Business Daily #1364 August 18, 2017 by Business Daily

Keep your hat on this Summer, Consigliere knows best Fashion & auction Pages 8 & 9

Friday, August 18 2017 Year VI Nr. 1364 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Education

Hengqin educational resources to lure MSAR locals Page 4

www.macaubusiness.com

HZMB bridge

Gaming

Operators

Page 2

Page 6

Page 7

Shuttle bus contract awarded

Jeju gaining momentum

Internet

Japan begins hearing for casino implementation

Mainland regulators broaden VPN crackdown Page 11

Proud of the Cloud Smart City

Technology experts consulted by Business Daily analyse the challenges and risks. Of the cloud data centre identified to power Smart City Macau. All agree that a huge investment in money and skills must be deployed, and the legal framework reinforced. With privacy issues still a moveable feast. Pages 4 & 5

Consensus at last. Reached yesterday by the committee charged with setting ownership ratios necessary for compensation for property rebuilds. The committee also agreed to cut property tax for owners.

New commerce channel takes off

Nansha link Yesterday, commercial links between the MSAR and Nansha strengthened exponentially. With the launch of a new logistics channel. Local products acquired through e-commerce platforms can now be delivered via the Hengqin Border Gate. Portuguese-speaking countries’ products purchased through local firms will also be fast-tracked. Page 2

Banks’ international Open Sesame! Results The e-commerce assets grow giant is on a roll. Declaring Local finance The Monetary Authority of Macau has released data on the share of international assets and liabilities held in local banks. Revealing an increase in y-o-y terms. The Hong Kong and U.S. dollar figure most prominently. Page 2

Urban renewal Page 3

HK Hang Seng Index August 17, 2017

yesterday that its net profit had almost doubled in the latest quarter. Alibaba said the positive results derive from solid revenue growth in its core shopping business - and cloud computing. Page 16 27,344.22 -64.85 (-0.24%)

Worst Performers

Ping An Insurance Group Co

+2.42%

Sino Land Co Ltd

+0.93%

Swire Pacific Ltd

-1.87%

AAC Technologies Holdings

-1.48%

Tencent Holdings Ltd

+1.92%

Sands China Ltd

+0.86%

China Mengniu Dairy Co Ltd

-1.87%

Cheung Kong Property

-1.31%

MTR Corp Ltd

+1.33%

Cathay Pacific Airways Ltd

+0.85%

AIA Group Ltd

-1.67%

BOC Hong Kong Holdings

-1.18%

Galaxy Entertainment Group

+1.28%

Lenovo Group Ltd

+0.64%

Hang Lung Properties Ltd

-1.52%

China Resources Land Ltd

-1.10%

CNOOC Ltd

+1.28%

Kunlun Energy Co Ltd

+0.54%

Wharf Holdings Ltd/The

-1.49%

PetroChina Co Ltd

-1.03%

29° 32° 28° 32° 27° 33° 27° 33° 27° 34° Today

Source: Bloomberg

Best Performers

Sat

Sun

I SSN 2226-8294

Mon

TUE

Source: AccuWeather

Done deal

2 Business Daily Friday, August 18 2017

Macau E-commerce

Opening up the e-channel option A new logistics channel to transport products purchased from the MSAR through e-commerce platforms to Nansha via the Hengqin Border Gate was inaugurated yesterday announced.

Nelson Moura nelson.moura@macaubusinessdaily.com

new l o g i s tics channel to t ra n s p o rt M aca u o r P o r t u guese-speaking countries’ products purchased through e-commerce platforms to Mainland China via the Hengqin Border gate was inaugurated yesterday, according to a release by the Macau Economic Services (DSE). The new channel also covers products from Portuguese-speaking countries purchased through Macau companies, with products shipped to Nansha and then directed to other regions in Mainland China.

Helping the little guy

Nansha is part of the Guangdong Free Trade Zone, a 116 square kilometre area comprising Nansha New Area in Guangzhou, Qianhai and Shekou Industrial Zone in Shenzhen, and Hengqin in Zhuhai. In all, the first shipment comprised 1,000 packages - valued at MOP40,000

(US$4,964) - of Macau pastries and souvenirs such as egg rolls, almond biscuits, biscuits and peanut sweets. More than 100 orders for the products shipped yesterday were given to local souvenir SME’s during the Dynamic Macau Week organised in Chenzhou, Fujian last week, the release

According to DSE, by allowing products to be delivered to consumers across Mainland China, the new ‘unimpeded’ channel will create ‘favourable conditions for micro, small and medium enterprises to join cross-border e-commerce . . . enhancing Macau’s role as a service platform for trade’ making a ‘significant contribution to promoting the adequate diversification of Macau’s economy.’ Th e d e p a r t m e n t a l s o stated its support for the ‘One-Stop’ cross-border e-commerce platform supporting local trading companies, manufacturers and

e-commerce associations. Announcing its completion in April, the platform opening was delayed due to “logistics issues” the Executive Vice-President of the Sino-Portuguese E-Commerce Chamber (SPECC), Johnny Ma, told Business Daily. He says the next step is to increase support for local suppliers to sell their products on the Mainland. DSE also stated it was in close co-operation with the Inspection and Quarantine Department of the Entry and Exit and Nansha Customs Service, regarding the addition of a channel of Customs declaration for direct mail imports of goods transported from Macao by land.

Banking

Richer abroad The amount of international assets and liabilities in the local banking sector in the second quarter of this year decreased slightly on a monthly basis but went up yearly, with most connected to Asia and Europe Nelson Moura nelson.moura@macaubusinessdaily.com

The share of international assets and liabilities in the local banking sector both managed to increase yearly as of the end of June 2017, data released recently by the Monetary Authority of Macau (AMCM) reveals. As of June this year, the amount of international assets increased by 4.5 per cent year-on-year to MOP1.22 trillion (US$151.8 billion) while the amount of international liabilities increased 3.2 per cent year-on-year to MOP1.14 trillion. In the second quarter, both international assets and liabilities increased 0.4 per cent and 0.5 per cent quarter-to-quarter. The share of international assets of total banking assets fell by 0.3 percentage points quarter-to-quarter to 84.4

per cent, while the share of international liabilities of total banking liabilities went down 0.2 percentage points to 79 per cent.

Assets and liabilities breakdown

Of all total international assets, external assets went up 3.4 per cent yearly to MOP892 billion, while local assets in foreign currencies increased 10 per cent to MOP546.2 billion. At the same time, external non-bank loans – considered a major component of the assets – increased 15.3 yearon-year to MOP428 billion. Of total international liabilities, local liabilities in foreign currencies posted a yearly increase of 3.2 per cent to MOP1.14 trillion, although external liabilities dropped 10 per cent year-on-year to MOP546.2 billion. Foreign currency deposits

held by local residents and the MSAR Government in local banks accounted for a major part of total liabilities, posting a hike of 19.2 per cent yearly at the end of June to almost MOP531.3 billion.

Currency by currency

In terms of currency, at the end of the first three months of this year the Hong Kong dollar and U.S. dollar accounted for the majority of total international assets, at 42.1 per cent and 45.3 per cent, respectively, and of international liabilities, representing 54.3 per cent and 35.3 per cent, respectively. Meanwhile, renminbi represented 6.4 per cent of international assets and 5.6 per cent of international liabilities, while the pataca maintained the same share of the previous quarter of 0.8 per cent and 1.5 per cent share

of total international assets and liabilities, respectively. Other international currencies still represented 5.4 per cent of international assets and 3.3 per cent of international liabilities as at the end of June.

Country by country

In terms of region, countries in Asia and Europe comprised the majority of external assets and liabilities. Claims on Hong Kong and Mainland China accounted for 36.6 per cent and 27.5 per cent of total external assets, respectively, as at the end of

June this year. At the same time, claims in the United Kingdom and Portugal accounted for 2.1 per cent and 2 per cent, respectively. As for external liabilities, Hong Kong and the Mainland accounted for 49.2 per cent and 21.3 per cent, while Portugal and Germany represented a share of 1.3 per cent and 0.6 per cent. Claims on Portuguese countries and those involved in the ‘One Belt, One Road’ development policy represented 1.6 per cent of external assets and 10.8 per cent of external liabilities.

Housing

Economical housing applicants on the move The Housing Bureau (IH) has reported that 5,742 economical housing applicants have been officially approved to notarise contracts, of whom 5,356 have appointed notaries, with 4,424 completing the procedure, according to the Bureau press release. In particular, the Bureau has

notified 634 applicants in advance of the sale of Edifice Cheng I to submit documents for notarisation; the Bureau will also continue to review applicants’ documents. As at Wednesday, 200 applicants for Edifice Cheng I, located on Avenida do Conselheiro Borja, had

received approval from the Bureau for notarisation. Recently, IH was slammed by the local anti-graft body, urging it to update the economic housing laws in order to improve the distribution of housing to those in need. The anti-graft body initiated an

investigation after receiving 27 complaints from candidates for economic housing. The Bureau recently confirmed that applicants for economical housing who got married during the waiting period will be approved to sign the deeds.

Greater Bay linkages

Contract for HZMB shuttle bus service awarded The contract for shuttle bus services to be operated on the Hong Kong-Zhuhai-Macau Bridge (HZMB) has been awarded to a consortium which includes one local company, according to information released this week by the government of the province of Guangdong. The consortium which won the tender comprises Hong

Kong-Zhuhai-Macao Land Transportation (Macau) Corp., Zhuhai Yuegong Xinhai Transportation Co, and Hong Kong Zhuhai Macao Bridge Shuttle Bus Services. The services will run between the three border checkpoints of the HZMB; namely, Macau, Zhuhai and Hong Kong. In particular, two kinds of shuttle

bus services will be provided. One line will serve passengers between the Hong Kong and Zhuhai checkpoints, while the other will transport passengers from the Hong Kong and Macau cross-border facilities. According to previous information provided by the local Transport Bureau (DSAT), the operator will be required to provide from 90 to 140

shuttle buses for daily operation, with some 30 vehicles reserved for backup. The tender, launched on June 15, was jointly organised by the traffic departments of the three areas linked by the superbridge, in addition to the Hong Kong-Zhuhai-Macao Bridge Trans-boundary Traffic Policy Co-ordination Group. S.Z.

