Business Daily #1388 September 21, 2017

Imperial Pacific signs aviation MoU aiming at VIP Saipan Page 6

Thursday, September 21 2017 Year VI Nr. 1388 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Cape Verde

www.macaubusiness.com

Tourism

David Chow resort delayed by infrastructure issues Page 5

Genting ready for its first cruise via HK and Nansha Page 7

Property

Commerce

Page 2

Page 8

New public consultation on plots

Taiwan trade relaxes

Hato long arm Typhoon

This Saturday it will be a month after the most terrible typhoon of the century left its trail of destruction in the city. Now we start to see economical impact in many sectors. Hotel occupancy, for instance, was deeply affected, as the latest official figures show. Page 3

Locals can get no (satisfaction)

A poll collecting opinions from public servants and residents show an evident dissatisfaction with some of the procedures of the government. The survey results especially shows criticism on ‘responding level’, ‘prevention of corruption’ and ‘level of transparency’.

From the experience

Seminar An event pushed by the Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries gathered businessmen with extended experience in business in Lusophone countries. The session gave interesting feedback for entrepreneurs aiming to do business in those countries. Page 4

Wynn and Adelson mind the biz Survey Page 2

HK Hang Seng Index September 20, 2017

28,127.80 +76.39 (+0.27%) Worst Performers

Geely Automobile Holdings

+5.73%

AAC Technologies Holdings

+1.49%

WH Group Ltd

-1.99%

Swire Pacific Ltd

-0.94%

China Unicom Hong Kong

+3.81%

Hong Kong Exchanges &

+1.20%

China Overseas Land &

-1.58%

CK Infrastructure Holdings

-0.80%

China Shenhua Energy Co

+2.57%

Hang Lung Properties Ltd

+0.86%

China Resources Power

-1.24%

China Resources Land Ltd

-0.74%

BOC Hong Kong Holdings

+1.97%

Galaxy Entertainment Group

+0.86%

Link REIT

-1.01%

China Petroleum & Chemical

-0.67%

Wharf Holdings Ltd/The

+1.55%

Industrial & Commercial

+0.69%

Sun Hung Kai Properties Ltd

Kunlun Energy Co Ltd

-0.67%

-0.97%

27° 31° 28° 31° 27° 31° 28° 31° 27° 31° Today

Source: Bloomberg

Best Performers

FRI

SAT

I SSN 2226-8294

SUN

MON

Source: AccuWeather

Businessmen ranking Tycoons Steve Wynn and Sheldon Adelson included in Forbes magazine list highlighting the greatest living minds for business. Las Vegas entertainment pioneer vision - hence as businessmen recognized. Page 6

2 Business Daily Thursday, September 21 2017

Macau Administration

DSPA head wears two hats

Director of Environmental Protection Bureau (DSPA), Tam Vai Man, takes also the position as the temporary head of Meteorological and Geophysical Bureau (SMG) for a year period.

According to a dispatch posted on the official gazette, Tam started his SMG position yesterday for a period of one year.

His new position will include an extra 225 salary points remuneration every month.

In the aftermath of Typhoon Hato, the Chief Executive announced the acceptance of resignation of the former SMG head, Fong Soi Kun.

Fong is currently undergoing investigation by the Commission Against Corruption (CCAC).

Meanwhile, newly-elected legislator Agnes Lam suggested promote a staff from SMG who is familiar with meteorological knowledge rather than appointing one that is not exposed enough to such related matters.

“Some departments constantly make expert decisions so I think the one who heads the department should at least have a certain level of specialties recognition,” remarked Lam. In addition, Lam suggested that a group of experts could evaluate weather condition and to decide the hoisting of any warnings. C.U.

Politics

Residents not satisfied over gov’t Survey revealed that residents and civil servants are mostly not satisfied over government’s responding level, prevention of corruption and level of transparency Cecilia U cecilia.u@macaubusinessdaily.com

L

ocal residents and civil servants are not pleased with the government’s ‘responding level’, ‘prevention of corruption’ and ‘level of transparency’, according to a survey conducted by the Macau Civil Servants Federation (FATFM).

The survey shows that both parties perceived that MSAR government’s response over topics relating to ‘environmental protection’, ‘price stability’ and ‘understanding the real-time needs and opinions of the grassroots’ is low. But survey respondents are aware of the government’s high response over ‘safety of residents’ lives and properties’, ‘caring of the disadvantaged’ and ‘education policy’.

In addition, civil servants in

particular opined that government’s response upon ‘public infrastructure’ is inadequate while residents denounced the low response over ‘economical diversity’.

Meanwhile, in relation to the government’s administration transparency level, both civil servants and residents gave out low ratings upon issues relating to ‘government publicising its policy assessment’, ‘implementation of the funding system for the Legislative Election’ and ‘publicising the government’s internal expenses’.

Nevertheless, both parties are satisfied over government’s publicising its policies.

Poor combat on corruption

In regard to government’s effort in prevention of corruption, respondents who are civil servants opined

that the internal corruption of the government is serious and the government is not making any positive outcome over combating such conditions.

Civil servants who responded to the survey remarkably perceive that corruption is not common among civil servants and generally have determination over anti-corruption.

But they also agreed that most of the residents would not approach related civil servants to resolve their issues. They also agree that anticorruption departments in the govt are homogeneous, with not enough diversification.

For residents, similarly, they gave out low ratings over ‘MSAR government official is rather uncorrupted’ and ‘MSAR government has good outcome over combating corruption’.

Moreover, residents believe that most

civil servants are uncorrupted.

Law rules, administration and public participation

According to the survey results, civil servants are not satisfied with the evaluation system of civil servants as well as the government’s efficiency in handling judicial cases. Nonetheless, the public servants are satisfied upon government’s financial support of industrial development and law and order practised by the police.

In terms of the stance of residents, they are discontent over the government’s protection of properties, the judiciary department’s fairness and justice as well as law and order by the police.

In terms of policy implementation, both civil servants and residents are not pleased with issues relating to ‘environmental protection’, ‘price stability’, ‘public infrastructure’ and ‘performance on the direction of governance consistency’.

‘Safety of residents’ lives and properties’, ‘caring of the disadvantaged’, ‘tax system’ and ‘employment’ are the good areas that both parties acknowledged.

As to public participation, civil servants consider that residents have limited participation in laying out public policies and local freedom of press is not protected by the law.

Residents, on the other hand, pronounced that the political system in Macau is not open and have similar opinions upon freedom of press with civil servants.

Meanwhile, both parties believed that operation of groups relating to public interests would pose positive impact upon government’s administration, and freedom of speech is highly protected by the city’s law.

FATFM’s survey received 871 valid responses from civil servants and 808 from residents.

Urban planning

New round of land plots seeking public opinion Cecilia U cecilia.u@macaubusinessdaily.com

A new round of 10 land plots are seeking public consultation over land usage, as announced by the Land, Public Works and Transport Bureau (DSSOPT) on its official Urban Planning Information website.

The new round of consultation will last from September 20 to October 4, which addresses the functions of one state-owned land, three long-term land concessions and six private lands.

The three long-term land concessions are among the largest plots in the city and

are suggested to be used for non-industrial purpose. The are located near Avenida da Republica on Macau Peninsula and take up 1,386 metre square, 865 metre squares and 521 metre squares.

According to the proposal, buildings to be developed on the plots cannot exceed the height of 18 metres. The proposal of the aforementioned land will have to take opinions from the Civic and Municipal Affairs Bureau (IACM).

Regarding the development, the plot is required to reserve the surrounding trees while the design of

the architecture on the plot should be coordinated with the surrounding area.

The state-owned land, on the other hand, is located at Iao Hon district which has already accommodated Xinhua School.

The land takes up about

848 metre squares, with the maximum height of the building at 50 metres, stated the proposal.

Meanwhile, the biggest private plot among the six is located near Rua da Madre Terezina, occupying some 1,194 metre squares. The plot

is intended for non-industrial development with the height of the building not to exceed 90 metres.

The proposal of the plot requires the podium of the building to have 50 per cent of its surface area used for a greening project, while the bottom of the podium could be used for a communal area such as a clubhouse.

With the implementation of the Urban Planning Law on March 1, 2014, public opinion must be sought regarding the use of all land plots except those to be used for public infrastructure, and deliberated upon by the Urban Planning Committee.

Business Daily Thursday, September 21 2017 3

Macau Hotel

Hato pulled down occupancy rate Meanwhile, the general room prices of the month increased Cecilia U cecilia.u@macaubusinessdaily.com

T

yphoon Hato that swept the city during the last week of August undermined the city’s hotel market, with the occupancy rate dropping 3.9 percentage points year-on-year, data released by the Macao Government Tourism Office (MGTO) shows.

Figures indicate that August’s average hotel occupancy rate was 88 per cent.

As opposed to the usual high occupancy rate typically seen in the summer month of August, the decline is even more significant when compared to July, down 5.8 percentage points.

Earlier this month, Chan Chi Kit, the president of the Macau Hoteliers & Innkeepers Association told Business Daily his prediction that occupancy rate in August would drop to around 50 to 70 per cent.

The storm catastrophe had resulted in a halt in receiving tour groups to the city from August 25 to 30, of which operations of over 60 hotels were affected.

Among different types of hotels, 3-star hotels were the only star-rated entities keeping a high occupancy rate at 90.8 per cent, but still decreasing 1.8 percentage points yearon-year and 5.7 percentage points month-on-month.

5-star and 4-star hotels in August

suffered bigger falls in terms of occupancy when compared to the same month last year, from 91.6 per cent and 92.1 per cent to 87.6 per cent (4 percentage points) and 88 per cent (4.1 percentage points), respectively.

When compared to the previous month, 4-star hotels experienced 6.1 percentage points decrease in their occupancy rate and 5-star hotels decreased by 5.5 percentage points.

Increased room price

Regarding the average price of hotel rooms, the city recorded an increase of 7 per cent in the last summer holiday month when compared to the same month last year, at the price of

MOP1,326.8 per room.

The average room price, meanwhile, also registered an increase of 8.3 per cent vis-a-vis MOP1,225.3 in July.

According to MGTO, the prices for 4-star (MOP865.0) and 3-star hotel (MOP902.2) rooms in August both increased by 8.8 per cent when compared to a year ago.

5-star hotels, meanwhile, also charged a higher price during August, which raised by 4.8 per cent year-on-year to MOP1,598.1.

For month-on-month comparison, rooms from 4-star hotels registered an increase of 14.3 per cent, similarly, room prices for 3-star increased by 14.2 per cent.

Vehicles

Cleaning up vehicles The Transport Bureau received more than 6,000 requests for cancelling licence plates with 90 per cent being vehicles damaged by Typhoon Hato As of September 18 the Transport Bureau (DSAT) has received 6,456 requests for cancelling vehicle licence plates, with 90 per cent of the requests being for vehicles damaged by the passage of Typhoon Hato, the department revealed yesterday.

Of the total requests 3,173 were for light vehicles and 3,283 were for motorbikes, DSAT informed.

‘DSAT is speeding up the removal

of canceled vehicles and sending the order information, once confirmed to the DSF for further follow-up,’ the release stated.

