Business Daily #1194 December 14, 2016 by Business Daily

China files complaint against U.S. & Europe with WTO Trade Page 10

Wednesday, December 14 2016 Year V Nr. 1194 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Agreement

MSAR inks intellectual property agreement with HK and nine regions in the Pan-Pearl River Delta Page 2

Politics

www.macaubusinessdaily.com

Gaming

Recipients of highest merit awards from CE include former Secretary for Social Affairs and Culture Page 3

China insurance market

December gaming revenue to increase between 9 pct and 14 pct y-o-y Page 6

Regulator to impose new stock investment rules on insurance companies Page 16

SMEs Seek Synergy Business

Several SME support schemes link businesses to operators. But product and service standards have some catching up to do, say the integrated resorts. One thousand-plus co-operation activities will be reliant upon training, seminars and services. Such as the recently launched ‘ChoicePro’ app. linking small businesses to large-scale demand. Page 5

CTFE cements Baha Mar deal

Chow Tai Fook Enterprises has officially signed a purchase agreement. For the US$3.5 bln Baha Mar resort in the Bahamas. The group will acquire all the share capital of the previous developer for an undisclosed sum. And plans to proceed with a phased opening starting April 1. US$200 mln is earmarked for pre-opening activities; with 1,500 locals to be hired.

Club Cubic eyes Zhuhai

M&A Club Cubic operator Luk Hing Entertainment Group plans to expand the group’s operations to the Mainland. With sights firmly set on Zhuhai. As the group enters into an M.O.U. to form a JV to operate a club in the city. For some RMB4.5 mln. Page 4

In it to win it

M&A Page 7

HK Hang Seng Index December 13, 2016

22,446.70 +13.68 (+0.06%) Worst Performers

PetroChina Co Ltd

+5.30%

CNOOC Ltd

+1.57%

Bank of East Asia Ltd/The

-2.01%

Swire Pacific Ltd

-0.99%

China Unicom Hong Kong

+2.04%

Ping An Insurance Group Co

+1.08%

Link REIT

-1.77%

China Resources Land Ltd

-0.97%

AIA Group Ltd

+1.60%

China Shenhua Energy Co

+1.03%

Li & Fung Ltd

-1.41%

China Overseas Land &

-0.91%

Belle International Holdings

+1.58%

China Mengniu Dairy Co Ltd

+1.03%

Sino Land Co Ltd

-1.16%

CK Hutchison Holdings Ltd

-0.87%

MTR Corp Ltd

+1.57%

Want Want China Holdings

+1.02%

HSBC Holdings PLC

Bank of Communications

-0.84%

-1.08%

14° 22° 13° 19° 13° 16° 16° 18° 18° 21° Today

Source: Bloomberg

Best Performers

THU

FRI

I SSN 2226-8294

SAT

SUN

Source: AccuWeather

Real Estate Businessman Edwin Leong, who chairs Tai Hung Fai Enterprises Co., saved nearly US$17 million on his tax bill. By skirting the HKSAR’s new property curbs. While the HK Gov’t tries to narrow the disparity, wealthy buyers still find legal ways around restrictions designed to cool home prices. Page 8

2 Business Daily Wednesday, December 14 2016

Macau In Brief Tax

E-commerce required to pay tax The Director of the Financial Services Bureau (DSF), Iong Kong Leong, said that any e-commerce trading companies conducting business in Macau are required to undertake tax registration, according to local newspaper Macao Daily News. The Bureau notes that it will continue to monitor online sales activities in the city to check for any e-commerce operations that have yet to complete their tax registration and remind them to do so. Until now, few have been found to be unregistered as the Bureau’s investigations are still in their initial stage. If businesses are found to have not registered for taxation for a long period of time penalties will be imposed. A.L.

Culture

Chong Sai Pharmacy opens Thursday

he r e n o vati o n o f th e city’s Chinese-Western Dispensary - also known as the Chong Sai Pharmacy - has now been completed, with the property scheduled to open to the public this Thursday, acc o r di n g t o a p r ess r e l eas e published by the Cultural Affairs Bureau (IC) yesterday. The Chong Sai Pharmacy - located at No. 80 Rua das Estalagens – was originally founded by the ‘Father of China’ Dr. Sun Yat-sen. The IC held an opening ceremony yesterday to celebrate the completion of the renovation project as well as the 150th anniversary of Sun Yat-sen’s birthday. According to IC President Ung Vai Meng, the budget for the renovation work was about MOP10 million (US$1.3 million), as reported

previously by Business Daily. According to the IC, the MSAR G o v e r n m e n t p u rc h a s e d t h e pharmacy building in 2011 and started its renovation work; the building now serves as a temporary display space for the Commemorative Exhibitions of the 150th anniversary of Sun Yat-sen’s birth. The exhibition seeks to educate the public to the relationship between Sun Yat-sen and Macau and the architectural features and traditional characteristics of the building, which was originally built around 1892. Despite not being included in the Unesco-classified Historic Centre of Macau, the renovation work was one of three main projects to help protect the city’s cultural heritage, in addition to work on the Patane Library and the Maritime

Sun Yat-sen

Workshops. The IC noted in the press release that it is planning to convert the building into an exhibition venue. A.L.

Intellectual Property agreement inked An agreement to strengthen intellectual property (IP) co-operation in the Pan-Pearl River Delta (PanPRD) Region was signed yesterday by both SAR Governments and nine intellectual property offices of the Pan-PRD Region. The agreement was signed at the 12th Pan-PRD Intellectual Property Co-operation Joint Conference in Nanchang, Jiangxi Province. The nine IP offices of the Pan-PRD are from the provinces and regions of Fujian, Jiangxi, Hunan, Guangdong,

Guangxi, Hainan, Sichuan, Guizhou and Yunnan. The agreement seeks to promote comprehensive development in the field of IP within the Pan-PRD Region, to fully unleash the advantages and the special features of different cities. It also seeks to encourage the utilisation of IP within the regions involved in order to strengthen the protection of IP and to improve services, with the objective of increasing mutual economic development for

the members of the Pan-PRD. The first related agreement was inked in 2005 in Chengdu, Sichuan Province. The new IP agreement covers eight areas: the strengthening of infrastructures for IP provinces; the protection of IP rights; the utilisation and fostering of development of IP trading in the regions; IP services; exploitation of IP information; external exchange and co-operation on IP; the promotion and education of IP; and the discussion and exchange of IP. C.U.

Business Daily Wednesday, December 14 2016 3

Macau Society

Golden lotus Former Commissioner Against Corruption and Secretary for Social Affairs and Culture Cheong U and former Legislator Lei Pui Lam will receive this year’s Decoration of Honour – Golden Lotus Nelson Moura with Lusa nelson.moura@macaubusinessdaily.com

hief Executive (CE) Fernando Chui Sai On will award the 2016 Decoration of Honour – Golden Lotus, the highest honour granted in the territory, to former Commissioner Against Corruption and Secretary for Social Affairs and Culture, Cheong U, and former Legislator Lei Pui Lam.

The second highest merit award, the Decoration of Honour – Silver Lotus, will be awarded to legislator and businessman Kou Hoi In and to Van Kuan Lok, from the education sector. The Decoration of Honour – Golden Lotus is awarded for distinguished services to the community or to those who have provided public or voluntary services of high merit, while the Decoration of Honour – Silver Lotus is

awarded for leadership in public affairs or voluntary work over a long period of time. The list of 36 individuals and entities that will receive the distinctions in January 2017 has been nearly halved in number compared to the number of awardees in 2015, when 60 personalities - including three former Secretaries - received the medals. According to the list, the honours for industrial and

The Lotus is the symbol of the city and the centerpiece of the flag changing ceremony held every December 20th, celebrating the city's handover

commercial Medals of Merit will be awarded to Ho Ioc Tong, Director of the Macao Chamber of Commerce Standing Committee, and to F. Rodrigues, the oldest trading company in the city. The Director of Macao

Government Tourism Office (MGTO), Maria Helena de Senna Fernandes, will receive the Medal of Merit for the Tourism sector, while the University of Macau will receive the Medal of Merit for Education.

Sand Supply

Zone A’s sand supply resumed Sand supply for the city’s new urban reclaimed land Zone A resumed last Friday, according to a press release published by the Infrastructure Development Office (GDI). GDI said in the statement that the current condition of sand supply for Zone A is stable, as the MSAR Government and the Guangdong Provincial Government will continue to adhere to a signed agreement from November 9 regarding the resumption and continuation of supply of sand to the MSAR. The agreement allows for the opening of the sand zone on the

northern area of the Hong KongZhuhai-Macau Bridge arrival point as a sandpit for the reclamation works in Zone A. The halt on the sand supply for the reclamation works of Zone A was caused by the construction work on the immersed tube tunnels of the Hong Kong-Zhuhai-Macau Bridge in early January this year. Due to a disruption in sand supply, the reclamation project for Zone A missed its scheduled deadline, originally slated for the end of last year. According to a dispatch published i n t h e O f f i c i a l Ga z e t t e, t h e

Anniversary

Macau Tower celebrates 15th birthday The Macau Tower celebrated its 15th Anniversary with a Cocktail R e c e p t i o n y e st e r d a y , w h i c h brought together over 300 local and overseas guests to the city’s landmark. The Macau Tower was originally opened on December 19, 2001, two years after the handover of Macau to the PRC. This year’s ceremony was officiated by Chief Executive Fernando Chui Sai On and attended by local representatives such as the Chairman of the Macau Tower Convention &

Entertainment Centre, Pansy Ho Chiu King, Secretary for Social Affairs and Culture Alexis Tam, and Secretary for Economy and Finance Lionel Leong Vai Tac. “Macau Tower is truly honoured to be part of Macau’s unique identity, integral to its modern city landscape and historical legacy. With all Macau residents, we will exert our best efforts to support the SAR Government in fulfilling the visions as set out in the 13th 5-Year National Plan,” pledged Ms. Ho. N.M. C

CMY

Tourism

Macau Tourism receives award for campaign in Portugal Macau Tourism, the Macao Government Tourism Office (MGTO) promotion delegation in Portugal, has received the Travelport Award created by travel commerce platform Travelport. The award seeks to promote the originality of the delegation’s campaign in Portugal which has

focused on promoting Macau as a tourist destination, conducted in cooperation with Travelport. The award was granted to Rodolfo Faustino, the Macau Tourism coordinator for Portugal and Spain, d u r i n g th e 42 n d P o r t u g u es e Association of Travel and Tourism Agencies Conference that took place from December 8 to 11. In September, the touristic promotion delegation also received the Best International Tourism Office award from Portugal Travel Awards 2016, part of World Travel Awards. N.M.

reclamation work contract had been extended from 2015 to 2017 and is worth MOP1.88 billion (US$235 million). The newly reclaimed land

zone will occupy 138 hectares and is destined for the construction of 28,000 public housing units and 4,000 private flats. A.L.

