Home prices in China cool after curbs implemented Property Page 11
Monday, November 21 2016 Year V Nr. 1177 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm
www.macaubusinessdaily.com
Labour
Hospitality
Gaming
City
Markets
Labour-policy rethink necessary as increasingly fewer manual labourers in the market, says data Page 2
14 hotels under construction in Q3, with 38 new hotel projects in the MSAR Page 6
Casino Taipa reopens its doors, but is not expected to contribute to SJM revenues or profits, says analyst Page 6
DSSOPT to be more transparent in announcing land plot distributions exempt from public tenders Page 2
HKShenzhen link ready to open Page 16
Visitor expenditure ends seven-quarter slump Tourism
Data from the third quarter shows a 17.4 pct y-o-y increase in visitor spending, ending a seven consecutive quarter drop. Total spending in the quarter hit MOP14.64 billion, attributable to a 21.5 pct surge in overnight visitor spending y-o-y, reaching MOP12 bln. Page 6
Looking abroad
A cut above the rest
The Governor of the U.S. state of Nebraska aims to open the door to the middle-income market in China, gaining a foothold in the MSAR and leveraging the Hong Kong market, amid on-going negotiations following the lifting of the ban on U.S. beef products, in place in the Mainland since 2003.
Investment Local investors in securities continue to focus on the Asia region for investment, however those securities distributed by Mainland entities saw a 13.5 pct decrease in market value during H1. Market value in Hong Kong-based securities also fell in the first half of the year, as local investors look towards the North Atlantic and Caribbean. Page 2
Import/Export Pages 4 & 5
President Xi offers to lead global free trade
HK Hang Seng Index November 18, 2016
22,344.21 +81.33 (+0.37%) Worst Performers
Li & Fung Ltd
+4.18%
CK Hutchison Holdings Ltd
+1.39%
China Shenhua Energy Co
-2.47%
CLP Holdings Ltd
-0.41%
China Unicom Hong Kong
+3.89%
HSBC Holdings PLC
+1.16%
Sun Hung Kai Properties Ltd
-0.69%
Henderson Land Develop-
-0.36%
Galaxy Entertainment Group
+2.86%
Hang Seng Bank Ltd
+1.12%
AIA Group Ltd
-0.64%
Cheung Kong Property
-0.29%
AAC Technologies Holdings
+2.50%
China Resources Land Ltd
+1.09%
China Merchants Port Hold-
-0.61%
MTR Corp Ltd
-0.25%
Sands China Ltd
+1.65%
CNOOC Ltd
+0.93%
Hong Kong Exchanges &
-0.49%
China Mobile Ltd
-0.18%
23° 27° 22° 25° 15° 23° 16° 19° 19° 21° Today
Source: Bloomberg
Best Performers
Tue
Wed
I SSN 2226-8294
Thu
Fri
Source: AccuWeather
APEC summit Chinese President Xi Jinping touted his country as a leader of free trade at a summit of Asia-Pacific leaders on Saturday, particularly following Trump’s vow to kill Obama’s signature trade initiative in the region, the Trans-Pacific Partnership, or TPP - an arduously negotiated 12-country deal that pointedly excludes China. Page 12
2 Business Daily Monday, November 21 2016
Macau In Brief
Corruption
Two public servants defraud Housing Bureau of affordable unit Anti-graft watchdog the Commission Against Corruption announced last week that two public servants - a couple – were found supplying false information to the city’s Housing Bureau when passing an assets examination to obtain the chance to buy an affordable housing unit in Seac Pai Van. The two, one working in the Office of the Prosecutor General and the other working for the Housing Bureau, deliberately concealed the fact that they owned a property in Mainland China and successfully bought the affordable housing unit for MOP600,000 (US$75,000) from the Bureau, the watchdog said. The two have allegedly committed document forgery, fraud and false declaration. The case has been referred to the Public Prosecutions Office. Procurement
Gaming operator-SME procurement deals over MOP900 mln The city’s six major gaming operators have reached procurement deals with over 1,000 local SMEs in 11 matching sessions in the past year, establishing contracts worth over MOP900 million (US$112.5 million), says a press release of the Office of the Secretary for Economy and Finance. Secretary Lionel Leong Vai Tac, meeting with the organiser of the sessions - the Macao Chamber of Commerce and the gaming operators, assured the results of the matching sessions. He suggested the Chamber and the operators should establish a regular communication mechanism with the government for communication and co-ordination on the issue.
Investment
Overseas securities investment rises y-o-y Mainland China remains the leading issuer of investments made by local residents Cecilia U cecilia.u@macaubusinessdaily.com
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y the end of June 2016, investment by MSAR residents in securities released by unrelated overseas residents, including investors that are individuals, the government and other legal entities but excluding the city’s foreign exchange reserves, amounted to MOP443.2 billion (US$55.4 billion) at current market value, indicating an increase of one per cent for both year-on-year and compared to end-2015, according to the latest official data posted by the Monetary Authority of Macao (AMCM). The latest report shows that equity securities (MOP168.7 billion), long-term debt securities (MOP258.3 billion) and short-term debt securities (MOP16.2 billion) saw a drop of 0.8 per cent, an increase of 4.4 per cent and a decline of 24.5 per cent, respectively, from the end of 2015.
In terms of the location of securities issued, the Asia region made up 57.2 per cent, remaining the most significant issuer of Macau residents’ external portfolio investment. Following are the North Atlantic and Caribbean region, occupying 13.8 per cent, and Europe, at 12.6 per cent.
China continues to lead
Investments in securities distributed by Mainland Chinese entities posted a decrease of 13.5 per cent by end2015 in market value, amounting to MOP177.4 billion. Nevertheless, securities issued by Mainland Chinese
Employment
Young blood becomes rarer Physical labourers under 35 may drop to 82,000 by 2031 Cecilia U cecilia.u@macaubusinessdaily.com
The amount of local physical labourers under the age of 35 could drop from 116,000 this year to 82,000 by 2031, according to data gathered for the Macau Population Forecast 2011
to 2036, released by the Statistics and Census Service (DSEC), as reported by Chinese newspaper Macao Daily. The future trend will lead to the restructuring of employment strategies for industries that normally hire local labourers – either to recruiting older employees or hiring
Smoking ban
Health Bureau: no smoking-room violations in Venetian & MGM The Health Bureau said it had not found the Venetian Macao and MGM Macau violating local regulations on the establishment of smoking lounges after its inspections conducted together with the city’s gaming regulator. According to a press release from the Bureau last Friday, the inspections were conducted followed complaints indicating the Venetian Macao had turned two of its mass-gaming areas into high-limit areas that allow smoking, whilst MGM Macau had set up “multiple-function rooms” that allow smoking in mass-gaming floors. However, the Bureau claimed that smoking ban notices were posted in the abovementioned areas whilst no as-yet-approved smoking lounges were opened during its inspections. The Bureau added that it has not approved any smoking lounge applications since October 2014 and will not give them the green light in the future. Currently, smoking is only allowed in VIP rooms and smoking lounges inside casinos, while a bill proposing a universal smoking ban inside gaming properties is still pending at the Legislative Assembly. K.L.
entities, including those listed on non-Mainland exchanges, persisted in taking the largest share - at 40 per cent of local residents’ portfolio investment outside the city. Within these investments, equity securities (MOP53.5 billion), longterm debt securities (MOP116.8 billion) and short-term debt securities (MOP7.1 billion) occupied 31.7 per cent, 45.2 per cent and 44 per cent, respectively, according to the AMCM data. The share of investment in securities released by Hong Kong entities, meanwhile, saw a drop from 13.4 per cent at end-2015 to 12.9 per cent, of which equity securities and longterm debt securities amounted to MOP36.4 billion and MOP18.0 billion, respectively, the official report shows. The market value of securities issued by the neighbouring SAR had decreased by 2.6 per cent to MOP57.4 billion, at end-June. According to AMCM’s data report, the share of local residents' portfolio investment in the North Atlantic and Caribbean continues to increase. The market value of investment in the region posted an increase of 14.9 per cent from end-2015 to MOP61.4 billion. In addition, European securities have also increased to make up 12.6 per cent of the share of total investment by local residents, registering an increase of two percentage points from end-2015.
more non-resident workers. According to the director of Nankai University’s Institute of Population and Development, Chen Weimin, the amount of employed local residents in the city who received higher education had increased to 34.1 per cent in 2015 from 20.9 per cent in 2010, exceeding the percentage of that of non-resident workers. The director also revealed that 11.7 per cent of local residents only received primary school education, compared to 7.7 per cent five years ago. Meanwhile, the number of non-resident workers below the age of 35 increased from 31.4 per cent in 2010 to 37.3 per cent in 2015, data provided by director Chen shows. Despite the rise in the number of younger workers in the employed population, workers over 55 accounted for 14.7 per cent of the entire employed population, up from 12.3 per cent in 2010, while local workers made up 19 per cent of the total employed population. Local workers over the age of 45 accounted for 44 per cent of employed labourers in 2015.
Land plot
DSSOPT: alternative ways to inform will be considered Legislator questions the limited transparency in the government's deals relating to land plots exempted from open bid procedures Cecilia U cecilia.u@macaubusinessdaily.com
The Land, Public Works and Transport Bureau (DSSOPT) will consider alternative ways to announce and inform the city’s residents regarding its land plot distributions that are exempted from open bid procedures, according to the response made by the Bureau to legislator Kwan Tsui Hang’s query. The DSSOPT states that it will consider announcing its related deals in dispatches approved by the
Chief Executive and published in the Official Gazette, adding that other approaches will also be pondered so as to respond to the public’s demands. In addition, in order to allow for public consultation, the Bureau noted in its response that future cases will be posted to and remain on the Bureau’s official website. In accordance with the current land law, notices or announcements with information - such as the function of the land and the amount of payment - that are related to the government’s distribution of land
plots exempted from an open bid procedure are required to be posted on the Bureau’s website to ensure the public’s knowledge of the process. DSSOPT has approved a total of eight special land applications since the establishment of the land law in 2014, the legislator’s query stated. However, notices regarding the deals were only posted on the official website for about two weeks and other announcements regarding the deals, such as press releases, were absent. Legislator Kwan criticised the inadequate transparency of the government’s transactions and expressed that the DSSOPT’s explanation for the short period of the posts until now is far-fetched (DSSOPT claimed to be preventing public confusion). The legislator also pointed out that the public is experiencing difficulties in referring back to related information on the website, with notices having been taken down.
