Currency sales in China moderate during January Forex Page 10
Monday, February 20 2017 Year V Nr. 1237 MOP 6.00 Publisher Paulo A. Azevedo Closing Editor Kelsey Wilhelm Gaming
Finance
Legend Palace to open its doors February 27 Page 8
www.macaubusinessdaily.com
Profit
Share of international business in banking sector decreases Page 6
Health alert
Shun Tak issues profit warning Page 6
Consumption in the Mainland not affected by birdflu outbreak Page 9
Property boom
Real estate
Transactions on building units and parking spaces purchased and sold in 2016 surged 43.5 pct y-o-y, hitting MOP74.1 bln. Residential units made up the majority, with over 10,000 transactions, seeing a 70 pct increase, while value was up 75 pct y-o-y. Completed residential units stole the stage, valued at MOP42.5 bln. Coloane remained the most expensive for residential at MOP110,000 per square metre on average. Page 2
Passing the buck
The potion for success
Diversity is key to making your business stand out in a highly competitive industry, says Chan Kam Tat, manager of Healthy Life Pharmacy. With four stores opened in just five years, and over MOP10 mln in assets, the group’s secret is focusing on the local market and getting strong rebates from suppliers, in order to avoid the economy’s ups and downs.
Court After-hour massages, allegedly illegitimate businesses being run out of rooms rented by the Public Prosecutions Office, contract values inflated between 3 pct and 50 pct depending on the type, and unverified services that were still paid for... So continues the trial of the former Prosecutor-general Ho Chio Meng. Page 3
Malaysian police investigating North Korean suspects
Interview | SMEs Pages 4 & 5
HK Hang Seng Index February 17, 2017
24,033.74 -73.96 (+0.31%) Worst Performers
Hengan International Group
+5.46%
China Petroleum & Chemical
+0.83%
Bank of East Asia Ltd/The
-4.06%
Bank of China Ltd
-1.99%
AIA Group Ltd
+3.38%
Cheung Kong Infrastructure
+0.79%
Lenovo Group Ltd
-3.69%
Sands China Ltd
-1.97%
MTR Corp Ltd
+1.13%
Cathay Pacific Airways Ltd
+0.72%
CITIC Ltd
-3.36%
Want Want China Holdings
-1.96%
Hang Lung Properties Ltd
+1.02%
CK Hutchison Holdings Ltd
+0.54%
China Overseas Land &
-2.48%
China Merchants Port Hold-
-1.60%
Hong Kong & China Gas Co
+0.95%
China Mengniu Dairy Co Ltd
+0.53%
Bank of Communications
-2.39%
China Construction Bank
-1.55%
19° 21° 19° 21° 17° 22° 14° 20° 12° 16° Today
Source: Bloomberg
Best Performers
Tue
Wed
I SSN 2226-8294
Thu
Fri
Source: AccuWeather
Kim Jong-Nam murder Malaysia is seeking four North Korean suspects who fled the Southeast Asian nation on the day Kim Jong-Nam was murdered. Police have detained four other suspects and are holding them for seven days.Page 16
2 Business Daily Monday, February 20 2017
Macau Real estate
Property transaction values surge in 2016 Last year, housing transaction values reached a total of MOP58.8 billion, accounting for nearly 80 per cent of the total Kam Leong kamleong@macaubusinessdaily.com
T
he Court of Final Appeal has turned down an appeal filed by a developer attempting to suspend the contents of a government dispatch announcing the invalidity of the developer’s land concession over a land lot near Rua de Choi Long in Taipa last April. The city saw a total of 14,108
building units and parking spaces purchased and sold for the whole year of 2016, with the overall sales value surging by 43.5 per cent year-on-year to MOP74.1 billion (US$9.3 billion), latest official data from the Statistic and Census Service (DSEC) reveals. During the year, there were a total of 10,170 transactions of residential units amounting to MOP58.76 billion, with the number of units transacted soaring by 70.2
per cent and the value by 75.7 per cent, year-on-year. Of total home transactions, 8,460 were for completed units, valued at MOP42.5 billion, while there were 1,710 presales of residential units totalling MOP16.3 billion. Meanwhile, some other 3,013 parking space transactions were recorded last year, with the total value reaching MOP4.19 billion. In addition, 555 transactions of shops were recorded during the year, valued at MOP7.82 billion, and 197 office units at MOP1.32 billion. Nevertheless, only 84 industrial units were purchased and sold during the whole of 2016, with the total value amounting to MOP1.07 billion.
Prices
In terms of pricing, the average price per square metre of usable area of residential units amounted to some MOP86,342 in 2016, a slight decrease of 0.6 per cent year-on-year. In particular, the average prices of completed home units went up by 0.9 per cent year-on-year to MOP78,145 per square metre. However, that of pre-sale residential units slid by 1 per cent year-on-year to MOP118,304 per square metre. By area, average housing prices in Coloane were the most expensive last year, amounting to MOP110,761 per square metre, up by 6.5 per cent Interpellation
year-on-year. Home units in Taipa also registered a slight year-on-year growth in price of 0.7 per cent, reaching MOP98,696 per square metre. But those on Macau Peninsula fell by 4.5 per cent year-on-year to MOP77,276 per square metre. Both office units and industrial units saw values decrease last year. The average price for the two types of units decreased by 11.8 per cent and 5.9 per cent year-onyear, amounting to MOP100,057 and MOP47,568 per square metre, respectively. According to the DSEC, a total of 14,215 real estate purchase and sale contracts were signed last year, involving 14,292 properties, an increase of 36 per cent yearon-year. In addition, the number of mortgage contracts totalled 13,282, with 18,529 properties involved, a growth of 11.8 per cent year-on-year. On the other hand, the whole year of 2016 saw building projects that will provide 5,122 new units and 3,882 parking spaces upon completion, with total gross floor area totalling 868,000 square metres. Meanwhile, gross floor area of buildings completed in 2016 was 192,000 square metres, providing 498 units and 551 parking spaces for cars.
Tourism
DSE drafts bill to exempt old 500 Portuguese travel buildings from stamp duty agents coming to Macau Director of the Legal Affairs Bureau (DSAJ) Liu Dexue revealed that the Macao Economic Services (DSE) has completed the draft of the bill regarding an exemption of stamp duty for old buildings that need to be renovated. The bill involves exemption of the property stamp duty and offers special stamp duty concessions to owners of properties that are in need of imminent renovation. In response to the enquiry made by legislator Si Ka Lon regarding the progress of legislating on urban renewal, Mr. Liu wrote that a total of 30 legal proposals are on the agenda
for the coming three years. He explained that affairs related to the livelihood of citizens are their top priority. The 30 legal proposals will cover the revision of law codes, and will update laws relating to labour affairs, medical matters, education, transportation and housing. In the response, the DSAJ Director also reported that the Urban Renewal Committee had held six planetary meetings in the ten months up until end of last year, with three task forces created to work on the city’s urban renewal.
Smoking lounges
Not so fast, but not final either The local Health Bureau (SSM) continues to champion the establishment of ‘improved’ smoking lounges inside casinos as a “viable and feasible” solution, although it reiterates that no final decision on the matter has been made yet. The announcement came at the end of last week, after the bureau held a press conference to present its recommendations for improving the standards of smoking lounges in casinos. The document presented by the Health Bureau constitutes a response to the study commissioned by the six local casino operators presented on 13 February, which concluded that the majority of casino employees “support a solution for smoking lounges.” The bureau claimed there was no final decision yet regarding the proposal introduced by the group of gaming operators, adding it is not giving in to pressure from the latter. Yet, the announcement still pointed out that a number of lawmakers had already expressed their
opposition to the implementation of a full smoking ban during discussions in 2015, which changed the previous bill (Law no.5/2011), and led to the creation of the “Regime on Tobacco-smoking Prevention and Control.” The Second Permanent Commission of the Legislative Assembly had indeed supported the creation of smoking lounges by casting seven votes against two. The Health Bureau also claims the smoking lounge solution seems to correspond with the “expectations of all parts,” without violating the World Health Organization principle for the “gradual” implementation of a full smoking ban. The bureau expects to hear back from local gaming operators about the proposal it has submitted with measures and recommendations for smoking lounges, in order to present its opinion. In case the new standards, and the amendment to the law, are implemented, they will be revised within three years. S.Z.
Some 500 tourism professionals from Portugal will come to Macau for the 43rd National Congress of the Portuguese Association of Tourism and Travel Agencies (APAVT), according to a release by the Macau Government Tourism Office (MGTO) published in the Official Gazette. The event, set to take place between the 23 and 27 November 2017, involves a partnership between MGTO and APAVT, together with the Macau Centre for Tourism Promotion and Information in Portugal. This will be the fifth time the Congress has
taken place in the MSAR, since its last instalment in 2008. Maria Helena de Senna Fernandes, MGTO’s Director, and Pedro Costa Ferreira, APAVT’s President, expressed their satisfaction with the number of tourism professionals from Portugal taking part in the event, while the MGTO director stressed that the Congress will highlight Macau’s role as a World Centre of Tourism and Leisure and Sino-Luso services platform, as well as contributing to diversifying the local economy and increasing the number of international tourists. S.Z.
Business Daily Monday, February 20 2017 3
Macau
Crime
A nightshift security guard on the 16th floor of Public Prosecutions Office stated the former Prosecutor-General entered the area late at night with a masseur
All in the family Witness confirms relatives of former Prosecutorgeneral Ho Chio Meng and other defendants in the case ran several companies from the 16th floor of the Public Prosecutions Office build-ing, with contracts being provided to the department for inflated prices Nelson Moura nelson.moura@macaubusinessdaily.com
A
witness in the trial of former Prosecutor-general Ho Chio Meng confirmed on Friday that several companies were run out of an office located on the 16th floor of the Public Prosecu-tions Office by relatives of the former top official and other defendants in the case. As the corruption case of the former official continued on Friday, the Court of Final Appeal heard from a witness surnamed Chu, who stated that she was hired by Mr. Ho’s older brother in 2004 to work as an administrative employee, preparing documentation and receipts for contracts made with the Public Prosecutions Office until 2007. The former prosecutor-general is accused of indirectly profiting from almost 1,300 contracts granted by the Public Prosecutions Office to front companies run by his relatives and alleged business associates. Ms. Chu said that Ho’s brother-inlaw was responsible for accounting and service contracts with durations of less than six months, and that his brother and two other defendants in the case would also appear regularly on the 16th floor to deliver orders for quotations and re-ceipts. She confirmed that at least nine of the ten alleged front companies operated from an office on the 16th floor, but that since all the defendants would sometimes give her orders, she couldn’t specify if any of them was the main person responsible. Ms. Chu confirmed that the Public Prosecutions Office was the only client for all the compa-nies, and that she would be asked to create budgets and proposals for different maintenance or purchase contract proposals with increased prices. She said she couldn’t confirm if the services had actually been provided by the defendants, but confirmed she was asked to prepare proposals based on receipts that seemed to be from oth-er companies. The prices demanded of the Public Prosecutions Office would be increased from between 3 per cent and 50 per cent, from the original expenses provided to her by the other defendants. There were even certain rules for increasing prices depending
on the type of contract, with public relations contracts being increased between 8 and 10 per cent, small material purchase contracts increased by 8 per cent and construction and repair works between 20 and 30 per cent. The witness also stated that the main contact within the Prosecutor’s Office was the former head of the Integrated Management Team (IMT) and also a defendant in the case, Chan Ka Fai, who would also request on certain occasions that prices be increased for budget proposals to the office.
