Business Daily #1280 April 21, 2017 by Business Daily

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

Followed by breakfast from 8:30am

Let the gurus guide you this weekend through technology, culture and food offerings Consigliere Pages 10 & 11

Friday, April 21 2017 Year VI Nr. 1280 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Trade

China’s imports fuel trade figures in Japan Page 13

M&A

Jack Lam sells control of Jimei Page 6

Regional competition

www.macaubusinessdaily.com

Analyst plays down Japan’s casino risk to Macau Page 6

Inauguration festivities

Sheldon Adelson top contributor to Trump victory celebrations Page 14

Academic anguish Education

The territory’s students are facing tough times. The latest PISA report on education reveals our younger generations are disenchanted. With some reporting the poorest satisfaction levels in the world. An alarming situation mirrored by Hong Kong. Page 2

VIP, VIP, hooray

Gaming forecast Ratings agency Fitch anticipates a 12 pct increase in gaming revenue for the year. The company cites VIP influence on the results distorting the real picture. Page 7

Complaints about PSP increase

Security forces The local security forces watchdog is the bearer of bad news. Receiving a total of 70 complaints regarding the security departments last year. Abuse of power and misconduct figure prominently in the annual report. Most offences involved officers from the Public Security Police Force. Page 2

Keeping fit’s the biz

Gyms and workout facilities are a key component of modern cities. Giving the sedentary a new lease of life. An awkward business environment, however, needs to be urgently addressed on a number of levels.

Yuan under control

Special Report Pages 4 & 5

HK Hang Seng Index April 20, 2017

24,056.98 +231.10 (+0.97%) Worst Performers

Geely Automobile Holdings

+3.19%

Bank of East Asia Ltd/The

+1.79%

Kunlun Energy Co Ltd

-0.55%

China Resources Land Ltd

-0.23%

Tencent Holdings Ltd

+2.78%

AIA Group Ltd

+1.75%

Cathay Pacific Airways Ltd

-0.55%

China Overseas Land &

-0.22%

China Unicom Hong Kong

+2.57%

China Life Insurance Co Ltd

+1.56%

CNOOC Ltd

-0.44%

Galaxy Entertainment Group

-0.12%

AAC Technologies Holdings

+1.99%

Sino Land Co Ltd

+1.39%

BOC Hong Kong Holdings

-0.32%

Cheung Kong Infrastructure

-0.08%

Wharf Holdings Ltd/The

+1.90%

Want Want China Holdings

+1.29%

Hang Lung Properties Ltd

-0.30%

Belle International Holdings

+0.00%

18° 27° 19° 23° 21° 22° 23° 24° 24° 26° Today

Source: Bloomberg

Best Performers

Sat

Sun

I SSN 2226-8294

Mon

TUE

Source: AccuWeather

Outflows Mainland authorities say capital outflow risks eased sharply in Q1. Relieving pressure on the currency this year. With stronger reserves an important part of the more stable situation. Page 12

2 Business Daily Friday, April 21 2017

Macau Security forces

Residents’ complaints about PSP more than doubled in 2016

he Security Forces Disciplinary Committee (CFD) received a total of 70 complaints about the city’s security departments in 2016 for abuse of power and misconduct, the department’s annual report indicated. Despite having received in total three fewer complaints than the previous year, the CFD noted that the majority of the received complaints (64) concerned officers from the Public Security Police Force (PSP), with six complaints about the Judiciary Police (PJ). The CFD noted that the number of

complaints regarding the PSP had increased considerably in 2016 - by 63 per cent yearly - signalling a rise in ‘improper execution procedures, poor attitude, slowness in law enforcement procedures, denial of justice, misconduct, abuse of police power and misuse of force.’ Most of the complaints were filed by residents, with two filed by the Commission Against Corruption (CCAC). Since the CFD does not possess. disciplinary powers, it has issued ten recommendations to police authorities, advising officers to be ‘more careful handling evidence’ since residents ‘frequently complain of

negligence.’ The department suggested the creation of ‘specialised proximity teams’ serving primarily as a ‘first line of intervention’ for ‘domestic violence cases’ while recommending that a ‘call centre’ be created for ‘clarifying doubts on immigration issues.’ Business Daily questioned the PSP and the Office of the Secretary for Security (GSS) on the reasons for the increase in complaints and what measures would be taken to improve the performance of police authorities but no response had been received by the time this newspaper had gone to print. N.M.

Education

Sad students PISA 2015, the latest report on education policy and practice released by OECD, details data on the struggles of Macau students Sheyla Zandonai sheyla.zandonai@macaubusiness.com

Macau and Hong Kong students showed the lowest level of life satisfaction in all regions or countries and economies participating in the PISA 2015, a report monitoring trends in students’ acquisition of knowledge and skills across countries produced by the Organization for Economic Co-operation and Development (OECD). PISA 2015 features data on 72 countries and economies, including all 35 OECD countries and 37 partner countries and economies, which

include Macau. Its target population is 15-year old students enrolled in grade 7 or above. On a scale from 0 to 10, where 0 denotes the worst possible life and 10 denotes the best, the average Macau respondent rated 6.6, while Hong Kong rated 6.5. The highest level of life satisfaction was found in the Dominican Republic (8.5). Within OECD countries only, the highest life satisfaction level was in Mexico (8.27) and the lowest in Turkey (6.12). On average across OECD countries, students reported a level of 7.3 on a life-satisfaction scale

The OECD report noted that ‘fewer than one in five students in the Asian countries or economies of Hong Kong, Korea, and Macao reported similar levels of life satisfaction.’

Education and social life

The percentage of students in Macau who agreed or strongly agreed that they feel ‘very anxious even if they are well prepared for a test’ was 65.6 per cent, while the percentage of students who agreed or strongly agreed that they get ‘very tense when they

study’ was 58.5 per cent – similar to Hong Kong at 67.1 per cent and 52.7 per cent, respectively. The report further suggested that ‘anxiety about schoolwork, homework and tests is negatively related to performance in science, mathematics and reading.’ In correlation with levels of anxiety, students in Macau also showed one of the highest exposures to bullying, at 14.4 per cent – with 15.4 per cent in Hong Kong. The highest percentage was reported in Qatar (19.1 per cent), followed by

New Zealand (18.3 per cent) and the United Arab Emirates (17.8 per cent).

Motivation and higher education expectations

Regarding students’ desire ‘to be one of the best students’ in their class, while only 48.6 per cent of Macau respondents agreed or strongly agreed with that, 75.4 per cent of respondents in Hong Kong said the same. In all countries and economies that participated in PISA 2015, the highest percentage of students with a desire to perform best was Tunisia (93.1 per cent), followed by Colombia 91.6 (per cent). Only 46.6 per cent of the students in Macau said they expect to complete a university degree. The highest percentage was in Croatia (77.8 per cent), followed by Qatar (76.5 per cent). The lowest expectation was found in Russia (16.9 per cent) followed by The Netherlands (17.4 per cent).

IPIM

Sino-luso Forum opening doors The Economic & Trade Co-operation and Human Resources Portal between China and Portuguese-speaking Countries (the Portal) has recorded 300,000 accesses since its inception nearly two years ago, the Macao Trade

and Investment Promotion Institute (IPIM) announced yesterday. According to IPIM, the Portal currently gathers information on more than 10,000 kinds of food products originating from

Portuguese-speaking countries, and has attracted over 14,000 subscribers. The Portal was launched on April 1, 2015, following up on the eight measures announced by the Central Government during the 4th Ministerial Conference of the Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries (Forum Macau) in 2013, a white

paper by IPIM reads. In addition to the online platform, the Portal was recently launched in a version for mobile phones. Co-ordinated by IPIM, the Portal is sponsored by the Ministry of Commerce of the People’s Republic of China and the Office of the Secretary for the Economy and Finance of the Macau SAR. S.Z.

Investment

China Huarong reaches out to the Road - and profits Sheyla Zandonai sheyla.zandonai@macaubusiness.com

China Huarong Asset Management Co., Ltd., a Mainland-based company that set up its first financial asset management in Macau last December, saw a 26.3 per cent yearon-year increase in its total income for the year, hitting RMB95.2 billion (US$13.82 billion/MOP110.72 billion), according to the group’s filing with the Hong Kong Stock Exchange. The increase was ‘mainly due’ to a combination of factors, it says, including income from distressed debt assets classified as receivables, investment and interest income, that from commissions and fees as well as fair value changes on financial assets and gains on disposal of associates. The group’s local operations were not included in the filing given its recent establishment.

Net profit attributable to the equity holders of the company also increased by 35 per cent to RMB19.6 billion for the 2016 year. Huarong further noted that its operating results ‘reached a record

high’ during the year, with total assets amounting to RMB1.41 trillion, a 62.9 per cent hike year-on-year. In line with its goal to develop and ‘valid business interconnections’ between institutions of Huarong serving

Greater China – in Hong Kong, Macau and Taiwan – as part of the Belt and Road strategy, the company established several subsidiaries in 2016, including China Huarong (Macao) International Holdings Limited. ‘China Huarong actively kept in line with the national development strategy, enhanced the collaborative relationship with local governments and state-owned enterprises and integrated industry and finance through the establishment of multiple integrated financial services platforms,’ notes the filing. Currently, China Huarong has 31 branches across 30 provinces, autonomous regions, and municipalities in China as well as in Hong Kong and the MSAR. Some of the principal activities of the group include acquiring and entrusting to manage, invest and dispose of both financial and non-financial institution distressed assets, bankruptcy management, and investment and securities dealing.

