Oriental Watch disposes of shares in MSAR joint venture Retail Page 6
Friday, September 9 2016 Year V Nr. 1127 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kam Leong Bank Accounts
Hong Kong cautions banks on heavyhanded customer due diligence Page 9
www.macaubusinessdaily.com
Gaming
Transport
Scientific Games designates social gaming subsidiaries as unrestricted Page 7
Mainland auto sales rise on rush to beat expiring tax cut Page 8
When Less Is More Gaming
The city’s gaming industry is now stabilising. This per Chief Executive Fernando Chui Sai On yesterday. Announcing the first Five-Year Plan for the MSAR, he anticipates annual gaming revenue of around MOP200 bln every year from here on in. The gov’t wants operators’ non-gaming revenue to reach 9 pct by 2020. Page 2
More outbound Chinese
Not that forever
Tourism An increasing trend. UnionPay and China Tourism Academy agree outbound Chinese travellers are on the up. Last year, 117 mln tourists explored the world. With 70 pct visiting Hong Kong, Macau or Taiwan. A further 11.5 pct are forecast this year. Page 5
Forever 21 is bracing to move on. Ensconced in the ‘Yellow House’ near the Ruins of St. Paul’s since 2013, the popular store is shutting down by end-September. Dwindling profits have been cited as the major reason for decamping.
Sino-Luso trade dips
Retail Page 3
HK Hang Seng Index September 8, 2016
23,908.54 +166.73 (+0.70%) Worst Performers
China Shenhua Energy Co
+4.72%
Wharf Holdings Ltd/The
+1.99%
Li & Fung Ltd
-1.66%
CITIC Ltd
-0.65%
AAC Technologies Holdings
+3.37%
New World Development
+1.80%
China Overseas Land &
-1.29%
CNOOC Ltd
-0.31%
Sino Land Co Ltd
+3.21%
Sun Hung Kai Properties Ltd
+1.78%
China Resources Land Ltd
-1.08%
AIA Group Ltd
-0.30%
Hang Lung Properties Ltd
+2.60%
Cheung Kong Property
+1.59%
Belle International Holdings
-0.76%
China Mengniu Dairy Co Ltd
+0.26%
China Life Insurance Co Ltd
+2.23%
Swire Pacific Ltd
+1.39%
Lenovo Group Ltd
-0.73%
Sands China Ltd
+5.30%
27° 30° 27° 30° 27° 30° 27° 30° 27° 30° Today
Source: Bloomberg
Best Performers
Sat
Sun
I SSN 2226-8294
Mon
Tue
Source: AccuWeather
Trade Trade value between China and Portuguese-speaking countries dropped 12.3 pct y-o-y in the first seven months of the year. In particular, China’s exports to these countries plummeted by nearly 31 pct y-o-y. Brazil remains China’s biggest trade partner in the Lusophone bloc. Page 6
2 Business Daily Friday, September 9 2016
Macau
Economy Gov’t expects gaming revenue to be around MOP200 billion each year
Stability the watchword for MSAR Chief Executive indicates turning the downward trend to positive growth of the city’s casino revenues is one of the targets in the city’s Five-Year Plan for 2016 to 2020. Annie Lao annie.lao@macaubusinessdaily.com
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he SAR Government expects Macau’s gross gaming revenue to return to positive growth and reach around MOP200 billion (US$25 billion) each year in the future. Nongaming elements in casino operators’ revenues are expected to account for nine per cent in five years’ time compared to the 6.6 per cent recorded in 2014 in order to advance economic diversification. “We’ve entered a relatively stable period. Most importantly, we estimate gross gaming revenue will reach MOP200 billion every year. We hope next year that the downward trend [in casino revenue] will be reversed to positive growth,” said Chief Executive Fernando Chui Sai On yesterday. “After some deep adjustments, for the next five years we’ve set the target to change the double-digit decline [in gaming revenues] to positive growth,” the top official added.
Rosário: Public housing priority
All land reclaimed in the city by the government will be first used for building public housing to meet the housing demands of local residents, said the Secretary for Transport and Public Works Raimundo Arrais do Rosário. Based on the Five-Year Plan, the city’s land management focuses on using reclaimed idle land, the reclamation of new land and current land in the city. This year, the government will build 4,000 public housing units and another 28,000 public housing units are planned to be built on land reclamation Zone A. Also, about 8,000 units of
In August, Macau reversed 26 consecutive months of decline in gaming revenue with a 1.1 per cent increase to MOP18.8 billion. Mr. Chui made his remarks in a press conference yesterday announcing the final version of the SAR’s first FiveYear Plan for 2016 to 2020 with other major officials.
Improving livelihoods
D es p i t e th e u n c e rtai n t y a n d f l u c t u a t i o n o f t h e ex t e r n a l economic environment, the city’s unemployment rate remains stable, which is crucial to sustaining Macau’s economy, said Secretary for Economy and Finance Lionel Leong Vai Tac “The low and stable unemployment rate in the city is an important element to supporting the city’s economy, at least it helps maintain our internal demand in the city as well as for local SMEs (small and medium-sized enterprises),” Mr. Leong said during the press conference. In addition, the Five-Year plan indicates increasing the city’s population employed by the retail
public housing will be built on the reclaimed plots located on Avenida Wai Long in Taipa. Secretary Rosário added that the government would immediately initiate the procedure to reclaim the idle land whenever a temporary land concession reached its 25-year expiry date. He said that the speed of the procedure depends upon the complexity of the concession contract. With regard to the development of reclaimed land Zone B, Rosário said that its urban planning needed to be done first, including electricity infrastructure and building design. As a result, construction work will not be finished in a few years.
sector to 10 per cent by 2020 from 8.5 per cent in 2015. It is also expected that a further 12,000 hotel rooms will be added to the city’s inventory and create at least 14,400 related jobs. Moreover, the government vows in the plan to continually support local SMEs by expanding sales channels for local enterprises. It includes a scheme to implement a public procurement mechanism by giving priority to buying local products and designs while promoting local products to large gaming operators. The target set for the amount of value that gaming operators purchasing local products or services is to reach at least 50 per cent by 2020, from 41 per cent in 2015.
Long-term goals
The Five-Year Plan, finalised after nearly one year of preparation, sets out comprehensive development targets for the city, focusing on citizens’ livelihood and Macau’s diversified economy. Chui Sai On said the final version has 48,000 characters on the basis of a draft issued on April 26, 2016, and includes suggestions from citizens and civil groups. The plan has 27 sections illustrating seven major targets, including maintaining stable economic growth, improving the structure of industries, improving Macau’s role as
an international tourist city, raising the quality of life of residents and the quality of education, protecting the environment, and strengthening the efficiency of the government, whilst deepening the building of the legal system. The plan also prioritises infrastructure projects for the next five years, such as the construction of a light railway network, a fourth bridge between Macau and Taipa, expanding a waste incinerator, and building an electronic surveillance system. “The experience that the government has learned shows that short-term plans would not help us handle the changing situation, nor promote the SAR’s public governance”, Chui Sai On said. “A long-term plan made with higher standards and vision is necessary for Macau’s future development. The plan was not made in haste; the SAR needs it, the people want it,” he added. Macau started drafting its first Five-Year Plan in October 2015, when a special committee was appointed to research and make a plan for the city to become a world centre of tourism and leisure by the mid-2030’s. The SAR Government has held over 40 public meetings to collect civil opinions and suggestions for this plan.
Business Daily Friday, September 9 2016 3
Macau Closure
Forever 21 ‘looking for alternative opportunities’ Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
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ollowing the announcement by Future Bright group that Forever 21 is to terminate its rental contract of the ‘Yellow House’ located next to the Ruins of St. Paul’s, the clothing retailer has announced that it ‘will continue to look for alternative opportunities in the region,’ without specifying whether the group would continue operations in the Macau market. The group could be facing up to MOP20 million (US$2.5 million) in compensation for terminating its five-year contract, set to expire in 2018, after agreeing an initial rental
of MOP2.4 million before its 2013 opening. Forever 21 did not disclose the information itself; rather, Future Bright, in a filing with the Hong Kong Stock Exchange, noted that its wholly-owned subsidiary – the Hou Wan Group Company Limited – ‘has entered into an agreement with the current tenant to early terminate the existing tenancy agreement’. In response to Business Daily’s enquiries, the clothing retailer commented that it is ‘constantly evaluating its portfolio of stores and has confirmed the Macau store is expected to close at the end of September, 2016’. With regard to the reason for termination of the agreement,
which according to Future Bright’s filing generated MOP14.1 million in turnover for the first half of the year for the landlord, profit was a major factor. ‘We made the decision to close the store after careful consideration of
the long-term profitability of that particular location,’ notes the retailer. ‘Forever 21 customers will continue to have access to the fast fashion they […] expect from Forever 21 on our website and at multiple stores across China,’ it added.
Public construction
Work to start on Prosecutor’s Office building in Q1 The construction of the Public Prosecutor’s Office building is expected to commence during the first quarter of next year, the Land, Public Works and Transport Bureau (DSSOPT) announced yesterday. According to local broadcaster T DM Ra di o , th e g o v e r n m e n t received 18 tenders for the firstphase construction of the building. The new building, located next to the Chinese Liaison Office in Macau on Avenida Dr. Rodrigo Rodrigues,
will occupy 2,200 square metres and comprise eight storeys plus a twostorey basement. Currently, the city’s Prosecutor’s Office is situated in a commercial building in ZAPE on the Peninsula. DSSOPT added yesterday that the authorities are still designing the plans for the superstructure and main structural works for the secondphase construction of the building, claiming there was thus no timeframe for inviting the tender. C.U.