Business Daily Monday, November 21 2016    3
Macau
4 Business Daily Monday, November 21 2016
Macau Interview | Import/Export
Bringing the beef back Leading an 80-strong trade delegation from the United States to Macau, Hong Kong and China, Governor Pete Ricketts of the state of Nebraska describes in an exclusive interview the implications of China’s recently lifted 13-year ban on beef products from the U.S., the potential from a developing middle-class market and the investment opportunities for Chinese investors in his state. Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
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our visit comes at an interesting time for U.S.-China relations. Why now? I’m a relatively new governor and we’re trying to establish relationships in China to be able to expand trade. So last year we came here to Beijing, this time we came back to go to Shanxi province for a demonstration farm, we were in Shanghai establishing relationships with businesses there and now we’re here in Macau and Hong Kong. Especially with China getting ready to open up the beef market it’s a great time to be here to talk about why we’ve got the best beef in the world.
“Supplying Nebraska beef and branding that so people know we have the best beef in the world is something that can help the casinos in branding their experience with our experience.” What advantages do you see in focusing on the middle-income market? I think that as you see the rise of the middle class in China they’re going to be looking for new products - better products - and going to be expanding
their diet. This is one of the things they’ll be asking for and we want to meet that demand. Aside from the Mainland market, are their solid opportunities in the Pearl River Delta for your delegation? Absolutely, look around us here in Macau where you’ve got all the casinos - and you’ve got a market here that’s coming (to this city), they’re going to want new experiences, they’re going to want to try different things they may not be able to get back at home. And that’s where supplying Nebraska beef and branding that so people know we have the best beef in the world is something that can help the casinos in branding their experience with our experience. Macau has been spoken of as a platform for Portuguese-speaking countries’ trade with China. Are you looking at it as the same for U.S.China trade? Certainly we think there’s a chance here to be able to expand the identity of Nebraska beef to a market that is going to spread out all across Asia and really the entire world. So by doing the events here and having companies here brand Nebraska beef gives us a chance to get a lot broader exposure than we would ordinarily. Are you mainly focusing on the integrated resorts as potential clients? Yes. It’s [mostly those] having those kitchens - they’re going to be looking for products to differentiate themselves and that’s why we’re here. What about small and medium enterprises? We’re really looking for anybody who wants to do it. Last night I was meeting with a gentleman who represents SMEs in Shanghai - so it’s
about trying to get the Nebraska name out there for the people who want to brand themselves with a different experience. What are you pitching as the qualities of your state’s main product: beef? What you’re going to find is a cut of beef that’s been raised in the best environment in the world, with superior heritage and genetics and also by ranchers who are fifth generation. They're the original conservationists, they really take care of the land and their animals. And so what you get is a cut of beef that’s tender, juicy and really outstanding. On this trade mission are you only focusing on promoting beef? That’s what we’re really pushing here in Macau, but with the trade delegation we brought a variety of businesses to be able to establish relationships both for people who are in Nebraska looking to enter the China market, and also meeting with Chinese businesses that are looking to invest in the United States. Is there another non-beef segment predominant within the delegation? One of the things we did with the demonstration farm in Shanxi province - we had our irrigation companies up there. Nebraska’s the largest irrigated state in the country, in the United States. And we have centre pivot (machinery) manufacturers that are the best in the world - that are always innovating on how they can grow more crops with less water. We’ve tripled our productivity in Nebraska and there’s the same opportunity in China, especially when China’s thinking about food security: how do they do a good job with making sure they’re providing for their own population and then
how do they make sure they have enough water as well – it’s a big issue in China. What type of investment coming in from China are you looking for? Our largest industry is agriculture and our second is manufacturing. So, for example, we met with Jiangsu World Group, who has purchased a lawnmower plant in Beatrice, Nebraska and are expanding their product line there. So other Chinese companies that are looking to come to the market to help expand their presence to the United States, we're a wonderful opportunity for them. We’ve got a great workforce, that’s well educated, great work ethic, loyal and will help a company succeed. And I know from personal experience because I came from the business world and that’s why our family business was so successful because we hired Nebraskans. What changes are you expecting under the Trump administration? Certainly I expect the Trump administration to take a different approach to trade because that’s what he said he would do. So I think the negotiations are going to be tougher but I know that what Donald Trump is looking for is just to make sure he’s getting the best deal he can for American companies, which is what every other country in the world does too. Does that mean more restrictions on trade with China? I don’t know that it will put any more restrictions on what we’re individually searching for (in China). One of the things that, as a Governor from Nebraska, that I’m going to be working with the Trump Administration on is just how important trade is to Nebraska. Ninety-seven percent of the world’s consumers lie outside our borders. We need to go get them. And that’s one of the ways that, by expanding trade opportunities, we can grow jobs back in Nebraska. So it’s a very important part of our economy and I want to make sure that we’re out there talking about that as we’re structuring new trade deals. Do you think inbound investment will be more restricted under Trump? I don’t think that it will be restricted
“I think that as you see the rise of the middle class in China they’re going to be looking for new products - better products - and going to be expanding their diet.” Governor Pete Ricketts, 40th Governor of the state of Nebraska
Business Daily Monday, November 21 2016 5
Macau because what we’re looking to do is get that investment. Nebraska for example, our largest foreign direct investor is Japan and the investments they have made really helped us grow jobs in Nebraska. I think there’s the same opportunity for Chinese investors to find that opportunity as well. Are you limiting yourself to Nebraska-only companies on your trade delegation? This is just a Nebraska delegation. Not everybody is from Nebraska, some of them are companies that have operations in Nebraska that are being represented here. But it’s really a wide variety of Nebraska companies. Paypal for example is part of this, even though they’re headquarters is outside the state, they have operations in the state of Nebraska so they’re here as part of this trade delegation.
“With the trade delegation we brought a variety of businesses to be able to establish relationships both for people who are in Nebraska looking to enter the China market, and also meeting with Chinese businesses that are looking to invest in the United States.” Macau is pushing to diversify its economy. What's your general impression of it? This is my first visit to Macau and I’m really blown away. I think there’s a lot of energy and vibrancy here and it really is something that people should be very proud of. It’s a great place. Did you have any contact with the American-based companies in Macau before coming? Our department of Agriculture has actually arranged a lot of the contacts we have here already with the different companies that are purchasers and that’s why we’re kind of here tonight (at a beef promotion event) to make the impression on and make contact with those companies. What other big names are with you in the delegation? We’ve got a variety of farmers and ranchers, we’ve got companies like Paypal, companies like Behlen (farm and ranch equipment), Lindsay (irrigation, transportation, industrial solutions). These are agro-business companies that are creating equipment, or irrigation equipment or that sort of thing. So that’s a lot of the companies that are along on this trip, but we also have people who have other products for the beef industry. It’s a variety of different people. Logistically, how do you handle the trip throughout China? The Friendship Association on the Chinese side really does a lot of work
for us and helps us out tremendously. So they’ve been fantastic. The consulates also do a lot of work helping us. And then it’s our Department of Economic Development and our Department of Agriculture who really help us develop the relationships to be able to plan our trips.
that want to feature Nebraska beef as a differentiator for them, we’d love to talk to them.
many states to expand jobs by finding new markets for their products and services.
How long is the Macau segment of your trip? One day in Macau and then the next in Hong Kong.
How frequently do trade missions happen? I try to do a couple trade missions a year. Last year I went to Japan, China and Europe. This year we’re focusing just on China and Macau and Hong Kong.
Is trade different when acting as a governor? Well I think as a governor you’re actually held responsible for doing something, which doesn’t seem to be the trend in Washington DC. So we actually look for opportunities to be able to take care of our people and trade is a big opportunity for
Even though the beef ban has been lifted, you're not currently selling beef in China. How long until that happens? We’re not selling it now. Primarily, they did say they are going to lift it, we’re still working through the details about how that will work to be able to start importing beef, but we’re really looking forward to being able to get that all squared away so we can start bringing U.S. beef into China. It’ll be an exciting opportunity – especially for Nebraska beef.
So basically you have your own ‘Pivot to Asia’? Yeah! Is Hong Kong a large or growing market for you? Hong Kong is the largest importer of Nebraska beef in Asia. So again we’re here to try and continue to develop those relationships and looking for other ways that we can expand that business opportunity. Would Hong Kong be a better conduit to gaining more business throughout Greater China than Macau? Well it remains to be seen but I think they’re different markets. So while Hong Kong doesn’t bring in a lot of raw commodities - beef is a good fit, as it is in Macau. Or in places like Shanghai or Beijing, we’re really talking about more commodities. You’ve mentioned beef sales would be focusing on the middle-income families. Is there the possibility for expansion to higher markets? Will that be limited by the corruption crack-down? We’re talking about Nebraska beef: it really is kind of middle income and up. So the upper end of the market is going to want this product as well and again it really gets back to – who is the company that is trying to present the beef? What are they trying to do and how are they trying to brand themselves? But regardless we think we can help create a differentiation for them with Nebraska beef. Restaurants here recently gained three more Michelin stars– bringing us to 19. Are these restaurants also the targets? Certainly. If there are restaurants
During Governor Rickett’s visit to the MSAR, he signed letters of intent for purchasing Nebraska beef with the following companies: -Angliss Macau Food Service Ltd. -Kateford International -Saison Food Service Ltd. -Sutherland Hong Kong -Wilson International Frozen Foods -Viva Asia
6 Business Daily Monday, November 21 2016
Macau Opinion
Sheyla Zandonai* Magic touch As usual the 63rd Macau Grand Prix 2016 was fast and furious, despite last-minute changes to the organizational and supplier chains. Uncertainty entered when Motor Race Consultants – the long-time organizer for the Macau Grand Prix Formula 3 races – unexpectedly pulled out. It was a bold move from the company led by Barry Bland, who blamed the withdrawal on delays in the race organization. A formula for disaster. Yet FIA took over the running of Macau Grand Prix and awarded it FIA World Cup status, following the restructuring of the event’s organising committee, now comprising the Macau Sports Bureau and the Automobile General Association Macau-China (AAMC). And everything seems to have gone ahead smoothly. It is a kind of magic. Last week, another surprising resignation. The director of the first Macau International Film Festival and Awards (IFFAM), Marco Mueller, also withdrew less than a month from the launch of the festival on December 8. After assembling a respectable jury and an outstanding selection of films, Mr Mueller quit, giving no further explanation. Actually, there was an explanation: “on-going differences of opinions” is how Maria Helena de Senna Fernandes, head of the Macao Government Tourism Office (MGTO), described the situation in a press conference. This being life, it does not seem like much of a justification. There are also rumours of impending litigation, though neither side commented further on this. Mr Mueller is a giant in the field. He has previously served as the head of the prestigious Locarno, Venice, and Rome film festivals, as well as the Silk Road International Film Festival (Fuzhou), and acted as chief advisor for the Beijing International Film Festival 2016. Though he is known today for his various roles as film festival director, consultant, and film producer, Mueller started his career as a scholar. He has a state doctorate in China, speaks fluent Mandarin, and has worked as a film critic and historian. His directorship of the festival would have been a promising start, a truly grand cornerstone upon which the festival could have been consolidated as an outstanding event. Though Mueller’s short-lived term at IFFAM will still have an impact on its first edition, it is uncertain what the future holds for the festival. For the time being, the show must go on, with Ms Senna Fernandes as acting director. Once again, amid controversies and unspoken words, the festival organizers may indeed succeed in their endeavour. Indeed, it is a kind of magic. *scholar and contributor to this newspaper.
