Chinese government slows down fiscal spending Public injections Page 10
Tuesday, November 15 2016 Year V Nr. 1173 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm
The silences and struggles that undermine independence The Portuguese and English Press Association (AIPIM) is conducting a survey on freedom of press in the Macau SAR. Despite the unfounded criticisms from international organizations – namely the Brussels-based International Federation of Journalists (IFJ), local journalists know that censorship, in its widest accepted terms, does not exist here. The IFJ-supported report was produced by its Hong Kong office, but they never went to the trouble of conducting a proper investigation or even contacting local representative associations. This, in itself, presents any criticisms as being based on a doubtful code of conduct and a highly censurable ethics code. However, there are factors that contribute to a lower level of access to information by journalists. Equally, due to selective and discriminatory practices, there are decisions from official departments and autonomous entities that violate the Chief Executive’s promises to treat all the press equally, as if outdated laws that promote unequal treatment were not damaging enough factors. Discriminatory decisions, either regarding access to information or equal distribution of support that might enhance or diminish the quality of a media can impact its independence. The current secretary for Social Affairs and Culture, while still acting as Spokesperson for the government and occupying the post of Chief of Staff to the Chief Executive, tried to shake the system, but systems are hard to change when only one man or a few men are pushing for that change. There are blocking forces in Macau that strive to impede greater transparency. Starting today, Business Daily will denounce cases and publish the internal struggles ongoing within the Macau government - the very same struggles that, in the extreme, cause certain media outlets to be discriminated against, while others enjoy privileges. Also, this newspaper is returning to an old practice of print media, of publishing the editorial on the cover page, instead of the inside pages. Good reading.
www.macaubusinessdaily.com
Festival
Cargo
Trade
Müller to be held responsible for ‘all liabilities’ after resigning from film festival Page 2
Macau International Airport to be hub for Malaysian cargo Page 7
Portuguese-speaking countries’ trade with China falls in first three quarters Page 7
Sitting upstream Finance
Capital held by banks and the non-banking and real estate sectors flowed out of the MSAR during the first half of the year. Total liquidity of the pataca declined by MOP3.6 bln, pointing to weak demand for the domestic currency or increased demand for external currencies. Page 5
Gaming
Cooperation call
The story behind the Saipan operation that beats local casinos Pages 8 & 9
Xi Jinping contacts Donald Trump promising a meeting soon Page 16
Row, row, row your boat
An outline for the MSAR’s territorial waters management law is expected to be made available for public consultation from today until December 15. The update comes after Chief Executive Chui Sai On visited Beijing at the beginning of the month to discuss the city’s newly assigned waters and future development.
Not engaged
Labour Civil servants feel little sense of belonging and engagement in their work, according to a study. Levels of stress are most influenced by civil servants’ personal lives, but nearly half of those surveyed feel frustrated at work. Competing for ever-fewer jobs at the top leaves many experienced workers feeling they have limited options. Page 2
Genting bows out of Jeju
Gaming Genting has sold its portion of a casino-gaming project in Jeju, South Korea, leaving real estate developer Landing to run the whole operation. Genting aims to consolidate its hold in Singapore and joins a list of operators shying away from investing in the country. Page 7
Chinese economy shows resilience
Land Page 3
HK Hang Seng Index November 14, 2016
22,222.22 -308.87 (-1.37%) Worst Performers
China Life Insurance Co Ltd
+0.94%
CITIC Ltd
-0.35%
Sun Hung Kai Properties Ltd
-4.64%
Hong Kong & China Gas Co
-2.05%
Hang Seng Bank Ltd
+0.49%
Cathay Pacific Airways Ltd
-0.38%
Tencent Holdings Ltd
-3.70%
Wharf Holdings Ltd/The
-2.02%
AAC Technologies Holdings
-0.07%
Power Assets Holdings Ltd
-0.41%
Link REIT
-2.45%
Industrial & Commercial
-1.96%
-0.21%
Belle International Holdings
-0.45%
China Resources Land Ltd
-2.24%
China Merchants Port Hold-
-1.95%
-0.30%
CK Hutchison Holdings Ltd
-0.48%
Cheung Kong Property
-2.10%
MTR Corp Ltd
-1.91%
Want Want China Holdings China Mobile Ltd
22° 27° 22° 25° 22° 25° 23° 25° 22° 25° Today
Source: Bloomberg
Best Performers
WED
THU
I SSN 2226-8294
FRI
SAT
Source: AccuWeather
Official data China’s economy kept up its steady pace after new measures to cool property markets were implemented. Almost every figure shows that stability is more a reality than a transitory situation. China’s expansion remains resilient, and economists are raising 2016 and 2017 growth forecasts. Page 10
2 Business Daily Tuesday, November 15 2016
Macau Civil servants
Not as good as it seems A survey conducted by FATFPM shows that the city’s civil servants feel little sense of belonging and engagement in their work, but the data also demonstrates a high rate of work performance Cecilia U cecilia.u@macaubusinessdaily.com
C
ivil servants in the city feel little sense of belonging and engagement in their work, according to a survey conducted by the Macau Civil Servants Federation (FATFM). During a press conference held yesterday, the President of FATFM, Pang Kung Hou reported that although the sense of belonging and engagement in their work by employees appear to be low, the work performance of civil servants is high. The survey also looks at the current stress levels of civil servants, from work as well as in their everyday lives. The data reveals that, in general, civil servants experience considerable amounts of stress, both from life and work. According to the results, some 42 per cent of respondents say they “often feel tired emotionally”, and around 40 per cent reported feeling constant fatigue from their
daily lives. Regarding fatigue brought on by work, the survey shows that some 47 per cent of public employees say they sometimes feel very emotionally tired from work, with 45 per cent indicating they occasionally feel frustrated with their work. Nonetheless, the level of stress from life is higher than from work, according to the results of the survey. Director Pang further explained the reason for the lack of a sense of belonging and low engagement levels in their work is due to the difference in the nature of civil servants from ordinary workers: that public servants serve the whole city instead of a particular company or enterprise. He added that many civil servants aim for a high salary and favourable working conditions. FATFM’s director also pointed out the current imperfections in the system for promotions, explaining that the higher the rank of a civil servant, the longer he or she takes
Surveillance
Second and third batches of CCTV costs MOP88 mln The MSAR government will pay MOP88 million (US$11 million) for the second and third batches of CCTV cameras to be installed in the city, according to a dispatch published in the Official Gazette yesterday. The provider of the cameras, Companhia de Telecomunicações de Macau, S.A.R.L. (CTM), will receive the payment in three installments spanning three years. According to the dispatch, the government will pay MOP8.86 million this year, MOP40 million in 2017 and
MOP39.8 million in 2018. The city’s Secretariat of Security previously announced that the surveillance network plan involves four phases, with 1,620 cameras to be installed in different parts of the city. The second and third batches will consist of a total of 600 cameras, with 263 CCTV cameras in the second phase and 338 in the third. The second and third batches will focus on major road and transport hubs, as well as spots that register higher crime in the city. C.U.
to get promoted further. Pang believes that the current system leads to an impression that there is limited concern for experienced employees.
Suggestions
In order to strengthen the “civil servant spirit”, FATFM suggested that training should be undertaken by new recruits and further training should also be offered to experienced civil servants. Pang also pointed out some cases of lower-ranked government employees being requested to deal with tasks that should be done by higher-ranked members. The director said that these situations put pressure on employees, leading to an increase in perceived stress. Moreover, FATFM believes that
the government should create more communication opportunities for employees with different ranks and positions to improve employee morale and efficiency. The Vice-President of the Macau Federation of Trade Unions (FOAM), Cheong Koc Iun emphasised that the results will be passed on to related government departments. “Our aim for conducting this survey is to attract awareness from the general public and the government about the working condition of the city’s civil servants,” Cheong said. “We hope we are able to provide immediate assistance for members in need, as to improve the efficiency and quality of the government’s performance as well as the services provided by civil servants.”
Culture
Marco Müller might face prosecution With the resignation of the former director of the International Film Festival & Awards (IFFA), Marco Müller on November 13, the organizer of the event – Macau Films & Television Productions and Culture Association (MFTPA) – has announced it ‘will claim Mr. Marco Müller for all liabilities arising from the non-compliance’ including through judicial processes, according to a declaration released by the association yesterday morning.
MFTPA states in the declaration that Müller failed to abide by the contents of the service agreement as the Festival Director. The secretariat has taken over the vacant position and the MFTPA emphasised that the resignation of Müller will not affect the preparations that have been made for the festival. Müller informed the MFTPA of his resignation on November 11 at 11:51pm, states the declaration. C.U.
Environment
Infrastructure
MOP16 mln for waste incineration centre expansion research
New Urban Zone C construction plan worth MOP3.7 mln
Sinomac Engineering Consultants Ltd will be granted a total of MOP16 million (US$2.12 million) to conduct research on the feasibility and preliminary design of the third phase expansion project of the city’s waste incineration centre, according to a dispatch published in yesterday’s Official Gazette. The MSAR government will pay the consultancy company in three instalments, with MOP2.5 million allocated
for this year, MOP13.5 million in 2017 and MOP844,000 in 2018. According to the latest ‘Macao’s Environmental Condition in 2015’ report released by the Environmental Protection Bureau, some 500,000 tonnes of waste were sent to the local incineration plant last year, a figure higher than that of other neighbouring cities in terms of the quantity of municipal waste per capita. C.U.
PAL Asiaconsult Ltd., an architecture and engineering consultancy company, will be granted a MOP3.7 million contract (US$470,695) to provide the “Compilation plan for the construction of the dike and filling on Macau New Urban Zone C”, according to a dispatch by Chief Executive Chui Sai On released yesterday in the Official Gazette. The payment will be made
by the MSAR government in two instalments, with MOP376,142 paid this year and MOP3,385,278 paid in 2017. According to the ‘master urban plan’ by the city’s Land, Public Works and Transport Bureau (DSSOPT), Zone C will cover 32 hectares on the northern part of Taipa Island. The area will be mainly used for the construction of residential buildings. C.U.
