Business Daily #1271 April 10, 2017

ANZAC Day observance in Macau Tue, 25 April 2017 │ 7:30am - 9:30am │ MGM Macau C DAY ANZA

Followed by breakfast from 8:30am

Chinese reserves above US$3 trillion in March Forex Page 9

Monday, April 10 2017 Year VI Nr. 1271 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm

www.macaubusinessdaily.com

Trial

Property

Ng Lap Seng aide pleads guilty in United Nations bribery case Page 6

Education

Continued Education scheme disburses MOP744 mln in 2014-2016 Page 2

Gaming

Former Baha Mar resort director says new gaming license lacked ‘in-depth background research' Page 7

HK’s leader housing plan to clash with Mainland’s investment Page 10

Padding the pockets Finance

Gov’t revenue picked up 5.3 pct y-o-y in the first two months of the year, reversing the 21 pct y-o-y drop seen the previous year. Driven by a 5.4 pct increase in gaming tax revenue, MOP16.96 bln filled the coffers during the two months, 83.4 pct from gaming. Direct taxes increased 13.7 pct while indirect taxes surged 38 pct. Capital revenue plunged by 83 pct, while gov’t expenditure declined nearly 30 pct, with the PIDDA investment plan slashed by 36 pct and current expenditure falling by 30 pct y-o-y. Page 3

Knowing the game

Making games like you would movies. Such is the mentality behind the 3D, cinematic content created by online gaming company Betsoft, explains the group’s Director Mark McKeown.

Despite countries such as the Philippines undergoing regulatory challenges, success abounds throughout Asia for the group’s ever-expanding catalogue, with one new title released every month.

Legislators join Pearl Horizon dispute Real estate | Politics A group of 19 legislators signed and delivered a petition to the MSAR’s Chief Executive, urging the gov’t to resolve the land dispute case as soon as possible. The gov’t claims it will seek a solution, but faces legal restraints. Legislators have proposed settling independently of the new land law, as well as finding solutions under the current legal framework. Re-tender could bring up transfer of benefits accusations against gov’t, says Secretary. Page 2

Warm presidential meeting

Gaming | Online gaming Page 4 & 5

HK Hang Seng Index April 7, 2017

24,267.30 -6.42 (-0.03%) Worst Performers

China Unicom Hong Kong

+4.98%

China Resources Land Ltd

+1.37%

Geely Automobile Holdings

-3.33%

Wharf Holdings Ltd/The

Lenovo Group Ltd

+3.05%

Want Want China Holdings

+1.08%

China Mengniu Dairy Co Ltd

-2.30%

Swire Pacific Ltd

-0.70%

PetroChina Co Ltd

+2.30%

Sands China Ltd

+1.07%

Belle International Holdings

-1.97%

Bank of Communications

-0.67%

CNOOC Ltd

+1.49%

Kunlun Energy Co Ltd

+0.76%

Sino Land Co Ltd

-1.74%

New World Development

China Petroleum & Chemical

+1.39%

Link REIT

+0.72%

BOC Hong Kong Holdings

-1.40%

Hengan International Group

23° 26° 20° 26° 20° 22° 21° 22° 22° 25°

-1.27%

-0.51% -0.50%

Today

Source: Bloomberg

Best Performers

Tue

Wed

I SSN 2226-8294

Thu

Fri

Source: AccuWeather

China-U.S. U.S. President Donald Trump ditched anti-China rhetoric, hailing an “outstanding” relationship with counterpart Xi Jinping at the end of a superpower summit on Friday, overshadowed by events in Syria. Page 8

2 Business Daily Monday, April 10 2017

Macau Politics

Legislators want solution to Pearl Horizon case 19 legislators joined a petition, urging authorities to settle the disputed matter based on current laws Kam Leong kamleong@macaubusinessdaily.com

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joint letter signed by 19 legislators of the MSAR was submitted to the city’s top official over the past weekend, urging the government to resolve the Pearl Horizon case as soon as possible. The government responded that it would seek a solution that can balance the general interests and benefits of the society.

On Saturday, 11 legislators of the campaign met with MSAR Chief Executive Fernando Chui Sai On. During the visit, the top official claimed his administration has studied different possibilities for resolving the matter, including those suggested by the legislators, stressing that all proposals face different difficulties and legal restraints due to the complexity of the case.

According to representative of the group of legislators, Kwan Tsui Hang, members of the campaign have suggested that the government settle the disputes following two major

directions: to handle the case independently by not amending the Land Law; and to come up with a solution under the current legal framework, Macao Daily reported.

Pearl Horizon, a residential project sitting on a site known as lot-P of Areia Preta on the Macau peninsula, was designed to house a total of 5,000-plus residential units. However, the government declared the land granted to the plot’s developer, Polytex Corporation Ltd, invalid, and

stated its intention to reclaim the land plot, following the latter’s failure to complete the project by the expiry date of its concession term - despite the fact that over 3,000 of the units were sold off-plan.

Lawsuit result matters

During the meeting, Secretary for Administration and Justice, Sonia Chan Hoi Fan stressed that the government will continue to seek a viable solution to the matter.

Speaking to reporters after the meeting, the representative of the legislators said the government believes it is easier to conclude the case

after local courts issue a ruling on its current lawsuits with the developer. She added that the government considers making a decision prior to the court ruling risky, and that it may need further study, according to Macao Daily.

Regarding the suggestion that the government could re-open public tenders for the plot, Ms. Kwan said the government is worried that the proposal may attract accusations against the government of transfer of benefits if it grants the tender to the same developer - in consideration of the benefits of the home buyers.

Developer of Pearl Horizon, Polytec Asset Holdings, has been claiming that it has ‘strong legal grounds’ to win its lawsuit levelled against the government, for extra time to complete the high-end residential project.

The grounds for the lawsuit are claims by the company that the delay in developing the property before the end of its 25-year concession agreement was due to delays by the local government in granting requisite approvals and permits for the project’s development.

The 19 legislators of the joint signature campaign are: Kwan Tsui Hang, Chan Meng Kam, Si Ka Lon, Ella Lei Cheng I, Song Pek Kei, Ho Ion Sang, Leong Veng Chai, Antonio Ng Kuok Cheong, Chan Hong, José Pereira Coutinho, Au Kam San, Wong Kit Cheng, Lam Heong Sang, Mak Soi Kun, Fong Chi Keong, Kou Hoi In, Chan Iek Lap, Angela Leong On Kei and Zheng Anting.

Subsidy

MOP7.5 mln distributed in Q1 for building maintenance The government disbursed some MOP7.5 million (US$937,193) via the Building Maintenance Fund in the first quarter of 2017.

The Fund had granted a total of 90 applications, of which 61 cases related to the maintenance and inspection of communal areas of buildings, and the removal of unauthorized building works.

The other 29 cases were associated with support for meetings for owners of residential, commercial and industrial buildings.

The Fund, established in 2007, has

set up a total of six financial support schemes.

Up until March 31, 2017 the Fund had given out some MOP330 million in funding for a total of 3,277 approved applications.

Meanwhile, the Housing Bureau revealed that the administrative management committee of the fund will unveil details regarding the procedures and conditions of the applications every quarter on the Bureau’s website starting this year, including information about the approved applications and amounts disbursed.

Subsidy

In the business of educating The Continuing Education Development Plan 2014 – 2016 splashed out over MOP700 mln Cecilia U cecilia.u@macaubusinessdaily.com

A total of MOP744.38 million (US$93 million) was disbursed by the MSAR Government to local residents in the second phase of the Continuing Education Development Plan 2014-2016, according to government data.

The amount distributed for the second phase registered an increase of around 40 per cent when compared to amount of the first phase, held between 2011 and 2013.

The plan assists local citizens aged 15 or above to take part in local or overseas educational programmes by giving out MOP6,000 per person.

The spokesperson of the Executive Council, Leong Heng Teng, also disclosed on Friday that a total of 167,369 local residents had received the subsidy of the second phase of the plan, indicating a participation rate of about 43 per cent.

In terms of age group, citizens aged 25 to 39 were the most active in utilizing the amount, making up 41.8 per cent of the total population engaged in the plan.

The official data also shows that a total of 92,835 local programmes provided by 367 local entities were approved under in the plan, of which 89,760 programmes related to continuing education and 3,075 were licensing examinations.

Of the total funds provided, some MOP83.55 million went to 16,836 applicants accepted for courses in foreign institutions, while a further MOP2.24 million went to 884 applicants for credentials exams from foreign institutions.

According to the mid-term review of the second phase of the plan released last year, 81 per cent of the respondents say the scheme helped them to enhance their knowledge and skills.

The review was conducted by Hong Kong Policy 21 Limited and commissioned by the Education and Youth Affairs Bureau (DSEJ).

Continuing Education Development Plan 2017-2019

The Executive Council also announced on Friday the launch of the third phase of the plan.

The amount for the latest plan will remain the same at MOP6,000 per applicant, said the spokesperson.

Mr. Leong explained that the plan for 2017 and 2019 has improved and

simplified its registration and approval procedures, while the rest of the content remains unchanged.

Given the limited number of fraud cases in the previous phases, deputy director of the DSEJ, Lou Pak Sang, said applicants can provide the receipt of the paid programme without submitting further proof of attendance, while noting that the monitoring of applicants will be continued.

According to the rules of the plan, overseas examinations need to be internationally recognised in order to be approved for the subsidy, including exams such as TOEFL (Test of English as a Foreign Language) and IELTS (International English Language Testing System).

Wong Chi Iong, the chief executive of the Division of Continuing Education under DSEJ added that overseas programmes required recognition from at least three countries or regions to be perceived as internationally recognised.

“Our intention is to ensure the professionalism of the applied examinations and also to encourage more citizens to take overseas examinations, so as to supplement the city’s professionals in certain fields,” explained Mr. Wong.

The plan, according to the spokesperson, will be officially launched tomorrow after a dispatch released today in the Official Gazette.

Business Daily Monday, April 10 2017 3

Macau Public finance

Gaming tax revenue jumps 5.4 pct as at end-February Gov’t fiscal surplus surges 35 pct y-o-y in the first two months of the year as total revenue driven up Kam Leong kamleong@macaubusinessdaily.com

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he recovery of the city’s gaming industry boosted the government’s total revenue to a year-on-year increase of 5.3 per cent in the first two months of the year, as compared to a drop of 20.9 per cent for the same period one year ago, according to the latest updates of

the central account by the Financial Services Bureau (DSF).

Between January and February, the MSAR Government generated a total of MOP16.96 billion (US$2.12 billion) in revenue, excluding that from autonomous bodies. Of the total, 83.4 per cent was direct taxes from the gaming industry, amounting to MOP14.1 billion, a growth of 5.4 per cent year-on-year.

In August 2016, the gaming sector

Taxi

Over 1,200 taxi violations recorded in Q1 In the first three months of the year, a total of 1,291 cases were filed with local police for taxi violations in the city, up by 14 cases when compared to the first quarter of 2016.

January saw the highest number of filed cases relating to taxi infractions, amounting to 589 cases.

The latest data published by the Public Security Forces (PSP) shows

that 723 cases were filed relating to over charging, and 359 were filed relating to refusal to take passengers, making up 56 per cent and 27 per cent of the total complaints filed, respectively.

In addition, a total of 494 cases were filed regarding illegal taxi services in the first quarter, an increase of 401 cases compared to the 93 cases recorded in the first quarter of 2016.

Of the 494 cases, 432 were related to taxi-hailing mobile applications.

The local police authority stressed that it will continue to combat taxi violations and unlicensed taxi services in the city.

Tourism

Macau starts application for UNESCO “City of Gastronomy” Macau officially started its application to become a member of the UNESCO Creative Cities Network, a City of Gastronomy, the special administrative region’s local media quoted Macau’s social and cultural chief as saying in its report on Friday.

Macau Daily reported Macau's Secretary for Social Affairs and Culture Alexis Tam Chon Weng as saying that the government has officially applied to become one of the most popular choices for food and restaurants, which will add another reputation to the city trying to become a global tourism destination.

Macau’s Tourism Office listed the UNESCO “City of Gastronomy” application as one of four major goals in 2017. The SAR Government even set up a special committee to be in

charge of this issue.