Business Daily Friday, August 18 2017 3

Macau Wholesale market

New Ilha Verde wholesale market capacity doubled

suppliers who have not operated in the old market will be allowed to move in accordingly. The new market occupies some 6,200 square metres: The new wholesale market located at the Cross the ground floor to the sixth floor is dedicated to Border Industrial Zone in Ilha Verde provides some 235 stalls - double those in the old market (pictured) - suppliers, while the seventh floor has been designated for the management company and warehouse. local broadcaster TDM Radio News reported. The IACM offices will be located from the eighth to The Supervisory Committee and Consultative eleventh floors, with some 274 parking lots for light Committee of the Civic and Municipal Affairs vehicles and 223 motorcycles will be available in the Bureau (IACM) visited the new wholesale market new market. on Wednesday, with IACM announcing that new

Urban renewal

Consensus reached on percentage of approval required for property rebuilds The Urban Renewal Committee also reached general agreement on the plan for temporary housing Cecilia U cecilia.u@macaubusinessdaily.com

he Urban Renewal Committee has reached general consensus on the amendment of ownership percentage and compensation, said Ip Sio Kai yesterday, co-ordinator of the third taskforce of the Committee after the seventh plenary meeting of this year. Four levels suggested by the Committee for the amended system: edifices built less than 30 years ago will need 100 per cent approval from owners to rebuild; 90 per cent for 30 to 40 year-old buildings; and just 85 per cent of approval for buildings 40 years or older as well as those experiencing issues related

to the environment or hygiene that might impact the surrounding neighbourhood. “During the meeting members were more concerned about the benefits of parties involved,” recalled Ip, saying that the meeting suggested two approaches of compensations, namely cash compensation and a flat-for-flat scheme. The co-ordinator said that the cash compensation must be able to reimburse the loss suffered by involved parties and ensure fairness. “The amount [of compensation] should not be lower than the market price,” said Ip. “We need to undertake further studies to determine the amount.” For the flat-for-flat scheme, Ip admitted that it would be difficult to operate, given

that flats are of different sizes. But Ip said most committee members agreed that the scheme would ensure the benefits of flat owners, with affected owners able to opt for a similar sized flat within the same building in compensation. “Our next mission is to think of the technical details of operating the scheme,” said Ip. Helping hand Paul Tse See Fan, co-ordinator of the first taskforce of the committee said members agreed to optimise the plan of temporary accommodations for affected residents involved in the rebuilding process of old buildings. Tse said residents could choose either to stay in

temporary housing built by the government or obtain cash compensation to rent another place during the renovation period. The co-ordinator of the first taskforce said that the committee had only discussed the frame of the compensation scheme, while adding that it is more appropriate to determine the amount offered once more details are determined. “The government’s wholly owned company will work on determining the price,” said Tse. In addition, the committee agreed to cut the payment of property tax for owners. “This [reduction of tax] would be applicable to both residential and industrial buildings,” said Tse, while

noting that the government expressed the hope of progressing change in the usage of industrial buildings, indicating that many are no longer used for industrial purposes. “Some of these industrial buildings are in fact not suitable for industrial purpose,” said Tse. Secretary for Transport and Public Works Raimundo Arrais do Rosário, on the other hand, said a proposal on the suggestions made by the committee will be composed by the Secretary’s department in the Land, Public Works and Transport Bureau (DSSOPT) and forwarded to the Chief Executive (CE). “When the CE approves the proposal we will then start legislative procedures,” concluded the Secretary. advertisement

4 Business Daily Friday, August 18 2017

Macau Opinion

Pedro Cortés*

Step back Amazingly, the rental control mechanism on tenancy agreements has not been approved by the Legislative Assembly in a last-minute Hitchcock cliffhanger with proponents of the law abstaining from the voting process. Macau and its people, including those who sit in the legislative body, still have this capacity to surprise us all. A box full of contradictory views and opinions where sense and logic are not the assets of those who should possess them. It is not in question, at this stage, whether the proposed mechanism was good or not. But if something is proposed by a certain person, a change of views cannot happen at the last minute unless superior interests dictate. We all know where this comes from. It comes from a lack of public interest. Their own agenda (in the words of lawmaker Song Pek Kei) is always present when it should be the opposite. Public interest shall prevail over private interests. It would be good if all those lawmakers who voted against the motion or even abstained saw the reality. Witness the abuse of the majority of landlords and even the real estate agencies who sometimes are those who try to make money out of the unbalanced relationship between landlord and tenant. In the end, it is the harmony – the supreme value of our politicians – that prevails: abetted by those who will not sail in the upcoming storm waters of the social situation of Macau. I am not for government control of all matters. Nonetheless, where abuses exist – and, for God’s sake, they do – the State should control and adjust in order to stop such abuses. This was the case for the rental control mechanism. A tool at the disposal of the Chief Executive to control speculation and meet social needs. Unfortunately, it is probably too hard for the legislators to understand. They are, for the most part, living in a different world where the contact with the population – the real one – does not exist and where what is important, what comes first, is that they, their friends and family enjoy good social and economic conditions. Secondly, of course, they will think about those who suffer day-to-day to maintain stability in their family, who fight every day for a better life. Fortunately, Ms. Song Pek Kei, who sometimes assumes controversial positions, understood what was at stake. Which hopefully bodes well for the future Legislative Assembly. *lawyer and frequent contributor to this newspaper.

Technology

Shaping a new cloud Albeit with undeniable advantages, the lack of qualified personnel and cybersecurity legislation in the MSAR still create doubts about security, privacy and feasibility of the cloud data centre to be developed in co-operation with the Alibaba Group Nelson Moura nelson.moura@macaubusinessdaily.com

nformation and technology experts unanimously agree that the proposed cloud centre could indeed improve several issues in the MSAR such as traffic and health, while reducing the costs of data hosting for local online companies. However, the lack of specific cyber security legislation and of local information security human resources create doubts about the capacity of the government to assure the privacy and security of the data to be collected in the proposed centre. On August 4, the Macau Government signed a framework agreement with the Alibaba Group to turn the MSAR into a ‘Smart City’. This development would imply the construction of a cloud platform centre in Macau, in two phases by June 2021. The first phase is expected to be concluded by June 2019, with the government stating Big Data analysis will allow the improvement of the city’s tourism, transportation, healthcare, governance and talent development during this period. The development of the centre is said to likely absorb MOP400 million in the next two years, with the platform to be installed on government premises. “[A data centre] like this won’t be cheap; the final price will depend upon many factors such as requirements for infrastructure,” the Manager of the Information Technology and System Department of the Macau Productivity and Technology Transfer Centre (CPTTM), Thomas Mak, told Business Daily. “They will have to install fire safety equipment, air conditioning for the entire floor, and assure power supply. It depends upon the quality of materials they choose, high end or low end. With MOP400 million they can build a very advanced cloud

system,” he added. According to Pun Chi Man, Head of the Department of Computer and Information Science at the University of Macau (UM) the centre will require a large investment in software and hardware, requiring plentiful qualified human resources. However, the UM academic considers that while Macau produces a large number of computer science graduates every year when it comes to human resources for data mining, software development based upon the data collected and information security experts then the city finds itself lacking qualified manpower.

“Due to the few choices of hosting infrastructure in Macau, hosting prices here can be ten times higher than hosting in Hong Kong, Singapore and Japan” Thomas Mak, Manager of the Information Technology and System Department of the Macau Productivity and Technology Transfer Centre

Recently, the Macau Government stated that the agreement with Alibaba would not mean the ‘abandonment of the existing information technology infrastructure, maintaining good flexibility for its expansion in the future’. According to a government response to Business Daily, just one data centre is being operated by the

government at the Public Administration and Civil Service Bureau (SAFP) building, but is currently described as being at ‘full Capacity’. Mr. Mak told Business Daily that currently there are two public data centres in the MSAR, operated by Companhia de Telecomunicaçōes de Macau (CTM) and MTEL Telecommunication Company Ltd., which already train qualified professionals for their management. CTM Data Centre - the first to have opened in Macau in 2012 - occupies 1,150 square metres and can operate 24 hours per day, with the company’s website stating it supports the needs of local and multinational organisations, including government departments, the gaming sector, banking and financial institutions. Business Daily questioned if CTM and the MSAR Government had approached the company to discuss collaboration in the future ‘Smart City’ plan, and if Alibaba would have to use the company’s existing technology and network. CTM only stated that it did not have ‘additional information about the topic’, while the government guaranteed that only Alibaba Cloud technology would be used for developing the new data centre.

Role of advantages

According to the tech experts the cloud centre would improve several aspects of local society such as traffic and public administration, with one advantage not mentioned by the government being a possible reduction in the price of hosting data for online companies. “Due to the few choice of hosting infrastructure in Macau, hosting prices here can be ten times higher than hosting in Hong Kong, Singapore and Japan (…) Such a large data centre could lower the costs for online companies to build their web services,” Mr. Mak told Business Daily. According to the tech expert, the average price for storing data in Macau is currently MOP700 to MOP1,000

Hengqin New Area

Educational resources in Hengqin to lure MSAR residents Access to education resources and facilities such as kindergartens, primary and middle schools will be made available to Macau residents in Hengqin, following on from the 2017 guidelines for the area’s reform, innovation and development, according to the Hengqin government portal citing Nanfang Daily newspaper. The government of the Hengqin development area was also referred

to as planning to allow the set up of agent service providers in Hong Kong and Macau to inform and assist students in finding opportunities to study overseas at their own expense. Hengqin was designated a national-level New Area in 2009. The population of the area numbers more than 7,000, of which some 4,200 individuals have been permanent residents since its establishment, according to official information. S.Z.

Business Daily Friday, August 18 2017 5

Macau per month. In Hong Kong, however, prices can range to MOP1,000 per year due to the existence of “several data centres, with their own power supplies and several floors in industrial buildings”. “Hong Kong also has many telecom companies, with each one building their own data centre and renting them to IT solutions companies. There’re many choices there,” he added. So far the government has not stated if private companies will be allowed to store their data in the new cloud centre or if prices will follow the costs charged by Alibaba Cloud in Mainland China. “Alibaba Cloud has a very flexible price scheme depending upon how much space you use. If you fully run a machine for the whole year, it can be around MOP800 to MOP1,000 per year,” Mr. Mak told Business Daily.

Lack of legislation

After the agreement with Alibaba was inked New Macau Association declared that the project should be “halted” due to concerns that the MSAR Government and Alibaba would not be able to protect or properly use the data gathered in Macau. On June 1 of this year, Mainland China enforced its new Cybersecurity Law which requires network operators to store select data within China and allows Chinese authorities to conduct spot-checks on a company’s network operations. The law requires network operators to co-operate with Chinese crime or security investigators and allow full access to data and unspecified ‘technical support’ to the authorities upon request. According to tech experts, data physically hosted in Macau would fall under local legislation, thus if Chinese companies were to deposit data in the territory it would be subject to the

city’s laws and theoretically beyond the central government’s reach. “Legislation is always dependent upon the physical location of the server. That’s why Piratebay [a website that allows the sharing of links leading to digital content, entertainment media and software] was always based in Sweden. Because their laws basically protected the service,” the Operations Director of digital studio Virtualmente told Business Daily. Currently, Macau law demands that any company information deemed to be of a personal nature be stored in Macau, while the security of the data stored in the future cloud centre would depend upon future legislation to be developed. “The law would decide if the data can or cannot be transferred outside the MSAR. If the government

allows the transfer, we would have some kind of monitoring system to control any transfers,” Mr. Pun told Business Daily. Addressing the security concerns of the new centre, authorities say the Office for Personal Data Protection (GPDP) and the current Personal Data Protection Law guarantee the full protection of the data to be collected. However, the Legal Affairs Bureau (DSAJ), Service Director, Liu Dexue, stated during the agreement signing that the Data Protection Law - enacted in 2005 - could be “reinforced” through some “legislation improvements”. The necessity of creating legislations specifically for cybersecurity issues is a matter that seems to chime with local tech experts and the government. “From an IT point of view we have

enough measures to assure the privacy of data collected, but with no law nobody can monitor [hacking] behaviour,” Mr. Pun stated. In the aftermath of the WannaCry ‘ransomware’ cyber attack Secretary for Security Wong Sio Chak said that last year a law proposal on cybersecurity had been sent to the Executive Council for consideration. In a response sent to Business Daily, the Office for the Secretary for Security said the government is currently facilitating the construction of a cyber security system in Macao to provide technical support, alert and guidance for cyber security incidents. ‘The legislation work for the framework of cyber security law(s) will be launched in 2018 in order to establish the layout of the corresponding strategic and executing entities,’ the response advised. advertisement

6 Business Daily Friday, August 18 2017

Macau Investment

KNJ participation in Global Media delayed The conclusion of the investment deal enabling local company KNJ Investment Limited to own 30 per cent of Portuguese media conglomerate Global Media Group has been delayed to September

he deal allowing local company KNJ Investment Limited (KNJ) to own 30 per cent of Portuguese media conglomerate Global Media Group (Global Media) should be finalised in September. “We’re taking care of the legal documents from both sides. We hope the contract to be finished in September,” confided KNJ CEO Kevin King Lun Ho. The contract signing was initially planned for March, with Mr. Ho not providing further details and only explaining that there was not a “specific reason” for the delay.