I take your word for it
The court also heard from Roque Lok Kei Chan, the brother of former Secretary for Admin-istration and Justice Florinda Chan, who worked as an employee of the Public Prosecutions Office from 1999. Mr. Chan worked for the IMT and was in charge of maintenance and verifying and inspecting services provided to the office, however he confirmed that on many occasions he would ap-prove the payment for several services without personally checking to see if they had indeed been provided. According to Mr. Chan, a man surnamed Wong - one of the case’s defendants - would be con-tacted for all service and construction contracts, and he would “take his word” and that of his colleagues, that the services had been provided. The contracts would all be awarded directly and without public tender, with contracts being handed to the same companies almost automatically, he added. “I would call my colleagues to ask if the works were concluded and they would present me the receipts to sign. We were told by our superiors this was the way it should be done,” Mr. Chan said. The witness also said that he refused to sign confirmation papers handed over by his su-perior for materials and services that weren’t provided, and that after he complained to his superior that some expenses for works provided by Mr. Wong were “too high”, confirmation slips for expenses handed to him stopped including prices. After he refused to sign the pay-ment confirmations, his superior started handing them to his colleagues instead. Mr. Chan also confirmed that
Mr. Ho’s brother-in-law would pick up proposals for services and materials in the Public Prosecutions Office, and identified him as someone who worked in Mr. Wong’s companies.
Late night massages
The court also heard from a former security guard, in charge of overseeing the 16th floor of the Hotline Building at night, who confirmed having seen Mr. Ho enter the area after hours on at least two occasions, accompanied by his driver and in one instance, an unidentified man.
When the security guard questioned the driver on the identity of man, the driver responded that it was a massage professional. The statement appears to confirm the accusations that the former prosecutor-general in-stalled a massage room on the floor rented by the Public Prosecutions Office, for his personal use. After the trial session ended, Mr. Ho denied receiving any massages on the 16th floor and said the statement must have been the result of a “miscommunication problem” between the guard and the driver.
4 Business Daily Monday, February 20 2017
Macau
Chan Kam Tat, Manager of Healthy Life Pharmacy
Interview | SMEs
Building a healthier life Having opened four stores in just five years, the manager of Healthy Life Pharmacy (Macau), Chan Kam Tat explains to Business Daily that diversity is one of the key factors in making a business stand out within a highly competitive industry Cecilia U cecilia.u@macaubusinessdaily.com
H
ow did you start your business? Healthy Life Pharmacy was founded in 2011 by myself and my wife. We started our business with MOP700,000 in capital, a combination of our savings and the amount we obtained from selling our property. Up until now we have already accumulated around MOP10 million in net assets. In the beginning, we depended mainly on our strong cash flow. Cash flow and human resources are the key factors in determining whether a company is successful or not. For instance, someone with MOP5 million on hand can easily manage a company that needs MOP1 million for operations, but a successful company is able to use an amount that is less than the required amount. What led you into the pharmacy business? Was it a good time in the industry to start the business? My wife was a pharmacist and she had been working in the industry for years. We were thinking of trying it out ourselves. For us, making a large amount of money was not the incentive for opening a pharmacy. We just wanted to do our very best, so customers could buy good quality products at the lowest price.
What is the current scale of your business? We started our business as one pharmacy and now we already have over 70 employees. Within these, we have pharmacists and technical assistants, as well as others. Most of
and Iao Hon and tourists tend not to visit these areas. Since our target is local residents, the city’s economic recession did not have great impact on our business.
our employees are fresh graduates, university students and housewives. So the overall age of our entire team is 35 years old. We require our employees to have at least literary and computing skills. We know this makes hiring more difficult. We offer a salary of MOP50 per hour with commission, and it is very rare for a part-timer to receive this amount of salary. Our business philosophy is quite similar to Uniqlo, McDonald’s, KFC and Muji. Half of our employees are in fact part-timers, many of whom have stayed and turned into full-timers. Recently, we also invited two professors from Mainland China to deliver training courses to our workers. Moreover, I believe that employees should be informed of two things: they have to be well aware of the company’s core ideology, and that the company that they are working for is making profit. We now have four stores and two distribution centres. One of our distribution centres is 8,000 square feet. It is in fact a rare case for a pharmaceutical company with only four branches to have such a large distribution centre. Our customer volume is very high and, as such, this helps us to maintain strong cash and goods flow. With a strong goods flow, suppliers rebate our orders. As a result, the price of our goods is comparatively lower. Moreover, our latest store is much larger than the other three and we would like to make it into a flagship store to build up our brand image.
What are the main products that Healthy Life Pharmacy is selling? We basically started our business as a pharmacy, but in 2013, we decided to put most of our resources into daily commodities, because we realised that within the residential areas, the demand for daily commodities is high. After years of operations, over 50 per cent of our products are daily commodities. Also, we only stock products that will be liked by customers. Since Macau has very limited suppliers, we stock products that do not normally appear in pharmacies - such as Japanese cup noodles. We sold 500 cup noodles in the past three days. We will keep on trying to search for new products that are rare in the city.
What is your customer base? The majority of our customers are local residents. We have less than 3 per cent that are tourists. Most of our stores are located in Areia Preta
How do you run your business and how do you get supplies? Since cash flow is very important to our business, we need to know well about the flow of our sales. After we
“Cash flow and human resources are the key factors in determining whether a company is successful or not”
recognize strong sales, we will then approach the suppliers and discuss the rebate that they can offer. In our initial stage, there were a number of social institutions, including major ones, that would procure products from us. Normally, most of these institutions would purchase either from suppliers or, more often than not, at supermarkets. What they need is convenience. They usually make purchases a day prior to holding an event. And we can provide enough products in a short period of time, plus we can offer a price that is lower than suppliers and supermarkets. We simply take less percentage from the rebate so as to offer a much lower price. And slowly we have transformed into a
Business Daily Monday, February 20 2017 5
Macau social enterprise that benefits the entire society. We also manage our business electronically. For instance, we only
“We just want to do our very best so customers can buy good quality products at the lowest price” have three goods distributors for four stores. But with electronic operations and management, our efficiency is boosted and the need for labour is reduced. In terms of seeking suppliers, the important thing is to let suppliers know the value of the company. During the recession, we actually gained more from suppliers. Most suppliers have difficulty selling their products during a slump and many of them offer high rebates. What do you have in mind when choosing the location for your pharmacies? We choose places that are close to a bus stop and/or on the corner. For business, location is a vital criterion, and all our stores are located on corners and near bus stops. There are two advantages with this arrangement: first is that each of these stores have their own storage and this reduces the pressure of storing as well as the cost; the second is the creation of the image of our company. In addition, our distribution centres are also located very close to our stores, making our response to shortages prompt. For the time being, we are not considering extending our business into the central part of Macau. Our business needs time to develop and, most importantly, our business beliefs or ideas could be altered if we served more tourists by setting up shop in the busy zones. Also, the sales method would also be adjusted to serve tourists, such as selling higher-end products to earn more, in order to pay the higher rents. With higher rents, we might need to forgo our business philosophy in order to survive. Is rent one of the important factors that affect your earnings? I believe expenditure relating to property certainly has impacts on all kinds of businesses and we are no exception. Most of our stores have been rented in the past few years and at times our rent has doubled. But we would not expect the expenditure on property to reach 30 per cent of our net profit.
Are there any difficulties in hiring pharmacists? Yes, and it is the biggest challenge for us. Pharmacists in Hong Kong generally receive MOP35,000 per month, whereas pharmacists in Macau receive MOP40,000. The reason for the difference is the medical system in Macau is exceptional. As one can see, there are many public health centres in the city, thus leading to the great demand for professionals. I think the salary growth rate for pharmacists in Macau is the highest among other occupations. Therefore we do encounter difficulties in employing pharmacists. But we will let interested parties know our company’s ideas and philosophy. Pharmacists are responsible for the safe consumption of drugs and we can provide the platform for performing this responsibility. Most pharmacies do not provide any prescription dispensing, and many are only selling supplements or other products such as milk powder and nappies. There are already many pharmacies in the city. How do you compete against the others? Many people think that pharmacies are always hard selling - recommending products other than the ones you are looking for. But for us, customers are self-helped. We provide self-helping services as much as we can, because some products require consultancy by a pharmacist - so we will put them in places out of reach of customers. Moreover, staff sometimes get a bit annoyed by the large number of customers and self-help services resolve this problem. And it requires less demand for labour too. In terms of setting the prices, our products are generally 15 per cent cheaper than those of supermarkets. We also reference Mannings (a chain of personal health and beauty retailers offering a range of pharmacy, healthcare, personal care, skin care and baby care products) to give out stamps, so as to attract customers to revisit out stores. Like Royal supermarket and New Yaohan, we also have our own VIP day to attract customers as well as suppliers. We have already held four VIP days, and on one of our VIP day we earned MOP3 million in sales over three days. We also hold special festivals such as the powered milk festival. On the other hand, we print out prescription labels, since more often prescriptions are hand-written. After we started using this method many others followed it, but we welcome competition. With competition, we will then improve. How do you promote your business? Recently we have established our own official WeChat account. Customers can earn points via subscribing to
our account, and with enough points customers can redeem gifts. The account also allows customers to check their purchasing records. Also, we have been using Facebook to promote since 2012 and we have accumulated a number of likes for our page. We create humorous advertisements by making videos to attract customers. Also, in most of our advertisements, we always include a person’s face. According to some studies, advertisements with a person’s face are much more likely to be welcomed and accepted by the audience. In Hong Kong, companies use Facebook and Twitter to promote, while companies in Mainland China use Sina and WeChat. For us, we use Facebook and WeChat. In my own experience, WeChat provides stronger penetration, and customers who are WeChat users tend to have strong-
“For business, location is a vital criterion, and all our stores are located on corners and near bus stops” er loyalty in terms of purchasing. Our business has grown at a much faster rate since we set up the account on WeChat. At the moment, we have gathered over 20,000 subscribers on both Facebook and WeChat. Moreover, we also take part in national trade fairs to promote our brand. Recently a number of Japanesebased stores have opened in the city. Has that affected your sales of Japanese-brand products?
We do sell a lot of Japanese-brand products, since the Japanese yen is at a low rate, and so products from Japan sometimes would be even cheaper than products from Hong Kong. Obviously Japanese products are not our main income stream, but if I am not mistaken our stores have the largest procurement and sales of Japanese products. And also, we only purchase certain Japanese products that are popular. We can see that there are more Japanese-based stores opening in Macau, but I think this phenomenon is very similar to stores selling bubble tea. Many of these are opened because investors think they will make a large profit, but the profit will get smaller as time passes, and the number of stores shrinks. For us, this would not be a big matter since a huge amount of our products come and go. Also, I do not see this as competition because these Japanese-based stores are helping us by selling products that we cannot get and providing more choices to customers. Does the Macau government provide any assistance to your business? We rarely use subsidies or funding provided by the government. But in our second year, we applied for a subsidy of MOP600,000 from the government. What are your future plans? There are three aspects that we are planning to pursue: to build up an online to offline platform; to strengthen co-operation with social institutions and schools – so as to expand our structure as a social enterprise; and possibly to open another new store if our customer base grows over time. But this will only happen in stages and not in the near future. Opening a new store is not easy, because business might be better when you have fewer stores, and the shortage of human resources remains another problem.
