MSAR Master Plan tender process initiated City planning Page 2
Monday, October 9 2017 Year VI Nr. 1398 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Security
Improved security measures were set in place during Golden Week, says Secretary for Security Page 6
www.macaubusiness.com
Transportation
Crime
Three public car parks cleared and ready for use by yearend, says DSAT Page 2
Equities
China denies cyber attacks against exiled tycoon Page 9
Citigroup attracted by Mainland markets Page 8
Improving investment opportunities Economy
New and likely profitable opportunities for investments in businesses in the MSAR abound, say experts, from logistics and tourism, to digital platforms and healthcare. Better inter-regional integration from infrastructure to the cultivation of emerging industries, coupled with the MSAR’s attractive tax policy will pave the way. Page 3
New rules on raffles
The youth of tomorrow
The International School of Macau is creating talents, educating students locally, with most seeking higher education abroad, and returning later to work in the MSAR. The school will soon have a capacity for 1,600 students, and while its tuition fees are the highest in the MSAR, they are still cheaper than regionally, says Head of The International School of Macau, Howard Stribbell.
Administrative A public consultation on commercial and leisure activities recommends reigning in raffles and lucky draws, with auditors to attend and results to be sent to DICJ. Also, increasing paperwork for events and activities, in particular those held outdoors. Massage parlours only providing foot, shoulder, head and arm massages won’t require a licence, while cybercafés could see a minimum age increase. Page 2
Rosneft rebalancing global oil flows
Interview | Education Pages 4 & 5
HK Hang Seng Index October 6, 2017
28,458.04 +78.86 (+0.28%) Worst Performers
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+3.04%
Hengan International Group
+1.42%
Galaxy Entertainment Group
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Sino Land Co Ltd
-1.00%
+1.81%
Bank of Communications
+1.18%
China Shenhua Energy Co
-1.51%
BOC Hong Kong Holdings
-0.78%
CITIC Ltd
+1.72%
Ping An Insurance Group Co
+1.11%
Cathay Pacific Airways Ltd
-1.48%
Want Want China Holdings
CK Infrastructure Holdings
+1.70%
Lenovo Group Ltd
AAC Technologies Holdings
-1.46%
HSBC Holdings PLC
Hang Lung Properties Ltd
+0.93%
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28° 31° 28° 32° 27° 32° 25° 32° 26° 29° Today
Source: Bloomberg
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Tue
Wed
I SSN 2226-8294
Thu
Fri
Source: AccuWeather
Energy Russia’s largest oil producer says it wants to increase sales to China. The move could hint to a shift in oil markets, as the volumes mentioned mean that Asia gains weight against Europe. Page 10
2 Business Daily Monday, October 9 2017
Macau Golden Week
Visitor arrivals jump 11.6 pct by seventh day of Golden Week
T
he city had received a total of 844,522 visitors as of the seventh day of the National Day Golden Week, Saturday-end, up 11.6 per cent when compared to the same period last year. According to the official data
released by the Macao Government Tourism Office (MGTO), there were some 647,352 Chinese visitors among the total number of tourists, accounting for 67.7 per cent and representing an increase of 9.6 per cent year-on-year. Regarding the arrivals by ports of
entry, a total of 109,084 crossed the seven borders in the city on October 7, a surge of 60.2 per cent when compared to last year. In more specific terms, around 75,298 Chinese tourists crossed the borders on the same day, an increase of 82 per cent year-on-year. C.U.
Urban planning
Tender opened for Macau Master Plan The pre-qualification tender for developing the Macau Master Plan was opened on Friday and received one
fully-approved application, while four of the five total received applications were partially-approved, according to
the Land, Public Works and Transport Bureau (DSSOPT). The Master Plan of the city includes the Macau Peninsula,
Taipa Island, Coloane, the new Zones of reclaimed land, the artificial island for the Hong Kong-Zhuhai-Macau Bridge
Flood aftermath
Law
Three flooded car parks to hopefully reopen by year end
Raffle and deal
The city’s Transportation Bureau (DSAT) has cleared three car parks those of Portas do Cerco, Pak Lok and Edifice Cheng I - affected by the flooding during Typhoon Hato in August, and they will hopefully be reopened for public use by the end of this year. DSAT noted that the purchase of related equipment and repair works must undergo administrative procedures, while reiterating that procedures are accelerating. The Bureau further reported that the
car park located within Edifice Fai Tat suffered the most damage, with the ventilation system, lifts, electronic gate and fire system completely damaged. As such, the authority is expecting that the car park will only be available for public use during the first half of next year. A little over a month since the super typhoon, DSAT has removed 470 vehicles from the affected car parks, of which 433 were light vehicles and 39 were scooters. C.U. advertisement
and the territorial waters, as well as the new University of Macau campus in Hengqin. C.U.
A new government proposal to revise administrative requirements for activities in public spaces proposes that raffles for profit purposes should be prohibited due to their gambling elements, while lucky draw activities be further regulated Nelson Moura nelson.moura@macaubusinessdaily.com
A public consultation regarding a proposed change to the demonstrative requirements for commercial and leisure activities started last Saturday, set to run until December 5, with changes looking to update regulations imposed in 1998. According to statements made by the head of the legislative production department of the Justice Affairs Bureau (DSAJ), Francisco Fong, raffle sales for profit will be prohibited, given their similarity to gambling activities. For-profit lucky draw activities will also be more regulated under the proposal, with the institution responsible for the activities having to “designate an accountant or auditor who does not belong to that entity” to supervise the draw. The results should then be sent to the Gaming Inspection and Co-ordination Bureau (DICJ), who may also decide to send “representatives to oversee this activity”. Organizers of non-profit lucky draw activities will also have to reveal publicly the amount of funds raised and their intended use. The changes proposed to the administrative regime also propose that several activities and events which previously only required notifying authorities, will instead require a licence. These activities include those performed in public locations; shows
performed outside public locations but open to the public; in laundry establishments; the sale of non-profit raffles; activities in cinemas and theatres and snooker and bowling establishments. Meanwhile, any activities taking place in entertainment facilities with public access would also require a license.
Localised massages
In regards to massage parlours, the changes propose that localized massage service establishments - involving only feet, shoulders, head and arms - will not require a licence. However establishments where “whole body” massages are performed will still require a licence, with the Deputy Director of DSAJ, Carmen Maria Chung stating the rule is maintained to prevent illegalities. “There are certain establishments that take advantage to provide other types of services prohibited by law,” she added. The proposal also considers an increase of the minimum age for minors entering cybercafes without supervision from 12 to 16-years-old, in order to match the same age requirement for video game arcades. “With the spread of internet access, cybercafes have started to have the same uses by people as video game arcades, with minors going to these places to play video games and not to search for information,” Mr. Chung added.
Cultural
Alexis Tam: repair work to cost MOP30 mln to MOP50 mln Some MOP30 million to MOP50 million will be spent on repairing damaged historical and cultural facilities, according to the Secretary for Social Affairs and Culture, Alexis Tam Chon Weng. Speaking on the sidelines of an event on Saturday, the Secretary said on behalf of the Cultural Affairs Bureau (IC) that repair works are expected to be slated by year end, adding that the the members of the Committee have agreed on the amount to be spent on the repair works. In regards to the flooded facilities of the Grand Prix building, the Secretary reported that the Sports Bureau
is currently expediting repair works, in order to meet the deadline for the scheduled 64th Macau Grand Prix in November. Meanwhile, a cross-departmental task force will be set up to develop the city’s tourism policies, measures and implementation, to be headed by Secretary Tam. The Cultural Heritage Committee meeting held last Friday was conducted behind closed doors, unlike previous meetings. The Secretary said the meeting was not open to the press given that it involved sensitive topics for the protection of related rights and interests. C.U.
Business Daily Monday, October 9 2017 3
Macau
Investment opportunities
In businesses we trust Business experts claim the city has urgent needs to address in order to improve its investment opportunity outlook, but argue promising prospects exist, which can overlap with government focus Sheyla Zandonai sheyla.zandonai@macaubusiness.com
C
urrent a n d likely profitable opportunities for i n v est m e n ts i n business in the Macau SAR range from logistics and tourism to the digital industry, according to experts who spoke to Business Daily. For the Executive Director of the British Business Association of Macao (BBAM), Jill Rigg, the city has a “bright future” within the Greater Bay Area, an area destined to become the “powerhouse of the world.” A focus on enhancing the MSAR’s place in the Greater Bay Area is a direction also framing policies fostered by the Macao Trade and Investment Promotion Institute (IPIM), with the agency claiming to Business Daily that ‘with the deepening of regional co-operation […] new business opportunities will continue to abound in Macau.’ In Ms. Rigg’s opinion, important concerns need to currently be addressed for that to happen, including the need for “vastly improved infrastructure” and conditions to import talent to the city. “A more open approach to attracting topline talent should be seriously undertaken and reviewed by the MSAR. Great talent and growth will give Macau citizens better living conditions and way of life,” details Rigg.
Integration
The city’s integration into the Pearl River Delta (PRD) and fostering training are points also raised by José Alves, the dean of the Faculty of Business and Leadership at the University of Saint-Joseph. Mr. Alves believes integration would open up opportunities for the development of logistics and transportation businesses. “[It] will not only improve access to Macau, but also offer its companies the opportunity to enter international supply chains, namely with Portuguese-speaking countries,”
he told Business Daily. This would be aided by infrastructure projects. “The city needs to have public infrastructures that are comparable in quality and efficiency with nearby cities in the PRD, or else investors may perceive other cities as more attractive,” he highlighted. Mr. Alves also pointed out that training is strongly connected to competitiveness. “The education sector needs to accelerate improvements at a rate that is faster than nearby cities, so that we can reduce knowledge gaps and remain competitive in the long term,” he suggested.
Broadening horizons
IPIM claims it is applying efforts in ‘cultivating’ what it calls ‘emerging industries,’ which to a large degree converge with the b usin ess o p port u ni ti es and niches mentioned by respondents to Business Daily. In reply to enquiries, the institute outlined that the ‘government pays close attention’ to the convention and exhibition industry (MICE), the Traditional Chinese Medicine (TCM) industry, and the cultural and creative industries, in addition to the ‘specialised finance’ and ‘the construction of infrastructure to support smart-city innovation and expediting the development of e-Government initiatives.’ Slightly off the government’s radar but equally promising areas for investment, according to Mr. Alves, are healthcare and digital technologies. The first is due to “the increasing purchasing power and ageing population” in the city, while the second would “increase productivity, especially of SMEs [small and medium enterprises], and facilitate communication, interactions, and transactions with remote markets and partners,” he said. Free circulation of capital, as well as visitors, are also appealing conditions for local commercial development, according to the Vice-President of the
Youth Entrepreneurs Association, Jorge Valente, who claims “all businesses have a potential clientele of over 30 million visitors a year.” According to Mr. Valente, who was a candidate in the latest legislative elections, another factor of attraction is Macau’s low tax environment, at least in principle, because that “entails the company survived to make profit in the first place.” Taxation is also one of IPIM’s main highlights in its responses. ‘Macau provides a business-friendly environment with no foreign exchange control, a low and simple tax regime and a highly open market enabling free flows of people, capital and
goods,’ the institution’s spokesperson noted.
Low taxes: enticing, but enough?