“There was another transaction that we were working on, therefore work slowed down a bit. Nothing special,” he added. The announcement that KNJ would make a capital injection of 17.5 million euros (MOP153.4 million/US$19.2 million) in Global Media, allowing the company to hold a 30 per cent stake in the media group, was made in October when a memorandum of understanding was signed between the two sides. As guaranteed by Mr. Ho, “our plans are slightly different [from what was initially proposed], for different reasons, but the main focus hasn’t

changed and the [amount] will still be 30 per cent. Other details will be announced when the deal is concluded,” said Mr. Ho. KNJ’s capital injection implies a reduction in the current shares held by businessman António Mosquito e Joaquim Oliveira - with each party holding 27.5 per cent - of Luis Montez, and Portuguese banks Banco Comercial Português SA and Novo Banco S.A; all three will hold a 15 per cent stake. Mr. Ho also added that negotiations for the agreement do not include a reduction in the number of work positions in the group that controls Portuguese radio TSF and Portuguese

newspapers Diário de Notícias and Jornal de Notícias. The investor warned, however, that “any increase or reduction in jobs will have to be made in accordance with the business necessities and future plans . . . At this moment I can’t guarantee anything, but I don’t see the necessity for any reductions.” KNJ Investment Limited is managed by Kevin Ho - nephew of the former MSAR Chief Executive Edmund Ho Hau Wah - and, according to the commercial registry, was founded in 2012. It focuses on investment, real estate, healthcare and food & beverages. Lusa

VIP gaming

King’s Club Suncity Group is promoting its poker club and tournament series in Korea for the upcoming World Poker Tournament, while increasing the options of mobile services for its clients in Maison Glad Hotel Jeju. The club claims it has organised more than 40 tournaments in different branches in Asia.

Sheyla Zandonai sheyla.zandonai@macaubusiness.com

The poker promotion brand of Suncity Group - Poker King Club (PKC) - is partnering World Poker Tour (WPT) to hold the WPT tournament in Jeju, Korea this coming September, the company announced yesterday. The event will be held with Suncity’s local partner in Korea, Paradise Casino Jeju Grand – operated by Paradise Company Limited – from September 24 to 30, with a guaranteed prize pool of ₩200 million (US$175,610/MOP1.45 million). PKC is also launching its own tournament series - the Suncity Cup on day one of WPT Korea, with the company claiming it is its ‘biggest tournament ever.’ The CEO of PKC, Winfred Wu, was quoted in a press release as saying that “The group has been working to further extend its reach to players in northern China as well as Japan, as we feel these events in Korea are perfect for attracting those audiences.” Speaking to Business Daily, Carlos Machado, Vice President, Agency Operations of Hogo, the marketing partner of PKC, said the company “is indeed focused on these two major

Suncity apps

markets, China and Japan, but also has other operations in Manila and Korea.” Focusing on players from outside Korea may be explained by the fact that Paradise Casino Jeju is a foreigners-only casino operation. Machado further explained that PKC “does not cater specifically to VIP clients,” with several types of poker games and different buy-in

ranges offered in its clubs. PKC was founded in 2009 and is owned and operated by Kings Consulting, a business of Suncity Group. It currently has three poker rooms to its name - one in Macau, located at the gaming floor of The Venetian, one in Manila at the Solaire Resort and Casino Manila, and one in Korea

The VIP junket operator also announced this week that it has launched a mobile phone application that enables VIP clients to keep track of their account information, earnings history, and rolling chip activities, GGRAsia reported yesterday. A spokesperson for the group told Business Daily that the app had been developed by the company’s own Information Technology department and launched last week. Named ‘Sun Finance,’ the app was created to offer secure account verification for clients, according to comments by the Vice President of the company’s IT operations, Celestino Ali, the same media said. It was also reported that the company plans to create within the new app an embedded link to another app, called ‘Sun Travel,’ which will allow Suncity to promote the group’s products and services via the identification of travel spending patters of clients, the VP was referred to as saying.

HK filing

‘Twilight’ and ‘Hunger Games’ put fizz into Jeju theme park The developer and operator of Jeju Shinhwa World - namely, Landing Jeju Development Ltd., - has entered into an agreement with Lionsgate Entertainment Inc. to develop Lionsgate’s first branded outdoor theme park, according to a filing posted by Landing with the Hong Kong Stock Exchange. The Lionsgate Movie World will occupy approximately 122,000 square

metres and offer seven movie zones with multiple renowned Lionsgate film properties such as The Hunger Games, The Twilight Saga and Now You See Me. The park will offer experiences of actual movie scenes via state-of-theart rides, attractions and 4D Intellectual Property reproduced streets and towns. Themed restaurants, cafes, souvenir shops and entertainment

performances will also be featured in each zone. The construction of the theme park is expected to commence in 2018 and is scheduled to open in 2019. ‘With the addition of Lionsgate Movie World as the centerpiece of Jeju Shinhwa World, the Group believes that Jeju Shinhwa World will offer a comprehensive premium guest

experience in world class resort facilities including Four Seasons Resort, Marriott Resort and Spa, Somerset serviced resort condominium and upscale villas,’ wrote the firm in its filing. Jeju Shinhwa World will also include an adventure water park, a destination spa, a K-pop entertainment centre plus a retail and food and beverages complex.

Events

Details of MGS Summit unveiled The 2017 MGS Summit will be held from November 14 to 16 This year’s MGS Summit will host its annual summit at The Venetian Macao from November 14 to 16, organisers announced in a press release yesterday. Named ‘Smart City, Smart Economy’, this year’s event will focus on how the gaming sector can deliver

key technological advances and financial solutions to inspire the ‘One Belt, One Road’ cross-continental economic development plan. “The international gaming industry has reached a pivotal stage in its development. Next-gen technology is the powerhouse of our business,

and the new wave promises so much more for us, especially with the ambitious and lucrative economic project along the Silk Road trading route gathering momentum,” the Chairman of the Macau Gaming Equipment Manufacturers Association (MGEMA), Jay Chun, said

yesterday. The organisers said the event will host almost 20 sessions on subjects ranging from next-gen technology, government partnerships, economic investment, new territories and artificial intelligence to engaging multi-media millennials.

Business Daily Friday, August 18 2017 7

Gaming

Expectations are for two or three sites for the first round, with Osaka (L), Yokohama (C) and Tokyo (R) cited as likely locations Casino legislation

Operators look for clarity as Japan begins public debate Casinos aren’t expected to open for business until several years after the 2020 Tokyo Olympics Lisa Du

he debate over Japan’s effort to allow casinos is going public as operators including MGM Resorts International and Caesars Entertainment Corp. look for clarity in a potential US$25 billion market Open hearings began yesterday over recommended guidelines to govern major resorts in Japan that will feature everything from blackjack tables to entertainment. The government is currently weighing regulations that could impose curbs on the gaming industry as more than half of the country’s residents oppose casinos. The proposed rules are tempering some of the earlier giddiness of investors and casino operators amid concern whether the guidelines will hamper the potential for growth. The companies are anxiously awaiting how legislators will shape the future for an untapped market with a wealthy population and proximity to China. “Our common goal is to see the introduction of world-class integrated resorts in Japan that drive economic, tourism and employment growth,” said Steven Tight, president of international development at Caesars Entertainment. “The government policy makers should ensure that the legislative framework doesn’t inadvertently hinder these aims.” The companies themselves have

the opportunity to weigh in during the month-long public comment period, which began yesterday in Tokyo. The measures will be debated in September, and the resulting bill will be submitted to an extraordinary session of the Japanese parliament in the fall. Casinos aren’t expected to open for business until several years after the 2020 Tokyo Olympics. The operators will be watching for government decisions on casino floor space, taxes and access for locals. The risk for the companies, some of which initially pledged to invest as much as US$10 billion in Japan, is if the restrictions become too onerous, according to Seth Sulkin, the chair of a task force on integrated resorts with the American Chamber of Commerce in Japan. “There’s just a lot of things the government could get so wrong that gaming companies will decide it’s not a worthy investment,” said Sulkin. One of the biggest challenges facing casino companies is public opinion. Casinos do not have wide public support, as residents associate gambling with organized crime and addiction. About two-thirds of Japanese were against the presence of a casino in their region, according to a survey conducted by news service Jiji in July. Those opposed cited disruption to public order and the negative influence on youth as top reasons. “I don’t think there’s any need to establish a facility so dangerous that it needs this much regulation,”

Takeo Shibata, a professor at Seigakuin University in Tokyo, said at the hearing. “We can be a tourist destination without casinos and with a clean image that will be reassuring for visiting families.” Compulsive gambling is already a problem with pachinko parlors and betting on races, both of which are allowed in Japan. A bill to address addiction is making its way through parliament. While the issue needs to be resolved before casinos can open their doors, ruling and opposition lawmakers have been locked in disagreement over it.