6 Business Daily Monday, February 20 2017
Macau Opinion
Sheyla Zandonai* Foggy reasons Last week, a battle over the retention of smoking lounges inside casino facilities dominated the government’s agenda. CEOs and high representatives of the six gambling corporations operating in Macau opened the week by publicly presenting a study they had submitted to the government in December 2016, which concludes that the majority of casino employees would not be strictly opposed to one of the two proposed smoking lounge ‘solutions,’ either on mass floor areas or inside VIP rooms. Given that a full smoking ban was on the line for the bill on tobacco prevention and control, the announcement triggered a series of reactions, from lawmakers to associations of gambling employees, and the Health Bureau. The latter of which issued two consecutive statements saying that, although it supports the study, it recommends higher standards of measures for better air quality inside casino premises and stricter controls on tobacco-smoking, highlighting that the political decision is not final yet. Read it as you like.
Banking
Int’l business of banks slightly up in 2016-end But the share of the segment in the whole business of local banks decreased slightly Kam Leong kamleong@macaubusinessdaily.com
T
he share of international business in the local banking sector had decreased as at the end of last year from a quarter earlier, even though its total international banking assets and liabilities both recorded an increase, according to the official data released last Friday by the Monetary Authority of Macau (AMCM). As at the end of December 2016, international assets held by local banks rose slightly by 1.6 per cent quarter-to-quarter to some MOP1.17 trillion (US$146.5 billion), which also represents an increase of 2.7 per cent compared to the same period of last year. Of the total, external assets amounted to MOP822.7 billion, a decrease of 2.2 per cent year-onyear. In particular, external nonbank loans declined by 2.7 per cent quarter-to-quarter to MOP361.7 billion. But local assets in foreign currencies rose by 11.8 per cent quarter-to-quarter, or 16.8 per cent year-on-year, to MOP347.3 billion. On the other hand, total
international liabilities of the local banking sector also recorded an increase of 1.2 per cent quarter-toquarter, or 1.4 per cent year-onyear, amounting to some MOP1.09 trillion. External liabilities accounted for MOP509.8 billion of the total, falling by 9.5 per cent quarter-to-quarter, or 16.5 per cent year-on-year. Yet, local liabilities in foreign currencies grew by 12.9 per cent quarter-toquarter or 24.9 per cent year-on-year to MOP584.2 billion. According to AMCM, foreign currency deposits held by residents and the MSAR government in local banks were the major component of international liabilities in the period. These types of deposits from the two sectors totalled MOP497.5 billion as at the end of the year, surging by 17.9 per cent as compared to some MOP422.1 billion one year earlier. On a quarter-to-quarter comparison, the amount also grew by 7.1 per cent.
Decreased share
N ev e rth e l ess, th e sha r e o f international assets in total banking assets of local banks fell to 84.1
per cent, a slight decrease of 0.1 percentage points from the previous quarter, while that of international liabilities in total banking liabilities also fell by 0.3 percentage points quarter-to-quarter to 78.7 per cent. Non-local currencies, primarily Hong Kong Dollars and U.S. Dollars, continued to be the dominant denomination of international ba n ki n g t ra n sacti o n s, w hi ch respectively accounted for 45.5 per cent and 42.7 per cent of total international assets; and 53.4 per cent and 35.8 per cent of total international liabilities. Meanwhile, the share of total international assets and total international liabilities held in Patacas was only 0.8 per cent and 1.7 per cent, respectively. According to AMCM, the majority of external assets and liabilities were related to Asia and Europe. Particularly, claims on Hong Kong and Mainland China occupied 38.6 per cent and 26 per cent of total external assets, while claims on the United Kingdom and Portugal took up 2.9 per cent and 2.7 per cent, respectively. In terms of external liabilities, Hong Kong and Mainland China accounted for 52.6 per cent and 20.2 per cent of the total, respectively, while Portugal and France each took up 0.8 per cent.
PolyU Technology and Consultancy Co. Limited, from Hong Kong Polytechnic University, which conducted the part of the study commissioned by the ‘big six’ dealing with technical features, concluded that all gaming operators comply with the standards established by the Health Bureau. Note, however, that the evaluation was not conducted in all Macau casinos, but only in one facility of each concessionaire, making for six, and not the 38 casinos in town – a number that does not include the likes of Mocha Clubs. If you have ventured across some of the casinos located in the Macau Peninsula, say, StarWorld or Pharaoh’s Palace, PolyU’s research findings are, at best, wishful thinking. Smoking happens freely in semi-open areas, which do not comply with whatever air pressure benchmarks and automatic doors everybody has been talking about lately. Inspections too are seemingly few. While several thousands were conducted in the city’s public spaces, only 44 were carried out in casinos for the whole year of 2016. Now, don’t get me wrong. There is no doubt that employees’ health should be a matter of public concern – and getting rid of misleading data may be a good start. Whereas everybody seems so worried about following the standards set by the World Health Organization, we have yet to hear the government commit to running pollutant-free public buses, for instance. If health is the main question in the public debate, I don’t see why car traffic shouldn’t also be reason for disquiet.
*scholar and contributor to this newspaper.
Results
Shun Tak expecting annual net loss Hong Kong-listed conglomerate Shun Tak Holdings Ltd expects the company will fall into the red for its 2016 fiscal year, ended December 31, it told the Hong Kong Stock Exchange last week. According to the company’s filing, the estimated annual net loss is due to ‘the decline in revaluation of investment properties which is non-cash in nature.’ The company added that the decrease in its revenue recognition of the sale of development properties was also a factor driving the loss. “The Board believes that such decline in revaluation and decrease in revenue will not have any impact on the business operations of the group,” the company claimed however in the filing. For its 2015 fiscal year, Shun Tak saw its profit attributable to owners of the company reach HK$745
million (US$92.8 million), plummeting by 83.3 per cent down from HK$4.5 billion for the 2014 year. In fact, the conglomerate already posted a net loss of HK$53 million for the first half of its 2016 fiscal
year, compared to a net profit of HK$387 million for the same period in 2015. The annual results of the company are expected to be published in late March, the filing reads.
Business Daily Monday, February 20 2017 7
Macau crime
North Korean leader's half-brother Kim Jong-nam killed. Lusa
Kim Jong Un's murdered half brother lived quiet, open life in Macau James Pomfret
B
efore he was killed in Malaysia, Kim Jong Nam, the estranged half-brother of North Korea's leader, lived quietly in the Asian gambling hub of Macau, avoiding controversy and seemingly relaxed about personal safety, according to sources close to him.crease for the same month. One veteran casino industry source, who has known him for over a decade, said he last met the affable, portly Kim at the Four Seasons Hotel in Macau last month, when he was eating cake and having a drink in the lobby coffee shop. “I often saw him by himself. He never seemed to have bodyguards,” said the source who declined to be named given the sensitivity of the matter. “He didn't seem nervous at all.” Five years ago, Kim Jong Nam pleaded with his half-brother, Kim Jong Un, to withdraw a standing order for his assassination, according to the South Korean intelligence agency. Some analysts have said Kim Jong Un believed his brother could be used in any overthrow of his regime. An attempt was made on Kim Jong Nam's life in 2012, after which he did not stay long in any place, and travelled frequently between various cities in Southeast Asia and China. U.S. and South Korean government sources said they believed North Korean agents murdered Kim Jong Nam at an airport terminal in Kuala Lumpur on Monday. A source with ties to top officials in Pyongyang and Beijing told Reuters
that North Korea was not behind the killing. “Kim Jong Nam has nothing to do with (North) Korea,” the source said. “There is no reason for (North) Korea to kill him.” Friends in Macau, where he spent much of his time, said Kim Jong Nam was an outwardly relaxed man, often casually dressed, sometimes in jeans and sandals, and carried a Louis Vuitton shoulder satchel. He had a
“He wasn't a big gambler but liked betting a few thousand (Hong Kong dollars) each time, mostly baccarat. He would just drift around the tables watching mostly, then suddenly put down a bet” Anonymous casino source striking dragon tattoo on his back according to a source who went to the gym with Kim. According to South Korea's spy agency, Kim had lived under the protection of Chinese authorities in the China-ruled territory, with at least one of his known wives and two of his children.
Facebook page
A Facebook page under the name Kim Chol, which appears to be his, includes friends from numerous countries including France, Singapore and Switzerland and photos of Kim in various locales including Macau and Shanghai, as well as pictures of dogs. Kim Chol was the name on the passport Kim Jong Nam used to travel to Malaysia, according to authorities there. “I miss Europe,” he posted next to a 2008 picture of himself and a man standing on a yacht. “Living Las Vegas in Asia,” he posted in 2010. His “likes” include French musician Serge Gainsbourg and two bars in Singapore, including one called Girls Bar Kimidori. He also “liked” Russian President Vladimir Putin and a Kim Jong Un impersonator calling himself Kim Jong “Um”. According to the casino source and another Macanese businessman who had known him for years, Kim dabbled in business ventures in Macau including a Japanese restaurant called Gold Japanese Cuisine that closed last year. The Chinese character for “gold” on the restaurant sign was the same character used to depict the word Kim. The place, along a harbour-front boulevard, was shuttered, the metal grill stuffed with envelopes that included bank statements and electricity bills. One notice above the door said power had been disconnected last March 15 due to “payment failure”. It wasn't possible to verify Kim's ownership in the restaurant with an initial search for companies registered
under Kim's name and one known alias showing up no records at Macau's Commercial Registry Office. One long-time business associate said some of Kim's family in Macau, including an adult son, were now under enhanced security. “It's very sensitive now,” said the Macanese businessman who claims he also once had trade dealings with Kim's father. “His family is under police protection, especially the son. I'm afraid he might be targeted. Anything is possible.” At a sprawling middle class residential development on Macau's Taipa island, a policeman was stationed outside one of the blocks where a resident and a security guard said Kim's family now live. For several hours on Wednesday evening, four police vehicles and around a dozen officers, some armed, were nearby. Macau authorities said in a statement in response to inquiries about Kim and his family that they were monitoring developments closely. While Kim was once known to enjoy a lavish lifestyle with extended stays in hotel suites, a love of fine French wine and gourmet cuisine, according to people who socialized with him in the past, he seemed to have cut back on his spending recently. His family in Macau had moved several times, first from an oceanfront villa to two modest residential high rises on Taipa island. “He often just queued for taxis. It's crazy that someone like him had to do that ... He seemed careful with his money,” said the casino executive. He liked the occasional flutter in the casinos, however, and was seen recently on the gaming floors of the Wynn Macau and the Four Seasons, according to a second casino source. “He wasn't a big gambler but liked betting a few thousand (Hong Kong dollars) each time, mostly baccarat. He would just drift around the tables watching mostly, then suddenly put down a bet.” Reuters
8 Business Daily Monday, February 20 2017
GAMING Warning signs
Local casino stocks flash warnings that preceded 2014 crash The last time investors were this optimistic about Macau casino stocks, it didn’t end well Jeanny Yu and Kana Nishizawa
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ack then, in 2014, bulls misread a Chinese anti-corruption campaign that scared away high rollers and erased US$146 billion of shareholder value. Now, as casinos rebound on hopes that smalltime gamblers and tourists will fill the void, some of the same signs of unbridled investor enthusiasm are flaring up again. Options traders are more bullish on Galaxy Entertainment Group Ltd. and Sands China Ltd., the two largest local casino operators, than at any time since at least April 2014. Sell ratings on the two stocks have disappeared, while short interest
has declined to the lowest levels since the crash. The sector’s priceto-earnings ratio, meanwhile, is almost 10 per cent higher than its 2014 peak. “The market’s being too bullish about the quantum of industry recovery,” said Vincent Khoo, a Kuala Lumpur-based analyst at UOB Kay Hian whose recommendations on Sands China over the past year produced the top return among peers tracked by Bloomberg. There’s no doubt that business has improved in Macau, the only place in China where casinos are legal. Gaming revenue has climbed for six straight months, while visitors during the critical Chinese New Year period increased 7 per cent
as tourists splurged on new family-friendly resorts and attractions.
