Increased fines to discourage abandoned vehicles Transportation Page 4
Tuesday, January 3 2017 Year V Nr. 1205 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Gaming
Transportation
December gross gaming revenue second highest of 2016 Page 7
Airport sees record number of passengers in 2016 Page 6
www.macaubusinessdaily.com
Investments
Rhodium Group expects China’s FDI in the U.S. to grow fast this year Page 9
Business
How Samsung landed at the centre of South Korea’s influencepeddling scandal Page 13
MSAR achieves 9 pct non-gaming goal
Economy
The year 2015 marked the MSAR’s achievement of its minimum 9 pct non-gaming revenue goal, five years ahead of schedule. Gaming operators earned MOP23.9 billion in non-gaming revenue for the period, and MOP15.25 billion in direct non-gaming revenue during the period. Hotel services led the way, contributing 41.2 pct, followed by F&B at 23.4 pct and Retail at 22.4 pct. Page 3
Deus ex gaming machina
Trade-off
External merchandise trade value was up 1.7 pct y-o-y in November, hitting MOP7.6 bln. The data shows the growth was driven by increases in local imports, which totalled MOP6.82 bln, a near 3 pct y-o-y increase. Total exports fell 8.1 pct y-o-y to MOP797.5 mln, despite an increase of nearly 20 pct in domestic exports.
Gaming Gaming equipment manufacturers need to shift to smart gaming equipment to stay competitive in a market expected to grow at a CAGR of over 15 pct until 2021. With market value estimated to reach US$96.4 billion, up from the current US$54.1 bln, manufacturers should exploit online sales, smart casino equipment, tax revenue contributions and the easing of gov’t regulations. Page 7
‘Not capital control’
Value Page 5
HK Hang Seng Index December 30, 2016
22,000.56 +209.65 (+0.96%) Worst Performers
Belle International Holdings
+3.07%
Hengan International Group
+1.79%
CK Hutchison Holdings Ltd
+0.00%
CLP Holdings Ltd
+0.28%
Hang Lung Properties Ltd
+2.62%
Sands China Ltd
+1.66%
PetroChina Co Ltd
+0.00%
Li & Fung Ltd
+0.29%
Want Want China Holdings
+2.47%
BOC Hong Kong Holdings
+1.65%
New World Development
+0.12%
Kunlun Energy Co Ltd
+0.35%
Galaxy Entertainment Group
+2.27%
Bank of Communications
+1.63%
China Unicom Hong Kong
+0.22%
Cathay Pacific Airways Ltd
+0.39%
China Merchants Port Hold-
+2.01%
Industrial & Commercial
+1.53%
Ping An Insurance Group Co
+0.26%
HSBC Holdings PLC
+0.48%
18° 22° 18° 22° 19° 22° 19° 22° 19° 22° Today
Source: Bloomberg
Best Performers
WED
THU
I SSN 2226-8294
FRI
SAT
Source: AccuWeather
Monetary Researcher at People’s Bank of China, Ma Jun, said the country’s latest regulations on cash transactions and overseas transfers, implemented on Sunday, are not capital controls. The research bureau head of the nation’s central bank added that the new regulations would not affect normal activities. Page 8
2 Business Daily Tuesday, January 3 2017
Macau
Politics
Entry denied Hong Kong democratic politician Frederick Fung claims to have been included in a ‘black list’ by the MSAR authorities after being denied entry to the city
A
Hong Kong democratic politician was barred from entering Macau on December 31 and is accusing the MSAR authorities of having a created and placed his name on a ‘black list’ of residents from the former British colony, to block their access to the city. F r e d e r i c k F u n g, f r o m t h e
Association for Democracy and People’s Livelihood, had his entry to Macau denied by local authorities, who justified the denial stating that they considered him to represent a threat and sent him back to Hong Kong, according to statements made by the politician to Hong Kong’s local broadcaster RTHK. The democratic politician also added that this was
Public housing At the end of 2016 there were 12,900
residents living in public housing units
House discounts
the third time he has been barred from entering Macau. “I think the MSAR government has a black list of Hong Kong residents,” he stated, noting that he considered the decision to deny him entry unjustified. “I’m a Hong Kong citizen and I haven’t done anything wrong,” he added, stating that the Hong Kong government should clarify the situation with the Macau authorities.
Common practice
Barring entry to Macau happens with some regularity, under the internal security law, usually on days close to commemorative holidays or visits from high level officials from Mainland China. That was the case in October of 2016 when Chinese Premier Li Keqiang was in the city, and two former political activists and a cinema director from Hong Kong were blocked entry to Macau, with the same argument, posing a threat to security, cited as the reason.
The Public Security Police Force (PSP) doesn’t usually present specific reasons for impeding entry into the city. In statements made to Lusa regarding the cases in October, the police authorities stated only that it was their responsibility to “inspect and control entries and exits in the MSAR” including the duty “to decide and authorise the refusal of visitors”. The PSP also added at the time that it had “nothing to refer or comment” in regard to “specific cases”. At the time, former activist Roddy Shaw Kwok-wah also stated he believed he had been included on “some sort of black list”. “Maybe I’m not in the Hong Kong government’s list, but maybe I’m still in China’s list,” he stated. On December 19 of 2014 - on the eve of the celebrations for the 15th anniversary of the city’s handover to China - four journalists from Hong Kong newspaper Apple Daily and 14 activists were also refused entry to the MSAR. Lusa
Government to maintain rent exemption for public housing unit tenants in lower income brackets in 2017 Nelson Moura Nelson.moura@macaubusinessdaily.com
The MSAR Government will maintain rent exemptions for lower income tenants, according to a Housing Bureau release on January 1. Tenants who do not exceed the maximum income stipulated by law, will continue to be exempt from paying monthly rent up to MOP2,000(US$250), with the rent exemption covering 12,000 social housing renters, or almost 91 per cent of all occupants. According to the release, as of December 23 of 2016, more than 12,900 residents were living in public housing units, with the government predicting that in 2017 around 11,700 will be exempt from paying monthly rent. The release also stated that the total exemption from monthly rent payments was estimated at
approximately MOP450 million.
Giving a hand
The measures for public housing leasing were implemented in 2016 in order to help low income tenants afford government housing units, and are applicable to renters with incomes under a maximum limit set by the Housing Bureau. According to the law, the maximum monthly income limits allowing for the exemption of monthly rent start at MOP9,560 for one person, and go to MOP29,460 for a family with seven or more people. Residents with incomes higher than the set limits are not exempt from paying monthly rent, with the government stating that the policy is intended to make owners in this category return the housing units on their own initiative. According to the release, between January and November of 2016, a total of 34 renters living in affordable housing units who received incomes above the set maximum limits, returned their units to the Housing Bureau. Affordable public housing was considered one of the top priorities by MSAR residents in a survey conducted by the Association of Macao New Vision, that interviewed 818 residents, revealing that the majority of respondents consider that accelerating the construction of public housing should be one of the top policy priorities of the MSAR Government. In his 2017 Policy Address, Secretary for Transport and Public Works, Raimundo do Rosário stated that some 3,400 public housing units will be built in 2017, together with 11,000 private units to be built by developers. N.M.
Economic housing
Home-owners 921 eligible economic housing applicants have been approved to select economic housing units to purchase The city’s Housing Bureau has approved 921 family economic housing applications as eligible to proceed on to the next step of acquiring the housing, according to a press release published by the Housing Bureau yesterday. The number represents 48.5 per cent of the total applications lodged. A total of 1,900 family economic housing applications were received by the bureau, of which 1,811 applications have had a substantive review completed by the Bureau. In total, 921 eligible applicants will be allowed to select their units,
accounting for 50.9 per cent of the total reviewed applications. On the other hand, 554 applications were rejected through the review process, accounting for 30.6 per cent. Another 152 applications are required to hand in additional documents in order to proceed further, accounting for 8.4 per cent of the total, and 69 applicants, or 3.8 per cent, of these requested to withdraw their applications. Finally, 115 applications, or 6.3 per cent, were suspended from the selection process. Up until December 16 of last year, the Bureau had arranged 719 eligible applicants to purchase their economic housing units, of which 712 applicants selected their units and the rest chose to give up their options and did not show up for selection. In addition, up until now, more than 60 confirmation letters have been sent out by the Bureau to inform the new eligible applicants to submit further documents within 30 days. A.L.
Business Daily Tuesday, January 3 2017 3
Macau Economy
Non-gaming goal achieved DSEC data indicates non-gaming income contributed 9.39 pct of the total revenue generated by the six local gaming operators in 2015 Cecilia U cecilia.u@macaubusinessdaily.com
I
n the year 2015, the six major gaming operators in Macau saw their overall adjusted non-gaming income account for 9.39 per cent of their total revenue, five years ahead of the targeted minimum of 9 per cent in non-gaming revenue set out in the Five-Year Plan released by the MSAR Government last year. The data, provided in the latest report released by the Statistics and Census Bureau (DSEC), which aims to map the city’s efforts in promoting economic diversification, shows that when non-gaming services offered through the participation of gambling activities either free of charge or discounted are included, the gaming operators earned MOP23.90 billion (US$2.99 billion) in the non-gaming area in 2015, indicating an increase of 2.68 percentage points year-onyear in terms of the ratio of the total revenue. However, in 2015, the growth in the ratio was determined by a significant drop in revenue generated from the gaming sector, despite the drop of 5.4
per cent year-on-year that appeared in adjusted non-gaming income. Meanwhile, the city’s casino sector generated MOP15.25 billion in direct non-gaming revenue in 2015, contributing 6.2 per cent of the total income, as stated in the report. In terms of adjusted non-gaming revenue generated in 2015, hotel services contributed 41.2 per cent, followed by food and beverage at 23.4 per cent, and retail at 22.4 per cent. The latest information, on the other hand, revealed that the proportion of gross gaming revenue attributable to VIP gaming, including VIP Baccarat, in 2015 dropped by 55.57 per cent, indicating a decrease of around five percentage points; whereas mass
market and slot machines saw their contribution increase in spite of a decline in overall revenue for both sectors.
Growth in related industries
With the city’s gaming industry leading all others in the city, the total revenue created by related industries increased from MOP229.85 billion in 2012 to MOP359.2 billion in 2015, registering an increase of 56.3 per cent over the three-year period. Regarding related industries, the latest information shows that the construction, finance and real estate and business services sectors enjoyed the largest growth in terms of amount of income over the years, up 193.4 per cent, 85.5
per cent and 47.5 per cent, respectively. On the other hand, the extensive report revealed that a total of 1,185 conferences were held in the city over the course of the year, up 23.1 per cent compared to 963 in 2014, however suffering a 3.1 percent drop in the number of participants year-on-year. Of the total number of conferences held in 2015, small conferences with around 10 to 49 participants took up the largest part, occupying 49.2 per cent, whereas those with more than 200 participants contributed around 13.2 per cent. The number of exhibitions organized in 2015 totaled 78, down 10.3 per cent compared to the 87 that were held in 2014.