‘Singapore has been cited by analysts as a possible model for Japan’ Japan is considering other proposals that could have a significant impact on key determinants of gaming revenue. Among recommendations in a 130-page document released this month by a government panel: limits on the amount of casino space within the resort area a possible ban on ATMs in the casino tax rates, with a fixed fee and a proportion of gross gaming revenue limits on the number of times local residents can visit the casino registration system called “My Number” to be used as

identification for locals and foreign residents On top of that, the number of integrated resorts and how operators and localities will be picked for the resort has yet to be decided. Expectations are for two or three sites for the first round, with Osaka, Yokohama and Tokyo cited as likely locations. Singapore has been cited by analysts as a possible model for Japan. The city state charges its citizens an entrance fee. It has two integrated resorts -- run by Las Vegas Sands and Genting Singapore Plc -- with each having one casino of 15,000 square meters. Some consider that space too small, as Singapore’s population of 5 million pales next to 38 million in a metropolis like Tokyo. “It does strike me as being out of line with what the local market can take on,” said Jay Defibaugh, an analyst at CLSA in Tokyo. “If you have a 15,000-square-meter casino space and a vibrant foreign visitor market and a local market, you could have people falling over themselves in the casino.” For many casino executives, it’s difficult to make decisions on resorts in Japan until the government addresses these issues. The bureaucrats in Japan “have been evolving this gaming legislation very, very intensely,” MGM Resorts Chief Executive James Murren said in an interview. “The opportunity in Japan is unclear at the moment.” Bloomberg News

8 Business Daily Friday, August 18 2017

Consigliere

Elvis’s rhinestone jumpsuit tops US$1.5 million memorabilia auction Matt Gross

orty years ago, Elvis Presley left the building—permanently. The original rock-and-roll superstar died Aug. 16, 1977, of a myocardial infarction, but his death gave birth to a multibillion-dollar industry that seems to be immortal. Right now, tens of thousands of devotees are in Memphis for Elvis Week. Of course, that takes place at Graceland, the King’s residence and the second most visited home in America (after the White House). It

has undergone significant upgrades in the past year, including the addition of a 450-room luxury hotel, the Guest House at Graceland, and an entertainment complex, both the result of a US$137 million makeover by Authentic Brands Group LLC. Among the week’s fan reunions, dance parties, and concerts, the festivities included a memorabilia auction that closed Aug. 12—and that featured some impressively high-ticket items, with the total haul topping US$1.5 million. Big ticket items included an Elvis-owned and stage-worn

sleeveless jumpsuit and jacket that sold for US$250,000. Jeff Marren, consignment director for Graceland Auctions, said the stage-worn suits tend to fetch the most money because only 15 to 18 of them are owned by collectors. Elvis’s “Blue Armadillo” jumpsuit—a sleeveless, bell-bottom jumpsuit with matching jacket and rhinestone details—sold for US$250,000, including the buyer’s premium, the high end of its estimate and the most expensive item at the auction. Worn by the performer in 1975, when he was

40 and touring, it’s apparently “an exemplary example” of his “evolving style.” The most bid-on lot, with 45 bids, was a 16-millimeter reel of Elvis’s first post-Army press conference, but right behind it, with 44 bids, was

a note he wrote by hand: “When you’re not in love your [sic] not alive. God is love, E.P.” That Instagram-ready letter was estimated to go for US$2,000 to US$3,000 but sold for US$27,500. Bloomberg

These ultra-light, exotic sport watches cost US$120,500 each Introducing the Richard Mille 67-02 Sprint and High Jump Cara Barrett

ichard Mille has just released two new additions to their collection, t h e R M 67 - 0 2 Sprint and the RM 67-02 High Jump. Both are based on the 67-01 Extra Flat, which was released back in 2016. Lately, Richard Mille has been creating a host of timepieces inspired by sports stars, most famously Rafael Nadal. This time around, the pieces were created in honour of Wayde van Niekerk with the Sprint in yellow and green, and Mutaz Essa Barshim with the High Jump in magenta and white. Both van Niekerk and Barshim are Olympic athletes for track and the high jump respectively. While the RM 67-02 is similar to the RM 67-01 in some respects, there are a few updates. Both watches are the sports versions of the RM 67-01, which is the flattest Richard Mille produced. The RM 67-02 is the lightest automatic produced by

Richard Mille and weighs only 32 grams (which aren’t much). The cases for both the Sprint and the High Jump are made of Quartz TPT (for the coloured front and back case plates) and Carbon TPT (for the case bands) which are both shock resistant and ultra-light—ideal for high intensity activities. The case measures 38.7mm x 47.52mm and is 7.8mm thick. Quartz TPT is a composite material composed of alternating layers of silica fibres, with the fibres of each layer oriented at a 45º angle to each other. The layers are “impregnated” with coloured resins and the resulting material is strong, light, rigid and colourful. A similar process is used for the straps, using carbon fibre rather than silica. (Silica is silicon dioxide, which in nature exists most commonly as quartz crystals, hence the “quartz” in the name of the material). The result is an almost agate-like banding effect, especially noticeable on the side of the cases.

The material is made by North Thin Ply Technology (that’s the TPT part) a specialist in quartz fibre composites located in Penthalaz-Cossonay, Switzerland, and indeed according to Composites World, it’s a new material that arose out of a collaboration between NTPT and Richard Mille—it was first used in the RM 27-02 for Rafael Nadal, back in 2015. That watch used white resin; the coloured resins appear to be a new development for the material. The watches are both automatic, and powered by the in-house calibre CRMA7

movement, which has a baseplate and bridges made from grade 5 titanium, and treated with DLC coating. CRMA7 appears to be technically quite similar to the CRMA6 ultra-thin movement in the RM 67-01 but of course there are some differences; the most notable is the absence in calibre CRMA7, of the function indicator in CRMA6, which shows the position of the crown. The rotor is pierced carbon TPT, which adds to the lightweight nature of the watch; the rim is white gold for better winding efficiency. The movement features a

50-hour power reserve and measures only 3.6mm thick. It’s then further painted (by hand) to match the colour of Wayde van Niekerk and Mutaz Essa Barshim’s respective native countries (South Africa and Qatar respectively). According to Richard Mille, these watches will be worn in competition by the athletes for whom they were designed. At the IAAF World Championships, which will take place in London August 4-13, Wayde Van Niekerk and Mutz Essa Barshim will both compete wearing their respective versions of the RM 67-02 (Richard Mille ambassador Yohan Blake will also be competing wearing the RM 59-01 tourbillon). Richard Mille has made something of a specialty of making ultra-light sports watches from exotic materials over the last few years and the RM 67-02 seems a clear indication that the trend will continue. RM 67-02 Extra Flat Automatic: Case, 38.07mm x 47.52mm x 7.80mm; front and back bezels Quartz TPT, quartz fibre composite; case back, Carbon TPT. Water resistance, 30m. Dial, grade 5 titanium, hand-decorated. Sapphire crystals front and back. Movement, calibre CRMA7, 50 hour power reserve, 28.04 x 31.25mm x 3.60mm; running in 25 jewels at 28,800 vph; free sprung variable inertia balance. Price, US$120,500. See them both at richardmille. com. Bloomberg

Business Daily Friday, August 18 2017 9

Consigliere

Where to find the perfect summer hat Sceptical that you can pull a Panama hat? Don’t be. Troy Patterson

he heat, the glare, the dermatologist’s admonishments regarding melanoma. Whatever the reason, in summer, your head wants a hat. Yet it may be having some trouble getting around the idea. In winter, covering your cranium is a no-brainer. The felt fedora serves admirably in many business-suited circumstances, despite its unsavoury association with pickup artists and other poseurs. Tweed caps, merino beanies, and rabbit-fur ushankas likewise pull their weight in certain dressy contexts. But that weight was heavyweight, and now you want all the style provided by a hat with none of the heatstroke. First, we’re not talking about rugged bush hats appropriate to the Outback. Nor are we considering New Era caps, found in the dining rooms of Outback Steakhouse. And while there is a place for a Tommy Bahama safari hat bought, in desperation and at a steep mark-up, from a hotel gift shop, that place is not atop a man walking to a client meeting. One way to adjust to the summer season is to look for a lighter material of whatever style of brimmed hat best suits you in winter. It is very likely that your preferred choice—a fedora, a trilby, a porkpie, what have you—is also available in straw. Current models from such brands as Albertus Swanepoel and

Paul Smith use raffia, a fibre made from membranes on palm fronds found across sub-Saharan Africa. But the dedicated hat-seeker will encounter more types of straw that he can shake a stalk of grass at—Florentine wheat straw and brittle bao straw, and Mexican sisal, and more. Some esteemed hat makers, including Borsalino, offer brimmed cotton hats, which might seem a little guitaristin-a-bad-ska-band but can sometimes work. It is even possible to purchase a straw top hat, though I can only imagine two gentlemen wearing such a thing: Mr Peanut, weekending in Charleston, and Eustace Tilley, catching butterflies near his place in Sag Harbour. Point is, the novice summer-hat customer can do worse than to consider searching for a comfortably familiar design.

The phrase summer-weight hat generally summons visions of Panama hats, woven from the leaves of the Toquilla palm. These are always airy but hardy, and the best of them, such as Montecristis, are ultrafine. “The joke in the U.K. is that you should be able to pull your Panama hat through your signet ring,” says Harry Brantly, a founder of the lifestyle brand Frescobol Carioca. One alleged advantage is that the Panama travels well. Some hat makers tout its “rollability,” while others speak frankly about the opposite. “Ours is not rollable,” Brantly said, explaining that, yes, you could roll one up and pack it in your suitcase, but after 20 times or so, you might as well just leave it there. Wearing one of these hats with a dark suit will possibly make you look goofy.

Wearing one with a polo shirt will probably make you look like a cricket umpire. But with a light jacket and the right attitude, it is doable. I suggest trying on Panamas in a variety of brim widths, crown heights, and band colors. It doesn’t have to be classic white to be authentic, either; a darker shade—a sand one from Lock & Co or a navy one from Loro Piana—will work well with a medium gray or medium blue suit. But I get it if this hat seems unworkably dated. I myself have suggested that a Panama may work best when worn with bushy moustache while squiring a date in a drop-waist skirt. If you find yourself making garden-party chit-chat about this hat, remember that it hails not from the isthmus of Panama but, like many excellent hats, from the Andes—Ecuador, specifically. It acquired the name because Panama was its most important export market. Some observers trace its

popularity in the U.S. and Europe to the building of the Panama Canal, which I think we did a good job building, a very good job. We cannot conclude without considering the roundshaped, flat-brimmed classic called the boater. In recent decades, most men other than country lawyers have found the boater too stagey to consider for daily wear. It has been left to people who appear on literal stages (playing clarinet in New Orleans, say) or in actual boats (at the Henley Royal Regatta). If you think you have the stuff to try it out, please do, perhaps with a navy double-blazer. Also, do your part to rebrand the boater by referring to it instead by an alternative name, the strat, for straw hat. But be sure to alert your friends before leaving the house in one, lest three of them have the same idea and onlookers start mistaking you for a barbershop quartet. Bloomberg

New Rihanna project bedazzles

ithout doubt, Rihanna is one of the most stylish women in the world. She must be the first name on the tip of the tongue when it comes to a charismatic fashion icon. Making her debut in 2005, Rihanna is a successful singer, songwriter and actress. Apart from her fruitful performing career, she also has a deep love for fashion, leading to her teaming up with Armani Jeans and Emporio Armani Underwear 2011 to design T-shirts, underwear and denim pieces. From then, on Bad Girl Riri (the name of Rihanna’s social media account) kicked off her designer’s life. She has captivated the fashion world with her fearless approach and experimental attitude, with everything she touches magically selling like hot cakes. This year, this talented woman announced her collaboration with Swiss luxury jewellery and watch Maison-Chopard to create the Rihanna ♥ Chopard Joaillerie Collection and the Rihanna ♥ Chopard Haute Joaillerie Collection. The love story between Rihanna and Chopard has been developing on red carpets all over the world over the last few years. Now, this bedazzling duo has partnered to showcase their brilliant wares. I n s p i r e d b y Ri ha n n a’ s

effortless confidence infused with strength, the limited edition Rihanna ♥ Chopard Joaillerie Collection is defined by its minimalist geometry and sharp, clean lines. A synergy of urban modernism and pure design gives Chopard’s classic Ice Cube shape a powerful sense of self and introduces new designs and coloured ceramic into the line. Rihanna applies her favourite colour of Jungle Green on linear rectangular motifs linking frosty rose gold cubes with solid ceramic blocks. Crafted from 18ct rose ethical gold certified Fairmined, the 9-piece capsule collection is available with icy polished or diamond set gold cubes. Meanwhile, the Rihanna ♥ Chopard Haute Joaillerie Collection showcases a modern collection inspired by Rihanna’s island roots – the lush

gardens of Barbados and the electricity of carnival. Rihanna has already been giving fans a sneak peek of the capsule collection. At the Grammy Awards, she dazzled in a oneof-a-kind pair of floral inspired multi-coloured chandelier earrings and marquise-cut diamond solitaire ring, while on the March 2017 cover of Harper’s Bazaar Rihanna sparkled in a pair of transformable diamond earrings. More recently, she wore flower drop earrings to complement her incredible look at the MET Gala, in New York City. “I’ve always been in love with Chopard’s exquisite jewellry, so to actually design collections with them is something I still can’t believe,” says Rihanna. “It was a really incredible process and I learned so much! I can’t wait for everyone to see it.” Edwina Liu, Essential Macau Editor

10 Business Daily Friday, August 18 2017

Greater China Development

Beijing growing its share of Southeast Asia’s infrastructure pie The 10 Asean members boast some of the world’s fastest expanding economies like the Philippines and Vietnam Melissa Cheok

hina has Southeast Asia in its sights. Companies from the world’s second biggest economy are increasingly targeting the region for investment, especially into infrastructure. That’s a potential boon for developing economies which need a massive upgrade of roads, rail and ports if they are to meet their economic potential. It also comes amid a wider crackdown by regulators in Beijing on outbound investment.