Business Daily Tuesday, November 15 2016 3
Macau
Politics Government predicts new maritime territories law proposal will reach the AL after the general elections in 2017
Water rules The law proposal for the management of new territorial waters will be made available for public consultation between November 15 and December 14 Nelson Moura nelson.moura@macaubusinessdaily.com
A
basic outline for Macau's new territorial waters management law will be made available to city's residents for consultation between November 15 and December 14, according to government representatives at a press conference yesterday. It was also announced that a new legal framework for the current territorial waters under MSAR control, amounting to 85 square kilometres, is expected to be put up for debate in the Legislative Assembly (AL) after
the general elections in 2017. The Chinese central government granted additional territorial waters to the control of the MSAR in December of last year, with the local government stating in May of this year that a legal framework for the new water resources would be defined through cooperation between the Marine and Water Bureau (DSAMA), the Legal Affairs Bureau (DSAJ), the Macau Economic Services (DSE), the Environmental Protection Bureau (DSPA) and the Macao Government Tourism Office (MGTO). The announcement comes after Chief Executive Fernando Chui Sai On travelled to Beijing at the beginning of
the month to discuss the management of the city’s new territorial waters and their future development plan with Minister of Transport, Li Xiao Peng. During the press conference, it was also stated that the new territorial waters would continue to be under the management of the DSAMA and the Macao Customs Service. The Free Travel Yacht Scheme, allowing yachts to travel from Mainland China to Macau and set to come into effect in June of 2017, will also come under the existing legislation for recreational ships in the MSAR waters.
Maritime economy
The territorial waters law proposal includes an outline for a planned exploration of the MSAR water resources including: perfecting existing legislation for maritime areas, establishing maritime zones, promoting environmentally friendly exploration of water resources and the sustainable development of a diversified local economy.
In the section of the law proposal relating to the economic development of the MSAR water resources, it is defined that the future legislation will focus on incentivising scientific and technological research of water resources in order to better assess how to develop the maritime economy, while promoting the creation of new maritime industries in the tourism and transport sectors. Expansion of the gaming industry in any future land reclamation zones in the territory’s waters has not been allowed by the Chinese central government. “We want a base law and judicial framing in order to better manage the 85 square kilometre area. We need to follow the national strategies and rulings for maritime traffic and water areas management. After the public consultation of the basic law for the water management, more detailed legislation will be presented,” stated Carmen Maria Chung, Legislative Department Chief at the DSAJ.
4 Business Daily Tuesday, November 15 2016
Macau
Business Daily Tuesday, November 15 2016 5
Macau
Monetary
Capital flowing out in H1 The latest report by the Monetary Authority of Macau shows that capital held by local banks, private non-banking sectors and real estate sectors flowed out during the first half of the year Kam Leong kamleong@macaubusinessdaily.com
D
uring the first half of the year, the city saw funds flow out from the MSAR as the total liquidity of patacas declined by MOP3.6 billion (US$45 million) down to MOP55.1 billion as at the end of June. According to the latest statistical report on cross-border capital flows by the Monetary Authority of Macau (AMCM), the lower MOP liquidity for the period pointed to weak demand for the domestic currency or increased demand for external currencies. For the period, the MSAR’s monetary
base, also known as high-powered money, dropped by MOP1.5 billion, down from MOP37.1 billion at the end of the first half of the year, compared to the end of 2015. The local banking sector registered net capital outflows of MOP24.9 billion, due to a notable growth of MOP38.4 billion in external interbank balances, compared to net capital inflows of MOP15.3 billion for the same period in 2015. In addition, a net capital outflow of MOP875.6 million to external banks was registered from local non-bank private sectors during the first three months of the year, AMCM said. According to the authority, the fund outflow from the city’s non-banking
sectors was due to the increased external deposits of local non-bank sectors while their external loans decreased.
Property and surplus
Another major source of capital outflows was the city’s real estate market, which primarily registered net outflows of foreign direct investment, AMCM said. For the first half of the year, the net amount of local properties disposed of by non-residents totalled MOP2.2 billion, compared to a disposal of MOP2.8 billion in the same period last year. In addition, for residential properties alone, purchases by non-residents from local residents were some MOP300 million, while their sales to local residents reached MOP2.3 billion in the same period. Nevertheless, AMCM noted that the general government recorded a net capital inflow and a mild reduction
in foreign assets for the period as it increased its investment in local assets. For the first half of 2016, the overall trade-account surplus amounted to MOP70.9 billion as the pace of economic contraction slowed. AMCM notes in the report that the current pace of contraction in the current account surplus will stabilise. ‘As Macau’s private and public sectors have maintained sufficient positions of net foreign assets, the SAR will continue to be a net capital exporter to the rest of the world, which strengthens its ability to withstand external shocks under extreme risk events,’ the report reads. However, it noted that the supervision of private economic sectors should be enhanced. ‘As shown in the statistics, individual economic sectors, which have demonstrated a reversal of external capital flows or large variations in foreign assets, require further close surveillance and enhanced prudence in supervisory management, in order to prevent unexpected economic turbulences,’ the authority wrote.
6 Business Daily Tuesday, November 15 2016
Macau Opinion
Albano Martins* How to diversify! Everyone knows how the three per cent rule for gaming table growth appeared when Cotai emerged as the alternative space for the main game in town. Today this policy is backfiring and impacting on the inventors themselves, having harmful effects on the accounts of those who invested billions of patacas when the rules were different, but were changed in the middle of a very tough championship! How long will we keep shooting our own feet? In a land that claims to be a free economy, where real estate speculation damages almost all other industries and the community, those who decide whether or not a casino should have more gaming tables should be the ones who are taking the business risks. That is, the casinos themselves. Not the regulator! No one can convince me that controlling the “ravages” of the gaming industry must be done in a way that has nothing to do with “science”, like the three percent rule! What the Government must do is economic policy! And economic policy is not to obstruct the growth of the only industry capable of creating lots of wealth and jobs, upstream and downstream. Economic policy should be directed at creating the conditions for other industries to emerge, using part of the funds generated and paid by the casinos as tax. Money should not just stay in the government coffers getting moldy. It should be invested in a smart way. Diversification does not come by decree, but through opportunities. Everybody in the world wants diversification. But this only arises when there are clusters and conditions created that allow them to appear. That’s the Government’s job! The Government must adjust its performance to enhance the development of the economy, responding in a healthy, fast and intelligent way to the growth of its king industry – gaming. The bottlenecks in the game - the quantity and quality of labor, the control of capital from China, and the lack of infrastructure in Macau - are already challenges enough. If competition from abroad worsens, Macau risks disappearing in the same way it has grown so exponentially. There is much talk about the conventions and exhibitions sector as one of the industries to be supported. Of course! But how long will it take until it achieves minimum visibility in GDP, if in the first half of this year it has only produced revenue of MOP70.7 million, equivalent to just 8.5 hours of revenue from Macau casinos? * an economist and contributor to this newspaper
Gaming
Studying gaming for Cape Verde Cape Verde students currently studying Business Administration in Gaming and Recreation Management at IPM see their education in Macau as an opportunity to find jobs in their country’s future gaming industry
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t the Macao Polytechnic Institute (IPM) there is a group of students comprised solely of Cape Verdeans learning how to manage casinos, at a time when their home country is preparing to commence its gaming industry. Belany, António and Kino are three of the 17 students from Cape Verde who have won scholarships to attend a degree in Business Administration in Gaming and Recreation Management. Many of them have never entered a real casino, but the space where they are doing their practical classes is similar to one. Behind a table, dressed as a croupier, 22-year-old Belany Lopes separates and spreads chips of different colours methodically on the green cloth table while mumbling numbers as a colleague supervises. “I was doing ‘blackjack’ calculations. At first it seems difficult, but with practice it’s easy! It’s interesting,” Belany says. “To run a good business you have to understand everything about it to know how it works. I always wanted to do game management and management,” António states, adding that he graduated in Biochemistry in Brazil, but decided that “he didn’t like to stay in the lab all day” and that his young age allowed him “this adventure”.
Cape Verde gaming
Although most of his colleagues met in their home country during the application process, Kino Rodrigues, 23, was already living outside of Cape Verde before coming to Macau, studying Mandarin in Beijing since 2014. “I wanted to study management and since the opportunity appeared I decided to come. Our country
is small and not everybody has the opportunity to continue their studies,” Kino states, adding that he still practises Mandarin at home, both speaking and writing. The student, who is still too young to enter casinos in the MSAR, also considers the course attractive, since the current integrated resort project being developed in Cape Verde is expected to create “more business opportunities”. This year, the first stone was laid for a tourist project in Cape Verde, which will include a casino with a gaming concession contract for 25 years. The project in the Ilhéu de Santa Maria, a small uninhabited islet in front of the capital city of Praia on Santiago Island, is the largest tourist development planned for the country and is the result of an investment by Macau Legend Development group run by local businessman David Chow. The investment is estimated at 250 million euros (MOP2.1 billion/ US$270 million) - about 15 per cent of Cape Verde’s gross domestic product (GDP) - and is scheduled to open in 2019. However the country’s first casino will actually open this year, on the island of Sal, a venture by the Hilton brand whose construction is already in the final phase, according to a source from the Gaming Inspection Bureau of Cape Verde (IGJ). Although Rodrigues considers the IPM course “a huge challenge” since it is conducted in English, he “really enjoys it” and recognises it will be “a golden opportunity”, as Cape Verde begins its gaming industry. António Lopes, who at 19 is one of the youngest students in the class, also believes the new project in the country will create plenty of work opportunities in Cape Verde, with
the IPM course being a chance for him to also explore his “passion for accounting”. Although he originally considered studying aeronautical engineering, António says he came to “study for real and not play around”. “I wanted to study a different course but with two other brothers in school, I knew it would be hard for my parents,” António states.