4 Business Daily Wednesday, December 14 2016

Macau Opinion

José I. Duarte* Impact-free The purported impact of false news and fabricated facts has become a topical subject. They seem to have an inordinate influence upon people’s behaviour. It is true that modern communication tools facilitate the fast spread of news, both fake and not so fake, to huge numbers of people. However, the ‘fake news’ epidemic explanation illuminates as much as it obscures – and possibly less. After all, both false assertions and misinterpreted or plainly manufactured facts have been probably with us since the dawn of time. Other factors may and are likely to be operating. But it is not the objective here to discuss the merits or otherwise of the claims that post-truth rules our polities. Listening to several of our local economic and political agents suggests instead we suffer, if that is the right word, from the inconsequential news. Let me explain with the help of a few examples. Agents of various strains usually operate in the Mainland trying to entice customers to casinos in Macau and elsewhere. The Mainland authorities have recently arrested several persons working for a wellknown company, including some senior staff. Expulsion was the worst conceivable scenario previously; prison is now a distinct possibility. So, apparently, tolerance for the activity has plummeted. Immediately, some people jumped to the front page of the news agendas claiming those events and the mood change they signalled would have no impact on Macau. It was so obvious that no-one felt the need to explain why. The monetary authorities in China are committed to stemming the outflows of funds. The local economy is heavily dependent upon Mainland punters and spenders. One could presume lower money flows might impact the local economy negatively, possibly delaying and slowing down any significant recovery. Not so, some assure us immediately; there is nothing to worry about, no impact on Macau. The amount of money that visitors can withdraw from Union Pay terminals each time was halved. But stay confident folks: the daily total remains unchanged and, you guessed it, will have no impact on Macau. No-one felt the need to explain why bothering to change a rule that, a minor inconvenience to the cardholder aside, will have no other effect. Nothing seems to be of any consequence; nobody feels the need to explain where such confidence stems from, and no-one appears to be willing to ask why. Any news is good news. *Economist and permanent contributor to this newspaper.

Expansion

Club Cubic operator expands to Zhuhai The company is teaming up with a Zhuhai-based company to open a clubbing venue in the neighbouring Mainland Chinese city Kam Leong kamleong@macaubusinessdaily.com

lub Cubic operator Luk Hing Entertainment Group Holdings Ltd. is investing in a new clubbing venue in Zhuhai, it told the Hong Kong Stock Exchange on Monday evening. The company, via its subsidiary Luk Hing China, has entered into a memorandum of understanding with Zhuhai Wei Chong Culture Broadcasting Company Ltd. in order to form a joint venture with other potential investors for the operation of a clubbing venue in the Mainland Chinese city. According to the filing, the parties proposed the joint venture be held 15 per cent by Luk Hing China, 30 per cent by Zhuhai Wei Chong, while

other investors hold the remaining 55 per cent. The registered capital of the new consortium would be RMB30 million (HK$33.7 million/ US$4.1 million), of which RMB4.5 million is set to be contributed by Luk Hing, RMB9 million by Zhuhai Wei Chong, and the balance by the potential investors. ‘The Board is of the view that the proposed formation of [the joint venture company] under the Memorandum of Understanding will pave way for great opportunities for the Group to extend its clubbing operations outside Macau as the Board believes that there is enormous business potential in the premium clubbing and entertainment business operations in Zhuhai,’ the company wrote in the filing. Luk Hing’s current business in the MSAR – namely, Club Cubic in the

City Of Dreams complex in Cotai - is limited to its agreements with Melco Crown Entertainment Ltd., requiring it to seek the consent of the casino-resort operator if it is to own, operate, or has any interest in developing businesses similar to Club Cubic in the territory, according to its previous filings. Only listed on the Growth Enterprise Market of the Hong Kong Stock Exchange last month, the company’s total revenue increased by 8.9 per cent to HK$94 million for the first three quarters of the year compared to HK$86.3 million for the same period of 2015. However, the company fell into the red for the period due to non-recurring listing expenses, recording a net loss of some HK$34,000 for the nine months from a net profit of HK$6.2 million one year ago. ‘The Board expects that the proposed formation of the [joint venture company] will diversify the Group’s business and expand our coverage and sources of revenue,’ the company said in the filing.

M&A

DJ Mag expands to China in £1 mln deal An alleged £1 million agreement has been signed between London-based music publication DJ Mag for the rights to the group’s monthly dance music and DJ magazine throughout the China, Hong Kong and Macau region, according to UK-based publication The Standard. The agreement, signed between DJ Mag and East21 - one of China’s club and music festival operators and booking agents - is for a fiveyear licence for East21 to host events under DJ Mag’s Top 100 DJs banner, a yearly competition which ranks the world’s electronic music DJs. One of the UK’s Conservative politicians who also promotes the cultural and creative industries abroad touted the move as “an example of the flourishing commercial relationship between the UK and China in the

creative sector,” in comments to the UK publication. The Managing Director of DJ Mag, Martin Carvell, commented on the future prospects for growth of the DJ scene throughout China, noting that the most recent deal means the

publication is: “looking forward to seeing more Chinese DJs and clubs breaking into the Top 100s.” DJ Mag also runs a yearly listing of the Top 100 clubs around the world, a competition previously won by famous UK club Fabric. K.W.

Business Daily Wednesday, December 14 2016 5

Macau SMEs

Improving SME bargaining power Improvements are needed for local SMEs, says the ACM Vice President. Meanwhile, a mobile app has been launched to provide a platform for local firms to share information and create more business opportunities Cecilia U cecilia.u@macaubusinessdaily.com

ver since the establishment of the SME (Small and Median Enterprise) support scheme, the six gaming operators have said that the products and services provided by local SMEs are still not reaching the expectations and standards of the groups, according to Vice-President of the Macao Chamber of Commerce (ACM) Chui Yuk Lum. The comments were made on the sidelines of the launch ceremony of the Macau Procurement Platform Mobile App ‘ChoicePro’, held yesterday. “The first step is that we need to open the gate and offer opportunities to them (SMEs),” said Mr. Chui. “Then we help them to get used to working with the big companies, with the government, co-operating with institutions such as Macau Productivity and Technology Transfer Centre to provide courses, talks and training.” Chui added that the local chamber

of commerce hopes to assist local SMEs in entering international markets, saying that large-scale companies have sent a list of local SMEs to their headquarters in the United States in the interests of furthering synergy. Moreover, Chui revealed that the ACM has been in discussions with local banks to provide financial support for local SMEs. “Currently, there are more than 1,000 cases of co-operation between local SMEs and the six gaming operators,” said the Vice-President. “There are around 400 to 500 SMEs working with the operators.” Additionally attending the event was Ms. Linda Chen, Chief Operating Officer and Executive Director of Wynn Macau, who revealed that the integrated resort operator has initiated business co-operation with more than 200 SMEs since the group’s SME procurement project was launched last year.

When asked the estimated amount of transactions resulting from the SME procurement programme, Chen replied business with selected SMEs is ongoing and that it is hard to obtain an estimate of the amount spent.

App for SMEs

With the launch of mobile application ChoicePro Chen remarked that in order to stay competitive within the international market providing a more convenient and faster approach to information access is vital. “The entire city can share the information through the use of this app,” said Chen. “It provides a faster way to access information […] We will also co-operate with the government; and the Macao Economic Services also provides a lot of applications to assist SMEs.” The developer of ChoicePro, Steven Lei, the Project Manager of Blupurple Interactive Media Ltd, told Business Daily that the app will create more

business opportunities between SMEs and big enterprises in the city. Commissioned by the CPTTM, the Macau Procurement Platform Mobile App Design Competition – which led to the appearance of ChoicePro - was held with the objective of developing an innovative and convenient mobile application that could connect local SMEs and large enterprises, with the app developed by Blupurple emerging the winner of the competition. “The app is user-friendly and I believe it will attract many local SMEs to make use of the platform,” said the project director. He also revealed that the new application currently focuses only on local SMEs and large-scale companies. Apart from the launching of the new mobile application, co-organised with the AMC, Wynn Macau held its third business matching session with local SMEs at Wynn Palace yesterday, receiving over 300 local SMEs.

6 Business Daily Wednesday, December 14 2016

Macau

Gaming GAMING ANALYSTS DIVIDED ON ATM WITHDRAWAL LIMIT IMPACT UPON THE GAMING SECTOR

Finishing in style Gaming analysts predict gross gaming revenues in December could reach a 14 per cent year-on-year increase Nelson Moura nelson.moura@macaubusinessdaily.com

acau’s gross gaming revenues in December could reach a 9 per cent to 14 per cent year-onyear increase, making it the fourth consecutive month of gaming revenue growth since August and the second consecutive month of double-digit growth since 2014, gaming analysts from Wells Fargo Securities LLC and Telsey Advisory Group predict. According to Wells Fargo analysts, the Macau gaming market has stabilised with some market growth being driven by ‘Chinese monetary stimulus and the re-inflation of the Chinese housing bubble’. However, the firm also notes that these influences ‘we think won’t drive

prolonged, above trend growth’. The brokerage firm estimates average daily revenues (ADR) in the first 11 days of December at around MOP690 million, and predict ADR at the end of December could reach from MOP625 million to MOP665 million. Ratings agency Telsey Advisory Group also estimates that gross gaming revenues will see positive year-on-year results, and could reach a 10 per cent or more year-on-year increase in December, predicting the month’s total gaming revenues could reach HK$19.5 billion (MOP20 billion/US$2.5 billion).

Stronger VIP

Analysts from both groups highlighted the good performance of the city’s VIP gaming sector in recent months. Wells Fargo analysts mentioned

average daily revenues at the beginning of the month benefited from a better than average performance in VIP business volume, with the firm’s contacts stating ‘some junkets are seeing 15 per cent 20 per cent growth in volumes’. Telsey’s analysts noted that the main focus of Macau market recovery was the ‘sustainability of the recovery in the VIP business’, which the firm expects to decline in 2017. In terms of the recently opened Cotai gaming properties’ performance, while Las Vegas Sands registered ‘strong’ gaming volumes after The Parisian’s opening in September the Wynn Palace property registered a ‘lukewarm opening’ impacted by ‘construction disruptions which should diminish over time’, Telsey analysts noted.

Withdrawal problems

Concerns in the local gaming market emerged after Hong Kong South China Morning Post stated that the MSAR Government would reduce China UnionPay card’s daily ATM

withdrawal limits to MOP5,000 per day, a report the Monetary Authority of Macau (AMCM) later dismissed. AMCM announced last Friday that local ATM transactions would be limited to MOP/HK$5,000 per transaction, but that daily limits w o u l d r e m ai n u n cha n g e d at RMB10,000 (MOP11,583/US$1,448). While analysts from Wells Fargo believed that any currency flow restrictions could create a ‘greater reliance on junkets and run customers from mass market to VIP’ and damage the city’s gaming property margins, Telsey analysts considered that ‘since players can withdraw cash multiple times per day’ the new regulations’ impact on the gaming sector would be ‘minimal’. ‘The event highlights the risks and volatility of investing in Macau stocks and is typical of historical circumstances in the market. The key challenge has been and will be managing the flow and accuracy of information from the market as well as the risk of regulatory changes in the market under the current circumstances. However, there remains ample opportunity for growth,’ stated Telsey analysts.