If taxes are low, the same cannot be said about other costs involved in the setting up and maintenance of business ventures in Macau, point out respondents. Mr. Valente told Business Daily that the main difficulty for young entrepreneurs “is the high cost associated with doing business in general.” Valente highlighted that “all fixed and variable costs are high,” including the cost of labour, even when the workforce is employable. “The lack of labour is another big problem,” he
pointed out, noting however that it is not the only one. “The lack of transparency in licensing of any kind and the length [of time] it takes kills most businesses,” he outlined. Law constraints are also perceived as a problem by Mr. Alves, who argued that enabling the city’s regulatory environment to “become more grounded on scientific, technological and sustainability standards,” would help trigger a positive effect similar to the outcome of investing in digital technologies: to “increase productivity.” This then “stimulates increased efficiency, transparency, and citizenship,’ advocated Valente. advertisement
4 Business Daily Monday, October 9 2017
Macau Interview
Lessons for life The ratio of quality and tuition costs for internationals schools is better in Macau when compared to Hong Kong or mainland China, points out Howard Stribbell, Head of The International School of Macao (TIS), discussing with Business Daily the value of education, the evolution of TIS and expansion projects for the school. Nelson Moura nelson.moura@macaubusinessdaily.com
W
hat is your professional background and how did TIS come about in Macau? Th e sch o o l o p e n e d in 2002 and I came in 2006. I was teaching at the [Canadian province of Alberta], saw an advertisement for an overseas school and it sounded like a neat opportunity. I packed up my family and we came to Macau thinking we would stay two or three years, and we’ve already been here for 12 years. In the beginning I was hoping Macau was in the Caribbean, I have to admit my ignorance. How has the private school business developed since you first arrived in Macau? At the time the founders looked to start an international school here, people said the city didn’t need another international school. However the school went from 58 students in the first year to 300 students when I first arrived. Since that time we’ve grown to 1,200 students and in the future we will have capacity for 1,600 students. It’s clear the Macau population is looking for international options and I think a school like us that accepts local and international students, really creates a unique context for learning. The end goal for all of our students is to go to overseas universities, primarily English-based, and we’ve accomplished that so strongly that it surprises me sometimes. How much financial support do you receive from the government? We’re a non-tertiary private school, which means we receive partial funding by the government. We
can apply for funding for inclusive education, small class sizes or the school development plan. Every year, on average direct support from the government to our budget ranges between 10 to 15 per cent of our operation. We have the highest tuition in Macau, but I believe we offer a high quality product and experience. If you compare it to Hong Kong, the tuition would be twice as high, or three times higher in the Mainland. I have to pay my teachers the same they would receive in Hong Kong or the Mainland. Taxation here helps, but while expenses are the same, our tuition levels are lower.
she’s convinced she will be the first one to get an offer in Antarctica.
What is the student age range of TIS? From three years old to 17 or 18 years old. This past graduating class was the first time we had students graduating that had been here since pre-kindergarten.
‘It’s clear the Macau population is looking for international options and I think a school like us that accepts local and international students, really creates a unique context for learning’
Your school uses the Alberta curriculum. Has that offered any obstacles to convince parents in the city? We had to get our parents to suspend their original disbelief since we use the Alberta curriculum, and who has even heard of the province of Alberta? The Alberta province has a very strong curriculum and it outperforms the other Canadian provinces, but it can be seen as very regionalised, so how international is that curriculum? Even now, I have parents who ask me if their kids need to go to school in Canada, which is understandable, but far from the truth. In fact 100 per cent of our students get offers of admissions from around the world. To date we have over 250 universities and colleges providing offers of admission. Literally in every continent except Antarctica, although my daughter graduates this year and
How much have you adapted the curriculum to fit the local education system? That was actually one of the challenges we had in the early days, to make sure we were taking this curriculum from Alberta and making it meaningful for the Macau and international context. For example, in grade four we teach Macau history, which ends up being fascinating even to the parents. We also have to make it meaningful for students that just moved to the city. So when we talk about political systems, we’ll learn about the Canadian political system, but we’ll also learn and talk about the American system and the UK system. We’ll talk about the Thai monarchy or what Australia’s system looks like. These kinds of teachings are very rewarding for our students.
We also really emphasise an international mind, and so our students really engage in a lot of community outreach. Every year we send the whole high school, grade seven to 12, overseas somewhere - from the United Nations in New York to India, to skiing in northern China or working with elephants in Thailand. We just had a great one in Laos where they were building toilets for villages. These are great opportunities to explore the world in a way that is hopefully not a ‘touristy’ kind of way, but in a way that really embraces the culture. What is the percentage of local to foreign students and staff in the school? Our largest group is from Macau, with Hong Kong and mainland China making up a small number. The next largest group would be Australian, then Canadian, American, Portuguese and then British. In total 44 different nationalities. In terms of staff, this year we have 200 staff, being 130 teachers and 70 support staff. They come from all over the world, with most coming from Canada, although over the last three years we’ve been making a much more diligent effort to have our teachers coming from a broader range of nationalities and of a broader range of experiences. Part of that is also because Macau is becoming an international destination. It’s very comfortable to live here, people can move here with their family and don’t just come for two years and then leave, they really are looking to put down roots. This makes it easier to recruit personnel. The school is also becoming more well-known in the region and so we have the career internationals who might’ve been in a British school before or at an American or Canadian school. They’re finding out about TIS and seeking to join our team. Have you faced any difficulties hiring personnel in Macau? We always encounter difficulties, we’re committed to complying with government regulations, which can be a challenge at times. With an international school that is accredited by the province of Alberta, 100 per cent of our teachers have to be certified by Alberta. We’re given no wiggle room at all, so that means they either come from Alberta or they meet the same requirements that Alberta has. If they come from England, for example, they have to meet the same requirements as in Canada or the U.S. That makes it very important that they fit the same standard while following the rules and regulations here in Macau as well. It can be a challenge. We started recruiting in November for the following academic year in September. We tend to have all our recruitment done by the beginning of February so we can process work visas until September. Every year we experience 10 to 20 per cent turn over in growth. Last year was our hardest getting teachers approved, we ran upon a couple of difficulties. We just had to work harder and make sure we complied as fully as possible.
Howard Stribbell, Head of The International School of Macao (TIS)
Which countries do your graduating students end up attending university in? Our kids are going all over the place. In fact, in the last graduating class the largest percentage of offers came from the UK. There’s a number of reasons for that, the UK has been very
Business Daily Monday, October 9 2017 5
Macau involved in marketing to students and they also make it easy for students to get offers by offering one exam and one admission process, with multiple universities giving multiple offers to the students. A student might get four or five offers from the UK in one application. If they apply to Canada or the U.S. they get one offer, since you have to apply directly to universities. They also have exceptionally good programmes.
‘We have the highest tuition in Macau, but I believe we offer a high quality product and experience’ Which academic areas does the school curriculum focus on more? We really emphasise a well-rounded education, so we have a very rigorous curriculum that will get students into universities all over the world. However, we also want to make nice human beings, so we want students that are engaged in sports and athletics. We have 28 sport teams that compete locally, regionally and internationally. We also want students to have a fine arts side, either through painting and drawing to drama and musicals. We also want to make sure the students and their families are giving back to their communities and back to the world. We have a different notion of what an international school is because we’re a constructivist school, so we believe students construct their own learning and that knowledge is not just something the teacher takes as a package and gives to the student.
Critical thinking, problem solving and collaboration are essential. If a kid gets passionate about something, you hardly need to teach him, it becomes this all-consuming fire. Sometimes students have a hard time when they first transfer to our school since our students work in small groups a lot. They have to do presentations and they have to be able to take context and text from multiple sources, analyse it, come up with their own opinion, and be able to back it up or present it. Generally, what are the most common demands from parents in Macau? I think our parents have high expectations of their children. They want their children to go on to university somewhere. As parents, we assume that will be in our home country, even I thought that. But what happens is that the doors open up to so many different countries and the world gets so much smaller. Our kids are used to getting on planes and going through immigration to fly all over the world. I think in Asia, families still see that value of education and parents are willing to invest money and time into their children’s education. Our parents are very actively involved and it’s an exciting part of our school, we encourage parents to take part in the school. We have open days and community days and we do a lot of extra-curricular activities. We want the school to be a real hub for the community. What are the future expansion projects of TIS? We opened up our north wing recently with the opening ceremony to be in early November. This new north wing will have an additional 11,000 square metres and basically doubles the square footage of our
school. That allows us to open up an additional 600 seats or 400 places for new students. We had anticipated this opening, so we had already expanded our kindergarten and we have this huge group of students that we need to move around the school. Opening up this building will allow us to do that without turning away people already here at the school. Unfortunately, we still have more demand than we can meet, with many people on the waiting list. For every student we accept to kindergarten or pre-kindergarten we turn away three or four students. How easily do graduates find employment after their time at TIS? We are very happy to see that our students are fluent in Mandarin, English and most in Cantonese. They’re well-educated, they can go work at casinos and get very high paying jobs if they want, but none of them chose to do that, they all chose to go to university. That’s exciting for me because it means they understand the value of education. Those students are now graduating and coming back to Macau. It’s neat to
see them work either at government or private positions, joining resorts or real estate agencies, and we keep following our alumni. I think that within the next two to three years we’ll actually start to see some of those graduates have kids and send them to TIS. In your opinion, what is lacking in the education system in Macau? I think Macau has a very low gap in terms of achievement from poor to rich people, which I think speaks well about the equity in the education system. What’s lacking is hard to say. I see the Education and Youth Affairs Bureau (DSEJ) making very good commitments, investing money and resources to improve the system. They have long-term plans and you’ve seen things improve over the years. They’re trying to bring a national curriculum that is standardised, which is difficult because everyone is doing their own thing. As long as they keep bringing a skill-based objective, then schools can use whatever curriculum they want and show how it complies with the Macau curriculum. advertisement
6 Business Daily Monday, October 9 2017
Macau Opinion
Sheyla Zandonai*
Wishful thinking Non-resident inhabitants of Macau, aka blue-card holders, will likely have to pay more to use public transportation in the city. The proposal to increase bus fares, announced by the government over a week ago, is slowly unpacking discontent. Positive or reverse discrimination is a concept which usually describes policies created to enable some advantages for people and groups of people who are usually perceived to enjoy fewer rights or to be somewhat unfairly treated in a given society. Those can include ethnic minorities, people with disabilities, women. It is slightly different from the way the Secretary for Transport and Public Works Raimundo do Rosário employed the term last weekend to defend the proposal, for it is not being framed as a way to benefit those allegedly more in need, but those allegedly living in less disadvantageous conditions. The only positive aspect to it is, thus, wishful thinking, and that hardly works in policy development. In truth, bus fares in Macau are not expensive in absolute terms, although they may be relatively more expensive or cheaper depending on the distance travelled. It is also common around the world that costs for public transport be subsidized. But in big cities and metropolises, they are usually not cheap and customers are paying their fare, so to speak. But here, Mr. Rosário explained the proposal is not based on economic intelligence. So, it is a political decision. Although its bottom line always reverts to privileging and protecting ‘locals,’ the reasons as to why the increase in bus prices will be higher for non-resident workers did not come out clear enough. One thing is certain though. By so doing, the government is creating a political problem where there might not be one. While defining policies that discriminate against the foreign labour force, it is levelling the way of social integration – which barely exists, truth be told – into more troubled waters. Integration does not mean that everybody will enjoy equal rights, or that there will not be resistance from different sectors of society. But enacting arbitrary discrimination is not laying the grounds on a good note. It is high time we recognize societies are not pure, bounded, impenetrable cultural entities. Macau is a diverse place. And mind you, that does not need be a problem. * Journalist.