Property
Centaline: Oriental Pearl prices to jump 10 pct Housing prices in the Oriental Pearl district on the Macau Peninsula may register an increase of 5 to 10 per cent during September and October, according to a note released by local property realtor, Centaline (Macau) Property Agency Ltd. The real estate agency says threebedroom units in the area are popular among local buyers who purchase the units for self-use whilst most of the two-bedroom units are bought by investors. The realtor further explained that the increased popularity of home units in the area is due to lower housing prices, claiming prices
there were MOP7,300 (US$912.5) to MOP7,600 per square foot. In addition, the leasing market in the district is active, said Centaline. ‘Due to the geographic advantages of the Oriental Pearl district – located in a central point as it’s in the middle of Macau Northern District, Taipa and Zhuhai, coupled with its auxiliary facilities, properties there attracted many tenants,’ the agency wrote in the note. It said the rents in the district amounted to MOP13.5 per square foot on average at the moment, while the leasing market there is primarily supported by local residents and expats working in casinos. A.L.
4 Business Daily Friday, September 9 2016
Macau
Business Daily Friday, September 9 2016 5
Macau Tourism
Over 70 pct of outbound China tourism to SARs and Taiwan in 2015
Outbound China tourism set to surge
O
ver 70 per cent of outbound China tourism in 2015 was to Hong Kong, Macau and Taiwan, according to a joint report by UnionPay and the China Tourism Academy. The report finds that for the 2015 year outbound Chinese tourists reached 117 million, showing 9.8 per cent year-on-year growth, down from the 20 per cent year-on-year growth seen on average in previous years, notes the report. Nevertheless, the report expects an 11.5 per cent year-on-year increase in outbound tourism from China would be posted for 2016, reaching 133 million. Better visa policies and easier payment methods outside of Mainland China are lauded as factors that have promoted outbound tourism from the country. According to the report, people born in the 1980s have become the major force in outbound tourism, with 85.9 per cent of tourists choosing shopping as their major spending item, although a shift in priorities
to ‘enjoying local life’ is evidenced, notes the report. In total for 2015, Chinese outbound tourists spent US$1.05 trillion (MOP8.4 trillion), a year-onyear growth of 16.6 per cent, whilst spending per capita was US$893, ‘showing a slower increase’ the report notes.
The Internet was cited as an increasing factor in outbound tourism, with 65 per cent of independent travellers interviewed having booked or bought airline tickets online, while 56.5 per cent booked hotels online and 57.7 per cent arranged their travel routes with the help of the Internet. Thailand and Japan saw an 88 per
cent increase in Chinese tourists during 2015. Meanwhile, Eastern Europe, South America and Central Asia are ‘about to gain popularity’, claims the report. The China Tourism Academy is a specialised research institute affiliated to China’s National Tourism Administration. K.W.
Courts Secret lovers feud in court is over
Hong Kong court dismisses ‘inconsistent’ case Eric Hotung and Winnie Ho’s legal battle, over returns on a supposed investment held in trust by Stanley Ho’s gaming business in Macau in 1961 has been dismissed by the courts. An attempt to claim ownership of shares in Stanley Ho’s gaming empire worth an “unimaginable sum” has failed, as the High Court of Hong Kong ruled that evidence presented by the claimant, billionaire Eric Hotung, was not accepted and deemed inconsistent, according to the South China Morning Post (SCMP). Hotung sued his former secret lover Winnie Ho Yuen Ki over HK$2 million (US$250,000) he said he had given her to invest in her brother Stanley Ho Hung Sun’s gaming business in the territory in 1961. Mr. Hotung and Ms. Ho have a son together, Michael Mak Shun Ming, who was also named as a co-defendant in the case, given his assistance in managing some of the assets in question with his mother. The publication notes that Mr. Hotung denies that the money transferred to Ms. Ho was a gift, commenting that the amount equalled two-thirds of his personal wealth at the time while his lawyer argued that the amount was an “unimaginable sum for anyone at that time”. The amount would be worth roughly HK$640 million now, according to SCMP. Winnie Ho was absent from the proceedings and did not give oral evidence, as she was said to be too
ill. The court ruling, handed down by Justice Anderson Chow Ka Ming, said that the case wasn’t supported or contradicted directly by any documentary evidence and that Hotung was the only one who had given evidence at the trial, notes the newspaper.
Not today
Mr. Chow said that he was “unable” to accept Hotung’s evidence that he had provided the money to Winnie Ho on trust for her to invest in the Macau casino business on his behalf. The court Justice also commented: “At times, he [Hotung] appeared to be confused by questions put to him by counsel,” quotes SCMP, finding Mr. Hotung to be affected by his old age. Although initially claiming that an oral agreement had been reached between Mr. Hotung and Winnie Ho, the billionaire recanted this during cross-examination stating “there was nothing actually said,” cites SCMP, noting that the Justice saw Mr. Hotung’s lack of interest in the casino dividends as indicative that he did not consider Ms. Ho to hold the shares in trust for him. Ms. Ho had previously said that she had paid back Mr. Hotung HK$1.6 million and her lawyer argued that the dispute might be due to the two not thinking through the nature of the
transaction before it was conducted. The ruling asserted the judge’s position that he could not determine the nature of the payment and Justice Chow noted that he was not required to make a definitive finding on the true nature of the sum. “I do not consider it beyond the realm
of possibility that [Hotung] could lend HK$2 million to Winnie on an informal basis, or make a gift of HK$2 million to her in 1961,” the justice stated, as quoted by the publication. The case was dismissed and Mr. Hotung was ordered to foot Winnie Ho’s legal bills but not that of her co-defendant, and son, Michael’s, reports SCMP.
6 Business Daily Friday, September 9 2016
Macau Opinion
Pedro Cortés
Public Invasion Macau Basic Law, Articles 30 and 31: ‘(…) Macao residents shall enjoy the right to personal reputation and the privacy of their private and family life. The homes and other premises of Macao residents shall be inviolable. Arbitrary or unlawful search of, or intrusion into, a resident’s home or other premises shall be prohibited.’ The rumours came to my knowledge some months ago, but in my candid belief I always thought them rumours. Two weeks ago, I heard in the first person the story: Macau officials are inspecting the homes of non-married couples in order to assess whether the declarations they make to get residency – when one member is resident and the other is not – are true (i.e.) whether in fact they live together or not. Under the laws in force, the authorities are entitled in any administrative proceedings, including for residency purposes, to request documents or information. However, it is not entitled, without a court warrant, to go to people’s homes to ask whether they have sex with a condom, to search for two toothbrushes in the bathroom, to check whether they have one or two beds, or to ask other disturbing and invasive questions. It seems that they “request” the inspected persons to sign a declaration to authorise the inspection. Nevertheless, even with that declaration signed – one understands promptly the consequences if such authorisation is not provided – all signals tend to conclude that we may be facing a deviation from the principles of the Basic Law and of the Administrative Procedure Code currently in force. I guess that this behaviour is not what was established in the Joint Declaration between Portugal and People’s Republic of China, as well as in the Basic Law. If I am wrong and I am the one with a deviated interpretation, maybe it is better to consider that we no longer live under the rule of law in the Macau Special Administrative Region. If the Administration has doubts about the authenticity of the declarations made for de facto unions, there are two options: either refuse the concession of the residency to the non-resident member or file the case with the Public Prosecutor’s Office per the making of false declarations. But, in my humble opinion, the authorities are not entitled to search people’s homes even with authorisation, especially when they ask indiscreet and intrusive questions. Otherwise, one day we are going to be requested information on whether we eat properly or sleep enough or take the appropriate pills. Yes, my friends, it seems ludicrous but the individuals involved are being questioned about whether contraceptive pills are used.
Pedro Cortés is a lawyer and frequent contributor to this newspaper.
Trade East Timor-China trade posts year-on-year increase
Sino-Luso trade continues to shrink Trade between China and Portuguese-speaking countries decreased 12.25 per cent year-on-year in the first seven months of 2016. Nelson Moura nelson.moura@macaubusinessdaily.com
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rad e b et w e e n Chi n a and Portuguese-speaking countries fell 12.25 per cent year-on-year between January and July of 2016, according to statistics published by the Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries (Forum Macao). F o r th e f i rst s ev e n m o n th s of 2016, total Sino-Luso trade amounted to US$51.5 billion. Of the total, China’s imports from Portuguese-speaking countries increased 0.44 per cent year-onyear to US$35.73 billion, whilst its exports to Lusophone countries decreased 30.8 per cent year-onyear to US$15.76 billion. On a month-to-month comparison, Sino-Luso trade in July grew 9.52 per cent to US$9.8 billion. China’s imports from Portuguesespeaking countries in July jumped 8.42 per cent month-on-month to US$6.98 billion, while its exports rose 12.34 per cent month-to-month to US$2.83 billion.
Brazil still faithful
For the first seven months of the year, Brazil was China’s biggest trading partner, with trade valued at US$38.2 billion – despite this representing a year-onyear decrease of 9.36 per cent. The decrease in trade value between the two countries in the seven months is due to China’s exports to the South American country plunging 33.8 per cent year-on-year to US$11.6 billion. Nevertheless, China’s imports from Brazil rose 8 per cent year-on-year to US$26.63 billion in the seven months. On a month-to-month comparison, trade between China and Brazil grew 6.04 per cent to US$7.3 billion in July, driven by China’s exports and imports riding 15.3 per cent and 2.7 per cent month-on-month to US$2.11 billion and US$5.18 billion, respectively.
Angola trade continues to fall
African Portuguese-speaking country Angola maintained its position as China’s second biggest Portuguese-speaking trading partner in the first seven months of the year, regardless of a 27.69 per cent year-on-year fall to US$9 billion in total trade value.
China’s total exports to the African country dropped 60.6 per cent yearon-year to US$942.9 million, while total imports from Angola fell 19.8 per cent year-on-year to US$8.05 billion in the seven months. In July alone trade between China and Angola reached US$1.83 billion, which is a month-on-month increase of 35.3 per cent.
