some U.S. lawmakers about China’s influence in Hollywood and the impact it might have on media in the United States China’s Dalian Wanda has agreed a US$1 billion takeover of Dick Clark Productions, the company that runs the Golden Globe awards and Miss America pageants, extending the Chinese property-to-entertain ment conglomerate’s buying spree in Hollywood. Wanda, run by China’s richest man, Wang Jianlin, said in a statement on Friday it would buy all of Dick Clark Productions, an iconic name in U.S. entertainment that also produces the Academy of Country Music Awards and the Billboard Music Awards. Dick Clark’s owner, media invest ment holding company Eldridge In dustries, had said it was in talks with Wanda in September. Founded by TV presenter Dick Clark, host of the “American Bandstand” pop music TV show from 1957 to 1987, the epony mous firm went public in 1986 before being taken private 16 years later. Wanda’s deal is its latest move in a cruise into Hollywood. It already owns Legendary Entertainment, co-producer of film hits such as “Ju rassic World”, and U.S. cinema chain AMC Entertainment Holdings Inc. It also has business ties with Sony Pictures and Sony Corp’s film unit in China. The drive has raised concern among some U.S. lawmakers about Chi na’s influence in Hollywood and the impact it might have on media in the United States. Wang has said his motivation comes from a “business perspective” and not a political one.
Wanda said in its statement that the deal marked its “first step” into television content to sit alongside its investments in theme parks, film production and sport. It added it would keep Dick Clark’s current management team after the deal.
Key Points Dalian Wanda to buy Dick Clark Productions for US$1 bln Wanda says purchase is first step into TV content Dick Clark behind Golden Globes, Miss America In August, Wang told Reuters he expected to seal two billion-dollar deals in the U.S. this year. He aims to bring Hollywood technology and muscle to China, and has expressed interest in the so-called “big six” Hollywood studios. Wang is now trying to attract Hol lywood film makers with subsidies to a new production studio in China’s eastern city of Qingdao. Meanwhile U.S. film producers are also looking for a way into China’s fast-growing cinema market. Wang predicts the Chinese box of fice would match the biggest market - the United States and Canada - by 2018, and grow by about 15 per cent annually for the next 10 years. Reuters first reported in June that
Wanda’s Wang Jianlin (pictured), predicts the Chinese box office would match the biggest market - the United States and Canada - by 2018
Eldridge Industries, the U.S. owner of magazines Billboard and The Holly wood Reporter as well as Dick Clark Productions, had hired investment banks to carry out a review of its
media holdings. An Eldridge representative was not immediately available for com ment outside regular U.S. business hours. Reuters
Business Daily Monday, November 7 2016 9
Greater China Regulations
In Brief
Internet authority formalises live-streaming rules The industry’s exponential growth attracted increased scrutiny from government authorities in 2016 Catherine Cadell
Chinese internet authorities have formalised controversial rules reg ulating the country’s fast-growing live-streaming video industry, in a move that strips out smaller competi tors and places hard-line surveillance measures on leading firms. In an announcement posted on their website on Friday, the Cyberspace Administration of China grouped a handful of earlier restrictions under a final 24-point regulation that will come into effect on December 1. The rules require streaming ser vices to log user data and content for 60 days, and work with regulators to provide information on users who stream content that the government deems threatening to national secu rity or social order. Both users and providers are punishable under the regulations. The law also codifies rules that ban online news broadcasting services from original reporting, requiring them to identify sources and non-se lectively reproduce state-sanctioned information. China’s live video streaming indus try has experienced booming growth in the past two years as dozens of video and social media sites scram bled to add the updated capabilities to their existing services. Credit Suisse Group analysts es timate the industry could top US$5 billion by the end of 2017, driven
by cheap bandwidth and a growing population of young mobile users. The industry’s exponential growth attracted increased scrutiny from government authorities in 2016. In April, Chinese authorities called on 20 of the country’s top firms to join a self-criticism coalition, saying the industry was damaging China’s youth by proliferating content including pornography, fraud and terrorism. On June 1 companies including Baidu Inc, Sina Corp , Sohu.com Inc and Youku Tudou, acknowledged new rules as part of the group, in cluding requirements for real-name authentication.
While the latest move places wide-reaching restrictions on the sites, it also signals an official sanc tioning of the industry and its top players by Chinese officials. Much like China’s earlier online video and music industries, the reg ulations put pressure on smaller competitors and bring larger firms into line with regulators, offering more growth opportunities for a smaller number of controllable companies.
“In the long run it’s actually relatively beneficial to the large companies” Mark Natkin, Managing Director at Marbridge Consulting
“One of the things the government always wants to do is narrow the playing field to a smaller number of higher profile known entities, ideally ones that have a better track record of cooperating with the government,” says Mark Natkin, Managing Director at Marbridge Consulting. “In the long run it’s actually relatively beneficial to the large companies.” In May the government handed down 588 licenses for prominent media outlets and live-streaming sites, effectively banning all unap proved services. Reuters
New York State
Agricultural Bank to pay fine for laundering violations In 2014 the New York regulator warned the bank that its systems for monitoring suspicious transactions were inadequate Suzanne Barlyn
Agricultural Bank of China Ltd will pay a US$215 million penalty for vi olating New York state’s anti-money laundering law, the state’s financial regulator said on Friday. Bank officials engaged in “inten tional wrongdoing,” including mask ing possibly suspicious transactions at its New York branch. Some trans actions involved parties which are subject to U.S. sanctions, the New York State Department of Financial Services said. The bank also “silenced” the branch’s chief compliance officer, who raised concerns to managers about an “alarming” pattern of sus picious financial transactions, the regulator said. Among the transac tions were payments from Yemen to Chinese companies and “unusually large” transfers between Chinese and Russian companies. The bank, in a consent order with the regulator, agreed to put in an in dependent monitor to address “seri ous deficiencies,” the regulator said. Officials at Agricultural Bank of China and its New York branch could not be immediately reached for comment. The bank holds total assets of about US$2.8 trillion, including around US$9.5 billion at the New York branch, New York state officials said. Since 2013, the New York branch has cleared U.S. dollar transactions involving foreign correspondent banks in “rapidly increasing vol umes,” according to the consent order. In dollar clearing, transactions in
foreign currencies between parties are satisfied in U.S. dollars using a U.S.-based bank. In 2014, the New York regulator warned the bank that its systems for monitoring suspicious transac tions were inadequate, and told the bank not to boost its dollar-clearing business until it put improved sur veillance measures in place. While the practice is common, dol lar-clearing can be risky for banks since it can be used by criminals and militant groups planning attacks to launder and move money. “The bank wilfully ignored (the state’s) warning and dollar-clearing transactions by the bank at the New York Branch skyrocketed in 2014 and 2015,” the regulator said. Agricultural Bank of China’s tac tics to mask transactions included