Poker
PokerStars aims to break new records
A
guaranteed prize pool of HK$25 million is set to lure in poker players both short-haul and long-haul this month for PokerStars’ Asia Championship of Poker, according to the group’s Department Head of Live Events Asia-Pacific, Mark Blake. The event takes place October
13 to 29. The prize pool is “unprecedented here in Macau,” points out Blake, noting that the tournament also has a “HK$100,000 buy-in, which is the biggest buy-in event in Asia and definitely is on a world stage – there’s not too many events globally that buy-in at that level,” Blake notes.
Seeing exponential growth over the past nine years since setting up in Macau, the next five years are set to “deliver bigger and better,” guarantees Blake, noting that the near-50 per cent increase in player numbers from 2015 to 2016 is maintainable in the near future. Coming off of the 1,308-unique player Macau Poker Cup, which broke its own record in terms of turnout, Blake notes that “players are starting to discover Macau for the first time and telling others about it”. “Understanding the market and constantly honing what we do, and asking our players what works, what they like and don’t like and adjusting our product to suit them,” has been key to staying competitive in this market, notes Blake, pointing out that looking forward “making sure that we’re doing all we can to grow the local market, whilst also attracting the international visitors to Macau,” will be the tone. Read more in the October edition of Macau Business magazine or watch the interview on MB.tv on Tuesday, October 10.
Security
Precautionary measures The recent Las Vegas shooting led the Office for the Secretary of Security to enhance security measures during the Golden Week holiday period Nelson Moura nelson.moura@macaubusinessdaily.com
The Office for the Secretary of Security told Business Daily that it had coordinated improved security measures during the Golden Week holiday period, after the recent Las Vegas shooting that left 59 people dead and almost 500 people injured. According to the response, the Unitary Police Service (SPU) - under the coordination of the Secretary for Security - mobilized the Customs Bureau, the Public Security Police Force (PSP), Judiciary Police (PJ) and the Fire Services Bureau to deploy tactical police manpower and law
enforcement operations during the Golden Week holiday period. ‘For years, the security authority has implemented corresponding policies to uphold the public order and social security […] These measures, which include crowd control when it is necessary, cover the most crowded locations such as major tourist attractions and casinos,’ the response stated. After the Las Vegas shooting, the Gaming Inspection and Co-ordination Bureau (DICJ) told Business Daily it will hold a meeting with local gaming operators, set to take place after the Golden Week period, to further discuss security measures.
A similar meeting was held on June 4 after a shooting at Resorts World Manila in the Philippines, with the Office of the Secretary of Security telling Business Daily that ‘all the representatives agreed with the requests made by the two bureaus to heighten their security measures, strengthen all the electronic surveillance devices and improve the law enforcement condition and facilities within casino areas’. These requests involved local hotels and casinos increasing the number of personnel and equipment for security checks, and enhancing communication with the PJ in case of emergencies.
Results
Casinos drop as Golden Week visitor numbers disappoint Daniela Wei and Jeanny Yu
MSAR casino shares slumped last Friday amid growing concern that business during Golden Week may not live up to optimistic projections due to fewer-than-expected tourists. Casino operators were the two worst performers on Hong Kong’s Hang Seng Index as data last Friday showed tourist arrivals from mainland China fell 1.1 per cent in the first five days. That compares with a 7.3 per cent jump in the year-earlier period. Galaxy Entertainment Group Ltd.’s shares fell 1.9 per cent, while Sands China Ltd. dropped 2.7 per cent, the biggest decline since June 1, at the close in Hong Kong. “Casinos, shops and restaurants inside the resorts were not crowded in the last few days. It’s just like a regular Saturday night performance, definitely not a ‘Golden Week’-type busy,” said Ben Lee, a Macau-based managing partner at Asian gaming consultancy IGamiX. “We are scrambling to find out what happened.” The VIP betting volume is expected
to decline slightly during Golden Week from a year ago, while mass gaming revenue may increase at low single-digits, based on the business performance in the first half of the holiday, he said. Bookings at hotels, junkets flush with high rollers and brand-new entertainment options were seen to help make Golden Week the most lucrative in at least the past decade. The Macau Tourism Office had forecast the number of tourists this week to increase by as much as 5 per cent from about 1.2 million visitors last year. The weaker-than-expected
data so far may be due to a longer Golden Week period this year that is spreading arrivals across more days, said Vitaly Umansky, analyst at Sanford C. Bernstein & Co.
Optimistic outlook
Melco Resorts & Entertainment Ltd. “is happy with” the gaming revenue for the first five days of the Golden Week, Chief Executive Officer Lawrence Ho said on Bloomberg TV last Friday. The numbers for this year compare with a higher base for 2016, he said. JPMorgan Chase & Co. analyst DS Kim said that he’s maintaining his outlook for a growth of 25 per cent to 30 per cent in gaming revenue for the week. “While the first four days’ betting volume showed a slight drop, the performance from Oct. 5 is strong for Suncity,” said Andrew Lo, executive director of Suncity Group Holdings ltd., the listed vehicle of the city’s biggest junket group. “And we expect our business will do better during the weekend,” he said late last week. Bloomberg
Business Daily Monday, October 9 2017 7
Gaming
ROI
Caesars bankruptcy ends amid Asia market shift, Vegas shooting Caesars has spent years struggling to manage more than US$25 billion in debt, much of it taken on in 2008 Tracy Rucinski
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aesars Entertainment Corp has an eye on expanding its Caesars, Harrah’s and Horseshoe brands in the United States and abroad after its casino operating unit emerges from nearly three years of bankruptcy as soon as Friday with US$10 billion less in debt. Industry analysts said it may be too late to catch up with rivals like MGM Resorts International, Wynn Resorts Ltd and Las Vegas Sands Corp that have spent years investing in highgrowth Asian markets like Macau as U.S. gambling has cooled.
“We’re primed for growth” Mark Frissora, Caesars Chief Executive “Twenty-five years ago Caesars was the premiere name internationally but they dropped the ball,” said Greg Bousquette of investment banking firm G.C. Andersen Partners, which advised unsecured creditors during the Caesars bankruptcy. Caesars has spent years struggling to manage more than US$25 billion in debt, much of it taken on in 2008 when Apollo Global Management and TPG Capital led a leveraged buyout of the company. The operating unit filed for bankruptcy in early 2015. Caesars emerges from Chapter 11 with a simplified structure by merging with Caesars Acquisition Corp and other affiliates, and former creditors will hold a majority of the stock. The U.S.-focused company may be more vulnerable than its peers if any downturn follows last week’s mass shooting on the Las Vegas Strip, where Caesars owns some of its most valuable resorts and casinos and derives most of its revenue. Las Vegas resort operators like Caesars may have to cut hotel rates and spend more on security and marketing to draw customers back, analysts said, though they expect business to bounce back over the longer term. Caesars declined to comment on any potential decline in its business stemming from the shooting, which resulted in 59 deaths. The company’s stock fell in early
trading last Monday, but soon recovered and market sentiment towards Caesars had been largely positive. Its shares, which had lagged rivals through much of the bankruptcy proceedings, have risen 74 per cent from a year ago, and investors two weeks ago snapped up its first bond offering since 2014. “We’re primed for growth,” Caesars Chief Executive Mark Frissora told investors in September, pointing to a leaner post-bankruptcy structure, US$2 billion of cash and plans for branding and licensing agreements, and M&A. The company in July hired two executives to oversee new projects and expansion in the United States and abroad. Target markets include Brazil and Japan, which are considering opening up gaming and resorts licenses. Caesars has already received preliminary approval for a foreigners-only destination in South Korea. But while Caesars spent years struggling under the debt from the leveraged buyout, its rivals were planting their flags in Macau and Singapore. Macau long ago surpassed Las Vegas in terms of gaming revenue. Companies that already have experience operating in Asia are frontrunners to receive licenses to run Japanese casino resorts, according to analysts.
The perks of total rewards
Caesars may have an edge in a tight U.S. market thanks to its Total Rewards loyalty program, the biggest in the industry with over 50 million members, analysts said. At Caesars’ Horseshoe Hammond outside Chicago, one retired couple said the rewards program is what draws them to the casino twice a week to try their luck at the slot machines and gaming tables. “The more we spend, the more points we get for food and other perks,” said Mrs. Johnson of Crete, Illinois. She declined to give her first name. Caesars has shown it can plug a hotel or casino into Total Rewards and immediately boost returns. In a Sept. 14 presentation, Caesars said underlying operating profit at the Planet Hollywood Resort & Casino in Las Vegas rose 232 per cent in the year after it was acquired in 2010. As pure gambling declines in the
United States, casino operators are relying increasingly on hotel visits and dining and entertainment, as well as new online and mobile platforms to engage the next generation of gamblers. Still, experts said Asia offers more
attractive growth opportunities. “Really what these companies should be focusing on in terms of best return on investment is Asian markets, particularly Japan,” said Morningstar gaming analyst Dan Wasiolek. Reuters advertisement
8 Business Daily Monday, October 9 2017
Greater China Tourism
Mainland’s answer to Airbnb sets sights on Japan Visitors to Japan rose 18 per cent to 18.9 million in the first eight months of the year Gareth Allan and Katsuyo Kuwako
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ujia.com, China’s largest vacation rental platform, seeks to boost Japan listings by 10 times in two years as it vies with Airbnb Inc. to capitalize on the nation’s tourism boom. The Beijing-based start-up aims to increase the number of properties available for holiday rental to about 100,000 by 2019 from 10,000 now, Tomoko Suzuki, chief executive officer of the Japanese unit, said in an interview in Tokyo. About half of the listings are owned by Chinese investors, she said, adding that Tujia may buy lodgings of its own in the future.
Japan’s home-sharing market is rapidly expanding after the government cleared regulatory hurdles earlier this year and as record tourist arrivals put a strain on the hotel industry. Chinese are bucking tighter capital controls at home to invest in real estate around the world, and Suzuki said Japan’s relatively low land prices will give them an incentive to purchase properties that Tujia can add to its listings. “Real estate in Tokyo, Osaka and Kyoto is cheap compared to Shanghai and Beijing, and Chinese interest in property investment is strong,” said Suzuki. Some investors own as many as 100 rooms, sometimes whole apartment buildings, and they lease
to local tenants as well as tourists through the Tujia platform, she said. Visitors to Japan rose 18 per cent to 18.9 million in the first eight months of the year, on course to beat 2016’s record 24 million, Japan National Tourism Organization data show. The country hosted more than 800,000 Chinese in August alone -- the most ever for a single month. Prime Minister Shinzo Abe’s government is seeking to attract 40 million arrivals in 2020, the year Tokyo hosts the Olympics.
Asia presence
Tujia charges owners 3 per cent of their accommodation rates, which are typically about 15,000 yen
Tourists at Narita airport in Tokyo
(US$130) to 20,000 yen a night, Suzuki said. The firm arranges more than 56,000 stays a day on a group basis, she said, declining to comment on how many of those are in Japan. The service, which is available only in Chinese, is in seven Asian countries including Singapore, Thailand and Malaysia.
