Business Daily #1231 February 10, 2017 by Business Daily

Casino architect pioneer Steelman pursues skill-based gaming Career shift Page 4

Friday, February 10 2017 Year V Nr. 1231 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Oscar Guijarro Think tank

Panel plots boost for Singapore economy Page 11

IPO

Lai Si Enterprise oversubscribed 187.7 times on initial offer Page 2

Opening

Roosevelt Hotel prepares for March opening Page 2

www.macaubusinessdaily.com Results

Sun International posts narrower net loss Page 4

Funding

Alibaba’s financial arm solicits US$3 billion injection Pages 9 and 15

Luso Trade Loses Steam Commerce

It’s been talked up for years. The closer ties between China and Portuguese-speaking countries. But trade is not keeping pace. Data shows that commercial exchanges between both parties haven’t performed anywhere as near well as expected. Page 3

Foiling the fanatics

Anyone home?

A roof over their head. A legislator is pressing the gov’t for answers about public housing for civil servants. The guarded response is that the benefits for society as a whole must be weighed up. With more surveys in the wings.

Audit The Asia/Pacific Group. They audit Cambodia, Mongolia, Thailand and the United States. And the MSAR, as well. Analysing potential terrorist-funding activities. Which typically adopt money laundering ploys. It has been all uphill work. Page 5

you

High end dating Love me, love my wallet. Eunice Sim, manager of a high-end dating agency, says female clients home in on financial stability. While their male counterparts are more physically-oriented. High matchmaking fees, however, are giving way to cheaper target-oriented packages and marketing innovations. Putting the sparkle into her company My Champagne. Page 6

China tightening credit Real estate Page 2

HK Hang Seng Index February 9, 2017

23,525.14 +40.01 142.75 (+0.17%) Worst Performers

Belle International Holdings

+5.33%

Galaxy Entertainment Group

+2.05%

BOC Hong Kong Holdings

-2.05%

China Resources Land Ltd

+4.82%

Sino Land Co Ltd

+2.02%

Hang Lung Properties Ltd

-1.73%

AIA Group Ltd Link REIT

-0.74%

Bank of China Ltd

+2.48%

China Overseas Land &

+1.66%

Cheung Kong Infrastructure

-1.57%

Cathay Pacific Airways Ltd

-0.72%

China Merchants Port Hold-

+2.39%

Ping An Insurance Group Co

+1.09%

China Shenhua Energy Co

-1.25%

CITIC Ltd

-0.52%

Kunlun Energy Co Ltd

+2.36%

Bank of Communications

+1.03%

Power Assets Holdings Ltd

-1.18%

HSBC Holdings PLC

-0.45%

11° 16° 13° 16° 14° 18° 15° 19° 15° 19°

-1.15%

Today

Source: Bloomberg

Best Performers

Sat

Sun

I SSN 2226-8294

Mon

TUE

Source: AccuWeather

Property Mainland authorities are stressing financial firms should restrict the number of mortgages granted. The gov’t is trying to contain risks in the property sector to prevent an oversized bubble. Page 9

2 Business Daily Friday, February 10 2017

Macau Housing

Flats shortfall for civil servants a hot potato Regarding the persistent matter of providing more accommodation for the city’s civil servants, the MSAR Government says it has to consider the overall benefits for all of society Cecilia U cecilia.u@macaubsuinessdaily.com

egarding the significant shortage of accommodations for civil servants in the city, the Public Administration and Civil Service Bureau (SAFP) stated that in order to construct houses for public servants

Demand for public housing

Legislator Ella Lei Cheng I submitted a written enquiry questioning whether the government is to produce an overall public housing policy concurrently with the research results pertaining to the demand for public housing release due by the end of this year. The Housing Bureau appointed

it needs to make various cautious considerations vis-a-vis the benefits to society as a whole. In response to legislator Si Ka Lon’s written interpellation, the government department explained yesterday that consideration of the overall housing policy is necessary for the planning of the construction of civil servants’ accommodations,

an academic institution to conduct research to determine the level of demand for public housing in the city in 2016. She criticised the government for not disclosing any information about the government’s intentions regarding the study results. Lei also enquired whether housing policy would be based on the research results.

noting that the land in Macau is both limited and valuable. SAFP brought up the subject of the increased housing subsidy launched on the first day of this year, justifying its attempt to soothe the current pressure of the expense of housing that most civil servants are enduring. According to the official reply, the MSAR Government rolled out 110 units in 2016 for rental, and is currently in the allocation stage, adding that a few flats have been reserved for the foreign workers and translators it employs.

The government perceives that allocations will be completed within this year. Meanwhile, no rental units are to be rolled out as the government is expecting small units to be returned. Legislator Si Ka Lon, on the other hand, enquired about revising the old law regarding the civil servants housing distribution system. SAFP admitted that the current law is outdated, saying that the government is currently in the initial stage of researching amendments to the law.

Hotels

Roosevelt Hotel mulls mid-March launch Roosevelt Hotel Macau, which is being built near the Macau Jockey Club, will be opened in mid-March, local Chinese language newspaper Macao Daily reported yesterday. Probably the first new hotel to be unveiled in the territory this year, the General Manager of the U.S.based hotel, Roberto Simone, said the new establishment is aiming to attract customers aged 28 to 45 years old seeking medium-high end services. The new hotel will provide 368 rooms, with the decor originating from the Hollywood Roosevelt in the States.

In comparison to the many resorts opened in the city, Macau Roosevelt sets itself apart as a boutique hotel,

Simone claimed. He added that the hotel will provide high quality, personalised services

rather than cutting room prices to entice customers. The hotel executive anticipates Chinese tourists will comprise 80 per cent of its overall customer base, with 10 per cent each from Hong Kong and worldwide. Over 100 employees are currently undergoing training in preparation for the opening, the manager said, adding that the hotel is to expand its team to around 300 to 350 employees for its operation. It was initially planned to open the hotel in 2015. The opening date was later postponed to the first half of 2016 then the first quarter of this year. Company representative Arron Iu said in July 2015 that the property would not provide any gaming venue. C.U.

Business

Trade

Lai Si shares oversubscribed 188 times

Centre to serve as local food outreach platform

Cecilia U cecilia.u@macaubusinessdaily.com

Locally based construction and renovation firm Lai Si Enterprise Holding Ltd. said its initial public offering has attracted applications 187.7 times over its initial offer, according to its filing with Hong Kong Stock Exchange. The company, which officially listed on the stock market today, has received 8,848 valid applications for some 1.88 million public offer shares compared to the total number of 10 million public offer shares initial under the IPO. Offering HK$1.15 per share, the company’s IPO has gathered net proceeds 6f HK$89.8 million (US$11.6 million) after deducting related underwriting fees and estimated expenses for the share offer. The announcement reads that the company w533 allocate net proceedings to finance the government’s

fitting-out and construction in the MSAR, in addition to financing the start-up costs of its fitting-out business in Hong Kong. Due to oversubscription, the company said it had relocated 40 million shares from the placing to the public offer, making the total number of shares offered 50 million, accounting for half of the total number of the shares available under the offer. In addition, the company said its placing was also oversubscribed, at 5.25 times of the initial offering of 90 million shares. The enterprise, founded in 1987 in Macau, is a construction company which engages in fitting-out works and construction as a contractor. The company also offers services relating to repair and maintenance works. Lai Si has engaged in projects for hotels, casino operators, international retailers, food and beverage outlets, and landowners as well as those for the MSAR Government.

The Portuguese-speaking countries Food Products Exhibition Centre will host promotional activities by three local F&B companies in February Members of the Federal General Commercial Association of Macau Small and Medium Enterprises will organise promotional activities in February at the Portuguese-speaking countries Food Products Exhibition Centre, according to Macau Trade and Investment Promotion Institute (IPIM). The exhibition centre in the Tap Seac Square Glass House opened in March 2016 as an initiative by IPIM to promote food and beverage products from the Lusophone countries, with three local companies - Dine in Macau, Macao Fine Wine Bazaar Co, Ltd. e Macao College Student Business Initiation Services Company Limited - now choosing to expose their products in the centre. Although the Centre primarily caters to Business-to-Business (B2B) deals - most products host a machine-readable optical label directing visitors to the company’s website upon scanning - the three local companies aim to promote their products directly to consumers. Local company Dine in Macau will promote its Portuguese salt and wine products between February 9 and 11 in the Centre, with wine importer Macao Fine Wine Bazaar Co. Ltd.

showing its products at the end of the month. Representatives from both companies told IPIM they usually supplied products directly to restaurants, expecting the showcase could be an opportunity to attract local consumers wanting to purchase quality wines at lower prices than found in restaurants or supermarkets. Food product company Macao College Student Business Initiation Services Company Limited - with a showcase planned for 23 to 25 February - the initiative could be a way to enhance co-operation between local SMEs. N.M.

Business Daily Friday, February 10 2017 3

Macau International Trade

Sino-luso hype muddies picture a year before, with China practically ceasing imports from that country, down 99.1 per cent from 2015, totalling just US$161,000-worth (MOP1.28 million) of imports.

Merchandise trade between China and Portuguese-speaking countries fell by 7.72 per cent in 2016, in spite of talks to boost exchange by the Macau Forum

Lost in translation?