‘China accounted for 14 per cent of net FDI inflows into Thailand last year’ The Asian Development Bank estimates that emerging economies across Asia will need to invest as much as US$26 trillion on building everything from transport networks to clean water through 2030 to maintain growth, eradicate poverty and offset climate change. That’s where China comes in. Though the share of Chinese foreign

ASEAN members flags and organization’s logo

direct investment into the Association of Southeast Asian Nations remains relatively small at 6.8 per cent of total net inflows in 2015, Chinese corporations are taking up larger stakes in major infrastructure projects across the region, according to Weiwen Ng, economist at Australia & New Zealand Banking Group in Singapore. China accounted for 14 per cent of net FDI inflows into Thailand last year, 8 per cent in Vietnam and Indonesia, and 6 per cent in Malaysia, according to ANZ. The Philippines received a marginal share of 0.14 per cent. By sector, the bulk of Chinese investments have gone into energy,

transport and real estate, ANZ noted. The three sectors accounted for 78 per cent of China’s cumulative investment and construction contracts in Asean between 2005 and the first half of 2017. For China, the opportunities are significant. The 10 Asean members boast some of the world’s fastest expanding economies like the Philippines and Vietnam, with growth rates of more than 6 per cent. With a combined population of over 620 million and an economy of US$2.6 trillion, the investment potential is huge. By 2020, the region will have the world’s fifth largest economy, the World Economic Forum predicts.

China’s mammoth Belt and Road Initiative will also further enhance its footprint in the region. Projects that may receive funding include a new high-speed rail line that runs from southern China through Laos to Thailand’s industrial east coast, along with rail projects in Laos, Indonesia and Thailand. Still, the investment isn’t without risk. “While the host countries stand to benefit from increased investment from China, it further increases the concentration risk given that ASEAN is already heavily exposed to China via trade and tourism flows,” Ng wrote in a note. Bloomberg News

Fitch

World’s biggest money market fund to get even bigger Chinese money market funds received an extra boost this year after the government sparked an increase in short-term bond yields as it cracked down on leverage in the financial system Yu’E Bao, the world’s biggest money-market fund, still has potential to grow more even after it expanded at the fastest half-year pace in three years in the first six months of 2017, according to Fitch Ratings. The Chinese fund is sold on the mobile-payment platform Alipay, offered by Alibaba Group Holding Ltd.’s financial affiliate, which is controlled by Jack Ma. The billionaire founder of Alibaba has promoted Alipay for everything from grocery shopping to settling restaurant bills. That’s spurred growth of Yu’E Bao, which gives users a way to stash away

savings with no minimum investment or time frame. Yu’E Bao has RMB1.4 trillion (US$210 billion) of assets under management, accounting for about 28 per cent of China’s money-market funds. It has beaten the average returns for money markets in the nation for much of this year, further boosting its allure, according to Fitch analyst Huang Li. “People are more willing to use Alipay to make payments and its customers have a high level of loyalty,” Huang said in an interview in Shanghai. “Alipay is getting more and

more convenient. If the money-market fund offered on Alipay can offer higher yields, it will certainly attract more investors.” Tianhong Asset Management Co., which is majority owned by the Ant Financial affiliate and manages Yu’E Bao funds, declined to comment on growth prospects. Ant Financial is formally known as Zhejiang Ant Small & Micro Financial Services Group.

Increasingly attractive

Chinese money-market funds have gotten an extra boost this year, after the government sparked an increase in short-term bond yields as it cracked down on leverage in the financial system. The seven-day annualized yield offered by Yu’E Bao has averaged 3.87 per cent in 2017, according to Bloomberg-compiled data. That compares with 3.74 per cent on all local money-market funds this year, according to research firm Howbuy. The flood of money into Yu’E Bao may have prompted Tianhong Asset to seek ways to control risks, said Fitch’s Huang. The company lowered

the investment cap in the fund to RMB100,000 earlier this month. But the rule change may not alter the growth trend, said Huang. “On average, customers invest about RMB4,000,” she said. “Assuming every customer added just another RMB1,000, it would be a 25 per cent increase.”

‘The fund had 324 million investors as of December 31’ The fund had 324 million investors as of December 31, according to Tianhong. Recent figures underscore how Yu’E Bao is driving expansion in the industry. Its assets under management rose by RMB623 billion in the first half of this year. That accounted for the bulk of the RMB822 billion expansion in all Chinese money-market funds, according to the Asset Management Association of China. Bloomberg News

Business Daily Friday, August 18 2017 11

Greater China Environment

In Brief

Hebei province to meet capacity cutting targets by end of September Official figures have shown air quality has worsened in China’s northern Beijing-Tianjin-Hebei region in the first seven months of this year Muyu Xu

China’s top steel-making province has pledged to fulfil capacity cutting targets for this year in steel, cement, coal and glass by the end of September, under efforts to tackle air pollution ahead of winter, an environment official said on Wednesday. Hebei, close to the capital Beijing, has eliminated 12.26 million tonnes of iron making capacity and 10.53 million tonnes of steelmaking capacity in the first seven months of the year, Yin Guangping, a spokesman for the province’s Environmental Protection Bureau, told a press conference on Wednesday. The province aims to cut steel capacity by 31.86 million tonnes in 2017, accounting for nearly two thirds of China’s total steel capacity reduction target for the year. China’s air pollution is typically

most severe in winter as domestic heating systems churn out toxic pollutants. Controlling the problem has become a political priority and Hebei has vowed to hold officials accountable if the region fails to meet pollution targets. A total of 3,625 officials have been cited in the January to July period for being inefficient in tackling pollution. Yet official figures have shown air quality has worsened in China’s northern Beijing-Tianjin-Hebei region in the first seven months of this year, adding to pressure on authorities to meet pollution targets. A statement published by Hebei in early August said 50 per cent of its steel capacity will be shut during the winter in key regions, including the city of Tangshan which produced 88.3 million tonnes of steel last year. Hebei has pledged to reduce concentrations of hazardous pollutants,

known as PM2.5, by more than 15 per cent during the coming autumn and winter compared with a year before.

‘A statement published by Hebei in early August said 50 per cent of its steel capacity will be shut during the winter in key regions’ The province also plans to close coal production capacity of 9.41 million tonnes and shut between 50 and 100 megawatts of coal-fueled power capacity in 2017. Reuters

Dumping

EU sets duties on mainland cast iron products The European Union has levied provisional tariffs as high as 42.8 per cent on some Chinese cast iron products after an eightmonth investigation found unfairly low prices hurt the bloc’s producers. The European Commission, the EU executive body, said while it had detected no dumping by India, the investigation would continue until definite findings were made. The Commission’s Aug. 16 decision published in its Official Journal yesterday was triggered by a complaint from Fondatel Lecompte SA, Ulefos Niemisen Valimo Oy Ltd, Saint-Gobain PAM SA, Fonderies Dechaumont SA, Heinrich Meier Eisengießerei GmbH & Co KG, SaintGobain Construction Products UK Ltd and Fundiciones de Odena SA. Results

Ping An insurance h1 profit up Ping An Insurance Group Co of China, the country’s second-largest insurer by market value, yesterday reported a 6.5 per cent rise in first-half net profit on robust growth in life insurance premiums. Net profit came in at RMB43.43 billion (US$6.51 billion) for the six months to June, versus RMB40.78 billion a year ago, according to a filing with the Hong Kong stock exchange. Its total premium income was RMB341.39 billion in the first half of the year, according to the filing. That compared with RMB256.87 billion in the year-ago period. Mining

Chalco plans investment in Guinea bauxite project Internet

Beijing targets Taobao, other e-commerce sites, in VPN crackdown This is the latest in a series of measures taken by China to secure the internet and maintain strict control over content Cate Cadell

Chinese authorities have issued a warning to the country’s top e-commerce platforms, including Alibaba Holding Group Ltd’s Taobao.com, over the sale of illegal virtual private networks that allow users to skirt state censorship controls. Five websites have been asked to carry out immediate “self-examination and correction” to remove vendors that sell illegal virtual private networks (VPNs), according to a notice posted by the Zhejiang provincial branch of the Cyberspace Administration of China (CAC), China’s top cyber regulator. Some of them were ordered to halt new user registrations, suspend

services and punish accountable staff. “The (CAC) has ordered these five sites to immediately carry out a comprehensive clean-up of harmful information, close corresponding illegal accounts ... and submit a rectification report by a deadline,” the regulator said yesterday. This is the latest in a series of measures taken by China to secure the internet and maintain strict control over content. Surveillance is being further tightened ahead of the 19th National Congress of the Communist Party later this year, when global attention will be on news from the world’s No.2 economy. Recently, China said it was investigating its top social media sites, including WeChat and Weibo, for failing to comply with cyber laws. It has already taken down popular celebrity gossip social media accounts and extended restrictions on what news can be produced and distributed by online platforms. This is in addition to its campaign to remove VPN apps. Regulators have clamped down on dozens of local VPNs, and ordered Apple Inc and other app stores to remove foreign VPN apps that allow users to access foreign websites censored by the government. China has also passed laws, which will come into effect from early 2018, that require telecommunications

providers and tech firms to play a greater role in removing VPNs. On Chinese online marketplaces, including the country’s largest e-commerce site Taobao, vendors sell a range of tools to set up personalised VPNs that are harder to track and block than some other services.

