SARS top Guangdong investors ranking Neighbouring links Page 4
Thursday, August 3 2017 Year VI Nr. 1353 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Contract
Public tender for WiFi Go maintenance opens Page 2
Real estate
Chinese snapping up property in Thailand Page 9
Trademarks
Trump brands apply for registration in MSAR Page 7
www.macaubusiness.com
Transport
Airport parking fees also increased Page 3
Luxury
Mainlander shocks Swiss paying US$10,000 for a shot of whisky Page 16
Seeking balance CE priority
CEO
Chief Executive Fernando Chui Sai On has declined to make higher education free in the MSAR. Prioritising labour market equilibrium over other educational alternatives. As declared in a session in the Legislative Assembly yesterday. Page 3
Propaganda banned
Back to work
SJM Holdings CEO Ambrose So Shu Fa is upbeat. Announcing that the work on the ongoing construction of Grand Lisboa Palace had resumed yesterday. Work was halted for several weeks due to on-site labour accidents.
Election Electoral Committee explains rules limiting candidate behaviour in local election campaign. Propaganda is strictly banned. Although the Committee will analyse on individual case basis. Given the line between freedom of speech and propaganda could prove to be blurred. Page 2
Read all about it!
Greater Bay Area Local authorities give thumbs-up. To progress co-operation between Guangdong-Hong Kong-Macau and Promotion of Construction of Greater Bay Area. With order to publish the framework signed in early July. Page 6
BRICS against protectionism
Grand Lisboa Palace Page 5
HK Hang Seng Index August 2, 2017
27,607.38 +67.15 (+0.24%) Worst Performers
Wharf Holdings Ltd/The
+5.69%
Geely Automobile Holdings
+2.48%
Ping An Insurance Group Co
-1.33%
Want Want China Holdings
-1.13%
AAC Technologies Holdings
+4.75%
Hang Lung Properties Ltd
+2.46%
Galaxy Entertainment Group
-1.26%
China Resources Land Ltd
-1.01%
China Shenhua Energy Co
+4.29%
China Unicom Hong Kong
+2.15%
Sands China Ltd
-1.25%
China Petroleum & Chemical
CK Hutchison Holdings Ltd
+3.07%
China Overseas Land &
+1.32%
PetroChina Co Ltd
-1.18%
Tencent Holdings Ltd
-0.57%
Hang Seng Bank Ltd
+2.80%
MTR Corp Ltd
China Life Insurance Co Ltd
-1.17%
AIA Group Ltd
-0.56%
+1.11%
-0.67%
28° 30° 27° 31° 28° 31° 28° 32° 28° 31° Today
Source: Bloomberg
Best Performers
FRI
SAT
I SSN 2226-8294
SUN
MON
Source: AccuWeather
Summit The block comprising China, Brazil, Russia, India and South Africa has pledged to fight protectionism. Trade ministers gathered in Shanghai for two days. Affirming their commitment to safeguard intellectual property. Page 8
2 Business Daily Thursday, August 3 2017
Macau Elections
The thin grey propaganda line Candidates in the 2017 Legislative Assembly Elections are now prohibited from promoting or expressing any content deemed to be propaganda by the Electoral Committee until the start of the official campaign period on September 2 Nelson Moura nelson.moura@macaubusinessdaily.com
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egulations limiting electoral propaganda for the 2017 Legislative Assembly Elections are not restricting freedom of expression in the MSAR, the Electoral Committee said yesterday. Starting from yesterday, candidates are prohibited from discussing issues mentioned in their electoral candidacy until the starting day of the official campaign’s 15-day period on September 2. Yesterday, candidates were informed by the Electoral Committee that by midnight yesterday they would have to remove or eliminate any activity that by any means relays a message that directs the public’s attention to one or more candidates; or suggests, expressly or implicitly, that voters should vote or not vote for a candidate or candidates. According to the electoral law, electoral propaganda made during the
Meeting of the Electoral Affairs Commission for the Legislative Assembly Election. Source: GCS
unauthorised period can lead to a fine of between MOP2,000 (US$248) and MOP10,000. The Committee message announced infractions could be considered qualified disobedience. However, questions have been raised regarding what would be considered electoral propaganda, with Electoral Committee chairman Tong Hio Fon saying photos of the candidates would have to be removed in
No drawing
The main topic of discussion was the definition of what votes would be considered valid or invalid, taking into consideration the Electoral Law.
association offices, and online content published prior to the exclusion period, including articles or interviews, would have to be removed. Such content or photos would then only be able to be reinstated after the end of the exclusion period on September 2. “What constitutes propaganda will have to be evaluated case by case. An interview with a candidate won’t be
immediately considered propaganda; we’d have to analyse the content (…) We’re not shutting up candidates but if what they’re expressing includes political content from their campaign [then that] is different,” the chairman concluded. The Committee also announced it has currently received 38 complaints or allegations of alleged irregularities related to the elections.
“For example, voters can’t tick more than one box, or draw and write in the vote bulletin. Next week we will meet with the General Assembly to better define what constitutes a valid vote,” the committee chairman
said yesterday. Promotional videos will also be divulged through social media, radio and television, with a voting booth set up to inform the population of voting procedures, said Mr. Tong.
Industries
Industrial and Commercial Fund hands out MOP48 mln in Q2 The city’s Industrial and Commercial Fund disbursed total subsidies of MOP48 million (US$6 million) to 677 individuals and institutions in the second quarter of 2017, according to the latest data released in the Official Gazette. The largest support granted between April and June was a MOP25.4 million subsidy provided to cover the fiscal expenses of establishing the Fund for Development Co-operation between China and Portuguese-speaking Countries headquarters in the MSAR, incurred by the locally registered financial company created to manage the fund. The US$1 billion (MOP8 billion) fund for financing the economic and social development programs of Portuguese-speaking countries
was officially moved from Beijing to the MSAR in June during the 8th International Infrastructure Investment and Construction Forum (IIICF).
The fund was set temporarily in the Business Support Centre, a department under the Macau Trade and Investment Promotion Institute
(IPIM), and will be moved later to a trade co-operation service platform complex for China and Portuguese-speaking countries to be developed near Nam Van Lake. The second largest support was granted to the Industry and Commerce Federation of Macau Central and Southern District, a MOP2.9 million subsidy to partially finance the organising expenses of its Pagoda Night Fair. The third largest beneficiary was Transferência Electrónica de Dados – Macau EDI VAN, S.A. – a government-owned company which received MOP2.3 million in financial support. In total, the Industrial and Commercial Fund disbursed MOP57.4 million in the first half of this year.
(DSRT) was heavily criticised by an Audit Commission report released in February. The report described the service as somewhat ‘useless’ with the city’s
telecommunication regulator failing to clearly orientate the service and its target users, as well as being slack in its supervision of service operation and quality. N.M.
Communications
Putting the go in WiFi Go A public tender for operating and maintaining the free wireless broadband service WiFi Go between January 1 2018 and December 31 2019 has been opened. The Bureau of Telecommunications Regulation (DSRT) has opened a public tender for the operation and maintenance services of the city’s free access wireless broadband service WiFi Go from January 1 2018 to December 31 2019, a release by the Official Gazette said yesterday. The public tender has not set a base price for the proposal with applicants having to deposit MOP350,000
(US$43,482) and with the proposal price counting for half of the evaluation requirements proposed by the DSRT. From 2014 to 2017, Companhia de Telecomunicações de Macau, S.A.R.L. (CTM) was granted an MOP18.6 million contract for operating the wireless service. The service launched in September 2010 by the former Bureau of Telecommunications Regulation
Business Daily Thursday, August 3 2017 3
Macau Chief Executive
Diversification without education The MSAR’s top official, while reiterating the need to diversify the economy and train local talent for the Legislative Assembly, stated that free higher education could disrupt the “equilibrium of the labour market” Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com
D
espite the push for diversification of the economy, the MSAR’s Chief Executive responded negatively to legislator enquiries on the possibility of making higher education free for residents, noting that “every year if we have a sufficient number of graduate students – that will imply an equilibrium of the labour market”. Chief Executive Fernando Chui Sai On, in the plenary session yesterday at the Legislative Assembly in which he responded to interpellations from 30 legislators, stated that providing free higher education to students “could have the effect that we desire or by being over-protective it will affect their competitiveness . . . [stating] . . . We should see if it’s advisable or not to push them to pursue their studies.” With regard to a question about using the land occupied by the Yat Yuen dog racing track for potential transitional housing for students posed by Legislator Angela Leong On Kei, the Chief Executive reiterated prior comments that “it [the land] won’t be for any commercial or hotel use – only for education and leisure”. The legislator is also involved in the company that runs the dog racing track, as well as being Executive Director of local gaming operator Sociedade de Jogos de Macau (SJM). The Chief Executive said the results of the land use would be better defined after the release of the results of a study commissioned on housing
and land use, set to come out “in September” of this year. This study would also be the basis for dividing up land to be used for social and economic housing as well as gauging whether to reinstate a housing subsidy discontinued in 2010. The Chief Executive had prior to Legislator Leong’s query stated “we hope that through the diversification of the economy we can also achieve our objective and reinforce the non-gaming elements in the gaming,” negating that the government would set up a more direct method to share the proceeds of the gaming revenues generated by the local casinos. “Observing the idea of equilibrium of salaries and the life of the
population is one of the most important factors in how the government shares its resources,” observed the MSAR’s top official, stating that “the essential is having a prudent management of these funds and not directly giving the revenue to the population”.
Greater Bay
Some of the most common themes in the near-four hour session were the Greater Bay Area, public housing and health, with the Chief Executive expressing that the MSAR is working with regional authorities to “create more facilities for the circulation of goods, people and capital” in the Greater Bay Area. Suggestions for the MSAR’s contribution to the Mainland initiative revolve primarily around the city acting as a financial leasing centre, in line with the One Belt, One Road, suggesting: “Our financial sector can also grant loans to the countries that need to develop their infrastructure, developing this financial leasing sector in line with the One Belt, One
Road initiative”. The CE also mentioned “taking advantage of this to promote the training of local talent, satisfying the necessities of the sectors”, citing a study by the Talent Development Committee “on how to train local talent and import talent to Macau.” With regard to the operation of the Hong Kong-Zhuhai-Macau Bridge, the top official stated that the results of a public tender for the shuttle bus service to operate on the bridge would be divulged “mid-August,” while a car park set to house “3,000 light vehicles and 2,000 motorcycles” would be set up on the Macau side of the crossing. Apropos public housing, the Chief Executive assured that part of the newly reclaimed land would be used for its purpose, pending the results of the study, while as for whether to institute universal public health care for local residents “we have to see whether the population is interested in going for this universal healthcare system”.
The Chief Executive, Mr Chui Sai On, attends a plenary session at the Legislative Assembly to take questions raised by Assembly members concerning government administration and social issues. Source: GCS
Immigration
Airport
PSP nab 273 illegal workers by end-June
Airport to adjust car parking fee
In the first half of this year, authorities found 273 illegal workers in the MSAR, seven more than in the same period of last year, after inspections conducted in 2,535 locations, according to the most recent data released by the city’s Public Security Police Force (PSP). Some 62 illegal workers were discovered in the city in the month of June this year, with the number increasing by 16 when compared to the 46 illegal workers identified in May. In co-operation with the Labour Affairs Bureau (DSAL) and other departments, the PSP conducted inspections
of 557 locations in March, in which construction sites, private properties, commercial and industrial buildings were included. In 2016, authorities arrested 487 illegal workers in Macau, according to data provided by PSP. Authorities deported 659 illegal immigrants to their country of origin in the first six months of this year, a 24.7 per cent year-on-year decrease from the number registered in the same period of last year. Around 82.4 per cent of deported illegal immigrants in the first half of this year were from Mainland China. N.M.