In order to simplify the procedures for owners of damaged vehicles to cancel licence plates, DSAT dispatched employees to parking lots affected by flooding to assist with proceedings and increased working hours of its service centre in Estrada de D. Maria II.

The department announced previously that owners of light vehicles, motorbikes or tourism buses damaged

by Typhoon Hato should cancel their vehicles’ licence plates before September 18 in order to obtain a subsidy on vehicle taxes, the Transport Bureau (DSAT) announced yesterday.

After the cancellation of the damaged vehicle’s licence plate, owners will be able to apply for a full repayment of their

vehicle tax from the MSAR Government if they chose to purchase a new vehicle powered by sustainable energy sources, or an 80 per cent repayment in the case of purchasing a vehicle powered by non-renewable energy sources.

However the tax refund decreases according to the age of the damaged vehicle, with the refund reaching less than MOP5,000 (US$622) in case the vehicle is over nine years old. N.M. advertisement

4 Business Daily Thursday, September 21 2017

Macau Opinion

Ashley Sutherland-Winch*

A New Macau Emerging Typhoon Hato blew through Macau on August 23rd, but the winds of change remained as evident in the Legislative Assembly vote on Sunday.

Voter participation increased 2.2 percent since the last election in 2013. When results were announced, there were victories that have the potential to bring a calming breeze over societal discontent with issues plaguing our city. Voters were frustrated with the lack of affordable housing in Macau, the government’s deficiencies surrounding Typhoon Hato, and other concerns. Voters cast their ballots for candidates that were more engaged in social issues and democracy.

A surprising victor in the election was 26-year-old, Sulu Sou who is believed to be the youngest-ever lawmaker in Macau. Sou’s party, The New Macau Association stands for a full democracy for the 33-seat legislature. Currently, only 14 seats are directly elected and the rest are filled by pro-establishment labor unions and special interest groups - or are appointed. The New Macau plans to invigorate Macau’s younger generation’s interest in politics and after Sunday’s vote, they may have succeeded.

Would the election results have been the same if Typhoon Hato had not come to Macau just weeks before the vote?

A devastating superstorm is never desired but it did bring to light many issues for voters to analyze prior to making their four-year decision of law makers. Many people in all socioeconomic demographics suffered hardship during the storm.

Post Hato clean-up saw volunteers in the thousands working together to help others and the city heal. The efforts created a stronger sense of community that undoubtedly affected the elections.

After the results were announced, Mr. Sou stated, “The [Legislative] Assembly is not the end, but the means, … this success does not belong to us only, but all of the citizens who want to revitalize the Legislative Assembly.”

Along with Mr. Sou, other pro-democrats Au Kam San and Ng Kuok Cheong were also elected. Over the next two years, the world will be watching as the Legislative Assembly begins their work. In 2019, Macau will hold its election for a new Chief Executive, and with gaming concessions to expire in 2020 and 2022, the newly elected legislators will have an opportunity to discuss the delicate process for the new gaming licenses. With more diverse legislators in office and a new smart city on the horizon, the winds of change will continue to flow through Macau. There will be a New Macau and not just the political party; but, how will this conflict with those who still love the Old Macau? *Marketing and Public Relations Consultant and frequent contributor to this newspaper.

Forum Macao

Passing down advice As Sino-Luso trade continues to grow yearly, several Chinese businessmen with experience in investing in African Portuguese-speaking countries shared some advice in a Forum Macao meeting Nelson Moura nelson.moura@macaubusinessdaily.com

T

he s e m i n a r w as h e l d y est e r da y b y th e F o rum for Economic and Trade Co-operation between China and Portuguese-speaking Countries (Macao) on the investment environment in Portuguese-speaking countries for Chinese companies and how to enhance Macau’s role in connecting these businesses.

The event saw several Chinese businessmen sharing their experiences in business in African Lusophone countries and providing advice for other businessmen interested in following the same path.

“A lot of time needs to be spent in discovering commerce opportunities, find the right incentive policies and what forms of financing can be used,” the General Manager of Taiwan based manufacturer Crown Machinery I/E Co. Ltd stated in the event.

“Many African countries are considered to be under-developed by

the United Nations so a lot of banks will have obstacles in providing financing for projects in these countries,” he added.

For the General Manager of Beijing Jin Tan Ri Sheng Group, Zhou Ping, since language is a common obstacle, it is important for Chinese entrepreneurs to develop good relations with Chinese businessmen already established in the country where they’re planning to invest, in order to get sufficient and reliable information on the country.

Steadily growing

T ra d e va l u e b e t w e e n P o r t u guese-speaking countries has steadily increased annually since 2002, going from US$6.05 billion (MOP48.62 billion) in that year to US$90.87 billion in 2016, the Deputy Secretary-General of the Permanent Secretariat of the Forum Macao, Ding Tian, stated yesterday.

Sino-Luso business co-operation has also diversified from the traditional commerce trade and investment into new co-operation in finance, infrastructure, sea

resources and health, with Macau playing an “irreplaceable role” in connecting parts.

In the first seven months of the year, Sino-Luso trade increased around 31.3 per cent yearly to reach US$67.61 billion, according to data provided by Forum Macao.

The event saw one of the first participations of the São Tomé and Príncipe delegation of Forum Macao, after the African country reinstated diplomatic relations with China.

“Sao Tome offers good investment opportunities in tourism, sea resources, agriculture, infrastructure,” the country’s Forum Macao delegate, Gualter Sousa Pontes de Vera Cruz, said.

Mr. Cruz also considered that although the country only has a population of 200,000 people, it was well located geographically in an area with 300 million consumers and US$22 million in gross domestic product, near African countries such as Cameroon and Gabon, and with airline connections with Portugal and Angola.

Group picture of organizers and participants of the seminar. Source: GCS

Forum Macao

Shuffle and deal Political changes in East Timor led to delays in development projects in the country by local company Charlestrong Engineering Technology and Consulting Limited Nelson Moura nelson.moura@macaubusinessdaily.com

L o ca l d ev e l o p i n g c o m p a n y Charlestrong Engineering Technology and Consulting Limited is waiting for authorisation from the East Timor newly elected government to advance with a resort development project, the company’s Vice-President, Afonso Chan, told Business Daily yesterday.

The 60-room project to be developed in the country’s special economic zone RAEOA (Special Autonomous Region of Oecusse Ambeno) was previously expected to be concluded in the first quarter of this year.

“From our part everything is prepared and all the materials are in place. It’s just a new conversation now with the new government to advance the project,” Mr. Chan added.

The Asian country saw a lot of

political changes this year, with the country’s 1.2 million population electing Mari Alkatiri as its new Prime-Minister this month and after a general election in July saw the Fretilin party winning by a small margin and forced to create a minority coalition government with the Democratic Party.

The political change also led to the halt of another of Charlestrong’s projects in the country, having concluded six low cost model houses for local army veterans but currently waiting for instructions by the new government to hand them over.

“The model houses will now be evaluated by the country’s government […] We are using the techniques we developed for a project in Mozambique and bringing it to East Timor,” Mr. Chan told Business Daily.

African experience

In 2014, Charlestrong signed a

c o n t ract w i th M o za m bi q u e’ s government housing bureau for the second phase of construction of the Olympic Village, a 240-apartment complex in Maputo for middle and lower-income residents.

Then in 2015 the company signed an agreement to build 35,000 housing projects in the Lusophone country, partnering with Chinese companies BNBM Group and China Machinery Engineering Cooperation (CMEC).

In July of this year the group also obtained a license for a viability study to develop a thermal station in the African country city of Tete, also in partnership with CMEC. A company delegation will now visit both Mozambique and East Timor in October to follow-up on the projects, the entrepreneur told Business Daily.

“No matter the government we still have confidence in the future of East Timor,” Mr. Chan added.

Business Daily Thursday, September 21 2017 5

Macau Press freedom

AIPIM to release report of freedom of the press

The Portuguese and English Press Association (AIPIM) will release a report entitled ‘Depiction of the freedom of the press and access to sources of information for working journalists in Macau’, next Wednesday, September 27 at 5pm, according to a release from the organization. The group describes the report as ‘an Evaluation of the survey carried out

by AIPIM regarding press freedom in the Macau Special Administrative Region’. The event will take place at the Casa Garden (Orient Foundation).

AIPIM has been vocal in its defence of press freedom, in particular relating to the recent Legislative Assembly elections and potential pressures on the press, pointing out specific cases in which journalists from Hong Kong were denied entry to the MSAR during the election period.

The group applies to its members a code of ethics relating to the carrying out of their activities, whose first line states: ‘A journalist has a duty to report facts with rigor and accuracy and to interpret them with honesty’.

Casinos

Cape Verdean delays The conclusion of the construction phase of David’ Chow’s integrated resort in Cape Verde will be delayed by five to six months due to issues with the reclaimed land plots where the project is being developed Nelson Moura nelson.moura@macaubusinessdaily.com

T

he construction of the integrated resort project in Cape Verde initiated by local businessman David Chow will be delayed due to the revamp of the island settlement where the project will be developed, the African country representative at the Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries (Forum Macao), Nuno Miguel Melo Furtado, said yesterday.

“The delay is due to the constructed settlement near the sea. According to the project developer there is the need for five to six months to solidify the land settlement,” Mr. Furtado said yesterday.

The 250 million euros (MOP2.4 million/US$300.1

million) integrated resort project is being developed by local gaming operator Macau Legend Development at the Cape Verdean capital, Praia, and will include a resort, casino, office buildings and a museum.

Parts of the 152,700 square meters project will be developed on the Santa Maria islet at the Praia bay, with parts being developed on reclaimed land.

A seawall has been concluded as part of the first phase of the construction, with the second phase comprising of the hotel construction, and with the resort opening expected for a period between 2019 and 2020.

However according to Mr. Furtado the delay on the reclaimed land development could postpone the project construction conclusion, with the Cape Verde representative not specifying if the resort opening could be delayed too.

“The project is at very early stages, still in the construction phase. According to my information the second phase will likely be started this year since the infrastructure is already visible. The project is just not going at the rhythm we wanted,” he added.

According to Mr Furtado all needed “environmental and economic” impact studies for the project were made before the resort development was allowed.

“When it comes to the economical impact in the area,

this area of the capital will be developed in terms of organization, with a very important investment being made in the Praia city, attracting more tourists and more revenue to public funds,” he stated.

Environmental studies also didn’t reveal a considerable negative impact in the area due to the resort development.

Building partnership

The statements by Mr. Furtado were made on the sidelines of a seminar organised by Forum Macao on the investment

environment in Portuguese-speaking countries for Chinese companies and how to enhance Macau’s role in connecting these businesses.

According to Mr. Furtado, the African country currently doesn’t intend to bring more students to Macau, with 17 Cape Verdean students currently studying Mandarin and gaming industry related course in the city as part of an agreement with the Macau Polytechnic Institute, with the students expected to work at the future integrated resort project.

“We will see how the investment in this project goes and if it is necessary we’ll bring more young people to study Mandarin and gaming [industry related courses],” he added.