Sheyla Zandonai sheyla.zandonai@macaubusiness.com

rade exchange between China and the Portuguese-speaking countries totalled US$90.87 billion (MOP726.19 billion) for the whole of 2016, according to the latest data released by China Customs published by the Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries, a.k.a. Forum Macau. Trade in 2016 dipped 7.72 per cent from a year earlier, when overall trade between China and the Portuguese-speaking countries closed the 12-month period at US$98.47 billion (MOP786.92 billion). The seven Portuguese-speaking countries comprise Angola, Brazil, Cape Verde, East Timor, Guinea-Bissau, Mozambique, and Portugal. C h i n a’ s ex p o r t s t o P o r t u guese-speaking countries tumbled 18.19 per cent year-on-year, from US$36.16 billion (MOP288.94 billion) to US$29.59 billion (MOP236.44 billion). Imports to China from Portuguese-speaking countries also dropped, slightly down 1.64 per cent, totalling US$61.28 billion

(MOP489.66 billion). Brazil topped merchandise trade with China, generating US$67.56 billion (MOP539.84 billion) in commercial exchange, followed by Angola at US$15.57 billion (MOP124.41 billion). Trade between China and these two countries declined by 5.91 per cent and 20.94 per cent, respectively. On the other hand, merchandise trade between China and East Timor represented the most important increase amongst the Portuguese-speaking countries, up 61.39 per cent from a year earlier - from US$106.67 million (MOP852.36 million) to US$172.17 million (MOP1.37 billion). The trade balance rise between the two countries was

primarily due to skyrocketing Chinese merchandise exports to East Timor, 62.22 per cent higher than the year prior. The value of merchandise trade between Portugal and China made for the third most important commercial partnership in the group, totalling US$5.17 billion (MOP41.31 billion). It represents an increase of 28.54 per cent from 2015, when total merchandise trade accounted for US$4.37 billion (MOP34.91 billion). The biggest drop in commercial exchange was registered between China and Guinea-Bissau, estimated at US$21.46 million (MOP171.47 million), 42.41 per cent lower than

Although commercial exchange between China and Brazil continues to top the list, official data released by those countries is inconsistent. According to data from China Customs, Brazil exported US$45.54 billion-worth (MOP363.89 billion) of goods to China in 2016. However, according to data from the Brazilian Balance of Trade published by Brazil’s Secretariat of Foreign Trade, the total amount of exports to China recorded was estimated at US$35.13 billion (MOP280.71 billion) for the year ended 31 December 2016 - that is, nearly US$10 billion (MOP79.90 billion) lower than that reported by China Customs. The value of Chinese goods imports to Brazil was similar in both Chinese and Brazilian official data - that is, US$22.16 billion (MOP177.07 billion) and US$23.36 billion (MOP186.66 billion), respectively. In 2016, Brazilian exports worldwide were estimated at US$185.23 billion (MOP1.48 trillion) while total exports from China were estimated at US$209.42 billion (MOP1,67 trillion). The top three products Brazil sold to China in 2016 were primary commodities: iron ore, crude petroleum, and soybeans. China’s top three exports to Brazil were technology-intense goods: including telephony, radio and TV receptor-machines, and portable terminals of mobile phones.

4 Business Daily Friday, February 10 2017

Macau Opinion

Gaming

Pedro Cortés*

Casino pioneer unveils skill-based gaming project

Not the way

Las Vegas architect involved in the city’s first integrated resort developed after handover to China gears up for skill-based gaming project

Legislator Pereira Coutinho, for whom I have great personal and professional regard, is coaxing our Secretary for Transportation and Public Works to step down as a result of what happened in relation to the overnight increases in the amount of car parking fines. I fully disagree with this request despite, as mentioned in a previous column, I do not agree with what was enacted, particularly the way it was done. As a matter of fact, most of the time the way measures are taken do not consider the public interest and this seems to be the case here. I do not have any privileged information regarding the case but it seems that our Secretary was less guilty in the way the fines were increased. There is surely another target, which seems to rule on its own without understanding that Macau citizens are our best source and should be protected. We have seen this in many other traffic measures and it seems we will continue to see them. I fully countenance demonstrations defending one’s rights. But what I totally disagree with is a witch-hunt just because it is good for an election year. It would be the same to ask any Secretary to step down should the subordinate Director of a Bureau make a mistake. There are responsibilities, of course, and one thing that our Secretary for Transportation and Public Works has demonstrated in the past is that he is not one of those who hides behind the scenes and, in typical Macau fashion, does not assume his responsibilities. He does assume them. And he makes things happen as we have seen in many areas. I have not seen the aforementioned legislator or others ask many of the previous or current Secretaries to step down because their Directors committed a mistake in the way a measure was conducted vis-a-vis the substance of the measure. Thus, I am with our Secretary and do hope that he continues in office for many years to come! Which does not, however, mean that his Bureau Directors are exempted from responsibility regarding the way they implement unpopular measures. *lawyer and frequent contributor to this newspaper.

Nelson Moura nelson.moura@macaubusinessdaily.com

asino architect Paul Steelman has applied to the Nevada Gaming Commission to become licensed as a gaming equipment manufacturer and distributor for skill-based casino games. The Las Vegas Review stated that the application was submitted through a subsidiary of Steelman’s architectural firm Competition Interactive LLC. The proposal is currently under review by the Nevada Gaming Control Board, with a recommendation by the state Gaming Control Board to be analysed on February 23. Steelman manages 10 employees from Competition Interactive for his new project, with its first game Running Rich Racing, a skill-based road-racing game with betting involved - having already been showcased at the 2016 Global Gaming

Expo (G2E) in Las Vegas. The game is now expected to be reviewed by Nevada’s regulators in late 2017. Skill-based gaming machines were approved for the first time in the United States in October 2016, with gaming regulators in the state of New Jersey approving the installation of

skill-based slot machines in three casinos. The Las Vegas architect has been involved in many global hotel and casino projects with developments in Asian countries such as the Vietnam, Philippines and Cambodia. In Macau, Steelaman participated in some of the city’s main casino and hotel projects such as Galaxy Phase II, Oceanus, and Sands China, the city’s first casino developed after the liberalisation of the gaming market. N.M.

Casino architect Paul Steelman

Results

Sun Int’l Resources net loss narrows end-2016 Sun International Resources Ltd., a company in which local junket boss Alvin Chau Cheok Wa owns a major interest, saw its net loss attributable to shareholders narrow by 35.8 per cent to HK$41.4 million (US$5.2 million) for the nine months ended December 31 from a year ago, according to its latest announcement this week. The company, listed on the Growth Enterprise Market (GEM) of the Hong Kong Stock Exchange, primarily

engages in the equine trade, financial services and computer software solutions. It explained in a filing that the improvement in the results is due to ‘gain on disposal of associates of mining service business and decrease in net loss from equine services business during the reporting period’. In the nine months, the company’s total turnover recorded an increase of 11 per cent to HK$85.8 million

compared to the same period of last year. In particular, that generated by financial services surged to some HK$34.1 million from HK$600 over the same period last year. But the company saw its revenue derived from its equine services fal 28.5 per cent year-on-year to HK$38.9 million, while that from computer software solutions and services plunged 42.4 per cent yearon-year to HK$12.8 million. For this year, the company believes that the expected slowdown in economic growth and the volatility of financial markets will not affect its equine services business, while such factors will also allow the company’s financial services to appeal to more investors and SMEs in Mainland China. ‘However, the results of the Group’s financial services segment would be heavily influenced by the performance of the stock markets in China and Hong Kong,’ the filing adds. K.L.

Banking

Novo Banco Asia profits plummet Novo Banco Ásia, S.A., a subsidiary of Novo Banco, S.A., wrapped up its 2016 fiscal year with MOP1.03 million in profits, according to data released on 8 February in Macau’s Official Gazette, Lusa reported. The bank posts an uncharacteristic year-on-year low when compared to profits registered in 2015, when the bank collected MOP4.77 million in profits; that is, nearly five times the amount declared for the whole of 2016. It registered MOP44.85 million in expenses, collecting revenues of over MOP45.89 million, according to balance sheet data as at year-end 31 December 2016. Novo Banco Asia succeeded Bank Espírito Santo do Oriente after Portuguese Bank Espírito Santo (BES), its parent company in Portugal, collapsed in 2015. In early August of last year, it agreed

on the sale of its Macau unit to Hong Kong incorporated brokerage firm Well Link Group Holdings Limited but the transaction was not fulfilled due to pending approval from the Portugal Central Bank and the Monetary Authority of Macau, according to information previously published by this newspaper.

Established in Macau in 1996, Novo Banco Asia is the only fully licensed commercial unit of the Novo Banco Group in the Asia Pacific region, according to the company. It specialises in corporate services, trade finance, and private banking. Novo Banco Group also has an established network of business units and ties extending to Latin America and Africa plus a Representative Office in Shanghai since 1998. S.Z. with Lusa

Business Daily Friday, February 10 2017 5

Macau Visas

Taiwan launches online services for nonlocally born residents

Permit for Hong Kong and Macau residents. Eligible applicants will be charged TWD600 (MOP154/US$19) for the application fee. Prior to Permanent residents of the two Special the launch of the online services, these types of Administrative Regions not born in the cities can now apply for a single entry permit to Taiwan via an resident were required to approach the local Taipei online system operated by the Taiwanese National Economic and Cultural Office for the visa in person. The new online service commenced yesterday and Immigration Agency, the Taipei Economic and operates from 9:00am to 5:00pm, while operating Culture Office announced yesterday. Applicants hours are to be expanded to around-the-clock in of the online service have to be holders of an SAR July. C.U. Resident ID card and passport or Mainland Travel

Audit

MSAR audit Asia/Pacific Group audited five other regions last year Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

he MSAR was not the only region to fall under the gaze of the Asia/Pacific Group (APG), an autonomous international organisation set up to combat money laundering, in its audit this year. According to the group’s yearly report, published Tuesday, the MSAR joined Cambodia, Mongolia, Thailand and the United States in mutual evaluations to assess and improve compliance, with evaluations to be adopted after the group’s annual meeting. Last year saw Bangladesh, Bhutan, Canada, Fiji and Singapore finalise their audits, while the MSAR played host to one of the group’s assessor training exercises. The audit is the first to have taken place since 2007, when the group found that ‘drug crime, organised

crime, kidnapping, bribery and illegal gambling are considered to be the major sources of illegal proceeds,’ relating to money laundering and financing of terrorism. It said that the ‘low number of convictions, considering STRs (suspicious money transactions) recorded and no comprehensive statistics existent under previous applicable money laundering legislation, provides some doubts on the effectiveness of previous regime’. In addition, the 2007 report noted that ‘it is impossible to assess the effectiveness of the current legislation and other regulations,’ due to there being ‘no comprehensive statistical system in place under the new money laundering criminalisation regime’. The timing of the first evaluation came just as new amendments were being made to the MSAR’s AML/CFT regulations, while last year’s audit occurred under similar circumstances. Factors such as ‘no freezing

provisions and procedures for money laundering activity […] no comprehensive special investigative techniques provisions in place so money laundering activities [...] requests cannot be fully complied with,’ are being attempted to be resolved through the passing in generality of the bill on money laundering and terrorism financing activities in November of last year. The bill is

currently under consideration by the 3rd standing committee of the Legislative Assembly. The bill comes nearly 10 years after the long list of suggestions provided by the group, although local authorities’ response to the report at the time noted that it would ‘take some time to fully implement the control measures and allocate the necessary resources’.