M&A

Rio Casino boss buys MOP950 mln property in Australia The property is currently the headquarters of multinational energy group ExxonMobil The chairman of Rio Hotel & Casino, Loi Keong Kuong, is buying the headquarters of the world’s largest oil and gas company - ExxonMobil in Melbourne, Australia - for AU$160 million (MOP952.5 million/US$119 million), according to the Australian Financial Review. The report says that Mr. Loi has

emerged as the final buyer of the waterside office tower located in the Southbank area of the Australian city. Occupying 22,000 square metres, the office building is one of the most expensive assets in the area, according to the outlet. It is claimed that the deal was negotiated on the buyer’s side by Hong

Retail

Le Saunda sales dips 8pct y-o-y in Q3 Footwear manufacturer and retail company Le Saunda Holdings Ltd. announced a decrease of 8 per cent in its total retail sales year-onyear for the third quarter of its 2016/2017 financial year, according to a filing with the Hong Kong Stock Exchange. Same store sales of the retailer also saw a 7.1 per cent drop year-on-year for the quarter, which when coupled with a 40.5 per cent yearon-year drop in the Group’s e-commerce business sales led the group’s diminished performance during the period compared to last year.

As at the end of the group’s financial quarter, November 30, Le Saunda had a total retail network comprised of 822 outlets spread throughout Mainland China, Hong Kong and Macau. However, on the back of the declines in sales, the Group has closed 75 outlets compared to the same period of last year. Of the total outlets, 737 are in self-owned and in operation in Mainland China, Hong Kong and Macau while 85 outlets are operated under franchising agreements in Mainland China. According to the Group’s previously launched interim

financial report, its total revenue for the first six months of fiscal 2016/2017, from March to August of this year, showed a decline of 13.8 per cent yearon-year to RMB651.2 million (US$94 million) from RMB756 million during the same period of the previous fiscal year. In addition, the Group’s profit dropped 24 per cent year-onyear to RMB45.6 million during the first half of the fiscal year. The Group is also engaged in the design and development of handbags and fashion accessories in Mainland China, Hong Kong and Macau. A.L.

Kong-based real estate agent Isabella Tse who heads up property investment firm Reliance Future. Currently, the building is primarily used by the energy giant, which is expected to maintain a short-term lease on the property as part of the agreement with the local businessman, the news outlet adds. The global energy giant was reportedly planning to sell the property in June, while real estate firm Jones Lang LaSalle was appointed to find a buyer for the company. Rio Hotel & Casino, located on the Macau Peninsula, runs its gaming business under the gaming concession of Galaxy Entertainment Group. K.L.

Business Daily Wednesday, December 14 2016 7

Macau M&A Resort purchase agreement value “sealed in court,” says Bahamian Prime Minister

Betting on the Bahamas Chow Tai Fook has officially signed a purchase agreement, enabling it to own and operate the Baha Mar Resort in the Bahamas Nelson Moura nelson.moura@macaubusinessdaily.com

he C h o w Ta i F o o k Enterprises (CTFE) conglomerate has officially s i g n e d t h e p u rc h a s e agreement that will allow it to own and operate the US$3.5 billion (MOP28 billion) Baha Mar Resort in the Bahamas, says a company release. According to the release, the group has signed a share purchase agreement (SPA) in order to obtain all issued capital from the property’s previous developer Perfect Luck Assets Limited (Perfect Luck), a special purpose vehicle created by the Chinese state-owned ExportImport Bank of China. The purchase agreement amount value wasn’t revealed in the release although the Prime-Minister of the territory, Perry Christie, confirmed the sale agreement with the Hong Kong-based group had been made, and that the purchase amount was “sealed in court,” Bahamas newspaper Tribune 242 reported. CTFE informed of it plans to proceed with a phased opening of the resort commencing April 1 2017, and that it was in discussions with international hospitality brands to operate a luxury property such as Grand Hyatt, SLS Hotels, and group subsidiary the Rosewood Hotel Group. The group also anticipates hiring 1,500 Bahamians during the first

phase of the opening at the beginning of 2017, with ‘thousands more’ being hired once the property is fully operational. “CTFE will dedicate significant, ongoing investment and resources towards the pre-opening and opening of Baha Mar Resort,” Graeme Davis, President of the CTFE’s Bahamas subsidiary, stated in the release. The casino hotel will include

a convention centre and golf course, with CTFE stating in the release that it plans to invest an additional US$200 million for pre-opening activities and for the redevelopment of the beachfront site of the former Crystal Palace Casino Hotel, and the ‘development of additional family friendly amenities, entertainment venues and offshore island facilities.’

Settling bills by the sea

The project was formerly under development by the Export-Import Bank of China and China State Construction Engineering Corp. in

co-operation with Baha Mar Resort Ltd., led by businessman Sarkis Izmirlian. After a bankruptcy request by Baha Mar Resort Ltd. was rejected by a U.S. court in 2015, the project’s construction has been on hold since April, with work eventually resuming in September. According to Tribune 242, before the agreement the Prime Minister had stated that the local government was focused on three main objectives: ensuring the immediate remobilisation and resumption of construction; opening the resort after the end of the 2016/2017 winter season; and settling “all valid claims of contractors and subcontractors suppliers and employees and other Baha Mar and CCA creditors.”

Gaming

M&A

Analyst predicts VIP growth for Tigre de Cristal

Potential new theme park/casino on Vietnam border in Cambodia

Local gaming mogul Lawrence Ho’s casino project in Vladivostok, Russia could expect to see more growth in its VIP operations within the next two years, according to a note published by analyst Grant Govertsen, cited by World Casino Directory. In the note, Govertsen predicts that VIP rolling chip at the property will increase by about 19 per cent yearon-year to reach HK$2.4 billion for year 2017. Estimates for 2018 place VIP rolling chip at HK$2.8 billion. This is in line with typical growth seen in territories where VIP programmes have been initiated, according to the analyst, although Govertsen does point out that the 2018 VIP forecast for Tigre de Cristal is around

1 per cent of the MSAR’s VIP gaming. According to forecasts, mass gaming table volumes are expected to grow from 8 to 9 per cent next year, to reach US$77.5 million. Tigre de Cristal is run under Melco-related company Summit Ascent via its subsidiary G1 Entertainment LLC. The property has opened its first phase, with phase two scheduled for construction during the second half of next year. The new addition will include hotel rooms, shopping, restaurants and conference space and is estimated to cost US$500 million, with predictions that the new phase will add 100 VIP gaming tables, 500 slot machines and electronic table games as well as 70 mass tables.

A new variation on the integrated resort theme could be about to pop up near Prey Vong Province in Cambodia. According to media reports in Malaysia and Vietnam, MQ Technology Bhd - an investment firm from Malaysia - is planning to link up with Cambodian Resorts and Entertainment Co. Ltd., a newly created business entity, in order to set up a US$30 million (MOP240 million/ HK$232 million) casino and theme park in the province, located near the Vietnam border. The reports, citing an anonymous source, note that the construction side of the new theme park/casino/ hotel project would be handled by MQ Technology whilst the actual running of the casino operations, upon the project’s completion, would be under the management of Cambodian Resorts and Entertainment. MQ Technology, notes the Phnom Penh Post, had previously announced a project to build a theme park in the city of Malacca, in Malaysia, although no updates have been provided as to whether this project would substitute

the Malaysia project. Regarding the newly formed Cambodian Resorts and Entertainment Co. Ltd. (CRE), the publication notes that the group’s commercial registry suggests that the theme park casino project could be linked to Cambodian gaming firm VW Win Holdings, a subsidiary of Malaysian group Century Dynasty, although this is unconfirmed. The Deputy Director of the finance industry department of the Ministry of Economy and Finance in Cambodia, in response to queries from the publication, could not confirm the project’s existence, noting that he had yet to receive an application for a gaming licence for a project matching the same criteria. However, the official did not rule out the likelihood, confirming that a casino project “could be built along the Vietnamese border in Prey Veng – but not in the provincial capital – and would be able to apply for and be granted a casino licence as long as it is for Vietnamese gamers,” the official told the publication. K.W.

8 Business Daily Wednesday, December 14 2016

Greater china Real estate

Billionaires buying first homes skirt Hong Kong’s new curbs Wealthy buyers are finding legal ways around restrictions designed to cool home prices in the SAR. by Frederik Balfour

ere’s how billionaire Edwin Leong, one of Hong Kong’s largest retail landlords, got around Hong Kong’s new property curbs and saved almost US$17 million on his tax bill. He managed to qualify as a firsttime homebuyer, purchasing three luxury apartments on the Peak for HK$1.2 billion (US$155 million) on the same day last month. Previously, Leong had held no real estate in his name - despite owning more than 300 other properties, including apartments, hotels and shopping malls, through his company, Tai Hung Fai Enterprises Co., and having an estimated net worth of US$4 billion. Wealthy buyers are finding legal ways around restrictions designed to cool home prices in the world’s least affordable city, where leaders are grappling to shrink a yawning wealth gap. Hong Kong property prices have risen to near-record highs and sales volumes have surged since Chief Executive Leung Chun-ying announced the latest round of curbs on November 4, underscoring the challenges in taming the market. “Since the policies of C.Y. Leung were introduced, most of the tycoons have been finding ways around them,” said Alan Wong, director of the Hong Kong market at Landscope Christie’s International Real Estate. About 70 per cent of new apartments sold since last month’s measures in Hong Kong have involved first-time buyers who qualified for the lower rate, compared with about 30 per cent before the new tax was

imposed, said Henry Mok, regional director of markets at Jones Lang LaSalle Inc. The government doesn’t publish figures on buyers who purchase multiple homes. Leung, who announced last week that he would not seek a second term, has been trying to quell discontent over high housing costs, a factor that led to student protests in 2014. The government has tried to increase supply by releasing more land for sale, although prices have continued to climb because of the influx of mainland Chinese developers seeking a toehold in Hong Kong. Prices in the secondary housing market have risen 0.8 per cent since early November to just 1.4 per cent below a September 2015 record, according to Centaline Property Agency Ltd. Adrian Cheng, executive vice chairman of New World Development Co., said the company was seeing a higher percentage of first-time buyers than before the new tax. Apart from the first-time exemption, another method employed by the wealthy involves buying a shell company that owns a property, which is treated as a share transfer and only incurs a stamp duty of 0.2 per cent. If the company is registered offshore, the tax is zero. That’s the tactic used in the November 28 sale of a free-standing home with a yard and swimming pool in the Kowloon district that was appraised at HK$410 million, according to a filing with the Hong Kong stock exchange. If it had been sold as a home rather than through the British Virgin Islands-registered company that holds the property, the sale would have triggered 45 percent

Insurance

China regulator says insurers should not be capital market “savages” The chairman of China’s insurance regulator said on Tuesday that the country’s insurers should be longterm money providers and not short-term capital market “savages”, according to a notice posted on the authority’s official website. The China Insurance Regulatory Commission (CIRC) has been trying to reduce risks from insurers investing in stocks and long-term assets using short-term funds that could lead to a sudden tightening of liquidity in the event of market volatility. “Becoming a friendly player in capital markets should not allow insurers to become hateful savages,

and also should not allow insurance capital to become a nightmare for capital markets,” said Xiang Junbo, chairman of the CIRC. On-site inspection should be strengthened, especially in relation to insurance firms who have a “quickbuy, quick-sell” attitude to stock investment, Xiang added. The CIRC must strengthen asset and liability matching regulation, said Xiang. Last week, on Monday, China’s blue-chip index posted its biggest drop in six months after the top securities regulator warned against “barbaric” share acquisitions. Reuters

Edwin Leong, chairman of Tai Hung Fai Enterprises Co.

in taxes, including a flip tax because it was purchased earlier this year - a total of more than HK$180 million. Instead, the tax bill will be $0.