Justified?
The question for investors, though, is whether the up-tick justifies a 69 per cent surge in the Bloomberg Intelligence Macau index from a five-year low last January through Thursday. The gauge of six casino stocks is now valued at 24 times projected earnings for the next 12 months, exceeding its peak of 22 in 2014. It fell 1.7 per cent last Friday as MGM Resorts International reported a decline in revenue from table games on the MGM casino’s main floor in the MSAR. For Alfred Lau, a Hong Kongbased analyst at Bocom International Holdings, the past year’s rally in casino stocks makes sense. Not only is industry wide gaming revenue recovering, he says, but Hong Kong-listed casino shares are also
potential targets for Chinese investors who’ve been funnelling money through the city’s cross-border exchange link. “The market expects liquidity to favour Macau casinos this year,” said Lau, who has buy ratings on Galaxy and MGM China Holdings Ltd. History favours the contrarians. When demand for bullish call options on Galaxy exceeded puts by this much in 2014, the stock was on the cusp of a two-year retreat. Oneway bets on Sands China are also similar to those at the peak three years ago. While positioning is less extreme for MGM China, options traders are near the most optimistic since May 2015 and short interest tracked by IHS Markit has dropped to the lowest in two years.
Future plans
Sceptics say a key risk for the world’s largest gambling hub is oversupply. Macau casinos have been building gambling capacity and tourist attractions at a record pace, according to Bloomberg Intelligence. Planned gaming tables through 2018 could add about 40 per cent to the market’s 2014 total, while the number of hotel rooms may jump by 80 per cent, BI estimates show. “Some of the properties definitely have a lot of overlap,” said Paul Chan, head of multi-asset and Hong Kong pensions at Invesco Ltd., which oversees about US$813 billion worldwide. Whether demand will increase enough to support casinos’ share prices remains to be seen, but the latest industry figures don’t bode well for bulls. Gross gaming receipts climbed just 3.1 per cent in January, missing the median analyst estimate of 8.5 per cent. Bloomberg
Gaming
M&A
Legend Palace opens doors next Monday
U.S. investment firm now interested in The 13
Macau Legend Development Ltd is set to launch its latest local property - Legend Palace Hotel - on February 27, according to the group’s co-chairman and chief executive officer, David Chow Kam Fai. Speaking to reporters on Saturday, the casino boss said the company would apply for more gaming tables from the MSAR government in the future, based on the business needs of the latest addition to its business portfolio. The new casino-hotel, located in the company’s Macau Fisherman’s Wharf complex, has been granted 15 new-to-market mass gaming tables and 91 slot machines, the Secretary for Economy and Finance, Lionel Leong Vai Tac announced last week. “It’s not about whether we are satisfied with [the number] or not,” said Mr. Chow as quoted by local broadcaster
TDM. “But we hope the government will keep granting us new tables.” “We had applied for 30 new tables, and the government gave us 15 after its calculations… We will co-ordinate with the government’s macro-policy and we will apply again if we find the number is not enough,” he said. According to the city’s economy head, gaming operator SJM Holdings Ltd - the holder of the gaming licence that Macau Legend uses for its gaming business - will transfer 55 other mass and VIP gaming tables from its other properties to the new project. Legend Palace is the second new hotel under the company’s redevelopment plan for Macau Fisherman’s Wharf, following the opening of the non-gaming Harbourview Hotel property in February 2015. The new hotel will provide a total of 223 hotel rooms. K.L.
U.S. based investment advisory firm Evolution Capital Management, LLC has acquired a notable number of shares in local hotel developer The 13 Holdings Ltd, according to a recent filing by the latter. The developer said it was notified on February 6 that the U.S. firm and its related parties ‘have first become interested in 338,628,459 underlying shares (in respect of unlisted equity derivatives) of the Company.’ ‘[The shares] represent approximately 36.77 per cent and 21.62 per cent of the existing issued share capital of the Company and the enlarged issued share capital of the Company (assuming exercise, in full, of all the convertible securities of the Company) respectively,’ The 13 noted. The same filing also reads that the company’s investor, Ontario Teachers’ Pension Plan Board has come to have a short position of 338,628,459 underlying shares of the company. The number of shares in short position held by Ontario Teachers’ Pension Plan Board is the same as those acquired by Evolution Capital Management, in addition to having the same percentage structure. Ontario Teachers’ Pension Plan Board, the largest single-profession pension plan in Canada, has been an investor in The 13 since 2013, when the Canadian entity invested HK$299.9 million (US$38.7 million) in the company through a
zero-coupon convertible bond issue. But The 13 did not elaborate in the filing as to the implications of the announcements. Its new luxury hotel The 13 is expected to open during this quarter, according to its interim report, published last December. It still remains unclear whether the new property will include any gaming facilities. K.L.
Business Daily Monday, February 20 2017 9
Greater China
Health alert
Domestic consumers seem to shrug off deadly bird flu Four years ago the outbreak cost the economy an estimated US$6.5 billion Adam Jourdan
Four years ago, a bird flu outbreak in China killed at least three dozen people, triggered mass poultry culling, put masks on millions of Chinese faces and hammered shares in fast food and travel companies. This winter, more than 100 people have died, but few birds have been slaughtered, there are few masks on the streets and little sign of any consumer reaction, let alone the panic seen in 2013. The number of posts mentioning "bird flu" or "H7N9" on China's popular Sina Weibo microblog - a useful proxy for gauging consumer interest or concern - peaked at just over 40,000 on Wednesday after the health ministry said as many as 79 people died from H7N9 bird flu in January alone. At the peak of the 2013 outbreak, daily posts topped 850,000. "Everyone's just used to it now," said Yuan Haojie, 24, a real estate worker in Shanghai. "Every year we
seem to have some sort of bird flu outbreak, but it never seems to affect anyone I know. Gradually you stop worrying about it." The 2013 outbreak was the first in China of the H7N9 bird flu strain. The virus this year appears to be less pathogenic among poultry, which show few symptoms, but more deadly among humans in direct contact with infected birds at live markets and on farms. Four years ago, the outbreak cost the economy an estimated US$6.5 billion, took chicken off the menu at schools and on airplanes, and prompted the widespread slaughter of millions of birds. The biggest impact this year is that Chinese chicken prices have dropped to their lowest levels in more than a decade. "In 2013, there was a great panic in the consumer market, and people were afraid to eat poultry," said Pan Chenjun, Hong Kong-based senior analyst at Rabobank. "Consumer market sentiment now isn't so bad. People are more resilient because coverage has been quite limited.
"Online rumour?"
Many consumers and fast food chain workers Reuters spoke to were unaware of the severity of this season's outbreak. "Is this one of those online rumours?" asked the duty manager at one KFC outlet in the northern mining city of Shuangyashan. The fried chicken
“Consumer market sentiment now isn't so bad. People are more resilient because coverage has been quite limited.” Pan Chenjun, Hong Kong-based senior analyst at Rabobank brand is operated locally by Yum China Holdings Inc. Yum, which reported a "significant, negative impact" during the 2013 outbreak, did not respond to requests for comment. The company's U.S.listed shares are down less than 5 per cent so far this year. A worker at local chicken chain Dicos
in Shanghai said this winter's bird flu outbreak had not hit sales, and the firm had not given staff any specific directives on how to respond to diners' concerns. Dicos, owned by Taiwan's Ting Hsin International Group, declined to comment. Global health bodies and government organisations in China have long said properly cooked chicken is not a safety risk. Some netizens and experts have said Beijing was slow to respond to the outbreak this year and data on human infections and deaths was not disclosed soon enough. China's health authorities said on Thursday they would tighten controls on poultry markets and the transport of live birds, but noted the spread of the virus among people was slowing. China's Centre for Disease Control and Prevention has said the vast majority of people infected by H7N9 reported exposure to poultry, indicating little person-to-person infection. In southern Guangzhou, 24-yearold office administrator Li Lishan said there were bans on poultry markets in her area and people were quite worried about the disease. However, she said she was still eating chicken. "The days before the trading ban I went crazy buying up chicken," she said, acknowledging there was a risk. "I know, I know. I'm just used to eating it." Reuters
Diplomatic ties
Mainland sees common interests outweigh differences with U.S. Foreign Minister Wang Yi met U.S. Secretary of State Rex Tillerson The common interests between China and the United States far outweigh their differences, China's Foreign Minister Wang Yi told U.S. Secretary of State Rex Tillerson on Friday in their first face-to-face meeting since Tillerson took up his job. U.S. President Donald Trump angered Beijing in December by talking to the president of Taiwan and saying the United States did not have to stick to the "one China" policy, under which Washington acknowledges the Chinese position that there is only one China and Taiwan is part of it. In a phone call with Chinese leader Xi Jinping two weeks ago, Trump changed tack and agreed to honour the "one China" policy, a major diplomatic boost for Beijing, which brooks no criticism of its claim to self-ruled Taiwan. However, several areas of disagreement between the two countries, such as currency, trade, the South China Sea and North Korea, were not mentioned in public statements on the telephone
North Korean leader's half-brother Kim Jong-nam killed. Lusa
conversation. A Chinese Foreign Ministry statement released after Wang met Tillerson on the side-lines of a meeting of foreign ministers of the G20 top economies in the German city of Bonn, made no specific mention of where the two disagree. Wang said the Xi-Trump call was
extremely important, and that the two countries should promote even better relations. "China and the United States have joint responsibility to maintain global stability and promote global prosperity, and both sides' joint interests are far greater than their differences," the statement
Chinese Foreign Minister said the two countries should increase mutual trust, deepen cooperation and ensure that under Trump they make even greater contributions to global peace paraphrased Wang as saying. The two countries should increase mutual trust, deepen cooperation and ensure that under Trump they make even greater contributions to global peace and prosperity, Wang added. The two also had a "deep exchange of views" on the North Korean nuclear issue, the statement said, without giving details. Tillerson on Friday urged China to do all it could to moderate North Korea's destabilising behaviour after ballistic missile test by Pyongyang, Tillerson's spokesman Mark Toner said after the Wang meeting. Reuters
10    Business Daily Monday, February 20 2017
Greater China
Markets
Private placement boom on borrowed time Market participants think a change in rules is imminent and the pendulum will swing back towards initial public offerings Samuel Shen and John Ruwitch
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three-yearboominprivate share placements in China, a handy way around tighter control of public share issuance, is running on fumes as Beijing turns its sights on the speculative excesses and dubious value the boom has engendered. Regulators have tightly restricted new public share sales since mid-2015, blaming them for draining cash from the rest of the share market while the country's main bourses nosedived, but that pushed more firms into more loosely regulated private placements to raise funds. The private placement market jumped fivefold from 2013 to RMB1.18 trillion (US$172 billion) in 2016, dwarfing the market for initial public offerings (IPO), which raised just RMB147.6 billion last year. But since the end of last year, the China Securities Regulatory Commission (CSRC) has been tightening its approval process for private placements, challenging the deal prices and the purposes of the cash being raised.