6 Business Daily Friday, February 10 2017

Macau

Romance

True love, Cantonese-style Dating boutique for high-income earners targets Cantonese-speaking locals Kelsey Wilhelm kelsey.wilhelm@macaubusinessdaily.com

ave y o u ev e r p a i d HK$10,000 for a date? If so, according to dating boutique My Champagne based in Hong Kong and Macau, then you might have got a discount, as some high-end dating boutiques are charging between HK$60,000 and HK$300,000 to manage your love life. Eunice Sim, Manager of My Champagne, tells Business Daily that the matchmakers have undercut their competition by about 50 to 60 per cent, charging by age and gender of their clients, with a three-date package for a 35-year old woman costing HK$8,800, while a male counterpart of the same age gets the same package for HK$3,600, and for both genders, the younger the client the cheaper the price. According to the group’s studies, the single male population in Hong Kong is smaller than the single

female population, with Sim noting that “many ladies are single, so men have many choices,” as reflected in the lower price point to attract more clientele. Not only does pricing vary, explains Sim, both parties tend to follow their stereotypes when procuring a partner: men pursue appearance and women pursue financial health. “For ladies looking for a partner, their requirements general speaking are focused on the financial status and background: job, education, income and if they own property,” comments Sim. “Sometimes, they won’t tell you so honestly or directly, but we know that because we deal with them.” “But for the guys, their main requirement, the first priority, is appearance,” said the manager. This reflects itself in who the company accepts as clients, as men with lower incomes are harder to find matches for, whereas women with lower incomes are less likely to find it to be a negative factor. Generally, male clients are in their 20s to late40s, while female clients are in their 20s to late-30s. The group even offers free of charge dates to women, especially those with a “quite nice profile” to paying male clients, relying upon word of mouth recommendations from the female client to attract future clients, which

Sim describes as “very helpful for the business to be sustainable.”

Building a database

Started in 2012, spotting an opportunity due to a non-expanding social circle (stuck at the secondary school and university colleague stage), Sim realised that others within highly demanding professions such as hers (an auditor and accountant) wanted to meet new people. By combining the databases of herself and her friends, Sim started My Champagne, expanding from Hong Kong to Macau in the same year. With about 100 clients in the MSAR and over 2,000 in Hong Kong, the firm plans to expand to Shanghai in May this year as research finds it to have “one of the highest populations in terms of single people” in a city of over 20 million. The business primarily targets the “high-end market . . . [whose] . . . purchasing power is quite high” with clients initially mainly from the banking sector, but later expanding to education, law, academia and beyond. Having worked for a large, formerly-U.S. listed, Mainland dating company, Sim saw a non-sustainable concept being applied, trying to “get most of the market share, so that people know the brand well,” but found that the “large budget in

marketing and advertising” wasn’t driving growth. Thus, Sim applied a more conservative approach, halving the price and offering free dating advice to clients. In addition, by collaborating with other dating companies opening the same year, and matchmaking clients between them, the group was able to reach a broader range of incomes and backgrounds.

Future together

The approach has been successful, with the group now hitting an “important milestone” – hiring a lawyer to certify marriages resulting from the service, a type of dating company audit. In an industry that “is quite competitive” with many newcomers starting speed dating businesses, many of which “don’t have physical offices,” and by renting venues and charging hundreds of Hong Kong dollars per ticket, My Champagne has – after its initial promotional campaign in newspapers and magazines – relied more upon word of mouth, channelling the saved marketing money into expansion. “It’s easy to set up a dating company [with] no government regulations just in Hong Kong you have to apply for a business registration,” comments Sim. However, one of the main secrets to the group’s success – keeping it local, with most of their clients Cantonese-speaking Hong Kong and Macau residents searching for their counterparts locally – is paying off.

Business Daily Friday, February 10 2017 7

Gaming Gaming

NagaCorp annual profit up 7 pct The company saw its mass gaming business boosted by the growth of visitors in Cambodia, with revenue increasing 6.8 per cent year-on-year Kam Leong kamleong@macaubusinessdaily.com

ambodia n g a m i n g operator NagaCorp Ltd. generated US$184.2 million (MOP1.47 billion) in net profit for the whole of 2016, jumping 7 per cent year-on-year due to increases in its casino earnings. According to its annual results announced to the Hong Kong Stock Exchange on Wednesday night, the operator’s earnings before interest, tax, depreciation and amortization (EBITDA) registered an increase of 12 per cent year-on-year to US$256.1 million. For the year, gaming revenue via its casino-resort NagaWorld in the capital city Phnom Penh, reached some US$500.8 million, growing 4.2 per cent from US$480.8 million for 2015, accounting for 94 per cent of its total. In particular, that derived from the mass market recorded an increase of 6.8 per cent year-on-year to US$275.2 million, while VIP business posted 1.2 per cent growth to US$225.7 million for the year. The company explained in the filing that the improvement in the mass market segment is attributable to visitor growth in the Southeast Asian country in the year that ‘increased footfall into NagaWorld.’ The casino property’s VIP rolling totalled US$8.7 billion for the year, up 11 per cent year-on-year, although the win rate of the segment dipped 0.2 percentage points to 2.6 per cent. Meanwhile, buy-ins for mass market tables grew by 12 per cent year-on-year to US$617.8 million

and bills-in for electronic gaming machines rose 9 per cent to US$1.5 billion. As at the end of the year, NagaWorld operated 241 gaming tables in addition to 1,648 electronic gaming machines. ‘The group aspires to further penetrate the regional VIP market by offering attractive commercial terms to junket operators and agents as a result of NagaWorld’s low cost structure,’ it said in the filing. The company’s non-gaming revenue generated by hotel, food & beverage and entertainment surged 33 per cent year-on-year to US$30.7 million for the year, primarily driven

by ‘higher occupancy and average rates as well as better performance across all the food and beverage outlets,’ it said.

Beneficiary

The Cambodian company expects its casino business to continue benefiting from the growth of visitors to the country. ‘In order to provide convenience for investors and increase investment in Cambodia, the government of Cambodia is now offering threeyear, multiple-entry visas to Chinese, South Korean and Japanese investors,’ the company said. ‘Poised to benefit from this growth is NagaWorld, which is one of the main tourist destinations located in the city centre of Phnom Penh and the entertainment centre for the Mekong region.’

In addition, it foresees the opening of the TSCLK Complex - also known as Naga2 and located next to NagaWorld - will ‘enhance NagaWorld’s appeal to both the mass market and VIP market across the region.’ The filing reads that the TSCLK Complex is undergoing fit-out and is expected to be operational in 2017. For the company’s new casinoresort project in the Russian city of Vladivostok, piling work on the site commenced last year, while an office has been established in the city centre, the company said in the filing, expecting the company to be operational in 2019. ‘The Group believes that its strategy to diversify its business geographically and expand into new casino markets will drive revenue growth in the long term,’ it wrote.

Gaming

Crown green-lighted for Melbourne hotel project The project, building the tallest tower in Australia, is expected to generate AUD2.1 billion-worth of economic benefits Kam Leong kamleong@macaubusienssdaily.com

Australian casino operator Crown Resorts has received the approval from the government to build its Queensbridge Hotel Tower on Melbourne’s Southbank, according to the company’s filing with the Australian Securities Exchange yesterday. The development, to be known as One Queensbridge, is in partnership with Australian-based firm Schivavello group. The 90-storey project will comprise a 6-star hotel providing 388 rooms and 700 apartments in addition to restaurants and lounges at the top of the building.

An announcement released by the Victoria State Government yesterday reads that the project is expected to generate economic benefits for the state of around AUD2.1 billion (MOP12.8 billion/US$1.6 billion). In addition, the partners have agreed to invest up to AUD100 million to develop tourism and other community amenities adjacent to the new project. The tower, to be the tallest in Australia upon completion, will link to the company’s Crown Melbourne integrated resort, the company announcement reads. The casino operator believes the development would ‘assist Melbourne

to meet its future tourist accommodation demands’ given by its current three hotels in Southbank are ‘at over 90 per cent occupancy.’ It adds that the project ‘remains subject to financing and long form agreement between Crown and Schivaello.’ According to previous filings by the company, it would be able to ‘acquire and manage the hotel upon completion. Meanwhile, Victorian Premier Daniel Andrews said in the state announcement that the project would

be “another sign of confidence in Victoria as the state of momentum . . . This is a bold transformation of Melbourne’s skyline that will build on our state’s reputation as the nation’s leader for tourism.” Crown Resorts was once a major shareholder in local gaming corporation Melco Crown Entertainment Ltd. until it announced it would further reduce its stake in the company to 11.2 per cent last December. Last May, Crown held 34.3 per cent stake in the local casino company, the same share of interest as joint venture partner Melco International Development Ltd. chaired by gaming mogul Lawrence Ho Yau Lung.

8 Business Daily Friday, February 10 2017

Greater china Markets

Changing debt risks drive up bond futures volumes Combined monthly turnover in China’s five and 10-year treasury futures doubled in November to RMB820 billion Samuel Shen and John Ruwitch

rading volumes in China’s typically sleepy bond futures market have exploded in recent months as investors seek to hedge the growing risks of rising interest rates and a volatile debt sector. Turnover of five- and 10-year bond futures quadrupled between October and December last year, data from China’s financial futures exchange showed, a massive spurt for a market that has attracted only modest attention since its opening three years ago. Volumes also remained high in January, defying the traditional Lunar New Year lull, as Chinese investors sought to hedge their interest rate exposures and as speculators bet on rising bond yields. “Investors are worried that market rates will trend higher. They’re worried about deleveraging, higher inflation and the risk of further slides in bond prices. They need risk-hedging,” Li Jie, an analyst at brokerage CITIC Futures, said. China re-launched the bond futures market in September 2013, nearly two decades after a multi-billion-yuan trading scandal led to its closure in 1995. Importantly, the market remains

off limits to banks and insurers, the biggest holders of the Chinese bonds underlying the futures, which makes brokerages and fund managers the dominant players in bond futures trade. Since their launch, trading in futures - contracts that allow investors to buy or sell a bond on a specified date at a predetermined price - remained small, with investors finding little need for hedging in a low interest rate environment. That changed in October last year when Beijing signalled a shift toward

tighter monetary policy, shaking markets out of their comfort zone and sending both bond yields and interest rate swaps higher. Many of these risks are new for an economy that has long operated on the assumption that most local debt is effectively guaranteed by the state. Since 2014, China has sought to reduce overall debt levels - almost three times the size of the economy - by allowing select defaults, encouraging securitisation and proposing a debt for equity swap regime for troubled corporates. It has also imposed several regulations to restrain capital flight and ward off massive currency declines. The result has been a turn in the three-year bull run in bond markets with 10-year yields at roughly 3.5 per

cent, up 80 basis points from their October lows.