4 Business Daily Tuesday, January 3 2017
Macau
Gross National Income
2015 Gross National Income down to MOP333.58 billion 2015 per-capita Gross National Income fell by 16.2 pct y-o-y Annie Lao annie.lao@macaubusinessdaily.com
T
he city’s Gross National Income (GNI) for 2015 reached MOP333.58 billion (US$41.76 billion), according to the latest data released by the Statistics and Census Service (DSEC). The figure represents a decrease of 13.5 per cent year-on-year for GNI, compared to the previous year’s MOP378.78 billion. GNI refers to the gross domestic product (GDP) of a territory, adding
income earned by resident investors from overseas, minus income earned by non-resident investors from investments made in Macau.
GDP down
After taking into account adjusted inflation according to current prices, Macau’s GDP for 2015 decreased by 21.5 per cent year-on-year, to MOP362.64 billion, compared to the previous year’s MOP442.07 billion. The rate of decrease in Gross National Income was smaller than that of the GDP for the year, which the service attributes as mainly being due to the 33 per cent decrease in external factor income outflow in 2015. The GNI for 2015 was also smaller than the GDP registered for the same period in real terms by MOP29.06 billion, indicating a net external factor
Breaking down the major components of GNI, the total inflow of external factor income for 2015 increased to MOP36.71 billion, a year-on-year improvement of 5.3 per cent when compared to the previous year’s MOP34.86 billion. The increase was also attributed to the inflow of portfolio investment
income, which reached MOP14.39 billion, up by 8.4 per cent year-on-year. In addition, the increase also boosted a 3.8 per cent rise in other investment income inflow to MOP20.15 billion year-on-year. At the same time, the inflow of direct investment income increased to MOP938 million, up by 14.2 per cent year-on-year. On the other hand, the total outflow of external factor income for 2015 decreased to MOP65.77 billion, a drop of 33 per cent year-on-year. This was largely due to a decrease in direct investment income, down by 39.9 per cent year-on-year, to MOP51.33 billion, compared to MOP85.39 billion in 2014, indicating a fall in income earned by certain non-resident companies and investors from investments in the territory. However, the outflow of portfolio investment income increased to MOP965 million, up by 27.1 per cent year-on-year. In addition, the outflow of other investment income also went up by 12.2 per cent to MOP11.55 billion year-on-year.
MOP600 per day for heavy vehicles. Referencing neighbouring cities such as Singapore, Taiwan and Hong Kong, DSAT has readjusted the fees for vehicle inspections to MOP500 for light vehicles and MOP300 for motor vehicles, up by 100 per cent to 900 per cent. An extra MOP400 will now be charged under the new adjustments, for early application fees or delayed
inspection fees, states DSAT. Meanwhile, the transfer fee for taxi licenses has also gone up from MOP2,000 to MOP20,000 in order to prevent the speculation of taxi licenses. The Transport Bureau has also increased fees and prices for examination of driving licenses and the purchase of special numbers for license plates.
income outflow of the same amount equivalent to 8 per cent of GDP in 2015, smaller than the value recorded the previous year, which amounted to 14.3 per cent, the statistics service explained. Both per-capita GNI and per-capita GDP for 2015 decreased by 16.2 per cent (down to MOP520,004) and 23.9 per cent (down to MOP565,301) yearon-year, respectively.
Components of GNI
Transport
Skyrocketing transport fees The adjusted new transport fees and prices commenced on the first day of 2017 Cecilia U cecilia.u@macaubusinessdaily.com
Fees relating to transport in the city have been raised, coming into effect on Sunday January 1, according to a press release posted by the city’s Transport Bureau (DSAT). The adjustment in prices covers a wide range of services, with the fee for the removal of vehicles due to illegal parking seeing the highest growth, rocketing between 400 per cent and 1,233 per cent, to MOP750 (US$93) for motorcycles and MOP1,500 and light vehicles, compared to the previous
MOP120 and MOP300. The soar in prices is due to prices having remained unchanged since 1998, but also due to increased driver awareness and limited instances of drivers discarding old vehicles. Moreover, the increase in prices will serve as a deterrent for the illegal occupation of car parks and street parking meters, notes the bureau. In order to coordinate the adjustment in fees for car parks, as well as to prompt drivers to collect removed vehicles, DSAT has increased the price of storing vehicles, charging MOP20 per day for removed motorcycles and
Telecommunication
Gov’t to renew contract with CTM The Bureau of Telecommunications Regulation revealed that the MSAR government will automatically renew the concession contract with local telecommunications operator Companhia de Telecomunicações de Macau, S.A.R.L. (CTM) for a further five years, if CTM does not violate the legal terms or damage public welfare, local broadcaster TDM Television News reported. The Bureau
stated that the government will continue monitoring CTM’s operations, in order to ensure the protection of assets. According to the terms of the contract, CTM is required to provide a special assets property inventory to the government, as well as to inform of any improvements and replacement of assets. Once the contract is renewed, the next expiration date will be extended to the last day of 2021. C.U.
Politics
Neighbouring SAR warned China will not permit Hong Kong to be used as a city that can disrupt the stability of the country or be used for subversion, according to statements made by Zhang Xiaoming, Director of the Liaison Office of the Central People’s Government in Hong Kong, to state-run broadcaster CCTV. Tensions have risen in recent months after two pro-independence activists changed the contents of their swearing in declarations, using words that were considered defamatory by the central government, promising to serve the ‘nation of Hong Kong’. “As far as Hong Kong is concerned, nobody is permitted to do anything in any form that damages the country’s sovereignty and security. They are not allowed to challenge the central government’s authority or that of
Hong Kong’s Basic law, and they are not allowed to use Hong Kong for infiltration subversion activities against the Mainland, to damage its social and political stability,” the Director stated, as cited by local media. Authorities of the central government’s communist party have been perturbed by the emergence of the pro-independence movement in the neighbouring SAR, despite the movement only consisting of a minority of Hong Kong’s residents. According to the “One Country, Two Systems” policy followed by both Hong Kong and Macau, the socialist policies of the Mainland are not applied in the SARs, except in the areas of Defence and Foreign Affairs, with both SARs allowed a ‘high degree of autonomy’. Lusa
Business Daily Tuesday, January 3 2017 5
Macau Trade
External trade jumps 1.7 pct for November Increase boosted by overall growth in local imports Kam Leong kamleong@macaubusinessdaily.com
T
he total external merchandise trade value in the city registered a slight increase of 1.7 per cent year-on-year for the month of November last year, amounting to MOP7.6 billion (US$950 million), driven by growth in local imports, according to the official data released by the Statistics and Census Service (DSEC) last Friday. For the month, the city’s total imports totalled MOP6.82 billion, a jump of 2.9 per cent year-on-year; however total exports fell by 8.1 per cent year-on-year to MOP797.5 million despite an increase of 19.4 per cent year-on-year in domestic exports, whose value reached MOP180.6 million. In terms of goods, local imports of motorcars & motorcycles continued to plunge during the month, slumping by 41.8 per cent year-on-year to MOP163.7 million for the month. In addition, that of gold jewellery dropped slightly by 2 per cent yearon-year to MOP548.4 million. However imports of watches surged by 69.1 per cent year-on-year to MOP603.7 million, while those of handbags & wallets also jumped by 30.7 per cent year-on-year to MOP248.9 million. Meanwhile, the city’s exports of clocks & watches also soared by
63 per cent year-on-year during the month, amounting to MOP85.9 million. Moreover, exports of tobacco & wine jumped by 69.2 per cent yearon-year to MOP72 million. However exports of machines, apparatus & parts dropped by 46.6 per cent year-on-year to MOP64.7 million, while total exports of textiles & garments also dropped by 20.3 per cent year-on-year to MOP60.6 million. For the first eleven months of 2016, total trade value reached MOP74.1 billion, declining by 15.3 per cent year-on-year. Of the total, imports accounted for MOP64.8 billion, a drop of 16.6 per cent year-on-year, while exports also decreased by 5.1
per cent to MOP9.3 billion.
Closer links with Luso countries
During the eleven-month period, the city saw its trade activities with Portuguese-speaking countries become more active than one year ago. In particular, local exports to these countries increased seven-fold year-on-year to MOP6 million, while imports from the Lusophone world also grew by 12.6 per cent year-onyear to MOP606 million, according to the DSEC. In terms of other origins, 36.6 per cent of local imports were from Mainland China, amounting to MOP23.73 billion, a drop of 18.7 per cent year-on-year, while those
from the European Union totalled MOP15.43 billion, down by 10.4 per cent year-on-year. In addition, analysed by place of consignment, imports from the Mainland also dropped by 5.6 per cent year-on-year to MOP11.1 billion, with those from the nine provinces of the Pan Pearl River Delta amounting to MOP10.4 billion, a decline of 6.7 per cent year-on-year. On the other hand, more than half of the city’s exports went to Hong Kong during the eleven months, amounting to MOP5.2 billion, a decrease of 11.7 per cent year-on-year. Exports to Mainland China also declined by 3.8 per cent year-on-year to MOP1.6 billion for the period.
6 Business Daily Tuesday, January 3 2017
Macau Land plot
Henqing to open land tender
T
he Land and Resources Bureau of Zhuhai has announced the opening of a bid for a land plot located in the Henqing New Area, occupying some 34,542 square metres with around 200,700 square metres available for total construction area. The notice on the Bureau website states that the starting price of the land is RMB4,994 (MOP5,741/US$719) per metre square, meaning the total price would exceed RMB1 billion. According to the notice, the tenure on the land is 40 years and it has been classified for use as a commercial facilities development. The Bureau is seeking bids from firms that take part in the logistics,
trade and business services sectors, in accordance with the ‘Henqing New Area Industrial Development Guidance Catalogue’, the notice specified. The bidding will take place online between January 17 and February 8, and firms from the Mainland or the SARs which are officially approved, are welcome to participate. Individuals and consortiums however are not eligible to bid on the property. Firms from the Mainland wishing to bid on the land are required to own a company with registered capital of no less than RMB100 million, and hold 100 per cent of the shares, and must have their company registered in the Hengqin New Area within
one month of the purchase. Firms from the SARs also need to meet
similar requirements, however only within six months of the purchase. The contract will be voided with no return of the deposit if the purchasing firm fails to meet these requirements within the specified time. C.U.