Business Daily Friday, April 21 2017 3

Macau

4 Business Daily Friday, April 21 2017

Macau Fitness

Getting a kick out of keeping fit The rising phenomenon of maintaining good health in the city has led to the growth of many different forms of fitness centre. The industry sees positive prospects for the fitness business in Macau but also questions the government’s complex policies relating to the granting of licences for fitness-related businesses Cecilia U cecilia.u@macaubusinessdaily.com

“

feel like the market in Macau, at the moment, is still only targeting the group that already have the habit of working out, and so it seems like we’re still fighting for [a slice of the] cake, not expanding the group,” says Josephine Kuan, founder of JK Fitbox, a fitness studio which provides fitness classes as well as customised personal training. Although more fitness centres are surfacing in Macau and the sector appears to be more visible, the fitness industry in the city does not appear to be trying to expand the user base. Ms. Kuan referred to a report showing that 17 per cent of the population of the United States has the habit of exercising, while 0.4 per cent in Mainland China do so, with no specific data for Macau. “I feel like the packaging of exercise is not doing its best [in Macau],” said Ms. Kuan, adding that the majority in Macau think that going to the gym is for bodybuilding. She also said that the market would expand so much more if ‘fitness’ was packaged in the right way. A similar notion is held by Kidonis

Ng, co-owner of the Mini Education Centre, a provider of fitness classes and training for both adults and children. “The culture of fitness in Macau is not strong enough,” commented Mr. Ng. “Many think working out is body building but it is not. It is more about maintaining our health.” Mr. Ng also perceives that the market is currently still developing, noting that many are still not completely sure what fitness really is. Although the majority of people in the city are not attracted to fitness centres due to their limited notion of fitness, the fitness industry still sees potential in the market. Lee Kin Kip, the Managing Director of Top Fighting, does see the potential of the fitness business in the city. “More and more people in Macau care about their health,” said Mr. Lee. “Macau has limited entertainment and working out can be a way to release stress and make people feel better.”

Competition not a problem

Specialising in Muay Thai and providing fitness courses as well as gym equipment, Mr. Lee is confident about Top Fighting professionalism, perceiving that growing competition

would not pose a negative impact on its business performance. “I know that more new fitness centres are gradually opening in the city but for us we are not worried because even if they can provide fitness training services they won’t be able to be as professional as we are in Muay Thai. We have professionals in this field,” commented Mr. Lee. Located in Taipa and currently the only fitness studio in the district, according to Ms. Kuan, JK Fitbox has not been affected by the growing competition within the industry, she maintains. “We don’t have severe competition for the one we have in Taipa. As far as I know, many gyms and fitness centres are mostly situated in Fai Zhi Kei and Areia Preta - there is only us in Taipa,” the owner of JK Fitness said. She noted that JK Fitbox targets a different group of customers, adding that she would not be worried about members switching to another fitness centre which opened in another region since most of them live in Taipa. But the studio founder did admit that their provision of three hours of free parking is a major advantage for her studio. Instead of wishing fewer fitness centres operated in the city, Mr. Ng, meanwhile, believes that the number of fitness centres in the city should the same as convenience stores such as 7-11, saying that competition is not a significant problem when fitness centres are opened in different areas or districts. With regard to what they provide, the Mini Education Centre provides functional training courses, which vary from the usual gym rooms in the city with treadmills and other equipment. “We don’t have much equipment […] As far as I know there are only a few [fitness centres] providing this [functional] training, [which] is more about training the body parts you use every day.”

“I feel like the market in Macau, at the moment, is still only targeting the group that already has the habit of working out, and so it seems like we’re still fighting for [a slice of the] cake, not expanding the group” Josephine Kuan, founder of JK Fitbox

“I mean, the Summer activities offered by the government are supported and managed by both the education and sports bureaus. Why would the Sports Bureau not support us?”

On the other hand, like many owners who operate fitness businesses, Mr. Lee’s passion for Muay Thai has led to his involvement in establishing Top Fighting. In the beginning, many of Mr. Lee’s friends did not see the potential of the business and people during that time would not accept paying for membership of a boxing hall. But people started accepting this once the brand and image had coalesced, the Muay Thai fighter said. For Ms. Kuan, her main motivation in opening her own fitness studio was to create an exclusive space and environment for women to exercise comfortably. “As everyone knows, there are usually more guys working out at the power training section area [in a gym]. When I was there, I didn’t feel comfortable about the gazing around,” she said. “I also think that although they [men working out at the gym] took the initiative to assist me, I think in terms of messages I can filter that and I don’t believe [in] what they taught me.” As such, she wanted to allow ladies to have a secure and comfortable environment, together with a base of scientific understanding of exercises and work-out by creating her own fitness station.

Kidonis Ng, co-owner of the Mini Education Centre

Employment of personal trainers and instructors

Intentions

Kidonis Ng, co-owner of Mini Education Center

courses to the general public for their business revenue. He also explained that the training for professional athletes is still developing in the city. “In the past, the Macau Government had not developed in this area [physical training for professional athletes],” noted Mr. Ng. “Before there were no professional athletes but we have now, and professional athlete training has just started developing.” Apart from developing their sports business, Mr. Ng said they would also like to attract the population which does not exercise on a regular basis to exercise more often in order to strengthen the health of the entire population.

Mr. Ng and his partner always wanted to specifically provide training courses to professional athletes when they first decided to open Mini Education Centre. “Professional athletes also need professional physical trainers and it would be stricter […] because most fitness centres only teach people body building,” claimed Mr. Ng. But the business of training athletes, which is considered private training, is difficult to expand. As such, Mr. Ng and his partner have to provide fitness classes and

Like many other industries, hiring fitness trainers and instructors, in particular full-time trainers, is the major difficulty that the majority of fitness centres suffer. Ms. Kuan indicated that the small market in Macau has led to the low supply of qualified trainers. “Trainers who have a licence would not consider working as a full-time trainer because of instability - plus people in Macau would rather choose to work in casinos,” remarked Ms. Kuan. In addition, JK Fitbox had a hard time hiring qualified trainers. As such, the majority of the trainers who currently work in JK Fitbox are part-timers.

Business Daily Friday, April 21 2017 5

Macau obtained its licence from the ID. “We initially started as an athletic association,” said Mr. Lee. “It is a difficult thing to achieve to open an officially approved fitness centre - like you need to take care of fire safety, the venue, and equipment.” He added that the government wants to open fitness centres in street stores or within commercial buildings, but said the cost is comparatively higher. The law states that fitness centres which operate in residential buildings can only be opened from 6:00am to 12:00am. Moreover, it is mandated that fitness centres located within residential buildings be located underground or in street stores. Meanwhile, fitness centres operating in industrial buildings are required to be located on the podium of the building with individual entrances and exits. Top Fighting is being registered as a private club, with the regulations prohibiting it from pocketing its profits. “We use our income to [host] boxing matches or competitions […] we can only use the money for paying employees or promoting sports development in the city.”

Other difficulties

Josephine Kuan, founder of JK Fitbox

Mr. Lee holds a similar opinion about the more favourable remuneration from casinos which has led to the shortage of fitness trainers. “If we offer higher [remuneration] our costs increase but then if we offer lower prices people would rather work in casinos,” echoed Mr. Lee. “For us, we would like to attract those who are really into sports, fitness or Muay Thai to ensure that they are interested in working at our place.” Although Top Fighting currently has the majority of full-time instructors, Mr. Lee said they would hire part-timers to help out when there is a shortage of full-time trainers. In terms of Muay Thai, Mr. Lee opined that it is not necessary for Muay Thai instructors to obtain qualifications, saying that it is easy to recognise if one is capable or not. Mr. Ng basically finds it difficult to hire trainers who are suitable for his centre. “Our trainers all acquired qualifications outside [of Macau], taking courses mostly in Taiwan,” revealed Mr. Ng. There are currently no regulations in the city requiring fitness trainers and instructors to have qualifications.

Licence for fitness centres

Mini Education Centre obtained its licence from the Education and Youth Affairs Bureau (DSEJ) and, as mentioned earlier, primarily offer fitness classes and courses. “In Macau, all institutions giving classes and courses need [the education] licence,” Mr. Ng said. “We are mainly teaching people and many other gyms only give out membership for using their facilities; so, we would have this support this July [Continuing Education Develop Plan].” The plan assists local citizens aged 15 or over to participate in local or overseas educational programmes by disbursing MOP6,000 (US$749) per person. In terms of obtaining a licence, the law requires fitness centres acquire a notice issued by the Sports Bureau (ID) in order to be approved for the establishment of a fitness centre. However, studios which provide fitness courses would be considered as private education centres and are obliged to acquire a licence from

DSEJ, while the ID has no authority to approve such application. Given the nature of fitness studios, the ID would provide consultations or opinions regarding licence applications made by fitness studios as well as extending support if requested by DSEJ. Mr. Ng, however, criticised the inflexibility of the law relating to the operation of fitness centres. “If you got a licence for education then you can only do stuff related to teaching, like we can’t sell drinks or any other stuff,” said Ms. Ng. “My opinion is that the government’s policy has limited many SMEs […] Macau has very limited space. Normally, fitness centres provide private trainers but they might violate the law because opening courses require an educational licence.”

JK Fitbox has realised its constraints in offering only training courses, thus another bigger studio will open in Avenida do Ouvidor Arriaga, providing equipment such as cardio machines as well as supporting facilities. “We’ve been running the one in Taipa for half a year and we discovered that there is a shortcoming in terms of marketing by not having cardio machines; without them it is hard to sell a membership,” remarked the owner. She pointed out that the exclusiveness of personal and group training as well as its instability confines its business expansion, adding that “membership is necessary for marketing.” “Sometimes we have a quiet period like cases when students are not feeling well and so can’t make it for a couple of classes; as such, our centre is heavily dependent upon these unpredictable factors.”

Meanwhile, Mini Education Centre has its greatest competitor, the MSAR Government. “The government might offer MOP50 for a month of yoga class and we can only offer [them at] MOP500,” said Mr. Ng, pointing out that the quality of classes offered by the government would not be guaranteed. Mr. Ng, moreover, criticised the government’s incapability of supporting the development of business in the city. “The government give out money, but they might not if they think the business is not rewarding,” commented Mr. Ng. “The government wants us to cater t6 20, 30 or maybe even 50 students in one class, but then the quality of these classes would not be guaranteed.” Mr. Ng was also confused about the lack of support from the Sports Bureau, with Mini Education Centre mainly providing fitness courses. “I mean, the Summer activities offered by the government are supported and managed by both the education and sports bureaus. Why would the Sports Bureau not support us?”