However according to the Cape Verde representative the majority of workers at the David Chow project will be Chinese nationals. advertisement

6 Business Daily Thursday, September 21 2017

Macau Mentions

Stories of success Forbes names Wynn and Adelson among ‘100 Greatest Living Business Minds’

C

asino moguls Steve Wynn (pictured) and Sheldon Adelson have both been named by Forbes magazine among the ‘100 Greatest Living Business Minds’. The publication, celebrating its 100 year anniversary has collected a series of essays from the 100 individuals selected, available on its website: www.forbes.com.

Sheldon Adelson, due to the alphabetical nature of the list, comes in as the first mention. The entrepreneur notes that as a 16-year old he bought vending machines, positioning them strategically to be able to take advantage of peak week and weekend customer flow. “ Years later I did a similar thing with casinos,” states the billionaire.

“Las Vegas had been successful in the United States, but China had a billion more people in it. Why not rebuild the Las Vegas Strip there?

Everyone else in the gambling industry thought it was the dumbest idea ever. I charged ahead in Macau anyways. Now all the naysayers would cut off their right arm to get a piece of land there. I’ve got a warehouse full of right arms, and a couple of left ones, too.”

The publication selected the quote “ “Take an old concept, like vending or gambling, and just put a new spin on

it; success will follow you like a shadow,” to epitomize the businessman.

Casino-billionaire Steve Wynn’s quote selected by Forbes was: “ “You need to have a culture instead of a payroll, so that people watch themselves. What does this? Not money, but enhanced self-esteem.”

The entrepreneur points out how the big question is “ How do you motivate employees?” given that the group’s main operations are in the service industry.

He points out how, instead of employing strategies such as ‘Employee of the month’, which can build up prejudices, to use a story-telling based approach in which each staff member is encouraged to share a guest experience by a supervisor.

“Then when staffers tell the story, we reinforce it,” states Wynn. “We thank them. The supervisor calls a storytelling hotline. We then put the story on the in-house internet and plaster it on the walls. We make the storyteller a hero and do this hundreds of times a week. Now I have 13,000 people looking for a story-it’s the thing that brings them all together.”

Adelson operators Las Vegas Sands and locally Sands China, while Steve Wynn operates Wynn Resorts and Wynn Macau.

Jets

Fly me to Saipan Imperial Pacific expects 300 per cent increase of private jets flying to Saipan, signing today a MoU with U.S. border authorities to ease clearance procedures for its guests Sheyla Zandonai sheyla.zandonai@macaubusiness.com

Casino operator Imperial Pacific International Holdings is signing a Memorandum of Understanding (MoU) today with U.S. Customs and Border Protection (CBP) to ease immigration clearance procedures for its customers arriving in private jets to Saipan, the Marianas Variety reported yesterday.

The agreement outlines the implementation of a reimbursable services program at the Saipan International Airport (Francisco C. Ada), where IPI operates its only casino-resort, Imperial Pacific Resort, in the city of Garapan.

Garapan is located on the west coast of Saipan, one of

the islands of the Northern Marianas, a commonwealth of the U.S. Under the MoU, IPI is to fund the cost of the services provided by the U.S. border authority – under the Department of Homeland

Security – including primary inspection processing, special service requests, charters, and unanticipated irregular operation, including diversions.

Among the reasons reported for striking the agreement

is the long waiting hours linked to the increase in tourist arrivals at the Saipan airport.

The Hong Kong-listed company was said to have reached out to the CBP in February to seek assistance

for its guests arriving in Saipan in private jets.

Following the implementation of the new measure and the completion of its casino in Saipan, opened on July 6, the company expects the arrival of private jets to increase by 300 per cent, still according to the news outlet.

Under Section 481 of the Homeland Security Act, 2002, as amended, CBP is empowered to enter into partnership with the private sector, state and local government entities.

In its interim results, IPI has announced it plans to expand its VIP-room offer by the end of 2017.

Its Saipan casino currently has a total of 16 VIP tables.

Corporate

BNU celebrates 115th Anniversary

The financial institution held yesterday its 115th Anniversary Cocktail at the Grand Ballroom in JW Marriott Macau with hundreds of Macau’s community and business leaders The celebration was officiated by Mr. Chui Sai On, Chief Executive of Macao S.A.R., Mr. Ho Iat Seng, President of the Legislative Council, Mr. Leong Vai Tac, Secretary for Economy and Finance, Mr. Liu Bin, Director-General of the Economic Affairs Department of the Liaison Office of the Central People’s Government, Mr. Zhang Jian, Head of International Organizations and Legal Affairs Department, Office of the Commissioner of the Ministry of Foreign Affairs of the People’s Republic of China in the MSAR., Mr. Vítor Sereno, Consul General of Portugal in Macau and Hong Kong,

Mr. Vong Lap Fong, Executive Director of the Administrative Committee of the Monetary Authority of Macau, Mr. Paulo Macedo, Chief Executive Officer of Caixa Geral de Depositos (CGD), Mr. José João Guilherme, Executive Board Member of CGD, Mr. Jorge Neto Valente, Chairman of the Board of the General Meeting of BNU and Mr. Pedro Cardoso, Chief Executive Officer of Banco Nacional Ultramarino.

Mr. Paulo Macedo delivered the welcome speech and expressed his gratitude to all BNU partners for their continued support and also recognized and praised all clients for their long-term trust. He introduced BNU’s parent company CGD, the leading bank in Portugal, is present in seven Portuguese Speaking Countries with a leadership position in five. With the Portuguese background inherited from CGD, he highlighted BNU holds a tight

connection with Portuguese speaking countries via CGD’s extensive banking network. Therefore BNU is ideally placed to promote bilateral trade and investment between China and PSCs in line with the “Belt and Road Initiative”.

In the congratulatory address delivered by Mr. Vong Lap Fong, he highly valued and appreciated the continued efforts and significant contributions of BNU over the past 115 years to the Macau society.

Mr. Chui Sai On (C) and distinguished guests during BNU 115th Anniversary cocktail yesterday. Source: BNU

Business Daily Thursday, September 21 2017 7

Gaming Cruises

Genting’s World Dream Hong Kong-listed cruise and entertainment company sending its first luxury vessel via Hong Kong and Nansha to Southeast Asia Sheyla Zandonai sheyla.zandonai@macaubusiness.com

T

he luxury cruise line of Genting Hong Kong Limited in Asia, Dream Cruises, will be shipping its second vessel, World Dream, on its first trip via Hong Kong and Nansha in November, according to a press release from the company.

The cruise will start sailing from Hong Kong on November 17 and from Nansha, in

the Guangdong Province, on November 19, taking guests to destinations such as Boracay and Manila in the Philippines and Ho Chi Minh City and Nha Trang in Vietnam.

“By building on the success of her twin sister ship Genting Dream, World Dream is expanding our capacity and strengthening our market leadership in the region,” the President of Genting Cruise Lines, Kent Zhu, was quoted as saying in the press release.

Genting Dream, Genting’s

first Asian luxury cruise, was launched in 2016.

The company’s president added that bringing World Dream to Hong Kong and Nansha would “further grow the Pearl River Delta as a cruise centre’” as well as “increase the FlyCruise market in this part of Asia.”

According to the company, World Dream was ‘purposely built for Asia.’

The cruise’s capacity is capped at 3,400 guests and 1,686 staterooms, 70 per cent of which will have views of

the ocean.

Genting Hong Kong – formerly known as Star Cruises Limited – is a company primarily engaged in the leisure, entertainment, and hospitality business.

It opened Resorts World Manila, an Integrated Resort in the Philippines, in August 2009, and runs the operation through a Philippine-listed associate, Travellers International Hotel Group, Inc.

Casino expansion

Resorts World Manila getting back to normal Genting jointly-run casino reportedly progressing with phase three expansion in the Philippines Sheyla Zandonai sheyla.zandonai@macaubusiness.com

Daily average foot traffic at the Resorts World Manila has seen an improvement, although the property’s second floor gaming area remains closed after a shooting left 37 people dead in the premises on June 2, according to information provided in a brief by the Integrated Resort’s President Kingson Sian, the Philstar reported yesterday.

Currently, some 25,000 to 26,000

visitors to the mall and the casino have reportedly returned to the premises, close to the 28,000 visitors which had been recorded one day before the incident, in which Jessie Javier Carlos, a gambler, blew into the facilities, randomly shooting patrons and setting fire to a portion of the casino resort.

Foot traffic in the operation opened in 2009 and has been run

by Travellers International Hotel Group, Inc. – a joint venture between Genting Hong Kong Ltd. and

Alliance Global Group, Inc. – was cut by nearly half to some 12,500 visitors after the shooting episode.

According to Resorts World’s President, the company is now working on the phase three expansion, which will provide an additional 12,000 square metres of gaming area with 650 gaming tables and 1,000 gaming machines, in order to fill the gap created by the closing of the second floor, the Philstar reported.

According to the company, its

aim is to open the new wing by the first quarter of 2018, or to enable a soft opening at the fourth quarter of 2017.

Sian has also claimed that the casino resort has tightened and improved its security.

He added that the company is rebranding the hotels located at the complex. Resorts World’s Maxims, which was affected by the June 2 incident, will be refurbished and rebranded. Remington Hotel will be rebranded as Holiday Inn Express. advertisement

8 Business Daily Thursday, September 21 2017

Greater china Crackdown

Mainland’s most indebted developer Sunac faces lender scrutiny Chairman Sun Hongbin has overseen a buying spree that has elevated the company’s net gearing to almost 400 per cent, according to analyst estimate

C

hina’s most indebted developer is the latest firm to feel the heat amid a drive by regulators to rein in risks in the financial system.

China Huarong Asset Management Co., a state-owned entity whose businesses include lending, asked units to temporarily suspend new project financing to Sunac China Holdings Ltd., according to an internal email seen

by Bloomberg. While Huarong says it’s not acting on instructions from regulators, the email noted authorities are paying more attention to Sunac’s high debt load and aggressive acquisition strategy.

Sunac shares closed 2.8 per cent lower in Hong K o n g y e st e r d a y , a f t e r earlier tumbling as much as 6.4 per cent. The shares have advanced 467 per cent this year to rank among the world’s top performing stocks. Sunac’s US$600 million bonds due in 2022 were down 0.4 cents on the dollar to 100 cents, the biggest drop since they were sold last month.

Sunac denied Bloomberg’s report, saying in a statement that cooperation between the developer and Huarong remains normal.

Chairman Sun Hongbin has overseen a buying spree that has elevated the company’s

Huarong, with RMB1.6 trillion of assets, was created with approval from the State Council as a non-banking financial institution. The company’s units include banking, trust, securities, financial leasing, futures, consumer finance, property and international operations. The extent of its lending relationship with Sunac wasn’t immediately apparent. Sunac’s annual report for 2016 and semi-annual results released last month did not mention any relationship with Huarong. net gearing to almost 400 per cent, according to analyst estimates. Some of the acquisitions, such as an investment in a struggling Internet company, have raised concerns at ratings companies. The pressure on Sunac comes as China has intensified a crackdown on the nation’s most prolific dealmakers ahead of its twice-a-decade Party Congress.

Heightened monitoring

Effective Sept. 18, Huarong’s risk department ordered a suspension of any new project loans to Sunac that haven’t been signed, according to the internal email. The email also called for heightened risk monitoring and attention to existing loans and said any financing for projects deemed necessary, with controllable risk, will need approval from

Huarong’s headquarters.