Wu Kan, head of equity trading at Shanshan Finance, said the private placement market had become a "black box" for speculative acquisitions, money misuse and even criminality as some investors colluded with listed companies to inflate share valuations. Market participants think a change in rules is imminent and the pendulum will swing back towards initial public offerings (IPOs) and other public fundraising. "Fundraising via private placement will likely shrink quite drastically this year due to tighter regulation, but the number of IPOs will increase," said Wu, whose firm has invested in privately placed shares. Such deals have been popular with issuers and investors, with long lockup periods in exchange for big discounts, but on Jan. 20, the CSRC expressed its discomfort with companies using the funds for backdoor listings, to invest in unrelated industries or contrive restructurings of no obvious commercial benefit.
"The biggest problem is that some listed companies raise funds excessively. Their funding structure is irrational, and they use the proceeds too much at will, and in an inefficient manner," CSRC spokesman Zhang Xiaojun said. The deals have on occasion masked market manipulation. Last month Chinese hedge fund manager Xu Xiang was jailed for 5-1/2 years for colluding with 13 listed companies in driving up their share prices, and profiting from non-public information, having taken part in private placements made by several of the named companies.
Tide turning
The CSRC has admitted that the decade-old rules for private placements
Key Points Private placements jump fivefold from 2013 to 2016 Raised RMB1.2 trln in 2016, versus RMB148 bln IPOs CSRC regulator tightens approval process since end-2016 Market expects swing back to IPOs this year are ripe for revision and wants to encourage alternative capital raising routes. "CSRC will develop the market for convertible bonds and preferred shares, to curb excessive fundraising by listed firms," Zhang said. One of its concerns is that companies are channelling cash into high-yielding wealth management products via the shadow-banking industry, an opaque
avenue for risky lending that is difficult for regulators to monitor and assess. Last year, 767 listed companies spent a combined RMB726.8 billion buying wealth management products, the official Securities Times reported. The private placement tide already appears to be going out. In the first nine months of 2016, it took typically a month or two to get the CSRC's go-ahead for a private placement, but that had stretched to more than four months in some cases by the last quarter of 2016, according to investment bankers. And some companies have pulled back after regulatory pushback; in August Wanda Cinema Line Co. scrapped a plan to raise up to RMB8 billion to buy an affiliate when the Shenzhen Stock Exchange queried the target's lofty valuation and asked what measures it had taken against a possible write-off in its goodwill. Several companies have also voluntarily cut the size of their placements, including loss-making Caihong Display Devices Co, which said on Jan. 23, after communication with regulators, that it was adjusting its fundraising target down to RMB19.2 billion from its original RMB23 billion. Meanwhile, CSRC is speeding up IPO approvals. Pricewaterhouse Coopers expects the IPO market to rise as much as 50 per cent to RMB250 billion in 2017. Some investors welcome the tighter regulations on private placement, saying that inefficient projects will be weeded out. "It benefits investors with a focus on fundamentals," said Luan Xiaoming, fund manager at Hotland Innovation Asset Management Co. Reuters
Forex
FX sales slow on stronger yuan, tighter capital controls The yuan has gained 1.2 per cent against the dollar so far this year, after sliding 6.6 per cent in 2016 China'scentralbanksoldtheleastamount of foreign exchange in five months in January, reinforcing views that capital outflows have eased as policymakers step up scrutiny of cross-border flows and as the yuan steadies. Net foreign exchange sales by the People's Bank of China (PBOC) amounted to RMB208.8 billion (US$30.42 billion) last month, according to Reuters calculations based on central bank data released on Friday. That compared with net sales of RMB317.8 billion in December and RMB644.54 billion in January 2016. China's foreign exchange regulator said on Friday that pressure from capital outflows has eased in 2017 and that cross-border flowswere becoming more balanced. Government efforts to prop up the
yuan currency pushed China's foreign exchange reserves below the US$3 trillion level in January for the first time in nearly six years. But the drop moderated from recent months, suggesting tighter controls are slowing capital flight. A recent stumble in the rising U.S. dollar has also helped ease pressure on the yuan and other emerging market currencies. Currency strategists surveyed by Reuters, however, expect the yuan to comeunderrenewedpressureincoming months on expectations that the U.S. central bank will raise interest rates two to three times this year, bolstering the dollar. Tim Condon, ING's head of Asia research in Singapore, said that the forex sales data was good news for the People's Bank of China (PBOC), as it indicated a significant drop in onshore dollar buying in January, but added that the fate of the yuan depends on the dollar. "There's still uncertainty as to what would happen if we go into a period of sustained dollar appreciation. As we saw at the end of last year, if the PBOC
adheres to its (fixing) policy (in the face of dollar strength), that would be associated with onshore dollar buying and reserve losses at a level that if sustained would prove politically unacceptable." China's currency policy creates an outcome that is "sustainable in a weak dollar scenario but unsustainable in a strong dollar scenario," Condon said.
Travellers, students hit
SAFE said that foreign currency purchases for travel and overseas study declined 28 per cent month-on-month in January, the biggest travel season in China, indicating more stringent reporting requirements could be having an effect on individuals' forex purchases.
Banks on Jan. 1 began requiring individuals using their US$50,000 annual foreign currency quota to specify how and when they will use funds, with additional documentation sometimes required. The new rules are meant to prevent forex purchases from being used for illegitimate purchases such as property. Capital outflows, while slowing from late last year, continued in January, the data indicate, despite the yuan gaining the most against the dollar since March. Also on Friday, the SAFE said commercial banks' sales of foreign currency fell to a three-month low of US$19.5 billion, compared to US$46.3 billion in December. Reuters
Business Daily Monday, February 20 2017 11
Greater China Overseas production
Beijing says policies unaffected by Trump plans China has repeatedly urged global leaders to reject protectionism
C
hina is closely following U.S. President Donald Trump's plans to create more domestic jobs by encouraging U.S. companies to bring home or "reshore" their overseas production, but the gov-
industries will suffer, China has repeatedly urged global leaders to reject protectionism, which Trump has championed with his "America First" campaign. China's steel sector has been under particular scrutiny, with mills subject to increasing numbers of anti-dumping moves amid accu-
said at the same press briefing on Friday that China's decision to slash 65 million tonnes of steel capacity last year had already brought prices back up, with a composite index run by the China Iron and Steel Association (CISA) rising 76.5 per cent in 2016. Xu said the total number of loss-making steelmakers fell 51 per cent last year, while overall sector profits rose more than twofold in 2016.
“We will not change our goal of opening up to the outside world”
Leverage control
Central bank says to tighten oversight of companies’ debt China's central bank said on Friday it plans to tighten up its oversight in a range of areas including corporate debt and bank assets, as policymakers fret over fast-rising leverage and the risk of asset bubbles in the rapidly growing economy. The People's Bank of China (PBOC) also said it will keep the yuan currency basically stable while maintaining a prudent and neutral monetary policy. China has relied on rapidly increasing credit to fuel economic growth in recent years, but policymakers have begun to point to the threat of asset bubbles forming. M&A
Miao Wei, China's Industry Minister
ernment will not change its overall strategy, Industry Minister Miao Wei said on Friday. "Regarding President Trump's efforts to revitalise U.S. manufacturing and allow more U.S. companies to move back to the United States, we are paying close attention to these policies but they will not affect the development of China's manufacturing industry," Miao said at a press briefing. He said China would continue to encourage foreign enterprises to invest in China while at the same time encouraging domestic firms to go overseas. "We will not change our goal of opening up to the outside world," he said. Worried its export-dependent
In Brief
HNA takes 3 pct stake in Deutsche Bank
sations that they were selling at less than cost and forcing foreign competitors out of business. Vice industry minister Xu Lejiang
China announced early last year that it would close as much as 150 million tonnes of production over the 2016-2020 period. Reuters
China's HNA Group has taken a stake of just over 3 per cent in Deutsche Bank and said on Friday it could buy further shares in the German lender. "We have the fullest confidence in Deutsche Bank's management and will keep a close watch on its future steps and lend support as a shareholder where appropriate," a spokesman for HNA said. The Chinese aviation and shipping company intends to keep its holding below 10 per cent, he said. HNA's stake of 3.04 per cent, worth around 750 million euros (US$799 million) at current share prices, makes it the bank's biggest shareholder after Qatar. Vice premier
Pressure to ensure enough jobs this year
Results
Bank of East Asia reports 2016 profit at 7-year low BEA, like several other financial firms, has been hit by regulatory challenges and economic slowdown in China and Hong Kong Bank of East Asia Ltd (BEA) has reported a 33 per cent fall in annual profit to its lowest in seven years, in line with estimates, due to slowing loan demand in its main markets of Hong Kong and China as well as a rise in bad loans. Profit fell to HK$3.72 billion (US$479.38 million) in 2016, the bank said in a statement on Friday, meeting the HK$3.7 billion average of 10 analyst estimates in a Thomson Reuters poll. Its impaired loan ratio rose to 1.49 per cent as at the end of 2016 from 1.13 per cent a year earlier. Loans to customers in Mainland China fell 7.1 per cent to HK$139 billion as at December-end. "We are cautiously optimistic that loan demand will improve in most markets in 2017... Higher interest rates should benefit our business in Hong Kong, where we are a net lender to the Interbank market," Chairman David Li said in the statement. "Barring unforeseen events, we expect asset quality to stabilise in the coming year."