Tourism
Visitor expenditure ends seven-quarter slump in Q3 Total visitor expenditure posted a year-on-year increase of 17.4 per cent in the quarter due to a notable increase in spending by overnight visitors Kam Leong kamleong@macaubusinessdaily.com
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or the first time in seven consecutive quarters, total visitor spending increased year-on-year in the third quarter of this year, up by 17.4 per cent to MOP14.64 billion (US$1.83 billion), according to the latest official data released by the Statistics and Census Service (DSEC). The increase in total visitor expenditure is attributable to a surge in spending by overnight visitors,
increasing 21.5 per cent year-on-year to MOP11.9 billion, whilst same day visitors also spent 2.1 per cent more compared to the same quarter of last year, at MOP2.7 billion. On a quarter-to-quarter comparison, total tourist spending in the quarter represents an increase of 25.1 per cent. Average per-capita spending of visitors also rose by 17.3 per cent year-on-year to MOP1,806 - the first year-on-year increase since the second quarter of 2014, the DSEC notes. In particular, an 18.2 per cent
Construction
14 hotels under construction in Q3 The market may see another 38 new hotel projects in the territory A total of 14 hotel projects were under construction during the third quarter of the year, expected to bring 5,606 new hotel rooms to the MSAR, according to the official data from the Land, Public Works and Transport Bureau (DSSOPT). These new hotel projects occupy a total of 512,316 square metres. Of the total, three are in Cotai and will supply 4,425 rooms, while eight are on the Macau Peninsula and will provide 561 new rooms. The other three projects are situated in Taipa or Coloane, and are expected to supply 620 new rooms. On the other hand, 38 other new hotel projects are at the design stage, and are expected to boost the local hotel room supply by 8,869 rooms.
According to DSSOPT, 32 of these projects, comprising 3,644 rooms, will be located on the Peninsula, while three others - adding 4,425 rooms - are being designed for Cotai. Taipa and Coloane will each house one new project. The DSSOPT data also shows that 618 units of 13 residential projects had been completed and were undergoing government inspection during the quarter. Meanwhile, the Bureau issued occupancy permits for seven projects, comprising 126 units during the three months. Some other 83 residences, comprising 10,357 units, were under construction in the quarter, while 204 others were at the design stage and are expected to provide 21,398 units. K.L.
Policy address Two years of economic adjustment
Cash handout Despite the city undergoing an economic adjustment phase since 2014, the continual support and benefits for citizens from the government have been beneficial, notes the Director of Macau Development Strategy Research Centre, Sio Chi Wai. Speaking on TDM Radio programme ‘Macao Forum’ last Friday, Sio pointed out that economic adjustments in other regions normally affect government expenditure relating to citizens’ livelihood. Sio however comments that the Chief Executive has continued to provide support to citizens whenever resources are available. Given the rebound in gross gaming revenue over the past three months, Sio voiced that the MSAR government should be cautious regarding worldwide instability in economies, noting that potential challenges might
arise in regards to the city’s economic development. “The current world economic environment poses a lot of challenges,” said Sio. “I hope the government continues to be cautious about its economy since Macau is dependent on the international markets.” Professor Rose Neng Lai, from the University of Macau, specialises in finance and business economy and agrees that the city should remain cautious even if the MSAR’s economy appears to stabilising. In terms of financial support programs provided by the government, Professor Lai questioned whether a further focus on equity should be observed, noting that some segments of the population need more help than others. However, she recognises that achieving equity in the current state is challenging, saying that the city should continue to work to improve the situation of its population. C.U.
year-on-year increase was registered in the per-capita spending of visitors from Mainland China, which amounted to MOP2,100. Among Chinese visitors, per-capita spending by those travelling under the Individual Visit Scheme went up 12.4 per cent year-on-year to MOP2,312, with spending by Guangdong tourists and Fujian visitors rising by 12.2 per cent and 3.7 per cent year-onyear, to MOP1,854 and MOP2,289, respectively. Meanwhile, the city also saw per-capita spending of visitors from other origins increase during the quarter, with that from Singapore (MOP1,912), Hong Kong (MOP 1,092) and Taiwan (MOP 1,638) growing year-on-year by 17.1 per cent, 19.7 per cent and 16.9 per cent, respectively. Among long-haul visitors, per-capita spending of visitors from Australia (MOP 1,421) and the United Kingdom (MOP 1,183) rose by 8.3 per cent and 7.2 per cent, respectively, while that by visitors from the United States dropped by 13 per cent year-on-year, to MOP1,177. During the period, 43.4 per cent of total visitor expenditure went towards shopping, followed by accommodation and food & beverages, amounting to 27.3 per cent and 21.3 per cent of the total, respectively. In terms of purpose of visit, visitors coming to the city for MICE events had the highest per-capita spending, at MOP3,089, up by 23.7 per cent year-on-year. This was followed by those coming for shopping and vacation purposes, who on average spent MOP2,504 and MOP2,421 per capita, an increase of 14.7 per cent and 9.1 per cent year-on-year, respectively.
Gaming
Casino Taipa at Regency reopens Casino Taipa re-launched operations last week in the Regency Art Hotel, with five tables and some 112 electronic gaming seats, according to brokerage Union Gaming, which believes the reopening of the casino is not likely to rake in any significant earnings. The casino, opened in 1987, had ceased operations since 2008 and was under the casino license of local gaming operator SJM, being denoted as a “self-promoted” casino of the operator rather than a satellite casino, the firm noted. ‘We do not believe Casino Taipa will generate material revenues or profits,’ wrote the analyst of the investment firm, Grant Govertsen. ‘This is a function not only of its size, but also given its location in Taipa that is disadvantageous relative to both the Macau peninsula and Cotai.’ According to the analyst, the five tables at Casino Taipa represent only 0.3 per cent of the total supply of SJM, while its 112-slot seats account for four per cent of the concessionaire’s total supply. ‘We believe the license has sat in some sort of dormant state over the intervening eight years,’ the analyst said, believing there is a framework for a casino license to stay dormant for some period of time. ‘For example, SJM’s third-party promoted Greek Mythology casino also seems to be in a similar state today with the potential to reopen in the future,’ he pointed out. He noted that there are two other SJM self-promoted casinos that also appear to have dormant licenses, namely the Casino Marina located nearby Galaxy’s Broadway property in Cotai, and the old floating casino: Casino Macao Palace. K.L.
Business Daily Monday, November 21 2016 7
Macau
Peter Hickman, winner of the Motorcycle Grand Prix
Tiago Montiero, winner of the Guia Race 2.0T
All hail the winners
Fierce competition in the Suncity Group 63rd Macau Grand Prix saw two victorious Portuguese racers - Tiago Monteiro in the Guia Race 2.0T and António Félix da Costa in the FIA F3 World Cup. Meanwhile, defending champion Peter Hickman won the 50th edition of the Motorcycle Grand Prix, and Laurens Vanthoor snagged first place in the FIA GT World Cup under surreal conditions.
Laurens Vanthoor, winner of the FIA GT World Cup
António Félix da Costa - winner of the FIA F3 World Cup
8 Business Daily Monday, November 21 2016
Macau
Suncity Group Formula 3 Macau Grand Prix - FIA F3 World Cup
Félix da Costa gets the laurels
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ntónio Félix da Costa has earned his second win in the FIA F3 World Cup in Macau, after his previous triumph in the territory in 2012. “It’s been a long time since I felt this kind of pressure. And (as Tiago) Monteiro had won this morning I felt even more (given that I’m also Portuguese),” Félix da Costa told the press. The driver for Carlin DallaraVolkswagen managed to fight off Felix Rosenqvist who, although failing to win a record third straight win in Macau, still managed to fight
back from a starting place of sixth to a final position of second. Brazilian and Red Bull Junior Team racer Sérgio Sette Câmara, the Guia circuit lap record holder, gained third position on the podium after remaining in first position for most of the race, having passed Félix da Costa and British Calum Ilott at the Mandarin Bend. “After I saw Câmara in the front I thought it would be really hard since he’s been really fast in the qualifying, but during the race restart I did my move and managed to pass,” Félix da Costa said.