sending coded messages through an international wire messaging system which compliance staff use to screen and monitor financial activity. The compliance officer, whom the regulator did not identify, believed that many of the “opaque” trans actions involved bank customers whose identities should have been disclosed for monitoring purposes. In once instance, a Turkish bank processed dollar transactions for an Afghan bank customer which is known by the U.S. Treasury De partment for its ties to a network associated with drug traffickers and illicit cash flows. Branch managers, in response to the compliance officer’s concerns, directed the officer not to commu nicate with regulators. The compliance officer left in June, 2015. One month later, New York bank examiners discovered an “unman ageable” backlog of nearly 700 po tentially suspicious transactions that had not yet been investigated. Reuters
FX operator
Yuan to remain basically stable The Chinese yuan will stay basically stable against a basket of currencies, the country’s FX trading plat form operator said on Friday. Despite relatively great uncertainty in future dol lar movement, the yuan will continue to experience two-way fluctuations against the dollar, the China Foreign Exchange Trade System said on its website. The yuan, also known as the renminbi, fell over 1.5 per cent in October alone as the greenback rose broadly against major global currencies in anticipation of an interest rate hike by the Federal Reserve. Payments
HKMA grants 8 more stored value licences The Hong Kong Monetary Authority (HKMA) said on Friday that it had granted stored value facilities (SVF) licences to eight more issu ers including Paypal Hong Kong Limited, bringing the total to 13. “We are pleased to see companies with diverse backgrounds offering a varie ty of SVF products which will enhance retail payment con venience in Hong Kong,” said Howard Lee, Senior Executive Director of the HKMA. The implementation of a supervi sory regime by the HKMA will strengthen public confidence in using stored value products and services which, in turn, will encourage innovation in the local retail payment industry, Lee said. Official data
Current account surplus at reasonable level China’s current account surplus accounted for 2.5 per cent of GDP in the third quarter of 2016, remaining below “a reasonable level” of 4 per cent, a statement from the foreign exchange regu lator said Friday. In the third quarter, the current account surplus rose 11 per cent from the second quarter to US$71.2 billion, according to prelimi nary data released by the State Administration of Foreign Exchange. Goods trade sur plus, major contributor to the current account surplus, rose 9 per cent from the previous quarter to US$137 billion due to slight recovery in overseas and domestic demand. Agricultural futures
Authorities to ramp up risk monitoring China will step up risk monitoring in agricultural futures to ward off exces sive speculation and price manipulation, and is stud ying ways to deregulate the sector and open it to foreign investment, a senior market regulator said on Saturday. Fang Xinghai, vice chair man of the China Securities Regulatory Commission, said China would encour age fundraising by futures brokerages via listings in domestic and overseas stock markets, as well as on China’s New Third Board, the over-the-counter equity market. Preparations would be made for the launch of options for agricultural products, Fang said.
10 Business Daily Monday, November 7 2016
Greater China Real estate
Hong Kong unveils fresh property curbs Chinese investment into Hong Kong properties perked up in recent months both in the primary and the residential market Venus Wu and Clare Jim
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ong Kong will raise stamp duties on property trans actions for the first time in three years, the latest effort to check an over heated property market buoyed by capital inflows from China. Hong Kong’s real estate is among the most expensive in the world and property experts have forecast that home prices will rise further this year. Skyrocketing property prices
have added to growing discontent in the city, with its population already under strain from high living costs and a widening wealth gap. The government will raise stamp duties on home purchases to 15 percent, across the board, effective Nov. 5, to dampen a red-hot market which has failed to respond to a raft of measures taken by policymakers in recent months. “We expect the measure to have an immediate and effective cooling impact,” Financial Secretary John
Tsang told a news conference. First time local home buyers will be exempt from the latest policy tightening measures with stamp duty ranges remaining from 1.5 percent to 4.25 percent depending on the value, officials said. Hong Kong home prices surged in September for the sixth consec utive month to hit the highest level in nearly a year, government data showed on Monday. Soaring property prices this year are in stark contrast to the slowdown in the overall economy, as evident from flagging retail sales and slowing eco nomic growth, and industry officials said renewed mainland purchases had been a key factor behind the rise to escape a depreciating yuan currency.
Chinese investment into Hong Kong properties perked up in re cent months both in the primary and the residential market after showing sluggish growth most of last year, ac cording to data from Midland Realty, a real estate agency.
Key Points Stamp duties to be raised to 15 pct of transaction value First time local buyers exempt from the increased taxes Govt expects measures to have immediate cooling effect But property analysts expect the measures to have limited impact on prices in the short term. “Under the current new policy, in the next two months we can ex pect the transaction volume to drop 20 to 30 percent but this will have limited impact on property prices,” said Thomas Lam, senior director at consultancy, Knight Frank. Another of the city’s largest prop erty agencies, Centaline Property Agency Ltd, earlier forecast that home prices would return to peak levels in the fourth quarter this year.
Prices become excited
Home prices began rebounding in the second quarter and have recent ly become “excited”, said Anthony Cheung Bing-leung, secretary for transport and housing. Transaction volumes in the property market have tripled to 6,000 in the third quarter from the first quarter. Earlier this week, Hong Kong saw its most expensive land deal this year when a unit of China’s HNA Group won a plot of residential land for HK$8.8 billion (US$1.13 billion), almost double market forecasts. A sub-index measuring property prices in Hong Kong is up 10.6 per cent so far this year, outpacing a 3.3 percent increase in the broader index. Hong Kong is not alone in trying to cool prices. China and South Korea also recently rolled out measures to temper property speculation where overheating has raised worries about a bubble. Reuters
M&A
CICC to buy China Investment Securities The deal comes as CICC looks to diversify and broaden in areas such as fixed income, currencies and commodities China International Capital Corp (CICC) plans to acquire China Investment Securities for 16.7 billion yuan (US$2.5 billion) as the country’s leading investment bank seeks to bolster its retail brokerage business. Earlier on Friday, two sources with knowledge of the matter told Reuters that CICC was in advanced talks to buy the state-backed securities firm in what would be its biggest acquisition, and its first since listing in November 2015. “The proposed acquisition will enhance the overall competitiveness of the wealth management business of the enlarged group and further promote the development of other businesses, including the investment banking business,” CICC said in a filing to the Hong Kong stock exchange. U n l i st e d Chi n a I n v est m e n t Securities, which is 100 per cent owned by Central Huijin, had assets of 96.6 billion yuan, while revenue and other income totalled 12.48 billion yuan in 2015, according to the CICC statement.