Bearish bets

For some investors such as hedge fund manager Wang Feng, bond futures are a convenient means to express their bearish bets on bonds and to make money from higher volatility. “In the past, the market was not deep, or liquid enough for us”, said Wang, CEO of hedge fund house Alpha Squared Capital.

Key Points China bond futures turnover quadrupled between Oct and Dec Beijing’s deleveraging campaign boosts risk-hedging demand Speculative trades may help double bond futures trading this year Wang’s firm uses quantitative strategies to trade stocks, commodities and financial derivatives. He anticipates a doubling in bond futures trading turnover this year. Combined monthly turnover in China’s five- and 10-year treasury futures doubled in November to RMB820 billion (US$119.13 billion) from the previous month, before doubling again in December to a record RMB1.77 trillion. Turnover remained high in January, totalling almost RMB1.2 trillion. For now, increasing volumes are enticing for those seeking more robust hedging options. “We will participate more in bond futures trading if this market becomes more actively-traded ... and brings in more liquidity along the way,” said Alpha Squared Capital’s Wang, a former Wall Street trader. Reuters

Corporate

Charity cheque lunch a big hit Who says corporate golf doesn’t pay off? The 10th Macau Business Charity Golf Tournament, battled out on

the manicured greens of Caesars Golf Macau, conjured up three deserving winners last October and, importantly, an equal number of local beneficiaries. The long awaited

cheque lunch presentation, delayed by all the festivities, was just awesome, with a smorgasbord of great food at Aurora, the Altira restaurant that complements a fine dining experience

with great views across the Macau Península. Well done to all - and let’s limber up for the 11th edition, this coming October!

From left to right: Paulo A. Azevedo (Chairman of the Charity Association of Macau Business Readers), Raymond Lei (the host and representing the longest serving partner of the event, Melco Crown Entertainment), Duarte Alves (Caesars Golf Macau), Jennifer Chau Wai I (Associação de Reabilitação ‘Fu Hong’ de Macau), Simon Broad (Suzohapp), Irene Wong and Sarah Rogers (MGM Macau), Stephen Ng (Suzohapp), Kylie Rogers (International Ladies' Club of Macau) and Hetzer Siu (Macau Special Olympics)

Macau Special Olympics National Director Hetzer Siu receives a cheque for MOP100,000 from a representative of the winning team, taking full advantage of the home factor of Caesars Golf Macau

The always glamorous Kylie Rogers receives the first runner up cheque of MOP60,000 on behalf of the International Ladies' Club of Macau, courtesy of the Suzoapp team

Sara Rogers (right) and Irene Wong award the second runner up prize of MOP40,000 - snapped up by the MGM team - to Jennifer Chau Wai I (Fu Hong Association)

Business Daily Friday, February 10 2017 9

Greater China Funding

In Brief

Alibaba’s Ant Financial to raise US$2-US$3 bln in debt Ant is making a concerted push to expand its presence overseas as competition from domestic rival Tencent Holdings Ltd’s Wechat payment system heats up at home Sumeet Chatterjee and Sijia Jiang

China’s most valuable online finance company, Ant Financial, is in early stage talks with banks to raise between US$2-US$3 billion in debt to fund international expansion, a person with direct knowledge of the matter told Reuters yesterday. Banks have made “soft pitches” to help Ant raise funds, most likely through loans, to be used by the company for acquisitions such as that of MoneyGram International Inc as well as for boosting existing investments, the person said. Ant, an affiliate of online shopping giant Alibaba Group , was valued at

about US$60 billion after a US$4.5 billion funding round last April. It is set for an initial public offering, although the firm has not specified a timeframe or listing venue. “It is the market practice for a globalised company like Ant Financial to raise debt in U.S. dollars,” a representative of Ant Financial told Reuters, when contacted for comment, but gave no further details. With 450 million users of its Alipay payment service, Ant is making a concerted push to expand its presence overseas as competition from domestic rival Tencent Holdings Ltd’s Wechat payment system heats up at home.

Last month, the firm said it would acquire U.S. money-transfer company MoneyGram for about US$880 million. It has also invested in Indian mobile payment and e-commerce website Paytm and Thai financial technology firm Ascend Money.

Key Points Banks have made soft pitches to help Ant raise funds Funds to be used for MoneyGram acquisition, boost investments Ant is controlled by Alibaba founder Jack Ma. Technology news website, The Information, earlier reported that Ant was looking to raise over US$3 billion, citing a person familiar with the matter. Reuters

Control

Government to take fingerprints of foreign visitors China is to begin taking fingerprints of all foreign visitors as it steps up security on its borders, the Ministry of Public Security said yesterday. The fingerprinting of foreigners will be introduced at Shenzhen airport in the south from Friday, and it will then be gradually rolled out at other entry points around the country, the ministry said in a statement. All foreign passport holders aged 14-70 will have to give their fingerprints, it said, without saying if other biometric data would also be collected. The ministry said the regulation would strengthen immigration controls and increase efficiency. China Daily

Vice Premier says falsifying data to be punishable China’s vice premier Zhang Gaoli has warned local government officials they will be punished if they submit false economic data, the official China Daily reported yesterday, following a scandal over statistics compiled in a rustbelt province. There has long been scepticism about the reliability of Chinese data, especially as the government has sought to reduce expectations of a protracted slowdown in the world’s second-largest economy. The newspaper quoted Zhang as saying that local governments, especially at provincial level, must improve the credibility of statistics as false data could mislead policymakers.

Borrowing

Nation’s banks start to lower discounts on mortgage rates China Securities Journal says banks in Guangzhou have been told by regulators to tighten screws on mortgage lending China’s banks in some big cities have started to lower discounts on lending rates for fist-time home buyers, the China Securities Journal reported yesterday, joining recent steps to curb financial risks stemming loose credit conditions.

“There are indications that the financial environment for the property market will no longer be loose in 2017” China Securities Journal Since the start of 2017, banks in Beijing have started discounting mortgage rates as much as 10 per cent off the official benchmark rate, reducing from as much as 15 per cent previously, the newspaper said on its website. The current one-year benchmark lending rate set by the People’s Bank of China is at 4.35 per cent, the lending rate for loans up to five years is at 4.75 per cent and loans longer than 5 years is at 4.9 per cent. Few lenders in Beijing and Shanghai still offer mortgage rate discounts

more than 10 per cent off the benchmark, it said. “There are indications that the financial environment for the property market will no longer be loose in 2017,” it said. In the southern city of Guangzhou, the Postal Savings Bank, Industrial Bank and Rural Commercial Bank have also adjusted discounts on mortgage rates to as much as 10 per cent off the benchmark rate from as much as 15 per cent, the paper said. Banks in Guangzhou have been told

Trump letter

by regulators to tighten screws on mortgage lending in light of a ramp up in new loans in January, the paper said. Chinese banks may have doled out RMB2.3 trillion (US$334.88 billion) in new loans in January, the second highest monthly tally ever and building off last year’s record lending, according to a Reuters poll. Chinese banks usually “front load” loans at the start of year in order to maintain their market shares. Last week, the central bank surprised markets by raising interest rates on its reverse repurchase agreements (repos) and standing lending facility (SLF), signalling a tightening policy bias over the coming year. That followed a move in late January to raise rates on its medium-term loan facility (MLF). The central bank hopes higher funding costs could help contain credit growth amid fears of asset bubbles and financial risks, analysts say. Reuters

Authorities attaching great importance to US ties China said yesterday it attached great importance to China-U.S. ties after confirming it had received a letter from U.S. President Donald Trump. Chinese Foreign Ministry spokesman Lu Kang said China commended Trump for sending Lunar New Year greetings to the Chinese people and said cooperation between the two countries was the only option. Trump sent a letter to Chinese President Xi Jinping on Wednesday saying he looked forward to developing a “constructive relationship”, a White House statement said. Graft crackdown

China imprisons former FAW chairman A Chinese court sentenced the former chief of one of the country’s largest stateowned automakers to 11 years and six months in prison for graft, China Central Television reported yesterday. Xu Jianyi, the former chairman and party secretary of China FAW Group Corp, was first charged with corruption in September. A FAW representative declined to provide any immediate comment. The court said it exercised leniency for Xu, who is also the former secretary of China’s ruling Communist Party in the north-eastern province of Jilin, because he had confessed and helped secure the return of the illegal gains.

10 Business Daily Friday, February 10 2017

Greater China

Missiles threat

Beijng’s response to THAAD does not warrant South Korean action South Korea’s Lotte Group said on Wednesday that Chinese authorities had halted construction on a multi-billion dollar real estate project Christine Kim

outh Korea’s finance minister said yesterday China had not taken any retaliatory measures over plans to deploy a U.S. anti-missile system that warranted official action, although South Korea is ready to lodge a formal complaint if needed. Finance Minister Yoo Il-ho was answering questions from legislators on whether China was taking action against South Korean companies for the planned deployment later this year of the U.S. Terminal

High Altitude Area Defence (THAAD) system. China worries that the system’s powerful radar can penetrate its territory and it has objected to the deployment. “If China officially takes unfair action against South Korea we would openly move against it, but as long as China says its moves are not related to THAAD and rather, local measures at home, the South Korean government cannot accuse China of retaliating,” said Yoo. South Korea’s Lotte Group said on Wednesday Chinese authorities

halted construction at a multi-billion dollar real estate project in the north-eastern city of Shenyang after a fire inspection. Yoo said Lotte executives had told the government the Chinese decision to halt the project was not directly related to the deployment of THAAD.