A new parking fee arrangement for Macau International Airport (MIA) will be implemented on the first day of September, with the new adjustment to be MOP6 per hour for light vehicles and MOP2 per hour for motorcycles. Airport operator Macau International Airport Co. Ltd. (CAM) also announced in the notice that the daily rate service will be abolished, meaning that daily parking will cost MOP144 for light vehicles instead of the current MOP50. According to CAM, the number of parking lots in MIA will be affected, in order ‘to cope with the future development and infrastructure extension programme’. The last adjustment of parking fee was in 2008; the irport operator
hoped that the adjustment would be in line with current charges in the city centre. The president of the Macau Civil Aviation Authority (AACM) revealed last Tuesday that the MSAR Government had asked the central government for permission to reclaim land for the expansion of the city’s airport. According to the Macau International Airport Master Plan released by AACM in January, the expansion is necessary as some of the facilities are already at capacity, including general aviation facilities, passenger terminal and road transport facilities, while some others ‘will become saturated very soon and therefore no longer meet the demand and affect service quality.’ C.U.
4 Business Daily Thursday, August 3 2017
Macau Opinion
Ashley Sutherland-Winch*
Calling all foodies! What could be better than a street food festival? A street food festival presented by The Michelin Guide, that’s what! The famous restaurant rating organisation is planning to debut a Street Food Festival in Macau’s Studio City entertainment resort this October and we should all save the dates. The event will host chefs from Michelin-starred restaurants, celebrated Bib Gourmand, and Michelin-recommended eateries across Asia serving their street food creations and signature delights. Food festivals are an incredible opportunity to try delicacies from a wide variety of restaurants and chefs, but a food festival hosted by Michelin and the Robert Parker Wine Advocate should not disappoint. The fourday event is scheduled from October 5-8 and will feature a star-studded line-up of eateries from Singapore to Japan including the world’s first-ever street food stall to have been awarded a Michelin star, Hong Kong Soya Sauce Chicken Rice & Noodle from Singapore. “Asia is recognised as having the world’s best street food and we are thrilled to invite some of our most talented chefs and their teams to cook together in Macau for the very first time, . . . foodies, families and friends can discover their favourite street eats, soak up the buzzing festival atmosphere and savour flavours old and new. The Michelin Guide Street Food Festival in Macau will truly be a unique dining experience for all food lovers to mark in their calendars.” said Patrick Sauze, spokesperson for Robert Parker’s Wine Advocate. I recognise the strong move of Studio City to host this event that will be sure to draw large crowds of both tourists and locals to their casino. We have so many incredible restaurants in our city that it is difficult to visit them all as a local, not to mention a tourist. The ability to visit many eateries at once is a foodie dream. The Macau Food Festival - held in November - is another great foodie option hosted by the Macao Government Tourism Office. This festival features cuisine from many different countries and regions including Taiwan, Penang, Malaysia, Henan, Japan, South Korea and China’s Mainland provinces and municipalities and ethnic minorities along with local favourites here in Macau plus games and entertainment. As the famous saying goes: ‘The best way to a man’s heart is through his stomach’ - but I’m willing to wager that these festivals will find a place in the hearts of women as well as men when they debut this Autumn! *Marketing and Public Relations Consultant and frequent contributor to this newspaper.
Statistics
Macau ranks second biggest investor in Guangdong While Macau ranks second, official data released by Chinese Bureau discloses Hong Kong tops the list Cecilia U cecilia.u@macaubusinessdaily.com
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he MSAR was the second biggest investor in Guangdong Province for the first half of the year, according to the Guangdong Bureau of Statistics. Data released by the Chinese Bureau has disclosed that Hong Kong ranked first during the six months period, with investments made by Hong Kong accounting for 70.6 per cent of the total foreign investment in Guangdong. A total of 3,267 investments made by Hong Kong investors, an increase of 28.3 per cent year-on-year. The contracts made with Hong Kong investors - valued at US$27.32 billion (MOP219.97 billion) – were, however, down 25.2 per cent when compared to the same period a year ago whilst the actual use of investment had increased by 4.2 per cent
to US$8.69 billion. The information provided by the Chinese data does not disclose data of the Macau sector. In overall terms, some 5,239 investment projects were newly registered in Guangdong Province, with both the cost of contracts and the actual use of investment up 0.4 per cent and 6.6 per cent year-on-year, to US$40.34 billion and US$12.31 billion, respectively. For the top ten investors in Guangdong Province, following the two SARs, were the British Virgin Islands, Singapore, Japan, Holland, the United States, Cayman Islands, the United Kingdom and Samoa. In particular, Holland, the Cayman Islands and Singapore registered a faster growth over the period in terms of actual use of investment, which grew 32.8 times, 5 times and 1.9 times, respectively. Region-wise, the Pearl River Delta attracted some 4,932 foreign
investments from January to June, increasing 41.7 per cent year-on-year. The total value of the contracts made in the area was US$38.78 billion, down 1.7 per cent, but the area saw an increase of 5.8 per cent in the actual use of the investments, amounting to US$11.87 billion. The number of investments, the amount of the contracts and the actual use of investment in the Delta took up 94.1 per cent, 96.1 per cent and 96.4 per cent, respectively, of the entire province.
Tertiary industries take the lead
Guangdong Province attracted a total of 4,601 investment projects relating to tertiary industries, taking up 87.8 per cent of the total foreign investment, a surge of 46.2 per cent. Total contracts cost US$31.32 billion, down 7.1 per cent year-on-year, while the actual use of investment amounted to US$80.98 billion, up 1.4 per cent. In particular, 26.2 per cent of tertiary industry was related to the real estate market, with the actual use of investment in the market reaching US$2.12 billion, up 1.5 per cent.
Infrastructure
Checking out the food chain A RMB262 million complex for logistics and safety supervision of agricultural products for the Greater Bay Area is expected to become operational in 2019 Nelson Moura nelson.moura@macaubusinessdaily.com
A cold-chain logistics and food safety complex serving the Guangdong-Hong Kong-Macau Greater Bay Area is expected to be operational in early 2019, according to China Daily newspaper. The facility - named the Zhuhai Agricultural Produce Logistics & Safety Testing Centre - is located in Qianshan in Zhuhai and was inaugurated on July 27, although it will only start operations two years later. According to China Daily, the Centre will occupy 27,805 square metres and have a total floor space of 68,784 square metres, at a cost of RMB262 million (MOP313.8 million/US$38.97 million). The Centre is being developed by Zhuhai Agricultural Investment Holding Group Co. Ltd. and the Inspection Technical Centre of the Zhuhai Entry-Exit Inspection & Quarantine Bureau (ZHTC). According to Bloomberg, the Zhuhai Agricultural Investment Holding Group was founded in 1980 in Zhuhai and engages in urban operations, real estate development, finance investment, trade logistics, cultural tourism, education plus convention and exhibition centre businesses in
China. According to the newspaper, the Centre is being constructed by a subsidiary of the Zhuhai Agricultural Investment Holding Group, an agricultural product logistics park company the group founded with RMB100 million in registered capital. The Centre will focus on the
logistics and safety supervision system of agricultural products for the MSAR, Hong Kong and Zhuhai-Zhongshan-Jiangmen Economic Circle. The complex will be equipped with a wholesale and exhibition fair, sorting and processing, cold chain transport, logistics and warehousing, quarantine and monitoring, and operation and management as well as support facilities. The report also reveals the Centre will integrate three major Macau targeted distribution centres in order to create an import-export demonstration base for agricultural products logistics, distribution, and circulation.
Business Daily Thursday, August 3 2017 5
Macau Gaming
Ambrose So: Grand Lisboa Palace construction resumed CEO of the local gaming operator says performance in July has rebounded following the recent drop in revenue during the first half of the year Cecilia U cecilia.u@macaubusinessdaily.com
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ork on the new property under construction on Cotai Grand Lisboa Palace - resumed yesterday, confirmed the Chief Executive Officer of local gaming operator SJM Holdings Ltd., Ambrose So Shu Fai, on the sidelines of the 13th annual SJM Scholarship Awards at Grand Lisboa yesterday. “In the meantime, of course, we have lost about seven to eight weeks and we are trying to readjust the programme of construction to try to catch up with the schedule,” said So, adding that the operator estimated that the new property - on which construction was suspended following industrial accidents on the site last June - would be unveiled by the second half of 2018. Meanwhile, when asked whether the absence of operations on the Cotai Strip had affected performance during the first half of the year, given that MGM also suffered shrinkage in its VIP segment with no property beyond the Peninsula, Mr.So said “it was just a coincidence”. Citing interim results posted on the Hong Kong Stock Exchange on
Tuesday, Mr. So affirmed that the two situations “would last in one blow”. “The performance in the premier mass was not satisfactory and the disappointing result [of the segment] is only because of bad luck,” remarked the CEO. While the second situation is owing to the awaited approval of the government for the renovated Jai Alai. “Currently, the hotel of Jai Alai is still waiting for official approval but we have already hired people to operate it,” explained Mr. So. “Considering all the conditions, our performance in the second quarter is very similar to the first quarter [...] so [we] hope that improvements appear in the third quarter.” When asked the reason for the long wait for permission for Jai Alai, the executive director of SJM, Angela Leong On Kei, cited a statement made by the Chief Executive during the plenary session in the Legislative Assembly yesterday that the government is improving the procedures of approving licences. The casino area in the Jai Alai building commenced operations in December last year, while the retail area in the building started business last April. The 132-room Jai Alai Hotel is still awaiting permission from the
Ambrose So Shu Fai, Chief Executive Officer of SJM Holdings Ltd.
government, as stated in the company’s recent filing. The CEO revealed that performance in July alone “has rebounded significantly”. Total revenue fell 1.9 per cent, to HK$20.64 billion, while gaming revenue decreased 2 per cent, to HK$20.37 billion, profit falling 12.9 per cent, to HK$955 million and adjusted EBITDA (earnings before interest, taxation, depreciation and amortization) fell 7.7 per cent to HK1.5 billion.
On the other hand, Mr. So confirmed that Andrew Billany, the senior vice president of operations at SJM Cotai, had already announced his resignation to the board. “We had planned to assign Andrew Billany to engage in the Grand Lisboa Palace operation, but now we will have to hire more people [to compensate],” said the CEO. The SJM CEO disclosed that Billany is to take another position at another company outside of Macau. advertisement
6 Business Daily Thursday, August 3 2017
Macau Greater Bay Area
Rolling out the plan The Greater Bay Area Plan - now inked and published - will operate under the guidance of the markets and promotion by the government, strengthening mechanisms for co-operation and technological innovation Sheyla Zandonai sheyla.zandonai@macaubusiness.com
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HE Macau SAR Government ordered the publication of the Framework Agreement for Strengthening Co-operation between Guangdong-Hong Kong-Macau and the Promotion of Construction of the Greater Bay Area in the Official Gazette yesterday. The signing of the framework agreement took place in early July, with the text promulgated on July 19. The Greater Bay Area Plan is co-ordinated by the National Commission for Development and Reform (NCDR). According to the text, the Framework seeks to maximise the global
benefits for Guangdong, Hong Kong and Macau’s respective populations by deepening mutual and bilateral co-operation. Overall, it is set to foster high level international co-operation, enhancing the guiding role in national
economic development and the country’s openness to the outside world. In particular, it seeks to inject new life into the development of Macau and Hong Kong while maintaining conditions for long-term prosperity and stability in the two Special Administrative Regions (SARs).