The deal, viewed by analysts as complementary for the two firms, will give investment bankingfocused CICC the means to boost its retail business in a country where frequent trading by mom-and-pop investors has boosted revenues at brokerages.
Key Points CICC seeks to bolster retail brokerage business China Investment ranked 17th by operating revenue Broking made up 36 pct of 126 Chinese firms H1 revenue Beijing-based CICC, the oldest investment bank in China, has played a crucial role in helping many large Chinese state-owned enterprises list in Hong Kong. That includes the US$21.9 billion initial public offering of Industrial and Commercial Bank of China in
2006 and the US$22 billion listing of Agricultural Bank of China in 2010.
Diversification
CICC is also recognised for its strong performance in major crossborder mergers and acquisitions by Chinese firms. It was second behind Morgan Stanley for Chinarelated M&A last year with 11 per cent of the market, Thomson Reuters data shows. But its retail stock broking business
is relatively small compared to rivals. China Investment Securities ranked 17th by operating revenue among China stock brokers last year with CICC six places below, according to data from the Securities Association of China. Shenzhen-based China Investment Securities runs about 200 retail branches across China compared with CICC’s 20, according to the two companies’ websites. China’s share trading turnover was US$9.8 trillion in the first half of 2016, 1.7 times the rest of AsiaPacific, according to financial services consultancy Quinlan & Associates. Reuters
Business Daily Monday, November 7 2016 11
Asia Political crisis
South Korea’s Park says ‘hard to forgive myself’ The leader of the main opposition party said Park’s apology was insincere Ju-min Park and Tony Munroe
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tearful and apologetic South Korean President Park Geun-hye said on Friday her “heart was breaking” over a political scandal that has engulfed her admin istration, pledging to cooperate with prosecutors in their investigation. Park has been rocked by an in fluence peddling scandal involving an old friend, sending her approval rating to just 5 per cent, a 12 percent age point drop from last week and the lowest since such polling began in 1988, according to a Gallup poll released on Friday. In a brief televised address to jour nalists, Park said that prosecutors should clarify what happened and that everyone involved should be held accountable, including herself, and take responsibility if found guilty. “It is hard to forgive myself and
sleep at night with feelings of sor row,” Park, 64, said, her voice trembling. A prosecution official declined to comment to Reuters when asked if Park would be subject to inves tigators’ questioning, which would be a first for a sitting South Korean president. “The president should remove her hands from state affairs,” Choo Mi-ae, leader of the Democratic Party of Ko rea, said in a statement, stopping short of demanding Park’s resignation. Park has faced growing pressure from the public and political oppo nents to resign. No South Korean president has ever failed to finish their five-year term. A former Park aide, Jeong Hoseong, was arrested late on Thursday on suspicion of leaking classified information, a prosecution official told Reuters, the second member of Park’s former inner circle of advisers
to be arrested last week. Prosecutors asked a court to grant an arrest warrant for another former adviser, An Chong-bum, on suspicion of abuse of power and attempted ex tortion, a prosecutor said, declining to elaborate. An has been under emer gency detention since Wednesday.
“I think she’ll manage to regain a bit of sympathy from the people who used to like her, but the speech itself was not enough to fix the crisis at hand” Kim Man-heum, head of the Korea Academy of Politics and Leadership
Old friend
South Korean President Park Geun-hye bows in apology as she delivers an address to the nation at the presidential office Cheong Wa Dae in Seoul on Friday. Lusa
Park’s long-time friend, Choi Soonsil, 60, is alleged to have used her closeness to the president to med dle in state affairs, and her lawyer has said he expects prosecutors to look into whether she inappropri ately received classified documents and benefited unlawfully from two non-profit organisations. “It is very miserable and regrettable that a particular individual is said to have taken profits and committed several unlawful acts, while we are working on a job in hopes of helping the national economy and people’s lives,” Park said, referring to Choi.
Park closed her remarks with a bow and walked towards a row of journalists and repeated her apology. She did not take questions. Park acknowledged carelessness in her ties with Choi, who Park has said helped her through difficult times. “It is true that I lowered the wall of caution myself because she stood by me in the most difficult period in my life,” Park said. “I’ve already cut all the connec tions in my heart but from now on will completely break my private connections.” Their friendship dates to an era when Park served as acting first la dy after her mother was killed by an assassin’s bullet intended for her father, then-president Park Chunghee. Five years later, in 1979, Park’s father was murdered by his disgrun tled spy chief.
Rejects cult claims
Choi, who has been in custody since last Monday, told South Korea’s Segye Ilbo newspaper last week that she received drafts of Park’s speeches after Park’s election victory but de nied she had access to other official material, influenced state affairs or benefited financially. Choi’s late father, Choi Tae-min, headed a now-defunct religious sect and was also close to Park during and after her father’s presidency. A 2007 U.S. diplomatic cable de scribed the senior Choi as the “Ko rean Rasputin”, an allusion to a close adviser to the last tsar of Russia and the perceived influence over Park Geun-hye. Choi Soon-sil has been portrayed in Korean media as having inherited her father’s influence over Park, while local media have also characterised Choi Tae-min’s religious group as a cult and alleged that Park held a shamanistic ritual at the presidential compound. Park rejected those allegations. “There is even talk that I fell into a cult or I held a shamanistic ritual at the Blue House,” she said. “I am saying clearly: none of this is true.” Reuters
Tourists
Thailand still expects 32.4 mln arrivals this year Tourism accounts for about 10 per cent of country’s GDP Thailand still expects to reach its fore cast of 32.4 million visitors this year, the tourism and sports minister said on Friday, a target that was revised lower in early October. The military government declared a year-long period of mourning to mark the death of King Bhumibol Adulyadej who died on Oct. 13 at the age of 88, after 70 years on the throne. It advised festivities be curtailed for the first 30 days of the king’s death, although it also urged businesses to stay active. Tourism and Sports Minister Kob karn Wattanavrangkul told reporters that visitor arrivals rose 1.8 per cent in October from a year earlier, or about 1.9 million. “Visitor numbers in October were still positive but there were five days missing and we will get them later,”
she said, noting the preliminary data captured only 26 days. “For the whole year, we still expect to achieve our 32 million target. But I don’t want you to focus on the num bers but rather on revenue,” she said.