China-Portugal trade increasing
Meanwhile, Portugal was the third biggest trading partner of China in the Portuguese-speaking world in the first seven months of 2016, with bilateral trade value amounting to US$3.14 billion. The amount represents a rise of 23.1 per cent compared to the same period of last year. In the seven months, China’s exports to the European country reached US$2.34 billion whilst imports from Portugal totalled US$799.1 million. However, on a month-to-month comparison, trade value between China and Portugal decreased by 5.91 per cent in July, at US$505.2 million. East Timor, the only Portuguese-speaking country in Asia, saw the biggest year-on-year increase in trade value with China during the first seven months of 2016. Its trade value with China surged 76.5 per cent year-on-year to US$81.2 million in the period.
Retail Oriental Watch disposes of all shares in MSAR joint venture
Time to let go L u x u r y w a tc h m a n u f a c t u r e r Oriental Watch Holdings Ltd. has announced that it will sell a 45 per cent share of capital interest in Hei Tung Watches Company Ltd. to Smart Group Limited for a total consideration of HK$83.2 million (US$10.4 million) according to a filing by the company with the Hong Kong Stock Exchange. The filing notes that Oriental Watch and Smart Group ‘entered into the agreement as they have decided to end the joint venture in respect of Hei Tung to pursue the watch retail business in Macau separately’. The deal also includes the benefit of loans of HK$66.8 million to Hei Tung. Hei Tung Watches is principally engaged in the retail of watches in Macau. For Hei Tung’s previous fiscal year, ending March 31, O r i e n t a l Wa t c h r e c e i v e d a repayment from its interest in the joint venture amounting to HK$6.3 million, as noted in its 2016 annual report. ‘The Group [Oriental Watch]
expects that the remaining amount would not be settled within twelve months from the end of the reporting period,’ notes the report, published in late July. Oriental Watch and its subsidiaries operated a total of three stores in the MSAR as at the end of March, with revenue from its Taiwan, Macau and
Mainland China segment amounting to HK$769.5 million and a loss of HK$16.92 million recorded for the segment during the period. M ea n w hi l e, H ei T u n g’ s n et profits before taxation amounted to HK$6.6 million at year-end 2015, as compared to HK$26.2 million at year-end 2014. K.W.
Business Daily Friday, September 9 2016 7
Macau Social gaming Scientific Games designates social gaming subsidiaries as unrestricted
If you love them, set them free Kelsey Wilhelm Kelsey.wilhelm@macaubusinessdaily.com
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cientific Games Corp. (SG) has announced that it has designated its wholly owned interactive social gaming subsidiaries as unrestricted subsidiaries under its debt agreements, according to a company press release. The move has the objective of ‘maximizing growth for the company’ and the group is looking at a series of options including joint ventures and acquisitions, among others, to stimulate growth. “Our industry leading investment in innovation is paying off”, commented CEO and President of Scientific Games, Kevin Sheehan, in the release. “Following our company’s third consecutive quarter of revenue growth, we see this as a perfect time to accelerate momentum and explore additional opportunities to deliver greater value from this strong and rapidly growing segment of our business”. Analysts at Telsey Advisory Group have noted that the strategy appears ‘to establish value for arguably its highest value asset’ – its social gaming entities - which Scientific Games notes will ‘remain wholly owned’ by SG and ‘continue under the leadership’ of Barry Cottle, Chief Executive of Interactive, and Jordan Levin, President of Interactive. With regard to immediate effects analysts at Telsey ‘expect the shares to respond positively to the
announcement in the near term’. However, in the long term the analysts are uncertain as the ‘spectrum of potential outcomes is wide and less clear’.
‘Opportune’ and ‘positive’
The analysts have ranked Scientific Games stock as ‘market perform’ and note that the timing of the announcement is ‘opportune’. SG’s social gaming business has seen sequential double-digit growth in the past three quarters as well as a 68 per cent year-on-year increase in revenue for the second quarter, ‘which positions the business unit as the fastest growing within the company by far and should be the highest value element at the moment,’ note Telsey analysts.
However, when comparing potential outcomes to recent sales - such as Caesars Interactive’s ‘Playtika’ for US$4.4 billion (MOP35.15 billion/ HK$34.13 billion) to a Chinese consortium led by Giant Investment (HK) Limited, and including a private equity firm created by Alibaba founder Jack Ma – the analysts note that ‘the business does not necessarily embody a brand similar to that of Caesars’. ‘The interactive business growth and value are largely driven by its integration with the enterprise systems business, in our view, which raises for debate the standalone value of the business unit,’ notes Telsey. However, overall the idea is sound and ‘positive’, note the analysts, and that ‘it is prudent for all companies with holdings in the interactive business to explore the prospects for value capture at this time’. Additional outcomes for the now-unrestricted subsidiaries include initial public offerings (IPOs) for the group’s social gaming frontrunners such as Dragonplay Ltd. and Phantom EFX.
Aviation
BOC Aviation changes Non-Executive Director The aircraft leasing unit of Bank of China Ltd. - BOC Aviation Ltd. - has appointed Liu Chenggang as its new non-executive director, according to the company’s filing with the Hong Kong Stock Exchange on Tuesday. The new appointment follows the resignation of the company’s former non-executive director Zhuo Chengwen, who has also ceased his functions as chairman of the Strategy and Budget Committee and member of the Audit Committee of the company, effective Tuesday. BOC Aviation purchases aircraft from manufacturers and then leases them to airlines for a monthly fee. The aircraft leasing subsidiary of Bank of China debuted on the Hong Kong Stock Exchange in June this year. For the first half of the year, the company recorded a net profit after tax of US$212 million (MOP1.7 billion), which increased by 24 per cent year-on-year. According to its recent financial report, 19.8 per cent of the company’s lease rental income was generated by Mainland China, Hong Kong, Macau and Taiwan. N.M.
8 Business Daily Friday, September 9 2016
Greater China In Brief Borrowing
Overdue credit card payments rise 5 pct China’s overdue credit card payments rose 4.91 per cent in the second quarter from the quarter before, the country’s central bank said yesterday in a report posted on its official website. As the speed of growth in the country slows, borrowers have been finding it harder to repay debt, leading to an increase in soured loans. Credit card payments overdue by more than six months hit 48.1 billion yuan (US$7.22 billion) at the end of the second quarter, the report said. Such overdue payments made up 1.43 per cent of the total amount outstanding on credit cards. Hang Sheng
Hong Kong stocks rise as inflows from Mainland intensify Hong Kong’s benchmark index finished higher yesterday as fresh inflows from mainland China persisted, and as fears of a U.S. interest rate hike this month faded. The Hang Seng index rose 0.8 per cent to 23,919.34 points, while the China Enterprises Index gained 0.4 per cent to 10,008.21. The Fed said overnight in its Beige Book report of anecdotal information that the U.S. economy expanded at a modest pace in July and August. But there was little sign that wage pressures are being felt beyond highly skilled jobs, which the Fed is looking for to push inflation higher.
Demand picks up
Imports rise for first time in nearly 2 years While a surge in commodity prices is widely acknowledged as a major factor for the rebound in imports, analysts believe the surprising uptick also reflected stronger domestic demand. Yawen Chen and Elias Glenn
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hina’s imports unexpectedly rose in August for the first time in nearly two years, boosted by coal and other commodities, suggesting domestic demand may be picking up and putting the world’s second-largest economy on a more balanced footing. Exports also showed signs of improvement, falling by a less-than-expected 2.8 per cent from a year earlier, as demand in the United States, Europe and even Japan showed some signs of improvement, data showed yesterday. If it proves sustainable, a trade recovery or even signs of trade stabilisation would help ease fears that China’s economy is becoming increasingly lopsided, and give feeble global growth a much-needed shot in the arm. In recent months, China’s economy has shown signs of stabilising, but growth has become more dependant on a government infrastructure spending spree and a housing boom as private investment fizzles and exports remain sluggish. “The improvement in imports is mostly a reflection of stronger domestic demand. Chinese companies are restocking (raw materials), and also are
now expecting prices to start rising,” said Wang Jianhui, an economist with Capital Securities in Beijing. “There is also some expectation that the economy is improving. As we are entering the high season in the fourth quarter, we expect exports to stay stable and imports to improve as higher prices spread to more products.” China’s 1.5 per cent import rise was the first expansion in value terms since October 2014. Economists polled by Reuters had expected a fall of 4.9 per cent, moderating from a sharp 12.5 per cent tumble in July. While a surge in commodity prices is widely acknowledged as a major factor for the rebound in imports, analysts believe the surprising uptick also reflects stronger domestic demand, which is fuelling a brighter profit outlook for Chinese manufacturers. “The size of the pick-up suggests that there may also have been some improvement in import volumes last month,” Capital Economics said in a note. Non-commodity imports also rebounded, HSBC said in a note, noting gains in machinery imports. The launch of new consumer electronic gadgets ahead of the year-end shopping season may also have given a
Green cars
Authorities say 5 auto firms cheated on subsidies China’s Ministry of Finance said yesterday that five domestic automakers had cheated on its programme to subsidise electric and plugin hybrid vehicles and had received roughly 1 billion yuan (US$150.07 million) in illegal subsidies. The ministry said it would revoke the production license of the largest violator, Suzhou Gemsea Coach Manufacturing, while the other four firms would be fined 50 per cent of the wrongly received subsidies, in addition to efforts to recover the fraudulent awards. The country spent $4.5 billion last year in subsidies for such vehicles, although it is set to gradually phase out the payments by 2021. Business support
Incubator with Denmark to help start-ups A business incubator, jointly invested by Chinese and Danish entities, was opened here on Wednesday to help ease the way for Chinese companies entering the Danish market and Danish companies entering China. Located a stone’s throw from the Danish landmark statue of “The Little Mermaid”, Innovation House China-Denmark is the first business facility of its kind designed to target the Chinese market. It will offer companies from both countries practical solutions combined with in-depth local knowledge, according to Mads Kragh, CEO of Vaeksthus Sjaelland and Vaekstfabrikkenrn, one of the shareholders of Innovation House.
boost to China’s supply chain, as firms imported more components to make products such as Apple’s iPhone 7, which officially launched this week. A similar bounce in hi-tech was seen in Taiwan’s export data on Wednesday, though analysts are sceptical it will last much beyond the seasonal Christmas peak. “We think the rebound in domestic demand is a reflection of robust infrastructure investment over the past few months. This is the result of an expansionary fiscal policy, which we believe will continue into the second half of 2016, and possibly well into 2017,” HSBC economists said.