Airport
Macau International Airport breaks passenger record With 6.6 million people arriving and departing in 2016, the Macau International Airport scored its highest passenger movements since first opening in 1995 Sheyla Zandonai sheyla.zandonai@macaubusiness.com
The number of passengers at the Macau International Airport (MIA) hit a record in 2016, according to a press release from MIA. During the year, 6.6 million travellers arrived and departed from the airport premises, signaling a 14 per cent increase year-on-year, with more than 56,000 flights operating during the same
period, a milestone in the airport’s 21 years of operations. The increase in passenger traffic volume has been attributed to the addition of three new routes – Guiyang (China), Manado (Indonesia), and Fukuoka (Japan) – and seven new airline carriers – AirExplore SRO, Vietjet Air, Far Eastern Air Transport, Air Seoul, PT Lion Mentari Airlines, JSC Royal Flight Airlines, and Nok Air. MIA also credits the recent success
to the “joint efforts and close cooperation” with business partners to enhance the airport’s role in the development of Macau as a World Centre of Tourism and Leisure. Currently, the local airport connects Macau to 41 destinations in Mainland China, Taiwan, and Southeast and North Asia. In regards to the inbound-outbound movement of visitors, the most important increase in market share was for the Southeast Asia and Taiwan regions, with 20 per cent and 15 percent growth seen, respectively. The Mainland China market registered an
increase of 4 per cent year-on-year. For 2017, the MIA plans to establish long haul routes “aiming to increase and change the current passenger market structure, thus attracting more international and local travelers”, the release notes. On its webpage, MIA states it is “forging new air services agreements with destinations in the Asia-Pacific, Europe, America, and Southern Africa”. MIA also expects to complete several infrastructure projects this year. When ready, the north terminal will expand the airport’s current 6-million passenger capacity to 7.5 million. The completion of a private jet hangar will “help to attract more high-end travelers”.
2017
CE New Year’s Day message MSAR striving for a diversified economy and the livelihood of local residents In his New Year’s Day speech, the city’s Chief Executive (CE) Fernando Chui Sai On reiterated the MSAR Government’s continued promotion of the city’s economic development through diversification and the goal to improve the livelihood of local residents this year, according to an announcement published by the government. The MSAR is continuing to develop in accordance with the central government’s 13th five-year plan, an economic blueprint set up for the country, lasting until 2020, that supports the development of Macau, the CE stated in his address. The local government continues to focus on the ‘One Centre, One Platform’ policy to transform Macau into a more diversified economy by creating a world centre of tourism and leisure, as well as a trade and service platform between Mainland China and Portuguese-speaking countries, the CE also noted. The five-year development plan of the MSAR, established in 2016, acts as a clear vision to ensure the long-term sustainability of the city and the wellbeing of
local residents, the CE stated. In addition, the CE added that the MSAR government continues to adhere to the MSAR Basic Law, based on the principle of prudent financial management and the protection of the livelihood of locals, as well as keeping the city’s investment plan unaffected. The government will continue to strengthen the city’s social security, health care, housing, education and personnel training programs as longterm development mechanisms in the MSAR, the CE concluded. A.L.
Business Daily Tuesday, January 3 2017 7
Macau Revenue
‘Just in line’ MOP19.81 billion in gross gaming revenue for December Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
G
ross gaming revenue for the month of December came in up 8 per cent year-on-year, according to the data posted by the MSAR’s Gaming Inspection and Coordination Bureau (DICJ). Despite the figure being the second highest gross gaming revenue recorded during the 2016-year, at MOP19.81 billion, the figure was ‘just in line’ with consensus estimates by analysts at JP Morgan, and the value ‘failed to continue its ‘beating streak’ since August,’ note the analysts. The figure for December trails only October’s figures, which amounted to MOP21.8 billion. Average daily revenue was MOP639 million per day in November, note the analysts, as compared to MOP626 million seen in November and MOP598 million for the third quarter. ‘Post a heavily VIP driven November we believe the December result […] somewhat disappointing,’ note analysts at Deutsche Bank, referring however to the ‘challenging December’ for stocks of the local gaming
operators as ‘likely’ accounting for the ‘majority of the slowdown/swifter deceleration’. The group notes that for the month, the VIP was ‘impacted modestly by hold, given the difficult year-on-year comparison, though still generated a mid to high single digit y/y growth rate, with mass coming in similarly’.
Bullish
Analysts at JP Morgan note that their sector view ‘remains bullish’, however point out that the industry has ‘entered a genuine upturn in demand, profits and cash-flows’. The analysts note that this should drive sustainable earnings upgrades, allowing investors more ‘predictable’ returns. Total accumulated gross gaming revenue for the 2016-year was down 3.3 per cent when compared to 2015 figures, amounting to MOP223.21 billion, compared to the previous year’s MOP230.84 billion Predictions by analysts at Deutsche Bank are for a 4.2 per cent year-onyear increase for January’s gaming revenue, however given that Chinese New Year will be falling in January this year ‘we believe a comparison
with 2012 is more appropriate and note that January 2012 win per day was 6 per cent better than that of December 2011’. This leads the analysts to predict year-on-year growth for the month of up to 12 per cent. Regarding the results from the last month of 2016, the analysts express the opinion that ‘the inability to improve from historical sequentials [is] a modest negative given the ramp up of two new properties in the market,’ commenting that ‘this shows that the respective ramps are coming primarily at the expense of others, rather than expanding the market’. The analysts note that they
‘continue to see MGM as the best way to play the sector into earnings season’. Bloomberg notes that in its survey of analysts, a consensus of a 7 per cent increase in gaming revenue for 2017 is expected, ‘in a recovery led by mass market players’. The group notes that, of the responses from the analysts, it found ‘macroeconomic and policy as among the risks facing Macau in the near term, along with new supply of casinos being planned by operators.’ December marks the fifth month of consecutive year-on-year growth in gross gaming revenue.
Gaming Gaming equipment manufacturers should develop new technologies
and shift to smart gaming equipment in order to stay competitive
Betting on the machine The global casino gaming equipment market is expected to grow at a compound annual growth rate of more than 15 per cent between 2017 to 2021, with market value reaching US$96.4 billion in four years Nelson Moura nelson.moura@macaubusinessdaily.com
Research firm Technavio estimates that the global casino gaming equipment market will grow ‘rapidly’ at a compound annual growth rate of more than 15 per cent between 2017 and 2021. By 2021, the global gaming
equipment market should reach US$96.4 billion (MOP770 billion), according to a report by the firm, with the current market value set at US$54.1 billion. According to the report, the casino gaming equipment market’s four main segments include casino tables, slot machines, gaming chips and video poker machines, with casino
Bonus
SJM gives out bonus to its employees Local gaming operator Sociedade de Jogos de Macau, S.A. (SJM) has given out a “living allowance” to its employees, according to an announcement made by the operator on Sunday. Included under the “living allowance” are “a new year bonus” and a “summer allowance”, to be paid to SJM employees this year. According to the statement, if the company’s employees earn MOP20,000 (US$2,504) per month
or less, they will receive a “living allowance” equal to two months of their current salary, whereas, if employees earn MOP20,000 per month or above, they will receive a “living allowance” of one and a half months of their current salary or at least MOP40,000, depending on which is higher. The first of the two installments of the bonus payment was distributed on January 1 and the second will take place on July 1. A.L.
tables and slot machines accounting for almost half of the market last year.
Strong arguments
The report considers that gaming equipment related sales have grown due to four factors: increased online sales of casino gaming equipment; the rise in demand for smart casino gaming equipment; tax revenue contributions; and, in particular, because of the easing of government regulations. “Many countries, such as Japan, are aiming at legalizing casino gaming because of the growing popularity of gambling and the high revenue contribution from casinos,” stated Technavio lead analyst Ujjwal Doshi in a company release. Income generated from gaming revenues and taxes on gamers’ disposable income, are some of the main factors that could persuade governments to legalize different types of gaming including sports betting, leading to growth in the four-year period and an increase in gaming equipment sales, the study informed. The report also stated that growth would be driven by increased global demand for high-quality casino gaming equipment, with different regions having preferences for different types of gaming equipment, such as video poker machines being more popular in China. Online purchases could also help
manufacturers earn additional revenue through exports and customised new models, stated the report.
Innovating to survive
The researchers consider that gaming equipment manufacturers face many challenges in the form of ‘intense competition, rapid advances in technology, and frequent changes in consumer preferences’. With casinos looking to attract more customers by installing large amounts of casino gaming equipment in their facilities, competition between gaming equipment suppliers has increased considerably the report states, with vendors needing to develop new technologies and stay upto-date with emerging technologies. According to the study there has been a demand to change from traditional equipment such as slot machines to ‘smart casino equipment’, in order to attract a younger segment, aged between 18 and 35 years old, seen as being more attracted to more innovative and integrated games. The adoption of virtual reality (VR) in the gambling market was cited as one of the changes that could attract new players to the sector and one of the factors driving growth in the market over the coming years. However, the report also considered that currently few developers were including the technology in their products.
8 Business Daily Tuesday, January 3 2017
Greater China Regulations
PBOC researcher: new bank regulations aren’t capital controls
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hina’s new regulations on cash transactions and overseas transfers are not capital controls, according to a central bank researcher cited by the official Xinhua News Agency. New requirements published by the People’s Bank of China Friday stoked concern that the government is imposing capital controls in a disguised form, Xinhua reported
will be neither extra documentation nor official approval procedures for businesses and individuals, Ma said. The PBOC said Friday it will require financial institutions to report any cross-border transfers of RMB200,000 (US$28,800). Officials say they want more timely data on individuals to track risks arising from increasing cross-border transfers, according to a statement.
Middle class and wealthy Chinese have been converting money into other currencies to protect against devaluation, putting downward pressure on the yuan. The currency started last year by roiling global markets, with a weaker-thanexpected fixings in January creating panic about currency policy and spurring outflows, and finished 2016 near an eight-year low.
China’s foreign reserves, the world’s largest stockpile, fell to a five-year low of US$3.05 trillion as of November. The US$99 billion drop last January, the largest in 2016, followed the last reset of the quotas. Data scheduled for release on Jan. 7 will show the hoard fell to US$3.01 trillion, according to the median estimate of economists surveyed by Bloomberg. Bloomberg
“It is not capital control at all” Ma Jun, chief economist of the research bureau of the People’s Bank of China late Sunday. “It is not capital control at all,” Ma Jun, chief economist of the central bank’s research bureau, told the staterun news service. The US$50,000 annual foreign exchange purchase quota for individuals is unchanged, and the rules won’t affect normal activities such as business investment and operations abroad or overseas travel and study, Ma said. Ma’s comments follow the annual January 1 reset of the US$50,000 limit for individuals, which may potentially aggravate capital outflow pressures that have been intensifying after the yuan suffered its steepest annual slump in more than two decades. The PBOC said Friday it will tighten rules for banks to report cross-border customer transactions starting July 1 as part of stepped-up efforts to curb money laundering and prevent terrorism financing.