Tam also said earlier this year that it is one of the SAR Government's major endeavours in 2017, when attending a meeting convened by this committee on January 19.

If Macau is successfully designated as a UNESCO gastronomy city, it will add a significant international brand for Macau with far-reaching significance and a powerful impetus to Macau’s transformation into a world tourism and leisure centre, as well as adequate diversification and sustainable development of Macau’s economy, Tan commented in that meeting.

Macau also organized the “International Gastronomy Forum” in November 2016 as a warm-up before it officially applies for the brand. Xinhua

ended its 26-consecutive-month slump in gaming revenue. For the first two months of this year, total gross gaming revenue rose by 10.6 per cent year-on-year to MOP42.2 billion, according to official data from the Gaming Inspection and Coordination Bureau (DICJ).

In addition to gaming taxes, local authorities saw other direct taxes increase by 13.7 per cent year-on-year to MOP854.5 million, while indirect taxes surged by 38.1 per cent yearon-year to MOP605.3 million.

Nevertheless, revenues derived from fees, fines and other penalties

decreased by 27.3 per cent yearon-year to MOP256.4 million. Total capital revenue - including sales of capital assets, financial assets, and reimbursements not deducted from payments, also plunged by 82.6 per cent year-on-year to MOP15.9 million.

Fiscal surplus soars as expenses down

On the other hand, the government’s total expenditure, excluding that of autonomous bodies, declined by 29.8 per cent year-on-year to MOP5.18 billion during the first two months of the year, only accounting for 6.1 per cent of the year’s authorised budget of MOP85.3 billion.

With the increase in revenue and decrease in expenditure, the total fiscal surplus of the central account registered an increase of 34.9 per cent year-on-year to MOP11.8 billion, compared to MOP8.73 billion registered one year ago. The amount is already more than triple the government’s expected annual surplus of MOP5.57 billion for the government’s central departments excluding autonomous bodies.

In fact, the decrease in expenditure during the two months was due to the fact that contributions to the investment plan (PIDDA) were slashed by 36 per cent year-on-year to MOP11.1 million, while current expenditure also fell by 29.8 per cent year-onyear to MOP5.18 billion.

But the government’s total expenditure on other investments jumped by 151.5 per cent year-on-year, amounting to MOP3.6 million in the same period.

On the other hand, the total amount of expenditure transferred to the city’s Social Security Fund during the period was MOP2.25 billion, the account reads.

4 Business Daily Monday, April 10 2017

Macau

Interview | Online gaming

Rapid release Being the leader in cinematic and 3D content for online gaming, Betsoft saw the advantages of expanding in to the Asian market, explains the group’s Director Mark McKeown. Despite recent events in Southeast Asia casting doubts on certain regulatory environments, the expert is confident in the continued success of the region, as well as online gaming, explaining how the group interacts with clients and consumers alike.

Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

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here’s a huge difference between creating content for Western markets and Asian markets. How did Betsoft find the adaptation process?

Our roadmap of product even before we launched into the market had Asian-themed content because we thought it was cool. And that does play in the Western world. Since we’ve come to the market, the demands of the customer base has meant that we’ve had to increase it.

And the issue now is just that when you make a single title, whether it’s Western or Asian themed, we still [make sure] it has the capability of working both markets, but players are quite different.

So it’s: do you take the one title and divide it in terms of some of the features? No, not really – you really want to build one title, because economically, to make it work you need to do it once. So it's: how do you make it work across multiple cultures and multiple places? I’m talking beyond languages, I’m talking about spin features and entertainment factors.

We probably put more entertainment into the Western version of the game, where we find Asia likes to get on with it, and for the spin reveal and for the experience to be

quicker, faster, get to the point – am I a winner or a loser?

In terms of your products, some of the key words that resonate in your branding are ‘3D’ and ‘cinematic’. Why do you think these are so important?

I think initially it was because it really stood out, and in a crowded marketplace like you now have, it’s also a bar which competitors can’t reach, because the team that we have is so on fire at what we do. So in going into that particular design element, we can really deliver something that almost - if you’re looking at a board of games or looking across a website - you can pick ours out immediately.

Which I think is a strong point. And the cinematic side of things is just that a lot of the people that work for us have come from a film background.

Where are those teams primarily based?

It’s a well-guarded secret. We really, really don’t quote or say. They are in many locations, we are agile in the way that we work and needless to say based upon time zone, production goes on around the clock. That’s about all I can say.

What about design elements – such as the number of claws on the dragon or tiger - was there a trial and error

process you had to go through?

We really rely heavily on our clients to help with that. We are selling to operators who really know their player.

We know players but nobody knows them better than themselves. So we have really strong relationships with them to ask them questions like that, and we broaden out our user testing to a group of people that input to the detail of these kind of things.

“It’s: how do you make it work across multiple cultures and multiple places?”

I was speaking recently about a game Fa-Fa Twins where we did the wrong colour eyes for the twins – as a kind of a green colour, it was completely culturally incorrect. And so we talk always about iterating a game.

So a game, even after it’s released, is never finished. We’re constantly tweaking, touching, updating based upon feedback, the metrics for the game. That’s the beauty now of these back-offices. I can log into my phone right now and see details of what’s happened today, [or] three weeks [ago]. We launched Slot Father 2, a sequel to one of our most popular

titles, just recently, and immediately that the game’s live, we can get an idea of numbers and what we need to do differently the next time.

How long does the process go on?

Is it never ending?

Well the game settles down. The initial development process is between four to eight months. So it is a mini-feature film in size. Concept to delivery - and delivery being an eleven-step process.

Then it goes live and we see how it goes – we get the feedback. I think most of the time, at the point that we’re live, we’re not suddenly going to deconstruct the whole title, but there’ll be bits that get modified, tweaked. I think that is the beauty of the online world. Well it’s the beauty and the curse – you’re never done, you can always tweak.

Where would you see as primary online markets that you’ll be focusing on, and what are the advantages within those markets?

The business is very strong in Europe, it’s established licensing base is in Malta and has nearly 100 clients in that market. Three years ago we really had seen tremendous success from a couple of Asian clients, 188bet and some of the older ones, and it was just a glaring hole that we hadn’t actually attacked the market more, focused on it. It was a changing outlook on RNG (random number generator) games, as they call them, there was more trust. Initial times when we were coming here, people were like “Oh I don’t know if I trust the mechanic here, I’m being ripped off, these aren’t potentially honest games”.

And based upon our level of testing of them, the certification processes that we go through, the regulatory processes, people start to believe in them, so that isn’t so much of an issue. We still face it, but it’s not as much of an issue. And so over the last two or three years, this has become the single most important market.

Business Daily Monday, April 10 2017 5

Macau there. I just wish they could tax this stuff and get on with it and everybody could do well out of it. And I’m including the United States in that, all sorts of other areas, which are completely off limits at this time.

“Four to eight months to develop a title, we have six to eight titles going through the process at any one time, we commit to our 140 clients worldwide that we will deliver one new title to them a month”

I’m talking in terms of volumes, in terms of the projections that we put beside some of the European projects, because so many of them are like – if you’re licensed in the UK you can operate in the UK, it’s not UK and France, it’s just UK. Whereas the market here still means you can put a zero beside many of your projections in terms of success.

“I’m staggered by the profit levels and the numbers from a place like Macau.

It’s insane”

Within Southeast Asia, for the licensing process, it’s not a one-size-fits all. How does it work?

No, it’s not. It’s still really fragmented and that was a big subject matter for conversation in Manila (at the ASEAN Gaming Summit). A lot of people don’t know exactly where they stand with the licensing bodies, it’s a constant communication thing that’s going on. It certainly helps that our business has got the Malta license, but even for some of the places that we’re operating in here (Southeast Asia) that doesn’t really apply. And so it’s just a growing area; that it’s just changing so much, it’s hard to sum up.

What about the Philippines? Have President Duterte’s comments and actions affected your outlook for the area?

We don’t have an established office there. So the short answer is: we’re not as badly impacted as some of our colleagues are who are really at potentially having to leave the area, relocate. For us, it’s worrying because we’re part of a bigger ecosystem, there’s a hell of a lot of operators

You promote very strongly that your group maintains a rapid release schedule. Has that changed at all since you expanded into Asia?

It maybe is more firmed up. By rapid release, we talked about the four to eight months to develop a title, we have six to eight titles going through the process at any one time, we commit to our 140 clients worldwide that we will deliver one new title to them a month. That’s what the rapid release means. We will do that across mobile and desktop simultaneously and we will provide all of the clients with advanced quarterly notice of all of the titles, dates for promotional materials, dates for actual release day.

It’s much like the film model. The movie, the game is going to come out on May the 22nd and because it’s so filmic we also do cool things like trailers and video accompaniment – so that gets plastered on social media.

So players are really looking out for those titles; they want to touch them on the first day that they’re available, that’s something that they look forward to. And so we prioritise the release of them to the clients that are valuable to us and that we have valuable partnerships with to get it to their players.

In terms of promotions, is that handled primarily on their side?

We do our own about Betsoft. We have a Youtube channel, we have all of the Facebook and Instagram, Twitter feeds. But yes, I would say the best communication points to the customers are by the customers themselves to their clients.

How do you convince someone that the math behind the games is accurate and fair, given that they don’t see the back-end?

Our clients do. The player doesn’t. We publish the RTP (return to player) to the clients. And they’re theoretical and they’re usually between 92, 93, 94 per cent return. With millions of rounds of gameplay through the back-office we can then, after a period of time, show the clients: look it’s coming out within one tenth of one point of what we advised that it would.

Including the payout table, we also provide product sheets on every game to our operators, and it’s up to the operator to provide that information to their players, but they’re allowed to.

We’re not hiding anything, we’re totally transparent – we want people to know what they’re getting into.

In fact, we have a responsibility to not screw people over. We wouldn’t be in business if we were developing something that didn’t have a balance between entertainment, pay-out to player, but also profitability to the operator. We’re the man in the middle here – we want the player to have a good experience, without that we won’t get volume. But if it’s returning

a 120 per cent to the customer, we also won’t keep that relationship with the client. So we’re the man in the middle.

How exactly does the licensing work?

It’s a perpetual license. By that I mean, by signing the license agreement they have rights to the entire back catalogue, which is about 150 games. And then we say to you, every month we’ll give you one new one, at least one new one. So it’s going to grow. So if we have 150 now, by the end of 2017 we’ll have 162 and you can choose to use 70 of those games or, we push you to use them all and position our games at the top of every one of your menus, because our games are the best. And then it’s up to a continual relationship between us, the account manager and the client to make sure that as each release comes out, as much is drawn from the title as possible.

Does that ever involve a percentage, based upon what the title you sold them is making?

We have one set of terms that we do in terms of our agreement with them for royalties that applies across most all the titles. Sometimes, with some of the other games, like baccarat or blackjack, we might offer slightly different terms, but for the most part it’s one set of percentages that apply to the vast majority. We just keep it simple, otherwise it becomes quite a mathematical computation.

Is that division based on skill-based games?

Skill-based games goes into an area that I think is different from any of these games. I guess some people feel as though there is more skill involved in them than others – table games – there is more, yes. I would say with table games there can be a different set of percentages there, because a lot of the land-based people expect those to be quite different than the slots.

Probably with some of the online operators there’s less of a requirement for that. But if we’ve done a deal with a land-based company who has recently gone online, they’ve got a very old-school mentality about how they expect it. And they also probably have a player base that will play the games differently than an online slot player would play a table game.

How interested are you in social gaming?

The games are used for fun, free to play. The same real-money games can be applied to a social gaming experience. They have worked very well in that environment. Recently it’s dropped off. I don’t know if it’s saturation or what it is. There’s been a couple of interesting discussions with a couple of new social gaming platforms. We haven’t given up, but it’s not our main focus.

Would that be a similar type of licensing agreement?

It can be based upon the number of tokens that are purchased, taking a

percentage of that. It can be different models too – we can say here’s the entire catalogue and here’s some kind of not one-off fee, but monthly fee for its use. It is done a little differently sometimes.

What about Japan?

Well, we are going to go over to the Tokyo show in May and we’re going to take a look. We are getting requests for discussions with people there that are going to do some things online.