Opportunities abroad
Th e st u d e n t g r o u p h a s t w o peculiarities: it is made up of only Cape Verdeans and it is the first group to have classes solely in English. The course has been running since 2009/2010, but so far only in Chinese, explains the director of the IPM Gaming Teaching and Research Centre, Hester Cheang Mio Han, adding that he believes this group of students is “great for a course as special as this”. The scholarship program includes exemptions from tuition fees and other fees, free accommodation and a monthly allowance over the four years of the course, dependent on their academic achievements. Although the Cape Verde students consider that the course will help open a whole new set of work opportunities in their home country’s upcoming gaming industry, they don’t think of returning home as a completely safe bet. “Honestly I don’t know, I think I prefer to have a bit of an adventure. I wanted to work for a little while in Macau, and get some experience before returning,” states Belany, adding he is considering some opportunities in Las Vegas or the Czech Republic. Kino also admits that having left his country in 2014, he has always thought of living and working abroad, but that could change if there was an invitation to work in Cape Verde, in order to be in his home country and near his family. António on the other hand, says he wants to make an effort to find a job abroad even “knowing that I will always have a job opportunity in my country”. Lusa
Business Daily Tuesday, November 15 2016 7
Macau Gaming
Landing to take full control over Jeju project
In Genting’s filing on Friday, the company stated that its disposal of the joint-venture shares to its partner was due to its plans to focus on
its current business in Singapore, in addition to enhancing its competitiveness in a bid for a gaming license in Japan. In a research note on Sunday, analysts from Union Gaming said the gain Genting is to receive from Landing is “modest”. Analyst at the research house, Grant Govertsen, noted that joint revenues in gaming developments ‘tend to be complicated or difficult in the best of times’. ‘Compounding this, in our view, was that the JV combined two non-Korean entities trying to navigate development in a jurisdiction that offered neither partner any sort of home field advantage,’ he wrote. Genting is the second major casino investor to turn away from the South Korean market. In June, Philippine-listed gaming operator Bloomberry Resorts Corporation announced its intention to sell its Jeju Sun Hotel and Casino, as well as the gaming concession, to local junket operator Iao Kun Group Co Ltd despite the deal failing to be concluded. Landing’s Jeju project, for which investment started in late 2013, is expected to see its first phase of construction, including hotels and theme park facilities, completed during the third quarter of 2017, while the whole project is slated for completion in 2019. In yesterday’s filing, Landing claimed it is “optimistic” about the prospects of the project. ‘Given the increasing number of tourists visiting Jeju with limited supply of hotel and accommodation facilities and lack of extensive and diversified entertainment facilities, the Jeju Project can definitely poach a market share in the expanding tourism in Jeju and truly satisfy the tourist needs,’ the company notes.
China’s second largest Lusophone trading partner in the first nine months of 2016, despite registering a 24.3 per cent year-on-year fall in trade value – the most considerable decrease of China’s three main Portuguese-speaking trading partners,
hitting US$11.78 billion. Portugal maintained its position as the third largest trade partner of China in the Portuguese-speaking world in the first nine months of 2016, with bilateral trade amounting to US$4.15 billion.
Singaporean gaming operator Genting Singapore has agreed to sell its 50 per cent stake in joint ventures with Landing in their casino-resort project in South Korea Kam Leong kamleong@macaubusinessdaily.com
C
hinese real estate developer Landing International Development Ltd is taking full control over its halfowned casino-gaming project in Jeju, South Korea: Jeju Shinhwa World (previously known as Myths and History Park). Last Friday, Genting Singapore PLC first announced to the Singapore Exchange that it is to dispose of the company’s current shares in its joint ventures for the development of the Jeju casino-resort project. According to Landing’s filing with the Hong Kong Stock Exchange yesterday, Landing is to acquire the whole capital stake of Callisto Spa from Algona Pte Ltd - a wholly owned company under Genting Singapore - for a total consideration of US$381 million (MOP3 billion). Callisto, via a wholly owned subsidiary, owns 50 per cent of the shares in the holding company of the casino project
- Landing Jeju Development Co. In addition, the same filing announced that Landing has reached another deal with Genting to obtain the latter’s 50 per cent shares in a joint venture between the two parties for managing and operating the hotel establishment in the casino-resort project. ‘The Board considers that complete ownership and control of the Jeju Project will provide a good opportunity for the Group to work towards the achievement of its business vision, enhance the Company’s flexibility on the development of the Jeju Project and facilitate the Company to build up its presence and goodwill in the
integrated resort and tourism sector,’ Landing wrote in yesterday’s filing. It remarked that it is pleased with Genting Singapore’s decision to sell its shares. ‘[The company] is delighted that Genting Singapore has agreed to proceed with the Callisto Acquisition after considering their corporate strategies of different market focus, brand repositioning and development of new facilities,’ it claimed.
“Modest” gain
Trade
Sino-Luso trade continues to fall Trade between China and Portuguese-speaking countries decreased 9.6 per cent year-on-year in the first nine months of 2016, with total trade value reaching US$69.13 billion Nelson Moura nelson.moura@macaubusinessdaily.com
Sino-Luso trade fell 9.6 per cent between January and September of 2016 when compared with the same period last year, to reach US$69.13 billion (MOP552.3 billion) according to data from the Chinese Customs Service, published by the Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries (Forum Macao). Exports from China to Lusophone countries were valued at US$21.27 billion dollars in the nine-month period, 25.78 per cent less than in the same period last year. Exports
to China from the eight countries reached US$47.85 billion dollars, a small year-on-year increase of 0.09 per cent. On a month-to-month comparison, Sino-Luso trade in September increased by 1.91 per cent, reaching US$8.89 billion.
Three amigos
Brazil was China’s largest Lusophone trading partner in the first nine months of the year, with a total of US$51.67 billion in trade value registered, despite a seven per cent decrease in total trade value yearon-year during the period. Angola maintained its position as
Cargo
MSAR as cargo hub between Malaysia and PRD The MSAR airport will act as a ‘strategic platform and hub’ for air cargo between Malaysia, the Pearl River
Delta and Southern China, the Macau International Airport (MIA) has announced. An agreement between
MIA and DRB-HICOM Asia Cargo Express Sdn. Bhd. (DHACE) will come into effect today as the first scheduled air freighter takes off, with the MSAR becoming the ‘first strategic springboard’ for DHACE to enter Southern China, transporting mostly Malaysian seafood, halal food, processed food
and seasonal fruit as well as exported goods such as e-commerce commodities destined for Southeast Asia and the Middle East via Malaysia. ‘The launch of the air freight service not only enriches the network development of Macau and Southeast Asia in air logistics field, [but] also facilitates Macau to be a significant aerial port of Southern China,’ notes the MIA release. K.W
Correction In an article entitled “Location, location, location”, appearing in the November 14 edition of Business Daily, the first sentence should read “A potential for cooling in the housing market in Mainland China could signal a drop in revenues for the MSAR, note analysts at Wells Fargo”. Business Daily apologizes to the parties involved and to our readers for any inconvenience caused.
8 Business Daily Tuesday, November 15 2016
Gaming
Saipan
Big money, big questions at Trump protégé’s remote casino Daniela Wei and Matthew Campbell
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n a tiny island in the western Pacific, at the end of a duty-free mall wedged between a onestory laundromat and a cell-phone shop, you’ll find what may be the most successful casino of all time. The awkwardly named Best Sunshine Live hardly looks like a high-roller hub. Construction workers bet US$5 or US$10 at a time on roulette and baccarat in a fug of nicotine. Clustered in a far corner are a handful of tables for so-called VIP gamblers, which at 8:30 p.m. on a September Saturday are almost empty. A nearby bar has just a couple of patrons. Nothing about the facility, which opened last year on the U.S. island of Saipan, hints at the money flowing through it—table for table, far more than at the biggest casinos in Macau, the world’s number-one gambling capital. Nor is there any sign of the connections of its owner, Hong Konglisted Imperial Pacific International Holdings Ltd., which has a market value of US$2.4 billion. It’s a power list that includes a former director of the Central Intelligence Agency, a former director of the Federal Bureau of Investigation, and three former U.S. governors, including past chairmen of both the Democratic and Republican National Committees. Behind them all: a Donald Trump protege, Mark Brown, who ran the Republican president-elect’s Atlantic City casino empire and is now Imperial Pacific’s chief executive officer. With that backing, Best Sunshine is posting numbers that stagger industry veterans. The daily reported revenue for each of its VIP tables in the first half of the year, about US$170,000, is almost eight times the average of Macau’s largest casinos. Its 16 VIP tables alone generate revenue that’s more than half of the receipts from 178 high-stakes tables at Wynn Resorts
Ltd.’s flagship casino in the Chinese territory, a 20-story palace with three Michelin-starred restaurants. The revenue figures, or actual wins by the house, are just a fraction of total bets. In September, Imperial Pacific reported a record US$3.9 billion in bets at its casino—meaning the 100 or so high-rollers who it says come through its doors monthly each wagered an average of US$39 million.
3.9 billion US$ Bets recorded in September at the Saipan casino
Those volumes of cash are drawing the attention of law-enforcement officials. The U.S. Treasury’s Financial Crimes Enforcement Network, which is responsible for alerting prosecutors and other authorities of suspicious financial flows, has taken notice of the activity at Best Sunshine, according to a person with knowledge of the matter. The person asked not to be identified because the information isn’t public. Spokesmen for the Treasury and Department of Justice declined to comment.
“It’s like pressing a balloon down—it’s going to pop up somewhere else”
“I’ve heard every question that you have in your mind. All my guys, my friends in Macau say this is bullshit,” Brown said in an interview, adding that he’s not aware of a Treasury inquiry and has not been contacted by the agency. “We are very transparent. We don’t want to do anything to break the law.” The story of how Saipan’s casino came to enjoy such puzzling success is a tale of money and political intrigue that stretches across the Pacific, connecting it to top power-brokers in Washington and New York, 14 time zones away. But above all, it links the
island with the burgeoning ranks of China’s super-rich and the fathomless wealth, obtained legitimately or otherwise, that they’re seeking to move around the world. It is cash that has bent the course of the global economy, flowing from Beijing and Shanghai to London, Sydney, Vancouver and other international cities. Along the way, it’s washing up in unheardof volumes on an obscure speck of American soil thousands of miles from almost anywhere. The money has arrived on Saipan as Chinese President Xi Jinping intensifies an unprecedented crackdown on corruption and capital flight from the world’s secondlargest economy. Macau’s casinos, traditionally a relatively simple avenue for citizens to spirit funds offshore in violation of currency controls, are a key target of his efforts, driving high-stakes gambling elsewhere. “It’s like pressing a balloon down— it’s going to pop up somewhere else,” said Grant Govertsen, an analyst at advisory firm Union Gaming. The somewhere else is Saipan, he said. Large-scale capital flight may be what accounts for the revenues at Best Sunshine, according to executives at three Macau gambling promoters, who spoke on the condition they not be identified bad-mouthing a competitor. The numbers are simply impossible if they are not inflated or facilitating money-laundering, they said. Four analysts who focus on Macau’s gaming industry and have examined Imperial Pacific’s figures said they can’t understand how it could report VIP bets totalling HK$105 billion (US$13.5 billion) and revenue of HK$3.8 billion in the first half of the year. They asked not to be identified because they don’t cover the company.
