Chinese workers keep up protests in Saipan Labour Page 3
Monday, August 21 2017 Year VI Nr. 1365 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Financial sector
Chinese banks struggling to improve results Page 8
Culture
Survey
Page 6
Page 2
Ox Warehouse finds partner for new venue
www.macaubusiness.com
Local retailers and restaurants less optimistic
Politics
MGM CEO stands up against hate speech Page 6
Meetings
Zhuhai awarded for MICE activities Page 3
Theme
Sources confirmed with Business Daily that the four towers of Sands Cotai Central hosting St. Regis, Sheraton Grand, Conrad and Holiday Inn are going to embrace London as a design theme. The features will complement Paris and Venice at the other Cotai premises of the company on the opposite side of the road. Page 3
Friendly poker
Better visitor spending
Official figures show that visitor spending in June increased remarkably. The figures confirm a stable growth path since spending results began improving steadily last year. Mainlanders led the increase.
Interview Tim Chen, CEO of poker tournament organising company MBP, discusses with Business Daily his bet to expand poker in Macau. With three tournaments already scheduled for the second half of the year, and Babylon Casino as a base, the CEO reaffirms his confidence in a game that he considers more friendly and positive than the reigning baccarat. Pages 4 & 5
Wynn could change U.S. listing
Markets Steve Wynn mulls delisting from Nasdaq to join IEX Group stocks operator. The new actor on the scene is offering a whole set of treats to attract companies to join its ‘somehow’ new way of facing the sector. Page 7
Cooler houses in mainland
Tourism Page 2
HK Hang Seng Index August 18, 2017
27,047.57 -296.65 (-1.08%) Worst Performers
Cathay Pacific Airways Ltd
+1.69%
Want Want China Holdings
+0.00%
Power Assets Holdings Ltd
-13.10%
CK Infrastructure Holdings
-1.95%
Ping An Insurance Group Co
+1.43%
New World Development
+0.00%
Lenovo Group Ltd
-3.39%
Bank of China Ltd
-1.79%
Wharf Holdings Ltd/The
+0.58%
Swire Pacific Ltd
+0.00%
China Resources Power
-2.75%
China Overseas Land &
-1.78%
Galaxy Entertainment Group
+0.42%
China Unicom Hong Kong
+0.00%
Industrial & Commercial
-2.14%
Hang Seng Bank Ltd
-1.74%
Sino Land Co Ltd
+0.31%
China Mobile Ltd
CITIC Ltd
-2.07%
China Construction Bank
-1.66%
-0.12%
29° 35° 28° 35° 25° 29° 27° 31° 27° 31° Today
Source: Bloomberg
Best Performers
Tue
Wed
I SSN 2226-8294
Thu
Fri
Source: AccuWeather
Real estate China’s home prices rose in fewer cities in July, adding to signs the property market is cooling. According to figures issued by the National Bureau of Statistics on Friday, prices fell in nine cities and were unchanged in five. Page 8
2 Business Daily Monday, August 21 2017
Macau Official Data
Tourists increase spending and buying Chinese tourists remained the biggest source of expenditure Cecilia U cecilia.u@macaubusinessdaily.com
D
uring the period from April to June, visitors to Macau spent a total of MOP13.75 billion (US$1.71 billion) excluding gaming expenses, an increase of 17.5 per cent year-on-year and 2.2 per cent when compared to the first three months of this year, official data from Statistics and Census Service (DSEC) reveal.
A year-on-year increase of 22.5 per cent was registered in the total spending of overnight visitors, amounting to MOP11.38 billion, while overall spending by sameday tourists dropped by 1.5 per cent to MOP2.37 billion. Per-capita spending in the second quarter was MOP1,787 per person, an increase of 11.7 per cent year-on-year and 4.6 per cent quarter-to-quarter. In particular, the per-capita spending of tourists from mainland
China grew 16.8 per cent year-onyear to MOP2,162. Of these, tourists from Guangdong province had per-capita spending of MOP1,804, up 12.4 per cent, whereas spending by Fujian tourists dropped 17.6 per cent year-on-year to MOP1,287 per person. Chinese tourists travelling under the Individual Visit Scheme (IVS) had per-capita spending of MOP2,361, up 5.2 per cent year-on-year. Regarding tourists from other
regions, per-capita spending of visitors from Malaysia increased by 8.2 per cent, but visitors from Singapore, Hong Kong and Taiwan saw their per-capita spending decline by 3.9 per cent, 8.2 per cent and 6.9 per cent, respectively. Decreases in per-capita spending were also recorded in tourists from Australia, the United States and the United Kingdom, down 21.7 per cent, 0.6 per cent and 4.4 per cent respectively. DSEC data also shows that per-capita spending of overnight visitors increased by 7.4 per cent year-onyear to MOP2,733, with tourists from the Mainland spending MOP3,241 per-capita, up 10.7 per cent. However, per-capita spending by overnight visitors from Taiwan decreased by 10.2 per cent. For same-day tourists, per-capita spending reached MOP671, up 2 per cent when compared to the same period last year. In particular, Chinese tourists had the highest spending at MOP845, while that of IVS visitors stood at MOP1,315. According to DSEC data, per-capita spending of visitors coming to the city for MICE [Meetings, Incentives, Conferences and Exhibitions] events grew significantly by 38.7 per cent year-on-year to MOP3,304.
Shopping still king
Visitors to Macau continue to spend most on shopping, accounting for 43 per cent, followed by accommodation (25.6 per cent) and food and beverage (23.1 per cent). Per-capita spending on shopping reached MOP768, up 10.7 per cent year-on-year, of which spending on local food products and cosmetics and perfume increased by 17.8 per cent and 18.6 per cent to MOP229 and MOP191, respectively.
DSEC
Stable business in restaurant and retail sales More restaurants expect better performance, while fewer retailers are optimistic about July’s sales Cecilia U cecilia.u@macaubusinessdaily.com
For the month of June, 45 per cent of survey respondents from restaurants and similar establishments indicated a year-on-year growth in receipts, a slight decrease of 1 percentage point when compared to May, according to the latest information released by the Statistics and Census Service (DSEC). Some 44 per cent of Chinese restaurants revealed a better performance in June, compared to 63 per cent recorded in May. Meanwhile, more Western restaurants (45 per cent) and local style cafes, congee and noodle shops (48 per cent) reported increased receipts, up 10 and 3 percentage points, respectively. However, 33 per cent of restaurants stated that they had recorded a yearon-year decline in receipts, the same percentage as recorded in May. Forty percent of Chinese restaurants and Western restaurants indicated having a less desirable performance, with the percentage increasing 14 and 10 points, respectively. Regarding the performance of the retail trade, DSEC data shows that 46 per cent of retailers reported that sales had improved year-on-year in June, a decrease of 1 percentage point month-on-month. More specifically, 56 per cent of retailers selling watches, clocks and jewellery said sales had improved
compared to a year ago, up 11 percentage points. However, only 33 per cent of department stores and 50 per cent of adults’ clothing retailers reported improvements in their sales, a decrease of 22 percentage points and 15 percentage points, respectively. On the other hand, some 34 per cent of retailers revealed a year-on-year decline in sales, down 2 percentage points when compared to May. The percentage of retailers of watches, clocks and jewellery reporting sales declines dropped 17 percentage points, but the percentage of motor vehicle retailers and department stores reporting poorer business grew by 22 percentage points each.
Prospects in July
When asked about their expectations for July’s performance, the official data shows that 29 per cent of restaurants expected to see growth in receipts in July, up 7 percentage points when compared to the previous month. Of these, 38 per cent of Japanese and Korean restaurants, 39 per cent of Chinese restaurants and 27 per cent of local style cafes, congee and noodle shops said they anticipate a year-onyear increase in receipts in the month of July, up 19, 11 and 10 percentage points from June, respectively. Meanwhile, 38 per cent of restaurants predicted that performance in July would drop, down 3 percentage
points, with the corresponding share of Chinese restaurants and Japanese and Korean restaurants decreasing by 11 percentage points and 6 percentage points, respectively. For retailers, 24 per cent of respondents predicted a year-on-year increase in sales in July, down 2 percentage points when compared to June. On the other hand, 38 per cent of retailers indicated an expectation of sales declines, an increase of 1 percentage point from June. Among the various types of retailers, the proportions of department stores (44 per cent), watches, clocks & jewellery retailers (39 per cent) and supermarkets (22 per cent)
expecting a year-on-year sales rise each went down by 11 percentage points, while the corresponding share of motor vehicle retailers (33 per cent) rose by 22 percentage points; in addition, 80 per cent of the leather goods retailers anticipated a year-on-year sales growth, the DSEC informed. On the other hand, 44 per cent of both department stores and supermarkets said they expected poorer business performance in July, up 33 percentage points and 22 percentage points, respectively. DSEC selected a total of 167 restaurants and similar establishments and 135 retailers, for the survey.
Business Daily Monday, August 21 2017 3
Macau Cotai
Sands Cotai Central becomes London The UK capital will be the next theme to be developed in Macau by Sands China Ltd., following The Venetian and The Parisian Alex Lee alex.lee@macaubusinessdaily.com
T
he four towers of Sands Cotai Central will soon feature a common theme: London. “The decision is done, it’s now just a matter of starting to work on it”, a Sands China Ltd. source, that preferred to remain anonymous, told Business Daily. Opened in April 2012, the
four towers right in front of the Venetian, accommodate international hotel brands including St. Regis, Sheraton Grand, Conrad and Holiday Inn. The towers have “for quite a while” been at the center of a strategic business discussion by top level executives of Sands China Ltd., a subsidiary of gaming mogul Sheldon Adelson’s Las Vegas Sands Corp. Themes like The Venetian
and the latest addition to the group, The Parisian, are seen as “more attractive to the Chinese visitors”, the source told this newspaper. London is now the next phase. According to the source, the outside surroundings of the four towers will host several characteristic features of the United Kingdom’s capital city. However, Business Daily could not confirm at this stage whether features like replicas of Big Ben, the Tower
A partial view of the four towers of Sands Cotai
of London, Buckingham Palace or the Tower Bridge will be built. Also in the pipeline are changes to the interior of the hotels, in order to “create a better London feeling”. And the iconic red double decker buses “are also in the plans”. The new theme is aimed at reinforcing Sands Cotai Central’s message of a “pathway to adventure, fun and fortune, with hotels, casinos, and an array of dining, retail and entertainment options
under one roof”, as its website describes the property. The combined properties of Las Vegas Corp. in Macau feature almost 13,000 hotel rooms (including The Venetian, Four Seasons and The Parisian), nearly 150 restaurants and food outlets and more than 850 retail shops. The Public Relations department of Sands China Ltd. did not reply to Business Daily’s enquiries by the time this article went to print.
The famous Houses of Parliament in London
Chinese gambler loses US$75 million
A Chinese high roller lost at The Venetian late last month a record US$75 million (600 million patacas), a company source told Business Daily. According to our source, when asked to choose anything he would like to have, the gambler chose a replica of the huge golden sphere in the hotels reception hall. The gaming operator agreed and the replica of the “present” is estimated to cost around 500,000 patacas to produce.