“We definitely have the highest expectations for the market here” Tomoko Suzuki, chief executive officer of the Japanese unit Tujia.com Tujia has been raising funds for its expansion. In Japan, the company employs eight people, a number Suzuki expects to roughly double by 2019. It’s seeking to increase the number of listings there to 200,000 by 2025, she said. By comparison, San Francisco-based Airbnb has about 55,000 listings in Japan, its most popular destination in the Asia-Pacific region. Airbnb doesn’t own the properties. Japan passed a bill in June that removed the uncertainty over whether renting out a property for short periods was legal. The legislation, which limits stays to 180 nights a year and requires providers to register with local governments, will take effect next year. “Japan has attractive places to visit everywhere,” said Suzuki. “We definitely have the highest expectations for the market here.” Bloomberg News
Markets
Citigroup considering onshore cash equities business in Mainland Citi is also looking to bolster financing support for hedge funds, to help win more trading business and boost its Asia equities market share Sumeet Chatterjee
Citigroup Inc is considering setting up an onshore cash equities business in China and expanding research coverage of Chinese stocks, to boost its share of the business in Asia, said the head of its regional equities unit. The U.S.-headquartered bank is also looking to add at least 10 people to the unit, including bankers and technology staff, mainly at its Hong Kong and Singapore hubs, Richard Heyes told Reuters. Citi’s sharpened focus on its Asia equities business, which includes stock trading and research, is part of its global effort to bolster trading technology, hire senior bankers and boost financing to hedge funds. “It’s an interesting opportunity, one we are looking very closely at,” Heyes said, referring to setting up an onshore cash equities business in China, which he said was in its early stages. He declined to give details. “At the moment we don’t feel we have a competitive disadvantage doing it from Hong Kong in the way the majority of people do. But over time, do I think we should strongly think about on-ground presence? Yes.” Analysts said China-listed shares’ inclusion in the U.S. index publisher MSCI’s emerging-markets
benchmark this year, a milestone for global investing, would lead to a jump in demand for brokerage and research services. That came on top of the introduction of programs allowing two-way trading between stock markets in Hong Kong and Shanghai and Shenzhen, as part of Beijing’s efforts to open up capital markets.
“It’s an interesting opportunity, one we are looking very closely at” Richard Heyes, head of Citigroup regional equities unit
China’s brokerage revenue pool touched US$41 billion in 2015, showed a report last year by Quinlan & Associates. Assuming institutional broking revenue is 10 to 15 per cent of the total, a 1 per cent market share would bring US$40 million to US$60 million in annual revenue to an equities
house in the world’s second-largest economy, the consultancy said. To tap into an expected demand surge, Citi, which provides research on 175 China-listed firms, plans to increase coverage to 200 by year-end and 250 in the longer term, Heyes said. “We have seen very clearly, as one of the biggest players in (the Hong Kong stock) connect, a very significant ramp up in the opening of accounts. It’s very clear that many
people are getting prepared for future activity in the China market.” Citi is also looking to bolster financing support for hedge funds, to help win more trading business and boost its Asia equities market share. “We have had very meaningful success with some very important, large global hedge funds in the U.S. We are now expecting or have commitments from many of them to onboard us in Asia either by end of this year or early next year.” Reuters
Business Daily Monday, October 9 2017 9
Greater China Security
In Brief
Authorities deny links to alleged cyberattacks targeting exiled tycoon Guo Guo has made wide-ranging corruption allegations against senior Communist Party leaders via a daily stream of Twitter and YouTube posts since the start of the year China has denied responsibility for alleged cyberattacks in the United States appearing to target exiled tycoon Guo Wengui, who has levelled corruption allegations against senior Communist Party officials and applied for political asylum. In a statement provided to Reuters yesterday, the Ministry of Public Security said an investigation had found “no evidence” of Chinese government involvement in the alleged cyberattacks. The law enforcement agency said China had also provided the United States government with evidence that Guo, who has applied for political asylum in the United States, fabricated documents used to support his claims. It said China would make an official request for U.S. authorities to investigate the matter. “The falsified official documents and the false information he
fabricated are sensational and outrageous,” the ministry said in a rare English-language statement. Guo did not immediately respond to requests for comment. The Washington-based Hudson Institute think-tank was scheduled to host Guo last Wednesday in a rare public appearance, but cancelled the event the day before without explanation. The event would have coincided with the visit of an official Chinese delegation to the U.S. capital for a high-level law enforcement and cybersecurity dialogue between the two countries. The Hudson Institute said it had detected a Shanghai-based attack aimed at shutting down access to its website several days earlier. The suspected attack prompted a complaint from U.S. Attorney General Jeff Sessions during a meeting with
China’s Public Security Minister Guo Shengkun on Wednesday, the Wall Street Journal reported. The New York-based Guo applied for U.S. political asylum in September, but said this week the law firm representing him, Clark Hill PLC, had backed out after being targeted by Chinese hackers. Clark Hill lawyer Thomas Ragland, who lodged the asylum claim, confirmed he was no longer representing Guo, without elaborating. After his Hudson event was called off, Guo held a news conference at the National Press Club on Thursday where he produced what he claimed were “top-secret” official documents showing China had sent secret agents into the United States. China’s Ministry of Public Security said the documents shown by Guo were “clumsily forged” and “full of obvious mistakes”. Guo has made wide-ranging corruption allegations against senior Communist Party leaders via a daily stream of Twitter and YouTube posts since the start of the year, which he says are aimed at disrupting a key five-yearly Communist Party congress which begins next week. The Chinese government has been seeking to discredit Guo, who is the subject of an Interpol red notice issued at Beijing’s request, as a criminal suspect who should not be trusted. Reuters
Commodities
U.S. defers national aluminium foil dumping decision Commerce Department said it would issue its preliminary determination by Nov. 30 The U.S. Commerce Department said last week it would defer issuing its preliminary determination in an anti-dumping duty probe into imports of aluminium foil from China. The department said in a statement the delay would allow it “to fully analyse information pertaining to China’s status as a non-market economy (NME) country.” U.S. aluminium foil producers have filed petitions with the U.S. government accusing Chinese manufacturers of dumping the product in the United States. In 2016, imports of aluminium foil from China were valued at an estimated US$389 million, department figures show.
‘The postponement comes after data last month showed China’s exports of semi-finished aluminium goods, including foil, fell for a third straight month’ In August, U.S. Commerce imposed preliminary anti-subsidy duties of about 17 per cent to 81 per cent on aluminium foil imported from China. The Aluminum Association, a U.S. industry lobby group which filed the suit, was disappointed by the delay, but remained confident in the strength of its case, President and Chief Executive Officer Heidi Brock said in a statement.
When it opened the probe in late March, the Commerce Department said it was also launching a review of whether China should be treated as a market economy country, a designation that would effectively limit the calculation of anti-dumping duties on Chinese-made goods. The terms of China’s accession to the World Trade Organization in 2001 allowed other WTO members to use a third country’s prices to assess whether Chinese goods were being sold below cost or fair market value. That clause expired last December and China has called on the United States and the European Union to drop their use of such surrogate pricing, which has led to higher U.S. anti-dumping duties on imported Chinese goods.
“In all cases, the Department conducts a full and fair assessment of the facts,” Commerce Secretary Wilbur Ross said in a statement. “This extension will ensure that the highest standards are followed in this case as we seek to guarantee fair treatment for U.S. workers and businesses.” Commerce said it would issue its preliminary determination in the aluminium foil case - along with a decision on China’s non-market economy status - by Nov. 30. A final duty determination is expected 75 days later. The postponement comes after data last month showed China’s exports of semi-finished aluminium goods, including foil, fell for a third straight month as manufacturers struggled to find alternative markets. Reuters
Technology
State media report bloated battery in Apple’s iPhone 8 A fresh case of Apple Inc’s new iPhone popping open due to a swollen battery has been reported in state media in China, the world’s biggest smartphone market where the U.S. firm is seeking to revive faltering sales. The incident comes as Apple investigates similar cases reported in Taiwan and Japan of batteries in its latest iPhone 8 Plus becoming bloated, causing the device’s casing to open. ThePaper.cn cited an iPhone buyer surnamed Liu as saying his newly purchased iPhone 8 Plus arrived cracked open on Oct. 5. There was no sign of scorching or an explosion. M&A
Beijing approves HP’s buy of Samsung’s printer business China said last week it has approved HP Inc’s US$1.1 billion purchase of Samsung Electronics’ printer business with certain restrictions, citing concerns about the U.S. firm’s dominance of the domestic laser printer market. HP announced the deal in September 2016, hoping to disrupt the US$55 billion copier market by focusing on multifunction printers and more deeply embedding mobile and cloud printing technologies to its product solutions. It hoped at the time to close the transaction within 12 months, pending regulatory review. Results
Yum China same-store sales beat Yum China Holdings Inc’s quarterly same-store sales beat analysts’ estimates as its KFC restaurants served up strong results, and the company said its Chief Executive Micky Pant would step down. Joey Wat, currently the company’s chief operating officer, will take over as CEO, Yum China said. Pant, who has led the company since its spin off from Yum Brands Inc late last year, will become vice chairman of the board and senior adviser to Yum China. The company’s same-store sales rose 6 per cent in the third quarter ended Aug. 31. M&A
Alibaba denies talks with NBA’s Brooklyn Nets Chinese internet conglomerate Alibaba Group Holding Ltd denied that its vice chairman, Joseph Tsai, is in advanced talks to buy a stake in the Brooklyn Nets of the National Basketball Association. “This is false,” Alibaba spokeswoman Jennifer Kuperman said. “Joe Tsai has never talked to the seller and he is not purchasing any stake in the Brooklyn Nets.” Two sources told Reuters that Tsai was in talks to buy a stake in the Brooklyn Nets, valuing the U.S. basketball team at around US$2.2 billion, and that a deal could be finalized in the next few weeks.
10 Business Daily Monday, October 9 2017
Greater China Energy
Rosneft aims for big boost in oil exports to Mainland Company’s total oil supplies to China are set to reach a record high of 40 million tonnes this year Vladimir Soldatkin and Gleb Gorodyankin
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ussia’s largest oil producer Rosneft wants to boost its supplies of oil to China through Kazakhstan to as much as 18 million tonnes (36,000 bpd) per year from around 10 million tonnes in 2017, three industry sources said. Such a big increase may significantly drain flows of Urals blend to Europe at a time when Russian oil output has been reduced as part of a global pact to support prices. “(Rosneft’s head Igor) Sechin would like to boost oil supplies to China to 13 million tonnes per year with a possibility of further increase to 18 million tonnes,” a source familiar with Rosneft’s plans said, adding that there has been no decision yet at government level. He didn’t specify when the increase was likely to happen. “This would mean significant oil supplies cuts to Europe,” the source added. Two other oil industry sources confirmed the plans. Russian oil production has been steady, at around 10.9 million bpd due to a global pact to reduce total production by around 1.8 million bpd to support weak oil prices. Rosneft did not respond to a request for comments.