Mainland Requests

The buyer, China Soft Power Technology Holdings Ltd. whose chairwoman is mainland property developer Lin Yuehe, didn’t respond to e-mail and phone requests for comment. In 2011, more than half of Hong Kong’s homes worth more than HK$20 million were sold via companies, according to government data. Although the practice was virtually halted after the government in 2013 began taxing companies buying properties at higher rates than individuals, thousands of properties are still held in this way and can offer significant tax savings when they are resold. Wong from Landscope said he gets many requests from foreigners, mostly rich mainland Chinese, looking to buy one of these companies, as they would otherwise face the new 15 per cent tax plus an extra 15 per cent tax on non-permanent residents. In fact, the property agency’s website promotes the practice. “Beat the stamp duty hike,” the site says. “Intimidated by the 15 per cent stamp duty? No worries! Our keypersons have sourced an array of properties that can be sold via share transfer (of course you will need a lawyer to handle the process).” Due-Diligence Still, because due diligence on the companies can be costly and complicated, only about 5 per cent of luxury homes are bought in this way, Landscope’s Wong said. Leong’s purchase at the Mount Nicholson development, a mountain-nestled enclave where his units have four marble bathrooms, his and hers walk-in closets, and private elevator lobbies, set a record for the most ever paid per square foot for a property in Asia, according to Jones Lang LaSalle. By being able to pay a lower stamp duty for first-time buyers, Leong saved 10.75 per cent in taxes. Leong, though his company, said he liked the “prestigious” address, while declining to comment on the tax savings. Two of the new apartments are adjacent units on the 17th floor and could be combined into more than 8,700 square feet of living space for Leong as his principal residence, more than 10 times the average size of a Hong Kong apartment. The third apartment, measuring 4,566 square feet, is 10 floors below and belongs to Leong and his family, his company said. Clear Loophole Last month’s new tax is the latest in a series of measures since 2011 aimed

at making it easier for low-income families to get onto the property ladder while increasing the costs for investors and foreign buyers. These include a tax that penalizes people who resell within three years and an extra stamp duty of 15 per cent for non-permanent residents. The government’s new 15 per cent stamp duty replaced taxes ranging from 3 per cent on homes worth less than HK$3 million to a maximum of 8.5 per cent on those worth more than HK$21.7 million. The rates are half that for first-time buyers, which includes people who may have owned homes in the past but currently do not. “This is clearly a loophole,” said Raymond Yeung, chief economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. “The government hadn’t thought about this before they launched the measure.” Singapore, which has been successful in driving down home prices since rolling out curbs in 2009, also levies a 15 per cent tax on foreigners and companies, while first-time homebuyers face lower stamp duties. Singapore and Hong Kong both define a first-time buyer as someone who currently does not own property in their name, regardless of whether they previously owned a home. Unlike Hong Kong, however, Singapore doesn’t allow first-time, multiple property purchases at lower rates.

‘Misguided Measures’

“The government is trying to cool the market, but there is no evidence that previous measures have done that,” David Webb, a Hong Kong-based shareholder activist who bought his own home 10 years ago through a company registered in the Seychelles. “There has been a whole series of misguided measures that have not had their intended effect.” A spokesman for the government’s Transport and Housing Bureau said the measures are beginning to have an effect. “More time is required before we can have a better assessment of the impact of the new stamp duty measure on the market,” the spokesman, Leo Law, said in an e-mail. “Nevertheless, market intelligence suggested that after the government announced the latest round of measures, the property market has shown signs of cooling down. Trading activities quietened down, and the uptrend in prices also slowed.” Still, nobody’s talking about making getting around tax measures more difficult, said Denis Ma, head of Hong Kong research at Jones Lang LaSalle. “These are loopholes that haven’t been closed, and I don’t think they can be,” he said. “Hong Kong prides itself on being a very free market, and government intervention is not very high.” Bloomberg

Business Daily Wednesday, December 14 2016 9

Greater China Trade

China launches WTO complaint against US & Europe The move follows the two parties failing to ease their calculations of anti-dumping duties on Chinese goods By Ben Blanchard and David Lawder

China on Monday launched a complaint at the World Trade Organisation against the United States and Europe after they failed to treat China as a market economy and ease their calculations of antidumping duties on Chinese goods. When China joined the WTO in 2001, its accession terms allowed other WTO members to treat it as a non-market economy and use a third country’s prices to assess whether Chinese goods were being sold below cost.

Key Points China says WTO rules mean it merits new treatment from Dec. 11 U.S. Commerce Dept says not changing China dumping calculations EU says regrets China action, given plans to adapt legislation

But part of that clause expired on December 11, which China says means WTO trading partners must drop their use of such surrogate pricing. “Regretfully, the United States and

European Union have yet to fulfil this obligation,” China’s Commerce Ministry said on its website. The U.S. Commerce Department sa i d Ch i n a’ s WT O ac c essi o n agreement did not require members to automatically grant market economy status to China, and allowed continued use of “alternative antidumping methodologies.” “The United States remains concerned about serious imbalances in China’s state-directed economy, such as widespread production overcapacity, including in the steel and aluminum industries, and significant state ownership in many industries and sectors,” a senior Commerce Department official said in a statement. “China has not made the reforms necessary to operate on market principles.”

While the Obama adminsitration made the decision not to change the dumping calculations, the case will be litigated by the Trump administration, which has promised a much tougher trade stance on China. The European Commission last month proposed a new way of treating China, but its plans await approval from the EU’s 28 members and the European Parliament. It said it had received a request for consultations, the first step in a WTO dispute. “We regret that China is launching this dispute now despite the fact that the Commission has already made a proposal to amend the legislation in question,” a Commission spokesman said. Last week it angered Beijing by

launching an anti-dumping case under the old system - using the prices of a third country - just days before the December 11 deadline. Separately, a Chinese ministry official said in another statement a U.S. investigation into what it regards as Chinese dumping of plywood products launched last week amounted to abuse of emergency trade relief measures. The United States and European Union are some of the biggest levellers of anti-dumping measures under this process against China. The measures have seriously affected exports and employment for Chinese firms, the ministry added. “China reserves the right under WTO rules to resolutely defend its legal rights,” it added, without elaborating.

10 Business Daily Wednesday, December 14 2016

Greater China Fiscal

China gov’t spending up 12.2 pct y-o-y in November

Government spending in China rose 12.2 per cent in November from a year earlier, while revenue rose 3.1 percent, the Ministry of Finance said on Tuesday. Government spending in the

first 11 months of the year was up 10.2 per cent from a year earlier, while revenues rose 5.7 per cent. China has relied on government spending to stabilise economic growth this year as private companies pull back, but concerns about the country’s debt load are increasing.

Retail

Gov’t urged to punish firms for ‘fake’ discounts on Singles’ Day The Chinese Consumers’ Association says nearly 17 per cent of the discounts offered on the Chinese ‘Singles’ Day’ were fake

Chinese state-backed consumer group says almost 17 per cent of discounts offered during the country’s multi-billion dollar Singles’ Day online sale event were fake, calling on the government to intervene and punish platforms and merchants. A report released by the Chinese Consumers’ Association on Monday says companies, including Alibaba Holdings Ltd and Amazon Inc, were guilty of hiking prices before the shopping festival, held annually on November 11, in an attempt to lure customers with sharp discounts. “There is a large number of false discounts and other price misleading behaviour,” said the CCA in an emailed statement. The group said it had referred the cases to relevant government

departments and recommended “severe punishment for price violations and price dishonesty.” Chinese authorities have ramped up efforts this year to stamp out dodgy sales tactics as the country’s top e-commerce firms take market share from traditional “brick-andmortar” stores and look to improve their image in international markets. In November, China’s top business regulator said it warned firms including Alibaba, Amazon and JD.com against falsifying figures and selling counterfeit goods ahead of the mass shopping event, which has become a yardstick for China’s retail appetite. Alibaba recorded RMB120.7 billion (US$17.49 billion) in sales during Singles’ Day in 2016. It is being investigated by the U.S. Securities and Exchange Commission over accounting practices related to its 2015

figures for the event. The U.S.-listed firm, which denies any wrongdoing, is one of several local e-commerce companies hoping to tap buyers outside of China as growth in local markets begins to slow. “We have strict measures in place to crack down on false sales discounting,” an Alibaba spokeswoman told Reuters, saying the company penalises merchants depending on the severity of the falsified discount. The CCA study recorded price changes on 12 platforms between

October 20 and November 25. Of all the discounted products surveyed, 35 percent of them on Amazon still cost more than regular non-sale retail prices, the highest of any platform, followed by JD.com at 26.8 per cent. Almost 19 per cent of surveyed discounted items on Alibaba’s Tmall were above regular, according to the report. A JD.com spokesman declined to comment. Amazon did not respond to emailed requests for comment. Reuters

Steel

Real Estate

China’s November steel output grows at fastest in over 2 years

China Nov property sales growth slows to lowest in 2016

Steel output of the country jumped 5 per cent year-on-year in November By Muyu Xu and Manolo Serapio Jr

China’s steel mills boosted their monthly output at the fastest pace in more than two years in November, data showed, as robust infrastructure demand spurred producers to expand production for a ninth straight month even as coking coal prices bite. Output rose 5 per cent to 66.29 million tonnes year-on-year, the fastest growth since June 2014, according to data from the National Bureau of Statistics on Tuesday. Although soaring costs of key raw materials, like coking coal and iron ore, have eroded margins, steel mills were still making a profit of between RMB200-600 (US$28.98-86.95) per tonne, said Wang Yilin, senior steel analyst at Sinosteel Futures. “Steel mills want to increase production because of the big profit

margins,” she said. “The steel market has also been driven by strong infrastructure demand, as Beijing has approved more projects this year.” The spike last month showed mills in the world’s top producer were chasing rising prices, said Richard Lu, analyst at CRU consultancy in Beijing. Shanghai rebar futures have surged 95 per cent this year. Strong demand and rising prices of raw materials have enabled steel mills to increase their prices and pass on the cost to end-users, said Lu. “Because of the strong market sentiment, physical traders are buying steel in hopes of making money with the price continuing to increase,” he added. Compared with October, output dropped 3.24 per cent to its lowest level since February ahead of a seasonally slowest period for steel sales from the infrastructure and construction sectors during the colder winter months. Analysts expect output to decline in December as mills undertake annual scheduled maintenance. Total output for the first 11 months of 2016 edged up 1.1 per cent to 738.94 million tonnes. In 2015, China’s output dropped for the first time since 1981 as weak metal prices and a government clampdown on excess capacity forced plants to shut or suspend operations. This year, most of the capacity that has been closed for good was already shuttered.