But no, we don’t have a set position or policy on that.

Right now they’re going for the integrated resorts model. Do you think that’s going to include the online side also?

I don’t know. I doubt it. It’s such a funny market. It’s ripe for it, but I sometimes just don’t understand – there’s so much politics in all of these. The U.S. one is fascinating.

My outlook with all of them is just bring taxes into it and everybody wins. Particularly there’s a landbased lobby that don’t want any of this. But my big statement, as I said from the start, is that if I see the casinos and the downturn in the market when I’m in Macau, I think that’s a good thing for my business. People aren’t going to stop gambling. They might stop doing it in the Venetian, or Wynn, but they’re going to still be doing it online somewhere. They’re doing it in China, we know that. And the Japanese are no less tech-savvy and no less interested in gambling.

Neither are the Indians.

So it’s going to come, it’s just a long game. I started working in gaming in 2000 and I thought that was going to be a short-term thing, and it’s 17 years later and it’s now a career.

“Over the last two or three years this has become the single most important market” If the lobbyists for the land-based casinos don’t manage to keep everything at a standstill, do you see that online gaming will take over – at least in terms of revenue – from land-based casinos?

I’m staggered by the profit levels and the numbers from a place like Macau. It’s insane. So I don’t want to try to pitch online necessarily.

I’ve never actually done the study, but I do know for instance Macau land-based is worth Vegas, Monte Carlo and Atlantic City combined.

I gotta think, based upon the number of households in the world, that online can dwarf land-based, with respect to land-based. But it’s got to.

Just pure logic maths would suggest that – casinos never close, it’s just a different model.

6 Business Daily Monday, April 10 2017

Macau Opinion

Sheyla Zandonai*

Tree buildings A new trend in urban design has it that wood is the new concrete. Architects are now experimenting and building skyscrapers using timber in London, Paris, Vancouver, and Vienna, to name a few.

So buildings are the new trees.

Wood has a long history in construction. From houses and boats, to temples and pagodas, wood-building techniques and traditions can be found across the world, from northern Europe to Latin America, and East and South-East Asia.

On the one hand, wood is a natural resource close at hand to people’s surrounding environment – or at least it used to be. On the other, it is both aesthetically appealing and more in tune with nature than, say, concrete and steel, which constitute the bulk of our cityscapes, so that human beings may feel more attracted to their organic quality.

Considering wood’s carbon-sequestering feature, timber buildings would actually be a welcome addition to car-jammed, densely urbanized Macau, except that tropical weather is not to their advantage here.

Although sharp engineering has made fire-resistant wood a possibility in the largescale construction enterprise, namely for high-rises, humidity is an often merciless, conspicuous force hard to fight here. It does not even spare concrete from slow though steady deterioration.

For this reason, wood architecture seems a distant alternative for being integrated into Macau’s building landscape. With notable exceptions, as the shipyards in Coloane – which stand as an example of the ways negligence and minimal maintenance can harm a fragile wood site – wood is not remarkably present in the cityscape. So what more feasible option for cleaner air and, arguably, a more liveable city could be afforded here? More trees.

Vegetation and materials more connected to nature are increasingly said to have a positive effect on people’s emotional attachment to a place and their overall physical and mental well-being.

There are several signs of that attraction to greenery both in large and small-scale settings in Macau. On the one hand, gardens such as Camoes, which are carefully taken care of, though arguably too few, remain popular venues in the city. On the other hand, vegetation spread over balconies, offices, and private spaces suggests that people are continuously seeking engagement with nature, producing their own green spaces. Why not harness this inclination under a larger plan for a greener Macau? *scholar and contributor to this newspaper.

Graft

Ng Lap Seng’s aide pleads guilty in U.N. bribe case Nate Raymond

T

he assistant to a billionaire real estate developer from the MSAR accused of engaging in a scheme to pay bribes to a former United Nations General Assembly president pleaded guilty to a single tax charge on Friday.

Jeff Yin, who was arrested along with billionaire Ng Lap Seng in 2015, entered the plea in Manhattan federal

Billionaire real estate developer Ng Lap Seng

court following two weeks of negotiations that led to an agreement in which he did not have to admit to bribing anyone.

Instead, Yin, 31, pleaded guilty to a single charge of conspiring to defraud the United States by trying to prevent the Internal Revenue Service from collecting taxes on a US$54,000 (MOP6,750) salary he earned from a U.N.-focused media outfit prosecutors said Ng founded.

Specifically, Yin admitted he tried to avoid paying taxes by having South-South News pay him in the form of cash and cheques made out to “petty cash.”

“Between 2013 and 2015, I agreed with others to not pay taxes to the IRS,” he said in court.

Yin’s plea deal contained no agreement to cooperate with prosecutors in the case against Ng, the founder of Macau-based real estate developer Sun Kian Ip Group. Ng, who has denied wrongdoing, is scheduled to face trial on May 30.

As part of the plea deal, Yin, a U.S. citizen who currently lives in California, agreed not to appeal any prison

sentence of 2-1/2 years or less. His sentencing is scheduled for July 21.

Ng, who was once linked to a campaign fundraising investigation during former U.S. President Bill Clinton’s administration, and Yin were among seven individuals charged since October 2015 in the U.N.-related probe.

Prosecutors had accused Ng and Yin of paying more than US$500,000 in bribes to John Ashe, a former U.N. ambassador from Antigua and Barbuda who served as General Assembly president from 2013 to 2014. Ashe died in June awaiting trial.

An indictment said Ng and Yin also paid bribes to Francis Lorenzo, a then-deputy U.N. ambassador from the Dominican Republic who pleaded guilty in March 2016 to bribery and money laundering charges as part of a deal to cooperate in the probe.

The main goal of the bribes, according to the indictment, was to have both ambassadors take steps to help obtain U.N. support for a multibillion-dollar conference centre in Macau that Sun Kian Ip Group would develop. Reuters

Communications

Above water line Government subsidies helped local broadcaster TDM to see a yearly profit increase of 133 pct to nearly MOP19 mln, despite MOP389.2 million in expenses Nelson Moura nelson.moura@macaubusinessdaily.com

Public radio and television broadcaster TDM – Teledifusão de Macau SA - registered a 133 per cent yearon-year increase in profit, reaching MOP19 million (US$2.4 million) for 2016, compared to a MOP8.1 million profit the previous year.

The public company saw an 11.39 per cent year-on-year increase in revenue for the year, reaching MOP107.6 million, with expenses rising by around MOP7 million to MOP389.2 million - a rise the company explained as being due to increased personnel and service supply expenses.

Personnel expenses increased by 10.2 per cent year-on-year in 2016, reaching MOP257.64 million, while service provision costs went up 11.5 per cent yearly to reach MOP40.4

million.

The group’s operating results saw a loss of MOP277.9 million in 2016, a 1.7 per cent decrease compared to a year earlier.

However, the MSAR Government granted the company almost MOP300 million in operation and investment subsidies, as well as a MOP3 million tax provision.

The Macau Government directly owns 99.8 percent of TDM, with the company having a concession contract valid until 2020.

According to the results, TDM’s ongoing investments in 2016 decreased by 93.7 per cent to MOP1 million, with 96.5 per cent of the MOP24.2 million approved for investments having been used, mainly for remodelling work at the Forum II TV studio and the purchase of high-definition equipment and cameras.

The MSAR Government’s subsidy

for investments went up by 24.2 per cent year-on-year to MOP38.1 million.

In 2016, the company hired 661 employees, an increase of 100 workers from the previous year, with the average amount in expenses per employee being MOP389,771.

The number of journalists increased by 18.5 per cent to 122, while that of technicians increased by 22 per cent to 145.

According to the company report, measures implemented in the last years have allowed for more stability in the group’s personnel, with 72 new employees having been hired, coinciding with 42 exits. However, it was also stated that the hiring process is still ‘complex’ due to the ‘salaries offered not being competitive with the local labour market’.

months of 2017.

On a year-on-year basis, the same store sales for Hong Kong-Macau and Taiwan were also down 13 per cent and 3 per cent, respectively.

As at March 31, 2017, the apparel retailer had a total of 196 self-managed shops, 18 shops less than a year earlier, when there were 214 units.

The number of self-managed shops in Hong Kong and Macau fell by six, down to 80 shops run by the group

in the SARs as of March-end.

Mainland China posted the most significant drop, with nine shops closing during the same period, down from 34 to 25.

Taiwan, with the largest number of self-managed shops, also posted the least significant decrease, with only three shops closing down during the fiscal year.

Established in Hong Kong in 1991, Bauhaus was listed on the Hong Kong Stock Exchange in 2005. S.Z.

Retail

Closing shops Apparel retailer Bauhaus International Holdings Limited has begun closing shops in the MSAR and neighbouring HKSAR, as its same store sales growth continued to fall in the first quarter of this fiscal year.

According to the group’s filing with the Hong Kong Stock Exchange, Bauhaus saw an overall decrease, both during the first three months of this year as well as during its fiscal year ended March 31, 2017.

Same store sales growth was only achieved in Mainland China, increasing 5 per cent year-on-year for the three-month period ended March 31 – although still experiencing a 3 per cent year-on-year decrease for the fiscal year.

Both the Hong Kong-Macau and the Taiwan segments of the company posted declines in same store sales, down 11 per cent and 23 per cent, respectively, for the first three

Business Daily Monday, April 10 2017 7

Macau Smoking

Tobacco-smoking infractions checked

workers (6.2 per cent).

Of the total number of offenders, 1,863 or 84.1 per cent of the total, have already paid their fines.

The majority of offenses were in

public spaces (parks, gardens and leisure areas) totalling 416 cases, followed by 279 cases at bus stops, and 234 cases in shops and commercial centres - corresponding to 17.8 per cent, 12.6 per cent and 10.5 per cent, respectively.

Inspections in casinos, which fall into a separate category, totalled 167 from January to March 2017, during which time 166 people were caught smoking in prohibited areas.

The majority of offenders, 156 individuals or 94 per cent of the total, were male, with only 10 female offenders identified.

Within the 166 offenses recorded during the inspections, 139 were committed by tourists, corresponding to 83.7 per cent, while 26 were

by Macau residents, accounting for 15.7 per cent, while only one was committed by a non-resident worker.

Since the enactment of the Tobacco Prevention and Control law on January 1, 2012, inspection agents have conducted a total of 1.37 million checks, charging 40,170 people with smoking in prohibited places. S.Z.

the resort operator considered that ties between the family of the late founder of the group, Hong Kong billionaire Cheng Yu Tung, and Sociedade de Turismo e Diversões de Macau (STDM), would make the group an ‘unsuitable’ investor in the

Bahamas project.

These statements were based on alleged ties between local gaming mogul Stanley Ho’s companies and Chinese criminal gangs detailed in a U.S. report, a statement quickly discredited by CTFE. N.M.

Over 900 daily inspections conducted this year

M

ale residents of Macau were among the biggest group of offenders of the tobacco control law during the first quarter of 2017, according to official data released by the Health Bureau last Friday.

During the first three months of the year, a total of 81,476 inspections were carried out by the Health Bureau (SS), with 2,220 charges filed.

The large majority of offenders were male, totalling 2,079 individuals, or

93.8 per cent of the total.

Of the 2,220 cases, 1,189 fines were issued to Macau residents (53.7 per cent), 890 fines to tourists (40.2 per cent), and 137 to non-resident

Gaming

Predetermined Outcome Former Baha Mar Resort property director says gaming licence granted to Chow Tai Fook Enterprises was predetermined and lacked due diligence The former director of integrated resort Baha Mar Resort believes that the Bahamas Gaming Board awarded a gaming licence to the new operator of the resort (a subsidiary of Chow Tai Fook Enterprises [CTFE]) without performing ‘in-depth background research’ on the Hong Kong group, Bahamas newspaper Tribune 242 reported.

According to statements made by the former director, Dionisio D’Aguilar to the newspaper, the gaming licence outcome was already ‘pre-determined’ since CTFE had already ‘hired staff and imported millions of dollars in gaming machines’ to the island prior to the decision.

Last week, the Bahamas authorities

approved a gaming licence for Sky Warrior Bahamas Ltd. - a CTFE subsidiary in the territory - to operate the casino-resort complex. The resort is expected to hold its soft opening on April 21.