Entrance hall of the Venetian
Industry awards
Zhuhai receives MICE recognition The Zhuhai municipality received two awards for its meetings, incentives, conventions, and exhibitions (MICE) industry at the 3rd China Events (MICE) Industry Fair held at the Shanghai New International Expo Centre on August 16, the city’s government announced last week. The national MICE Industry’s Goldfinger Awards granted to Zhuhai included the ‘Destination for the Most Valuable MICE Brand,’ and the ‘Most Influential Professional
Trade Fair’ awarded for its biennial China International Aviation & Aerospace Exhibition. The Macao Trade and Investment Promotion Institute (IPIM) had not confirmed to Business Daily if the Macau SAR participated in the fair or received any awards by the time this story went to print. As at the end of 2016, direct and indirect MICE revenues in Zhuhai amounted to RMB13.4 billion (US$2 billion/MOP16.17 billion), of which
RMB10.5 billion was generated by the exhibition industry and RMB2.9 billion by the convention industry, according to the 2016 Zhuhai Convention & Expo Bureau report on the MICE industry. In Macau, a total of 366 MICE events were held during the first quarter of 2017, consisting of 344 meetings and conferences, 7 exhibitions, and 15 incentives, with the total number of participants and attendees amounting to 222,000,
according to the latest data provided by the Statistics and Census Bureau (DSEC). Among the MICE activities the Zhuhai government plans to hold in the second half of this year, highlights include the China-Latin America International Expo, ChinaBio Partnering Forum, Silk Road International Economic Forum, and the International Congress of the Chinese Orthopedic Association. S.Z.
Overseas labour
Chinese workers protest again in Saipan Another protest erupted last week in Saipan, by a group of workers who were laid off in March without proper pay from two companies affiliated with Imperial Pacific International Holdings, The Marianas Variety reported on Friday. A total of 37 workers who were formerly employed by MCC International and Beilida Overseas Ltd. - two
Chinese sub-contractors of the Best Sunshine Casino operated by Hong Kong-listed IPI in the U.S. Commonwealth Pacific Island - claimed they had sought assistance from a local Chinese Association to send a letter to the Chinese Consulate in the U.S. According to an excerpt from the letter published by the same news outlet, the Chinese workers claim
they ‘paid thousands of dollars’ to go to Saipan, and that they had worked ‘long days under bad conditions for less than a minimum wage.’ The workers further claimed that after one of their co-workers died from a fall, they were all laid off. The group is demanding payment of what is owed to them according to the law, and compensation for the
injured workers. The workers are currently staying in a dormitory in Garapan, and receiving food from IPI. Controlled by Hong Kong billionaire Cui Lijie, IPI is said to be the biggest contributor to the island’s economy and its largest private-sector employer, according to previous reports. S.Z.
4 Business Daily Monday, August 21 2017
Macau
Interview
A winning hand Macau-based poker tournament organiser, Macau Billionaire Poker (MBP) seems to have been dealt a good hand, having recently signed an agreement with major Asia-Pacific poker tour Asia Poker Tour (APT), for an exclusive agreement to bring a minimum of two international poker events per year to Macau for the next five years. Business Daily spoke with the CEO of MBP, Tim Chen (pictured), at Babylon Casino where the company’s tournaments take place, to discuss the evolution of the poker market in mainland China and Macau and its contribution to the local economy. Nelson Moura nelson.moura@macaubusinessdaily.com
I played, since they were all private games, but it was very high stakes.
How did you become interested in poker? I’m originally from Guangzhou and met poker during my studies in Michigan in the United States back in 2003 when Chris Moneymaker won the World Series of Poker. It’s a legendary story; he turned a US$40 entry ticket into a US$2.5 million first prize championship, beating one of the best professional players of the world at the time [Sam Farha], being himself a total amateur. At the time, ESPN and other TV channels started making several poker TV shows, such as World Series of Poker (WSOP) live and High Stakes Poker. It was the time of the poker boom with everything from online poker, world series poker and TV shows. It was amazing. That’s how I got into poker and I never got out.
When did MBP start? The company was founded in 2010 by Mr. Rono Lo [who is still the company’s partner] and we held a very large tournament in 2012, with a total prize pool of HK$180 million. The first prize of HK$50 million was won by a Hong Kong player named Stanley Koi, a stock trader. We wanted to promote poker in the Greater China area as we recognise the potential of this game.
What was your professional background prior to creating MBP? Before MBP I ran a series of poker operations such as websites, forums, training websites, social and streaming video websites and a poker TV. I established most of my connections operating in mainland China through online means, with some outreach to the Greater China area. Do you personally play poker? I used to be one of the best professional poker players in China. I can’t really reveal the highest stakes game
Did the gaming operators have a positive reception to poker when you first started? I think during that time gaming operators and junket operators like Suncity Group didn’t really notice the rising trend of poker, since the cash value is nothing compared to VIP Baccarat, where one single player can play HK$20 million in one table in the lobby. What added value can poker tournaments bring to gaming operators’ properties? Poker is very recreational and an intelligent game, so it creates a lot of traffic, especially during tournaments. As an example, during our last tournament the normal rate for a room in Harbourview hotel - which can be between HK$600 to HK$700 per day - went up to HK$3,000 or HK$4,000, almost 10 times more. Maybe the prize pool compared to
other games is not that large, but it brings guests to the hotel, into the food and beverage areas, and to all other entertainment offerings. Therefore it’s huge in terms of attached value and social value, it’s huge. It brings attention and exposure and people will come. People will go broke playing baccarat, but in my 15 years of poker experience, nobody ever went broke playing poker, especially in poker tournaments. It’s healthy entertainment and it’s an entertaining game.
“I really think Macau has the potential to be the poker capital in Asia” Baccarat is king in Macau. Do you think poker has the necessary appeal to the typical Chinese player? I think baccarat players tend to be older since it is simple and its excitement comes from the possibility of reversing a loss or profit in one or two minutes. In China, poker players tend to be from younger generations. If you go to our tournaments and look around, it’s mainly young faces, around 20 to 30-years old. The oldest guys tend to be foreigners. However, the young population in mainland China is not that interested in hardcore luck based gaming, they
like to think and they like to fight. They like to put a strategy behind it. There’s two reasons for this; one because younger generations were brought up in a developing China. The Chinese economy is booming right now so they probably have a good income, while they’re mostly only children. They don’t really care about money, they care about title or status. The other important reason is that baccarat is not allowed in mainland China, but poker can be played in some situations. Currently in mainland China, there are several very large companies promoting poker such as Tencent or Booyah from Hong Kong. Poker can have many forms. It can be illegal if you play large cash games, but there’s one poker game on WeChat that has huge traffic using only play money. Tencent just signed with WSOP for a ten-year agreement to use their brand in mainland China, together with WSOP Asia. I think the game will become more and more popular in China, especially with younger generations. How is the situation of online poker gaming in mainland China? It is allowed if it uses play money. In the U.S. they had Black Friday [when the U.S. Department of Justice shut down the operations of three of the countries largest poker websites PokerStars, Full Tilt Poker, and Absolute Poker] which hit the American poker market hard. However, I think it was a good thing for the Chinese poker market, since
Business Daily Monday, August 21 2017 5
Macau after that a lot of the business focus shifted to the Chinese market. I see players from all social levels coming to the local tournaments, from CEO’s to college students. Everybody loves it. How has the Macau poker scene evolved since 2010? If you look at the history of poker development in Macau, around 2010 until 2013 actually a lot of casinos were holding poker tournaments in Galaxy, Wynn Macau, The Venetian. However after 2013, many of these casinos closed their poker tables because they would calculate the average profit of a poker table, which is calculated as an average gambling table having to pay the same fee to the government. They realised they couldn’t get the same level of value as baccarat tables. In the last two years there are again more and more poker tables, which I believe is due to the micro-economy adjustment. The Chief Executive said that in the next 10 years, Macau will turn into the entertainment and recreational capital of Asia, away from the gaming capital of Asia. I totally agree with this direction because if people just come here every year to go broke, it’s not really good. Gaming revenues declined in the last years and I think more and more casino operators are going in the same direction, with poker being a perfect game for recreation and entertainment. You can bring your family during a tournament and they just go somewhere for fine dining or The Venetian to get a boat. You can spend HK$40,000 and be able to win a prize of HK$4.2 million. In our tournament, you can spend only HK$28,000 and get four days of enjoyment. Do you know how many people go to the WSOP in Las Vegas? Around 120,000 people, just for one event, with an average buy-in of HK$5,000, so you can see how much it can generate in one city for one month. Not to mention accommodation, dining and other expenses. I really think Macau has the potential to be the poker capital in Asia. Do you believe Macau manages to attract the most important world players like Las Vegas does? I think we already do in Wynn Macau and City of Dreams, where they run very high stakes tables. Plenty of famous professional players play there such as Tom Duong, Phil Ivy or Daniel Negreanu. We invited three champions to our last event, such as Jonny Chan and Martin Jepson, the 2013 WSOP champion. Have your events always been held at Babylon Casino? We used Galaxy and Wynn Macau once before, but since 2015 Babylon became our permanent home. I think it will be our headquarters for at least the next five years, since it has the space and all the equipment and staff to hold very large tournaments. We’ve been in a very long and good business relationship with Macau Legend and SJM, they’re very supportive towards us. The casino is also close to Fisherman’s Wharf, with a nice sea view, good restaurants and most importantly, being isolated from other large casinos. So people who come here, they just come for the poker. Normally poker players don’t play other games. I’ve been in Macau hundreds of times and I don’t even know the rules to baccarat. I’m just not interested. Have you partnered with any junket operators? Not for now. It just hasn’t crossed our
line, since the customers they try to cater to are totally different from our target. My aim is middle class players, we have side events with HK$3,500 buy-ins. We have HK$500,000 tables for VIP’s but it’s not our focus right now. I want larger and well-organised tournaments with brand value.