Key Points South Korea cannot accuse China of retaliatory measures - minister Fewer Chinese tourists partly due to THAAD - central bank says South Korea and the United States have said the missile system is only intended to defend against North Korean aggression.

Hours before Yoo’s appearance at parliament, the Bank of Korea said the number of Chinese tourists going to South Korea’s tourist island of Jeju, had fallen 6.7 per cent over the Lunar New Year holiday from last year. The central bank said in a report the fall in arrivals was partly due to China’s “anti-South Korea measures due to the THAAD deployment decision”. Earlier, South Korean officials said they suspected a Chinese decision in December to deny applications from South Korean airlines to expand charter flights between the countries was “indirect” retaliation for South Korea’s deployment of the missile system. China has not commented on South Korea’s suspicions about retaliation. Reuters

M&A

Hong Kong TV broadcaster TVB seeks more details on unbidden suitor The offer is conditional on shareholders voting down a proposed share buyback TVB announced last month Television Broadcasts Ltd., Hong Kong’s dominant free-to-air TV broadcaster, said it received an unsolicited offer for 29.9 per cent of the company from TLG Movie & Entertainment Group and is gathering more information about the prospective buyer. The broadcaster’s shares jumped the most in two weeks in Hong Kong trading yesterday with volume more than triple the 3-month full-day average. A 29.9 per cent stake would be valued at about HK$3.9 billion (US$503 million) based on the stock’s last closing price. Closely held TLG Movie didn’t provide information about its owners, source of funds or “proof of financial soundness,” according to the TVB filing. TLG shareholders are Wai Ho Choi Geoffrey and Dong Wei-tsun Kelvin, also its sole director, according to a filing. Wai is a non-executive director of TLG (HK) Holdings Ltd. TVB said it will seek more information, “including in particular whether the possible purchaser has adequate financial resources” to fulfil the company’s six-year investment plan.

The offer is conditional on shareholders voting down a proposed share buyback TVB announced last month, TLG Movie said in a filing to the Hong Kong exchange Wednesday night. TVB said on Jan. 24 it planned

to spend as much as HK$4.21 billion repurchasing as many as 138 million shares, an HK$30.5 offer price, 15 per cent more than the previous close. The proposed buyback would raise the combined stake of the biggest shareholders including Li Ruigang’s China Media Capital, Chairman Charles Chan Kwok Keung and non-executive director Mona Fong to 43.66 per cent from current 29.9 per cent, TVB said in January.

A China Media Capital representative declined to comment. A call to TLG Movie’s office number in Beijing listed on its website showed the number is no longer in use. Shaw Brothers Hong Kong Ltd. is TVB’s largest shareholder with a 26 per cent stake as of October 2016, according to data compiled by Bloomberg. Shaw Brothers is controlled by China Media Capital, the nation’s first media-focused private equity firm. China Media Capital and its other investment vehicle CMC Holdings have about RMB50 billion (US$7.3 billion) of investments and funds combined, Li said last month in an interview at the World Economic Forum in Davos, Switzerland.

‘TLG Movie & Entertainment Group wants to acquire 29.9 per cent of TVB’ China Media Capital controls TVB and Shaw Brothers Holdings Ltd., the studio behind many Bruce Lee and Jackie Chan movies. The company’s also known for acquiring Star China TV from Rupert Murdoch’s 21st Century Fox Inc., as well as for establishing joint ventures with some of the biggest Hollywood studios such as Dreamworks Animation LLC and Warner Bros. Bloomberg News

Business Daily Friday, February 10 2017 11

Asia Economic strategy

Singapore advisory panel unveils long-term plan Prime Minister said in a letter attached to the report that the government would pursue all of the strategies

key Singapore advisory panel yesterday proposed a 10-year strategy aimed at ensuring annual economic growth of 2-3 per cent, mainly centred on trade partnerships, deepening the workforce’s tech skills and digitalising the economy. It also recommended a review of Singapore’s tax system so that it remains pro-growth and competitive, while also “broad-based, progressive and fair” to adjust to an ageing society, but it did not go into details over how that should be shaped. “Over the next decade, our collective efforts should enable us to grow by 2-3 per cent per year on average, exceeding the performance of most advanced economies,” the Committee on the Future Economy (CFE) said in its report. Singapore has a history of conducting broad reviews of its economic strategy going back to the 1960s and 1970s, and most recently in 2010, with the government following most proposals. The CFE, formed of some government officials, prominent CEOs and specialists in various fields, consulted 9,000 stakeholders, including trade associations, public agencies, unions, companies and students, before

putting forward its proposals. Prime Minister Lee Hsien Loong said in a letter attached to the report that the government accepted the proposed strategies and would pursue all of them. Ministers will provide a response during the 2017 budget speech, due on Feb. 20. Asked about possible specific changes to the tax system, Finance Minister Heng Swee Keat said that will be addressed through a separate

process, including consultations. “We basically have to look ahead and make sure that whatever we do is sustainable,” Heng said at a press briefing on the report yesterday. The report identifies the rise of the Asian middle-class and increased urbanisation as opportunities for its finance, logistics and hub services, as well for a more advanced manufacturing sector. In terms of external policies, the government was advised to resist protectionism and strengthen trade cooperation by reducing tariffs and other barriers. The ASEAN Economic Community and the Beijing-favoured Regional

Lee Hsien Loong, Singapore’s Prime Minister

Comprehensive Economic Partnership are key avenues to pursue such policies. Another option is partnering global financial institutions on regional development projects. Domestically, the report identified cybersecurity skills as of strategic importance for the economy and national defence. It said these could be developed in the workforce during national service training, which is mandatory for male citizens upon leaving school.

“We basically have to look ahead and make sure that whatever we do is sustainable” Lee Hsien Loong, Singapore’s Prime Minister A simplified regulatory framework for venture capital funds and encouraging more private equity firms to be based in Singapore, could help spur the growth of local companies, while the government should provide more targeted assistance, the report said. The committee urged the government to support the development of digital capabilities such as applied data analytics by establishing joint laboratories with industry players. It recommended that the government should keep investing in new international connections such as the planned Kuala LumpurSingapore high speed rail, Changi Airport’s Terminal 5 and the hightech seaport in Tuas. Reuters

Industry

Japan’s machinery orders rebound Orders from the services sector rose 3.5 per cent after a 9.4 per cent decline in November Tetsushi Kajimoto

Japan’s core machinery orders rebounded more than expected in December from the prior month’s fall and are seen rising again this quarter - an encouraging sign of a pick-up in capital expenditure. The Cabinet Office data showed on Thursday core orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, grew 6.7 per cent in December, the fastest month-on-month gain in six months. It followed a 5.1 per cent drop in November and was twice the 3.1 per cent pace forecast in a Reuters poll. Japanese policymakers hope capital spending will help drive growth in the world’s third-largest economy and pull it out of deflation and stagnation. “Capital expenditure is picking up due to a recovery in exports, and it will gather momentum in the coming months as external and domestic economic conditions firm up,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “Policies of U.S. President Donald Trump could pose a risk. If

protectionism causes global trade to contract, that could hit Japan’s domestic capital spending as well.” By sector, core orders from manufacturers rose 1.0 per cent in December, following a 9.8 per cent gain the previous month.

Key Points Dec core orders +6.7 pct m/m vs forecast +3.1 pct Core orders +6.7 pct yr/yr vs forecast +4.6 pct Q4 core orders -0.2 pct, seen +3.3 pct in Q1 Capex seen crucial for sustainable economic growth Orders from the services sector rose 3.5 per cent after a 9.4 per cent decline in November. Manufacturers surveyed by the Cabinet Office forecast that core orders will rise 3.3 per cent in January-March from the previous quarter, after a 0.2 per cent decrease in the final three months of last year.

Compared with a year earlier, core orders, which exclude ships and orders from electric power utilities, grew 6.7 per cent in December, the data showed. The Cabinet Office, however, maintained its assessment of machinery orders, saying the pick-up was stalling. Data out next Monday is likely to show Japan’s economy grew for a fourth straight quarter in October-December led by exports and

capital spending, and the Bank of Japan sees the economy in gradual recovery through fiscal 2018. However, the outlook is far from assured as protectionist talk from U.S. President Donald Trump impairs the outlook for global trade, possibly undermining the economic health of export-reliant Japan and investment by Japanese companies. Trump and Prime Minister Shinzo Abe are scheduled to meet for talks later this week, where trade imbalances and currency valuations are in focus as Trump pursues an “America First” campaign. Reuters

12 Business Daily Friday, February 10 2017

Asia In Brief Outlook

S.Korea says weak consumption may persist South Korea’s finance ministry said yesterday that sluggish consumption in Asia’s fourth-largest economy may continue due to uncertainties stemming from policy changes in the United States and consumer sentiment at home dented by a political scandal. In its monthly assessment of the economy for the prior month, the finance ministry added that the recent recovery in exports was a positive factor for the economy, which had in turn, improved investment. However, slow growth in consumption continues to remain a drag on the overall recovery of South Korea’s economy, the statement said. Real estate

Australian new home sales edge up

Governor comments

Australia’s central bank paints optimistic growth picture Monetary head did cite some areas of concern, including home prices and employment

ustralia’s top central banker laid out an optimistic vision yesterday for the next couple of years, predicting solid economic growth, a further expansion in resource exports and a welcome pickup in inflation. The upbeat take from Reserve Bank of Australia (RBA) Governor Philip Lowe underlined why financial markets are pricing in only a slim chance of another cut in interest rates following two policy easings last year. “Over the next couple of years we expect GDP growth to be around the 3 per cent mark,” Lowe told a dinner

of local and international investors. That would be a step up from the year to September when a shock contraction in the third quarter saw growth slow to just 1.8 per cent. “This largely reflected a confluence of temporary factors,” said Lowe. “We expect that in the December quarter, the economy returned to reasonable growth.” The economy has been held back in part by the unwinding of a massive boom in mining investment, but Lowe said the RBA estimated that this process was now around 90 per cent over. Instead, exports of liquefied natural