According to the report, the gaming licence was approved only four days after a public hearing on the application was held. Mr. D’Aguilar commented that any necessary bureaucracy is already set to be approved by CTFE and the Bahamas Government before the proposed opening date.

Prior to the US$3.5 billion (MOP28 billion) purchase agreement for Baha Mar Resort, signed by CTFE, the former Director and Board Member of

Gaming

Crime

Junket database pending GPDP approval

Phone scam steals MOP11mln

The Office for Personal Data Protection (GPDP) is already evaluating the junket credit database platform proposed by the Macau Association of Gaming and Entertainment Promoters, according to the office’s response to Business Daily’s enquiries.

‘The request is under evaluation, taking into consideration any and all issues related to the Personal Data Protection Law’ the GPDP response notes.

Last week, the director of the Gaming Inspection and Co-ordination Bureau (DICJ), Paulo Chan, told local broadcaster TDM that: “once the system is cleared, then data can start to be inserted into the system”.

In response to Business Daily’s enquiries on the topic, the DICJ noted that it would continue to ‘pay close attention’ to the development of the credit database and how it can comply with the law.

The gaming oversight bureau noted that the database would be used to verify the credit status of VIP gaming patrons, and since the initiative was first presented by the Macau Association of Gaming and Entertainment Promoters, the DICJ considers they are the most active players in discussing its establishment with the GPDP. No information was provided on a possible start date for operations of the database. N.M.

A phone scam leading to losses of over MOP11 million (US$1.4 million) was brought to the attention of local authorities, with the Judiciary Police (PJ) receiving a total of 150 complaints between March 14 and April 5, according to a response to Business Daily’s enquiries. Of the total complaints, 17 admitted to having lost money through the scam.

According to the PJ, the scam involved someone dialing residents’ phone numbers and claiming to be an employee of the Immigration

Department of the Public Security Police Force (PSP) or the Mainland China Public Prosecutions Office.

The caller would then claim the person contacted was involved in illicit activities and ask for personal banking account data so as to proceed to an assets investigation, appropriating money from the accounts afterwards.

The PJ also informed Business Daily that as of the time of the enquiry, nobody connected to the scam had been arrested by authorities. N.M.

8 Business Daily Monday, April 10 2017

Greater China

Trump-Xi Summit

Accomplishment: getting to know one another Trump tweeted on Saturday that the meetings had created “tremendous goodwill and friendship” but that “only time will tell on trade”

U

.S. officials said President Donald Trump’s first meeting with Chinese President Xi Jinping last week was an opportunity for the leaders of the world’s two largest economies to get to know each other and set up future meetings.

That was the biggest accomplishment after about 18 hours together at Trump’s Mar-a-Lago resort -- a visit punctuated by a U.S. missile strike on Syria Thursday night. There were no trade or investment deals announced, no agreement to contain North Korea’s nuclear ambitions, no plan stitched together to reduce tensions in the South China Sea. A statement from White House Press Secretary Sean Spicer late Friday cited an array of topics the pair and their contingents discussed, from North Korea to cybersecurity to protecting human rights, and said Trump and Xi “established a new and cabinet-level framework” for future talks.

“We have very similar economic interests and there are areas where they clearly want to work with us,” Treasury Secretary Steven Mnuchin told reporters on Friday. “The objective is for us to increase our exports

to them.”

Commerce Secretary Wilbur Ross added that “the most interesting thing to me was they expressed an interest in reducing their net trade balance because of the impact it’s having on money supply and inflation. That’s the first time I’d heard them say that.’’

Trump tweeted on Saturday that the meetings had created “tremendous goodwill and friendship” but that “only time will tell on trade.”

China’s leaders in fact have long been concerned about the yawning U.S. trade deficit with their country, US$347 billion in 2016. Ross said the two countries agreed to a “100-day plan” to discuss trade; there were few details.

In tone and results, the summit was similar to a 2013 meeting between Xi and President Barack Obama in Rancho Mirage, California, that also produced little by way of tangible announcements. But Trump’s inaugural visit with Xi had a little more drama.

Syria strike

Trump upended the meeting by ordering the launch of dozens of cruise missiles at Syrian targets on Thursday, just before Xi’s arrival in Florida.

The missile strike overshadowed the

summit and also increased tension between the two countries over North Korea, days after Trump said in an interview with the Financial Times that he’s willing to take unilateral action against a regime flouting international norms.

Secretary of State Rex Tillerson said “there was no kind of package arrangement discussed to resolve” tensions with North Korea, adding that Xi agreed the situation “has reached a very serious stage in terms of the advancement.”

Trump told Xi the U.S. would “chart our own course if this is something China is just unable to coordinate with us,” Tillerson said.

‘Xinhua agency said that the “positive and fruitful” meetings have sent a “clearcut” message that Washington and Beijing can become great cooperative partners’ In his statement, Spicer said the two sides “noted the urgency of the threat” of Pyongyang’s weapons programs, “reaffirmed their commitment to a denuclearized Korean peninsula, and committed to fully implement UN Security council resolutions.”

For China, the meeting was probably a success. Much of the Communist Party’s top leadership will change during a congress later this year, and in the run-up to that event, “Xi Jinping just wants the United States off his back,” said Bonnie Glaser, senior adviser for Asia and the director of the China Power Project at the Centre for Strategic and International Studies in Washington. The two leaders appeared to develop a rapport, she said.

‘Positive and fruitful’

China’s official news agency Xinhua said Saturday that the “positive and fruitful” meetings have sent a “clearcut” message that Washington and Beijing can become great cooperative partners.

The presidents didn’t mention the Syria attack, and even steered clear

in their public remarks of issues like trade that were supposed to dominate the summit.

They remarked generally about “progress” in their relationship and optimism about the future. That could indicate that the relationship between the two countries remains stable, despite Trump’s fiery accusations during his campaign, and afterward, that China has stolen U.S. manufacturing jobs.

“The relationship developed by President Xi and myself, I think, is outstanding,’’ Trump said Friday during a meeting between the two countries’ delegations. “I believe lots of very potentially bad problems will be going away.’’ In a posting on its website on Saturday, China’s foreign ministry said the countries had agreed to “properly” deal with issues of trade friction.

Strolling the grounds

Xi thanked Trump for his hospitality and said the meeting had served the purpose of advancing the U.S.-China relationship.

“We had long and in-depth communication,’’ Xi said through a translator. “And, more importantly, we have further built up understanding and establish a kind of trust, and we have initially built up a working relationship and friendship.’’

The two leaders were later photographed strolling the grounds of Trump’s waterfront resort. Trump accepted Xi’s invitation to visit China later this year, Tillerson said.

Surface charm

The friendly banter between the leaders belied growing tension in the relationship after Trump’s public criticisms of China and his promises to extract concessions from the country on trade and North Korea.

“We have been treated unfairly and have made terrible trade deals with China for many, many years,’’ Trump told reporters aboard Air Force One on Thursday as he flew to Palm Beach. “That’s one of the things we are going to be talking about.’’

His Cabinet secretaries said that Trump indeed confronted Xi. “President Trump noted the challenges caused by Chinese government intervention into its economy,” Tillerson said Friday. “The president underscored the need for China to take concrete steps to level the playing field for American workers, stressing repeatedly the need for reciprocal market access.” Bloomberg News

Business Daily Monday, April 10 2017 9

Greater China Currency

In Brief

FX reserves stay above US$3 trillion after small March rise Regulator, in a statement on its website on Friday, said pressure on capital outflows eased somewhat in the first quarter China’s foreign exchange reserves stayed above US$3 trillion in March, during which a pause in the dollar’s rally aided Beijing’s efforts to contain capital outflows.

Reserves rose US$3.96 billion during March - less than the US$5 billion predicted in a Reuters poll - to total US$3.009 trillion, compared with US$3.005 trillion at the end of February.

In January, reserves slipped below US$3 trillion for the first time in nearly six years, but in February they moved back above that line with their first rise in eight months.

The March increase marks the first time reserves had increased two consecutive months since April 2016.

Julian Evans-Pritchard of Capital Economics said the way reserves were broadly stable in March “suggests that the recent easing of capital outflows has allowed the People’s

Bank of China to step back from FX intervention”.

“The obvious follow-up question is whether this halt to official intervention is a temporary phenomenon or a more permanent shift,” he wrote in a note.

“Our hunch is that it will be temporary,” asserting that the key factor in curtailing outflows was the pause in dollar appreciation rather than tighter capital controls.”

China’s foreign-exchange regulator, in a statement on its website on Friday, said pressure on capital outflows eased somewhat in the first quarter.

Forex reserves are expected to further stabilise, the regulator said, adding that the monthly change in reserves’ total is also stabilising.

The March reserves data came out as Chinese President Xi Jinping is meeting with U.S. President Donald Trump in Florida, and one week

before a U.S. Treasury’s currency report - which could label trading partners as currency manipulators - is due.

Xi urged cooperation with the United States on trade and investment.

China’s State Administration of Foreign Exchange (SAFE), the regulator, said last week that pressure from capital outflows eased somewhat in 2016 and there will be greater flexibility in the yuan’s exchange rate in 2017.

The regulator also said that authorities will take measures to attract capital inflows this year.

Tighter flow scrutiny

In February, China’s central bank sold the smallest amount of foreign exchange in nine months, supporting the government’s assertions that capital outflows were easing amid tighter scrutiny of cross-border flows.

China has tightened rules on moving capital outside the country in recent months as it seeks to support the yuan currency and stem a slide in reserves.

It burned through nearly US$320 billion of reserves last year but the yuan still fell about 6.5 per cent against the dollar, its biggest annual drop since 1994.

Gold reserves value fell to US$73.74 billion at the end of March, from US$74.376 billion at end-February, data published on the People’s Bank of China website also showed.

Recent remarks by senior government officials seem to indicate that China is not firm in keeping its reserves above the US$3 trillion mark, but prefers a gradual drop.

China does not have a “bottom line” for either the yuan exchange rate against the dollar or foreign exchange reserves, a senior PBOC official told Reuters in March. Reuters

Xiongan

Stock regulator challenges corporate hype to cool economic zone fever Over a dozen companies have put out statements disclosing potential business impacts from the newly announced economic zone Samuel Shen and Brenda Goh

China’s stock regulator has moved to cool speculative fever around plans to build a massive economic zone near Beijing, warning several listed companies against misleading investors with bombastic hypes around the red-hot theme.

China has unveiled plans to build Xiongan New Area, a “thousand-year project” which official media described as carrying the same national significance as the Shenzhen Special Economic Zone that helped kick-start China’s economic reforms in 1980.

The new economic zone immediately became the hottest investment theme in China’s stock market, with dozens of “Xiongan” concept stocks surging as investors piled into companies that will potentially benefit from the scheme.

In the real estate market though, speculation around Xiongan has been muted by Beijing’s tough controls on property development and transactions.

But companies including Beijing Jiayu Door Window and Curtain Wall Joint-Stock Co and software maker Beijing Egova Co raised eyebrows from regulators after the their discussions with investors about Xiongan boosted share prices.

In a statement published late on Friday, Beijing Jiayu said that it had received a letter from the Shenzhen Stock Exchange, warning the company against using “exaggerative” language in describing future investment, or using hot topical events to mislead investors.

The bourse also urged Jiayu to detail its investment plans around Xiongan and submit feasibility reports, after the company told investors via an on-line platform on Tuesday that it would build regional headquarters in the Xiongan New Area.

Beijing Egova said in a public filing that the company’s communications with investors about business opportunities in Xiongan was also challenged by the Shenzhen Stock Exchange.

Vowing to make corrective

measures, Egova said: “We will adamantly follow the exchange’s order ... and refrain from using hot topics in the stock market to influence investors’ judgment on the company’s value in an inappropriate manner.”

In addition, over a dozen companies have put out statements disclosing potential business impacts from the newly announced economic zone, which the official China Securities Journal said was the result of regulatory guidance on disclosure aimed at curbing speculation.

Chinese regulators have been tightening disclosure rules to discourage listed firms from using hot topics to pump up share prices as part of efforts to curb speculation.