Positive outlook

Although challenges appear, Ms. Kuan is confident about the future of her fitness business, revealing that JK Fitbox has been collaborating with other healthy brands in the city. “I spent a lot of time co-operating with other brands like Juice Ga Macau Red Bull,” disclosed the owner. “With much collaboration with different brands, there are noises created and so I believe the business will get more interesting.” Regarding the overall picture, Ms. Kuan perceives that exercising will become an essential part of people’s lives if the industry keeps improving its marketing and provides good experiences for clients. Mr. Ng also has a positive outlook of the industry, although he cannot tell how long it will take to alter the general opinions about fitness. The MD of Top Fighting also expressed confidence, claiming that its developed reputation would meet the increasing demand to learn Mauy Thai or keep fit.

“More and more people in Macau care about their health” Lee Kin Kip, managing director of Top Fighting In response to Business Daily’s enquiries, DSEJ confirmed that licensed education centres are prohibited from performing non-teaching activities. JK Fitbox, which is commercially operating within a residential building, has acquired a licence approved by three different bureaus – the Fire Service Bureau, Health Bureau and DSEJ. “Our studio is commercially operating, so we need to provide the venue plan to the Fire Services Bureau, Health Bureau and Education and Youth Affairs Bureau,” explained Ms. Kuan. DSEJ explained that an inspection committee would be formed comprising staff from the Land, Public Works and Transport Bureau (DSSOPT), Fire Service Bureau, Health Bureau and DSEJ to examine the fitness venue in question regarding safety considerations. Meanwhile, Top Fighting, located within an industrial building,

Lee Kin Kip, managing director of Top Fighting

6 Business Daily Friday, April 21 2017

Macau Opinion

Pedro Cortés*

Samba opportunities These days the Brazilian financial capital of São Paulo is a place where most homes and apartments have a ‘For Sale’ sign hanging outdoors. After the 2014 football World Cup and the 2016 Olympic Games in Rio, we see today the biggest trading partner of our People’s Republic of China immersed in a crisis which may be an opportunity for Macau entrepreneurs. We all know that Macau as a platform between the PRC and the Portuguesespeaking countries has only included the South American giant on paper; in reality, the participation of Brazil has been hesitant. The trade agreements are made directly in Beijing or São Paulo, with Macau, ostensibly the platform chosen by the PRC for the Lusosphere effectively sidelined. It is now time to reset this trend and view the crisis as an opportunity to expand the manifesto of the PRC for Macau. In which areas? Well, the first of them are the traditional areas of real estate and tourism. But, more than that; like Japan - despite delay in the process Brazil is considering opening casinos with integrated resorts. It is seen as a way to overcome the downturn in the economy and give another boost to the tourism industry, which is one of the strongest of this huge continent. Some of the operators, including a few that have investments in Macau, are already considering this huge prospect. It makes a lot of sense that the operators that are in the biggest gaming destination in the world be present in a potentially overwhelming market, which has more than 206 million population and welcomed 6.6 million foreign visitors in the Olympic year. The experience our gaming operators have in Macau and the fact that we have a common language makes this country a natural destination for the investment of our companies. More than that, Brazil. And in particular its financial capital, is a mix of cultures, races and religions. A true Babylon of the world, which, if the corruption problems were different could be even a bigger power in the current world economies. Macau companies and entrepreneurs should think big and follow the trend of the motherland. Putting Macau on the map of Brazilian foreign investments could also be a great opportunity for both sides. A decisive landmark may be happening and the wish is that the platform can be a reality. *lawyer and frequent contributor to this newspaper.

Casinos risks

Visa restrictions harming more than Japan’s casinos Gaming expert believes China’s visa polices will help balance any possible impact upon local gaming market caused by Japanese gaming development Nelson Moura nelson.moura@macaubusinessdaily.com

he future gaming market in Japan won’t have a considerable impact upon Macau’s gaming revenues since policies created by the Chinese central government have already reduced the local gaming market substantially, the Asia Editor for Gambling Compliance, Martin Williams, stated in an interview on Nevada Public Radio (KNPR) ‘I’m sceptical [Japan gaming development] would be a great issue for Macau (…) The amount of money one or a dozen Japanese integrated resorts can take away from Macau is dwarfed by the amount of money the Macau market loses in terms of Chinese Government policies in terms of restrictive measures for visas,’ Mr. Williams said.

According to the gaming analyst, gross gaming revenues in Macau have fallen from a record high of US$42 billion (MOP336.35 billion) in 2013 to US$28 billion in 2016 not because of “falling demand” but due to the “substantial and dramatic” effect of Chinese President Xi Jinping anti-corruption campaign. For the gaming expert the control of the Chinese Government has over “visas and permits” for visitation is the most important factor for the gaming market in the MSAR, thus if the “new Japan gaming market started taking bit of Macau’s revenues, the Chinese Government would just have to open up the tap of visitors to the city a little bit.”

Chinese disadvantage

When questioned about which companies were best positioned to first obtain gaming licences, Williams

plumped for American gaming operators Las Vegas Sands Corp., Wynn Resorts Ltd. and MGM Resorts International, plus local operator Melco Resorts and Entertainment as they were “very aggressive in their courting of the Japanese market,” adding he would be surprised if they were not the recipients of the first “two or three gaming licences expected to be handed out in 2018 or 2019.” The gaming expert also confirmed industry sources believe “ethnical Chinese gaming companies from Malaysia, Singapore or Macau” could face a disadvantage in entering a future Japanese market due to the animosity and “sensitive relationship” between the countries’ governments and residents, giving an advantage to American or Filipino gaming operators. However, he believes that the integrated resorts draft bill being prepared by the Japanese Government will probably require any gaming company to operate in the country with local partners, helping “mitigate any problems Chinese companies might have entering the country.”

Gaming

Jimei control sold Jack Lam, recently cleared of bribery charges in the Philippines, is now stepping away from control of Jimei International Sheyla Zandonai sheyla.zandonai@macaubusiness.com

Casino mogul Jack Lam Yin Lok has sold the control of Jimei International Entertainment Group Ltd. for a total consideration of HK$443.17 million (US$56.99 million/MOP456.46 million) to Cosmic Leader Holdings Limited, according to a filing of the company with the Hong Kong Stock Exchange yesterday. The sale was completed through Reach Luck International Limited, a controlling shareholder of Jimei prior to the completion of the share sale and purchase agreement, which took place on 7 April, 2017. Pursuant to the agreement, Cosmic Leader, a company incorporated in the Republic of Seychelles, has acquired 65.04 per cent of the entire issued capital of Jimei International, corresponding to 369,308,914 shares of the company on the day of completion of the agreement.

Immediately prior to the completion, Cosmic Leader already held 8.79 per cent of the entire issued capital of Jimei. Following the acquisition, the company incorporated in the Seychelles owns nearly 73.83 per cent of the entire issued share capital of Jimei, holding a total of 419,202,914 shares in aggregate. The consideration payable by Cosmic Leader in respect of the share sale will be fully paid to Reach Luck in two batches. The first batch consideration of HK$222 million – roughly 50.09 per cent of the total consideration of the deal – was satisfied by transfer in cash (in Hong Kong dollars) to the account designated by the vendor upon the completion. The second batch consideration of up to HK$221.17 million – being the balance of the consideration – will be satisfied by the offeror on 5 January, 2018. According to the filing, Cosmic

Casino mogul Jack Lam Yin Lok

Leader announced that it intends to maintain the listing of the shares on the Stock Exchange. Cosmic Leader is ultimately beneficially owned as to 80 per cent by Mr. Yan Xu and 20 per cent by Ms. Chen Hong. Mr. Yan Xu, aged 48, is the legal representative and has been an executive director of Chengdu Xuhe Property Development Group since July 2006; he is currently the legal representative and an executive director of Sichuan Xuhe Film Company Limited.

Addiction

Gambling exclusion maintains steady trend The Gaming Inspection and Co-ordination Bureau (DICJ) received 97 applications for casino exclusion in the first quarter of 2017, according to the latest data released by the Bureau on its website. Of the total, 80 applications consisted of ‘self-exclusion’ requests, while the remaining 17 applications constituted ‘third-party exclusion’ requests. For the whole year of 2016, DICJ received 351 applications for casino exclusion, four less applications than for 2015. Total applications received in 2014 amounted to 280. According to Law No. 10/2012, ‘Regulating the Conditions of Entering, Working and Gaming at Casinos,’

applications for exclusion can be filed by an individual (‘self-exclusion’) or by one of his or her family members (‘third-party exclusion’), following

which the Director of DICJ may prohibit the person from entering all or some of the casinos in the city for a maximum period of two years. S.Z.

Business Daily Friday, April 21 2017 7

Macau Projections

Fitch: Gaming revenues up 12 pct in 2017 Ratings agency expects ‘about equal contribution’ of VIP and mass to revenues Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

n the wake of the 16.8 per cent year-on-year increase in VIP gaming revenues seen in the first quarter of the year, reaching MOP35.49 billion (US$3.8 billion), ratings agency Fitch expects gaming revenue in the territory to see a 12 per cent year-on-year increase for the year, as reposted by Reuters. The group points in particular to the growth in the VIP segment as

‘exceeding Fitch’s expectations’ in the first three months of the year, with the uptick ‘possibly attributeable . . . [to] . . . stronger economic indicators on the Mainland’ and ‘players getting acclimated to China’s corruption crackdown initiatives.’ In addition, the group points to ‘China’s authorities’ heightened crackdown on casino marketing by foreign companies’ which it notes as being ‘so far those based outside Macau’ - alluding to the arrest of 18 Crown Resorts staff in the Mainland late last year.

Despite VIP revenues outweighing those of the mass segment in the first quarter, at 55.9 per cent of total revenues, according to data from the Gaming Inspection and Co-ordination Bureau (DICJ), the ratings agency expects ‘about equal contribution from VIP and mass market revenue toward achieving Fitch’s 12 per cent growth forecast.’ The forecast takes into account ‘the possibility that the tightening monetary policy and increased real estate restrictions may slow economic growth on the Mainland.’ ‘There is a good amount of headroom for growth permitting regulatory and other conditions,’ notes the agency, as current gross gaming revenue currently ‘has a level similar to that of 2010.’ However, given the ‘opaque nature’ of VIP, forecasting the MSAR’s gross gaming revenue ‘with a fair amount of certainty is difficult,’ leading the group to ‘remain cautious.’