Guiding principles
The framework establishes five main principles for co-operation between the Province and the SARs. First, it aims to open up the economies of the Delta by improving and
Seven priority areas of co-operation • Boosting infrastructure links • Raising the level of market integration • Creating an international centre for technological innovation • Building a system of modern industries of co-ordinated development
• Collectively building a community with good quality of life, praised for good living, working and tourism standards • Fostering a new advantage in international co-operation • Supporting the construction of important co-operation platforms
boosting innovation in trading and investment practices. Secondly, it seeks to maximise the use of the relative advantages of all parties by innovating and improving co-operation systems and mechanisms, strengthening co-ordination and the co-ordination of policies and plans. Thirdly, the plan frames the allocation of production resources throughout the region under the guidance of market principles and promotion by the government. Moreover, the framework aims to foster systems’ innovation and co-operation mechanisms by enabling the implementation of pilot projects and the resolution of crucial problems affecting the populations of the area such as the question of retirement benefits. Finally, ecological priorities and green development have been inked as sustainable development goals guiding construction, industrial production, and the framing of ways of life in the metropolitan region.
Cross-border trade
Shrinking CEPA Local exports under the Closer Economic Partnership Arrangement have decreased 8.2 per cent monthly to almost MOP7 million Nelson Moura nelson.moura@macaubusinessdaily.com
The value of local exports of zero tariff goods to Mainland China under the Closer Economic Partnership Arrangement (CEPA) dropped 8.2 per cent month-on-month to almost MOP7 million (US$869,657) in July, with a 34.6 per cent yearon-year drop, according to the latest data released by the Macao Economic Services (DSE). For the first seven months of this year, the total value of exported local goods to Mainland China reached MOP49.54 million, a 6.3 per cent decrease from the same period of last year. Between the time of the policy’s
implementation in 2004 and end-July this year, the total value of goods exported hit MOP816.01 million. As at the end of last month, some 624 local firms were holding Macau Service Supplier certificates, two more than the 622 recorded in June of this year. The certificate allows local companies and enterprises to operate on the Mainland and enjoy zero tariff treatment. Official data shows that the majority of certificate holders – 308 or nearly 52 per cent of the total – were engaged in the transport industry, such as those operating freight forwarding agencies, and businesses related to logistics, storage and warehousing as well as transportation.
Following these firms, were those engaged in medical and dental services, accounting for 147 companies, or around 25 per cent of the total certificate holders.
In July, there were also 41 certified firms from the convention and exhibition services sector and 33 certified firms from the real estate sector under the CEPA agreement.
HKEx
Local construction firm applies for listing Kin Pang Holdings Limited, a local integrated construction contractor, submitted its application for listing on the Hong Kong Stock Exchange (HKEX) on Tuesday. Established in 2006, the contractor primarily engages in building and ancillary services as well as emergency repair services, with their business mainly based in Macau, according to the application filing on the HKEX. The building and ancillary services
involve foundation associated works, hard landscaping, alteration and addition works, as well as works relating to roads, water pipes, electricity and mechanism. The firm has completed 158 projects, and is currently engaged in 21 building and ancillary services projects, with an aggregate outstanding contract sum of MOP116.6 million (US$14.48 million). For the first five months of this year,
JV
Club Cubic operator goes into restaurant business A subsidiary of Luk Hing Entertainment Group Holdings, operator of Club Cubic in the MSAR, has entered into a joint venture for the operation of a Chinese restaurant and bar located in Harbour City, in Kowloon district of Hong Kong, according to a filing with the Hong Kong Stock Exchange. The venue of the restaurant and bar will be rented. The subsidiary of the company,
L&B Betula, will invest HK$17.75 million of the aggregate HK$25 million total invested in the joint venture – holding 71 per cent of the joint venture. The other investors in the project are Brilliant Hero and Guangdong Weikedor, holding 20 per cent and 9 per cent ownership, respectively. Given its entry into the business segment, the group notes that it ‘incurred and expects to continue
to incur substantial start-up and pre-opening costs, including but not limited to additional staff costs, rentals, commission and professional fees, as well as promotion expenses’. The group expects an ‘adverse impact’ on its 2017 results, noting that as a result of the venture ‘the operating expenses increased and are expected to continue to increase significantly in 2017’.
the company booked a revenue of MOP77.30 million, with gross profit reaching MOP17.32 million. The profit made this year posted an increase of 57.5 per cent when compared to the MOP11 million made in the same period last year. According to the filing, the initial nominal value of the company’s share costs HK$0.01, although the filing has yet to reveal the number of shares to be allocated to the market.
Business Daily Thursday, August 3 2017 7
Macau Trademark
Playing the Trump card in Macau? A new series of brand registration requests by a company running Donald Trump’s trademarks has been filed in the Macau SAR, seeking, in particular, registration for casino business Sheyla Zandonai sheyla.zandonai@macaubusiness.com
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company managing trademarks linked to the President of the United States, Donald Trump, has filed a series of registration requests in the Macau SAR under the brand name ‘Trump’, an announcement in the Official Gazette showed yesterday. Particularly noteworthy in the series of trademark applications requested is the one for ‘gambling and casino services and casino facilities.’ In all, the four trademark approvals sought under the
name ‘Trump’ were filed on June 7, 2017 by DTTM Operations LLC, a Delaware-based company that Donald Trump set up in January 2016 to manage his trademarks, according to Mother Jones newspaper. In accordance with the Macao Industrial Property Code, a two-month period follows for filing a complaint after a trademark application request is published in the Official Gazette. The ‘Trump’ trademarks now pending approval in Macau cover a large array of business sectors. In addition to casino services, they range from residential
and commercial real estate management, financing, and development and construction, to hotel services, food and beverages, and conference and function facilities. Trump Tower and Trump International Hotel and
Tower were two other brands applied for in the name of Donald J. Trump for trademark registration in Macau in 2006 and 2008, according to Newsweek publication. Last March, China granted preliminary approval for
38 new Trump trademarks, opening the way for the U.S. President and his family to potentially develop a host of branded businesses ranging from insurance to hotels and golf clubs, Insurance Business America reported.
Hospitality accolade
Tigre de Cristal nominated best hotel in Russia A hotel property majority-controlled by Lawrence Ho - Summit Ascent Holdings’ Tigre de Cristal Hotel and Resort in the Russian Far East - has been nominated for the World Travel Awards in the category of Russia’s Leading Hotel
2017, according to Prima Media. Tigre de Cristal opened in 2015 in the Primorye Krai Integrated Entertainment Zone on the outskirts of Vladivostok. The complex, which includes a 121-room hotel, also offers two
main gaming floors with 42 mass market gaming table and 759 slot machines and electronic table games (ETGs), according to the company. The Ritz-Carlton Hotel in Moscow was the winner in the last four
editions of the World Award in the category Tigre de Cristal is now nominated for. The international award, established in 1993, acknowledges and rewards excellence across key sectors of the travel, tourism, and hospitality industries. The awardees are selected by voting by tourists and industry specialists. S.Z. advertisement
Profit warning
Genting warns of US$200-220 mln net loss in H1 Gaming, cruise ship and hospitality operator Genting Hong Kong Limited has announced a profit warning for its first half-year results, according to a filing with the Hong Kong Stock Exchange. The group notes that it is ‘expected to record a consolidated net loss in the range of US$200 million to US$220 million (Mop1.61 billion to MOP1.77 billion),’ according to the filing. The group notes that the 171-198 per cent year-on-year increase in loss for the period is largely attributable to a more competitive environment in the cruise ship sector, with ‘a 13.7 per cent increase in new luxury cruise ship capacity in the industry’, as well as ‘higher marketing costs and startup costs of new Crystal river ships and
AirCruises operations’. The group recently announced it would launch its inaugural Crystal AirCruises flight during the Golden Week this year, replacing its initial plan for seven VIP air cruises set to take place between August 31 and October 13. The group also notes ‘additional depreciation and amortisation of new Genting Dream [cruise ship] and shipyards’. The group notes that ‘Despite the decline in its consolidated net results, the performance of the underlying core Asian cruise business has improved in the second quarter of 2017 compared to the first quarter of 2017, and the Group remains positive on the underlying core Asian cruise business for the second half of the year.’ K.W.
Loan business
Neptune lending more Local junket operator Neptune Group Limited has entered into a mortgage loan agreement with two independent third parties, according to a filing by the company with the Hong Kong Stock Exchange on Tuesday after trading hours. The loan deal amounts to HK$42 million, with a 7 per cent interest rate per year for a term of 12 months, and is provided by Top Vast, an indirect wholly owned subsidiary of the company. Neptune noted it expects to receive annual interest income of HK2.94 million during the term of the loan. A residential property located on ‘a prime site in Hong Kong’ Island appraised at HK$60 million will serve
as collateral for the deal. Since the end of 2016, Neptune has started diversifying its portfolio by engaging in the money-lending business. Earlier this week, Hou Wan, a junket service provider operated by the company, received notice from The Venetian of the termination of operations in the property, effective August 30. The termination of business involving Hou Wan comes after The Venetian terminated other business of the company, suspending the operation of 14 VIP tables in the casino run by another subsidiary of Neptune, Hao Cai Sociedade Unipessoal Limitada, effective June 30, 2017. S.Z.