In a most infamous case, shares of loss-making property developer Shanghai Doulun Industry Co doubled in 2015 after the company changed its name to P2P to stir up investor interest at a time when internet finance was a hot investment theme. The stock has since tumbled over 60 per cent from its peak. Reuters

Investors

Regulator vows to punish “iron roosters” China’s top securities regulator urged listed companies to reward investors with cash dividends, vowing to punish stingy “iron roosters.” Liu Shiyu, Chairman of the China Securities Regulatory Commission (CSRC) also warned listed firms against raising money for blind investments, or designing complicated share structures that facilitate insider trading and other malpractices. “Paying cash dividends is a basic way to reward investors ... and the ultimate source of a stock’s intrinsic value,” Liu said in a recent speech, a transcript of which was posted on CSRC’s website on Saturday.

Bond market

Clearing houses partners with Canada’s TMX In Beijing’s latest push to attract foreign investment into the country’s US$9 trillion bond market, China’s state-owned clearing house said on Saturday that it will work with Canada’s TMX Group to expedite cross-border investments. Shanghai Clearing House, supervised by China’s central bank, said in a statement that by exploring ways to link securities registration and custody functions with TMX, “Canadian, and even North American investors will be given easier access to China’s bond market.” In addition, the People’s Bank of China will further deregulate the bond market.

Results

PetroChina sees lower Q1 profit China’s largest oil and gas producer, PetroChina, said on Friday it expected a first-quarter profit of RMB5-6 billion (US$724.8US$869.8 million), down slightly from the preceding quarter, but a turnaround from a huge loss a year earlier. The forecast is slightly lower than the RMB6.2 billion profit reported in the fourth quarter. However, it would be a big improvement from the year-ago loss of RMB13.8 billion, the company’s first-ever, due to a recovery in crude prices and cost cutting measures, the company said.

Auto industry

GM China vehicle sales fall in Q1 U.S. automaker General Motors Co said on Friday its first quarter sales in China fell 5.2 per cent compared to the same period a year ago due to a shift in the government’s tax policy and Lunar New Year fluctuations. The decline comes despite a 16 per cent year-on-year increase in China sales in March. Demand for cars in China, the world’s largest auto market, got a shot in the arm in 2016 as people rushed to buy before the planned expiration of a tax cut on vehicles with engines of 1.6 litres or below.

10 Business Daily Monday, April 10 2017

Greater China Housing

New HK leader’s affordable homes plan up against wall of Mainland capital Home-grown property companies are being edged out of their own market and are looking overseas to do business Clare Jim and Venus Wu

A

pledge by Hong Kong’s incoming leader Carrie Lam to make the city’s vertiginous property prices more affordable could founder on the bottomless pockets of Mainland Chinese developers, who are bidding up the price of land.

Home prices in Hong Kong have jumped 364 per cent since 2003, while the median monthly household income has risen just 61 per cent, pushing home ownership out of reach for many.

While the mass protests that paralysed parts of Hong Kong for 79 days in 2014 were primarily about demands for full democracy from Beijing, many were also motivated by the rising cost of living in the city, and the cost of accommodation in

particular.

A typical Hong Kong apartment costs 18.1 times gross annual median income, according to research group Demographia, and the city topped its survey of the world’s most expensive places for accommodation for the seventh straight year. Second-placed Sydney was a long way behind on 12.2.

“Anything over a multiple of 5.1 is usually deemed as being ‘severely unaffordable’,” said Denis Ma, JLL’s Head of Research in Hong Kong.

With most of the city’s more than 7 million citizens living in cramped apartments - some no bigger than a parking space - Lam, who takes over as chief executive on July 1, is aiming to tackle the problem by increasing housing and land supply.

But Alice Mak, head of the Hong Kong legislature’s housing panel, said

the influx of capital from Mainland developers will make Lam’s job very difficult.

“When there’s overseas capital investment in Hong Kong, it will stimulate the local property market. If the government wants the housing market to grow at a stable rate, this will be a very big challenge for them,” Mak said.

Chinese companies successfully bid for six out of 27 plots of land sold by the government in the fiscal year starting April 2016, Lands Department data shows, but in money terms they accounted for 44 per cent of total transactions.

In the previous fiscal year, Chinese firms paid more on land deals than their Hong Kong competitors, taking up 55 per cent of the value and nearly half of the land sold.

Local developer David Chiu, chairman of Far East Consortium International, said he had become increasingly disheartened after seeing his company’s auction bids fall below the average.

Key Points HK home prices up 364 pct since 2003, incomes up just 61 pct Typical HK apartment costs 18.1 times gross median income Mainland developers increasingly outbid locals for land Mainland developers account for 44 pct total deal value

Mainland developer KWG Property, which won a plot of residential land for a record price co-bidding with Logan Property, said lower lending rates and taxes make development in Hong Kong more profitable than in China.

“There’s still a gap between ‘flour and bread prices’ in Hong Kong, but in China the prices are basically the same, so I boldly predict that more and more Chinese developers will come to Hong Kong to buy land in the future,” KWG chairman Kong Jian Min told an earnings conference last month.

The direct impact of this influx on home prices is stark in the Kai Tak district, overlooking Victoria Harbour. Prices there rose as much as 50 per cent in less than a year, consultancy JLL said, after Chinese conglomerate HNA Group bought four land parcels in the past five months at eye-popping prices.

Hong Kong’s home-grown property companies are being edged out of their own market and are looking overseas to do business.

“In the past there were 20 developers fighting for land, but now with Chinese developers joining, it means another 20 more,” he told a conference in February, adding that he was glad his company had already invested elsewhere and had plans to expand in the UK and Australia.

“I think it’ll be very difficult for Hong Kong’s small and medium developers to win a tender; it wouldn’t surprise me if Hong Kong developers became landlords relying only on rental income (from commercial properties) after 10 years,” he said.

Lam has already conceded in an interview with the Hong Kong Economic Journal there is nothing she can do to stop outside capital competing in the land bids.

Even established professionals say buying a home is an increasingly daunting prospect and doubt that government will succeed in holding down prices.

“They won’t be able to help us,” said 30-year-old accountant Mok Ho-man.

“Buying a flat is not an impossible dream ... but it will only get more and more difficult.” Reuters

per cent in March, slowing from the 9.5 per cent growth registered in the first two months.

The bank said growth of the country’s consumer price index (CPI), a main gauge of inflation, may rebound to 1.3 per cent in March from 0.8 per cent in February as distortions from the Chinese New Year effect disappeared.

In the fourth quarter of 2016, China’s economy grew 6.8 per cent yearon-year. The Chinese government has targeted growth of around 6.5 per cent this year.

The country is scheduled to release its first-quarter economic data, including GDP growth, fixed asset investment, industrial output and retail sales, on April 17. Xinhua

Impossible dream?

Goldman Sachs

GDP likely to grow 6.8 pct in Q1 The bank expects weaker auto sales to continue weighing on the country’s retail China’s economy is likely to remain solid in the first quarter of this year, growing 6.8 per cent from a year earlier, Goldman Sachs forecast.

‘Fixed asset investment growth is likely to remain strong, expanding 8.9 per cent in the first three months of the year, according to Goldman Sachs’

The bank said in a research report that purchasing managers’ index (PMI) readings from both official and private surveys have implied firm activity growth overall. It expected China’s GDP growth to reach 6.6 per cent for 2017.

Goldman Sachs expected China’s industrial production to rise 6.4 per cent in March, slightly higher than the 6.3 per cent growth for January and February.

Fixed asset investment growth is likely to remain strong, expanding 8.9 per cent in the first three months of the year, unchanged from that in the first two months, according to Goldman Sachs.

It expected weaker auto sales to continue weighing on the country’s retail sales, which may increase 9.4

Business Daily Monday, April 10 2017 11

Asia Monetary policy

Singapore c.bank seen on hold as economy emerges from doldrums First quarter GDP probably grew 2.4 per cent on a year-on-year basis Masayuki Kitano

S

ingapore’s central bank is widely expected to keep policy steady next week, with the economy seen on track to meet the official full-year forecast despite an expected contraction in the first quarter.

Eighteen of 19 analysts in a Reuters survey predicted that the Monetary Authority of Singapore (MAS) would keep its exchange-rate based policy unchanged at its semi-annual review due on April 13, at 8 a.m.

(0000 GMT).

The government’s advance estimate of first-quarter GDP, due at the same time, is expected to show that GDP shrank 1.9 per cent from the previous three months on annualised basis, according to the median forecast in a Reuters survey.

Economists say the likely contraction is due to the economy coming off a high peak in the fourth quarter, when GDP jumped 12.3 per cent on-quarter, rather than signalling any sharp deterioration in economic activity.

“I don’t think there’s a need for alarm,” said Selena Ling, head of treasury research and strategy for OCBC Bank.

“Whether all these green shoots that we’re seeing in manufacturing sustains into the second quarter, that’s the key question,” Ling added.

Market focus will also turn on any changes to the forward guidance introduced in October 2016, when the MAS said it “assesses that a neutral policy stance will be needed for an extended period to ensure medium-term price stability.”

Since inflation has edged higher and exports have picked up, analysts say a removal of that phrasing could stir market speculation of the MAS tightening policy in October.

Still, very few see chances of tighter policy anytime soon, especially

given some of the external risks to the outlook, including a rise in trade protectionism under U.S. President Donald Trump’s administration and any weakness in China - Singapore’s biggest trading partner.

Exports recovery

First quarter GDP probably grew 2.4 per cent on a year-on-year basis, according to the median forecast.

While that would be slower than the fourth quarter’s 2.9 per cent expansion, the pace would still be at the higher end of the government’s full-year forecast of 1-3 per cent for this year, and the 2016 full-year rate of 2.0 per cent.

With exports and manufacturing having picked up since late 2016, and inflation rising in line with official forecasts, most analysts expect the MAS to stand pat after having eased policy three times since January 2015, most recently in April 2016.

The central bank manages monetary policy by letting the Singapore dollar rise or fall against the currencies of its main trading partners within an undisclosed trading band based on its nominal effective exchange rate (NEER).

Key Points Singapore c.bank decision, Q1 GDP due on April 13 18 of 19 analysts see MAS keeping policy steady in April 1 analyst expects MAS to ease Reuters poll: Q1 GDP -1.9 pct q/q, +2.4 pct y/y

The MAS maintained a stance of zero per cent appreciation of the Singapore dollar NEER’s policy band at its previous decision last October, leaving scope for the currency to weaken and provide a cushion to the economy in the event of a deteriorating outlook.

“The Singapore dollar NEER still has about 2 percentage points within the policy band to adjust,” said Edward Lee, an economist at Standard Chartered Bank. Reuters

Investment regulation

Australia appoints former spy boss to advise on foreign interests Foreign investment in Australian infrastructure assets has become an increasingly contentious issue since the 2015 sale of the Port of Darwin to Chinese government-affiliated interests Harry Pearl

Australia on Saturday appointed the former director of its domestic spy agency as chairman of its foreign investment advisory committee, stepping up the role of national security in vetting bids for critical infrastructure.

David Irvine will begin his five-year term leading the Foreign Investment Review Board in April, where he will be responsible for advising the government on investment policy and administration, including foreign investment applications.

His appointment follows a series of controversial foreign investment rulings last year, when the government blocked Hong Kong and Chinese firms bidding for Ausgrid, the biggest power grid in the nation’s most populous state, New South Wales, on national security grounds.

“The Turnbull Government has taken consistent and determined action when it comes to ensuring foreign investment is not contrary to the national interest, whilst never

underestimating its importance to our national economy,” Treasurer Scott Morrison said in a statement on Saturday.

“The Turnbull Government has taken consistent and determined action when it comes to ensuring foreign investment is not contrary to the national interest” Scott Morrison, Australian Treasurer A respected diplomat, Irvine is also a former director general of both the Australian Security Intelligence Organisation and the Australian Secret

Intelligence Service, which is responsible for foreign intelligence.

“I would read his appointment as an indication the government is looking to strengthen the national security side of foreign investment decisions,” said Peter Jennings, the executive director of the Australian Strategic Policy Institute.

Jennings said Canberra viewed a more assertive China and the threat of cyber attacks as increasing risks to critical infrastructure.