Management which has been pressing for a sale and which sued the bank last year over a share placement. In October, BEA agreed to sell share
China will face pressure to ensure sufficient job creation this year, vice premier Ma Kai said on Friday, even after authorities beat targets and created more than 13 million jobs last year. The government should increase coordination between employment and economic policies and encourage job creation through innovation, Ma said at a State Council meeting on employment on Friday. The registered urban unemployment rate was 4.02 per cent at the end of 2016. China targeted 10 million new urban jobs in 2016, and said it hoped to create 50 million new jobs over the five years to 2020. Corruption fight
Corruption fight
BEA, like several other financial firms, has been hit by regulatory challenges and economic slowdown in China and Hong Kong. But unlike other Hong Kong family-owned banks, deteriorating market conditions have not forced its sale. It has, however, faced pressure from activist shareholder Elliott
registry subsidiary Tricor Holdings to private equity firm Permira for HK$6.5 billion, a deal seen as bolstering its capital reserves. That was the first major sale of any business by the bank, whose offerings include corporate and retail banking, wealth management and investment services. Reuters
A court in China jailed a former senior official at one of the country's business regulators for 18 years on Friday for corruption, state news agency Xinhua said. Sun Hongzhi was a deputy head of the State Administration for Industry and Commerce. He was expelled from the ruling Communist Party in 2015. The court in Shandong province found Sun guilty of corruption, saying he abused his power while holding a series of offices between 2002 and 2014, Xinhua said. All his assets had been confiscated, including a tiger and a leopard pelt, it added.
12 Business Daily Monday, February 20 2017
Asia Risks persisting
Singapore economy speeds up in last quarter The impulse in exports growth has seen many analysts predicting the central bank will keep its exchange-rate based policy on hold this year
falling exports and cooling demand from major trading partner China. The challenge for policymakers in Singapore, and other export-reliant regional economies, is how to navigate rising risks of protectionism under U.S. President Donald Trump and an increase in funding costs as the Federal Reserve steps up the pace of rate hikes. "Domestic sectors will be dragged down by higher interest rates, a still weak real estate market, and subdued consumer demand," said Trinh Nguyen, Hong-Kong based economist for Natixis.
Earlier this week, Singapore's two-biggest lenders DBS Group Holdings and OCBC both reported falls in quarterly profit and booked higher provisions for bad loans, hobbled by debt payment woes in the city-state's oil service sector. The manufacturing sector grew an annualised 39.8 per cent from the previous quarter compared with a 5.0 per cent contraction in the third. Singapore's trade agency, IE Singapore, slightly revised up its forecast for non-oil domestic exports (NODX) in 2017 to 0.0 to 2.0 per cent growth, from its previous forecast of -1.0 to
Masayuki Kitano and Fathin Ungku
S
ingapore's economy grew at a faster pace in the final three months of last year than initially thought, but the government warned the outlook remained hostage to policy and protectionist risks in the United States. That uncertainty was reflected in the affluent city state retaining its 2017 growth forecast in a wide 1.0 to 3.0 per cent range, underscoring the small, open economy's vulnerability to external headwinds.
Key Points Singapore Q4 GDP +12.3 pct q/q annualised; +2.9 pct y/y Reuters median forecasts +12.6 pct q/q; +2.5 pct y/y Manufacturing +39.8 pct q/q annualised; services +8.4 pct Full-year 2016 GDP growth revised to 2.0 pct from 1.8 pct MTI 2017 growth forecast unchanged at 1-3 pct
"If protectionist approaches become the norm, global trade will be adversely affected, with knock-on effects on economic growth worldwide," the Ministry of Trade and Industry (MTI) said in a statement accompanying revised GDP data on Friday.
A panoramic view of Singapore
The ministry's cautious tone took some of the shine off a surge in manufacturing, which lifted economic growth to 12.3 per cent in the fourth quarter from the previous three months on an annualised and seasonally adjusted basis, bouncing from a contraction of 0.4 per cent in the third quarter. That was up from the government's initial estimate of a 9.1 per cent expansion and compared with expectations of 12.6 per cent growth. Still, full-year 2016 growth of 2.0 per cent was barely above the 1.9 per cent rate clocked in 2015 - the weakest since 2009, knocked by
Policy uncertainty
The positive impulse in exports growth, thanks to a bounce in electronics shipments, towards the end of 2016 has seen many analysts predicting the central bank will keep its exchange-rate based policy on hold this year. Nonetheless, the trade ministry flagged potentials risks, saying further tightening in Chinese policy could result in a sharper-than-expected slowing in growth in the world's second-biggest economy. Singapore's key oil and gas sector is also struggling to recover from tumbling oil prices.
+1.0 per cent. Exports fell 2.8 per cent in 2016. Capital Economics' Asia economist Krystal Tan took a dim view of the trade outlook: "Growth in Singapore's key export markets looks set to stay fairly anaemic, so hopes for a robust and sustainable export recovery are likely to disappoint." To be sure, the Singapore government didn't shy away from acknowledging the headwinds. "Political risks and the lack of clarity on the policies of the new U.S. administration have also heightened economic uncertainties globally," MTI said. Reuters
Institutional players' participation will boost commodities trade and restore confidence of retail investors, said Harish Galipelli, head of commodities and currencies at Inditrade Derivatives & Commodities. Confidence in India's commodity markets suffered a blow in July 2013 when National Spot Exchange Ltd (NSEL) abruptly suspended trading in most of its contracts. Investigations by the Forward Markets Commission (FMC) subsequently showed a fraud of 55 billion rupees.
Goldman Sachs Investments (Mauritius), Blackstone GPV Capital, Matthews Asia Growth Fund and InterContinental Exchange (ICE) are among foreign investors that hold stakes in Indian commodity exchanges. "Thin liquidity forces many large companies to hedge on overseas exchanges. With the entry of institutional investors liquidity will rise and we may see them hedging on local platforms," said a Mumbai-based broker with a global trading firm. Reuters
Regulator comments
India may soon allow institutions to trade commodity futures SEBI is also planning to allow options trading in commodities Abhirup Roy and Rajendra Jadhav
India could start allowing institutional investors to trade in its annual US$1 trillion commodity futures market as soon as in a month, the head of the country's capital markets regulator said on Friday, as the government targets deepening of the market. Asia's third biggest economy has allowed futures trading in commodities since 2003 but has so far kept out foreign investors, banks, mutual funds and other institutions. The move to open up to institutional investors will give large companies hedging opportunities and help in integrating the spot and futures markets. "Without the active participation of institutional investors this market cannot grow," U. K. Sinha, chairman of the Securities and Exchange Board of India (SEBI), told reporters on the side-lines of a conference.
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Mutual funds are likely to be the first to get access to the commodity futures market, may be in a month, Sinha said. Banks have huge exposure to commodities through their lending programmes and they need to hedge the risk, he said. SEBI is in early discussions with the Reserve Bank of India (RBI) to allow banks to participate in the commodity futures market, he added. While SEBI has been pushing to allow institutional investors into commodity futures, it needs to consult with the central bank to allow entry for banks and foreign investors. Market participants welcomed SEBI's plan as in the last few years commodity futures markets have stopped growing. Indian commodity futures volumes have fallen to 67 trillion rupees (US$998.96 billion) in 2015/16 from 170 trillion rupees in 2012/13.
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 Monday, February 20 2017 13
Asia Trade
In Brief
Australia may seek better deal on visas from post-brexit Britain Britain is up to the task of negotiating a deal, despite its lack of experience since joining the EU more than 40 years ago Sarah Jones
Australia might demand a “better deal” on visas as part of any post-Brexit trade pact with Britain, according to the country’s top envoy to the UK. “We might throw into the mix -and this might be a little contentious --
completed its divorce from the EU, but it has already held preliminary discussions with countries including Australia, New Zealand and India, as well as Donald Trump’s new U.S. administration. Downer, a former Australian foreign minister, said he is confident a free-
agreements in 12 years including with the U.S., has been quick to set up a working group on Brexit and provide the UK with a scoping paper.
‘Low-hanging fruit’
“I’m not sure they can negotiate more than one of these things at a time,” he said. Doing a deal with Australia, New Zealand or Canada “would be what you might call low-hanging fruit -- easy to pick.” The UK is Australia’s seventh biggest trading partner but that
“We need to make sure that our interests are protected and more than that we can maximize outcomes to suit Australia” Harish Galipelli Alexander Downer, Australia's High Commissioner
the fact that we want a better deal on visas,” High Commissioner Alexander Downer said in an interview in which he said Australia would only be interested in a “high-quality” trade accord once the UK leaves the European Union. Prime Minister Theresa May is eyeing trade deals around the world as she prepares to trigger two years of Brexit talks by the end of March. Britain can’t negotiate new accords until it has
trade agreement eliminating tariffs and quotas can be struck quickly given the similar legal systems, values and language. He has previously suggested a time frame of as little eight months. Britain is up to the task of negotiating a deal, despite its lack of experience since joining the EU more than 40 years ago, said Downer, who spoke from Australia House in London. The Australian government, which has negotiated eight free-trade
will likely change once the heavy restrictions imposed from the EU, such as a 10 per cent tariff on British cars, are removed, he said. Since Australia struck a deal with the U.S. more than 10 years ago, trade between the two countries has increased 70 per cent, he added. “We have invested a lot of time on this issue,” Downer said. “We need to make sure that our interests are protected and more than that we can maximize outcomes to suit Australia.” Bloomberg News
Philippine miner ordered shut says to ship nickel ore in March Mines ordered shut can appeal to President Rodrigo Duterte, who has so far backed Environment and Natural Resources Secretary latest actions
Philippine miner Marcventures Mining and Development Corp, whose nickel mine was one of 23 ordered to close by the environment ministry, said on Friday it will take legal action to overturn the ruling and plans to ship out ore next month. Marcventures' mine in southern
S.Korea court declares Hanjin Shipping bankrupt A South Korean court declared Hanjin Shipping Co Ltd bankrupt on Friday, after ruling earlier this month that the firm's liquidation value would be worth more than its value as a going concern. Hanjin Shipping, which had been the world's seventh-largest container shipper, applied for court receivership in late August after its creditor banks halted further support. The Seoul Central District Court said in a statement it has chosen a bankruptcy administrator, and claims by creditors are due by May 1, 2017. The first meeting of creditors will be held on June 1, 2017. Government
Myanmar state chief minister to resign Chief Minister of Mon state U Min Min Oo confirmed on Saturday his intention to resign and will submit his resignation letter to the president today. This will be the first resignation of a chief minister since the National League for Democracy Party (NLD)led government took office in April last year. He hinted his resignation firstly on Facebook on Saturday morning. "I am just following my own decision which suits the right time. I will explain when my resignation letter is approved," U Min Min Oo told Xinhua on Saturday. Energy
Environment
Manolo Serapio Jr
Corporate
Philippines was among those ordered shut by Environment and Natural Resources Secretary Regina Lopez for environmental violations in a ruling that has led to an outcry from the industry. Another five of the 41 mines in the world's largest nickel ore supplier were suspended. A unit of Marcventures Holdings
Inc, the company said its mine was ordered to close as it was located in a declared watershed, where mining is prohibited. But the area was only declared a protected watershed by the government in 2009, while Marcventures secured its mining contract in 1993, the company said in a filing to the Philippine Stock Exchange. It also contested the agency's finding that that it failed to plant three million seedlings, saying efforts were underway and there was no basis for the closure order. "We will take all the necessary legal actions and exhaust all remedies available to prevent the implementation of the order," it said. "We expect to operate as usual and to start shipments of nickel ore by first week of March 2017." Mining typically halts in the southern Philippines during the monsoon season that starts around October and ends in the first quarter of the following year. Lopez has said her decision on Feb. 2 to shut mines operating in watershed zones is non-negotiable, arguing they will affect water supply and quality. She has also cancelled almost a third of contracts for undeveloped mines she said were located in watershed areas. "The environment is under siege from forces of greed and selfishness and it is the government's duty to regulate it such that the environment benefits our people," Lopez told local radio on Friday. Australian miner OceanaGold Corp, which runs the Philippines' biggest gold mine and was ordered to suspend operations, said earlier this week it has filed an appeal with Duterte's office, putting a stay on the execution of the suspension order. Reuters
Thailand to build plant despite opposition Thailand will go ahead with a plan to build a coal-fired power plant in a southern tourist province, the prime minister said on Friday, despite opposition from residents and activists for more than two years. The construction of the 800-megawatt power plant in Krabi, a province in the south known for its pristine beaches, is part of Thailand's Power Development Plan for 2015 to 2036. The project was shelved two years ago due to mounting opposition, but the National Energy Policy Committee gave the project the go-ahead on Friday. M&A
SoftBank willing to cede control of Sprint Japan's SoftBank Group Corp is prepared to give up control of Sprint Corp to Deutsche Telekom AG's T-Mobile US Inc to clinch a merger of the two U.S. wireless carriers, according to people familiar with the matter. SoftBank has not yet approached Deutsche Telekom to discuss any deal because the U.S. Federal Communications Commission has imposed strict anti-collusion rules that ban discussions between rivals during an on-going auction of airwaves. After the auction ends in April, the two parties are expected to begin negotiations, the sources told Reuters last week.