Mass

The drivers of mass will include ‘healthy consumer spending,’ with the ratings agency predicting 7.5 per cent annual growth in the area for 2017. The prediction comes on the heels of the International Monetary

Fund’s estimate for a 2.0 per cent year-on-year increase in consumer prices, while local Statistics and Census Service (DSEC) data show a 5.45 per cent reduction year-on-year in the Tourist Price Index in the first quarter of the year. Additionally driving tourist spending will be ‘increasing room capacity, which encourages longer average length of stay’ as well as potential from an ‘under-penetrated’ mass market in Asia Pacific in the longer-term. Recently opened casinos’ results are ‘performing largely in line with Fitch’s expectations,’ says the report, noting ‘roughly US$100 million–US$200 million of annualized incremental EBITDA (earnings before interest, taxation, depreciation and amortization)’ for both Wynn Resorts and Las Vegas Sands (parent company of Sands China) – ‘after accounting for cannibalization at the existing properties’. Expectations are for ‘incremental benefits to improve’ for the Cotai properties throughout the year ‘as the market improves’ and as construction from the light rail transport system (LRT) and MGM Cotai construction winding down ease access to Wynn Palace.

Gaming

Blocking casino referendums Members of Taiwan’s ruling party have proposed the removal of the possibility of residents of outlying islands holding gaming referendums, according to website Gambling Insider. Claiming public opinion is generally against gaming, four members of the country’s Democratic Progressive Party (DPP) suggested the removal of an Article on the Offshore Island Development Act allowing Taiwan’s islands to vote for or against gaming development in the territories. According to DPP member

Lin Ching-yi, as cited by the publication, “gaming was not a concept supported either by popular opinion in Taiwan or by trends in the regional industry” and therefore holding referendums on the matter was a “waste of administrative resources.” Although gaming is forbidden in Taiwan, in 2009 its parliament approved an amendment to the Offshore Islands Development Act allowing offshore islands to hold referendums on casino development. Since then, residents of the Taiwanese Matsu Islands

approved gaming development in a referendum in 2012, while residents on the island of Penghu vetoed casino development for the second time in seven years in 2016; residents on Kinsmen will possibly hold a referendum this year. However, even if a referendum approves gaming development, the country’s parliament has yet to approve a Tourism Casino Administration Act that would effectively enforce regulations for the establishment and management of casinos. N.M.

Sale

eSports

Taking the Pac back

Blizzard Entertainment holds first eSports international tournament in Taiwan

James Packer sells share of RatPac Entertainment Less than 18 months after the opening of Studio City saw the likes of Leonardo DiCaprio, Martin Scorcese, Robert De Niro and Brett Ratner grace the stage of the opening ceremony – alongside Melco Chairman and CEO Lawrence Ho Yau Lung and Director of Crown Resorts James Packer (pictured) – the Crown director is selling his stake in RatPac Entertainment. Packer created RatPac with producer-director Brett Ratner in 2013 and the sale represents the latest in a string of disposals by the Australian gaming mogul, including a December sale of its stake in Melco Crown,

prompting the group to propose a name change to remove the ‘Crown.’ The sale was made to U.S.-billionaire Len Blavatnik, head of Access Industries, notes the Australian Financial Review, which speculates that the deal ‘would be at best for several tens of millions of dollars’ as the value was not disclosed to the public. The publication notes a peak in Packer’s wealth in 2014, at US$7.19 billion, falling to last year’s US$5.08 billion after a series of personal events and global economic changes, as well as the crackdown in China, took their toll. K.W.

United States gaming company Blizzard Entertainment is seeking to capitalise on the eSports market in Asia with a NT$8.3 million (MOP2.1 million/US$273,011) prize tournament at the company’s new electronic games stadium in Taipei, the South China Morning Post newspaper reported. Inaugurated in March, the company’s 1,653 square metre eStadium near Taiwan’s capital landmark Taipei 101 has a capacity for 250 spectators and is currently holding the Overwatch Pacific Championship, a 13-week tournament starting this month and finishing in June, involving professional eSports players from Hong Kong, Japan, Australia, Thailand and Taiwan. In 2014, Major League Gaming

(MLG) - the largest international eSports network in the world and a company owned by Activision Blizzard, Inc. - announced construction of the first-in-the-world video game destination development on Hengqin Island, with the arena accommodating a possible 15,000 attendance and scheduled to open in 2018 as part of a MOP22.21 billion (US$2.77 billion) project. The opening will be the first step in the MSAR for eSports, a market that according to a report by marketing company Newzoo in February of this year will generate US$696 million (MOP5.57 billion) in 2017, a 43 per cent yearly increase from the year prior, with total global audiences reaching 385 million. N.M.

8 Business Daily Friday, April 21 2017

Greater China

Business Daily Friday, April 21 2017 9

Greater China

10 Business Daily Friday, April 21 2017

Consigliere

Highly recommended Every businessman should know about this

lberto Kwan, executive director of Original Technology, answers to some questions from Consigliere: Which devices every businessman should know for work, leisure, family and health? Mr. Kwan has a privileged position to address such question as his store focuses in lifestyle technology products categorized in Health, Living, Fun and Shooting areas. He says that he selected the next products as “the ‘Internet of Things’ (IoT) is becoming an increasingly hot topic in our life (work, leisure, family and health). IoT is basically the concept of any device connecting to the Internet, such as your smartphones, wearables devices and shooting gadgets. The IoT is a trend and makes our work and living smarter. Simply put, the products recommended can help you save your time and improve efficiency on your life.”

These are his recommendations:

1. Work: Wacom Slate

2. Leisure: DJI Osmo Mobile

Different from ordinary notebooks, Bamboo Slate allows you to sketch and write on papers, and at the same time it will digitalise and save your contents automatically and upload them to Cloud.

iPhone and other smartphone users can enjoy shooting highly stabilized images with Osmo Mobile and its mobile app. Osmo mobile has new ActiveTrack and Motion timelapse functions, which allow users to determine the camera movement and speed while shooting.

The reason why

Every time you have finished making notes, your thoughts and ideas can be accessed on your computers and other smart devices, and they can easily be shared to friends and colleagues for further collaboration and editing.

The greatest late night snacks from around the world Kate Krader

t’s not scientifically proven, but humans have been known to crave a specific kind of food when it gets late at night. Specifically, you’re looking for something indulgent—greasy, salty, cheesy, or chewy. Preferably, it’s something you can eat with your hands. Almost always, for Americans, it’s pizza. Chefs are no different—except when they get the late night munchies, they are armed with a wider vocabulary of snacking. Not only do they have training and travels to lean on, they are night owls by design. On an average day, once you are finished eating, that’s when they eat. So what can the rest of us slice addicts learn from these masters about the most satisfying alternate treats for the wee hours? The answers, from some of the world’s great chefs, include such lesser-known regional delights from around the globe. Here’s what they

dream of eating late at night, and where they find it.

Chicken Croquettes (São Paulo) Recommended by: Ignacio Mattos, from Estela in New York

For this Uruguay-born chef, the best late-night cure-all is an egg-shaped fried croquette stuffed with creamy chicken, a staple at bars in Brazil. Reasoning: “Coxinha de Frango is like a large croquette that they serve all over Brazil. My favorite are the ones in São Paulo. First of all, it’s really hard to find coxinha made with such care; what makes them even better is that I find the best ones in bars. I don’t know what the secret is, but they’ve got a perfect, creamy stuffing with shredded chicken, with a crispy, fried crust. Definitely one of my favourite late-night snacks.”

Suadera Tacos (Everywhere) Recommended by: Daniela Soto-Innes, from Cosme in New York

The chef at outstanding, modern

Because...

...with the use of your smartphone together, you will open up your shooting experience in a further level - become a shooting expertise in your leisure time. Mexican restaurant Cosme craves messy grilled-steak tacos after a big night out. Reasoning: “If I’m getting food after a night out, I’m definitely craving something spicy, because it’s way more comforting and delicious. So tacos shops are my favourite places to stop. Maybe it’s just the Mexican in me—we love spice and fat for curing a hangover. I can always find a good place that’s open late, and it can’t be fancy. Tacos are the best when they’re messy, anyway. Suadero [grilled steak] tacos are my favourite, extra everything on top: onions, cilantro, cilantro, salsas.”

Hot Dogs with Mashed Potatoes and Fried Onions (Sweden) Recommended by: Marcus Samuelsson, from Red Rooster in New York

For Samuelsson, the best end-ofnight treat is an all-in-one dish with which he has a long history. Reasoning: “In Sweden, it’s a tradition to eat “tunnbrodsrulle”: a hot dog wrapped up in a buttered tunnbrod (Swedish flatbread) with mashed potatoes, fried and/or raw onions, and shrimp salad after a night out. It’s hard to beat! Growing up in Gothenburg, my friends and I would hit the bars and discos, then tuck

into Swedish hot dogs to remedy all the beer we’d consumed. I have great memories of eating those hot dogs in the early hours of the morning, especially in the summer, when it’s already light out. And it’s still a favourite.”

Grilled Pig Parts (Tokyo) Recommended by: Daniel Skurnick, from Le Coucou in New York

Daniel Skurnick is the pastry chef at the smash hit French restaurant, Le Coucou, but he’s spent time in Tokyo, where he discovered an incredible, post-whiskey, street food specialty. Reasoning: “After a long day in Tokyo eating demon spicy ramen and tonkatsu, nights would lead to beer and shochu and highballs, stumbling from one tiny, four-person bar to the next. The smart move is to head out to the countless yakiton stalls that specialize in every part of the pig. As you order more beers and shochu, the skewers start arriving: chewy tongue, tangy liver. Then you decide it’s a good idea to order the “other” parts- rectum, spleen, womb. Why not? They smell delicious; and the drunken salaryman next to you has been talking for the last 20 minutes about Miley Cyrus.