8 Business Daily Thursday, August 3 2017
Greater china Summit
BRICS trade ministers vow to fight protectionism The ministers also approved guidelines for cooperation between the five countries on intellectual property rights
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hina and the other BRICS nations pledged yesterday to fight protectionism and safeguard intellectual property rights, even as U.S. President Donald Trump considers action against what he sees as unfair trade practices by China. Trade ministers from Brazil, Russia, India, China and South Africa concluded two days of meetings in Shanghai agreeing to deepen trade and investment links, and “safeguard and develop” the multilateral trading system, according to a statement by Chinese Commerce Minister Zhong Shan. “Ministers were committed to continue to firmly oppose trade and investment protectionism, recommitted to their existing pledge for both standstill and rollback of protectionist measures, and called upon countries to join in that commitment,” the statement said. The ministers also approved
guidelines for cooperation between the five countries on intellectual property rights (IPR). “Ministers agreed to promote exchanges and cooperation on IPR legislation and enforcement in order to create favourable conditions for trade and innovation-driven economic development,” the statement said. On Tuesday, a senior Trump administration official said Trump could decide as early as this week on how to respond to what he considers China’s unfair trade practices. A Chinese commerce ministry official declined to answer questions about Trump. The United States has a long list of grievances about China on trade, including accusations of steel dumping and theft of U.S. intellectual property. Trump promised tough measures during his campaign last year but so far has not followed through. Trump’s interest in penalizing Beijing has risen because of his concern
Chinese President Xi Jinping speaks during a meeting with the delegation from the seventh meeting of BRICS senior representatives on security issues at the Great Hall of the People in Beijing, China, 28 July 2017. Lusa
at what he perceives to be Chinese inaction on reining in an increasingly belligerent North Korea, which is pursuing its missile and nuclear weapons programmes in defiance of U.N. Security Council resolutions. Beijing has repeatedly said its
influence on North Korea is limited and that it is doing all it can. Moreover, it argues trade between China and the United States benefits both sides and that Beijing is willing to work with Washington to improve their trade relationship. Reuters
Markets
Billionaire triples wealth and shorts see a fat target While investors from China have cheered Sunac’s deal making, bears have zeroed in on the company’s ballooning liabilities Short sellers are calling time on the remarkable rise of Sun Hongbin. The Chinese billionaire, whose roller-coaster career has included a stint in prison and the forced sale of a developer he once predicted would become the nation’s largest, finds himself in the crosshairs of hedge funds and other bearish speculators after the biggest hot streak of his nearly three decades in business. Sun’s fortune has more than tripled this year to US$5.1 billion after shares of his real estate firm, Sunac China Holdings Ltd., recorded one of the largest rallies worldwide. In Sunac, short sellers see a prime example of what ails the broader Chinese economy: an overdose of debt-fuelled investment. Even as some of the company’s high-flying peers have scaled back their ambitions amid rising borrowing costs and growing regulatory scrutiny, the Tianjin-based developer has piled on leverage to buy everything from distressed land assets to Dalian Wanda Group Co.’s theme-park business and a US$2.2 billion stake in LeEco, a cash-strapped Chinese media and technology conglomerate. While investors from China have cheered Sunac’s deal making -- fuelling a 212 per cent jump in the stock this year -- bears have zeroed in on the company’s ballooning liabilities. At an estimated 349 per cent, Sunac’s debt-to-equity ratio is nearly five times higher than its industry peers. What’s more, exchange filings indicate that Sun may have pledged 84 per cent of his controlling stake in the company, a potential overhang if the stock price were to fall enough to trigger a margin call. “People are worried about Sunac’s financial stability and leverage after the LeEco investment and the Wanda deal, while Chinese banks are generally tightening their loans to private companies,” said Dan David,
the chief investment officer at FG Alpha Management who’s known for his short-selling reports. While he isn’t currently betting against Sunac, David said he’s following the company closely. The stock fell 4.9 per cent in Hong Kong yesterday, the biggest drop in the MSCI China Index, as Sunac announced plans to issue dollar bonds to refinance existing debt. The company may raise as much as US$1 billion, according to people familiar with the offering. Short interest in the developer has swelled to a record 15.4 per cent of shares available for trading, according to data compiled by IHS Markit. Sell-side analysts are bearish too, with share-price targets compiled by Bloomberg on Tuesday implying a 37 per cent drop over the next 12 months, the most negative outlook among Hong Kong-listed companies with at least two analyst forecasts. But betting against Sunac is by no means a sure thing. The risk for short sellers is a repeat of their failed attempt to call the top in China Evergrande Group, one of Sunac’s heavily indebted rivals. Evergrande shares have surged nearly 170 per cent since early May, burning bears who had doubled their short positions in the preceding two months. Despite its heavy debt load, Sunac’s top-line growth has been impressive. The company’s property sales almost doubled in 2016 as its push into China’s booming second-tier cities proved prescient. That tailwind may to continue this year, with forecasters including Nomura Holdings Inc. predicting strong first-half results from Chinese developers. Chinese investors, meanwhile, have embraced Sunac’s spending spree. Their combined stake in the developer, purchased through the country’s cross-border exchange links with
Hong Kong, has swelled to at least 25 per cent from about 14 per cent a year ago, according to data compiled by Webb-site.com. Many retail punters admire Sun for his bold expansion plans and his ability to weather adversity. (He spent less than two years in prison in the early 1990s after being convicted for embezzlement, a ruling that was later overturned.) The Sunac founder’s rags-to-riches story is one reason why Ping Jingwu, a 25-year-old individual investor from Shandong, is bullish on the company. He sees Sun as one of the savviest developers in China and says Sunac’s massive land holdings make the stock cheap. “They’re fast, rational, and forward-looking,” said Ping, who began investing in Sunac in mid-2016 and went “all-in” on the shares this year.
‘The stock of Sunac fell 4.9 per cent in Hong Kong yesterday, the biggest drop in the MSCI China Index’ Sunac declined a request to comment for this story, while Sun didn’t return a message sent to his WeChat account seeking comment on short sellers, share pledges and Sunac’s leverage. Last week, the billionaire vowed to slow Sunac’s expansion and reduce debt levels, according to a posting on his microblog. Still, Sunac appears to be employing some of the same tactics that got Sun into trouble at his previous developer, Sunco Group. In 2003, Sunco rapidly increased its land acquisitions and construction projects, taking on debt to finance the expansion. The following year, government austerity measures sparked a market downturn and the company struggled
to service its liabilities. Sunco was eventually broken up and sold. Jitters over Sunac’s debt burden came to the fore on July 18 after a local media outlet reported that domestic banks were reviewing the developer’s credit risk. Sunac shares plunged as much as 13 per cent on the news. While the stock has since rallied to fresh highs, the recovery has failed to deter bears. Sunac’s short interest, as indicated by shares out on loan, climbed to an all-time high on July 28, surpassing that of Evergrande to make Sunac the most-shorted developer in Hong Kong. Sunac’s financial metrics help explain why bears are so persistent. The shares trade at 15 times projected 12-month earnings, a 32 per cent premium versus peers, while the company’s profit margin is half the industry average. Even after raising US$516 million in a share sale last week, Sunac’s debt-to-equity ratio is about 50 per cent higher than it was at the end of 2016, according to Bloomberg Intelligence. Sun’s suspected share pledge, indicated in a November exchange filing, could be another concern for Hong Kong traders wary of such financing arrangements. When China Huishan Dairy Holdings Co. tumbled 85 per cent in Hong Kong trading four months ago, the rout was exacerbated by an unwinding of shares held by the company’s controlling stockholder, who had pledged nearly all his stake for loans. Sun is likely to have pledged his Sunac shares at levels far below where the stock is currently trading, giving him a sizable cushion against losses. For investors, the risk posed by the pledge depends largely on their view of where the shares are headed from here. “On the very same moves by Sunac, different investors take the exact opposite sides,” said Mars Li, Hangzhou-based portfolio manager at Zhejiang Mofeng Investment & Management Co. “Supporters feel they are always cheerfully surprised. For bears, Sunac brings nothing but unpleasant shocks.” Bloomberg News
Business Daily Thursday, August 3 2017 9
Greater China Real estate
Priced out of home market, Mainlanders snap up Thai properties Thailand ranked sixth in number of Chinese real estate buying enquiries made in 2016, but moved up to No.3 in the first half of 2017 Donna Airoldi and Clare Jim
Mainland Chinese are snapping up more properties in Thailand for both personal and investment purposes, after being priced out of the market in big cities at home, developers in the Southeast Asian country said yesterday. With its beaches, varied street food and ancient temples, Thailand has become a holiday favourite with Chinese visitors, who are expected to account for close to a third of an estimated record 35 million tourists this year. Thai property developer Sansiri Pcl, which is opening three new offices in China this year to join its Beijing branch, said sales to Chinese buyers had risen steadily over the past three years. “In 2014, they comprised about 15 per cent of our foreign buyers. Last year, almost 30 per cent. This year they might actually be up to, or surpass, Hong Kong, which has been our lead market for years,” Cobby Leathers, Head of International Business
at Sansiri, told Reuters. The CEO of Raimon Land Pcl, Adrian Lee, said three to five years ago Chinese buyers accounted for 20-30 per cent of the company’s foreign buyers. Now they make up around 60 per cent. Thailand ranked sixth for the number of Chinese real estate buying enquiries made in 2016, but moved up to No.3 in the first half of 2017, said Sue Jong, chief of operations for Juwai. com, a major Chinese international property portal. “We are also seeing a formerly under represented buyer appearing in larger numbers. This is the upper middle-class Chinese buyer who can’t afford property in more expensive countries,” said Jong. Two-thirds of Chinese buyers are looking at property that costs US$250,000 or less, Jong added. Shu Feifei, 33, a native of Chengdu in China’s south-western Sichuan province, said she had bought two properties in Bangkok in the past two years and that she rents them out through the short-term rental
website Airbnb. “Investing there was a better option than investing in China,” Shu told Reuters. “In Thailand, it’s good for foreigners to buy smaller properties, it’s easier to rent out too if they want to rent,” Shu said, adding she had received many enquiries through social media from Chinese investors interested in doing the same.
“We are also seeing a formerly under represented buyer appearing in larger numbers. This is the upper middle-class Chinese buyer who can’t afford property in more expensive countries” Sue Jong, chief of operations for Juwai.com China home prices have seen significant growth since the start of last year, with gains spilling over to smaller cities in recent months as authorities placed restrictions to keep prices in check in major cities. Bangkok and seaside favourites Phuket and Pattaya are top destinations for Chinese buyers, according to Chinese real estate portal Juwai.com. The surge in Chinese buyers has continued despite a recovery in the yuan in 2017 after falling to a near 8-year low against the dollar in late 2016. Reuters
Energy
Beijing defends gas field activity in East China Sea Earlier this year, U.S. President Donald Trump offered reassurances the U.S. would come to Japan’s defence if China were to seize the uninhabited Senkaku islets, which it calls Diaoyu China yesterday defended its oil and gas activity in the East China Sea as occurring in areas “indisputably” under its jurisdiction, after Japanese protests stirred a longstanding dispute over the region. The two countries both claim islands in the East China Sea controlled by Japan, which knows them as Senkaku, and regularly send ships to nearby waters to assert their claims amid repeated diplomatic clashes. Talks between Tokyo and Beijing begun in June 2008 to cooperate over oil and gas resources in the area broke down two years later amid rising tensions, and have not resumed. On Tuesday, Japan’s top government spokesperson Yoshihide Suga told reporters it was “extremely regrettable that China is unilaterally continuing its development activity” by stopping mobile drilling ships near the median line separating the two countries’ exclusive economic zones (EEZ). He added that Japan lodged a protest late last month after noticing
the activity but did not specify what exactly the Chinese ships were doing. “China’s oil and gas activities in the East China Sea are all located in maritime areas indisputably under Chinese jurisdiction,” China’s foreign ministry told AFP in a statement,
adding: “The so-called issue of ‘unilateral exploitation’ does not exist.” The gas field under the joint development agreement lies in an area where both countries’ EEZs overlap. Japan says the median line between the two nations should mark the limits of their respective EEZs. But China insists the border should be drawn closer to Japan, taking into account the continental shelf and other features of the ocean. China’s foreign ministry said it rejected the idea of a median line between Japan and China, calling it “Japan’s unilateral proposition.” Chinese drilling ships were last spotted near that line in October 2016, Kyodo News and the Sankei Shimbun daily reported. So far, China has built 16 drilling platforms on its side near the median line, the Asahi Shimbun reported. Earlier this year, U.S. President Donald Trump offered reassurances the U.S. would come to Japan’s defence if China were to seize the uninhabited Senkaku islets, which it calls Diaoyu. In a joint statement with Japan’s Prime Minister Shinzo Abe in February, the pair said they “oppose any unilateral action that seeks to undermine Japan’s administration of these islands”. AFP
In Brief Overseas
Beijing issues rules to curb investment risks China’s finance ministry has issued guidelines on overseas investment of state-owned enterprises (SOEs), amid a campaign to tighten controls on outbound investment and financial risks. The guidelines will help “strengthen financial management of overseas investment of state-owned enterprises, prevent financial risks and improve investment efficiency,” the ministry said in a statement yesterday. The guidelines covered areas of investment decisions, financial management, cost control, dividend distribution and foreign exchange business. In January, China issued regulatory rules on outbound investments by centrally-controlled state firms. FX regulator
Legitimate use of assets to get loans accepted China’s foreign exchange regulator said yesterday it supports the legitimate use of domestic assets as collateral for overseas loans. The State Administration of Foreign Exchange said that media reports that it is investigating certain firms’ use of domestic assets as collateral for foreign loans are not true and that it is not examining these practices. Bloomberg reported on Tuesday that SAFE was examining companies including Anbang Insurance Group, Dalian Wanda Group Co, Fosun International, and HNA Group on how they use domestic assets as collateral for foreign loans. Media
Provinces launching more state capital investment firms Twenty-one of China’s provinces have set up 52 firms to invest public funds, the state-owned Economic Information Daily said yesterday. The move comes after China said at the end of 2016 it will allow local governments to meet “reasonable” funding requirements to support economic growth this year, even as it sought to curb burgeoning debt and rein in credit growth. The firms have been set up by State-owned Assets Supervision and Administration Commissions at the provincial and city levels and will be investing state funds, the paper said. Auto industry
Honda outsells Toyota in mainland Honda Motor Co is outselling its bigger, deeper-pocketed rival Toyota Motor Corp in China this year, data from the Japanese companies shows, helped by new model launches and strong sport-utility vehicle (SUV) offerings. Honda said yesterday it sold 113,803 vehicles in the world’s biggest auto market last month, up 11.6 per cent from a year earlier. Its sales volume for the first seven months of 2017 amounted to 757,970 vehicles, up 17.6 per cent from the same period a year ago. Toyota sold 732,900 vehicles in China during the first seven months of this year, up 6.2 per cent from a year earlier.