Sales of new homes in Australia edged higher in December, a solid result given it built upon a sharp rebound the month before, an industry survey reported yesterday. The Housing Industry Association (HIA) said its survey of large-volume builders showed new home sales rose a seasonally adjusted 0.2 per cent in December from November, when they jumped 6.1 per cent. Sales of houses dipped 1.6 per cent, while apartment sales climbed 6.4 per cent. “The strong finish to 2016 for new home sales admittedly follows a very weak month in October,” said HIA chief economist Harley Dale.

gas were expected to ramp up sharply over the next two years as production came on stream while Australia’s other major commodities were also commanding higher prices. Inflation was still low around 1.5 per cent but likely to rise gradually toward the RBA’s target band of 2 to 3 per cent. Lowe did cite some areas of concern, including home prices and employment, as well as longerterm challenges related to infrastructure, government finances and productivity. Housing was a “complex picture”, Lowe said, with prices rising strongly in Sydney and Melbourne but falling in some other places. Investor demand for property looked to have picked up, even as a large amount of new supply was set to come onto the market. Lowe noted that high levels of household debt added more risk to the mix, and welcomed efforts by banks to tighten their lending standards on mortgages. The labour market also bore close watching, he added, with employment growth having disappointed last year. The level of job vacancies held out the hope of an improvement this year, but likely not enough to bring the jobless rate down. For the longer run, Lowe urged more investment in public infrastructure while also reiterating the need to repair government finances. He also aimed an oblique blow at the rise of protectionism globally, noting Australia had benefited greatly from the rise of free trade and any retreat would damage the country’s standard of living. Reuters

Chip business stake

Toshiba receives bids as high as US$3.6 bln Toshiba Corp has received bids ranging from 200 billion yen to as much as 400 billion yen (US$1.83.6 billion) for a 19.9 per cent stake in its flash memory business, a person directly involved in the deal told Reuters yesterday. The Japanese conglomerate is seeking to raise around 300 billion yen from the sale, said the person, who was not authorised to speak with media and so declined to be identified. A sale at that price would help Toshiba offset a multi-billion dollar write-down on its U.S. nuclear power business, which investors worry could wipe out shareholder equity. Households

Monetary policy

Philippines keeps rates steady on strong growth The economy grew faster than expected at the end of last year Enrico Dela Cruz and Neil Jerome Morales

The Philippine central bank held its benchmark interest rate steady yesterday with the economy expected to remain in a sweet spot of strong growth and manageable inflation. The policy-making Monetary Board voted to maintain the overnight borrowing rate at 3.0 per cent,

Key Points

Korean borrowing slows down

C.bank hold rates but raises 2017, 2018 CPI forecasts

Bank lending to South Korean households rose 0.1 trillion won (US$87.14 million) in January, central bank data showed yesterday, marking the smallest monthly net rise since borrowing fell 2.2 trillion won in January 2014. In December, households borrowed a net 3.4 trillion won from banks, revised down from a 3.5 trillion won rise reported earlier. The Bank of Korea said the modest gain in January was due to seasonal reasons, as the cold winter weather at the start of the year usually results in fewer real estate transactions. The monthly data is not adjusted for seasonal patterns.

C.bank says economy to stay robust

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in oil prices and weaker peso. The higher projections bolstered expectations the central bank would raise its benchmark interest rate this year to keep price pressures in check. “We still expect the BSP to raise its interest rate corridor by third quarter,” said Eugenia Victorino, economist at ANZ in Singapore. “We expect inflation to remain on an upward trend initially...Meanwhile robust domestic demand, coupled with the government’ push for infrastructure spending, will likely

push inflation higher throughout 2017,” Victorino added. The Philippine economy grew faster than expected at the end of last year on robust domestic demand and infrastructure spending, and is also seeing rising fuel costs. The central bank has not tinkered with interest rates since it raised the benchmark rate by 25 basis points in September 2014, as inflation has remained manageable despite strong growth momentum. But it set the main rate at 3.0 per cent when it moved to an interest rate corridor system in June to make policy transmission faster and more efficient. Reuters

Some economists expect c.bank to hike rates this yr as predicted by 10 economists in a Reuters poll. “While the global economic environment has become more challenging due to expected shifts in macroeconomic policies in advanced economies...domestic economic activity is expected to stay firm,” central bank officer-in-charge Nestor Espenilla said. However, it raised its inflation forecasts for this year to 3.5 per cent from 3.3 per cent, and for next year to 3.1 from 3.0 per cent, reflecting increases Founder & Publisher Paulo A. Azevedo, pazevedo@macaubusinessdaily.com Editorial Council Paulo A. Azevedo; José I. Duarte; Mandy Kuok Newsdesk Mike Armstrong; Óscar Guijarro; Kam Leong; Nelson Moura; Annie Lao; Kelsey Wilhelm; Matthew Potger; Cecilia U; Sheyla Zandonai Group Senior Analyst José I. Duarte Design Aivi N. Remulla Photography Cheong Kam Ka, Ruka Borges, Gonçalo Lobo Pinheiro, António Mil-Homens, Carmo Correia Contributors Albano Martins; James Chu; João Francisco Pinto; José Carlos Matias; Larry So; Pedro Cortés; Ricardo Siu; Rose N. Lai; Zen Udani Assistant to the Publisher Lu Yang, lu.yang@‌projectasiacorp.‌com Office Manager Elsa Vong, elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd. Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 E-mail newsdesk@macaubusinessdaily.com Advertising advertising@‌macaubusinessdaily.‌com Subscriptions sub@‌macaubusinessdaily.‌com Online www.‌macaubusinessdaily.com

Business Daily Friday, February 10 2017 13

Asia Finances improvement

Moody’s upgrades Indonesia outlook to positive They reaffirmed its rating of Baa3 for Indonesia, its lowest notch for investment grade debt Moody’s Investors Service upgraded its credit outlook on Indonesia to “positive” from “stable”, praising its progress on reforms and its efforts to keep finances under control despite falling prices for its main commodity exports. Moody’s upgrade late on Wednesday follows a similar move by Fitch in December, and comes at a welcome time for Indonesia’s policymakers as they seek to attract and retain more foreign investment as emerging market assets globally come under stress. Outlook upgrades typically mean a country is closer to a ratings upgrade, which would allow it to sell government bonds at lower rates and attract more foreign investors. “The positive outlooks from Moody’s and Fitch suggest Indonesia’s sovereign credit rating is on an uptrend. We expect the factors cited by Moody’s...to continue and ultimately translate into a ratings upgrade,” economists at Nomura said in a note. Moody’s reaffirmed its rating of Baa3 for Indonesia, its lowest notch for investment grade debt, while noting it is now less vulnerable to external shocks and has a lengthening track record of economic stability

and fiscal discipline. Fitch has an equivalent rating of BBB-. S&P is the only major global ratings agency which still rates debt of Southeast Asia’s largest economy below investment grade, but analysts think it may soon join in. Some major institutional investors require investment grade ratings from all three agencies to buy a country’s debt. “We think an upgrade by S&P, which still has its rating one notch below investment grade but with a positive outlook, is next,” Nomura said.

“The key criteria S&P cited to support an upgrade in our view are improving, including the quality of fiscal spending, as subsidies are further reduced while the infrastructure budget is increased further. NPLs of banks have stabilised and will likely decline gradually, partly as commodity prices have improved.” Indonesia’s central bank Governor Agus Martowardojo said in a statement that the upgrade showed international recognition of the country’s “success in maintaining macroeconomic and financial stability that create a conducive environment for sustainable growth” amid domestic and global challenges. The governor said on Wednesday that Indonesia’s current account

deficit shrank to 0.8 percent of gross domestic product (GDP) in the fourth quarter of 2016, its smallest reading in five years, though he noted it may widen again in 2017.

“We expect the factors cited by Moody’s... to continue and ultimately translate into a ratings upgrade” Economists at Nomura note The country’s foreign exchange reserves at the end of January was also at the highest since August 2011, Thomson Reuters data showed. Scenaider Siahaan, director of borrowing strategy at the finance ministry, said the positive outlook means efforts for structural reforms “have started to show”. Moody’s said it would upgrade Indonesia’s rating if the government reduces its reliance on external debt, while at the same time strengthening its financial institutions, among other criteria. But the rating agency warned it could lower the outlook back to stable if reform efforts unravel or if the government is unable to boost revenues. Reuters

Monetary stance

Bank of Japan’s Nakaso says economy still needs monetary support Deputy Governor stressed that the central bank priority now was to achieve its inflation target through aggressive monetary easing Leika Kihara

Bank of Japan Deputy Governor Hiroshi Nakaso said Japan’s economy still needs massive monetary support given overseas uncertainties and stubbornly weak price growth, shrugging off market speculation it may raise its bond yield target this year. He also said Group of 20 nations recognise that Japan abides by a joint agreement to refrain from using monetary policy to manipulate exchange-rates, arguing against criticism from U.S. President Donald Trump that Japan was using ultra-easy policy to weaken the yen and give its exports an unfair trade advantage. “The BOJ guides monetary policy solely for the purpose of achieving its inflation target at the earliest date possible. It does not target exchange rates,” Nakaso told reporters on Thursday, when asked about Trump’s accusation.

Nakaso said that while Japan’s economy was recovering moderately, risks to the outlook were skewed to the downside due to uncertainty over U.S. policies and weak price growth at home. “Some market players, taking into account recent rises in overseas interest rates, argue that the BOJ might consider raising its long-term rate target,” Nakaso said in a speech to business leaders in Kochi, western Japan. “But the momentum toward achieving our price target, while sustained, isn’t sufficient. There’s still a long way to go to achieve our target,” he said. “I believe it’s most important that the BOJ persistently pursue powerful monetary easing.”

Easing bias intact

Doubts over the BOJ’s resolve to keep Japanese government bond yields from tracking global long-term interest rates drove the 10-year JGB yield to a one-year high last week,

Bank of Japan Deputy Governor Hiroshi Nakaso

forcing the bank to conduct a special bond buying operation. The rise in long-term rates challenged the BOJ’s commitment to its “yield curve control” scheme introduced in September, under which it guides the benchmark yield around zero per cent in a bid to accelerate inflation to its 2 per cent target. Nakaso said the conditions for raising the BOJ’s yield targets would be for long-term interest rates to rise in sympathy with an improvement in the economy. He stressed, however, that the BOJ’s priority now was to achieve its inflation target through aggressive monetary easing. “The BOJ is ready to buy sufficient and necessary amounts of government bonds to meet its yield targets,” Nakaso said, adding the current shape of Japan’s bond yield curve was consistent with what the BOJ deemed appropriate.