Commodities and cars
Among commodity imports, coal jumped over 50 per cent by volume as China cut back on mining its own coal in favour of buying higher quality supplies from countries such as Australia. While iron ore imports slipped from July they remained near record highs as Chinese steelmakers rebuild inventories in expectation of higher returns. Stockpiles at small- and medium-sized mills rose 7.5 per cent from Aug. 11 to 25, Morgan Stanley said in a note. The steel price surge is due in part to Beijing’s efforts to reduce excess capacity. Some Chinese steel plants are turning in the best margins in at least three years as prices rise and demand for building materials increases. Chinese steel exports also look set to hit a fresh record this year, raising friction with some of its major trading partners. Passenger vehicle sales in China to retail customers rose 12.7 per cent in January-August from a year earlier, the China Passenger Car Association said yesterday. Imports of automobiles and auto parts also increased significantly in August, Nomura noted. Global demand for Chinese goods also seems to be picking up slowly, though weak U.S. factory activity readings and German output data this week suggest export orders may remain sluggish. Exports fell 2.8 per cent from a year
Automotive industry
Mainland auto sales rise in rush to beat expiring tax cut The state-backed China Association of Automobile Manufacturers has urged the government to make the tax cut on small cars permanent. China’s passenger-vehicle sales climbed for a sixth consecutive month as consumers rushed to buy ahead of a tax cut due to expire at year-end and General Motors Co. and Great Wall Motor Co. emerged from stiff pricing competition with rising deliveries. Retail sales of cars, sport utility and multipurpose vehicles increased 24.5 per cent to 1.8 million units in August, the China Passenger Car Association said yesterday. Deliveries climbed 13 per cent to 14.2 million units through the first eight months of this year. Consumers are anticipating the expiration of a tax cut on purchases of vehicles with smaller engines, according to Cui Dongshu, secretary general of the association. Automakers also are discounting to draw buyers, narrowing the average profit dealers are making for selling a premium car in China to 66 yuan (US$10) from 487 yuan in June, according to data compiled by WAYS Consulting Co. “In our recent dealer interviews, it was clear that pre-buying had already
begun to influence industry volumes,” Robin Zhu, an analyst at Sanford C Bernstein, wrote in a report dated September 5. “We expect the pull-forward of demand to persist through the end of the year, and support year over year growth.” Great Wall, the top-selling sport utility vehicle maker that started to cut
prices of its H6 and H2 models last year, boosted deliveries by 25 per cent in August. Guangzhou Automobile Group Co.’s sales increased 31 per cent, with its SUV deliveries almost doubling. Geely Automobile Holdings Ltd.’s sales climbed 69 per cent. Deliveries for GM increased 18 per cent in August, while Nissan Motor Co.’s rose 17 per cent. Ford Motor Co.’s sales climbed 22 per cent. The state-backed China Association of Automobile Manufacturers has urged the government to make the tax cut on small cars permanent to encourage development of fuel-efficient vehicles. China cut levies on small-engine cars by half beginning in October after lobbying by the carmakers association to buttress the nation’s slowing economic growth. Bloomberg News
Business Daily Friday, September 9 2016 9
Greater China Accounts hurdles
earlier, beating forecasts for a 4.0 per cent decline. Shipments to the U.S. dipped marginally while those to the European Union rose 2.4 per cent. Exports to Japan also improved, albeit modestly. China’s customs department said pressure on shipments was expected to ease further in the fourth quarter, though analysts doubt there will be any strong recovery soon. China recorded a narrower trade surplus of US$52.05 billion in August, versus a US$58 billion forecast and July’s US$52.31 billion.
Key Points Imports rise 1.5 pct y/y, modest but 1st growth since late 2014 Exports slip 2.8 pct y/y, decline at more moderate pace Imports of resources such as coal, iron ore, oil, copper robust Exports to United States, Europe, Japan improve Global demand still expected to remain sluggish
However, global demand still remains depressed. International Monetary Fund (IMF) Managing Director Christine Lagarde said earlier this month that it will likely downgrade its 2016 global growth forecast again. China’s cabinet said this week that it will step up proactive fiscal policy efforts now that commodity prices are relatively low, hinting that the infrastructure boom will continue. But some analysts a housing rebound may be peaking as sharp price rises force more cities to tighten restrictions on home buyers. Reuters
Hong Kong cautions banks on heavy-handed customer due diligence The American Chamber of Commerce called on Hong Kong authorities to come up with long-term solutions to allow easier access to services offered by lenders. Alfred Liu and Karen Yeung
The Hong Kong Monetary Authority has warned banks that applying disproportionately stringent due diligence on new account openings risks excluding legitimate businesses from basic financial services. The city’s de facto central bank urged lenders to adopt an approach that differentiates the risk of individual customers through factors such as country, business or product risk, rather than take a “one-size-fits-all” approach, it said in a statement yesterday. The HKMA said it will work with banks to implement consistent anti-money laundering and counter-terrorist financing requirements to ensure legitimate businesses aren’t excluded. The HKMA’s comments come amid increasing debate over difficulties individual and corporate customers are facing opening and retaining accounts, at a time when banks are stepping up compliance efforts to meet regulatory requirements. Billions of dollars of fines handed down by regulators around the world have put lenders under pressure to monitor customer accounts more closely for possible financial crimes such as money laundering and terrorist financing. The American Chamber of Commerce called on Hong Kong authorities to come up with long-term solutions to allow easier access to services offered by lenders, the South China Morning Post reported this week, adding that the city’s 29 international chambers
of commerce raised the issue with the city’s government in June.
No explanation
In one example of a recent account closure, a global trust company that had been a long-time client of HSBC Holdings Plc was suddenly notified by the bank last year that all its main operational accounts held with the lender had been shut, the SCMP reported, without naming the firm. No explanation was given, the newspaper said. The SCMP cited the trust company’s head, which it also didn’t name, as saying that the closure may have been related to HSBC’s desire to break from any offshore businesses to avoid being accused of assisting tax evasion.
Gareth Hewett, a Hong Kong-based spokesman for HSBC, said in an e-mail before the HKMA statement was released that the bank was unable to comment on individual cases, citing customer confidentiality. “We take each case seriously and we rigorously review complaints,” Hewett said. “For all account opening applications, it is important for us to understand the business’s purpose in establishing an account in Hong Kong.” HSBC, which gets most of its profit in Asia, said in its interim report total expenditure on regulatory programs and compliance in the first half increased 14 percent to US$1.5 billion from a year earlier. The lender has been striving to bring misconduct costs and litigation to an end by boosting its compliance work after it agreed to pay US$1.9 billion to U.S. authorities as part of a deferred prosecution agreement over money laundering allegations in 2012. Bloomberg News
10 Business Daily Friday, September 9 2016
Greater China
This year’s swings in rebar illustrate how manic trading has been Futures market
Hedge fund makes 2,100 per cent from the world’s most extreme mania Turbulence in Chinese commodities markets has rarely been so extreme.
P
lenty of professional investors like to tout their talent for turning volatility into opportunity. Few have managed to deliver on that promise as well as Wang Bing. With deft timing and the magnifying power of leverage, the 37-year-old trader of Chinese commodity futures has navigated the most fevered speculative mania of 2016 to produce the kind of returns that only volatile markets can provide. Wang says his Guli Trend Aggressive Strategy fund has climbed about 750 per cent this year, extending an advance since its March 2015 inception to 2,100 per cent. Those gains would stand out in any market environment, but they’re even more remarkable at a time when hedge funds around the world are getting battered by weak performance and client outflows. While many of Wang’s peers have embraced computer-driven strategies in an attempt to gain an edge, the former iron-ore importer says his trades are dictated by old-fashioned analysis of supply and demand. Whether that makes him a long-term star of China’s futures markets or a shortlived outlier, only time will tell. “There are always more opportunities to make big profits, or big losses if you are wrong, amid wide price swings,” said Wang, whose fund has climbed the most this year among Chinese peers tracked by Shenzhen PaiPaiWang Investment
and Management Co., a compiler of domestic hedge fund returns. Turbulence in Chinese commodities markets has rarely been so extreme. Over a two-month span earlier this year, daily turnover on the nation’s futures exchanges more than tripled to US$261 billion - exceeding the gross domestic product of Ireland. Prices of at least five commodities surged more than 50 per cent during the boom, which peaked in April. The market has been wracked by volatility ever since. Official efforts to restrict speculation left some momand-pop investors scrambling to unwind positions, while professional traders have struggled to gauge demand amid uneven economic data in China and the U.S. This year’s swings in rebar illustrate how manic trading has been. After surging 66 per cent from early December to mid-April, futures on the construction material dropped 28 per cent over the following month. They then rallied 35 per cent until mid-August, before sliding about 10 per cent through Wednesday.
Market timing
Wang says he’s managed to time the big swings almost perfectly. He reversed a short position in rebar at the end of last year as prices bottomed out around 1,600 yuan a metric ton, betting that production cuts would spark a rally. He added to his bullish wager in early April as property and infrastructure
investment picked up, then closed out the positions on April 22 just as prices were peaking. His outsized returns were made possible by the embedded leverage of futures contracts. Their purchase or sale typically requires an initial deposit, known as margin, that’s just a fraction of the value of the underlying assets. That means even small price changes can lead to big profits - or losses - for holders of the derivatives. Wang had recently been betting on higher commodity prices, encouraged by signs that President Xi Jinping’s government would take measures to tackle oversupply. But he closed out the last of those positions on Wednesday, responding to local speculation that producers of coke and coking coal will be allowed to ramp up production. He’s looking to re-open bullish bets on rebar when prices fall to around 2,300 yuan a metric ton.