10 Business Daily Thursday, August 3 2017
Greater China Internet
Amazon mainland partner tells users to stop using illegal VPNs The government has shut down dozens of China-based VPN providers and has been targeting overseas services as it tightens control over the internet
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Chinese partner of global e-commerce firm Amazon.com Inc has told customers to end the use of illegal virtual private networks (VPNs), which can allow users to circumvent internet censorship. The instruction comes after Apple Inc removed VPN services from its Chinese app store over the weekend, amid a government crackdown against their use to bypass the so-called “Great Firewall”, which restricts access to overseas websites. In January, the government passed laws banning all VPNs not approved by regulators. Its stance is that rules governing cyberspace should mimic real-world border controls and that the internet should be subject to the same laws as sovereign states. “If we discover (clients using unapproved VPNs), we will shut down services,” said a member of staff at Beijing Sinnet Technology Co Ltd, which operates Amazon’s cloud business,
A m az o n W eb S e rvi c es (AWS), in China.
“We’re hopeful that over time the restrictions we’re seeing are lessened, because innovation really requires freedom to collaborate and communicate” Tim Cook, Apple’s Chief Executive Officer “This is in accordance with directives from the Ministry of Industry and Information Technology (MIIT),” said the person, referring to the regulator that oversees VPN use. “We have asked clients to
check all illegal cross-border businesses.” The person was not authorized to speak to the media and so asked not to be identified. A member of staff at AWS, also on condition of anonymity, likewise said directives had come from the MIIT. The MIIT did not respond to requests for comment. Amazon did not respond to Reuters’ requests for comment outside of U.S. business hours, but the firm told the Wall Street Journal that Sinnet was “responsible for ensuring that its customers in China comply with local laws”.
“Their notice was intended to remind customers of their obligations,” an Amazon spokeswoman told the newspaper. The government has shut down dozens of China-based VPN providers and has been targeting overseas services as it tightens control over the internet, ahead of a Communist Party congress later this year. The MIIT has also requested Internet network providers to high-end hotel chains - rare locations where users could access otherwise blocked sites - to stop recommending and helping install VPNs.
Apple’s Chief Executive Officer Tim Cook, talking to analysts about removing VPNs from its China app store, said the iPhone maker was complying with local laws, irrespective of whether it agreed with them. “We would obviously rather not remove the apps, but like we do in other countries we follow the law wherever we do business,” he said after Apple reported its earnings results on Tuesday. “We’re hopeful that over time the restrictions we’re seeing are lessened, because innovation really requires freedom to collaborate and communicate.” Reuters
Central bank
‘Mother PBOC’ squeezes traders again as money market tightens China’s money-market squeeze is back, with sovereign bonds beginning to feel the heat as the central bank keeps liquidity on a tight leash and concerns grow about a wall of fund maturities this month The yield on 10-year government debt has risen on all but two of the last 13 days to reach an almost two-month high, and the benchmark seven-day money-market rate surged the most since May on Tuesday. The People’s Bank of China -- seen to be pushing an official deleveraging drive with renewed vigour following a policy meeting last month -- refrained from boosting the supply on cash in the financial system for the third day in a row. “If ‘Mother PBOC’ doesn’t love you, every day is monthend,” Guotai Junan Securities Co. analysts Qin Han and Gao Guohua wrote in a research note yesterday. “The tightness at the beginning of the month is unexpected. It
may be because banks are granting loans aggressively at the beginning of the month, leading to a drop of lending in the interbank market, and to non-bank financial institutions.” China’s deleveraging drive has pushed borrowing costs higher. President Xi Jinping lent fresh impetus to the campaign at the July 14-15 National Financial Work Conference, with the Xinhua News Agency citing him as saying that the authorities will actively prevent financial risk. The PBOC may raise interest rates further, and the 10-year sovereign bond yield will probably climb to 4 per cent, Andre de Silva, head of emerging-market rates research at HSBC Holdings Plc, said in an interview in
People’s Bank of China headquarters
Hong Kong last week. The Guotai analysts pointed also to upcoming loan maturities, saying a combined RMB1.56 trillion (US$232 billion) will come due this month i n r ev e rs e- r e p u rc h a s e
agreements, Medium-term Lending Facility loans and treasury deposits. In addition, about 1.6 trillion yuan certificates of deposit will mature as well, they said. “The PBOC wants to maintain a neutral position, but if
it sees banks’ lending getting too aggressive, it could use open-market operations as a way to remind them not to be too aggressive,” said Chen Peng, fixed-income analyst at Fortune Securities Co. in Shenzhen. Bloomberg News
Business Daily Thursday, August 3 2017 11
Asia
Funding measures
S.Korea to hike taxes on conglomerates and the rich The hike would put South Korea’s top corporate income tax rate on par with the average of the world’s 20 major economies Cynthia Kim
S
outh Korea imposed stiff tax hikes yesterday, targeting leading conglomerates, high-income individuals and investors with large holdings of South Korean shares as President Moon Jae-in seeks to tackle income inequality and fund increased welfare benefits. The corporate tax changes will hit 129 companies in South Korea and are expected to increase government revenue from corporate taxes by 5 per cent or 2.6 trillion South Korean won (US$2.31 billion) from the 2018 tax year, the finance ministry said. The top marginal corporate income tax rate will be raised to 25 per cent from the current 22 per cent for corporations with more than 200 billion won (US$179 million) of taxable income a year, the finance ministry said in its annual statement on revisions to the tax code. The proposed changes in the tax code are subject to parliamentary approval, posing a challenge for the government in passing the bill as Moon’s ruling Democratic Party only holds 40 per cent of the 299 seats in the National Assembly. The hike would put South Korea’s top corporate income tax rate on par with the average of the world’s 20 major economies, at 25.7 per cent.
To address growing income inequality, “those who are better off, and conglomerates could contribute more to achieve social integration”, Finance Minister Kim Dong-yeon said at an embargoed briefing. “Spent well, it could boost income for the socially marginalised and increase investment on manpower, and help create a virtuous cycle in the economy,” Kim said. The government wants to raise more revenue to cover rising social welfare costs as a rapidly ageing population creates long-term problems for South Korea’s economy. South Korea is set to become a super-aged society by 2026, and has the fastest-rising average age among the Organization for Economic Co-operation and Development (OECD) countries. A super-aged society refers to nations where people of 65 years or older make up at least 20 per cent of population, according to the United Nations. Boosting household income is also an urgent task for the Moon Jae-in administration, as wages have failed to keep up with corporate earnings. Household income as a proportion of aggregate corporate income fell to 62.1 per cent in 2016 and has fallen steadily from 69 per cent in 1995, government data shows. The ratio of household debt to
disposable income is rocketing towards 190 per cent, as weak income growth pushes Koreans to borrow more for housing and living expenses. The government is counting on an 11 trillion won supplementary budget approved in July to support private consumption this year as corporate income failing to flow to households drags on growth. To fund such spending and reduce income inequality, the government plans to broaden its revenue base by taking more from the affluent and less from the poor.
Key Points Corporate tax hike to hit 129 big companies Large shareholders to face higher capital gains tax Income tax hike to hit about 93,000 high earners An income tax rate of 42 per cent will kick in on personal earnings exceeding 500 million won (US$447,0000) a year starting 2018, up from 40 per cent currently, the statement said. Income tax for annual earnings of 300 million won to 500 million won will be subject to income tax of 40 per cent from next year, up from 38 per cent. The tax hike on high incomes will affect about 93,000 salary earners and entrepreneurs, the finance ministry estimated.
A capital gains tax that is applied only to large shareholders will also be raised from next year. Large shareholders will pay a 25 per cent tax when their when they sell shares listed in the Korea Composite Stock Price Index (KOSPI) at a gain of more than 300 million won a year, up from current rate of 20 per cent. Capital gains of less than 300 million won a year will continue to be subject to 20 per cent tax rate. Capital gains tax will gradually be applied on a larger range of investors. By April 2021, individual shareholders with more than 300 million won worth of shares in companies in the KOSPI or a stake exceeding 1 per cent, will be subject to capital gains tax. Currently, capital gains tax is only applied to large shareholders with a stake exceeding 1 per cent or holding 2.5 billion won worth of KOSPI-listed stocks. Institutional investors will not be affected by the revised capital gains tax codes because they are subject to corporate income tax. Companies hiring workers will receive tax exemptions proportional to the number of jobs created through 2020, with small- to medium-sized companies eligible for proportionately larger tax benefits than large businesses. The revisions, which the finance ministry said would add 5.5 trillion won (US$4.9 billion) annually to government revenue, will be submitted to the National Assembly on September 1 for parliamentary approval. Revision of 13 tax codes will need to be approved, the ministry said. Reuters
12 Business Daily Thursday, August 3 2017
Asia Monetary stance
Japanese central banker says institution no longer setting deadline for inflation target Board member Funo said a strong economy and a tightening job market will likely gradually push up wages and inflation Leika Kihara
B
ank of Japan (BOJ) board member Yukitoshi Funo said the central bank no longer has a binding timeframe for meeting its ambitious inflation target, conceding the bank has essentially abandoned an earlier pledge to meet the goal in roughly two years. With inflation still flat lining despite years of massive stimulus measures, the BOJ has already postponed the target timeframe six times since setting it in 2013, most recently at a board meeting last month, pushing it back to 2019/20. BOJ officials, including Governor Haruhiko Kuroda, have toned down their commitment to meet the goal within a set timeframe since revamping the bank’s policy framework last year to one more suited for a long-term battle against deflation. But Funo’s comment on Wednesday was the first time a board member has publicly acknowledged that the BOJ has relinquished a binding timeframe for its target. “I don’t expect prices to surge suddenly any time soon,” Funo told reporters after meeting business leaders in Sapporo, northern Japan. “My understanding is that under the current policy framework, we don’t have a two-year deadline for meeting the target,” he said. “We still pledge to hit the price target at the earliest date possible. But I don’t think we need a set time frame for achieving it.” Funo has consistently voted for Kuroda’s proposals.