Main supplier to China
Russia has steadily increased oil supplies to China over the past years to become the main supplier of oil to the country. This year, Rosneft’s total
oil supplies to China are set to reach a record high of 40 million tonnes (800,000 bpd). Rosneft’s influential head Igor Sechin has in the past said his ambition is for the company’s exports to China to reach as much as 1 million bpd. The bulk of oil supplies to China by Rosneft go via the Pacific port of Kozmino at the end of the East Siberia-Pacific Ocean pipeline, some via the pipeline’s special spur to China and the remains via Kazakhstan and railway. In August, Russia beat Saudi Arabia to become China’s top crude oil supplier for a sixth month, as
independent refiners ramped up purchases and as state-owned refiners bought seaborne shipments from the Russian Far East port of Kozmino. China’s crude oil imports from Russia last month were 4.426 million tonnes, or about 1.04 million barrels per day (bpd), down 4.5 per cent over the same month last year. Rosneft and China’s CNPC agreed in January on an increase of oil supplies via Kazakhstan through to 2023 with total supplies of 91 million tones over a 10-year period. Kazakhstan’s energy ministry said Rosneft has not officially applied for an increase in transit volumes to China.
Currently, the supplies are made through Atasu - Alashankou pipeline, the capacity of which has already been upgraded to 20 million tonnes, according to the ministry, while between 2 and 3 million tonnes are used for Kazakstan’s own exports to China. “The necessity of further pipeline expansion would also depend on the level of volumes as well as the time frame of guaranteed supplies, oil transportation tariff, etc,” the ministry said. The Kremlin-controlled company has boosted ties with China after privately-run conglomerate CEFC China Energy bought a 14.2 per cent stake in Rosneft for US$9.1 billion. Reuters
Strategy
Hong Kong’s CLP seeks acquisitions to diversify, expand in India The company is planning to enter the electricity transmission business Saket Sundria and Rajesh Kumar Singh
Hong Kong’s largest power utility CLP Holdings Ltd. is scouting for more renewable power projects in India at a time when conventional generators are coping with stranded projects and under utilization. CLP India Pvt. is eyeing run-of-the-river hydro power projects, solar and wind capacities as well as efficient coal-based power generation units located near coal mines, which helps to lower costs, according to company executives. “We have a global climate commitment and our ability to increase emissions is pretty limited,” said Amarthaluru Subba Rao, executive director for finance and strategy at CLP India. “So we would keep looking at opportunities within our policy framework.” CLP India’s focus on cleaner generation reflects the parent’s commitment to reduce emissions as well as an increasingly competitive power market in India. A rapid decline in renewable power prices has made clean energy more attractive to state retailers looking to lower costs. CLP Holdings’ Indian unit accounted for less than
5 per cent of its revenues in 2016, according to data compiled by Bloomberg. The local unit is looking to buy hydro power projects of 50-200 megawatts in size, that are either completed or nearing completion as it wouldn’t like to build one itself, said Naveen Munjal, commercial director at CLP India.
“We expect mainland China and India to remain our growth markets in the medium to long term, especially in renewable energy” Michael Kadoorie, CLP Holdings Chairman
Power transmission
The company is also planning to enter the electricity transmission business. Last month, it bid for a 200 kilometre power-transmission project connecting the
northern and western grids in India, Munjal said. After adding generation capacity at a rapid pace over the past few years, India is focusing on transmission and distribution projects to ensure electricity reaches users. An added attraction is safety of revenue, as the federal government ensures payment protection for its transmission projects. “Transmission is an area where we are very keen to open an account,” Munjal said. CLP India’s portfolio includes a 1,320 megawatt coalfired plant, a 655 megawatt gas-based combined-cycle power plant, more than 925 megawatts of wind power and a 100 megawatt solar farm. The company is targeting a higher presence in renewable capacity in line with the group’s aim to generate 30 per cent of its electricity capacity from sources such as wind, solar and nuclear by 2020. “We expect mainland China and India to remain our growth markets in the medium to long term, especially in renewable energy, as both countries seek to reduce their reliance on fossil fuels,” CLP Holdings Chairman Michael Kadoorie said in the company’s interim report, published in August. “Going
forward, we will also explore growth opportunities along the energy supply chain in these markets.” India has found 34 coalfired projects stressed and in need of financial restructuring to make them viable. The
country’s coal plants idled an average 40 per cent of their capacity, while 25-gigawatts of gas-fired power plants used less than a quarter of their capability during the five months ended August. Bloomberg News
Business Daily Monday, October 9 2017 11
Asia Index
Japan’s economy likely posted 2nd best stretch of post-war growth A Bank of Japan survey showed households’ mood improved in September from three months ago Kaori Kaneko
Japan’s economy likely posted its equal second-best stretch of uninterrupted post-war growth, a government index for August showed, a nod to strong global demand and premier Shinzo Abe’s aggressive stimulus measures. The latest reading comes as Abe heads to a general election later this month and puts his “Abenomics” policies in the spotlight. However, despite the strong headline number, analysts say the benefits of growth have failed to reach broader sectors of the economy with generally anaemic wages leaving households behind. The index of coincident economic indicators rose a preliminary 1.9 points to 117.6 in August from the previous month, the level seen in March 2014, the Cabinet Office said. This would mark 57 straight months of growth, matching the second-best stretch of expansion since World War Two, seen between 1965 to 1970. “I don’t feel the economy has been growing and I’m not in a mood to spend on luxury things. I need to save money for my child’s education and for when I retire as I don’t think I will get enough pension to make ends meet,” said Satoko Sakuma, 57 years old, a part-time worker in the elderly care industry. The coincident index is used to measure the state of the economy
and is among indicators the government uses when deciding whether the economy is expanding or in recession. It includes a range of readings such as factory output, employment and retail sales. Under the government’s definition, the economy has been in an expansion since December 2012, when Abe came into office. The economy posted its best stretch of consecutive monthly growth of 73 months from February 2002 to February 2008.
Key Points Coincident indicators index up 1.9 points in Aug Abenomics helped boost jobs, corporate profits Analysts say many people left behind from expansion Japan’s economy expanded at an annualised 2.5 per cent in the second quarter as consumer and company spending picked up, with steady growth likely to be sustained in coming quarters. But while there has been some economic momentum, it remains historically modest: the economy grew an average 1.2 per cent during the current expansion, much slower than 11.4 per cent average growth during the 1965 to 1970 expansion,
SMBC Nikko Securities said. Other data on Friday showed Japanese workers’ wages rose in August from a year earlier in a sign of a gradual pick-up in household income. And a Bank of Japan survey showed households’ mood improved in September from three months ago, though fewer of them expected prices to rise a year from now. The jobless rate, which was at 4.3 per cent when Abe took office, fell to 2.8 per cent in August. Corporate earnings rose 75 per cent during the period, as the yen fell more than 30 per cent and the Nikkei stock average doubled in value. “Companies have enjoyed record profits but wages aren’t growing much,” said Hidenobu Tokuda, senior economist at Mizuho Research
Institute. “Most of the increase in corporate profits came from factors like falling oil costs and a weak yen, and the recovery in sales wasn’t as strong as past economic expansions. This is making companies cautious of raising wages.” Some economists say companies may keep hoarding cash as they see little growth prospects in Japan’s rapidly ageing society. “It’s hard to predict the future so companies tend to save cash. They can’t raise prices as they may lose customers,” said Yoshiki Shinke, chief economist at Dai-ichi Research Institute. “It would be better if the economy sees growth stabilise above its potential.” Reuters
Markets
Over US$500 mln in Thai bank shares transferred on behalf of king The Crown Property Bureau’s stakes in SCB and Siam Cement PCL are together worth around US$8.3 billion Shares worth over $500 million in Thailand’s Siam Commercial Bank have been transferred on behalf of King Maha Vajiralongkorn from the Crown Property Bureau, which manages palace assets, a filing with Thailand’s Securities and Exchange Commission (SEC) said on Friday. The filing by the Crown Property Bureau did not identify the ultimate beneficiary of the shares, nor did it indicate if any money had been paid for the shares. The transfer took place on Oct 2, the filing said. The law was changed in July to formally give the king control of the Crown Property Bureau. Details of its assets are not made public, but they are estimated to be worth more than US$30 billion. The Crown Property Bureau confirmed the transaction but declined comment on how the transfer fitted with changes to the way palace finances are run since the king took the throne late last year after the death of his revered father. “It is his majesty’s private affair so I cannot comment further,” said an official of the Crown Property Bureau who declined to be named because of the sensitivity of anything to do
with Thailand’s palace. The king has put an increasingly assertive stamp on the monarchy since succeeding his father King Bhumibol Adulyadej, who will be cremated on Oct. 26 in a ceremony that marks an end to more than a year of mourning in Thailand. Siam Commercial Bank, Thailand’s
third-largest bank by assets, declined to comment on the transaction in its shares. The filing said that the shares transferred amounted to 3.33 per cent of the total value of the bank. After the transfer, the Crown Property Bureau still had a holding of 18.14 per cent, it said.
Based on the latest share price, the shares had a value of 16.9 billion baht (US$505 million). At the latest dividend yield of 3.62 per cent, the shares would give a payout of around US$18 million a year.
‘The law was changed in July to formally give the king control of the Crown Property Bureau’ Shares in SCB closed 0.66 per cent down on Friday compared to a 0.22 per cent fall in the banking index. The Crown Property Bureau’s stakes in SCB and Siam Cement PCL are together worth around US$8.3 billion. According to a former official within the Crown Property Bureau, they have accounted for up to 80 per cent of the agency’s income in recent years. Although its real estate holdings are bigger, the returns from those are much lower. Reuters
12 Business Daily Monday, October 9 2017
Asia Currencies
Australia, NZ dollars seen stuck in a rut for some time to come The antipodean currencies have lost their shine since surging dramatically at the start of the year against the U.S. dollar Swati Pandey
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he Australian dollar is seen stuck at current levels over the next year, while its New Zealand cousin will likely inch higher, according to a Reuters poll that predicted a remarkably flat future for the two currencies. The survey of 50 analysts predicted the Australian dollar would be at US$0.7800 in three-, six- and 12-months ahead, barely changed from present levels. Still, forecasts have erred before. At the start of 2017, the Aussie had been seen at US$0.7300 in six months and US$0.7200 in a year. Instead, it climbed to a more than two-year peak of US$0.8125 in September and has since dropped to US$0.7743 - the lowest since mid-July. Despite the steady median, the range of forecasts is quite wide. The highest for three months ahead is US$0.8400, a level not seen since late 2014, and the lowest is US$0.7400.
The New Zealand dollar was forecast at US$0.7200 in a month, not far from current levels of US$0.7110 and unchanged from the previous poll. It climbed to US$0.7435 last month, the highest since early August, but has since tumbled on political uncertainty after no single party won a majority at a recent general election. The kiwi was seen at US$0.7200 over a three-, six- and 12-month horizon. The near-term fate of the kiwi will be determined by the composition of the ruling coalition which is expected to be known next week.
Tide has turned
The antipodean currencies have lost their shine since surging dramatically at the start of the year against the U.S. dollar. The upsurge had come as a surprise to analysts who had predicted modest gains, if any, for the two currencies with global central banks tightening monetary policies and Australia and New
Zealand keeping rates at record lows. It is catching up now, with the yield advantage that Australia and New Zealand enjoy seen whittling away as some of their rich-world peers unwind stimulus. Canada has already raised rates twice this year and the U.S. Federal Reserve still aims to hike once more in December.