Business Daily Friday, April 21 2017 11

Consigliere

3. Family: Ambi Climate

4. Health: Ozmo Java+ Smart Cup

With Ambi Climate and the Ambi app, you can maintain the most comfortable indoor climate at home on your fingertips, as your iPhone is now the control of your air conditioner. Ambi Climate also has artificial intelligence, which remembers the preferred temperature for you and your family, and it can even save energy by it’s AI tuning of your air conditioner.

Ozmo Java + not only helps you to achieve your daily hydration goal of drinking enough water, it can also keep it warm at 45°C. It has a 3- week battery life with single charge and, same as the previous generation, it works with the Ozmo app so that you can always track your daily caffeine and water consumption.

As you can get ...

Why?

... Access on your air conditioner at home even though you are miles away from home so that you can have your ideal temperature all the time once you get home from outside. And it reduces unnecessary cooling and heating to help you save money without compromising comfort.

Plus the subways stopped running four hours ago, and someone just bought another round.”

Cantonese Clams with XO Sauce (Golden Century, Sydney) Recommended by: Dave Chang, from the Momofuku group

The founder of the epic, Korean-accented restaurant empire swears by an Australian Chinatown mainstay. Reasoning: “My favorite late night place is Golden Century in Sydney. It’s open until 4 a.m., late enough you can always go after service. I always get the pippis [local clams] with XO sauce and crispy noodles. It’s my favorite dish on the planet, a Cantonese seafood noodle feast. This place is like the Balthazar of Sydney, and it’s my favorite late night spot anywhere. I’ve tried to make versions of it in New York, but it doesn’t work without the pippis—and whatever they do at Golden Century.”

Stir-fried Noodles, Singapore Recommended by: Daniel Boulud, from the Daniel Boulud empire

Boulud is renowned as one of the last chefs standing on many nights. When he’s in Singapore, where he has a Db

Bistro, he will inevitably make his way to one of the food stalls and get spicy noodles before going to bed. Reasoning: “Char Koay Teow is a stir-fried rice noodle dish you traditionally find in Singapore’s night markets. It’s similar to pad Thai, with Chinese sausage, egg, shrimp, black cockles, and crispy pork lard, fried with dark soy sauce, which brings a deeply satisfying sweet and salty flavor. After a busy service at the restaurant, when you’re really worked hard and your stomach is growling, there’s almost nothing more satisfying and comforting. One of my favorites is from Rasapura Masters. I get the Beef Char Quay Teo Extra Spicy. I like it because it has a lot of “wok hei”—the flavor of a hot seasoned wok—and for takeaway, it comes in a little, folded-paper pouch that makes it easy to eat if you’re going out from there.”

Chicken Oyster Skewers (Yakitori Totto, New York) Recommended by: Eric Ripert, from Le Bernardin in New York

Eric Ripert’s travels have taken him around the world, but the spot he likes best lies blocks from his elite, seafood temple of a restaurant, Le Bernardin.

With the help of Smart Cup and the mobile app, you can see in details how much water you consume every day, thus effectively assist you to drink enough (8 glasses) of water per day, lowering chances of having a fever or flu due to dehydration.

Reasoning: “Everyone needs a go-to neighborhood favorite, and Yakitori Totto is my secret spot for Japanese cravings when I leave my restaurant, whatever time it is. I sit at the counter and watch the guys at work. I eat everything, but I will always get the chicken oysters [the oyster-shaped nugget of thigh meat]. I like the whole vibe and experience; it almost feels like you’re in Tokyo as you climb the stairs. The dishes are very flavorful and very authentic.”

French Onion Soup (Au Pied de Cochon, Paris)

Recommended by: Pierre Koffmann, from now-shuttered Berkeley in London

British chef Pierre Koffmann picks this hearty brasserie classic as his go-to: onion soup, in a meaty broth, topped with a sheath of melted cheese. Reasoning: “I always like to eat the food of the country I am visiting, so if I am in Thailand, I enjoy street food. In Italy, I go for a plate of pasta or charcuterie. Spain is very easy, because they eat quite late and you go for tapas. It is hard to eat late in France, but in Paris you can go to Au Pied de Cochon, which is open 24 hours. It’s where I like the very traditional onion soup.” Bloomberg News

A unique vision of Macau legislation Today, at 6:30pm, at Fundação Rui Cuhna, Paulo Cardinal introduces his new book Direito, Transição E Continuidade (Law, Transition and Continuity). A law advisor to the Legislative Assembly for more than 20 years, Mr. Cardinal has witnessed the legal evolution of the territory from a unique perspective. The book - subtitled Escritos Dispersos de Direito Público de Macau - is more “a notebook,” in Mr. Cardinal’s own words. “They are papers written for the past 25 years that I just put together and published now”. He considers this book complements a previous one focusing on fundamental rights. “It is also a bit of a sentimental journey as I had to review papers that I wrote 25 years ago. It is like a retrospect of my academic production,” he explains, and believes this book should help spread the need in Macau to develop research in legislation and foster legislation debate, hoping this to be his “contribution to the Macau legal system.” When asked what has changed in Macau in all these years he says that “from the law point of view many thing changed with the transfer of authority . . . but on the other hand, due to the basic principle of continuity . . . we have a continuity in the special way of living in Macau that is what is promised in the legal text and that is what we hope will be maintained in order to secure the difference of Macau concerning Mainland China - the difference within unity.”

12 Business Daily Friday, April 21 2017

Greater China In Brief Brokers hacked

Hong Kong to tighten cyber security rules Hong Kong plans to toughen information security rules after a series of embarrassing hacks at the city’s brokers, the securities regulator said yesterday. The draft rules would likely include requirements for two-step authentication for account log-in and for brokers to notify clients when a transaction had been made, a Hong Kong Securities and Futures Commission (SFC) spokesman said. The SFC would publish a consultation on the draft rules during the second quarter. The rule changes would be made to the SFC Code of Conduct, meaning they would not need to be passed into legislation. EU’s top diplomat

New Silk Road must be open to Europeans Projects along China’s New Silk Road must be open to Europeans, the EU’s top diplomat said yesterday, as China’s prepares its first summit dedicated to the ambitious plan to link Asia, Africa and Europe. President Xi Jinping has championed what China calls the “One Belt, One Road” initiative involving billions of dollars of investment in infrastructure including roads, railways, ports and power grids. “Obviously, for us it is essential that the opportunities are opened up for all including Europeans,” the EU’s top diplomat, Federica Mogherini, told students at the elite Tsinghua University in Beijing. Real estate

LeEco plans sale of Beijing real estate Chinese tech conglomerate LeEco is in talks to sell a prized property asset in the heart of Beijing it acquired in a US$420 million deal last year, the latest effort by the electric car-tosmartphone behemoth to raise funds amid a severe cash crunch. The company plans to sell either all or a majority of its Shimao Gongsan retail property in a popular area on the east side of Beijing by divesting from two firms it owns, two people with direct knowledge of the matter said. LeEco has been in talks with potential investors for some months now, the first person said. Funding

Bitauto raises US$1 bln from internet giants Auto portal Bitauto Holdings Ltd has recently raised US$1 billion from Tencent Holdings Ltd, Baidu Inc and JD.com Inc as it seeks to be China’s largest online car financing platform, its chief told Reuters yesterday. William Li, who is also chairman of electric vehicle startup Nio, did not elaborate on the fundraising. It is the latest in a series of investments Bitauto has raised from three of China’s biggest technology companies. Chinese traditionally avoid taking out loans to buy cars, although consultancy Deloitte expects that to change with 50 per cent of cars to be bought on credit in China by 2020 as automakers aggressively push financing to increase sales.

Business Daily is a product of De Ficção – Multimedia Projects

Forex

Capital outflows stabilised as capital controls bite Net sales of foreign exchange by Chinese commercial banks dropped to US$40.9 billion in the first quarter

apital outflows from China eased sharply in the first quarter and cross border flows were more balanced, the foreign exchange regulator said yesterday, in the latest official comments indicating policymakers are growing less worried about the yuan currency. Reduced pressure from outflows has helped steady the yuan this year and brought China’s foreign currency reserves back over the closely watched US$3 trillion mark. Expectations for further yuan depreciation have weakened significantly, State Administration of Foreign Exchange (SAFE) spokeswoman Wang Chunying told a news conference. Net foreign exchange sales by China’s commercial banks fell sharply in the first quarter after policymakers tightened supervision on money leaving the country and as a weaker U.S. dollar took pressure of the yuan and other emerging currencies. Net sales of foreign exchange by Chinese commercial banks dropped to US$40.9 billion in the first quarter, compared with US$124.8 billion in the first quarter of 2016 and US$337.7 billion in sales last year, SAFE data showed.

The yuan slumped around 6.5 per cent against the surging dollar last year, but has firmed nearly 1 per cent so far in 2017 at the dollar recoiled. Though most analysts polled by Reuters earlier this month still expect the yuan’s downtrend to resume later in the year -- assuming the dollar will recover -- some market watchers such as Macquarie Capital Ltd now forecast no depreciation this year. China’s improving economy has helped support the currency even as the U.S. central bank raises interest

rates, Wang said. The economy grew at the strongest pace since mid-2015 in the first quarter. The central bank said last week its net foreign exchange sales in March were the lowest in 10 months at RMB54.7 billion (US$7.94 billion), while China’s foreign exchange reserves edged up in March to US$3.009 trillion. Wang said yesterday China will push forward with opening up its capital account in a prudent and orderly way and will not backtrack by adding more capital controls. “China’s foreign exchange management will not turn back, we will not go back down the old road of capital controls,” said Wang. While clamping down on outflows, China has also been looking to encourage more inflows by opening up its bond market to foreign investors and promising to open more sectors to foreign investment. Foreign central banks held US$81.1 billion in yuan assets at the end of last year, up 13 per cent, with 92.5 per cent of those assets in bonds, SAFE data showed. That number was slightly different from the International Monetary Fund’s total of US$84.51 billion in foreign government-held yuan assets, with Wang saying the reason for the difference could be that some yuan assets were held by intermediaries. Reuters