The BOJ launched its radical stimulus programme in 2013 to meet its pledge to achieve 2 per cent inflation in roughly two years. But it was forced to revamp its policy framework last year after failing to meet the goal for nearly four years. It now expects inflation to reach 2 per cent by around March 2020, well after Kuroda’s term expires in April next year, but some analysts say that still looks too ambitious as price pressures globally remain unexpectedly sluggish. Funo reiterated the central bank’s resolve to maintain its “powerful” monetary easing stance, as inflation remains distant from its goal despite signs of strength in the economy. But the former Toyota Motor Corp executive said private-sector and government efforts to boost Japan’s growth potential were also important to foster sustainable price rises.
“To achieve 2 per cent inflation stably, it’s very important to have a combination of monetary, fiscal steps and structural reforms,” he said. “What’s particularly important are structural reforms.” Kuroda has repeatedly said the BOJ will continue efforts to achieve the price goal at the earliest date possible. But he has recently stopped saying it will meet the goal in two years.
Room to boost productivity
Funo said a strong economy and a tightening job market will likely gradually push up wages and inflation. But he said there was a risk companies may remain reluctant to raise wages. Japan’s rapidly ageing population means the demand outlook for goods and services will slacken, so companies must cut excess output capacity and put their human resources to better use, he said. “Japan’s economy still has room to raise productivity when seen from a global perspective,” Funo said. To ease the pain from such streamlining efforts, Japan needs a growth
strategy to promote innovation and create new business opportunities, he said. For instance, the government can help companies develop attractive new goods and services, he added. Japan must also take steps to promote job mobility, while companies should cut excess services or overlapping operations to cope with labour shortages, he said. “Now is a good chance to proceed with structural reforms and growth strategies, because monetary conditions are very loose and the job market is tight,” Funo said. “Japan should not miss this opportunity.” Japan’s economy expanded at an annualised 1.0 per cent in the first three months of this year, posting a fifth straight quarter of growth on firm exports and a pick-up in consumption. Household spending hit a two-year high in June as job availability reached a 43-year peak. But core consumer prices rose just 0.4 per cent in June from a year earlier, underscoring the challenge policymakers face in beating deflation. Reuters
Bank of Japan headquarters
Labour
New Zealand employment unexpectedly falls Economists said the fall in unemployment was largely due to the participation rate slipping Charlotte Greenfield
New Zealand’s employment unexpectedly contracted in the second quarter for the first time in 1-1/2 years and wage growth slackened, reinforcing the central bank’s recent signal it could keep its policy rate at record lows at least until 2020. Employment rolls shrank 0.2 per cent in the second quarter, with 4,000 fewer people employed, after six consecutive quarters of gains. That translated into a 0.4 percentage point quarter-on-quarter drop in the employment rate. Market expectations were centred on employment rising 0.7 per cent in the June quarter. Most economists, however, weren’t overly concerned about the weak employment numbers given the volatility in the quarterly data. “The fact that it fell I think is more statistical noise than a clear signal. Labour market data is volatile,” said Philip Borkin, senior economist at ANZ. What was more worrying for policymakers is the sluggish pace of wages growth, with quarterly wage
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inflation at 0.4 per cent unchanged from the first quarter. At 1.6 per cent, annual wage inflation was also lower than consumer price inflation of 1.7 per cent in the second quarter. The Reserve Bank of New Zealand (RBNZ) has expressed concern that robust economic growth and industry complaints of labour shortages in high-skilled sectors such as technology and construction, have not
led to broad-based growth in wages. “This release reinforces the idea that the RBNZ will be in no rush to raise interest rates any time soon,” said Nick Tuffley, chief economist at ASB Bank. “There is just not a lot of sign of wage inflation coming through and you have also got that question mark being raised over the weak employment growth after two quarters of moderate GDP growth,” he added. The RBNZ, which is due to meet on Aug. 10 for a monetary policy decision, slashed rates throughout 2016
to the current record lows of 1.75 per cent in November. The central bank has signalled it will stand pat, possibly until 2020, to boost inflation. The data also showed the unemployment rate slipped, in line with expectations, to 4.8 per cent, lows last seen in the third quarter of 2016 - the weakest since the 2008 global financial crisis.
Key Points NZ posts surprise fall in Q2 job growth Jobless rate falls to 4.8 pct Wage growth remains tepid at 0.4 pct Q/Q Cenbank seen keeping rates on hold - economists Economists said the fall in unemployment was largely due to the participation rate slipping 0.6 percentage points to 70 per cent, meaning the overall pool of people looking for work was smaller and there were more jobs to go round. “The RBNZ will remain extremely comfortable with its ultra-neutral stance, though the labour market is the key area we expect to challenge the current dormant inflation picture,” ANZ’s Borkin said. Reuters
Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Nelson Moura; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@projectasiacorp.com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com Online www.macaubusinessdaily.com
Business Daily Thursday, August 3 2017 13
Asia Energy
South Asia becomes global LNG hotspot With Bangladesh set to join the club of importers next year, the region could import 80-100 million tonnes a year by the mid 2020s Ruma Paul and Henning Gloystein
South Asia, long a backwater for energy markets, is emerging as a hotspot for liquefied natural gas (LNG), with Pakistan and Bangladesh set to join India as major consumers, helping to ease global oversupply that has dogged this market for years. Only India and Pakistan currently import LNG in South Asia, taking in a combined 25 million tonnes, or 8 per cent of global demand last year. But with a fast growing population, strong economic growth and soaring energy demand, more import projects are being developed, lead by Pakistan and Bangladesh. “Both countries already have extensive gas infrastructure due to legacy production from domestic gas fields,” said Chong Zhi Xin, principal Asia LNG analyst at energy consultancy Wood Mackenzie. “As domestic production has failed to keep up with demand, both markets are a natural fit for LNG imports.” Pakistan only started importing its first LNG in 2015, and surprised some in the industry by developing its first terminal within schedule and budget. A second is about to become operational and a third is expected to be completed next year. With Bangladesh set to join the club of importers next year, the region could import 80-100 million tonnes a year by the mid 2020s, analysts said, making it the world’s second biggest import region, ahead of Europe.
from which gas will start flowing (by) next July,” Hamid told Reuters. Both FSRUs will be deployed off Moheshkhali Island in the Bay of Bengal, in the southeast of the country. They will have a combined capacity of 7.5 million tonnes a year. Two more FSRUs are planned, though no exact dates have been finalised. In addition, state-run Petrobangla signed a preliminary deal with India’s Petronet in December to set up an onshore terminal to regasify a further 7.5 million tonnes a year of LNG on Kutubdia Island, just to the north of Moheshkhali, at a cost of $950 million. “By 2025, depending on our national demand, we will import anywhere from 2,000 to 2,500 mmcfd gas,” Hamid said. Those imports would add to plans from India and Pakistan to buy 50 million and 30 million tonnes of LNG per year, respectively, by the mid-2020s. “LNG imports in South Asia are expected to rise four-fold from 22 million tonnes per year in 2016 to over 80 million tonnes per year by 2030,” said Mangesh Patankar, head of Asia/Pacific business development at energy consultancy Galway Group. Should all plans in the region go
Bangladesh boom
Bangladesh, a country of over 160 million people, could import as much as 2,500 million cubic feet per day (mmcfd) of LNG, equivalent to around 17.5 million tonnes per year, by 2025, said Nasrul Hamid, Bangladesh’s state minister for energy and power. With its own gas reserves depleting and seeking to almost double power capacity to 24,000 megawatt (MW) by 2021, Bangladesh is tapping cheap and plentiful supplies on world markets and investing heavily in LNG. Several floating storage and regasification units (FSRU), the first developed by private U.S. company Excelerate Energy, are due to begin importing cargoes starting in 2018. “We are working on two FSRU’s
ahead and Sri Lanka also start imports, this figure could rise to 100 million tonnes, industry project data shows. That would push South Asia’s demand ahead of Europe as the world’s second biggest LNG import region by 2020, though it would still lag North Asia’s 150 million tonnes of annual imports.
Key Points Bangladesh LNG imports could surge over 17 mln tonnes by 2025 Bangladesh, Pakistan benefit from existing gas infrastructure South Asia could import 80-100 million tonnes of LNG by 2025 The boom in demand will help ease oversupply in LNG markets, which have resulted in a more than 70 per cent price fall from their 2014 peaks to US$5.75 per million British thermal units.
Supply talks
Hamid said Bangladesh was in talks with Qatar’s RasGas and Indonesia’s Pertamina for long-term deals, while it also planned to import significant amounts of its future demand via the freely traded spot market. “We are looking for a mixture of both long-term contracts and the spot market,” Hamid said. Rupantarita Prakritik Gas, part of Petrobangla, in June posted a notice looking for LNG suppliers for spot cargoes from 2018. Not everyone believes Bangladesh and Pakistan will achieve their LNG ambitions. “It is likely to be an overly ambitious target... China took more than 10 years to reach 20 million tonnes of LNG imports. In India, it took 13 years to reach the same amount,” said Chong Zhi Xin. Low domestic gas prices also required LNG imports to be subsidised in Bangladesh and Pakistan, he said. “As LNG imports increase, so does the subsidy bill. Without pricing reforms, it would be a challenge for Pakistan and Bangladesh to fulfil their LNG import ambitions.” Hamid, however, is confident. In order to meet surging demand, he said LNG was part of an even bigger plan. “The solutions are FSRU, landbased LNG, deep sea exploration in the Bay of Bengal, and transnational (gas) grids ,” he said. Reuters
Vietnam targets 16 bankers in latest crackdown Several high-profile bankers are currently awaiting trial or serving lengthy prison terms Vietnam issued arrest warrants for 14 bankers and took two more into custody on Tuesday after accusing them of causing losses totalling hundreds of millions of dollars in the scandal-tainted sector. The communist government has been on the warpath against wrongdoers in an industry plagued by favouritism and dodgy loans -- part of a broader drive against corruption in the country. A total of 16 people from various private and government-owned banks are accused of deliberate misconduct, the Ministry of Public Security (MPS) said on its website without elaborating. The bankers allegedly colluded with the private Vietnam Construction Bank to skirt the law to
Monetary policy
India’s central bank cuts repo rate The Reserve Bank of India cut its policy rate yesterday by 25 basis points to 6 per cent, the lowest since November 2010, as slumping inflation allowed the central bank to focus on boosting an economy growing at the slowest pace in over two years. Forty of 56 economists polled by Reuters predicted the RBI would cut the repo rate by 25 bps - its first rate cut since one of the same size in October and the first easing move by a central bank in Asia since New Zealand in December. Real estate
Collusion
secure millions in loans, causing US$660 million in losses, state media reported. The group “deliberately violated state regulations on economic management, causing serious consequences”, MPS said. The two most senior bankers named are Tram Be and Phan Huy Khang from Sacombank, one of the country’s leading private banks. Both were arrested Tuesday. Be is the former bank deputy chairman and belongs to one of Vietnam’s richest families, who earned much of its fortune in logging, real estate, farming and jewelry. Khang was CEO from 2012 until he was sacked last month along with Be. Several people have already been punished. In September last year 36 former Vietnam Construction Bank employees were given jail terms of up to 30 years, after they were accused of secretly withdrawing millions of dollars from clients’ accounts to use for loans or keep for themselves.