Assume responsibility
Financial institutions will assume responsibility for reporting and there
Economy
Central bank adviser calls for flexible 2017 growth target The Chinese government should set a more flexible target for economic growth this year to give more space for reform efforts, a central bank adviser told the official Xinhua news agency in comments published on Sunday. China’s economy grew 6.7 per
cent in the third quarter from a year earlier and looks set to achieve the government’s full-year forecast of 6.5 to 7 per cent, buoyed by higher government spending, a housing boom and record bank lending. However, growing debt and concerns about property bubbles
have touched off an internal debate about whether China should tolerate slower growth in 2017 to allow more room for painful reforms aimed at reducing industrial overcapacity and indebtedness. Huang Yiping, a monetary policy committee member of the central
People’s Bank of China and Peking University professor, told Xinhua that China’s GDP growth target range should be 6 to 7 per cent for this year, compared with 6.5 to 7 per cent in 2016. “The 6.5 per cent target is just an average rate,” Huang said. “As long as employment is stable, a slightly wider growth target range in the short term will reduce the need for pro-growth efforts and give policy makers more room to focus on reforms.” This year’s growth target will d et e r m i n e th e g o v e r n m e n t’ s monetary policy, Huang said. “Large-scale monetary loosening is unlikely, while the possibility of tightening can not be ruled out,” he added, citing inflation concerns, higher U.S. interest rates and a weakening yuan. While the yuan is under pressure from U.S. interest rate rises in the short term, Huang said the yuan’s exchange rate will be “largely unaffected by investors’ expectations about China’s economic growth”, Xinhua said. As Chinese people diversify their investment portfolio, capital outflow will “last only for a certain period” in future, Huang added. In 2016, the yuan posted its biggest annual loss against the dollar since 1994, making it the worst performing major Asian currency during the year. Reuters
Business Daily Tuesday, January 3 2017 9
Greater China Manufacturing
Growth in Mainland's factories, services slows in December The official Purchasing Managers’ Index (PMI) stood at 51.4 in December compared with 51.7 in November. China’s manufacturing sector expanded for a fifth month in December, but growth slowed a touch more than expected in a sign that government measures to rein in soaring asset prices are starting to have a knockon effect on the broader economy. The official Purchasing Managers’ Index (PMI) stood at 51.4 in December compared with 51.7 in November. A reading above 50 indicates an expansion on a monthly basis while one below 50 suggests a contraction. December’s reading was slightly below the forecast in a Reuters poll for 51.5. A housing boom in the second half of 2016 and a government spending spree on infrastructure have helped boost prices for commodities from cement to steel, giving the manufacturing sector a much-needed lift. But the government is cracking down on speculative property buying, and signals from policymakers that more will be done to contain asset bubbles and rising debt - even at the expense of slower growth means extra stimulus measures could be limited. “Today’s PMI figures suggest that the change of policy tone has taken its toll, as the authorities are seriously concerned about the asset bubbles,” said Zhou Hao, senior economist at
Commerzbank. Factory output slowed in December, with the sub-index hitting 53.3 compared with 53.9 the previous month. Total new orders were flat at 53.2, logging the same as in November, while new export orders fell to 50.1 from 50.3. Jobs were again lost, with the employment sub-index sitting at 48.9, compared to 49.2 in November, as
the country pledged to cut excess capacity over a range of industries. A sub-index for smaller firms fell, and performance for larger companies also worsened. The Markit/Caixin PMI, a private gauge of manufacturing activity which focuses more on small- and mid-sized firms, is due on Jan. 3. Analysts in a Reuters poll expect it to fall to 50.7 from the previous month’s reading of 50.9. A separate reading on the services sector showed the pace of growth slowed in December, Sunday’s data showed.
capital outflow
Real estate
China’s investment in U.S. in new year expected to grow fast
HK parking garage may fetch US$2.2 bln in 2017 sale
China’s direct investment in the U.S. is expected to grow fast in 2017, but political realties pose major downside risk to it, according to a research report by a U.S. consulting firm. Chinese companies invested a record of US$45.6 billion in the U.S. in 2016, tripling the amount in 2015, said the Rhodium Group in its recent report. Although merger and acquisition remain the primary Chinese investment in U.S., greenfield investment is continuing fast expansion, the report said. The rising Chinese investment to certain degree reflected China’s economic restructuring. “In contrast to the dominance of fossil fuel investments before 2013, more than 90 per cent of Chinese FDI (foreign direct investment) in 2016 was targeting U.S. services and advanced manufacturing sectors,” it said. Real estate and hospitality, information and communications technology, entertainment, and financial services continued to attract the interest of Chinese investors. The report expected Chinese
investment in U.S. to continue experiencing growth in 2017, because Chinese companies are keen to upgrade technology and build out brands and local consumer presence. Other factors, such as stable U.S. economic outlook and the appreciation of U.S. dollar, also played a role in boosting Chinese investment. However, the report warned that political realties are likely to pose a major downside risk to the Chinese investment. “Chinese investors also face greater uncertainty and political deal risk in the United States in the aftermath of the Presidential election,” said the report. President-elect Donald Trump’s cabinet appointments suggest a more confrontational approach to trade and investment policy toward China, it said. In addition, China is tightening administrative controls on certain types of transactions amid rising capital outflow pressure, which could also pose uncertainty for the outlook of the Chinese investment in U.S., the report added. Xinhua
Moxy Ying
Hong Kong’s government has announced the first sale of commercial land in the city’s central business district in more than 20 years. The site, currently used as a multistory car park in Murray Road, Central, is about 31,000 square feet, according to a government statement released late Thursday. The plot is valued at HK$15.8 billion to HK$17 billion (US$2.2 billion), according to Vincent Cheung, Colliers International executive director of valuation and advisory for Asia. I t i s t h e f i r s t c o m m e rc i a l development site available in Central since 1996, Cheung said, and rents will set “a new indicator” for offices in Central. The sale of the plot, situated near the Bank of China building and billionaire Li Ka-shing’s Cheung Kong Center, is slated for the first quarter of next year. It comes after some record-breaking deals in Hong Kong’s office market, driven by strong demand from Chinese companies. In July, Wheelock & Co. sold HarbourGate East Tower to Shenzhen-based company Cheung Kei Group for HK$4.5 billion. In 2015, Chinese developer China Evergrande Group and China Life
The official non-manufacturing Purchasing Managers’ Index (PMI) stood at 54.5 in December, down from 54.7 in November, but well above the 50-point mark. China is counting on growth in services - which account for more than half of gross domestic product - to offset persistent softness in exports that is dragging on the economy. Private investment has also remained stubbornly weak. But GDP still looks set to hit Beijing’s 2016 growth target of 6.5 to 7 per cent, after expanding 6.7 per cent for each of the first three quarters. Reuters
Insurance Co. bought office blocks in separate transactions worth a combined HK$18.35 billion. The sale may attract attention given the lack of new supply and low prime-office vacancy rates in the area, Bloomberg Intelligence analyst Patrick Wong wrote in an email. The potential high price may “stimulate” investment demand for office properties in Central and sale prices of existing offices in Central may rise further, he said.
Residential market
On the residential front, the government is projected to supply 19,460 private units in the fiscal year ending March, which is 8 per cent above its target. That’s the biggest supply since 2010, Paul Chan, the city’s development secretary, told reporters on Thursday. Hong Kong’s residential property prices have risen to record highs and sales volumes have surged even after the government raised stamp duty in November, defying previous forecasts that the measures would send transactions plunging by as much as 70 per cent. Private housing prices in November reached the highest since data was first made available in 1979, the city’s rating and valuation department said Friday. “The government will spare no effort in identifying additional suitable sites for development and closely monitor the market situation,” Chan said. Bloomberg
10 Business Daily Tuesday, January 3 2017
Greater China Telecom
Huawei vows to shake everything up in a tougher 2017 The country’s largest telecom equipment maker expects a 32 per cent rise in revenue to RMB520 billion last year
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uawei Technologies Co. pledged to overhaul its culture and rethink the way it conducts business, expecting global uncertainty to mount in 2017 after sales growth slowed. China’s largest telecommunications equipment maker expects a 32 per cent rise in revenue to RMB520 billion (US$75 billion) in 2016, rotating Chief Executive Officer Eric Xu said. That’s down from the 37 per cent growth it posted in 2015. The company now needs to re-tool its management approach to zero in on customers’ needs, while staunching costs and avoiding “blind optimism and rhetoric.” Huawei, which debuted its first Android device in 2009 and is now the largest smartphone maker after Apple Inc. and Samsung Electronics
Co., has made significant inroads into markets from the U.S. to Europe. But Chinese rivals from Oppo to Vivo have taken the lead back home and its business of selling networking gear to wireless carriers is vulnerable to political swings. Huawei’s consumer business, which includes mainly smartphones, probably grew sales 42 per cent to RMB178 billion in 2016, divisional CEO Richard Yu said in a separate memo. “The year 2016 has seen a flock of black swans - both political and economic - sweep across the globe,” Xu said in a memo to staff that was posted on the company website. “In 2017, we will face even greater global political and economic uncertainties.” Those include a rise in costs that outpaced revenue and gross margin growth in 2016. Xu outlined a laundry list of time- and money-wasting
activities to root out, including “empty talks in offices that are far removed from actual business” and “fancy” internal promotional videos and slides. He wants more independent thinking and visits to key operations from base stations to stores. More fundamentally, Xu - one of several executives that rotate in and out of the top position - urged a shift in attitude and mindset from merely responding to customers to actively evolving into a technology leader. He wants to build research and innovation centers around the world. And he warned of internal disruption as employees are trained and re-assigned to the field. “Our human resource policy should help reduce entropy in our workforce,” he said. Founded in 1987 by former army engineer Ren Zhengfei, Huawei is one of several Chinese companies trying to compete in the global technology market. It remains a global leader in carrier equipment, and its latest smartphones - the P9 and P9 Plushave proven popular in higher-end
markets. It posted a 37 per cent jump in overall 2015 revenue to RMB395 billion, and shipped roughly 100 million smartphones globally. Smartphone sales are expected to grow a single-digit percentage in 2016 for the first time, according to IT researcher Gartner. Huawei’s consumer mobile division, riding the strong reception for its marquee phones, far outpaced that: it probably expanded shipments by 29 per cent to 139 million units this year, Yu said. The goal is to become one of two to three few surviving players after a global industry shake-out over the coming three to five years, the consumer division chief added. To get there, Huawei must continue to evolve into a true premium brand and adapt to a rapidly shifting market, rotating CEO Xu said. “To cure an illness, you have to treat the root cause,” Xu said. “Past success is not a reliable indicator of the future, and a long list of accomplishments might end up nothing more than an epitaph.” Bloomberg
SAC
Copyright
Mainland's brokerages told to manage reputation risk as scandals spread
Chinese firms ordered to pay Disney, Pixar US$194,000 compensation
The Securities Association of China (SAC) has told brokerages to strengthen their risk management regimes to include reputation risk, SAC said in a statement on its official website late Friday. The changes come at a sensitive time for the brokerage industry. Sealand Securities Co Ltd has been embroiled in a US$2.4 billion bond scandal that raised fears of a banking system liquidity crunch before regulators stepped in. Brokerages now must include subsidiaries in their risk-management framework, and should prevent reputational hazards from becoming liquidity risks, the SAC said in four revised rules published late on Friday.