“In mainland China there’s incidents of tournament organisers just bailing with the money or the police calling off tournaments one day before it starts. It’s why the largest poker tournaments will be held in Macau” How have the MBP tournaments changed over the years? They grew very fast. Just as an example, in March of this year we had a poker event with a guarantee of HK$2 million, with 397 people showing up. In our recent MBP Summer Showdown in June, the prize pool was ten times larger with 826 players showing up for the main event. This tournament was held between July 27 and August 3 with a record breaking [for Asia] HK$20 million prize pool. The whole organisation went very smoothly, laying down the basis for our future tournaments. We’ll have an even larger one at the end of the year. MBP operates two kinds of tournaments, some just with our one brand and others in partnership. With our own brand, we have three events in Spring, Summer and the end of the year. The others are with other organisations like Asia Poker Tour (APT) and the Booyah Poker Tour. We are looking to host one tournament monthly. Also, we don’t associate with any gaming platforms or organisations. For example, City of Dreams can only organise tournaments by PokerStars, but we don’t have that burden, we welcome any valuable and reliable brand. We’re also in talks with Tencent. We had to adjust our direction in the last two years, because online poker grew up so much in mainland China. You just partnered with APT. How did that partnership come about? APT’s CEO, Jeff Man, is one of our very old friends, having operated APT for almost 10 years. The company has become very famous, with a unique brand value across Asia. They have a site in Manila, Jeju Island and events in Cambodia, but they were always looking for a stable home in Macau, so here we are. They will hold at least two annual events here, with the one in the end of the year being the largest of their series, like a closing ceremony. We also agreed to cooperate in staff training and mutual promotions. Do most tournament players come from mainland China? Yeah, I would say 70 per cent or 80 per cent. What is the process of hosting a tournament? It’s exhausting and it’s absolutely a
Prize pool - amount of money collected to award as prizes to players in a tournament Straight Flush - five cards in numerical order, all of identical suits. Royal flush - best possible straight flush consisting of the ace, king, queen, jack and ten of a suit
team effort. For just a one week tournament we need to begin preparing four or five months before. With pregame promotions, preparing all the tables and all the computer systems, training staff. For a tournament like Summer Showdown, we need to train a lot of new dealers or get professional dealers to do it part-time. They make good pay, and if we make a monthly tournament, they can get more than in a full-time job. What future tournaments are being planned? We have already set up for three in the second half of this year, one just us in October, one with APT in November, another one to be held in September or October, and another at the end of December or in the beginning of next year. What differentiates MBP tournaments from other local tournaments? I think we partner with China a lot, so we have the largest percentage
of Chinese players, attracting a lot of fans. Foreign players tend to play very seriously, with shades and all, while in our tournament it is more like a Carnival. It’s very entertaining. Have you had any issues with gaming regulators in Macau? We work closely together with the Gaming Inspection and Coordination Bureau (DICJ), and in every tournament we need to submit a very detailed application such as the table layouts, staff work permits, tournament structure. It’s a good thing about Macau, everything is examined closely, giving the game more fairness. In mainland China there’s incidents of tournament organisers just bailing with the money or the police calling off tournaments one day before it starts. It’s why the largest poker tournaments will be held in Macau, the government is supportive and it has great economic and social value. advertisement
6 Business Daily Monday, August 21 2017
Macau Opinion
Sheyla Zandonai*
Planning reality The Macau SAR Government is finally moving ahead with the comprehensive urban planning of the city. In a dispatch published in the Official Gazette last week, the Land, Public Works and Transport Bureau (DSSOPT) launched the public tender for the development of the Master Plan of Macau. A Master Plan offers a longrange vision for the built environment of a city. It is not concerned only with the materiality of things. That’s a blueprint. It also tackles the social fabric of a place. At the end of the day, it is an enterprise in design, communication, and policy development. While detailed information is expected to be included in the MOP1,000 dossier that bidders will have access to by entering a competition, there are a few details which deserve consideration here, either because they have not been clarified or because they raise questions. The first one would be what the government means by ‘Macau.’ Is it envisaging a Master Plan for the peninsula or for the whole jurisdiction under its control? Does it include the new reclaimed land zones and territorial waters? The timing of the publication of the dispatch and the time allowed for the submission of proposals also deserve some thought. The dispatch came out after the Legislative Assembly closed its yearly cycle and in a period where city affairs are slower than usual because of the summer break. As for the time allowed for submissions, defined as little more than one month and a half from the date of announcement, it seems short at first approach. In fact, talks about the Master Plan have been present in the public debate for at least the last 10 years. But it is somewhat striking that its design is now a matter of a month or so. If the data provided to bidders is comprehensive, skilful teams or consortia might be able to come up with a decent proposal, knowing that this would also require them to be resourceful. Planning involves imagination. Urban designers consider master plans as road maps. They are relevant as long as they chart a course of action that allows what exists to become a better reality, with milestones along the way. It is a process of collaboration between designers, authorities, developers, and residents. Given the scope, it is likely the contract will be awarded to a consortium, probably with outside offices involved. Ideally, it would include a local company. The question is: who in the city has the expertise and connections to pursue the goal? * Journalist.
Art space
Homeless, for now The Ox Warehouse has found a partner in the private sector to provide it a physical location in order to hold its artistic activities in the coming year, but will spend several months without a proper space to exist in Sheyla Zandonai sheyla.zandonai@macaubusiness.com
T
he Ox Warehouse, a local art space and association, has struck a deal with a partner from the private sector to secure a place to hold its artistic activities starting April 2018, according to information provided to Business Daily by its curator, Si Wun Cheng. In June, the Cultural Affairs Bureau (IC) asked the association to leave its current premises – located at the crossroads of Avenues Coronel Mesquita and Almirante Lacerda, in the northwest of Macau – by the end of its annual contract, on September 30. The deal Ox Warehouse has negotiated with the private initiative came after it had approached the government about possible locations to set up a new art space, without success. The space’s curator advanced that the partner from the private sector is a “culture-related” entity, but said she could not disclose more information at this moment “because the deal has
not been implemented yet.” Ms Si added that the place is a “private space,” and that the partner is involved “just to provide the place, without any other [financial] investment.” “For Macau the place is very important. Rents are too expensive, so space becomes an obstacle to development,” she stressed. Ms Si explained that the group had visited and considered several places in the Macau peninsula, mostly “small galleries,” because “it is not easy to find a place as big as the Ox Warehouse.” From October 2017 to April 2018, the association will not have a home. According to Ms Si, they are also still looking for a place “to store their things,” as they have been kept busy conducting the final artistic activities before they leave the premises. “We may have time in September to find a place. We are looking for something cheap. It could be an underground unit or shop, since it is just for storage,” she said. As for the activities to be carried out in the meantime, the curator clarified
Old facilities of Ox Warehouse
that they are considering asking the government “to borrow some space” on a project basis, giving the example of possibly organizing an exhibition at the old courthouse as a way for the association to continue conducting its activities.
Moving out again
At the end of 2016, IC requested that the association leave the premises it has occupied for nearly 14 years, although the case only became publicly known in June this year. “Our contract was renewed on an annual basis and they [IC] said they would not renew it this time, without giving us any clear reason,” Ms Si explained. Although the Cultural Bureau said it would continue to “use the space for cultural activities,” the Ox Warehouse’s curator claimed, it has not yet announced its plans for the future use of the space. Ms Si believes the government might carry out a public tender to allocate the space. It is the second time the group formerly named the Old Ladies House has been asked to move out. The first time, it was asked to leave one of the houses that makes up the complex which is known today as the Albergue, in Saint-Lazarus Parish. Founded in March 2002, the Ox Warehouse is a private and non-profit art association. The space it operates under the same name is a cultural and contemporary art venue open to local artists and art associations, where they propose exhibitions and develop activities in collaboration with the local community, as well as artists from the region and beyond.
Hate speech rejection
MGM CEO blasts ‘hate mongers,’ will match employee donations Fellow casino executives have been silent about the events in Charlottesville in which protesters shouted “Jews will not replace us” Christopher Palmeri
MGM Resorts International denounced “hate mongers and white supremacists” in a letter to employees Friday, offering to match their donations to civil rights groups including the National Association for the Advancement of Colored People.
“You have my commitment that we will vigorously and zealously continue to reject hate speech and hate-based actions in any form” Jim Murren, MGM Chief Executive Officer
“You have my commitment that we will vigorously and zealously continue to reject hate speech and hate-based actions in any form,” Chief Executive Officer Jim Murren (pictured) wrote, telling workers he felt compelled to
speak after the violence in Charlottesville, Virginia, and the terrorist attack in Barcelona this week. MGM Resorts is the largest casino operator on the Las Vegas Strip and employs about 77,000 people worldwide. Murren, a lifelong Republican, broke with his party last year and endorsed Hillary Clinton for president. In the letter to employees, he listed seven groups worthy of employee contributions, including the Southern Poverty Law Center, the Council on American-Islamic Relations and the Anti-Defamation League. Murren’s announcement comes after a tumultuous week in which
President Donald Trump, himself a former casino executive, blamed protesters on “both sides” at a white supremacy rally in Virginia of stirring up trouble. His comments prompted a number CEOs to resign from two presidential advisory boards and Trump to disband them. Fellow casino executives, including Wynn Resorts Ltd. CEO Steve Wynn, who is finance chairman of the Republican National Committee, and Las Vegas Sands Corp. CEO Sheldon Adelson, one of the largest Republican donors, have been silent about the events in Charlottesville in which protesters shouted “Jews will not replace us.” Bloomberg News
Business Daily Monday, August 21 2017 7
Macau Gaming
Wynn Macau net profit up in H1
T
he Macau casino o p e rat o r W y n n Macau Ltd recorded a net profit of HK$1.59 billion (US$203 million) for the six months ended June 30, an increase of 39.5 per cent
year-on-year, according to the unaudited consolidated results posted by the gaming operator with the Hong Kong Stock Exchange. Net revenue registered for the first six months of this year was HK$16.79 billion,
an increase of 1.9 per cent when the revenue generated by Wynn Palace is excluded, given that the new property was only opened on August 22 last year. Wynn Palace made HK$6.92 billion in net revenue for the period.
Moreover, Wynn Macau Ltd explained in its filing that ‘an increase from Wynn Macau driven by higher VIP gaming volumes’ was also another contributing factor to the significant increase in net revenue.
As such, the gaming operator announced an interim dividend of HK$0.21 per share, which will be payable to shareholders whose names appear on the register of members on September 6 this year.
Markets
Steve Wynn mulling to move away from Nasdaq IEX has been offering to waive the first five years of listing fees for the initial group of companies that list on its exchange Ca si n o m ag n a t e St ev e Wynn, an investor in stock exchange operator IEX, has said he may switch Wynn Resorts Ltd stock to IEX from Nasdaq. A Wynn spokesman confirmed that is still the case. A year after disrupting the U.S. stock market with a new approach to handling trades, IEX Group is planning to nab listings from rivals by charging simpler, cheaper fees, Sara Furber, IEX’s head of listings, said in a recent interview. In October, IEX will roll out a flat fee structure for the first companies that call its Investors’ Exchange their home, Furber said. Other venues charge companies based on the number of outstanding shares they have,
which is costlier not only for companies with more shares but potentially for those that perform stock splits or make acquisitions. To get companies on board for the launch, IEX has also been offering to waive the first five years of listing fees for the initial group of companies that list on its exchange, said an executive at one company that IEX pitched, who requested anonymity to discuss private business negotiations. IEX launched as a trading venue exactly a year ago on Aug. 19, but its founders had already been portrayed as crusaders against predatory trading tactics in the controversial 2014 book “Flash Boys: A Wall Street Revolt.” It upended the status quo by
introducing new concepts like a “speed bump” to slow trading, and flat pricing for other types of services, all of which it says benefit investors. In trying to attract companies, IEX hopes to shatter the near-duopoly currently
held by the New York Stock Exchange and Nasdaq Inc. But rivals may simply copy IEX’s tactics, much as they have done with previous IEX innovations such as speed bumps. IEX expects its first listings
to be from companies that switch from other exchanges, as opposed to initial public offerings, Furber said. It has a strong pipeline of potential clients from various industries including finance, technology and hospitality, she added. New York-based IEX is also highlighting its startup-status in an attempt to land listings from Silicon Valley. The exchange recently brought on Snap Inc Chairman Michael Lynton as a board member, and has backing from Iconiq Capital, the multifamily investment adviser used by Facebook Inc CEO Mark Zuckerberg. A successful listings franchise could give the closely held company a boost in revenue and volume. Reuters advertisement
8 Business Daily Monday, August 21 2017
Greater China Real estate
New home price growth cools in July Average new home prices in China’s 70 major cities rose 0.4 per cent in July from the previous month Yawen Chen and Ryan Woo
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hina’s home price growth slowed in July, with Beijing declining for a second straight month, reinforcing expectations that property price growth may stagnate over the course of the year. Government restrictions to keep prices in check weighed on larger cities, with July showing the slowest growth since August 2016, while smaller centres pulled back but remained robust. Policymakers have prioritised stabilising the property market ahead of an autumn leadership reshuffle, stressing the need to avoid dramatic price fluctuations that could threaten the financial system and harm social stability.