Saipan
Even the rare high rollers betting several hundred million Hong Kong dollars wouldn’t be enough to generate those kinds of revenues, the
executives said. One executive, who works with some of Macau’s largest casinos, said he’s never been able to attain Saipan’s daily average even on a single day in 20 years in business. Asked about the discrepancy, Brown said he believes Macau c a si n o s a r e u n d e r- r e p o r t i n g figures, with off-books betting not showing up in official reports. Many gaming tables at Macau resorts are underused, which accounts for the high revenue from the limited tables in Saipan, according to Imperial Pacific. Brown also said the company is stepping up its antimoney-laundering procedures to match those at international banks, and that about 750 prolific gamblers whose backgrounds it knows have accounted for the bulk of revenue since Best Sunshine opened. In what it said was an effort to
Business Daily Tuesday, November 15 2016 9
Gaming said in an interview, adding that he and Brown were previously acquainted from his efforts as governor to bring gambling to Pennsylvania. “The biggest selling point to me was the trip to the Mariana Islands, a part of the world where I’ve never been.” Rendell said he is paid US$5,000 a month for his role, and that his work so far has mostly been limited to making an introduction to Haley Barbour, the ex-Mississippi governor and RNC chairman who’s now a prominent lobbyist. The Saipan revenues are possible because Macau’s casino industry is “cratering,” Rendell said. Barbour now also advises Imperial Pacific. He said he’d not yet had “the chance to get into the details of the business,” and was not concerned about accepting the role “because I have high regard” for Rendell and Woolsey.
Food for thought
“enhance its integrity,” Imperial Pacific earlier this year appointed to its board James Woolsey, who ran the CIA in the early 1990s and was among national-security advisers to Trump’s White House campaign. He joined Eugene Sullivan, formerly a senior U.S. military judge, who was appointed last year. Sullivan declined to comment; Woolsey didn’t respond to requests for comment. A separate advisory committee for business strategies and government relations, formed in April, includes former FBI director Louis Freeh and Ed Rendell, previously governor of Pennsylvania and chairman of the DNC. Freeh didn’t respond to requests for comment. Former New York Governor David Paterson was also an adviser to Imperial Pacific from August 2015 to this spring, when he resigned to pursue other opportunities. Paterson didn’t attend any meetings about the Saipan casino “beyond due diligence and security-expert recommendations,” said a spokesman, Sean Darcy. It was Paterson who pitched Freeh and Rendell on joining the committee, according to the latter. “They wanted some Americans involved in case anything came up with the regulation or legalities,” Rendell
Proximity to the corridors of power is a dramatic change for Imperial Pacific, which is controlled by a mother-and-son duo from mainland China and for most of its existence was called First Natural Foods. In 2013 it recorded gross profit of just US$1.25 million. The following year it embarked upon an unusual metamorphosis, announcing it would move from frozen food into the greater opportunities of gambling by paying US$30 million to apply for a casino license on Saipan, the capital of the U.S. Commonwealth of the Northern Mariana Islands. At the time the island, with 50,000 inhabitants and such poor infrastructure that the Centres for Disease Control advises against drinking the tap water, was hardly a tourist hub. Local legislators wanted to change that, and earlier in 2014 had reversed years of opposition to casinos.
105 billion HK$ VIP bets made H1 at Saipan casino
The casino law was introduced and passed in the Marianas’ House on March 3, and in the Senate the following day, without being referred to committee. A lawsuit filed by a local activist, Glen Hunter, alleged the process violated rules that forbid “legislators from holding surprise sessions where acts are undertaken as part of a secret agenda.” Before voting for the law, Senate President Ralph Torres and other legislators had visited Hong Kong for “fact-finding” purposes, Torres said in a deposition. He also said he was “not sure” if he’d fully read the bill before the Senate acted on it.
As Imperial Pacific closed in on a 40-year casino license, the only other bidder, Marianas Star Entertainment Inc., also sued the government. It alleged that “significant benefits” were illegally provided to legislators by casino investors, and that regulators refused to investigate whether Imperial Pacific was linked to them. The suit was unsuccessful; Imperial Pacific said those investors “were not connected” to the company. A spokeswoman for Torres, now the Marianas governor, said there is “no evidence to support” allegations of improper benefits to legislators.
20 million US$ Yearly payment to the Mariana’s community fund by Best Sunshine
Imperial Pacific’s deal did include above-board payments. The company agreed to pay US$15 million annually to top up the Marianas pension fund. Another US$20 million a year would go to a community fund, according to the island’s gaming regulator. And it added a remarkable sweetener: a one-time US$10 million payment to cover the home electric bills of everyone on the island.
Atlantic to Pacific
To run the Saipan project, Imperial Pacific hired Brown, who got his start as a teenage blackjack dealer in his native Atlantic City, before rising through the ranks of Trump’s casinos to become a senior executive. The real-estate mogul cited Brown among his trusted advisers in his 2004 book, “Trump: How to Get Rich,” and Brown returned the favour in May this year by telling Fortune that his old boss was “great with women” and has “a great brain.” Brown left Trump in 2005, heading to Macau to oversee Las Vegas Sands Corp.’s project to build a replica of the Venetian hotel. He departed in 2009; two years later Las Vegas Sands was plunged into turmoil by a Securities and Exchange Commission investigation into potential violations of the Foreign Corrupt Practices Act in Macau over a period that overlapped with Brown’s tenure. In 2012, Australian regulators denied him a license to work at Sydney’s Star Casino for reasons they didn’t disclose. Las Vegas Sands this year settled the allegations for US$9 million without admitting guilt. Brown was not accused of wrongdoing, and said he was never involved in the investigation. A chance at economic revival hasn’t silenced local critics of Brown’s latest project. At his low-slung office in the
Saipan village referred to grandly as Capitol Hill, legislator Ramon Tebuteb said he fears the island is becoming a “safe haven” for illicit Chinese money. “It will happen, and I think it has happened,” said Tebuteb, the minority leader in the Marianas House of Representatives. The neighbouring island of Tinian provides a cautionary tale. Last year the U.S. Treasury fined the Tinian Dynasty casino US$75 million for “wilful and egregious” violations of anti-money-laundering rules. It closed afterward. Saipan’s gambling watchdog is adamant there’s no impropriety on its watch. The Commonwealth Casino Commission was created in 2014 and oversees only Best Sunshine, the island’s sole casino. The commission’s members are paid US$20 an hour for time spent attending official meetings only, according to the territory’s casino law. “We do not cahoot with the licensee,” Edward DeLeon Guerrero, the commission’s executive director, said in an interview. “Have you seen corruption in other parts of the world? Probably. From my experience, I have not seen that.” DeLeon Guerrero, a former customs chief and court administrator, hadn’t worked in a casino-related job before taking on the role of regulating Best Sunshine. Although he conceded the commission faces a steep learning curve, “this is America. We protect our borders,” DeLeon Guerrero said. “Movement of money we track 1,000 per cent.”
Big plans
Brown has huge plans for Saipan. Near Best Sunshine, construction is underway on Imperial Pacific’s planned new hotel and resort. According to renderings, it will resemble a 1.5 million square-foot mash-up of the Forbidden City and the Palace of Versailles with a 100-foot glass sculpture of an undulating dragon in the lobby, reached via hallways drenched in golden filigree. After that, plans call for “20 six-star themed hotels, 11 world-class casinos,” and a kilometre-long “duty-free shopping boulevard.” Imperial Pacific is planning to sell as much as US$650 million in bonds to finance the project, Brown said. The company says it and future partners may spend as much as US$7 billion, which would amount to one of the largest resort projects in history. It may all sound improbable—but then so is the notion that a storefront casino on Saipan could out-earn the titans of Macau. “A legitimate high-stakes gambler wouldn’t want to spend time in this place,” Hunter, the plaintiff in the suit against the Saipan casino law, said of Best Sunshine. “Have you seen it? It’s a duty-free store with a fresh coat of paint and some chandeliers.” Bloomberg
10 Business Daily Tuesday, November 15 2016
Greater China Official data
Latest figures point to steadier economy for now Property investment growth quickened in October to its highest since April 2014 Elias Glenn and Kevin Yao
C
hina’s economy largely showed further signs of steadying in October as expected, but disappointing retail sales growth and fears of U.S. trade frictions under incoming President Donald Trump are increasingly clouding the outlook. Fixed-asset investment quickened slightly and beat expectations in January-October as the government stepped up infrastructure spending to support growth, official data showed yesterday. But a number of other indicators released over the past week from exports to bank lending, as well as expectations of a slowdown in the heated property market, suggest economic momentum may falter in the months ahead. “On balance, today’s data suggest that the recent recovery in economic activity continued into the fourth quarter,” Capital Economics said yesterday in a note. “We expect growth to hold up well for another quarter or two. However, with credit growth now slowing and the property market beginning to cool the drivers of the recent recovery look set to fizzle out early next year.” China’s leaders have depended on a surging real estate market and government infrastructure spending to drive activity this year and look set to meet their growth target of 6.5 to 7 per cent. The construction boom in turn has helped perk up the ailing industrial sector, spurring demand for cement to steel. B u t t o p p o l i c y m a k e rs a n d investors are also clearly growing more concerned about the risks of prolonged debt-fuelled stimulus. 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 has resulted in a financial bust or sharp economic slowdown, analysts say. “I believe the overall policy tone has turned to risk management as the authorities are concerned about asset bubbles,” said Singapore-based economist Zhou Hao at Commerzbank, predicting that the government will throttle back its aggressive stimulus before the end of the year.