Previously, brokerages’ riskmanagement systems did not need to cover their subsidiaries, and reputation risk was not included. The purpose of the rule update, which covers areas including liquidity risk and stress tests, was to “further promote brokerages’ riskmanagement awareness, help them improve their risk-management systems, and strengthen their ability to manage risks,” SAC said in a statement on its website. Listed brokerages were given a grace period of six months, while non-listed securities firms were required to implement the new rules by end-2017, the SAC statement said. Reuters
A Shanghai court ordered two Chinese firms to pay Walt Disney Co and Pixar more than RMB1.35 million (US$194,440) compensation for copying parts of their hit movies “Cars” and “Cars 2”, the official Xinhua news agency reported on Saturday. The ruling is the latest in a slew of intellectual property wins for large foreign firms, who have complained about widespread copyright infringement in China. Disney and Pixar took the Chinese firms to court saying the characters, titles and posters from local animation “The Autobots” were substantially similar to those from “Cars” and “Cars 2”. The court agreed that the Autobots characters K1 and K2 were similar to Disney and Pixar’s animated cars Lightning McQueen and Francesco Bernoulli, Xinhua said.
The court ordered infringement activity to stop immediately, and said Disney and Pixar should receive RMB1 million to cover economic losses, as well as RMB350,000 for legal expenses. Disney is making a major push into China with the recent opening of a US$5.5 billion theme park in Shanghai, its first on the Mainland. Its animated movies including “Zootopia” and “Big Hero 6” have been big box office hits there. Disney, Pixar and the two Chinese firms were not immediataly available for comment. Xinhua said the total order covered more then RMB1.35 million, but did not list any other payments. German carmaker BMW and basketball star Michael Jordan have both won intellectual property cases in China this year. Reuters
Business Daily Tuesday, January 3 2017 11
Asia Monetary
Largest bank sees India loans jump from 25-Year low on rate cuts The state-run lender cut lending rates based on the marginal costs of funds by 90 basis points across all tenures on Sunday Anto Antony
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tate Bank of India, the country’s largest lender, is predicting an acceleration in loan growth from a 25-year low after slashing borrowing costs to the lowest level in at least six years. The state-run lender cut lending rates based on the marginal costs of funds by 90 basis points across all tenures on Sunday. Other banks including Union Bank of India, Punjab National Bank and IDBI Bank Ltd. also cut their MCLR rates after a surge in deposits following a cash ban in the country brought down the cost of funds. Deposits have surged at a faster pace at Indian banks than loan growth after people started turning in 500 (US$7.35) and 1,000 rupee notes that are no longer legal tender following a November 8 decision by Prime Minister Narendra Modi to ban high-value currency notes, effectively canceling 86 per cent of cash in circulation. This jump in deposits has cut the cost of funds for lenders, State Bank of India Managing Director Dinesh Khara said. “The cut in lending rates will give an immediate boost to consumer loan growth and its ripple effect should have a positive impact on loan demand from companies,” Khara said in a telephone interview on Monday.
Loan growth at Indian lenders in the year to November 25 fell to 5.8 per cent, the slowest pace of growth since 1992, data compiled by Bloomberg shows. State Bank of India fell 2.6 per cent to 243.65 rupees at 12:55 p.m. in Mumbai, making it the second-biggest loser on the 10-member BSE Bankex Index that dropped 1.5 per cent. Punjab National bank lost 1.4 per cent and ICICI Bank Ltd. declined 1.8 per cent. Modi’s cash ban prompted economists to cut India’s growth forecast and a private gauge indicates that India’s manufacturing sector will
shrink for the first time in a year. The Nikkei India Manufacturing Purchasing Managers’ Index was at 49.6 in December, a report showed on Monday, the lowest since December 2015. A number below 50 indicates a contraction. It will take a lot more than interest rate cuts “to boost credit demand as demonetization took the wind out of the sails of many sections of the economy,” Payal Pandya, a Mumbai-based analyst at Centrum Wealth Management Ltd., said by phone. “Hopefully by early 2018 we could see loan growth coming back strongly as the economy comes back on track.” The reduction in borrowing costs means net interest margins at the banks will “come under pressure,” Morgan Stanley analysts lead by Sumeet Kariwala said in a note on
Economy
Retail
Lee: Singapore economy likely grew over 1 pct in 2016 Singapore’s economy probably grew more than 1 per cent in 2016 but the government is keeping a close watch on the labour market as it has shown signs of weakening, Prime Minister Lee Hsien Loong said last Saturday. Singapore’s trade-reliant economy has faced headwinds over the past two years from sluggish global growth, a slowdown in China and falls in global oil prices, which have all weighed on the city-state’s marine and offshore engineering industry. “We expect growth this year to be one plus per cent, still positive though less than we had hoped for,” Lee said in a pre-recorded New Year message to the nation. The government had previously forecast that the city-state’s economy would grow by 1 to 1.5 per cent in 2016, which puts the economy on track for its weakest performance since 2009, when gross domestic product (GDP) contracted 0.6 per cent. “While the labour market has eased, unemployment remains low and we are still creating new jobs. I know many employers and workers are concerned, but rest assured the government is watching this closely,” Lee said.
Monday. Large private sector banks are expected to follow state-owned lenders in cutting lending rates, according to the note. A five basis point fall in the net interest margin will reduce the industry’s net income in the year ending March 2018 by four per centage points, according to estimates by analysts led by Aashish Agarwal at CLSA India Pvt. Shares of non-bank mortgage finance companies including Housing Development Finance Corp. and LIC Housing Finance Ltd. fell most in more than a month on expectation of slower loan growth and narrowing net interest margins. HDFC fell 3.4 per cent while LIC Housing dropped 5.5 per cent. Mortgage finance companies are expected to see significant rise in requests from customers for transferring their loans to banks that are offering lower interest rates and hence their loan growth and lending margins will fall from “lower portfolio re-pricing,” the Morgan Stanley note showed. Bloomberg
The government’s Committee on the Future Economy will unveil its recommendations on longer term strategies for growth “in a few weeks’ time”, he added. Layoffs in Singapore in the first half of 2016 reached 9,510, the highest since 2009. The unemployment rate
was 2.1 per cent in the third quarter. The government is due to release its advance estimates for GDP in the fourth quarter and the whole of 2016 today. The GDP data is expected to show that the economy expanded in the October-December quarter, averting a slip into recession. However, economists say the outlook is clouded by uncertainty o v e r g l o ba l t ra d e u n d e r t h e incoming Trump administration in the United States. Reuters
Online shopping in S. Korea hits record high in November Online shopping in South Korea hit a record monthly high in November thanks to a rise in cyberspace trading through mobile phones, a government report showed on Monday. Shopping on the Internet reached a n e w m o n th l y h i g h o f 6 . 09 trillion won (US$5.04 billion) in November, up 23.0 per cent from a year earlier, according to Statistics Korea. It was the first time since related data began to be compiled in 2001 that the monthly figure surpassed 6 trillion won. The previous high was 5.65 trillion won tallied in October last year. The online shopping topped 3 trillion won in November 2012, surging to 4 trillion won two years later and over 5 trillion won in December 2015. The fast growth came as widespread use of smartphones encouraged consumers to buy products in cyberspace. Mobile shopping through smartphones jumped 40.5 per cent from a year earlier to 3.43 trillion won in November, accounting for 56.4 per cent of the combined Internet shopping. Xinhua
12 Business Daily Tuesday, January 3 2017
Asia Automobiles
Hyundai, Kia aim to grow 2017 sales to 8.25 mln vehicles globally This suggests a growth of 5 per cent year-on-year Hyunjoo Jin and Se Young Lee
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yundai Motor and affiliate Kia Motors on Monday forecast global sales to rebound in 2017 by a stronger-than-expected 5 per cent, after posting their first annual sales fall in nearly two decades last year. Sales could get a lift this year with emerging markets such as Russia stabilising, and with Hyundai and Kia Motors gearing up to boost supply to the United States and China, analysts said.
Key Points Hyundai Motor 2017 sales target 5.08 mln vs 2016 goal of 5.01 mln Kia Motors 2017 sales target 3.17 mln vs 2016 goal of 3.12 mln Hyundai Motor Group chairman warns of heightened uncertainties
But margins could come under pressure as the South Korean duo - which together rank fifth in global sales plan to add capacity in China and Mexico, just as many analysts expect those markets and the United States to slow. “With the global economy continuing its low growth, trade protectionism spreading and competition intensifying in the automobile industry,
uncertainty is growing more than ever,” Hyundai Motor Group Chairman Chung Mong-koo said in his New Year message to employees. The 78-year-old chief said the automakers will launch more than 10 new models every year, including a new SUV for advanced markets and a Genesis G70 sedan this year. The projected 5 per cent rise in global sales for 2017 to 8.25 million vehicles easily beats the 1.9 per cent rise forecast earlier by Hyundai Motor Group’s own think-tank. “The 2017 goal is slightly higher than my projection,” said Ko Tae-bong, an auto analyst at Hi Investment & Securities.