Huarong said in a statement to Bloomberg that it continues to cooperate with Sunac on the condition that risks remain manageable, and that it hasn’t received any regulatory request or notice regarding Sunac.

Huarong didn’t dispute the authenticity of the email seen

by Bloomberg.

Sunac said in its statement that its work with Huarong has been continuing normally and wasn’t halted. “The attention paid to Sunac was China Huarong’s normal client management behavior. China Huarong didn’t cease business cooperation with Sunac, and under the precondition of risks being controllable, China Huarong will continue to maintain its cooperation with Sunac,” according to the statement.

China crackdown

Dalian Wanda Group Co., Anbang Insurance Group Co., HNA Group Co. and Fosun International Ltd. are among those companies that have faced regulatory scrutiny in China. Regulators are seeking to ensure that over-expansion won’t destabilize the financial system, weaken the currency and deepen the country’s debt woes.

China Deal Spree Faces Resistance Abroad, and at Home: QuickTake Fitch Ratings cut the firm deeper into junk status on July 12, citing what it called the company’s “acquisitive business approach.” Moody’s Investors Service saw financial risk for the company, and S&P Global Ratings put Sunac on negative watch.

Sun in July vowed to reduce

the Chinese developer’s leverage after its buying binge, including a US$6.5 billion purchase of theme parks from Wanda, triggered concern at the ratings companies.

Despite concerns over the company’s debt, the shares have been among the world’s top performers, surging 465 per cent this year in Hong Kong.

Sunac’s net gearing was the highest among major listed developers in Hong Kong in the first half -- rising to 394 per cent from 208 per cent a year earlier -- if the firm’s perpetual bond securities are treated as equity, according to CIMB Securities Ltd. and credit ratings firm Lucror Analytics.

Earnings at Chinese developers are also coming under scrutiny as one-time gains pad profit-margins.

One-Time Gains Never Played a Bigger Role for Chinese Developers Sunac reported RMB3.7 billion of gains in the category of “business combination” in its half-year earnings. That “drastically” changed its income statement, said Singapore-based credit analyst Zhou Chuanyi at Lucror Analytics. The gains exceeded the company’s gross profit of RMB2.6 billion. If they were excluded from core earnings, Sunac had a loss of RMB1.8 billion, Bank of China International Ltd. estimated.

Bloomberg News

Exports

Taiwan’s export order growth eases, may pick up speed on iPhone X The near-term outlook for electronics exports will largely depend on Apple’s supply chain pattern of production and shipments Jess Macy Yu and Liang-Sa Loh

Taiwan’s export orders rose for a 13th straight month but at a slower pace in August, a boon for the region’s tech-manufacturing economies riding the surge in global demand for electronics products.

Strong exports of chips and other tech devices will set the export-driven economy up for a strong year-end and help Taiwan meet its bumped-up growth forecast of 2.11 per cent this year. The solid outlook will also give the central bank leeway to stand pat on interest rates at its policy review today.

Export orders in August jumped 7.5 per cent from a year earlier, government data showed yesterday, slower than the 8.5 per cent median estimate in a Reuters poll and 10.5 per cent in July. Total export order value for August was US$40.8 billion.

The economics ministry said it expects September export orders to grow in the range of 1.3 to 3.6 per cent, and total US$43.5 billion to US$44.5 billion, due to the deferred launches of some new smartphone models, Lin Li-chen, director of the ministry’s statistics department, told a news conference.

“This year’s situation is not quite the same compared to the past where there was one main smartphone model type...It is related to the effect of the iPhone models,” Lin added.

Taiwan’s export orders are a leading indicator of demand for Asia’s exports and for hi-tech gadgets such as Apple’s new iPhone 8 and iPhone X, whose models will be launched in September and November, respectively.

Key Points August export orders +7.5 pct y/y vs 8.5 pct Reuters poll f’cast Orders from China +11.6 pct y/y, from U.S. -0.8 pct y/y Sept order value to increase from August - ministry While both the iPhone 8 and 8 Plus will be available in September, the premium iPhone X won’t be launched until November, slightly later than some expectations.

The product launches are likely to keep manufacturers busy well into the fourth quarter, as orders typically lead actual shipments by two to three months.

Late boost

Taiwan’s near-term outlook for electronics exports will largely depend on Apple’s supply chain pattern of production and shipments, DBS said in a research note ahead of the data.

Last week, Apple announced three new iPhone models, including the iPhone 8 and 8 Plus, and a premium version iPhone X which includes OLED screen and facial recognition technology.

“The implications for Taiwan are that electronics exports will still enter a seasonal upturn from 3Q onwards, similar as in the previous years. But a strong rise may only emerge in 4Q

when the mass production of iPhone X kicks in,” DBS said in its note.

DBS said demand for electronics components could remain buoyant well into the first half of 2018, due to belated support from the iPhone X. Orders from Taiwan’s two biggest markets showed a mixed picture.

While August export orders from China grew 11.6 per cent on year, faster than 10.7 per cent the previous month, they fell 0.8 per cent from the United States versus 7.7 per cent growth in July.

For 2017, U.S. export orders are still expected to be the biggest in volume terms, as many communications products orders come from the United States and Europe, particularly Apple orders, Lin said.

Export orders leapt 21.3 per cent from Europe and rose 13 per cent from Japan. Reuters

Business Daily Thursday, September 21 2017 9

Greater China Strategy

Ex-BlackRock execs target Hong Kong ETFs where others failed They would be the first Chinese ETFs globally to use more than one factor in the increasingly popular strategies Viren Vaghela

F

ormer executives at BlackRock Inc. think they’ve found a way to succeed with Chinese exchange-traded funds where their erstwhile employer failed to gain traction -- in Hong Kong.

The key, in a phrase, is multi-factor smart-beta.

Premia Partners Co. -- established by BlackRock alums Aleksey Mironenko and Rebecca Chua, China Asset Management (Hong Kong) Ltd. veteran David Lai, and former ICBC Credit Suisse Asset Management International banker Laura Lui -- is seeking approval from Hong Kong’s Securities and Futures Commission for two smart-beta funds targeting global investors in Asia. They would be the first Chinese ETFs globally to use more than one factor in the increasingly popular strategies.

Each fund will contain 300 China stocks with portfolios set up through a multi-factor program, which is based on categories beyond market capitalization such as profitability, value, low volatility, asset growth and quality. One of the ETFs focuses on China’s old economy, while the other concentrates on China’s new economy. The firm plans to start selling them next month and received regulatory approval today.

Premia’s ambitions fly in the face of the difficulty higher-profile competitors have had in selling Chinese ETFs. Most notably, BlackRock and Deutsche Asset Management this year delisted China sector funds that failed to gather enough assets.

Bucking trends

“We will continue to expand our offerings in areas where we identify demand from investors,” said Marco Montanari, head of passive asset management for the Asia-Pacific region at Deutsche Asset Management.

Representatives from BlackRock declined to comment.

Overall, Hong Kong’s ETF market has shrunk in 2017. But that may change now that index provider MSCI Inc. has included Chinese shares in its gauges. In addition, the Hong Kong Stock Exchange is adding ETFs to its

stock connect program, which links securities to the Mainland.

“China is an immature market, so excess return is possible if strategies are constructed correctly,’’ said Chua, Premia’s managing partner. “Combining factor drivers over the long term leads to a diversification benefit and a consistent excess return.’’

Globally, ETF assets are at a record high, but Hong Kong has experienced outflows even as the Hang Seng Index has rallied 28 per cent this year.

Some of the reasons are structural, such as the commission-based fee model that encourages banks to push mutual funds instead of ETFs.

Data science

But Mironenko, Premia’s chief distribution officer, says the end result is that investors are under-served.

“Less than 10 ETFs are regularly traded in Hong Kong,” he said.

“When there are outflows that’s a validation of our plans -- the products are subpar, so we need better versions.’’

“China is an immature market, so excess return is possible if strategies are constructed correctly” Rebecca Chua, former BlackRock executive and Premia’s managing partner The firm is betting on data science to help it outperform similar China ETFs. Jason Hsu, co-founder with Rob Arnott of the California investment consulting firm Research Affiliates LLC, is advising Premia, along with Chen Zhiwu, professor of finance at Yale University.

The new economy fund represents industries that may benefit from the Communist Party of China’s five year plan on social and economic development initiatives, Lai, Premia’s co-chief investment officer said. An aging population of

1.4 billion people means demand for nursing homes, biotechnology and legal services like estate planning, plus consumers are upgrading household goods such as air conditioners, he said.

Reflecting the economy

China’s A50 equity benchmark is 60 per cent weighted toward financials, which Lai says isn’t representative of the real economy. Investors are concerned that the gauge mainly gives exposure to the old economy, financials and potential non-performing loan problems, he said. In a mature economy like the U.S., an encompassing measure like the S&P 500 Index better represents the economy as a whole, he said.

The firm plans to offer its ETFs for about half the price of a typical fund.

The average expense ratio for China ETFs in Hong Kong is 0.99 per cent compared with 0.22 per cent for all U.S. ETFs, according to Premia Partners data. BlackRock’s iShares FTSE A50 China Index ETF has a 0.99 per cent expense ratio, while CSOP Asset Management Ltd.’s equivalent fund costs 1.08 per cent, according to data compiled by Bloomberg.

High fees turn off price-sensitive institutional investors in Hong Kong, Mironenko said. Representatives for CSOP declined to comment.

‘Cost advantage’

“There’s a lack of competition in the Hong Kong market,” he said. “We are aiming for our ETFs to offer a significant cost advantage to investors as we won’t have 80 per cent margins and big overheads.”

Premia sees enough demand to grow each fund beyond US$50 million, a figure that’s often seen as a yardstick for profitability. With low fees and an academic approach provided by Research Affiliates, the firm has a sound foundation, according to Eric Balchunas, an ETF analyst at Bloomberg Intelligence.

“It’s probably not going to set the world on fire immediately,’’ he said.

“Multi-factor in the U.S. took some time to get going. But it will likely work long term as smart-beta is delivering active management in a better mechanism.’’ Bloomberg

In Brief Fundraising

Taiwanese electric scooter maker Gogoro raises US$300 mln Taiwan’s Gogoro said it raised US$300 million from investors including Singapore’s Temasek and Japan’s Sumitomo Corporation, helping it further expand the market of its electric scooters with battery swapping technology in Europe. Gogoro, which sold more than 34,000 electric scooters since its launch in 2015, also added investors - Al Gore’s Generation Investment Management and France’s Engie SA. The fund-raising would help the company expand its business in Europe, including its recently launched scooter-sharing service that has a network of 1,600 scooters across Berlin and Paris, the company said. Growing restrictions and charges for diesel and gasoline vehicles are spurring the rise of electric vehicles, although analysts say big investments in charging points and power networks will be needed to serve a mass market.