As China’s home price rises have generally been moderating and sales are slowing, analysts do not see a major risk of a sharp price fall or crash, given the strength of underlying housing demand. “We need the administrative measures in the short term but keeping them long-term would be a retreat for the market economy,” said Joe Zhou, Head of Research for China at Jones Lang LaSalle. Nonetheless, developers expect the curbs to be longer-term. Ouyang Jie, vice-president of Shanghai-listed Future Land , believes the controls will be in place for the next five years, under the new government that follows a leadership reshuffle in the autumn. “We think the current restrictions on purchases, borrowing and price
growth will continue for five years, but the price cap over new units may be relaxed gradually over the years,” he said. Analysts say the speculative switch to smaller cities and their large housing overhang has resulted in an alarming rise in debt in those centres. Beihai, a small port city in the Guangxi region on China’s southwest coast, had the biggest monthly price increase of 1.5 per cent in July and posted robust annual growth of 14 per cent. “I think the small city boom is a trap,” JLL’s Zhou said. “It won’t last long because I don’t see the possibility of a huge drop in inventory there while there is not enough population inflow to support demand.” While the statistics bureau says the
housing market should still be able to maintain stable growth, many economists expect the residential sector to lose momentum in the second half of the year in the face of policy tightening and an official financial deleveraging campaign. Average new home prices in China’s 70 major cities rose 0.4 per cent in July from the previous month, slowing from the 0.7 per cent growth in June as policymakers battled to rein in demand. In China’s biggest markets, Beijing’s new home prices fell 0.1 per cent in July, after declining 0.4 per cent in June. Shanghai prices stalled while Shenzhen prices fell by 0.2 per cent from a month ago. Compared with a year ago, new home prices rose 9.7 per cent in July, easing from a 10.2 per cent gain in June and marking the slowest growth since August 2016, Reuters calculated from National Bureau of Statistics (NBS) data. New construction starts measured by floor area, a telling indicator of developers’ confidence, contracted for the first time since last September, falling 7 per cent in July from a year ago, compared to a 14 per cent increase in June. Household loans, mostly mortgages, fell to RMB561.6 billion (US$84.13 billion) in July from RMB738.4 billion in June, according to Reuters calculations based on central bank data. But household loans as a proportion of total new loans rose to 68 per cent from 48 per cent in June, suggesting banks were more exposed to the property market even though it cooled in July. Reuters
Financial sector
Mainland banks battle slowing loan growth Despite China’s commercial banks reported higher first-half profits Shu Zhang and Engen Tham
Chinese banks are set to see a slowdown in lending growth in the second half of the year, having exhausted most of their annual credit quota, raising the spectre of corporate defaults as financing costs climb further in the world’s No.2 economy. Beijing’s crackdown on riskier lending has already stretched financing costs and hurt profit margins. Analysts estimate banks have used 80 per cent of their yearly credit quota over January-June, versus the usual 60 per cent, amid a regulatory push to bring shadow financing activities to the main loan book. “Loan demand is strong throughout the whole year,” said Ma Kunpeng, chief financial industry analyst at China Merchants Securities. “The core conflict in the second half is loan quota - whether banks will be able to extend more loans than they originally planned.” The country’s top five lenders, including Industrial and Commercial Bank of China (ICBC), China Construction Bank and Agricultural Bank of China, will report their first-half results over the coming weeks. China saw a 12.9 per cent growth in outstanding yuan loans as of June end. Nomura’s China economist Wendy Chen expects this to moderate to 12.6 per cent year-on-year in the third quarter and 12.4 per cent in fourth, from 13.5 per cent in 2016. China’s policymakers have said the government will continue to lower overall leverage and that slower growth in broad M2 money supply, which includes demand deposits and
monies held in easily accessible accounts, could be a “new normal”. The central bank has also increased checks on banks’ off-balance sheet wealth management products - a key component of shadow banking credit - while the banking regulator has stepped up a crackdown on risky lending behaviours. “Corporate defaults will rise if the availability of finance is further restricted. This could become a threat to economic growth ... especially if defaults are concentrated in labour-intensive segments like steel and coal,” Moody’s said. China’s economic growth showed signs of fading in July as lending costs rose, but a hard landing is unlikely with Beijing keen to ensure stability ahead of a once-in-five-years Communist Party leadership reshuffle later this year. China’s commercial banks reported
higher first-half profits, while overall non-performing loans in June did not increase from March, the banking regulator said last Monday. But analysts cautioned that slower credit growth would eventually take a toll on banks’ profit margins.
Margin pressure
Net interest margins (NIM) - the difference between interest paid and earned by banks and a key gauge of profitability - have fallen sharply in the past quarters following six successive benchmark interest rate cuts in 2014-15. For China’s top lender ICBC, the margin is forecast to narrow to 2.13 per cent in 2017 from 2.21 per cent last year, while CCB could report a drop of 27 basis points to 2.09 per cent in 2017, Thomson Reuters data shows. Adding to banks’ cost pressures is their move to increase deposit
interest rates this year to as much as 40 per cent above central bank benchmark rates to lure depositors, statistics compiled by Reuters showed. Part of the higher costs has been passed on to corporate borrowers. The price of loans as measured by the weighted average of loan interest rates rebounded to 5.67 per cent in June, from 5.22 per cent in September.
Key Points China’s top five lenders to start reporting earnings next week Second half outstanding loan growth seen moderating versus H1 Pressure on margins seen continuing on high funding costs ICBC, CCB, BoC, Agbank to report H1 results on Aug 30 Bank of Communications (BoCom) to report on Aug 24
But that will not be sufficient to cushion the impact on near-term profits. “The most direct impact of the regulatory crackdown is on liquidity and profitability,” said Alicia Garcia-Herrero, chief Asia Pacific economist at Natixis. “Chinese banks will find themselves in a dilemma ... with more doors shut in the shadow banking, which has been a source of profits to offset the impact on net interest income.” Reuters
Business Daily Monday, August 21 2017 9
Greater China Overseas expansion
In Brief
Government to curb “irrational” Belt and Road investment
Energy
Local firm wins shale gas block auction in Guizhou
Mergers and acquisitions by Chinese companies in countries linked to the Belt and Road initiative have been growing at a rapid rate China will strengthen rules to defuse risks for domestic companies investing abroad and curb “irrational” overseas investment in its Belt and Road initiative, the state planner said on Friday. The National Development and Reform Commission (NDRC) said in an online statement lauding the Belt and Road initiative that it would provide better guidance on risks to companies investing overseas in order to prevent “vicious” competition and corruption. The initiative is aimed at building a modern-day “Silk Road”, connecting China by land and sea to Southeast, South and Central Asia, and beyond to the Middle East, Europe and Africa. The state planner cited unspecified security risks for Chinese companies investing abroad. The NDRC did not give more details about how it planned to strengthen rules or why it was concerned about corruption and unhealthy competition between companies. “(We will) guide firms to fully consider national conditions and actual needs of target countries, pay attention to mutually beneficial cooperation with local governments and companies, and generate economic and social benefits,” the State Council said in a statement. Mergers and acquisitions by Chinese companies in countries linked to the Belt and Road initiative have been growing at a rapid rate, even as the government takes aim at China’s acquisitive conglomerates to restrict capital outflows. Unveiled in 2013, the Belt and Road initiative has also come with some security concerns for China. This year, militants in Pakistan, a key Belt and Road partner, killed 10 workers and two teachers from China.
Xi Jinping, President of China, during the Belt and Road Forum
The largest deal in a Belt and Road country this year was a Chinese consortium’s US$11.6 billion buyout of the Singapore-based Global Logistics Properties. Chinese acquisitions in the 68 countries officially associated with President Xi Jinping’s signature foreign policy totalled $33 billion as of Aug. 14, surpassing the $31 billion for all of 2016, according to Thomson Reuters data. Lawyers and dealmakers had told Reuters that companies were enjoying a relatively smooth approval process for Belt and Road-related deals as regulators tended to classify them differently when reviewing outbound investments. China has tightened outbound capital controls and cracked down on overseas deals it sees as risky, putting pressure on acquisitive conglomerates like Anbang Insurance Group , HNA Group, Dalian Wanda Group and Fosun International Ltd (0656.HK). In the statement Friday, the NDRC cited projects such as a high-speed
railway in Indonesia and a crude oil pipeline between southwest China and Myanmar as examples of how the initiative was advancing. Up to the end of 2016, Chinese companies had invested more than US$18.5 billion to build economic and trade cooperation zones in 20 countries along the Belt and Route routes, it said. The State Council said capable firms were encouraged to invest overseas in sectors including agriculture and high-tech manufacturing, while mining, oil, and gas developments based on “prudent assessments” are also encouraged. It reiterated that investment in property, hotels, entertainment, sports club, and film industries would be restricted, as will investment projects that do not meet environmental protection or safety standards. Investment in gambling and pornography, and some core defence technologies, and those that use technology not permitted for export are forbidden, the State Council said. Reuters
GDP
Taiwan upgrades 2017 economic growth forecast on solid trade Economy has been bolstered by a strong export performance this year Taiwan upgraded its economic growth forecast for this year and signalled confidence for 2018, as a strong exports outlook lifts momentum. The statistics bureau revised its estimate for 2017 gross domestic product to 2.11 per cent, up from the previous projection of 2.05 per cent in May and closer to the central bank forecast of 2.13 per cent. The bureau also said it expected output to rise 2.27 per cent in 2018, according to a statement on Friday. “As a key segment of the global electronic and technology supply chains, Taiwan is a clear beneficiary of increasing global trade,” said Aidan
Wang, an economist at Cathay Securities Investment Trust in Taipei. Wang said the central bank is likely to keep interest rates unchanged until early next year as inflation remains moderate. Taiwan’s economy has been bolstered by a strong export performance this year, with Apple Inc. poised to release the newest model of its flagship iPhone in the fall, lifting suppliers on the island. At the same time, domestic investment and consumption remained sluggish, keeping central-bank policy accommodative. “The global recovery is gathering momentum and international trade
has warmed up,” the statistics bureau said in a statement, adding that external demand will increase in the second half of this year. Economic uncertainties include impacts of Federal Reserve policy, China-Taiwan relations, raw material prices, and geopolitical risks, the agency said.