Key Points Regulator warns Taobao, 4 others, over sale of illegal VPNs Some sites ordered to suspend services and user registrations Says companies must ban goods, sellers by unspecified deadline

“Taobao forbids the listing or sale of any products that are forbidden by applicable law. We screen and remove product listings from third-party sellers which violate our marketplace rules,” an Alibaba spokeswoman said, referring to the products mentioned in the regulator’s notice. Other sites named in the notice include women-focused social shopping network Mogujie and entertainment platforms Xiami and Peiyinxiu. The notice did not specify the date of the deadline by which the sites have to complete the rectifications. Reuters

Aluminium Corp of China (Chalco) plans to invest US$500 million in a project to produce bauxite, used to make aluminium, in Guinea starting next year, the mines ministry said. The deal comes after a trip by the Guinean mines minister, Abdoulaye Magassouba, to China and follows other major Chinese investments in the resource-rich West African nation. “The reserves of bauxite abandoned by BHP Billiton will eventually be exploited from 2018 by Chalco,” said Saadou Nimaga, secretary general of the mines ministry. State-run Chinalco is the parent company of Chalco. The project is in the Boffa area, about 200 km from the capital Conakry. Markets

Cathay gains as optimism worst is over Cathay Pacific Airways Ltd. advanced as optimism the worst may be over for Asia’s biggest international airline prompted some brokerages to upgrade the stock. Shares rose 0.9 per cent to HK$11.80 in Hong Kong yesterday, after rallying as much as 6.2 per cent earlier. Cathay reported its biggest half-yearly loss in at least two decades Wednesday amid a business revamp aimed at fending off competition from the region’s budget carriers and mainland Chinese rivals.

12 Business Daily Friday, August 18 2017

Asia Employment

Australia adds more jobs than forecast on part-time rebound Australia added more jobs than forecast in July, even as a burst of full-time hiring came to an end, setting up a mixed picture for a central bank that’s been showing confidence the labor market is on the mend. Michael Heath

he data provide ammunition to both hawks and doves. For the Reserve Bank of Australia, rising employment chimes with its confidence of a strengthening labor market boosting income growth and supporting consumption. For doves, the slump in full-time employment and monthly hours worked supports the view of a soft underbelly in a jobs market looking sound at the headline level. The RBA has kept the cash rate at a record low 1.5 per cent for the past year to cushion the economy’s transition to manufacturing and services-driven growth and away from mining investment. Markets are pricing in little chance of a hike until the second half of next year in an environment of weak wage growth and tepid inflation, a picture reflected in many developed world economies.

Economist takeaways

The rise in employment “continues the recent very good run and is going someway to cushioning the blow to households’ finances from record low wage growth,” said Paul Dales at Capital Economics. “The past volatility of the data means it pays not to get too excited

by strong employment data and not to get too worried by weak data.” “Overall we’d consider this a robust employment report -- and one that follows a string of solid gains,” said Adam Boyton of Deutsche Bank. “Employment has risen by 1.9 per cent in Western Australia over the past year and 2.7per cent in Queensland after some pronounced weakness. This suggests to us that the post-mining investment boom adjustment is now largely complete in those two states.”

“There is still a high degree of slack across the labor market,” said Callam Pickering of Indeed. “This is helping to contain wage growth and indicates that the economy still has some way to go before the Reserve Bank should contemplate tighter monetary policy.” Unemployment rose in the two states driving the national economy, New South Wales and Victoria, to 5 per cent and 6.1 per cent respectively. The island state of Tasmania recorded the biggest lift in jobless,

to 6.3 per cent from 5.6 per cent; it also regained the mantle of the worst unemployment rate after South Australia dropped to 6.2 per cent from 6.6 per cent. The resource-rich and tourist destination of Queensland recorded the bulk of the jobs increase with 27,000 positions; Victoria and Tasmania shared the biggest losses with 2,200 apiece. Monthly hours worked in all jobs decreased 14.4 million hours, or 0.8 per cent, to 1.7 billion. Bloomberg News

Trade

Japan’s exports rise in July, underpin strengthening economy Total imports were up 16.3 per cent in July from a year earlier Leika Kihara

Japan’s exports rose for an eighth straight month in July on robust shipments to the United States and a boost from a weak yen, suggesting the economy is carrying strong momentum through to the second half of the year. The data underscores the Bank of Japan’s view the world’s third-largest economy is showing increasing signs of strength as private consumption adds momentum to an export-led recovery. Imports rose for the seventh straight month on brisk demand for personal computers and digital cameras from China, highlighting the strength of domestic consumption that served as a key driver of Japan’s economic growth in the second quarter. “Exports aren’t particularly strong in volume terms but will gradually recover ahead. The import figures, on the other hand, underscore the strength of domestic demand,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “Domestic demand is gaining momentum and will likely drive Japan’s economic recovery.” Exports to the United States rose 11.5 per cent in July from a year earlier to mark the sixth straight month of gains. That pushed up Japan’s trade surplus with the United States by 9.1 per cent from a year ago to 647 billion yen (US$5.88 billion).

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Japan’s trade surplus has been a target of criticism by U.S. President Donald Trump’s administration, which has called for cutting the U.S. trade deficit under his protectionist “America First” policies. Total exports increased 13.4 per cent in July from a year earlier, Ministry of Finance data showed yesterday, roughly in line with a median market forecast for a 13.6 per cent gain. The rise, which followed a 9.7 per cent increase in June, was driven by solid auto shipments to the United States and demand from China for electrical equipment, the data showed.

But the gain in exports was more modest in volume terms at 2.6 per cent, suggesting the value of exports was inflated by the yen’s declines during the month. Total imports were up 16.3 per cent in July from a year earlier, roughly in line with a median market forecast for a 17.0 per cent gain. It followed a 15.5 per cent rise in June.

Uptrend intact

Shipments to Asia were up 14.8 per cent in July from a year earlier, while those to China rose 17.6 per cent to mark a ninth straight rising month. Japan’s manufacturing activity grew

in July at the slowest pace in eight months as export demand weakened, a private survey showed earlier this month, casting some doubt on the strength of Asian trade. “Exports clearly rose in July, indicating that a slight decline in second-quarter exports was a brief interruption of an ongoing uptrend,” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.

Key Points July exports up 13.4 pct vs f’cast +13.6 pct Shipments to U.S. rise 11.5 pct yr/yr Exports to Asia up 14.8 pct yr/yr Imports up 16.3 pct, underpin solid domestic demand Japan’s economy expanded at the fastest pace in more than two years in the second quarter as consumer and company spending picked up, highlighting a long-awaited bounce in domestic demand. Negative external demand, or exports minus imports, shaved off some growth in the quarter as shipments of information-technology goods to Asia slowed, though many analysts expect exports to remain firm in coming quarters. Reuters

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Business Daily Friday, August 18 2017 13

Asia GDP

In Brief

Philippines growth quickens on construction boom Household consumption grew at slightly faster annual pace of 5.9 per cent in the second quarter Enrico Dela Cruz

The Philippine economy grew at a sizzling pace in the second quarter, topping expectations as a government-led construction boom and an extended rebound in the farm sector took some of the sting off a peso currency wallowing at 11-year lows. The Southeast Asian nation is the second-fastest growing economy in Asia after China, though some analysts cautioned that activity could wane if foreign investors are scared off by President Rodrigo Duterte’s deadly war on drugs. Gross domestic product rose 6.5 per cent in the second quarter from a year earlier, the national statistics agency said yesterday, picking up from the 6.4 per cent pace in the first quarter, and above the 6.2 per cent forecast in a Reuters poll. Quarter-on-quarter growth at 1.7 per cent also topped the 1.6 per cent pace projected in a Reuters poll, and faster than the previous quarter’s upwardly revised 1.3 per cent. “We are well on track to meeting our full-year target growth of 6.5-7.5 per cent,” Economic Planning Secretary Ernesto Pernia told reporters at a briefing. Like its regional peers, the Philippines has benefited from an improvement in global demand, with exports up nearly 14 per cent in the

six months to June. Household consumption grew at slightly faster annual pace of 5.9 per cent in the second quarter compared with 5.8 per cent in the first, while government spending jumped 7.1 per cent in a dramatic rise from the revised 0.1 per cent gain in the March quarter. “The sequential increase implies that the economy is gaining momentum,” said ANZ economist Eugenia Fabon Victorino in a note to clients.

Drugs war, peso woes

Indeed, Manila aims to lift growth to as much as 8 per cent during Duterte’s term through a six-year, US$180 billion “Build, Build, Build” infrastructure programme. All the same, the outlook is not without risks, according Capital Economics senior economist Gareth Leather, who said that Duterte’s controversial war on drugs has started to undermine investor sentiment. The security crisis in the southern city of Marawi is also a “potential risk to the near-term economic outlook,” as it could deter foreign direct investment into the country, said Rajiv Biswas, Asia Pacific Chief Economist at IHS Markit. Thousands of people have been killed in the anti-drugs campaign, Duterte’s signature policy, since it was launched on June 30 last year,

with the intensity of the crackdown alarming the international community. Duterte has repeatedly said solving the drugs scourge was necessary for the economy to prosper. Investors were also focused on the peso currency following a sharp slide since July though it was steady after the GDP report. Policymakers have sought to soothe frayed nerves in the foreign exchange market after the peso hit an 11-year low, saying currency movements do not reflect the underlying strength of the local economy. Bangko Sentral ng Pilipinas Governor Nestor Espenilla said yesterday the central bank was “ready to adopt policies” to keep prices and financial markets stable. The central bank has kept policy settings steady since a 25-basis-point hike in September 2014. A construction boom in the Philippines has contributed to the peso weakening amid a recent surge in capital goods imports, setting the nation on course to book its first annual current account deficit in 15 years. The infrastructure drive saw public construction surge 12.0 per cent in the second quarter from 1.9 per cent in the first three months of the year, but private building work slowed to 4.7 per cent from 13.0 per cent in the March quarter. Reuters

Property

S.Korea’s Moon says can deploy tougher steps to curb speculation Moon’s comments come as policymakers gauge the effects of the latest measures announced on Aug. 2 Cynthia Kim and Christine Kim

South Korean President Moon Jae-in said yesterday the government may roll out a tougher set of measures to rein in property market speculation if its earlier measures fail to curb a further rise in housing prices.