Sustainability doubts
“How strongly the government pushes for capacity reduction will decide how much prices go up,” said Wang, whose Guli Trend fund now holds just 49 million yuan (US$7.4 million) after he withdrew some of his own initial investment. The fund was started with money from Wang and a small group of clients and is currently closed to new investors, he said in an interview at his Shanghai office. Not all of Wang’s strategies have delivered such stellar gains. Among his eight funds with returns tracked by Shenzhen PaiPaiWang, none have
climbed as much as the Guli Trend fund, with two shown as losing money for investors. “The massive rally on rebar contracts earlier this year gave rise to many splendid returns, but they are not sustainable in the long term,” said Gao Fei, a Shanghai-based analyst at Chinese fund tracker Howbuy.
“Overall, high-frequency traders have helped me because they enlarged price trends.” Wang Bing, hedge fund manager Wang, who started trading futures in 2008, said he supplements his assessment of commodities supply and demand with simple forms of technical analysis. One of his favourite measures is the 30-day moving average. When prices move above that level, he’s more inclined to bet on gains. On the rise of computer-driven traders in China’s commodities markets, Wang said his new hightech competitors have only helped his prospects by exacerbating volatility. “I have a longer-term approach and hardly do intraday trading,” Wang said. “So overall, high-frequency traders have helped me because they enlarged price trends.” Bloomberg News
Business Daily Friday, September 9 2016 11
Asia Weak momentum
Japan growth revised up slightly The tame economic outlook will keep the Bank of Japan under pressure to ease policy further. Tetsushi Kajimoto
Japan’s economy grew faster over April-June than initially estimated, the Cabinet Office said yesterday, with upward revisions to capital expenditure and inventories, but the lack of a strong growth driver is seen undermining momentum for the rest of this year. The Cabinet Office said the economy grew at a 0.7 per cent annualised rate over April-June, an upward revision of the preliminary reading of 0.2 per cent growth, in which the strong yen and weak demand were seen hurting exports and capital spending. Japan’s economy, the world’s third largest, is seen lacking momentum in the current quarter and beyond, following a recent run of weak export, factory output and household spending data. Unless overseas economies improve and the yen’s gains fade away, the economy is at risk of faltering later this year, before Prime Minister Shinzo Abe’s government fully implements the stimulus package it unveiled last month, analysts say. The tame economic outlook will keep the Bank of Japan under pressure to ease policy further as the
central bank conducts comprehensive assessment of the effects of its stimulus programme at its September 20-21 rate review. “The economy is likely to remain stagnant in July-September and October-December in the absence of a growth engine,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
Key Points
economists’ median estimate of an annualised 0.0 per cent reading in a Reuters poll. The figure translates into quarter-on-quarter growth of 0.2 per cent in real, price-adjusted terms, against an initial reading of 0.0 per cent. Capital expenditure, a key component of GDP, fell 0.1 per cent for the quarter, versus the preliminary estimate of a 0.4 per cent decline. Inventories contributed 0.1 percentage point to growth, versus the preliminary slightly negative contribution recorded. Private consumption, which accounts for roughly 60 per cent of
the economy, rose 0.2 per cent, unchanged from the preliminary estimate. Taken together, domestic demand contributed 0.4 percentage point to growth, versus the initial 0.3 percentage point registered. Net exports knocked 0.3 percentage point off growth. With economic growth having ground almost to a halt and inflation sliding further away from the central bank’s 2 per cent target, most analysts expect the BOJ to loosen policy this month. BOJ Governor Haruhiko Kuroda signalled his readiness on Monday to ease policy further, shrugging off some concerns that monetary stimulus is reaching the limits of its effectiveness. Reuters
Q2 GDP revised to annualised +0.7 pct vs prelim +0.2 pct Capex -0.1 pct qtr/qtr vs prelim -0.4 pct; inventory revised up Private consumption +0.2 pct, unchanged from prelim reading Soft data points to moderate econ growth in Q3 “Household income gains are not strong enough to drive up private consumption, while the yen’s gains are expected to undermine exports and capital spending gradually but surely.” The revised gross domestic product (GDP) data compared with
Infrastructure
Thailand places growth hopes on big projects Transport Minister Arkhom Termpittayapaisith is optimistic, saying infrastructure projects will lift growth to a four-year high. Orathai Sriring and Pairat Temphairojana
Thailand’s military government aims to jolt its underperforming economy into action with US$40 billion of big-ticket investment projects - but so far nearly all the plans remain just that, with less than 1 per cent of the amount spent. One example is a jointly-built Thai-Chinese rail line. It has gone nowhere after 13 bilateral meetings due to disagreements over cost, financing and land rights. Thailand now says it intends to start the project by itself. The junta has approved a majority
of 20 proposed big-ticket projects it aims to build by 2022, which the transport minister estimated will cost 1.41 trillion baht (US$40.63 billion). But it had only disbursed 11.3 billion baht, 0.8 per cent of the total, by August 19. There’s a risk Thailand “would not be able to implement all the large public infrastructure plans,” said Kiatipong Ariyapruchya, a World Bank economist. The World Bank said factors behind delays include an unclear appraisal process, slow procurement and lengthy environmental impact assessment and approval.
Thailand’s infrastructure ranking in the World Economic Forum’s Global Competitiveness Index fell to 44 in 2015-2016 from 38 in 2006-2007. Indonesia climbed to 62 from 89 during the same period. In the first half of 2016, Thailand’s growth rate inched up, helped by higher government investment. But with exports and domestic consumption both weak, getting stronger growth rates requires both bigger state and private investment. Private investment has fallen the past three years. Finance Minister Apisak Tantivorawong said recently that without private investment, recovery “will be slow”.
Political uncertainty
Keeping down investment has been uncertainty about Thailand’s political path ahead, though the junta has said there will be elections in late 2017. “Politics have partly kept investment at low levels because investors may want to see the next government first,” Bank of Thailand Governor Veerathai Santiprabhob told Reuters in July. The central bank has held interest rates near the record low for more than a year, waiting for fiscal policy to shoulder some of the load of lifting the economy. Public investment jumped nearly 30 per cent to a record 865 billion baht last year, after falling 7.3 per cent in 2014. Euben Paracuelles, Nomura economist in Singapore, said second-half growth should be “weak or slower” than the first half because the pace at
which the government speeds spending on large projects “is probably not going to be enough to keep headline GDP rising”. “Hopefully the disbursement will accelerate,” he said. The Bank of Thailand predicts 2016 GDP growth of 3.1 per cent, with exports falling for the fourth year. The World Bank sees 2.5 per cent GDP growth. The economy grew 2.8 per cent last year.
Optimism about 2017
Transport Minister Arkhom Termpittayapaisith is optimistic, saying infrastructure projects will lift growth to a four-year high of 3.5 per cent this year, and to 3.5-4.5 per cent in 2017. “The benefits will be higher in 2017 as projects bid this year will start next year,” he said. The central bank governor expects higher disbursements for larger investment projects in the second half of this year as some, such as motorways, have now gone to auction. Sangvorn Lipatapanlop, managing director of contractor Prayoonwitt Co, which has some highway work, said that once the auctions were held, it can take around three to four months to complete contract negotiations, and then a further two months for the government to release funding. Even if there’s not much money spent on large-scale projects the rest of this year, economist Pimonwan Mahujchariyawong of Kasikorn Research Center said people will have some confidence as auction processes get under way. “Just opening bids for them would already make people happy,” she said. Reuters
12 Business Daily Friday, September 9 2016
Asia In Brief Finance ministry
SK faces downside risks from Fed rate policy South Korea’s economy faces downside risks as the U.S. Federal Reserve gears up to raise interest rates and Korea overhauls of its shipping and shipbuilding industries, the finance ministry said yesterday. The ministry noted in its monthly assessment of the economy that growth could be constrained by extensive strikes at automakers. Unionised workers at South Korea’s Hyundai Motor rejected a tentative wage deal last month, signalling more strikes and production losses at its biggest manufacturing base. August export data showed early this month shipments would have performed better had it not been for the auto strikes.
Central bank governor
Indonesia’s tax likely missing revenue target The Finance Ministry projected US$76.5 billion would be repatriated thanks to the programme. Gayatri Suroyo and Hidayat Setiaji
I
ndonesia’s flagship tax amnesty programme will likely yield only a fraction of what was targeted, the central bank governor said, in a blow to the government’s plan to meet its budget deficit target. Indonesia launched the ninemonth tax amnesty programme in July, offering low penalty rates for taxpayers who declare untaxed assets at home and abroad by March 2017.
Private survey
Thai consumer mood improves Thai consumer confidence rose for a second straight month in August, a university survey showed on Thursday, after voters approved a junta-backed constitution in a referendum and a drought ended. Consumers thought the fading drought impact coupled with rise in farm price help boosted purchasing power, the University of the Thai Chamber of Commerce said. In July, the consumer mood improved for the first time in seven months. The military, which seized power in May 2014 to end months of political unrest, has struggled to revive Southeast Asia’s second-largest economy, with exports and domestic demand still sluggish.
Indonesia’s new Finance Minister Sri Mulyani Indrawati
But the programme has started more slowly than expected, raising doubts over whether it will generate enough revenue to keep the deficit within target. And the shortfalls could make it harder for President Joko Widodo’s government to fund its ambitious infrastructure projects. The government had banked on the amnesty bringing in 165 trillion rupiah (US$12.6 billion) in 2016, to help keep the budget deficit from breaching its legal limit of 3 per cent of GDP. Indonesia’s new Finance Minister Sri Mulyani Indrawati had estimated last month that the deficit would be 2.5 per cent for 2016. But Bank Indonesia Governor Agus Martowardojo told a parliamentary hearing late Wednesday that the central bank’s baseline model for the amnesty programme points to merely 18 trillion rupiah of revenue in 2016 - only 11 per cent of target - and an additional 3 trillion rupiah in 2017. Assets repatriated home under the amnesty would probably amount to just US$13.8 billion, he said. “We’re being conservative about our outlook based on the latest development of the tax amnesty,” Martowardojo said, citing that 1-1/2 months after its launch, the government’s amnesty revenue was less than 4 per cent of target. The central bank was more optimistic back in April, when Martowardojo said the amnesty would attract home about US$42 billion.