Key Points Says preliminary Oct visitors up 1.8 pct y/y Foreign visitors hit a record of 29.9 mln last year Tourism accounts for about 10 per cent of Thailand’s GDP, and the in dustry has been a rare bright spot for an economy that has struggled to gain traction since the army seized power in May 2014 to end political unrest. The country’s exports and domestic consumption have both been stubbornly sluggish. The 32.4 million target was set on Oct. 4, which was cut from 33 mil lion earlier due to a drop in Chinese
tourists, Thailand’s largest number of visitors following a Thai crackdown on cheap tour packages. Restrictions on entertainment and television in Thailand will be lifted on Nov. 14.
The ministry has forecast revenue of 1.63 trillion baht (US$46.60 billion) from foreign tourists this year, up 11.7 per cent from 2015. In the first nine months of 2016, the number of tourist arrivals was 24.82 million. Last year, Thailand hosted a record 29.9 million visitors. Reuters
12 Business Daily Monday, November 7 2016
Asia In Brief Trade
Malaysia’s exports fall Malaysia’s exports fell in September due to weak oil prices and a slump in demand for manufactured goods, government data showed on Friday. Exports in September contracted 3.0 per cent from a year earlier, faster than the 1.9 per cent decline forecast in a Reuters poll. In August, exports had increased 1.5 per cent. Annual exports of crude oil and liquefied natural gas fell 26.8 per cent and 20 per cent, respectively, in September, data from the International Trade and Industry Ministry showed. Meanwhile, ship ments of manufactured goods declined 1.2 per cent, with lower exports of machinery and metal products. Pre-Summit
Japan, Russia agree to economic cooperation Japan and Russia will focus on about 30 items of eco nomic cooperation ahead of a December summit at which Japanese Prime Minister Shinzo Abe hopes to make progress in resolving a long-festering territorial row, said the Nikkei business daily. Japan’s trade minister Hiroshige Seko met Russian officials in Moscow, includ ing Economic Development Minister Alexei Ulyukayev, and the two sides agreed to seek concrete progress before Russian President Vladimir Putin visits Japan next month, the Nikkei reported on Friday. Mood poll
Consumer confidence rises in Indonesia Indonesia’s October con sumer confidence index rose to the highest since March 2015, the central bank said on Friday. October’s index reading was 116.8, rising from 110.0 a month before, reflecting consumers’ rising optimism about the current economic condition, Bank Indonesia said. A reading above 100 indicates con sumers are optimistic. The survey involves about 4,600 respondents from 18 major cities. The survey said that Indonesian consumers ex pected better job availability in the next six months, while price pressures were expect ed to cool in the coming three to six months. Tata Sons
Ratan Tata installs new management team Tata Sons has put in place a new management team for the US$100 billion steel-tosoftware group, days after its board ousted Chairman Cyrus Mistry and disbanded his advisory council, trig gering a public spat between him and Ratan Tata. Ratan Tata, patriarch of the Tata group who is temporarily back at the helm as interim chairman, has put together a team of five executives, including two former Mistry advisers, Tata Sons said in a statement on Friday.
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Retail data
Australia’s central bank upbeat on economy The RBA left its forecasts for both growth and inflation unchanged from its August outlook Swati Pandey
A
ustralia’s central bank said on Friday it sees “reasonable prospects” of achieving sustainable economic growth as solid demand from China boosts commodity prices and revives the terms of trade, suggesting further cuts in interest rates are off the agenda. Its optimism was underpinned by a robust 0.6 percent rise in retail sales in September, marking the best two months since the middle of last year. The data, which also came out on Friday, points to some momentum in consumer spending going into the all-important Christmas shopping period. In its 60-page statement on monetary policy, the Reserve Bank of Australia (RBA) forecast the A$1.6 trillion (US$1.23 trillion) economy would grow around its 3 percent potential next year before accelerating to between 3 and 4 percent in 2018. “The tone is much more balanced and could probably even be described as upbeat,” said Paul Dales, Sydneybased chief economist at Capital Economics. “We still believe there is a chance that stubbornly low inflation may yet
force the RBA to reduce rates again. But for the moment, it’s becoming increasingly clear that the RBA thinks it has done enough.” The central bank held rates steady at 1.5 percent for a third month this week, after easing twice in May and August following surprisingly soft inflation readings.
“We still believe there is a chance that stubbornly low inflation may yet force the RBA to reduce rates again.” Paul Dales, chief economist at Capital Economics
But its pitch has changed in recent weeks. On Friday, the RBA revised up the outlook for commodity exports following sharp increases in prices for coal, the country’s second biggest
export earner, which had lifted the terms of trade. “This represents a marked change from the pattern of recent years,” RBA Governor Philip Lowe wrote. “It is expected to provide some support to income growth.” “The forecasts assume that the terms of trade will remain above the low point reached earlier this year. In part, this reflects the expectation that Chinese demand for steel will remain resilient in the near-term.” It sees the economy expanding by 2.5-3.5 percent next year, while core inflation is seen steady at 1.5 percent, before rising to 2 percent by end-2018. However, the performance at home has been patchy. Job growth has been slow in recent months and skewed toward part-time workers, even though the unemployment rate inches lower. Wage growth is at an all-time trough. The RBA expects labour costs to remain low over the forecast period and cautioned of heightened uncertainty about spare capacity in the job market and the extent to which it will ultimately feed into inflation. The RBA also sees downward pressure on inflation from weak rents while growth in the costs of constructing a house has fallen even though building activity has strengthened. Reuters
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Business Daily Monday, November 7 2016 13
Asia Private poll
Japan’s economic growth edging up Private consumption likely stalled in the last quarter Kaori Kaneko
Japan’s economy likely expanded for a third straight quarter in July-Sep tember, a Reuters poll showed on Friday, but weak private consump tion and lacklustre company capital spending suggest growth will remain fragile. The world’s third-largest econo my is expected to have grown at an annualised rate of 0.9 per cent in the third quarter, the poll of 22 econo mists found, following a 0.7 per cent expansion in the second quarter. That would translate into a muted 0.2 per cent rise for the quarter, the same pace as in the second quarter. “The economy is escaping from a lull but we cannot say it returned to a track of sustainable growth because private spending and capital expend iture remained low,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute. “The economy is expected to pick up moderately from October-De cember but downside risks continue to stay.”