Private poll

Stung by debt, Mainland growth to slow to 6.5 pct in 2017 The International Monetary Fund on Tuesday raised its forecasts for China’s 2017 growth to 6.6 per cent from the previous 6.5 per cent China’s economic growth is seen slowing to 6.5 per cent in 2017 despite a strong start to the first quarter, as the government seeks to cool the property sector and temper credit growth to contain risks from a dangerous build-up of debt, a Reuters poll showed. Growth is expected to weaken further to 6.2 per cent in 2018, the Reuters poll of over 75 economists showed, extending a slowing trajectory for the world’s second-biggest economy which grew 6.7 per cent in 2016 for its worst performance in 26 years. The forecasts for this year and in 2018 were unchanged from a January poll, even after stronger than expected first quarter growth of 6.9 per cent, underscoring the drag on the economy from property controls and tighter credit. The solid first quarter was boosted by higher government infrastructure spending and a gravity-defying property boom which helped boost industrial output by the most in over two years. But as Beijing looks to put the economy on a more balanced and sustainable footing, growth is seen losing steam later this year on the back of more property cooling measures and central bank steps to raise funding costs to defuse bubble risks. On a quarterly basis, China’s economy is expected to slow to 6.7 per cent growth in the second quarter, 6.6

per cent in the third and 6.5 per cent in fourth quarter, the poll showed. The government is targeting annual growth of around 6.5 per cent this year. China’s debt-to-GDP ratio rose to 277 per cent at the end of 2016 from 254 per cent the previous year, with an increasing share of new credit being used to pay debt servicing costs, according to an estimate from UBS. Analysts also expect annual inflation to average 2.1 per cent in 2017 and 2.3 per cent in 2018, up from 2 per cent in 2016. Sluggish demand is expected to keep consumer prices largely in check despite a big bump in producer prices.

at 4.35 per cent through at least the third quarter of 2018, the Reuters poll showed. They have pushed back their expectations on a cut in the amount of cash that banks are required hold as reserves, or the reserve requirement ratio (RRR). The central bank is expected to cut the RRR by 50 basis points (bps) in the fourth quarter this year to 16.5 per cent, according to the poll. The January had predicted a 50 bps cut in RRR in the third quarter of this year. Fan Gang, an adviser to China’s central bank, has said that cuts in the RRR would be normal given sharp drops in its foreign exchange reserves. Reuters

Tightening bias

Stronger global demand and China’s bid to keep the economy on an even keel could support growth ahead of a major leadership transition later this year. The People’s Bank of China (PBOC) is trying to put the brakes on flush credit by guiding short-term interest rates higher, but it’s expected to keep benchmark interest rates steady and may even loosen credit conditions if growth falters. Higher domestic borrowing costs could also support the yuan, especially if U.S. interest rates continue to rise, which could risk a resurgence in capital outflows from China. Analysts believe the PBOC will keep benchmark lending rates unchanged

Analysts believe the PBOC (headquarters pictured) will keep benchmark lending rates unchanged at 4.35 per cent through at least the third quarter of 2018

Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Nelson Moura; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@‌projectasiacorp.‌com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@‌macaubusinessdaily.‌com Subscriptions sub@‌macaubusinessdaily.‌com Online www.‌macaubusinessdaily.com

Business Daily Friday, April 21 2017 13

Asia Trade

In Brief

Japan’s exports jump in March Gains were led by strong demand for auto parts and optical instruments

apanese exports recorded their biggest gain in more than two years in March, official data showed yesterday, in a sign of optimism for the world’s third-biggest economy. The strong result, which came in better than expected, backs up the view that Japan’s economic growth is picking up steam. The International Monetary Fund (IMF) on Tuesday boosted its economic forecast for Japan, projecting a 1.2 per cent annual expansion this year from a January projection of 0.8 per cent. A key Bank of Japan business confidence also points to rising optimism among big manufacturers. Prime Minister Shinzo Abe has been trying for years to rejuvenate growth and end an extended period of onand-off deflation through a policy

blitz of easy money, stimulus and reform. Exports expanded 12.0 per cent in March to 7.2 trillion yen (US$66.12 billion), the strongest expansion since January 2015 and the fourth straight monthly gain, according to the Finance Ministry. “Japan’s production and exports are rising on the back of a global rebound in manufacturing,” said Masaki Kuwahara, senior economist at Nomura Securities Co. “In Asia, developing nations are doing well cyclically and that’s directly helping Japan’s exports.” Export gains were led by strong demand for auto parts and optical instruments, such as mobile phone parts and tools to make semiconductors, the ministry said. The data comfortably beat the market’s expectation for a rise of 6.2 per cent. Imports also rose 15.8 per cent to 6.6 trillion yen, more than expected, mainly due to rising oil and coal purchases needed to fire the Japanese

economy. Japan has been less reliant on nuclear power since the March 2011 earthquake, tsunami and nuclear meltdown crisis that led to many of its atomic reactors shutting down over safety fears. The latest figures put Japan’s trade balance at 614.7 billion yen, down 17.5 per cent from a year ago. “The upshot is that net trade should have provided another boost to Q1 GDP growth,” said Marcel Thieliant, senior Japan economist at Capital Economics. Japan announces preliminary gross domestic product figures next month. By regions, Japanese exports to top trade partner China rose 16.4 per cent, while imports from the Asian giant expanded 10.3 per cent. Japan’s exports to the United States expanded 3.5 per cent, led by auto parts, but all-important vehicle shipments dropped 3.8 per cent, the ministry said, as US new auto sales begin to show signs of losing steam. Reuters

12.0 per cent Japanese exports expanded in March

Oil industry

Singapore crude sales nearly hit year-high Crude oil sales from storage tanks around Singapore rose to an 11-month high in March, with nearly half of the volumes going to China and traders clearing inventories ahead of record shipments to Asia expected to arrive in April. Traders sold a total of 22.6 million barrels of crude from storage in Singapore, southern Malaysia and northern Indonesia in March, Thomson Reuters Eikon trade data showed. Around half of the volumes went to China, partly to help quench the still-growing demand from the country’s independent refiners. Inc. sentiment

Japan manufacturers’ mood rises Confidence among Japanese manufacturers has risen for an eighth straight month to a level not seen since before the 2008 global financial crisis, a Reuters survey found, reflecting output and export gains led by overseas economic recovery. The Reuters’ monthly poll - which tracks the Bank of Japan’s key quarterly tankan - also showed confidence at service-sector firms hit a three-month high, a sign that the effects of an export-led economic recovery are spreading - albeit gradually. In the poll of 529 largeand mid-sized firms, conducted between April 4-17 in which 261 responded, the sentiment index for manufacturers rose one point to 26 in April. Debt

S.Korea to allow vulnerable households to defer repayments

Analysts survey

Australia’s economy to capture global growth crown this year Lofty prices for major commodity exports delivered a big boost to national income and nominal growth Wayne Cole

Australia’s economy is forecast to slowly gather speed this year and next, according to a Reuters poll of analysts, an outcome that would see the resource-rich nation pip the Dutch for the longest expansion in modern history. Analysts estimated Australia’s A$1.7 trillion (US$1.28 trillion) of annual gross domestic product (GDP) would grow 2.6 per cent this year and 2.8 per cent next year, unchanged from forecasts in the previous poll in January. That would be up from 2.4 per cent in 2016 and extend the country’s current run of 101 quarters without a recession, already just a whisker from the Netherlands’ record of 103. The race had looked in doubt when the economy unexpectedly contracted in the September quarter of last year, but activity bounced back strongly as export earnings surged and consumers and government spent more. While iron ore prices have swung lower recently on concerns about Chinese demand, shipments of liquefied natural gas are expanding

massively as new projects come on stream. Growth will take a temporary knock from Cyclone Debbie, which barrelled into northern Queensland late in March and caused widespread flooding in the coal-heavy region, disrupting rail haulage for several weeks. Analysts estimate the damage might take 0.3 per centage points off GDP growth this year and add a little to inflation, though rebuilding would offset some of that over time. Also helping will be a levelling off in mining investment after several years of steep falls. Business investment

alone took around 1 per centage point from GDP in 2016, so if it merely stabilises that would remove a major hurdle to growth. This was one reason the IMF this week raised its forecast for Australian growth to 3.1 per cent for 2017, from 2.7 per cent. “Modest growth as far as the eye can see,” was the prognosis of Riki Polygenis, head of Australia economics at NAB, who saw GDP rising 2.8 per cent next year and 2.6 per cent for 2019. One risk was the lacklustre performance of the labour market which is keeping wage growth at record lows and sapping consumer spending power.

Key Points Economy to grow 2.6 pct this year, 2.8 pct next CPI inflation seen 2.1 pct in 2017, 2.2 pct in 2018 The danger is all the greater as household debt is at all-time highs and red-hot housing markets in Sydney and Melbourne are vulnerable to a major price correction. The heat in housing has made the Reserve Bank of Australia (RBA) very reluctant to cut interest rates any further, though neither is there much pressure to tighten given inflation is still too low for comfort. Having spent the past two years under the RBA’s target band of 2 to 3 per cent, analysts predict inflation will pick up only slowly to 2.1 per cent this year and 2.2 per cent in 2018. Reuters

South Koreans who have lost their jobs or gone out of business will be allowed to delay repaying principal on their loans for up to three years, starting from the second half of this year, the Financial Services Commission (FSC) said in a statement. The plan aims to reduce the debt burden on some of the country’s most vulnerable households as borrowing costs rise. The FSC will require banks and financial institutions to implement the changes within this year so that qualifying borrowers can refinance their debt if they wish. Election

President's ally poised for Jakarta loss Jakarta residents appeared set to elect a new governor, with unofficial tallies showing a defeat for one of President Joko Widodo’s top allies. Former education minister Anies Baswedan held a comfortable lead in quick count surveys over Basuki Tjahaja Purnama, the incumbent governor nicknamed Ahok. He had taken over the job when Widodo, known as Jokowi, won the presidency in 2014. The race exposed religious tensions in Muslim-majority Indonesia as Ahok, an ethnic Chinese Christian, struggled to overcome allegations that he insulted the Koran.