“As a key segment of the global electronic and technology supply chains, Taiwan is a clear beneficiary of increasing global trade” Aidan Wang, an economist at Cathay Securities Investment Trust GDP rose 2.13 per cent in the second quarter from a year earlier, according to the final reading released by the bureau on Friday, versus a preliminary reading of 2.1 per cent. Taiwan’s central bank in June kept the key interest rate unchanged for a fourth straight quarter. Bloomberg News
A local firm on Friday won the right to explore and develop a shale gas block in the south-western Chinese province of Guizhou in a government auction for RMB1.29 billion (US$193 million), local media reported. State-run Guizhou Industry Investment (Group) Co, with business spanning financing, property, power and coal, is expected to start commercial gas production at the Zheng An block within three years, according to a report on Guizhou Radio’s social media account. The Guizhou firm will become one of the few players not primarily focused on the oil and gas industry to explore and develop the unconventional resource in China. Investigation
U.S. formally launches probe of IP practices The United States on Friday formally launched an investigation into China’s alleged theft of U.S. intellectual property, a widely expected move following a call from President Donald Trump earlier this week to determine whether a probe was needed. The probe is the administration’s first direct measure against Chinese trade practices, which the White House and U.S. business groups say are bruising American industry. Trump repeatedly railed against Chinese trade practices on the campaign trail, but as president he had not taken significant action until last week. Agribusiness
COFCO forms U.S. grain supply partnership China’s state-owned COFCO International Ltd (CIL) and U.S. farm cooperative Growmark Inc will partner in a deal that gives China more direct access to the food it imports, the companies said on Friday. The grain supply partnership is the latest expansion move by CIL since it invested US$3 billion to buy Noble Group’s agribusiness and a large stake in Dutch grain trader Nidera in deals that bolstered its position in the international grain market. Growmark staff will assist in sourcing grain at COFCO’s St. Louis office as part of the partnership, the companies said in a statement. Results
Lenovo warns of cost challenges as it sinks Chinese personal computer maker Lenovo Group Ltd warned of higher costs and margin pressure due to shortages of components like memory chips, as it posted its first quarterly loss in almost two years on Friday. Lenovo, which gave up its title as the world’s largest PC maker to HP Inc in the quarter through June, lost $72 million compared with a profit of US$173 million for the same period last year. It was the company’s first quarterly loss since September 2015 and lagged analysts’ average forecast of a US$5.29 million profit.
10 Business Daily Monday, August 21 2017
Greater China State planner
Beijing will step up efforts to boost private investment The government will simplify investment approval procedures for private firms and ensure “reasonable returns” in public-private partnership projects
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hina will take more steps to boost private investment, the state planner said on Friday, as policymakers seek to keep growth steady while reducing the economy’s reliance on state spending. A sharp slowdown in private investment last year forced Beijing to rely more heavily on fiscal spending and investment by heavily indebted state firms to hit its growth target.
Key Points Aim is to get more private investment in infrastructure projects State planner quickens investment project approval in July Planner: July project approvals the most since December
“Expanding private investment and strengthening private economy is an important foundation for ensuring stable, healthy and sustainable development of China’s economy,” Meng Wei, a spokeswomen for the National Development and Reform Commission (NDRC), told a Beijing briefing. The government will simplify investment approval procedures for
private firms and ensure “reasonable returns” in public-private partnership (PPP) projects to lure private investment in infrastructure and public utility projects, she said. Financial institutions will be banned from attaching conditions when they make loans to private firms, while local governments will be encouraged to set up funds to help private firms hedge credit risks, Meng added. The state planner said it approved RMB165.5 billion (US$24.80 billion)
of fixed-asset investment projects in July, the highest since December. Data released by the statistical bureau on last Monday showed fixed-asset investment grew 8.3 per cent in the first seven months from a year earlier, cooling from 8.6 per cent in the first half. Annual growth of private investment slowed to 6.9 per cent in January-July from 7.2 per cent in the first half. The government kept its budget
deficit target at 3 per cent of gross domestic product this year - the same as in 2016 - as policymakers look to a recovery in private investment, partly via PPP projects, to drive growth. China’s factory output, investment, retail sales and trade all grew less than expected in July as lending costs rose and the gravity-defying property market cooled, though activity levels generally remained solid, propped up by a year-long construction spree. Reuters
Scam
Mainland suspects took over 11-storey block in Cambodia Police said they had arrested 225 Chinese nationals on suspicion of using internet voice calls for an extortion scheme Amy Sawitta Lefevre and Prak Chan Thul
No sooner had the 11-storey apartment building in Phnom Penh’s affluent Tuol Kouk district been finished than dozens of young Chinese men and women moved in loaded with desks and laptops, said neighbours. “I thought they were moving an office in,” said Eng Somnang, 20, who owns a noodle soup shop directly opposite and watched them arrive early this month. Police in the Cambodian capital accuse them of doing exactly that: setting up a criminal call centre with more than 200 Chinese nationals to carry out a telephone and internet scam on victims in China. Police raided the building on Wednesday to stop what they said was the latest operation of a type that has duped people out of billions of dollars - with scammers operating from countries that have good internet access and relaxed visa rules. From a balcony of the building in Phnom Penh, some of the suspects told Reuters they had not been given food and police were not allowing them to leave. One of the suspects, Fang, 30, from China, said she came to Cambodia on a tourist visa. She said there were more than 200 people inside the building but declined to answer questions about what they had been doing there. Police said they had arrested 225 Chinese nationals, 25 of them women, on suspicion of using internet voice calls for an extortion scheme. They will be sent to China to face justice, police investigators said. Since 2011, Cambodia has deported
800 people from mainland China and Taiwan, arrested on suspicion of telecoms scams. Neighbours in Tuol Kouk, dotted with large villas, described the occupants of the building as quiet. They said it had been rented out to tenants for US$25,000 a month. The owner was not available to comment.
Wary
The occupants kept to themselves, venturing out only at night to get food, neighbours said. “They were mostly men, some women. Maybe 20, 23 years old. Young,” said Eng Somnang. “When people delivered food to them they were not allowed inside.” In the past, Chinese fraud suspects have often entered Cambodia on tourist visas, said Uk Haisela, chief of investigation at Cambodia’s immigration department. The victims of the scammers were often civil servants and retired officials from mainland China, he said. One of the suspected telephone fraudsters who Uk Haisela interrogated said he made up to US$70,000
per week. Uk Haisela said victims ere sometimes blackmailed and the suspects used Cambodia because it was easy to stay in the country and internet speeds were fast. Cambodia was able to track the gangs with help from China, he said. “China sends IP addresses to us ... Once we make arrests, we report to the Chinese embassy,” Uk Haisela told Reuters. China’s Foreign Ministry said there had always been close cooperation with Cambodia. “China appreciates Cambodia’s cooperation with China on jointly cracking down on telecoms fraud and other cross-border crime,” it said in a statement. The scams have become a headache for both China and Taiwan, bringing cooperation between them, but also objections from Taiwan because of the deportation of suspects from the self-ruled island to face trial on the mainland. Suspected scammers have been arrested elsewhere in Asia and Asia. This month, 77 Chinese fraud
suspects were sent to China from Fiji. More than 150 were detained in Indonesia over a scam that police said had netted about US$450 million. Scammers choose countries where they think law enforcement is weak and governments are unlikely to see them as a priority, said Lennon Chang, a criminologist and expert in telecoms fraud at Monash University in Melbourne.
“China appreciates Cambodia’s cooperation with China on jointly cracking down on telecoms fraud and other cross-border crime” China’s Foreign Ministry statement
“We might be able to call them criminal nomads,” he told Reuters, saying they moved every couple of weeks. The fraudsters sometimes posed as officials and tricked people into disclosing bank account details, he said. “The leaders are not easy to discover. All are young kids. Even if the crime syndicates are discovered and dissolved, the leaders will be able to start a new group in a short period of time.” Reuters
Business Daily Monday, August 21 2017 11
Asia Tag
Malaysia surprises with strong growth Investment in Malaysian stocks, bonds and other financial assets improved sharply
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alaysia’seconomy expanded at the fastest pace in more than two years in the second quarter on the back of domestic demand and robust exports, defying expectations for a slight slowdown. The strong performance is likely to add to speculation that Prime Minister Najib Razak will call early polls to take advantage of improving economic conditions and a fractured opposition. Southeast Asia’s third-largest economy grew 5.8 per cent in April-June from a year earlier, data showed on Friday, well above a Reuters poll forecast of 5.4 per cent. Growth accelerated from 5.6 per cent in the first three months of the year, which had also been better than expected. Following the data, Malaysia’s central bank raised its 2017 growth forecast to above 4.8 per cent. The last forecast in March predicted growth of 4.3 to 4.8 per cent. “Based on the numbers from Q1 and Q2, we expect (full year) growth will go beyond our earlier forecast,” Bank Negara Malaysia (BNM) Governor Muhammad Ibrahim told a news conference. Construction, services and
manufacturing all grew at a faster pace in the quarter, offsetting weakness in mining and agriculture. For a breakdown of the GDP data, see Muhammad expected domestic consumption and exports to improve further in the second half, but warned there were always risks related to global factors. Exports grew 10 per cent on-year in June, well below May’s 32.5 per cent. But analysts believe the slide may be due to seasonal factors, noting global demand still seems strong. Fitch Ratings affirmed Malaysia’s ‘A-’ credit rating with a stable outlook on Thursday, citing its strong economic growth and the government’s ability to contain the impact of falling oil prices on its budget deficit. “It is another recognition for the country’s economic management,” Najib tweeted earlier in the day about Fitch. The current account surplus grew to 9.6 billion ringgit (US$2.24 billion) over the second quarter from 5.3 billion ringgit in January-March, due to a larger goods surplus and smaller services and primary income deficits. Investment in Malaysian stocks, bonds and other financial assets also improved sharply, with portfolio
The turnaround may be partly due to improved confidence in the ringgit
inflows rebounding to 16 billion ringgit, compared with outflows of 31.9 billion in the first quarter. The turnaround may be partly due to improved confidence in the ringgit. It has firmed 4.5 per cent against the dollar this year since hitting a 19-year low of 4.9880 on Jan. 4. But foreign direct investment dropped to 8.3 billion ringgit, from 17 billion ringgit in the first quarter. While FDI flows can be volatile, the weaker reading could point to some loss of economic momentum in the months ahead.