Key Points Govt has stronger options in mind if home prices rise further Higher taxes may be considered for better distribution of wealth Responding to a question if the government would impose heavier taxes on property ownership, Moon

said the government has “a more stringent set of measures in pocket if (home prices) show further signs of rising after some time.” “The government could consider (strengthening) property possession taxes for the purposes of fair taxation, distribution of wealth and to secure funds for additional welfare, but it’s not something we are considering now to stabilise housing prices,” Moon told a news conference marking his first 100 days in office. Moon’s comments come as policymakers gauge the effects of the latest measures announced on Aug. 2 - the third set of steps in 10 months - to rein in speculators who policymakers blame for stoking a housing bubble in main regions across the nation. Under the fresh measures, those advertisement

South Korean President Moon Jae-in

with more than three homes will face an additional 20 percentage point tax on top of the existing levy when their property is sold at a gain, as the government seeks to stabilise home prices and slow soaring growth in household debt, a drag on economic growth and consumption. The measures are the most stringent on record and signal government worries that rampant household debt could imperil the economy if left unchecked. In South Korea, taxes are far heavier on property transactions than on the possession of property. Moon also said the government may seek further tax increases if public consensus could be made in order to fund growing welfare. Earlier this month, the government proposed stiff tax hikes targeting leading conglomerates, high-income individuals and investors with large holdings of South Korean shares. The proposed revision on corporate taxes, pending parliamentary approval, will hit the top 129 companies, as it seeks higher taxes on taxable income of more than 200 billion won (US$176.1 million) a year. In his first 100 days, Moon managed to win parliamentary approval for an 11 trillion won (US$9.7 billion) spending plan to add jobs, and announced plans to provide more welfare for the elderly and childcare. Reuters

Legislation

Australia proposes stronger money laundering rules Australia said yesterday it would strengthen its money laundering laws, including bringing bitcoin providers under the government’s financial intelligence unit, days after a fresh scandal at one of the country’s biggest banks. The government said a coming bill would be the first stage of reforms to strengthen the country’s Anti-Money Laundering And Counter Terrorism Financing Act. “The threat of serious financial crime is constantly evolving, as new technologies emerge and criminals seek to nefariously exploit them. These measures ensure there is nowhere for criminals to hide,” Minister of Justice Michael Keenan said. Tax on stocks

Sri Lanka minister says concerns will be addressed Sri Lanka’s junior finance minister said yesterday concerns about a possible tax on share trading will be addressed before a proposed revenue bill is passed in the parliament. The island nation’s main share index has shed 3.9 per cent since July 27 and declined in 14 out of the past 15 sessions due to a fall in June-quarter profit and speculation that the new tax reform bill will impose a 28 per cent tax on trading stocks. Trading of shares at the Colombo Stock Exchange is subject only to a transaction levy of 1.12 per cent and there is no tax on the profit made. Deposits

S.Korea’s July foreign currency deposits edge up South Korea’s foreign currency bank deposits at end-July edged up from June as businesses boosted their dollar deposits from trade settlements. The Bank of Korea said total foreign exchange deposits increased by US$5.5 billion to US$69.11 billion as of end-July from US$63.61 billion in June. The bank said the increase was mainly due to exporters depositing more dollars from their trade settlements. Some businesses increased their dollar savings after issuing foreign debt, the data showed. Dollar deposits edged up by US$4.84 billion to US$59.03 billion as of the end of July, rebounding after falling in June. Financial sector

Lenders hold key to India’s economic growth Indian central bank Governor Urjit Patel and Deputy Viral Acharya are pushing commercial banks to cut borrowing costs in a bid to boost investment, after what many economists see as a final policy-rate reduction in this cycle. Both voiced concerns about inflationary pressures from farm loan waivers announced by several state governments and warned this could crowd out private borrowers, according to minutes of this month’s meeting published Wednesday. The six-member monetary policy committee had voted 5-1 for an interest-rate cut. The benchmark repurchase rate was lowered to 6 per cent from 6.25 per cent.

14 Business Daily Friday, August 18 2017

International In Brief Unemployment

French second-quarter jobless rate dips to lowest in 5 years France’s unemployment rate fell to its lowest level in five years during the second quarter, boosting President Emmanuel Macron as he pushes through reforms to ease employment regulations. The jobless rate dipped to 9.5 per cent from 9.6 per cent in the previous quarter, the INSEE national statistics office said yesterday. The unemployment numbers chimed with INSEE data last week that showed French private sector job growth accelerating at its fastest rate in at least six years during the second quarter. Retail

Lisbon prime retail rents in Q2 show biggest rise in Europe Lisbon’s downtown Chiado neighbourhood in the second quarter posted the largest year-on-year increase in rents for street-level commercial premises, followed by Budapest, Rome and Milan, according to figures released by property consultancy Cushman & Wakefield on Wednesday. According to C&W’s ‘DNA of Real Estate’ study, prime monthly rents in such premises averaged €115 per square metre at the end of March, up 9.5 per cent from a year earlier, while the average for the whole quarter was up 15 per cent on the year.

Monetary policy

Fed policymakers grow more worried about weak inflation Fed officials reinforced expectations of an announcement in September to begin reducing the central bank’s holdings of bonds Lindsay Dunsmuir and Jason Lange

ederal Reserve policymakers appeared increasingly wary about recent weak inflation and some called for halting interest rate hikes until it was clear the trend was transitory, according to the minutes of the U.S. central bank’s last policy meeting. The readout of the July 25-26 meeting, released on Wednesday, also indicated the Fed was poised to begin reducing its US$4.2 trillion portfolio of Treasury bonds and mortgage-backed securities. Last month’s meeting, which concluded with a unanimous decision to leave rates unchanged, was marked by a lengthy discussion about the recent soft inflation readings, the minutes showed. The central bank’s preferred inflation measure dropped to 1.5 per cent in June from 1.8 per cent in February and has remained below its 2 per cent target for more than five years. “Many participants ... saw some likelihood that inflation might remain below 2 per cent for longer than they currently expected, and several indicated that the risks to the inflation outlook could be tilted to the downside,” the Fed said in the minutes. The inflation retreat has spurred concerns the Fed may have to cool its monetary tightening pace even though the economy is growing

moderately and the unemployment rate fell to 4.3 per cent in July, matching a 16-year low touched in May. The Fed has raised its benchmark overnight lending rate twice this year and forecasts one more rise before the end of 2017.

“What it boils down to is what inflation will do between here and December” Eric Winograd, an economist at Alliance Bernstein

Some policymakers argued last month against future rate rises until there was more concrete evidence that inflation was moving back toward the Fed’s objective, according to the minutes. Others, however, cautioned that such a delay could cause an eventual overshooting in inflation given a tightening labour market “that would likely be costly to reverse.”

Balance sheet reduction

In an interview with Reuters on Wednesday, Cleveland Fed President Loretta Mester said, “I’m not one who would like to see inflation be at 2 per cent before we continue

on the path” of rate hikes because policy affects the economy with a lag. “On the other hand, we do have to take into account that we have had weak readings on inflation,” Mester added. Senior Fed officials have largely dismissed the inflation softness as temporary. Fed Chair Janet Yellen said last month that special factors, including price drops for mobile phone plans and prescription drugs, were partly responsible. Voting members of the Fed’ rate-setting committee agreed to monitor inflation closely in light of the concerns, with a few policymakers cautioning that the central bank’s framework for analysing inflation was “not particularly useful,” according to the minutes. Fed policymakers at last month’s meeting also cast a keener light on financial stability and agreed it was important to look for signs of declining market volatility or concentration of investors in particular assets. Elsewhere in the minutes, Fed officials reinforced expectations of an announcement in September to begin reducing the central bank’s holdings of bonds that were bought in the wake of the 2007-2009 financial crisis and recession. Several policymakers were prepared to announce a start date last month, but the Fed decided to wait as “most preferred to defer that decision until an upcoming meeting.” Reuters

Oil Industry

Saudi crude exports fall just as domestic stockpiles dwindle Saudi Arabia, the world’s biggest crude exporter, shipped the least oil in almost three years in June, just as domestic stockpiles are dwindling. Exports fell to 6.9 million barrels a day, the lowest since September 2014, from 6.92 million in May, according to data yesterday on the Joint Organisations Data Initiative website. Domestic stockpiles stood at 256.6 million barrels, the lowest since January 2012, the data show. Saudi Arabia’s Energy and Industry Minister Khalid Al-Falih last month promised even deeper cuts to crude exports for August, with shipments capped at 6.6 million barrels a day. Economy

Qatar’s growth prospects dim as Saudi-led boycott takes toll Qatar’s economy will expand this year at the slowest pace since 1995, according to economists surveyed by Bloomberg this month, as the impact of a Saudi Arabia-led boycott is felt on trade and investor confidence. Gross domestic product will grow 2.5 per cent in 2017 and 3.2 per cent next year, compared with 3.1 per cent and 3.2 per cent respectively in the previous survey conducted in June. Economists now expect a budget deficit of 5.1 per cent of GDP this year, up from 4.6 per cent, while the forecast for inflation dropped to 2.2 per cent from 2.5 per cent.

Survey

Little trusted Putin beats Trump on global affairs, Pew says Trump is still doing better than Putin in his own country Ilya Arkhipov and David Tweed

Russian President Vladimir Putin inspires little confidence when it comes to handling world affairs, a Pew Research Centre survey showed. But he still outshines his U.S. counterpart Donald Trump. “Although confidence in Putin’s handling of foreign affairs is generally low, in many countries he is more trusted than American President Donald Trump,” Pew wrote in a survey focused on Russia’s power and influence. Pew is a Washington-based non-partisan research group.

“Although confidence in Putin’s handling of foreign affairs is generally low, in many countries he is more trusted than American President Donald Trump” Washington-based non-partisan research group Pew Pew wrote in a survey A median 60 per cent of people in 37 countries, including the U.S., said they lack confidence in the Russian leader’s actions in world affairs, versus 26 per cent who said he’s doing a good job. Pew didn’t provide

Russian President Vladimir Putin (L) and U.S. President Donald Trump. Source: Lusa

matching statistics for Trump in a survey focused on Russia, but of the 36 countries canvassed on who they trust more, 22, including Germany, France and Japan, trust Putin more than Trump, according to the pollster’s 2017 spring survey. The survey was conducted Feb. 16 to May 8, before Trump set global markets on edge in August by tweeting threats to rain “fire and fury” on North Korea should the hermit regime threaten U.S. territory with any of its intercontinental ballistic missiles. It also preceded Trump’s decision to sign a bill deepening sanctions against Russia over Ukraine. The Kremlin retaliated by ordering the U.S. to slash staff at its diplomatic missions. Trump is still doing better than Putin in his own country. Pew said that 53 per cent of the American public has confidence in Trump, versus 23 per cent for Putin. About a third of the nations surveyed see Russia as a

major threat to their country, similar to the level of concern caused by China and the U.S. Trump edged out Putin in the confidence stakes in 13 countries, including the U.K., India and Israel. He also scored better in Ghana and the Philippines, where both leaders are expected to attend international summits later this year. The two leaders drew a dead heat in Tanzania. Results from the U.S., which was also part of the survey, weren’t included in this question, and China wasn’t polled. Most Russians believe that Putin has improved their country’s standing in the world, Meanwhile, American and Russian views of each other have become less harsh. The number of Russians who view the U.S. favourably rose to 41 per cent, from 15 per cent in 2015, while 29 per cent of Americans felt more favourably disposed toward Russia, up from 22 per cent in 2015, Pew said. Bloomberg News

Business Daily Friday, August 18 2017 15

Opinion

Private equity follows the money with push into debt Gillian Tan a Bloomberg Gadfly columnist

rivate equity firms are continuing to diversify away from, well, private equity. On Wednesday, Bloomberg News reported that Advent International is planning a move into debt investing and is in the early stages of forming a team to then raise a dedicated fund. The news comes just weeks after techfocused buyout specialist Thoma Bravo confirmed in a filing that said it’s seeking to raise US$750 million for its first fund dedicated to credit investing, joining others in the industry that already have thriving debt businesses. By expanding into new areas like credit, private equity firms can generate more income from their existing customer base of sovereign wealth fund, pension fund, endowments and family offices -- all of which have a seemingly bottomless pit of capital to deploy. These investors have in recent years tried to whittle down the number of relationships they maintain and are super-receptive to new products with different risk and return profiles -- such as a debt of infrastructure fund -- managed by firms they’ve long allocated capital to for private equity investments. That dynamic has helped transform the industry’s giants into alternative asset managers. Three of the six largest publiclyt ra d e d fi r m s -Apollo Global Management LLC, Ares Management LP and Oaktree Capital Group LLC -- have credit businesses that dwarf their other units. And Blackstone Group LP’s real estate arm has eclipsed private equity unit for a while now. G i v e n t h i s, i t’ s curious in some ways that it’s taken this long for Advent and Thoma Bravo, which manage US$39 billion and US$17 billion r es p ecti v e l y , t o make the leap into credit. Start-up costs are light: All they need to do is hire a handful of debt experts and once a fund is raised, begin collecting an annual management fee plus -- if all goes well -- a performance fee, too. Plus, deal flow is ample, in part due to a retreat by big banks that has created an opportunity for alternative investors who are willing to hold buyout-related and other arguably-riskier financing. An added bonus? A larger recurring fee haul points to a higher or improved valuation if a firm decides to sell a stake in itself, a move that has -- in recent years -- provided executives with liquidity without the need to endure the headaches of becoming publicly traded. There are still some heavyweights that have yet to launch separate credit arms. Among them? Warburg Pincus, Apax Partners, Cinven, Clayton, Dubilier & Rice, Silver Lake, Hellman & Friedman and Leonard Green & Partners. While some may decide to remain solely focused on private equity for the long haul, expect them to become a shrinking minority. Bloomberg Gadfly