China’s property sales growth slowed sharply to 7.9 per cent in November from a year ago, its lowest since November 2015, and and well short of 26.4 per cent increase in October. Meanwhile, real estate investment rose 6.5 per cent over January to November from the same period a year earlier, and property sales area increased 24.3 per cent, official data showed on Tuesday. Investment growth, reported by the National Bureau of Statistics (NBS), also slowed slightly from an increase of 6.6 per cent in January to October, as house prices and sales have shown signs of cooling in recent months. That is in stark contrast to a robust recovery in home prices and sales that supported the economy in the first three quarters of the year, thanks to a flurry of government stimulus measures. Nonetheless, in recent months policymakers have begun to worry about

an overheating property market and the risk of a sudden and sharp price fall damaging the economy. Regulators have told banks to strengthen risk management around property loans. More restrictions on home purchases have been implemented to curb soaring prices, helping to slow down property investment. Real estate investment, which directly affects about 40 other business sectors in China, is considered to be a crucial driver for the economy, which last year saw its slowest growth in a quarter of a century. National Statistics Bureau spokesperson Mao Shengyong said in November that property investment would accelerate or remain at current levels for the rest of the year, due to a low-base effect. The outlook for China’s residential property market in 2017 is stable, Moody’s Investors Service said in a report issued late November. Reuters

Business Daily Wednesday, December 14 2016 11

Asia Economy

South Korea’s central bank to hold rates this week The Bank of Korea is expected to keep interest rates unchanged amid political crisis and Fed risk

outh Korea’s central bank is expected to keep interest rates unchanged at Thursday’s policy meeting as it tries to gauge the economic fallout of a political crisis at home and the impact on emerging markets from a Federal Reserve decision early that day. All 20 analysts surveyed in a Reuters poll predicted the Bank of Korea

will leave its key policy rate at a record-low of 1.25 per cent for the sixth consecutive month. Though some analysts have been expecting another cut to boost a fragile recovery, an influence peddling scandal that embroiled President Park Geun-hye and sparked off a political crisis have raised uncertainty over what the BOK will do next. Last F r i d a y , S o u th K o r ea n

lawmakers overwhelmingly voted to impeach Park over the scandal, possibly making her the country’s first elected leader to be expelled from office in disgrace. The Constitutional Court must now decide whether to uphold the impeachment, which could take up to 180 days. “The biggest risk for the South Korean economy is instability in running the country due to the impeachment,” said Kim Ji-na, a fixed-income analyst at IBK Securities. “Once the negative fallout from this

starts spreading to the economy, it could spark calls for a responsive measures, but it will be difficult for anyone to come up with proper policy anytime before June next year.” Kim and 11 other analysts expect the central bank would keep interest rates unchanged indefinitely, while 7 see a cut sometime next year and one declined to provide a forecast on the BOK’s future moves. South Korea, Asia’s fourth biggest economy and the world’s sixth-largest exporter, is also seen as highly vulnerable to capital outflows. The Fed’s decision on Wednesday (early Thursday in Asia), and more importantly what it signals for the coming months, as well as the path taken on international trade and domestic policy by U.S. President-elect Donald Trump are seen as risk factors for Korea. Expectations Trump will boost fiscal spending and set U.S. growth on a higher gear have already drawn a rush of funds from Emerging Asia, including Korea, and analysts say the BOK will not want to increase the allure of dollar-assets by cutting rates in a hurry. Moon Hong-cheol, an analyst at Dongbu Securities, said the BOK will have no choice but to stay pat until end-2017 despite a shaky economy as policymakers tread cautiously in the face of domestic and global headwinds. “Our fundamentals are sluggish, but monetary policy around the world is expected to turn hawkish, staying the BOK’s hand,” Moon said. Reuters

Economy

Japan sets path for overhauling economic data to improve accuracy A timetable agreed by a government panel of private-sector economists on Tuesday Japan’s government has taken a large step toward an overhaul of its most important macroeconomic data to address long-standing concerns about volatility, collection methods, sample quality and accuracy. A timetable agreed by a government panel of private-sector economists on Tuesday said improvements in statistical calculations of household spending and capital expenditure used in gross domestic product (GDP) should start from the end of 2017. The overhaul could reduce the big swings often seen between preliminary and revised GDP data, which stem from incomplete capital expenditure data. It may also give economists an earlier picture of capex trends. The plan calls for the government to consider streamlining the Finance Ministry’s corporate survey so it can be compiled more quickly and used in preliminary GDP data.

It also urges a study of how to adjust residential rents in the consumer price index (CPI) and whether Internet retail prices should be included in Japan’s benchmark measure of consumer prices. The panel’s report comes shortly after the Cabinet Office, which publishes some economic indicators, adopted a new method to calculate capital expenditure for GDP, bringing it in line with the United Nations’ System of National Accounts. The government is likely to adopt the plan in full, but it is uncertain whether proposed changes will push GDP and CPI up or down, Cabinet Office officials told reporters. The plan calls for the government to use on-line forms to collect capital expenditure data from 2019 to increase replies and make compiling the data easier. The government should do the same for the household spending

survey, which will ease the burden on respondents and increase responses, the plan said. The plan calls for new quarterly data on disposable income and savings from fiscal 2018, the streamlining of services sector data from fiscal 2019 and a study on how to measure the

“sharing economy” to start this fiscal year, which ends in March 2017. The “sharing economy” loosely refers to companies that use the Internet to quickly form a dispersed network of people that provide services such as delivery, taxi rides or temporary lodging. Reuters

Taxation

Thailand approves shopping tax break for consumers The measure aims to boost spending of consumers Thailand’s cabinet approved on Tuesday a shopping tax incentive for consumers to spur spending before the end of the year, as the military government tries to lift sluggish economic growth. Although a military coup in May 2014 ended prolonged political unrest, the export-reliant economy has struggled to regain traction due to weak global demand, sluggish consumption and depressed private investment. The junta has ramped up spending and investment projects and unveiled various other stimulus measures in a bid to boost momentum in Southeast

Asia’s second-largest economy. The government will allow Thais a tax deduction of up to 15,000 baht

(US$421) on goods they buy between December 14 and 31, Kobsak Pootrakool, vice minister at the Prime Minister’s Office, told reporters. The official said he expected the tax break would help boost spending by

20 billion baht. Last year, it offered a similar shopping tax break for the last seven days of the year. This year’s tax rebate follows a previously announced tax deduction for Thais on domestic travel to support the tourist sector, which accounts for about 10 per cent of the economy. Tourism has been a rare bright spot but slowed due to cutbacks in spending since the death of King Bhumibol on October 13, and after a Thai crackdown on cheap tour packages for Chinese tourists, Thailand’s biggest source of visitors. Private consumption makes up half of Thai GDP but has been restrained by high household debt and falling farm income. The finance ministry has forecast economic growth of 3.3 per cent this year, up from 2.8 per cent in 2015.

12 Business Daily Wednesday, December 14 2016

Asia Aviation

ANA Plans to start flights from Myanmar in 2018 with venture The Japanese airline has invested in a new airline venture in Myanmar by Chris Cooper and Kiyotaka Matsuda

NA Holdings Inc. has invested in a new airline venture in Myanmar that aims to start international flights in 2018 as the Japanese carrier seeks to capture demand in Asia’s fastest-growing economy. ANA has a 49 per cent stake and a local company holds the remainder, Shinya Katanozaka, chief executive officer of Japan’s largest airline, said in an interview in Tokyo Monday. The companies made a combined initial investment of US$150,000 in the venture, he said. The Japanese carrier is expanding abroad as more people take to

the skies in developing economies such as Myanmar, which the International Monetary Fund forecasts will expand 8.1 per cent this year, the quickest pace after Iraq. ANA is making a bet on international travel from the Southeast Asian nation after the carrier in 2014 cited intensified competition in Myanmar for its decision to cancel a plan to buy 49 percent of Asian Wings Airways Ltd., a domestic airline. “Myanmar’s economic power is growing,” said Katanozaka. “We want to help contribute to the boom in business and overseas holiday travel from the new middle class.” ANA, which bought a stake in Vietnam Airlines Corp. this year, is also

considering adding flights across the globe, Katanozaka said. The carrier added flights to Phnom Penh this year and will start a service to Mexico City next year. ANA joins companies including Coca-Cola Co. and Unilever Plc in expanding in Myanmar, after the U.S. eased some sanctions in the nation four years ago as the country moved toward democracy following five decades of military rule. The Japanese carrier restarted flights to Myanmar’s Yangon airport in 2013 and is the only airline to offer direct flights between Japan and the country. The Myanmar venture will begin with a couple of airplanes and plans to increase the fleet, he said. ANA’s investment will rise as the venture adds aircraft, Katanozaka said. ANA is also expanding the fleet

of wholly owned subsidiary Vanilla Air Inc., which started flights two years ago and uses Airbus Group SE A320s for domestic as well as international routes. Vanilla has 10 aircraft and plans to expand its fleet to 25, according to ANA’s mid-term plan through March 2021. “We want to start medium-distance flights,” said Katanozaka. “We’re considering what planes we need and will make an announcement next fiscal year” starting April 1, he said, without identifying destinations. Vanilla is a founding member of the Value Alliance started this year, comprising low-cost carriers such as Singapore Airlines Ltd.’s Scoot and Nok Airlines Pcl in Thailand. The group aims to sell tickets and extras such as baggage allowance and inflight meals across the alliance’s eight airlines in a single transaction. Bloomberg

M&A

Asahi to Buy SABMiller’s European Beers for US$7.8 bln The Japanese company expects the acquisition to close during the first half of next year by Grace Huang and Thomas Buckley