A recovery in automobile produc tion which may have contributed to the economy in July to September has likely waned, though government stimulus measures are expected to continue to provide some support for activity, he said. Private consumption, which ac counts for roughly 60 per cent of gross domestic product (GDP), likely stalled in the last quarter after im proving in the previous two quarters, economists predicted. Capital spending was seen up a marginal 0.1 per cent, but still rising
for the first time in three quarters. The Cabinet Office will announce the GDP data on Nov. 14 at 8:50 a.m. (2350 GMT, Nov. 13). The poll also found core machinery orders, a leading indicator of capi tal spending, likely slipped 0.8 per cent in September from the previous month, down for the second straight month. The expected fall would follow a 2.2 per cent decline in August. The highly volatile data series is regarded as an indicator of capital spending in the next six to nine months. Core orders, which exclude those for ships and electrical equipment, likely rose 3.5 per cent in September
from a year earlier after a 11.6 per cent jump in August. “External demand is weak due to an impact from a strong yen, which could prompt manufacturers to be come cautious about capital expend iture,” said an analyst at SMBC Nikko Securities at the survey.
Key Points Q3 annualised GDP seen +0.9 pct vs +0.7 pct in Q2 Economy to grow for 3nd straight quarter but pace still sluggish Sept core machinery orders f’cast -0.8 pct vs -2.2 pct in Aug GDP due at 2350 GMT Nov 14 The Cabinet Office will release ma chinery orders on Nov. 10 On Wednesday, the finance min istry will release the current account balance for September, which is ex pected to show a surplus of 1.9602 trillion yen (US$19.02 billion). The Bank of Japan’s corporate goods price index (CGPI) on Friday, which measures the price companies charge each other for goods and services, was seen down 2.7 per cent in the year to October. Reuters
Monetary policy
NZ central bank rate cut on the cards Inflation is currently running at only 0.2 per cent, well below the RBNZ’s target band of 1 to 3 per cent Charlotte Greenfield
A rate cut is considered almost a cer tainty when the New Zealand central bank meets next week, a move that seems at odds with the Pacific island nation’s economy which is charging ahead amid a population and housing boom. A recent run of upbeat activity data have underlined the economy’s vig our, yet inflation still remains far too low for comfort, forcing the Reserve Bank of New Zealand (RBNZ) to ease again to avoid an unwelcome spiral into deflation. “So why is the RBNZ still cutting next week? Strong activity growth, including the buoyant housing mar ket, is still not translating into broadbased inflationary pressure,” said Annette Beacher, chief Asia-Pacific strategist at TD Securities, in a re search note. The RBNZ has all but committed it self to at least one more easing, which is why 30 out of 33 economists polled by Reuters expect rates to be cut by 25 basis points to an all-time low of 1.75 per cent on Nov. 10. Markets are also almost fully priced for a cut next week. Still, record strength in employ ment and rising prices for the nation’s dairy exports have investors wagering it might be “one and done”. Futures imply only a 10 per cent chance of a further move to 1.5 per cent.
New Zealand’s economy grew an annual 3.6 per cent in the second quarter - better than most of its rich-country peers - thanks to sol id household spending and exports.
Key Points 30 of 33 economists see RBNZ cutting to 1.75 on Nov. 10 Majority expect no more easing after that Low inflation and high NZ$ outweigh strong economy, jobs International milk prices rose 11.4 per cent in this week’s fortnightly auction, extending a recovery that has been a major relief to the country’s legion of farmers.
Low inflation
The jobless rate also dropped to near eight-year lows of 4.9 per cent in the third quarter as employment blew past all expectations, rising 1.4 per cent, almost triple market forecasts. Yet the surge in jobs is being met by a record influx of migrants, keep ing pay claims suppressed. Wages grew only 1.6 per cent in the year to September. “It’s yet another piece of data that says the economy is doing extremely
well, but it’s not creating inflation,” said Stephen Toplis, head economist at BNZ. The soaring Kiwi, which was trading close to one-month highs
of US$0.7309, was weighing on infla tion by lowering the cost of imported goods. A lofty currency also offsets the boost from dairy since milk is priced in U.S. dollars. That means the RBNZ will be re luctant to signal its easing campaign is over for fear of sending the kiwi ever higher. Reuters
14 Business Daily Monday, November 7 2016
International In Brief IMF loan
Portugal backtracks on early repayment Portugal’s Socialist govern ment said Saturday it will not make early payments of 6.6 billion euros in IMF loans this year in order to maintain financial reserves. “The early paybacks of the IMF loan will depend on market con ditions and financing needs, including raising the capital” of the publicly owned Caixa Geral de Depositos bank, the finance ministry said in a statement. It wanted to keep reserves “adapted to mar ket conditions” of 6.5 billion euros (US$7.2 billion) at the year end, the statement said. Portugal paid back 2 billion euros to the IMF in February. WTO
Germany calls for global free trade accord German Economy Minister Sigmar Gabriel called for a resumption of long-stalled efforts to negotiate a glob al free trade accord on Saturday, warning that a proliferation of bilateral trade deals could lead to varying standards and rules. “The best thing would be an agree ment under the auspices of the World Trade Organisation (WTO),” Gabriel said dur ing a business conference in Hong Kong. In the absence of a global trade agreement, Gabriel said it was important that bilateral trade deals also include social, climate and consumer standards, beyond simply reducing tariffs.
Monetary policy
Strong U.S. job data boost rate hike prospects Fed Chair Janet Yellen has said the economy needs to create just under 100,000 jobs a month to keep up with growth in the work-age population
U
.S. employers maintained a strong pace of hiring in October and boosted wages for workers, which could effectively seal the case for a December interest rate increase from the Federal Reserve. Nonfarm payrolls increased by 161,000 jobs last month amid gains in construction, healthcare and pro fessional and business services, the Labour Department said on Friday. The solid labour market funda mentals were also underscored by revisions to August and September data, which showed 44,000 more jobs created than previously reported. Average hourly earnings rose 10 cents or 0.4 per cent in October. As a result, the year-on-year gain in wages last month rose to 2.8 per cent, the largest in nearly 7-1/2 years. The report came on the heels of data last week showing an acceleration in economic growth in the third quarter. Businesses have created 15.5 million jobs since 2010, with almost half of them high wage jobs. Even Americans holding low-income jobs are starting to experience wage gains. Though the U.S. central bank is expected to increase borrowing costs at the Dec. 13-14 policy meeting, that decision will likely depend on the outcome of Tuesday’s election.