Key Points Aussie seen at US$0.7800 in 1 year, vs US$0.7650 in Aug poll Kiwi seen at US$0.7200 in 1 year, unchanged from July poll In addition, the price of iron ore - Australia’s biggest export earner - has come off a boil, adding pressure on the Aussie. The most-traded Dalian iron ore contract has slid 25 per cent from a fivemonth peak set in August. There are also questions over whether China can
keep fuelling growth in Australia’s A$1.7 trillion economy. China is the biggest consumer of Australia’s iron ore as well as a major foreign investor. “The tide has turned on both fronts,” said Morgan Stanley analyst Has Redeker, who sees the Aussie at
US$0.7100 in one year. “First, China is in the middle of restructuring its economy, suggesting less terms of trade income for Australia. Second, China’s capital flow into Australia may have eased as it has tightened its capital account rules. We stay AUD short.” Reuters
Markets
Indonesia’s first ever IPO by a start-up draws robust investor interest Kioson operates an “online to offline” business model, which allows customers to make online purchases and pick up their orders at the ubiquitous kiosks Eveline Danubrata
E-commerce firm PT Kioson Komersial Indonesia Tbk drew strong investor interest for Indonesia’s first ever IPO by a start-up, and its shares surged on their trading debut last week. The response to the IPO could potentially pave the way for more technology companies in Southeast Asia’s biggest economy to follow in Kioson’s footsteps and list in the domestic stock market. Kioson raised 45 billion rupiah (US$3.3 million) by selling 150 million shares, or 23.1 per cent of the company’s total share base, at 300 rupiah each. The offering was more than 10 times over-subscribed. The stock surged as much as 50 per cent on its debut, but volumes were very thin with just over 10,000 shares traded. Indonesia’s start-up scene is
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booming as investors are lured by the youthful demographic of the country of 250 million people, who are increasingly buying anything from tickets to electronic gadgets online. President Joko Widodo has also aimed to increase broadband access in the sprawling archipelago. Kioson CEO Jasin Halim said the company previously received offers from venture capital and private equity funds, but decided to go for an IPO because of a difference in valuation. “The path that start-ups take is normally to look for venture capital, angel investors and so on...We feel that by taking the IPO route, that’s the method that is the most fair and transparent,” he told reporters. “Let the market value our company.” On top of showing that an IPO could be an alternative method to raise funds for start-ups in Indonesia, Kioson also offers retail investors a chance to take part in the capital market and benefit from the “hyper-growth” of start-ups, Halim said. Kioson operates an “online to offline” business model, which allows customers to make online purchases and pick up their orders at the ubiquitous kiosks, locally known as “warungs”, across Indonesia. The company had tied up with 19,000 kiosks as of September, and plans to raise that to 100,000 by 2019, Halim said. Kioson plans to use the proceeds from its IPO mainly to acquire online vouchers firm PT Narindo Solusi Komunikasi.
Andi Boediman, co-founder of venture capital firm Ideosource, told Reuters he expects more start-ups to take the IPO route in Indonesia as they could get better valuations from local investors who are more familiar with their products. “With products that are offered in Indonesia, it’s easier to build a positive perception in Indonesia than to introduce it in other countries,” said
Boediman, whose venture capital firm had invested in online retailer PT Bhinneka Mentari Dimensi. (http:// reut.rs/2yJnoHQ) PT M Cash Integrasi, which distributes online vouchers through its physical kiosks, is also planning to raise up to 300 billion rupiah by offering a 25 per cent stake in an IPO. M Cash is a unit of PT Kresna Graha Investama Tbk. Reuters advertisement
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Business Daily Monday, October 9 2017 13
Asia Election
In Brief
Japan’s new party vows to scrap over-reliance on fiscal, monetary steps Party of Hope leader said her party would build on Abenomics to bring the benefits of the economic recovery to more households Tetsushi Kajimoto and Leika Kihara
Tokyo Governor Yuriko Koike’s new party unveiled an election platform that seeks to distance her “Yurinomics” policies from Prime Minister Shinzo Abe’s aggressive stimulus, by cutting reliance on fiscal spending and monetary easing. Launched less than two week’s ago, Koike’s “Party of Hope” will take on Abe’s ruling coalition in a national election called for Oct. 22. It has made populist calls to freeze a scheduled sales tax hike in 2019 and phase out nuclear power, in an effort to set itself apart from the government on key issues, but the fresh approach on the economy was given its own catchy name. “We’ll carry out ‘Yurinomics’ that brings out private sector vitality, without relying excessively on monetary easing and fiscal spending,” the Party of Hope said. “While maintaining the Bank of Japan’s massive monetary easing for the time being, the government and the BOJ should work together to seek a smooth exit strategy,” it added. “Yurinomics” is a piece of political branding to counter “Abenomics” - the name given to the aggressive monetary and fiscal stimulus measures and structural reforms Abe has adopted since returning to power in December 2012. Five years on, Abe’s government can point to some signs that his strategy is finally fostering stronger economic growth and defeating deflation. Appointed by Abe, Bank of Japan Governor Haruhiko Kuroda still wants to give his money-printing ways more time to work, whereas the Hope party wants to debate a strategy to smoothly end them. Abe called the snap election last week in the hope his Liberal Democratic Party-led coalition will secure a
simple majority in parliament’s lower house, from its two-thirds “super majority” earlier. Amid signs that voters are disillusioned with Abe after nearly five years in power, Koike’s Hope party, pitched as a “reformist, conservative” alternative to Abe’s equally conservative LDP, has clouded the outlook, however. “By putting monetary policy on the table, Koike’s platform could spur debate among a lot of lawmakers about the need to fix some of the things they think are wrong, and quantitative easing could be a candidate,” said Shuji Tonouchi, senior market economist at Mitsubishi UFJ Morgan Stanley Securities. “Right now, the market impact is limited because the chances of her party forming a government are low.”
Tax firms, pay households
The new party says “Yurinomics” derived from Koike’s first name - will focus on deregulation and tax firms’ massive internal reserves - worth around 300 trillion yen (US$2.66 trillion) to encourage them to put unused cash to better use. It will also freeze the scheduled sales tax hike in 2019 and help low-income households with a “basic income” policy that regularly pays a set amount of money to all citizens. While the Party of Hope’s conservative approach on defence and constitutional reform resembles that of Abe’s LDP, its economic policy has a more populist streak, analysts say. “Basic income is being called for in some countries facing growing social inequality, so I’m not totally rejecting the idea,” said Hiroshi Shiraishi, senior economist at BNP Paribas Securities. “But without a secure source of revenue, it’s simply impossible.” Abe’s ruling coalition has pledged to proceed with the sales tax hike
Tokyo Governor Yuriko Koike. Source: Lusa
and use the revenues for child care and education. Koike said her party would build on Abenomics to bring the benefits of the economic recovery to more households. “We need to carry out a more meticulous economic policy and social reform that would strike people’s heart,” Koike told a news conference, where she reiterated that she would not stand in the coming election. Her party is open to debate on a possible revision of the constitution’s pacifist chapter 9, whose literal interpretation would ban the maintenance of armed forces. In an interview, Abe told Kyodo news agency he wanted to win support from other parties, including Koike’s, for the LDP’s campaign pledge for a revision to provide a firm legal basis for Japan’s military, the Self-Defence Forces. Koike, 65, a former defence minister and member of Abe’s LDP, has not made clear whom her party would back as the next prime minister. She defied the LDP to run for governor last year, defeating the ruling party candidate by a landslide before leading her small local party to a huge victory on a reformist platform in a July Tokyo assembly election. Reuters
Wages
Cambodia hikes minimum salaries for textiles workers Wages for garment workers have increased over 150 per cent over the past five years Cambodia agreed last week to raise the minimum monthly wage of workers in its crucial textiles and footwear industry by 11 per cent to US$170 from next year. The sector generates US$7 billion annually for the economy, and garment workers are in the spotlight ahead of a general election in 2018.
‘The garment industry employs an estimated 700,000 workers in Cambodia’ Prime Minister Hun Sen Hun Sen, who has ruled the country for more than three decades, has met with garment workers almost every day in recent weeks, taking selfies with them and having lunch. Garment workers have clashed with police in recent years and some unions representing disgruntled employees have joined opposition supporters protesting Hun Sen’s government. Wages for garment workers have increased over 150 per cent over the past five years from US$61 per month in 2012 to the current US$153.
The country has had to tackle the challenge of competitiveness, with some arguing that the wage increases have made Cambodia less appealing for some firms. The garment industry employs an estimated 700,000 workers in Cambodia, helping to sustain rural livelihoods in one of the world’s poorest countries. Government representatives, factories and unions backed the latest increase. Hun Sen “always pays attention to the welfare and livelihood of the workers,” a statement from the Ministry of Labor and Vocational Training on Thursday said. The ministry said that new wage will come into effect on Jan. 1, 2018.
It also said that the government will continue to delay taxing profits in the textiles sector and eliminate export management fees. Pav Sina, president of the Collective Union Movement of Workers, said unions were happy with the hike. “The prime minister always adds it every year, this is appropriate to what we tried to achieve,” Pav Sina said, while adding that higher wages would not make Cambodia less competitive. But Kaing Monika, deputy secretary general for the Garment Manufacturers Association in Cambodia, said the new minimum wage was “beyond the affordability of some of our members and the competitive level of the country”. Reuters
Central bank
Indonesia’s forex reserves hit record Indonesia’s foreign exchange reserves hit a record high at the end of September, the central bank said on Friday, attributing the increase to rising export proceeds and auctions of the bank’s forex bills. Bank Indonesia (BI) said Indonesia’s reserves were US$129.4 billion at the end of September, versus US$128.8 billion at the end of the previous month, which had also been a record. Indonesia’s rupiah had been relatively stable against the U.S. dollar for most of 2017, but at the end of September it fell to its weakest in 10 months as the greenback firmed. India
Oriental Bank says under central bank ‘corrective action’ Oriental Bank of Commerce Ltd, a mid-sized Indian staterun lender, said the nation’s central bank has initiated “prompt corrective action” against the bank over its high amount of net non-performing assets (NPA). Oriental Bank is the seventh state-run lender to be put under a corrective action plan, which requires a bank to enact curbs on hiring, branch expansion and taking on new loans. “This action will not have any material impact on the performance of the bank and will contribute in overall improvement in its risk management, asset quality, profitability and efficiency,” the lender said. Russian sources
N.Korea preparing longrange missile test North Korea is preparing to test a long-range missile which it believes can reach the west coast of the United States, a Russian lawmaker just returned from a visit to Pyongyang was quoted as saying on Friday. Anton Morozov, a member of the Russian lower house of parliament’s international affairs committee, and two other Russian lawmakers visited Pyongyang on Oct. 2-6, Russia’s RIA news agency reported. “They are preparing for new tests of a long-range missile. They even gave us mathematical calculations that they believe prove that their missile can hit the west coast of the United States,” RIA quoted Morozov as saying. Aviation
Singapore Airlines plans cost cuts to offset competition Singapore Airlines Ltd intends to cut fuel consumption, review its supplier relationships and invest in digital technology under a three-year transformation plan to boost its competitiveness, according to an internal newsletter. Singapore Airlines and Hong Kong-based rival Cathay Pacific Airways Ltd are struggling against mounting international competition from Chinese and Middle Eastern rivals, without domestic flights to underpin their earnings. After a surprise fourth-quarter loss, Singapore Airlines set up a dedicated transformation office to review its strategy in May, although it has not released a cost-cutting target.