Politics

Singapore’s Lee cements China ties with pre-party congress visit Singaporean Prime Minister Lee Hsien Loong’s visit to China this week signals efforts on both sides to reaffirm relations that have showed strains over the past year -- both in its timing and number of high-level meetings. “This is an extremely high-profile visit that happened at an extremely critical time,” said Li Mingjiang, coordinator of the China program at the S. Rajaratnam School of International Studies in Singapore’s Nanyang Technological University. “It shows the high-level connection between the two nations is stable and they highly regard each other in the relationship.” Singapore expects to be at the forefront of the region’s relations with China next year, when the city-state heads the Association of Southeast Asian Nations. The bloc’s summits have sometimes become a platform for the airing of grievances with China, especially over its efforts to assert expansive claims to the South China Sea. IPO

Alibaba-backed Best Inc raises US$450 mln in IPO after slashing terms Chinese logistics firm Best Inc priced its U.S. initial public offering at the bottom of expectations, raising US$450 million after it revised terms of the deal to cope with tepid investor demand.

Up to US$932 million had originally been expected for the listing, underscoring how some fast-growing companies may have to temper their expected valuations to lure investors burned by recent underperforming IPOs. The offering was the biggest by a Chinese firm in the United States since rival express delivery firm ZTO Express Inc raised US$1.4 billion in October. ZTO’s stock has traded below its IPO price since debuting and is down 22 per cent from the listing price. Best, which is backed

by Alibaba Group, priced 45 million American depository shares (ADS) at US$10 each, the bottom of a US$10 to US$11 indicative range, Thomson Reuters publication IFR said yesterday, citing people familiar with the deal. Best declined to comment on the IPO pricing when contacted by Reuters. The company had initially expected a price range of US$13 to US$15 per ADS and an IPO consisting of 53.56 million new shares and 8.54 million existing shares.

10 Business Daily Thursday, September 21 2017

Greater China

Aviation

Airbus seeks Mainland goodwill with first wide-body site abroad The number of people flying to, from and within China will almost double to 927 million by 2025, and reach 1.3 billion by 2035

A

irbus SE is courting China with its first wide-body jet facility outside Europe, positioning the company to chase billions of dollars in potential orders from an aviation market that’s set to become the world’s biggest within a decade.

Yesterday, Chief Operating Officer Fabrice Bregier inaugurated the US$200 million completion centre in Tianjin, a site designed to give finishing touches such as painting and cabin installation to A330 aircraft. The city, near Beijing, is already home to an assembly plant that produces single-aisle A319s and A320s.

In a race to earn Chinese goodwill, Airbus and Boeing Co. are moving parts of their manufacturing and supply chains to a country the U.S. company estimates will need US$1.1 trillion of aircraft over two decades and where the government still makes key purchasing decisions.

For China, which has its own aviation ambitions, the A330 centre is a coup of sorts in its chase to build its own commercial planes.

“China naturally wants to capture back some of the value in its purchases,” said Will Horton, a senior analyst at Capa - Centre for Aviation in Hong Kong. “Assembly and outfitting are a small portion of an aircraft’s total value, and something Airbus and Boeing can part with in order to build their relationships in China.”

Besides the political decision to woo China, where policy makers want companies to manufacture locally under a “Made in China 2025” blueprint, the two aerospace giants are also moving delivery closer to customers in Asia to help ease the strain on the planemakers’ existing facilities. The first A330 off the new line will go to Tianjin Airlines. The

facility aims to roll out two planes a month in a year.

Boeing Too

Airbus is also building a helicopter plant in the coastal city of Qingdao while Boeing has started construction of a finishing centre for its 737 narrow-body jets on Zhoushan island south of Shanghai. Besides these facilities, the two are also in joint ventures with units of state-owned Aviation Industry Corp. of China, or AVIC, to supply aircraft parts.

After their investment in the narrow-body assembly line in China, the market share improved, Bregier told Bloomberg Television’s Tom Mackenzie yesterday. “So, there’s a direct connection between your investment, your capabilities to demonstrate that you care about the Chinese industry and at the same time your market access,” he said after the inauguration.

Returning the favour, China has placed billions of dollars in orders with the companies. In July, Airbus won contracts worth US$22 billion to supply state-owned China Aviation Supplies Holding Co. with 100 of the A320-series jets and 40 of its latest twin-aisle A350s. In 2015, planemakers won orders valued at US$102 billion for some 780 aircraft.

Not Much

“A completion centre doesn’t cost very much compared with a final-assembly line,” said Richard Aboulafia, an aerospace consultant at Teal Group in Fairfax, Virginia. “So, if it results in a modest number of additional Chinese orders, it’s worth the investment.”

But competition is brewing slowly in China. State-owned Commercial Aircraft Corp. of China, which tested

its home-built single-aisle C919 jet in May, said Tuesday that it won orders for as many as 130 of the aircraft while it still waits for certifications from regulators. The company, known locally as Comac, says its order book is now at 730 planes. It has also teamed up with Russia’s United Aircraft Corp. to develop a wide-body model which it aims to deliver by 2027.

“China has always been thinking about being involved in all aspects of the aviation industry.

Manufacturing is the last part they need to build on, but it’s also the most difficult part” Mohshin Aziz, analyst at Maybank Investment Bank Bhd

“The new facility is undoubtedly going to help with advanced manufacturing for China, considering this is the first facility for wide-bodies,” said Wang Guangqiu, deputy director of Beijing Skyrizon Aviation Industry Investment Co. “However, be it Airbus or Boeing, none of them will be willing to transfer their core technologies and create a competitor.

Moving part of the manufacturing

facility here is just for reducing cost and being close to the market.”

In March last year, Bregier said that Comac is seen as “a very real competitor” that could become formidable sooner than the 20 years once envisaged.

The choice of A330 for the completion centre may help limit leaks of advanced technology as it is a relatively older plane, but will still keep Beijing happy. The order backlog for the plane in Asia Pacific was 594 at the end of August, according to the company’s website. Among wide-bodies, the latest A350 model and Boeing’s 787 Dreamliner are gaining in popularity.

Meanwhile in China, narrow-body aircraft are in vogue more than larger types. Single-aisle models are expected to account for 75 per cent of the 7,240 new planes estimated to be delivered to the country in the 20 years through 2036, according to Boeing.

While China remains the world’s biggest source of outbound travellers, a lot more Mainlanders are also taking to the skies to explore domestic destinations, making it a lucrative market for planes that can fly short and long haul. The number of people flying to, from and within China will almost double to 927 million by 2025, and reach 1.3 billion by 2035, according to the International Air Transport Association.

“China has always been thinking about being involved in all aspects of the aviation industry,” said Mohshin Aziz, an analyst at Maybank Investment Bank Bhd. in Kuala Lumpur.

“Manufacturing is the last part they need to build on, but it’s also the most difficult part. Having a centre for both wide- and narrow-body aircraft will be good for China.” Bloomberg News

Business Daily Thursday, September 21 2017 11

Asia Exports

Japan exports surge at fastest in nearly 4 years on global demand A pickup in shipments of cars, car parts, and semiconductor manufacturing equipment increased Japan’s year-on-year exports to the United States in August by 21.8 per cent

B

ooming s h i p ments of cars and electronics in August drove up Japan’s exports at the fastest pace in nearly four years, further evidence that overseas demand is strong enough to support healthy economic growth.

The 18.1 per cent annual increase in exports was the fastest since November 2013 and handily beat the median estimate for a 14.7 per cent annual rise seen in a Reuters poll.

August’s export result was well up on July’s 13.4 per cent, and marked a ninth straight month of expansion.

Export growth is seen likely to continue as the global economy remains on a solid footing, which should underpin policymakers’ confidence in Japan’s economic outlook.

The Bank of Japan is expected to keep monetary policy on hold at a meeting

ending on Thursday as inflation remains confusingly low despite data pointing to solid economic growth.

“This data suggests that o v e rs eas d e m a n d w i l l drive Japan’s growth in July-September and make up for slight weakness in consumer spending,” said Hiroaki Muto, economist at Tokai Tokyo Research Centre.

“The global economy is

healthy, so expect Japan’s exports to accelerate even further.”

Supporting growth

Japan’s exports rose 10.4 per cent by volume in August from a year ago, following a 2.6 per cent annual increase in July.

Export volumes rose the most since 2010 in August, suggesting that net trade

should have started to support growth in the third quarter, Marcel Thieliant, Japan economist at Capital Economics, said in a research note.

A pickup in shipments of cars, car parts, and semiconductor manufacturing equipment increased Japan’s year-on-year exports to the United States in August by 21.8 per cent versus an 11.5 per cent annual increase in

the previous month. The rise in Japan’s exports to the United States in August was the fastest since December 2014, finance ministry data showed.

China-bound exports rose 25.8 per cent year-on-year in August, faster than a 17.6 per cent annual increase in July as Japan shipped more electronic screens panels and plastics.

Imports rose 15.2 per cent in the year to August, versus the median estimate of an 11.8 per cent increase.

The trade balance came to a surplus of 113.6 billion yen (US$1.02 billion), versus the median estimate of a 93.9 billion yen surplus.

Capital Economics’ Thieliant noted, however that: “The surge in the annual growth rates was driven by base effects. In seasonally-adjusted terms, both export and import values rose by a modest 1.2 per cent month-on-month.” Reuters

Fuel

India ONGC strikes ‘good’ offshore oil, gas find -sources ONGC tested nine zones in the well, the two sources with knowledge of the matter told Reuters Nidhi Verma

The latest discovery of India’s largest oil explorer, Oil and Natural Gas Corp, to the west of its Mumbai High offshore fields is estimated to hold in-place reserves of about 20 million tonnes, sources with knowledge of the matter said.

The Mumbai High field annually produces oil and natural gas of about 9 million to 10 million tonnes of oil equivalent. The company discovered hydrocarbon reserves west of Mumbai High at well WO 24-3 in July.

ONGC tested nine zones in the well, the two sources with knowledge of the matter told Reuters.

“One zone alone yielded more than 3,000 barrels per day of oil and there are deeper zones where oil and gas both are encountered,” said one of the sources.

“It is a large discovery going by Indian standards and is in a different play than discoveries made in the neighbouring Mumbai High fields,” the source said.

Shares in ONGC recovered losses after Reuters reported the news, trading at a three-month high of 170.9 Indian rupees (US$2.65).

ONGC informed the Directorate General of Hydrocarbons (DGH), the upstream advisory arm of the federal

oil ministry, about the latest discovery earlier this month.

ONGC now plans to drill appraisal wells to determine the size of the new find’s recoverable reserves, the sources said.

ONGC is struggling to ramp up its output as most of its production comes from mature fields.

“It is a good discovery and gives ONGC further hope. This has opened up a new area for exploration around Mumbai High,” the second of the sources said.

An ONGC spokesman declined to comment on the potential for the discovery. Reuters

Real estate

Yanlord, Perennial’s offer for Singapore’s United Engineers fails Anshuman Daga

A plan to acquire Singapore’s United Engineers Ltd by Yanlord Land Group and Perennial Real Estate Holdings that valued the century-old property group and a stake in a subsidiary at US$1.4 billion has failed on low shareholder acceptance.

The consortium agreed in July to buy a one-third stake in United Engineers owned by Oversea-Chinese Banking Corp and its group companies at S$2.6

per share, triggering a mandatory offer for the remaining shares - a deal that was set to be one of the biggest property takeovers in Singapore in recent years.

After the S$1.83 billion (US$1.4 billion) offer was announced below market price at the time, Singapore property firm Oxley Holdings swooped in and accumulated a stake of more than 14 per cent in the target company from the open market at above S$2.6 per share.