Investment still heavily reliant on government
Fixed-asset investment expanded 8.3 per cent in the first 10 months from a year earlier, slightly ahead of market expectations and supported largely by government spending. Investment by state firms surged 20.5 per cent, though the pace cooled slightly from the first nine months. In an encouraging sign, growth of private investment picked up to 2.9 per cent from 2.5 per cent in JanuarySeptember, though it remained sluggish after hitting a record low of 2.1 per cent in the first eight months of the year. Private investment accounts for about 60 per cent of overall investment in China. Chinese policymakers have been trying to lure private investors into big infrastructure projects through public-private partnerships, but many lucrative sectors are still dominated by less efficient state firms.
Uncertainties
The most surprising miss for October was found in retail sales, though analysts were quick to note it was too early to tell if slowing consumption
would turn into a trend. Retail sales growth cooled to a fivemonth low of 10.0 per cent from 10.7 per cent in September. Analysts had forecast they would hold steady. On Friday, Alibaba Group Holding Ltd’s Singles’ Day festival posted a record RMB120.7 billion (US$17.73 billion) worth of sales, though the gala shopping day saw growth slow as Chinese shoppers searched for deeper discounts and lower price tags. Statistics bureau spokesman Mao Shengyong blamed the sales slowdown on a high level of comparison with last year. “Consumption can maintain stable growth. There should not be a problem achieving this year’s GDP growth targets,” he told a news briefing. October industrial output also missed expectations but to a much smaller degree, rising 6.1 per cent, the same pace as in September but marginally less than forecast. Stronger factory prices have helped boost industrial profits, relieving some pressure on companies squeezed by higher costs and weak demand, though there are concerns some of the gains are due to speculation and are not sustainable. Data last week showed a sharp slowdown in bank lending last month, suggesting demand for
mortgages is cooling after a spate of steps by local governments last month to restrict home purchases to cool soaring prices. While property investment growth quickened in October to its highest since April 2014, some analysts suggested it could be due to a last-minute push by developers to complete construction projects as home sales and surging prices start to slow. October exports and imports also fell more than expected, adding to doubts that the pick-up in economic activity in the world’s largest trading nation can be sustained even if a trade war with the U.S. does not materialize. Trump had lambasted China throughout the campaign, drumming up headlines with his pledges to slap 45 per cent tariffs on imported Chinese goods and label the country a currency manipulator his first day in office. China’s top leaders are due to map out economic and reform plans for 2017 at the annual Central Economic Work Conference expected in December. Analysts believe it’s too early for the government to start withdrawing policy support now due to rising domestic and global uncertainties, despite the risk of added debt. Reuters
Public support
Government reports rare drop in fiscal spending Overall government revenues rose 5.9 per cent, up from 4.9 per cent in September Government spending in China posted a rare drop in October, but still surged 10 per cent in the first 10 months of the year as officials looked to shore up economic growth. A 12.5 per cent decline in fiscal spending in October from a year earlier was largely due to a high base of comparison with the same period last year, the Ministry of Finance said yesterday. Most analysts believe the government will have to continue its robust spending amid growing domestic and global economic uncertainties, though top officials are also increasingly concerned about the dangers posed by rising levels of debt. Central government spending rose 5.6 per cent in October from a year earlier, while spending by local
governments dipped 15.5 per cent, the ministry said in a statement on its website. China has relied more heavily on infrastructure spending to stabilise growth this year as private companies pull back on investment, but
concerns about growing debt levels are increasing. Overall government revenues rose 5.9 per cent, up from 4.9 per cent in September. Government revenues rose 5.9 per cent in the first 10 months of the year. That implied a fiscal deficit of RMB1.1 trillion (US$161.17 billion) in the January-October period, narrowing from RMB1.46 trillion in the first
nine months, which was equivalent to 2.7 per cent of gross domestic product, according to Reuters calculations. China is aiming for a 3 per cent fiscal deficit this year, though some economists believe it may be higher.
Key Points Oct spending drops but due mainly to base effects -ministry Jan-Oct spending up 10 pct y/y, revenues up 5.9 pct Jan-Oct fiscal deficit at 1.1 trln yuan -Reuters calculation Last week, China appointed Xiao Jie as new finance minister who is expected to maintain an expansionary fiscal policy and push reforms to put a lid on mounting debt levels. Some central bank officials have said China has room to raise its fiscal deficit ratio to between 4 and 5 per cent to more effectively boost the economy. Reuters
Business Daily Tuesday, November 15 2016 11
Asia Reopening mines
In Brief
Coal output extends decline despite gov't call Production has fallen every month since at least July last year Fang Cheng and Chen Aizhu
China’s October coal output fell 12 per cent compared with a year earlier, data showed yesterday, even after the government gave operators the go-ahead to ramp up output and reopen mines in a bid to top up power producers’ inventories ahead of winter. With the restart of shuttered mines taking time to kick in, the drop highlights concerns about tight supplies in the world’s top consumer and producer of the fossil fuel, a factor that has fuelled a nearly year-long rally in thermal coal prices. For the first 10 months of the year, China produced 2.74 billion tonnes of coal, down 11 per cent from a year earlier, the National Bureau of Statistics (NBS) data also showed. At 281.85 million tonnes, October output was ahead of September’s 277 million tonnes, according to NBS data. But on a daily basis, the October level still meant a drop of 1.5 per cent with the shorter month of September. “As the government rolled out the
policy to push for output increases very recently, we shall wait for November and December to see if the measures take effect,” said a Beijing-based coal trader. “It’s unlikely to see production to be on par with year-ago rates, but we may expect to see month-on-month increases in the coming months.” Coal inventories at Qinhuangdao, the country’s largest coal port, rose to more than 6 million tonnes for the first time this year yesterday, according to industry website www. cqcoal.com. Production has fallen every month since at least July last year as Beijing obliged mines to close or curb production as part of a drive to combat pollution. But starting in late September, Beijing began urging coal producers to boost supplies in a slew of emergency meetings, because the efforts to cut overcapacity and curb pollution had depleted supplies to utilities and triggered rising prices. Last week the state planner pressed two top miners to sign long-term
supply contracts with utilities at a base price that is a quarter below current spot market rates. Traders said the market was looking for clarity on the details of the term prices agreed between the top miners and utilities for a better gauge of supply and demand. The government has said the base price agreed was a reference point that could fluctuate depending on market conditions.
Key Points Oct coal output down 12 pct on year Oct daily output down 1.5 pct on vs Sept Jan-Oct production down 10.7 pct on yr Beijing urging reopening of mines to curb price rally “The market is keenly looking for guidance as to which benchmark prices will be adopted in the execution of the term supply deals, and how serious the term contracts will be carried out,” said the Beijing trader. Reuters
Survey
Entrepreneur confidence restored Chinese entrepreneurs’ confidence in domestic economy has been restored as the economy shows more signs of stabilizing, according to findings of a recent survey. Organizers of the survey include several departments under the State Council and the National Bureau of Statistics. The result was based on a survey of 1,960 enterprises nationwide. The survey revealed that 20.3 per cent of the entrepreneurs think the economy is running well, 2.7 per centage points higher than the previous year, and 43 per cent of them describe the economy as average, 4.9 percentage points higher. Focus change
Eastern Airlines wants to become investment firm China Eastern Airlines said it has applied for government permission to operate as an investment firm - a move that would allow it to reduce its reliance on ticket sales and diversify into other businesses. Wang Haitao, vice-president of China Eastern’s strategic development unit, told financial magazine Yicai its airline business would remain its core business but the change would allow it to explore investment opportunities across the aviation sector. China’s travel boom has brought in large profits for its state-owned airlines but revenue per passenger has begun to fall due to fierce competition and slowing growth in traveller numbers. Investment
FDI with U.S. far higher than official data
Commodities
Crude output drops to lowest since May 2009 For the first ten months of 2016, domestic supply dropped to 166.82 million tonnes China’s daily crude oil production in October fell to the lowest in more than seven years, statistics bureau data showed yesterday, as producers remain reluctant to drill new wells amid tepid oil prices and as output drops from aging wells. Oil output last month in China, the world’s second-largest crude consumer, dropped 11.3 per cent from the same time a year ago to 16.05 million tonnes, the National Bureau of Statistics reported. The figure is up slightly from September’s 15.98 million tonnes. On a daily basis, October production was 3.78 million barrels per day (bpd), the lowest since May 2009, and down from 3.89 million bpd in September. “Producers have not ramped up output even as oil prices rebounded in October. Many of them see the uptick in prices as unsustainable,” a Beijing-based crude trader said.
Prices for international crude benchmark Brent climbed to as high as US$53.73 a barrel in October though prices ended the month 1.5 per cent lower than at the end of September. Brent was at US$44.80 yesterday.
Key Points Oct crude output lowest since May 2009 on daily basis Refinery runs jump to highest since at least 2011 Natural gas output declines from 1.4 pct from a year ago Sinopec’s Chairman Wang Yupu told investors in August that the energy giant would open new discovered reserves if crude prices were between US$45 to US$50 a barrel to make up for falling output.
Major upstream producer PetroChina reported in October that its crude output for the first nine months of 2016 fell to 696.6 million barrels from 722.9 million a year earlier. Offshore oil specialist CNOOC recorded a 7.7 per cent decline in net oil and natural gas production in the third quarter. For the first ten months of 2016, domestic supply dropped to 166.82 million tonnes, or 3.99 million bpd, compared with 4.30 million bpd in the same period last year, the bureau data showed. Crude oil refinery throughput in October was up 5.5 per cent from a year earlier to 47.05 million tonnes, or 11.08 million bpd, the highest since at least January 2011, as units came back from a heavy maintenance season that lasted from July to September. For natural gas, China produced 10.8 billion cubic meters (bcm) in October, down 1.4 per cent from a year ago. Year-to-date natural gas production reached 111.2 bcm, up 1.9 per cent from the same period a year ago. Reuters
Foreign direct investment flows between the United States and China are far higher than official data shows, new research indicates, highlighting the close connection between the two economies even as tensions around cross-border deals rise. U.S. FDI into China totalled US$228 billion from 19902015, much higher than the US$70 billion to US$75 billion reported over the period based on U.S. and Chinese government data, according to a report published on Monday by Rhodium Group, an economic research consultancy specialising in Greater China and India. Agriculture
Kunming hosts int’l coffee science conference The 26th international conference on coffee science opened in Kunming on Sunday in southwest China’s Yunnan Province, the country’s largest coffee producer. The conference, which will last until Nov. 19, attracts about 400 coffee experts and entrepreneurs from nearly 60 countries and regions. The participants will discuss such subjects as coffee chemistry, coffee’s sustainable development and relationship with people’s health, according to the organizer. Currently, China’s coffee plantation area exceeds 120,000 hectares, with an output of 140,000 tonnes. Yunnan accounts for more than 99 per cent of the country’s coffee output.