The Finance Ministry had been even more bullish, projecting US$76.5 billion would be repatriated thanks to the programme. Finance Minister Indrawati, who attended the parliamentary hearing, declined to comment on the central bank’s revised forecast.
“We’re being conservative about our outlook based on the latest development of the tax amnesty” Agus Martowardojo, Bank Indonesia Governor The ministry’s tax office, which runs the amnesty programme, said afterwards that its revenue target was unchanged. “We hope it can be achieved. We will never be satisfied,” Ken Dwijugiasteadi, the director general for taxes at the finance ministry, told Reuters. Since the launch of the amnesty programme, the index has rallied more than 10 per cent, supported by the prospect of more money coming home to Southeast Asia’s largest economy. Some compan ies have also prepared to increase their bond sales this year to absorb returning funds, while property firms have tailored their marketing to specifically target amnesty participants. Reuters
Technological assistance
Myanmar seeks deletion from least developed country list The Myanmar government is taking measures to remove the country from the Least Developed Country (LDC) list, seeking technological and developmental assistance, parliament sources said yesterday. Deputy Minister of Planning and Finance U Maung Maung Win told the House of Representatives that Myanmar was listed in 1987 but did not enjoy LDC benefit due to economic sanctions. Works are underway to seek short-term technical advice and consultancies from resident UN Development Program (UNDP) experts and adoption of policies to support Myanmar’s graduation from the LDC status, he said. Capital boost
Yes Bank launches US$1 billion share sale India’s Yes Bank Ltd has launched a share sale worth up to US$1 billion, according to a regulatory filing on Wednesday, as the country’s fifth-biggest private sector lender by assets aims to boost its capital base. Yes Bank is selling 66 billion rupees worth of shares, or about US$1 billion, to institutional investors at 1,350-1,410 rupees apiece, IFR, a Thomson Reuters publication, reported, citing two bankers privy to the transaction. Ahead of the announcement, the bank’s shares closed down 2.7 percent at 1,401.55 rupees.
Commerce
WTO appeals court backs South Korea in U.S. trade dispute The U.S. Commerce Department had imposed anti-subsidy duties of up to 82 per cent on washers made by Samsung, LG and Daewoo. Tom Miles
South Korea largely won an appeal ruling at the World Trade Organization on Wednesday in a challenge that puts U.S. anti-subsidy duties on Korean-made washing machines in jeopardy. South Korea partially won a ruling from a WTO adjudication panel in March, but both sides appealed part of that judgment. Wednesday’s ruling by the WTO Appellate Body, which is final, strengthened South Korea’s win by reversing part of the earlier ruling that had gone in Washington’s favour, concerning the calculation of anti-subsidy duties. The ruling does not immediately strike down the U.S. duties imposed in 2013 after Washington found that South Korea was unfairly subsidizing and pricing Korean-made washers exported to the United States. The U.S. Commerce Department had imposed anti-subsidy duties of up to 82 per cent on washers made by Samsung Electronics Co, LG Electronics Inc and Daewoo Electronics Co after a complaint brought by Michigan-based Whirlpool Corp. South Korea complained to the
Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Joanne Kuai; Nelson Moura; Annie Lao; Kelsey Wilhelm Group Senior Analyst José I. Duarte Design Aivi N. Remulla Web & IT Janne Louhikari Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@projectasiacorp.com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com Founder & Publisher
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WTO about the methodology used to calculate the duties. The panel ruling in March rejected part of South Korea’s complaint, including objections to the U.S. Commerce Department’s findings that tax credit subsidies were not tied to specific products. The WTO Appellate Body upbraided the panel for making several wrong decisions about the U.S. methodologies, and said Washington, not Seoul, was in the wrong. A spokesman for the U.S. Trade Representative’s office said the agency was “disappointed” with the appellate ruling, but noted that it confirmed WTO members’ ability to employ alternative methods to calculate duties to combat “targeted
dumping”, or unfair price cuts aimed at specific regions, time periods or customer groups. Under WTO rules, the United States will be expected to bring its rules into line with the appeal judgment, which could result in changes to its anti-subsidy calculations. If South Korea feels that the United States has failed to do so, it could ask the WTO to rule on U.S. non-compliance and then ask for trade sanctions against Washington. “We are currently in the process of reviewing the Appellate Body report, and based on this review, will evaluate our options for responding to the report,” the USTR spokesman said. A Whirlpool spokeswoman said that the ruling would have “no direct or immediate effect on the 2013 antidumping and countervailing duty orders on clothes washers from South Korea”, and the U.S. response could take some time. Reuters
Business Daily Friday, September 9 2016 13
Asia
Hi-frequency trading
India’s “flash boys” fret over proposed automated trading curbs Algo, or automated computer-driven trading of which HFT is a subset, accounts for over 40 per cent of executed orders in India. Abhirup Roy and Euan Rocha
India’s “flash boys”, or high-frequency traders, are pushing back against the domestic markets regulator and in some cases putting investments in new strategies on hold, saying proposed tighter rules could render their ultra-fast systems redundant. The Securities and Exchange Board of India (SEBI) last month proposed regulating hyper-fast stock trading, amid concerns that investors lacking access to such advanced and expensive systems were being disadvantaged. But trading firms contend such rules could hurt liquidity and destabilise Indian markets.
Key Points India considers tighter rules on automated trading High-frequency traders worry it will dent their business HFT firms holding back investment in new strategies HFT sector argues new rules would harm market liquidity “If you keep changing the rules of the game every now and then, people are going to worry about how much money they want to sink in,” said Rajesh Baheti, managing director at Crosseas Capital, adding that investments in new high frequency trading (HFT) strategies were on hold. “HFT’s not something that gives you instant returns. There’s a huge investment in technology.” India has been a land of opportunity for HFT players as high transaction costs in some European markets and greater competition in the United States have encouraged international HFT companies to flock to India in recent years. Algo, or automated computer-driven trading of which HFT is a subset, accounts for over 40 per cent of executed orders in India, above an estimated average of 32 per cent across Asian markets in 2015, according to market research firm Aite Group. The proposed rules, though, are forcing many to hit the pause button. Five HFT firms have told Reuters they are holding back new investments given the uncertainties surrounding the proposed regulations. “We were about to set up a new strategy and we were ready to deploy capital, and build a team of traders
and programmers, but if these changes are implemented that strategy would effectively be zero,” said a Delhi-based industry insider.
“Negative consequences”
SEBI has said it was looking at potential limits on so-called algo traders, including “speed bumps” to randomly delay execution of some orders, and forcing exchanges to take orders from co-located servers and other sources alternatively, removing another advantage enjoyed by HFT platforms. The deadline for submitting responses to SEBI ended on August 31. SEBI has said it planned to analyse the responses and hold discussions before creating a regulatory framework. “We will not do anything in haste,” Manoj Kumar, SEBI’s head of Market Regulation, told a conference last week. “We will keep on consulting everybody.” But in a letter sent to SEBI dated August 31, the global Futures Industry Association, which represents major HFT firms including Citadel, IMC and Optiver, raised a number of concerns. It said they may result in “potentially detrimental impacts to market liquidity, increased risk and increased trading costs for investors which outweigh potential regulatory benefits.”
Waiting game
In the discussion paper, SEBI noted that while literature existed showing algo trading helped tighten spreads and boost liquidity, research also showed it may raise costs for non-algo traders and increase the risk of “flash crashes”. Regulators in the United States, Europe and elsewhere have moved to crack down on high-speed trading, responding to fears that the practice distorts markets, ups risks and disadvantages retail and institutional investors. Authorities in Asia-Pacific markets, where HFT is generally less of a factor, have also stepped up scrutiny of algo trading over the past two years, and in some cases introduced curbs to curtail it. Most notably, China’s securities watchdog has investigated a number of automated trading firms and proposed far-reaching electronic trading restrictions after the market rout of 2015. The Bombay Stock Exchange (BSE) Brokers Forum, in a letter to SEBI last week, appealed for more time to deliberate.
“The steering committee of the forum looking into the matter was divided on the issue,” said Alok Churiwala, vice-chairman of the forum. “There are credible reasons on both sides of the issue.” The proposals, if implemented, could take a chunk out of the revenues of BSE and the National Stock Exchange, India’s biggest bourse, just as both exchanges are gearing up to go public. Some foreign players are also wary of the proposed changes, concerned they could widen spreads and make markets more prone to sudden swings, all at a time when India is
increasingly attractive to overseas investors. “The proposed rules could definitely hurt foreign investor sentiment around Indian markets,” said one North American institutional investor. Some hope the pushback from the HFT industry could encourage SEBI to reconsider its plans. “Once they see these comments come in, they’ll probably have a fresh look,” said PwC partner Suresh Swamy, who consults for some HFT firms. “SEBI should think hard before implementing any of these provisions.” Reuters
14 Business Daily Friday, September 9 2016
International In Brief Finance minister
South African economy to grow slowly South Africa’s economy is likely to grow more than initially forecast this year but the pace remains slow and subject to risks including drought-induced food inflation, the finance minister and central bank governor said. Governor Lesetja Kganyago said the South African Reserve Bank is likely to revise its 2016 growth estimate upwards after figures this week showed the strongest expansion in six quarters between April and June. That erased fears the economy might slip into recession after shrinking in the first quarter although Kganyago said growth would remain slow. Money management
World’s wealthy saved by private equity
FAO
World food prices hit 15-month high Only cereals dropped in value in August, weighed down by prospects for a bumper harvest. Isla Binnie
World food prices rose in August to their highest since May 2015, as increases in dairy, oils and sugar offset a drop in cereal prices, the United Nations food agency said yesterday. The rise in the Food and Agriculture Organization’s (FAO) index puts food prices back on an upward path after dropping slightly in July. The index hit a seven-year low in January. “We seem to have reached the bottom for food prices in general some months back, and I think what we are seeing goes some way to confirm that,” said FAO senior economist Abdolreza Abbassian. Abbassian said a drop back to January’s levels was unlikely but
he did not expect a return to historic highs either. In July, FAO forecast broadly stable prices over the next decade. Food prices on global markets were almost 7 per cent higher in August than in the same month last year. The index measures a basket of cereals, oilseeds, dairy products, meat and sugar. Only cereals dropped in value in August, weighed down by prospects of a bumper harvest. Abbassian said confusion over an Egyptian ban on wheat containing a certain fungus was also having an impact. “These things are probably going to keep cereals in check,” Abbassian said, adding, “the United States seems to be heading for quite an amazing, big crop but this is not the situation with any of the other crops.”