14 Business Daily Friday, April 21 2017

International In Brief IMF

Portuguese banks have too many employees and branches The International Monetary Fund (IMF) has said the European banking sector is too large in some countries, noting that in Portugal there are too many employees and bank branches. In the Global Financial Stability report, issue don Wednesday, the IMF said there had been “considerable progress,” in the last few years in the European banking sector, and that the banks now have more capital (it noted recent recapitalisations in Portugal and Italy), more demanding regulation and efforts continue to adapt business models, assisted by economic improvements. Employment

Saudi Arabia to limit shopping mall jobs to own nationals Saudi Arabia’s labour minister issued an order yesterday to restrict employment in shopping malls to Saudi nationals, who currently make up only one in five staff in the retail sector. The kingdom has been steadily closing off different areas of employment to foreigners, who comprise about a third of the population, as it aims to create jobs for young Saudis and cut the unemployment rate among nationals. According to the Vision 2030 economic reform plan released last year, the Saudi retail sector currently employs 1.5 million workers, of whom only 300,000 are Saudis. The plan calls for a million new jobs for Saudis in the sector by 2020.

U.S. filing

Adelson was the top donor of Trump’s inauguration Many of the companies which made donations to the 2017 event also donated to Obama’s prior inauguration David Shepardson and Diane Bartz

arge U.S. companies and their executives helped President Donald Trump raise a record-setting US$106.7 million for inauguration festivities in January, according to a U.S. government filing released on Wednesday. That tally more than doubled the prior 2009 record of US$53.2 million for President Barack Obama’s first inauguration, which had topped the previous 2005 record of US$42.3 million for President George W. Bush, government records showed. The biggest donor by far to Trump’s inauguration was Sheldon Adelson, casino magnate and founder of Las Vegas Sands Corp. He gave US$5 million, according to the 58th Presidential Inaugural Committee’s filing with the Federal Election Commission.

Adelson declined comment. Many of the companies that donated to Trump, a Republican, have significant matters pending before the U.S. government or have been invited to White House events. Many of the companies which made donations to the 2017 event also donated to Obama’s prior inauguration. For example, aerospace and defence groups Boeing Co and Lockheed Martin Corp each donated US$1 million to Trump’s inauguration fund, the filing said. Boeing had donated US$1 million to the 2013 Obama inauguration, according to the OpenSecrets website run by the Center for Responsive Politics, a campaign finance watchdog. Money donated to the Trump inaugural committee falls into two categories, said Larry Sabato, political analyst at the University of Virginia.

Peru economy to recover in 2018, 2019 after flood damage

Trade balance

Germany defends surplus before IMF, World Bank meetings

Forbes

Energy tycoon Leonid Mikhelson tops Russia’s rich list Leonid Mikhelson, co-owner of Russian gas producer Novatek, has topped Russia’s rich list for a second year running with an estimated wealth of US$18.4 billion, the Russian edition of Forbes reported yesterday. It said that Mikhelson, 61, had increased his wealth by US$4 billion year-on-year, putting him at the head of the financial magazine’s 2017 list of Russia’s 200 wealthiest businessmen. Apart from a stake in Novatek, Russia’s second largest gas producer after Gazprom, Mikhelson also owns a stake in Sibur, a petrochemical firm.

‘Sheldon Adelson gave US$5 million to the inauguration event’ Financial services companies and executives were among the US$1-million donors to Trump’s big festivities, including Charles Schwab Corp, Bank of America Corp, financier Henry Kravis and Cantor Fitzgerald Chairman Howard Lutnick. Their industry is eager for Trump to roll back regulatory reforms put in place after the 2008 financial crisis. Coal and oil companies were also prominent donors. Clifford Forrest, owner of the Rosebud Mining Co, gave US$1 million. AT&T gave nearly US$2.1 million in cash and services. It is seeking approval from the Trump administration to acquire Time Warner Inc. AT&T donated US$4.6 million to the 2013 Obama inauguration, according to OpenSecrets. “For many years, AT&T has contributed to our nation’s presidential inaugural celebrations,” said AT&T spokesman Mike Balmoris. Boeing, Lockheed Martin and Kravis declined comment. Bank of America, Charles Schwab, Forrest and Lutnick did not immediately respond to a request for comment. Reuters

Minister

Peru’s economy will recover in coming years with investment in construction after recent flooding, likely growing 4.5 per cent in 2018 and 5 per cent in 2019, Finance Minister Alfredo Thorne said on Wednesday. Previously, the government had expected growth of 4.3 and 4.1 per cent for the next two years. The estimate for 2017 growth was lowered this month to 3 per cent from 3.8 per cent previously due to flooding. “The shock will be temporary,” Thorne said in a presentation at Lima’s Chamber of Commerce. The floods have damaged 6,000 kilometres of roads, destroyed thousands of houses and killed 106 people since December.

“It’s either make-up money or it’s a continuation of support by people who are invested in Trump. You don’t give this kind of money to get a few tickets to inaugural balls,” he said. Trump publicly criticized both Boeing and Lockheed Martin before his inauguration. In Twitter messages he said costs on Boeing’s new Air Force One plane were “out of control” and urged the federal government to “Cancel order!” Trump in December sent a Twitter message saying the cost of Lockheed Martin’s F-35 fighter jet was also “out of control.” White House spokesman Sean Spicer said on Wednesday that inaugurations have “pretty much been a nonpartisan activity ... This is a time-honoured tradition, and I think a lot of Americans and companies and entities are proud to support the inaugural.”

Berlin argues that the current account surplus is a consequence of market-based corporate decisions Germany yesterday pushed back against U.S. criticism of its trade surplus, saying ahead of global finance talks in Washington that nobody could blame Berlin for the competitiveness of ‘Made in Germany’ products. Economy Minister Brigitte Zypries said the government had only limited influence on trade flows, and the surplus - which data shows hit a record 252 billion euros (US$271 billion) in 2016 - was linked to factors beyond its control such as the oil price and euro exchange rate. “Our companies produce high-quality machines and equipment that customers abroad like to buy. We do not have to apologise

for this,” she told mass-selling Bild newspaper. She pointed to political efforts, such as the introduction of a national minimum wage, tax cuts and increased investment activity to boost domestic demand and imports, as ways of reducing the trade gap. In a U.S. Treasury currency report on Friday, the Trump administration backed away from naming any major trading partner as a currency manipulator, but kept Germany and five others under scrutiny over their foreign exchange and economic policies. Germany’s wider current account surplus, which measures the flow of goods, services and investments,

swelled to an all-time high of 261.4 billion euros last year, Bundesbank data shows. In terms of overall economic output, however, it shrank to 8.3 per cent in 2016 from 8.6 per cent in 2015, and the government expects a further drop to around 7 per cent next year. In a position paper drawn up ahead of the International Monetary Fund and World Bank talks in Washington, Berlin argues that the current account surplus is a consequence of market-based corporate decisions. World finance leaders gathering on Trump’s home turf yesterday were expected to try to nudge his still-evolving policies away from protectionism and to show broad support for open trade and global integration. The IMF in particular has sounded warnings against Trump’s plans to shrink U.S. trade deficits with potential measures to restrict imports, arguing in its latest economic forecasts that protectionist policies would crimp global growth that is starting to gain traction. Reuters

Business Daily Friday, April 21 2017 15

Opinion

Wall Street’s great earnings don’t spell jobs for Asia Nisha Gopalan a Bloomberg Gadfly columnist

ith the exception perhaps of Goldman Sachs Group Inc., first-quarter earnings at U.S. banks are booming, powered by gains in fixed-income trading. But if you think that’s cause for celebration among job seekers in Asia, you’d be wrong. Beyond digital banking, the region’s hiring thermometer is set to deep freeze. It’s a reflection of the broader slowdown in investment banking, which as well as stock, fixed-income, currencies and commodities trading, includes equity capital markets, debt capital markets and M&A. According to data from industry researcher Coalition, corporate and investment banking revenue in Asia Pacific slid 7 per cent last year, with higher trading income offset by a slump in equities broking, IPO underwriting and deal advisory. While declines in prop trading since the global financial crisis are partly to blame for the reduced headcount in FICC, the rise in algorithmic trading is also responsible. C o m p u t e r programs can execute thousands of stock trades in seconds. On top o f t h a t, s ev e ra l per cent E u r o p ea n ba n ks Bank of America like Barclays Plc first-quarter profit have retreated in key businesses, and new share sales have slowed, leading Goldman Sachs alone to lay off about 30 bankers from the region last year, mainly in Singapore and Hong Kong. While Asia contributed US$3.3 billion, or about 20 per cent, of revenue for Citigroup Inc. in the three months through March 31, much of the excitement was outside investment banking. Treasury, trade and consumer were the real highlights, thanks in part to an increase in online payments made via credit cards linked to apps such as Uber and Grab. Unless a career at a Chinese bank appeals, being tech-savvy, or content with a role sans the excitement of a trading floor, is the way to go. But even then, banks from the mainland have been criticized for their low pay and red tape, which sort of takes the fun out of merchant banking. More stimulation can be had at fledgling investment funds, or private equity firms, for example. It’s also worth remembering that despite all the reams of newsprint dedicated to China, Asia remains one of the smallest parts of most Western banks’ businesses. Goldman Sachs’s Deputy Chief Financial Officer Marty Chavez, outlining the lender’s first-quarter earnings, noted that Asia accounts for about 15 per cent of the total versus 60 per cent for the U.S. and 25 per cent for Europe. So not only is corporate and investment banking in Asia a shrinking pool that’s part of a much larger pond, it’s boring to boot. Brush up on your digital skills or go elsewhere. That seems to be the message. Bloomberg Gadfly

Bubble-spotting, like genius parenting, is rare “

s this market a bubble?” and “Is my kid a genius?” are two questions which are asked far more often, and with less profit, than they should. Financial advisors probably dread the asking of the one, just as much as teachers fear the other. That’s because both questions, when asked by the typical investor or parent, embed both a delusion of detective skill and a wrong-headed idea of the point of the exercise. You will very likely not be able to work out the answer, and will be prone to make the wrong move even if you do. Moreover, and this applies equally to bubble hunting or genius cultivating, you make the cardinal error of putting yourself firmly at the centre of an operation in which you belong well on the periphery. Your kid probably isn’t a genius and won’t be helped, and may well be hurt, by your interest in the matter. The market probably isn’t in a bubble and your consideration of the matter sets you on a path to do more harm then good. “The bubbles that did not burst are just as important for investors to know about as the bubbles that did burst. Placing a large weight on avoiding a bubble, or misunderstanding the frequency of a crash following a boom, is dangerous for the long-term investor because it forgoes the equity risk premium,” Yale finance professor William Goetzmann wrote last year in a study of bubbles in financial history. “In simple terms, bubbles are booms that went bad but not all booms are bad.” What Goetzmann found is that booms are more likely to be followed by another boom than by a bust. Looking at 21 national stock markets since 1900, 14 per cent of the time stocks doubled in real terms over a three year period, or what we might call a boom. Subsequent to this markets which doubled halved 3.37 per cent of the time in the following year but doubled again 8.37 per cent of the time. Stretch that out to five years and post-boom markets double again a bit less than 50 per cent of the time but only halve about 8.0 per cent of the time. Get out after a boom and you are more likely to miss another boom than a bust. Clearly, unless you are exceptionally good at bubble detecting you are playing with fire in attempting to pick them out.