In Brief
Vietnam has achieved several years of solid economic growth of five percent or higher, making it one of the best performing economies in Southeast Asia. But soaring public debts, bloated state-owned enterprises and rampant official corruption have threatened progress. Several high-profile bankers are currently awaiting trial or serving lengthy prison terms. Authorities have also targeted other sectors in their anti-corruption drive. Former state oil executive Trinh Xuan Thanh handed himself into police Monday after an 11-month manhunt. Also on Monday officials proposed that deputy trade minister Ho Thi Kim Thoa be stripped of her post for suspected wrongdoing at a stateowned lamp factory. Despite Vietnam’s vow to crack down on corruption, analysts have said prosecutions and punishments are often spurred by political infighting rather than a genuine commitment to reform. AFP
S.Korea rolls out toughest rules yet to cool housing South Korea will raise capital gains taxes on owners of multiple homes and impose fresh mortgage curbs to rein in speculators who policymakers blame for stoking a housing bubble in main regions across the nation. The latest measures - the third set of steps in 10 months - are the most stringent on record and signal government worries that rampant household debt could imperil the economy if left unchecked. Starting from April 2018, those with two homes in the designated regions will face 10 percentage point of additional capital gains tax, on top of the current tax rates ranging from 6 per cent to 40 per cent. Results
ANA Q1 profit rises 80 pct on international routes ANA Holdings Inc, Japan’s biggest airline by revenue, yesterday said first-quarter operating profit rose 80 per cent due to brisk business on international routes and after taking control of lowcost arm Peach Aviation Ltd. Profit for the three months through June was 25.4 billion yen (US$229.3 million). That compared with an average estimate of 18.8 billion yen from two analysts surveyed by Thomson Reuters. ANA maintained its forecast that operating profit would rise by 3.1 per cent this year to 150 billion yen. Trade
Thailand may export 11 mln T of rice in 2017 Thailand is likely to export 11 million tonnes of rice this year, the country’s commerce minister said yesterday, higher than its target. “Thailand is negotiating rice deals with many countries such as Sri Lanka and Bangladesh,” Commerce Minister Apiradi Tantraporn told reporters. “This will help improve Thai rice prices and push our export volume to reach 11 million tonnes,” she said. Thailand, the world’s second-biggest rice exporter after India, set an export target of 10 million tonnes for 2017. It has exported 6.3 million tonnes of rice so far this year, an increase of 16 per cent from the same period last year.
14 Business Daily Thursday, August 3 2017
International In Brief Mozambique
Kroll publishes revised report Consultant Kroll has altered parts of its report about Mozambique’s public debt to respond to some criticisms made by other consultants involved in the hidden loans to ProIndicus and Mozambique Asset Management (MAM). After the attorney general published the Executive Summary dated 23 June 2017, Abu Dhabi Mar, Privinvest and Palomar Capital Advisors Ltd / Palomar Consultants LLC wrote to Kroll regarding some parts of the summary, the new document states. An external, independent audit into the US$1.4 billion in undeclared loans was one of the demands by the international donors to start funding Mozambique once again. Results
StanChart gain undermined by uncertainty Standard Chartered Plc is seeing revenue growth as Chief Executive Officer Bill Winters makes progress in his overhaul of the lender. Still, the outlook is uncertain and the U.K. bank is unable to resume dividends. Operating income rose 6 per cent to US$7.2 billion from a year earlier, the London-based bank said in a statement yesterday. Loan impairments, which have marred the bank’s performance in recent years, almost halved. “The external operating environment has shown some signs of improvement in the first half as expected, but in other respects, the pace and extent of recovery remains uncertain,” Chairman Jose Vinals said in the statement.
Banking
Regulators to delay meeting in bid to reach capital deal Basel members such as the United States want a floor equivalent to 75 per cent of the amount standard regulatory capital calculations used by smaller lenders comes up with Huw Jones
B
anking regulators will postpone their next meeting in another bid to agree on global capital rules, taking more time to try to overcome objections from European banks to minimum capital levels, people familiar with the talks said. The negotiations are being closely watched by thousands of lenders, even though the rules would not come into force until 2024 or 2025, and Standard Chartered said yesterday it would not pay a dividend because of the regulatory uncertainty The next meeting of the Basel Committee of banking supervisors was set for mid-September but it is now expected in early October, the sources said. The Basel Committee, which has been trying to reach a deal since last year, had no comment. The Basel meeting delay will give officials more time to overcome European banks’ reluctance to accept a “floor” or minimum level of capital a big bank must hold, the sources said. Basel members such as the United States want a floor equivalent to 75 per cent of the amount standard regulatory capital calculations used by smaller lenders comes up with. Europe wants a figure nearer 70
per cent. Potential compromises include scaling back on capital elsewhere in the package if a floor of 75 per cent is chosen. Conversely, capital could be ratcheted up elsewhere in the package if a floor of 70 per cent is selected, the sources said.
“Clearly, Europe remained united in the last (Basel) meetings. I think there is a clear awareness and understanding in different (EU) countries of what is at stake” Frederic Oudea, chief executive of French bank Societe Generale A floor of 72.5 per cent would look silly but acceptable if it gets the deal done, one source said. Central bank governors such as the U.S. Federal Reserve’s Janet Yellen, the European Central Bank’s Mario Draghi and Bank of England chief Mark Carney are pushing for
a deal to allow the banking sector and regulators to move on. The rules under discussion would complete Basel III, the world’s response to undercapitalised lenders that taxpayers had to bail out in a financial crisis that started a decade ago. “Clearly, Europe remained united in the last (Basel) meetings. I think there is a clear awareness and understanding in different (EU) countries of what is at stake,” Frederic Oudea, chief executive of French bank Societe Generale, said yesterday. “There will be further discussions ... It would be 50:50 to have an agreement at the end of the day.” Bank of France governor Francois Villeroy de Galhau said last month that a floor set at 75 per cent would hit too many European banks. Other banking sector officials say this is because European banks don’t hold enough capital. Basel is also facing a growing list of members who want to delay implementing tougher capital requirements for banks’ trading books, a separate reform that has already been agreed. Singapore, Hong Kong and Australia are delaying the rules while the U.S. Treasury has recommended a delay and the European Union has proposed a phase-in. It is unclear if the committee would agree to an across-the-board delay - as it did twice with new rules that require cash to be set aside against trades - or simply let each member do it’s own thing and risk confusion in markets. Reuters
Angola
Cash dispensers expand, withdrawals surge The number of cash dispenser machine cards in the Angolan network increased by more than 1.5 million between January and June this year the company that runs the service said on Tuesday. Clients withdrew more than 22 million euros a day from the cash dispensers in the first six months, a new record. The system’s manager, Empresa Interbancária de Serviços (EMIS) said that in the first six months of the year, 766.6 billion kwanzas (3.9 billion euros) were withdrawn from the 2,920 cash machines in Angola. Oil industry
Russia sticks to global deal Russia’s oil output stood at 10.95 million barrels per day (bpd) in July, unchanged for a third month and in line with its pledge to curb production in an effort to support the price of crude, Energy Ministry data showed yesterday. The Organization of the Petroleum Exporting Countries and other producers led by Russia are cutting oil output until the end of March 2018. A committee of OPEC and non-OPEC nations recommended extending the curbs further if needed. On Tuesday, Russian Energy Minister Alexander Novak said the country had cut its oil output by 307,600 bpd in July.
Oil industry
Libya crude floods market again as OPEC fights to restrict flows An expected crude-price recovery has failed to materialize since January Conor Molumby and Rupert Rowling
Libya’s crude shipments jumped to a new three-year high last month, dealing a fresh blow to OPEC and allied oil-producing nations as they battle to restrict a global supply surplus that’s depressing prices for the commodity. The North African nation shipped about 865,000 barrels a day of crude in July, tanker tracking data compiled by Bloomberg show. That was a gain of 11 per cent from June, which was already the highest since at least July 2014. The pace at which Libya can revive crude sales is critical for the oil market because, along with Nigeria, the nation wasn’t bound by
Organization of Petroleum Exporting Countries supply restrictions that helped limit supply this year. Domestic conflicts mean the two nations can pump at will while other producer states are depriving themselves of export revenues. Nigeria is also boosting output as a militant campaign is quelled. Libya’s revival “hurts OPEC’s efforts to re-balance the oil market,” said Carsten Fritsch, an analyst at Commerzbank AG. It comes at a time when other countries that agreed to curb production are starting to comply less strictly with the accord, he said. The total output from OPEC members in July rose 210,000 barrels a day from June to reach 32.87 million
barrels a day, according to data compiled by Bloomberg. Libya led the gains. An expected crude-price recovery has failed to materialize since January, the start point for when OPEC, along with non-member nations including Russia, agreed to restrict collective output by about 1.8 million barrels a day. It may be a challenge for Libya to maintain its current rate of exports, according to Torbjorn Kjus, chief oil analyst at DNB Bank ASA.
‘The pace at which Libya can revive crude sales is critical for the oil market’ “It would be a surprise if they could keep production stable,” he said, adding that there are still too many groups and people battling for a share of the country’s oil sales. Bloomberg News
Business Daily Thursday, August 3 2017 15
Opinion Business Wires
Taipei Times Aboriginal rights campaigners (in Taiwan) yesterday condemned the government for having not carried out a promise to reinstate traditional Aboriginal territories, and they demanded that an independent agency be established to restore Aboriginal rights to land and transitional justice. President Tsai Ing-wen (pictured) on Aug. 1 last year delivered a landmark apology to Taiwan’s Aborigines for their deprivation of rights in the hundreds of years since the mass migration of Han people began. She promised to reinstate land rights, self-determination, economic development, cultural and language preservation and other rights protection.
OPEC is confronting a game-theory dilemma
The Phnom Penh Post Inflows of foreign capital into the Kingdom’s (Cambodia) banking sector nearly doubled during the first half of the year as two heavyweight players entered the local market and lending institutions responded to revised minimum capital requirements, a central bank official said. Chea Serey, director general of the National Bank of Cambodia (NBC), said that foreign direct investment into the banking sector amounted to US$439 million during the first six months of the year, an 89 per cent increase compared to the same period one year earlier.
The Korea Herald Prosecutors said yesterday they have launched an investigation into suspicions of accounting fraud at South Korea’s sole aircraft manufacturer, Korea Aerospace Industries Co., with its top executives already under probe for cost manipulation and slush funds. The Seoul Central District Prosecutors’ Office began its probe into KAI last month over allegations that some of its top officials manipulated expenses for development projects, including the making of a utility helicopter known as the Surion, to gain illicit profits. Now the prosecutors suspect that KAI also overstated the value of proceeds from the sale of a light attack aircraft, FA-50, to Iraq.
The Asahi Shimbun Sony’s fiscal first quarter profit nearly quadrupled from a year earlier, boosted by its lucrative image sensor and other businesses and highlighting a gradual recovery at the Japanese electronics and entertainment company. Sony Corp. reported Tuesday an 80.9 billion yen (US$735 million) April-June profit, up dramatically from 21.2 billion yen the same period a year ago. Quarterly sales gained 15 per cent to 1.86 trillion yen. Sony, whose sprawling business spans finance, movies, video games and consumer electronics, is seeing better results at its various units, including games, imaging products, semiconductors and home-entertainment systems.