Asahi Group Holdings Ltd. agreed to buy SABMiller Plc’s eastern European assets including Pilsner Urquell from Anheuser-Busch InBev NV for 7.3 billion euros (US$7.8 billion), as the Budweiser maker ties up loose ends after combining the world’s two biggest brewers. Asahi expects the acquisition to close in the first half of 2017, and is positioning its overseas business as a growth engine to establish itself as a global player, the Tokyo-based brewer said Tuesday. The deal further strengthens Asahi’s foothold in Europe after Japan’s largest brewer agreed to pay 2.55 billion euros for AB InBev’s Peroni and Grolsch brands earlier this year. For AB InBev, the divestment brings it a step closer to meeting the antitrust commitments that allowed it to buy SABMiller for about US$100 billion. “We had estimated a value between US$5 billion and US$6 billion, so the price paid by Asahi looks pretty full and great for AB InBev,” Trevor

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Stirling of Sanford C. Bernstein said by phone. The analyst estimates the market share by beer volume that Asahi will now have in Europe, excluding Russia, is about 9 per cent. Asahi shares fell 4.6 per cent by the close of Tokyo trading Tuesday, the biggest drop since June. The purchase would be the largest by a Japanese brewer since Kirin Holdings Co.’s AU$4.8 billion (US$3.6 billion) acquisition of Australia’s Lion Nathan Pty in 2009, according to data compiled by Bloomberg. The deal would value the SABMiller assets at about 15 times Ebitda for the year ended March 2016, a higher multiple than analysts had expected. A completed sale would bring some much-needed cheer for AB InBev investors, who have seen the stock slide 15 per cent this year through Monday. In October, the brewer missed profit estimates for the sixth straight quarter, illustrating why it needed to acquire SABMiller.

market is stagnating, with little growth projected through 2019, according to data tracker Euromonitor. Over the same period, the global market for suds should expand by 8.2 per cent. Asahi and other Japan brewers have been chasing overseas acquisitions to reduce their dependence on a domestic market hampered by a shrinking population. Buying the additional SABMiller brands will also

help Asahi attract younger Japanese drinkers with established premium beers, said Haitong International securities analyst Nicolas Wang. “There was also probably a lot of competition for the assets, which pushed up the price,” said Wang in an interview. “It’s possible the company views this as a strategic investment worth paying a premium for. After all, asset quality under SABMiller is very good.”

Japan Stagnating

The US$21 billion Japanese beer 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 Wednesday, December 14 2016 13

Asia Energy

In Brief

Oil prices firm as Abu Dhabi cuts exports amid soaring Asian demand By Henning Gloystein

Traders said there was significant profit-taking after oil shot to mid-2015 highs earlier this week after the Middle East-led Organization of Petroleum Exporting Countries (OPEC) Oil prices were stable on Tuesday, supported by strong demand in Asia and a supply cut by Abu Dhabi as part of production curbs organised by OPEC and other exporters. But traders said the market was being pressured by investors closing financial positions that profited from strong gains the day before. International Brent crude futures were trading at US$55.65 per barrel at 0648 GMT, down 4 cents from their last close. U.S. West Texas Intermediate (WTI) crude futures were down 5 cents at US$52.75 a barrel. Traders said there was significant profit-taking after oil shot to mid-2015 highs earlier this week after the Middle East-led Organization of Petroleum Exporting Countries (OPEC) and other exporters led by Russia reached a deal to cut output by almost 1.8 million barrels per day to reduce oversupply and prop up prices. But they added that oil markets were still broadly supported by the deal to

crimp output. “The market is putting a lot of importance on the commentaries coming out of OPEC and non-OPEC (and) the market is giving OPEC the benefit of the doubt that cuts will be implemented and achieved,” said Michael McCarthy, chief market strategist at Sydney’s CMC Markets. However, he added that prices would “turn negative very quickly if the market feels compliance won’t happen”. BMI Research said that the agreement would likely push Brent over US$60 per barrel. In a sign that producers are acting on their plans to cut output, Abu Dhabi National Oil Company (ADNOC) told customers it would reduce Murban and Upper Zakum crude supplies by 5 per cent and Das crude exports by 3 per cent. ADNOC’s cuts will mostly hit Asia, although refiners said they fell within contractual allowances under which ADNOC can alter agreed supply volumes. Meanwhile, China’s November crude output fell 9 per cent on a year earlier to 3.915 million barrels per day, data showed on Tuesday, but recovered from October’s 3.78 million bpd, which was the lowest in more than seven years.

That came as China’s refinery throughput hit a daily record in November of 11.14 million bpd, up 3.4 percent year-on-year. “Declines in Chinese ... crude oil output and expansion of its strategic crude reserves underpin our view for China’s crude oil imports to strengthen over the coming quarters,” said BMI Research. In India, Asia’s No.2 oil consumer behind China, fuel demand rose 12.1 percent in November compared with the same month last year, hitting 16.64 million tonnes. Reuters

Australian home prices grew at the slowest pace in over three years last quarter amid tougher rules on investment lending and economic hardship in mining states, a cooling that could reduce hurdles to a further cut in interest rates. An easing might be needed if business conditions continue to soften at the pace suggested by National Australia Bank’s latest survey of 500 firms. Its index of business activity slipped 2 points to over 5 in November, the lowest since April 2015, as tough times in the retail industry weighed on sales and profits. “We are becoming increasingly concerned about the underlying momentum in the economy as evidence mounts that the nonmining economy is losing steam,” said NAB chief economist, Alan Oster, who has had a bearish outlook for

some time. Government figures last week showed the economy shrank 0.5 per cent in the third quarter, the first contraction since early 2011, with business investment again very weak. Tuesday’s data from the Australian Bureau of Statistics showed home prices rose a surprisingly modest 1.5 per cent in the third quarter, less than the 2.3 percent that economists had expected. Annual growth braked to 3.5 per cent, far below last year’s frothy top of 10.7 per cent. On the face of it, that should reassure the Reserve Bank of Australia (RBA) which has been worried that ever easier policy was fuelling a debtdriven bubble in the market. The central bank has been on hold since cutting rates to a record low of 1.5 per cent in August. Indeed, the slowdown in prices was partly engineered by regulators who, alarmed at frenzied demand

in Sydney and Melbourne, imposed tighter rules on investment lending. The impact was clear in Sydney, where annual price growth sank to a four-year low of 3.2 per cent, a huge pullback from last year’s high of almost 20 per cent. Weakness was also evident in states exposed to the long-suffering mining industry, with Perth recording a drop of 4 per cent in the year to September. The weakness in the ABS data stands in contrast with some other measures of prices which report continued strength. Property consultant CoreLogic’s index showed annual price growth accelerated to 9.3 per cent in November, from 7.5 per cent in October. The ABS series is, oddly enough, based on CoreLogic’s database. Policymakers will not want home values to weaken too far given they make up the greater part of household wealth and provide a much needed offset to subdued growth in wages. In the past five years the value of all the nation’s homes has climbed by almost 40 percent to reach AU$6.15 trillion (US$4.6 trillion).

OLED

Japan Display to raise stake in OLED display maker Joled The company is to pay over US$100 million to riase its take in Joled to 50 per cent By Thomas Wilson

Japan Display Inc will pay more than US$100 million to boost its stake in an organic light-emitting diode (OLED) panel maker, the Nikkei business daily said - a step that would improve its position in a key technology where it lags far behind rivals. Manufacturers of consumer and other electronics are increasingly looking to adopt OLED screens, which are generally thinner and more flexible than liquid crystal display (LCD) screens. South Korean display makers in particular are investing billions of dollars in production lines. Japan Display will raise its stake

in Tokyo-based Joled to more than 50 per cent from 15 per cent by the end of 2017 and will also receive 75 billion yen (US$650 million) from a state-backed fund to expand its LCD and OLED businesses, the Nikkei said - a report that sent its shares surging 5 percent. Japan Display and Joled declined to comment. Representatives for the state-backed fund, the Innovation Network Corp of Japan, which owns 75 per cent of Japan Display, were not immediately available to comment. The company, which has been looking to invest in advanced screens for cars and gaming headsets as growth in the smartphone market

Motorcycle sales in Indonesia in November rebounded 6.6 per cent from a year earlier, the first expansion in eight months, data from an industry association showed on Tuesday. Motorbike sales stood at 570,923 units in November, up from 535,682 units sold in the same month last year, but a bit lower than the 571,201 units sold in October. Motorcycles are hugely popular in Southeast Asia’s biggest economy and their sales are a key indicator of consumption. Sales in November were led by Honda Motor Co Ltd, Yamaha Motor Co Ltd and Kawasaki, the data showed. Reuters

Singapore Q3 jobless rate 2.1 pct

Australian home prices come off the boil By Wayne Cole

Indonesian November motorbike sales rise 6.6 pct y-o-y

Employment

Property

Home prices in the country recorded slowest growth in over three years for the third quarter

Retail

slows, set up a pilot OLED production line in 2014 and plans to start mass production of OLED screens for smartphones by 2018. Japan Display’s finances have withered on fluctuating demand from Apple Inc, prompting the company to request support from INCJ this year after a funding crunch saw it take out short-term loans. But even with help, Japan Display is likely to be one of the smaller players in OLED. By comparison, LG Display Co Ltd said last year it would invest 10 trillion won (US$8.6 billion) in a new plant to make the ultra-thin panels. Samsung Display, a unit of Samsung Electronics Co Ltd that’s the largest maker of OLEDs for smartphones, is investing 4 trillion won by 2017 in an OLED production line. Reuters

The third quarter jobless rate of Singapore was unchanged from the preliminary estimate of 2.1 per cent, according to the official unemployment data for Singapore’s Ministry of Manpower for the third quarter on Tuesday. Total employment fell by 2,700 in the third quarter of 2016. The number of workers made redundant amounted to 4,220 in the third quarter, revised up from the previous estimate of 4,100. Layoffs in the first half of 2016 had reached 9,510, the highest since 2009, in a sign of growing labour market slack at a time of sluggish economic growth. Reuters Business

Symphony looks to Asian expansion with CEO move Symphony Communications Services LLC is relocating its chief executive toSingapore and targeting Asian investors as it looks to expand its Wall Street chat technology into the region.David Gurle, who is currently based in the company’s Palo Alto headquarters, will move to the Southeast Asian city-state in the first quarter of next year, a Symphony spokeswoman said.Gurle’s relocation comes as Symphony is in talks to raise between US$100 million to US$150 million in funding from new and existing backers, according to people familiar with the deal. The company has held discussions with potential investors based in Asia for the new round, which would value it at just over US$1 billion, one of the people said. Reuters Shares

Japan Display to raise stake in Joled Japan Display Inc will pay more than US$100 million to boost its stake in an organic light-emitting diode (OLED) panel maker, the Nikkei business daily said - a step that would improve its position in a key technology where it lags far behind rivals. Japan Display will raise its stake in Tokyo-based Joled to more than 50 per cent from 15 per cent by the end of 2017 and will also receive 75 billion yen (US$650 million) from a state-backed fund to expand its LCD and OLED businesses, the Nikkei said - a report that sent its shares surging 5 per cent. Reuters