The BOJ revamped its policy framework in September, shifting its target to interest rates from the pace of money printing after three years of huge asset purchases failed to accelerate inflation to target. While the economy is showing signs of life, core consumer prices in December fell 0.2 per cent from a year earlier, marking the 10th straight month of declines and underscoring the difficulty of hitting the BOJ’s price goal. Adding to the gloom, Japanese policymakers were shocked by Trump’s accusation that Tokyo was using “money supply” for currency devaluation - a sign his criticism could distract the BOJ from its years-long efforts to revitalise the economy. Currency policy may be discussed when Japanese Prime Minister Shinzo Abe visits the United States for a bilateral meeting with Trump later this week. But Japan will push back firmly on any attempts by Trump’s administration to meddle with its independence on setting currency and monetary policies, say sources familiar with the deliberations in Tokyo. Reuters

14 Business Daily Friday, February 10 2017

International In Brief Currency tensions

Germany’s trade surplus sets record Germany’s trade surplus climbed to a record high in 2016, official data showed yesterday, days after U.S. President Donald Trump’s top trade adviser accused Berlin of exploiting a “grossly undervalued” euro to its advantage. The surplus is likely to worsen tension between Washington and Berlin, which is trying to safeguard global free trade this year during its presidency of the Group of 20 leading economies, adopting the motto “Shaping an Interconnected World”. Germany’s trade surplus for 2016 rose to 252.9 billion euros (US$270.05 billion), surpassing the previous high of 244.3 billion euros in 2015, the Federal Statistics Office said. Circular economy

Portugal President on two-day trip to Madrid

Employment

U.S. jobless claims fall to near 43-year low A Labour Department analyst said there were no special factors influencing last week’s data Lucia Mutikani

he number of Americans filing for unemployment benefits unexpectedly fell last week to near a 43-year low, amid a further tightening of the labour market that could eventually spur faster wage growth. Initial claims for state unemployment benefits dropped 12,000 to a seasonally adjusted 234,000 for the week ended Feb. 4, the Labor Department said yesterday. That left claims just shy of the 43-year low of 233,000 touched in early November. Claims have now remained below 300,000, a threshold associated with a strong labour market, for 101 straight weeks. That is the longest

stretch since 1970, when the labour market was much smaller. The labour market is at or close to full employment, with the unemployment rate at 4.8 per cent. It hit a more than nine-year low of 4.6 per cent in November. The economy created 227,000 jobs in January.

Key Points Weekly jobless claims fall 12,000 Four-week average of claims lowest since 1973 Prices of U.S. Treasuries extended losses after the data. U.S. stock index futures were trading slightly higher as was the dollar against a basket of currencies.

Further tightening in labour market conditions could boost wage growth, which has remained stubbornly sluggish despite anecdotal evidence of more companies struggling to find qualified workers. Lacklustre wage growth, if sustained, could hurt consumer spending and crimp economic growth. Economists polled by Reuters had forecast first-time applications for jobless benefits rising to 250,000 in the latest week. A Labour Department analyst said there were no special factors influencing last week’s data and no states had been estimated. The four-week moving average of claims, considered a better measure of labour market trends as it irons out week-to-week volatility, fell 3,750 to 244,250 last week, the lowest level since November 1973. The claims report also showed the number of people still receiving benefits after an initial week of aid increased 15,000 to 2.08 million in the week ended Jan. 28. The four-week average of the so-called continuing claims fell 3,750 to 2.08 million. Reuters

Portugal’s president is beginning a two-day trip to Madrid yesterday to participate on Friday in a forum of COTEC Europa to promote the transition to a “Circular Economy”. This evening President Marcelo Rebelo de Sousa is to be the guest of honour at a dinner with the business community organised by the Portuguese-Spanish Chamber of Commerce at a hotel in the Spanish capital. At the COTEC Europa meeting on Friday where he will be with the heads of state of Spain and Italy too, there will be businessmen from the three countries along with the European Research, Science and Innovation Commissioner, Carlos Moedas. Legislation

Qatar approves draft for domestic workers Qatar has approved a draft law which would provide legal protection for tens of thousands of female domestic workers for the first time, according to state media. The law is expected to specify how many hours staff such as nannies, drivers and gardeners should work per week, how many days holiday they receive annually and how they are paid, reported the Qatar News Agency (QNA). Legislation has been agreed by the cabinet, said QNA in a statement posted on Wednesday. Markets

New BCP shares admitted for trading The new BCP bank shares that were issued following the capital increase are to start being traded on the Portuguese bourse yesterday. The 14,169,365,580 new Banco Comercial Português de (BCP) shares are to be admitted on the Lisbon bourse with an issue price of €0.094 a share. BCP concluded a €1.3 billion euro capital increase last week, which was fully subscribed. The capital increase was designed to enable the bank to reimburse the €700 million in state aid in full and to bolster the bank’s capital ratios.

Environment

EU plans more legal action against emissions cheating The draft law will now go to a plenary vote next month. Alissa de Carbonnel

The European Union plans more legal action soon against governments that have failed to police emissions test cheating by carmakers in the wake of the Volkswagen diesel scandal, a top official said yesterday. In a bid to prevent a rerun of the VW scandal, the European Commission has proposed an overhaul of rules on how vehicles are licensed and tested across the bloc. A draft bill, which would bolster EU oversight, won the backing of the European Parliament’s internal market committee in a vote yesterday. But it still faces a tough battle to be approved by member states, with EU industry Commissioner Elzbieta Bienkowska accusing governments of obstructing the bloc’s efforts to rein in what it sees as wayward behaviour by the car industry. “Member states really failed to enforce the law,” Bienkowska told the EU lawmakers. “I feel they are still playing for time.” Amid mounting frustration over what Brussels sees as governments colluding with carmakers, it began legal cases against Germany, Britain and five other EU members in December.

Bienkowska said there were a lot more cases to come in the coming months. “But these are very limited tools,” she added. “We need a new type approval system.”

Fixing the system

The draft law, which will tackle conflicts of interest when national regulators inspect and certify cars made by their own domestic manufacturers, will now go to a plenary vote next month. But some countries have balked at the reforms. “There are elements of this that are going to be very tough,” Conservative lawmaker Daniel Dalton, who is steering the bill through Parliament, told Reuters. “But member states can’t act in isolation.” After VW admitted to using software to mask the levels of health-harming emissions from some of its diesel cars, several European countries ran their own investigations. They revealed on-road nitrogen oxide (NOx) emissions as high as 15 times the regulatory limits, as well as the use of defeat devices to reduce exhaust treatment. The use of such devices is illegal under EU law, but car manufacturers have invoked an EU legal loophole that allows them to use software to

scale back emissions controls when necessary to protect car engines. All deny breaking the law. Seeking to close this loophole, the Commission issued guidance last month on how members of the 28-nation bloc should apply the rules. Under the reforms, Brussels would get powers to carry out vehicle spotchecks and levy fines, while national authorities would be able to peer-review each other’s decisions.

Key Points EU lawmakers back overhaul of new vehicle licensing Reforms seek to avoid repeat of VW scandal EU says governments protecting carmakers Currently, vehicles can only be recalled by the country that licensed them, although they can be sold across the bloc. The bill also seeks to break cosy relations between carmakers and the firms they hire to test new vehicles by introducing a non-direct payment mechanism. Lawmakers also call for on-road checks on a minimum of 20 per cent of car models per year across Europe. Reuters

Business Daily Friday, February 10 2017 15

Opinion

Ant raising debt is a way to sidestep valuation question Lusa Tim Culpan a Bloomberg Gadfly columnist

sst. Are you a fast-growing start-up that needs to raise money without showing your hand in the cutthroat valuation game? Have I got a deal for you! Raise debt. That’s exactly what China’s Ant Financial is doing, and big time. Alibaba Group Holding Ltd.’s payments affiliate is looking to borrow more than US$3 billion through bank loans or bonds, The Information reported yesterday, citing a person it didn’t name. Ant, which operates Alibaba’s Alipay payments service, is the world’s secondbiggest unicorn, with a US$60 billion equity valuation that trails only Uber’s US$62.5 billion, according to TechCrunch. That estimate is almost a year old, though, after an April fundraising round. It may be worth less, or even a lot more, as CLSA Ltd. believes. Either way, in these crazy times of unicorn markdowns -I n d i a’ s O l a a n d Snapdeal come to m i n d -- th e r e’ s no need to risk a down round if it billion US$ Amount sought can be avoided. At by Ant the very least, debt allows a company to get cash without escalating an already heady price tag that will make a future IPO harder to sell. Xiaomi Corp., the Chinese smartphone and gadgets maker, was valued at US$45 billion in an April 2015 funding round and has raised total equity of US$1.1 billion, according to TechCrunch. Yet it’s also taken out at least US$1 billion in loans, according to Bloomberg News. The debt has helped it avoid tapping equity investors in the past two years just as that massive valuation comes into doubt. To be sure, avoiding being put under an appraisal microscope isn’t the only reason for a start-up to turn to loans or bonds. In fact, it needn’t even be the main reason, especially when debt is cheap and freely available. It is a convenient alternative, though, and may be relatively quick to put together compared with the effort of negotiating equity. Borrowing isn’t without its problems. Music-streaming company Spotify AB is one such example. As fellow Gadfly Leila Abboud outlined this week, the company sold convertible debt a year ago with strict terms that increase the interest rate it pays by 1 per centage point every six months until the company holds an IPO, topping out at an amazing 10 per cent. For Ant, which has already raised US$4.5 billion through equity, a further US$3 billion in debt might give it a lot of runway and plenty of time to avoid the question of how much it’s really worth. Bloomberg Gadfly

Brexit in a brave new world

hen it comes to bilateral trade, gains and losses are distributed asymmetrically between the larger and the smaller economy. In the best of times, that would be bad news for the United Kingdom as it seeks new trade deals with the European Union and others. And these are not the best of times. Economic theory predicts that erecting new trade barriers hurts both sides. But economic principles also suggest that the larger of the two economies is likely to lose less. In the case of a tariff, for example, lower demand from the larger economy will tend to push down the prices of the goods that it imports. The smaller economy is unlikely to have enough of an impact on overall demand for the goods it imports, and thus on their prices. The advantage of the larger economy is even greater when it comes to non-tariff barriers, which often result from differences in regulations and standards among trading countries. In most cases, the smaller country must simply accept the larger one’s rules. Given this, Brexiteers are wrong to claim that the UK, as a net importer, will be in a strong position in trade negotiations with the EU. What counts is relative size, not net trade flows. Multiple studies confirm this, concluding that the UK will bear the lion’s share of the costs of Brexit. If the UK and the EU agree to a new trade relationship based on World Trade Organization (WTO) rules, the studies predict, the UK will lose about €110 billion ($119 billion), whereas the EU will lose only about €50 billion. Given that the EU’s economy is about five times larger than that of the UK, this implies that the loss for the UK, as a share of GDP, would be about ten times larger. If no deal is reached, the same imbalance will emerge, only the costs to the UK will be even larger – a reality that British Prime Minister Theresa May, declaring that the UK will walk away from negotiations that don’t go its way, refuses to recognize. Notwithstanding political rhetoric, a “bad deal” is actually better for the UK than no deal at all. But the talks with the EU are only the beginning. The UK will also have to negotiate trade deals with other partners, including the world’s two largest economies: the United States and China. At first glance, the negotiations with the US may seem like nothing to worry about. After all, President Donald Trump has indicated that the UK would be “first in line” for a US trade deal. Moreover, he has praised Brexit, even encouraging other EU member states to follow the UK out of the bloc.