After Hitech GP racer Nikita Mazepin crashed at the Paiol corner, Félix da Costa took advantage of the race restart to pass Ilott on the outside of Lisboa Bend and continued chasing Câmara. At the same time, the Theodore Racing by Prema drivers were making respective impressive comebacks, with Rosenqvist passing Japanese champion Kenta Yamashita on the third lap, and Nick Cassidy managing an impressive rise from 28th to 11th. However Cassidy also ended up crashing at the Paiol corner, provoking another race restart, which
Félix da Costa promptly used to pass his teammate Câmara to reach first position. “I was thinking of doing the restart early when the safety car turned his lights off at the Melco Hairpin, but the lights went off too late and I couldn’t do it. António was on it and risked a lot and did a good job,” Câmara told the press. With two laps to go, Rosenqvist passed the Brazilian into the Lisboa turn, but despite managing to clock the fastest lap in the race, still couldn’t reach Félix da Costa, who took the chequered flag 1.6 seconds ahead. Local driver Andy Chang Wing Chung still managed to get 12th place in his Dallara NBE, a better finish than last year when he came 19th. During the final press conference, Félix da Costa stated this would be his last appearance in F3 in Macau, with the 25-year-old driver planning to come back next year to race in the GT Cup with “the rest of the old guys”.
SJM Macau GT Cup - FIA GT World Cup
Vanthoor turns around for the win Laurens Vanthoor emerged the victor of the FIA GT World Cup after a race that only lasted about one and a half laps saw his Audi R8 LMS suffer a crash at the Mandarin corner which left fans scared for his safety. The race was abandoned after the crash and the pilot was granted the victory. “I’m more scared than hurt. Physically I’m okay. (But) to be straight upside down and see the other cars coming is not really describable and will always be a memory in my mind. Officially I won it but the way I did was very strange,” a visibly shaken Vanthoor told the press. Although in the end, the race was considered as finishing with four laps, most of it was spent behind the safety car. This is the first win in Macau for the Audi Sport Team racer in a race full of incidents and controversy, with Kévin Estre securing second place and last year’s winner Maro Engel completing a podium which saw the presence of
Audi, Porsche and Mercedes. It was a bumpy start as an initial incident led to a suspension lasting over 45 minutes, after a crash by Modena Engineering driver Ricky Capo at Fisherman’s Bend that damaged the protection walls. After the race restarted, Vanthoor was overtaken by Bamber’s Porsche, and ended up violently crashing against the Mandarin bend Armco, with his Audi turning over and then scraping almost half of the straight to the Lisboa corner upside down. Coming around the bend, Engel zigzagged quickly and avoided crashing his Mercedes against Vanthoor’s overturned vehicle by inches. “It’s great to see Laurens is fine, that’s not the way you want to see a car when you pass the bend,” the Mercedes driver told the press. Bamber ended up receiving a five-second penalty, going down the ranking to fourth after pressing Engel against the wall in the beginning of the race, a move last year’s GT
World Cup winner says could have created a “massive crash”. After a qualification plagued by technical problems in his Lamborghini Huracán GT3, local racer André Couto wasn’t very confident for a strong result due to starting the race in 13th, yet managed to recover one position in the end. “There wasn’t much of a race, my car was better after we changed it a little again. It’s a shame I didn’t have enough time to get used to the car after this tuning,” Couto told the press. The Macau driver also considered that the positioning of the speed bumps in the curve where Vanthoor had the accident has caused similar problems for drivers before. Having been penalised on the second qualifying, Edoardo Mortara started in 16th after topping the first qualification, but the three-time winner of the competition dubbed ‘Mr. Macau’ only recovered three places before the early ending of the race.
Business Daily Monday, November 21 2016 9
Macau
Suncity Group Macau Motorcycle Grand Prix - 50th Edition
Peter Hickman conquers the Motorcycle Golden Jubilee
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ritish BMW rider Peter Hickman conquered the 50th edition of the Suncity Group Macau Motorcycle Grand Prix for the second consecutive year. No mean feat for a man that only got to know his bike last Thursday and that started in seventh as the race kicked off. Hickman Bathams/SMT BMW teammate Michael Rutter managed second position with Martin Jessopp grabbing third. Hickman's considered the race one of the “toughest” he had ever participated in, with first place position changing repeatedly over the course of the last laps. “My last lap was faster than my qualifying, which I was very happy for. When I passed Martin Jessopp and Michael Rutter I approached Lisboa probably 10 or 15 miles faster than I usually go there, hit the brakes and nearly didn’t make the corner. It was a bit scary,” Hickman told the press. Eight-time winner Rutter seemed posed for a ninth win, leading the
platoon from the start, when on lap 7 Rutter and Jessopp changed positions two times, in a thrilling last half of the motorcycle main race that left the crowd on the edge of their seats. Having already finished in second place three times, Jessopp, on his Riders Motorcycles bike, was determined to finally become king of the hill, but as the leading three entered the Lisboa run, both Rutter and Hickman flashed by. A sudden gear trouble also forced Jessopp to slow down, losing third place to Northern Ireland’s Glenn Irwin, who many saw as the hottest newcomer in town as the leading rookie in the British SuperBike Championship. The rookie driver from Bathams/ SMT BMW almost achieved an impressive podium in his Macau debut, but a technical issue on the penultimate lap with his PBM Be Wiser Ducati forced him to go back to the pits and Jessopp took the podium honours. “I don’t want to sound cocky but after the mistakes I made last year I just sat behind Michael Rutter and
felt good. I was watching the big screen coming down from Lisboa and could see Peter Hickman coming and thought it would be the time to go. I passed Michael and when we got to the harbour and looked back he was still there so I thought ‘okay I’m not gonna destroy my title like last year’. Then they just passed me on the straight when I was on neutral and that was it,” Jessopp told Business Daily. With Rutter breathing down his neck, the 29-year old Hickman held his nerve and reached the chequered flag for the win with a 0.533 second lead, stating afterwards that he was already looking forward to coming back next year for a triple. Twenty seconds behind the winning trio was Conor Cummins on his Honda Racing bike, followed by Horst Saiger and four-time winner Stuart Easton, also from the Rutter and Hickman team.
Suncity Group Macau Guia Race 2.0T
Monteiro wins 3 hours TCR marathon Tiago Monteiro clinched first position in the Suncity Group Macau Guia Race 2.0T - a race lasting three hours due to multiple red flags and safety car laps. Placing after Monteiro in the race was Leopard Racing Volkswagen driver Jean-Karl Vernay and Craft-Bamboo Lukoil driver SEAT Pepe Oriole. Leopard driver Stefano Comini finished in fourth position and due to his accumulated points in the championship has been announced the winner the TCR International Series for the second time in a row. “The Guia track is very tricky and dangerous but Macau marshals are actually pretty good and experienced, but a lot of things can happen. I was almost three hours in the car, it was almost an endurance race. You have to keep your nerves down and resist all the way, but it was definitely a strange race,” Monteiro told Business Daily. The touring cars race started with a bang, with an accident taking out Gianni Morbidelli and allowing James Nash, the favourite with 17 points ahead of Comini, to reach fourth place before the first red flag. However, after the restart of the
race a three car pile-up involving Dusan Borkovic, Matej Homola and Nash left the Seat driver with damaged suspension. The race ended up being suspended with only five laps completed, leaving Comini as the new championship winner. “This is more a win for Leopard Racing than me and I want to thank my teammate Vernay and the rest of the team” Comini told the press. Monteiro was a JAS Honda
guest driver and therefore wasn’t competing for the championship, but is now the first Portuguese driver to win the Guia Race and vowed to repeat the feat next year’s when the FIA World Touring Car Championship (WTCC) returns to Macau. “It’s a fantastic feeling, I’ve been on the podium here many, many, times but never won. I’m very excited for the WTCC coming back next year, it’s my competition,” Monteiro told the press.
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Suncity Group Chinese Racing Cup Chinese Driver David Zhu came out this year’s winner of the Chinese Racing Cup, held between “made in China” road car-derived BAIC Motor Senova D70 cars, following a qualifying that saw him snatch the pole position from teammate Jason Zhang Zhi Qiang, who placed third and Taiwan’s Chang Chien Shang, who managed to steal second place after starting the race from third. “It was a difficult race, I started well but then because of the weather I had to slow down a bit. I continued to follow the first one to find a place where I could overtake him and I ended up getting it,” Zhu stated. David Zhu also added that he would like to return to the Guia track next year to participate in the Macau GT Cup. Putting on the best show of drivers from the MSAR was the Automobile General Association Macao-China’s (AAMC) driver Hélder Assunção who managed to recover from starting in 8th position to a 4th place finish.
Suncity Group Macau Road Sport Challenge Macau racer Lo Kai Fung won the Suncity Group Macau Road Sport Challenge, the sixth consecutive win for the local racer. Despite rain influencing the track conditions, no negative affect was seen on the local driver’s performance at the helm of a Mitsubishi Evo7. Last year’s winner, also from Macau, Leong Iang Veng failed a consecutive victory after starting in 1st with Lo and Wong tailing him, but on Lap 6 Lo overcame Leong who fell further behind. In the end Lo took the laurel after an incident at San Francisco ended the race. “At the beginning, in the first laps, the tire temperature was not very good, but from the fourth lap it improved and it was possible to maintain the tire’s temperature and grip. By the end, the surface of the track was practically dry and I kept the time to the end,” Lo stated.
CTM Macau Touring Car Cup Paul Poon Tak Chun conquered the CTM Macau Touring Car Cup again, behind the wheel of his Peugeot RCZ. The favourite for the win had already gained pole position after Saturday’s qualifying session and succeeded despite running in a race suffering multiple accidents and with the constant presence of the safety car. Macanese Filipe Sousa managed second placed, followed by Hong Kong pilot Fung Kar Chue. This was Paul Poon’s fifth victory after successes in Macau in 2006, 2007, 2012 and 2015.
10 Business Daily Monday, November 21 2016
Greater China
Macau Guia Race 2.0T
TCR eyes stronger presence in China
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ince its first edition in 1972, the Macau Guia Race has built itself a strong reputation as one of the main events on the international touring car calendar. From 2004 to 2014, Macau’s Guia Circuit played host to the FIA World Touring Car Championship (WTCC) season finale. In the end of 2014, the Macau Guia Race was left orphan of the strong and reputable technical touring car regulation, putting its heritage and status at stake. Then the TCR International Series and its Asian series stepped in, with the blessing of the Macau Grand Prix Committee, offering a continuation of touring car races on the streets of Macau last November. Unfortunately, the TCR International Series will end its association with the Guia Race of Macau after just two years, but the concept will stay in the region. FIA WTCC founding father and former promoter Marcello Lotti, now CEO of WSC Ltd, is the man behind the TCR concept that quickly spread across the world. The objective: restoring the ‘Touring Car Pyramid’, with cars that can compete at the national, regional and international level. Touring car racing has a huge legacy in the region and unsurprisingly Asia promptly embraced the concept. The TCR Asia Series was the first regional series to be established, set up last year by WSC Asia Limited, and headed by David Sonenscher. Sonenscher has a long history in Asian motorsport and successfully ran the Asian Touring Car Series from 1997 up until the end of 2011 through his Malaysia-based company Motorsport Asia, which also promotes the highly successful GT Asia Series. China is the world’s largest auto market for new cars, and will certainly play a role in the future shaping of the TCR Series concept. “We are very much keen on establishing the TCR concept in the whole of Asia and in particularly in China. The whole region is a market
that provides large figures for the automotive industry. And China is the peak of this huge market,” Lotti told Business Daily.