14 Business Daily Monday, February 20 2017
International In Brief Social support
Portuguese PM aims to fight poverty Portuguese Prime Minister António Costa said on Friday the government would map out a strategy to raise people's incomes as a way to fight poverty. "We have to go ahead with a strategy to improve incomes, improving pensions, social support and overall salaries," Costa said at a local school in Pacos de Ferreira, around 340 km north of Lisbon, during a ceremony to present a program to rehabilitate social housing. The program presented by Costa on Friday involves interventions in around 8,500 homes, with investment reaching 115 million euros. Taxes
Fannie Mae to pay Treasury US$5.5 bln U.S. mortgage finance provider Fannie Mae said on Friday it will pay the Treasury US$5.5 billion in dividends in March, but warned that it would face losses and again require taxpayer support if President Donald Trump's pledge to slash corporate taxes comes to fruition. A significant cut in corporate tax rates, from the current marginal federal rate of 35 per cent, would result in Fannie having to write down its deferred tax assets, according to the government-sponsored enterprise. If the writedown were greater than its capital, Fannie said, it would have to draw on its credit line with the U.S. Treasury Department. Currency
Merkel suggests euro is too low for Germany German Chancellor Angela Merkel suggested on Saturday that the euro was too low for Germany but made clear that Berlin had no power to address this "problem" because monetary policy was set by the independent European Central Bank. Merkel made her remarks at the Munich Security Conference as U.S. Vice President Mike Pence looked on. They seemed aimed at addressing recent criticism from a top trade adviser to President Donald Trump, who has accused Germany of profiting from a "grossly undervalued" euro. Trade
Jordan hopes resumption of exchange with Iraq soon Jordanian Prime Minister Hani Mulki on Saturday expressed hope of the resumption of trade exchange with Iraq following the closure of the crossing border between the two countries, the state-run Petra news agency reported. At a meeting with a delegation of Iraqi business people and officials, Mulki said that the relationship between Jordan and Iraq is strategic. He added that the on-going security conditions in Iraq have negatively affected the trade exchange. The prime minister stressed on the need to speed up efforts to reopen the main crossing border between Iraq and Jordan to facilitate trade flow.
Sustainability
World Bank ranks Denmark as leader in green energy system as the world's best. "Denmark takes a very strong position and of course the government endeavors to stick to it," the minister said. Since the energy crisis in the 1970s, Denmark has made substantial investments in sustainable energy, based on wide political agreements on increased energy efficiency and
United States, Britain and Germany," the minister said. "Within the space of a few months, the government's energy commission will present their recommendations for the energy policy as from 2020 and on. Based on these recommendations we will make a proposal for a new, ambitious energy conciliation, which we will present this autumn," he added. In 2015, Denmark's export of energy technology amounted to 71.4 billion Danish kroner (US$10.19
transition to sustainable energy. The Danish government has set a long-term target of covering at least half of the country's energy needs with renewable energy by 2030 and making it independent of fossil fuels by 2050. Lilleholt said the government will continue the ambitious green transition and present a series of initiatives during 2017. "Shortly, we will present an export strategy for energy technology to boost the export of Danish energy technology to countries like the
billion), representing 11.1 per cent of the total Danish export of goods in the year. This makes Denmark leader in the EU when it comes to the share of export of energy technology of the total export of goods. The Confederation of Danish Industry assesses that the country's export of energy technology can rise to 125 billion kroner (US$17.8 billion) as a consequence of the international agreement on climate change signed at the COP21 in Paris in 2015. Xinhua
It was followed by Canada and the United States each having three points less
T
he Danish government will hold on to its green leadership through green transition as the World Bank ranked the country as the leader in green energy, Minister for Energy, Utilities and Climate Lars Christian Lilleholt said on Friday. "It makes me very proud that once again Denmark can put on the global, green jersey as an indication that Denmark is the country in the world with the best framework conditions for a sustainable energy system,"
The Danish government has set a longterm target of covering at least half of the country's energy needs with renewable energy by 2030 Lilleholt said in a statement. Denmark has the best framework conditions in the world when it comes to energy efficiency, sustainable energy and access to energy, according to a new report issued by the World Bank. On a score from 1 to 100, Denmark gets 100 in "access to energy," 86 in "energy efficiency" and 94 in "sustainable energy," securing the leading position with 94 points. Last autumn, the World Energy Council named Denmark's energy
Legislation
U.S. infrastructure bill back on Congress' radar The Republican president has talked about creating a tax credit to encourage private sector investment in many infrastructure projects Richard Cowan
President Donald Trump's pledge to bring massive investments in U.S. infrastructure projects showed new signs of life on Friday after lying dormant for weeks, as leading Republican lawmakers said proposals from the administration could be in the offing. Senate Majority Leader Mitch McConnell, a Republican, told reporters he expects to receive "some kind of recommendation on an infrastructure bill, a subject that we frequently handle on a bipartisan basis," but gave no details or timing. He has previously voiced concern over adding to budget deficits with a new injection of federal funds for road, bridge and other construction projects like the ones President Barack Obama secured from Congress in 2009, especially after a major highway funding law was enacted about a year ago. Some Republicans and Democrats in Congress are increasingly criticizing Trump's administration for being slow to get behind his legislative initiatives during the first month of his presidency. Trump’s plans to create an infrastructure council led by two New
York billionaire friends, developers Richard LeFrak and Steven Roth, have yet to be launched, a spokesman for LeFrak said. During his presidential campaign, Trump said he would push for a US$1 trillion infrastructure program to rebuild roads, bridges, airports and
Several lawmakers and aides speculated the initiative could be attached to tax reform legislation that Republicans want to advance this year other public works projects. He said he wanted action during the first 100 days of his administration, which now seems unlikely. The Republican president has talked about creating a tax credit to encourage private sector investment in many of these projects. But
Democrats say that would fail to spur enough rebuilding and put taxpayers on the hook for a tax credit to wealthy developers, who they said would build toll roads that taxpayers would then have to pay to use. Democrats want a more direct federal role in sparking a construction boom. In an interview on Tuesday, Republican Representative Mario Diaz-Balart said he had "no doubt that it (infrastructure investment) is a priority for the administration." Diaz-Balart chairs a House subcommittee that would control the flow of Washington money that might be needed to fund some of the public works projects. Several lawmakers and aides speculated the initiative could be attached to tax reform legislation that Republicans want to advance this year, but no decisions have been made. Writing an infrastructure bill involves seven or eight committees, there are complicated tax and spending questions at stake, and lawmakers are divided. There are also questions over what would qualify as an infrastructure project, with rural areas, for example, clamouring for more broadband internet service. Senator John Thune, a member of the Republican leadership who chairs the commerce and transportation panel which has a say on any bill, said he had little information on the content or status of legislation. Asked about McConnell's comments, Thune said, "Maybe he knows more about it since he's married to the secretary of transportation," Elaine Chao. Reuters
Business Daily Monday, February 20 2017 15
Opinion Business Wires
The Times of India Inching towards rolling out of GST (goods and services tax), the GST Council on Saturday approved a law to compensate states for any loss of revenue from the implementation of the new national sales tax but deferred approval for enabling laws to next meeting. The all-powerful GST Council will meet again on March 4 and 5 to approve the legally vetted draft of the supporting legislations for Central GST (C-GST) and Integrated GST (I- GST), days before the start of the second leg of the Budget Session where the Centre is hoping to get them approved.
Trump the reluctant multilateralist
Taipei Times The Judicial Yuan yesterday proposed several measures aimed at reforming the justice system. Among them were proposals to amend the Code of Criminal Procedure to prevent defendants from fleeing the country before being sentenced and other changes that would facilitate court proceedings, Judicial Yuan Secretary-General Lu Tai-lang said. The Judicial Yuan is mulling rules to have a defendant in court for their verdict and more powers to detain them, Lu said, adding that district prosecutors’ offices would be able to detain a defendant who has been sentenced to death or a prison term of more than two years.
Philstar Investment banks see the Bangko Sentral ng Pilipinas (BSP) shifting the country’s policy stance to ‘hawkish’ from ‘dovish’ with a 25 basis point rate hike as early as next month. DBS Bank Ltd. said another rate increase by the U.S. Federal Reserve in March would prod the Philippine central bank to kick off its own policy normalization. Last Feb. 9, the BSP’s Monetary Board kept benchmark rates unchanged but raised the inflation forecasts to 3.5 per cent instead of 3.3 per cent this year and to 3.3 per cent instead of 3.1 per cent next year.
The Korea Herald Lee Jae-yong, de facto leader of Samsung Group, appeared before special prosecutors for the second straight day yesterday to undergo questioning over an influencepeddling scandal involving President Park Geun-hye. Lee, vice chairman of Samsung Electronics Co., appeared at the prosecution team's office in southern Seoul where he is to be questioned over allegations that he received business favours by granting a large amount of bribes to the president's long-time friend. This marked the second day that Lee, Samsung's heir apparent, came to the prosecution office to undergo an interrogation, following an eight-hour investigation Saturday.