The offer was extended twice but in the end it only received shareholder acceptances representing just 1.4 per cent of United Engineers’ ordinary shares, Yanlord, a China-based real estate developer and Singapore’s Perennial said in a joint statement late on Tuesday.

Yesterday, United Engineers’ shares fell 1.5 per cent to S$2.7.

The Yanlord-led group, however, did complete a purchase of OCBC and its group firms’ roughly one-third

stakes in United Engineers and its property firm WBL Corp.

Separately, United Engineers said its chairman, group managing director and directors had resigned and it had made new appointments, but did not elaborate on the reasons.

United Engineers’ property businesses are located mainly in Singapore and China. Yanlord and Perennial also mainly own and manage sizeable portfolios in the same countries. Reuters

12 Business Daily Thursday, September 21 2017

Asia

Investigation

Uber is said to review Asia dealings amid U.S. criminal probe Attorneys are focused on suspicious activity in at least five Asian countries: China, India, Indonesia, Malaysia and South Korea Eric Newcomer

U

ber Technologies Inc., facing a federal probe into whether it broke laws against overseas bribery, has embarked on a review of its Asia operations and notified U.S. officials about payments made by staff in Indonesia, people with knowledge of the matter said.

As the Justice Department looks into a possible criminal case, Uber is working with law firm O’Melveny & Myers LLP to examine records of foreign payments and interview employees, raising questions about why some potentially problematic business dealings weren’t disclosed sooner, said the people, who asked not to be identified because the details are private.

Attorneys are focused on suspicious activity in at least five Asian countries: China, India, Indonesia, Malaysia and South Korea. For instance, Uber’s law firm is reviewing a web of financial arrangements tied to the Malaysian government that may have influenced lawmakers there, the people said.

Uber said it’s cooperating with investigators but declined to comment further. Wyn Hornbuckle, a Justice Department spokesman, declined to comment.

Late last year, Uber had a run-in with Indonesia police over the location of an office in Jakarta providing support to local drivers, people with knowledge of the events said. Police officers said the space was outside city zoning for businesses, so an employee decided to dole out multiple, small payments to police in order to continue operating there, the people said. The transactions showed up on the employee’s expense reports, described as payments to local authorities.

Uber fired the employee, the people said. Alan Jiang, the company’s head of Indonesia business who approved the expense report, was placed on a leave of absence and has since left the company.

Jiang didn’t respond to requests for comment.

At least one senior member of the legal team at Uber initially decided not to report the incident to U.S. officials when he learned of it late last year, the people said. After the Justice Department approached Uber about possible violations of the Foreign Corrupt Practices Act, Uber informed officials about what

Business Daily is a product of De Ficção – Multimedia Projects

happened in Indonesia. The Justice Department can be more lenient when a company voluntarily discloses information.

Digging in

Uber’s law firm is also investigating a corporate donation, announced in August 2016, of tens of thousands of dollars to the Malaysian Global Innovation and Creativity Centre, a government-backed entrepreneur hub. Around that time, a Malaysian pension fund, Kumpulan Wang Persaraan (Diperbadankan), invested US$30 million in Uber, said people familiar with the deal. Less than a year later, the Malaysian government passed national ride-hailing laws that were favourable to Uber and its peers. Lawyers are trying to determine whether there was any form of quid pro quo.

Emil Michael and Eric Alexander, two former business executives at Uber, played key roles in negotiating those deals, the people said.

“We strongly refute our involvement in any quid-pro-quo arrangements,” a spokeswoman at Malaysian Global Innovation and Creativity Centre said via email.

Uber’s law firm is also asking questions about how Alexander came into possession of an India rape victim’s medical records, a document he regularly carried around with him for several months in 2015. Michael and former Chief Executive Officer Travis Kalanick were aware that Alexander had the medical report, and they discussed it with colleagues. Alexander and Kalanick declined to comment through spokespeople, and Michael didn’t immediately respond to requests for comment.

Dealings in China and South Korea are also under review, though the details are unclear. The bribery inquiry is one of at least three federal probes the San Francisco-based company faces -- the other two involve software developed by Uber to gather data on competitors and deceive law enforcement officials conducting stings on Uber drivers.

Before the probe into foreign payments, O’Melveny & Myers advised self-driving car startup Otto on its sale to Uber. Alphabet Inc. is now suing Uber over trade secret claims related to that deal. In June, Uber asked O’Melveny & Myers to focus on the India probe, and the scope expanded.

It’s common in corporate fraud cases for companies to conduct an

internal investigation into allegations of misconduct and report those findings to the Justice Department.

Such internal probes often help the government decide the size and scope of an investigation.

The mounting legal troubles have played a role in the departures of several top executives, including Kalanick. He was pressured to step

down by investors, who said his leadership put the company at legal risk. The head of compliance left this month, and Salle Yoo, the chief legal officer, also said she plans to depart after helping new CEO Dara Khosrowshahi find her successor.

On Tuesday, Michael Brown, head of operations in Asia, said he plans to leave. Bloomberg NEWs advertisement

Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Nelson Moura; 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 Albano Martins; 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 Thursday, September 21 2017 13

Asia M&A

In Brief

Bain is said to plan closing Toshiba deal despite legal threats To complete the sale, Toshiba may have to overcome continued resistance from joint venture partner Western Digital Yuki Furukawa and Pavel Alpeyev

T

oshiba Corp.’s board has agreed to sell its chip unit to a group led by Bain Capital, with the assurance that the buyout firm will complete a deal regardless of legal challenges from Western Digital Corp., according to a person familiar with the matter.

The Bain consortium includes financial support from Apple Inc., Dell Inc. and several other companies, said the person, asking not to be identified because the matter is private. Toshiba also plans to invest 350 billion yen (US$3.1 billion) alongside the U.S. buyout firm, said the person.

The Bain-led group was identified as a preferred bidder almost three months ago, but the process has been delayed by lawsuits, government opposition and corporate indecision.

Toshiba’s chose Bain over a group led

by KKR & Co. and two state-backed funds, Innovation Network Corp. of Japan and Development Bank of Japan. To complete the sale, Toshiba may have to overcome continued resistance from joint venture partner Western Digital.

Toshiba is selling off its chips business to pay for losses in its U.S. nuclear business and needs to raise the money by March to avoid seeing its shares delisted from the Tokyo Stock Exchange. The auction has been complicated by legal action from Western Digital, which has argued it should have veto rights in any sale because of its partnership with Toshiba in the chips business. The Japanese company disputes that and sued Western Digital for more than US$1 billion for interfering in the auction.

The Japanese company’s board agreed to the Bain proposal at a meeting yesterday. Under the agreement, Bain, Toshiba, SK Hynix Inc.

and Japan’s Hoya Corp. will pay about 960 billion yen for common and convertible stock, while Apple, Dell, Kingston Technology Co. and Seagate Technology Plc will spend about 440 billion yen for convertible and non-convertible preferred stock, the person said. The special purpose entity making the acquisition will be called Pangea and receive about 600 billion yen in loans, the person said. Reuters reported earlier that Toshiba’s board had chosen Bain.

Ups and downs

The auction has gone through dizzying twists and turns. Last week, Toshiba signed a memorandum of understanding with Bain, with the goal of reaching a final deal before the end of the month. But the MOU didn’t

preclude Toshiba from continuing to negotiate with other bidders.

This week, KKR and INCJ worked on a revised bid, with the Japan fund taking a more prominent role in the consortium and planning an initial investment of about 550 billion yen, up from the previous 300 billion yen, people familiar with the matter said.

Under the revised proposal, Toshiba could buy back equity from INCJ and DBJ later, the people said.

Bain then revised its offer too. The U.S. buyout firm sought more financial support from Apple, asking for about US$7 billion in capital, up from a previous agreement for about US$3 billion, said a person familiar with the matter. It’s not clear exactly how much capital Apple will ultimately contribute to the offer. Bloomberg NEWS

Philippine lawmakers yesterday said they would hold more hearings before deciding whether to confirm the appointment of the country’s environment minister, although some said they were likely to approve the step. The confirmation of Environment and Natural Resources Secretary Roy Cimatu is being closely watched given the policy implications for the mining sector in the world’s top nickel ore supplier. Cimatu, a former soldier, replaced staunch environmentalist Regina Lopez who was rejected by the same legislative panel in May after less than a year in office. All ministerial appointments in the country go through a similar process. During her term, Lopez ordered the closure or suspension of 26 of the nation’s 41 mines and banned open-pit mining, measures that Cimatu has not reversed. He has said his team was still reviewing the closure and suspension orders.

New Zealand election could put an obstacle in path to nailing TPP deal

Australia court upholds appeal against Tabcorp’s US$4.9 bln buyout of Tatts The decision marks a potentially time-consuming setback for a deal announced a year earlier which has already been delayed by the ACCC’s court challenge An Australian court upheld yesterday an appeal against betting firm Tabcorp Holdings Ltd’s agreed A$6.15 billion (US$4.9 billion) buyout of lotteries operator Tatts Group Ltd. Tabcorp and Tatts had billed their third attempt to join since 2006 as a way to create a domestic gambling powerhouse to fend off online rivals like Britain’s William Hill and Ireland’s Paddy Power.

Philippine lawmakers defer decision on appointment of environment minister

Politics

M&A

Byron Kaye and Tom Westbrook

Environmental

The deal was cleared in June by the Australian Competition Tribunal (ACT), a court-affiliated body, but antitrust regulator the Australian Competition and Consumer Commission (ACCC) appealed the decision.

“The court orders that the decision of the tribunal ... be set aside (and) be referred back to the tribunal for further consideration,” three Federal Court judges wrote, adding that they would publish their reasons in five days.

The decision marks a potentially time-consuming setback for a deal announced a year earlier which has already been delayed by the ACCC’s court challenge.

Representatives of Tabcorp and Tatts were not immediately available for comment.

Key Points Third attempt by companies at US$4.9 bln takeover Competition tribunal has approved the deal Federal Court upholds appeal from antitrust regulator Tabcorp and Tatts took the unusual step of applying to the ACT after the usual arbiter, the ACCC, had raised concerns about the deal.

The ACCC then sought a review on the grounds that it believed the ACT had misused certain tests to determine if the deal would hurt competition, and that it had given inappropriate weightings to data about the effects of the takeover.

Shares in Tabcorp and Tatts were in a trading halt yesterday. Reuters

If New Zealanders vote this weekend to change who governs them, that could create an obstacle to plans by members of the Trans-Pacific Partnership (TPP) to finalise a trade deal in November. After President Donald Trump withdrew the United States from TPP early this year, the group has 11 members. New Zealand and Japan have led the way in saying they remain committed to a deal to cut trade barriers in the Asia-Pacific region. New Zealand’s opposition Labour Party, which is neck-and-neck with the ruling National Party in Saturday’s election, says it would renegotiate the TPP to accommodate its proposed ban on foreign ownership of existing properties. Historically, both political parties have championed free trade. Some analysts say that the plan by Labour, if it wins, might prompt other TPP members to make fresh demands, stalling the agreement or even leaving New Zealand out. “It’s a real risk that other countries will seize the opportunity to find the parts that they don’t like about the deal and try to change them,” said Daniel Kalderimis, partner at Wellington law firm Chapman Tripp.