TCR Cars Concept Car sold at MOP700,000/ MOP1.25 million including engine Affordable running costs Production-based engine 2.0L Turbo - 300/300 Bhp The TCR concept is very much oriented for customer racing. It has come about as a direct result of the experiences faced by the different national Touring Car championships. There was a strong demand for competitive cars that could be purchased and run at reasonable cost. Car manufacturers, racing departments and tuners are now using this stage to
Marcello Lotti, CEO of WSC Ltd
reinforce and enlarge their clientele and increase their profits. A stronger presence in Asia will undoubtedly boost the sales and help in promoting the sporting brands in a growing market. Lotti knows this well and the Italian entrepreneur is preparing for the future in this part of the globe. “We are planning to create TCR platforms in the key countries to cover the whole of Asia. Our goal is to spread TCR series all over the Far East by 2018,” he says. Drivers from across the world line up to race on the Guia Circuit, considered one of the most challenging road courses in the world. So far, the Macau Grand Prix event has been the only event of the TCR International Series held in the People’s Republic of China, but no one would be surprised to witness a TCR International Series race in Mainland China in the coming seasons. “One race meeting in China remains
one of the options we are considering for the near future”, says the TCR International Series promoter. These past few months, prominent car manufacturers like Audi and KIA have got on-board the TCR concept, joining the likes of Honda, SEAT, Volkswagen, Alfa Romeo, Ford, Subaru and Opel. Chinese automakers are taking their first steps into motor racing at home. BAIC, Hayma and Geely are already involved in the national motor racing series. It won’t take long until the Chinese auto giants will go racing overseas and battle the supremacy of European, Japanese and American carmakers on the racetracks. Lotti remains positive about the possibility of seeing a “Made in China” TCR car hitting the tracks soon. “The TCR concept is founded on a kind of car – compact, front-wheel drive, two-litre turbo engine – that nearly every manufacturer has in its range. In fact, there are several Chinese brands that produce cars that would be easily developed in TCR specifications”, he adds. Thirty of the 36 participants in this year’s Macau Guia Race 2.0T were driving TCR specification cars. The Macau Guia Race 2.0T was the host of the last race of the season for TCR International and Asia Series drivers.
Business Daily Monday, November 21 2016 11
Greater China Real estate
Hot house prices cool as curbs on speculation bite Despite the monthly slowdown, new house prices in China’s 70 major cities still rose 12.3 per cent in October from a year earlier
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hina’s booming property market showed early signs of a softening in October after a fast and furious price rally that propped up economic growth this year. A National Bureau of Statistics (NBS) survey out on Friday showed October’s monthly price growth virtually halved to 1.1 per cent from September’s 2.1 per cent, as most of China’s first- and second-tier cities posted slowing price growth. Analysts welcomed the softening as it showed that local and national measures intended to curb speculation were working without seeming to trigger a sharp price correction. “October data showed the momentum is softening, and that is within market expectations,” said Julia Wang, Greater China economist at HSBC global research said in Hong Kong. “I think that’s actually good news since it showed the effectiveness of the new curbs introduced earlier in October without depressing the market too much.” Despite the monthly slowdown, new house prices in China’s 70 major cities still rose 12.3 per cent in October from a year earlier, accelerating from an 11.2 per cent increase in September.
Prices in Shenzhen, one of China’s long-time high-growth markets, dropped 0.5 per cent in October, the first fall since October 2014, suggesting restrictions to curb speculative buying in the hottest markets are starting to bite. China has depended on a surging real estate market and government stimulus to drive growth this year, but fears of a property market crash have led more than 20 cities to introduce tightening measures to cool overheating markets. HSBC’s Wang said the impact of
tightening measures on growth would be “limited” as the policies were still more relaxed than seen in previous tightening cycles, especially without a credit squeeze from monetary tightening. “We expect monetary policy to remain loose next year,” she said. Wang estimated the property market currently contributed 17 per cent of China’s total investment, with infrastructure spending still the major driver. Property investment rose in October on an annual basis to its highest since April 2014, according to Reuters calculations from data issued by NBS on last Monday. Analysts say the impact on real-estate investment from tightening measures is usually delayed,
but a property market dampened by sluggish domestic demand could weigh on the economy from early next year, adding uncertainty to the growth outlook.
Strict rules to continue
Sixty-five of the 70 cities tracked by NBS showed a year-on-year price gain, up from 64 in September. In the second-tier city of Hefei, once again the top price gainer, new home prices rose 48.4 per cent in October, quickening from a 46.8 per cent surge in September.
Key Points Oct new home prices +12.3 pct y/y vs Sept +11.2 pct Monthly growth slowed to 1.1 pct from Sept’s 2.1 pct Hefei again top performer as prices +48.4 pct y/y Tier-1 & 2 cities home prices have cooled - Stats bureau Analysts say a record headline figure in October suggests policymakers will maintain measures to bear down on price growth. “The current strict policy tone will persist, which could add pressure to growth in the coming quarters,” said Singapore-based Commerzbank economist Zhou Hao. Some overheated cities are already beefing up existing measures with stricter multiple curbs, suggesting more cities may follow suit in bolstering controls. On Tuesday, major cities such as Shenzhen and Wuhan stepped up restrictive measures with fresh curbs on borrowing and purchasing of multiple homes. Reuters
12 Business Daily Monday, November 21 2016
Greater China In Brief Investment
Alibaba buys into supermarket chain China’s e-commerce giant Alibaba Group Holding Ltd plans to invest RMB2.1 billion (US$305 million) in supermarket chain Sanjiang Shopping Club Co Ltd to further expand its retail presence. Sanjiang said announcements it had made about Alibaba’s investment had prompted the Shanghai stock exchange to ask whether Alibaba will ultimately seek control. Sanjiang’s shares were suspended on Nov. 8 and will resume trading today. Alibaba will subscribe to a private placement in Sanjiang, which will help raise up to RMB1.5 billion and be equivalent to a 25 per cent stake in the supermarket operator. M&A
Deutsche Bank says sells Hua Xia Bank stake Deutsche Bank said on Friday it has sold its 20 per cent stake in Chinese lender Hua Xia Bank for a total sum of around RMB23.2 billion (US$3.37 billion) to PICC Property and Casualty Co. The consideration for the shares is at the lower end of the 23 to RMB25.7 billion range Deutsche was hoping to get when the sale was first announced late last year. The RMB23.2 billion includes dividends paid to Deutsche Bank earlier this year. A Deutsche Bank spokeswoman confirmed the stake transfer to PICC Property & Casualty and the sale price in an emailed statement to Reuters. Markets
More SMEs debut on New Third Board More small and medium-sized enterprises (SMEs) were added to China’s New Third Board last week. A total of 156 debuted on the board, up from 103 two weeks ago. The number of companies listed on the board rose to 9,637 as of Friday. Turnover on the board reached RMB4.93 billion (around US$715 million), up 16.82 per cent from a week ago. The New Third Board, or National Equities Exchange and Quotation (NEEQ) system, is a national system for SMEs to transfer shares and raise funds. M&A
Swire Pacific to buy Coca-Cola bottling assets Hong Kong conglomerate Swire Pacific Ltd said on Friday it will acquire Coca-Cola bottling assets in China for RMB5.87 billion (US$852 million), betting on growing consumption in the mainland of non-alcoholic ready-to-drink beverages. Swire said it will buy China manufacturing and distribution assets of non-alcoholic ready-to-drink beverages from China Foods Ltd, a subsidiary of state-owned food firm COFCO Corp, for RMB4.65 billion. The conglomerate will also buy the 12.5 per cent stake it does not own in non-alcoholic ready-to-drink venture Swire Beverages Ltd from Coca-Cola Co for RMB1.22 billion, it said in a statement.
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Chinese President Xi Jinping greets the audience during the meeting of businessmen as part of the Asia Pacific Economic Cooperation Forum (APEC) in Lima, Peru, 19 November 2016. Lusa APEC meeting
President Xi pledges further opening as leaders scramble for free trade Some APEC members are determined to press on with TPP and held out hopes the United States would still show leadership on trade Rosalba O’Brien and Kiyoshi Takenaka
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hinese President Xi Jinping pledged to open the economy further on Saturday as leaders of Asia-Pacific countries sought new free-trade options following Donald Trump’s election to U.S. president on promises to scrap or renegotiate trade deals. All eyes were on China at this year’s APEC summit in Lima, Peru just over a week after Trump’s surprise victory in the United States dashed hopes of the largest-ever U.S.-proposed trade deal, the Trans-Pacific Partnership (TPP), coming to fruition. U.S. President Barack Obama has championed the TPP as a way to counter China’s rise, but he has now stopped trying to win congressional approval for the deal signed by 12 economies in the Americas and Asia-Pacific, excluding China. Without U.S. approval the current agreement cannot be implemented. Trump campaigned against the TPP and the North American Free Trade Agreement (NAFTA) as bad for U.S. jobs. He said he would scrap the TPP and threatened to impose tariffs on imports from China and Mexico. Following a meeting with Obama, Xi said Beijing’s relationship with Washington was at a “hinge moment” and called for a smooth transition. Xi has been selling an alternate vision for regional trade by promoting the Beijing-backed Regional Comprehensive Economic Partnership (RCEP), which as it stands excludes the Americas. “China will not shut its door to the outside world but open more,” Xi said in a keynote address at APEC. “We’re going to...make sure the fruits of development are shared.” Chinese attendance at the APEC meeting was its largest ever and regional delegates said China would take the lead on trade if the U.S. turned toward protectionism. The Obama administration has warned that the RCEP would not
include strong protections for workers, the environment or intellectual property. In Lima on his last scheduled trip abroad as president, Obama said the United States worked to include labour provisions in a U.S.-Peru free trade agreement to lift wages and standards for Peruvian workers. “That’s the kind of attitude that we want to try to promote in ... the years going forward, and my hope is that that policy will continue.” TPP leaders held a meeting at APEC, where Obama urged them to work together to advance TPP, the White House said. The leaders had confirmed the economic and strategic importance of the agreement, Japanese Deputy Chief Cabinet Secretary Kotaro Nogami told reporters after the meeting.