14 Business Daily Wednesday, December 14 2016

International In Brief United Nations

Former Portuguese PM sworn in as 9th Secretary-General The former Portuguese prime minister has been sworn in as the 9th Secretary-General of the UN taking the oath on the United Nations Charter at a ceremony in the organisation’s general assembly. In the oath, Mr. Guterres swore that his conduct would only be in the “interest of the United nations” and “would not seek or accept instructions from any government or other external authority”. Mr. Guterres was accompanies by the chairs of various UN bodies, by the president of Portugal Marcelo Rebelo de Sousa and Portugal’s prime minister, António Costa, along with diplomats from the regional groups. He then gave an emotional hug to the president, Portuguese prime minister and out-going Secretary-General, Ban Kimoon. LUSA Italy

Unicredit to raise 13 bln euros in biggest share issue Italy’s largest bank, UniCredit, said on Tuesday it would raise 13 billion euros (US$13.83 billion) in the country’s biggest share issue to clean up its balance sheet and boost longer-term profitability. UniCredit’s move comes at a troubled time for Italian banks and the economy, with the country’s third-largest bank, Monte dei Paschi di Siena, at risk of failure, a new government just installed in Rome and early elections expected next year. UniCredit plans to launch the issue by June and use the proceeds to help fund the removal of 17.7 billion euros worth of bad debts from its balance sheet, enabling it to boost its profits and also dividend payout by 2019. Reuters South America

Venezuela shuts Colombia border to secure banknote switch Venezuela decided Monday to temporarily close the border with Colombia, as the country prepares to introduce new banknotes and withdraw the 100-bolivar notes from circulation. “Starting now, the border with Colombia is closed again for 72 hours,” President Nicolas Maduro ordered Monday in a televised broadcast. The introduction of the new banknote is scheduled to officially launch on Tuesday. In announcing the banknote switch decision on Sunday, Maduro said additional security measures were needed to combat criminal rings along the Venezuela-Colombia border that run illegal currency exchange centers and hoard the 100-bolivar bills as part of an “economic war” against his government. Xinhua

Economy

Turkey’s Government revises GDP Maths The new maths catapults the country’s economy above that of India Isobel Finkel and Onur Ant

here reforms and a series of rate cuts failed, new accounting methods have succeeded in delivering a US$140 billion boost to Turkey’s economy. That’s how many economists are interpreting Monday’s gross-domestic product data, whose methodology is prompting a host of eye-popping revisions. Where last year’s GDP had been previously reported at US$720 billion, the updated arithmetic shows it to have been US$862 billion, pushing Turkey past the Netherlands to take its place as the 17th largest economy worldwide. For Turkey, 2015 was a year of two general elections, terrorist attacks in major urban centers, record lira weakness, and the lowest levels of economic confidence since records began - and yet the economy still grew 6.1 per cent, revised up from the 4 per cent the old data showed. The new calculations, which take the recessionary year of 2009 as their base, improve the previously reported figures for 14 of the last 15 years, and boost the nation’s average growth rate of the last five years up to 7.1 per cent, from 4.4 per cent before. That means that since 2010, Turkey’s economy has grown faster than India’s, and only marginally slower than China’s. “The revisions to past growth figures beg for an explanation,” said Inan Demir, a London-based economist at Nomura International Plc. Take the 8.5 per cent the economy is now reported to have grown in 2013, the year of the taper tantrum that saw Turkey among the hardest-hit emerging markets. Turkey’s 2013 rate of expansion - now higher than China’s - compares with a growth in industrial output of just 3 per cent.

economic data has been the subject of scrutiny. The primary budget surplus reported by the finance ministry - and lauded by investors and ratings companies - turns to a deficit when calculated using International Monetary Fund standards that discount one-off items. Similarly, the extension of Turkish banks’ offshore borrowing maturities that was hailed as the flagship economic improvement of 2015 fades away when you realize that to make that borrowing qualify as “longer-term,” the banks were extending the time they had to pay back the loans by less than a week.

More Accurate

Still, some, like Odeabank AS’s Istanbul-based Economist Sakir Turan, said that the methodology may be more accurate in capturing the true extent of business activity because previous, narrower measures underplayed contributions from the black-market economy. The revisions don’t just affect GDP, Capital Economics says, but a whole host of other closely watched metrics that have that as an input. “The current-account deficit now stands at around 4 per cent of GDP, rather than 4.5 per cent,” economist William Jackson said, adding, “but these don’t change anything on the ground.” Meanwhile the savings shortfall once dubbed “the economy’s Achilles’ heel” by Deputy Prime Minister Mehmet Simsek, the country’s highest economic official, is after the revisions just as high as Germany’s, according to the acting head of the Turkish statistics office, Mehmet Aktas, who answered reporters’ questions in a press conference in Ankara after the data were released. The agency TUIK, or Turkstat in

‘Different Pictures’

“I find it difficult to make sense of it,” Demir said. “Growth and high-frequency indicators such as industrial output are portraying different pictures. They will either make revisions to industrial output as well, or we’ll end up with a disconnect between the two. And this will lead to concerns about the strength of growth data.” This isn’t the first time Turkey’s

English, has been without a director since the previous head Birol Aydemir left the post in February. His departure came shortly after he convened a press conference to protest new procedures that he said would “ gravely affect” the collection of demographic statistics, Haberturk newspaper reported at the time.

Government Spending

While the changes to GDP calculation methods have been under discussion for some time, they were officially announced midday on Friday, just before Monday’s release for the third quarter. Data for the most recent period showed a year-on-year contraction of 1.8 per cent, the first such dip since 2009, led lower by sectors including services, which shrunk more than 8 per cent. The only positive expansions were construction, which ticked 1.4 per cent higher, and government consumption, which increased 24 per cent over the same period of 2015. The new data set is hard to compare to previous figures because the breakdowns are different, and the previous calculations were removed from the statistics office’s website. Seasonally adjusted figures for the third quarter weren’t ready in time and will be released in March, the statistics office said. A bulletin explaining 2015’s revised estimate, which was published on Monday morning, was removed from the website by the afternoon, and calls to the statistics office in Ankara about it weren’t returned.

Eurostat Relations

The new methodology is designed to conform closer to European ESA-2010 standards, the statistics agency said. “Eurostat has provided methodological support to Turkstat in implementation of ESA 2010,” a spokesman for the Brussels-based institution said in response to questions on Monday. “We are not yet in a position to give further comments on the revisions, as the data have just been published.” Aktas had a more colorful response. “There’s no mechanism for approval between statistics agencies and Eurostat, it’s a technical cooperation,” he said, when asked if the new figures had been externally reviewed. “There’s been a Eurostat expert for 15 years who took a girl from us,” he added, apparently referring to a Eurostat official who married a Turkish woman. “There’s someone who came here as an adviser, liked a girl here and took her. The technical relationship is extraordinary.” Bloomberg

Poll

Study: Crisis leaves Greeks gloomiest in Europe Over 92 per cent of Greeks said the debt crisis had affected them, with 76 per cent of households suffering reduced income Greece’s debt crisis has made its population the unhappiest not only in western Europe but also in comparison with people in some former Communist countries, a study showed on Tuesday. The “Life in Transition” survey conducted by the European Bank for Reconstruction and Development (EBRD) and the World Bank has questioned households across a broad region since 1991 as the Cold War came to an end, but Greece was included for the first time this year. Over 92 per cent of Greeks said the debt crisis had affected them, with 76 per cent of households suffering reduced income due to wage or pension cuts, job losses, delayed or suspended pay or fewer working hours. Only one in 10 Greeks were satisfied with their financial situation

and only 24 per cent with life overall, compared with 72 per cent in Germany and 42 per cent in Italy, the two western European countries used as comparisons. The figure was 48 per cent in post-communist countries. Austerity measures demanded by international creditors have been tough on Greeks. Pensions, for example, have been reduced by about a third since the crisis began in 2009. The leftist-led government is still at odds with lenders over labour reforms and a projected fiscal gap in 2018. Only 16 per cent of the respondents in Greece saw their situation improving over the next four years, compared with 48 per cent in post-communist countries and 35 and 23 per cent in Germany and Italy, respectively. “This signals that, despite the recent political changes and attempts

at economic reforms that have taken place in the country, Greeks do not see their situation improving for the foreseeable future”, the report said. The poll of 51,000 households in 32 countries showed a closure of the “happiness gap” between Western Europe and the EBRD region from Morocco to Mongolia, partly because satisfaction had declined in Germany and Italy since the euro crisis. It also showed the financial crisis has left many countries less tolerant of immigrants and that corruption remained relatively high. People in Russia, Turkey and Ukraine were on average less satisfied with life than a decade ago. EBRD chief economist Sergei Guriev said countries could only make a success of transitioning from being centralised economies to more market-driven ones if the process is “perceived by the public as being fair and of benefit to the majority.” “If the public does not see the benefits of the reforms, they will ultimately not be successful,” he said. Reuters

Business Daily Wednesday, December 14 2016 15

Opinion Business Wires

The Phnom Penh Post The Cambodian government has submitted a new draft sub-decree to Prime Minister Hun Sen that would amend the mandate of the Cambodian Chamber of Commerce, allowing the business association to establish representative offices abroad to promote trade and investment, an official said yesterday. Soeng Sophary, spokesperson for the Ministry of Commerce, said that if approved, the sub-decree would allow Cambodians living and doing business abroad to become members of the Cambodian Chamber of Commerce (CCC) and officially represent the chamber overseas. “The amendment to the subdecree is an official way for getting permission to establish the CCC in other countries to promote the business sector,” she said.

Trump’s Choice on Climate Change

Jakarta Globe AirAsia Indonesia, the local units of Southeast Asia largest budget airline AirAsia, is weighing a backdoor listing as an alternative to an initial public offering at Indonesia Stock Exchange to raise capital from the stock market next year. “We are exploring all options available to us,” Dendy Kurniawan, the president director at AirAsia Indonesia, over the weekend. The airline saw government bar it from opening new routes last year after the company reported negative equity on its balance sheet. While the parent company had come to the rescue by injecting new capital, AirAsia Indonesia has yet to return to profit, making the airline less attractive for an IPO, according to a source with knowledge of the company’s plan.

The Korea Herald South Korean telecommunications company KT yesterday unveiled its latest preparations for the successful deployment of a pilot 5G network service at the 2018 PyeongChang Winter Olympics. Short for fifth-generation, 5G is an ultra-fast wireless network system offering up to 20 times faster transmission speeds than the existing 4G or Long-Term Evolution networks. The futuristic network is expected to be fully commercialized around the world in 2020. KT has pledged to run the world’s first-ever 5G pilot service at the Olympics in 2018, two years before competitors. In doing so, the firm is hoping to make the 5G specifications used for PyeongChang the global standard for future 5G networks worldwide.