“

Daniel Gros Director of the Centre for European Policy Studies

But Trump has also pledged to put “America first” in all deals it makes and actions it takes, particularly regarding trade. This raises doubts about whether Trump will be willing to open US markets in the few areas where the UK can still compete, like the aerospace and automotive industries. Even if he does, he is not likely to do it for free. At the very least, the UK will have to adhere to US standards and regulations. May knows that, to get a decent deal out of Trump, she has to play his game. So when Trump signed an executive order to bar anyone from seven Muslim-majority countries from entering the US for 90 days, and to close the door to refugees from Syria indefinitely, she avoided any strong statements. By contrast, her EU counterparts, confident in the size and strength of the EU as a trading bloc, were uninhibited in condemning the move. This highlights a challenge that the Brexiteers did not anticipate. They expected Brexit to occur against the backdrop of the rulesbased multilateral trading system. With global trading frameworks like the WTO in place, it seemed that even the worst-case scenario for Britain wasn’t all that bad, and, therefore, that the consequences of leaving the EU would be minor. But the world has changed considerably since then. Trump’s rise to power was fuelled by promises to throw off the fetters of the WTO – indeed, of all international organizations – and to take unilateral decisions based on America’s own interests. Even trade negotiations with the EU seem too multilateral to some of Trump’s cohorts, because they involve 27 member countries. Without the US on board, the rules-based international system would be far less secure – not least because others might soon follow Trump’s example, choosing bilateral deal making over multilateral cooperation. As the world trading system became less open, everyone would lose, but not equally. The US, China, and the EU (provided it survives) would do far better than smaller economies, like the UK. It remains to be seen whether the US, with its economic might, can afford Trump’s protectionist approach. But it seems clear that the UK will incur some heavy costs during the Brexit process. If more countries follow Trump’s lead, and the rules-based global system continues to deteriorate, those costs will only grow. Project Syndicate

The US, China, and the EU (provided it survives) would do far better than smaller economies, like the UK

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16 Business Daily Friday, February 10 2017

Closing Ministry of Commerce

China’s outbound investment to slow in 2017

China, particularly from Chinese state firms, said MOC spokesperson Sun Jiwen China’s outbound direct investment (ODI) at a press briefing. will steadily slow, but be of better quality The ministry will support authentic, legal in 2017, the Ministry of Commerce (MOC) outbound investment by capable and qualified Chinese companies, Sun told said yesterday. reporters. Despite rapid ODI growth in 2016, He said measures will be taken to prevent Chinese companies face increased risks in outbound investment, regulate the risks in investing overseas due to market and encourage investment in the fluctuations on international financial real economy and emerging industries. markets, uncertainties in other country’s economic policy and restrictions by some China’s non-financial ODI soared 44.1 per developed countries on investment from cent US$170 billion in 2016. Xinhua

Cryptocurrency

Mainland bitcoin exchanges to strengthen customer scrutiny BTCC, Huobi and OkCoin last month stopped margin lending and introduced trading fees after the PBOC launched checks into them Brenda Goh

hina’s three largest bitcoin exchanges said yesterday they will strengthen oversight of customers’ identities and sources of funds, in the latest shift since the Chinese central bank stepped up its scrutiny of the industry. BTCC, OkCoin and Huobi said in identical statements on their websites that they wanted to curb market speculation and prevent activities such as currency exchange through bitcoin, which they warned was not issued by monetary authorities and carried high risk. Their move comes after China’s central bank said it called nine of the country’s smaller bitcoin exchanges in to a Wednesday meeting to discuss risks in the bitcoin market, and warned them that they risk closure if they seriously violated regulations or took part in activities such as margin lending. Beijing signalled that it was keeping a closer eye on the bitcoin industry last month by launching checks into BTCC, Huobi and OkCoin, amid growing government efforts to stem capital outflows and relieve pressure on China’s currency, the yuan. While the yuan weakened 6.6 per cent against the dollar last year, its worst performance since 1994, the bitcoin price has soared to near-record highs.

That, and the relative anonymity the digital currency offers, has prompted some to believe bitcoin has become an attractive option for tech-savvy Chinese to hedge against the yuan and skirt rules limiting how much foreign exchange individuals can buy each year. BTCC, Huobi and OkCoin last month stopped margin lending and introduced trading fees after the PBOC launched checks into them. In their yesterday statements, they also said they may freeze assets or limit trading by users who were found to flout the rules. Their statements

also contained links to documents published by China’s banking regulator that warned investors about market risks. News of meetings between the various exchanges and the PBOC and other government agencies has caused the bitcoin price to swing wildly. On Wednesday, the price fell from a one-month high after sources at bitcoin exchanges in China said the PBOC had summoned some exchanges to a closed-door meeting. The price of bitcoin fell 1.23 per cent on the Huobi exchange yesterday from the previous day, trading at RMB7,458, equivalent to around US$1,086. The PBOC said the nine exchanges involved in the Wednesday meeting were CHBTC, BtcTrade, HaoBTC, Yunbi, Yuanbao, BTC100, Jubi,

BitBays and Dahonghuo. Industry insiders said the majority of these exchanges allowed other cryptocurrencies to be traded on their platforms besides bitcoin.

Key Points BTCC, Huobi, OkCoin warn that bitcoin trading risky Move to stop money laundering, currency exchange China central bank met smaller exchanges BtcTrade, Bitbays and BTC100 declined to comment on the meeting. Reuters was unable to immediately reach the other six platforms for comment. Reuters

Fitch ratings

Exporters

Trial

Number of countries with top debt ratings down in 2016

Chinese suffers more trade India applies to extradite remedy probes from U.S. in 2016 Kingfisher tycoon Mallya from UK

The number of countries with a top-notch sovereign credit rating fell to the lowest level in 13 years last year, the international rating agency Fitch said yesterday. “The number of Fitch-rated sovereigns with ‘AAA’ ratings is at its lowest level since 2003 and is expected to remain unchanged over the next two years,” Fitch said in a statement. “Eleven countries have ‘AAA’ status, compared with an all-time high of 16 during 2004 to 2009, reflecting the longer term impact of the global financial crisis,” the agency said. The 11 countries with the most stable ratings are: Australia, Canada, Denmark, Germany, Luxembourg, the Netherlands, Norway, Singapore, Sweden, Switzerland and the United States. Fitch said that all of the 11 countries had a “stable” outlook, “suggesting we do not anticipate downgrades in the coming 12 to 24 months.” At the same time, no country with an ‘AA+’ rating -- the next step down from triple-A -- had a “Positive Outlook, suggesting upgrades to ‘AAA’ are unlikely over the same time-frame.” Japan was the first sovereign to lose its triple-A rating in 1998, followed by another six in the aftermath of the global financial crisis. AFP

Chinese exporters have suffered a total of 20 trade remedy probes initiated by the United States in 2016, an 81.1 per cent increase year on year, the Ministry of Commerce (MOC) said yesterday. The 11 anti-dumping and nine anti-subsidy investigations involved US$3.7 billion, up 131 per cent from 2015, the MOC said. Recently, the U.S. published a series of trade remedy rulings involving Chinese products, including truck and bus tyres as well as imports of Chinese stainless steel sheet and strip. China suffered 140 trade remedy measures from the United States as of the end of 2016, including 102 anti-dumping and 38 anti-subsidy measures, according to MOC data. “Given that the trade scale between China and the U.S. is huge, it is normal that trade frictions will occur,” said Wang Hejun, head of the MOC’s trade remedy and investigation bureau. “However, it is noticeable that the U.S. is imposing high taxes on Chinese imports and many of its measures are against WTO rules.” Last year, Chinese exporters suffered a record 119 trade remedy probes, initiated by 27 countries or regions, a 36.8 per cent increase year on year. Xinhua

India said yesterday it had applied to Britain to extradite Vijay Mallya to face trial after the liquor and aviation tycoon was charged with conspiracy and fraud over a loan to his defunct Kingfisher Airlines. Mallya moved to Britain last March after banks sued to recover about US$1.4 billion the Indian authorities say is owed by Kingfisher. He has dismissed the charges against him, saying on Jan. 28 that “not one rupee was misused”. Mallya’s press representative was not immediately available for comment on the Indian extradition request. Earlier attempts by India to get Mallya, the head of the Force India Formula One team and one-time billionaire, deported have failed. The new push comes after Mallya was charged in absentia last month by the Central Bureau of Investigation - along with nine former executives from the failed Kingfisher Airlines and IDBI Bank Ltd - over a 9 billion rupee (US$135 million) loan. “We have today handed over the request for the extradition of Mr Vijay Vittal Mallya, as received from the CBI, to the UK High Commission in New Delhi,” Vikas Swarup, spokesman for the Ministry of External Affairs, told a news conference. Reuters