China fills the void?
With the fate of the TPP uncertain, China’s talks on RCEP, which include Australia, India and more than a dozen other countries, are seen as perhaps the only path to the broader Free Trade Area of the Asia-Pacific (FTAAP) that APEC aspires to. “It’s a more traditional trade deal, reducing tariffs on goods and services. It’s not as far reaching as the TPP,” Australian Prime Minister Malcolm Turnbull told reporters of RCEP. But “the more access we can get to more markets for our exports, the better.” New Zealand Prime Minister John Key said the United States was an important partner in the region, but China would fill the void if a Trump administration backs away from free trade. Key said TPP members might be able to incorporate “cosmetic changes” to make the deal more palatable to the real estate magnate and former reality TV star. “The Trump Pacific Partnership for instance, that’d be fine,” Key said, laughing. Despite China’s overtures, some APEC members were determined to press on with TPP and held out
hopes the United States would still show leadership on trade. “Our geopolitical position is with the United States, obviously,” Mexican President Enrique Peña Nieto said. “That’s where our eyes are set and that’s what we are working for.” Peña Nieto said the NAFTA pact between the United States, Mexico and Canada should be “modernized,” noting that issues relating to labour rules and the environment were among those that could be included in such talks - two areas Mexico had believed it could update with the United States via TPP. Trump has vowed to scrap NAFTA if he cannot renegotiate it. Mexico wants to harness Canadian support for NAFTA and TPP, and after a meeting between Peña Nieto and Canada’s Prime Minister Justin Trudeau, Mexico’s government said in a statement the pair stated their countries should keep working together “to promote North America as a competitive and prosperous region.”
“China will not shut its door to the outside world but open more” Xi Jinping, President of China
The two also pledged their nations’ commitment to the “free market”, the statement added, without referring to NAFTA or TPP. Mexico, Japan, Australia, Malaysia, New Zealand and Singapore aim to continue with TPP with or without the United States, Mexico’s economy minister, Ildefonso Guajardo, said on Friday. Several APEC members said it was too soon to write off support from Trump on TPP. “Barack Obama was not a supporter of the TPP when he became elected and he’s leaving office as one of its greatest advocates,” Australia’s Turnbull said. Reuters
Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Nelson Moura; Annie Lao; Kelsey Wilhelm; Matthew Potger; Cecilia U Group Senior Analyst José I. Duarte Design Aivi N. Remulla Web & IT Janne Louhikari Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@projectasiacorp.com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com
Business Daily Monday, November 21 2016 13
Asia Political crisis
Park ‘colluded’ in influencepeddling, Korea prosecutor says Hundreds of thousands of people have gathered near the presidential compound in the past two weeks to demand Park’s resignation and arrest Kanga Kong and Hooyeon Kim
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resident Park Geun-hye colluded with her former aides in an influence-peddling case that included undue pressure on South Korean corporations to raise tens of millions of dollars for foundations controlled by her friend, a South Korean prosecutor said yesterday. Prosecutors have secured enough evidence to believe Park played a
role when her friend, Choi Soon-sil, allegedly extracted money from some of the country’s biggest companies and gained access to classified information, including presidential speeches and evaluations of cabinet candidates, Lee Young-ryeol, the head of the Seoul Central District Prosecutors’ Office, said at a televised briefing. Lee gave the briefing after indicting Choi and two former presidential secretaries on charges including the
A South Korean marches towards the presidential compound carrying placards reading ‘Not My President and All Guillotine’ during a rally against South Korean President Park Geun-Hye on a main street in Seoul, South Korea, 19 November 2016. Lusa
abuse of power. Park is the first South Korean president to be targeted as a suspect in a corruption investigation while in office. Park has apologized twice to the nation for consulting Choi, which sparked allegations that her friend meddled in state affairs extensively for personal gain. Park has asked for more time to prepare for her defence. Her approval rating has dropped to 5 per cent, according to Gallup Korea.
Nationwide Campaign
Hundreds of thousands of people have gathered near the presidential compound in the past two weeks to demand Park’s resignation and arrest. Moon Jae-in, the front-runner in public opinion polls on presidential candidates, said last week he’ll run a nationwide campaign to push Park out. “Park should step down,” the People’s Party, the second-largest opposition party, said by text message. “Park’s collusion and her status as a criminal suspect for the prosecutors’ investigation meet the requirement for impeachment.” If Park was to resign, an election would have to be held within 60 days. Despite the growing calls for her removal, Park has shown few signs she’d step down any time soon. This month she resumed official duties including making appointments to government offices and naming new ambassadors. On Friday, the presidential office reaffirmed plans for Park to attend a summit with China and Japan in Tokyo next month. Bloomberg News
Malaysian currency
Central bank to no longer tolerate ringgit trade in NDF market The governor said they are also finalising an operational framework for Foreign Exchange Administration compliance Malaysia’s central bank said “prompt supervisory intervention” will be taken against any individuals or banks which are engaged in ringgit trade in the non-deliverable forwards (NDF) market. Bank Negara Malaysia (BNM) Governor Muhammad Ibrahim said it has been made clear to local banks that onshore opening ringgit prices cannot reference offshore prices or be out of sync with the underlying fundamentals of the economy.
“This week has seen many noises surrounding these measures. There is no new policy on capital flows. There is no proxy capital control either” Muhammad Ibrahim, Bank Negara Malaysia Governor “This week has seen many noises surrounding these measures. There is no new policy on capital flows. There is no proxy capital control either,” Muhammad said in a speech at an event on Friday night. The speech was released to the media on Saturday. Earlier on Friday, the central
bank confirmed that it had been intervening in the onshore market to stem the slide in the ringgit, Asia’s worst performing currency since Donald Trump’s surprising win in the U.S. presidential election on Nov. 8 sparked a global sell-off in emerging markets. Emerging Asian currencies and bonds lost ground as investors feared higher U.S. interest rates once Trump assumes the presidency would spark capital outflows from the region. Malaysia sent out form letters last week from banks in Malaysia to their offshore counterparts and clients. The letters asked them to sign a commitment to cease trading the ringgit in the NDF markets and then send the letters back to Bank Negara.
BNM said the clamp down was to “ensure orderliness and stability of our markets”, but stressed that it did not amount to capital controls. Muhammad said in his speech on Friday that the central bank will implement several measures to boost onshore ringgit trade, particularly against the U.S. dollar and Chinese yuan. These would include a pilot programme that would allow onshore hedging of dollar and yuan transactions against the ringgit without the need to see underlying documents, and the introduction of onshore dollar and yuan futures against the ringgit. The central bank governor said they are also finalising an operational framework for Foreign Exchange Administration compliance, that will set an industry standard for minimum due diligence and provide more clarity and efficiency in foreign exchange and hedging transactions. “Taken together, these three measures are targeted at residents such as the Small and Medium Enterprises with a view to expand their access to hedge freely and directly with onshore banks,” Muhammad said. Reuters
In Brief Macroeconomics
IMF sees stability in Sri Lanka’s conditions The International Monetary Fund (IMF) on Saturday said Sri Lanka’s macroeconomic and financial conditions have begun to stabilize and the island nation’s performance under its US$1.5 billion loan programme is satisfactory. The global lender, after completing the first review of Sri Lanka’s economic performance, also said inflation has trended down and the balance of payments has improved, though international reserves remain below comfortable levels. The completion of the review enables the second IMF disbursement of US$162.6 million under the loan, bringing the total disbursements to US$325.1 million. CLV meeting
Cambodia to host summit on development The 9th Cambodia, Laos and Vietnam (CLV) Summit on Development Triangle Area will be held in northwestern Cambodia’s Siem Reap province on Nov. 22 and 23, a Foreign Ministry statement said. The biennial event will bring together the leaders of CLV countries, including Cambodian Prime Minister Samdech Techo Hun Sen, Laos Prime Minister Thongloun Sisoulith and Vietnamese Prime Minister Nguyen Xuan Phuc, the statement said. CLV Development Triangle Area is aimed at accelerating economic growth, poverty reduction, social and cultural progress in the areas of the triangle, which comprises 13 provinces, including four in Cambodia, four in Laos and five in Vietnam. 1MDB scandal
Malaysian protesters march against Prime Minister Tens of thousands of protesters, undeterred by the arrests of opposition leaders, marched in Malaysia’s capital on Saturday demanding that Prime Minister Najib Razak step down. Protesters clad in yellow shirts marched through the heart of Kuala Lumpur bringing traffic to a standstill in several tourist spots, wrapping up peacefully in front of the iconic Petronas Twin Towers after an initial plan to assemble at Independence Square was thwarted by police. Najib has faced criticism since the Wall Street Journal reported last year that around US$700 million from state fund 1Malaysia Development Berhad (1MDB) was diverted into the personal bank account of the prime minister. Infrastructure
Foreign firms to build Vietnam port complex Vietnam has approved a foreign consortium’s plan to invest around US$315 million in a seaport and industrial zone complex in northern Quang Ninh province, the government said on Saturday. The licence was handed on Friday to the consortium including CDC International Corp from Cayman Island, Asia Infrastructure Development Co from Hong Kong and Singapore’s Tien Ich Trung Dong Co, said in a report on the government’s website. Actual inflows of foreign direct investment in Vietnam in nearly the first 10 months of 2016 rose 7.6 per cent from a year ago to an estimated US$12.7 billion, based on government data.