The unemployment rate fell onetenth of a percentage point to 4.9 per cent last month, in part as people dropped out of the labour force. A broad measure of unemployment that includes people who want to work but have given up searching and those working part-time because they can not find full-time employment fell two-tenths of a percentage point to an 8-1/2 year low of 9.5 per cent.
Trend has slowed
The trend in employment growth has slowed as the labour market nears full employment and the economy’s recovery from the 2007-09 recession shows signs of aging. Employment growth so far this year has averaged 181,000 jobs per month, down from an average gain of 229,000 per month in 2015. Still, the monthly job gains are more than enough to absorb new entrants into the labour market. October’s rise in average hourly earnings added to September’s 0.3 per cent gain. The year-on-year increase was the biggest advance since June 2009 and followed a 2.7 per cent rise in September. Wage growth remains moderate and economists blame this on a low labour force participation rate. The participation rate, or the share
of working-age Americans who are employed or at least looking for a job, fell 0.1 percentage point to 62.8 per cent last month, not too far from multi-decade lows, in part reflecting demographic changes. The solid payrolls gain accom panied by the surge in wages could support consumer spending heading into the holiday season, and in turn keep the economy on a relatively higher growth path. Construction payrolls increased 11,000, rising for a second straight month. But manufacturing employ ment fell 9,000 last month, falling for a third straight month.
Key Points Nonfarm payrolls increase 161,000 in October Unemployment rate falls to 4.9 per cent from 5.0 per cent Average hourly earnings increase 10 cents Retail sector employment surpris ingly fell 1,100 jobs, despite anecdotal evidence retailers had embarked on early hiring for the holiday season. Professional and business services payrolls rose 43,000. Healthcare and social assistance employment increased 39,100 last month. Tem porary-help jobs, a harbinger for future hiring, increased 6,400. Government employment rose by 19,000 jobs. Reuters
EU industry
Juncker warns not to cut own Brexit deals European Commission President Jean-Claude Juncker warned European firms he would block at tempts to cut special deals with Britain ahead of for mal Brexit negotiations. In an interview published on Saturday, Juncker said he had heard industrialists’ concerns in a meeting with French President Francois Holland and German Chancellor Angela Merkel but told them not to interfere in the negoti ations. Juncker’s comments appeared to be a warning after Nissan agreed to build new models in Britain after reassurances from UK PM that it would receive support to preserve its competitiveness in the EU market after Brexit.
PMI
Euro zone business growth still struggling to gain traction
Infrastructure
Brazil to redo concessions to attract investors Brazil will allow investors to return concessions for road, railroad, port and airport projects that have not taken off in an effort to attract fresh private investment to mod ernize decrepit infrastruc ture, a government source said on Friday. A presiden tial decree will be issued as soon as this week to revise concessions granted by the previous leftist government that failed to take effect, the source, with knowledge of the government’s plans, told Reuters. Current railroad concessions will be extended but will require that pri vate investors match pub lic investments and allow third-party freight on their lines, the source said.
Producer prices rose 0.1 per cent month-on-month in September, official figures showed earlier on Friday Jonathan Cable
Business activity in the euro zone during October was not as robust as first thought, a survey showed on Friday, adding to signs the bloc’s re covery remains on track but is strug gling to gain momentum. For the second month running, firms held prices steady despite costs rising at the steepest rate since July 2015, indicating companies’ pricing power remained muted and that the European Central Bank might have to do more to drive up inflation. Markit’s final composite Purchasing Managers’ Index for the euro zone was 53.3 in October, below a 53.7 flash estimate but beating September’s 52.6 and its highest since January. The reading has been above the 50 mark that divides growth from
contraction since mid-2013. “The economy is ticking along but there is a lack of traction and that tells you the ECB’s best efforts to stimulate the economy haven’t worked yet,” said Peter Dixon at Commerzbank. Markit said the PMI pointed to fourth quarter economic growth of 0.3 per cent, in line with the predic tion in a Reuters poll. A stable but lacklustre economic outlook will push the ECB to tweak its asset purchase programme and announce by year-end an extension to it beyond March 2017, a Reuters poll found last month. Years of ultra-loose monetary pol icy has so far failed to get inflation anywhere near the central bank’s 2 per cent target ceiling but the PMI showed input prices rose sharply,
largely driven by higher staff costs and oil prices. The input prices sub index was 54.2, up from 53.5. Inflation was just 0.5 per cent in October, the European Union’s statistics office said last week, while the figure used by the ECB as core inflation dipped to 0.7 per cent from 0.8 per cent.
Key Points Euro zone final October composite PMI 53.3 PMI points to Q4 GDP growth of 0.3 pct -Markit Although costs were rising, firms in the bloc’s dominant service industry returned to discounting to drum up trade after holding prices steady last month. The output prices sub index for the sector was 49.7, down from September’s 50.0 and the flash 50.3 estimate. Those price cuts helped drive activity up from the previous month and the services PMI registered 52.8, above September’s 52.2 but below the 53.5 preliminary reading. Reuters
Business Daily Monday, November 7 2016 15
Opinion Business Wires
The Times of India Government will introduce a bill in the winter session of Parliament beginning this week tabulating the revenue likely to be foregone by each state on account of subsuming of local taxes and the Centre’s contribution to make up for the loss. The GST Compensation Bill will provide a legal backing to the Centre’s promise to compensate the states if their revenue growth rate falls below 14 per cent in the first five years of the GST roll out. The base year for calculating the revenue of a state has been decided as 2015-16.
The new fiscal reality The Korea Herald Samsung Electronics’ next flagship smartphone Galaxy S8 will adopt an artificial intelligence platform, which will also be applied into all of its home appliances, the company said. “We will focus on how to provide more pleasure and convenience to users through VIV Labs’ AI solution,” Lee Jae-yong, Samsung Electronics’ vice chairman, said while meeting the chiefs of VIV Labs in the company’s Seocho office building in Seoul. Lee added that Samsung would strengthen its technology leadership in the Internet of Things by integrating VIV Labs’ solution into its smartphones, home appliances and semiconductors.
The Straits Times Tigerair will come under the name of its budget carrier sibling, Scoot, by the end of next year, the two airlines announced. Scoot and Tigerair intend to pursue a single brand and operating licence next year, said Budget Aviation Holdings Pte Ltd, which owns and manages Singapore Airlines’ low-frills carriers. The integration is expected to be realised between mid- and end-2017, given the full spectrum of commercial, operational and regulatory considerations, said the statement. The integration will mean Tigerair and Scoot will have merged flight scheduling and connections, as well as a common website, contact centre and check-in counters.