12 Business Daily Tuesday, November 15 2016
Asia In Brief Labour
Half of Japan firms reviewing work hours Just over half of Japanese firms are reviewing rules on working hours with many looking to cut down on overtime, a Reuters poll shows, in a sign that the government has gained traction in its campaign for more employee-friendly labour practices. The survey results also come amid a scandal engulfing advertising agency Dentsu Inc this year after a young worker committed suicide, with the apparent trigger 105 hours of overtime in one month - a scandal that has also likely given firms more impetus to reform. Infrastructure
Malaysia, Singapore to sign high speed rail agreement Malaysia and Singapore are likely to sign an official bilateral agreement on the much anticipated high speed rail project linking the two countries in December, local media reported yesterday. Malaysian Prime Minister Najib Razak and his Singaporean counterpart Lee Hsien Loong are expected to witness the signing of the legally binding agreement during their annual talks early next month, the New Straits Times reported. The signing of the agreement would pave the way for construction to start in 2018, the report said. Malaysia and Singapore had said they were targeting operations by 2026. Analysts
Australia should remove large bank notes Australia should follow in India’s footsteps and remove large denominated currency from circulation to improve the economy and banking resilience, analysts at UBS Group AG said in a note to clients yesterday. UBS says Australia should take the same approach despite concerns with the cash economy not being the same as in India. In Australia, 92 per cent of all currency by value is in the two largest denominations, the 50 Australian dollar and 100 Australian dollar note. The larger that’s “rarely seen” has almost three times as many notes as Australia’s five Australian dollar note (by number) in circulation. Trade
South Korea import prices fall South Korea’s October import prices declined, but at their slowest pace in more than four years, as the won dropped against the dollar, central bank data showed yesterday. Import prices, one of the gauges for future inflation movements, eased 0.6 per cent from a year earlier, the Bank of Korea said, slowing considerably from a revised 7.7 per cent decline in September. September’s fall was revised from a 7.8 per cent drop. The sharp slowdown in the pace of decline was mainly due to the won falling around 2 per cent in October against the dollar.
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GDP
Japan economy grows faster than expected Central bank governor said next year’s wage negotiations between companies and labour unions were crucial to whether Japan would hit 2 per cent inflation Tetsushi Kajimoto and Leika Kihara
J
apan’s economic growth handily beat expectations in the July-September period, expanding for a third straight quarter as exports recovered, but weak domestic activity cast doubt on hopes for a sustainable economic recovery. Government data issued yesterday underscored a potentially fragile export-reliant economic recovery just as Republican Donald Trump’s shock victory in the U.S. presidential election added to uncertainty over the global economic outlook.
Key Points Q3 GDP expands annualised +2.2 pct vs f’cast +0.9 pct External demand adds to growth, domestic demand weighs BOJ Kuroda keeps upbeat on economy, warks of risks
consumption was “somewhat lacking momentum” and making some companies hesitant to raise the prices of their goods and services - potentially delaying achievement of the central bank’s 2 per cent inflation target. “Risks to both economic activity and prices are skewed to the downside,” Kuroda told business leaders on Monday in the central Japan city of Nagoya, stressing his resolve to ease again if the economy loses the momentum to hit his price goal.
Patchy recovery
Yesterday’s data highlighted the uneven nature of Japan’s recovery. External demand - or exports minus imports - added 0.5 percentage point to gross domestic product (GDP). It was the biggest contribution since April-June 2014, but was due in part to falling imports caused by yen gains and oil price falls. Exports grew 2.0 per cent, the fastest gain in a year, but the increase
Consumption “somewhat lacking momentum” - Kuroda BOJ watching yen moves carefully - Kuroda
The world’s third-largest economy expanded by an annualised 2.2 per cent in the third quarter, faster than the 0.9 per cent increase markets had expected, following a 0.7 per cent increase in April-June, Cabinet Office data showed. Bank of Japan (BOJ) Governor Haruhiko Kuroda maintained his optimistic view of the economy, saying it was on track for a moderate expansion as exports and output rebounded thanks to an expected improvement in the global economy. But he acknowledged that private
A subway entrance in Tokyo
was driven by potentially one-off factors such as a boost in shipments of smartphone parts. Private consumption, which accounts for roughly 60 per cent of GDP, rose just 0.1 per cent, as bad weather kept consumers from shopping. That added to concerns the benefits of Prime Minister Shinzo Abe’s “Abenomics” stimulus drive are yet to spread to households, as seen in tepid annual wage rises. Capital expenditure, a key component of GDP, was flat following a 0.1 per cent decline in the second quarter, likely reflecting worries about the global outlook. “Exports recovered, but private consumption and capital expenditure are weak. The economy isn’t as strong as the 2.2 per cent (headline figure) makes it seem,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute. “There are risks from China and Trump’s trade policies. We need to continue to pay attention to downside risks.” Kuroda said next year’s wage negotiations between companies and labour unions were crucial to whether Japan would hit 2 per cent inflation, calling on firms in Nagoya - home to auto giant Toyota Motor Corp - to help boost wages. The BOJ governor said the bank was watching yen moves carefully as they have a “big impact” on the economy and prices. “It’s desirable for currencies to move stably reflecting economic and financial fundamentals,” he said, noting this view was shared in other major economies. The dollar sank as low as 101.19 yen last Wednesday as Trump’s victory boosted investor appetite for the safe-haven yen, but the prospect of Trump’s spending being inflationary has seen the dollar rebound to around four-month highs since then. This recovery offered some respite to Japanese policymakers worried about the hit a stronger yen could inflict on the export-reliant economy. Reuters
Lifestyle vs. income
Australian Tax Office using social media to find cheats Social media posts and immigration data have unveiled dozens of cases of undeclared income Australian authorities are trawling through Facebook and other social media to identify and prosecute tax cheats. Chris Jordan, Commissioner of the Australian Tax Office (ATO), said his organization had invested in data collection analysis of social media platforms to find cases of people’s declared incomes not matching their lifestyles as part of a multi-faceted crackdown. The social media posts, in addition to private school records and immigration data, have unveiled dozens of cases of undeclared foreign income being used to pay private school fees or for overseas holidays, netting the ATO US$7.2 billion in 2015. “It’s also a reality of the age we live in that there is more and more information publicly available, particularly through social media,” Jordan said yesterday.
“Of course, we’ll never go looking for this information where people are doing the right thing and are open with us. We only go looking when something just doesn’t add up.” The ATO said that the gap between the tax that would be paid if all income was declared and the actual amount collected was US$141.3 billion in the financial year ending
in 2016. “Lots of little amounts add up to a lot,” Jordan told News Limited. “We need to continue to support those who do the right thing, and identify and take action against those who choose not to.” Jordan gave an example of a married couple who declared total income of US$105,000 for the year but had three children at private schools at an estimated total annual cost of US$56,000 and had recently purchased five business-class flights for a holiday to the Whistler ski resort in Canada. “If our intelligence from immigration shows that the family of five flew business class three times in the last few years, and their social media posts show photos of the family on a ski holiday in Whistler, this will prompt us to contact them to ask more questions,” Jordan said. “People say ‘well how do you know about that?’ They can’t dispute it because the kids are at that school and a lot of it is public information.” Xinhua
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Business Daily Tuesday, November 15 2016 13
Asia Mourning period
Thailand bullish on tourism after muted month for king’s death Many Thai websites yesterday also switched back to colour after a month of adopting monochrome tones Tourist arrivals to Thailand have not been hit by a strict mourning period for late King Bhumibol Adulyadej, authorities said Monday, as curbs on entertainment and celebration imposed since his death one month ago were eased. Bhumibol’s death on 13 October after a seven-decade reign has sparked mass displays of grief and left the politically-divided nation without its only unifying figure. The junta, which seized power in 2014, instituted an initial monthlong mourning period, which lapsed yesterday.
“The government wants life to go on and we also want that” Chattan Kunjara Na Ayudhya, of the Tourism Authority of Thailand In the last month Thais have worn black or white, bars have closed early, many sporting events and concerts have been cancelled with television networks even ordered to pull soap operas from their schedules. The measures had raised fears that
Shoppers walk past paintings depicting late Thai King Bhumibol Adulyadej on display outside a shopping mall in Bangkok, Thailand, 11 November 2016. Lusa
tourists would be deterred from visiting a country renowned for its wild nightlife and carefree atmosphere, just as peak visitor season gets into swing. But Chattan Kunjara Na Ayudhya, of the Tourism Authority of Thailand (TAT), said a target set before the king’s death of a record 32 million arrivals for 2016 - up from 30 million last year - remained in reach. “So far numbers have not dropped, that’s from the surveys we did and from numbers from overseas offices,” he told AFP. “The government wants life to go on and we also want that,” he added. Despite the month-long restrictions on entertainment and celebration, authorities have also struck a pragmatic note aware of the potential to
damage the cash-cow tourism sector - a rare bright spot in an otherwise gloomy economy. A similar pragmatism has emerged in the country’s red light districts with venues turning down the music and go-go dancers swapping their usually garish outfits for black bikinis and dresses. Despite the easing of restrictions on entertainment, festivities are likely to remain comparatively muted for the foreseeable future. Thais will mark the annual Loy Krathong religious festival, a picturesque celebration where millions of candles are floated on rivers or lanterns released into the air. But fireworks have been forbidden, deemed not in keeping with the sombre national mood.