Weather

Flights, Trains in Turmoil as Rains Hit India’s Finance Hub Many flights were cancelled and trains were running late in Mumbai, India’s financial hub, yesterday, as rains disrupted normal life for the second time in less than a month, highlighting infrastructure challenges in India’s mega-cities.

Heavy rains are predicted in Mumbai, home to the nation’s two largest stock exchanges and the central bank, and its suburbs in the next few hours, according to India’s weather office. Schools and colleges of Mumbai metropolitan area were ordered shut by Vinod Tawde, the education minister for Maharashtra state, of which Mumbai is the capital.

14 Business Daily Thursday, September 21 2017

International In Brief

Telecom

Saudi Arabia set to lift ban on internet calls Saudi Arabia will remove its ban on internet phone calls today, a government spokesman said, in a bid to stimulate online business as the kingdom looks to boost non-oil revenue.

All online voice and video call services such as Microsoft’s Skype and Facebook’s WhatsApp that satisfy regulatory requirements will become accessible at midnight (2100 GMT), Adel Abu Hameed, spokesman for the telecoms regulator CITC said on Twitter yesterday. The lifting of the ban could pinch Saudi Arabia’s three main telecoms operators - Saudi Telecom Co (STC), Etihad Etisalat (Mobily) and Zain Saudi - which earn substantial revenue from international phone and text calls made by the millions of expatriates living in the kingdom. The policy reversal comes as part of the government’s broad reform programme to diversify revenue sources as oil prices have hit the finances of the world’s top exporter. “Digital transformation is one of the key kick-starters for the Saudi economy, as it will incentivize the growth of internet-based businesses, especially in the media and entertainment industries,” a separate statement from the information ministry said.

Review

Nordea move to trigger broad review of Swedish banking rules Sweden’s minister in charge of bank legislation says the country is reviewing its regulatory framework after Nordea Bank AB announced it was moving into the European banking union. The Stockholm-based lender’s plan coincides with global regulator efforts to impose capital floors and a European revision of rules.

Per Bolund, Sweden’s financial markets minister, says those developments will force a rethink of bank rules in Scandinavia’s biggest economy. “When the negotiations are completed we need to make an assessment of how that and Nordea’s relocation affect the design of Sweden’s capital requirements,” Bolund said in a written response to questions received on Sept. 18.

Referendum

Spain moves against Catalan separatists as police raid offices Spain’s Civil Guard raided Catalan government offices including the economy, labour and international affairs departments as Madrid moved to shut down preparations for an illegal referendum planned for Oct. 1. Officers are also searching a Catalan government data centre, a press officer for the Barcelonabased executive said in a text message. Josep Maria Jove Llado, a senior official in the economy department, was arrested, news website El Confidencial reported. State broadcaster Television Espanola said offices of Indra SA, which provides vote-counting machines in many Spanish elections, were also being searched.

“The government is doing what it has to do,” Prime Minister Mariano Rajoy told the Spanish Parliament in Madrid yesterday. “And we will keep doing that until the very end.” Catalan separatist lawmakers walked out of the chamber in response to his comments.

Retail

UK retail sales rise more than forecast as consumers stir Lucy Meakin

U

K retail sales rose in August at their fastest pace in four months, providing further evidence of a tentative pickup in consumer

spending.

The quantity of goods sold in stores and online increased 1 per cent from July, as did sales excluding auto fuel, the Office for National Statistics said yesterday. The increase far exceeded the median forecast of economists and marked the first run of three consecutive gains since 2015.

The figures may fuel speculation that the Bank of England is approaching its first interest-rate increase in more than a decade. A majority of rate setters including Governor Mark Carney now believe policy will need to be tightened in the coming months amid signs that the worst may be over for inflation-squeezed households.

Overseas buyers

Sales were driven by spending on items such as watches and jewellery, a possible result of the weak pound attracting overseas buyers. There were also gains for floor coverings and dispensing chemists, the ONS said. Sales at department stores rose by 1.1 per cent and non-store sales jumped 5 per cent as consumers felt confident enough to spend more on non-essential goods..

But there were some signs of weakness as sales of clothing, footwear and household goods fell on the month.

That reflects the squeeze on households from inflation, with average store prices jumping 3.2 per cent in August from a year earlier.

Retail sales are unlikely to contribute to growth in the third quarter.

Sales will fall unless September sees

an increase of 2.9 per cent, a figure last exceeded at the end of 2013.

The fragility of the outlook was underscored this week when Carney, in a speech in Washington, spoke of “considerable risks to the UK outlook” including Brexit. Bloomberg NEWS

IPO

Abu Dhabi targets IPOs worth USUS$5 bln ahead of Saudi Aramco A total number of 13 IPOs have raised US$4.49 billion since 2012 Saeed Azhar and Stanley Carvalho

Abu Dhabi is hoping to fast-track at least US$5 billion of stock market listings by state-backed companies next year before Saudi Aramco’s planned US$100 billion IPO dominates investor demand.

Like neighbouring Saudi Arabia, Abu Dhabi is restructuring its industrial sector, hoping to lure foreign investors with privatisations after lower energy prices depleted its coffers.

This could result in at least five large listings including Abu Dhabi National Oil Co (Adnoc’s) fuel distribution unit, aluminium-maker EGA, industrial conglomerate Senaat and Abu Dhabi Ports, government and banking sources said.

Bankers had pitched for the Abu Dhabi Ports IPO, but no decision has been made and the company has said there are no immediate plans

for listing.

The IPOs could raise at least US$5 billion, several of the sources said, exceeding money raised through listings in the United Arab Emirates over the last five years, according to Thomson Reuters data. A total number of 13 IPOs have raised US$4.49 billion since 2012.

Bankers said the companies hope to complete their IPOs before Saudi Arabia’s IPO of its crown jewel Saudi Aramco either in late 2018 or early 2019 as part of a wider multi-billion dollar privatisation programme.

“The timing for all of this is now and, if at all possible to achieve, ahead of the IPO of Saudi Aramco and the upgrade of MSCI Saudi Arabia to emerging market status,” Sanyalaksna Manibhandu, head of research at First Abu Dhabi Bank, said.

Government-owned companies in Abu Dhabi have been told to manage budgets efficiently and control

spending and possibly raise their own finances for expansion to make them less reliant on the state, a source close to the government said.

“Abu Dhabi is taking bold measures to kickstart the markets and boost investor confidence by pushing government related entities to sell shares and list publicly,” an Abu Dhabi-based senior bank executive who has advised on deals there said.

Consolidation

At the same time, Abu Dhabi-based companies spanning sectors such as banking, insurance, services and healthcare are also expected to go through more consolidation, the sources said.

Last year Abu Dhabi merged its two sovereign wealth funds, Mubadala and IPIC, while National Bank of Abu Dhabi and First Gulf Bank created one of the largest banks in the Middle East and Africa.

“When we were a very young country, you could have multiple companies and you basically had to grab your domestic market share.

Now it’s time to reach the size, where we need to export our services, export our business,” Sabah al-Binali, a UAE-based investor, said.

Abu Dhabi is using tougher economic conditions to push through reforms that would have been harder to implement in previous years, when higher oil prices boosted its revenue.

“The good old days of the state bearing the weight of spending and providing subsidies because of rich resources is over. That model is outdated,” an Abu Dhabi-based banker said.

“The private sector has to bear the burden too now, something Abu Dhabi has realised.” Reuters

Business Daily Thursday, September 21 2017 15

Opinion Business Wires

The Star Sime Darby Bhd’s unit has completed the sale of its entire stake in Malaysia Land Development Company Bhd (MLDC) to Datuk Seri Tong Seech Wi for RM1 cash consideration. It said yesterday Sime Darby Property Bhd had sold the stake, comprising of 5.069 million shares, under the share sale agreement on April 3. MLDC’s core activities are property investment, property management and investment holding. Sime Darby said the disposal consideration was based on the financial position of MLDC, Genting View Resort Development Sdn Bhd (GVR), a 60 per cent-owned subsidiary of MLDC, and Sime Darby GVR Management Sdn Bhd (SDGVR), a unit of MLDC. Under the agreement, Tong shall pay to Sime Darby Property, for and on behalf of MLDC, RM60mil as the full and final settlement of the outstanding shareholder’s loan of RM84.5mil (as at Feb 28, 2017).

China’s lead supply chain looks stressed out

Straits Times Singapore’s electronics manufacturing sector is getting a leg up with the aim of growing it to have a manufacturing value-add of S$22.2 billion and create 2,100 new jobs for professionals, managers, executives and technicians (PMETs) by 2020. Minister for Trade and Industry (Industry) S. Iswaran yesterday (Sept 20) said this comes as the Republic works to broaden capabilities in the electronics sector and build “smart factories of the future”. He was unveiling the Industry Transformation Map (ITM) for the electronics sector at the official opening of JTC nanoSpace@Tampines.

The facility is purpose-built to meet the operational requirements of niche semiconductor manufacturers.

Andy Home columnist for Reuters

R

ising price, tightening time spreads and plunging warehouse stocks. The Shanghai Futures Exchange (ShFE) lead contract is showing all the signs of a classic bull market.

There is plenty of evidence to suggest that the futures market is accurately reflecting acute stress along the length of the country’s physical supply chain.

Within a tightening global raw materials market, China’s lead production sector has come in for particular scrutiny as Beijing wages war on industrial pollution. And the stresses could become more acute as China loses an important source of raw materials from North Korea as part of its commitment to international sanctions.

It’s a starkly different picture to that on the London Metal Exchange (LME), where stocks and time spreads are still at comfortably relaxed levels and money managers are short.

Futures market stress

ShFE lead stocks were 16,568 tonnes at the end of last week, down 80 per cent from a May peak of 83,622 tonnes and the lowest since March 2016.

The historical comparison needs to be put into context, since the Shanghai contract was a low-key, lowvolume market until the fourth quarter of last year.

Low and falling inventory has flipped Shanghai time spreads into backwardation, with nearby months trading at premiums to next-dated months all the way through to April next year.

Both price and market open interest are at their highest since last December, a record-breaking month for the Shanghai lead contract after its 2011 launch.

Back then it was only one of several commodity markets to experience the gale-force impact of China’s “flash” investment crowd. But what is noticeable this time is that volumes, though spiky, are nowhere near the levels during the December bubble.

That suggests lead is not on the retail investment radar right now, or at least only dimly lit.

“

Philstar The United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) has recognized the Philippines as one of the most prepared Southeast Asian countries to carry out a massive infrastructure buildup program, the Department of Finance (DOF) said.

This was disclosed during UNESCAP’s workshop on infrastructure financing strategies recently held in Manila, and attended by Finance Undersecretary and chief economist Gil Beltran. “The workshop found the Philippines to be among the most ready in ASEAN in boosting infrastructure development,” Beltran said. According to Beltran, the UNESCAP cited favourable factors which contribute to the country’s healthy fiscal position, enabling it to pursue an expansionary fiscal policy to fund its Build Build Build program.

Metals Industry Association.

It estimates that the crackdown has led to the closure of about 80 per cent of “illegal” secondary smelters, meaning those using scrap as feedstock.