O
ver the last few years, producers belonging to the Organization of Petroleum Exporting Countries (OPEC) have had mixed success at winning the pricesetting “game” for oil. To stand a better chance of regaining durable control, they must do a much better job of working together, and, importantly, they need to do so in a much broader and more institutionalized manner. Otherwise, they risk finding that the calming influence of a good July for the oil market, including a 9 per cent price gain, could give way to continuing pressure from non-traditional suppliers, particularly in shale, that are benefiting from cost-cutting innovations. To win the price-setting game, oil producers need to address two related issues: They must maintain prices at a relatively high level without losing more market share to non-traditional producers, and they need to retain unity amid geopolitical tensions and disparities in domestic economic and financial situations. The easiest way to achieve this -absent a major exogenous shock to oil production -- is through a large increase in energy demand. This is unlikely to happen anytime soon. The alternative is better supply management. Here, OPEC members have essentially three types of approaches available, and each comes with implementation challenges. The first is to try to establish and lead a broad coalition that includes non-OPEC producers and involves some type of understanding with non-traditional suppliers. This is OPEC’s best chance of reversing the multi-decade process of transition from a cartel of the many when it comes to share of energy production to the cartel of the fewer. But this first best approach for OPEC is not just the least likely; it may also be a non-starter, given that non-traditional producers have such a fundamentally different setup. They are much more dispersed and highly decentralized, and they have little experience in self-organizing. Also, many reside in the U.S., a legal jurisdiction that is highly averse to pursuing a governmentled approach to oil production. The second approach is for OPEC to try to strengthen its recent alignment with producers outside the cartel by seeking tighter production curbs and stronger verification and enforcement mechanisms, and adding the incentive of a stabilization fund that would help the more pressured producers through multiple cash crunches. Such a unified approach would provide oil producers with greater short-term influence over oil prices. Again, implementation is far from straightforward, as it would require a greater level of cooperation among a group that includes increasingly bitter geopolitical rivals. Moreover, a heavy funding
“
Mohamed A. El-Erian a Bloomberg View columnist
burden would need to be carried by the low-cost producers led by Saudi Arabia, and would involve a set of cross-subsidies that are likely to be a lot more permanent than they may wish to -- and should -- commit to. The third approach would be for OPEC to go all out to meaningfully disrupt the current production of non-traditional suppliers and, simultaneously, cripple the flow of funds for their investment needs. By allowing oil prices to plummet and stay low for a considerable time, this approach would eat into both operating earnings and investable funds in a manner that would render a recovery tricky and a lot more uncertain for these suppliers. It would be a repeat of what was attempted starting in November 2014, but with more duration and structural underpinnings. In this scenario, and without a meaningful pickup in demand, OPEC members would need to be willing and able to live with a lot lower oil prices. They would have to convince their citizens that the potential longer-term gains are worth what would likely be considerable short-term pain. And to maintain the type of unity that would be required to carry out potential mid-course corrections, they would need to introduce an even larger stabilization fund than required for second option. Again, this is not an approach that OPEC would readily adopt. But members could risk slipping into a disorderly version of it if the current arrangement with non-OPEC producers does not hold. This brief survey of the most likely types of supply approaches available to OPEC speaks to a larger notion of game theory. Having experienced a gradual and persistent erosion in its dominance of the oil market, OPEC members are being pushed to play a larger cooperative game that involves ever broader coalitions to secure an orderly influence on oil prices. This explains the step-up in contacts with non-OPEC producers. And it explains why the initial agreement reached already needs some tweaking. The survey also suggests that, at least for now, the most likely outcome is one in which OPEC seeks to influence a series of range-bound trading bands around what is likely to be a declining secular trend longer-term. Periods of price recoveries within the bands, such as the one in July, should reinforce rather that deter member countries from implementing the fundamental changes at home that would make them more resilient to what is likely to be a trickier future. Bloomberg View
OPEC members are being pushed to play a larger cooperative game that involves ever broader coalitions to secure an orderly influence on oil prices
”
16 Business Daily Thursday, August 3 2017
Closing State sales
Sri Lanka to divest luxury hotel firms after port sale
Holdings (Pvt) Limited, which owns a 49-floor building that will operate as Grand Hyatt Colombo once construction is completed. Sri Lanka yesterday announced plans to sell Canwill is currently incorporated as a private off two state-owned luxury hotel companies company, but its equity is held by three state following its billion-dollar privatisation of a lossentities -- the country’s main insurance company making port. and its subsidiary and the main pension fund. Government spokesman Rajitha Senaratne said ministers approved the seeking of bids for a 51 per Last year the insurance company valued the hotel cent stake in Hotel Developers (Lanka) plc, whose property at over US$240 million. The latest announcement came four days after luxury hotel in Colombo is managed by Hilton. the government sealed a US$1.12 billion deal to let He did not give a value for the company, which a Chinese state firm take over the southern port occupies prime land in the heart of Colombo. of Hambantota. AFP The government will also sell all of Canwill
Currency
Global traders have little to fear in hints of a freer yuan Since making the fixing more market-driven in August 2015, a vicious cycle of capital outflows and speculative selling has prompted policy makers to tighten control Justina Lee
W
hen China blindsided traders in August 2015 with the steepest yuan devaluation on record, the reaction in global markets was swift and painful: Emerging-market equities collapsed into a bear market, oil plunged and the S&P 500 Index began a slide that would spiral into its worst month in three years. But these days, a flurry of speeches and commentaries on the need for a freer yuan -- some of which suggested widening its trading band -- have caused barely a ripple. That’s because the People’s Bank of China has already succeeded in taming the market: thanks to suspected intervention and stricter capital controls, the spot rate has rarely moved more than 0.5 per cent on either side of the fixing, well within the 2 per cent daily limit. With a much steadier economy and financial markets, China faces a choice of returning to its commitment to freeing the currency, or keeping a tight grip to minimize risks ahead of a key political leadership shuffle in the fall. Fulfilling repeated pledges to ease exchange-rate controls would help the country retain monetary independence and open up its capital account -- while risking quicker declines in the yuan.
“Widening the band is a cheap way for them to be seen as delivering exchange-rate reforms without doing a lot,” said Sue Trinh, head of Asia foreign-exchange strategy at RBC Capital Markets in Hong Kong. “I don’t think we should kid ourselves that any widening of the band would represent any kind of exchange-rate liberalization. The reality is that China maintains tight control over the exchange rate.” The time is right for the currency to be allowed greater flexibility because the market is stable, the China Securities Journal said in a front page commentary on Tuesday, while PBOC Assistant Governor Zhang Xiaohui wrote Monday that the nation will let the market play a more decisive role. A newspaper run by the central
bank laid out the steps needed for further reforms in a July 12 report that included potentially widening the trading band.
Tighter controls
Since making the fixing more market-driven in August 2015, a vicious cycle of capital outflows and speculative selling has prompted policy makers to tighten control. They have restricted outflows, pushed up offshore yuan rates, intervened in the market occasionally, and, most recently, tweaked the reference rate mechanism. All these moves, along with a weaker greenback, have put the yuan on course for its first annual gain since 2013. It has strengthened 0.9 per cent this quarter to 6.7223 per dollar, extending its advance for the year to 3.3 per cent. The spot rate is now 0.03 per cent weaker than the fixing, compared with an average 0.9 per cent in the year leading up to the 2015 devaluation. The yuan’s trading range was last expanded in March 2014 from 1 per cent, and before that
doubled from 0.5 per cent in April 2012. The limit was 0.3 per cent ahead of an adjustment in May 2007. National Australia Bank strategists led by Christy Tan wrote in a note in mid-July that greater flexibility should first be about allowing more volatility within the current 2 per cent range. Bank of America Merrill Lynch’s Claudio Piron said in a note last week that increasing the band could make the yuan vulnerable to bigger declines in case U.S.-China trade tensions escalate. Tuesday’s Securities Journal article stressed that this was a good time to boost flexibility because volatility may rise again. “The yuan won’t keep remaining steady,” it read. “The current pricing mechanism and other measures are just temporary, transitional tactics to buy time for the market to adapt to greater flexibility.” Any move to increase the range will likely be preceded by more supportive commentary in the media, said Gao Qi, a Singapore-based strategist at Scotiabank. He wrote in a note yesterday that recent comments in state press and by officials have “markedly raised the odds of a band widening over the remainder of the year.” RBC’s Trinh said in a July 21 note that an unchanged band over the coming months would reinforce concerns over a lack of consensus in the leadership and suggest that calls for widening were criticisms against the current currency policy. “What we really need are policies that support a widening trading band -- that is, market-friendly reform,” said Axel Merk, president of Merk Investments LLC in San Francisco. “We see China taking as many steps forward as they take backward.” Bloomberg News
P2P
Luxury
Submarine deal
Singapore’s GIC leads funding round for Chinese lender
Chinese man pays US$10,000 for whisky shot at Swiss bar
French prosecutors investigate aide to Malaysian PM
Chinese peer-to-peer lending platform Dianrong has raised US$220 million from Singapore sovereign fund GIC Pte Ltd and other investors to fund R&D in China and potential ventures elsewhere in Asia. Other investors in the funding round included CMIG Leasing, a unit of China’s biggest private investment conglomerate China Minsheng Investment Group (CMIG), and South Korean fund manager Simone Investment Managers, Dianrong said yesterday. The Shanghai-based firm will use the funds to automate some of its new branches across China, for research and development and potential acquisitions, Dianrong’s co-Chief Executive Soul Htite told Reuters. Hong Kong boutique investment bank AMTD Group acted as financial adviser to Dianrong. The company, co-founded by Htite, who was also behind U.S. online lender LendingClub Corp, already has big backers including the private equity arm of Standard Chartered and technology-focused investment firm Tiger Global Management. It raised $207 million in a previous fundraising round in 2015. Reuters
A young Chinese man paid 9,999 Swiss francs (US$10,000) last week at a Swiss hotel for a glass of whisky made in 1878 by the revered Scotch maker Macallan, the 20Minuten website said. The hotel’s Devil’s Place Whisky Bar has been honoured for its 2,500 bottle collection, including by the Guinness Book of World Records. But proprietor Sandro Bernasconi told 20Minuten he never expected to open this particular treasure. After entering the bar with a group of people, the client expressed particular interest in the Macallans -- the hotel has 47 options, ranging from seven Swiss francs to ten grand. Now that the bottle is open, the hotel hopes to sell the remaining shots and may consider dropping the price, 20Minuten said. Before it was uncorked, the bottle had been valued at 50,000 Swiss francs, a relatively modest price compared to recent record sets by whisky bottles at auction. The identity of the young -- but presumably well-heeled -- connoisseur was not immediately available. A special collector’s blend of Macallan’s sold at auction in Hong Kong for nearly US$630,000 in 2014. AFP
French financial prosecutors have put a former aide to Malaysian Prime Minister Najib Razak under formal investigation as part of a probe into the 2002 sale of submarines to Malaysia, a French judicial source said yesterday. Razak Baginda has denied wrongdoing. He advised Najib, who was defence minister at the time, on the purchase of two Scorpene-class submarines from French state-controlled warship builder DCN International (DCNI) in 2002. DCNI then became a new entity called DCNS, which in turn rebranded itself as Naval Group this year. French defence company Thales owns around a third of Naval Group. “The inquiry by the French is welcomed as Dr Razak Baginda has not committed any crime of corruption or breached any laws in the matter,” the former aide said in a statement sent to Reuters. Two French former defence industry executives were placed under investigation last month as part of the same probe into alleged kickbacks from that submarines deal. In France, being put under formal investigation means there is serious or consistent evidence that points to likely involvement of a suspect in a crime. It does not necessarily lead to a trial. Reuters