“Authorities will enforce... the order banning the lighting of fireworks,” deputy national police spokesman Police Colonel Krissana Pattanacharoen told reporters, adding those who breach it face up to three years in jail. In the northern city of Chiang Mai, where the festival usually draws tens of thousands of tourists, locals said they were expecting smaller crowds. “Since he (the king) passed away business has gone down a little bit,” Tik Srirat, a hotel owner in the town told AFP. “But as an owner I am not too concerned about it because of the circumstances - we all feel deeply about the king.” Many Thai websites yesterday also switched back to colour after a month of adopting monochrome tones. AFP
14 Business Daily Tuesday, November 15 2016
International In Brief Brexit impact
U.K. sees US$82 billion investment hit U.K. businesses have delayed or cancelled investments worth 65.5 billion pounds (US$82 billion) since the vote to leave the European Union, with more than 40 per cent of large companies scaling back, according to a new survey. Executives have been reluctant to follow through on spending plans because of a plunge in the pound and a lack of clarity over the U.K.’s future relationship with the EU, according to the study published yesterday by the Centre for Economics and Business Research and Hitachi Capital U.K. Stance on Trump
EU offers cooperation while signalling firmness The European Union promised to cooperate with U.S. President-elect Donald Trump while vowing to stand by international agreements he has questioned including United Nations deals to curb climate change and ease sanctions on Iran. After a dinner in Brussels to discuss future EU-U.S. relations in the wake of Trump’s victory in the Nov. 8 American election, European foreign ministers also signalled a determination to maintain their opposition to Russia’s encroachment in eastern Ukraine. “We are looking forward to a very strong partnership with the next administration,” EU foreign policy chief Federica Mogherini told reporters. Fourth revolution
UAE joins hands with WEF to push industry The United Arab Emirates (UAE) announced yesterday to cooperate with the World Economic Forum (WEF) on common research and consultancy on the “fourth industrial revolution.” Briefing the media on the first Annual Meeting of WEF Global Future Council (GFC), Mohammed Abdullah Al-Gergawi said the future cooperation between the UAE government and the WEF GFC will develop a global governance framework to establish legislation for the 4th industrial revolution. According to WEF founder Klaus Schwab, the fourth industrial revolution is based on the internet. He said drones, self-driving cars and artificial intelligence will transform societies. M&A
Siemens to buy Mentor Graphics Siemens agreed to buy U.S.based Mentor Graphics in a US$4.5 billion cash deal that will further enhance the German engineering group’s industrial software capabilities. Siemens said yesterday it would pay US$37.25 per share for Mentor Graphics, which makes software for designing semiconductors, a 21 per cent premium to Friday’s closing price. Siemens Chief Executive Joe Kaeser has set out to reshape the group, a household name in Germany, to make it more profitable and more agile by selling off non-core businesses and investing in areas promising faster growth and fatter margins.
Legislation
Obama officials work against time to wrap banking rules Some sixteen copy editors are due to forego leave and be on hand in the coming weeks to process final rules Patrick Rucker and Lisa Lambert
U
.S. officials are striving to put finishing touches on a slew of banking rules before President Barack Obama leaves office and hands regulatory power to Donald Trump who has vowed to rewrite the existing financial rule book. President-elect Trump will take over on Jan. 20 and his fellow Republicans will have control of Congress and government agencies, allowing the new administration to block or roll back many of the lastminute changes. But by completing far-advanced work on some banking standards in the next 10 weeks, Obama officials would raising the chances that some elements of the regulatory framework will survive. Some rules are meant to flesh out the Dodd Frank Act of 2010 designed to prevent the next global financial crisis. Trump campaigned on a pledge to scrap the law but now he says only some provisions must go to lighten the regulatory burden. The Federal Reserve is working on rules to govern matters such as executive pay, market stability and what investments Wall Street may hold. Last m o n th, S ec u ri ti es a n d Exchange Commission Chair Mary Jo White said her agency would “in the near term” finish a rule on one thorny issue: how mutual funds manage derivatives. The SEC and bank regulators have also for years struggled to finalize a rule that would tie more banker pay to the long-term health of their firms rather than short-term performance of Wall Street firms. With only about 40 working days until the handover, it is not clear which, if any, of those standards will get across the finishing line. “Just look at the calendar,” said
Tom Quaadman of the Chamber of Commerce. “These are intricate rules and there’s not much time.” The executive pay rule exemplifies the challenge. Six federal agencies have a say on the compensation standard meant as part of Dodd Frank and a final draft has not yet been offered, industry officials told Reuters. It would be nearly impossible to circulate a final rule and get the agencies to endorse it while still satisfying standards for clearing such paperwork, several lobbyists who have opposed the rule said. Banking regulators declined to comment on when the compensation rule might be completed.
No time to chat
Simple logistics also pose a challenge. New federal rules come into force once they have been published in the Federal Register and employees there typically need several days to typeset a rule. That means Obama officials need to lodge paperwork with the Federal Register at the beginning of the inauguration week at the latest. Some sixteen copy editors are due to forego leave and be on hand in the coming weeks to process final rules
expected from dozens of agencies, said an official familiar with the operation, but not authorized to speak to the media. “These days, people do not spend a lot of time hanging around the coffee maker,” he said. Some freshly-minted rules also face the prospect of getting erased under a 1996 law known as the Congressional Review Act, which allows Congress to block a regulation within 60 working days of being drafted.
‘With only about 40 working days until the handover, it is not clear which rules will get across the finishing line’ One such rule allows students who were defrauded by for-profit colleges to seek loan forgiveness. The Department of Education finalized it days before the Nov. 8 election, meaning Republicans who have raised objections to it will have a chance to block it. President George W. Bush was the first to trigger the Review Act when he blocked labour regulations that his predecessor Bill Clinton had enacted at the end of his term. Reuters
U.S. Capitol building hosts Congress’ chambers
Prices
Nigerian inflation quickens to 11-year high The International Monetary Fund forecast GDP will shrink by 1.7 per cent this year Dulue Mbachu and Paul Wallace
Nigerian inflation accelerated for the 12th consecutive month in October as exchange-rate pressures persisted on the prices of goods and services, complicating the central bank’s task of supporting an economy forecast to contract this year. The inflation rate in Africa’s most populous country rose to 18.3 per cent, the highest in 11 years, according to central bank data, from 17.9 per cent in September, the Abuja-based National Bureau of Statistics said in an e-mailed statement yesterday. Prices rose 0.8 per cent from the previous month. The October inflation rate was in line with the median of 12 economist estimates compiled by Bloomberg. Inflation has been accelerating partly due to dollar shortages caused by the plunge in the price of crude, Nigeria’s main export, since mid2014. That pushed up import costs for consumer goods and machinery. The government has struggled to manage the economic fallout, at one point pegging the exchange rate for
more than a year and recently using law enforcement to bring down the street price of dollars. “It seems as if inflation hasn’t reached its peak,” Ogho Okiti, chief executive officer at Abuja-based Time Economics Ltd., said yesterday by phone. “We may see it approaching 19 per cent before the end of this year.” Governor Godwin Emefiele kept the central bank’s key rate unchanged at 14 per cent in September despite calls by Finance Minister Kemi Adeosun to reconsider a previous increase to help boost growth. Emefiele will announce the Central Bank of Nigeria latest decision on monetary policy on Nov. 22. The October inflation number “will put yet more pressure on the central bank to tighten monetary policy,” John Ashbourne, an economist at Capital Economics Ltd. in London, said in an e-mailed note. “We expect that the bank will hike its key policy rate from 14 per cent to 16 per cent at its meeting next week.” Nigeria’s economy contracted in the first half of the year as the drop
in oil prices and output squeezed government revenue, and shortages of power and foreign currency weighed on output. The statistics agency will release gross domestic product growth data for the third quarter on Nov. 21.
“We expect that the bank will hike its key policy rate from 14 per cent to 16 per cent at its meeting next week” John Ashbourne, an economist at Capital Economics Ltd. in London
Food inflation quickened to 17.1 per cent in October from 16.6 per cent in September, the statistics agency said. This was driven by increases in the price of bread, cereal, fish and meat. The average gasoline price was 0.3 per cent lower in October than in the previous month. Bloomberg News
Business Daily Tuesday, November 15 2016 15
Opinion Business Wires
New Zealand Herald ASB economists say yesterday morning’s earthquake could increase the odds of another interest rate cut next year if economic disruption leads to a fall in confidence. They also warn there is a risk to the booming tourism sector and rebuilding will put pressure on the stretched construction sector. Based on damage reports, they say South Island transport infrastructure and Wellington’s business district are the key areas that are vulnerable to short-term economic disruption. The 2013 Seddon earthquakes caused moderate damage to a number of Wellington buildings.
Bangkok Post Thailand has seen the largest overall gain from digital transformation among Southeast Asian markets and the secondbiggest in the world after India, according to a survey by software maker CA Technologies. The survey, conducted with global consultancy Coleman Parkes Research in May and June, details the impact digital transformation is having on enterprises and demonstrates the strong connection between business performance and the technologies and practices that underpin digital transformation. The survey included 1,770 senior business and IT executives from large enterprises across 21 markets and 10 industry sectors.
The Asahi Shimbun Toyota will pay up to US$3.4 billion to settle a class action lawsuit brought by U.S. pickup truck and SUV owners whose vehicles lacked adequate rust protection. Court filings show that the settlement reached on October 31 covers 1.5 million vehicles, dealing a financial blow to the Japanese automaker whose trucks were subject to corrosion that could harm their structural integrity. The settlement applies to Tacoma trucks made from 2005 to 2010, Sequoias from 2005 to 2008 and Tundras from 2007 to 2008. The settlement estimates the value of replacing the frame at roughly US$15,000 per vehicle.
The Star Fiercer competition and rising capex needs will put pressure on the credit profiles of most Asian telcos over the next year, says Fitch Ratings. The international rating agency has a negative outlook on the telecoms sectors in India, Singapore, Malaysia, Thailand and the Philippines. South Korea, Indonesia, China and Sri Lanka are all on stable outlook. Competition is likely to intensify in India, Singapore and Malaysia, with new entrants poised to offer cheaper tariffs to poach customers from incumbents. Competition could be the most intense in India.