Foreign investment in Australian

infrastructure assets has become an increasingly contentious issue since the 2015 sale of the Port of Darwin to Chinese government-affiliated interests sparked a backlash over the security implications and drew a rebuke from U.S. government officials.

In January, the government established the Critical Infrastructure Centre, whose role will include checking whether foreign-led bids for key assets, including power grids and ports, pose any national security risks. Reuters

12 Business Daily Monday, April 10 2017

Asia F1

Motor racing-Malaysia to host final race this year The October 1 race this year will be the last Rozanna Latiff

M

alaysia will stage its final Formula One Grand Prix in October after the government and the sport’s commercial rights holders announced on Friday that their hosting agreement would end a year early.

The Southeast Asian country has hosted a round of the world championships at the Sepang International Circuit (SIC) since 1999 but the government said last November that the deal would not be renewed when it expired at the end of 2018.

On Friday, however, both parties announced that the Oct. 1 race this year would be the last.

“It’s always sad to say goodbye to a member of the Formula 1 family,” Formula One commercial operations managing director Sean Bratches said in a statement.

“Over nearly two decades, the Malaysian Formula 1 fans have proven themselves to be some of the sport’s most passionate supporters.”

Malaysia’s Prime Minister Najib Razak said on Friday that declining ticket sales, viewership and tourism were behind the decision to pull out of hosting the race.

“The Cabinet has agreed to end the contract for hosting the Formula One race... after considering lowering returns to the country

compared to the cost of hosting the championships,” he said in a statement.

State oil and gas firm Petronas is the title sponsor of the F1 race.

The company has been hit hard in recent times by tumbling oil prices.

Petronas, however, would continue to sponsor the Mercedes Formula One team as part of its marketing strategy, Najib said.

Mercedes team boss Toto Wolff said he hoped the last race at the

circuit would provide a fitting finale.

“It’s been a very successful race over 18 years but they have decided to call it a day and we have to respect that decision,” Wolff told reporters in Shanghai, where Mercedes are preparing for this weekend’s Chinese Grand Prix.

“I hope we can mark 2017 with a special result in Sepang -- it will be the last grand prix on a really challenging circuit and it would mean a lot to win there for all our fans in Malaysia.

“Although we will miss the event

from the calendar, our long and successful partnership with Petronas means Malaysia will continue to have a world-class presence in F1 in the years ahead.”

Government funds allocated for the race will be redirected towards other types of motor racing, upgrading the circuit, and training future Malaysian Formula One drivers, the Prime Minister added.

Formula One faces an uncertain future in Southeast Asia as the other race in the region, the Singapore Grand Prix, has yet to agree terms on an extension to its contract that expires this year. The first Singapore race was held in 2008.

The Sepang Circuit will continue to host a round of the motorcycling world championships until 2021 under the terms of a deal signed with MotoGP rights holders Dorna Sports last year. Reuters

Monetary defence

Abe adviser says Japan should push back on any U.S. attack on yen The weak yen has been one of the most prominent outcomes of Prime Minister Shinzo Abe’s “Abenomics” stimulus policies Kaori Kaneko and Sumio Ito

Japan should push back against any U.S. suggestion that it is suppressing the yen’s value for trade advantage, an adviser to Prime Minister Shinzo Abe said, in a bid to pre-empt criticism of Japan’s currency policy.

Koichi Hamada, Cabinet adviser and emeritus professor of economics at Yale University, told Reuters in an interview that Tokyo should stress that Japan has a different currency policy from China.

With President Donald Trump criticising the trade policies of Japan, China and other major economies, Tokyo fears that trade friction could return for the first time in years, harming Japan’s interests and its deep relations with Washington.

A senior U.S. official told Reuters that the administration is shifting its attention from countries that “manipulate” their currencies to currencies that are “misaligned,” even if the imbalance is unintentional.

“What Japan should argue is that Japan and China have totally different stances towards currency manipulation,” Hamada said on Thursday.

“Japan has not intervened in the currency market under Abenomics, and Japan’s monetary policy is targeted strictly at domestic economic targets.”

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Tokyo has not entered the market to sell yen for dollars since November 2011. However, the weak yen has been one of the most prominent outcomes of Prime Minister Shinzo Abe’s “Abenomics” stimulus policies, helping to boost exporters’ profits and lift Japanese stocks sharply higher.

Inflation, however, is still anaemic and is well behind the Bank of Japan’s 2 per cent target.

“The current level of yen is not extremely strong against the dollar for Japanese businesses. The BOJ (Bank of Japan) does not need to ease further,” Hamada said.

Since Trump’s election victory in November, the dollar has rallied to hit above 118.60 yen on expectations he will deliver stimulus-enhancing policies, but has since retreated as the new U.S. administration faced early hurdles in Congress.

Hamada said sensitive trade issues such as exchange rates, cars and agriculture, will likely come up in high-level bilateral economic talks set to start this month. But he portrayed this as a way for the two governments to seek mutually beneficial agreements after the failure of an Asia-Pacific trade deal.

“It is natural to talk about these issues in the dialogue to seek criteria for win-win situations for both countries bilaterally,” after Trump pulled America out of an ambitious Pacific trade agreement, he said.

BOJ

Hamada echoed BOJ Governor Haruhiko Kuroda who recently said the central bank won’t raise its long-term bond yield targets simply because overseas long-interest rates rise.

He said that a central bank should manage monetary policy solely to influence its domestic economy.

“The BOJ does not need to raise its 10-year Japanese Government Bond yield target just because yields in the U.S. increase,” he said.

“But if the BOJ keeps the longterm bond yield low regardless of the high U.S. yield, then it will naturally accelerate the yen’s falls, and cause mild inflationary pressure in Japan.”

The BOJ pledges to keep the 10-year JGB yield around zero per cent but analysts predict the BOJ’s next move would be to start scaling back its ultra-easy policy and they expect the central bank will raise the yield target.

Key Points Cars, agri could be among topics in U.S.-Japan econ dialogue BOJ should raise yield target when economy gets overstimulated Current yen rate vs dollar not extremely strong

“If the Japanese economy gets over-stimulated, the BOJ will have to raise its 10-year JGB yield target to calm down the economy,” Hamada said.

He also reiterated the BOJ does not have to stick to its 2 per cent inflation target in an environment where the job market is tight and the economy is on a recovery trend.

“Ultimately, as long as employment is full and production is in favourable condition, the price inflation is hardly any longer the fundamental target.

The price target is, in my opinion, a merely secondary target.” Reuters

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Business Daily Monday, April 10 2017 13

Asia Election survey

In Brief

South Korean presidential race tightens as Ahn gains on Moon

Monetary policy

Thai c.bank says need to remain ‘accommodative’

The next leader will face multiple tasks including addressing the North Korean nuclear threats Kanga Kong

South Korea’s presidential race narrowed as Ahn Cheol-soo, an advocate of a tougher stance against North Korea, surged in polling to be nearly level with left-leaning front-runner Moon Jae-in.

Ahead of the May 9 election, support for Ahn of the centrist People’s Party jumped to 35 per cent from 19 per cent a week ago, the Gallup Korea survey showed on Friday. Moon, of the Democratic Party of Korea, garnered 38 per cent support, up from 31 per cent.

The poll was the first taken by Gallup Korea since all major parties chose their candidates for an election triggered by the ouster last month of Park Geun-hye amid a graft scandal.

The next leader will face multiple tasks including addressing the North Korean nuclear threats, Chinese retaliation over the deployment of the Thaad U.S. missile shield, and reform of the family-run conglomerates that contributed to Park’s downfall.

Running third in the poll was Hong Joon-pyo of Park’s conservative Liberty Korea Party. Support for Hong climbed to 7 per cent support from 4 per cent a week earlier.

Ahn, who has leaped into contention from a single-digit rating in early March, is probably attracting conservative voters plus supporters of some Democratic Party candidates who lost the nomination to Moon, according to political scientist Park Won-ho.

“Some conservative voters are clearly shifting to Ahn simply because they don’t want Moon as president, while other conservatives actually like Ahn because he tells them what they want to hear, like his position on Thaad,” said Park, a Seoul National University professor who specializes in voting behaviour and research methods.

Supports Thaad

Ahn, 55, said on Thursday the next president should continue to allow the U.S. to install Thaad on South Korean soil. The millionaire founder of an antivirus software start-up said he would name former United Nations Secretary-General Ban Kimoon as a special envoy to enlist other nations against the threat from North Korea, which test-fired another ballistic missile this week.

Moon, 64, who was runner-up to Park in 2012, favours a softer line on

Ahn Cheol-Soo, the presidential candidate of the centrist People’s Party, speaks during a press conference in Seoul, South Korea, 06 April 2017. Lusa

North Korea and has said he would review the decision to deploy Thaad.

He has fended off resurfaced accusations he is aligned with Kim Jong Un’s regime by touting his background as a special forces veteran in South Korea’s military.

Moon has also vowed to clean up what he calls “deep-rooted evil” in society, such as the cozy ties between chaebol business groups and successive governments.

Park was ousted on March 10 and arrested three weeks later on suspicion of bribery and abusing her powers. An election would have been due

by December anyway, since Park’s single, five-year term was set to expire in February 2018. Bloomberg News

Summit

ASEAN reaffirms commitment to growth The regional finance and central bank chiefs also pledged to deepen regional financial cooperation to realize an ASEAN Economic Community 2025 Finance ministers and central bank governors of the Association of Southeast Asian Nations (ASEAN) reaffirmed their joint commitment Friday to promote economic growth and strengthen financial integration and stability amid global economic uncertainties arising from possible protectionist policies and volatilities.

In a joint statement issued at the end of the 3rd ASEAN Finance Ministers and Central Bank Governors Meeting, the ASEAN officials also committed to “remain steadfast” in pursuing ASEAN’s goals to achieve “a highly integrated, cohesive economy” that is “competitive, innovative, dynamic, with enhanced connectivity and sectoral cooperation.”

The statement said the measures are vital to making the region more “resilient, inclusive, people-oriented, people-centred and connected with the rest of the world” amid the rise protectionism and geopolitical

developments that could derail the recovery of the global economy.

“As such, we shall continue to promote economic growth, financial integration, strengthen financial stability, implement appropriate monetary, fiscal and macroprudential policies in our jurisdictions, and intensify financial cooperation to further advance our region’s resilience,” the statement said.

The finance and central bank chiefs also pledged to deepen regional financial cooperation to realize an ASEAN Economic Community 2025, pursue the creation of an interconnected, inclusive and resilient regional capital market and ensure the efficient development of the Green Bond initiatives.

They also initiated a “financial inclusion initiative” to deliver more financial products and services to under-served communities within the ASEAN and reaffirmed their vision of liberalizing

progressive financial services.

The officials also noted the sustained expansion of the ASEAN economy at 4.6 per cent in 2016 amid global uncertainties, and stressed that domestic demand will continue to be a key driver to regional growth, while structural reforms, public spending and fiscal stimulus will enhance investments in the region.

But despite these positive trends, they also cited risks emerging from a rising tendency toward protectionism, the normalization of policy rates and “geopolitical developments.”

The ministers and central bank heads also discussed promotion of the use of local currency to facilitate int-ASEAN trade and investments and the ASEAN payment and settlement systems.

The progress of the development and integration of the insurance sector in ASEAN and plans to liberalize international maritime, aviation and transit (MAT) insurance were also discussed at the meeting, along with the liberalization of catastrophic reinsurance to financially arm ASEAN economies and improve their economic resilience against natural catastrophes. Xinhua

Brunei’s Ministry of Finance Pehin Abd Rahman Ibrahim, Cambodia’s Undersecretary of State Seilava Ros, Indonesia’s Chairman of Fiscal Policy Agency Rionald Silaban, Lao’s PDR Vice Minister Sila Viengkeo, Malaysia’s Ministry of Finance Kalinan Givananadam, Philippines’ Undersecretary of Department of Finance Gil Beltran, Philippines’ Assistant Secretary Department of Finance Maria Edita Tan, Myanmar’s Deputy Minister Maung Maung Win, Singapore’s Ministry of Finance Ching Yee Tan, Thailand’s Ministry of Finance Boonchai Charassangsomboon, Vietnam’s Deputy Director General Pham Tuan Anh and Director for Market Integration, ASEAN Secretariat Ho Quan Trung hold during the 3rd ASEAN Finance Ministers’ Central Bank Governors’ Joint Meeting and Related Meetings at the Shangrila Mactan Resort and Spa Hotel in Cebu, Philippines, 04 April 2017. Lusa

Thailand’s monetary policy has to remain “accommodative” until Southeast Asia’s second-largest economy shows broader and firmer growth, the central bank said on Friday.