“

James Saft a Reuters columnist

Forever blowing bubbles

Of course bubbles, those artificial and unsustainable increases in asset prices, like geniuses, exist and of course they make a big impression when they come around. Bubbles happen for a complex and fascinating set of reasons. A short list of causes would need to include human psychology and the fear of missing out, monetary policy and its late tendency to see asset price rises as a means to achieve aims previously met by genuine innovation and fiscal policy. It is also true that the fact that we benchmark the managers we hire to steer our mutual and pension funds means they have an in-built motivation to chase irrational market valuations higher. If they sit out bubbles they are more likely to get fired. That helps to drive both genuine booms and bubbles alike. The person who can determine which is which, especially the person who is simply managing their own retirement or long-term savings risk, is a rare bird and unaccountably in the wrong job. So, sure, an optimum execution of investment would avoid bubbles, but a typical investors’ main risk isn’t that they might be subject to a downdraft but that they, in seeking shelter, may miss out on equity gains while doing so. Investors, like parents, should aim to do reasonably well and act cautiously, and with a proper respect for how little they know about the future and what will be for the best. Exceptional phenomena, like crashes or child geniuses are just that, exceptional, and best left to worry about themselves. Bubbles, therefore, are a problem, but one which individuals are in a very poor position to mitigate. Policy makers should worry about bubbles, which can be more destructive to human and economic capital then they tend to be to portfolios. Better fund management incentive systems and more symmetrical monetary policy around potential market bubbles would be a good thing. You, on the other hand, are more than likely to do yourself, and your portfolio, damage by trying to time bubbles. Reuters

Clearly, unless you are exceptionally good at bubble detecting you are playing with fire in attempting to pick them out

”

16 Business Daily Friday, April 21 2017

Closing IPR

Mainland’s copyright monitoring goes online

China launched a national copyright monitoring website yesterday, a step forward in the nation’s crackdown on piracy. The website, www.12426.cn, is managed by the Copyright Monitoring Centre under the Copyright Society of China, providing identification, security monitoring, early warning and rights infringement solution services for registering copyright owners. The website applies big data technology similar to fingerprint analysis, enabling it to quickly identify dubious content. It monitors various online terminals including PCs, mobile phone apps, smart TVs and live streaming

platforms around the clock and has a professional team dealing with rights infringement offline. The intellectual property rights (IPR) protection environment has remarkably changed in China, both from a legal perspective and in terms of technological application, said Yan Xiaohong, head of the Copyright Monitoring Centre. He hopes the website can play a bigger role in IPR protection, especially in the protection of online IPR. The website will not only serve the copyright owners, but will provide technological support for Chinese authorities’ campaigns targeting online piracy, according to the centre. Xinhua

Markets

China investors chase “Nifty 50” as love affair with small caps sours Such divergence underscores a dramatic reversal from Chinese investors’ strong preference for small-caps over blue-chips since 2009

hina’s stock investors are chasing up the country’s version of the “Nifty 50” index as their love affair with trendy small caps fades amid a regulatory crackdown on speculation and concerns that the economy may lose momentum later in the year. The shift in investor preference has also been fuelled by a desire for more stable returns, and a burst in supply of listed start-ups favoured by smaller punters seeking quick gains. The term “Nifty 50” originally referred to a group of 50 U.S. stocks favoured by institutional investors in the 1960s and 1970s, including stalwarts like General Electric, Coca-Cola, and IBM, once known as “one-decision” stocks investors could buy and hold forever. Now Chinese investors are piling into their approximate counterparts such as home appliance maker Gree Electric and spirit maker Kweichow Moutai. Despite recent market weakness, Gree has gained some 38 per cent this year and hit record highs this week, while Kweichow Moutai became the world’s biggest liquor maker by market capitalisation, dethroning British distiller Diageo Plc. Big cap stocks have always had a stable and loyal following among institutional investors in China, but have lacked the magnetism of small

caps in a country where the retail investing culture is imbued with a high appetite for risk. “The upward trend for blue-chips like Moutai is not yet over,” Eastmoney Securities strategist Zhang Jiadai said, citing Moutai’s generous dividend payouts and “modest” valuation, at roughly 24 times forward earnings. The brokerage’s blue-chip Eastmoney Nifty 50 Index has gained over 5 per cent so far this year, outperforming the market benchmark Shanghai Composite, which is up roughly 2 per cent.

Meanwhile, investors are dumping small caps, with the growth board ChiNext down nearly 6 per cent. Zhang predicted that bearish trend “will last for a long time,” potentially halving the index’s valuations from the current level.

Dramatic reversal

Such divergence underscores a dramatic reversal from Chinese investors’ strong preference for small-caps over blue-chips since 2009, creating huge valuation gaps. Even after this year’s sharp correction, ChiNext still trades at an earnings multiple of roughly 50, while the SME board is around 40. In contrast, the SSE50 Index, another gauge that some liken to China’s “Nifty 50”, trades at price/earnings ratio under 10.

Interest in small caps is quickly waning as regulators have restricted reckless fundraising, blocked “blind” acquisitions and vowed to “brandish the sword” against speculation. “There had been a lot of speculative interest in small-caps, because high valuations allowed them to raise money cheaply to fund acquisitions and thus maintain rapid growth,” said Zhou Liang, fund manager at Minority Asset Management Co. “Once they can no longer keep playing this game, they reveal their true features,” Zhou said, adding he would not be surprised to see the average valuation of ChiNext shares halve over the next two to three years. In addition, regulators are loosening the tap on initial public offerings (IPOs), flooding the market with newly-listed start-ups and this depressing valuation of small caps in general. Fund manager Zhou predicted that blue chips will continue to rally due to their relatively low valuations and stable returns, saying it is “a new cycle that has just started”. Hou Bin, a fund manager at Goldstate Capital Fund Management Co, said he favored modestly-priced banking and home appliance stocks, because “when liquidity conditions tend to tighten, and risk appetite is low, stocks with high valuations will be dumped”. But Wu Kan, head of equity trading at Shanshan Finance, said there may be a silver lining in that painful process for discerning investors. “As the bubble deflates, there will definitely be bargain opportunities for those real growth stocks with core competitiveness.” Reuters

Ecommerce

Trade

Saudi minister

Alibaba’s Singapore unit enlists Uber, Netflix to lure customers

Taiwan March export orders Oil producers ‘might have beat forecasts to’ extend output cuts

Alibaba Group Holding Ltd. has created a loyalty program for online shoppers in Singapore that it may expand to other markets, teaming up with Uber Technologies Inc. and Netflix Inc. to lure customers. It’s the first time Uber and Netflix have jointly created an online rewards program, said Maximilian Bittner, chief executive officer of Lazada Group SA, the Singapore-based e-commerce operator Alibaba acquired for US$1 billion in 2016. The trio’s “LiveUp” program started yesterday and links their services, from UberEats and Netflix to online grocer RedMart and Alibaba’s Taobao online marketplace. Consumers pay S$28 (US$20) a year to get benefits such as six months of Netflix streaming, discounts on Uber rides and free delivery on Taobao or Lazada purchases. A mobile app will be rolled out in the second half of the year. “Singapore is the market on the cutting edge of validating what we think consumers might want, so we will focus on Singapore first,” said Bittner, who expects to add more partners. He drew a comparison with code-sharing among carriers, which gives consumers a range of benefits like flight redemptions. Bloomberg News

Taiwan’s export orders rose for the eighth straight month in March and at a faster pace than expected as global demand remained strong for components of Apple Inc’s new iPhone and other tech gadgets. The continued expansion bodes well for the island’s trade-driven economy and revenues for many companies in the global electronics supply chain, though the export outlook remains clouded by worries about a rise in U.S. protectionism. Taiwan’s export orders rose 12.3 per cent in March from a year earlier, above the 10 per cent forecast in a Reuters poll but slowing from a 22 per cent pace the prior month. In the first quarter, orders rose 12.6 per cent from the same period last year, government data showed yesterday. “Although the first half of the year is the time when outgoing and incoming models of high-end handheld devices overlap, the Internet of things, automotive electronics, and cloud computing and other emerging technologies accelerate the development,” the ministry of economic affairs said. Taiwan’s orders are a leading indicator of actual shipments two to three months ahead and a gauge of demand for Asia’s high-tech gadgets. Reuters

Saudi Arabia’s energy minister said yesterday that oil-producing countries might have to extend output cuts agreed for the first six months of the year in order to achieve the desired rebalancing of the market. “We might have to extend in order to reach the target... of stock levels,” Khalid al-Falih told an energy forum in Abu Dhabi, referring to a deal between OPEC and non-OPEC producers to cut production by around 1.8 million barrels per day. Falih, whose country is the world’s largest exporter, said there was a sort of “initial agreement “ on the need to extend the deal after talks in Kuwait last month. He said producers would continue to assess market figures until next month, when ministers are expected to take a final decision at a meeting in Vienna. “There was a high level of commitment in the first three months, but despite that, we have not achieved the target” of reducing the supply glut, he said. OPEC members agreed in November to cut production by 1.2 million barrels per day for six months beginning from the start of the year in a bid to shore up prices. AFP