“ Ri va l s a r e ex p ect e d to launch a full-blown assault based on their cost competitiveness,” he said in a speech to employees. Hyundai Motor shares ended up 2.7 per cent on Monday and Kia Motors
stocks were up 0.6 per cent in a flat wider market . Hyundai Motor shares fell for a third straight year in 2016, down 2 per cent, while Kia Motors was the worstperforming stock among major car makers with a 25
per cent slump. Executives paid the price for Hyundai Motor’s rough year. The automaker’s top U.S. executive resigned and the South Korea sales chief and China head were replaced. Reuters
Rising competition
Hyundai Motor likely clocked its fourth straight annual profit decline in 2016. Sales were hit by its sedan-heavy line-up, which meant it missed a boom in SUV demand, and sluggish emerging markets. Hyundai Motor sold 4.86 million vehicles compared with its target of 5.01 million last year. Kia Motors sold 3.02 million vehicles, shy of its goal of 3.12 million. Hyundai Motor is now targeting 2017 global sales of 5.08 million vehicles, while its smaller affiliate set its goal at 3.17 million vehicles. Kia Motors Vice Chairman Lee Hyong-keun warned of tough competition in the year ahead.
Telecom
Samsung warns of slowing growth in key markets Jungah Lee
Samsung Electronics Co. sees growth slowing in key markets and uncertainties increasing around
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trade protectionism and currency fluctuations. In his annual New Year’s speech Monday, Samsung Vice Chairman and Co-Chief Executive Officer Kwon
Oh-hyun urged employees to learn from costly failures as the consumer electronics giant seeks to recover from 2016’s bruising debacle surrounding the Note 7 smartphone.
“We should not compromise with even the tiniest problems in product quality,” Kwon said at the company’s headquarters in Suwon, South Korea. “Let’s recover our pride by improving manufacturing processes and safety inspections.” The Note 7’s tendency to catch fire prompted a global recall and the marquee product was eventually scrapped. The fiasco cost the world’s largest smartphone maker more than US$6 billion and pushed profits at its mobile business to a record low in the third quarter. The company was also embroiled in allegations being investigated by South Korean prosecutors that the merger of its two affiliates in 2015 may have received favorable government treatment. While Samsung has been battling these kinds of challenges, its rivals have been focusing on and investing in key future technologies such as artificial intelligence and big data, Kwon said. He asked employees to help the company widen its technology leadership through continued innovation and business enhancements.
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; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla 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 Tuesday, January 3 2017 13
Asia Tourism
Cambodia’s Angkor annual ticket sales up 4 pct
province, the Angkor archaeological park, inscribed on UNESCO’s World Heritage List in 1992, is the kingdom’s top tourist destination. In August, the Angkor Enterprise Ticket sales to foreigners visiting Cambodia’s famed announced that ticket prices for foreigners visiting Angkor archaeological park reached US$62.5 million in the site would be increased from February 1, 2017. The 2016, a 4.21-per cent rise year-on-year. The ancient site entrance fee for a one-day visit to the site will be raised welcomed almost 2.2 million foreign tourists last year, up 4.63 per cent year-on-year, the state-owned Angkor to US$37, from the current US$20 U.S. dollars. The price for a three-day visit will be increased to US$62, from the Enterprise said on Monday. The largest sources of tourists to the site are China, South Korea and the United current US$40, and for a week-long visit, the ticket will cost US$72, from the current US$60. Xinhua States. Located in northwest Cambodia’s Siem Reap
Business
How ties to an “equestrian princess” landed Samsung at centre of a scandal Samsung agreed last year to pay US$18 million to Core Sports International GmbH controlled by Choi Soon-sil, from which her daughter Chung Yoo-ra has been the main beneficiary Ju-min Park and Miyoung Kim
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amsung E l e c t r o n i c s Co’s sponsorship of the equestrian-athlete daughter of a long-time friend of President Park Geun-hye has helped to land South Korea’s top company in the center of the country’s influence-peddling scandal. Samsung agreed last year to pay US$18 million to Core Sports International GmbH, a consulting firm controlled by Park’s friend Choi Soon-sil, who is in jail and faces charges of abuse of power and fraud in a criminal trial that began this month. A South Korean court has also issued an arrest warrant for Choi’s Germany-based horse-riding daughter, 20-year-old Chung Yoo-ra - who has been the main beneficiary of the sponsorship - for alleged criminal interference related to her academic record, and other unspecified charges. The sponsorship deal is being examined by prosecutors as they try to ascertain whether Samsung, which was also funding and chairing the Korea Equestrian Federation (KEF), sought favours from Choi and President Park in return for funding initiatives backed by them. In particular, they are looking at whether favours included the National Pension Service’ support for Samsung’s founding family in a shareholder vote last year. “A crucial part of our investigation is to look into why Samsung and the KEF supported Choi Soon-sil and her daughter Chung Yoo-ra and transferred funds to companies set up by Choi or involved with Choi,” an official at the special prosecutor’s team told Reuters by phone. He declined to be identified because he is not authorized to speak with the media. Park has been impeached by parliament over her role in a wideranging influence-peddling scandal
Daughter arrested in Denmark
The daughter of impeached South Korean President Park Geunhye’s longtime confidante Choi Soon-sil has been apprehended in Denmark, an independent counsel team said yesterday The team, led by special prosecutor Park Young-soo, said that Chung Yoo-ra was arrested in Denmark and that it has been cooperating with relevant authorities to have the 20-year-old repatriated as rapidly as possible. The 20-year-old was arrested at Sunday night (Denmark time) for illegally staying in the European country, local media reports said. The independent counsel team had requested the so-called “red notice” with Interpol as Chung gave no response to the
linked to Choi, and now awaits a Constitutional Court review of that decision, which if upheld would make her the first democraticallyelected South Korean leader to leave office in disgrace.
A horse named Vitana V
Reuters has reviewed a copy of Samsung Electronics’ August 2015 contract with Core Sports to sponsor the team at a German facility in Biblis, a small town south of Frankfurt. Neither party announced the sponsorship. “Samsung wishes to develop an Equestrian Team, including overseas training of athletes to prepare for 2018 Asian Games and World Equestrian Games,” the consulting agreement says. Samsung Electronics ended up spending about 8 billion won (US$6.6 million) on the team, which went to support Chung, according to testimony by Samsung Group’s de facto head, Jay Y. Lee, during parliamentary testimony earlier this month. A more precise accounting, including whether some of that funding supported her coach and fellow rider, Park Jae-hong, was not available. The team was meant to include six riders with 12 horses, Samsung’s contract says, but never grew beyond Chung and her coach, according to lawmakers on a parliamentary c o m m i tt e e i n v est i gat i n g th e presidential scandal. Reuters was unable to determine why the team did not expand beyond the two riders. Samsung’s outlay included the 1 million euros (US$962,000) purchase of a horse to be used by Chung named Vitana V, according to Lee. He told the hearing there was a reason the group felt compelled to fund the equestrian team, but did not say what that was. “I was told there were inevitable
team’s repeated summons for questioning. Chung is alleged to have received illegal favours when entering a prestigious university. Even after being admitted to Ewha Womans University, she allegedly continued to have benefitted from her mother’s influence-peddling to professors. When Chung was apprehended there, she was with her baby born in 2015 as well as two men in his late 20s and early 30s. Chung’s arrest is being put on the South Korean media spotlight as Choi, who has denied all allegations on the scandal that led to the presidential impeachment, may tell the truth and admit to part of her wrongdoings when seeing her daughter arrested and grilled. Xinhua
circumstances ... But I admit that the deal was done in an inappropriate way and regret that I didn’t look into it more thoroughly,” Lee testified. He didn’t elaborate further. Chung was not available for comment and her lawyer, who also represents her mother, did not return multiple requests for comment. Choi, who has denied legal wrongdoing, told lawmakers on December 26 that she had not sought the sponsorship from Samsung. Reuters could not reach Park Jae-hong for comment. Samsung Electronics declined to comment for this story. Sung-Kwan Park, a Frankfurtbased lawyer who was Core’s managing director, declined to discuss details of the deal when approached by Reuters, citing attorney-client privilege.
Sport for the elite
Samsung Electronics’ support for Choi-backed initiatives also included 1.6 billion won to a foundation run by Choi’s niece Jang Si-ho, and another 20.4 billion won, funding shared with the company’s affiliates, to two foundations set up by a major business lobby to support Park policies. Prosecutors say in their indictment of Choi that they suspect that she controlled the foundations, including choosing staff. Jang has said the foundation she ran was established to support young athletes and that Choi had asked her to set it up. Her lawyer told a court hearing on Thursday that Jang put pressure on Samsung to sponsor the foundation, but said it was not clear that was the reason for Samsung’s backing. Lee told lawmakers Samsung’s contributions to the two foundations backing Park’s initiatives were not made with any quid pro quo expected. Samsung’s offices have been raided twice by prosecutors but none of its officials have been charged with any wrongdoing. The Samsung Group, which has been a major sponsor of the Olympic Games, has also funded a range of sports in South Korea in the past 20 years, including soccer, baseball, basketball, and volleyball. While those sports have mass appeal, equestrian, as in many countries, is seen as a sport for the wealthy elite - there were just 251 registered equestrian riders in the country in 2014, according to the KEF. The conglomerate and its founding family have a long-term relationship with the sport. The 48-year-old Lee,
grandson of the group’s founder, is an accomplished horseman and represented South Korea at international events, winning medals in various competitions in the late 1980s and early 1990s.