The Bangkok Post Krungthai Bank (KTB), the country’s second-largest lender by assets, has set an ambitious goal to bring down its gross bad loan ratio to be on par with its peers by 2018 to improve its asset quality and lower its loan-loss provision burden. The bank wants its asset quality to be in line with three other large banks in a couple of years, said Parinya Patanaphakdee, senior executive vice-president and head of the credit restructuring and asset management group. KTB has higher gross non-performing loans (NPLs) than other big lenders, both in terms of amount and as a percentage of the total portfolio. The bank’s coverage ratio is also lower than its peers.

lanning. It is the key to successful military action – and, in many ways, to success in general – and United States Marines like me pride ourselves on it. But if you’ve spent 30 years in the military, as I have, you know that an effective plan cannot be static; operating environments change, often in surprising or unexpected ways. Donald Trump’s victory in the US presidential election earlier this month constitutes just such a change. It may be a long time before we fully understand the new operating environment. But we must begin adjusting – and continue adjusting as new facts come to light. Otherwise, we risk becoming vulnerable to serious strategic threats – the gravest of which is likely to be climate change. The increase in the Earth’s surface temperature represents a fundamental shift in the global operating environment, both economically and militarily. It is not just that some so-called “elites” think that the weather is going to warm up a bit. Climate change is not trivial; nor are its security implications. Climate change is what we in the military call a “threat multiplier.” Its connection to conflict is not linear. Rather, it intensifies and complicates existing security risks, increasing the frequency, scale, and complexity of future missions. The urgency of the climate threat is growing quickly. Climate change is already expanding the scope of military operations, with the US Navy and Coast Guard assessing new missions in the Arctic. More intense hurricanes, typhoons, and droughts are increasing the demand for military-assisted humanitarian responses, most notably in the Pacific. As i n c r easi n g l y ext r e m e weather reshapes migration patterns, the number of displaced people (already at record highs worldwide) will rise, and competition for essential resources (such as water, food, and energy) will increase. These effects will be particularly destabilizing in already-volatile situations, exacerbating challenges like weak governance, economic inequality, and social tensions – and producing truly toxic conflicts. That is why we call climate change “an accelerant of instability.” Don’t take my word for it. America’s entire national security establishment is clear on this. In fact, the US military has recognized climate change as a major security risk for more than a decade, making it a world leader on this front. Last year’s National Security Strategy reiterated this view, identifying climate change as a top-level strategic risk to US interests, alongside factors like terrorism, economic crisis, and the proliferation of weapons of mass destruction. These are not empty words. The US military has long been integrating climate change into our planning. After all, the worst security failures – for example, the Japanese attack on Pearl Harbor, which dragged the US into World War II, and the September 11, 2001, terrorist attacks – tend to

“

Stephen Cheney a retired brigadier general in the US Marine Corps, is CEO of the American Security Project

arise from inadequate preparation. Reflecting this lesson, during President George W. Bush’s administration, legislation was enacted to require all US defense agencies to consider the effects of climate change in future strategic policy development. In the last four years, the Department of Defense has released a series of directives that put climate-change preparedness at the center of how we do business. It is too early to say what the Trump administration will do when it comes to climate change. On the campaign trail, he promised to undo some key climate policies, even threatening to back out of the Paris climate agreement. It is critically important that he and his cabinet recognize that to follow through on his promise would be extremely shortsighted. The truth is that it is in America’s best interest, in terms of both security and the economy, to remain on the path toward a cleaner future. Already, the clean-energy revolution has brought jobs, money, and industry to rural America. It is a source of untold opportunities. And isn’t identifying opportunity one of America’s great strengths? The shifting economic operating environment bolsters these opportunities. China, India, and other emerging economies are racing to be the global clean-energy superpower; it would not be in America’s interest to be left behind. If America is to be great, as Trump has promised, it needs to build more future-oriented industries that can compete globally – and that can provide jobs to American workers. M o r e o v e r, T r u m p ’ s administration will need to continue the US military’s work and create a more resilient national security strategy. The American Security Project, of which I am CEO, looks forward to providing the Trump administration with relevant advice and solutions. We will also call the administration to account if it fails to protect US interests adequately. Ignoring threats might work in politics, but it does not work in security. Denying the reality of climate change will not make it go away; rather, it will erode the economy and expose the US to serious risks. That would amount to a failure by Trump to fulfill one of his most important responsibilities as president: ensuring the security of the American people. Serious strategic risks cannot be a political plaything. The threat of climate change does not sit neatly on either side of the left-right divide; it is – and must remain – part of US strategic planning. Anyone who has been involved in such planning knows that we cannot prepare only for the wars we want to fight; we must prepare for the wars that will come, whether we like it or not.

Ignoring threats might work in politics, but it does not work in security. Denying the reality of climate change will not make it go away; rather, it will erode the economy and expose the US to serious risks

”

16 Business Daily Wednesday, December 14 2016

Closing Finance

after the ministry held a meeting with Taiwan to issue US$12.6 bln bonds in 2017, lowest since 2007 traders earlier in the day to assess Taiwan’s finance ministry will issue about TWD400 billion (US$12.6 billion) in government bonds in 2017, a 10-year low, as fewer bonds mature next year, sources with direct knowledge of the matter said on Tuesday. The ministry will also suspend issuance of threeyear government bonds next year, the sources said, speaking on condition of anonymity as they are not authorised to speak to media. The move came

bond demand for 2017. A ministry official told Reuters the amount was in line with what was decided at the meeting. Taiwan has issued government bonds totaling TWD563.5 billion this year. The total amount issued has topped TWD600 billion each year between 2011 and 2015. The lowest level issued previously was TWD390 billion in 2007.

Oil Industry

IEA: OPEC Deal to create oil-supply deficit in H1 The agency expects oil stockpiles will decline by about 600,000 barrels a day in the next six months as curbs by OPEC and its partners take effect by Grant Smith

lobal oil markets will swing from surplus to deficit in the first half of 2017 as OPEC and other producers follow through on an agreement to cut supply, according to the International Energy Agency. Oil stockpiles will decline by about 600,000 barrels a day in the next six months as curbs by OPEC and its partners take effect, said the agency, which had previously assumed inventories wouldn’t drop until the end of 2017. Russia, the biggest producer outside OPEC to join the deal, will gradually implement the full reduction it promised, according to the IEA. Oil has gained more than 16 per cent since the Organization of Petroleum Exporting Countries agreed on November 30 to trim output for the first time in eight years, an accord expanded on December 10 with the participation of 11 non-members including Russia and Kazakhstan. “Before the agreement among producers, our demand and supply numbers suggested that the market would re-balance by the end of 2017,” the Paris-based agency said in its monthly market report. “If OPEC promptly and fully sticks to its production target” and other producers cut as agreed, “the market is likely to move into deficit in the first half of 2017.”

The stockpile declines will only occur if OPEC reduces supply enough to meet and maintain a target of about 32.7 million barrels a day, the agency said. The organization pumped a record 34.2 million a day in November, according to the IEA, which advises 29 nations on energy policy. There are some signs the market is already starting to tighten. While inventories of crude and refined oil

in industrialized nations remain 300 million barrels above their five-year average, they dropped for a third month in October, the longest run of declines since 2011, according to the agency. As a result of the December 10 deal, the IEA chopped its 2017 estimate for total non-OPEC supply growth in half, to 220,000 barrels a day. NonOPEC supply will average 57 million barrels a day next year. The IEA reduced its 2017 forecast for production in Russia, which promised to deliver half of the total non-OPEC cut, by 140,000 barrels a day. Russian output of crude and condensate will fall to 11.3 million barrels a day in the

second quarter from 11.6 million in the fourth as the country gradually implements a cut of 300,000 barrels, according to the report. While Kazakhstan also agreed to make a minor reduction, the IEA kept its projections for the country unchanged following the government’s insistence that output from its three largest fields won’t be constrained. Kazakh production will grow by 160,000 barrels a day next year. The agency increased its forecast for global oil demand in 2017 by 100,000 barrels a day. Consumption will rise by 1.3 million barrels a day, or 1.4 per cent, to 97.6 million a day. Bloomberg

Insurance

Agreement

Consumer price index

China to unveil new stock investment rules for insurers

Singapore, Malaysia sign final UK inflation rises accord for High-Speed Rail Link to highest in over 2 years

China’s insurance regulator will soon announce new rules to tighten control over insurance companies’ stock market investment activities, local media Caixin reported. The China Insurance Regulatory Commission (CIRC) is expected to publish a new notice that will, for the first time, set some boundaries for insurers’ parties acting in concert when they acquire public firms, Caixin reported, without specifying its source of information. The CIRC’s new rules will require insurers’ parties acting in concert to apply for regulatory approval before acquiring listed companies and their purchases must be funded by their own capital, according to the Caixin report. The regulator will also ban insurance firms from acquiring public firms in concert with any non-insurance parties, according to the report. The move comes amid an intensifying regulatory crackdown on risky activities by some aggressive players in the insurance sector, particularly those seen to be engaging in financial market speculation using expensive short-term funds. Reuters

Singapore and Malaysia signed a final agreement to build a high-speed rail that will link the citystate to Kuala Lumpur by December 2026. The accord was signed on Tuesday in the presence of Singapore Prime Minister Lee Hsien Loong and his counterpart Najib Razak in Putrajaya, Malaysia’s administrative capital, paving the way for the development and execution of the 300-kilometer (185 miles) line connecting the two cities. The long-envisioned plan, six years behind an earlier target, is aimed at trimming the land journey between the two Southeast Asian cities to 90 minutes, from about five hours now, with trains plying at a top speed of more than 300 kilometers an hour, the two governments have said. The link, when commissioned, is set to challenge budget carriers such as AirAsia Bhd. and Singapore Airlines Ltd.’s Tiger Airways, which fly passengers from Singapore to Kuala Lumpur in about an hour. The two countries will jointly award the tender for a development partner in early 2017, according to a statement from Singapore and Malaysian transport authorities. Reuters

British inflation hit its highest rate in more than two years last month, pushed up by more expensive clothing and the impact of June’s Brexit vote on the prices consumers paid for technology goods. Consumer prices were 1.2 per cent higher than a year earlier in November, up from 0.9 per cent in October and the biggest increase since October 2014, the Office for National Statistics said on Tuesday. Economists polled by Reuters had expected a 1.1 per cent annual rise in a Reuters poll. In a separate release, the ONS said prices paid by British factories for materials and energy fell more than 1 percent on the month but were up by nearly 13 per cent compared with November 2015 - the biggest annual increase since October 2011. The Bank of England forecast last month that inflation would surge to about 2.8 per cent by mid-2018, as sterling’s plunge after Britain’s vote to leave the EU pushes up the cost of imports and squeezes living standards and household spending. Sterling is currently down about 15 per cent against the U.S. dollar and 8 percent against the euro, making suppliers and retailers battle for profits as imported goods become more expensive. Reuters