D
onald Trump did not assume the U.S. presidency as a committed multilateralist. On that, partisans of all political persuasions can agree. Among his most controversial campaign statements were some suggesting that NATO was obsolete, a position that bodes ill for his attitude to other multilateral organizations and alliances. Last week, however, Trump stepped back, reassuring an audience at U.S. Central Command in Tampa, Florida (the headquarters for U.S. forces that operate in the Middle East). “We strongly support NATO,” he declared, explaining that his “issue” with the Alliance was one of full and proper financial contributions from all members, not fundamental security arrangements. This more nuanced view presumably reflects a new appreciation, whether born of security briefings or the sobering fact of actually occupying the Oval Office, that the world is a dangerous place. Even a president committed to putting “America first” now seems to recognize that a framework through which countries can pursue shared goals is not a bad thing. Th e q u est i o n n o w i s whether what is true for NATO is also true for the International Monetary Fund, the World Bank, the World Trade Organization, and the Basel Committee on Banking Supervision. Trump’s record on the campaign trail and Twitter is not heartening. Back in 2012, he tweeted criticism of the World Bank for “tying poverty to ‘climate change’” (his quotation marks). “And we wonder why international organizations are ineffective,” he complained. Likewise, last July, he mooted the possibility that the United States might withdraw from the WTO if it constrained his ability to impose tariffs. And he vowed repeatedly during the presidential campaign to withdraw from the Paris climate agreement. But the evolution of Trump’s position on NATO suggests that he may yet see merit to working through these organizations as he comes to recognize that the world economy, too, is a dangerous place. Following the election, Trump acknowledged having an open mind on the Paris climate agreement. His position seemed less to deny the existence of global warming than to insist that policies mitigating climate change not impose an unreasonable burden on American companies. The way to limit the competitive burden on U.S. producers is, of course, by ensuring that other countries also require their companies to take steps to mitigate climate change, thereby keeping the playing field level. And this is precisely what the Paris agreement is about. The same can be said of the Basel Committee’s standards for capital adequacy. Holding more capital is not costless for U.S. banks, as advisers like
“
Barry Eichengreen a professor at the University of California, Berkeley, and the University of Cambridge
Gary Cohn, formerly of Goldman Sachs and now the head of Trump’s National Economic Council, presumably tell the president morning, noon, and night. Leveling the playing field in this area means requiring foreign banks also to hold more capital, which is precisely the point of the Basel process. Trump may similarly come to appreciate the advantages of working through the IMF when a crisis erupts in Venezuela, or in Mexico as a result of his own policies. In 1995, the U.S. Treasury extended financial assistance to Mexico through the Exchange Stabilization Fund. In 2008, the Federal Reserve provided Brazil with a US$30 billion swap line to help it navigate the global financial crisis. But imagine the outrage with which Trump’s supporters would greet a “taxpayer bailout” of a foreign country or Mexican officials’ anger over having to secure assistance from the same Trump administration responsible for their country’s ills. Both sides would surely prefer working through the IMF. Trump can’t be pleased that the Obama administration rushed to push through the reappointment of its chosen World Bank president, Jim Yong Kim. But he clearly recognizes the benefits of development aid. While he has said that the U.S. should “stop sending foreign aid to countries that hate us,” he has also observed that failure to help poor countries can foment instability. This would appear to be an area where Trump will favour bilateral action, which would enable him to assuage his conservative critics by insisting that no U.S. funds go toward family planning, while taking credit for any and all assistance. At the same time, minimizing the role of the U.S. in the World Bank would create a vacuum to be filled by China, Trump’s bête noire, both in that institution and through the activities of the Chinese-led Asian Infrastructure Investment Bank. The real test of Trump’s stance on multilateralism will be how he approaches the WTO. Persuading the U.S. Congress to agree on corporate and personal income-tax reform, a US$1 trillion infrastructure initiative, and a replacement for Obama’s signature health-care reform won’t be easy, to say the least. Doing so will require patience, which is not Trump’s strong suit. This suggests that he will feel pressured to do what he can unilaterally. One thing he can do unilaterally is slap duties on imports, potentially in violation of WTO rules. We’ll soon find out whether those rules will deter him. Project Syndicate
The real test of Trump’s stance on multilateralism will be how he approaches the WTO
”
16 Business Daily Monday, February 20 2017
Closing Markets
Stock exchange exhibition kicks off in Cambodian capital
Launched in 2011, CSX is a joint venture between the Cambodian government which holds 55 A stock market exhibition kicked off in Phnom percent of the stakes and the Korean Exchange Penh yesterday with the aim of attracting which owns the remaining 45 percent. new investors and potential companies to the Currently, there are four listed companies, namely, kingdom's nascent stock market. The exhibitors included four listed companies, five state-owned Phnom Penh Water Supply Authority securities firms and two law firms, among others, and Phnom Penh Autonomous Port, and privatesaid Hong Sok Hour, chief executive officer of the run sportswear maker Grand Twins International and Phnom Penh Special Economic Zone. Cambodia Securities Exchange (CSX). "In the near future, state-owned Sihanoukville "The one-day event is a campaign exhibition to attract public interest to the stock market," he said Autonomous Port will become the fifth company listed on the CSX," said Hong Sok Hour. Xinhua at the exhibition's opening ceremony.
Murder investigation
Malaysia seeks N. Korean fugitives in Kim killing The deputy police chief refused to comment on any political motive for the killing, saying only that investigations were on-going Elizabeth Law
M
alaysian police said yesterday they believe five North Koreans were involved in the murder of the half-brother of leader Kim Jong-Un, with four having fled the country on the day of the killing. Seoul said the announcement proved Pyongyang was behind the murder of Kim Jong-Nam, who died after being squirted in the face with an unidentified liquid at Kuala Lumpur International Airport last Monday. The case has also sparked a diplomatic row between Pyongyang and Kuala Lumpur, after Malaysia rejected demands quickly to hand the body over to the North. Four North Korean men were being sought over the killing, Deputy Inspector-General of Police Noor Rashid Ibrahim told a press conference, in addition to their 46-year old compatriot Ri Jong Chol who was arrested in Kuala Lumpur Saturday. Suspects Ri Ji Hyon, O Jong Gil, Ri Jae Nam and Hong Song Sac, aged between 33 and 57, entered Malaysia in February or late January, the police chief said. Three more North Koreans were wanted for questioning, he said. Officers have already arrested one
North Korean, an Indonesian woman and her Malaysian boyfriend, as well as a Vietnamese woman. "Considering that five suspects are North Korean nationals, we view that the North Korean government is behind the incident," Seoul's unification ministry spokesman Jeong Joon-Hee said immediately after yesterday's announcement. The deputy police chief refused to comment on any political motive for the killing, saying only that investigations were on-going. Pyongyang has demanded JongNam's body be returned but Malaysia has said it must remain in the country until it is identified through a DNA sample from a family member. "We are trying very hard to get the next of kin to come and assist us in the investigation," Noor Rashid said, but added no such family member had yet come forward. Police were still waiting for the results of an autopsy conducted on Wednesday, he said.
Spa masseuse suspect
Vietnamese suspect Doan Thi Huong, 28, worked as an "entertainment outlet employee", police said yesterday, while 25-year-old Indonesian Siti Aishah was a masseuse at a spa. Huong grew up in a small rice
farming village in Vietnam's Nam Dinh province and left around 10 years ago, former neighbours said, but always stood out on visits back home. "She has always been very fashionable, with colourful hair,"
Officers have already arrested one North Korean, an Indonesian woman and her Malaysian boyfriend, as well as a Vietnamese woman neighbour Maria Nguyen told AFP, adding that every lunar new year Huong would return to the village with a different foreign boyfriend. Huong was seen in CCTV images at Kuala Lumpur airport wearing a white top with the letters "LOL" emblazoned on the front, according to Malaysian media. Authorities in Hanoi have yet to confirm whether the woman identified by Malaysia as Doan Thi Huong is a Vietnamese national, but Ngyuen said "we knew one hundred percent it was her". Police have been making regular
visits to the village since the news broke, she added. Huong's brother Joseph Doan said they had been given little information on what had happened to his sister. He said he had not been in contact with her much and did not know what she did for work. Indonesian Police Chief Tito Karnavian said he had information from Malaysia that Aishah was tricked into thinking she was simply taking part in a prank for a reality TV show, but Noor Rashid would not comment on the claim. The drama erupted on last Monday as Jong-Nam prepared to board a plane to Macau, where he has been living in recent years. Malaysian police say the 45-year-old was jumped by two women who squirted liquid in his face. He suffered a seizure and died before arriving at hospital. He was once thought to be the natural successor to his father, the then-North Korean leader Kim Jong-Il. But after Jong-Il's death in 2011 the succession went instead to his younger half-brother Kim Jong-Un. Reports of purges and executions have emerged from the current regime as Jong-Un tries to strengthen his grip on power in the face of international pressure over his nuclear and missile programmes. South Korea has cited a "standing order" from Jong-Un to kill his sibling, and a failed assassination bid in 2012 after Jong-Nam criticised the regime. AFP
IMF
Private report
IMF to loan Mongolia US$440 million as part of bailout
EU citizens living in UK face Australian former judges, legal chaos MPs, clergy oppose Netanyahu visit
Mongolia reached an initial agreement with the International Monetary Fund for a three-year program that includes a US$440 million loan package as part of a US$5.5 billion bailout to help the north Asian country with looming debt repayments. “The Asian Development Bank, the World Bank and bilateral partners including Japan and Korea are expected to provide up to another US$3 billion in budget and project support, while the People’s Bank of China is expected to extend its RMB15 billion (US$2.2 billion) swap line with the Bank of Mongolia for at least another three years,” the IMF said in a statement released on Sunday. “The total external financing package will thus be around US$5.5 billion.” Economic growth in Mongolia slowed to 1 per cent last year as commodity prices fell and growth slowed in China, the main buyer of the nation’s copper and coal exports. The country also saw foreign investment collapse after a dispute with Rio Tinto Plc over the Oyu Tolgoi copper mine. The Extended Fund Facility will support the government’s plan to address balance-of-payment pressures and also help the government repay looming debts. Bloomberg News
European Union citizens living in the UK will face a “legal no-man’s land” after Brexit, according to a document obtained by the Observer newspaper. European lawmakers and officials foresee problems because Britain lacks information on which EU nationals are in the country before its divorce, the newspaper reported. That will make it difficult to choose who will remain after Brexit, and could “overburden” the system, according to the leaked report, which was drawn up by the European Parliament’s employment committee. Prime Minister Theresa May has so far refused to guarantee the rights of EU citizens to stay in Britain until formal exit talks begin. She plans to trigger those negotiations by invoking Article 50 of the Lisbon Treaty next month, with a view to securing an exit deal within two years. May has said she favours controlling immigration at the expense of unfettered access to the EU’s single market and customs union -- a stance known as hard Brexit. The number of EU workers in Britain has more than doubled in the past decade, according to the Office for National Statistics. An Observer survey showed most Britons believe that Europeans living in the UK should be given the automatic right to stay after Brexit. Bloomberg News
Diplomacy
A group of more than 60 prominent Australians signed a statement denouncing Israeli Prime Minister Benjamin Netanyahu’s visit to the country, saying that his policies are inconsistent with the nation’s values and beliefs. Netanyahu’s arrival in Australia on Wednesday will mark the nation’s first visit by a sitting Israeli prime minister. It also follows Netanyahu’s visit last week to the U.S., where U.S. President Donald Trump said he would be open to a Mideast peace agreement that doesn’t include separate states for Israel and Palestinians. Australian Prime Minister Malcolm Turnbull has said that he still supports a two-state solution. Former parliamentarians, senior legal professionals and clergy signed the statement released Sunday by the Australia Palestine Advocacy Network, a group that describes itself as a national coalition of organizations and individuals seeking to influence Australia’s public policy on Palestine and Israel. Signatories include businesswoman Janet Holmes a Court, former Solicitor General Gavan Griffith and former Federal Court judge Murray Rutledge Wilcox. Bloomberg News