Fake documents
In 2010, Samsung pulled out of sponsoring the KEF only to return to the sport in March 2015 when Samsung Electronics President Park Sang-jin took over the chairmanship of the KEF. That was at a time when the KEF was being accused by lawmakers and local equestrian federations of granting Chung undue favors, including selection to the national team, because of her mother’s perceived influence with Park. In 2014, Chung was labeled the “Equestrian Princess” by South Korean media, though she partially answered her critics by winning a group dressage gold medal at the 2014 Asian Games. The KEF declined to comment, citing the ongoing investigation by prosecutors. Park Jong-so, a veteran rider and former national team head coach, said many in the country’s equestrian community were puzzled when Samsung resumed its leadership of the federation. Samsung gave 2.6 billion won to the KEF between resuming the sponsorship and August this year, according to a document it filed to parliament and shown to Reuters by a lawmaker. The country’s culture ministry, which oversees sports, said in a December audit report that the KEF signed fake documents provided by Chung to excuse her absences from high school and gain credit for volunteer activities she never did. The saga has left equestrian sports in South Korea in a state of flux. Some local media have reported that Samsung has canceled the contract with Core, which has been renamed Widec Sports GmbH. Samsung declined to comment. Hwang Young-shik, who won two 2014 Asian Games gold medals, including one with Chung in the group dressage, and now trains young riders at his own farm, said the whole saga has been embarrassing for the sport in South Korea. “Young riders are frustrated over this,” he told Reuters, adding that everyone in the equestrian world now “knows who Chung Yoo-ra is.” Reuters
14 Business Daily Tuesday, January 3 2017
International In Brief Terrorism
IS claims responsibility for Istanbul nightclub attack The Islamic State (IS) on Monday claimed responsibility for an attack early Sunday that killed 39 and injured 69 others in an Istanbul nightclub, Turkish media reported. Hurriyet daily news said the IS made the claim in a statement posted on social media. A gunman stormed Reina nightclub early Sunday and shot at hundreds of people gathering there for New Year celebrations, leaving at least 39 dead and over 60 others injured. Many of the victims were foreign nationals. Police have launched a manhunt for the gunman, who remains on the run after fleeing the nightclub in chaos. Economy
Portuguese president hopes for more economic growth Portuguese President Marcelo Rebelo de Sousa said he hoped for more economic growth in 2017, in his speech to mark New Year’s Day on Sunday at the presidential palace in Lisbon. He said the country has taken “small steps” but much was still left to do. “2016 was a year of immediate management, of political stabilisation and concern with financial rigour,” he said. “2017 has to be a year of long-term management and of defining and executing a sustained economic growth strategy.” He added that the country had learnt that by working together success was possible and said that it was undeniable that there was now social and political stability. He pointed to the country’s agreement to raise the national minimum wage, the European Union accepting the country’s state budget, the implementation of international commitments, the reinforcement of the banking system and compensation to people hit by the crisis. “We have taken small steps, as small as they might be, to correct injustices and to create a less tense, less divided and less negative climate here (in the country) and a more confident image internationally,” he said. Portugal has one of the European Union’s highest government debt levels, which currently stands at around 130 per cent of GDP. Economy
Angola opposition leader expects crisis to deepen The President of Angola’s largest opposition party UNITA, Isaías Samakuva, said on Friday that the crisis in Angola could worsen in 2017, given the social and living conditions of most of the Angolan population. “My outlook is not very good, which means that the political and social crisis may deepen, but we must remain optimistic and seek to encourage those who have power to influence the country in seeking out concrete and viable solutions,” he told Lusa. The leader of the National Union for the Total Independence of Angola (UNITA), Isaías Samakuva, said his outlook was not good because he believes that the current “rhetorical solutions” do not solve existing problems. “The country cannot continue in the situation it is in and unfortunately my outlook for the near future is not good, instead of seeing concrete solutions and measures to solve the problems we have now, I find there is a certain rhetorical indifference, giving the impression that there are measures to resolve existing problems, but in practice I see no functional measures,” he said.
Strategy
Deutsche Bank chairman rules out European merger This followed the lender’s US$7.2 billion mortgage settlement with the U.S. Department of Justice
D
eutsche Bank Chairman Paul Achleitner has ruled out a European merger or a state bailout after the lender’s mortgage settlement with the U.S. Department of Justice, Frankfurter Allgemeine Sonntagszeitung reported. The bank, Germany’s biggest, last week announced a US$7.2 billion settlement with the U.S. Department of Justice over its sale and pooling of mortgage securities in the run-up to the 2008 financial crisis. “The management board in principle looks at everything that could help the business,” Achleitner said in an interview with the weekly newspaper published on Sunday. “At the moment, however, enthusiasm for a pan-European merger is
muted as we have other priorities,” he said, when asked why Deutsche does not merge with Italy’s UniCredit or another lender. Deutsche, which is trying to simplify its operations to make it more efficient, will keep its investment banking operations and ensure they comply with political and regulatory rules, Achleitner said. Supervisors including Germany’s Bundesbank and the European Central Bank have called for more consolidation in the banking sector, saying there are still too many banks despite a steady fall in the number of branches since the 2008 financial crisis. Higher capital requirements would put European banks at a competitive disadvantage to their U.S. rivals,
Achleitner said, referring to efforts by the Basel committee of supervisors to tighten bank capital rules to avoid a repeat financial crisis. “The global rules, established with the Basel accord, must not one-sidedly reflect the views of the Americans,” Achleitner said.
Key Points European merger not a priority for Deutsche - Achleitner Says new bank capital rules threaten European lenders Confirms will seek new five-year term as chairman in May The former finance chief of Allianz said European banks needed to defend their interests more vigorously against rivals in the United States where lenders are helped by state-sponsored bodies such as Fannie Mae, allowing them to shed part of the risk of mortgages. “It’s obvious that national interests are increasingly being defined and represented in a more robust fashion,” Achleitner said. “It’s about time that we Europeans stand up for our interests too.” Separately, Achleitner said government aid for players in the financial industry would not become an issue in Germany. “No one in Germany needs to worry about rescuing banks,” said Achleitner, who confirmed he will stand for re-election as chairman at the bank’s annual general meeting in May. By contrast, the Italian government has earmarked 20 billion euros (US$21 billion) to bolster its ailing lenders. The Bank of Italy said on Thursday that total costs for the state bailout of Banca Monte dei Paschi di Siena would come to about 6.6 billion euros. Reuters
ExPats
World’s highest-paid expats toil in land of fondue and watches Andy Hoffman and Zoe Schneeweiss
It pays to be an expatriate in Switzerland. Expats living in the home of UBS Group AG, drug maker Novartis AG and commodity trader Glencore Plc earn an average salary of US$188,275 a year. That’s the highest in the world and almost twice the global average, according to data published Monday by HSBC Holdings Plc. Switzerland also tops the bank’s expat career ranking for a second year. “Expats ranked Switzerland highly for both financial and personal wellbeing criteria,” said Dean Blackburn, head of HSBC Expat. “The combination of high salaries and excellent work culture has placed Switzerland at the top of the careers league table.” It isn’t just big paychecks that make Switzerland, which also hosts the European headquarters of the United Nations in Geneva, the best all-round destination for a career abroad. Of those surveyed by HSBC, 69 per cent said their work-life balance had improved in Switzerland and 61 per cent said the work culture was better than their home country. Germany and Sweden ranked second and third overall, despite salaries that were at or below the global average, according to HSBC. European countries took six of the top 10 spots.
“Expats in Sweden and Germany enjoy benefits outside the financial side of work,” said Blackburn. “Germany offers the best job security for expats. Sweden, as well as topping the tables for work culture, is praised by 79 per cent of expats for its excellent work-life balance.” Money, of course, can’t buy happiness. Previous data released by HSBC showed that while Switzerland ranks first in financial well-being for those working abroad, it ranks close to last in cultivating relationships and social life. The cost of living in Switzerland is also notoriously high, with Swiss newspaper Neue Zuercher
Zeitung last month reporting that the price of food is 70 per cent higher than the European average, while healthcare expenses are more than double. The best employment packages - i n c l u d i n g h ea l th b e n e f i ts, accommodation allowances and trips home - are found in Middle East countries such as Bahrain and the United Arab Emirates, according to HSBC, which surveyed 26,871 expats in more than 100 countries. Hong Kong and Singapore topped the ranking for career development with 68 per cent and 62 per cent respectively of respondents agreeing that these were good places to improve their careers. Lifestyle, however, suffered for some upon moving to Asia as 30 per cent of expats in Singapore and 50 per cent in Hong Kong reported a decline in work-life balance. Bloomberg
Business Daily Tuesday, January 3 2017 15
Opinion Business Wires
The Phnom Penh Post Cambodia’s aviation sector is gearing up for another big year, with tourist traffic growing and at least half a dozen carriers looking to register for a limited number operating permits. Keo Sivorn, director-general of the State Secretariat of Civil Aviation (SSCA), said the agency is reviewing the documentation of two airlines that have applied for air operator’s certificates (AOCs), while another two airlines have received preliminary government approval and are expected to file for operating permits soon. In addition, at least two more airlines are reportedly considering establishing local operations. “We are now reviewing the AOC applications of Lan Mei Airlines and JC Airlines,” he said yesterday. “To receive an AOC, the airlines must prove they have sufficient capacity for flight operations and human resources, as well as correct documentation.”
Bangkok Post Although the OPEC has recently agreed to cut oil production substantially, Thai energy policymakers believe global oil prices will remain in the relatively low range of US$42 to US$55 per barrel in 2017, but investment in the sector will remain high. Twarath Sutabutr, director-general of the Energy Policy and Planning Office, said the cut in oil production from OPEC and non-OPEC countries may push retail oil prices up by one to two baht per litre if there is no additional tax and levy collection. He said the global liquefied petroleum gas price could stay at an average price of US$400 per tonne, slightly up from 2016. Demand for all fuel products will continue to rise despite rising global oil prices, he predicted.
Will Dollar strength trigger intervention in 2017?
O
nly a small group of central banks refrain from intervening in the foreign-exchange market to stabilize their currencies’ exchange rate or coax it in the desired direction. Even when they do not intervene directly, their interest-rate policies are often formulated to be compatible with exchange-rate objectives. As a result, freely floating currencies are comparatively rare. This has important implications for the United States authorities as they confront a sharp rise in the dollar’s exchange rate. When a potential or actual loss of confidence in the currency threatens to bring about large capital outflows, intervention usually takes the form of sales of foreign-exchange reserves to mitigate the magnitude or speed of depreciation. The People’s Bank of China’s ongoing reserve losses are a salient recent example. The most recent U.S. intervention in foreign-exchange markets (which has been rare in general) to support a weak dollar dates back to 1992-1995. At the other end of the spectrum, concerns about lower international competitiveness as a result of significant currency appreciation may be even more common among policymakers and exportoriented firms. Worries about overvalued currencies permeated policy discussions in many emerging markets as recently as 2013, and sustained efforts to lean against the wind of appreciation resulted in record reserve accumulation for many central banks. Fears of a strong currency are by no means limited to emerging economies. As the recent crisis in the eurozone periphery deepened and the euro’s value plunged relative to the Swiss franc, Switzerland’s central bank, citing the strong franc’s threat to the economy, introduced a de facto exchange-rate peg in September 2011. The policy capped the Swiss franc’s appreciation against the euro, because the central bank stood ready to buy foreign exchange in whatever quantities were necessary. After a spectacular increase in reserves, the cap was eventually lifted in December 2014 and replaced with a policy of negative interest rates. The U.S. has not been exempt from such concerns. In the first half of the 1980s, following the Federal Reserve’s record interest-rate hikes, the dollar appreciated by almost 45 per cent against other major currencies. As a result of the strong dollar, the U.S. lost international competitiveness and the trade balance sank to record lows in 1985. These developments set the stage for the Plaza Accord, which my colleague Jeffrey Frankel has described as probably the most dramatic policy initiative in the foreign-exchange market since President Richard M Nixon floated the dollar in 1973. At New York City’s Plaza Hotel on September 22, 1985, U.S. officials and their counterparts from the world’s leading economies agreed to take concerted action to halt and reverse the dollar’s appreciation. It was an accord precisely because it involved international policy coordination among the major players, whose public statements were coupled with organized market intervention (selling U.S. dollars).