Philstar The Duterte administration cannot just simply “build, build, build” infrastructure without reforms that will help both national and local governments to spend funds efficiently, the Economist Intelligence Unit (EIU) said. “Despite meaning well, the government will need to undertake other administrative reforms if it is to find success in ramping up its efforts,” EIU analysts Miguel Chanco and Roxana Slavcheva said in a report. While the government needs to fill a huge infrastructure gap, the EIU warned the challenge lies more in “reforming flaws in disbursing agencies” that haunted the previous government’s similar program.
“
W
hen the facts change, I change my mind. What do you do, sir?” This, reportedly, is how Keynes replied to the criticism that he had changed his position on the policy response to the Great Depression. Pragmatism of this sort is not that common: policy views are often characterized by considerable inertia. Too frequently, today’s perspectives remain shaped by yesterday’s facts. Fiscal policy is a case in point. Facts have changed in two significant ways. First, for sovereign states long-term borrowing costs are exceptionally low. At end-October, the annual yield for government bonds issued by France, a country with public debt approaching 100 per cent of GDP, was 0.5 per cent for ten-year bonds and 1.6 per cent for 50-year bonds. Italy and Spain, both of which faced investors’ reluctance five years ago, have also been able to tap the market for 50-year bonds. As long as high demand for government debt securities lasts (a subject of debate among economists), it offers an unprecedented opportunity to finance public investment. A key factor in determining whether to borrow is the difference between the rate of nominal GDP growth and the interest rate: if it is negative, debt can easily be repaid, because nominal income grows faster than the interest burden. Using the (fairly miserable) past as a yardstick, it is hard to believe that French nominal GDP will increase by less than 0.5 per cent annually over the next ten years: from 2005 to 2015, nominal growth averaged 2.1 per cent. So low interest rates are an opportunity that should not be missed. The second way facts have changed is that output growth has been disappointing. In its latest World Economic Outlook, the International Monetary Fund noted that, despite the drop in oil prices and favourable monetary conditions, output and investment in advanced countries have consistently remained below expectations over the last two years. The outlook for the eurozone is especially underwhelming: the IMF expects output growth to slow from 2 per cent in 2015 to 1.7 per cent in 2016 and 1.5 per cent in 2017. With the European Central Bank’s asset-purchase program close to reaching its limits, an investmentoriented fiscal stimulus would help reverse this weakening. It would also help reverse the slump in public investment experienced by several countries as a consequence of fiscal austerity in recent years. But, while facts have changed, minds have not. On average, governments are using the gains implied by lower interest rates to spend a bit more or to reduce taxes, rather than to launch comprehensive investment programs. The IMF expects the structural fiscal balance for the eurozone to be roughly the same level in 2017 as in 2014. The same applies to the United States. Some countries, like the United Kingdom, are still in a fiscal tightening phase. Italy is in an expansionary phase, but it is facing criticism from the European Union for non-compliance with its commitments under the Stability and Growth Pact (SGP). Overall, there is no discernible momentum in either direction. But is there really fiscal space for action? With gross public debt close to 100 per cent of GDP in the US, the UK, and the eurozone, and much higher in Japan (though net debt is less frightening),
“
Jean Pisani-Ferry a professor at the Hertie School of Governance in Berlin
there is admittedly cause for concern. Market sentiment can change quickly, and some European governments remember how precipitously they were forced to change course in 2010-2011, after having embarked on fiscal expansion. It would be unwise to assume that low interest rates will last forever and simply relax fiscal discipline. The solution is an approach that combines, on one hand, the continuation of fiscal consolidation, with a view to putting the debt-to-GDP ratio on a steadily declining path, and, on the other hand, special investment programs financed at exceptionally low interest rates. This would serve the mediumterm goal of public-finance sustainability, while treating the interest-rate level as a one-off windfall that can be used to address priority investments and strengthen growth potential. There are several types of investments worth undertaking. In some countries – especially the US – infrastructure is in need of a significant upgrade. In others, like Spain or France, human capital should be given priority, with an emphasis on improving school performance and the skills of the labour force. For countries that must invest in reforms, budgetary support would help overcome political obstacles to institutional transformation. Mitigation of climate change through investment in renewable energy, insulation of buildings, and low-carbon transportation networks is an overwhelming requirement in virtually all countries. In several areas, well-chosen investment – for example, upgrades of equipment and information systems in health care – could even reduce future public spending, thereby strengthening long-term fiscal positions. In the EU, it is sometimes argued that the way to trigger these investments is to exclude capital spending from the SGP and monitor only the balance for current spending. This would not be the appropriate solution. Brick-and-mortar public investment is often less valuable than spending on education or institutional improvement, and can end up financing “white elephants” of dubious social worth. Moreover, there are few arguments for treating capital spending separately under normal economic conditions. What applies to the current zero-interest rate environment should not be made permanent. Rather, governments should borrow now to finance special physical and institutional investment programs to be carried out over the next few years. These programs should be given defined goals and be subject to strict governance. In the EU, they should be exempt from SGP rules, but subject to an assessment by the European Commission that they contribute to improving growth and fiscal sustainability in the medium term. And they should be designed in such a way that they can be interrupted if bond-market conditions normalize and interest rates return to historical levels. We should not be hostage to a false choice between budgetary responsibility and economic revitalization. The facts have changed. We can do both. Project Syndicate
It would be unwise to assume that low interest rates will last forever and simply relax fiscal discipline
”
16 Business Daily Monday, November 7 2016
Closing
A file picture dated 03 November 2016 shows US Republican Presidential nominee Donald Trump holding a campaign rally at The Farm in Selma, North Carolina.
Democratic Presidential nominee Hillary Clinton holds a ‘get out the vote’ rally at Pitt Community College in Winterville, North Carolina, USA, 03 November 2016.