‘By expanding into new areas like credit, private equity firms can generate more income from their existing customer base of sovereign wealth fund, pension fund, endowments and family offices’

Want to follow 4 per cent rule? Don’t start from here

f your aim is to spend 4 per cent of your portfolio annually in retirement, the best advice is “I wouldn’t start from here”. Today’s high financial asset valuations, with U.S. equity valuations in the 96th percentile, imply we may well be in for an extended period of low returns. That, in turn, ups the chances that a retiree who follows the old 4 per cent rule of thumb faces an unacceptably high chance of running out of money before they run out of heartbeats. Popularized in the 1990s, the ‘4 per cent rule’ held that a retiree with a diversified portfolio of stocks and bonds who wants her assets to last 30 years can safely take 4 per cent out in the first year and then increase drawdowns annually by inflation. While the ideal percentage, and the definition of ‘safely’, have been in hot debate since then, today’s heady stock market levels a rg u e f o r ta k i n g a m o r e conservative approach. Based on market prices compared to the last 10 years of earnings, the S&P 500 now has a price/earnings ratio of about 30, meaning it is trading at a more expensive level than 96.5 per cent of all markets since 1871. Valuation is not always destiny, but in aggregate it is an excellent indicator of future returns, with higher prices implying, as a general thing, lower scope for future gains. Yet, looking at just the top quartile of S&P 500 valuation periods, the following 10 years have seen single-digit or negative annual equity returns 99 per cent of the time, according to Goldman Sachs Asset Management. In 17 per cent of cases investments at top quartile valuations produce a decade of negative returns. Those kinds of figures put a 4 per cent rule plan in serious jeopardy of creating a disastrous outcome. “High valuations of core assets in the U.S. suggest that retirement withdrawal rates that were once safe may now deliver success rates that are no better - or even worse - than a coin flip,” Justin Sibears, of quantitative asset manager Newfound Asset Research writes in a note to clients. “Retirement success and muted future returns are not mutually exclusive. However, achieving financial goals in such an environment requires careful planning for factors that may have been safely ignored given the generous market tailwinds of prior decades.”

“

James Saft a Reuters columnist

Getting there from here

Research Affiliates’ capital markets assumptions, which notably do not assume a mean reversion of valuations, expect that U.S. equities will over the next decade return 5.3 per cent annually in nominal terms, against a historic average of 9 per cent. Ten-year Treasuries will return just 3.1 per cent annually, compared to 5.3 per cent in the past. Using those figures and running simulations, even a volatile portfolio with 100 per cent equities would run out of money before 30 years 34 per cent of the time, according to Newfound. A classic 60/40 stock/bond mix would bust 42 per cent of the time. But if you cut the initial withdraw level to 3 per cent from 4 the picture improves greatly. A 60/40 asset allocation then has a 94 per cent chance of not being exhausted in 30 years. Go to 2 per cent withdrawal rate and even an all-bond portfolio has a 97 per cent chance of lasting. Those figures, it should be noted, are gross of fees and expenses, which brings us on to our next important set of points. It isn’t so much that “you can’t get there from here” but rather that retirement savers need to redefine both the route and the destination. For those with a decade or two until retirement, the most obvious and powerful move is to cut current expenses and save more. Plan on retiring later, or on spending less than planned while in retirement. Many financial intermediaries look at this situation and immediately start to recommend investments they think will beat the market, stressing that this is even more important when market returns will be low. My bias would be towards taking an even more ruthless than usual attitude towards fees and costs. Annual costs of 1 per cent in a 9 per cent return world are less significant, proportionally, than in one in which an overall portfolio might only make 4.5 per cent for a decade. Returns are always prospective, to be hoped for but not counted on. Fees and costs are real and certain. Reuters

For those with a decade or two until retirement, the most obvious and powerful move is to cut current expenses and save more

”

16 Business Daily Friday, August 18 2017

Closing Infrastructure

New BRICS bank plans US$1.5 bln lending for South African projects

A New Development Bank (NDB) set up by the “BRICS” group of emerging economies plans to lend US$1.5 billion to South Africa for infrastructure projects over the next eighteen months. The BRICS - Brazil, Russia, India, China and South Africa - agreed to create the infrastructurefocussed lender in July 2014 as an alternative to the World Bank, launching it a year later. The bank, headquartered in Shanghai, officially opened its African regional centre in

NDB opening ceremony

Johannesburg on Thursday which will identify projects that it can fund. “We have an appetite to do about US$1.5 billion of lending to South Africa for the next 18 months and the task before the members of the Africa regional centre is to make sure that this pipeline is rectified into actual lending projects,” the bank’s president Kundapur Kamath said at the launch. The NDB was created to address a massive infrastructure funding gap in the member countries, which account for almost half the world’s population and about one-fifth of global economic output. Reuters

Results

Alibaba outstrips revenue estimates with online sales growth Revenue from Alibaba’s core e-commerce business made up 86 per cent of total revenue Cate Cadell

libaba, China’s top e-commerce firm, beat analyst’s estimates with a 56 per cent rise in first-quarter revenue, driven by growth in online sales which make up most of its business. Yesterday’s results show that Alibaba Group Holding Ltd, one of Asia’s most valuable companies, is benefiting from more and more Chinese buying an increasing proportion of everything from food to clothing to luxury items online. Alibaba’s stock is up by over 81 per cent this year, lifted by steady increases in revenue for its commerce business and strong growth in its cloud computing and entertainment units, even as investments in offline stores are yet to pay off. Alibaba’s revenue rose to RMB50.1 billion (US$7.51 billion) for the three months ended June 30, compared with analysts’ average estimate of RMB47.7 billion, according to Thomson Reuters I/B/E/S. “Our technology is driving significant growth across our business and strengthening our position beyond core

commerce,” chief executive Daniel Zhang said in a statement. Revenue from Alibaba’s core e-commerce business made up 86 per cent of total revenue in the three months to June 30, up from 73 per cent in the same period a year prior. In the cloud business, revenue grew 96 per cent in the quarter to RMB2.4 billion,

with total paying customers breaking the 1 million mark for the first time, up from 577,000 a year earlier. Alibaba’s cloud business boosted its total global data centres to 17 during the first quarter, with the addition of two centres in India and Indonesia. Revenue in the entertainment business rose by 30 per cent to RMB4 billion.

Net income attributable to the company’s shareholders nearly doubled to US$2.17 billion, or 83 cents per share. Shares of Chinese e-commerce firms, including Alibaba.com and JD.com Inc, have outperformed the market in 2017, buoyed by positive revenue growth around June sales events and overseas expansion developments.

In June Alibaba raised its expectations for full year revenue growth to 45-49 per cent.

Key Points Revenue RMB50.1 bln vs RMB47.7 bln expected by analysts Net income to shareholders US$2.17 bln, or US$0.83 cents/shr Paying customers for cloud business cross 1 million mark It has accelerated the roll-out of its e-commerce infrastructure in Southeast Asia, with a further US$1 billion investment in Singapore-based e-commerce platform Lazada Group, and targeted new merchants in Russia and the United States as part of a wider plan to boost revenues and attract new customers outside of China. Alibaba, though, is yet to prove the value of several recent large-scale investments, including US$2.6 billion in department store chain Intime Retail Group Co Ltd, among other brick-andmortar investments. Reuters

Employment

Inc

Blackouts

U.S. jobless claims drop to near six-month low

China gets tough on long, odd company names

Taiwan power outage caused US$3 mln in damages

The number of Americans filing for unemployment benefits fell to near a six-month low last week, pointing to a further tightening in the labour market that could encourage the Federal Reserve to lay out a plan to start unwinding its massive bond portfolio. Labour market strength was corroborated by other data yesterday showing manufacturers in the mid-Atlantic region sharply increased hours for workers in August amid a jump in new orders and unfilled orders. Initial claims for state unemployment benefits dropped 12,000 to a seasonally adjusted 232,000 for the week ended Aug. 12, the Labor Department said. That was the lowest level since the week ended Feb. 25 when claims fell to 227,000, which was the best reading since March 1973. Data for the prior week was unrevised. It was the 128th week that claims remained below 300,000, a threshold associated with a robust labour market. That is the longest such stretch since 1970, when the labour market was smaller. The unemployment rate is 4.3 per cent. Economists polled by Reuters had forecast claims dropping to 240,000 in the latest week. A Labour Department official said there were no special factors influencing the claims data. Reuters

“Beijing Afraid of Wife Technology” and “What You Looking at Technology” are among the kind of company names that will become a thing of the past under new Chinese government rules. After launching a campaign to eliminate public signs with poor English translations -- or “Chinglish” -- China’s communist rulers are now taking aim at firms that attempt to register names that are excessively long or strange. The Legal Daily cited names of existing firms that would not be allowed under the new rules, including “Shanghai Wife Biggest Electronic Commerce” and “Hangzhou No Trouble Looking for Trouble Internet Technology”. The state newspaper also gave the example of a condom company called “There is a Group of Young People with Dreams, Who Believe They Can Create Wonders of Life Under Uncle Niu’s Leadership Internet Technology”. The State Administration for Industry and Commerce brought the restrictions in this month, while also banning company names deemed offensive or racist or having religious or political connotations. China’s drive for normality also moved the government to previously ban “weird architecture” in a country that has seen a huge construction boom. AFP

Taiwan’s massive power blackout on Tuesday resulted in about US$3 million worth of losses for 151 companies in industrial parks and export processing zones on the island, the economics ministry said yesterday. The government plans to release a figure for the overall economic cost of the blackout in the next few days, a ministry spokesman said. The five-hour long blackout caused estimated losses of NT$87.47 million (US$2.89 million) and affected millions of homes as well as offices and companies. The outage prompted an apology from President Tsai Ing-wen. Advanced Semiconductor Engineering told Reuters the power outage resulted in a preliminary estimate of US$500,000 to US$800,000 worth of output losses for the company. However, the company does not expect the output losses to have an impact on its August revenues as it plans to undergo overtime work to compensate, a company spokesman said. The blackout was caused by “structural problems” and human error involving the replacement of equipment at state-owned gas supplier CPC Corp, which ultimately affected the operations of a power plant owned by state-run Taiwan Power Co, CPC Corp said. Reuters