Trading is not a dirty word
A
mutual fund which keeps portfolio turnover low may be simply a mutual fund which keeps missing opportunities. A new study finds that active funds which trade more, rather than less, go on to outperform. Perhaps in part because of the vogue for index funds, which trade as seldom as possible, there has been considerable focus on the virtues of keeping costs low by opting for funds which make their bets and stick to them. While the logic of keeping costs minimal is integral to a passive investment strategy, having low turnover as a value, as such, may be less than useful in selecting active managers. “We identify a new dimension of fund skill - the ability to tell when profit opportunities are better,” Lubos Pastor of The University of Chicago and Robert Stambaugh and Lucian Taylor of The University of Pennsylvania write in the study which is slated to be published in The Journal of Finance. “Our finding that funds are able to successfully time their trading activity seems new in the literature.” This successful varying of trading activity depending on conditions implies not only skill in securities valuation, but that the managers can, in the old phrase, “time the market”, perceiving and acting on opportunities. A one-standard-deviation increase in the average turnover of similar funds brings with it a 0.43 percentage point increase in annual fund performance. It’s significant that average turnover of similar funds, which weeds out the effects of inflows and outflows, is predictive for returns even when you control for an individual fund’s turnover. The important point is that the study tries to better capture trades which the fund chooses to make, rather than ones it is forced to make to accommodate new inflows or help fund sellers to cash out. The survey considered data from U.S. equity mutual funds between 1979-2011. The study looked at the relationship between fund trading activity and three indicators which might suggest that there were mis-pricings in financial markets: investor sentiment, crosssectional dispersion in individual stock returns, and aggregate stock market liquidity. When sentiment is bombed out, for example, stocks are often trading at attractive prices, as they sometimes do when prices are volatile or when there is low liquidity. Just think about trading conditions at the height of the financial crisis in 2008 and 2009 - which in retrospect was a perhaps once-in-a-lifetime entry point for investors - to get an idea of the relationship between those three indicators and
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James Saft a Reuters columnist
opportunity. As an investor might hope, trading picked up when the market, using those three indicators, was functioning poorly at pricing.
Useful or better?
The less liquid a stock is, generally the stronger the relationship between turnover rate and performance improvement, according to the study. “Funds holding stocks of small companies, or small-cap funds, have a significantly stronger turnover-performance relation than do largecap funds. Similarly, we find a stronger relation for small funds than large funds, consistent with the ability of smaller funds to trade lessliquid stocks, given that smaller funds tend to trade in smaller dollar amounts,” according to the study. This is driven, presumably, by the fact that a given trade in a small-cap stock impacts price more than it does for large-capitalization shares, implying that managers need a commensurately larger opportunity to justify the same trade. If you accept that more highly skilled funds are able to charge more, something I’ve not always found to be the case, then it is reasonable to expect that there is a rising relationship between fees, turnover and performance. “That is indeed what we find,” the authors write. None of this settles the passive vs. active argument, and indeed the evidence remains strong for active. As with earlier studies which find a negative relationship between turnover and truly active management - those funds which aren’t simply hugging benchmarks to avoid career risk, this study could be useful in choosing an active fund if that’s what an investor wants. What the study does underscore is the useful role which active fund managers play in helping the market allocate capital efficiently. Active funds trade more when it makes sense to and thus drive prices closer to where they, by rights, ought to be. By aiding price discovery - the act of figuring out what something really should be worth, active fund managers help both passive investors and the economy as a whole. With the share of U.S. equities owned by passive investors headed towards half, that process may someday weaken to everyone’s detriment. For now, passive investors are probably better off continuing to accept that free ride. Reuters
If you accept that more highly skilled funds are able to charge more, something I’ve not always found to be the case, then it is reasonable to expect that there is a rising relationship between fees, turnover and performance.
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16 Business Daily Tuesday, November 15 2016
Closing Reorganization
UBS to restructure Hong Kong corporate finance, China teams
“Anticipating any potential shortfall, we are redeploying our CFG (corporate finance group) bankers tactically into sectors allowing them UBS AG is reorganising its Hong Kong-based corporate finance team and China-focused country to share knowledge and develop best-practice execution capabilities,” according to the internal bankers, which would result in about 20 junior memo by Sam Kendall head of Corporate Client bankers moving to other departments within the Solutions (CCS), Asia Pacific, and Joseph Chee, investment bank, an internal memo and sources Head of CCS, Asia. familiar with the matter told Reuters yesterday. UBS has slipped to No. 8 position in Asia Pacific The move comes as the Swiss bank seeks to ex-Japan ECM deals in the first nine months of the recoup some of its lost market share in the Asia year. It earned US$92.3 million in fees, a 54 per investment banking business, especially in equity capital market deals where it has taken a hit in the cent drop from year ago, according to Thomson Reuters/Freeman Consulting data. Reuters first nine months of 2016.
Top contact
President Xi tells Trump cooperation is only choice The two agreed to maintain close communications and meet soon
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hinese President Xi Jinping told U.S. President-elect Donald Trump that cooperation was the only choice for relations between the world’s two largest economies, with Trump saying the two had established a “clear sense of mutual respect”. Trump lambasted China throughout the U.S. election campaign, drumming up headlines with his pledges to slap 45 per cent tariffs on imported Chinese goods and to label the country a currency manipulator on his first day in office.
largest developing and developed economies, there were many areas where China and the United States could cooperate. “The facts prove that cooperation is the only correct choice for China and the United States,” China Central Television (CCTV) cited Xi as saying. Xi’s remarks were a reiteration of phrasing typically used by Beijing to describe bilateral relations. The two sides must “promote the two countries’ economic development and global economic growth”
and “push for better development going forward in China-U.S. relations”, Xi said. “During the call, the leaders established a clear sense of mutual respect for one another, and President-elect Trump stated that he believes the two leaders will have one of the strongest relationships for both countries moving forward,” a statement from Trump’s presidential transition office said. The two agreed to maintain close communications and meet soon, CCTV said. Xi had congratulated Trump in a message delivered shortly after his surprise election victory last week.
There is intense speculation over the impact of Trump’s win on issues facing the two countries, from climate change and global trade to the security balance in the Asia-Pacific. Trump’s criticism of U.S. allies, including Japan, for free-riding on U.S. security guarantees, has deepened anxiety among Washington’s allies about its commitment to post-war security arrangements in the face of a rising China and volatile North Korea. Trump appears to be seeking quick ways to withdraw the United States from a global accord to combat climate change, which has been billed by China and U.S. President Barack Obama as a key area for cooperation. China has also signalled it will promote plans for regional trade integration, vowing to seek support for a Beijing-backed Asia-Pacific free trade area at a summit in Peru later this month, after Trump’s win dashed hopes for the U.S.-led Trans-Pacific Partnership (TPP). Reuters
“The facts prove that cooperation is the only correct choice for China and the United States” China Central Television cited Xi as saying
His election has injected uncertainty into relations at a time when Beijing hopes for stability as it faces daunting reform challenges at home, slowing growth and a leadership reshuffle of its own that will put a new party elite around Xi in late 2017. In their first interaction since the U.S. election, Chinese state media said Xi told Trump in a telephone call on Monday that as the world’s
Report
Bank members
PBOC
Chinese Q3 tech IPOs lead global market
AIIB head says Trump Chinese FX sales ease may review U.S. snub for bank from September
China led the global market in technology IPOs, with nine tech firms listed in the third quarter (Q3) this year, a report showed yesterday. The number of tech IPOs in Q3 is an increase from eight over the previous two quarters combined, this pick up has been attributed to the improving economic environment, increased confidence and reduced fears of a sharp drop to the economic growth rate, according to a report by PwC. IPOs in China generated US$611 million in Q3, with an average of US$68 million, while 20 technology IPOs were listed worldwide, generating proceeds of US$5.38 billion. The overall performance in Q3 equates to a 43-per cent increase in the number of tech IPOs globally compared to the previous quarter, and a 264-per cent rise in proceeds, the report showed. Software, and Internet software and services accounted for 65 per cent of global tech IPOs in Q3. Nine software IPOs were reported, of which five were from China, according to the report. Meanwhile, cross-border IPOs, especially in Hong Kong and the U.S., are becoming more attractive to Chinese tech firms, PwC China TMT partner Frank Lin said. Xinhua
The head of the Asian Infrastructure Investment Bank (AIIB) said the United States could rethink its reluctance to become a partner in the China-backed multilateral lender following Donald Trump’s election as president, the People’s Daily reported yesterday. “I have heard a certain senior official of the President Barack Obama speak good of the AIIB and after Donald Trump won, I was told that many in his team have an opinion that Obama was not right not to join the AIIB,” AIIB president Jin Liqun said in an interview with the official newspaper. “So we can’t rule out the new government in (the) U.S. endorsing the AIIB or indicating interest to join as member.” A top adviser of U.S. President-elect Trump on Thursday said the Obama administration’s opposition to the AIIB was “a strategic mistake”, suggesting a possible policy shift when Trump takes office in January. AIIB president Jin said the bank is willing to welcome new members, but cautioned that after the next batch of members are admitted, there would be few shares left for new joiners, according to the People’s Daily report. Reuters
China’s central bank sold a net US$39.2 billion worth of foreign exchange in October, data showed yesterday, easing from an eight-month high hit in September but still indicating continued official interventions to support the yuan. Net foreign exchange sales by the People’s Bank of China (PBOC) amounted to RMB267.9 billion (US$39.2 billion), according to Reuters calculations based on central bank data released on its website. That compared with net sales of RMB337.5 billion in September. Earlier data showed China’s foreign exchange reserves fell US$45.7 billion in October to US$3.121 trillion, the biggest monthly decline since January. That indicated further capital outflows despite recent signs that the world’s second-largest economy is stabilizing. The central bank is widely believed to have sold U.S. dollars to cushion the descent of the yuan currency in October, when it fell to sixyear lows. Beijing also has been trying to stem the flow of capital abroad with a string of measures aimed at closing loopholes and clamping down on illegal transfers. Reuters