FAO raised its forecast for world cereal production in the 201617 season to nearly 2.566 billion tonnes, 1.6 per cent higher than in 2015. It forecast both world wheat and rice output hitting new records.
“We seem to have reached the bottom for food prices in general some months back” Abdolreza Abbassian, FAO senior economist
The overall food price index averaged 165.6 points in August, 1.9 per cent above the month before. Reuters
The world’s wealthiest families saw investment returns judder to a near halt in 2015, lagging expectations for a third straight year despite gains in private equity and real estate, a report yesterday showed. The average “family office” portfolio returned just 0.3 per cent in 2015, the UBS/Campden Wealth Global Family Office Report 2016 showed, down sharply from 6.1 per cent in 2014 and 8.5 per cent in 2013. The average allocation to private equity was 21.6 per cent, the study showed, with a benchmark return of 5.9 per cent, while the average allocation to real estate was 9.2 per cent. Loan
Nigeria approves borrowing from World Bank, China Nigeria’s presidency has approved plans for external borrowing from the World Bank, China and Japan. Nigeria will take on debt from institutions including the World Bank, African Development Bank, Japan International Cooperation Agency and Export-Import Bank of China, the presidency commented on Twitter. This will include “low-cost, long-term” loans with interest rates of 1.25 per cent and maturities of 20 years, according to the tweets. Details of a Eurobond will be announced “in due course.” The government is now waiting for lawmakers to approve the plans, the presidency said. Falling supplies
Algeria to send oil to Cuba Algeria is sending crude to Cuba for the first time to help offset lower supplies from Venezuela, hit by production problems due to low oil prices, sources with direct knowledge said. Algeria’s state-owned Sonatrach will send a cargo of crude oil to Cuba in October, the sources said, to supplement falling Venezuelan supplies. The cargo would be the OPEC member’s first crude delivery to Cuba, sources who monitor its exports said. Algeria’s main export grade is light sweet Saharan Blend. An 80,000 tonne cargo will be loaded in October.
Surveys
UK’s post-Brexit rebound extends to housing and jobs Some economists have pulled back from forecasts of outright recession made in the wake of the Brexit vote. David Milliken
The bounce back in Britain’s economy from the initial shock of the Brexit vote has expanded to the country’s recruitment and housing markets, according to two surveys which previously painted a bleak outlook. The Recruitment and Employment Confederation - which last month said hiring was in “dramatic freefall” - said firms increased permanent staff for the first time in three months, and were also spending more on temporary workers. The Royal Institution of Chartered Surveyors said its monthly house price index jumped to +12 in August from July’s three-year low of +5, the first rise in six months, though still one of the lowest readings in the past year and a half. “There are clear signs that the housing market is settling down after the initial surprise of the outcome to the EU referendum,” RICS chief economist Simon Rubinsohn said. The Bank of England’s decision to cut interest rates in August for the first since 2009 probably contributed to the brighter mood, Rubinsohn added. The recovery in the RICS and REC surveys follows a pattern set by surveys of the services and manufacturing sectors which plunged in
July, when Britain was plunged into political chaos by the Brexit vote, before rising sharply in August. Housing and retail firms also gave confident outlooks. Property website Zoopla said annual earnings would hit the top end of forecasts, confounding predictions that Brexit would freeze the market. Housebuilders Barratt and Redrow have also sounded upbeat. Dixons Carphone, Britain’s biggest electricals and mobile phone retailer, reported better-than-expected sales and said it had not seen no Brexit impact on demand.
Slowdown still expected
Some economists have pulled back from forecasts of outright recession made in the wake of the Brexit vote, though almost all - including the BoE - still expect a sharp slowdown. BoE Governor Mark Carney said on Wednesday that economic growth seemed to be slowing to about half its pace from before the referendum, a slightly less severe hit than the Bank has previously predicted. REC chief executive Kevin Green said it was too soon to draw longterm conclusions about the health of the job market. “The fact that vacancy growth has softened is concerning, suggesting
that hiring could be volatile over the coming months,” he said. Green also called on the government to allow EU workers to continue to come to Britain easily to work once it leaves the bloc, a position which is opposed by many supporters of Brexit who want to stem the flow of EU migrants in Britain. “Developing an immigration policy which will allow employers to access enough candidates for the jobs available is vital,” Green said
Key Points RICS reports first acceleration in house prices since Feb Recruiters say permanent staff hired for first time since May Top electricals retailer sees no sign of slower demand
RICS said that for the first time since April its members expected house prices to rise over the coming three months, and forecast a 1.1 per cent increase in prices over the next year. Sales volumes - which had previously dropped sharply - were now stabilising, RICS added. Not all analysts were positive about the outlook. “Looking ahead, a renewed squeeze on households’ real incomes, largely due to a rebound in inflation, likely will put renewed downward pressure on demand. As such, we doubt that house prices will return to a smooth upward trajectory,” Pantheon Macroeconomics’s Samuel Tombs said. Reuters
Business Daily Friday, September 9 2016 15
Opinion Business Wires
Bangkok Post The Thai government vows to ramp up shipments of innovative and high-tech products and stimulate more strategic partnerships next year in a bid to boost exports to 3 per cent growth in 2017. According to a Commerce Ministry source, Thai commercial counsellors and trade ministers from overseas offices have set an export target of 3 per cent growth next year. They are committed to stimulating export growth in key markets, such as 1 per cent growth for Europe, 3 per cent growth for East Asia including China, 2 per cent increase for Hong Kong, a 3 per cent increase for Taiwan.
The trouble with value is the trouble with agents
Thanh Nien News Vietnam aims to privatise its US$3 billion Dung Quat oil refinery by June 2017, with energy firms from Russia, Thailand and Kuwait expressing interest in taking a strategic stake, the head of the refinery’s operator said. Vietnam is trying to accelerate the sale of stakes in state firms, including an initial public offering IPO of the firm that runs the country’s sole refinery, which has been meeting about 30 per cent of local oil product demand since it began operating in 2011.
The Times of India India is on the path of becoming a “pivot” for high-tech world manufacturing even as global manufacturing growth is expected to remain low in 2016 due to weakened financial support for productive activities, a new UN report said. The quarterly ‘World Manufacturing Production report’, published by the UN Industrial Development Organisation said world manufacturing output is expected to increase by only 2.8 per cent in 2016. However, in contrast to recent years, there will be no breakout from the lowgrowth trap in 2016.
I
f you want to understand why value strategies have trouble attracting inflows, look not at investors but at the people they hire. Value investing, it must be said, has had a terrible run. Despite long-term evidence that seeking out undervalued stocks works, the last few years have not been pretty. Large-cap value stocks have underperformed growth stocks and the S&P 500 for seven of the past nine full years. That may help explain why only 20 per cent of equities held by public-sector pension plans are value stocks. Take a longer view and use a value- and capweighted index and the merits of value come into focus. The S&P 500 has offered 2.9 per cent annualized excess return above 20-year Treasuries from 1962-2015. That’s against a 1.8 per cent annualized excess return for a Research Associates value index, but with about a quarter of the risk and more periods of outperformance over rolling three- and 15-year periods. Why, in other words, do investors show a strong bias towards stocks but not towards value? Part of the trouble, both with a t t ra c t i n g f u n d s t o va l u e approaches, and with sticking with them during the sometimes long periods of underperformance, may be traceable to the inevitable mismatch between what is best for the owner of the money and what is best for the manager hired to advise or execute a strategy. “Principal-agent conflicts arise from contradictory motivations between the owner (the principal) and the person delegated to act on behalf of the owner (the agent),” John West and Amie Ko of Research Affiliates write in a note to clients. “The time horizon for owners can span decades. The time horizon for agents is the span over which their own performance is judged - years or even shorter time periods. As such, agents face a powerful incentive to minimize short-term drawdowns relative to peers and benchmarks.” In other words, advisors and fund managers find it hard to advocate for value, or execute it, because it carries higher career risk, the risk that they will lose assets or their jobs. It is one thing to stick with a value strategy if you are Warren Buffett. Quite another if you are a typical pension fund advisor or fund manager being judged on your latest three-year results.