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Korea Herald Nearly 3,000 employees at local banks left the industry mainly due to layoffs in 2016 amid the challenging environment for profitability, industry data showed Monday. The banking industry’s move to cut jobs is expected to continue this year, as it faces new competition against financial technology companies and internet-only banks, observers say. According to data from the Financial Supervisory Service, the number of employees at banks declined by 1,507 to 115,516 at the end of September compared to the end of 2015. Out of the 1,507, about one-third or 551 came from Kookmin Bank, which has about 20,000 employees in total. Other lenders KEB Hana Bank, Woori Bank, NH Bank and Shinhan Bank also cut 271, 243, 169 and 87 jobs, respectively, during the nine months. However, state-run policy lender Korea Development Bank hardly cut any jobs, only reducing its total workforce of 3,508 staff by 12 jobs.
Carmen Reinhart a Professor of the International Financial System at Harvard University’s Kennedy School of Government
The dollar did indeed depreciate, though the extent to which this can be attributed to the Plaza Accord remains a source of some debate. What is certain is the relevance of that debate today. The dollar has appreciated by more than 35 per cent against a basket of currencies since its low point in July 2011. While the dollar’s climb has been attributed partly to Donald Trump’s unexpected victory in the U.S. presidential election, it also reflects the fact that U.S. monetary policy is set to tighten against a backdrop of continued monetary stimulus in the eurozone and Japan. President-elect Trump campaigned on a promise to bring back U.S. manufacturing, even if doing so requires imposing tariffs and dismantling existing trade arrangements. Yet a strong dollar is a major obstacle to fulfilling his promise. Perhaps financial markets will begin to perceive the dollar as currently overvalued and retrench. If not, will it be time for another Plaza-style accord? More important, who would be willing to cooperate? Apart from the significant cumulative appreciation of the U.S. dollar, there are scant similarities between the current environment and 1985. Back then, Japanese real GDP growth topped 6 per cent. Today, sustained appreciation of the yen would probably derail the modest progress forged by the Bank of Japan in raising inflation and inflation expectations. With the ratio of public debt to GDP at around 250 per cent, higher inflation is likely to be part of the solution to Japan’s debt overhang. On the other hand, Germany, with its record-high currentaccount surpluses (exceeding 8 per cent of GDP) could withstand an appreciation. But, unlike 1985, in a scenario where the euro survives its current challenges, it will not be the Bundesbank that sits at the table in 2017. From the vantage point of the European Central Bank, which is coping with another round of distress in the periphery (primarily in Italy, where the frailty of the banking system is fueling capital outflows), the euro’s weakness is a godsend. That leaves China, now the world’s second-largest economy, which was not an integral part of the 1985 agreement, to bear the burden of dollar depreciation. But China’s recent tightening of capital controls underscores the challenge it already faces in preventing the renminbi from depreciating further. Moreover, given the negative impact of the strong post-Plaza yen on Japan’s subsequent economic performance, it is unclear why China would consider a stronger renminbi to be worth the risk. In other words, while it is quite plausible to expect that Trump’s Treasury will want to reverse the dollar’s climb, it is equally plausible that no other major economy will help. If the strong dollar prompts intervention in currency markets in 2017, the most likely scenario is one in which the U.S. intervenes alone.
While it is quite plausible to expect that Trump’s Treasury will want to reverse the dollar’s climb, it is equally plausible that no other major economy will help. If the strong dollar prompts intervention in currency markets in 2017, the most likely scenario is one in which the US intervenes alone.
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16 Business Daily Tuesday, January 3 2017
Closing PMI
Manufacturing boosts eurozone equities gains
European equities got off on the right foot in 2017, pushed higher on Monday by a stellar set of data showing eurozone manufacturing growth at a 68-month high. With major Asian, London and U.S. markets still closed for the New Year holiday, trading was expected to be light. But sentiment was brightened by final results of December manufacturing surveys that showed robust performances across most of the eurozone, where the uncertainty over the impact of Britain’s exit from the EU has threatened a tepid recovery. The final eurozone manufacturing PMI figure for
December came at 54.9 points, up from 53.7 in November. With a result above 50 indicating expansion, the result was the best since April 2011. The surveys of companies about their performance and outlook are an important early indicator of how economies are faring before official data is collected and processed. Germany’s DAX 30 index rose 0.8 per cent in yesterday's midmorning trading, while the CAC 40 in Paris added 0.2 per cent. Manufacturing in the Netherlands and Austria were also at 68-month highs, with France close behind at a 67-month high, according to IHS Markit. AFP
Aviation
South Korea considers “measures” as China blocks charter flights The country’s Finance minister said it would look into whether the rejection was related to the planned deployment of a U.S. anti-missile system in its territory Hyunjoo Jin
S
outh Korea’s government and airline companies will meet on Tuesday to discuss China’s rejection of applications by Korean carriers to add charter flights between the two countries for early this year, a government official said on Monday. South Korean Finance Minister Yoo Il-ho said on Sunday he would look into whether China’s decision, which came ahead of a traditional surge in Lunar New Year travel, was “related to” the planned deployment of a U.S. anti-missile system in South Korea. Yoo told reporters there were “several suspected cases of nontariff barriers” following last year’s decision to deploy the U.S. Terminal High Altitude Area Defence (THAAD) system and South Korea needed to determine China’s “real intention”. China’s foreign ministry did not immediately respond to a request for comment on a holiday, while China’s Civil Aviation Administration was not immediately reachable. China worries that the THAAD’s powerful radar can penetrate its territory and has objected to the deployment, which South Korea and the United States say is aimed solely at countering any threat from North Korea.
South Korean carriers Asiana Airlines, Jeju Air and Jin Air, an affiliate of Korean Air Lines, said their applications for charter flights to China were rejected for January and February, with no reason given. “It is regrettable,” a spokesman at Jeju Air said. The companies already operate scheduled flights to China but wanted to add charter flights at busy times. The transport ministry had sent a letter to China’s ministry seeking cooperation on the proposed flights and it would also meet the companies
Telecom
to ponder a next step, a ministry official said. “We will hold a closed-meeting with major airline affiliates tomorrow morning to discuss measures,” the ministry official said, without elaborating on what type of measures might be considered. China Eastern Airlines and China Southern Airlines had asked South Korea to hold off on approving their applications to add charter flights in January, citing “a situation in China”, said the official who is not authorised to speak to media and declined to be identified. A China Eastern press official denied that it had asked South Korea to hold off approving applications to add charter flights. A China Southern media official was not immediately available.
Emissions Probe
The Korea Tourism Organization said charter flights typically accounted for 4 to 5 per cent of available seats between the two countries. “Travellers can switch over to regular scheduled flights, so we do not expect huge losses,” said Han Hwa-joon, China team director. Shares in South Korean cosmeticsrelated companies and airlines dropped on news reports of the charter denials. Korean cosmetics are a hot-selling item for visitors from China, South Korea’s biggest source of tourists. Shares in cosmetics maker Amorepacific Corp were down 5 per cent on Monday, their biggest daily percentage loss since October 25 and Korean Air Lines Co Ltd shares fell 2.2 per cent to their lowest level since July 14. Reuters
Corruption
Apple partner seeks to expand Korea bans sales of some India smartphone parts plant Nissan, BMW models
Isarel PM reportedly to be questioned in graft probe
Smartphone component maker Wistron Corp, which counts Apple Inc among its customers, has applied for permission to expand its plant in the Indian city of Bengaluru, a high-ranking regional government official said on Monday. The Taiwanese contract manufacturer has also requested that its application be fast-tracked, the official at the state government of Karnataka in southern India told Reuters. The move comes less than two weeks after the Wall Street Journal reported that Apple was in talks with India’s federal government about the possibility of assembling products in one of the world’s biggest smartphone markets, where the U.S. tech firm controls less than 2 per cent. Apple setting up production in India would be a significant win for the government which has embarked on a major campaign to attract global manufacturers under the slogan “Make in India”. “Wistron has approached us to expedite certain clearances with regards to the augmentation and expansion of its existing unit,” said the official, who was not authorised to speak publicly on the matter and so declined to be identified. Whether Apple will begin manufacturing in India is unknown, but Wistron’s desire to expand “pretty quickly” could represent “several steps in that direction,” the official said. Reuters
Israeli police were expected to question Prime Minister Benjamin Netanyahu Monday over whether he illegally accepted gifts from wealthy supporters, media reports said, in a probe shaking the country’s political scene. The long-running inquiry has looked into whether Israeli and foreign businessmen have offered gifts worth tens of thousands of dollars as well as another unspecified issue, according to the reports. Attorney general Avichai Mandelblit has reportedly decided to upgrade the inquiry to a criminal probe, though he has yet to confirm this. Police and Netanyahu’s office declined to comment on Monday. Public radio said Netanyahu has agreed to be questioned at his residence. Screens were mounted at the entrance to the compound in central Jerusalem in an apparent bid to shield the investigators’ arrival. In a Facebook post at the weekend, Netanyahu rejected all allegations against him and said his political opponents and some news outlets wanted to bring down his government. Police have carried out the inquiry in secret over the course of some eight months and recently arrived at an important breakthrough, reports said. Some 50 witnesses are said to have been questioned. Reuters
South Korea banned the sale of 10 models built by Nissan Motor Co., BMW AG and Volkswagen AG’s Porsche after an investigation found the automakers fabricated documents related to emission tests. The three manufacturers were slapped with total fines of 7.17 billion won (US$5.9 million), which apply to 4,523 vehicles, and the certifications given for these models have been withdrawn, the Ministry of Environment said in a statement Monday. Six of the models are on sale, while four were discontinued, it said. Carmakers and component suppliers worldwide are facing increased scrutiny following a spate of product performance scandals at companies including Volkswagen, Takata Corp. and Mitsubishi Motors Corp. Last month, South Korea imposed a record fine on VW’s local unit for falsely advertising emissions ratings on cars sold in the country and in August blocked sales of 80 of the automaker’s models because it fabricated documents related to emissions and noise-level tests. Imported cars accounted for about 15 per cent of the market in South Korea in the 11 months through November, and the most popular choices include diesel models made by BMW and Daimler AG’s Mercedes-Benz, according to data from the Korea Automobile Importers and Distributors Association. Reuters