Election speculation
The central bank also said inflation is expected to ease further after moderating
to 4 per cent in the second quarter. “Inflation will still be within the range of 3-4 per cent, but we expect it to track lower for the rest of the year,” BNM’s Muhammad said. The central bank has kept interest rates unchanged since July 2016. But there is widespread concern about the rising costs of living, which Najib will need to temper before going to the polls. He may be facing his toughest election yet as he looks to counter bad press from a corruption scandal involving state-owned fund 1Malaysia Development Berhad (1MDB) and a growing challenge from his former mentor turned foe, Mahathir
Mohamad. On Wednesday, Najib brandished more than US$3 billion in housing packages for the country’s majority ethnic group. Last month, he gave cash hand-outs and offered debt waivers to palm oil farmers, a key voter base. T h e h a n d- o u t s h av e fuelled speculation he will call an election earlier than the scheduled deadline of mid-2018. “Although this is a cyclical upturn rather than a structural one, it certainly gives PM Najib some respite given the clouds hanging over the administration’s management of the economy,” said Trinh Nguyen, senior Asia economist of Natixis Asia in Hong Kong. Reuters
Trade pact
U.S., South Korea to start talks tomorrow A South Korean trade official said in July that the joint committee meeting did not necessarily mean that South Korea will renegotiate the deal The United States plans to start negotiations with South Korea tomorrow in Seoul on amending a five-yearold free trade agreement, U.S. Trade Representative Robert Lighthizer said on Thursday. Lighthizer announced plans on July 12 for the special session meeting of the Joint Committee under the U.S.-Korea (KORUS) Free Trade Agreement, months after U.S. President Donald Trump said he would either renegotiate or terminate what he called a “horrible” trade deal. Lighthizer and South Korean Trade Minister Kim Hyun-chong will open the meeting via video conference, to be followed by senior-level talks between U.S. and Korean officials in Seoul, the U.S. Trade Representative’s Office said in a statement. “Since KORUS went into effect, our trade deficit in goods with Korea has doubled from US$13.2 billion to US$27.6 billion, while U.S. goods exports have actually gone down,” Lighthizer said in the July statement. “This is quite different from what the previous administration sold to the American people when it urged approval of this agreement. We can
and must do better,” he said. Trump, in an interview with Reuters in April, blamed the trade deal on his 2016 Democratic presidential election opponent, Hillary Clinton, who as secretary of state promoted the final version of the agreement before its approval by Congress in 2011. A South Korean trade official said in July that the joint committee meeting did not necessarily mean that South Korea will renegotiate the deal. “We will meet and discuss mutual
interests and concerns. Our stance is that we have not agreed on renegotiation of the deal,” Yeo Han-koo of South Korea’s trade ministry told Reuters by phone. He said South Korea believes the deal is mutually beneficial, and the two countries need to first establish whether the U.S. trade deficit with South Korea is caused by the trade deal or is a result of other fundamental economic issues. On July 1, Trump met South Korean President Moon Jae-in and said
the United States was renegotiating what he characterized as a “rough” trade deal with South Korea agreed to five years ago by his predecessor, Barack Obama.
We will meet and discuss mutual interests and concerns. Our stance is that we have not agreed on renegotiation of the deal” Yeo Han-koo, South Korea’s trade ministry
KORUS was initially negotiated by the Republican administration of President George W. Bush in 2007, but that version was scrapped and renegotiated by President Barack Obama’s Democratic administration three years later. Reuters
12 Business Daily Monday, August 21 2017
Asia Funding
India’s central bank governor says state banks need more capital Governor Patel also said that banks would need to take haircuts as they tackle bad debts Suvashree Choudhury
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tate-run banks will need more capital to resolve bad loan problems weighing on their balance sheets, Reserve Bank of India Governor Urjit Patel said on Saturday, adding his voice to calls for increased capital injections into lenders. More than US$150 billion of bad debt is crimping credit growth in Asia’s third-largest economy and the government and central bank have been trying to ease the burden
on state-run lenders, which account for 70 per cent of all lending, to get more credit flowing. Patel said that the regulatory challenges of tackling bad loans were compounded by the weak capital position of some banks, particularly those owned by the government. “The success and credibility of all the resolution efforts would be critically contingent on the strength of public sector bank balance sheets to absorb the costs,” Patel told a conference in Mumbai. “The government and the Reserve
Bank are in dialogue to prepare a package of measures to shore up capital in a time bound manner.” Extra capital could be raised either by getting funds from the market, through the government diluting its stake in state-run banks, through additional government capital infusions, or the sale of non-core assets and mergers among lenders, he said. “The early signs are encouraging. However we all must realise it will be a long haul before the intended objective are fully achieved,” the governor said.
Patel also said that banks, whose weak lending discipline he blamed for the mountain of problem loans, would need to take haircuts as they tackle bad debts. Moody’s Investors Service said in June that the 11 Indian state-run banks that it rates could need up to 950 billion rupees (US$14.8 billion) in equity capital by March 2019, far above the 200 billion rupees the government plans to inject into state banks by then.
Key Points Patel says capital position of some state-run banks remains weak Govt capital injections, asset sales, mergers among options “long haul” before India’s bad loan problems resolved - Patel The central bank in June identified 12 of India’s biggest loan defaulters and said creditors must pursue bankruptcy proceedings against them, part of a new bankruptcy regime that regulators are compelling lenders to use to recover debts. India’s Finance Minister, Arun Jaitley, said on Saturday that effective supervision was needed to ensure a company’s functioning did not come to a standstill, and that its valuable assets were preserved, during the insolvency process. Reuters
Oil industry
Vietnam crude oil imports to hit record Domestic orders are still small compared with Asian’s top buyers, China and India Henning Gloystein
Vietnam’s crude oil imports will soar to record highs in August as the country ramps up fuel refining at a time when local crude output is dwindling. August will mark the first month on record in which Vietnam is a net importer of crude oil, according to shipping data in Thomson Reuters Eikon, with the trend set to continue in coming months as the Southeast Asian nation’s refinery capacity grows.
Key Points Vietnam’s second refinery has started importing crude Imports jump as country’s crude production stalls Kuwait, Brunei and Azerbaijan supplying Vietnam with crude The surge in overseas orders comes as Vietnam’s 200,000 barrels per day (bpd) Nghi Son refinery, its second such facility, prepares to produce liquefied petroleum gas, gasoline, diesel, kerosene and jet fuel, mainly for the domestic market, likely starting later this year or in early 2018. With local oil production stalling, traders said the country of over 90 million people and 6-per cent annual economic growth would gradually increase its crude imports.
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“We expect to send bigger and more frequent volumes of crude to Vietnam in the future. Vietnam is one of the key new centres of oil demand growth, and we wouldn’t want to miss this opportunity,” said a senior oil trading manager. He asked not to be identified as he was not allowed to discuss trading strategies. Shipping data in Thomson Reuters Eikon shows that Vietnam will import around 100,000 bpd of crude in August, on three tankers, versus exports of 70,000 bpd. September tanker imports are scheduled at similar levels.
Vietnam’s orders are still small compared with Asian’s top buyers, China and India, which import around 8 million and 4 million bpd of crude per day respectively. “But in an environment of oversupply, this incremental new demand is very welcome for crude suppliers,” the trading manager said.
Kuwait, Brunei, Azerbaijan
Kuwait Petroleum International and Japan’s Idemitsu Kosan each own 35.1 per cent of the Nghi Son refinery, while state-owned PetroVietnam
holds a 25.1 per cent stake and Japan’s Mitsui Chemicals 4.7 per cent. Kuwait was the first supplier of crude oil to the new facility, sending 2 million barrels in August on a supertanker, with its oil minister saying in July that it expected to send regular shipments to Vietnam. The small Southeast Asian country of Brunei sent 500,000 barrels of its crude to Vietnam this month on two tankers, shipping data shows. Three tankers carrying a million barrels of Azeri crude each are scheduled to head to Vietnam in September. Vietnam’s oil production peaked in the early 2000s at around 400,000 bpd. The country is exploring new oil fields in several areas of the South China Sea, but this has seen several delays as the country clashes with its bigger neighbour China. Drilling at Vietnam’s Block 136/3 was suspended in July after pressure from China, which says the concession operated by Spain’s Repsol overlaps the vast majority of a waterway that it claims as its own. Despite its rising refining capacity, analysts said that Vietnam’s demand-growth for fuel would still require refined fuel imports. “Vietnam will not be free of imports of refined fuels,(although) combined diesel and gasoline imports will halve from about 200,000 bpd in 2016,” said Suresh Sivanandam, analyst at energy consultancy Wood Mackenzie. Reuters
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Business Daily Monday, August 21 2017 13
Asia Tax
In Brief
Australia puts multinationals on notice after Chevron drops appeal The tax office estimates the court’s decision will result in more than A$10 billion in additional revenue Sonali Paul
Chevron Corp has withdrawn an appeal to Australia’s High Court over a disputed A$340 million (US$268 million) tax bill, leaving in place a landmark court ruling on related-party loans that could affect other multinational companies. “Chevron Australia has reached agreement with the Australian Taxation Office (ATO) on the loan transfer pricing dispute and have withdrawn our appeal to the High Court,” the company said in an emailed statement. “Chevron believes the agreed terms are a reasonable resolution of the matter and are not expected to have a material impact on the year to date results of the company.” The oil and gas giant and the tax office declined to comment on the size of the settlement. With the appeal withdrawn, a Federal Court ruling remains in place, which found Chevron had underpaid taxes by setting up a A$2.5 billion intercompany credit facility offshore with an abnormally high interest rate, effectively lowering its taxable income within Australia.
The tax office estimates the court’s decision will result in more than A$10 billion in additional revenue being brought in over the next 10 years related to multinationals’ transfer pricing of related-party financing alone, the government said. “Not only does this result put more revenue back to the Australian people, it also strengthens the ATO’s position in pursuing other arrangements where multinationals seek to dodge Australia’s transfer pricing rules,” Revenue and Financial Services minister Kelly O’Dwyer said in a statement. Chevron did not say why it decided to drop its appeal to the nation’s highest court. It lost an earlier appeal in Australia’s Federal Court in April. The case covered the tax years from 2004 through 2008. “The judgement in Chevron is one of the most important decisions in corporate tax in Australia,” an Australian Taxation Office spokesman said in an emailed statement. The closely watched case is a first test of how Australia’s transfer pricing rules apply to interest paid on a cross-border related-party loan. “We have been very clear that this
case would have direct implications for a number of cases the ATO is currently pursuing in relation to related party loans, as well as indirect implications for other transfer pricing cases,” the ATO spokesman said.
“It ... strengthens the ATO’s (tax office) position in pursuing other arrangements where multinationals seek to dodge Australia’s transfer pricing rules” Kelly O’Dwyer, Revenue and Financial Services minister
The tax office declined to name which companies it may pursue. Reuters
Inflation
Japan’s consumer prices seen rising for 7th straight month More than four years of massive monetary stimulus has failed to accelerate inflation to the BOJ’s 2 percent target Leika Kihara
Japan’s core consumer prices were expected to show their seventh straight month of annual increases in July, a Reuters poll found, offering the central bank some hope a strengthening economic recovery will gradually lift inflation toward its 2 percent target. But the projected 0.5 percent yearon-year increase will be well off the Bank of Japan’s (BOJ) target and keep the central bank under pressure to maintain its massive monetary stimulus, analysts say. “The increase is largely due to the effect of rising energy costs. Upward price pressure for other goods remains weak,” said Takumi Tsunoda, senior economist at Shinkin Central Bank. The nationwide core consumer price index (CPI), which includes
Lending
Indonesia loan growth falls in June Loans extended by Indonesian banks grew 7.7 per cent in June from a year earlier, the slowest pace for any month since October, the financial services authority said on Friday. In May, annual loan growth was 8.7 per cent. Bank Indonesia (BI) will hold a policy meeting tomorrow. A Reuters poll showed BI is expected to keep its benchmark interest rate unchanged at 4.75 per cent, where it has been since October, despite sluggish private consumption. In 2016, the central bank cut the benchmark rate six times, by a total of 1.5 per centage points, in a bid to spur faster loan growth. Visitors
Thailand’s July tourist arrivals up International tourist arrivals in Thailand rose 4.8 per cent in July from a year earlier, led by visitors from China, Malaysia, Laos, Korea and India, the tourism and sports ministry said on Friday. Foreign arrivals stood at 3.1 million in July, the ministry said in a statement. For the seven-month period, arrivals were 20.4 million, up 4.47 per cent. The government expects about 35 million tourists this year. Tourism accounts for 12 per cent of Thailand’s economy, and has been a rare bright spot for Southeast Asia’s second-largest economy, whose growth still lags its peers. Negotiation
U.S. agrees with Japan to accelerate trade talks
oil products but excludes volatile fresh food prices, rose 0.4 percent in June from a year earlier. Core consumer prices in Tokyo, available a month before the nationwide data, were seen likely to rise 0.3 percent in August from a year earlier after a 0.2 percent gain in July, advertisement
according to economists polled by Reuters. The government will announce the consumer inflation data at 8:30 Tokyo time on Aug. 25 (2350 GMT Aug. 24). More than four years of massive monetary stimulus has failed to accelerate inflation to the BOJ’s 2 percent target, underscoring the difficulty of eradicating the deflation that has plagued the country for two decades.