14 Business Daily Monday, October 9 2017
International In Brief U.S.
Trump says Tillerson could be tougher U.S. President Donald Trump said on Saturday he had a good relationship with Secretary of State Rex Tillerson but that Tillerson could be tougher. Trump, who made the comment to reporters at the White House, did not elaborate. NBC reported last week that in a session with Trump’s national security team and Cabinet officials at the Pentagon, Tillerson had openly criticized the president and referred to him as a “moron.” Tillerson on Wednesday said he had never considered resigning and was committed to Trump’s agenda, but failed to address whether he had referred to the president as a “moron,” as NBC reported. Mercosur
Brazil, Argentina call EU trade offer disappointing The European Union farm products offer presented last week during talks in Brasília on a trade deal with the Mercosur bloc was disappointing, negotiators for Brazil and Argentina said on Friday. Brazil’s chief negotiator, Ambassador Ronaldo Costa Filho, said the European offer to allow 70,000 tonnes of beef and 600,000 tonnes of ethanol to enter the EU with lower tariffs was far from what Mercosur members were expecting and will make the goal of reaching a deal by December more difficult. The small offer came as a surprise, but did not impede “productive and constructive” talks on other areas, Costa Filho said.
Globalization
Treasury pushes U.S. regulatory interests, setting scene for clash A more assertive United States will raise tensions in the European Union with both sides having laboured for years to find common ground in areas like clearing derivatives Huw Jones and Michelle Price
T
he U.S. Treasury said domestic regulators should prioritize U.S. interests when engaging in global rulemaking forums, setting up possible conflicts with overseas regulators. The recommendation comes days before global regulators from the Basel Committee and the Financial Stability Board are due to convene in Washington ahead of an International Monetary Fund meeting, and will likely overshadow discussions that will take place on the side-lines. U.S. President Donald Trump’s executive order earlier this year calling for the rollback of rules introduced after the 2007-2009 financial crisis has sparked fears that the world’s most influential financial market would retreat from global rulemaking. The United States should continue to engage in global rulemaking, U.S. Treasury Secretary Steven Mnuchin said in a report on regulatory reform on Friday, but should do so in a way that helps Wall Street be globally competitive and keeps financial markets fair and vibrant.
“U.S. agencies should also continue to advance U.S. interests by engaging bilaterally and multilaterally to enhance American companies’ competitiveness,” the report said. International rules should only be used if they align with domestic objectives, and should be “carefully and appropriately tailored” to meet the needs of the U.S. financial services industry and the American people, the report said. The United States has already made it clear it won’t endorse a planned global capital rule for insurers unless it meets U.S. requirements.
More accountability
Mnuchin’s report comes at a time when momentum in global rulemaking is already sputtering as the immediate post-crisis sense of urgency fades. Top officials at several global bodies are also coming to end of their terms, potentially creating leadership vacuums. One top U.S. regulatory official told Reuters last month that frustrations were growing over the Basel and FSB rule-making process which “left much to be desire”. This person said the process was too opaque, that implementation deadlines were often
Trade
U.S. backs 300 per cent in duties on Bombardier The U.S. Commerce Department has notched up proposed trade duties on Bombardier Inc CSeries jets to nearly 300 per cent, affirming Boeing Co’s complaint that the Canadian company received illegal subsidies and dumped the planes at “absurdly low” prices. The decision underscored the defensive trade policy of U.S. President Donald Trump, and could effectively halt sales of Bombardier’s innovative new plane to U.S. airlines by quadrupling the cost of the jets imported to the United States. The Commerce Department proposed a 79.82 per cent antidumping duty on Friday, on top of a 219.63 per cent duty for subsidies announced last week. Banking
EU conducts inspections over limits to account access The European Commission said on Friday it had conducted inspections in some EU states into banks’ alleged anti-competitive practices in limiting rival financial firms from gaining legitimate online access to their customers’ data. The Commission said in a statement it had “concerns” that the companies involved “may have engaged in anti-competitive practices in breach of EU antitrust rules”. It did not name any company. It said that banks could have prevented non-bank competitors from gaining online access to account information of their customers to provide financial services, in spite of having obtained prior authorisation from the customers.
Steven Mnuchin, U.S. Treasury Secretary. Source: Lusa
arbitrary, and that cost-benefit analysis wasn’t always adequate. On Friday, the Treasury recommended increasing “transparency and accountability” in these international bodies, saying they should adopt U.S. style rulemaking procedures that include “robust” impact assessments and broad consultation. “Treasury recommends increasing the number and timeliness of external stakeholder consultation and publicizing the schedule of major international meetings,” the Treasury wrote on Friday. A spokesman for the FSB declined to comment on the report, but in a statement outlining its 2018 agenda on Friday the FSB said it would review its processes, procedural guidelines and transparency. Representatives of Basel did not immediately respond to emailed requests for comment. Mnuchin had already ruffled regulatory feathers with his first report on regulatory reform which proposed delaying two of Basel’s rules in order to ease the burden on American banks. That recommendation prompted warnings from the European Union not to roll back on globally agreed rules. Earlier on Friday, the Basel Committee announced it would allow flexibility in the way one of those rules are implemented in a bid to persuade members like the United States to stick to the 2018 start date. But the Treasury report may put further strain on attempts by Basel to complete its Basel III bank capital reform initiated after taxpayers had to bail out lenders during the crisis. A split between the United States and Europe has prevented a deal on a key element of the package. Federal Reserve Board Governor Jerome Powell told a Reuters Summit this week there was a good case for getting a deal this year, “but we’d like to do that on terms that are fair, and fair to us”. Reuters
Trade
EU sets duties on Brazil, Iran, Russia, Ukraine steel Chinese hot-rolled steel is already subject to duties Philip Blenkinsop
The European Union has decided to set duties on hot-rolled steel from Brazil, Iran, Russia and Ukraine after a complaint by EU manufacturers that the product used for construction and machinery was being sold at excessively low prices. The EU will levy anti-dumping tariffs of between 17.6 and 96.5 euros (US$20.6-112.8) per tonne from Saturday, its official journal said. The European Commission had initially proposed setting a minimum price - of 472.27 euros per tonne but revised its proposal after failing to secure backing from EU member states. European steel association Eurofer, which brought the complaint, said it was happy the minimum price proposal had been dropped, but expressed disappointment that the Commission had opted for fixed-price rather than normal percentage tariffs. Given the current price of steel, the fixed-price amounts were lower than the equivalent percentage tariffs
the Commission had set out in its reasoning. “This outcome is not in line with normal EU anti-dumping procedures and the objective to tackle unfair imports,” said Axel Eggert, Eurofer’s director general. He also said it was not right that the Commission had ended its investigation into Serbian steel imports without proposing measures. The country, he said, was home to a large state-owned, state-run Chinese steel producer.
Key Points Commission drops idea of having a minimum price EU steel body not happy with fixed price duties Among companies newly facing tariffs were the Brazil arms of ArcelorMittal and Aperam, both of which also produce in Europe, Companhia Siderugica Nacional, Usinas
Siderugicas de Minas Gerais and Gerdau - at rates between 53.4 and 63.0 euros per tonne. Iranian steel would be subject to a duty of 57.5 euros per tonne and Ukraine’s Metinvest Group 60.5 euros. Rates for Russian producers varied from 17.6 euros for Severstal, 53.3 euros for NLMK to 96.5 euros per tonne for MMK. BCS investment bank said there would be no major impact on Russian steel companies, which had already redirected volumes from the European markets to other markets. MMK said it would redirect part of its hot-rolled steel to Asian and other markets due to the imposed duties, with the Russian domestic market remaining its priority. Severstal said it would continue to ship to Europe because of its low tariff rate, giving it a competitive advantage over other suppliers. NLMK said it expected its European plants, including La Louviere which produces hot-rolled steel in Belgium, to benefit. Reuters
Business Daily Monday, October 9 2017 15
Opinion Business Wires
The Korea Herald The number of local subsidiaries established abroad by South Korea’s 30 biggest business groups rose gradually in recent years, a report said yesterday, as they actively made inroads into overseas markets to survive the keen competition. The figure surged to 3,332 last year from 2,650 in 2013 and 3,053 in 2015, according to market researcher Chaebol. com. Chaebol refers to South Korea’s major business groups. By country, China accounted for the biggest share with 753 or 22.1 per cent of the total. The comparable figure for the United States climbed 51 to 473 last year from a year earlier.
Philstar The Bangko Sentral ng Pilipinas (BSP) has hit the ground running to speed up the development of the domestic debt market as part of additional gamechanging financial sector reforms in the medium term. The BSP’s Monetary Board has relaxed and streamlined the requirements on the issuance of bonds and commercial papers by banks and quasi-banks (QBs). “The new regulation aims to provide greater flexibility to banks and QBs in tapping the capital market as an alternative funding source. This is also consistent with the initiatives of the BSP, together with other financial regulators, to spur the development of the domestic bond market,” it said.
A people’s choice guide to the economics Nobel Cass R Sunstein a Bloomberg View columnist
B
ecause economics is such a diverse field, with many distinguished thinkers, predicting the winner of the Nobel Prize in economics is notoriously difficult. But suppose that we narrowed the field, so as to focus on candidates who have not only made important theoretical contributions, but have also had a significant impact on the world, and affected the lives of numerous people? If that is the standard, here are some leading contenders for the prize, which is to be announced today:
Esther Duflo, Massachusetts Institute of Technology
The Times of India Prime Minister Narendra Modi on Saturday hailed the sweeping changes in the GST to give relief to small and medium businesses, saying his government does not want the country’s business class to get caught in red-tape. Referring to newspaper headlines, the prime minister said he was happy that the changes made by the GST Council which met on Friday had been welcomed all over the country. “We do not want the country’s business class to get caught in red tapism, files, bureaucracy, I will never want this,” Modi said.
Governments are keenly interested in the actual effects of their interventions, but they often lack tools to establish what works and what doesn’t. Building on work in medicine and related fields, Duflo has pioneered the use of randomized controlled trials. One group of people serve as a control; another group, otherwise identical, is subjected to a policy intervention, designed to reduce disease, increase access to loans, reduce poverty or improve education. If the trials are done properly, they can be used isolate the actual effects of the intervention. That’s huge progress. In recent work, Duflo argues that an economist can be a plumber: “She installs the machine in the real world, carefully watches what happens, and then tinkers as needed.” Focusing on poverty and development, Duflo’s own randomized controlled trials are not only providing invaluable information to policy makers; they are also getting help to many people who need it.
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Richard Posner, University of Chicago
New Zealand Herald The slowdown in the housing market (in NZ) is causing sellers to take bigger losses on house sales. The quarterly Pain and Gain report from CoreLogic showed that while the number of people taking a loss is trending down, the amount they lose has increased. The report is a quarterly analysis of homes which were resold over the quarter. CoreLogic found that the proportion of all properties resold at a loss in the latest quarter was 3.7 per cent. Nationwide, the median loss per loss-making sale is around NZ$20,000. Investors were worse off than owner occupiers, losing NZ$44,500 per sale.
solves, some seemingly intractable problems. Nordhaus’s work played a defining role in the efforts of the U.S. to produce a “social cost of carbon,” which in turn influenced many regulatory initiatives both here and abroad. (If Nordhaus gets the Nobel, a strong co-recipient would be Harvard’s Martin Weitzman, who has done pioneering work on how to think about risks of catastrophe, with special reference to climate change.)