The Bank of Thailand, in its quarterly policy report, also said it expects that capital flows and exchanges “would continue to experience heightened volatility”.

Foreign exchange risk management will be increasingly important for the private sector, it added. Jaturong Jantarangs, an assistant governor, told a news conference that interest rate rises by the Federal Reserve could results in capital flows to the United States and a slight depreciation of the baht “but not so much that it is worrying”.

Forex

Indonesia forex reserves rise Indonesia’s foreign exchange reserves increased in March to US$121.8 billion, the highest since August 2011, Bank Indonesia (BI) said on Friday. The reserves stood at US$119.9 billion at the end of February. March’s reserves increase of almost US$2 billion came from “tax revenues and government oil and gas export proceeds, the issuance of government global bonds, as well as auction of Bank Indonesia foreign exchange bills,” the central bank said in its statement.

State visit

India offers credit line to Bangladesh India offered a US$4.5 billion line of credit to neighbouring Bangladesh on Saturday to help it implement projects in priority areas such as the energy sector, and a separate US$500 million credit line to support defence related procurements. Indian Prime Minister Narendra Modi made the announcements after a meeting with Bangladesh Prime Minister Sheikh Hasina, who is on a state visit to India. “We want to build cooperation in new areas, especially some high-technology areas, that have a deeper connect with the youth in both our societies,” Modi said in a speech.

Engine problems

Hyundai, Kia to recall nearly 1.5 mln vehicles Hyundai Motor Co and Kia Motors Corp plan to recall 1.48 million vehicles in the United States, Canada and South Korea due to engine issues, the latest blow for two firms already struggling in key markets. The recall could cost the two firms hundreds of millions of dollars each and revives quality concerns at a time when Hyundai and Kia face a sharp drop in China sales and sluggish demand in the United States and South Korea. The South Korean companies are recalling 1.19 million cars and sport utility vehicles in the United States, 114,187 in Canada and 171,348 in South Korea.

14 Business Daily Monday, April 10 2017

International In Brief Portugal

House prices rise above EU average House prices in the European Union rose by an average of 4.1 per cent on year in the Euro Zone and 4.7 per cent in the European Union (EU) in the fourth quarter of 2016, with Portugal recording higher price rises compared to both averages, Eurostat said on Friday. In Portugal, house prices rose 7.6 per cent, but the highest on year rises were seen in the Czech Republic (11.0 per cent), in Hungary (9.7 per cent) and in Lithuania (9.5 per cent), and there were no downturns in prices according to Eurostat’s figures.

In Portugal, house prices rose by 1.2 per cent compared to the previous quarter.

Public accounts

Brazil nearly doubles 2018 deficit target The Brazilian government last week widened its 2018 fiscal deficit target to 129 billion reais (about US$41 billion) from 79 billion reais, highlighting the challenges President Michel Temer faces in rebalancing the country’s depleted public accounts.

Two years of deep recession have dragged down tax revenues and eroded government finances to the point that Brazil lost its coveted investment-grade sovereign debt rating. A member of the economic team told Reuters last week the deficit goal could be widened given the slow pace of recovery.

Balance sheet

Wall Street sees Fed normalization plan by year-end Disappointing jobs report caused traders to briefly slash their bets on a June rate hike

W

all Street’s top banks see the Federal Reserve laying out by year end its plan to scale back reinvestments in Treasuries and mortgage-backed securities in order to begin shrinking its US$4.5 trillion balance sheet, a Reuters poll showed on Friday.

Five of 15 primary dealers, or banks that do business directly with the U.S. central bank, expected the Fed to start paring reinvestments by year end, while the rest forecast the central bank would do so by the end of the second quarter of 2018.

The median view of 11 dealers was for the Fed to eventually shrink its balance sheet to US$2.75 trillion.

As the U.S. central bank seems prepared to tackle unwinding its bond holdings, primary dealers see the Fed raising interest rates two more times by year end and three times in 2018.

Fed policymakers have turned their focus to paring the central bank’s

massive bond holdings, as shown in the minutes of their March policy meeting released on Wednesday.

Last month, the Fed raised rates by a quarter percentage point to 0.75 per cent-1.00 per cent amid signs of an improving U.S. economy and stock prices reaching record highs.

The central bank amassed its Treasuries and MBS during three rounds of large-scale purchases known as quantitative easing, which was aimed to lower long-term borrowing costs and combat the repercussions of a severe recession that was exacerbated by the global credit crisis more than eight years ago.

On Wednesday, the Fed held US$2.46 trillion in Treasuries and US$1.77 trillion in MBS. While the Fed has longed to reduce those holdings, it has been reluctant to do so due to concerns that buying fewer bonds could cause a spike in mortgage rates and other long-term borrowing costs and hurt an economy that has been stuck at a 2 per cent

growth rate.

The Fed’s willingness to embark on this change came after Donald Trump’s surprise U.S. presidential victory in November, which unleashed hopes of tax cuts, looser regulations and infrastructure spending to bolster business investments and job growth.

That optimism has cooled in recent weeks after Trump and the Republican-controlled U.S. Congress failed to pass healthcare reform. This led investors to scale back expectations on tax cuts and infrastructure spending in 2017.

Federal fiscal stimuli, analysts say, would cushion tighter financial conditions from interest rate increases and fewer bond purchases from the Fed. In the latest Reuters poll, 13 of 17 dealers saw the Fed hiking rates to 1.00-1.25 per cent by the end of the second quarter, compared with 11 of 17 dealers in a March 15 poll.

Eight of 17 dealers saw the Fed lifting rates to 1.25-1.50 per cent by the end of the third quarter, while 16 of 17 expected that rate range to be reached by year end. Reuters

Cash crunch

Venezuela clinches US$300 mln deal Venezuela’s central bank has reached a deal that will provide the country with at least US$300 million from New York-based investment fund Fintech Advisory Inc to help offset a cash crunch, two market sources and a source close to the government told Reuters on Friday.

The crisis-hit country has spent months negotiating with investment banks, offering bonds as a guarantee, as it seeks to boost liquidity ahead of steep debt payments that begin next week, Reuters reported in February. Venezuela’s oil-dependent economy is suffering a brutal recession that has millions of people skipping meals amid steep inflation and low salaries.

Argentina

IMF says sustained reform effort needed Free-market policies adopted by Argentina over the last 16 months are working and should lead to an economic rebound, the International Monetary Fund said on Friday, calling on the country to deepen reforms as October elections approach. Mauricio Macri has floated the peso currency, reduced labour costs and lowered trade restrictions since becoming president in December 2015. Congressional elections in six months will show how much political momentum he has to continue his reform effort and run for re-election in 2019. Macri’s popularity has fallen in recent months due to unpopular decisions.

Tax

Moscovici urges EU states to persist in fight against avoidance He said the biggest source of uncertainty would be to maintain a “status quo” where EU states compete with each other on corporate tax policy Francesco Guarascio

European Union states should continue reforming corporate rules to tackle tax avoidance, EU tax commissioner Pierre Moscovici told finance ministers on Saturday, as some smaller nations urged slower reform to avoid scaring away big corporations.

In a paper to be discussed at a meeting of EU finance ministers in Valletta on Saturday, Malta, which holds the rotating EU chair until July, said EU tax reforms would increase uncertainty, harming investment and trade.

It suggested states should be given more time to adapt to changing rules.

Addressing the ministers, Moscovici opposed Malta’s view and said the biggest source of uncertainty would be to maintain a “status quo” where EU states compete with each other on corporate tax policy.

Many large U.S. corporations have set up their headquarters in smaller EU states, allowing them to cut their tax bills due to more lax tax rules.

Following recent revelations, such as the Panama Papers, of widespread tax evasion and avoidance by big

corporations and wealthy individuals, the European Commission has made several legislative proposals to close legal loopholes. However, some of the most ambitious plans have yet to be approved by EU states.

Multinationals, including Apple, Amazon.com , McDonald’s and Starbucks Corp, are under investigation or have been sanctioned by the EU executive for their excessively low tax bills in some EU states.

“We must finish what we have started” Pierre Moscovici, EU tax commissioner

“We must finish what we have started,” Moscovici urged ministers, according to his speaking notes circulated to the media. The pace of reforms should remain “fast”, he said.

He told states to move “with ambition and determination” to agree

on proposals for a common tax base at EU level that would put an end to the wide range of corporate tax exemptions and deductions currently applied by EU countries, and which are exploited by big companies to lower their tax bills.

He faced opposition from some smaller EU states. On his arrival to the meeting, Belgian finance minister Johan Van Overtveldt said Malta was right in stressing that the pace of reforms should not be “too fast” and that the EU should adapt its speed to other major economies worldwide.

His remarks were echoed by Luxembourg’s finance minister Pierre Gramegna, who called for a “level playing field in terms of taxation worldwide”.

Moscovici said the EU should lead the world on tax reforms, especially at a time when the U.S. tax policy is unclear and may further slow down reforms.

Dutch finance minister Jeroen Dijsselbloem sided with Moscovici.

“Let’s not get soft on tax avoidance,” he told reporters on his arrival to the meeting.

Calls for more tax certainty “cannot be an excuse” to slow down the EU fight against tax avoidance, German finance minister Wolfgang Schaeuble told reporters at the end of the meeting. Reuters

Business Daily Monday, April 10 2017 15

Opinion

China has smarter places to park money than car garages Nisha Gopalan a Bloomberg Gadfly columnist

I

f there’s one message to take away from Asian buyers’ heated interest in French parking lot operator Indigo, it’s that investors remain hungry for yield and assets are scarce. But those steering away from their traditional targets in the hope of infrastructure-like returns from car spaces should be wary.

With fewer car parks being built in city centres, parking-lot owners have become a hot commodity. Both Indigo and Q-Park NV, an operator that’s being sold by Dutch insurance companies and pension funds, have thousands of assets dotted around Europe, and Indigo is also present in North and South America, and the Middle East. Ardian SAS and Predica, part of Credit Agricole SA, are aiming to net about 4 billion euros (US$4.3 billion) for Indigo, valuing it at 13 to 14 times earnings. Q-Park could go for more than 2.4 billion euros.

Those aren’t small numbers, which speaks to the dearth of big, reasonably yielding assets with low upkeep costs. Chinese firms appear particularly keen, with Li Kas h i n g’ s C h e u n g Kong Infrastructure billion euros Holdings Ltd., China Indigo possible sale price Oceanwide Holdings Group Co. and Fosun International Ltd. all expressing interest in Indigo, according to people familiar with the matter.

One upside of investing in parking lots is that, with city populations expanding and urban work forces rising, demand often outstrips supply. Operators can put up prices. Yields also tend to be somewhat recession-proof.

Infra Park SAS, the holding company for Indigo, posted an 8.2 per cent increase in revenue last year to 860.1 million euros, with all regions outside of France growing.

Group Ebitda came in at 305.4 million euro in 2016, a jump of 8.7 per cent: But a parking lot isn’t the same as a utility that can count on many decades of electricity demand, generating steady income flows akin to what investors in some of Li’s companies expect. Apps such as Uber mean fewer people are driving to work, and the advent of new technologies is challenging the parking industry also. In every city, there are hundreds of unused spaces in private or council car parks, and even homes, that aren’t generating any revenue, and could.

An Airbnb Inc.-type business model has the capacity to seriously disrupt the status quo. Self-driving cars would probably make parking in town for the day redundant also.

And if much of an investment’s power is liquidity, then car parks don’t fare well, changing hands a lot less frequently than commercial buildings, for instance.

Governments can also be a major killjoy.