Key Points Nationwide core CPI seen up 0.5 pct yr/yr in July Tokyo core CPI seen up 0.3 pct yr/yr in August Weak inflation data seen keeping BOJ under pressure The CPI data will follow news this week that Japan’s economy expanded at the fastest pace in more than two years in the second quarter as consumer and company spending picked up, heralding a long-awaited bounce in domestic demand. Nonetheless, wage growth and inflation remain subdued as companies remain wary of passing more of their profits to employees. Reuters
The United States and Japan agreed last week to speed up talks on bilateral trade issues and explore ways to strengthen trade ties, the U.S. Trade Representative’s office said, seven months after President Donald Trump pulled out of a Pacific Rim trade deal that included Japan. USTR Robert Lighthizer also discussed with Japanese Foreign Minister Taro Kono U.S. concerns about Japan’s recent decision to raise tariffs on imports of U.S. frozen beef, the trade office said in a statement. Lighthizer said he welcomed “the acceleration of discussion on trade with Japan.” Law violation
India threatens Philip Morris with ‘punitive action’ The Indian government has threatened Philip Morris International Inc with “punitive action” over the tobacco giant’s alleged violation of the country’s anti-smoking laws, according to a letter sent to the company by the federal health ministry. The letter was prompted by a Reuters investigation last month that revealed how Philip Morris was deploying marketing tactics in India, some targeting young people, that officials said were illegal. The letter cites the Reuters story in the opening paragraph, listing Philip Morris’ marketing methods as outlined in the article.
14 Business Daily Monday, August 21 2017
International In Brief Corruption
Brazil police seek charges for alleged World Cup stadium graft Brazil’s Federal Police have called for the indictment of 21 people, including two ex-governors of the capital Brasilia, for allegedly overcharging 559 million reais (US$178 million) in the renovation of the stadium used in the 2014 World Cup. The Mane Garrincha stadium in Brasilia was originally scheduled to cost around 600 million reais but ended up costing closer to 1.575 billion, officials said. It was built by a consortium led by construction firm Andrade Gutierrez. The investigation into the overbilling began after the firm’s executives entered into a plea-bargain deal to offer details about their role in long-running and massive political kickback schemes. Survey
U.S. consumer sentiment rises to 7-month high U.S. consumer sentiment improved to its strongest level in seven months in early August, reflecting confidence in the outlook for the economy and in personal finances as the U.S. stock market holds near record highs, a key survey showed on Friday.The University of Michigan’s consumer sentiment index rose to 97.6 in the first half of August from 93.4 the month before, which was an eight-month low. The result exceeded expectations for a reading of 94, according to a Reuters poll. Rating
Fitch upgrades Greece to ‘B-’ from ‘CCC’ Fitch Ratings upgraded Greece’s long-term foreign-currency issuer default ratings to ‘B-’ from ‘CCC’, citing reduced political risk and sustained GDP growth. Fitch said on Friday it expected the general government debt to steadily improve, cushioned by benefits from the European Stability Mechanism (ESM) program. Euro zone governments in June threw Greece another 11th-hour credit lifeline worth US$9.5 billion and sketched new detail on possible debt relief. The Fitch upgrade comes after Moody’s upgraded Greece’s longterm issuer rating to Caa2 in June saying that it expected to see growth in the Greek economy. Investment
Carl Icahn steps down as adviser to U.S. President Billionaire investor Carl Icahn ended his role as a special adviser to U.S. President Donald Trump on Friday after facing criticism that policy recommendations he offered could help his own investments. Some Democratic lawmakers and biofuels advocates argued that Icahn’s guidance to the Republican administration created a conflict of interest with his businesses, including oil refining company CVR Energy Inc. Icahn has denied any conflict of interest. Icahn’s departure followed a flurry of changes at the White House. The White House declined to comment. A call to Icahn’s office was not immediately returned.
Election
Angola’s Lourenco vows to diversify economy if elected president The country depends on oil for more than 90 per cent of its export earnings Henrique Almeida and Candido Mendes
T
he presidential candidate from Angola’s ruling party, Joao Lourenco, said he’ll push hard to diversify the economy as Africa’s second-biggest oil producer struggles to overcome the worst economic crisis since emerging from a civil war in 2002. In the Popular Movement for the Liberation of Angola’s last campaign gathering ahead of the Aug. 23 vote, Lourenco predicted the MPLA would win with a two-thirds majority, in line with recent polling. The victor will replace President Jose Eduardo dos Santos, who attended the rally and whose 38 years in power make him the continent’s second-longest-serving ruler. “We believe that with your vote we will erect an economy based on farming, industry, tourism, fishing and other important sectors,” Lourenco, 63, said in a speech in the Camama district, on the outskirts of the capital, Luanda, as thousands of supporters dressed in the red and black colours
of his party cheered on. “We can compete in the international market and export quality products made in Angola.”
“We believe that with your vote we will erect an economy based on farming, industry, tourism, fishing and other important sectors” Joao Lourenco, Angolan presidential candidate Angola, which depends on oil for more than 90 per cent of its export earnings, is struggling to recover
from a drop in crude prices, which are down more than 50 per cent since mid-2014. After expanding for 14 consecutive years, the economy posted zero growth last year and is forecast to expand 1.3 per cent in 2017, according to the International Monetary Fund. About a third of Angola’s 27 million citizens live in poverty, data complied by the World Bank shows. “Angola’s economy is going through a less good moment, which means the difficulties the people face have increased,” said Lourenco, who is currently the country’s defence minister. “But the people will vote for the MPLA because they know that the MPLA will guarantee the continuation of a peaceful, free and democratic Angola.” The MPLA is widely expected to beat a divided and underfunded opposition that includes the National Union for the Total Independence of Angola, the main opposition party, and the Broad Convergence for the Salvation of Angola – Electoral Coalition party, or Casa-CE. A poll last month predicted the MPLA would win with 61 per cent of the votes. Bloomberg News
Politics
Bannon’s exit not seen to signal Trump shift to centre Bannon joined a string of senior officials who have left the Trump administration in the past five weeks John Walcott and Steve Holland
President Donald Trump’s ouster of chief strategist Steve Bannon is unlikely to mark the abandonment of the administration’s “America First” agenda that has unnerved investors and trade partners and split the White House into nationalist and globalist camps. Within hours of leaving Trump’s administration on Friday, Bannon was back at the helm of Breitbart News, the hard-right news site he ran before becoming the main architect of Trump’s 2016 presidential campaign. Bannon can now do more to further conservative causes because “he can speak his mind” without the constraints of working in the White House, Rick Weatherly, 61, a maintenance technician from the Denver suburb of Lakewood, said on Saturday. Trump appeared to agree, tweeting: “Steve Bannon will be a tough and smart new voice at @BreitbartNews ... maybe even better than ever before. Fake News needs the competition!” Bannon, 63, was instrumental in some of Trump’s most contentious policies including the travel ban on people from several Muslim-majority nations, departure from the Paris climate accord and rejection of the Trans-Pacific Partnership trade deal. He was no friend to the Republican political establishment and was loathed by liberals, but became a darling of some of the president’s hard-line conservative supporters. “Trump will now have a great external ally,” a source close to Bannon said on condition of anonymity. “He will use his big hammer against the congressional leadership in support of the president’s agenda.” Trump supporters in south Florida, Chicago and Colorado told Reuters that they were not concerned that Bannon’s departure meant the president was distancing himself from policies he supported during last year’s campaign. “I think Trump will be fine,” said
Steve Bannon, Assistant to the President and Chief Strategist to U.S. President Donald J. Trump. Source: Lusa
Bob Janda, a 67-year-old small business owner in Chicago. Nor is Bannon likely to be distanced from Trump’s ear, a White House official said on condition of anonymity.
‘Direct pipeline’
Bannon joined a string of senior officials who have left the Trump administration in the past five weeks, leading to the appointment of retired Marine general John Kelly as the new White House chief of staff. Kelly has succeeded in imposing some order on what had been a haphazard operation, but Bannon will still have “a direct pipeline into the Oval Office with Breitbart, Twitter and the TV,” the same White House official added. “My guess is he’ll (Bannon) probably be more effective goading the president from outside, especially if the president feels boxed in by John Kelly’s clean lines of authority and (national security adviser H.R.) McMaster’s orderly processes,” said Kori Schake, a research fellow at Stanford University’s Hoover Institution who previously served in the White House. Prior to joining the Trump campaign, Bannon had spearheaded Breitbart’s shift into a forum for the “altright,” a loose online confederation
of neo-Nazis, white supremacists and anti-Semites. His departure capped a tumultuous week in which Trump was widely criticized for saying both sides were responsible for last weekend’s violence at a Charlottesville, Virginia rally organized by neo-Nazis and white supremacists. Bannon told the conservative Weekly Standard on Friday that he would use Breitbart to attack opponents of the populist and nationalist agenda he championed, including establishment Republicans. At the same time he appeared to suggest that his departure signalled a major shift for the Trump agenda. “The Trump presidency that we fought for, and won, is over,” Bannon said. Defence policy is one area where Bannon could play a role from the outside. While many of Trump’s national security aides favor sending several thousand more troops to Afghanistan, where the Taliban insurgents have been regaining ground, Bannon argued for withdrawing the 8,400 U.S. personnel still there. He also had advocated restraint in dealing with North Korea, rejecting the use of military force to solve the recent crisis. Reuters
Business Daily Monday, August 21 2017 15
Opinion
Mass reasons to like Jack Ma’s Hong Kong insurance deal
China hasn’t yet fixed its outflow problem Christopher Balding a Bloomberg View columnist
Nisha Gopalan a Bloomberg Gadfly columnist
I
t had started to look like Jack Ma’s magic touch was beginning to elude him when it came to Yunfeng Financial Group Ltd., the Hong Konglisted brokerage backed by the billionaire. Not any more. A group led by Yunfeng said last week it would buy Hong Kong-based MassMutual Asia Ltd. from Massachusetts Mutual Life Insurance Co. for HK$13 billion (US$1.7 billion). Yunfeng will end up owning a stake of around 60 per cent in MassMutual Asia, with the rest held by other consortium members including Singapore sovereign wealth fund GIC Pte and Ant Financial, the payments affiliate of Alibaba Group Holding Ltd. There are several reasons why Yunfeng, which earlier this year created a roboadviser application to manage the wealth of regular Chinese and Hong Kong investors, has done well here. For one, Yunfeng is largely paying billion US$ in stock (and its MassMutual Asia sale shares rocketed as much as 31 per cent Friday); it ends up with Massachusetts Mutual Life in the U.S. as a shareholder; and it acquires a coveted Hong Kong insurance license. With MassMutual Asia’s suite of products, the deal also allows Yunfeng to better target all those mainland visitors to Hong Kong seeking insurance offerings. Yunfeng currently ranks just 15th in the city in terms of new policies sold last year, trailing market leader AIA Group Ltd. by a wide margin, according to Bloomberg Intelligence analyst Steven Lam. Despite all sorts of curbs from Beijing on capital outflows, including restrictions on the use of UnionPay cards to buy policies, sales to Chinese residents are booming. AIA’s business in Hong Kong soared 54 per cent to US$828 million in the first half, an impossible increase in a city of 7 million without mainland buying. Even in valuation terms, Yunfeng, which used to be known as Reorient Group Ltd. before Ma’s capital injection, is getting a good deal, paying about 1.9 times last year’s book value, according to Lam. Two insurance firms in Hong Kong over the past 12 months have gone to mainland buyers for distinctly frothy valuations. There was China UCF Group Co., the conglomerate led by businessman Zhang Zhenxin, which acquired Hong Kong Life Insurance Ltd. at 9 times, and the sale of Dah Sing Financial Holdings Ltd.’s insurance business to China’s Thai Hot Group for 5 times. On those numbers alone, Yunfeng has a mass of reasons to like this transaction.