W. Kip Viscusi, Vanderbilt University
Viscusi is rarely listed among Nobel candidates, but his work on the monetary valuation of risks to life and health has had a massive effect. In the U.S. alone, it plays a major role in the work of the Environmental Protection Agency, the Department of Transportation, the Department of Energy, the Department of Labor and the Department of Health and Human Services. These agencies and many others build on Viscusi’s work on the “value of a statistical life.” Viscusi does not really ask what a life is worth; he is interested in the value of statistical risks. If, for example, workers face a mortality risk of 1 in 100,000, how much compensation do they get in return? Suppose that the best answer is in the vicinity of US$90. With a little multiplication, that produces a US$9 million value for a statistical life -- roughly Viscusi’s own figure, which is, not coincidentally, the value now used by most agencies of the U.S. government.
Economics is called ‘the dismal science,’ and since the Great Recession, the field has taken a beating in the public eye
Recently retired from the federal bench, Posner is the leading thinker behind the field of law and economics, which tries to analyse legal rules with the help of economic tools. Suppose that a local government imposes a rent control law, or that a state court strikes down certain contracts as “unconscionable” because they are unfair to poor people. What are the likely effects? Whether the issue involves occupational safety, automobile accidents, antitrust law, consumer protection or the role of private property, public officials, lawyers and judges are now using the methods that Posner helped introduce. (If Posner gets the Nobel, a strong co-recipient would be Judge Guido Calabresi, who also did pioneering work.)
William Nordhaus, Yale University
The problem of climate change raises unusually difficult problems for economists, not least because of high levels of uncertainty about the likely effects, tough questions about how to turn those effects into monetary equivalents, and serious challenges, at the intersection of economics and philosophy, about how to deal with harm to future generations. More than anyone else, Nordhaus has produced disciplined, rigorous and luminously clear thinking about all of these questions, in a way that is transparent about underlying assumptions and that makes real progress on, and possibly even
Richard H. Thaler, University of Chicago
Over recent decades, the rise of behavioural economics has been the most interesting development in economic theory. More than anyone else, Thaler has been responsible for that development. He has shown that in concrete ways, people do not act as predicted by standard economic theory. Far from seeing money as fungible, people put their cash in separate “mental accounts” (mortgage money, vacation money, retirement money). Investors overreact to unexpected news events. Human beings care about fairness -- and they are willing to pay something to punish people who have been unfair. People are planners as well as doers, and when they are planning, they might try to foil their own doing (as, for example, by keeping high-calorie foods out of the house). It’s true that with respect to Thaler, I’m biased. He’s a friend as well as a co-author. But no one can doubt that his influence can be seen in the work of governments all over the world, as officials use his findings to increase retirement savings, cut poverty, boost employment, increase safety on the highways and improve health. (Thaler is the pioneer, but worthy co-recipients would be Colin Camerer of the California Institute of Technology, Ernst Fehr of the University of Zurich, George Loewenstein of Carnegie Mellon University and Matthew Rabin of Harvard.) Economics is called “the dismal science,” and since the Great Recession, the field has taken a beating in the public eye. Sure, some of the research of those listed here has produced dismal news -- but it has also helped make the world a much better place. Bloomberg View
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16 Business Daily Monday, October 9 2017
Closing Energy
Gas trucks boom in China as government curbs diesel in war on smog Sales of large LNG trucks are expected to hit record levels in China this year
O
n a recent morning in Yutian, a dusty town bisected by the highway that connects Beijing to the sea, Su Meiquan strolled into a dealership packed with hulking trucks and prepared to drive off with a brand new rig. After years of driving a diesel truck for a trucking company, he had decided to buy his own vehicle – a bright red rig fuelled with liquefied natural gas, capable of hauling as much as 40 tonnes of loads like steel or slabs of marble. Su hopes the LNG truck less polluting and cheaper to operate than diesel ones - will be the cornerstone of his own business, plying the route to the western fringes of China. “Everybody says gas is cleaner with nearly no emissions,” he said after signing a stack of paperwork in the dealer’s office. In front of him, photos of proud drivers posing in front of their own new LNG trucks had been taped to the wall. Sales of large LNG trucks are expected to hit record levels in China this year as the government steps up an anti-pollution campaign that includes curbs on heavy-duty diesel vehicles. LNG trucks account for about four per cent of the more than six million heavy vehicles able to haul 40 to 49 tonnes of goods that are currently on China’s roads. The vast majority of the 43 billion tonnes of freight transported across China last year was by highway. But demand for LNG trucks is soaring as companies and manufacturers shift to vehicles that run on the gas that
Beijing sees as a key part of its war against smog. Sales of LNG heavy trucks surged 540 per cent to nearly 39,000 in the first seven months of the year, according to Cassie Liu, a truck analyst with the IHS Markit consultancy. That was partly fuelled by a ban this year on the use of diesel trucks to transport coal at northern ports in provinces like Hebei and Shandong, and in the city of Tianjin. “We are seeing a blowout in LNG trucks this year, thanks to the government’s policy push,” said Mu Lei, marketing manager for China National Heavy Duty Truck Group, known as Sinotruk, the country’s largest manufacturer of heavy-duty trucks. The shift to gas trucks is helping fuel demand for LNG in China, as are other government measures aimed at
Politics
clearing the air, especially in the north, which is shrouded in a hazardous coal-fuelled smog for much of the winter. One major project is piping gas to 1.4 million households across the north for heating this winter, shifting away from coal. China, already the world’s No.3 LNG consumer, has seen imports jump 45 per cent so far this year. Chinese companies like Jereh Group and ENN Energy Holding, which build LNG filling stations, and Zhangjiagang CIMC Sanctum Cryogenic Equipment Co., Ltd, which specialises in LNG tanks, are expected to benefit from the gas boom, analysts said.
Overload, ports
Government restrictions on cargo overloading last year, for safety reasons, has also driven truck sales
as operators rushed to buy bigger trucks. Next month, Beijing will also impose restrictions on thousands of northern factories using diesel trucks, forcing many to use more rail and others to consider gas-powered lorries. Sales of new heavy-duty trucks, including diesel and LNG vehicles, jumped 75 per cent in the January-August period to 768,214, according to industry website www. chinatruck.org. It did not break down the numbers, but companies say that diesel growth is being dwarfed by that of the LNG trucks. Sinotruk has recently netted new orders for 1,371 heavy-duty trucks, 900 of which run on LNG, at an event bringing together coal transport companies from seven northern Chinese cities, Mu said. In the first half of this year, Sinotruk sold 5,200 LNG trucks, up 650 per cent year on year. “Gas trucks are both more environmentally friendly and more economic,” said Lai Wei, general manager of Tianjin Shengteng Transport Company, a privately-run trucking company. Lai is tripling his LNG fleet to more than 100 by the end of this year, adding 65 new trucks made by Shaanxi Heavy Duty Automobile Co. Ltd, the country’s largest LNG vehicle producer. He is also cutting back his diesel fleet to 30 from 50 previously because of the new emissions rules in Tianjin that come into effect this month. Only vehicles meeting “National Five” emissions standards, similar to Euro V standards for trucks and buses in Europe, will be allowed
Graft
to operate at the port. Lai said he was also concerned that there might be further restrictions on diesel trucks in a few years.
Cleaner, cheaper
China, the world’s top energy guzzler, wants gas, which emits half the carbon dioxide as that of burning coal, to supply 15 per cent of energy demand by 2030, up from 6 per cent currently. That effort stalled in 2014 as an oil price slump lifted demand for diesel. But as oil prices have risen in the past 20 months, rebounding to above US$50, LNG sales, especially from Australia and the United States, have soared. Diesel costs between 10-30 per cent more than gas on average currently at Chinese gas stations, according to truck companies. For Su, the new truck owner in Yutian, about 140 kilometres to the east of Beijing, price is a major reason for making the switch from diesel. He plans to hire two drivers to shuttle the 3,500 kilometres between Yutian and Urumqi, in the northwestern region of Xinjiang, to carry steel products west and coal or other goods on the way back. “It really suits our journeys as the longer the trip, the more you save on fuel on an LNG truck,” he said. He is paying RMB390,000 for a Sinotruk rig, about RMB60,000 more than a diesel truck would have cost. “On a return trip, we can save RMB3,000 in fuel,” he added. “That means we’ll be able to recoup within a year the extra cost on the vehicle.” Reuters
UK
New Zealand parties hold talks Chinese watchdog says 1.34 million May’s cabinet reshuffle puts to form coalition government officials punished since 2013 Boris Johnson in firing line New Zealand’s small nationalist party which holds the balance of power after an inconclusive election held talks yesterday with Prime Minister Bill English and separately with the opposition Labour leader as both try to form a coalition government. New Zealand First leader Winston Peters has said he would only make a decision on which party to back after the results of the Sept. 23 election become official next Thursday. Peters remained tight-lipped after talks with the prime minister, saying the meeting was “fine”, and later met Labour Party leader Jacinda Ardern. Ardern has brought Labour within reach of forming government since becoming party leader in August, with a Labour-Green bloc winning 54 seats, two seats short of the ruling National’s 56. New Zealand First holds the nine seats needed to meet the 61 seat majority in parliament. A final vote count on Saturday showed National lost some ground to the Labour-Green bloc from a preliminary tally, even though it still held the largest number of seats in parliament. “It did pay to wait, didn’t it?,” Peters said, referring to the final vote count. Reuters
China’s anti-graft watchdog said roughly 1.34 million lower-ranking officials have been punished since 2013 under President Xi Jinping’s anti-corruption drive. Xi, who is preparing for a major Communist Party leadership conference later this month, has made an anti-graft campaign targeting “tigers and flies”, both high and low ranking officials, a core policy priority during his five-year term. China is preparing for the 19th Congress later this month, a twice-a-decade leadership event where Xi is expected to consolidate power and promote his policy positions. Those punished for graft since 2013 include 648,000 village-level officials and most crimes were related to small scale corruption, said the Central Commission for Discipline Inspection (CCDI) yesterday. While much of the country’s anti-graft drive has targeted lower ranking village and county officials, several high-ranking figures have been taken down. In August the head of the anti-graft committee for China’s Ministry of Finance was himself put under investigation for suspected graft. Reuters
UK Prime Minister Theresa May will soon shake up her team of top ministers in a bid to reassert her authority and end the government infighting that’s put Brexit talks in jeopardy. Senior officials in May’s Conservative party, speaking on condition of anonymity, want her to deal with Boris Johnson, who has angered colleagues by forging his own path on Brexit in the run up to what proved a disastrous party conference for May this week in Manchester. In an interview with the Sunday Times, May sent a strong signal about her intentions when asked specifically what she planned to do about her rebellious foreign secretary, the former London mayor who’s a perennial contender for her job. “It has never been my style to hide from a challenge and I’m not going to start now,” she told the newspaper. “I’m the PM, and part of my job is to make sure I always have the best people in my Cabinet.” May faced fresh calls to quit following a chaotic speech at the conference that she almost failed to finish after a prolonged coughing fit. Bloomberg News