14 Business Daily Monday, November 21 2016
International In Brief Investment plan
Hammond to boost U.K. infrastructure Philip Hammond will set out Wednesday an investment plan to boost productivity, including a 1.3 billion-pound (US$1.6 billion) program to improve British roads, in his first budget statement as U.K. chancellor of the exchequer. As the government prepares to publish its industrial strategy in coming weeks, the chancellor will announce in his first Autumn Statement planned spending for infrastructure and innovation, as well as measures to help working families struggling to make ends meet, the Treasury said in an e-mailed statement. 2017 Presidential race
French Premier ‘ready to lead fight’ French Prime Minister Manuel Valls said he was prepared to represent the Socialist Party in the country’s presidential race next year amid doubts about Francois Hollande’s re-election bid. “I’m ready to lead the fight for 2017,” Valls said in an interview Saturday with French TV channel BFM. “I want people to regain hope and desire.” Hollande, whose popularity is near a record low for French presidents, has yet to officially commit to a bid for a second term. Valls, who is leading Hollande in polls, has said he would run if the president doesn’t seek re-election.
UN summit
Climate talks set 2018 deadline to agree rules Environmental groups said the outcome in Marrakesh was a step in the right direction, but many issues needed to be resolved over the next two years Alister Doyle and Megan Rowling
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early 2 0 0 n a t i o n s agreed around midnight on Friday to work out the rules for a landmark 2015 global deal to tackle climate change within two years in a new sign of international support for a pact opposed by U.S. Presidentelect Donald Trump. At the end of two-week talks on global warming in Marrakesh, which were extended an extra day, many nations appealed to Trump, who has called climate change a hoax, to reconsider his threat to tear up the Paris Agreement for cutting greenhouse gas emissions. Showing determination to keep the Paris Agreement on track, the conference agreed to work out a rule book at the latest by December 2018. A rule book is needed because the Paris Agreement left many details vague, such as how countries will report and monitor their national pledges to curb greenhouse gas emissions.
Two years may sounds like a long time, but it took four to work out detailed rules for the 1997 Kyoto Protocol, the Paris Agreement’s predecessor, which obliged only developed countries to cut their emissions. Paris requires commitments by all. The final text also urged rich nations to keep building towards a goal of providing US$100 billion a year in climate finance for developing countries by 2020. M o r o cca n F o r ei g n M i n i st e r Salaheddine Mezouar told a news conference that Marrakesh had been the start of turning promises made in Paris into action. “We will continue on the path,” he said, urging Trump to join other nations in acting to limit emissions. Fi ji ’ s P ri m e M i n i st e r F ra n k Bai n i m a ra m a, w h o w i l l h o st next year’s climate meeting in Germany, invited Trump to drop his scepticism about climate change and visit the South Pacific nation to see the effects of stronger storms and rising seas.
Trump plans to favour fossil fuels over renewable energies and has threatened to halt any U.S. taxpayer funds for U.N. climate programmes. On Thursday, governments reaffirmed their commitment to “full implementation” of the Paris accord which seeks to phase out greenhouse gas emissions this century and to limit a global average rise in temperature to “well below” 2 degrees Celsius (3.6 degrees Fahrenheit). “Not one country has said that if President Trump pulls the United States out of Paris, they will follow him,” said Alden Meyer of the Union of Concerned Scientists. Environmental groups said the outcome in Marrakesh was a step in the right direction, but many issues needed to be resolved over the next two years, including funds for developing nations. “Rich countries have been trying to wriggle out of their pledges to help poorer countries meet the costs of coping with impacts and greening their economies,” said Harjeet Singh at ActionAid. Also on Friday, a group of 48 developing countries most at risk from climate change said they would strive to make their energy production 100 per cent renewable “as rapidly as possible”, as part of efforts to limit global warming. Reuters
M&A
Fantasy sports arch rivals to merge The two biggest U.S. fantasy sports companies DraftKings and FanDuel said on Friday they would merge to cut legal bills and improve operating efficiency after tussling for years to win customers. The tie-up could reduce costs as both companies separately fund legal defences and lobbying for legislation to authorize fantasy sports in states that have declared it illegal. Financial terms of the merger were not disclosed. The companies had each been valued at over US$1 billion before authorities including New York Attorney General Eric Schneiderman began a crackdown on the industry last year. University case
Trump agrees to pay US$25 million to settle lawsuits Donald Trump agreed on Friday to pay US$25 million to settle fraud lawsuits over his Trump University real estate seminars, in what New York’s attorney general called a “stunning reversal” for the U.S. president-elect. The lawsuits led to one of the more controversial moments of his run when he claimed the judge overseeing two of the cases was biased because he was of Mexican ancestry. The settlement was announced by New York Attorney General Eric Schneiderman, who said it followed repeated refusals by Trump “to settle for even modest amounts of compensation for the victims of his phony university.”
Executive Secretary of the UN Framework Convention on Climate Change Patricia Espinosa (2-L), Moroccan Foreign Minister Salaheddine Mezouar (3-L), Moroccan King Mohammed VI (3-R), and United Nations Secretary-General Ban Ki-moon (2-R) attend at the World Climate Change Conference 2016 (COP22) in Marrakech, Morocco, 15 November 2016. Lusa
Euro zone
ECB chief Draghi hints at more stimulus to come Draghi said that inflation it was still far off the bank’s target of just under two per cent
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uropean Central Bank chief Mario Draghi on Friday said the eurozone’s tentative recovery remained heavily reliant on the bank’s ultraloose monetary policy, fuelling expectations of more stimulus to come. “We cannot be sanguine over the economic outlook,” Draghi said in a speech at a banking conference in Frankfurt. Among the factors clouding the euro area’s growth prospects were geopolitical risks, anaemic inflation and an over-reliance on the ECB’s easy money policies, he said. “The recovery remains highly reliant on a constellation of financing conditions that, in turn, depend on continued monetary support,” Draghi said, adding that the bank was “committed to preserving the very substantial degree of monetary accommodation”. The remarks appeared to confirm observer expectations that the ECB will announce an extension of its
80-billion-euro a month bondbuying programme when the governing council next meets on December 8. The scheme, aimed at encouraging lending and investment, is currently scheduled to end in March but analysts widely believe more efforts are needed to reinvigorate growth and drive up inflation. Draghi said that while eurozone inflation hit a two-year high in October to reach 0.5 per cent, it was still far off the bank’s target of just under two per cent. “The ECB will continue to act, as warranted, by using all the instruments available within our mandate” to get inflation up to that level, Draghi told the audience. The ECB has in recent months embarked on an unprecedented stimulus programme to lift the economy out of its doldrums, offering cheap loans to banks and buying well over a trillion euros in corporate and government bonds in a bid to pump cash into the financial system.
It has also kept interest rates at historically low and even negative levels, much to the dismay of banks who say it has squeezed their profit margins.
“The recovery remains highly reliant on a constellation of financing conditions that, in turn, depend on continued monetary support” Mario Draghi, European Central Bank chief Deutsche Bank CEO John Cryan, speaking at the same Frankfurt gathering, said that while he disagreed with some of Draghi’s policies he had to at least give him credit for taking action - in contrast to European governments who have failed to back up the ECB’s efforts with fiscal reforms. Draghi “is pretty much the only person in Europe doing anything”, Cryan said. AFP
Business Daily Monday, November 21 2016 15
Opinion Business Wires
Viet Nam News Digital banking has assumed crucial importance in the development of Viet Nam’s banking system, Đào Minh Tú, deputy governor of the State Bank of Việt Nam (SBV) stressed at a recent conference. The conference themed “Digital bank - the future of banking?” was held in Hà Nội. At the conference, experts discussed challenges to the security of digital banking and the future of banking. Digital banking poses opportunities and challenges to the Vietnamese banking system, said Tú. Digital banking was different from traditional banking, forcing banks to continuously learn and develop, he said.
Globalization’s last gasp
The Korea Herald South Korean households’ real income and spending retreated in the third quarter from a year earlier amid a protracted economic slowdown, a government report showed Friday. An average household earned 4.44 million won (US$3,700) per month in the JulySeptember period, up 0.7 per cent from the same period last year, according to the report by Statistics Korea. But their inflation-adjusted real income fell 0.1 per cent on-year over the cited period, while the country’s consumer prices index has hovered below the 1 per cent level for a few months.
The Times of India The scrapping of Rs 500 and Rs 1,000 notes, which comprised about 86 per cent of all cash in circulation, will put a dent in India’s growth. How big is a matter of speculation — some analysts pegged the setback at a few tenths of a per centage point, others slashed estimates by half. The most pessimistic view would possibly see India slipping back behind China and losing its title of fastest growing major economy in the world. Most put the revised number at around 7 per cent against earlier estimates of near 8 per cent.
Philstar UK-based think tank Capital Economics said politics remain a major risk to the robust economic expansion of the Philippines. Gareth Leather, senior Asian economist at Capital Economics, said the Philippine economy remains in good health with gross domestic product (GDP) growth accelerating to 7.1 per cent in the third quarter, making the country the fastest growing economy in the region. The GDP expansion in the third quarter was faster than the seven per cent growth registered in the second quarter of the year and brought to 71 the number of quarters wherein the Philippines has been posting positive GDP growth.