“Illegal” is a word with a rapidly lengthening list of definitions for Chinese environmental inspectors. But if it means a completely unauthorised black market operation, it also means that the plant’s production was never counted in the official figures.

What is being closed, in other words, is statistically unknown; an invisible but expanding hole in the country’s already stressed supply chain.

Another crack in the chain has opened in the form of a technical failure at the 100,000 tonne-per-year smelter in Liaoning province operated by Haicheng Chengxin Nonferrous Metal Co. It is now expected to close for a month of repairs, bringing forward a planned maintenance scheduled for the end of October.

North Korea sanctions

Haicheng Chengxin also happens to be the main buyer of North Korean lead concentrates. Its smelter is only 140 miles (230 km) from the border.

Official imports of North Korean material totalled 108,000 tonnes (bulk weight) last year and jumped by 45 per cent over the first seven months of this year.

Indeed, North Korea has been China’s second-largest supplier of concentrates by volume this year. Its share has risen as availability from other traditional suppliers has dwindled.

Haicheng Chengxin says it will switch to domestic mine supply, but in doing so it will add further pressure to a sector in which output slid by 4.3 per cent in the first seven months of the year, according to Antaike.

Industrial metals are one of Beijing’s prime targets and lead, a metal associated with toxicity, seems to have come in for special treatment

Physical market stress

Rather, the signals from the futures market, particularly the dramatic drawdown in inventory, point to a genuinely tight physical market.

The first sign of stress in the sector came from the country’s trade figures.

China began importing refined lead in significant quantities in February. Cumulative imports through July were 59,000 tonnes. That may not sound like much, but it’s the strongest pull on the international market since 2009.

The country’s smelters were already struggling with falling availability of mine concentrates, part of a global squeeze at the start of the lead supply chain. Imports of concentrate slumped by 26 per cent last year and are down another 2 per cent this year.

Then came the inspections.

Beijing has teams of inspectors fanning out across entire industrial supply chains to check environmental performance and to close “illegal” capacity.

Industrial metals are one of Beijing’s prime targets and lead, a metal associated with toxicity, seems to have come in for special treatment. Mines, smelters and lead-acid battery makers have all come under scrutiny.

“This year domestic environment inspections have reached their most severe period in history,” says Antaike, the research arm of the China Nonferrous

Keeping calm?

While the Shanghai lead market bubbles, London remains flat.

LME three-month metal has just clawed its way back above US$2,400 a tonne after slipping to US$2,257 early this month.

Time spreads are in relaxed contango with cash metal’s discount to the threemonth price valued at US$25.75 a tonne at Monday’s close.

LME lead stocks experienced an early-year raid but have since stabilised. At a current 162,700 tonnes, they are down by 32,200 tonnes, or 16.5 per cent, this year. However, last week’s inflow of 17,050 tonnes, largely at Antwerp and Rotterdam, suggests a lack of physical market tightness.

Money managers are still playing this market from the short side, says LME broker Marex Spectron.

It estimates that lead is the only major LME metal to exhibit a net speculative short position, albeit to the fairly marginal tune of 1.4 per cent of open interest.

Lack of bullish interest may reflect the much-loved LME play of trading lead and zinc as a relative value pair, with lead playing the role of ugly sister.

Funds have bought into the zinc bull story but have shied away from lead, at least partly because of its lack of coherent statistical narrative.

The problem is the lack of visibility on lead’s allimportant scrap dynamic, an issue that in China is compounded by the broader unreliability of metals production figures.

The Shanghai market, however, is very visibly signalling growing stress in the statistical void that is the country’s lead supply chain. Reuters

”

16 Business Daily Thursday, September 21 2017

Closing M&A

Maersk sells oil tankers to owner, opening door to Mitsui

expects to close by next month, will have no impact on its financial guidance for 2017.

A.P. Moller Holding, a wholly-owned fund A.P. Moller-Maersk has agreed a US$1.71 established by the founder of A.P. Mollerbillion deal to sell its oil tanker division to Maersk with approximately US$20 billion its controlling shareholder, who in turn will enter an ownership consortium with Japan’s under management, will take ownership of Maersk Tankers through its subsidiary APMH Mitsui & Co. The Danish conglomerate last year embarked Invest A/S. on a restructuring to focus on transport and Maersk said the new owner will establish an ownership consortium for Maersk Tankers’ logistics and last month sold its oil and gas fleet with Mitsui & Co. and other potential business to Total in a US$7.45 billion deal. partners, but that A.P. Moller Holding will Maersk said it will use the proceeds to remain the majority shareholder. Reuters reduce debt and that the sale, which it

Merger

Thyssenkrupp and Tata to create Europe’s no. 2 steelmaker The deal involves combining Tata’s plants in the Netherlands and UK with Thyssenkrupp’s German assets Aaron Kirchfeld, Thomas Biesheuvel, Swansy Afonso and Siddharth Philip

T

hyssenkrupp AG and Tata Steel Ltd. reached a tentative deal to merge their European steel businesses in a bid to create the region’s second-largest producer and tackle overcapacity in the industry.

The German and Indian companies have signed a memorandum of understanding for the joint venture to be named Thyssenkrupp Tata Steel, which will be equally owned by both parties, they said yesterday.

The transaction is expected to be finalized at the beginning of next year and will require the approval of the European Union.

The two foresee annual synergies of 400 million euros (US$480 million) to 600 million euros and the venture will be closer in size to Europe’s top producer, ArcelorMittal. Savings will be made in areas including capacity utilization, sales and administration and research and development. The companies flagged the possible loss of as many as 4,000 jobs, from a newly combined workforce of about 48,000.

Thyssenkrupp and Tata

have been in tie-up talks for more than a year to drive the latest wave of consolidation as steelmakers seek ways to counter overcapacity and cut costs. While prices have recovered since early last year, the industry still faces a global glut caused by large Chinese exports and too much capacity around the world.

Benchmark prices in Europe are about half the level they were in 2008, according to Metal Bulletin Ltd.

Stock climbs

“We have always clearly stated that we believe in consolidation as the best solution for steel,” Thyssenkrupp

Investment

Chief Financial Officer Guido Kerkhoff told Bloomberg TV. “Now we’re taking another step in this journey to merge into an even bigger entity: Thyssenkrupp Tata Steel. The clear number two -- a clear number two that we want to form.”

The venture would have a pro-forma revenue of about 15 billion euros annually and shipments of about 21 million metric tons of flat steel products, the companies said. No cash would change hands under the proposed combination.

Investors have mostly welcomed the prospect of Thyssenkrupp finding a

partner for its cyclical and capital-intensive steel operations. Still, Chief Executive Officer Heinrich Hiesinger, who is working to transform Germany’s top steelmaker into a more diversified industrial group, has faced some opposition from activists and unions. For Tata Steel, the move would let it focus more on its Indian market, where it plans to grow aggressively.

The deal involves combining Tata’s plants in the Netherlands and UK with Thyssenkrupp’s German assets.

The venture will be based in the Netherlands.

Dutch Prime Minister Mark

Fuel

Rutte called the deal “good news” in a Twitter post. “This strengthens the leading role of Tata Steel Ijmuiden as one of the most efficient and sustainable steel plants in the world,” he said.

Activist investor Cevian Capital AB may oppose the venture and instead favour a breakup of the German engineering company, people familiar with the matter said last week. Labour representatives, who have half of the seats on Thyssenkrupp’s supervisory board, have also expressed concern over job losses.

Tata Steel cleared a hurdle for the venture after a UK regulator approved a deal to solve a long-running pension standoff, which Thyssenkrupp CEO Hiesinger had said was potentially a major stumbling block to the combination.

Thyssenkrupp’s largest shareholder backed the planned combination.

“The Alfried Krupp von Bohlen and Halbach Foundation welcomes the planned cooperation between Thyssenkrupp AG and Tata, which has as its goal the long-term preservation and independent continuation of the company,” the foundation, which owns more than 23 per cent, said in a statement. Bloomberg NEWS

Brexit

Volvo Cars is said to double India’s Reliance plans major expansion EU officials doubt May U.S. investment to US$1 billion at world’s largest oil refinery complex will break Brexit deadlock Volvo Cars is so eager for growth, it’s planning to expand its first U.S. factory -- and it hasn’t even finished building it yet.

The Chinese-owned Swedish automaker is set to double the investment in its assembly plant near Charleston, South Carolina, to a total of US$1 billion, said a person familiar with the plans. The added spending will support an additional 1,900 jobs in addition to the 2,000 originally planned, said the person, who asked not to be identified because the plans are private.

Volvo is rapidly expanding its product lineup and manufacturing base as it aims for 800,000 global light-vehicle sales by 2020 -- 50 per cent more than last year’s record total. Global sales through August this year rose 8.7 per cent to 359,798, even as U.S. deliveries slipped 7.3 per cent -- a shortfall that the automaker said will be made up by the end of the year.

Since Li Shufu’s Zhejiang Geely Holding Group Co. bought the company from Ford Motor Co. in 2010, Volvo has been moving quickly to adapt to changes in the industry. Long known for passenger safety, it’s become a leader in driver-assistance systems and autonomous-vehicle development. In July, the Gothenburg, Sweden-based automaker committed to eventually converting its lineup to all hybrid or electric powertrains. Bloomberg NEWS

India’s Reliance Industries, operator of the world’s largest refining complex, is considering expanding its oil processing capacity by over 40 per cent by 2030, according to two sources familiar with the matter.

Reliance may expand the capacity at its dual refinery complex in Jamnagar in the western Indian state of Gujarat by 30 million tonnes a year to 100 million tonnes per year, according to the sources, who saw the expansion plans in a presentation by the company on potential energy scenarios to 2030.

Reliance made the presentation to India’s Centre for High Technology (CHT), a unit of the Ministry of Petroleum and Natural Gas that evaluates projects and assesses their technological requirements.

The plans signal that Reliance remains bullish on the outlook for India’s fuel demand even as the government is considering plans to electrify all of the country’s vehicles by 2032. Still, India’s demand for diesel and gasoline to power existing and expecting combustion engine vehicles will likely remain strong as its population grows and becomes more wealthy.

“The plan to is to have petrol and diesel output capacity of close to 60 million tonnes by 2030, produced from cheaper heavy grades,” said one of the sources. Reuters

European Union officials aren’t holding out much hope that UK Prime Minister Theresa May will next week break the deadlock in the Brexit negotiations.

A week before May delivers a speech in Florence aimed at updating her strategy towards the divorce, officials on the continent want her to propose solutions to sticking points such as the financial settlement, but aren’t confident she will do so.

“It would be very nice if we could get a clear message on where the British are” on its financial obligations with the EU, Danish Foreign Minister Anders Samuelsen said in an interview in Copenhagen. “The more concrete the message she gives, the better.”

Three months since negotiations began, the UK and the EU are at an impasse, limiting the likelihood that they will begin to open talks over a trade deal as soon as next month. The EU wants first to resolve differences over the Irish border, citizens’ rights and the controversial divorce bill.

One EU official said expectations for May’s speech are low as she still needs to appease members of her Conservative Party, both those who support a hard Brexit and those who are more moderate.

The party holds its annual conference two weeks after the Florence address. Bloomberg NEWS