1.7
Bloomberg Gadfly
B
y some measures, China has braved the storms buffeting its currency. The yuan is up 4 per cent so far this year, and foreignexchange reserves are up by US$70 billion. State media has even called for relaxing capital and exchange-rate controls. But that would be like a sick person who stops taking his medicine when he feels better: The underlying conditions haven’t really changed. After China’s surprise currency devaluation in 2015, it was reasonable to expect significant pressure on its reserves and the yuan for the foreseeable future. As recently as January -- with the Federal Reserve tightening monetary policy, and China’s reserves hitting their lowest level since 2011 -- it seemed safe to assume that a rising dollar would hit China hard. But a funny thing happened on the way to the yuan’s collapse. Even though the Fed has raised interest rates three times since December, the dollar has fallen by 8.4 per cent. This has in turn propped up the value of the PBOC’s reserves while allowing the yuan -- which has a soft peg to the dollar -- to rise. The dollar falling faster against global currencies than the yuan gently pushed the yuan up against the dollar. China’s government also stepped in aggressively. Regulators cracked down on all types of capital outflows, threatening penalties on property investors and blocking companies from making foreign acquisitions. The PBOC is widely thought to have intervened in currency markets to keep the yuan priced within a predetermined range. It also introduced a new “counter-cyclical” pricing measure designed to reduce the yuan’s volatility against the dollar. The much-touted effort to make the yuan a major global currency has been all but shelved. The result of all this is higher reserves and a stronger yuan -- even though the underlying dynamics haven’t changed at all. China’s citizens still want to move their money overseas. They’re buying up property from Bangkok to London. With a lack
“
of promising domestic investment opportunities and some of the most expensive real estate in the world, that’s not surprising. Corporations still want to get their money out, too. Whether by repatriating profits, going on acquisition sprees, or investing in the government’s “Belt and Road” infrastructure plan, they’re taking China-based capital and investing it in other markets. Although official foreign investment has fallen by 67 per cent thanks to stricter regulation, the ratio of bank payments for imports to customsrecorded imports -- which bottomed out last year -- has been inching back upward, indicating disguised outflows. Wanting to liberalize the yuan because it achieved stability after all these measures makes no sense. Before it can consider a liberalization, China needs to address the reasons that companies and people are trying to move capital overseas. Assets such as real estate, where most households keep their wealth, remain very expensive by global standards, and people have an enormous incentive to move real estate capital gains offshore. The government has to do more to maintain price stability for a sustained period, including strengthening its crackdown on property speculation. Keeping corporate cash at home will probably be harder. Companies will continue looking abroad for opportunities as long as China has widespread surplus capacity, opaque regulation and markets saturated with capital. The government needs to follow through on its promises to deleverage and do more to depoliticize financial markets. Ironically, China’s restrictions appear to be harming its ability to balance capital flows: Foreign investors, hesitant to see their money go through a one-way door, have reduced direct investment by 5.5 per cent this year. In the long term, it’s true that China will need to relax restrictions on its currency. But first it needs to fix the problems that made them necessary in the first place. Bloomberg View
China’s citizens still want to move their money overseas
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16 Business Daily Monday, August 21 2017
Closing Smartphones
Apple under pressure to dazzle as market slows
market leader Samsung is holding an August 23 unveiling likely to launch its Galaxy Note 8 handset. As Apple and Samsung gear up to launch The two market leaders are seeing rivals, mainly new flagship smartphones, the market leaders from China, chip away at market share, creating are seeking a wow factor that can help them pressure to showcase innovation, say analysts. fend off challenges from rising Chinese-based Some reports say the new iPhone will include a highmanufacturers. quality, edge-to-edge screen with a notch in the top Apple is under particular pressure to dazzle as the culture-changing California iPhone maker looks for a for an extra camera supporting 3D facial recognition. way to maintain its image as an innovation leader in Some speculate that the back of the new handset will be glass and will offer wireless charging. a global market showing signs of slowing. Apple is widely expected to unveil the latest iteration “We are expecting a major design refresh on Apple,” GlobalData analyst Avi Greengart told AFP. AFP of the iPhone in September, while smartphone
Trade
China’s not running a trade surplus with every nation on Earth One of China’s biggest appetites is for machines and electronics from South Korea, Malaysia and Germany
C
hina’s big trade surpluses hog all the headlines, but imbalances go both ways. South Korea’s US$72.2 billion surplus with the People’s Republic in fact tops a list of more than 40 nations that export more to the country than they import from it, followed by Switzerland and Australia, data compiled by Bloomberg show. Besides commodity exporters such as Iran and machinery producers like Germany, smaller economies such as Ireland, Finland and Laos round out the tally. Imports by the world’s biggest exporter show how its humming factories prop up other economies - and for some of those, what’s on the line should they find themselves involved with territorial disputes or geopolitical tensions with one of their biggest customers. In Asia, South Korea and Malaysia are among the most vulnerable to China’s economic arm-twisting, while Japan and Vietnam look relatively immune, according to Bloomberg Intelligence estimates based on their trade surpluses with China as a share of total output. One of China’s biggest appetites is for machines and electronics from South Korea, Malaysia and Germany, according to World Bank data from 2015, the most recent year available. Semiconductors from South Korea and Malaysia account for much of that as they’re brought in and then installed in other electronic products assembled in China’s factories. The iPhone itself is an ecosystem
that illustrates the global reach of farflung supply chains. China’s assembly lines for the device incorporate expensive components imported from sources including Germany, Japan, South Korea, the U.S. and Taiwan. Such complex and crucial trade relationships give South Korea something of a buffer against Chinese reprisals like those it faced last year after agreeing to install a U.S. missile defence system. “Eighty per cent of Korean exports to China are intermediate goods, and everyday people can’t see them from the outside or feel them,” said Yang Pyeongseob, a senior research fellow
at the Korean Institute for International Economic Policy in Beijing. China’s factories, construction sites, vehicles soak up oil, metal and materials from commodity exporters around the world, so when the economy sneezes it spurs big swings in things like the Australian dollar or Mongolian gross domestic product. Those two countries are key suppliers of iron ore, precious metals and coal. Meanwhile, oil from Angola, Oman, Iran, and Venezuela helps keep China’s cars and trucks running, and Turkmenistan sends natural gas. Chile offers metal, mainly copper, but
wine and cherries are more familiar South American imports on Chinese supermarket shelves. Swiss trade is driven by pharmaceuticals, chemicals and precision instruments and watches. The surplus size may have been distorted by commodities trading, which doesn’t necessarily lead to actual shipments.
‘In Asia, South Korea and Malaysia are among the most vulnerable to China’s economic arm-twisting’ South Africa’s shipments include diamonds, gold and wine. Elsewhere in the southern hemisphere, Brazil was China’s top overseas source of soybeans, soy oil, beef and sugar last year, according to China’s Ministry of Commerce. The most populous nation imported 38 million tons of soybeans alone from Brazil last year. And farmers in New Zealand are increasingly stocking those supermarket shelves for more discerning consumers. China imported more lamb from New Zealand than anywhere else, the most wheat from Australia, and the largest amount of fruit and nuts from Chile. Bloomberg News
New cabinet
Brexit
Politics
Iran parliament clears oil, foreign ministers
Britain will not exclude possible EU oversight of UK borders
Buoyant N.Z. Labour Party eyes political redemption
The Iranian parliament voted yesterday to keep the oil and foreign ministers, two of pragmatist President Hassan Rouhani’s key members of cabinet, in their posts. Oil Minister Bijan Zanganeh has been credited with the boost in Iran’s crude output since many global sanctions were lifted last year and with a multi-billion-dollar deal with France’s Total to develop South Pars, the world’s largest gas field. Foreign Minister Mohammad Javad Zarif was Iran’s lead negotiator in the landmark 2015 agreement in which Western powers agreed to rescind sanctions on the Islamic Republic in exchange for curbs on its disputed nuclear programme. “The most important duty of our foreign minister is to stand by the nuclear agreement and not allow America to succeed, not allow Iran’s enemies to succeed,” Rouhani said in an address to parliament before the vote, broadcast live on state TV. “The person who defends the nuclear agreement is standing against the enemies of Iran, in other words standing against America, Israel and some small enemies in the region who are creating trouble.” Fourteen other ministerial candidates also received parliamentary approval yesterday. Reuters
Britain will not rule out the possibility that the European Union may retain oversight of customs controls at UK borders after it leaves the bloc, as the country seeks ways to keep unhindered access to EU markets following Brexit. Last week, the UK published a policy document proposing two possible models for British-EU customs arrangements after withdrawal from the EU in 2019. The first model was a “highly streamlined customs arrangement” which involved the re-introduction of a customs border but which envisaged electronic tracking of shipments, rather than physical checks of goods and documents at the border. An alternative proposal was the “new customs partnership” which would remove the need for a UK-EU customs border altogether. Under this model, the UK would operate as if it was still part of the bloc for customs purposes. British goods would be exported tariff-free and Britain would levy EU tariffs on goods coming into the UK for onward passage to the EU directly or as components in UK export goods. The EU’s system of movement of goods across EU borders without checks works on the basis that all members closely monitor shipments coming into the bloc from outside. Reuters
New Zealand’s main opposition Labour Party, buoyed by a surge in the polls under new leader Jacinda Ardern, launched its campaign to win next month’s election with a pledge to close the gap between rich and poor. Speaking to party faithful in Auckland yesterday, Ardern highlighted child poverty as a key issue heading into the Sept. 23 vote. “We have nearly 300,000 kids living in poverty,” she said. “I want to build a country where every child grows up free from poverty, and is filled with hope and filled with opportunity.” Labour, which slumped to its worst defeat since 1922 at the last election in 2014, is seeking to return from the political wilderness and prevent the ruling National Party from winning a rare fourth term in office. Ardern has revitalized her left-leaning party since taking the helm three weeks ago, boosting its support to the strongest in nine years. If she can secure victory, the 37-year-old would become New Zealand’s youngest prime minister since 1856. Ardern squares off against incumbent Premier Bill English, who is set to campaign on a strong economy, tax relief, and National’s record of stable government. Bloomberg News