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oes Donald Trump’s election as United States president mean that globalization is dead, or are reports of the process’ demise greatly exaggerated? If globalization is only partly incapacitated, not terminally ill, should we worry? How much will slower trade growth, now in the offing, matter for the global economy? World trade growth would be slowing down, even without Trump in office. Its growth was already flat in the first quarter of 2016, and it fell by nearly 1 per cent in the second quarter. This continues a prior trend: since 2010, global trade has grown at an annual rate of barely 2 per cent. Together with the fact that worldwide production of goods and services has been rising by more than 3 per cent, this means that the trade-to-GDP ratio has been falling, in contrast to its steady upward march in earlier years. This disturbing trajectory, argue the mavens of globalization, reflects the resurgent protectionism manifest in popular opposition to the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP), and now in Trump’s electoral victory. It means that the benefits of openness and specialization are being squandered. Causality in economics may be elusive, but in this case it is clear. So far, slower trade growth has been the result of slower GDP growth, not the other way around. This is particularly evident in the case of investment spending, which has fallen sharply since the global financial crisis. Investment spending is trade-intensive, because countries rely disproportionately on a relatively small handful of producers, like Germany, for technologically sophisticated capital goods. In addition, slower trade growth reflects China’s economic deceleration. Until 2011 China was growing at double-digit rates, and Chinese exports and imports were growing even faster. China’s growth has now slowed by a third, leading to slower growth of Chinese trade. China’s growth miracle, benefiting a fifth of the earth’s population, is the most important economic event of the last quarter-century. But it can happen only once. And now that the phase of catch-up growth is over for China, this engine of global trade will slow. The other engine of world trade has been global supply chains. Trade in parts and components has benefited from falling transport costs, reflecting containerization and related advances in logistics. But efficiency in shipping is unlikely to continue to improve faster than efficiency in the production of what is being shipped. Already, motor-vehicle manufacturers ship an automotive transmission back and forth across the U.S.-Mexican border several times in the course of production. At
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Barry Eichengreen a professor at the University of California, Berkeley, and the University of Cambridge
some point, unpacking that production process still further will reach the point of diminishing returns. So should we worry that trade is growing more slowly? Yes, but only in the sense that a doctor worries when a patient runs a fever. Fever is rarely life-threatening; rather, it is a symptom of an underlying condition. In this case, the condition is slow economic growth, also known as secular stagnation, caused by depressed investment, which in turn reflects financial problems and policy uncertainty. This, then, is the underlying condition. Trade agreements like the TPP and TTIP address it only obliquely. Increased spending on infrastructure by governments, to boost investment and growth directly, is more to the point. But whether the Trump administration and the new US Congress can design and implement a program of productive infrastructure spending remains to be seen. More generally, a political consensus is needed on growthpromoting policies, so that investment is not held hostage to political infighting. Whether this will be possible under Trump’s administration is another open question. The story for cross-border flows of financial capital is even more dramatic. Gross capital flows – the sum of inflows and outflows – are not just growing more slowly; they are down significantly in absolute terms from 2009 levels. But dramatic is not the same as alarming. In fact, it is mainly cross-border bank lending and borrowing that have fallen. Foreign direct investment – financial flows to build foreign factories and acquire foreign companies – remains at pre-crisis levels. So do cross-border borrowing and lending through stock and bond markets. This difference reflects regulation. Having concluded, rightly, that cross-border bank lending is especially risky, regulators clamped down on banks’ international operations. In response, many banks curtailed their cross-border business. But, rather than alarming anyone, this should be seen as reassuring, because the riskiest forms of international finance have been curtailed without disrupting more stable and productive forms of foreign investment. We now face the prospect of the U.S. government revoking the Dodd-Frank Act and rolling back the financial reforms of recent years. Less stringent financial regulation may make for the recovery of international capital flows. But we should be careful what we wish for. Project Syndicate
A political consensus is needed on growthpromoting policies, so that investment is not held hostage to political infighting
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16 Business Daily Monday, November 21 2016
Closing Stock markets
HK firms in China charm-push ahead of HK-Shenzhen link The head of Hong Kong Exchanges and Clearing Ltd said on Friday the link would go live “in a few more days” Samuel Shen and John Ruwitch
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cores o f H o n g Kong-listed companies - many small - are on a roadshow blitz in China to whet the appetite of Mainland investors ahead of the launch of a cross-border investment link between Shenzhen and Hong Kong. Mainland investors are enthusiastic, viewing the cross-border channel as a way to buy relatively cheap growth companies and hedge against a rapidly falling yuan, which hit an eight-year low on Friday against the dollar. “Valuations of Hong Kong stocks are very low. In addition, the Hong Kong dollar is pegged to the U.S. dollar, so when you buy Hong Kong dollar assets, you’re actually buying into the U.S. dollar,” Ma Hong, general manager of Shanghai TopFund Investment Management Co, said at an event in Shanghai promoting the Hong Kong-Shenzhen Connect trading link. “For us, the Hong Kong market represents a strong currency plus cheap assets ... we need to embrace it.” China and Hong Kong have not specified when the link would open, but the head of Hong Kong Exchanges and Clearing Ltd said on Friday it would go live “in a few more days”. The link would allow Chinese investors access to about 100 smaller companies listed in Hong Kong. The existing Shanghai-to-Hong Kong link allows investment in 318 bigger Hong Kong-listed companies. Since the Shanghai link opened two years ago, Chinese investors have bought a net RMB294.7 billion
(US$42.8 billion) of Hong Kong shares, more than double the purchases of Shanghai shares by Hong Kong, highlighting the more lukewarm interest of foreign investors in Chinese shares. The southbound money flow has halved the premium that Chinese listed shares had over Hong Kong shares this year alone. UBS forecast net inflows from China into Hong Kong next year would be RMB160 billion under the two links,
Key Points Firms on road show blitz to attract Chinese investors Pent up demand seen in China for overseas investment HK-listed shares offer hedge against falling yuan but some are making bolder predications. Industrial Securities, a Chinese brokerage, estimated that Chinese insurers, which have recently been allowed to participate in the connect schemes, will invest RMB400-600 billion into Hong Kong stocks by the end of 2017. China maintains tight controls on capital movements across its borders and since the stock market crash last year has been clamping down on capital outflows. Zhou Jie, chairman of Haitong Securities, told a promotional event sponsored by the brokerage in Shanghai that there is pent up demand in China for global investment opportunities. The Shanghai and Shenzhen trading links provide
Internet
a valve for that demand. But while they give Chinese investors a chance to hedge against the falling yuan, they are closed systems aimed at preventing Chinese money leaking offshore. Chinese investors pay for their Hong Kong purchases in yuan and receive the proceeds in yuan when they sell the shares. They cannot use their Hong Kong shares as collateral for offshore loans.
Charm
A range of companies, including Kingdee International Software Group Co, Bloomage Biotechnology Corp and sportswear maker 361 Degrees, have taken part in the charm offensive. Others include Concord New Energy Group, natural gas seller Blue Sky Power Holdings Co and public relations firm Wonderful Sky Financial Group Holdings. Many are hoping Chinese investment will lift their share prices and market valuations and so boost their fund raising potential. It could also add liquidity to trading in their stock, making the equity more attractive to a broader investment base. Still, companies will have to expect greater volatility, said Li Qian, board secretary of BYD Co Ltd , a Chinese automaker which is dual-listed in Shenzhen and Hong Kong. “Mainland investors hold stocks for a much shorter period (than global peers),” he said, noting the firm’s Chinese shareholders change frequently while global institutional holdings are more stable. Pang Jiahong, chief financial officer at Hong Kong-listed Universal Medical Financial & Technical
Advisory Services Co, said she welcomes speculation. “If mainland investors take a shorter-term trading approach, I think that’s good for the company in terms of the stock’s liquidity.” Universal, which counts CITIC Capital Partners, the Vanguard Group Inc, and Hanwha Asset Management Co as major shareholders, trades at a price-to-earnings ratio - a common measure of comparative value - of 13. That is significantly lower than the average of 52 for the healthcare sector on the Shenzhen exchange. China’s small-caps are about 4-6 times more expensive than their Hong Kong peers, so investment
Internet policies
Chinese authorities in favour Online insurance sales of greater global curbs surge in Mainland China’s ambitions to tighten up regulation of the Internet have found a second wind in old fears - terrorism and fake news. Chinese officials and business leaders speaking at the third World Internet Conference held in Wuzhen last week called for more rigid cyber governance, pointing to the ability of militants to organise online and the spread of false news items during the recent U.S. election as signs cyberspace had become dangerous and unwieldy. Ren Xianling, the vice minister of China’s top Internet authority, said on Thursday that the process was akin to “installing brakes on a car before driving on the road”. Ren, number two at the Cyberspace Administration of China (CAC), recommended using identification systems for netizens who post fake news and rumours, so they could “reward and punish” them. The comments come as U.S. social networks Facebook Inc and Twitter Inc face a backlash over their role in the spread of false and malicious information generated by users, which some say helped sway the U.S. presidential election in favour of Republican candidate Donald Trump. Over the last year, China has formalised a series of Internet controls, including a controversial cybersecurity law passed earlier this month. Reuters
With more Chinese managing their wealth online, insurance policies sold via the Internet more than doubled in China last year. The combined premiums of insurance policies sold online totalled RMB223.4 billion (about US$32.5 billion) in 2015, jumping 160 per cent from 2014, said an industry report released yesterday by the Insurance Association of China. Breakdown figures showed that life insurance premiums and property insurance premiums reached RMB146.6 billion and RMB76.8 billion last year, respectively. By the end of 2015, 110 insurers were selling policies online in China, with the premiums collected by the ten largest insurers topping RMB172.5 billion, accounting for about 77.3 per cent of the total, noted the report. Online insurance has been expanding quickly and played an increasingly important role in the industry in recent years, Zhu Jinyuan, head of the association, said at an event for the release of the report. “However, not enough efforts have been made to innovate online sales business models. Industry rules need to be improved and risk prevention needs to be strengthened,” Zhu said. Xinhua
opportunities under the Shenzhen connect are very attractive, said Zhou Weida, vice general manager at Invesco Great Wall Asset Management Co. Outperformance by the Hang Seng Small-cap Index suggests that some investors in Hong Kong may already be pre-empting the Chinese demand. The index is up over 12 per cent since the Shenzhen link was approved by China in August. It has outpaced rises of around 9 per cent in both the Hang Seng Composite Mid-cap Index and the Hang Seng Composite LargeCap Index respectively, which are included in the Shanghai link. Reuters
Energy sector
Nation’s grid-connected wind power capacity increases China’s grid-connected wind power capacity continued to pick up, but the utilization rate was waning after years of capacity expansion, the latest data from the National Energy Administration (NEA) showed. China’s total installed capacity of wind power generation facilities connected to the power grid reached 139 million kilowatts by the end of September, up 28 per cent from a year earlier, according to the NEA. The growth rate outpaced that of the nation’s total power use, a key barometer of economic activity, which totalled 4.5 per cent year on year for the first nine months, official data showed. The first nine months also saw newly added gridconnected wind power generation capacity of 10 million kilowatts, said the NEA. However, those power generation facilities had average utilization hours of 1,251 in the first nine months, declining by 66 hours from a year earlier. Of all provincial areas, southwest China’s Yunnan Province registered the largest gain in gridconnected wind power capacity of 2.26 million kilowatts in the first nine months. Xinhua