Unlike power distributors, which get multiyear contracts from regulators that help to guarantee returns, car parks’ popularity can turn on a dime. Levies imposed by regional or city authorities wary of traffic will only increase in the Western markets where Indigo and Q-Park play, while town planners can make a business district unattractive with the stroke of a pen.

With scant opportunities on the horizon, Asian investors’ interest in car parks is understandable, but ill-advised. Bloomberg Gadfly

4

Boycott America?

The catastrophic outcome of last November’s United States presidential election is now clear.

President Donald Trump’s indifference to the risk of climate change, and the actions he is taking because of that indifference, are likely to have consequences that dwarf the significance of his executive order on immigration, his nomination of an archconservative to the Supreme Court, and, should he manage to achieve it, his repeal of the Affordable Care Act (“Obamacare”).

With the exception of launching a nuclear war, it is hard to think of anything a U.S. president could do that is liable to harm more people than last month’s order cancelling rules issued under former President Barack Obama to freeze the construction of new coal-fired power plants and shut down many old ones. Trump’s order followed his pledge to rescind stricter fuel-efficiency standards for cars and trucks, and his announcement that he wants to slash spending on climate science.

Although Trump did not announce the withdrawal of the U.S. from the Paris climate agreement, his actions are likely to prove incompatible with the U.S. government’s pledge to reduce greenhousegas emissions to 26 per cent below 2005 levels by 2025. The Paris agreement, signed by 195 countries, is our last real chance of keeping global warming to less than 2ºC above pre-industrial levels. Even 2ºC is too much for the inhabitants of low-lying island states. Many of these states were pleading for a 1.5ºC limit – without which some will disappear beneath the ocean.

Any increase in global temperature greater than 2ºC, scientists agree, risks triggering feedback loops that cause much greater warming and could render large parts of the planet uninhabitable. For example, further warming would release large quantities of methane – a more potent greenhouse gas than carbon dioxide – from thawing Siberian permafrost, leading to more warming, more thawing, and more methane in the atmosphere. Similarly, warming causes the loss of arctic ice, which means that less of the sun’s heat is reflected back rather than being absorbed by the ocean.

During the election campaign, Trump described climate change as a “hoax” perpetrated by the Chinese to destroy American industry. Last month, Scott Pruitt, Trump’s appointee to head the Environmental Protection Agency, said that he did not believe that CO2 is the primary contributor to climate change. He added that “we do not know that yet,” and “we need to continue the review and analysis.”

The American Meteorological Society promptly wrote to Pruitt saying that it is “indisputable” that CO2 and other greenhouse gases are the primary cause of global warming, and that it is “not familiar with any scientific institution with relevant subject matter expertise that has reached a different conclusion.”

That is true. What many commentators failed to notice, however, is that even if, contrary to all the evidence, we were to accept Pruitt’s statement that “we do not know” whether CO2 is the primary contributor to climate change, the Trump

“

Peter Singer Professor of Bioethics at Princeton University and Laureate Professor at the University of Melbourne

administration’s actions would still be reckless.

Unless the probability that CO2 is the primary contributor to climate change is vanishingly small, it is wrong to take chances with the future of our planet and the lives of hundreds of millions of people in order to reduce energy costs for Americans and preserve a few thousand jobs in the coal industry. (In fact, coal jobs are disappearing because of automation and competition from cheaper natural gas, not because of regulations to reduce CO2 emissions.)

Perhaps, though, Trump does not see his policy as reckless because, as he has repeatedly proclaimed, he puts “America first.” And it is indeed America between now and the next election that he puts first, at the expense of Americans’ longer-term interests and the interests of everyone who is not American. In the short term, those who will suffer most from climate change are not Americans, but people living in tropical latitudes, and especially the poor, who will have nowhere to go when rains fail or the heat parches their crops. When sea levels rise, those island-state inhabitants, living just a meter or two above sea level, will be the first to be driven off their land, followed by tens of millions of people farming small plots in fertile delta regions in Bangladesh, Southeast Asia, and Egypt.

The Paris climate agreement has no mechanism for sanctioning countries that fail to fulfil their pledges. The idea is that such countries will be “named and shamed.” Well before Trump was elected president, however, when the notorious video in which he boasted of groping women became public, it was obvious that he is immune to shame. What, then, can other countries, and individuals, whether in the U.S. or beyond its borders, do about the fact that Trump is jeopardizing the future of us all, for many generations to come?

If the U.S. uses the cheapest available fuels to produce energy, irrespective of the harm that burning those fuels does to others, it is giving its companies an unfair advantage over those elsewhere that are making a good-faith effort to reduce their greenhouse-gas emissions and meet their Paris pledges. That should be enough for the World Trade Organization (WTO) to allow other countries to erect trade barriers against U.S. goods. If, however, the WTO is not brave enough to take that step, the remedy is in the hands of foreign consumers, who should show the Trump administration what they think of its policies by choosing not to buy American.

A boycott is a blunt instrument that would, regrettably, harm many U.S. workers who did not vote for Trump and are in no way responsible for his policies. But with so much at stake, and such limited means of changing Trump’s policies, what else is there to do? Project Syndicate

If the U.S. uses the cheapest available fuels to produce energy, ... , it is giving its companies an unfair advantage

”

16 Business Daily Monday, April 10 2017

Closing Results

Mainland’s leading hotel group says profits more than doubled

up from 73.34 per cent in 2015, it said in a statement to the Shanghai Stock Exchange.

China’s leading hotel group BTG Hotels BTG Hotels attributed its substantial said yesterday that its net profits growth last year to the expanded climbed 110.66 per cent year on year to RMB210.94 million (US$30.57 million) in operation scale resulting from a merger with Homeinns Hotel, which contributed 2016.

The Beijing-based hotel group registered RMB5.22 billion in operating revenue.

The company took over its domestic 389.4 per cent increase in operating rival Homeinns Hotel for RMB11 billion revenue to RMB6.52 billion last year. and the deal was completed in April The group’s operating revenue from its 2016. By the end of last year, the group hotel business totalled RMB6.15 billion, accounting for 94.3 per cent of the total, had more than 3,400 hotels. Xinhua

Investors

More annual shareholder meetings go virtual in U.S. Virtual meetings became possible following changes in law in a number of U.S. states Luc Olinga

B

ig U.S. corporations have identified a new strategy for managing irate investors at annual shareholder meetings: Going virtual.

This year, about 250 companies are expected to convene their yearly investor tete-a-tete via audio or video, up from 155 in 2016 and just 26 in 2012, according to investors communications firm Broadridge.

The set of companies forgoing the face-to-face encounters includes number-two U.S. automaker Ford and energy giants ConocoPhillips and Duke Energy.

“We take very seriously the trust that our shareholders place in our leadership team,” said Bill Ford, Ford’s executive chairman. “The virtual nature of this year’s meeting will enable us to increase shareholder accessibility, while improving efficiency and reducing costs.”

Duke Energy also defended the practice, saying the format would permit chief executive Lynn Good “to answer more shareholder questions, either during the meeting or afterward through a web posting,” according to a press release.

But not everyone is persuaded of the nobility of intent.

“What’s really going on is that corporations are trying to hide -- from shareholders, from protesters, from anyone trying to hold them accountable,” said Marni Halasa, founder of protest consulting firm Revolution is Sexy, who has previously criticized

large banks.

Duke shareholder Danielle Fugere of the non-governmental organization “As You Sow” added: “We do not believe it is in the company’s interest to insulate itself from the interested public.”

The group has proposed a shareholder resolution to require the company to report on the public health impacts of its use of coal.

Avenue for individual investors

New York City Comptroller Scott Stringer, who oversees investments under the city’s US$170 billion public pension system, has declared war on virtual meetings, sending a letter to almost 20 companies demanding they go the traditional way.

“It’s one of the great markers of American enterprise — whether you

own one share or a one million, you can speak at a company’s annual meeting,” Stringer said.

“Except now, in this interconnected world, companies are using technological tools to whittle away at investors’ rights and hide from accountability.”

But the companies rebut this point, with Ford saying “any pertinent questions that cannot be answered during the meeting, due to time constraints, will be answered and posted online.”

Virtual meetings became possible following changes in law in a number of U.S. states, including Delaware, where many companies are based.

The annual events are not usually a major occasion for the biggest shareholders, who are typically in an on-going dialogue with corporations.

But the annual meeting has traditionally offered a unique forum to the individual investor who lack the clout of large institutional investors.

By going virtual, big companies can avoid sometimes pointed criticism over shareholder pay, their environmental performance or any number of controversial matters.

Calpers, which oversees pension and health benefits for some 1.6 billion people in the state of California, joined smaller shareholders in decrying the trend.

“We do not believe it is in the company’s interest to insulate itself from the interested public” Duke shareholder Danielle Fugere of the non-governmental organization “As You Sow” Calpers backs physical meeting that are accessible remote investors via technology. Some companies, like Microsoft, have employed this hybrid style.

“Companies should hold shareowner meetings by remote communication (so-called ‘virtual’ meetings) only as a supplement to traditional in-person shareowner meetings, not as a substitute,” Calpers said, adding that the technology “should facilitate the opportunity for remote attendees to participate in the meeting to the same degree as in-person attendees.” AFP

Public-private

Graft

New Third Board

Commerce Secretary Ross’s former firm investing in Chinese steel

Beijing says insurance regulator head probed

Chinese SMEs report rising profits for 2016

Wilbur Ross’s former investment company is making a big bet on China’s steel industry, even as the billionaire works to finish severing ties to the firm and his Commerce Department challenges alleged dumping of Chinese steel.

WL Ross & Co., founded by Ross and later acquired

by Invesco Ltd., said Saturday that it will help lead a joint venture to acquire steel assets in China.

Along with China Baowu Steel Group and a few other firms, WL Ross is setting up an investment vehicle -- Four Rivers Investment Management Co. -- to find under-performing assets with plans to invest between US$5.8 billion and US$11.6 billion from its Shanghai headquarters.

The announcement came the day after a summit between President Donald Trump and his Chinese counterpart Xi Jinping. After the talks, Ross said the countries agreed to a “100-day plan” to discuss trade.

It’s unclear to what extent Ross -- just 40 days into his job running Trump’s Commerce Department -- was briefed on the negotiations for the Four Rivers arrangement before he left his firm, but he “had nothing to do with this” effort, said Jeaneen Terrio, a spokeswoman for WL Ross. Bloomberg News

The head of China’s insurance regulator is under investigation for suspected disciplinary violations, the ruling Communist Party’s anti-corruption watchdog said yesterday, using phrasing that usually refers to graft.

In a brief statement, the Central Commission for Discipline Inspection said Xiang Junbo, head of the China Insurance Regulatory Commission, was suspected of “serious disciplinary violations”.

The regulator has stepped up a crackdown on risky activities by some aggressive players in the insurance sector, particularly those seen to be engaging in financial market speculation using expensive short-term funds.

Xiang, who is also a member of the central bank’s monetary policy committee, took control of the insurance regulator in 2011 after serving as chairman of Agricultural Bank of China, one of the big four state banks.

Chinese President Xi Jinping is leading a campaign against official corruption that is tearing down once-untouchable party, military and business leaders and rolling up their powerful networks of relatives and allies. Reuters

China’s small and medium-sized enterprises (SMEs) reported growing net profits for 2016, despite slowing growth in the world’s second largest economy.

Average net profits of 1,598 SMEs listed on the National Equities Exchange and Quotations (NEEQ) system reached RMB21.05 million (US$3.05 million) last year, up 26.29 per cent year-on-year.

The SMEs, which delivered their annual reports at the end of March, posted an average annual business revenue of RMB212 million in 2016, an increase of 25 per cent, according to NEEQ. Total assets of each company averaged RMB464 million at the end of 2016, expanding 23.9 per cent year-on-year.

SMEs ramped up their spending on research and development, which climbed 8.25 per cent year-on-year in 2016 to RMB11.58 billion, with strategic emerging industries investing a total RMB4.03 billion, surging 58.59 per cent year-on-year.

NEEQ, also known as the “New Third Board,” was launched in Beijing in late 2012 to supplement the main Shanghai and Shenzhen bourses. It is seen as an easy financing channel for small businesses with low costs and simple listing procedures.

By the end of 2016, NEEQ listed 10,163 companies. Xinhua