“
James Saft a Reuters columnist
manager, and Dimitri Vayanos, of the London School of Economics, who have argued that the very activity of benchmarking puts fund managers in a position where they are all too likely to follow the crowd. A fund manager who is judged by a benchmark has an inbuilt reason to buy that which has just gone up in value. If a fund manager is underweight Amazon and Amazon is outperforming, the pressure mounts to buy in or look bad when mandate review rolls around. That pressure often leads to cynical buys of stock not based on fundamentals. Those defensive, or self-interested, stock purchases extend the momentum cycle. Amazingly, that’s despite risky stocks historically underperforming less volatile ones. Value, Woolley and Vayanos assert, can work, but requires trust and a long horizon by savers. The issue may also be partly one of conditioning, according to West and Ko of Research Affiliates. Over the past 45 years most generations of asset managers have experienced long periods of strong outperformance of stocks against bonds, reinforcing convention wisdom, but less good results for value. “In the last decade, current practitioners have tangibly felt value investing’s severe disappointments alongside brilliant value-add generated by stocks versus bonds; not only are these recent events shared by nearly everyone in today’s investment community, they may also unconsciously and more heavily weigh on our memories and expectations, crowding out the wins experienced from value investing in earlier years,” West and Ko write. The rise of passive investment, which now accounts for 40 per cent of the money invested in U.S. stocks, has probably raised pressure on managers to stick with convention and emphasize the short term. After all, if you are working in a declining industry, which active investment shows many signs of being, you might want to emphasize remaining employed over creating long-term returns. Ultimately, it will be up to investors to bring their agents to heel. Reuters
A fund manager who is judged by a benchmark has an inbuilt reason to buy that which has just gone up in value.
The Korea Herald South Korea’s population reached more than 50 million for the first time last year, according to Statistics Korea on Wednesday. After including the population of foreigners residing in Korea, the country’s population stood at around 51.07 million as of November 1, 2015, up 2.7 percent from the 49.71 million five years ago. The male population stood at 25.61 million, 150,000 more than the female population. The number of foreigners in Korea also surpassed 1 million for the first time, reaching 1.36 million and accounting for around 2.7 percent of the total population, the statistics office’s survey showed. It increased more than 41 percent from five years ago.
Momentum is a social and economic force
Much of this thinking accords with that of Paul Woolley, a veteran IMF official and fund
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16 Business Daily Friday, September 9 2016
Closing Stock markets
Beijing allows insurers to invest in HK via link
investors to buy stocks in Hong Kong and approved the opening of a second link via China has opened up a new channel for insurers Shenzhen, while retaining daily limits. Insurers are allowed to invest up to 15 per cent of their to invest in Hong Kong equities. assets in overseas markets including Hong Insurance funds are now allowed to buy the Kong, which they can currently do through a city’s shares through an exchange trading link with Shanghai, the China Insurance Regulatory different program. Commission said in a statement on its website, Chinese investors have already been showing more appetite for Hong Kong stocks. Net without saying when the funds could start buying of equities in the city through the using the link. The increased access will help the companies boost investment returns, it said. Shanghai link has swelled to average 4.7 billion yuan (US$705 million) a day this week, The move comes less than a month after officials dropped the overall quota for mainland exchange data show. Bloomberg News
Avoiding divorce service
Licence to split: China’s mistress hunters on a mission Ludovic EHRET
D
on’t get mad, get your opponent to surrender voluntarily: when Mrs Wang discovered her husband had been cheating on her for several years, she called in an elite team of Chinese “mistress hunters”. Rather than seek a divorce - which could have hit her social and financial standing - she hired a specialist to earn the other woman’s trust, and then persuaded her to end the extra-marital relationship. It was a longstanding affair, but once the mistress hunters were called in, it was over within two months. Wang said she paid between 400,000 and 500,000 yuan (US$60,000US$75,000) for the service. “I think it was worth it, I’m satisfied,” she added. So much so, she is now thinking of becoming a hunter herself. “That way I can help women protect their families and their rights,” she explained. The company Wang used, Weiqing - or “protector of feelings” - has 59 offices across the country, and offers free legal advice and lectures. Its founder Shu Xin said he has 300 agents at his command. “My goal is to prevent divorces,” he told AFP at his upmarket Beijing headquarters. “Every year we save some 5,000 couples.”
Ming Li, 47, has been doing the job for three years. “I’m older than these mistresses, in general, so they listen to me,” she said. “If the mistress goes to a park, to the supermarket or to work, I’ll happen to meet her. And even if she is a stayat-home sort of person, I can claim I’ve got a leak in my apartment and ask for her help,” she told AFP. “We always find a way to initiate contact. “One time, I pretended to be a fortune teller, and the mistress asked me to tell hers. Obviously, I already knew all about her from the wife, so it was easy to leave her dumbfounded and exhort her to leave the husband. It was one of our most quickly resolved cases.”
‘Being unfaithful is easy’
Chinese divorce rates have surged from 1.59 per 1,000 people in 2007 to 2.67 in 2014, according to the most recently available civil affairs ministry figures - far higher than in Europe, with France at 1.9 and Italy at just 0.9. In Beijing, official statistics show 73,000 couples divorced in 2015 almost three times the number nine years previously. “The reasons? The liberalisation of
‘Chinese divorce rates have surged from 1.59 per 1,000 people in 2007 to 2.67 in 2014’
Learn the ropes
The mistress hunters are mostly women and are all psychology, sociology or law graduates. They spend three years learning the ropes before being sent out into the field, where they pose as neighbours, cleaners or even babysitters.
morals, tensions related to differences between the husband’s and the wife’s income, incompatible personalities,” said Zhu Ruilei, a divorce attorney at Beijing-based law firm Yingke. “But also the desire to pursue personal dreams is stronger than it used it be.” According to a study by dating site Baihe.com, at least one party has been unfaithful in half of Chinese first marriages. The survey found that more than 21 per cent of first time husbands have had a mistress, and a similar number - 20 per cent - of wives have had a lover. In nearly nine per cent of first marriages, both partners have cheated. “Today being unfaithful has become easy, especially with the internet,” said Pan Xingshi, who runs an online advice company, referring to the popularity of Tantan, China’s equivalent of Tinder. But mistresses are still poorly regarded in the country, where having children out of wedlock remains socially taboo. They are known as “xiaosan”, a derogatory term meaning a third person of lower rank than a wife. Sometimes they fall victim to
Abhishek Jacob via Foter.com / CC BY-SA
violent vigilantism. In June, a video went viral showing a naked girl being attacked by a group of women. She was suspected of being the mistress of one of the women’s husbands.
‘Luxury apartments’
“Mistresses are global. But specifically in China they are kept women: the husbands, often rich, pay for luxury apartments, cars and luxury products,” explained Weiqing chief Shu, a former journalist. “Some women do not want to divorce out of fear of getting into financial difficulty. They just want to get rid of the mistress. That’s where we come in,” said Shu. It is an expensive process: the mistress hunters often have to rent similarly pricey accommodation and buy high-end jewellery and clothes as they try to forge a friendship with their targets. “We are paid a lot. But we also risk losing a lot too, because if we fail then we repay the entire amount,” explained Shu, who says his mistress hunters sent 8,552 women packing in 2014 - some husbands have more than one. Under Chinese law the activities of Weiqing and similar firms are not illegal, said Zhu, the lawyer, adding that they “serve a purpose”. But there were also “many problems”, he added: “Invasion of privacy, the relationship between the mistress and the investigator is based on deceit. There is the risk that people’s feelings get hurt.” Mistress hunter Ming has a solution for that: “Sometimes I help the mistress find a boyfriend,” she said. “It’s my way to bring her happiness.” AFP
Technology
Ratings firm
Tourism
Xiaomi wearable devices hit North Korea
Dagong feeling the heat from competitors at home
Taiwan attracts 6.28 million visitors in 7 months
Mi band 2, a wearable device designed by Chinese phone maker Xiaomi Inc., has become popular at a trade fair in the Democratic People’s Republic of Korea (DPRK). The smart wrist band, sold at US$35, immediately became a best-selling product at the 12th Pyongyang Autumn International Trade Exhibition. “We have confidence in the release of the smart bands in the DPRK market, but we haven’t expected them to be such best-sellers,” Gong Yunhong, a salesperson in charge of the booth, told Xinhua. The Mi band 2 is currently out of stock at the trade fair as they only brought around 200 units, Gong said. However, DPRK consumers are currently unable to connect the electronic device to their mobile phones, meaning that some functions are unavailable. Gong said that the DPRK side has been working on developing its own application suitable for domestic use and that those functions temporarily unusable can work normally by the time the new app is launched. Now DPRK consumers can use the band to read time, record walking distances and steps and measure instant heart rates. Xinhua
China’s best-known ratings agency, Dagong Global Credit Rating, is feeling the pressure of cut-throat competition at home from local rivals, while the operating environment in Europe remains unfavourable, Chairman Guan Jianzhong told Reuters. Dagong, which a decade ago controlled about half of China’s credit ratings market, has seen its market share shrink to less than a third now as domestic competitors undercut it with aggressive pricing and ratings tactics. “A lot of the companies do not qualify for AA rating,” Guan said in an interview. China opened up its US$7 trillion domestic bond market to foreign investors earlier this year. But its ratings industry is still closed to Western ratings giants such as Moody’s, Standard & Poor’s and Fitch, a major drawback for global investors seeking access to high-yielding Chinese bonds. Chinese issuers must obtain a credit rating equivalent to AA or above to be allowed to tap the market for funds. About 80 per cent of Chinese companies have such a rating, largely because historically the government would rarely allow a company to default on its debt obligations. Reuters
More than 6.28 million tourists from outside Taiwan visited the island from January to July, an increase of 7.93 per cent from the same period last year, according to a report released by the island’s tourism bureau yesterday. According to the report, there were about 2.41 million tourists from the Chinese Mainland during the period, 38 per cent of all visitors from outside the island. The reading posted translates to 0.41 per cent growth compared with the same period last year. The number of mainland tourists had been contracting since May. Although the number of individual visitors from the mainland rose slightly, the number of tourists visiting the island on group tours declined by about 30 per cent over the three months since May, compared with the same period last year, according to the report. The number of tourists from the Republic of Korea grew by 29.01 per cent in the period, the highest among all sources. Promotions contributed to an increase of 17.46 per cent in the number of tourists from Japan in the seven months, according to the report, which added that the island aims to attract about 10 million tourists from outside the island this year. Xinhua