U.S. Election
Clinton means continuity for US economy, Trump the unknown In the immediate aftermath of the election, a Trump victory, or worse a disputed vote, will send Wall Street lower Virginie Montet
O
n taxes, public spending and protectionism the two candidates for the White House are diamet rically opposed: Hillary Clinton represents continuity while Donald Trump seduces or frightens with his radical proposals. But while many economists are alarmed by the threat Trump poses to American prosperity, there is no shortage of small business owners and investors who believe the Re publican candidate’s plans would benefit the economy. With polls showing the candi dates are neck-and-neck just days before tomorrow’s election, the race could be summed up as “Wall Street is pro-Clinton, Main Street is proTrump,” said Steve Odland, of the Committee for Economic Develop ment, a non-partisan, business-led economic policy group. But even Wall Street is somewhat ambivalent. A survey conducted by the CNBC network last week with 50 economists and Wall Street par ticipants showed 82 per cent think Clinton will win, but 46 per cent
feel Trump would be better for the economy, compared to 39 per cent favouring Clinton. Another survey conducted in Oc tober by the Pepperdine/Graziad io Business School in Los Angeles with 1,353 small businesses across the country, shows a majority of employers prefer Trump due to his positions on health insurance (55 per cent to 45 per cent for Clinton), as well as on taxes (66 per cent to 34 per cent) and trade (55 per cent to 45 per cent).
Deficit and deregulation
Trump’s economic plan aims to re vive economic activity through de regulation. He promises to achieve 3.5-4 per cent growth - compared to 1.8 per cent projected for 2016 - by cutting the corporate tax rate to 15 per cent from 35 per cent, and lowering the income tax rate for wealthy tax payers - the highest bracket would drop to 33 per cent from 39.6 per cent. The impact would be a sharp increase in the budget deficit. Trump also has promised to renego tiate US trade agreements, repeal the “Obamacare” health insurance pro gram, and erect a wall on the US-Mexico
border to prevent illegal immigration. In contrast, Clinton would mostly stick to President Barack Obama’s economic path. The Democratic candidate’s plan includes raising taxes of the rich est taxpayers, increasing the federal minimum wage, providing free local universities for the less affluent, and reforming Obamacare. Her plan al so would widen the deficit but to a lesser extent.
“Wall Street is pro-Clinton, Main Street is pro-Trump” Steve Odland, member of the Committee for Economic Development Trump is worrying the academic world: no less than 370 economists, including several Nobel Prize win ners, signed an open letter in the Wall Street Journal appealing to voters to “choose another candidate”, saying Trump spreads disinformation and “promotes magical thinking.” “Donald Trump is a dangerous, destructive choice for the country. He misinforms the electorate, de grades trust in public institutions with conspiracy theories, and promotes
wilful delusion over engagement with reality,” the letter said. Even the International Monetary Fund is alarmed by the spectre of growing protectionism, from Trump to Britain’s vote to pull out of the European Union, which it says is a threat to global growth.
Real estate mogul’s patter
Odland said Trump’s style attracts some in the business world because he speaks to voters in the familiar blunt patter of a real estate developer negotiating a deal. “We in the retail industry have to negotiate all the time with commer cial real estate developers. They are bombastic, they are emotional, they come at things in a way that frankly sounds crazy,” Odland said. “He’s approaching geopolitics in the same way. Is it right? Well it’s unconventional. His supporters say, ‘Well, maybe it will end up to be a better deal for us,’ and that’s why they are willing to make the bet.” Analysts at Capital Economics said that Trump’s pitch might be exaggerated. “A Trump victory might not result in the radical changes that many fear. He would probably soften his rhetoric on trade policy once in the Oval Office and would struggle to push his plans for fiscal policy through Congress.” But in the immediate aftermath of the election, a Trump victory, or worse a disputed vote, will send Wall Street lower. Analysts estimate a Trump win would send the broad S&P 500 in dex below the 2,000 level, about 5 per cent lower than the week before the vote. That is what the index did on June 27, the day markets were shocked by the Brexit vote. But it was not long before the index re bounded. AFP
Low prices
Official trip
Post-Brexit
Ex-Thai PM Yingluck helps farmers sell rice
Premier Li says economy to maintain steady growth
May flies to India to prepare ground for trade deal
Former Thai Prime Minister Yingluck Shinawatra Saturday helped farmers sell 10 tonnes of rice to hundreds of people waiting in line in Bangkok as prices of jasmine rice have tumbled to its lowest since January 2008. Yingluck said at the scene that she felt the obliga tion to continue to help farmers who are struggling with low rice prices. “I think in the overall the world economy has an impact (on falling prices of rice). The other issue also is domestic (falling prices of rice at home) and that is why we worry that the situation is getting worse. So when you see news about farmers in trouble, we tend to want to help farmers and I am helping them on my own. So I hope that everybody will want to help the farmers,” said Yingluck. Yingluck told Xinhua that she just returned from the northeastern Ubon Ratchathani Province and trucked in 10 tonnes of jasmine rice to Bangkok, hoping that Bangkok residents would be interested in buying the jasmine rice. The 10 tonnes of rice were sold out in about an hour. Yingluck said she will launch similar events at a bigger scale, so northeastern rice farmers will have more opportunities to sell rice to city buyers. Xinhua
China will maintain steady growth and speed up economic transformation, Chinese Premier Li Ke qiang said, adding that the world’s No. 2 economy would be able to overcome current challenges, official news agency Xinhua reported. China is trying to rebalance its economy to adapt to slower growth both at home and abroad but policymakers are struggling to contain a range of domestic issues such as surging home prices and rising debt levels. Li said China’s moves to ensure “supply-side structural reform” while appropriately expand ing aggregate demand have boosted the domestic economy, and economic restructuring and liber alisation have also generated new areas of growth. Data released last month showed China posted economic growth of 6.7 per cent in the third quar ter, steady from the previous quarter, as increased government spending and a property boom offset stubbornly weak exports. He said that China has consistently followed proac tive fiscal policy and prudent monetary policy, and adopted new ways of macroeconomic regulation, reported Xinhua, while using “market-oriented and rules-based methods” to defuse risk. Reuters
U.K. Prime Minister Theresa May fled to India yesterday to prepare the ground for one of Britain’s key trade agreements after it quits the European Union. The premier will arrive in New Delhi with Trade Secretary Liam Fox and a delegation of 33 business leaders to cement links with the world’s fast est-growing major economy and seek to remove barriers to British companies winning contracts. “The U.K. and India are natural partners – the world’s oldest democracy and the world’s largest democracy,” May said in a statement. “This is a partnership about our shared security and shared prosperity. It is a partnership of potential. And on this visit I intend to harness that potential...” The visit will include signing of host of commercial agreements that combined will create as many as 1,370 U.K. jobs, according to the statement. While Britain isn’t permitted to open negotiations with India over a trade deal until it has formally started proceedings to leave the EU, May will use talks with Prime Minister Narendra Modi to explore what a post-Brexit relationship might look like, according to a person familiar with her plans. Bloomberg News